CORNELL 
 
 UNIVERSITY 
 
 LIBRARY 
 
 BUSINESS 
 
Cornell University Library 
 HJ 2379.N27 
 
 Taxation and national Income ... 
 
 3 1924 018 164 743 
 
Cornell University 
 Library 
 
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 tine Cornell University Library. 
 
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 http://www.archive.org/details/cu31924018164743 
 
TAXATION AND NATIONAL 
 INCOME 
 
 Research Report Number 55 
 October, 1922 
 
 National Industrial Conference Board 
 
 THE CENTURY CO. 
 NEW YORK 
 PUBLISHERS 
 
Copyright, 1922 
 National Industrial Conference Board 
 
Foreword 
 
 This study of important aspects of taxation in the United 
 States and in other leading industrial nations is presented by 
 the Conference Board in pursuance of the fundamental pur- 
 pose of its work — "to secure, analyze and disseminate informa- 
 tion concerning industrial problems and experience in the 
 United States and other countries" and "in general, to encour- 
 age and promote the sound development of American industry." 
 It cannot be gainsaid that taxation has become an industrial 
 problem of the first importance. The larger part of the taxes 
 raised in the United States and other industrial nations fall 
 upon productive industry, and the sound development of in- 
 dustry is directly affected by the questions touching the equit- 
 able distribution of the tax burden and its reduction through 
 governmental economy and efficiency. In these senses the 
 facts regarding the growth of government expenditures and the 
 accompanying increase of taxation, and the relation of these 
 to national income, merit the close attention of industry no less 
 than they do that of the general public. This report, presenting 
 these significant facts in compact form, is oifered as a timely 
 contribution to the better understanding of this important 
 question. 
 
CONTENTS 
 
 PAGE 
 
 Introduction 1 
 
 Development of Taxation 2 
 
 Taxation and National Income 5 
 
 Character of Taxation Included in Report 6 
 
 Purpose of the Report. .'. 7 
 
 I. The Growth of Public Expenditures 9 
 
 Expansion of Government Activities 9 
 
 Increase in National Wealth 11 
 
 Growth of Public Expenditures 11 
 
 Effects of the Waf 12 ■ 
 
 II. The Growth of Taxation in the United States 
 AND Abroad 22 
 
 Pre- War Growth of Taxation 23 
 
 Public Monopolies 23 
 
 War Taxation 24 
 
 Relation to National Income 25 
 
 III. The Burden of Taxation in the United States. .39 
 
 Summary of Tax Systems in the United States. . .39 
 
 Local Taxation 39 
 
 Federal Taxation 40 
 
 Sources and Character of Data 41 
 
 (a) Financial Data of the Federal Government.. . .44 
 
 (b) Financial Data of States 45 
 
 (c) Financial Data of Local Governments 46 
 
 Taxation by States 46 
 
 IV. The Present Problem of Taxation in the United 
 
 States 72 
 
 Growth of State and Local Taxation 72 
 
 Taxation and National Income 74 
 
 Productivity of Government Expenditures 78 
 
 Local Financial Economy 80 
 
 Distribution of Taxation 81 
 
 Taxation and Citizenship 82 
 
 V. General Summary 84 
 
 T 
 
LIST OF TABLES AND CHARTS 
 
 TABLES 
 
 PAGE 
 
 Table 1 : Total Governmental Expenditures in the United 
 
 States ^^ 
 
 Table 2: Total Governmental Expenditures in the United 
 
 Kingdom 15 
 
 Table 3: Total Governmental Expenditures in France. . . 16 
 
 Table 4: Total Governmental Expenditures in Italy 17 
 
 Table 5: Total Governmental Expenditures in Germany. 18 
 Table 6: Total Governmental Expenditures in Japan 19 
 
 Table 7: Per Capita Total Expenditures of Governments 
 on the Pre- War Purchasing Power Basis 20 
 
 Table 8: Total Receipts from Taxation in the United 
 States 28 
 
 Table 9: Total Receipts from Taxation in the United 
 Kingdom 29 
 
 Table 10: Total Receipts from Taxation in France 30 
 
 Table 11 : Total Receipts from Taxation in Italy 31 
 
 Table 12: Total Receipts from Taxation in Germany 32 
 
 Table 13: Total Receipts from Taxation in Japan 33 
 
 Table 14: Per Capita Total Taxation on the Pre-War Pur- 
 chasing Power Basis 34 
 
 Table 15: Per Capita Total Taxation on the Pre-War Pur- 
 chasing Power Basis as Percentage of Pre-War National 
 Income 36 
 
 Table 16: Ratio of Total Taxation to National Income — 
 United States 38 
 
 Table 17: Taxes Related to Income, by States, 1919 50 
 
 Table 18: Federal Taxation, by States, 1919 56 
 
 Table 19: General Property Tax Levies of Local Govern- 
 ments 58 
 
 vi 
 
PAGE 
 
 Table 20: Per Capita Local Levies of the General Property 
 Tax 63 
 
 Table 21: Per Capita Receipts from Taxation of State 
 Governments 65 
 
 Table 22: Per Capita Receipts from Taxes and Licenses of 
 Principal Cities of the United States 67 
 
 Table 23 : Taxation and National Income — United States . 77 
 
 Table 24: National Income and Savings 77 
 
 CHARTS 
 
 Chart 1 : Per Capita Total Expenditures of Governments 
 On the Pre-War Purchasing Power Basis 21 
 
 Chart 2: Per Capita Total Taxation of Governments on 
 the Pre-War Purchasing Power Basis 35 
 
 Chart 3: Total Taxation and National Income, United 
 States 37 
 
 Chart 4: Distribution of Total Taxation by States, United 
 States 49 
 
 Chart 5: Growth of Federal, State and Local Taxation, 
 United States 75 
 
Taxation and National Income 
 
 INTRODUCTION 
 
 The growing burden of taxation has perhaps never before in 
 history been so forcefully impressed on our minds as in recent 
 years. Fiscal efforts during the course of the war and there- 
 after were of tremendous and unprecedented proportions, and 
 the prodigious costs entailed in waging wars on a modern scale 
 have resulted in constantly increasing demands upon the tax- 
 payers of the nations. 
 
 Present and future generations are confronted with huge gov- 
 ernment budgets which have their origin mainly in circum- 
 stances arising from the war. In proportion as nations have 
 financed the war by means of bonds they have thrown on pos- 
 terity a recurring burden in the shape of added taxes to meet 
 the annual interest charges on the public debt. So far as 
 governments have issued more or less inconvertible currency, 
 either directly, as in Italy, or indirectly through the medium of 
 central banks, as in Germany, no interest charges accrue or else 
 the costs in connection with rediscount are insignificant be- 
 side the huge amounts involved. But these issues of currency 
 have contributed and still continue to contribute to inflation. 
 
 In the case of Germany and Austria, this inflation has largely 
 disposed of the problem of debts and annual debt burdens, by 
 reducing the annual carrying charges of these debts to a mere 
 fraction of the principal of the obligation incurred, in terms of 
 actual purchasing power. The embarkation by governments 
 on social policies of a pressing character created an ever- 
 widening disparity between income and outgo, and issuance of 
 inconvertible currency commended itself to the governments 
 in power as the only course. The inevitable result has been a 
 form of repudiation. Savings of large groups in society have 
 been almost completely wiped out and a redistribution of 
 wealth has ensued, the burden of which has fallen primarily 
 on the middle classes that form the nucleus of the intellectual 
 life of these countries. Aside from the chaos and disorganiza- 
 tion that have followed in the wake of inflation, the morale 
 and efficiency of the masses have been seriously undermined. 
 
 1 
 
To countries that are actually on a gold basis or that have 
 a semblance of this standard, however, the annual debt charge 
 presents problems that in some instances challenge solution. 
 The situation of France is a case in point. Her debt has been 
 increasing continually, primarily because of outlays in connec- 
 tion with reconstruction of devastated areas. These sums are 
 theoretically recoverable from Germany; but only a fraction 
 toward their payment has been received to date. On December 
 31, 1918 the public debt of France stood at 171 billion francs; 
 from the latter date to the end of the year 1922, an additional 
 145 billions will have been borrowed. About 91 billions have 
 thus far been spent on reconstruction, and completion of the 
 full program will require a further expenditure of 55 billions, 
 exclusive of 36 billions yet to be paid in war pensions. By the 
 end of 1925, the annual debt charge will have increased to 19 
 billion francs, or more than the revenue from normal sources 
 in the 1923 budget, exclusive of the requirements of the army, 
 navy and civil departments. 
 
 The huge growth in the burden of taxation cannot, however, 
 be attributed to the war alone. Since the successful prosecu- 
 tion of the war required that monetary and other consider- 
 ations be subordinated to the needs of the hour, namely, the 
 victory of Allied arms, it is clear that the military branch 
 of the government had to be given a free rein in expending public 
 funds in such manner and in such amounts as exigencies dic- 
 tated; but these abnormal expenditures did not end as soon as 
 the combatants laid down their arms. It is true that the con- 
 version of military activities from a war to a peace footing 
 caused a heavy reduction in the outlays of national govern- 
 ments, but this reduction was partly offset by a sharp spurt 
 in state and local government expenditures and in their result- 
 ing tax burdens. Even before the war, it had been discernible 
 that the tendency was for state and local governmental expendi- 
 tures to increase rather materially from year to year. During 
 the war, public policy made it advisable to curb the activities 
 of these disbursing authorities, but it was after the war that the 
 latter increased their demands and raised the burden of tax- 
 ation to an unprecedented level. 
 Development of Taxation 
 
 Taxation in its broadest sense is as old as the record of man 
 himself. Closely interwoven with economic life, its develop- 
 
 2 
 
ment is a true reflection of the vast political and social changes 
 that^have taken place throughout history. Appearing first in 
 the guise of voluntary contributions in Iprimitive society, 
 taxation later assumed a compulsory character when royalty 
 began to extend its influence and commerce developed. What 
 was initially merely a periodic and compulsory contribution 
 for a particular or personal service, soon became a means of 
 promoting common well-being. Revenues flowing into the 
 public coflFers were utilized at first for the promotion of 
 national security and defense and later for the regulative and 
 cultural activities of government, and these in most cases form 
 the bulk of the functions of government today. It is here that 
 we have the beginnings of the problem of taxation with its 
 modern ramifications. 
 
 Indirect taxation antedates direct taxation. The latter 
 form of compulsory contribution did not meet with popular 
 favor in the early days. Its existence would have presupposed 
 a strong monarch or leader who could defy public sentiment. 
 Only as democracy develops and public morality and civic 
 responsibility grow is it found possible to introduce direct 
 taxation. Recognition of social duty opens the way for a 
 system of taxation primarily based on one's property. At first 
 levied in the form of poll or capitation tax, direct contributions 
 were later exacted based on land, gross produce, and net produce. 
 Finally, as modern economy emerges and the principle of 
 ability is accepted as the best criterion, a system of taxation 
 develops founded on the income of individuals or legal entities. 
 The latter stage is only a recent phenomenon and marks the 
 acceptance of those principles of fiscal justice and equity of 
 which civilization boasts today. 
 
 Amid the clash and din of opposing political forces during 
 the past centuries there has gradually developed in modern 
 communities a system of taxation which fundamentally rests 
 on the theory of ability. Historically, taxes were at first a 
 badge of dishonor; a social stigma was attached to the term 
 because the ruling classes within a given nation enjoyed com- 
 plete exemption from taxation. This principle was extended 
 to the field of international relations, when victorious nations 
 practiced a policy of pecuniary exploitation of subject coun- 
 tries and provinces.^ In the Middle Ages, tax exemption was 
 
 'Cohn, Gustav, "Sciance of Finance," translated by T. B. Veblen, University of Chicago 
 Press, 1899, pp. 301 flf. 
 
 3 
 
a coveted honor and was synonymous with princely authority 
 and prestige, but as the tempo of democratic progress began to 
 grow more rapid, the underlying philosophy underwent a 
 complete transformation and universality of taxation became 
 the battle cry of the majorities in each country. 
 
 Contemplating recorded history as a unit we find that there 
 have been five distinct stages in the development of taxation. 
 The first manifestation is the poll or capitation tax, levied on all 
 alike because the interests of all citizens are supposedly 
 identical. It does not take a long time, however, for in- 
 equalities to begin to creep in; differences in mental and 
 physical characteristics of individuals lead to disparities in the 
 amount of possessions. Tangible property then becomes the 
 basis of taxation, but the introduction of this new method must 
 needs be slow for it presupposes a ruler whose power is secure 
 enough to exact tribute from the wealthier classes by direct 
 means. It assumes the form of a groping opportunism and is 
 circumscribed more or less by expediency. Ere long the de- 
 fects of property taxation manifest themselves. There is a 
 divergence between property and product; the non-propertied 
 classes escape the burden altogether; and as industry and com- 
 merce expand there is a growing variety in the forms of wealth 
 which vie in importance with tangible property. 
 
 The lack of universality inherent in the property tax causes 
 a reaction and expenditure becomes the standard. A tax on 
 articles of consumption touches every class in society, and the 
 tentacles of the exchequer therefore reach into everyone's 
 pocket. The fundamental defect of this method is, however, 
 that it casts a heavier burden on the lower classes as com- 
 pared with the upper. Expenditures for consumption com- 
 prise a much larger percentage of the total budget among the 
 poor than among the rich. These shortcomings soon disclose 
 themselves and then comes the movement toward the taxa- 
 tion of gross produce and later of net produce. The former is 
 a tax on the thing — on the land — and not on the person. In- 
 dividual ability constitutes no criterion; the costs of indebted- 
 ness are, therefore, not deductible. The dissatisfaction that 
 this norm entails finally leads to the taxation of income, which 
 has become the standard upon which modern economists and 
 
 4 
 
statesmen now rely to a material extent.* Although income is 
 generally recognized as the best single criterion of ability to pay, 
 a judicious combination of income and property taxes is, how- 
 ever, widely accepted as a good measurement of ability. 
 
 A glance at tax systems in vogue today will reveal the fact 
 that the stages above described were not separately developed 
 nor were they synchronous in their origin. They grew up side 
 by side, but over a long period of time there is discernible the 
 fact that emphasis has gradually been shifting to ability-to- 
 pay as the norm of equitable taxation. The fundamental 
 public activities determine the existence of the individual and 
 govern his total personal and economic strength, and the 
 principle of ability has, therefore, won wide acceptahce. 
 
 Taxation and National Income 
 
 Just as it is true of the individual, so the principle applies to 
 an aggregation of individuals or to the State, that the source of 
 all taxation is income.* The State raises certain amounts from 
 its citizens which it disburses in wages, salaries, pensions, 
 materials and equipment, maintenance of hospitals, arsenals, 
 etc. The individual merely hands over to the State a portion 
 of the income that he would have spent or saved. In return he 
 receives protection and services which comprise the intangible 
 items in his budget. No matter how the tax is levied, whether 
 on property or expenditure, whether on income or capital, it is 
 paid out of the individual's income. Even an estate tax, 
 while sometimes derived from the sale of capital assets, is 
 nevertheless a tax on the income of the recipient, for the be- 
 quest or inheritance minus the tax is nothing other than 
 current income to its possessor. Taxation is the transfer of 
 part of a citizen's spending or saving power to the govern- 
 ment,' and the burden of its weight varies in the last analysis 
 with the income, either accumulated or current, of the individual 
 or of the nation as a whole. 
 
 Hence, in this study of federal, state and local taxes it was 
 considered essential that the relationship be drawn between 
 these two factors. 
 
 iSeligman, E. R. A. "Essays on Taxation," Ninth Edition, The Macmillan Co., New 
 Yoric, 1921, p. 18, and "Income Tax," Fourth Edition, The Macmillan Co., New York, 
 1914, Introduction. 
 
 'Wagner, Adolph. "Finanzwissenschaft," Zweiter Theil, "Theorie der Besteuerung, Ge- 
 bllhrenlehre und allgemeine Steuerlehre", Zweite Auflage, Leipzig, 1890, pp. 315 ff. 
 
 'Hobson, J. A., "Taxation in the New State," Harcourt, Brace and Howe, New York, 
 1920, pp. 9-14. 
 
