BOOK REVIEWS AND NOTICES Problems of Public Finance. By JENS P. JENSEN. New York: Thomas Y. Crowell Co., 1924. Pp. xviii+606. $3.00. The appearance of a new text in public finance is welcome. This book follows the conventional organization, treating in separate parts public expenditures, public revenues, public credit, and fiscal administration. The employment of theoretical discussion is minimized and the emphasis is placed, rather, on illustrative material drawn chiefly from the United States. This policy, intentionally pursued by the author (p. ix) has both advantages and disadvantages depending upon the type of course that is being offered. In some parts of the work, however, one may well wish that the intention could have been otherwise. At the close of each chapter is given a "bibliography," usually not of an exhaustive character but sufficiently well-chosen to give the student some additional references. A survey of these sources reveals all too few citations to periodical literature and scant references to foreign authors. A few chapters have practically no references at all. (Chapter xxiii, "Taxation of Business Incomes," three references; chapter xxiv, "Taxes on Profits," two references.) In this connection it is to be lamented that nowhere does Jensen discuss the literature of public finance. The chief criticism to be directed against the work is that of scattered organization. The same subjects are referred to in several places, often in similar terms. Note, for example, the statements relative to the levy of direct taxes by the United States (pp. 225, 237; cf. p. 286). The Model Plan of the National Tax Association, moreover, is not adequately discussed though three phases of the proposal are mentioned in as many places (pp. 339, 379, 386). Or again, in the chapter on the shifting and incidence of taxation (chap. xii) a few references to concrete cases are made, but subsequently, there appear discussions of the incidence of a tax on mortgages (p. 247), customs duties (p. 320), personal and business income taxes (pp. 361, 396), and profits taxes (p. 403). The treatment of this difficult section in public finance would have been more effective if the material was concentrated instead of being scattered. Factual errors and misstatements of conditions appear to be quite few. Some, which at first may be so classified, are later modified. On page 191, Jensen states: "There is no way in which shifting can take place except through a change in the price of the commodities or services exchanged by the taxpayer." But on page 194 it is recognized that shifting may take place by a change in the quantity or quality of the product. In formulating a definition of income for taxation, Jensen discards the concept of income as a flow of psychic satisfactions (p. 348), but the concept of income as a flow of wealth without a decrease of capital is not considered. He adopts the accountant's concept of the difference of economic power between two points of time (p. 350), but without reference to Haig, and but few sources which treat of the concept of income are cited (p. 362). In applying the definition of income which is adopted, he is not altogether consistent. Though the income is to be a "net accretion," it includes sums spent for the satisfaction of physical wants but excludes business expenses. Nor is it necessary, according to the definition, that the gain be realized before it is treated as income. However, inasmuch as all economists are not agreed on this question, Jensen's departure can be overlooked. A few detailed matters leave something to be desired. In discussing the taxation of National banks, the famous "Richmond Case" (41 S.C. Rep. 619) is ignored and it is stated in substance that bank shares may be taxed at different rates from other property in classification states (p. 267). The matter is not so simple. In the treatment of special excises the gasoline sales tax is not mentioned. It appears in Part III, "Public Debt," in the chapter on "Public Roads and Public Borrowing" (chap. xxxi). The movement for the partial exemption of improvements and buildings in the United States receives bare mention (p. 431), though Canadian plans receive considerable attention, and deservedly so. The question of shifting the war burden to posterity is raised (p. 486), but the discussion leaves much to be answered or assumed. The discussion of the problem of the taxation of the corporate excess which omits the treatment of bonded indebtedness, may be similarly classified (cf. p. 337 ff.). The unique income tax of South Carolina is not treated, though the acts of Wisconsin, Massachusetts, New York, and Oklahoma are considered. One typographical error should be noted (p. 581 n.). The tax rate for Ames, many of the monopolistic rights enjoyed by its rival." Some of the legislators resented the offer as a bribe; others looked upon it as a sincere effort to pay the state for the benefits it could confer. The Pennsylvania, fearing that it could not continue to defeat the National's demand for a charter, suddenly began to urge the passage of a general railroad act. It could rely upon its geographic position, its established monopoly, its political influence and special privileges to protect it from all ordinary rivals. If it must have competitors, then better for the field to be thrown open to them all rather than to have the state grant exclusive favors to a rival corporation. The National, however, continued to press its demand for a special charter. It was not in favor of a general railroad act if it could secure special favors for itself. It did not want monopolies destroyed, it merely wished to be one of the favored few. The results of the battle were doubtful. The Pennsylvania "owned" men in both the Democratic and Republican delegations, and there were a few honest