1. Provision for the expense of organized government is the fundamental purpose of taxation. Taxation may be defined as the taking by the government of private property for public uses. This implies a certain degree of compulsion. When the national government accepts ten million dollars in trust for the Carnegie Institution, it is not taxation, though wealth is given for public uses. The effects of taxation pervade all industrial affairs, but they will be discussed here only in relation to the value of goods and to the distribution of incomes. By taxation the government interferes with the individual's free choice and with the impersonal economic forces. It expends income in different ways from those.

Taxation defined which would be chosen by the individual.

The primary purpose of taxation is public defense. War often has driven men into closer social relations. Public defense requires sacrifice on the part of the family and of the individual. In family or patriarchal communities all share a common income and combine in the common defense, but self-preservation compels such small communities to form a larger, stronger state for the common defense. Personal service in the field gives place to money taxes permitting a more regular, continuing, and perfect organization of military forces.

Taxation for public defense.

Next comes the need of civil government to insure domestic tranquillity. As political unity grows, the citizens need less often protection against foreign foes, and they need more often, relatively, defense against the aggressions of some of their own countrymen. The preservation of domestic order requires police, courts of justice, and other agencies. The ideal of the anarchist to do without government is nowhere realized. Everywhere there must be government to preserve peace and to protect property. Unfortunately, this need grows with the growing density of population. Crime increases when men swarm in great cities. To maintain and operate the social machinery requires ever-increasing resources. The courts which settle disputes between men, and which interpret their contracts, are agencies of peace, displacing physical contests. Many other public expenses tend to enlarge, as those for legislative bodies, public buildings, statistical inquiries, the printing of public documents. Government on these accounts has become in modern times an increasingly costly institution.

To preserve domestic order.

Developing public wants; social and industrial welfare.

2. The promotion of the social and industrial welfare of society has come to be an important purpose of taxation. Some functions of government, less essential than the primary ones just mentioned, seem naturally to grow out of them. In a democratic society, popular education is one of the necessary conditions of good government, as it appears that domestic order is not possible in a democratic state without intelligent citizens. Step by step the functions of government are widened. Some industrial functions are performed by the government in connection with the primary needs. Light-houses are necessary to guide the navy, but they also serve to guide the merchant marine and to aid industry. The post was established as an agent of political and military government to connect the ruler with the outposts (a fact the name post indicates), but the postal service has grown in every country to be a great industrial and social agency. The consular service, beginning in the political need of keeping official representatives in foreign lands, has grown to be a great economic agency. Consuls are commercial travelers, advancing the trade-interests of their countries in all quarters of the globe. These social and industrial functions have been increasing of late. As the national and local governments engage more in industry, they usually make larger demands in the shape of taxation.

It is along the border-line between the primary and the secondary purposes of taxation that the contest goes on regarding the proper functions of government. If they are to stop short of the extreme of socialism, where shall the line be drawn? The movement has been of late toward greater government activity; more of the wants of men are thus supplied through the agency of the state. That year by year a greater sum is taken by taxation and spent for the citizen is a fact that may be recognized without debate here. The toll-road becomes a public road, the toll-bridge becomes free, more is supplied by taxation for schools, for advanced research, and for technical training. In our country great wealth was given by the Morrill Act to scientific and technical schools. The state universities, against much opposition, have become in many states of the Union the dominant educational force. Moreover, taxation often is used as a means not merely of raising revenue, but of discouraging one kind of industry and encouraging another. One industry wanes or dies under increasing burdens, another waxes strong by fostering exemptions and bounties. A large share of this "protective legislation" is done under the guise of taxation.

The sphere of the state expands.

3. Shifting of the limits of state action and corresponding changes in the weight of taxation are constantly affecting value and incomes. Society as a whole is made up of many groups of industry. Government is the largest of these, collecting and expending more than any individual or corporation. Government is in one aspect a consumption good. In return for its collective cost men collectively get the enjoyment of social organization, markedly in contrast with the uncertain ties and hazards of primitive communities. But government becomes also a mode of social investment, an indirect agent, a productive enterprise. Wealth applied through it secures a greater product than is possible by individual action. Government can maintain light-houses more economically than individuals could otherwise secure them.

Government as a consumption good and as a means of production.

Apportioning of the cost.

But when the government undertakes these various tasks, the expense falls unequally on individuals and affects differently their incomes. When free schools take the place of private schools, the law compels every one to contribute to education. To many individuals it is a matter of indifference whether they pay tuition or taxes, but the wealthy bachelor sometimes grumbles when forced to help in educating the day-laborer's family of twelve. The average result may be right, but individuals diverge from the average and thus have constantly a motive to attempt to change the limits of governmental action. Happily the subject is not always viewed with selfish eyes. The ethical and patriotic thought is not, "How will this affect my interests?' but, "How will it affect the general interests?" But as the question of value is always involved, men are usually found favoring or opposing a measure of taxation according as it affects their own income. Thus taxation is inevitably an economic question.

The various forms of taxes.

On incomes.