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(tolumbta lllnt\?ersttp FACULTY OF POLITICAL SCIENCE Nichillas Murray Butler, LL.D., President. J. W. Burgess, LL.D., Pro fessor of .Political Science and Constitutional Law. Munroe Smith, J.U.D., Professor of Comparative Jurisprudence. F. J. Goodnow, LL.D., Professor of Administrative Law. E. R. A. Seligman, Ph.D., Professor of Political Economy and Finance. B. L. Osgood, Ph.D., Professor 01 History. Wm. A. Dunning, Ph.D., Professor of History. J. B. Moore, LL.D., Professor of International Law. F. B. Giddings, LL.D., Professor of Sociology. J. B. Clark, LL.D., Professor of Political Economy. J. B. Robinson, Ph.D., Professor of History. W. M. Sloane, L.H.D., Professor of History. B. R. Seager, Ph.D., Adjunct Professor of Political Economy. B. L. Moore, Ph.D., Adjunct Professor of Political Economy. W. R. Shepherd, Ph.D., Instructor in History. A. S. John son, Ph.D., Tutor in Economics. B. A. Cushing, Ph.D., Lecturer in History. J. T. Shotwell, A.M., Lecturer in History. G. W. Botsford, Ph.D., Lecturer in History. G. J. Bayles, Ph.D., Lecturer on Ecclesiology. SCHEME OF INSTRUCTION GROUP I. BISTORYAND POLITICAL PHILOSOPHY. SUBJECT A. European History, sixteen courses. SUBJECT B. American History, nine courses. SUBJECT C. Political Philosophy, three courses. SUBJECT D. Ancient History, seven courses. GROUP II. PJJBLlC LAW AND COMPARATIVE JURISPRUDENCE. SUBJECT A. Constitutional Law, four courses. SUBJECT B. International Law, four courses. SUBJECT C. Administrative Law, seven courses. SUBJECT D. Roman Law and Comparative Jurisprudence, seven courses. GROUP III. ECONOMICS AND SOCIAL SCIENCE. SUBJECT A. Political Economy and Finance, fifteen courses. SUBJECT B. Sociology and Statistics, ten courses. Most of the courses consist chiefly of lectures; a smaller number take the form of research under the direction of a professor. In each subject is held at least one seminar for the training of candidates for. the higher degrees. The degrees of A.M. and Ph.D. are given to students who fulfil the requirements prescribed by the University Council. (For particulars, see Columbia University Bulletins ot Information, Faculty of Political Science.) Any person not a candidate for a de. gree may attend any of the courses at any time by payment of a proportional fee. University fellowships of $650 each, the Schill fellowship of $600, the Curtis fellowship of $600 and University scholarships of $150 each are awarded to ap· plicants who give evidence of special fitness to pursue advanced studies. Several prizes of from $50 to $250 are awarded. The library contains over 340,000 vol. umes, and students have access to other great collections in the city. ~ PRINCIPLES OF JUSTICE IN TAXATION STUDIES m HISTORY. ECONOMICS AND PUBLIC LAW IDITED BY THE fACULTY Of POLITICAL SCIENCE OF COLUMBIA UNIVERSITY Volume XVIO Number 2 PRINCIPLES OF JUSTIC ErN TAXATION BI' STEPHEN F. WESTON, Ph.D. NtlD mark THE COLUMBIA UNIVERSITY PRESS mE MACMILLAN COMPANY. AGENTS 1mmoIt: P. S. KIKa a: So. 1903 PREFACE. THE subject of this monograph was chosen in 1891 while I was taking post-graduate work at Columbia University. The first draft was nearly finished