culties are insurmountable under the Constitution as it now stands, for the Supreme Court of the United States has declared that the income tax is a direct tax, and must therefore be apportioned among the States according to population. Since a federal income tax laid according to this ruling would be neither just (p. 277) nor practicable, the federal government for the present must be content with other forms of taxation.

Graduated or Progressive Taxation. It is sometimes contended that one's duty in respect to the payment of taxes should be measured, not by ability, but by sacrifice. According to this view a tax is burdensome, not in proportion to what is paid, but to what is left. To equalize the sacrifice of taxpayers a graduated or progressive tax has been proposed. Under the workings of this tax the rate increases with the amount of property. For example, if A, B, C and D are worth respectively $10,000, $20,000, $30,000 and $40,000, a scheme of progressive taxation might impose upon A a rate of one per cent., upon B a rate of two per cent., upon C a rate of three per cent., and upon D a rate of four per cent. D's property is only four times as great as A's, yet it pays sixteen times as much in taxes.

In eighteen States the constitutions provide that taxation shall be in exact proportion to the value of the property taxed. In these States progressive taxation would doubtless be adjudged unconstitutional. The other States would, perhaps, be permitted to apply the progressive principle. Congress has levied a progressive inheritance tax, and the validity of the progressive principle has been sustained by the Supreme Court of the United States. South Carolina has a progressive income tax, and several States have tax laws with progressive features.

The Single Tax. The most radical of tax reforms is the plan by which all revenues, federal, State and local, are to be raised from a single tax imposed on land. According

to this plan, men should contribute to the support of government, not in proportion to what they produce or accumulate, but in proportion to the value of the natural opportunities they hold; and it is contended that the landholder is the great monopolist of natural opportunities. The single tax would be laid upon land as such, and not upon the improvements upon land. The tax upon a vacant lot, provided it were as favorably located, would be as heavy as the tax upon a lot improved by a magnificent structure. The fundamental principle of the single tax is this: The individual should get the advantage of all improvements upon land, while the government (society) should get the advantage of favorable location, and of the increased values that accrue to land in a community which is progressive and which is increasing in population.

QUESTIONS ON THE TEXT

1. State three great difficulties that lie in the way of a just system of taxation.

2. What reforms are being made in respect to the taxation of railroads?

3. What is the rule for the assessment of interstate railway property?

4. What is the rule for determining the value of a corporation's franchise?

5. What are the advantages and disadvantages of a general income tax?

6. Explain the operation of a progressive or graduated tax. 7. What is the single tax?

SUGGESTIVE QUESTIONS AND EXERCISES

1. Is there an income tax in this State? If so, explain its nature and workings.

2. Is it just that a man who owns a little property should be taxed and that a man who receives a large salary and who owns no property should escape taxation?

3. Are there any progressive taxes in this State? If so, give an account of them.

4. Discuss progressive taxation in reference (a) to its justice, (b) to its expediency, (c) to its effect upon fortune building.

5. Prepare a five-minute paper on "The Single Tax." Shearman's "Natural Taxation."

Consult

6. Compare the system of segregating taxes as proposed by Mr. Adams with the system actually in force in this State.

7. What reforms in taxation are needed in this State? How may these reforms be accomplished?

Topics for Special Work.-The Incidence of Taxation: 19, 248-258. The Income Tax: 21, 577-582; 19, 239-247. Corporation Taxes: 21, 569-573.

XL

MONEY

Introductory. Closely related to the financial function of government is the function of regulating the monetary system. Indeed, the subject of money is regarded by many writers as only one of the divisions of the subject of public finance. In the United States the money function belongs solely to the federal government.

The Different Kinds of Money. The early colonists brought with them but little money, and they were therefore placed in conditions quite similar to those which existed in the earliest times when there was no money, and when exchange of goods had to be effected by barter; that is to say, when one commodity had to be exchanged for another directly, corn for fish, a horse for a cow. Exchange by pure barter, however, is too clumsy to be practiced long. An intelligent people will always find some commodity which will pass from man to man as money and thus make exchange easy.

The colonists in Virginia chose tobacco as a substitute for the silver and gold coins which they lacked. Tobacco was in universal demand. The Indians prized it highly, the colonists themselves used it freely, and the merchants were always ready to purchase it when it was brought down to the ships which traded with the new world. Men, therefore, would accept tobacco in exchange for a commodity, not because they wanted tobacco themselves, but because they knew that that commodity was so generally

desirable that they would have no trouble in exchanging it for any other commodity which they might wish.

There were other reasons why tobacco could be exchanged for any other kind of goods. A small bulk of it contained a great deal of value: a pound, in the early days of the colony, being worth three shillings in England. Again, tobacco could be easily divided and subdivided, and articles of small value as well as of great could be exchanged for it. One pound of tobacco usually represented about the same value as another. These characteristics of tobacco, joined with the universal demand for it, led to its use as money.

In New England, in the early days when coin was scarce, corn was used as a substitute, although it proved to be a poor substitute. In New York, Indian wampum or polished clam shells passed as money among the settlers. Each colony adopted as money the commodity which would circulate the most readily. "We find that the various colonies at one time or another authorized the payment of public or private debts in wheat, oats, barley, peas, bacon, pork, beef, fish, flax, wood, sugar, brandy and even musketballs." A Harvard student in 1649 paid his college bill with an "old cow."

It would be difficult to name a commodity of general use which has not at some time or another in some part of the world passed as money. Metals especially have been held in high esteem as instruments of exchange. Iron, lead, tin, copper, bronze, as well as silver and gold, have been used as money. There is, therefore, no natural universal money. A nation will use as its money that commodity which is most suitable to its own civilization.

Silver and Gold. As industries in the colonies multiplied, and trade and wealth increased, gold and silver became

'Bullock, "Monetary History of the United States,'' p. 10. We are informed on the same page of this book that gopher tails were employed as money in some sections of Dakota as late as 1885!