Character of Taxation Included in Report 
 
 In connection with the classification of general revenue re- 
 ceipts falling under the title "tax," it must be borne in mind that 
 a tax in its broadest sense is a compulsory contribution levied 
 upon the inhabitants of the state or any subdivision to which 
 it relegates authority by virtue of its sovereign power. The 
 purpose is to defray the costs of government and to meet the 
 general public needs. The consideration may involve the 
 transfer of money, of other forms of wealth or of services. The 
 first is the usual medium through which the obligations to the 
 state are liquidated, but it is not uncommon nowadays to 
 make payments of taxes in government securities in accord- 
 ance with legal provisions expressly made therefor, as for 
 example, in the case of the excess profits taxes in the United 
 States, estate duties in the United Kingdom and federal 
 property taxes in Germany. The requirement that citizens 
 of the state contribute a specified number of days of labor 
 toward the building of roads and the construction of other 
 public works, was not infrequent in past centuries, but such 
 services have in the course of time been converted into money 
 equivalents and have now assumed as a rule the form of a poll 
 or capitation tax. It is not unusual to find in the tax laws of 
 many of our states today a provision requiring able-bodied 
 adults to contribute their labor on public improvements for 
 specified periods, and only in default of labor to pay a certain 
 money equivalent for each day of required service. The most 
 extreme case of compulsory service at the present time which 
 assumes the form of a tax is to be found in Bulgaria, where a 
 recent enactment makes both sexes (upward of 20 and 16 
 years for males and females respectively) liable to obligatory 
 community labor, with no substitutions and with exemptions 
 limited only to the physically unfit, the military and a few other 
 groups.* 
 
 Taxes are levied on persons, both natural and corporate, or 
 physical and juridical. Furthermore, the international 
 movement of capital in recent decades has been rendered so 
 easy and secure that a large revenue is now being derived by 
 citizens of one country from investments in foreign countries. 
 The property thus invested becomes subject to multiple tax- 
 ation which is borne by a non-citizen or foreigner, although 
 
 'Compulsory Labor Service Act, dated June S, 1920, as published by the International 
 Labor Office, Legislative Series, 1920, Bulgaria, No. 1. 
 
 6 
 
this happens to be amenable to taxation originally in the 
 country of residence of its recipient. 
 
 Under the head of taxes, it has been deemed advisable in this 
 report to include what are commonly known as licenses or license 
 taxes. These are compulsory contributions exacted in connection 
 with the issuance of written documents which authorize the 
 licensee to engage in specific lines of business activity. Fees, 
 which represent compensation for special services rendered by 
 the government, inuring to the benefit of the individual, and 
 covering the costs of the service, are excluded. In some instances, 
 government accounting designates as a fee what is essentially 
 a license or license tax and hence official designations could not 
 always be used as a criterion of proper classification. 
 
 Purpose of the Report 
 
 It is for the purpose of bringing out the facts with regard to 
 taxation and its relation to national income, and of calling 
 public attention to its possible effect on national well-being, 
 that the National Industrial Conference Board has undertaken 
 to make a study of the problem in its broadest aspects. Here- 
 tofore in discussions of problems of public finance emphasis 
 has usually been placed on expenditures and taxation of national 
 governments, and because of the paucity of collected data and 
 lack of knowledge of its importance, local finance has been 
 relegated to the background. This report makes available 
 in a new form information which gives a comprehensive picture 
 of the total burden of public expenditures and taxation in the 
 six principal manufacturing countries of the world, viz., the 
 United States, the United Kingdom, France, Italy, Germany 
 and Japan. In some cases, figures for local government ex- 
 penditures and taxation represent estimates, based, however, 
 on sufficiently reliable data to render the margin of possible 
 error fairly small. The basis of these estimates is discussed 
 in connection with them. 
 
 The first chapter of the report gives a brief survey of the 
 growth of governmental expenditures in recent years; the 
 second summarizes the facts regarding the increase of taxation 
 in the United States and abroad; the third presents an analysis 
 of the federal, state and local tax burdens in the United States; 
 and the fourth discusses the problems raised in this country 
 by the increase of taxation in relation to income. 
 
 7 
 
Detailed examination of the facts and figures brought out in 
 the report will no doubt help to throw some interesting side- 
 lights on the status of American public finance. While the 
 Board has been interested primarily in the extent of tax burdens 
 and their relation to national welfare, it has not lost sight of 
 the fact that there are questions relating to equitable distribu- 
 tion of our total national taxation which have not been treated 
 with sufficient detail and which might become the subject of 
 special studies. It is hoped, however, that this report will 
 stimulate thought on the vital problems connected with taxa- 
 tion and increase interest in the activities of the government. 
 
I 
 
 THE GROWTH OF PUBLIC EXPENDITURES 
 
 With the gradual displacement of absolutism in the political 
 systems of Europe early in the nineteenth century, the hope 
 was entertained that demands on the public purse would begin 
 to diminish and a new era of economic management of the 
 State would be ushered in. This view is exemplified in the 
 remarks of Villfele, the French Minister, of Finance who, in 
 introducing the first billion-franc budget after the Napoleonic 
 Wars, is said to have exclaimed, "Gentlemen, salute these 
 figures; you will never have an opportunity to contemplate 
 them again."* 
 
 It was destined that this sanguine forecast should not be 
 realized in the succeeding century for any country, and so far as 
 the next few decades are concerned, there is no hope of even 
 approximating it. 
 
 An outstanding phenomenon of the past two centuries was 
 the tremendous growth of public expenditures. The increase 
 went far beyond the imagination of the most astute observer 
 before the industrial revolution. The environment and forms 
 of economy existing at the time could not warrant any opti- 
 mistic expectations in regard to the income of governments. 
 Agriculture was practically the mainstay of economic life, and 
 the tax yield from this source was naturally very limited. 
 Under such circumstances it was inevitable that one's outlook 
 as to the public finances of the future should be tempered by 
 economic considerations that then confronted the observer. 
 
 Expansion of Government Activities 
 
 Late in the eighteenth century, however, a revolution took 
 place which was fated to bring in its train a long series of social, 
 economic and political changes of far-reaching importance. 
 The factory economy began slowly to replace the individual 
 system of work, and with it there came unexampled expansion 
 of wealth and enhancement of public welfare. Population 
 grew rapidly, national rcspurces were exploited on an ever- 
 widening scale, and prosperity became more widespread. 
 
 'Quoted in Adams, H. C. "Science of Finance," Henry Holt & Co., New York, 1912, 
 p. 84. It is interesting to note in this connection tliat in 1913 tlie national government 
 expenditures of France amounted to more than 5 billion francs. 
 
In private economy it is a well-known and readily accepted 
 principle that standards of living keep pace with income, and 
 the same applies also to public economy. The physiocrats, 
 a group of economic theorists who held that land is the ultimate 
 source of wealth, had recognized the relationship between pub- 
 lic and private finance in Quesnay's celebrated maxim, "Pauvres 
 pay sans, pauvre royaume; pauvre royaume, pauvre roi,"^ although 
 the doctrine as thus phrased was tinged somewhat with the 
 flavor of their peculiar philosophy. As industry developed and 
 trade began to flourish on a scale theretofore unknown, the 
 State assumed more and more functions, at first meeting the 
 problems growing out of a new economic status, and later, with 
 the rise and spread of the democratic movement, entering into 
 the field of public welfare. The sphere of State activity was 
 enlarged to embrace not only protection from internal disorder 
 and foreign aggression but also public education and health, 
 public works, provision for spiritual as well as physical advance- 
 ment and other related activities. The collective wants of 
 society kept abreast of economic progress and whenever indus- 
 try and trade were confronted with new dangers and complexi- 
 ties, the aid of the State was enlisted to an increasing extent. 
 
 Meanwhile, the costs of military preparation in the feudal 
 and early monarchical period were dwarfed by the huge outlays 
 appropriated in the past century as the spirit of nationalism 
 grew. The beginnings of political democracy were attained 
 after a protracted struggle, at great cost in human sacri- 
 fice and material goods, but democracy did not do away with 
 militarism and its great cost of maintenance. In place of 
 the heavy expenditures for luxurious court requirements still 
 greater sums were raised to meet the needs of highly indus- 
 trialized communities, and armament construction was even 
 accelerated. Thus, public finance has always been, as it is now, 
 at the mercy of the political, social and economic factors 
 operating in society. 
 
 The steady increase in population and the slow but insidious 
 effect of the changing price level, consequent upon the increase 
 in supplies of specie and credit media, are additional factors 
 that have often been disregarded as partly explaining the in- 
 crease in monetary outlays. In the two decades prior to 
 the outbreak of the World War, although the alterations in 
 
 •"Poor peasantry, poor kingdom; poor kingdom, poor king." 
 
 10 
 
prices from year to year were hardly perceptible, the trend 
 was definitely upward. During the war, the huge credit oper- 
 ations on government and private account gave impetus to the 
 inflationary movement, and in certain countries pushed it to 
 unprecedented heights long after the din of battle had ceased. 
 
 Increase in National Wealth 
 
 It must not be inferred from the above account, however, 
 that the burden of public expenditure before the war became 
 so heavy as to interfere with progress, for the contrary was 
 true. Along with the enlarged duties of the State, there 
 was a more than proportionate increase in national wealth and 
 income which tended to ofi^set the growing demands on the 
 public purse. 
 
 In the United States, expenditures of the national govern- 
 ment showed a sixteenfold rise in the period between 1850 and 
 1912, but national wealth grew to twenty-seven times its 
 earlier proportions during the same interval. The same 
 phenomenon is observed in other countries of the world, 
 although not to the same degree. 
 
 Growth of Public Expenditures 
 
 A glance at Tables 1 to 7 and Chart 1 will show the growth 
 of public expenditures in the past two decades for national, 
 state, provincial and local purposes in the United States, the 
 United Kingdom, France, Italy, Germany and Japan. 
 
 In the fiscal year 1903 or thereabouts the total per capita 
 costs of government were approximately |22 in the United 
 States, as compared with $40 in the United Kingdom, $24 in 
 France, $14 in Italy, $44 in Germany and $5 in Japan. In the 
 year immediately preceding the outbreak of the World War the 
 per capita costs had risen to $35 in the United States, $42 in the 
 United Kingdom, $33 in France, $22 in Italy, $69 in Germany 
 and $8 in Japan. 
 
 These figures include duplications such as revenue collected 
 by the central government and turned over to the minor civil 
 divisions. They also embrace extensions on account of com- 
 mercial and industrial undertakings, including monopolies,* 
 of national, state and local governments. The latter circum- 
 stance, in all probability, accounts for the large per capita 
 government outlays of Germany, for example, as compared 
 
 iSuch as, for example, that of the manufacture and sale of tobacco in France, and the 
 operation of telephones and telegraphs in Italy. 
 
 11 
 
with other countries, since in Germany state and municipal 
 operation of utilities and industrial undertakings was more 
 greatly developed than elsewhere. 
 
 Effects of the War 
 
 The World War upset human calculations and proved far 
 more costly, directly and indirectly, than even the keenest and 
 most far-sighted militarist could have contemplated. Its effects 
 were felt throughout the entire economic system and the 
 decades to come will continue to reflect the consequences of 
 the world's greatest upheaval. The destruction of capital and 
 wealth has been far larger than the annual increments due to 
 saving, and although the world is poorer today than it was 
 before the war, the yearly costs of government are bound to 
 remain at a level twice or three times as high as in 1914, and 
 in some cases still higher. This is the sum and substance of 
 the economic situation as it confronts us today. 
 
 During the war, local governments tacitly submitted to 
 numerous restrictions in their expenditure policies in order to 
 grant the central or national authoriti,bs complete freedom in 
 shaping their fiscal systems to meet the extraordinary demands 
 occasioned by the conflict. This procedure was, however, 
 equivalent to putting one coin into one pocket and removing 
 many more from the other. Per capita costs of national, state, 
 provincial and local governments in the last fiscal year of the war 
 period rose to |179 in the United States, as compared with 
 J294 in the United Kingdom, ?285 in France, $176 in Italy, 
 $245 in Germany and $13 in Japan (foreign currencies being 
 converted at pre-war mint parity). A large part of this in- 
 crease was, however, due to inflation and the changing price 
 level. Reducing these per capita outlays to the pre-war pur- 
 chasing power basis,' the figures were substantially $88 for the 
 United States, $130 for the United Kingdom, $84 for France, 
 $46 for Italy, $114 for Germany and $6 for Japan. 
 
 In the post-armistice period, national expenditures, meas- 
 ured in terms of the respective currencies, have declined con- 
 siderably in the United States and the United Kingdom. In 
 France the reduction has been small, largely owing to heavy 
 disbursements on account of reconstruction of devastated 
 areas, which in major part are theoretically recoverable from 
 
 'Derived by dividing current figures by the index number of wholesale prices on the pre- 
 war base. 
 
 12 
 
Germany under the Treaty of Versailles. In Japan and Italy, 
 demands on the national purse were increased almost to the 
 maximum war levels, due in the one case to an enlarged naval 
 program and in the other to the sale of necessities by the State, 
 from which large deficits have resulted, though offset some- 
 what by receipts. In Germany, the enormous inflation of 
 the currency, combined with heavy subsidies on account of 
 public provisioning and of public undertakings, and the re- 
 curring burdens of reparations, have raised national expendi- 
 tures to dizzy heights when expressed in terms of the mark. 
 
 One of the outstanding features of post-armistice finance is 
 the huge growth in expenditures of state subdivisions of 
 the federal governments and of provincial and local bodies. 
 This is particularly true of the United States, the United King- 
 dom, France and Italy. Public improvements long postponed 
 because of the war's exigencies have now been undertaken, and 
 there has been a special incentive for communities to take 
 advantage of the falling rate of interest and the lower costs 
 of construction. These pent-up demands have been let loose 
 with a consequent severe drain on the already impoverished 
 economic resources of the countries. 
 
 Per capita expenditures in the fiscal year 1920-1921, with 
 foreign currencies converted at par of exchange, were $87 in the 
 United States, ?164 in the United Kingdom, ?266 in France, $162 
 in Italy and $18 in Japan. An attempt has also been made to 
 arrive at totals for Germany in later years, but because of the 
 paucity of data for local governments, the highly erratic state 
 of the currency which renders all comparisons futile, and 
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 on the pre-war purchasing power basis, per capita expenditures 
 during the fiscal year 1920-1921 were $45 for the United States, 
 $61 for the United Kingdom, $77 for France (calendar year 
 1921), $26 for Italy, $56 for Germany and $7 for Japan. 
 
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Chart 1: Per Capita Total Expenditures of Govern- 
 ments ON THE Pre-War Purchasing Power Basis 
 
 (National Industrial Conference Board) 
 
 I9IS-I3 1913-14 1914-15 1915-IB I9IB-I7 1917-IB I9IQ-I3 I3)9-EQ ISED-El I9EI-EE 
 
 21 
 
II 
 
 THE GROWTH OF TAXATION IN THE 
 UNITED STATES AND ABROAD 
 
 In the preceding chapter the development of total govern- 
 mental expenditures in the six major countries of the world 
 was traced. Were this growth merely the outcome of enlarged 
 industrial and commercial activities of the State, which would 
 yield sufficient net revenues to cover the requirements of 
 the budget for purely governmental administration, no prob- 
 lem would have ensued and no popular dissatisfaction would 
 have arisen. But the accompaniment of this rising movement 
 of government outlays was the increase of tax burdens and the 
 exaction of ever larger contributions from the citizens of the 
 State as the years rolled on. 
 
 That the burden of taxation was growing rapidly even before 
 the recent World War is a fact that is borne out by abundant 
 statistical data of official and unofficial nature and is further 
 corroborated by popular testimony. In fact, in pre-war days 
 it was a fairly common expression of opinion that taxation was 
 rapidly approaching a point that threatened to court popular 
 disfavor and breed general discontent with government. 
 
 If this is true of the period prior to 1914, how much more 
 true is it today when the war, with its enormous destruction of 
 capital, with its impoverishment of the whole human race and 
 its weakening of its moral stamina, has left as heritage for the 
 next generations, debts which bid fair to establish, for a gen- 
 eration or two at least, an annual carrying charge beside 
 which pre-war figures pale. 
 
 In the last analysis all taxes — whether direct or indirect, 
 whether borne by those who pay at first or later shifted to 
 the shoulders of others — ^must come out of the excess of income 
 over consumption or out of the national surplus of either past 
 or current origin. Since the latter has appreciably diminished 
 as a result of the war and since national productiveness has been 
 impaired, especially in the older countries that participated in 
 the conflict, the seriousness of the situation is multiplied many 
 fold in view of the piling up of tax burdens. Furthermore, 
 
 22 
 
although a decrease has taken place in the national surplus 
 and tax burdens have been increased far beyond normal pro- 
 portions, the requirements for additions to and betterments 
 of industrial and commercial capital are heavier now than 
 they were during the recent war. Repairs and substitutions 
 had been at a low ebb during the war period, primarily be- 
 cause governments had a prior lien on all available capital 
 and this was in greater part diverted into channels that served 
 purely war purposes. High rates of interest and high con- 
 struction costs in themselves discouraged extensions and 
 additions that might have been contemplated, and kept re- 
 pairs at a minimum. If industry and commerce are to re- 
 cover, it is clear that the demands for additions and better- 
 ments will have to grow faster than the net increase of the 
 national income in the coming years and the encroachments on 
 the national surplus by virtue of high taxation will prove to 
 be more burdensome and disproportionate. 
 
 Tables 8 to 16 and Chart 2 present a comparative summary of 
 tax burdens in the six major countries. 
 
