Taxation Principles in the United States

Taxation in 1889

The following information about Taxation is from the Cyclopaedia of Political Science, Political Economy, and the Political History of the United States by the Best American and European Writers:

“Process is the eye of the law. Its vision is limited by territorial boundaries. Whatever does not exist within that limit, does not, for any purpose of law, exist at all. The rich man, whose property is in Europe and the pauper, whose property is nowhere, are then equal, as persons, before the law. A tax upon a pauper would be a personal tax. A tax upon the rich man is, by unimpeachable parity of reason, the same. Such a tax would be a gross solecism on our system. The philosophy of our plan of voluntary political association, is that all individuals, and all the values within a community, shall aggregate into one mass all the power which they separately contain, which sum total shall constitute a sovereignty of the whole. This sovereignty—the soul of the state, which can not be impaired, and the state survive—reflects back upon its constituents, in detail, all that it has received from them. What it receives, and what it returns, is of two kinds, as to both source and object, viz., individual service to the government, and protection to the individual from it. Thus, in his individual capacity, a man is bound to perform military service, and the state, by the military arm, is bound to protect him from invasion. He is bound to do jury duty, and the authorities are bound, upon his demand, to provide him a jury.

He is bound to aid the sheriff, and the sheriff is bound to execute process in his favor by posse comitatus if necessary. These personal services correspond to those which in feudal times the mesne lord holding a frank tenement owed the lord paramount. They can not be compounded for, for their value consists in their being rendered in kind. Their performance is the only price which the citizen pays for his citizenship. The terms are not only consistent and harmonious with our general scheme of government, but are highly politic. They are a liberal invitation to all men to come and add to ours their lives, their hopes, their strength, labor and courage, that we may build up a nation. To all political privileges we admit each one by virtue of his being a man, free born and of lawful age, we ask him nothing concerning his property, unless his property asks something from us.”

Second Report of Commissioners of New York, 1873</h3<

"It is claimed that each individual owes the state annually a certain sum of money in the way of taxes, proportioned to his entire property. If he voluntarily pays, he escapes arbitrary measures. If he declines to pay, or tries to avoid payment, he has no just cause to complain if he is regarded in the light of a criminal, or if the same arbitrary measures are used to collect his tax, as if it were a debt owing by one citizen to another. But let us examine this averment. If the defaulting tax payer is to be regarded as a criminal, and as such placed in the worst possible light, be certainly ought not to be deprived of the privileges of a criminal; which are, a right to a public investigation according to the rules of evidence adopted by free and enlightened communities, a right to be heard before condemnation, and the right to be presumed innocent of having property subject to taxation until the fact is ascertained otherwise by legal proof. But under the existing tax laws of most of the United States there are not accorded to the tax payer the privileges of a criminal; for no tax can be assessed on a large proportion of the personal property of the state according to any rules of legal evidence that any common law court would adopt.

No assessor, under the laws of New York, for example, in assessing personal property, can act judicially. The law gives him no power to obtain legal testimony of a character that is admissible in a court; he must act the part of an arbitrary despot against an inculpated tax payer, or not act at all, and his conclusions for acting must be reached at best by the testimony of those who have no means of knowing anything, in a legal sense, about the subject matter under investigation. It seems clear, therefore, that any attempt to tax without legal evidence is an act of usurpation or despotism, wholly antagonistic to the principles of a free government, and that it is a mockery to characterize such acts as, in any sense, judicial proceedings Nor does the right to reduce or regulate the assessment by the oath of the tax payer relieve the law in any degree of its unequal and despotic character; for every individual holding public office knows that oaths, as a guarantee of truth in respect to official statements, have ceased to be of any value.

The assessments made according to the oaths of parties, furthermore, are not made according to legal evidence, upon examination and proofs; but according to the will and secret caprice of each tax payer, instigated by his selfishness, and the natural depravity of human nature. Each tax payer, under the present rule, becomes, therefore, the interpreter, not only of the law, but of the fact, and makes a secret interpretation of both, and we have as many interpreters of the law as there are numbers of tax payers; and also an indefinite multiplicity of assessors; for each person who unfairly reduces his own assessment, arbitrarily assesses thereby some other of the community for the difference. Could or would any people apply the same rules for the collection of debts? Is there any one who has so much confidence in human nature that he will propose a law, that a person who issued shall be discharged from all claims of indebtedness if he will make oath, interpreting both the law and the fact himself, that he owes the claimant nothing? Is it believed, that under tariff laws, the government could get sufficient revenue to pay for its collection, if the importer was permitted to offset debts against the value of his goods; or if the law was peremptory that his oath alone should be given, and that there should be no legal examination, inspection or proof of the value or character of the importations?."

