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Rh taxation—Government ownership is not gaining in importance. In the states and cities, the earnings of public service enterprises shrank in relative, though not in absolute, importance during the decade; and in the national budget, postal earnings, Panama Canal tolls and similar receipts have been dwarfed by the huge tax levies necessitated by the war. Federal taxes, which before the war were of smaller amount than city taxes, became after it larger than all state and local taxes combined; and the leading Federal tax, the income tax, displaced the property tax from its old position at the top of American public receipts. In the fiscal year 1913, property taxes supplied over one-half of the revenue receipts of all divisions of Government, while the yield of income taxes was comparatively insignificant. In the fiscal year 1920 property taxes produced less than one-sixth, while income and profits taxes produced at least one-third and possibly as much as 40% of the total taxes collected in the United States.

Federal taxes at the beginning and end of the decade 1910-20 are contrasted in Table I. which portrays statistically the supersession of customs duties by the income and profits taxes; the beginning of the decline of the tax on alcoholic beverages caused by prohibition legislation a decline which is disguised in the table by the inclusion of new taxes on non-alcoholic beverages, introduced since the beginning of the World War; the introduction of the Federal estate or inheritance tax; and the multiplication of internal taxes on articles of common consumption. In the past it has been customary to contrast “direct taxes” such as income and inheritance taxes, which are supposed to rest in the main where first imposed, with “indirect taxes” such as those on tobacco and beverages, which, however collected in the first instance, are supposed to be paid eventually by the producer or consumer. Interpreted with reservations, the distinction is serviceable. It will be noted that in 1910 customs, liquor and tobacco taxes regressive taxes on consumers yielded over 95% of the total tax revenue; while in 1920 the same taxes augmented by similar taxes on “luxuries,” attendance at amusements, and transportation and insurance, produced only 25% of the total. Progressive income, profits and inheritance or estate taxes produced over 70% of the total in 1920. It is obvious that the war revolutionized the character of the Federal tax system in the direction of what has been called “liberal democratic finance.” However, in July 1921 the income and profits taxes were falling off more rapidly than the indirect taxes on consumption, owing to business depression; there was a recrudescence of protectionism, and a strong movement to introduce a general sales tax. It seemed probable, at that time, that for the fiscal year ending June 30 1922 indirect taxes would supply from 30% to 40% of the total tax collections. The “consumer” would be thus paying no small share of the national tax bill.

State taxes and other receipts during the period 1915-9 for which general statistics could be obtained are analyzed in Table II. The net revenue receipts of all states for the year 1919 amounted to $670,183,918, and the net governmental-cost payments to $635,370,153, from which figures the general meaning of the percentages given in the table may be inferred. In arriving at the “net revenue receipts,” there have been excluded the proceeds of bond issues and of sale of investments or supplies, refunds returned by reason of error or otherwise, and bookkeeping items representing transfers between governmental departments. The term “net governmental-cost payments” is applied to actual payments for expenses, interest and outlays, less counterbalancing payments and receipts, refunds received on account of error or otherwise, and departmental transfers. By “outlays” is meant capital outlays for permanent property. With these explanations, the more important developments in the field of state taxation and finance during the latter half of the decade may be inferred from Table II. Taxes increased in the aggregate from $364,543,797 in 1915 to $527,819,167 in 1919, but the relative importance of taxes among the total receipts decreased slightly. As a source of state revenue, property taxes were declining in importance, while business and other licence taxes were increasing. Earnings of public enterprises, together with rents, interest and charges for highway privileges—commercial earnings in their general character—were comparatively speaking stationary. For the three years 1917-9 state receipts exceeded state expenses by a substantial margin.

City taxes and the relative importance of other classes of municipal receipts are analyzed in Table III., which is based upon the revenue receipts of 146 of the larger cities of the United States for which comparative statistics are available for a period of 17 years. The net revenue receipts of these cities increased from $439,126,723 in 1903 to $1,103,665,750 in 1919; and the net governmental cost payments increased from $514,189,206 to $1,113,599,879 in the same interval. The net revenue receipts thus increased 151% while the cost payments increased less than 117%. In 1903 the receipts constituted only 85.4% of the expenditures, but in 1919 the receipts amounted to more than 99% of the expenditures. There is thus no foundation for the current statement that because they may issue bonds “free from taxation,” American cities have been led in recent years to borrow unduly.

Table III. describes in figures the more significant movements among city taxes and receipts during recent years; the material increase in the relative importance of the general property tax, the decline of the liquor taxes, the shrinkage in the use of the special assessment since the outbreak of the war, and the slight decrease in the importance of earnings of public service enterprises. Expressed in absolute figures, the total net revenue receipts rose from $21.14 per capita in 1903 to $35.26 in 1919; receipts from the general