 Pre-War Growth of Taxation 
 
 In 1903 or thereabouts, the per capita taxation of national, 
 state, provincial and local governments amounted to J18 in 
 the United States, %2\ in the United Kingdom, %\1 in France, 
 $10 in Italy, %\2 in Germany and $3 in Japan. By 1913-1914 
 the annual tax burden had grown to $23 in the United States, 
 %T1 in the United Kingdom, $22 in France, $12 in Italy, $19 in 
 Germany and $6 in Japan. Thus the percentage increase 
 during the ten-year period in question was largest for Japan, 
 with 95%, and lowest for the United Kingdom, with 15%. 
 Germany showed an increase of 62%, followed by France with 
 36%, the United States with 31% and Italy with 27%. That 
 the population changes did not materially influence the se- 
 quence may be gleaned from the fact that the increase in 
 the total amount of taxes actually raised was 124% in Japan, 
 100% in Germany, 60% in the United States, 38% in France, 
 38% in Italy and 26% in the United Kingdom. 
 
 Public Monopolies 
 
 It should be borne in mind in connection with the tax status 
 that in some states public monopolies and undertakings have 
 been conducted along purely business lines, yielding surpluses 
 
 23 
 
wherewith to reduce the national tax bill,* other things being 
 considered equal. This was particularly true in France, Ger- 
 many and Italy before the war and, to a less extent, in Japan. 
 In 1903 the net profit from the French state monopolies, from 
 the postal system, telephone, telegraph, railroads, etc., exclusive 
 of domains, totaled 453 million francs, or $2.24 per capita; in 
 1913 it was 574 million francs or $2,19 per capita. In Italy the 
 net profits from these sources amounted to 346 million lire or 
 $1.71 per capita in 1902-1903, and in 1913-1914 to 404 million 
 lire or $2.19 per capita. In Germany the operation of railroads, 
 public utilities, etc., by the separate states and municipalities 
 yielded financial results which were highly satisfactory. In 1913- 
 1914, commercial enterprises of the national and state govern- 
 ments of the German Empire alone yielded a net revenue of 
 1,258 million marks or $4.42 per capita, and this figure is 
 exclusive of municipal activities of a lucrative nature. The 
 postal administration of the United States, however, has 
 frequently reported a deficit and the effect of the government 
 conduct of the business has been to increase the burden of 
 taxation. 
 
 During the war, because of the desirability of pursuing 
 certain social policies, profit-making features of government 
 undertakings were temporarily submerged under the pressure 
 of political considerations, and losses became the rule prac- 
 tically everywhere, so far as commercial and industrial under- 
 takings were concerned. The productivity of monopolies has 
 fallen off generally, even in France, as is evidenced occasionally 
 in the debates of the Chamber of Deputies (official figures are 
 not available), but monopolies in Italy have been growing more 
 and more lucrative in a cumulative fashion. In 1918-1919 the 
 yield of Italian state monopolies was 1,142 million lire or $5.88 
 per capita, and in the subsequent years the net yield will 
 probably be still higher. 
 
 fVar Taxation 
 
 In the conduct of the war, so far as the six nations under 
 review are concerned, credit was primarily the means by which 
 the costs of the war were met. Although the fiscal policies 
 
 'It was deemed advisable not to consider such profits as additional taxation, on the ground 
 that they do not conform to the accepted definition of a "tax." Furthermore, were the 
 attempt otherwise justifiable, their inclusion would have led to many difficulties because 
 of the differences in fiscal theories followed by various governments and because of the 
 paucity of data bearing on the net results obtained during the war and post-war periods. 
 
 24 
 
pursued by the various belligerents may thus be characterized 
 in a general way, there was wide difference in actual practice 
 from country to country. At one extreme there are to be 
 found Japan, the United States and the United Kingdom, who 
 made immediate readjustments in their fiscal systems in an 
 attempt to defray a goodly portion of the total expenditures 
 by means of taxation. At the other extreme are to be found 
 France and Germany, whose management of the war from a 
 fiscal standpoint is exposed to the charge of laxity and short- 
 sightedness. Italy also made a poor showing, but this is 
 largely due to her impoverished state rather than to inertia 
 or negligence. Japan's record represented no great fiscal 
 effort in view of her limited participation in the conflict. 
 
 The per capita of taxation of national, state and local govern- 
 ments in the fiscal year 1918-1919, with foreign currencies com- 
 puted at par, reached $65 in the United States, $94 in the United 
 Kingdom, $30 in France, $30 in Italy, $44 in Germany and 
 $9 in Japan, but reduced to a comparable (pre-war) purchasing 
 power basis, i.e., with inflation eliminated, these figures would 
 be about $32 for the United States, $42 for the United Kingdom, 
 $9 for France, $8 for Italy, $20 for Germany and $4 for Japan. 
 With the close of the war, taxation receipts of national govern- 
 ments continued to rise, with the exception of the United 
 States and Japan, where there has been some recession. In 
 addition, the burdens imposed by local governments have been 
 increasing very rapidly in the past year or two, and this cir- 
 cumstance has in some cases offset the amelioration in national 
 taxation that has resulted in the interim in the case of some 
 countries. The total per capita taxation in the fiscal year 1920- 
 1921, computed on the basis of pre-war purchasing power, was 
 about $41 for the United States, $46 for the United Kingdom, 
 $15 for France ($25 in the calendar year 1921), $8 for Italy, 
 $19 for Germany and $5 for Japan. 
 
 Relation to National Income 
 
 Inasmuch as taxation must ultimately come out of the na- 
 tional surplus, as stated above, it is important to indicate the 
 relation between national income and taxation. Unfortunately 
 figures of national income of foreign countries are not available 
 for recent years; they all relate to pre-war conditions. Since 
 
 25 
 
1914, national incomes have undergone considerable changes, 
 in some cases resulting in improvement and in others in retro- 
 gression. Germany's national income has been considerably 
 reduced owing to transfer to neighboring nations of territories 
 formerly under her control, and also to decreased efficiency. The 
 reduction by virtue of these conditions is estimated to be 1S% 
 to 20% of the national income. The national income of the 
 countries benefited by this distribution was therefore enhanced, 
 other things being considered equal. There has also been in 
 the interim an upheaval in the normal channels of trade. 
 
 In the absence of any satisfactory alternative with regard to 
 post-war estimates of foreign countries, comparison is made in 
 Table 15 between the tax burden per capita (for national, 
 state and local purposes combined) on the pre-war purchasing 
 power basis as compared with the pre-war national income. 
 This study discloses the startling fact that in the fiscal year 
 1920-1921 about one-eighth of the pre-war national income of 
 the United States was diverted into tax channels, one-fifth in 
 the United Kingdom, one-twelfth in France (one-eighth in 1921), 
 one-sixteenth in Italy, one-eighth in Germany, and slightly less 
 than one-fifth in Japan, when due recognition is given to the 
 changed price levels and the factor of population. The per- 
 centage of the pre-war national income represented by taxes 
 has been growing throughout the war period to date in most 
 countries, the full significance of which fact has been barely 
 appreciated as yet. 
 
 Estimates of the national income for the United States 
 have been made by other authorities' for the years 1909-1919. 
 It is therefore possible, after readjusting the figures to make 
 the tax year dovetail with the calendar year to which the esti- 
 mates of income apply, to compare our tax burden from year 
 to year without being required to reduce our taxes to a pre- 
 war purchasing power basis. Table 16 and Chart 3 show that 
 our total tax burden has grown from 6.4% of our national income 
 in 1912-1913 to 14.3% of our national income in 1920-1921. 
 The full import of this condition has barely been recognized 
 as yet in this country, although the general aspects have 
 been covered from time to time in various financial dis- 
 
 'Natlonal Bureau of Economic Research, Inc., "Income in the United States, Its Amount 
 and Distribution, 1909-1919," Harcourt, Brace and Company, New York, 1921. 
 
 26 
 
cussions. If in a country like the United States, rich in 
 natural resources and abounding in productive capacity, tax 
 burdens threaten to represent so high a percentage of the current 
 national income, how much more true is it of the poorer 
 countries of the world and how much more handicapped are 
 these countries in their attempts to reconstruct their industrial 
 and commercial systems? 
 
 27 
 
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Chart 2: Per Capita Total Taxation of Governments 
 ON the Pre-War Purchasing Power Basis 
 (National Industrial Conference Board) 
 
 lai^tij 1913-14 ISI4-I5 ISI5-IB I9IB-I7 I3I7-IB ISIfl-IS 1913-60 I3E0-EI I92I-EE 
 
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 36 
 
Chart 3: Total Taxation and National Income, United 
 States 
 
 (National Industrial Conference Board) 
 °°7D m° GROWTH DF TAXES AND NATIONAL INCa ME PER CAPITA 
 
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 RATIO OF TAXES TD NATIONAL INCOME PER CAPITA 
 PE'' nnjll NATIDNAI. INCDME' PER CAPITA - 100 V. 
 
 1312-13 I9I3-I.4 1914-15 I9I5-1G I91B-17 I9I7-1B I3IB-I9 1919-2n 1920-21 1921^2. 
 
 37 
 
Table 16: Ratio of Total Taxation to National Income — 
 United States 
 
 
 National Income 
 
 Total Taxation 
 
 Ratio of Taxation to 
 
 Fiscal Year 
 
 Per Capita' 
 
 Per Capita' 
 
 National Income 
 
 1912-1913... 
 
 $360.81 
 
 $22.95 
 
 6.36% 
 
 1913-1914... 
 
 357.52 
 
 22.93 
 
 6.41% 
 
 1914-1915... 
 
 351.66 
 
 23.28 
 
 6.62% 
 
 1915-1916. . . 
 
 402.77 
 
 24.54 
 
 6.09% 
 
 1916-1917... 
 
 482.75 
 
 28.81 
 
 5.97% 
 
 1917-1918... 
 
 546.83 
 
 57.59 
 
 10.53% 
 
 1918-1919. . . 
 
 612.83 
 
 64.66 
 
 10.55% 
 
 1919-1920. . . 
 
 648.94 
 
 84.37 
 
 13.00% 
 
 1920-1921... 
 
 552.91 
 
 79.15 
 
 14.32% 
 
 ^Arrived at by taking the average of two years' national income (figures of the National 
 Bureau of Economic Research, Inc., in "Income in the United States, Its Amount and 
 Distribution, 1909-1919," Harcourt, Brace and Company, New York, 1921) and dividing 
 the resultant fi^re by the estimated population at the middle of the fiscal year. Fo r 
 the calendar years 1920 and 1921. the national income was independently estimated at 
 f 72 billions and $50 billions, respectively. 
 
 ^Federal, state and local combined. 
 
 38 
 
Ill 
 
 THE BURDEN OF TAXATION IN THE UNITED STATES 
 
 Summary of Tax Systems in the United States 
 
 Before describing in detail the sources from which the tax 
 data of this report are derived, it will be advantageous to view 
 the whole fiscal structure as it exists today in order to under- 
 stand better the complexities involved. The outstanding 
 observation is that the present fiscal system in the United 
 States has grown up around the political structure. This is, 
 of course, an inevitable consequence of the manner in which the 
 State has grown, and its development presents no fresh aspects 
 whose counterparts cannot be found in every civilized region 
 of the world where centralized authority exists. Local needs 
 asserted themselves first, and as relations between localities 
 became stronger and unification resulted, further burdens were 
 superimposed on those designed to meet local requirements. 
 The tax system as constituted today recognizes three distinct 
 tax-levying authorities, viz., federal, state and the civil divisions 
 of the latter, and contributions must be paid, either directly 
 or indirectly, to each of the three. 
 
 Local Taxation 
 
 Local taxation in the United States is almost wholly 
 grounded on property. The general property tax, or as it is 
 sometimes called, the ad valorem tax, constitutes the pillar 
 of local finance. As a general proposition, it is safe to main- 
 tain that over 90% of all local tax revenues are derived from 
 this single source. The more backward or undeveloped a 
 community is, the greater is its dependence on the general 
 property tax, and the more closely does the percentage ap- 
 proach 100. In the more industrialized centers, considerable 
 revenues are drawn from license taxes and from participation 
 in state business and income taxes, but even in such localities, 
 reliance on property taxes is pronounced and the latter consti- 
 tute by far the largest single item of local government income. 
 
 Just what falls under the title "property taxes" varies from 
 state to state. Property taxes as administered in the United 
 
 39 
 
States usually assume the form of a proportional tax on the 
 value of real estate, both land and improvements, and on 
 personalty of every character and description. Exceptions 
 may be found in the taxation of natural resources, such as in 
 the case of the net output of mines or the net yield of forests, 
 and qualifications may be discovered even in the methods of 
 assessing value, as for example, taxes upon ships at a specific 
 amount per registered ton or taxes upon grain at a specific 
 amount per bushel. 
 
 In the tax systems of a few state governments, property 
 taxes have been assigned to a subordinate position, but this 
 situation does not obtain in a majority of the commonwealths. 
 Originally, the general property tax served the double purpose 
 of being the principal source of revenue for both the state 
 and local governments, but as local needs grew, and as other 
 bases of taxes sprang up, states have gradually begun to re- 
 linquish the general property tax. In the finances of the 
 majority of states, the general property tax still holds first 
 place, but there is an unmistakable tendency on the part 
 of the more developed commonwealths to place greater and 
 greater reliance on business and income taxes than heretofore. 
 In three states, viz., California, Pennsylvania and Delaware, 
 the general property tax is reserved entirely to the local govern- 
 ments; in others, as in New York, this source is tapped inter- 
 mittently or irregularly by the state government. The bulk 
 of the revenue of the more prosperous states is derived from 
 taxes on capital stock, incomes, inheritances, corporations, 
 banks and miscellaneous businesses and also from licenses for 
 hunting and fishing, on motor vehicles, etc. 
 
 Federal Taxation 
 
 Federal revenues within recent years have acquired an en- 
 tirely different complexion; an almost complete transformation 
 has taken place in the relationship of the various sources. 
 Before the entrance into the World War, the mainstays of federal 
 finances were customs duties and internal revenue taxes on 
 tobacco and liquors. Taxation of corporate and individual in- 
 comes had begun only in 1909 and 1913, respectively, but tested 
 by its lucrativeness it played a secondary r61e. As soon, how- 
 ever, as the necessity for expanding the fiscal program became 
 manifest early in the war, as a result of the prodigious increase 
 
 40 
 
in government outlays, attention became focused on the in- 
 come tax and its ally, the excess profits tax, and both became 
 by far the principal revenue producers of the nation. From 
 ^71 millions in 1913-1914, their combined yield grew to ^3,957 
 millions in 1919-1920, and along with them there developed a 
 system of miscellaneous taxes and licenses to which the emer- 
 gency gave birth. While before the war federal taxes consti- 
 tuted but 30.6% of all taxes combined, during the war the 
 former increased to such an extent as actually to exceed the 
 state and local taxes by a wide margin. 
 
 Sources and Character of Data 
 
 One of the popularly recognized distinctions between public 
 and private finance relates to the method employed in raising 
 and expending the revenues. In private finance, income 
 governs outgo; in public finance, expenditures shape and 
 mould the revenue policy. In the individual economy, 
 expenditures are usually circumscribed by the amount of 
 current receipts, although at times the expected but still un- 
 realized income enters into the calculations. In public 
 economy, however, the reverse is usually true. The legis- 
 lative bodies first fix the amounts which they undertake to 
 appropriate, and this done, attention is then directed to 
 securing ways and means to meet the obligations incurred. To 
 contend that the legislator pays no heed to the credit side of 
 his revenue accounts but merely visualizes the debits and 
 determines their proportions, would, however, be a far- 
 fetched and inaccurate notion of actual parliamentary pro- 
 cedure. There is always a limit to taxation, and political ex- 
 pediency very often dictates that even an approach to this 
 condition must be avoided. Nevertheless, it should be recog- 
 nized that as a general rule the expenditure policy is, within 
 reasonable limits, mapped out long before consideration is 
 given to the revenue aspects. Not infrequently a balance 
 becomes impossible and deficit financiering results. This is 
 particularly true in times of war, when loans of all sorts are 
 made to fill the void, with government fiat money sometimes 
 issued when other recourses are considered inadvisable or less 
 attractive; but even in periods of international tranquility, 
 nations have repeatedly failed to meet their current expenses 
 
 41 
 
out of revenue for long intervals at a time, as is evidenced by 
 some of the South American countries. 
 
 This general situation has its reflection in the manner in which 
 public accounts are kept. Where no budgets exist, where more 
 interest is manifested in outgo than in income, where political 
 corruption spreads its tentacles into the public treasury, or 
 where men are elected or appointed as supervisory accounting 
 officers whose technical qualifications are nebulous and whose 
 possession of office represents the reward for party service, 
 sound accounting principles of public finance must perforce 
 give way at times to chaos and opportunism. There still are 
 states that have not discarded their timeworn and antiquated 
 systems of accounting, the retention of which would have long 
 been conducive to bankruptcy were a private organization to 
 pursue the same methods. Perhaps in few other fields of 
 economic research is the investigator confronted with such in- 
 adequate, heterogeneous and disconnected data as in the 
 domain of American public finance. 
 
