The North American Review,
vol. 144, issue 363, February 1887.

SCIENTIFIC TAXATION.
by
Edward Hewes Gordon Clark

THE great injustice, not to say utter rottenness, of the whole system of American taxation, is leading, just now, to much discussion, and to a demand for reform.  The discussion is very superficial.  But no other question before the people, or that can be put before them, is of such immediate practical importance.  Stupid and inequitable taxation, direct and indirect, may be charged with most of the ills, and most of the crimes that curse modern civilization.  By taking "from the mouth of labor the bread it has earned," to use the words of Jefferson, such taxation has defeated what he declared necessary to make Americans "a happy and prosperous people."  Our country is full of tax thimbleriggers on the one hand, and tax dodgers on the other;  and these are the two most "dangerous classes" that now threaten the United States with dry-rot or revolution.

 

Thimblerig taxation is indirect, and the masses of mankind are only just beginning to open their patient ox-eyes wide enough to see it at all.  American thimblerig taxation results chiefly from monopolies of the currency, the tariff, and of transportation--the watered stock of the latter, for instance, costing the people such an impost, more or less, as the "railway kings" are permitted by law to levy on their four thousand millions of dollars in fictitious capital.  But direct taxation, of the right kind, would do much, if not all, to kill indirect taxation, and to extinguish our worst monopolies.

 

We talk much of "science" in this "advanced age."  While we are exclaiming for tax reform, suppose we stop a moment and think.  The moment may be used up, to be sure, without getting out a newspaper, or making a cent in cash down.  But, among the sciences, is there not somewhere the science of taxation ?

 

The very question will, of course, make a ward politician thirsty for something "practical," and cause a sneer to bloom on the nose of an average "statesman." But shall we ever get on much farther with American welfare until we consider it ?

 

Recent political economy, supplemented by patient research into the property systems of ancient times, has put a new face on the whole subject of taxation.  Our theory in the United States has been that taxation should be as light as possible, and should defray nothing beyond the necessary expenses of government--a theory derived mainly from the rich, aristocratic land-owners of England, who have always shaped British legislation just as closely to their own exclusive money-bags as could be done.  But this whole theory is now found to be simply a gross imposition upon society, resulting in the one fundamental monopoly of the world.  For, in ancient times, the capital of nations (which was chiefly land) was regarded as the common stock of citizens, and was either held and worked by government, as under Egyptian despotism, or was periodically redistributed, according to population, as under Hebrew democracy.  European feudalism gave the domains of the various states to military chieftains, from whom was exacted, in return, the maintenance of government and the support of the common people.  But democracy arose, and broke, not only the bonds which held the common people to the lands they had tilled, but broke also the support that had been guaranteed with their toil.  The barons took the lands, and the serfs were left out in the cold of naked freedom.  Then, as the emancipated serfs built up modern industry, the barons went into the business of legislation.  They legislated away the people's old, recognized right in the natural wealth of each generation.  Next they legislated off their own former duties and taxes, as far as possible, and put on rising industry all the government expenses they could make it bear.

 

"The learned" understand all this now, and the unlearned are fast getting hold of it.  The true value of Mr. Henry George's Progress and Poverty is the unanswerable demand it makes that the people's ancient natural right in the earth's common capital be revived and satisfied.  Thus the new school of political economists, both in Europe and America, have shown, more or less explicitly, that the true purpose of taxation is a double one.  The main purpose, indeed, is to collect from a nation's wealth the people's common right in it.  Complemental to this purpose is the payment of public expenses out of the people's fund.

 

Science now asks, with other questions: What is a people's common right in the property of a country they maintain ?  I think the question has been answered.

 

But one thing is certain: Whatever the amount of any tax should be, all taxation should bear equally upon all property.  It is impossible to move the common sense of mankind from this pivot, however selfishly and dishonestly the rich have always dodged around it.  Adam Smith said: "The subjects of every State ought to contribute toward the support of the government as nearly as possible in proportion to their respective abilities."  Then he almost spoiled that bit of unalloyed wisdom by adding: "that is, in proportion to the revenue which they respectively enjoy under the protection of the State."  Here is the income tax; but if he had left off his addendum, his principle would have been understood to demand a direct tax on assets in proportion to holdings.

 

There is no other tax really worth consideration.  A tax on incomes always includes a fine imposed upon persons who handle property to the best advantage.  In seasons of close competition, or in "hard times," it puts a premium on the stop page of industry, and leads to "slow, sure investments," thus injuring the whole community in all directions.  But a tax on assets pushes them into active use, that their value may not diminish, in spite of the deduction for the public.

 

Scientific taxation will consist of ascertaining a people's exact right and share in the wealth of any country, collecting it rigidly, paling all legitimate public expenses out of it, and then redistributing the surplus for the production of new wealth, through the employment of idle labor.

 

But one point will have to be emphasized with unmistakable force.  The man who dodges his lawful tax should be punished, if necessary, to the extent of confiscating his whole property, and confining him in the State prison.  There is no offense against property that ought to be met with more severe penalties.

 

EDWARD GORDON CLARK.