ingly exiguous salaries of the Prussian officials, and in 1909 provision was made to procure a revenue for this purpose. The final disposition of the matter was to be effected by a general revision of the tax laws, but in the meantime the rates of the income tax were increased for what purported to be only a three-year period. Because of the temporary character of the arrangement, the alterations were inserted not into the income tax law itself, but in the so-called "Cloak" or "Garment" Law (Mantelgesetz).1 The rates were increased for individuals by from five to twenty-five per cent; for limited-liability companies by from seven and a half per cent to forty-five per cent; for stock companies by from ten per cent to fifty per cent. The local additions to income tax, however, were to be made on the old basis.

Advantage was taken of the discussion to effect one important change in the income tax itself. This concerned the subject of abatements. The changes of 1906 which have been mentioned above were found to be inadequate, and accordingly a new law was passed in 1909.2 This not only extended the privilege of abatements from incomes of 6500 to those of 9500 marks, but increased the abatements themselves. In the case of incomes not exceeding 6500 marks, a reduction of one grade was permitted for two children, or other dependents; of two grades for three or four children or dependents; of three grades for five or six children or dependents; and of an additional grade for every two additional children or dependents. In the case of incomes between 6500 and 9500 marks there was permitted a reduction of one grade for three children or dependents, of two grades for five or six children, and of one additional grade for every two children or dependent members of the family. The other important part of the amendment was the extension of abatements for

1 Gesetz v. 26. Mai, 1909. For the exact figures, cf. the Finanz Archiv, vol. xxvi (1909), p. 809. The annual figures as to the yield of the Prussian income tax may be found in Mittheilungen aus der Verwaltung der direkten Steuern im preussischen Staate. Statistik der preussischen Einkommensteuern.

2 Printed in Finanz Archiv, vol. xxvi (1909), p. 807.

'exceptional causes" affecting the taxpayer's ability to pay from 9500 to 12,500 marks.

The minor changes in the law were the permission to estimate incomes according to the business rather than the calendar year, and the provision making the income tax law conform to the new and revised imperial act of 1909 regulating the entire subject of double taxation.1 This law provides that when the trade or industry is carried on in several states, only a proportionate part of the income can be taxed in any The commonwealth laws must all conform to the

one state.

imperial law.

§ 8. Conclusion

If we try to form a conclusion as to the German, and especially the Prussian, income tax, it is evident in the first place that it has become an effective fiscal engine. Step by step, as we have seen, the theory of the law was bettered and the administration was improved; while the opposition of the people, which was at first quite as keen and determined as in England, was slowly overcome, until they became satisfied with the drastic methods introduced toward the end of the nineties. The German administration is admirably efficient, and the public has a well-merited confidence in the officials. Two considerations, however, force themselves upon our mind.

In the first place, the German system of direct assessment does not seem, even from the fiscal point of view, to be as satisfactory as the English system of stoppage at source. As will be seen from the table in the appendix, the income tax yielded in all Germany in 1908, 407 million marks (about 102 million dollars) for state purposes. To this ought be added the proceeds of the supplementary property tax, 62 million marks, making a total of about 117 million dollars. To this might further be added the sums raised for local purposes, which amounted to 301 million marks in localities of over

1 Deutsches Doppelsteuergesetz v. 22 März, 1909. Printed in Finanz Archiv vol. xxvi (1909), p. 369.

10,000 people alone. The total yield of the income tax in all divisions for the whole of Germany was 768 million marks or, including the supplementary property tax, over 830 millionsabout 208 million dollars. In view of the fact that the tax does not exist in Bavaria as well as in two of the smaller states, it might be claimed that the German system compares not unfavorably with the English and that, in fact, more revenue is raised by the income tax in Germany than in England. It must be remembered, however, that in the above computation the income tax in Germany includes both local and state taxes, and that the total rate, accordingly, is much higher, rising to as much as twelve or fifteen per cent on the income in some cases; whereas in England the rate is only five or six per cent.1 Moreover, the exemptions and abatements are very much more limited than in England, so that the yield ought to be proportionately greater. As a matter of fact, however, the yield for state purposes is far smaller than in Great Britain, notwithstanding the population of Great Britain is only about two-thirds that of Germany. The relatively unfavorable results of the German tax are, of course, in part due to the fact that Germany, although it has made such immense. strides of recent years, is nevertheless not so wealthy as England, and that the whole scale of incomes is lower. Even allowing for these facts, however, it is impossible to avoid the conclusion that the administrative methods are both more costly and less effective in Germany than in England. As a mere fiscal engine, the German income taxes are inferior to the English.

