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Home -> Merlin Harold Hunter -> Outlines of public finance -> Preface

Outlines of public finance - Preface

1. Preface

2. Chapter 1

3. Chapter 1 continue

4. Chapter 2

5. Chapter 2 continue

6. Chapter 3

7. Chapter 3 continue

8. Chapter 3 continue

9. Chapter 4

10. Chapter 4 continue

11. Chapter 4 continue

12. Chapter 5

13. Chapter 5 continue

14. Chapter 5 continue

15. Chapter 6

16. Chapter 6 continue

17. Chapter 7

18. Chapter 7 continue

19. Chapter 7

20. Chapter 7 continue

21. Chapter 9

22. Chapter 9 continue

23. Chapter 10

24. Chapter 10 continue

25. Chapter 10 continue

26. Chapter 11

27. Chapter 11 continue

28. Chapter 11 continue

29. Chapter 12

30. Chapter 12 continue

31. Chapter 13

32. Chapter 13 continue

33. Chapter 13 continue

34. Chapter 14

35. Chapter 14 continue

36. Chapter 14 continue

37. Chapter 15

38. Chapter 15 continue

39. Chapter 15 continue

40. Chapter 16

41. Chapter 16 continue

42. Chapter 17

43. Chapter 17 continue

44. Chapter 17 continue

45. Chapter 18

46. Chapter 18 continue

47. Chapter 18 continue

48. Chapter 19

49. Chapter 19 continue

50. Chapter 19 continue

51. Chapter 19 continue

52. Chapter 20

53. Chapter 20 continue

54. Chapter 20 continue

55. Chapter 20 continue



Public Finance Has Distinguishing Characteristics The Word
Finance Has No Definite Meaning Public Finance Is a Division
of Economics Public Finance Is Related to Other Sciences
Different Methods of Study May Be Used The Systematic
Study of Fiscal Problems Began in Italy French and German
Scholars Followed Italian Writers in the Study of Fiscal Prob-
lems Modern Fiscal Systems Have Well-defined Characteristics
The Interest in Public Finance Is Increasing Public Finance
May Be Studied Under Different Heads Supplementary Read-
ing Should Be Followed.

Revenue Has Received More Study than Expenditures Early
Writers Did Not Entirely Neglect Public Expenditures Early
Systems of Expenditure Were Simple The Nature of Public 4-
Expenditure Differs from Private Expenditure The Nature of
Public Expenditures Has Changed with Changes in Forms of
Government The Universal Tendency of Public Expenditure V
Has Been to Increase Increase in Public Expenditure Is Not
Confined to Any Political Unit Expenditures in the United
States Show an Upward Trend Increasing Expenditures Can- ,
not Be Considered Apart from Other Factors Many Causes Are
Responsible for the Growth of Public Expenditures Public Ex-
penditures Supply the Less Material Wants All Public Ex-
penditures Cannot Be Justified Public Expenditures Have Im-
portant Economic Effects An Accurate Comparative Study of
Public Expenditures Is Difficult Attempts to Find a Proper ---
Proportion of Expenditure to National Income Have Failed.

Many Bases Have Been Used in Attempting to Classify Ex-
penditures Some Attempts at Classification Have Been Un-
satisfactory The United States Census Bureau Classifies Ex- -
penditures Expenditures May Be Divided into Four Classes,
According to Benefit Conferred Important State Services Are
Found in Each Class of Expenditure Reference to Statistics
Shows Relative Importance of Principal Expenditures Expendi-



ture for Protection Is an Important Item States and Cities
Make Expenditures for Protection Expenditures for the Gen-
eral Government Are for the Common Benefit Consular and
Diplomatic Services Have Been Expensive Expenditures for
Education Have Been Large Highways Are an Important
Cause of Public Expenditure The Regulation of Private Indus-
try Is an Item of Increasing Importance Many Miscellaneous
Expenditures Are Made for the Common Benefit The Cost of
Providing for Dependents, Defectives, and Delinquents Is Large
Governments Often Give Pensions and Bounties to Individ-
uals Some Expenditures Are for Individual as Well as Common
Benefit Some Expenditures Are Primarily for the Individual.


