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Home -> Merlin Harold Hunter -> Outlines of public finance -> Chapter 4 continue

Outlines of public finance - Chapter 4 continue

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

Deficits often occur,
not because the enterprise could not be made financially
successful, but because the aim in view has been to give a
service at a low cost. In measuring the success of a public
industry, then, the aim with which it is conducted must
always be considered. In most cases the fiscal aim has
been superseded by the desire to give a public service.

58. The United States Census Bureau Classifies Rev-
enues. The classification of revenues which is used by
the census bureau is similar to its classification of expend-
itures, in that it is largely for mechanical purposes. The
reports must be based upon official records, and since
there is a lack of uniformity in the various political divi-
sions, a detailed classification would be impossible. Only
a broad statement of receipts, therefore, has been at-
tempted. A number of classes have been formed with a
definite meaning assigned to the terms used to designate
them. The meaning assigned has been taken from the
usage of the best authorities on fiscal problems, modified
in particular instances by some special requirement.

Revenue Receipts. The two primary classes of revenues
correspond to the two primary classes of expenditure.
They a.re revenue receipts an4 norjreyenue receipts, The


former applies to all money and wealth received by gov-
ernmental bodies which increase the aggregate assets with-
out increasing the liabilities. Under this head the follow-
ing items are listed, a detailed discussion of which will be
taken up in succeeding chapters: general property taxes;
special property taxes; poll and occupation taxes; special
assessments; business and income taxes; business license
taxes; nonbusiness license taxes; fines, forfeits, and
escheats; highway privileges; interest and rents; sub-
ventions and grants; donations and gifts; earnings of
general departments; and earnings of public service

Nonrevenue Receipts. The class of nonrevenue receipts
is described by the census bureau as follows: "The term
nonrevenue receipts is applied to all receipts of a civil
division other than its revenue receipts, as previously
defined. The nonrevenue receipts of a fiscal year of any
civil division comprise all receipts recorded during the
year from (1) sales of investments and of supplies which
have been purchased for sale; (2) issue of debt obligations
and transactions which increase the indebtedness without
the issue of formal debt obligations; (3) trust and agency
transactions; (4) receipts offsetting outlays, as the col-
lections of insurance to be applied to the reconstruction
of destroyed property, refunds of erroneous payments,
and receipts in error; and (5) such counterbalancing re-
ceipts as transfers between the funds or divisions of the
governmental unit." From the nature of the items in
this second classification, it is readily seen that it occupies
a place of comparative unimportance. In so far as the
discussion of succeeding chapters deals with revenue,
therefore, the revenue receipts will occupy a place of much
greater importance than nonrevenue receipts.

59. Statistics Show the Rapid Growth in Revenues
Secured by Governments. The lack of uniformity in
fiscal systems of the various governmental bodies makes
it difficult to get accurate comparative statistical data.



The census reports on the revenues of the Federal govern-
ment and of the states are accurate enough, however, to
show the rapid growth in the amount of funds secured.
The following table shows the revenue receipts of the
Federal government for 1903 and 1913, the last year which
can strictly be classed as a year of normal operations.
It is seen from this table that from only one source the
revenue was less in 1913 than it was in 1903. The
total increase is a little less than 50 per cent. The interest
of the table will be enhanced by briefly noting the signifi-
cance of the items. The important item under special
property taxes is the customs receipts. The tax on the
circulation of national bank notes and some other small
items are included. The four-dollar levy upon each alien
entering the United States makes up the bulk of the poll
tax. Business taxes consist of the internal revenue collec-
tions other than those from liquor. The returns from the
income tax, since its inauguration, are also included here.

