The real estate tax is divided into two parts, the land and the building tax. The land tax is levied on the assumed net produce of the land as determined by a periodical survey and valuation (cadastre). Since it is a tax on the produce of the land and not on the income of the owner, mortgage debts are not deducted. The other part of the real estate tax which falls upon buildings is assessed according to their rental value. The business tax is designed to hit the profits of the business, but it is levied only according to outward signs or presumptions, such as the rent paid for the business premises, the number of clerks, the size of the town, etc. The door and window tax is imposed on all openings for doors or windows, and is presumed to reach the ability of the individual indirectly in three ways: hitting in some cases the owner of the house, in others the occupant of the dwelling, and in still others the proprietors of the business conducted on the premises. The personal and personal property tax consists of two elements: The first (contribution personnelle) is a kind of poll tax, fixed originally at a sum equivalent to three days' wages, and varying since 1830 in different parts of the country, from one and a half to four and a half francs. The other portion of the tax, on movables or personal property (contribution mobilière), is a tax on house rent (loyer d'habitation according to the valeur locative). These were the original four taxes, all of them, as is seen, being imposed on the thing rather than on the person. With the growth of corporate wealth, and especially with the increased fiscal needs of the government after the reverses of 1870, the system of taxes on product was rounded out by a tax on securities or on corporations (impôt sur les valeurs mobilières). This tax was originally imposed in 1872 at the rate of three per cent on the interest, dividends, and other income of corporations and associations, and is advanced by them, being deducted from the sums payable to the security holders. In 1890 the rate was raised to four per cent. The local revenues in France, finally, are raised chiefly by additions (centimes additionels) to the four taxes on product. The French system has been remarkably successful from several points of view. It has yielded immense revenues, and it has been attended by a minimum of annoyance. With the lapse of time, however, the defects of the system have made themselves more and more apparent. Above all, the recent growth of large fortunes and the development of democracy have conspired to set the inevitable shortcomings of a system of taxes on product into greater relief. The land tax was from the very beginning an apportioned, not a percentage, tax, and the methods of assessment were so imperfect that the proportionate amounts paid by landholders in different parts of the country bore less and less relation to the actual yield of the land. Attempts at the equalization (péréquation) of the land tax were frequently made, but failed in France, as they have usually failed in the United States. So glaring did the inequality become, that in 1890 the building part of the real estate tax was separated from the land tax proper and was made a personal tax at the rate of 3.2 per cent on the annual rental value. But all efforts to introduce the same system into the land tax have thus far failed, and the land tax, with the centimes additionels, has been a crushing burden to the peasant and the small farmer. The business tax has become honeycombed with the grossest kind of inequalities, the presumed profits of many classes of occupation and enterprise standing in very slight relation to the actual income. The door and window tax has been universally recognized to be a tax on light and health, inimical to the best interests of the whole population. The personal tax is open to all the objections of a poll tax, and the tax on movables or house rent presses with special severity on the poorer classes. Taking it all in all, the French system of taxes on product which responded so admirably to the needs of the early nineteenth century, has been outgrown through the development of the last hundred years. In recent years the pressure to consider, in part at least, the personal conditions of the taxpayer has been so strong as to lead to minor changes in the system. Thus, in the land tax, the law of 1897 exempts the taxpayers where the tax does not amount to more than ten francs, deducts three quarters of the tax when it is from ten to fifteen francs, one-half of the tax when it is from fifteen to twenty francs, and one-quarter of the tax when it is from twenty to twenty-five francs. These abatements are made only to Frenchmen, and under the double condition that this is their total land tax, and that their liability to the personal property tax does not exceed twenty francs. In 1906 there were 5,165,977 such abatements amounting to 14,854,167 francs.1 In the business tax the very smallest traders and the petty employers are now exempt, while, on the contrary, the law of 1905 subjects the large department stores to a special additional scale of taxation.2 In the door and window tax, the existence of large tenements in the great cities led, as early as 1852-1855, to the permission, in the case of Paris, Lyons, and Bordeaux, to grade the tax according to the rent paid rather than according to the number of doors and windows. Paris and Bordeaux have availed themselves of this privilege. Moreover, since 1894, model workingmen's tenements are exempted both from the door and window tax and from the house tax. In the case of the personal tax, towns having an octroi or municipal customs duty, are permitted to substitute the latter for the former. Finally, in the case of the personal property tax, abatements are now made in the case of large families. Thus the law of 1890 entirely exempts parents of seven children when they are subject to a tax of not more than ten francs; and by the laws of 1900-1904 special abatements are made for large families in the case of taxpayers who pay very small house rents.4 These concessions to a growing sentiment have not been adequate, however, and with the growth of the democratic movement there has been a strongly marked tendency toward 1 Jèze, Cours Elémentaire de Science des Finances, p. 752. 