way, the individual who rented a piece of real estate might be requested to pay over the tax for his lessor; the mortgagor might be obliged to pay the tax for the mortgagee; the banker might be made to pay the tax for his client; the employer for his employee; and so on. Such a system would naturally receive various names. In so far as the tax is levied separately in the different categories or schedules, it might be called a scheduled income tax instead of a lump-sum income tax. In so far as the revenues are intercepted at their source, it might be called, and in fact has been called, a system of "collection at the source," or "stoppage at source," or "taxing at the source," or "charging at the source." In so far as the tax is for the most part not collected directly from the recipient of the income, but is advanced by the payer of the income, it is sometimes called the indirect income tax, as opposed to the direct income tax. Finally, inasmuch as the tax is not collected upon the entire income of the individual, but is divided up so as to form practically a series of assessments on different kinds of income, it has sometimes been called a tax on incomes rather than a tax on income. As Great Britain is the chief, although by no means the only, example of this form of tax, it seems better to apply the term which is in common use there, namely, the "stoppage-at-source" income tax; and in England itself, where both methods have been tried, there is no doubt in the minds of the authorities as to the advantage of a stoppage-at-source income tax over a lump-sum income tax. One of the chief points to be considered in the following investigation is to ascertain how far these claims are legitimate. It is obvious, however, that the stoppage-atsource income tax possesses disadvantages as well as advantages. If the lump-sum income tax requires admirable administrative efficiency, it possesses, at all events, the good point of permitting, without any difficulty, the application of the principles of differentiation and progression. On the other hand, while the stoppage-at-source income tax offers no obstacles to the application of the principle of differentiation, it does present very great impediments to the introduction of graduation. For it is clear that if the tax is assessed by schedules and stopped at the source, it becomes almost impossible to put definite rates upon varying amounts of total income. Since, therefore, each of the two modern systems of income taxation possesses advantages and disadvantages of its own, it becomes necessary to probe a little deeper. It is at bottom, however, a question not alone of the particular form of tax and of administrative environment, but also of the theory embedded in the legislative provisions themselves. A mere analysis of the provisions of existing laws would be far from giving us the results which we are attempting to In order to understand an existing law, it is almost always necessary to trace the origin and development of its provisions; and no judgment of the success or failure of a system can be attained without considering the manner in which the legislative provisions are actually carried out in practice. Nor, finally, can the working of a system be comprehended without a familiarity with the general attitude of the public, as reflected in the literature. secure. We propose, therefore, to take up the most important examples of income taxation in existence to-day; to trace the legislative and the literary history of each; to analyze the provisions of the existing law; and to explain the practical workings of the system. After we have done this for the most important foreign systems, we propose to deal with the American experiences, and with the peculiar constitutional situation in the United States. Only on the basis of such a study will it become possible to take a definite attitude on the problem of the income tax in the United States at the present time. THE MIDDLE AGES THE INCOME TAX IN THE Middle AGES § 1. The Local Taxes THE income tax played, with rare exceptions, an exceedingly insignificant rôle in the Middle Ages. Taxation itself was for a long time of minor importance when compared with the other sources of public revenue, for feudal income was derived very largely from the lucrative prerogatives of the feudal lord. When taxation did develop, it consisted, to an overwhelming extent, of taxes on trade and transportation; and when direct taxation began, first in the local communities and then in the larger divisions like departments, provinces, states and even empires, the well-nigh universal system was that of the general property tax. The history of the general property tax has been told in another place.1 It will be pertinent, however, to recall some points in this history so far as they bear upon the subject of the present investigation. In the first place, real estate under the feudal system was rarely bought and sold, so that practically the only method of ascertaining the value of the land was by taking account of its rents. The local property tax, so far as real estate was concerned, was therefore a tax on produce rather than on selling value; and later on, when in some cases the tax was assessed on the selling value, this was reached by capitalizing the rent. In the second place, all movables or personal property were assessed at the selling value, so that the tax became a combination of a tax on produce and on selling value. In the third place, as the expressed effort of the legislator was to reach the faculty of the tax 1 Seligman, Essays in Taxation, chap. 2. Cf. also Seligman, Progressive Taxation, part i, § 2, "The Middle Ages." |