Most Demands of the Modern State Are Monetary Gratuitous
Services to the State Are Unsatisfactory Public Revenues Re-
ceived Many Early Classifications The Question of Public
Lands Has Been Important The United States Has Disposed
of Her Public Lands Agitation for the Public Retention of
Forests and Mines Has Been Increasing States May Success-
fully Conduct Some Forms of Industry The Post Office Is a
Good Example of Government Enterprise States Enter Many
Fields of Activity Public Ownership Has Had Most Rapid Ex-
tension in Municipalities Revenue Has a Place of Relatively
Small Importance in Modern Public Enterprise The United
States Census Bureau Classifies Revenues Statistics Show the
Rapid Growth in Revenues Secured by Governments The
Majority of Modern Revenue Is Secured by Compulsion.


Many Ideas of Taxes Are Inaccurate Some Terms Used in Con-
nection with Taxes Are Important The Economic Effect of
Taxes Has Received Much Consideration Adam Smith Gave
Four Maxims in Regard to Taxes Many Attempts Have Been
Made to Classify Taxes-praxes May Be Justified but Not Meas-
ured by the Benefits Conferred by the State Faculty Is Usually
a Satisfactory Measure for Taxes Many Problems Arise in
Measuring Ability The Social Aspects of Taxes Deserve Con-
sideration States Do Not Always Attempt to Follow Principles
of Justice in Levying Taxes.

Several Factors May Be Considered in Classifying Revenues-
Fees Have an Important Place in Revenue Systems The Char-
acteristics of Fees Vary Fees Have Held an Important Place
in the Fiscal Systems of European Countries Fees Have Been
Used Extensively in the United States Fees Have Important
Social and Political Aspects Special Assessments Resemble



Taxes and Fees The Special Assessment Has Been Used More
Extensively in the United States than in Europe The Justice
of Special Assessments Has Not Been Destroyed by Difficulties
Encountered in Their Use Prices Are Paid for Commercial
Services Supplied by the Government States Have Sources of
Revenue of Minor Importance.


Modern Revenue Systems Have Developed Since Feudalism
Early Taxes in England Took a Variety of Forms Later Eng-
lish Taxes Are More Permanent Indirect Taxes Play an Im-
portant Role in the Fiscal System of France The Prussian Tax
System Has Had a Systematic Development Fiscal Develop-
ment in American Colonies Was Not Uniform The Central
Government Encountered Difficulties in Financing the Revolu-
tion The Federal Constitution Contains Important Fiscal Pro-
visions Numerous Taxes Make Up the Revenues of the United
States Definite Tendencies Are Indicated by Fiscal Systems.


The Justice of a Tax May Depend on Its Shifting and Incidence
A Study of Shifting and Incidence Is Fundamentally a Study
of Price General Poll and Income Taxes Cannot Be Shifted
Land Taxes Are Often Called Burdenless Taxes Taxes on
Buildings May Be Shifted The Capitalization Theory Has Been
Ably Criticized All Taxes on Monopolies Will Not Be Shifted
to the Consumer Taxes on Competitively Produced Goods
Have Varying Effects Shifting of Taxes Is Influenced by the
Elasticity of Supply and Demand.


Modern Customs Duties Apply Chiefly to Imports Various
Motives May Prompt the Levy of Customs Duties The Inci-
dence of Customs Duties Is Important Problems Arise from
the Use of Customs Duties Definite Principles Should Be Fol-
lowed in Levying Customs Duties Early United States Tariffs
Combined Fiscal and Protective Aspects The War of 1812 In-
creased the Sentiment for Protection The High Tariffs Were
Followed by Reduced Rates The Panic of 1857 and the Civil
War Changed the Course of Tariff Rates Revenue Is Given
First Consideration in English Tariffs Other Countries Have
Used Tariffs for Industrial and Fiscal Purposes.


The Federal and State Governments Impose Many Taxes Ex-
cise Duties Are Taxes upon Consumption The Use of Excise
Taxes Presents Various Problems Excise Taxes May Have
Industrial and Social Effects Different Methods Are Used in



Levying Excise Taxes Excise Taxes Will Continue to Form a
Part of Fiscal Systems The United States Has Effective Ma-
chinery for Administering Excises The United States Did Not
Use Excises Extensively Before the Civil War The Civil War
Excises Have Been Permanently Retained Excise Taxes Have
Important Places in Foreign Fiscal Systems Government In-
dustries May Have Effect of Excise Taxes Capitation Taxes
Are No longer Important in Fiscal Systems Business Taxes
Have Been Extensively Developed in France and Prussia
Business and License Taxes May Be Extended by American Fis-
cal Authorities.


