Chapter XXII: Revenue and Taxation

Revenue.--The regulation of revenue and taxation is one of the most important and difficult questions of government. One of the wisest of modern statesmen has said that the management of finance _is_ government.

Government, whatever its form, is an intricate and expensive machine, and therefore sure and ample sources of revenue are as necessary to it as blood is to the human body. The necessary expenses of a local community, such as a village, a city, or a county, are heavy; while those of a State are immense, and those of a nation almost beyond conception. These expenses must be promptly met, or the government becomes bankrupt, lacking in respect, without power to enforce its rights even among its own people, and finally ceases to exist.

TAXATION.--The chief source of revenue in all governments is taxation. A _tax_ is a portion of private property taken by the government for public purposes. _Taxation_, the act of laying taxes, is regarded as the highest function of government. It is also one of the most delicate, because it touches the people directly, and is therefore frequently the cause of discontent among the masses.

The government makes no direct return to the citizen for the taxes it exacts, and in this respect only does taxation differ from the exercise of the right of eminent domain. How much revenue must be raised? what articles should be taxed? what should be the rate of taxation? are questions that concern every government.

As a person may be at the same time a citizen of a village, a township, a county, a State, and the United States, so he may, during the same year, pay a separate tax to each of these five governments.

NECESSITY OF TAXATION.--Taxation is one of the necessary burdens of society. A government as well as an individual must have money to pay its expenses, and the principal part, if not all, of this money must be raised by taxation of one kind or another. Men may differ as to the kind and the rate of taxation, but taxes must be paid in order that government may exist. The tax payer receives no immediate return for his taxes, but has a _constant_ return in the way of protection to life, liberty, and property, the enjoyment of public conveniences, and the improvement of society.

By means of taxes each person bears his part in the cost of maintaining the social compact. He gives up a portion of his property in order that what remains may be the more secure and valuable, and that he may enjoy many other blessings that would otherwise be impossible. Although the rate is often high, even higher than necessary, it is safe to say that every tax payer of the country receives from the government more than he contributes by taxation.

Taxes are direct or indirect.

DIRECT TAXES.--A _direct tax_ is levied directly at a given rate upon property or polls. Taxes levied by villages, towns, townships, cities, counties, and States are for the most part direct taxes.

A _poll_ tax is levied upon the polls, or heads, of the male inhabitants who have attained a certain age, usually twenty-one years.

A _property tax_, as the name indicates, is levied upon property. Property is of two kinds, real and personal.

_Real property_, usually called _real estate_, consists of lands and buildings.

_Personal property_ is that which can be moved from place to place, and includes everything that a person can own except real estate.

In all systems of taxation, much real estate, such as churches, cemeteries, colleges, charitable institutions, and public buildings, is exempt from taxes.

Five times in its history--namely, in 1798, 1813, 1815, 1816, and 1861--the United States levied a direct tax upon the people, but in each case the law was in force but a single year. From 1861 to 1871 there was also an _income tax_; that is, a tax of a given per cent. upon all annual incomes that exceeded a certain amount. In 1913, Congress passed a new income tax law, with additional taxes on very large incomes.

INDIRECT TAXES.--An _indirect tax_ is assessed upon the property of one person, but is indirectly paid by another. The owner of the property at the time of assessment pays the tax to the government, but a part or all of the tax is ultimately paid by the consumer of the goods. All taxes now levied by the national government are indirect.

The indirect taxes levied by the national government are _customs_, or _duties_, and _internal revenue_.

CUSTOMS, OR DUTIES.--_Customs_, or _duties_, are taxes levied upon certain goods imported from foreign countries. The Constitution prohibits the taxation of exports.

The schedule or list of articles taxed and of duties to be paid is called the _tariff_. Custom dues are collected by officers of the national government at the custom-houses, located at the ports of entry, usually, but not always, on or near the sea-coast. By far the larger portion of the national revenue is derived from customs.

INTERNAL REVENUE.--_Internal revenue_, sometimes called _excise_, is a tax levied upon certain articles produced in this country, such as tobacco and spirituous liquors. It is collected by officers of the national government, called collectors, stationed in different parts of the country.

SUGGESTIVE QUESTIONS.

1. Name some of the items of expense in village government.

2. In township government.

3. In city government.

4. In county government.

5. In State government.

6. In national government.

7. What is the rate of property taxation in this country?

8. What is the rate in this State?

9. Where is the nearest custom-house?

CONSTITUTION OF THE UNITED STATES.

PREAMBLE.

We, the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquillity, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.

ARTICLE I. LEGISLATIVE DEPARTMENT.

SECTION I. Congress in General.

All legislative powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.