the tide of democracy which went on rising for so many years, seems, if not receding, at least to have touched high-water mark. The American people, if sometimes bold in their experiments, have a fund of good sense which makes them watchful of results, and not unwilling to reconsider their former decisions.

CHAPTER XLII

STATE FINANCE

THE financial systems in force in the several States furnish one of the widest and most instructive fields of study that the whole range of American institutions presents to a practical statesman, as well as to a student of comparative politics. Here only a few points can be touched on, and I have selected the following for mention:·

Purposes for which State revenue is required.
Forms of taxation.

Exemptions from taxation.

Methods of collecting taxes.

Limitations imposed on the power of taxing.
State indebtedness.

Restrictions imposed on the borrowing power.

I. The budget of a State is seldom large, in proportion to the wealth of its inhabitants, because the chief burden of administration is borne not by the State, but by its subdivisions, the counties, and still more the cities and townships. The chief expenses which a State undertakes in its corporate capacity are - (1) The salaries of its officials, executive and judicial, and the incidental expenses of judicial proceedings, such as payments to jurors and witnesses; (2) the State volunteer militia; (3) charitable and other public institutions, such as State lunatic asylums, State universities, agricultural colleges, etc.; (4) grants to schools; (5) State prisons, comparatively few, since the prison is usually supported by the county; (6) State buildings and public works, including, in a few cases, canals; (7) payment of interest on State debts. Of the whole revenue collected in each State under State taxing laws, a comparatively small part is taken by the State itself and applied to State purposes. In 1882 only seven States raised

for State purposes a revenue exceeding $2,000,000. In 1891 the gross revenue of New York was $21,243,639 (pop. in 1890 6,000,000); of Ohio, $3,419,000 (pop. 3,680,000). These are small sums when compared either with the population and wealth of these States, or with the revenue raised in them by local authorities for local purposes. They are also small in comparison with what is raised by indirect taxation for Federal purposes.

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II. The National government raises its revenue by indirect taxation, and by duties of customs and excise,1 though it has the power of imposing direct taxes, and used that power freely during the Civil War. It has now again (1894) imposed an income tax, exempting, however, smaller incomes. State revenue, on the other hand, arises almost wholly from direct taxation, since the Federal Constitution forbids the levying of import or export duties by a State, except with the consent of Congress, and directs the produce of any such duties as Congress may permit to be paid into the Federal treasury. The chief tax is in every State a property tax, based on a valuation of property, and generally of all property, real and personal, within the taxing jurisdiction.

The valuation is made by officials called appraisers or assessors, appointed by the local communities, though under general State laws. It is their duty to put a value on all taxable property; that is, speaking generally, on all property of whatever nature which they can discover or trace within the area of their authority. As the contribution, to the revenues of the State or county, leviable within that area is proportioned to the amount and value of taxable property situate within it, the local assessors have, equally with the property owners, an obvious motive for valuing on a low scale, for by doing so they relieve their community of part of its burden. The State accordingly endeavours to check and correct them by creating what is called a board of equalization, which compares and revises the valuations made by the various local officers, with the aim of having taxable property in each locality equally and fairly valued, and made thereby to

1 Stamp duties were also resorted to during the Civil War, but at present none are levied by the National government.

2 The Supreme Court has ruled that this statute was unconstitutional.

bear its due share of public burdens. Similarly a county has often an equalization board to supervise and adjust the valuations of the towns and cities within its limits. However, the existence of such boards does not overcome the difficulty of securing a really equal valuation, and the honest county or town which puts its property at a fair value suffers by paying more than its share. Valuations are generally made at a figure much below the true worth of property. In Connecticut, for instance, the law directs the market price to be the basis, but real estate is valued only at from one-third to three-fourths thereof. Indeed one hears everywhere in America complaints of inequalities arising from the varying scales on which valuers proceed.

A still more serious evil is the fact that so large a part of taxable property escapes taxation. Lands and houses cannot be concealed; cattle and furniture can be discovered by a zealous tax officer. But a great part, often far the largest part of a rich man's wealth, consists in what the Americans call intangible property," notes, bonds, book debts, and Western mortgages. At this it is practically impossible to get, except through the declaration of the owner; and even if the owner is required to present his declaration of taxable property upon oath, he is apt to omit this kind of property.

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In every part of the country one hears exactly this stated. The tax returns sent in are rarely truthful; and not only does a very large percentage of property escape its lawful burdens, but "the demoralization of the public conscience by the frequent administration of oaths, so often taken only to be disregarded, is an evil of the greatest magnitude. Almost any change would seem to be an improvement."

I have dwelt upon these facts, not only because they illustrate the difficulties inherent in a property tax, difficulties of course greater where such independent taxing authorities as the several States are close together, but also because they also help to explain the occasional bitterness of feeling among the American farmers as well as the masses against capitalists, much of whose accumulated wealth escapes taxation, while the farmer who owns his land, as well as the workingman who puts his savings into the house he lives in, is assessed and taxed upon this visible property. We may, in fact, say

of most States, that under the present system of taxation the larger is the city the smaller is the proportion of personalty reached by taxation (since concealment is easier in large communities), and the richer a man is the smaller in proportion to his property is the contribution he pays to the State. Add to this that the rich man bears less, in proportion to his income, of the burden of indirect taxation, since the protective tariff raises the price not merely of luxuries but of all commodities, except some kinds of food.

Besides the property tax, which is the main source of revenue, the States often levy taxes on particular trades or occupations, sometimes in the form of a licence tax, taxes on franchises enjoyed by a corporation, taxes on railroad stock, or (in a few States) taxes on collateral inheritances. Comparatively little resort has hitherto been had to the so-called "death-duties," i.e. probate, legacy, and succession duties, nor is much use made of an income tax. Five States, however, authorize it. As regards poll-taxes there is much variety of practice. Some State constitutions forbid such an impost, as "grievous and oppressive; " others direct it to be imposed, or allow the legislature to impose it, while about one-half do not mention it. The amount of a poll-tax is always small, $1 to $3: sometimes (as in Tennessee) the payment of it is made a pre-requisite to the exercise of the electoral franchise. It is scarcely ever imposed on women or minors.

III. In most States, certain descriptions of property are exempted from taxation, as, for instance, the buildings or other property of the State, or of any local community, burying grounds, schools and universities, educational, charitable, scientific, literary, or agricultural institutions or societies, public libraries, churches and other buildings or property used for religious purposes, tools and household furniture, farming implements, deposits in savings banks. Often too it is provided that the owner of personal property below a certain figure shall not pay taxes on it, and occasionally ministers. of religion are allowed a certain sum (as for instance in New York, $1500) free from taxation.

No State can tax any bonds, debt certificates, or other securities issued by, or under the authority of, the Federal government, including the circulating notes commonly called