Method of procedure adopted in Boston

The most curious and confirmatory evidence of this is to be found in a method of procedure adopted in the city of Boston, Massachusetts—a method which has no parallel except in the records of the middle ages and of the inquisition, and constitutes, in itself, a satire upon any claim to the enjoyment of a wholly free and enlightened government. For failing to obtain satisfactory information about the private affairs of any individual, the chief assessors and their subordinates in this city, to the number of some fifty, meet in secret session, in a large upper chamber set aside for the purpose, and appropriately termed the “dooming chamber,” when the citizen in question, without being present either by counsel or in person, is arbitrarily doomed to the payment of any sum which a majority of those present may think proper; and from which “dooming” there can be no appeal.”

Property Taxes

(…) heresies to some of the best thinkers and writers on political economy. Some confuse themselves on the subject, by first defining property as anything that can be bought or sold, and then, since a title—as, for example, a deed – can be bought and sold, accept the inference that a title is necessarily property. But let us analyze this definition and assumption. We can, without doubt, sell and deliver a deed to a farm, but what is sold in such instances is the farm, including a right, a right to have dominion over it. But it may be rejoined, that a right of dominion is property. Let us, therefore, carry the analysis a little farther.

If the farm in California is property in the state where it is, and where it is taxed, any right or title to the same farm, held in New York or England, be it in the nature of a deed, a mortgage, a partnership interest, or any other form of title, can not be the property; for the same thing certainly can not be property in two separate states and jurisdictions, and in two distinct forms and manifestations, at the same time. On the other hand, if it be assumed that the title to the farm is the property, and, as such, can be rightfully taxed where it (the title) is, then it stands to reason that the subject of the title, the farm in California, ought not to be also regarded as property, and taxed in New York or England. In other words, if the title to the farm is property, then the farm is not really in California at all (unless the owner of the title resides there), but goes out of that state in the pocket of the individual who walks off with the title to it. We have all heard of such concentration of meat that all that is valuable in an ox for food can be put into a quart can; but such a concentration of property as is here supposed is something much more remarkable; and admits of a man having a drove of oxen in his hand, ten acres of woodland in his hat, a church with a steeple in one coat pocket, and a four-story brick block and a mill privilege in the other.

Physiocrates

The views held by the physiocrates on production being incomplete and erroneous, their financial conclusion is no longer worthy of consideration. J. B. Say’s conclusion is in harmony with those of Ricardo and Adam Smith; but it is lacking in precision. That of Ricardo, if it be exact, should be amended thus: ‘Taxes in general and in the long run, fall on the consumer.’ And, indeed, in the face of the facts, it is difficult to admit, that this diffusion or transmission of burdens is made directly, immediately and without effort. If we may so express ourselves, Ricardo considers the phenomenon as if it were happening in vacuo, whereas, in reality, the tax, to find its natural or definitive incidence and to traverse the successive strata of society, needs a pretty long lapse of time, a thing which is effected only after many and complex repercussions. The burden weighs at first on certain classes of citizens; then, by degrees, it apportions itself among a greater number of tax payers, or among all tax payers, and by successive repercussions it becomes an integral part of the price of things, in such a way that the person who buys most things pays most taxes. At first view the tax seems paid, whereas it has only been advanced.

Philadelphia

In 1874 the real estate of Philadelphia was assessed at $539,003,602, on an asserted full valuation. The personal property of the city subject to taxation at the same time, was returned at a valuation of $9,464,873; and included horses, carriages, furniture, gold and silver watches. The system of taxation in Montreal, dominion of Canada the same year, was as follows: one-fifth of 1 per cent. on the value of real estate; one-fifth of 1 per cent. for school tax; one-twentieth of 1 per cent. on railway property; 7½ per cent. on rentals. In addition, there were water rates, and special taxes on insurance, telegraph, ferry and street railway companies, and on innkeepers, billiard tables, theatres, breweries, banks, brokers, etc., and licenses on grocers, butchers, exhibitions, dogs, etc.”

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