 The only attempts at systematic and regular collection of 
 data relating to the public finances of state and local govern- 
 ments have been made by the United States Bureau of the 
 Census. Every year the latter now publishes a volume en- 
 titled "Financial Statistics of States" and "Financial Sta- 
 tistics of Cities over 30,000."^ Financial statistics of munici- 
 palities under 30,000, of counties, villages, towns, town- 
 ships, school and other districts, etc., are not regularly col- 
 lected and published. The latest figures on tax levies for all 
 the minor civil divisions of the states published by the Census 
 Bureau appertain to the year 1902.'' In 1913, the Census 
 Bureau undertook the publication of financial data of cities 
 under 30,000 but over 2,500 and also of counties, in addition 
 to data for states and for cities over 30,000, which have 
 appeared annually or biennially since 1902. Data for other 
 local governments were not, however, included in the scope of 
 the investigation. For both 1902 and 1912, the Census 
 Bureau presented figures which gave the ad valorem tax levies 
 of all states and local governments. 
 
 Special assessments on property were omitted from the 
 totals in this report wherever the character of the data was such 
 
 'Because of pressure due to the decennial Census, this series was interrupted in 1920 but 
 was resumed in 1921. 
 
 "U. S. Department of Commerce and Labor. "Wealth, Debt, and Taxation." Special 
 Reports of the Census Office, Washington, 1907. 
 
 42 
 
as to render this course possible. Special assessments consti- 
 tute exactions from the owners of property to defray the cost 
 of a special public improvement which is made in the interest 
 of the general citizenry, but which accrues to the special benefit 
 of the individual involved. While a tax in its generic sense 
 falls as a direct burden upon the payee, a special assessment 
 theoretically leaves the property owner no poorer than there- 
 tofore, since he is usually compensated by the special benefits 
 conferred or the special services rendered. A tax is a recurring 
 charge levied on all forms of tangible and intangible property, 
 on rights, privileges, occupations, etc., to be disbursed for any 
 object which the legislative authorities see fit. Special assess- 
 ments are, however, intermittent and non-recurring; they are 
 levied only on realty and the revenue therefrom cannot be 
 utilized for any other purpose than the particular improvement 
 or services mentioned in the special legislation enacted. 
 
 In this report cash receipts for taxes were utilized in the case of 
 federal and state finance, but levies of ad valorem taxes were pri- 
 marily used in determining local burdens because of the paucity 
 of statistics relating to their finances. Allowances were made for 
 other tax levies and miscellaneous licenses. Whether or not 
 the tax levy is wholly or partly collectible in the year to which 
 it refers varies from state to state. Furthermore, the levy does 
 not necessarily correspond to the actual collections, since 
 practically every tax-levying authority has outstanding un- 
 collected taxes, often running into high figures. On the other 
 hand, receipts are to be recorded on account of taxes collected 
 in any given fiscal period other than that in which they were 
 originally levied. In the long run, these items may be assumed 
 more or less to balance each other. 
 
 As far as the data permitted, duplications appearing in 
 state and local finance accounts were eliminateid. Local 
 governments very often share in state sources of revenue or 
 vice versa, and many difficulties presented themselves in the 
 proper allocation of the items . In a few instances where the state 
 accounts were presented in gross form, it was found necessary 
 to credit the state government with the full amount, thus un- 
 derstating somewhat the local burdens . The total of state and 
 local taxes was not, however, affected by this procedure. 
 
 In the following paragraphs the procedure in determining 
 the tax burden by principal receiving sources is outlined: 
 
 43 
 
(a) Financial Data of the Federal Government. Receipts of 
 the Federal Government from income and excess profits taxes 
 for the year 1919 classified by states, were derived from 
 "Statistics of Income, 1919," published by the U. S. Bureau of 
 Internal Revenue. These data represent the actual tax pay- 
 ments made by individuals and corporations, in the various 
 states.* The grave shortcoming to be noted in the use of this 
 material is that payments do not afford a true and accurate 
 picture of the actual burdens borne by residents and legal 
 entities of the respective states. An individual files his income 
 tax return in the district where his local residence or principal 
 place of business is located, and local entities file their returns 
 in the districts containing their principal place of business or 
 principal office. Obviously, if individuals or corporations de- 
 rive their income from two or more states, their income 
 tax is not apportioned among the states concerned, but the 
 whole amount is credited to the one state in whose districts the 
 returns are filed. This circumstance undoubtedly tends to 
 upset the relative distribution of the federal tax burden by 
 states, and detracts in no small way from the usefulness ol 
 the data. No satisfactory remedy appears at hand wherewith 
 to make the proper allowances or corrections for this factor. 
 This defect must nevertheless be continually borne in mind 
 and any conclusions that are formulated must be qualified by 
 this limitation. 
 
 Since payments on amount of income and excess profits 
 taxes and the distribution of national income by states relate to 
 the calendar year 1919, it was deemed essential that the 
 balance of federal taxes be referable to the same period. The 
 classification of other federal tax receipts by states, is under- 
 taken only for the government fiscal year, and hence to 
 secure comparability an average of the two fiscal years 1919- 
 1920 and 1920-1921 was used. Taxes on legal and business 
 transactions, on documents and on insurance, excise taxes on 
 consumers and dealers, and miscellaneous taxes on occupa- 
 tions, acts and privileges, were considered as personal taxes, 
 virtually always borne by the person upon whom they are at 
 first levied. They present on the whole no complications with 
 respect to the matter of state boundaries. Taxes on con- 
 sumption and on services are, however, of interstate char- 
 
 •These fieures are likely to be swelled by collection of back taxes after returns are com- 
 pletely audited, but records of these adjustments are not available. 
 
 44 
 
acter and it would be wholly indefensible to credit to a state 
 where the article or service originates the total of taxes paid 
 by the manufacturer or wholesaler in that state. Taxes on 
 tobacco, beverages, excise taxes on manufactures, postage 
 tax, customs duties and transportation taxes, all fall into this 
 category. These taxes are in large part paid for directly by 
 the ultimate consumer or are later shifted through the various 
 stages of manufacture. These items were allocated among the 
 states according to relative population, on the strength of the 
 theory that they are primarily consumption taxes and that 
 their weight falls more or less evenly on all economic classes, 
 varying directly with the number of consumers. In so far as 
 an appreciable portion of our customs duties is levied on 
 luxuries which find their way among the wealthier classes that 
 are centered in a few states along, say, the Atlantic coast, 
 this method of distribution cannot perhaps be well defended, 
 but taken by and large, the distribution of these taxes by 
 states will vary with their population. 
 
 {b) Financial Data of States. As stated above, financial data 
 relating to states are now published regularly by the Bureau 
 of the Census. The latest one of the published, series bears 
 the date 1919 and presents tax receipts of state governments 
 whose fiscal years end in the period between July 1, 1918, and 
 June 30, 1919. For the purpose in hand, it was possible to 
 use the Census figures for only fifteen states, viz., Arizona, 
 California, Iowa, Kansas, Kentucky, Michigan, New Jersey, 
 New York, North Dakota, Ohio, Oklahoma, South Dakota, 
 West Virginia, Wisconsin and Vermont, since their fiscal 
 years all end June 30, 1919. Figures given by the Census 
 Bureau for the remaining states refer to the fiscal year ending 
 in 1918; hence it was necessary to secure data for the fiscal 
 year ending in 1919 from reports of auditors, comptrollers and 
 treasurers. In some cases captions and titles in the latter reports 
 and statements were not clear enough to indicate the differentia- 
 tion between fees and licenses, for example, and some tax items 
 were highly doubtful. The cooperation of responsible officials 
 was usually sought, but correspondence in some cases failed to 
 bring about a satisfactory disposition of the queries submitted. 
 These uncertainties were allowed to remain in the table, but the 
 percentage of possible error due to their inclusion is relatively 
 small or negligible. 
 
 45 
 
(c) Financial Data of Local Governments. Difficulties 
 abounded in securing local government material. In only 
 a few states is an attempt made to secure and publish receipts 
 and expienditures of counties, cities, towns and minor civil divi- 
 sions. Such information is compiled annually principally in Cali- 
 fornia, Iowa (cities and towns only), Massachusetts, Nevada, 
 New Hampshire, Pennsylvania and Wisconsin, and quadren- 
 nially in Connecticut. In a few states it is compiled in in- 
 complete form, as in Virginia; in others, only disbursements 
 are shown, as in Maine. Hence, to obtain comparable re- 
 sults, it was found necessary to utilize levies of general property 
 taxes for all local governments, with allowances made for mis- 
 cellaneous taxes and license receipts, but even here obstacles 
 presented themselves. In not all cases are such data collected. 
 In Florida, Kentucky, Louisiana, Maryland, North Caro- 
 lina, South Carolina, Tennessee, Texas and Wyoming, 
 however, county and district taxes were available, or else 
 rates and valuations for these civil divisions were extant on a 
 basis of which computations could be made, with interpola- 
 tions required wherever certain figures were lacking. Taxes 
 and licenses of other civil divisions per capita were assumed to 
 have grown as rapidly as county tax revenues per capita since 
 1902. For seven states no data whatever could be secured as 
 to local taxes, viz., Alabama, Arkansas, Delaware, Missis- 
 sippi, Montana, Nebraska and Oklahoma; tax receipts per 
 capita of local governments were in these cases estimated on 
 the basis of the increase in state taxes per capita since 1902. 
 The latter figures constitute the least satisfactory in the table. 
 For purpose of comparability, levies of ad valorem taxes, 
 either actual or partly estimated, were usually employed 
 with allowances made for miscellaneous tax receipts and 
 licenses. 
 
 Taxation by States 
 
 While a knowledge of the burden that taxation places upon 
 society serves a useful purpose, the value of such a study is 
 considerably enhanced when it becomes localized and assumes 
 a more specific and definite character than a national study 
 permits. Estimates of the national income have recently been 
 made available covering the years 1909-1919.* In connection 
 with these estimates an attempt has been made to distribute 
 
 'National Bureau of Economic Researcli, Inc. "Income in the United States," of. cit. 
 
 46 
 
the national income for the year 1919 by states, which enables 
 us to make a study of the real burden of taxation state by 
 state, in order to bring out clearly local differences.' 
 
 The state disclosing the highest percentage of its income 
 diverted to the support of government in the form of taxes is 
 New York with 17.2%. New York State contributed in 1919 
 one-eighth of the total income and excess profits taxes collected 
 by the Federal Government. As stated elsewhere, however, 
 federal tax payments in any state do not necessarily emanate 
 from the income of the citizens of that state, and hence the 
 burden is somewhat exaggerated. The same conclusion ap- 
 plies with equal or greater force to the state of Delaware, 
 where federal tax collections are swelled by the fact that a 
 large number of corporations operate under Delaware charters 
 and file income tax returns from that state, although the 
 business is conducted mostly in other commonwealths. Texas 
 shows the lowest ratio of total taxes paid to income, namely 
 7.4%. In the vast majority of the states the ratio exceeds 
 10% and the general average is 12.1%. This means that in 
 the calendar year 1919 the total tax bill represented one- 
 eighth of the national income. (See Table 17 and Chart 4.) 
 
 That the burden of state and local taxes is higher in agri- 
 cultural and mining states and that federal taxes fall more 
 heavily on manufacturing states is one of the outstanding 
 observations to be made from Table 17. State and local taxes 
 constituted 9.1% in Montana; 8.1% in North Dakota; in 
 Minnesota, 7.7%; Wisconsin, 7.1%; Nevada, 6.8%; Idaho, 
 6.6%; Utah, 6.5%; New Mexico, 6.4%; South Dakota, 6.3%; 
 Colorado, 5.8%; Washington, 5.7%; Arizona, 5.6%; and New 
 Hampshire and Nebraska, 5.5%. In New York, on the other 
 hand, the portion of the respective state income diverted to 
 state and local taxes was only 4.7%; in Pennsylvania, 3.1%; 
 Michigan, 4.5%; and Ohio and Illinois, 4.3%. Federal tax 
 collections constituted 12.5% of New York's income; 11.9% 
 in Rhode Island; 11.5% in Delaware; 10.5% in Massachusetts; 
 10.3% in Michigan; 8.4% in Connecticut; 8.0% in Illinois; 
 7.8% in Missouri and Pennsylvania and 7.6% in North Caro- 
 lina. In South Dakota, the ratio of federal taxes to state 
 income was only 3.1%; in North Dakota, 3.2%; in Nevada, 
 3.1%; and in Idaho and Arizona only 3.5%. 
 
 •Knauth, O. W., National Bureau of Economic Research, "Distribution of Income by 
 States in 1919," Harcourt, Brace and Company, New Yorlc, 1922. 
 
 47 
 
An explanation of this circumstance is to be found in the 
 nature of the respective tax systems. Local taxes, which com- 
 prise the bulk of what falls under the combined heading 
 "state and local" taxes, are based on realty and very little on 
 personalty, in view of the evasions which are extensively 
 practiced under the present administration of the general 
 property tax laws in most states. They take no cognizance of 
 profits, earnings, turnover, volume of sales, etc., except in a 
 very general and indefinite way. State taxes are levied partly 
 on property and partly on the basis of other norms. The 
 farmer's wealth is largely tangible and conspicuous; that of 
 other groups in society is in great part intangible and thus often 
 escapes the eye of the tax assessor. Hence, the amount of 
 income expropriated for local taxation is higher in agricul- 
 tural states than in manufacturing states. Federal taxes, on 
 the other hand, are largely based on income, both personal 
 and corporate. Because of the general exemption features 
 and defects inherent in estimating the farmer's income, the 
 latter is not affected, as a general rule, by direct federal tax- 
 ation, but the brunt of the burden falls on the industrialist. 
 This disparity is very marked as between agricultural and 
 industrial states. 
 
 Per capita taxes in 1919 were highest in New York, with 
 $148.36; followed by Massachusetts, with $125.35; Delaware, 
 J124.41; Rhode Island, |115.25 and Michigan, $105.71. The 
 distinction of having the lowest per capita tax falls to Alabama 
 with $26.47. In sixteen states, viz., Arizona, Florida, Idaho, 
 Iowa, Kansas, Minnesota, Montana, Nebraska, Nevada, New 
 Hampshire, New Mexico, North Dakota, South Dakota, Utah, 
 Washington and Wisconsin, state and local burdens per capita 
 exceeded federal figures. 
 
 Table 18 shows the distribution of federal taxation by states 
 in 1919 and Tables 19 to 21 inclusive present figures which 
 afford a picture of the growth of state and local taxation 
 in recent years. 
 
 In Table 22 there are tabulated per capita receipts from 
 taxes and licenses of the principal cities of the United States. 
 The growth of municipal taxes is merely a reflection of what 
 has transpired in the finances of other civil divisions. In 1921, 
 as far as data have been released by the Bureau of the Census, 
 
 48 
 
Boston, Mass., shows the highest per capita tax, followed by 
 Los Angeles, Cal., Seattle, Wash., Pittsburgh, Pa., and Bridge- 
 port, Conn. The lowest per capita tax is shown by Mobile, Ala. 
 
 Chart 4: Distribution of Total Taxation by States, 
 United States 
 
 (National Industrial Conference Board) 
 
 TOTAL TAXES 
 .6.a33.TD3.DDD — IDDV. 
 
 ^LEADING tvlANUFACTUniNG STATES 
 
 49 
 
Table 17: Taxes Related to Income, by States, 1919 
 
 states 
 
 Total 
 
 Income 
 
 by States> 
 
 (thousands) 
 
 All Taxes 
 
 Federal^ 
 (thousands) 
 
 State 
 (thousands) 
 
 Local 
 (thousands) 
 
 Total Taxes 
 (thousands) 
 
 Alabama 
 
 Arizona 
 
 Arkansas 
 
 California 
 
 Colorado 
 
 Connecticut 
 
 Delaware 
 
 Dist. of Columbia 
 
 Florida 
 
 Georgia 
 
 Idaho 
 
 Illinois 
 
 Indiana 
 
 Iowa 
 
 Kansas 
 
 Kentucky 
 
 Louisiana 
 
 Maine 
 
 Maryland 
 
 Massachusetts. . . . 
 
 Michigan 
 
 Minnesota 
 
 Mississippi 
 
 Missouri 
 
 Montana 
 
 Nebraska 
 
 Nevada 
 
 New Hampshire. . 
 
 New Jersey 
 
 New Mexico 
 
 New York 
 
 North Carolina. . . 
 
 North Dakota 
 
 Ohio 
 
 Oklahoma 
 
 Oregon 
 
 Pennsylvania 
 
 Rhode Island 
 
 South Carolina. . . 
 South Dakota ... 
 
 Tennessee 
 
 Texas 
 
 Utah 
 
 Vermont 
 
 Virginia 
 
 Washington. 
 
 West Virginia. . . . 
 
 Wisconsin 
 
 Wyoming ,^. 
 