in the spring of 1894 when I was compelled to give up work for a time on account of ill health. Engaging in academic work in the fall of 1894 I was again obliged to set the monograph aside until the winter of 1900. Since then it has been completely rewritten and chapter VIII added. For his constant interest and encouragement I feel greatly indebted to Professor Seligman. for otherwise the monograph would not have been completed. I wish. also. to take this occasion to express my appreciation for the courtesy shown to me by the Faculty of Political Science of Columbia Uni versity in giving so much extension of time for the comple tion of my monograph. To Dr. Alvin S. Johnson. of Columbia U~iversity. I am indebted for verbal changes of text and for reading of proof. S.F.W. AlrnOCH CoLUGII, Y&LI.OW S.... IKGS. OHIO. May. 19OJ. TABLE OF CONTENTS .... CHAFfER I lJn1lO1117CTI0il. • • • • • • • • • • • • • • • • • • • • • • • • •• •• •• • • • • •• • • • • • • • • • • • • •• • • II CHAPTER II 11m OJUGUI AlID NATUU O. TID srAU L THa INDIYJDOAL AND SocJBrt...... ........... ...... .... 19 O. 0IlIcI" a. TH. STAU • •• •• • • •• • • • • • • • • • ••• • • •• • • • • •• • • •• •• •• •• J4 OL THa NATUU O. TID STAU...................... •••• ••••••••••• 26 IV. OiAa.u:T1IJUmca O. 11m STAU •••••••••••• • • •• •• • • •• • • • • • •••• • • •• I. 1"11 y~ tJU ItrWI"tf/.'7 CAtlrtulw 1/ PtJIilUfII Org""u.- Ii... ..................................................... .. L TIl 0rpttU ~ I/IA, SIIII# •.••• ••••••• •••• ••••••• ••••• 31 J. TIl.,...",,, Sww~.......... ...... ...... .... .... .... 36 CHAPTER III TAXATIOJ'. lICONOlllCS AlID lIrrHICS I. TAXAnoR ••••••••••••••• •••••••••••••••••••••••••••••••••••• 43 •. 1"IIN--.". T .......................................... 43 L a.r.,lwidiall/. T.................... .................... 46 J. TAlI Li.iII "T_"lillll.......... .... .... ................. SO IL TAXA"nO" AND EcoNOIIICS....... •••• ..... ..... ...... .......... 54 I. T_.Ii... .uPrtltllMliIItI ........... '" ................., .. 55 .. T_tJli.... "'" DUiru,.,;"" • • .. • • • ... • • • • .. • • • • • • •• ........ eo J. T_tJIiIItI .,,4 C_pli... ................................ 65 ilL TAXA"nON AND E'I1t1cs .......... _. •••••• •••• •••• • ••••• •••••• •••• 68 CHAFfER IV THK I'OLI'I1CAL BASIS AND PRINCIPLES O. TAXATION L TIl. SocIAL CoHTIlACT AND TAXATION............................ 76· •• Tit, PMlictll PltiUNpltwl •••••••• .. • • .. .. .. .. • • .. .. .. • • • • •. 77 .. TAlI PrNM/i... Tw'7 "I T_tJli"".... •••• •••• • ••••••••• •••• BS- 343] 7 8 CONTENTS ~ n. nra EvoLtmoN Tllllou 01' THIt STATa AND TAXATION.... ••••••••• 90 In. TIu UTwTAlUAN THJi:OaV OFTHII STATa AND TAXA'ItOK.... •••• •••• 98 I. '71N~,. NiI/.................. ...... .... ............ 99 .. 7L Uti/iM-u. TII~ -f S- aM.., AIIIIrWti SCM«.... •••• loa IV. Soa.u. THEGal1S AND TAXATION •••••••••••••••••••••••••••••••• 106 I. A....mint ••••••••••••••••••••••••••••••••••••••••••••••• 106 .. C__ ... int •...••••••••••••••••. ••••••••••••.•••••••••. 