Taxes on Property Have Developed from Early Times Demo-
cratic Ideals Have Influenced the Tax System The Southern
and Western States Present Centralized Tax Systems Some
Features of the Early Property Tax Do Not Now Exist Marked
Variations Occur in the Assessment of Real Property Much
Personal Property Is Not Assessed Difficulties Arise in Exempt-
ing Property from Taxation Evils of Double Taxation Arise
with the Use of Personal Property Taxes The Proper Handling
of Indebtedness Is Difficult The Personal Property Tax Dis-
criminates Among Classes The Personal Property Tax De-
grades the Morals of Citizens The General Property Tax Is
Intrenched in the United States.


Constitutional Provisions Present Difficulties Attempts Have
Been Made to Correct Real Estate Assessments Many Devices
Are Used in Personal Property Assessments Classification of
Property for Taxation Has Been Attempted Limitations Have
Been Placed upon Tax Rates and Borrowing Power The Sep-
aration of Sources of Revenue Has Been Advocated The Pres-
ent Tendency Is to Centralize Fiscal Authority The State Tax
Commission Presents the Best Example of Centralization Tax-
ation of Property Remains Unsatisfactory.


The Use of Income Taxes Represents a Developed Fiscal System.
Difficulties Arise in Denning Income The Concept of Income
Is Sometimes Modified to Conform to Justice in Taxation Vari-
ations Occur in Methods of Levying Income Taxes Fiscal Au-
thorities Meet Difficulties in Ascertaining and Classifying In-
comes The Income Tax Has Been Successfully Used in England
Prussia Has Used Income Taxes Successfully Many Other
Foreign Countries Use the Income Tax Federal Income Taxes
in the United States Have Had No Systematic Development-
Federal Income Taxes Were Attempted in 1894 The Present



Federal Income Tax Was Made Possible Through a Constitu-
tional Amendment The Income Tax Was Modified by the
Revenue Act of 1916 Defects Appear in Federal Income Taxa-
tion Income Taxes Have Been Used by Several States.


The Inheritance Tax Is Not of Recent Origin The Inheritance
Tax Was Much Discussed by Early Economists The Inherit-
ance Tax Is Widely Advocated at Present Some Justify the In-
heritance Tax as a Regulator of Fortunes The Benefit Theory
Has Been Applied to Taxing Inheritances The Inheritance Tax
Conforms to Modern Fiscal Concepts Most Objections to the
Inheritance Tax Are Weak The Courts Have Strengthened the
Position of the Inheritance Tax Problems Arise in Formulating /
Inheritance Tax Laws Conflicting Jurisdictions Create Serious 1
Problems The Federal Government Has Not Regularly Used
Inheritance Taxes Inheritance Taxes Are Important in the
Fiscal Systems of Some States The Inheritance Tax Is Used
Extensively Abroad.


Different Causes Have Placed Special Taxes on Corporations
Special Corporation Taxes Take the Form of Franchise Taxes
Taxation of the Franchise to Be Presents Serious Problems
Taxes upon Capital Have Been Most General Public Utilities
Frequently Have Been Subject to Special Taxes A Tax on
Gross Earnings Presents Difficulties Taxes on Net Earnings
Have Not Been Satisfactory Taxes on Value Are Becoming
More Popular Taxes on Public Utilities Are No Longer Needed
for Regulation New York Furnishes the Best Example of
Special Franchise Taxation Some Corporations Have Been
Taxed in Special Classes Taxation of Foreign Corporations Has
Proved Troublesome The Federal Government Taxes Corpora-
tions Taxes Have Been Placed upon theJTransfer of Corporate

CHAPTER XVI. THE SINGLE TAX * . " . . ~ . f . >'. T . * . 5 . . . 363
The Proposal for a Single Tax Is Not a New One Henry George
Was Responsible for the Modern Single Tax Proposal The Single
Tax Program Has a Broad Social as Well as Fiscal Significance
The Principle of Natural Rights Is Not Generally Indorsed
Social Values and Unearned Increments Are Not Confined to
Land The Social Claims for the Single Tax Have Not Been
Proved The Use of the Single Tax Would Reveal Undesirable
Features and Difficulties The Burden of the Single Tax Would
Be Most Severely Felt by Rural Districts Various Tactics Have
Been Employed in Propagating the Single Tax The Single Tax
Campaign in Oregon Did Not Show Substantial Results The


Advocates of the Single Tax Have Been Active in Other States
The Single Tax Has Found Adherents Outside the United
States The Single Tax Agitation Has Emphasized Defects in
Our Fiscal System.