 Total 
 
 $812,496 
 
 223,208 
 
 666,354 
 
 2,816,710 
 
 603,538 
 
 991,276 
 
 174,862 
 
 388,256 
 
 408,156 
 
 1,144,924 
 
 262,708 
 
 4,968,008 
 
 1,710,953 
 
 1,711,725 
 
 1,071,445 
 
 950,801 
 
 770,704 
 
 449,750 
 
 1,000,786 
 
 3,017,861 
 
 2,580,409 
 
 1,391,378 
 
 629,512 
 
 1,825,325 
 
 284,367 
 
 916,751 
 
 66,500 
 
 266,092 
 
 2,394,845 
 
 147,971 
 
 8,960,762 
 
 981,034 
 
 335,520 
 
 3,971,647 
 
 1,086,829 
 
 558,711 
 
 5,950,620 
 
 433,114 
 
 738,091 
 
 440,470 
 
 855,467 
 
 2,517,469 
 
 234,042 
 
 186,812 
 
 994,443 
 
 1,073,048 
 
 657,729 
 
 1,472,664 
 
 154,552 
 
 $42,468 
 
 7,760 
 
 33,019 
 
 189,531 
 39,224 
 82,809 
 20,135 
 22,388 
 21,843 
 68,657 
 9,121 
 
 398,969 
 88,037 
 64,838 
 54,677 
 58,836 
 61,654 
 26,522 
 66,997 
 
 321,365 
 
 270,137 
 86,560 
 32,240 
 
 142,973 
 
 11,882 
 
 35,852 
 
 2,093 
 
 15,154 
 
 163,132 
 
 6,141 
 
 1,121,074 
 
 74,458 
 
 10,697 
 
 292,427 
 48,310 
 34,714 
 
 464,894 
 51,367 
 44,996 
 13,705 
 56,833 
 
 126,990 
 11,947 
 9,465 
 65,931 
 56,076 
 42,943 
 91,369 
 5,656 
 
 $6,220' 
 3,191' 
 5,551' 
 
 24,383' 
 6,339» 
 
 12,651" 
 3,463" 
 
 ' '4^,639" 
 
 8,11 8« 
 
 3,509" 
 
 28,385" 
 
 11,291" 
 
 11,931' 
 
 5,630' 
 
 10,851' 
 
 6,963" 
 
 8,552*' 
 
 10,509" 
 
 33,9142* 
 
 21,313' 
 
 20,637^ 
 
 4,757«' 
 
 11,491» 
 
 3,640" 
 
 7.519" 
 
 1,401«' 
 
 3,396" 
 
 25,623'= 
 
 2,112" 
 
 76,112" 
 
 7.178» 
 
 2,493' 
 
 20,003' 
 
 8,526' 
 
 4,500» 
 
 46,075" 
 
 4,761" 
 
 4,357" 
 
 3,104' 
 
 7,770«i 
 
 23,143" 
 
 4,997*' 
 
 3,247' 
 
 11,936" 
 
 11,791" 
 
 4,207' 
 
 15,924' 
 
 1,580« 
 
 $13,476* 
 
 9,383' 
 
 15,428' 
 
 111,377' 
 29,088' 
 38,922' 
 4,148" 
 9,334" 
 16,043" 
 21,194" 
 13,945' 
 
 186,077' 
 62,808' 
 74,817' 
 49,409« 
 28,782" 
 29,468" 
 12,624' 
 24,122" 
 
 127,6102' 
 96,352' 
 86,284' 
 22,4102' 
 76,285" 
 22,18828 
 42,830« 
 3,170« 
 11,396' 
 85,225' 
 7,316» 
 
 343,506' 
 24,849" 
 24,852' 
 
 150,870' 
 34,724* 
 24,298' 
 
 132,825' 
 13,520' 
 13,638" 
 24,434' 
 24,839" 
 43,643" 
 10,349' 
 5,415' 
 18,819« 
 50,106' 
 28,113' 
 89,155' 
 5,688" 
 
 $62,164 
 20,334 
 53,998 
 
 325,291 
 74,651 
 
 134,382 
 27,746 
 31,722 
 42,525 
 97,969 
 26,575 
 
 613,431 
 
 162,136 
 
 151,586 
 
 109,716 
 98,469 
 98,085 
 47,698 
 
 101,628 
 
 482,889 
 
 387,802 
 
 193,481 
 59,407 
 
 230,749 
 
 37,710 
 
 86,201 
 
 6,664 
 
 29,946 
 
 273,980 
 
 15,569 
 
 1,540,692 
 
 106,485 
 38,042 
 
 463,300 
 91,560 
 63,512 
 
 643.794 
 69,648 
 62,991 
 41,243 
 89,442 
 
 193,776 
 27,293 
 18,127 
 96,686 
 
 117,973 
 75,263 
 
 196,448 
 12,924 
 
 $66,250,695 $5,068,866 
 SO 
 
 $569.683 
 
 $2,395.154 
 
 $8.033,703 
 
Table 17: Taxes Related to Income, by States, 1919 — continued 
 
 Total 
 
 Fed- 
 
 Taxes 
 
 eral 
 
 as 
 
 Taxes 
 
 Per 
 
 as Per 
 
 Cent 
 
 Cent 
 
 of 
 
 of Total 
 
 Total 
 
 In- 
 
 Income 
 
 come 
 
 State 
 and 
 Local 
 Taxes 
 as Per 
 Cent of 
 Total 
 In- 
 come 
 
 Per Capita 
 
 Total 
 
 In- 
 come of 
 States 
 
 Federal 
 Taxes 
 
 State 
 Taxes 
 
 Local 
 Taxes 
 
 Total 
 Taxes 
 
 States 
 
 7.6 
 9.1 
 
 8.2 
 11. S 
 12.3 
 13.6 
 IS. 8 
 
 8.2 
 10.5 
 
 8.6 
 10 
 12 
 
 9 
 
 8 
 
 10 
 10 
 12 
 10 
 10 
 IS 
 IS.O 
 13.9 
 
 9.4 
 12.6 
 13.3 
 
 9 
 
 9 
 11 
 11 
 10 
 17 
 
 10.8 
 11.3 
 11.7 
 
 8.4 
 11.3 
 10.9 
 16.1 
 
 8.S 
 
 9.4 
 10.4 
 
 7.6 
 11.6 
 
 9.8 
 
 9.7 
 10.9 
 11.4 
 13.3 
 
 8.4 
 
 5.2 
 3.5 
 5.0 
 6.7 
 6.5 
 8.4 
 
 11. S 
 5.8 
 5.4 
 6.0 
 3.5 
 8.0 
 5.1 
 3.8 
 5.1 
 6.2 
 8.0 
 5.9 
 6.7 
 
 10.6 
 
 10.5 
 6.2 
 5.1 
 7.8 
 4.2 
 3.9 
 3 
 5 
 6 
 4 
 
 12 
 7.6 
 3.2 
 7.4 
 4.4 
 6.2 
 7.8 
 
 11.9 
 6.1 
 3.1 
 6.6 
 5.0 
 5.1 
 5.1 
 6.6 
 5.2 
 6.5 
 6.2 
 3.7 
 
 2.4 
 5.6 
 3.2 
 4.8 
 5.8 
 5.2 
 4.3 
 2.4 
 5.1 
 2.6 
 6.6 
 4.3 
 4.3 
 5.1 
 5.1 
 4.2 
 4.7 
 4.7 
 3.5 
 5.3 
 4.5 
 7.7 
 4.3 
 4.8 
 9.1 
 5.5 
 6.8 
 
 8.1 
 4.3 
 4.0 
 5.1 
 .3.1 
 4.2 
 2.4 
 6.3 
 3.8 
 2.6 
 6.5 
 4.7 
 3.1 
 5.7 
 4.9 
 7.1 
 4.7 
 
 12.1 7.6 4.5 $627 
 
 $346 
 668 
 380 
 822 
 642 
 718 
 784 
 887 
 421 
 395 
 608 
 766 
 584 
 712 
 606 
 393 
 429 
 586 
 690 
 783 
 703 
 583 
 352 
 536 
 518 
 707 
 859 
 601 
 759 
 411 
 863 
 383 
 519 
 690 
 536 
 713 
 682 
 717 
 438 
 692 
 366 
 540 
 521 
 530 
 431 
 791 
 449 
 560 
 795 
 
 $18.08 
 23.22 
 18.84 
 55.31 
 41.75 
 59.98 
 90.29 
 51.16 
 22.55 
 23.71 
 21.12 
 61.52 
 30.04 
 26.97 
 30.90 
 24.35 
 34.28 
 34.53 
 46.22 
 83.42 
 73.64 
 36.26 
 18.01 
 42.00 
 21.65 
 27.65 
 27.04 
 34.20 
 51.69 
 17.04 
 107.95 
 29.10 
 16.54 
 50.77 
 23.82 
 44.31 
 53.31 
 84.99 
 26.72 
 21.53 
 24.31 
 27.23 
 26.58 
 26.86 
 28.55 
 41.34 
 29.34 
 34.71 
 29.09 
 
 $47.95 
 
 $2.65 
 9.55 
 3.17 
 7.11 
 6.73 
 9.16 
 
 15.52 
 
 '4!79 
 2.81 
 8.13 
 4.38 
 3.85 
 4.96 
 3.18 
 4.49 
 3.87 
 
 11.14 
 7.25 
 8.80 
 5.81 
 8.65 
 2.66 
 3.37 
 6.62 
 5.80 
 
 18.10 
 7.67 
 8.12 
 
 .86 
 .33 
 .80 
 .85 
 .47 
 .21 
 .74 
 5.28 
 7.88 
 2.59 
 4.87 
 3.32 
 4.96 
 11.12 
 9.21 
 5.17 
 8.69 
 2.87 
 6.05 
 8.13 
 
 $5.74 
 28.09 
 
 8.81 
 32.50 
 30.95 
 28.18 
 18.60 
 21.33 
 16.57 
 
 7.32 
 32.28 
 28.69 
 21.43 
 31.12 
 27.93 
 11.91 
 16.38 
 16.44 
 16.64 
 33.13 
 26.26 
 36.15 
 12.51 
 22.41 
 40.42 
 33.05 
 40.95 
 25.72 
 27.00 
 20.30 
 33.08 
 
 9.71 
 38.41 
 26.20 
 17.12 
 31.02 
 15.23 
 22.38 
 
 8.10 
 38.39 
 10.62 
 
 9.36 
 23.03 
 15.36 
 
 8.15 
 36.93 
 19.20 
 33.87 
 29.26 
 
 $5.39 $22.66 
 51 
 
 $26.47 
 60.86 
 30.82 
 94.92 
 79.43 
 97.32 
 
 124.41 
 72.49 
 43.91 
 33.84 
 61.53 
 94.59 
 55.32 
 63.05 
 62.01 
 40.75 
 54.53 
 62.11 
 70.11 
 
 125.35 
 
 105.71 
 81.06 
 33.18 
 67.78 
 68.69 
 66.50 
 86.09 
 67.59 
 86.81 
 43.20 
 
 148.36 
 41.61 
 58.80 
 80.44 
 45.15 
 81.07 
 73.82 
 
 115.25 
 37.41 
 64.79 
 38.25 
 41.55 
 60.73 
 51.43 
 41.87 
 86.96 
 51.41 
 74.63 
 66.48 
 
 $76.00 
 
 Alabama 
 
 Arizona 
 
 Arkansas 
 
 California 
 
 Colorado 
 
 Connecticut 
 
 Delaware 
 
 .Dist. of Columbia 
 
 Florida 
 
 Georgia 
 
 Idaho 
 
 Illinois 
 
 Indiana 
 
 Iowa 
 
 Kansas 
 
 Kentucky 
 
 Louisiana 
 
 Maine 
 
 Maryland 
 
 Massachusetts 
 
 Michigan 
 
 Minnesota 
 
 Mississippi 
 
 Missouri 
 
 Montana 
 
 Nebraska 
 
 Nevada 
 
 . . .New Hampshire 
 
 New Jersey 
 
 New Mexico 
 
 New York 
 
 .... North Carolina 
 
 North Dakota 
 
 Ohio 
 
 Oklahoma 
 
 Oregon 
 
 Pennsylvania 
 
 Rhode Island 
 
 .... South Carolina 
 
 South Dakota 
 
 Tennessee 
 
 Texas 
 
 Utah 
 
 Vermont 
 
 Virginia 
 
 Washington 
 
 West Virginia 
 
 Wisconsin 
 
 Wyoming 
 
 Total 
 
References: Table // 
 
 •Figures derived from "Distribution of the National Income by States, 
 1919," published by the National Bureau of Economic Research, Inc. 
 (Harcourt, Brace & Company, New York, 1922.) 
 
 'For details, see Table 18. 
 
 'Annual Report of the Auditor of the State of Alabama, Year ending Sep- 
 tember 30, 1919, pp. 27-29. 
 
 ^Estimated by allowing the maximum constitutional rates, plus miscellaneous 
 taxes and allowances. Figures of assessed valuation were derived from the 
 Annual Report of the Auditor of the State of Alabama for the Fiscal Year 
 ending September 30, 1919, p. 81. 
 
 ^Financial Statistics of States, 1919, Department of Commerce, Bureau of 
 the Census, pp. 64-65. 
 
 'Includes also estimated amounts received from taxes other than on general 
 property and licenses of every nature, based with certain adjustments on 
 the experience of counties and cities over 8,000 in 1902 and 1913. In addi- 
 tion to Wealth, Debt and Taxation, 1907 and 1913, op. cit., the following 
 sources were used in securing the general property levy of counties and all 
 local civil divisions: Arizona, Fifth Biennial Report of the Arizona Tax Com- 
 mission, December 31, 1920, inserts, pp. 76, 78-79, 80-81 and 82; Colorado, 
 Tenth Annual Report of the Colorado Tax Commission, 1921, pp. 100-103; 
 Connecticut, Report of the Tax Commissioner for the Biennial Period, 1919 
 and 1920, pp. 140-147; Idaho, First Biennial Report of the Department of 
 Finance to the Governor, 1919-1920, Exhibit G; Illinois, Biennial Report of 
 the Auditor of Public Accounts, Nov. IS, 1920, pp. 179-183; Indiana, Annual 
 Report of the Auditor of the State of Indiana for year ended Sept. 30, 1919, 
 pp. 27-32; Iowa, Report of the Auditor of State for the Biennial Period ending 
 June 30, 1920, pp. 140-149; Kansas, Seventh Biennial Report of the Tax Com- 
 mission of the State of Kansas, for the period Oct. 16, 1918 and Oct. IS, 1920, 
 pp. 256-257; Maine, 29th Annual Report of the Board of State Assessors of 
 the State of Maine, 1919, pp. 134 and 135, with state taxes levied on cities and 
 towns deducted (Cf. Seventli Biennial Report of the State Auditor for the Fiscal 
 years ending Dec. 31, 1919 and Dec. 31, 1920, p. 54); Michigan, Report of the 
 Board of State Tax Commissioners and State Board of Assessors, 1919-1920, 
 pp. 96-97 and 102-103; Minnesota, Seventh Biennial Report of the Minnesota 
 Tax Commission, 1920, p. 19; Nebraska, estimated on the basis of total levies 
 of 1921, as furnished by the Department of Finance in specially tabulated 
 form; Nevada, Biennial Report of the Nevada Tax Commission, 1919-1920, 
 pp. 58-59; New Hampshire, 10th Annual Report of the New Hampshire State 
 Tax Commission, tax year of 1920, pp. 39-40; New Jersey, Fourth Annual 
 Report of the State Board of Taxes and Assessments for the year ending June 
 30, 1919, pp. 167, 356 and 360; New York, Annual Report of the State Tax Com- 
 mission, 1919, pp. 497-501; North Dakota, Fifth Biennial Report of the North 
 Dakota Tax Commissioner for the fiscal years 1919 and 1920, pp. 80-81; Ohio, 
 Uth Annual Report of the Tax Commission of Ohio for the year ended Dec. 
 31, 1920, p. 8; Oregon, Sixth Biennial Report of the State Tax Commission, 
 1921, pp. 38-39; Pennsylvania, based on Report on Productive Industries, 
 Railways, Taxes and Assessments, Waterways and Miscellaneous Statistics 
 of the Commonwealth of Pennsylvania for the year 1920, Dept. of Internal 
 Affairs, pp. 80 S., with state license collections eliminated as far as possible; 
 Rhode Island, Eighth Report of the Board of Tax Commissioners of the State 
 of Rhode Island, for the Biennial period, 1919-1920, p. 42, insert, with esti- 
 mated figures included for fire districts and other municipal subdivisions for 
 which no data were available; South Dakota, Annual Report of the Tax Com- 
 mission of the State of South Dakota, 1919-1920, pp. 88 et seq.; Utah, Biennial 
 Report of the State Auditor for the period ending Nov. 30, 1920, p. 47; Ver- 
 
 52 
 
mont. Biennial Report of the Commissioner of Taxes of the State of Vermont 
 for the term ending June 30, 1920, pp. 126-131; Washington, Second Biennial 
 Report of the State Tax Commissioner of Washington for the period ending 
 Sept. 30, 1920, pp. 30-32; JVest Virginia, letter of the State Tax Commissioner 
 to the National Industrial Conference Board under date of June 15, 1922; 
 Wisconsin, 10th Biennial Report of the Wisconsin Tax Commission, 1920, p. 
 124, and Financial Statistics of Cities of Wisconsin, Wisconsin Tax Com- 
 mission, pp. 20 S. 
 