In the second place, the administrative methods employed in Germany, and especially in Prussia, would be impracticable almost anywhere else. In no other place is the bureaucracy so powerful. Nowhere else are the people so meek in the face of officialdom. In no other country of the world would it be possible to enforce so inquisitorial a procedure as we have

1 In the Denkschriftenband, vol. 1, pp. 788 et seq., will be found a number of elaborate tables calculating the total rate of the income tax in the local divisions of the nine chief states of Germany, arranged according to scales of income.

learned to be customary in Prussia. And even with all these rigorous and stringent methods, it is questionable, to judge from the fiscal results, whether the frauds and evasions are appreciably less than in England.

Taking it all in all, however, the German income tax, which, as in England, has been the slow product of a long evolution, must be pronounced a decided success. It is accepted by the people; it has become indispensable to the government. Its methods of assessment are, on the whole, in conformity with public opinion, the honest taxpayer has but little to fear from even the most rigorous officials, and the tax now constitutes not only an important, but an increasingly important, part of the general tax system.

Note to 2d ed. An imperial income tax was levied for the first time at the end of 1913 by a law of the same year. The defense-contribution (Wehrbeitrag) is a tax levied once and for all on all property and income. The property tax is levied on all property at a rate which varies from 0.15% for the first 50,000 marks to 14% for sums over 5,000,000 marks. Property of 10,000 marks is exempt; if the income does not exceed 2000 marks, 50,000 marks of property are exempt; if the income does not exceed 4000 marks, 30,000 marks of property are free. When the property does not exceed 100,000 marks, or the income 10,000 marks, the tax is reduced 5% for the third and every additional minor child. When the property does not exceed 200,000 marks or the income 20,000 marks, the tax is reduced 10% for the third and every additional son that has performed military duty.

The income tax is levied at a rate which rises from 1% on incomes to 10,000 marks to 8% on incomes over 500,000 marks. If the income tax payer has any property, a sum equal to 5% on the taxable property is deducted from the income. The tax is assessed by the separate states.

In addition to the defense-contribution, which is levied only once, an imperial so-called tax on possessions (Besitzsteuer) is to be levied in 1917 and every three years thereafter. This is a tax on the increment of property, i.e., on the amount by which the value of the property of individuals (not of corporations) at the expiration of the three-year term exceeds its value at the beginning. The discussion of this interesting innovation, however, does not fall within the scope of the present study. See for details Die Reichsfinanzgesetze vom 3 Juli, 1913. Von Karl Theodor von Eheberg. Leipzig, 1913.

CHAPTER II

THE INCOME TAX IN FRANCE

Preliminary

THE fiscal work of the Revolution consisted in substituting for the personal taxes of the ancien régime a system of socalled real taxes, or taxes on product. The abuses, inequalities, and privileges connected with the old methods had been so potent a cause of the Revolution that the very first step was to make a clean sweep of the entire existing system. It was hoped at first, somewhat under the influence of the Physiocratic doctrines, to defray all the public expenditures by a new system of direct taxes alone; but this proved to be impossible, and one by one the indirect taxes, in a modified and improved form indeed and largely denuded of their old abuses, were gradually reintroduced. So far, however, as the direct taxes were concerned, it was universally conceded that all excuse for inquisition and for arbitrariness must be avoided; and as a consequence a system of taxation was elaborated, based primarily on the thing to be taxed and not on the person of the taxpayer.

The system of direct taxation which was created in the last decade of the eighteenth century exists with slight modification to-day. It comprises four principal imposts: the real estate tax (contribution foncière), including both land and buildings; the business tax (patentes); the door and window tax (contribution des portes et fenêtres); and the personal and personal property tax (contribution personnelle et mobilière).1

1 The fullest account of the details of the French system at present is found in Traité de l'Impôt Direct, by Marcel Trélat, in collaboration with Corneille Berget and Dessart. 2 vols., Paris, 1902. A shorter account will be found in Cours Elémentaire de Science des Finances et de Législation Financière Française, by Gaston Jèze. Paris, new ed., 1909.