scout the existence of any theory-expressed or impliedof contract between the State and the citizen, "whereby the subject is bound to render some service to the State, as a recompense for the service which the State has rendered to him"; when the Constitution of Massachusetts, which may be supposed to have been also before them, recognizes this contract in the following explicit language: The legislature shall have power "to impose and levy proportional and reasonable taxes upon all the inhabitants of, and estates lying within the Commonwealth, for the support of the government of said Commonwealth, and the protection and preservation of the subjects thereof." The ground having been thus cleared of obstructions, the commissioners next advance to what in their opinion is the true theory of taxation, namely, that "a man is taxed not to pay the State for its expense in protecting him, and not in any respect as a recompense to the State for any service in his behalf, but because his original relations to society require it." It is somewhat difficult to consider such reasoning from any other standpoint than the ridiculous; but as the original relations of man to society are unquestionably the relations which come into existence when society is incipient or in process of formation, when the law of might is the law of right, and everybody gets what he can and keeps what he gets, it may be remarked that the Massachusetts commissioners have at least been logical and consistent in making the reference they have made for the origin of such an arbitrary system as they advocate. Laying aside, however, all subtleties of reasoning, all appeals to court decisions, and all reference to the "original relations" of society, the plain, simple questions which it is desirable under this head to bring before the public are: "Is it consistent with the principles of equity? Is it conducive to public morality? Is it worthy of a high civilization for a State or a community to tax directly or indirectly property not within their territory or jurisdiction, and which their laws are unable to reach or protect?" And when the public have been induced to give them intelligent consideration, there can be no question that a further long stride in tax reform will be made most speedily.

Finally, as a further precedent to radical reforms in local VOL. CXXIII. NO. 251.

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taxation through popular action, there must be a larger lar comprehension of the principle, that in order to bu equitably and uniformly all persons and property, it is necessary to tax primarily all persons and property within taxing district. The experience of Philadelphia, Mont England, and France, where personal property is excluded taxation, and the burden of the expenses of the State is to fall primarily and almost exclusively upon realty, is absolute demonstration," that any complicated and inquisit system of separate taxation of goods and chattels is w unnecessary, an obstruction to trade, an injury to produc an unnecessary invasion of the privacy of human affairs, a self-torment inflicted on land itself." The Massachusetts missioners, however, in their recent report, before referred contend that the doctrine that taxes tend "to equate and fuse themselves," "is condemned by facts and justified b sound economical theory "; and that on the contrary tendency of taxes is, that they must be paid by the actual sons upon whom they are levied," at the same time qu from British writers to prove that the incidence of B taxation falls with crushing severity upon the poor, and p esying that the same result will follow the adoption in country of the simple system recommended by the New Commissioners. But the reasoning of the Massachu Commissioners confutes itself. For if taxes do not di themselves, and "stay where they are laid," how can the be crushed, and made to bear "disproportionate burd under a system like that of Great Britain, which taxes dir no actual necessary of life, nor indeed any article of cons tion with the exception of tea, coffee, spirits, beer, and tob which exempts all incomes under £100 ($500); and fi all houses renting for less than £20 ($100) per annum estimated exemption (from imperial taxation) of six-seve of all the dwellings in the kingdom? What, further do such reasonings and assumptions as those of the M chusetts Commissioners on the subject of the diffusio taxes amount to, in view of the most significant fact, the

*

* For local taxation, houses are made subject to assessment in Great B the poor-rate being imposed on houses of £6 rental and upwards.

Philadelphia, containing over fifty thousand small houses built under the auspices of loan and building fund associations, and mainly owned by their occupants; where the infinitesimal system of taxation is not recognized, where real-estate is almost the only thing subject to primary assessment, and where the current rate of taxation for the present year (1876) is in excess of two per cent (2.15) on a basis approximating market value, there is little or no complaint against the method of taxation, but only against the amount; while the contentment and general prosperity of the poorer and middle classes are admitted to be greater than in any other city of the country? *

Another illustration to the same effect and equally striking is found in the fact, that during the past year, the city of Montreal revised its system of taxation, and as preliminary to doing so, submitted to popular judgment through an official circular, prepared in the Auditor's Office, five different statements, showing in what manner the annually required municipal revenue might be raised by various forms of taxation; but in all of these the only items of personal property, which it was even suggested should be made subject to direct assessment, were the items of pleasure horses and carriages.†

The features of the proposed revision were in the direction of further simplification, — making the system to consist mainly of a taxation of one and a quarter per cent on all real property; an annual tax (to be called a business tax) on all trades, manufactories, occupations, professions, etc., not exceeding seven and a half per cent on the annual value'

*In 1874 the real estate of Philadelphia was assessed at $539,003,602, claimed to be full valuation. The personal property of the city subject to taxation for city purposes in 1875 was returned at a valuation of $9,464,873; and includes horses, carriages, furniture, and gold and silver watches.