107 ' 3- S«I"ds. •••••••••••••••••••••••••••••••••••••••••••••••• 108 V. CONCLVSIONS AS TO nul 1'oUT1CA1. BAsIs AND I'alNCIPUS •••• , • • • • •• III .CRAPrER V Ttu: ICONONIC BASIS AND HlNC1J'LIS 01' TAXATION I. THIt PHYSlOCMTS AND THIt SIl\IG\~ TAXUIS ••••••••••••••••••••••• 116 I. n~ Eltj'Si«r1lb ••• ; ••••••••••••••••••••••••••••••••••••••• 116 , .. TIt~ S;+ Tax,.., •••• , ••• •• • • • • •• • • • . •• . • •• ••• •••••••••• 119 U. THIt CLASSICAL ScHOOL 01' EcoNoMISTS •••••••••••••••••••••••••• 115 I. Tit, Bnufil Tr.-,. ~ T~. •••••••••••••••••••••••••••• liS ,.. Tlu ~"ffP T~.... .• •••••••• •••••••••••. •••. •••• •••. 1:19 3- Tit, I.~ T~ ••••••••••••••.•••••••••••••••••••••. 131 IU. TlIIt PROI>l1Cl1\'1t TlI_v OF TAIATION ••••••••••••••••••••••••• 134 IV. THIt UnLnY TlIroltY OF SAX ••••••••••••••••••••••• , ••••••••••• 138 I. Its Qnci• .J,'iJ'......................... .................. 140 .. S;-Jtli~ ••~ rr.tA •••.•• ••••••••••••••••••.••.•••••••• 141 3- I,.Jin'.i_I.ttiI CNJKtiw ~" •••••••••••••••••••• ••••• 143 \,1) Individual hychoIO£1 ................................ 145 (2) Collecti~ ~cho1oa •••••••••••••••••••••••••••••••. 146 4- ~N Io'«ols _Iuu.ll,y CMSiMr_ •••••••••••••••••••••• 149 (I) Differences ill ClIaractel: •••••••••••••••••••••••••••• , 149 (I) I'olitkal Factors ••••••••••••••••••••••••••••••••••••• 151 V. CoNcLl."SIOlI"S AS TO Tan EcoNoMIC BASIs 0\1I0"D PaINcIPU:s...... ... 155 CHAPrER VI • THE £TH\CAL BASIS or 'UIA'ItOK L THIt)3ENUIT TlIEGay OF TAXATION.......... •••••• •••• •••• •••••• 160 I. TIl, ~i" 71~ ••••••••••••••••••••••••••••••••• 161 a. TAt y.-..,.~ 1llM?............. .................. 165 (I) Expenditure •••••••••••••••••••••••••••••••••••••••• 167 <I) Pro~ •• "" .... ".... " ••••• " ......... " •••••••••••••••••• 168 (:;) IDCOIIIie"""""""" .. "" .. """""""" .. ".. """"" .. " .. """ .. "" .... """".... 169 (4) MaqiDal Utilit;J" "" " " " "" "" ".. "" "'I."" ".. """" "" ...... ,," " .... ".. .... 170' 345] CONTENTS 9 ...... IL MIUT1' AI AJI Enoc.u. BAsIS OF TAXAnoll. • • • • • • •• • • • • • • • • • •• ••• 171 I. AftIi'7."" p,~ •••••••••• •••• •• .••.•• ••.• •••.•. ••.•••• 175 a. "tn/II)!."" Itu"IIIe •••••••••••••.•••••••••••••••••.••••. , •• 178 (I) MeaniDg ollDCOme •.••••••••••••••.••••••••••••••••• 179 (2) Taxable IDcome ••••••••••••••••••••••••••••••••••.••• 182 Ill. MU.ITT A.'(D ~na. .... .•..• ...• .... .... .... ...• ...... .... 187 I. Mill •••••...•••••..•..••••..••.•••.•.•.•••••......••.... 187 a. '''tI~ .,," 1\'""",."" .... .... ...• ... ......•........... 189 J. M.ye, •• " •••••• •••• ..•• . .. •••• •••• .. .• •••• •••• .. .• •• ••• 190 ... s..r ..................................................... 19J 5· TluDrdd Ec_isb .......•............................. 197 6. E"K~tA ••••.. .......................................... 201 IV. CoNCLUSION: ABILITY VItUUS SAalFia ••••..•••..••••••••••••.. CHAPrER VII ETHIc.u. PIIINCIPLES OF TAIATION I. THE P1uNCIPL& OF EQuALITY ................................... 212 I. RtlU."" &.Iue D/ltu~...... •••• •••••• •••••• • .......... 213 ( I) F lIDded aDd U DfuDded IDcomes........................ 21 J (2) IDheritaDce aDd Gitll ••••••••••••••.••••••••.••••.• '" 216 (3) MODopoly aDd Quasi·Reat IDcome ••••••••••••••••••••.• 217 (4) IDcome from SpeculatioD •••••••••••••••••••••.••••.•. 220 a. Rtlu."" CIuJ,iMUr "llrtcD",e....... •••. •••• •••• •• .. •. •. ••.. 221 J. /f.u.""