senators who favored the general act rather than a bill granting more special privileges. Enough of these must be "secured" to defeat the National bill, and the Pennsylvania secured them. When the final vote was taken, the triumph of the Pennsylvania was as complete as any of the older victories of the Camden and Amboy. It had again defeated a rival.45 But the strategy of the Pennsylvania had been too subtle. In order to divide the forces of the National Railroad, it had urged the passage of a general act which would make it possible for any group to build a railroad at any time. The National, so long as it might possibly secure a special charter, opposed such a bill, but with that possibility gone, it felt that even a charter under a general law was desirable. Quickly the National's support was thrown to that small group in the legislature which had favored the passage of the general act. The Pennsylvania must "Sackett, op. cit., I, 56. 45 For a description of this legislative session see a graphic and authentic article by Lincoln Steffens, "New Jersey-A Traitor State," McClure's Magazine, XXIV (April, 1905), 652. greatest interest. Most business men are willing to admit the receipt of income, but they wish to take full advantage of allowable deductions from the gross amount. The portions covering depreciation, interest, losses, and business expenses in general will be well thumbed. The chapter on non-deductible expenditures is carefully planned. Twenty-one such items are tabulated with references to detailed discussion of them in other parts of the volume. Part V, on "Invested Capital" represents a well-thought-out presentation of a phase of the income tax problem which has at present lost its practical significance. Previous acts presented business men and economists with a practical problem in the incidence of income taxation. The excess profits tax compelled a careful study and differentiation of paid-in capital, earned surplus, and surplus arising from revaluation. As the author suggests, if invested capital is again brought into a tax law, difficulties in its computation will be greatly decreased. Part VI takes up the subject of "Rates of Taxes and Returns." It contains useful charts and tables and illustrates clearly the procedure of filing individual and corporation tax returns. The final section of the text material, Part VII, deals with the "Applicability of Income Taxes." The circumstances under which income of individuals and corporations are taxable under the 1924 act are carefully explained. This portion of the volume ends with a chapter on the review of returns, claims, and penalties. A reader is impressed with the author's apparent desire to clear away the mystery from income tax procedure. This is a laudable desire and the nature of the treatment causes this attempt to be in a measure fruitful. It is more complete than the hurried surveys of the syndicated services, and it is less tiresome to the general reader than some of the more encyclopedic publications intended for the practitioners. There is some trace of the recent compulsory revision of the text, which was originally based upon the 1921 act. For example, after discussing at some length the intricate proportional basis, under previous acts, for computing taxable profit arising from involuntary conversions, the author concludes the paragraph with a single sentence stating the simplified procedure under the new law. In each chapter there are summaries of decisions bearing upon the points under discussion. They are well stated and illustrate clearly many otherwise difficult points. Three Appendixes follow the text ma terial, 62 problems for class assignment, 110 questions for discussion, and a copy of the Revenue Act of 1924. The Index is complete and well classified. In conclusion, it is doubtful if there really exists a set of accounting principles underlying federal income taxes. One feels rather that certain accounting procedure has been imposed by or developed from the various tax laws. However, it is possible that standardization of accounting procedure, even if resulting from legislative enactment, may ultimately prove to be highly desirable. UNIVERSITY OF CHICAGO C. RUFUS ROREM The Federal Trade Commission: A Study in Administrative Law and Procedure. By GERALD C. HENDERSON. New Haven: Yale University Press, 1924. Pp. xiii+382. $3.50. This is the first of a contemplated series of intensive studies of selected administrative bodies. Though made by a lawyer for the Committee on Administrative Law and Practice of the Commonwealth Fund, it is far from being technically legal in character and is worthy of careful attention by economists and others who are interested in the governmental regulation of industry. In harmony with the purpose of the study, the field is, in the main, limited to those activities which have to do with the regulation of industry and to the legal rights of the Commission. Little or nothing is said of the work of the Economic Division except so far as legal questions have been raised in regard to it, or of the Export Trade Division. The author begins with a discussion of the political and legislative history of the Trade Commission Act and the Clayton Act. He then examines in detail the procedure of the Commission in dealing with complaints and with trade practice submittals. An entire chapter is devoted to the findings of the Commission and the method of arriving at them. This is followed by two long chapters dealing with "Deceptive and Dishonest Practices" and "Practices Which Restrain Trade," in regard to which the Commission has issued orders to cease and desist. A final chapter contains general conclusions and recommendations. While the book contains much good descriptive matter, the author's chief contribution is to be found in his criticisms and recom |