†The system of taxation in force in Montreal previous to the revision of 1875 was as follows:

Assessment of per cent on value of real estate.

Special taxes on insurance, telegraph, ferry, and street railway companies, and on inn-keepers, billiard-tables, theatres, breweries, banks, brokers, etc.

Licenses on grocers, butchers, exhibitions, dogs, etc.

(rental) of the premises occupied; and an annual tax on pedlers, inn-keepers, theatres, ferries, street railways, and the owners of horses, vehicles, dogs, etc.; insurance and gas companies and banks; the proposed annual tax on the latter to be not in excess of four hundred dollars on every bank with a paid-up capital of one million or less, and increasing gradually for banks with capital in excess of one million.

In considering this question of the diffusion of taxation it is essential to correct reasoning that the distinction between taxation and spoliation be kept clearly in view. That only is entitled to be called a tax-law which levies uniformly upon all the subjects of taxation; which does not of itself exempt any part of the property of the same class which is selected to bear the primary burden of taxation, or by its imperfections to any extent permit such exemptions. Such taxes if not so excessive as to become a prohibition on the use of the thing taxed, become a part of the cost of all production, distribution, and consumption, and diffuse and equate themselves by natural laws in the same manner and in the same minute degree as rents, wages, cost of material, waste, and all other elements that constitute the expenses of production. "We produce to consume, and consume to produce, and the cost of consumption, including taxes, enters into the cost of production, and the cost of production, including taxes, enters into the cost of consumption, and thus taxes uniformly levied on all things of the same class, by the laws of competition, supply, and demand, and the all-pervading mediums of labor, will be distributed, percussed, and repercussed to a remote degree, until they finally fall upon every person, not in proportion to his consumption of a given article, but in proportion to his aggregate consumption. Mr. Astor bears no greater burden of taxation (and cannot be made to bear more by any laws which can properly be termed tax-laws) than the proportion which his aggregate individual consumption bears to the aggregate consumption of all others in his circuit of immediate competition. As to Mr. Astor's other taxes he is a mere tax-collector, or conduit, conducting taxes from his tenants or borrowers to the State or city treasury. A whiskey distiller is a tax-conduit or tax-collector, and sells more taxes than the original cost of whiskey;

a dealer in imported goods, like Mr. Stewart, keeps a stock of accumulated imports, foreign and domestic, for sale; the farmer charges taxcs in the price of his product; the landlord in his rents; the laborer in his wages; the clergyman in his salary; the lender in the rate of interest he receives; the lawyer in his fees; the manufacturer in his goods."

The general principle governing the diffusion of taxes is also thus happily set forth by a recent anonymous writer in the New York Tribune, and is here quoted for the reason that it is of the utmost importance to the future enactment of proper tax laws, that the popular fallacy adhered to and reenunciated by the Massachusetts commissioners, that "the tendency of taxes is that they must be paid by the actual persons on whom they are levied," should be thoroughly exploded, as it can be, by illustrations and arguments which are the farthest removed from abstract reasoning:

"Taxation is a question of interest to all, for in a civilized community every man, woman, and child is taxed. The owner of real estate pays his tax and increases his rent to a proportionate extent. The tenant must counterbalance this increase in some way, and so he increases his profits on goods sold. If the buyer of the merchandise sells it, he also obtains an advance on the cost price sufficient to cover his charges and rent; but if he retains and consumes it, he is the man who really pays the tax to the State. But he does so at the expense of the whole community, for, supposing him to be a mechanic, then in order to pay the increased price he must get increased wages, or if he be a merchant he must charge additional profits, or if a landlord he must advance his rents. The man who evades a tax robs his neighbors. The thief pays taxes indirectly, for he is a consumer and must pay the advanced price caused by his own roguery for all he consumes, although he does steal the money to pay with. Idlers, and even tramps, pay taxes, but the amount that they indirectly pay into the fund is much less than that which they take out of it. To avoid taxation a man must go into an unsettled wilderness, where he has no neighbors, for, as soon as he has a companion, if that companion be only a dog, taxation begins, and the more companions he has, the greater improvements he makes, and the higher the civilization he enjoys, the heavier will be the taxes he must pay."

Exclusive Taxation of Real Estate. Remarks of Isaac Sherman before the Committee of Ways and Means, New York Assembly, 1875.