 'State taxes represent the average for the two years beginning Oct. 1, 1918 
 and ending Sept. 30, 1920. Biennial Report of the Treasurer of State of Arkan- 
 sas, for the Biennial Period beginning Sept. 30, 1918 and ending Sept. 30, 
 1920, p. 24. Local taxes were estimated on the basis of suggestions and figures 
 furnished by the Auditor of State in his letter to the National Industrial Con- 
 ference Board, under dates of June 24 and June 28, 1922. 
 
 'Annual Report of Financial Transactions of Municipalities and Counties 
 of California for the year 1919, pp. 33, 186-187 and 189, and idem, for the year 
 1920, pp. 61, 188-189 and 191. Average for the two years was employed in 
 view of^the fact that the tax figures cover the years ended June 30, 1919 and 
 June 30, 1920. 
 
 •Biennial Report of the Auditor of State of Colorado, 1919-1920, pp. 37 ff. 
 
 •"Report of the Treasurer for the Year ended June 30, 1920, Public Document 
 No. 10, pp. S if. Figures appertain to the fiscal year ended June 30, 1920, 
 inasmuch as the preceding fiscal year was of only 9 months' duration. 
 
 "Annual Report of the State Treasurer, 1919, pp. 13-15 and p. 26. Local 
 taxes were estimated on the basis of the per capita increase in taxation in the 
 City of Wilmington and in the County of New Castle. The latter information 
 was furnished by the State Tax Department in its letter to the National Indus- 
 trial Conference Board, dated June 30, 1922. 
 
 •^Annual Report of the Commissioners of the District of Columbia, Year 
 ended June 30, 1919, Vol. I, pp. 70-71. 
 
 "Report of the Comptroller of the State of Florida for the year ending 
 December 31, 1919, pp. 7 ff. 
 
 '^Property taxes for civil divisions other than counties were estimated on the 
 basis of increases in county tax levies since 1902 with allowances for receipts 
 from miscellaneous taxes and licenses. In addition to Wealth, Debt and 
 Taxation, 1907 and 1913, op. cit.j the following sources were used which gave 
 only property tax levies of counties: Florida, Report of the Comptroller of the 
 State of Florida for the year ending December 31, 1919, pp. 136-137; Ken- 
 tucky, based on a table forwarded by the State Tax Commission bearing date 
 of January 23, 1922, which furnished a comparison of county tax levies in 
 1917 and 1921, with 1919 figures interpolated; Louisiana, State and Local 
 Taxes for the year 1919 compiled by the Board of State Affairs, April, 1920, 
 pp. 30 and 54-55; Maryland, Third Biennial Report of the State Tax Com- 
 mission of Maryland, 1919-1920, pp. 27 ff, and Annual Report of the Comp- 
 troller of Baltimore City, for the fiscal year ended December 31, 1919; Mis- 
 souri, Report of the State Auditor of Missouri for the Two Fiscal Years begin- 
 ning January 1, 1919 and ending December 31, 1920, p. 607; North Carolina, 
 Report of the State Tax Commission, 1919, p. 421; South Carolina, Report 
 of the Comptroller General of South Carolina to the General Assembly for the 
 Fiscal Year 1919, pp. 50-53; Tennessee, First Biennial Report of the Tennessee 
 Board of Equalization, 1919-1920, p. 114, with municipal taxes estimated on 
 the basis of the figure given for 1920 {ibid., p. 135); Texas, Annual Report of 
 the Comptroller of Public Accounts for tie FiscalYear ended August 31, 
 1919, Tatle 46, with estimates made in the counties for which rates lyere 
 lacking; Wyoming, First Biennial Report of the State Board of Equalization, 
 191^1920, pp. 44-64 and Appendix F. 
 
 "Annual Report of the Treasurer and State Bank Examiner of the State 
 of Georgia for Year ending December 31, 1919, pp. 14 ff, and Report of the 
 Comptroller-General of the State of Georgia for the Year ending December 
 31, 1920, pp. 25 ff. Local taxes were estimated on the basis of the average 
 
 53 
 
rates paid by public service corporations on their assessed valuations: Report 
 of the Comptroller-General for the Year ending December 31, 1919, pp. 239, 
 391 and 394. 
 
 "Average for two years. Fifteenth Biennial Report of the Auditor of the 
 State of Idaho, October 1, 1918 to September 30, 1920, p. 26 ff. 
 
 "Biennial Report of the Auditor of Public Accounts, November IS, 1920, 
 pp. 10 fF. 
 
 "Annual Report of the Auditor of the State of Indiana for the Year Ended 
 September 30, 1919, pp. 6 fF. 
 
 "Biennial Report of the Auditor of Public Accounts of the State of Louisiana, 
 for the years 1918 and 1919, Part II, pp. 38-42. 
 
 ^Seventh Biennial Report of the State Auditor for the Fiscal Years Ending 
 December 31, 1919 and December 31, 1920, pp. 53-56. 
 
 ^•Annual Report of the Comptroller of the Treasury of the State of Mary- 
 land for the Fiscal Year Ending September 30, 1919, pp. 10 fF. 
 
 '^'Report of the Auditor of the Commonwealth of Massachusetts for the 
 Fiscal Year Ending November 30, 1919, pp. 2 ff. 
 
 "Thirty-third Annual Report on the Statistics of County Finances for the 
 Year Ending December 31, 1919, Commission of Corporations and Taxation, 
 Division of Accounts, pp. 17-18, and 14th Annual Report on the Statistics 
 of Municipal Finances, for City and Town Fiscal Years Ending between 
 November 30, 1919 and March 31, 1920, Commission of Corporations and Tax- 
 ation, p. viii. 
 
 '^Figures appertain to the fiscal year ended June 30, 1920, the previous 
 fiscal period being only of eleven months' duration. Biennial Report of the 
 State Auditor to the Legislature of Minnesota for the Fiscal Years Ending 
 June 30, 1919, and June 30, 1920, p. 104. 
 
 '"Biennial Report of the Auditor of Public Accounts of the State of Mississippi, 
 from October 1, 1917, to October 1, 1919, pp. 184 ff. Local taxes were esti- 
 mated at suggestion of the Mississippi Tax Commission, on the basis of the 
 average tax rates paid by the Cumberland Telephone and Telegraph Company 
 in the State of Mississippi "which pays taxes in nearly every municipal, school 
 district, road district and county in the State" (letter to the National Indus- 
 trial Conference Board, dated June 24, 1922). This information was secured 
 through the courtesy of the American Telegraph and Telephone Company. 
 
 ^'Report of the State Auditor for the Two Fiscal Years beginning January 1, 
 1919, and ending December 31, 1920, pp. 7 ff. 
 
 "According to a letter of the State Treasurer to the National Industrial 
 Conference Board under date of May 10, 1922. 
 
 *'Based on figures compiled by the State Board of Equalization and the 
 Montana Taxpayers' Association, Bulletins 1, 2 and 3, with allowance made 
 for miscellaneous taxes and licenses. 
 
 ^'Average for the two years ending November 30, 1920. Biennial Report of 
 the Auditor of Public Accounts, State of Nebraska, 1919-1920, pp. 20 ff. 
 
 '"Annual Report of the State Controller, 1919, pp. 6-7. 
 
 "Report of the State Treasurer of the State of New Hampshire for the 
 Fiscal Year Ending August 31, 1919, pp. 5 ff. 
 
 '"Report of the Joint Committee on Treasurer's Accounts and of the State 
 Treasurer for the Fiscal Year Ending June 30, 1919; also Financial Statistics 
 of States, 1919, op. cit. 
 
 ''Biennial Report of the Auditor of the State of New Mexico for the Seventh 
 and Eighth Fiscal Years Ending November 30, 1920, pp. 5 ff. Local taxes 
 comprise local levies as given in Report of Special Revenue Commission to 
 the Governor and Legislature of the State of New Mexico, 1920, pp. 296 and 
 324, plus miscellaneous taxes and licenses estimated. 
 
 ''Report of the Comptroller for the Fiscal Year Ended June 30, 1920, pp. 6 ff. 
 
 54 
 
"Biennial Report of the Treasurer of North Carolina, 1919-1920, pp. 24-25. 
 ^Biennial Report of the State Treasurer, 1919-1920, pp. 25 S. 
 "SmuU's Legislative Handbook and Manual of the State of Pennsylvania, 
 1920, pp. 1005-1007. 
 ''Annual Report of the General Treasurer from January 1 to December 31, 
 
 1919, pp. 13-14 and 29 S. 
 
 "Report of the Comptroller-General of South Carolina to the General 
 Assembly for Fiscal Year 1919, pp. 18 fF. 
 
 "Figures relate to the fiscal year ended June 30, 1920, the previous fiscal 
 period extending only from December 19, 1918 to June 30, 1919. Biennial 
 Report of the Comptroller of the Treasury, December 19, 1918, to June 30, 
 
 1920, to the 62nd General Assembly, pp. 29-32. 
 
 ^'Annual Report of the Comptroller of Public Accounts for the State of 
 Texas, for the Year Ended August 31, 1919, pp. 8 fF. 
 
 **Biennial Report of the State Auditor for the Period Ending November 30, 
 1920, pp. 15-16. 
 
 ^'Annual Report of the Auditor of Public Accounts for the Fiscal Year End- 
 ing September 30, 1919, pp. 5 fF. Taxes and licenses in counties, districts 
 and municipalities were derived from ibid., pp. 245-260, with estimates made 
 wherever data were lacking. 
 
 **Average for the two fiscal years ended September 30, 1920. 16th Biennial 
 Report of the State Treasurer, October 1, 1918, to September 30, 1920, pp. 9 fF. 
 and 79-80, and 16th Biennial Report of the Secretary of State, October 1, 
 1918, to September 30, 1920, p. 6. 
 
 "■Average for the two fiscal years ended September 30, 1920. Biennial 
 Report of the Treasurer of the State of Wyoming for the Two Years Ending 
 September 30, 1920, pp. 8-9. 
 
 55 
 
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References: Table ig 
 
 'Unless otherwise stated, the figures appertain to counties, cities, towns, 
 townships, villages, boroughs, school, fire and other districts, etc., and represent 
 lemes of general property taxes, but in the case of California and Pennsylvania 
 figures of actual collection (including licenses) were used. In some cases, the 
 figures include taxes other than those falling under the head of general property 
 taxation, because of the fact that comparability might be vitiated were a segre- 
 gation made in the data presented. Appropriate notations to this eiFect are 
 made in the footnotes wherever such instances occur. 
 
 ^Derived from Wealth, Debt and Taxation, 1913, Department of Commerce, 
 Bureau of the Census, Vol. I, pp. 797 flF, unless otherwise noted. 
 
 'Fifth Biennial Report of the Arizona Tax Commission, Dec. 31, 1920, pp. 
 76, 78-82 and inserts. Figures for 1921 were submitted by the Arizona State 
 Tax Commission in a letter to the National Industrial Conference Board under 
 date of June 12, 1922. 
 
 'Annual Report of Financial Transactions of Municipalities and Counties 
 of California for the year 1912, pp. 32, 72 and 73; idem, for the year 1919, 
 pp. 33, 186, 187 and 189; idem, for the year 1920, pp. 61, 69, 188, 189 and 191; 
 idem, for the year 1921, pp. 56, 63, 165 and 185. 
 
 'Third Annual Report of the Colorado Tax Commission, 1914, pp. 60-61; 
 Tenth Annual Report, 1921, idem, pp. 100-103. 
 
 'Report of the Tax Commissioner for the Biennial Period 1919 and 1920, 
 pp. 140 and 151. For 1912, the Census figures were used (Wealth, Debt and 
 Taxation, 1913, Vol. I, p. 797) diminished by the amount paid out by the towns 
 as a military tax to the state (Report of the Tax Commissioner for the Biennial 
 Period 1913-1914, pp. 187-188.) 
 
 'Annual Report of the Commissioners of the District of Columbia, Year 
 ended June 30, 1912, Vol. I, p. 62; idem. Year ended June 30, 1920, Vol. I, pp. 
 114 ff.; idem, year ended June 30, 1921, pp. 8-9. 
 
 'County taxes only. Report of the Comptroller of the State of Florida, for 
 the year ending Dec. 31, 1912, pp. 194-195; idem, for the year ending Dec. 
 31, 1919, pp. 136-137; idem, for the year ending Dec. 31, 1920, pp. 88-89; 
 idem, for the year ending Dec. 31, 1921, pp. 166-167. 
 
 'First Biennial Report of the Department of Finance to the Governor, 
 1919-1920, Exhibit G, and letter from the Department of Finance, addressed 
 to the National Industrial Conference Board, bearing date of July 7, 1922. 
 Figures for 1920 and 1921 include, however, special assessments of cities and 
 villages. 
 
 '"Biennial Report of the Auditor of Public Accounts, 1913-1914, p. 135 and 
 idem, 1919-1920, pp. 10 ff. Figures for 1920 were submitted by the State 
 Auditor in a letter to the Board under date of June 13, 1922. Includes dog 
 taxes. 
 
 "Annual Report of the Auditor of State of the State of Indiana for the Fiscal 
 year ending Sept. 30, 1913, pp. 32 ff; idem, for the fiscal year ending Sept. 30, 
 1919, as reprinted from Year Book, pp. 27-32; idem, for the Fiscal Year ending 
 Sept. 30, 1920, pp. 153-158. Figures for 1921 were obtained from a letter by 
 the State Board of Tax Commissioners addressed to the National Industrial 
 Conference Board under date of June 23, 1922. 
 
 "Report of the Auditor of State for the Biennial Period ending June 30, 
 1914, p. 378; idem. Biennial Period ending June 30, 1920, pp. 140-149; Valu- 
 ation and Taxes, compiled by the State Auditor, 1922, pp. 7 ff. 
 
 "Third Report of the Tax Commission of the State of Kansas, for the Period 
 Oct. 16, 1910 and Oct. 16, 1912, p. 168; idem, for the Period Oct. 16, 1918 and 
 Oct. 15, 1920, pp. 256-257. Figures for 1920 and 1921 were furnished by the 
 State Tax Commission in its letter to the National Industrial Conference Board 
 under date of June 29, 1922. 
 
 "County taxes only. Figures for 1919 and 1920 interpolated. Chart pre- 
 pared by the State Tax Commission bearing date of Feb. 14, 1922. 
 
 "County taxes, including City of New Orleans. State and Local Taxes 
 for the year 1919, compiled by the Board of State Affairs, April, 1920, pp. 
 
 60 
 
54-SS and p. 280; and Fifth Annual Report of the Louisiana Tax Commission 
 (formerly Board of State Affairs) for the year 1921, pp. 284-287. 
 
 "Twenty-ninth Annual Report of the Board of State Assessors of the State 
 of Maine, 1919, pp. 134-135; 30th Annual Report, 1920, idem, p. 13S; 22nd 
 Annual Report, 1912, idem, p. 135. Figures for 1921 were submitted by the 
 Board of State Assessors in its letter to the National Industrial Conference Board 
 under date of May 6, 1922. State taxes on cities and towns were deducted, 
 being derived from the Third Biennial Report of the State Auditor for the 
 Fiscal Years ending Dec. 31, 1911 and Dec. 31, 1912, p. 53; 7th Biennial Re- 
 port, idem, Dec. 31, 1919 and Dec. 31, 1920, pp. 40 and 233; and letter from the 
 Board of State Assessors, dated June 20, 1922. 
 
 '"County taxes, including City of Baltimore, as computed from rates and 
 valuations given in Third Biennial Report of the State Tax Commission of 
 Maryland, 1919-1920, pp. 27 if. Fourth Biennial Report, idem, 1920-1921, 
 pp. 13 fF. 
 
 "Including polls. Annual Report of the Commissioner of Corporations 
 and Taxation for the year ending Nov. 30, 1921, Public Document No. 16, p. 65. 
 
 "Report of the Board of State Tax Commissioners and State Board of 
 Assessors, 1913-1914, pp. 78-79; idem, 1919-1920, pp. 96-97 and 102-103. 
 Figures for 1920 and 1921 were submitted by the Board of State Tax Commis- 
 sioners in its letter to the Board under date of June 14, 1922. 
 
 '"Fourth Biennial Report of the Minnesota Tax Commission, 1914, p. 343 ff; 
 Seventh Biennial Report, idem, 1920, pp. 240-259. Excludes money and 
 credits taxes. Figures for 1921 derived from a chart furnished by the Minne- 
 sota Tax Commission. 
 