2 Jèze, op. cit., pp. 795, 800. P. 88. 3 Jèze, op. cit., p. 820. For details of this system, see Seligman, Progressive Taxation, 2d ed., 1908, the abolition of the entire system of taxes on product, and its replacement in whole or in part by the taxation of income. Beginning with the revolution of 1848 and resumed after the creation of the Third Republic, these efforts have become more and more insistent, until they culminated, in 1909, in the passage by the Chamber of Deputies of an income tax bill. A review of this half century of struggle will be found instructive from many points of view.1 1 In Heuschling, L'Impôt sur le Revenu, Brussels, 1873 (a later edition of a book originally published in 1848), will be found a short account of the income tax projects up to that date. Joseph Chailley, L'Impôt sur le Revenu. Législation Comparée et Économie Politique. Paris, 1884, pp. 483-619, contains a full and interesting account of the period from 1848 to 1883 inclusive. In L'Impôt sur le Revenu, by Yves Guyot, Paris, 1887, which is a reprint of an official report, will be found a short treatment of the projects from 1871 to 1887. A complete enumeration of all the bills introduced from 1871 to 1896 is contained in the Rapport fait au nom de la Commission du Budget (Impôt Général sur le Revenu), by M. Paul Delombre, Chambre des Députés, Session de 1896, no. 1831, pp. 5364. A chronological list of all the income tax projects from 1848 to 1907, with a summary of each and an analysis of the more important, will be found in L'Impôt sur le Revenu, Essai d'Économie Financière, by Gaston-Gros. Paris, 1907, pp. 423-472 and 511-530. A somewhat shorter list and a description of all the income tax projects from 1848 to 1910 will be found in L'Impôt sur le Revenu, by Just Haristoy. Paris, 1910, annexes ii, pp. 802-835. The fullest account of all the bills and projects is contained in the official Rapport fait au nom de la Commission de la Législation Fiscale chargée d'examiner le Projet et les Propositions de Loi tendant à l'Établissement d'un Impôt Général sur le Revenu. Par M. Réné Renoult, Chambre des Députés, Session de 1907, no. 1053, vol. ii, annexe i, pp. 5-87. An elaborate description of the discussion on each of the projects up to 1898 will be found in Le Problème Fiscal de L'Impôt sur le Revenu, by Charles Philippe, 6th ed., 1898 (the first edition was published in 1894), pp. 37-311. For the period subsequent to 1903, full details of all the schemes are published in the current numbers of the Revue de Science et de Législation Financière. A short analysis of the most important later projects will be found in Eléments de Science Financière, by Boucard et Jèze, vol. ii (1906), pp. 911 et seq. All these books will hereafter be referred to simply by quoting the name of the author. A German treatment of the subject is Die Einkommensteuer projecte in Frankreich bis 1887, by Hermann Meyer, Berlin, 1905, and a later study by the same author, “Ein Ueberblick über die französischen Einkommensteuer-projecte in Frankreich bis 1887, nach Annahme der Resolution vom 10 Febr. 1887," in Finanz Archiv, vol. 32 (1906), pp. 13-41. A very short account in English will be found in an article by H. Parker Willis, "Income Taxation in France," Journal of Political Economy, vol. 4 (1896), pp. 37-53. § 2. The Revolution of 1848 The earlier history of the income tax projects in France is well summed up by a French writer in the statement that "The Revolution did not want to establish it, and the governments which succeeded either would not or could not." It was the Revolution of 1848 that brought the income tax scheme to the front. As a result of the financial crisis of 1847-1848 the provisional government, confronted by the necessity of extraordinary expenditure, found itself face to face with a large deficit. M. Garnier Pagès, the Minister of Finance, proposed to make good the deficit by selling the crown jewels, by disposing of some of the national forests, by increasing the rate of the existing taxes, and by a patriotic loan. But at the last moment his courage failed him, and the plan was not carried through. It was then that he suggested the possibility of an income tax, pointing to the experience of England. On March 16 he stated: "I should have liked to submit to your approval the plan of an income tax. Just in principle, more just than all the others, the income tax possesses, in addition, the advantage that it can be easily collected."2 But he confessed that it would take too long to prepare such a measure, and abandoned the project for the moment. On May 8, however, he came back to the subject and said: "Of all taxes the most just, the most efficacious, the one which I shall endeavor with all the power of a deepseated conviction to have you accept, is the progressive income tax. You citizens will have in the eyes of posterity the eternal glory of having established it definitively in a France that has become republican and democratic."3 The radicals in the Assembly could not let such a suggestion pass. The country was being flooded with a mass of pamphlets and more serious projects, suggesting more or less 1 "La Revolution n'a pas voulu l'établir, les Gouvernements qui l'ont suivie ne l'ont pas voulu ou ne l'ont pas pu." - Chailley, p. 483. 2 Philippe, p. 50; and Chailley, p. 485. 8 Le Moniteur Universel, no. 130, May 9, 1848, p. 981. Cf. Pilippe, p. 51. |