the report of the canton of Zurich, for instance, where it became possible to check up the returns from the general property tax by means of the inheritance tax, it was stated that in 1897 only fifty-four per cent of the property was reached.1 In an address on the question of fraud, that was given by one of the officials in 1895, a careful analysis was made of the situation, with the conclusion that the frauds increase four times as fast as the wealth increases.2 A few years later Professor Wolf, who declared the property tax the "child of sorrow" (Schmerzenskind) of all tax reformers, stated that where the tax rates were felt to be too high, the taxpayers found the natural corrective in under-assessment. The situation has not improved at the present day. In Bern, the conditions are not much better, and we are told that in Appenzell and St. Gallen there is no thought at all of an honest assessment. In other cantons the inhabitants look upon it as something that goes without saying, that they should declare not more than one-third of their income; and in still other places it has become the custom for the assessors to ask the taxpayers directly as to how much they care to pay. This is especially true where the rate of the property tax is so high that it is virtually impossible to pay it. Even where the rates are not so very high, the situation is not much better. Everywhere in Switzerland, we are told, the people are tired of taxes. Moreover, the use of the general property tax both for local and for cantonal purposes has brought about the same result as in the United States, 1 Cf. Steiger, op. cit., p. 70. 2" Hieraus wird der Schluss abgeleitet, das die Verheimlichung mit zunehmendem Reichtum nicht nur proportional sondern fast in quadratischem Verhältniss anwachse." -J. Walder, Referat vor der Versammlung der Kantonalen gemeinnützigen Gesellschaft zu Bülach, quoted in Ernst, Die Direkten Staatssteuern des Kanton Zürich. Winterthur, 1903, p. 209. 3 Die Steuerreform im Kanton Zurich, von Dr. Julius Wolf. Quoted in Ernst, op. cit., p. 210. Zurich, 1897. Esslen, Die direkten Steuern im Kanton Zürich. Zurich, 1910, pp. 33 et seq. 5 "Von einer ehrlichen Versteuerung gar keine Rede sein kann.". Steiger, op. cit., p. 72. 6" Überall in der Schweiz ist mann steuersatt." - Op. cit., p. 232. namely, the endeavor of each locality to keep the assessments down as low as possible, in order to escape their share of general taxation. As we are told, "it is an old story."1 Other writers tell the same tale. In Zurich the declarations are notoriously inexact. Nobody is astounded nor is any one scandalized by these under-assessments. In Appenzell they go still further. It has become good form (de bon ton), to use an official expression, to return as small a fraction of one's property as possible. Not only does the public not think of blaming the taxpayer who conceals the greater part of his property, but people are actually esteemed in proportion to the skill with which they can evade the payment of the tax.2 In many of the towns regular contracts are entered into between the taxpayer and the assessor, whereby the individual agrees, in consideration of the small assessment, not to transfer his residence to some other town. In only two of the towns of fair size are conditions at all better. One of these is Geneva, with a population of 145,000, where, we are told in a government report, almost "one-half of the proceeds of the tax is paid by a little more than one hundred taxpayers, who, it must be conceded, have always acquitted themselves of their obligations with absolute correctness and loyalty. It is not there that the evasions are to be found; they must be sought elsewhere." This, however, is due to the fact that the taxe mobilière is very low, amounting, if reduced to terms of income at four per cent on the capital, to a tax of less than eight per cent on the income. The entire proceeds, moreover, are insignificant, being less than one-quarter of a million dollars. The other exception to the general rule is Baselstadt, a town of about 120,000 inhabitants, where we are also told that "the taxpayers, at least according to government reports, acquit themselves of their fiscal obligations with the greatest loyalty." But in Basel, also, it will be remembered that the rate is exceedingly 1"Es ist alles schon dargewesen." — Steiger, op cit., p. 232. 4 * Ibid., p. 80. low, running up from one to three per mill on the property. This is a very different situation from the other cantons, where the rates become "unreasonable and absurd" (unsinnig)1 and reach the figure of one and a half or two per cent on the property. 12 Careful students of the problem have therefore been forced to the conclusion that it is only where the rates are exceedingly low and the tax itself insignificant that it meets with any measure of success, and that in proportion as the rates are raised and the property tax plays a more important rôle, it fails. “If the rate is moderate," we are told, "the tax is paid regularly; if it is exaggerated, frauds, which are more or less avowed, are employed in order to reduce the tax rate to a reasonable sum.' In the larger towns the situation is like that of which we are told in St. Gallen and Rorschach, where official documents inform us that "so far as concerns our deplorable tax situation, we must at the very outset reckon with the presumption of a more or less considerable system of fraud. Every taxpayer who is even half-way honest is the victim of a hundred others who snap their fingers at the law and who, in doing so, are to a very great extent not interfered with in the least by the officials."8 All this has a familiar sound to us in the United States. It shows that where conditions are similar the results must be the same. The general property tax accordingly is almost as much of a failure in Switzerland as in the United States, and succeeds fairly well 1 Cf. Steiger, op. cit., p. 73. 