 "Counties only. Report of the State Auditor for the Two Fiscal Years, 
 beginning Jan. 1, 1911 and ending Dec. 31, 1912, p. 483; idem, 1919-1920, 
 pp. 605-607. 
 
 '^Figures obtained from compilations of the State Board of Equalization and 
 Bulletins 1, 2 and 3, of the Montana Taxpayers' Association. 
 
 '"Estimated tax revenue. Biennial Report of the Nevada Tax Commission, 
 1919-1920, pp. 58-59; County and City Budgets for the year 1922, compiled 
 from budgets filed with the Nevada Tax Commission, which give figures for 
 1921 and 1922. 
 
 '^Tenth Annual Report of the New Hampshire State Tax Commission, Tax 
 Year of 1920, pp. 39-40; 11th Annual Report, idem, 1921, pp. 29-30. Includes 
 polls. 
 
 ^Eighth Annual Report of the Board of Equalization of Taxes for year 
 ending Oct. 31, 1912, p. 135; Fourth Annual Report of the State Board of 
 Taxes and Assessments for the year ending June 30, 1919, p. 167; idem, for 
 the year ending June 30, 1920, p. 140, idem, for the year ending June 30, 1921, 
 p. 121. Excludes municipal franchise and gross receipts taxes. 
 
 ^'Report of the Special Revenue Commission to the Governor and Legislature 
 of the State of New Mexico, 1920, pp. 296 and 324. 
 
 ^'Annual Report of the State Board of Tax Commissioners, 1912, pp. 520- 
 521; Annual Report of the State Tax Commission, 1919, pp. 497-501; idem, 
 1919, pp. 497-501; idem, 1920, pp. 369-371; Figures for 1921 were furnished 
 by the State Tax Commission in letters addressed to the National Industrial 
 Conference Board and bearing dates of June 13 and July 11, 1922. 
 
 "Counties and schools only. Capitation taxes and miscellaneous licenses 
 included. Report of the State Tax Commission, 1913, p. 339; idem, 1920, 
 p. 439. 
 
 ''Fifth Biennial Report of the North Dakota Tax Commissioner for the 
 Fiscal Years 1919 and 1920, pp. 80-81; figures for 1920 and 1921 were derived 
 from data enclosed by the Tax Department in its letter to the National Indus- 
 trial Conference Board under date of June 23, 1922. 
 
 '"Fifth Annual Report of the Tax Commission of Ohio, 1914, p. 376; idem, 
 for the year ending Dec. 31, 1920, p. 8. The figures for 1920 and 1921 were 
 
 61 
 
derived from a, circular issued by the Office of the Tax Commission, Depart- 
 ment of Finance. 
 
 "Second Biennial Report of the State Tax Commission, 1913, p. 85; Sixth 
 Biennial Report, 1921, idem, pp. 38-41; and letter of the State Tax Commission 
 to the National Industrial Conference Board under date of June 16, 1922. 
 
 '^Includes licenses collected by local governments, part of which reverts to 
 the State government. Amount for 1912 was secured from Report of the 
 Secretary of Internal Affairs for the year ending Nov. 30, 1912, Part I, p. 9B; 
 figures for 1919 were interpolated; figures for 1920 and 1921 were derived from 
 Report on Productive Industries, Railways, Taxes and Assessments, Water- 
 ways and Miscellaneous Statistics of the Commonwealth of Pennsylvania 
 for the year 1920, Dept. of Internal Affairs, p. 889. 
 
 ''Data refer to municipalities and are exclusive of amounts reverting to the 
 State. First Annual Report of the Board of Tax Commissioners, Jan. 15, 
 1912, pp. 119 ff; Eighth Annual Report of the Board of Tax Commissioners 
 of the State of Rhode Island for the Biennial Period 1919-1920, p. 42 insert. 
 Figures for 1921 were derived from data submitted by the Board of Tax Com- 
 missioners in its letter to the National Industrial Conference Board under date 
 of June 14, 1922. 
 
 '^Counties and schools only. Includes capitation and dog taxes. Report 
 of the Comptroller-General of South Carolina to the General Assembly for the 
 Fiscal Year 1912, Part II, pp. 93-96; idem, for the Fiscal Year 1919, pp. 50-53; 
 idem, for the Fiscal Year 1920, pp. 61-64, Seventh Annual Report of the South 
 Carolina Tax Commissioii, 1921, pp. 111-114. 
 
 ''Annual Report of the Tax Commission of the State of South Dakota, 1919- 
 1920, pp. 108-109; idem, 1920-1921, pp. 106-107. Figures for 1921 were sub- 
 mitted by the State Tax Commission in its letter to the National Industrial 
 Conference Board under date of June 15, 1922. 
 
 ''Counties only. First Biennial Report of the Tennessee State Board of 
 Equalization, 1919-1920, pp. 114 and 135; letter of the State Tax Department 
 to the National Industrial Conference Board under date of June 20, 1922. 
 
 "For counties only, computed from tax rates and valuations with figures 
 interpolated in the case of counties for which rates were lacking. Annual 
 Report of the Comptroller of Public Accounts for the Fiscal Year ended Aug. 
 31, 1919, Table 46 and idem. Fiscal year ended Aug. 31, 1920, Table 80. 
 
 "Biennial Report of the State Auditor for the Period ending Nov. 30, 1920, 
 pp._ 47-48; mimeographed compilation furnished by the State Board of Equali- 
 zation. 
 
 "Biennial Report of the Commissioner of Taxes of the State of Vermont for 
 the Term ending June 30, 1920, pp. 126-131, and letter of the Commissioner 
 of Taxes under date of July 8, 1922, addressed to the National Industrial 
 Conference Board. 
 
 "Second Biennial Report of the State Tax Commissioner of Washington for 
 the Period ending Sept. 30, 1920, pp. 30-32; Statement of 1921 Taxes Due in 
 1922, prepared by the Division of^ Municipal Corporations, pp. 7-8. 
 
 ''Letter of the State Tax Commissioner to the National Industrial Confer- 
 ence Board, dated June 15, 1922. 
 
 ^^Includes soldiers' bonus in 1919. Tenth Biennial Report of the Wiscon- 
 sin Tax Commission, 1920, p. 124 arid Bulletin No. IS of the Wisconsin Tax 
 Commission, June, 1922. Figures for 1921 were submitted by the Wisconsin 
 Tax Commission in its letter to the National Industrial Conference Board under 
 date of June 15, 1922. 
 
 ^'Counties and school districts only. Third Biennial Report of the Com- 
 missioner of Taxation of Wyoming, 1913-1914, p. 76; First Biennial Report of 
 the State Board of Equalization of Wyoming, 1919-1920, pp. 44-64 and Appen- 
 dix F. Figures for 1921 were furnished by the State Board of Equalization 
 in its letter to the National Industrial Conference Board under date of June 
 IS, 1922. 
 
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 71 
 
IV 
 
 THE PRESENT PROBLEM OF TAXATION 
 IN THE UNITED STATES 
 
 The fact has been impressed on the popular mind within the 
 last year or two that the yield of federal taxes has been declin- 
 ing, and this coupled with the exaggerated importance often 
 assigned to the position of federal taxes in the entire system of 
 American public finance has served to lull taxpayers into the 
 belief that the peak of the burden is a matter of the past. It 
 cannot be gainsaid that the federal tax burden, measured in 
 terms of dollars, irrespective of price changes, has grown 
 smaller in bulk although it does not necessarily follow that it 
 is more easily borne. Federal taxes totalled $4,926 millions in 
 1919; in 1921 actual collection by the Federal Government 
 amounted to $4,430 millions — a decline of 11.2%. But it 
 should not be overlooked that the 1921 dollar had a purchasing 
 power of 26.9% more than the 1919 dollar,' and hence the 
 federal tax burden in 1921 was actually 15% higher in the 
 aggregate than in 1919. Furthermore, with slower movement 
 of stocks and relatively large inventories, payment of federal 
 taxes in 1921 very likely presented a much more difficult 
 problem to the average business man than in 1919. 
 
 Growth of State and Local Taxation 
 
 Aside from this situation, the increase of state and local 
 taxes has been nothing short of phenomenal. During the war, 
 as stated above ,^ local expenditures were kept down to the abso- 
 lute minimum; borrowings of local governments were subordin- 
 ated to the needs and necessities of the emergency. High 
 prices of labor and materials in themselves discouraged the con- 
 struction of public improvements and the undertaking of 
 public works which could be postponed to a period of greater 
 advantage without loss or detriment. It was after the war 
 that we find a mercurial ascent in local government expendi- 
 tures. Stimulated, on the one hand, by the decline in prices of 
 labor and materials, and on the other, by the desire to aid in 
 
 •Based on index number of wholesale prices of the U. S. Bureau of Labor. 
 2See p. 13. 
 
 72 
 
partially solving the unemployment problem which became 
 acute as the depression set in, the state and local governments 
 entered into ambitious construction programs. This situa- 
 tion was accentuated by later efforts to increase salaries of 
 government employees and by the stimulus embodied in lower 
 money rates and in tax-exemption features attaching to 
 government security issues. By virtue of the latter fact, local 
 governments were able to secure better terms than private 
 enterprises. 
 
 Bonds issued by states and municipalities of the United 
 States totalled ?2,020 millions in 1921, compared with |1,438 
 millions in 1920, $736 millions in 1917 and $647 millions in 
 1915. The growth in long term issues has been much more 
 pronounced in the last two years than that in short term issues, 
 indicating that borrowings have been more for improvements, 
 the benefit from which extends over a long period of time, 
 than for the purpose of meeting current liabilities and paying 
 off maturing obligations, as is indicated in the following table: 
 
 BONDS ISSUED BY STATES AND MUNICIPALITIES* 
 (thousands of dollars) 
 
 Long-term 
 
 Short-term 
 
 Total 
 
 1922 (9 months) 
 
 1921 
 
 1920 
 
 1919 
 
 1918 
 
 1917 
 
 1916 
 
 1915 
 
 1914 
 
 1913 
 
 1912 
 
 $1,039,939 
 1,304,289 
 773,664 
 770,195 
 262,819 
 444,933 
 497,404 
 492,590 
 445,906 
 408,478 
 399,046 
 
 $210,605 
 716,104 
 664,087 
 450,094 
 4/3,135 
 392,444 
 292,407 
 154,728 
 286,055 
 483,218 
 192,450 
 
 $1,250,544 
 
 2,020,393 
 
 1,437,751 
 
 1,220,289 
 
 735,954 
 
 837,377 
 
 789,811 
 
 647,318 
 
 731,961 
 
 891,696 
 
 591,496 
 
 *BondBuyer, Jan. 7, 1922, p. 5, and Oct. 7, 1922, p. 27. 
 
 That local taxes have risen prodigiously is attested by figures 
 relating to levies of general property taxes presented in Table 
 19. Information was obtained for forty-one states, including 
 the District of Columbia, and in all probability the conclusions 
 that apply to them hold also for the remaining ones. The gain 
 in local taxes levied in 1919 over those levied in 1912 was 82%; 
 in 1920 the increase over the preceding year was 21%; and in 
 1921 a further gain of 12% was registered. Similarly, data have 
 
 73 
 
been compiled for thirty state governments, which reveal an 
 increase of 37.5% in taxes and licenses collected in 1921 as 
 compared with 1919. When cognizance is taken of the rise in 
 purchasing power of the dollar since 1919, local burdens have 
 been increased still further and compare in importance with 
 federal tax receipts. 
 
 A comparison of the nation's tax bill in the past two decades 
 (Table 23 and Chart 5) reveals the shifting of the center of 
 gravity in variance with economic conditions prevailing in 
 this period. Before the war, federal taxes constituted but three- 
 tenths of total taxes. State and local taxes had been growing 
 faster than federal taxes. During the war and immediately alter 
 the armistice, the tables were reversed and state and local taxes 
 began to occupy a subordinate position. In 1921, however, we 
 find that federal taxes have fallen from over three-fifths of the 
 nation's total to slightly more than one-half, while state and 
 local burdens have been rapidly approaching the point where 
 they begin to share equal importance with federal taxes. 
 
 Taxation and National Income 
 
 It will be ascertained from Table 23 that whereas taxes 
 related to national income constituted but 6.7% in the calen- 
 dar year 1902 and 6.4% in the calendar year 1913, the per- 
 centage had increased to 12.1% in the calendar year 1919, 
 and in the calendar year 1921, on the basis of a rough estimate 
 of that year's income, the tax burden of all government authori- 
 ties in this country represented 16.7% of the nation's income. 
 The latest estimates of the national income' by the National 
 Bureau of Economic Research relate to the year 1919; the 
 1921 figures were estimated on the basis of declines in the 
 value of crops and animal products since 1919 and in the 
 physical volume of principal manufactures, which, translated 
 into dollars, was further accentuated by a drop of 12.1% in 
 average prices. 
 
 What is the significance of these figures ? How does this 
 tax situation aflFect the national income ? What problems does 
 this suggest with which the period of reconstruction must 
 grapple ? 
 
 The national income is a composite figure; it represents the 
 aggregate of individual incomes, the greater part of which is 
 
 ■National Bureau of Economic Researcti, Inc., "Income in the United States," op cit. 
 
 74 
 
Chart 5: Growth of Federal, State and Local Taxa- 
 tion, United States 
 
 (National Industrial Conference Board) 
 
 BILUONS 
 
 °'' °°^ Y^^ GRaWTH OF TAXATIO N 
 
 1312-13 1913-14 IEI4-I5 I3I5-IB I9IB-I7 I3I7-IB I9IB-I3 I9I9-ED I3SD-EI 1321 
 
 1912-13 1313-14 1314-15 1315-lB I3IB-I7 1917-16 1913-13 1313-20 192D-2I 1921-22 
 
 75 
 
consumed every year. Part of this consumption is for neces- 
 sities and part for luxuries. In proportion as the damper is 
 placed on luxury expenditures, larger amounts are available 
 for productive investment, which yield > a return and serve to 
 increase the national income and raise the general standard 
 of living. The United States is spending huge sums on lux- 
 uries and semi-luxuries. The falling-off in the consumption of 
 luxuries has by no means been commensurate with the degree 
 of change in the business cycle. In 1920, the luxury bill, 
 exclusive of liquors, amounted to $10,078 millions and in 1921 
 it had dropped to slightly below $9,860 millions, or a decline 
 of 2.1%y If cognizance is taken of the fact that 1921 compared 
 unfavorably with 1920 from the standpoint of employment 
 and that the national income in that year experienced a con- 
 traction of over 30%, a decline of 2% in expenditures on lux- 
 uries and semi-luxuries appears to be a rather inadequate 
 reflection of altered economic conditions and connotes on the 
 whole the adoption of an expenditure policy no saner or more 
 wholesome than that prevailing heretofore, especially in view 
 of relatively limited price recessions in some luxury articles. 
 
 The portion of the national income remaining above the 
 necessary consumption demands and depreciation of capital 
 is devoted to the support of government and to the increase 
 in capital funds. It has been estimated that the savings 
 of the nation averaged about one-sixth of the national in- 
 come in normal years. During the war there was so much 
 destruction of wealth that despite the tremendous increase in 
 personal savings, a net deficit was recorded. The nation's 
 savings represented on the average 17% of the total income in 
 the years 1909-1914, as may be observed from Table 24. 
 
 Striking a rough average, it will be found that total taxes 
 and savings amounted to somewhat less than 24% of the na- 
 tional income in the six years preceding the war and that the 
 remaining 76% represented consumption requirements of indi- 
 viduals, depletion, depreciation and obsolescence of property, 
 
 'Partly estimated on the basis of returns of the U. S. Commissioner of Internal Revenue 
 and partly on the basis of information furnished by trade associations. Because there exists a 
 wide variance of opinion as to what are articles of luxury and semi-luxury , the estimate 
 made here cannot be considered otherwise than as a rough approximation. Some pianos, 
 for example, may be purchased for strictly commercial use or may find their way into 
 schools where they are used for educational purposes, and organs may be purchased for the 
 use of churches. Refinements of the crude data to take cognizance of these varying cir- 
 cumstances have not been undertaken because of the paucity of information on the basis of 
 which modifications of the original estimates could be made. An attempt has been made 
 only to indicate a rough total of these expenditures. 
 
 76 
 
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 77 
 
etc. With our national wealth showing a very small change 
 since 1916 when measured in terms of an unchanged dollar, 
 and with the industrial depression enforcing economy, it is 
 highly likely that this percentage was increased. On the 
 presumption that it is not a desirable policy to have the tax 
 program interfere with present standards of living, and apply- 
 ing roughly 25% to the national income of 1921, we have 
 $12,500 millions available for taxes and fresh capital invest- 
 ments, of which $8,400 millions were absorbed by taxes, leav- 
 ing approximately $4,000 millions for the latter purpose. It 
 was recently estimated that fresh capital investments needed 
 annually in this country at March, 1921 price levels amount 
 to approximately $6,000 millions.^ This would seem to indi- 
 cate that under present conditions our tax bill is fast making 
 inroads on the surplus considered vital for our economic 
 progress, and threatens to continue to hamper our growth 
 materially, especially in view of the hitherto uninterrupted rise 
 in local government taxes. 
 