The receipts from taxes upon liquor comprise the re-
turns under liquor licenses and other imposts, while the
amount received from certain liquor and trade licenses in
Alaska comprise other business licenses. The important
source of interest is the amount paid by banks on govern-
ment deposits. Formerly the government owned a num-
ber of industrial securities, principally railroad, which
were interest-bearing, and which helped to swell this item.
Many items go to make up the earnings of the general
departments. Some of the more important included in
these earnings are the returns from the consular, patent,
and land offices, rents of buildings and grounds, receipts
from the sale of materials, profits on coinage, and receipts
from forest reserves. The earnings from public service
enterprises include such items as the postal receipts and
returns from the Panama Canal.
Receipts from inheritance
taxes are placed with the special property taxes. The
remarkable increase in nonbusiness license taxes is due
to the general practice of licensing automobiles. The
large decrease in returns from public enterprises can be
explained in a measure by South Carolina giving up the
state dispensary method of handling liquor.

It must be remembered that this is a general table
showing the combined figures of forty-eight states. The
tendency for particular states might be entirely different
from the general results. A study of the general property
tax in the states, for example, will show that in some cases
it is becoming of comparatively little importance as a
source of state funds. Likewise many states show a
decrease in a number of the items hi spite of the increase
indicated by the combined figures.

60. The Majority of Modern Revenue Is Secured by
Compulsion. Revenue systems have gone through a long
process of development, and it is only in recent years
that they have assumed their present form. The early
state scarcely functioned so as to commend itself for sup-
port by its citizens. Revenues had to be secured from
independent sources, such as public lands. These soon
became inadequate, and the public consciousness had not
been sufficiently aroused to permit the direct exaction of
funds from the citizens. Roundabout methods had to be
used, such as claiming a payment for a more or less ficti-
tious service, or by the use of taxes, the burden of which
was hidden by their indirectness. It has only been with
the development of a high sense of individual responsi-
bility in public affairs that the state has made compulsory
levies upon individuals and property without creating a
disastrous antagonism.

Historical Development. Various writers have traced
the historical development of the idea of compulsion.
The available sources of funds often proved insufficient
and the citizenship had to be relied upon to meet the

need. That it was looked upon as a gift to the state is
evidenced by the terms donum and benevolence, the desig-
nations by which the first payments by citizens were
known. That the state had to implore help at times is
shown by the fact that revenues sometimes were called
prcecarium and bede. The idea that the state had a right
to expect assistance from its citizenship, or that the citi-
zens should be under obligation to sacrifice anything for
the welfare of the state, did not develop until later. That
these ideas did develop, however, is shown by such rev-
enues as the aid, steuer, and duty. The more modern stage
was reached when the right of the state to assess, levy,
and collect funds from its citizenship became recognized.
The use of such expressions as impost and tax marks the
beginning of this modern situation, in which the citizen
is so interested in the welfare and activities of the state
that he will consent to pay the levies that are placed upon

English Poor Rates. An interesting example of this de-
velopment is found in the poor rates of England. It be-
came 'necessary, very early, that the state give assistance
to the poor, and funds had to be secured. At first volun-
tary contributions were made. It was not long until the
amount secured by this means was insufficient, and the
authorities were instructed to prosecute those who had
not contributed. This did not succeed in getting what
was considered a just amount from the various contribu-
tors, and power was conferred upon the justices of the peace
to determine what would be considered a reasonable con-
tribution, and if it were not made, prosecution was likely
to follow. The next change was to that of regular levies,
with a compulsory payment of the amount. This policy
has continued to be used to the present.

Motives Beneath Modern Revenues. Many of the mo-
tives suggested in this sketch of the development of
revenues, no doubt, are still active. Gifts still form a
part of the revenue of most governmental units, either as


a conscience fund or for the building or endowing of some
public institution. The feeling of obligation, moreover,
often prompts payments for particular purposes. The
state may still receive returns from the conduct of indus-
try, the products of which are purchased by the citizens
of their own volition. Yet the sum total of these would
form a small share of the income of the modern state, for
the greater part of the amount received would doubtless
remain with the individual if he were not compelled to
turn it over to the public treasury. Even the modern
sense of public duty has not been developed to such an
extent that all state activities would be supported by
voluntary contributions. It will be the various classes of
these compulsory exactions with which the succeeding
chapters will deal most extensively.

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