Indebtedness Is Characteristic of Modern Fiscal Systems All
Aspects of Public and Private Debts Are Not the Same The
Economic and Political Effects of Public Indebtedness Are Im-
portant All Countries Have Not Taken the Same Attitude
Toward Extinguishing the Public Debt Public Debts May
Take a Variety of Forms Many Problems Arise in Floating a
Bond Issue Administering a Public Debt Presents Complex
Problems A Study of Indebtedness in the United States Pre-
sents Interesting Conclusions The Indebtedness of Many ^
Countries Has Reached Vast Proportions.


The Importance of Proper Fiscal Administration Has Been
Underestimated The Administration of Public Funds Should
Harmonize with Other Institutions The Expenditure of Public
Funds Is Carefully Scrutinized Revenues and Expenditures
Should Be Closely Correlated England Has Done Much to
Systematize Her Fiscal Operations Many European States Use
a Form of Budget -The Fiscal Machinery of Canada Resembles
That of England Budget Development in the United States
Has Been Toward an Unsystematic System The Present Plan
of Estimating Revenues and Expenditures Is Unsatisfactory
Much Agitation for Budget Reform Has Developed The Bud-
get System of Fiscal Administration Is Found in Many American
States The Administration of Municipal Finance Is Receiving
Much Attention The Outlook for Proper Fiscal Administration
Is Encouraging.


Expenditures for War Furnish the Best Examples of Emergency
Financiering The Problem Is to Secure Revenue or Materials
Borrowing Possesses Some Evident Advantages Borrowing Is
Likely to Increase the Cost of War Borrowing Does Not Shift
the Burden of War to the Future The Extensive Use of Taxes
Has Much to Commend It Borrowing Usually Has a Legiti-
mate Place in Emergency Financiering The Proper Combina-
tion of Loans and Taxes Forms the Best War Finance Policy
Earlier Wars of the United States Were Financed Largely
Through Borrowing The United States Made Extensive Use
of Taxes in Financing the Great War Administrative Problems
Developed from the Tax Laws The United States Borrowed
Extensively During the Great War Fiscal Problems Did Not



End with the War England Financed the War Through a Com-
bination of Loans and Taxes The Revenue of France Was
Secured Largely by Borrowing The Central Powers Used Loans
Most Extensively The Methods Used by the Different Coun-
tries Present Interesting Comparisons.


The Cost of War Presents a Variety of Aspects The United
States Was Not Free from War Costs During Its Early History
The Civil War Augmented Our War Burden The Cost of the
Great War Eclipsed Any Previous War Expenditures The Ex-
pansion of Money and Credit Greatly Affected the War Cost
The Indirect Costs of the War Must Not Be Overlooked.


The Fiscal Burden Will Continue to Be Large Different Politi-
cal Units Will Use the Same Bases for Taxes The Social Point of
View Has Gamed in Prominence The Employment of Fiscal
Experts Is Encouraging The Study of Fiscal Subjects Is In-
creasing A More Enlightened Public Is Needed Tax Laws
Need Simplification Attempts Have Been Made to Outline a
Model System of Taxation.



INTEREST in fiscal problems has grown rapidly. Twenty-
five years ago the subject matter of Public Finance
aroused comparatively little discussion. While public ex-
penditures were continually on the increase, wealth and
population were increasing more rapidly, so that no greater
per capita burden was felt by the citizen. To-day the
situation is different. The demands upon the public purse
have become so large, because of extended and increased
governmental activities, that the burden of taxes has
begun to be felt, and in many cases it has begun to cut
deeply. A few decades ago, therefore, the principles of
Public Finance primarily commanded the interest of pub-
lic officials, while at present the citizen upon whom the
tax burdens fall is also interested. He is beginning to ask
what is being done with the funds he has paid in taxes,
whether he is paying more than his share, whether the
funds are properly handled, and what can be done to
secure a better fiscal system.