 Productivity of Government Expenditures 
 
 It should be realized that the bulk of our national govern- 
 ment expenditures are due to the war and represent a diversion 
 of national funds into unproductive' channels. Not only does 
 the cost of maintaining the military and naval establishments 
 come within the scope of this statement, but also the cost of 
 carrying and paying off the public debt incurred during the 
 war, the straggling burden of soldiers' relief, etc. It is true 
 that part of such government expenditures goes into the 
 pockets of bondholders, i.e., for the service of the national 
 debt, and part for war pensions and the like. The net reduc- 
 tion of the private incomes by virtue of taxation must, there- 
 fore, be somewhat smaller than at first appears, but the prob- 
 lem of high taxation nevertheless remains a serious one. 
 
 The argument might be advanced at this point that in view 
 of the fact that expenditure for education, health and other 
 social functions of the state stimulates productivity through 
 their reaction on the individual, the recent growth of public 
 
 ■Douglas, Paul and Dorothy. "What Can a Man Afford?" American Economic Review, 
 December, 1921, supplement No. 2, p. 34 ff. The U. S. Bureau of Labor indtx number of 
 wholesale prices was 155 for August, 1922, compared with 162 in March, 1921; hence this 
 estimate of capital requirements is but slightly affected by the change in prices since the 
 date when the calculations were originally made. 
 
 ft. nn the sense that they went largely for destructive purposes and involved in the final 
 analysis a waste of national resources and human life. 
 
 78 
 
expenditures more or less justifies itself. To what extent the 
 premises which form the basis of this conclusion are valid is 
 beyond human measurement. All depends on the efficiency 
 with which these outlays are made and the direction in which 
 they are made. Whether or not a wastage occurs and whether 
 or not society receives in return more than it spends, as re- 
 flected in the totality of national income, is an open question. 
 Certainly the effects cannot in any manner be accurately esti- 
 mated and the problem must remain an abstract one, subject 
 to varying opinions. 
 
 That the limits of taxable capacity have about been reached, 
 or at least that taxation is on the verge of becoming more or 
 less unbearable, appears to be generally recognized. The 
 consequences of this unwise policy are bound to have an un- 
 favorable reaction on our entire national economy. Our 
 present and prospective national income cannot much longer 
 support any tax program which tends to encroach on the 
 surplus available for the development of industry to the 
 extent that recent years have witnessed. The problem bids 
 fair to become aggravated as industry recovers from the 
 lethargic state which characterized the past year and begins 
 to require more capital for expansion . The continuance of so 
 burdensome a system of taxation, aside from its stifling effects 
 on individual initiative and effort, spells a lower standard of 
 living for the American people. 
 
 The war has left as a heritage for the next decade or more a 
 federal budget which is from three to four times its pre-war 
 proportions. A large part of this amount is not susceptible of 
 immediate reduction, and hope of materially lowering it in the 
 course of the next few years cannot now be entertained. Under 
 this heading there fall interest and amortization of the public 
 debt which now absorb about J 1,300 millions annually, com- 
 pared with $23 millions in 1914; the care of war veterans, 
 1500 millions annually; enlarged expenditures for army and 
 navy, which now amount to $800 millions annually against 
 $217 millions in 1914; and straggling outlays in connection 
 with the operation of government enterprises during the war 
 which still constitute a drain on the treasury.' While installa- 
 tion of a budget system in the conduct of the federal govern- 
 ment's finances has undoubtedly resulted in large economies, 
 
 lit must be considered in this connection that the purchasing power of the dollar in 
 1922 was about 60% of that in 1914. 
 
 79 
 
there still is room for further retrenchment, but it is also 
 becoming increasingly evident that the field in which the 
 budgetary axe can be successfully wielded has been narrowed 
 down to a point where there is little hope of immediately 
 reducing the government's requirements below their present 
 levels. 
 
 Local Financial Economy 
 
 It is primarily in the field of local finance that attention 
 should first be focused. Students of the unemployment 
 problem have constantly been urging that the government 
 undertake the construction of public improvements and 
 public works in a period of depression, primarily because this 
 policy helps to relieve the hardships of the unemployed, while 
 at the same time advantage can be taken of lower costs. In a 
 more normal period than at present, this suggestion merits 
 commendation and assumes a practical form, but it is doubtful 
 whether, under present conditions, it could be carried out to 
 the extent to which it has been in recent years. 
 
 A survey recently made by The Bank of America shows the 
 gross indebtedness of state governments alone in the United 
 States in 1922 was $1,072 millions,' compared with ?667 millions 
 in 1918-1919." Of the total debt outstanding early in 1922, 
 about 34% was incurred for the construction of highways, 
 20% for waterways and harbors (principally New York, Louisi- 
 ana, California and Massachusetts), and 12% for soldiers' 
 bonus payments. Of the total increase in state indebtedness 
 in the last three years, ?63 millions or 21% was incurred for 
 highway purposes, and $191 millions or 63% was for water- 
 ways and harbors. The outlays for soldiers' relief paid through 
 the flotation of securities amounted to $130 millions. These 
 figures take no cognizance of the enormous increases in local 
 government indebtedness, which amounts to many times the 
 debt of state governments.' 
 
 The fact should be borne in mind that in this study we con- 
 cern ourselves with taxes only and give no consideration to 
 special assessments, for reasons enumerated elsewhere.* 
 
 iThe Bank of America, "A National Survey of State Debts and Securities," New York 
 1922. 
 
 >U. S. Bureau of the Census, "Financial Statistics of States, 1919," p. 114. 
 
 'In 1918-1919, the combined gross debts of cities having a population of over 30,000 wa s 
 $3,904 millions, compared with {667 millions in the case of state governments. Data on 
 Indebtedness of other local governments are not available but their totality must assume 
 very large proportions. 
 
 <See p. 42. 
 
 80 
 
Nevertheless, the latter burdens must be considered by the 
 individual, for they must be paid out of his total resources. That 
 they also have been very large in some cases is indicated by 
 the protest made by citizens of Arkansas early in 1921 against 
 a system that assessed betterment taxes almost equal to the 
 full value of the property. Popular indignation at the time 
 ran high. Certain sections of the state were, so to speak, 
 transformed into armed camps to resist the attempts of the tax 
 collector. This situation may not be literally true of other 
 states, but it does bring to mind the seriousness of the problem. 
 At a time when the federal tax burden resting on every man, 
 woman and child in the country averages over $41, com- 
 pared with $7 before the war, expediency should emphasize the 
 folly of permitting local burdens to increase from $17 per 
 capita to over $28 in 1919 and $37 in 1921. When taxation 
 represents one-sixth of the national income and begins to 
 encroach on the national wealth, the question arises as to 
 whether a wise national policy is being pursued. 
 
 Distribution of Taxation 
 
 To serious students of the question, however, the need of the 
 hour is not only for a reduction in our federal tax burden but 
 also for a more equitable distribution. The constantly grow- 
 ing outcry against excessive or inequitable taxation has its 
 origin in circumstances which go far beyond personal consider- 
 ations or individual circumstances. A scientifically constructed 
 and efficiently administered system of taxation can not and 
 should not be a respecter of persons or legal entities. 
 
 In 1920, 27.8% of those filing income tax returns paid 92.3% 
 of the amount collected, and 10% of those filing returns paid 
 84.6% of the total tax. Of the total number of gainfully 
 employed in 1920, namely, 41,609,192 persons, only 7,259,944 
 filed returns, or 17.4%. The remainder did not file returns, 
 largely owing to liberal exemption and abatement features of 
 our income tax laws, although faulty administration and 
 evasion probably also explain the absence of a large number of 
 returns that should have been filed. In view of the fact that 
 the income tax forms the bulwark of our federal finances — the 
 only other federal taxes being those on customs, tobacco, 
 liquors for medicinal purposes and miscellaneous excise 
 sources which constitute about one-third of the total tax 
 
 81 
 
receipts — this shortcoming assumes serious proportions and 
 raises vital questions as to the equitable diffusion of our 
 federal tax burden. 
 
 A glance at income tax exemptions in some of the principal 
 democracies abroad will disclose how liberal are the exemptions 
 which our income tax law provides. In Great Britain, ex- 
 emptions of £150 and £250 are granted to single and married 
 individuals respectively, equivalent to approximately $660 
 and $1,100, respectively, at current rate of exchange. Even 
 in France, where the principle of income taxation has under- 
 gone very slow development and where aversion to direct 
 taxation is popular and deep-rooted, the legislators have seen 
 fit to provide for initial exemptions of only 6,000 francs, 
 equivalent to |400 at current exchange.' In Germany, the 
 exemption allowed by law is so small in view of its present 
 purchasing power that to all intents and purposes none exists. 
 
 Taxation and Citizenship 
 The ramifications of this issue are deep, and bear an intimate 
 relationship to enlightened citizenship and enhanced interest 
 in governmental activity. Just as in private transactions one 
 aims to obtain the greatest amount of return for his expenditure 
 or outlay, so it is true in public finance that interest is more 
 keen where direct contributions are involved. Direct taxa- 
 tion from one point of view may thus be considered as the 
 handmaiden of advanced civic responsibility. The burden of 
 indirect taxation, particularly that on articles of consumption 
 and on expenditures, is virtually imperceptible so far as the 
 average citizen is concerned. The absence of direct and 
 immediate pain or sacrifice which a direct impost necessitates 
 and brings forcefully to the attention of the payer, serves to 
 create the impression that no taxes are paid by the citizen in 
 question and that he has nothing directly at stake in vital 
 political and economic questions which confront the nation 
 from time to time and which can be brought to a successful 
 conclusion only with the aid of collective effort. 
 
 If for no other reason than that of awakening a more general 
 interest in the conduct of government, a wider diffusion of 
 national tax burdens may be desirable and imperative. No 
 
 >The French system of progression in rates cannot be directly compared to that of some 
 other countries which have adopted income taxation, and hence, in so far as the statement 
 applies to France, it must be subjected to modification due to these peculiarities . 
 
 82 
 
matter how small or nominal this sum may be, it would represent 
 a dividend coupon upon which the citizen could draw in the 
 future, in the form of an aroused civic pride and concern, of 
 widened pohtical horizon, and greater efficiency in the services 
 that government renders. It would be an investment whose 
 capitalized value would be immeasurable, yielding an annual 
 return which would more than offset the sacrifice entailed in 
 the payment of the tax. 
 
 83 
 
GENERAL SUMMARY 
 
 The foregoing analysis of the growth of public expenditures 
 and taxation in the United States, the United Kingdom, France, 
 Germany, Italy and Japan, and of the relation between taxation 
 and national income in these countries brings out the following 
 outstanding facts: 
 
 Public Expenditures, by Countries 
 
 1. From 1903 to 1914 the total expenditures of all govern- 
 mental disbursing authorities in the United States increased 
 from $12 to $35 per capita; in the United Kingdom (England, 
 Scotland, Wales and Ireland) from $40 to $42; in France from 
 $24 to $33; in Italy from $14 to $22; in Germany from $44 to 
 $69 and in Japan from $5 to $8 per capita. 
 
 2. The war greatly increased public expenditures in all these 
 countries. Allowing for the influence of inflation and the 
 changed price level, and reducing outlays to the pre-war internal 
 purchasing power basis, public expenditures in the fiscal year 
 1918-1919 were substantially $88 per capita for the United 
 States, $130 for the United Kingdom, $84 for France, $46 for 
 Italy, $114 for Germany and $6 per capita for Japan. 
 
 3. The cessation of hostilities did not radically reduce public 
 expenditures, largely because of the huge growth in outlays by 
 minor political units such as states or provinces and local 
 governmental bodies, particularly in the United States, the 
 United Kingdom, France and Italy. Computed on the pre-war 
 internal purchasing power basis, per capita expenditures in the 
 fiscal year 1920-1921 were $45 for the United States, $61 for 
 the United Kingdom, $77 for France (calendar year 1921), 
 $26 for Italy, $56 for Germany and $7 for Japan. 
 
 Total Taxation, by Countries 
 
 4. From 1903 to 1914 the per capita taxation of national, 
 state, provincial and local governments combined rose from 
 $18 to $23 in the United States, from $24 to $27 in the United 
 Kingdom, from $17 to $22 in France, from $10 to $12 in Italy 
 from $12 to $19 in Germany, and from $3 to $6 in Japan. The 
 
 84 
 
percentage increase during the ten-year period was largest for 
 Japan (95%), and lowest for the United Kingdom (15%). 
 Germany showed an increase of 62%, France 36%, the United 
 States 31% and Italy 27%. 
 
 5. At the end of the war the per capita total taxation, re- 
 duced to the pre-war internal purchasing power basis, was J32 
 in the United States, |42 in the United Kingdom, $9 in France, 
 $8 in Italy, |20 in Germany, $4 in Japan. In 1920-21 this per 
 capita taxation had risen to |41 in the United States, $46 in 
 the United Kingdom, $15 in France ($25 in the calendar year 
 1921), $8 in Italy, $19 in Germany, $5 in Japan. 
 
 6. At present, of the six countries studied, the United King- 
 dom ranks first in tax burdens per capita, with the United 
 States following close behind, Germany third, France fourth, 
 Italy fifth and Japan last. 
 
 Federal Taxation, United States 
 
 7. In the United States federal taxes totaled $4,926 millions 
 in 1919; in 1921 they amounted to $4,430 millions, a decline of 
 11.2%. The 1921 dollar, however, had a purchasing power of 
 26.9% more than the 1919 dollar. Hence the federal tax burden 
 in 1921 was actually 15% higher in the aggregate than in 1919. 
 
 Taxation and National Income, by Countries 
 
 8. Comparing the total per capita tax burden on the pre-war 
 internal purchasing power basis with the pre-war national 
 income for each of the six countries studied, it is found that in 
 the fiscal year 1920-1921 about one-eighth of the pre-war 
 national income of the United States was diverted into tax 
 channels; one-fifth in the United Kingdom; one-twelfth in 
 France (one-eighth in the calendar year 1921); one-sixteenth 
 in Italy; one-eighth in Germany and slightly less than one-fifth 
 in Japan. 
 
 9. In the fiscal year 1913-1914, taxes paid to national, state 
 and local governments in the United States represented 6.4% of 
 the current national income. By 1919-1920 the ratio had grown 
 to 13% and by 1920-1921 to 14.3%. In the calendar year 1921, 
 one-sixth of the national income was diverted into tax channels 
 for the support of governmental bodies in the United States. 
 
 State and Local Taxation in the United States 
 
 10. Per capita tax burdens in the United States in 1919 were 
 
 85 
 
highest in New York State ($148.36), followed by Massachu- 
 setts ($125.35), Delaware ($124.41), Rhode Island $115.25), 
 and Michigan ($105.71), the lowest per capita tax being that 
 of Alabama ($26.47). 
 
 11. In the year 1919, among all the states, the highest per- 
 centage of income (17.2%) was diverted in taxation to the 
 support of government in New York State. Texas and Alabama 
 showed the lowest ratio of taxation to income (7.6%). In the 
 majority of states the ratio of taxation to state income ex- 
 ceeded 10% and the general average was 12.1%. 
 
 State and Local vs. Federal Taxation in the United States 
 
 12. The burden of state and local taxation is highest in agri- 
 cultural and mining states, while federal taxation falls most 
 heavily on manufacturing states. Furthermore, the burden of 
 state and local taxation is increasing rapidly. The gain in 
 local taxes levied in 1919 in 41 states was 82% over those levied 
 in 1912; in 1920 the increase over the preceding year was 21% 
 and in 1921 a further increase of 12% was shown. 
 
 13. Before the World War federal taxation constituted but 
 three-tenths of total taxation and state and local taxes had 
 been growing at a faster rate than federal taxes. In 1919, how- 
 ever, federal taxation constituted over three-fifths of total 
 taxation. In 1921, federal taxes fell to slightly more than one- 
 half of the national total and state and local burdens began to 
 share equal importance with them. 
 
 14. In sixteen states, viz., Arizona, Florida, Idaho, Iowa, 
 Kansas, Minnesota, Montana, Nebraska, Nevada, New Hamp- 
 shire, New Mexico, North Dakota, South Dakota, Utah, 
 Washington and Wisconsin, per capita state and local taxation 
 combined in 1919 exceeded federal taxation per capita. 
 
 15. Under present conditions, the tax bill in the United 
 States is fast making inroads on the surplus necessary for eco- 
 nomic progress and threatens materially to hamper our growth, 
 especially in view of the uninterrupted rise in state and local 
 government taxes. 
 
 16. It is a question of growing importance whether a 
 reduction in and wider diffusion of national tax burden may not 
 be desirable, not only for the protection of the national surplus 
 but in order to awaken a more general interest in the activities 
 of the government. 
 
 86 
 
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