2 Cérenville, op. cit., pp. 134-135, where he sums up his investigations of each of the separate cantons. The same conclusion is reached by Professor Bullock in his address on "The General Property Tax in Switzerland" in State and Local Taxation, Fourth International Conference under the Auspices of the International Tax Conference. Columbus, 1911. As Esslen, op. cit., p. 39, points out, however, a mere reduction of the rate will in itself not help, unless there is a decided change in administrative methods. 866 Angesichts unserer Steuermisere ist zum vornherein mit der Präsumption einer mehr oder weniger erheblichen Steuerhinterziehung zu rechnen. . . . Jeder auch nur halbwegs ehrlich Versteuernde ist eben bei uns das Opfer von hundert andern, die dem Gesetz eine Nase drehen und darin vielfach von den Steuerbehörden nicht gestört werden."-Steiger, op. cit., p. 117. only in agricultural districts, and in places where the tax is so insignificant that it plays but a slight rôle in the budget. The experience with the income tax is not a whit more. favorable than with the general property tax. The methods of assessment are practically the same, and we have all degrees of variation, from complete local autonomy in assessment to more or less centralized control by the cantonal authorities. Although the rate of the income tax in general is, as we have seen, lower than that of the property tax, the results are about the same, because the assessment is imposed upon the same individuals. Those who escape or avoid the property tax do not pay the income tax. Moreover, the difficulties in the assessment of income are greater than those in the assessment of property, because some property, at all events, is visible and tangible, while income cannot be put into that category. If any comparison is to be drawn between the income and the property taxes in Switzerland, it is in favor of the property tax. In the one important canton, Bern, where, as we have learned, the income tax is of a more general character, and where it is levied on all incomes except that from real estate, it has been proved by experience that the income tax works less well than the analogous property tax in other cantons. We are told that the frauds are far more numerous in Bern, where the personal tax is levied on incomes, than in the other cantons, where the tax is levied on property; and this is true even of those cantons where the property tax is not checked up by the system of inventory after death. Moreover, it is conceded that on general principles the income tax in Switzerland is inferior to the property tax. For the business man it makes very little difference whether the tax is assessed on income or on capital. For the workman who spends his money daily, without keeping 1"D'après les expériences faites dans le canton de Berne qui, seul de son espèce, prélève un impôt exclusif sur le revenu des capitaux mobiliers, les fraudes paraissent y être beaucoup plus nombreuses que dans les cantons se ralliant à l'impôt sur le capital, même dans ceux qui de ne connaissent pas l'inventaire au décès." - Cérenville, op. cit., p. 100. accounts, the calculation of income is considerably more difficult than that of capital, if he has any. For the peasant, a large part of whose income is derived from the produce of the land which he and his family consume, a satisfactory estimate of income becomes impossible. In the canton of Vaud, for instance, it was pointed out that the introduction of an income tax would result in the whole agricultural population paying not a single cent. It is for this and similar reasons that the students of Swiss taxation consider it absurd to hope for an escape from the evils of the cantonal general property tax through the substitution of a cantonal general income tax. If the property tax works badly, the income tax works still more badly.1 The Swiss experiences are especially instructive because of the political analogies with the United States. Everything in the way of the patching up of the general property tax that well-intentioned but misdirected zeal has attempted in the United States, has been tried in Switzerland and with similar lack of success. Not only has the general property tax broken down as the chief source of revenue, especially in the industrial centres, but the income tax, where it exists, is even more unsuccessful than the property tax. If any one lesson is to be learned from Swiss experience, it is that a system of state income taxes, resting, as do the general property taxes, upon methods of local assessment, even when modified by a central state control, is bound to fail. It is a conclusive proof of the fact that the way out of American difficulties is not to be sought in the direction of any kind of local or state income tax. 1 Cérenville, op. cit., pp. 93–103; cf. Esslen, op. cit., p. 38. |