a labor organization is the "personal and private affair" of the employee. To this line of argument it is sufficient to say that it cannot be judicially declared that membership in such an organization has no relation to a member's duty to his employer; and therefore, if freedom of contract is to be preserved, the employer must be left at liberty to decide for himself whether such membership by his employee is consistent with the satisfactory performance of the duties of the employment.

Of course we do not intend to say, nor to intimate, anything inconsistent with the right of individuals to join labor unions, nor do we question the legitimacy of such organizations so long as they conform to the laws of the land as others are required to do. Conceding the full right of the individual to join the union, he has no inherent right to do this and still remain in the employ of one who is unwilling to employ a union man, any more than the same individual has the right to join the union without the consent of the organization. Can it be doubted that a labor organization-a voluntary association of workingmen-has the inherent and constitutional right to deny membership to any man who will not agree that during such membership he will not accept or retain employment in company with non-union men? Or that a union man has the constitutional right to decline proffered employment unless the employer will agree not to employ any non-union man?

And can there be one rule of liberty for the labor organization and its members, and a different and more restrictive rule for employers? We think not; and since the relation of employer and employee is a voluntary relation, as clearly as it is between the members of a labor organization, the employer has the same inherent right to prescribe the terms upon which he will consent to the relationship, and to have them fairly understood and expressed in advance.

When a man is called upon to agree not to become or remain a member of the union while working for a particular employer, he is in effect only asked to deal openly and frankly with his employer, so as not to retain the employment upon terms to which the latter is not willing to agree. And the liberty of making contracts does not include a liberty to procure employment from an unwilling employer, or without a fair understanding. Nor may the employer be foreclosed by legislation from exercising the same freedom of choice that is the right of the employee.

To ask a man to agree, in advance, to refrain from affiliation with the union while retaining a certain position of employment, is not to ask him to give up any part of his constitutional freedom.

He is free to decline the employment on those terms, just as the employer may decline to offer employment on any other; for "it takes two to make a bargain." Having accepted employment on those terms, the man is still free to join the union when the period of employment expires; or, if employed at will, then any time upon simply quitting the employment. And if bound by his own agreement to refrain from joining during a stated period of employment, he is in no different situation from that which is necessarily incident to term contracts in general. For constitutional freedom of contract does not mean that a party is to be as free after making a contract as before; he is not free to break it without accountability. Freedom of contract, from the very nature of the thing, can be enjoyed only by being exercised; and each particular exercise of it involves making an engagement which, if fulfilled, prevents for the time any inconsistent course of conduct.

XIII

SOCIAL REFORM AND TAXATION

It is not surprising that with the passing of laissez-faire and the assumption of a larger area of control by the state, there should arise fresh interest in the problems of taxation. A society using means of control as varied as ours could not overlook so facile an instrument. Nor could it long ignore the vital fact that its new social responsibilities require increased expenditures, and that the field of taxation must be newly explored to discover sources of additional revenue.

More than one generation of economists has fought over the question of whether taxation should be used as an instrument of social control. The advocates of "taxes for revenue only" have usually seriously routed their opponents, chiefly because of the nicety with which their fiscal theories have harmonized with general intellectual theories established upon an individualistic basis. But the advocates of taxes as means of control have quite as seriously triumphed over their opponents in determining usual practices. The small town vindicates its belief in mercantilism by taxing the out-oftown peddler; tax assessors very conveniently under-assess, or fail to assess, the property of industries which their districts are anxious to “encourage”; the state attempts to shape its tax laws in such a way as to invite investment from other states; public sentiment demands a high excise duty on intoxicants as a means of decreasing their consumption; and the nation legislates "prosperity" by rapid and skilful manipulation of customs duties. There is nothing novel in even the advocacy of the single tax as a means of correcting distribution, encouraging production, and eliminating social evils. And when we remember that a tax on commodities will decrease consumption, and are confronted by such an instance as a tax on distilleries causing a rapid development of technique, it is evident that we could not escape using this vehicle in programs of social control, even if we would.

But whether or not the system of taxation is to be used to effect changes in social life and institutions, a rational use of the machinery of taxation must be based upon adequate knowledge. This includes, first of all, a clear idea of the classes or properties which we wish to bear the assessed taxes, and why we wish to put the burdens upon them. We must, in short, have principles or "canons" of taxation. In the second place, we must know the machinery of taxation well enough to know just how to reach the desired objects, assuming that they are not beyond reach. Taxes, you know, have a disagreeable habit of getting "shifted"; and quite frequently their "incidence" falls upon those whom we had no intention of burdening. If we are taking thought for the morrow, and are concerned with increased efficiency of production and "equity" in distribution, we must pay particular attention to the incidence of taxes on the factors of production. In the third place, the consequences of taxation are not confined to shifting; taxes produce other effects than those evidenced by price changes. Such social consequences as business failures, greater concentration in industry, changes in technique, and relocalization of industries must be as accurately anticipated as possible.

