value and levy the tax, the delay in the arrival of the collector often brought about the loss of the entire crop, which rotted in the fields.

The ad valorem duties levied on imported goods lie open to objection under this rule. There is less certainty with regard to the amount that can be collected under this method than there would be if specific duties were levied instead.

3. Taxes should be levied at a time when the taxpayers find it most convenient to pay them.

When taxes are thus levied, much of the disagreeableness is taken off the burden. In this particular, indirect taxes have an advantage over direct, since the consumer, on whom the indirect tax falls, pays the tax when he buys the commodities. He can, in many cases, refrain from buying the article altogether, or he can limit his purchase in proportion to the amount he is content at the moment to pay.

Bonded warehouses here offer an advantage in permitting the merchants to defer the payment of the tax on goods they have bought, until such time as they are ready to take them out or until purchasers appear for them.

In the same way, bills of exchange made out for long periods allow the sellers of goods to defer the payment of taxes until the goods have been paid for by the purchasers.

4. "Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state."

Taxation ought to be as economical to the state as possible. It is unwise to impose taxes of such a nature that for various causes the benefit derived to the state will not be proportionate to the losses sustained by the taxpayers. There are several signs by which such uneconomical taxes may be recognized.

(1) Taxes are uneconomical when they have the effect of lessening production. Excessive taxation will produce this result. It will cause capital to withdraw from productive enterprises, and the wealth of the country will decrease. "When

taxation absorbs too large a share of the produce, labor is discouraged and economic decline sets in. Under Louis XIV, vines were uprooted to escape the taxes called Aids, which, according to Vauban, often amounted to the price of the vintage. The two most powerful empires of the world, the Roman and that of Charles V, were both ruined by excessive taxation." (E. de Laveleye, Elements of Political Economy, transl. by A. W. Pollard.)

Should the land tax exceed the economic rent of the land, the land will not be cultivated and production will decrease. When production is thus affected, the very source of taxes is lessened.

When taxes exceed the incomes, the taxes must be paid out of capital. This may not be an evil, nor can it always be avoided, but the diminution of capital should not be so great that it would bring about a marked decrease in production.

Should the tax on personal property be excessive, greater efforts will be made to conceal its ownership, and the owners may be driven to take up their domicile in other lands.

If heavy taxes are placed on productive property, industry will be hindered and the wealth of the country will be reduced. "In many villages in Palestine, the wealth-bringing palm trees have been torn up, because each tree was taxed." (E. de Laveleye, Ib.)

(2) Taxes are uneconomical when they require a great expenditure in collecting, due to the establishment of numerous officers and bureaus. Internal taxes on particular commodities would entail great expense in the collection. Such taxes were frequent in England in the past.

(3) Taxes are uneconomical when labor and capital are deflected by them from more productive to less productive industries. This happens, as was seen in preceding pages, as the result of tariff duties which divert capital and labor into industries from which the returns are less in profit and in product, in proportion to the amount of capital and labor employed, than they would be if employed in self-supporting industries.

(4) A tax is uneconomical when many are ruined by the

penalties and fines imposed on them for attempted evasion of the tax, and their capitals are withdrawn from active coöperation in the prosperity of the country.

(5) A tax is uneconomical when people are subjected “to the frequent visits and odious examinations of the taxgatherers, and exposed to much unnecessary trouble, vexation, and oppression." (Cf. Adam Smith, Wealth of Nations, Bk. V, ch. 2.) The preceding four laws are laid down by Adam Smith and have become classical. In addition to these, the following principles may be given:

5. The property of all persons should be appraised for taxation at the same ratio of value.

6. Taxes should be levied only for public purposes. Any tax that helps only one individual class is unjust.

7. Double taxation should be avoided, as it imposes a twofold burden upon the taxpayer. There is double taxation, for example, when the same objects or occupations are levied upon by both federal and state governments.

8. "Taxes ought never to be raised from immoral sources, such as lotteries and gambling houses." (De Laveleye, Elements of Political Economy, transl. by A. W. Pollard.)

9. All those things which constitute the necessaries of life should as far as possible be exempt from taxation. Instead of the necessaries, those things should preferably be taxed which conduce to the superfluous luxury of the wealthy, or which may become a menace to the morals of the community.

10. In like manner, in customs duties imposed on imports, those foreign articles should be taxed which minister to the luxurious tastes of the rich, rather than those which are of daily need to the poor.

II. Personal property, which is generally unproductive, should be taxed rather than immovable property which is employed in a productive capacity and serves in the various industries to increase the wealth of the country.

12. Establishments which, like hospitals, etc., are intended for the use of the public should be free from taxes.

III. PUBLIC DEBTS

Public Loans. When a country cannot collect through taxation sufficient revenue for the maintenance of the government, it must resort to raising money by loans.

A country contracts a debt when it issues bonds which mature at some future date and pay interest until maturity. All the holders of such bonds become the creditors of the government.

The money lent to the government on bonds may come from the inhabitants of the country; or the bonds may be bought up in great measure by foreign bankers and investors, and thus a large amount of foreign capital may be brought into the country. This is an advantage in one sense, but when a country that has borrowed abroad comes into financial straits, it may be exposed to disagreeable interference on the part of the foreign powers whose monetary interests become endangered.

Bond issues made in order to raise revenue impose a burden upon future generations. The interest on the bonds must be paid until the maturity of the bonds, and this interest as well as the principal ultimately must come from taxes imposed on the citizens.

Loans should not ordinarily be resorted to as a means of raising revenue. The country should depend on its own internal resources and find in taxation a sufficient source of revenue.

It is contended that there are only two circumstances that would reasonably warrant government loans:

1. The sudden emergency of a war, which may not easily be foreseen and which will entail extraordinary expense.

2. The construction of public improvements that will benefit not only the present generation but all generations to come. When such public works are to be made use of by future generations, it is only right that they should bear a part in the expense. Public Debts. - The debts contracted by a government are of various kinds :

(1) Floating Debt. - A floating debt consists of the shortterm obligations of the government, unsecured by any fund.

Such obligations resemble the current obligations in the form of promissory notes incurred by business men in the course of business.

(2) Funded Debt. - A funded debt consists of formal obligations issued by the government guaranteeing the payment of interest up to maturity and the payment of the principal at maturity. These obligations are government bonds.

(3) Refunded Debt. A funded debt represented by bonds bearing a certain rate of interest may, before or at maturity, be changed into a new debt represented by bonds bearing a lower rate of interest. The debt is then said to be refunded. In 1900 (Mar. 14), the 3, 4, and 5 per cent bonds of the United States then outstanding were converted into the 2 per cent consols; that is, the older bonds were paid off with the money raised by issuing the new bonds.

On June 30, 1912, the interest-bearing debt of the United States was as follows:

1. What are the sources of government revenue?

2. What is the extent of the public domain of the United States? How can revenue be derived from it?

3. How can public businesses become a source of revenue?

4. How is revenue collected through fines, fees, and assessments? What are the evils of the fee system? What advantage is claimed for it?

5. What is a tax? Whence arises the right of the state to tax?

6. Give the different kinds of taxes.

Explain briefly each kind. Why

are some taxes called direct taxes, and others indirect taxes? 7. What methods are used to gain knowledge of the property of tax

payers?