The nature and rapid increase of public expenditures,
as well as the objects for which they are made, have be-
come of general interest. The public has learned to place
so much reliance upon the activities of the government
that it is continually demanding that new activities be
undertaken and that old ones be carried out more
efficiently. The per capita expenditures of the cities for
education, and the expenditures of the states for educa-
tion and the care of defectives, delinquents, and depend-
ents, have reached an amount that would have been
considered enormous a few years ago. The nature of the
expenditures of the different political units, the extension


of governmental activities, accompanied by increased tax
burdens, have caused the individual to weigh more care-
fully the resulting utilities. The greatest item of expendi-
ture, and the one which has made tax burdens most press-
ing, has been for war or the preparation for war. The
Great War has caused the indebtedness of the principal
nations to reach figures which are incomprehensible, the
burden of which will last for years. Consequently, the
nature and growth of public expenditures, the forms and
costs of public indebtedness, the possible methods of
financing an emergency, such as a war, as well as the direct
and indirect costs of war, are no longer of interest to fiscal
officials alone, but are commanding the attention of the
general public, upon which the burden finally rests.

The rapid increase in public expenditures has made it
necessary to seek new fields for revenue, and the taxpayer
has come to demand a justification for the new taxes he is
called upon to pay. The Federal government still relies
extensively upon customs 7 duties and excise taxes, and
these, of course, deserve consideration; but in recent
years it has begun to use corporation taxes, income taxes,
excess profits taxes, and inheritance taxes. The states
have ceased to secure their entire amount of revenue from
property taxes, but are using corporation taxes, business
and license taxes, income taxes, and inheritance taxes as
well. The localities are supplementing property taxes
with numerous license payments. These are taxes the
burden of which the citizen is required to bear, and he
not only has the right to know something of their merits
and difficulties, but it is his duty to be informed. To
accomplish this a somewhat extended discussion of each
of these forms of revenue becomes necessary.

The pressure of the tax burden has caused much con-
cern about justice, the pointing out of many problems,
followed by many suggestions for reform. The proper
method of levying a tax, together with its shifting and
incidence, can be properly understood only when the dis-


cussion is based upon sound economic principles. Loose
thinking, which has otherwise resulted, has been respon-
sible for the proposal of reforms which cannot stand
under the light of reason. Some of these, such as the
single tax, have been propagated to such an extent as to
need special emphasis, while others can be dismissed
much more easily.

It is to help the student, the general reader, and the
public official to secure a better understanding of the
nature of public expenditures and revenues, and the prin-
ciples which underlie a sound fiscal system, that the fol-
lowing chapters have been written. They are in no sense
an exhaustive treatment, but, as the title of the book in-
dicates, an outline, which could easily be expanded. An
attempt has been made to eliminate tedious theoretical
and philosophical discussions, which cannot easily be
understood, as well as to limit the amount of historical
material. Some theory will, of course, be found in the
necessary underlying economic principles, and historical
backgrounds and illustrations will frequently be used.
Primarily, however, the purpose is to emphasize the prac-
tical aspects of the field of Public Finance, and to acquaint
the taxpaying citizen with the important aspects of ex-
penditures and revenues with which he is continually
coming in contact.

In a book of this nature it is impossible to acknowledge
all the sources to which one is indebted. Much of the
material has been collected from general reading for my
courses in Public Finance and Taxation, and acknowledg-
ment must be made to all the important writers in this
field. I cannot refrain from mentioning Profs. A. A.
Young and T. S. Adams, under whose instruction my
interest in fiscal problems began to develop. Many of
my friends and colleagues at the University of Illinois
have rendered valuable assistance. Dean Charles M.
Thompson has devoted much time to reading the manu-
script and has given many valuable suggestions, as has

also my colleague, Prof. N. A. Weston. Mr. E. E. Leisy,
of the department of English Dictionary, carefully read the entire
manuscript for corrections in composition. Others have
assisted in reading proof and in numerous other ways, an
indebtedness to whom I hereby acknowledge.


July 1, 1921.

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