Today our concern is not so much with the use of taxation as a means of social control as of adjusting the system to the present industrial situation and of making it yield larger and larger revenues. The first of these

is requiring an abandonment of the general property tax. This time-honored fiscal institution was admirably adapted to rural and handicraft communities; but it seems unable to reconcile itself with the varied forms of property which Modern Industrialism has produced. The older methods of assessment are also inadequate. Small industrial units, organized as individual businesses, could justly be assessed by county or local officials. The property of huge corporations, lying in many counties or states, and much more valuable as entities than the aggregate of material properties would indicate, demands a more centralized system of assessment. It is evident, too, that to treat individuals alike is not to give them equal treatment. The old principle of assessment at a uniform rate, found in so many of our state constitutions, is an inheritance from the eighteenth century. The system, in short, must be made to conform to the newer concepts in which modern industrial life is expressed.

But of greater importance is the increasing demand for revenue. We are being called upon to extend our educational system; to furnish to the people opportunities for recreation, amusement, and cultural development; to lighten the burden of economic insecurity; to perfect an adequate mechanism of social control. These demands are constantly becoming more imperative. To meet them our scheme of taxes must be reconstructed. Customs duties and excise taxes are likely to be retained because of the ease of their collection. The income tax, so closely in harmony with modern concepts of pecuniary property, is likely to grow in favor. The corporations are by no means immune from taxation with increasing severity. Increased volume of business, operation in "a stage of increasing returns," and lack of imperative demand for the lowering of prices together create an ideal condition for an increase in such taxes. But perhaps greater and greater dependence will be put in the inheritance tax. The yield from both this and from the income tax is likely to be greatly increased through "graduation."

It is more than possible that "the single tax," which for so long has preserved its theoretical existence, will be transformed and adapted to the new situation. The time was when the "single-taxer" insisted that rent was wholly unearned, that it should be taxed at 100 per cent, and inferentially that the tax should be made retroactive. It is not long since he was insisting that the levying of such a tax would result in the elimination of all our social evils. Now we are convinced that the question at issue is merely one of the social expediency of the private ownership of land; we realize that "unearned increments" may attach themselves to instruments of production other than land; and we have forced even the single-taxer to abandon the idea of retroactive taxation. Many champions of the scheme are now insisting upon making the rate of taxation only a fractional part of 100 per cent. They are no longer saying that the single tax will eliminate social evils, but are insisting that it is the only adequate device which the state can use to secure the funds with which to eliminate these evils. It is in short gradually becoming "the tax on land values." As such it is playing its part in the solution of social problems abroad and in the not remote future is likely to take its place among our efficient devices for raising

revenue.

The use of such taxes, in addition to raising revenue, will involve profound social changes. Inheritance and property will become institutions quite different from those we have known. Wealth will be distributed in quite a different way. The forces making for social development will be different in content and in arrangement. Primarily designed as revenueproducers, these taxes will be none the less effective instruments in transforming our institutions.

A. TAXATION AND INDUSTRIAL DEVELOPMENT

337. Expenditures and Social Organization1

BY HENRY CARTER ADAMS

The aggregate of public expenditures depends, among other things, upon the theory of social relations which a people has adopted, and the degree of strictness with which that theory is followed in practice. This theory may be looked for in the accepted philosophy of the respective rights and duties of government and individuals, or, what amounts to the same thing, in the attitude of mind which the public instinctively assumes when certain social or industrial problems are under consideration.

The problems of the class referred to are such as rely for their solution upon the extension, in some of its various forms, of the principle of co-operation; but a great deal depends, so far as the public expenditures are concerned, upon the character of that cooperation. Is the collective activity demanded governmental or is it private? Is the co-operation desired to be secured by coercion or through voluntary association? One cannot emphasize too strongly the contrast between these two forms of social activity in their influence upon the aggregate of public expenditures.

. It is exceedingly difficult to express in a few words the characteristic features of the social theories which, under various forms and with many and constant modifications, give color to the political and social fabric of various states. These differences may, however, be suggested by observing that the one theory is a modification of the view of the state assumed by Roman law, and exemplified in a general way by most of the Continental peoples; while the other is a development of the Teutonic and Saxon ideas of personal liberty; and shows its most natural unfolding among peoples in English historical descent. The former makes the state the center of all collective life, and defines the rights of individuals in terms of national importance; the latter places the individual at the center of thought, and conceives of the state as one of several means to individual attainment and development. Under the influence of that philosophy which subordinates the individual to the state it is natural for those intrusted with the administration of the government to regard all questions as properly adjusted when the interests of the state are conserved. Especially will this be true if to such a theory of society there be added the influence of the monarchial 'Adapted from The Science of Finance, 46-48. Copyright by Henry Holt & Co. (1898).