THE INCOME TAX: THE PRINCIPLE OF PROGRESSION by F. W. Taussig The first question of principle in taxation has to do . . . with (11C mode of apportionment. In what manner determine how much the individual shall contribute toward defraying the various public services rendered gratuitously? Shall he pay simply in proportion to his income or more than in proportion? On this question there are two fundamentally different answers, the one more conservative, the other more radical; the one maintaining the principle of proportion, the other that of progression.
The conservative opinion, maintaining the principle of proportion, is very simple. It proposes to call upon each person to pay in proportion to his income and so to leave the relations between different incomes undisturbed. Let the rich pay more in the degree to which their incomes are larger, but in that degree only. The essential basis for this view is that the existing distribution of wealth should not be disturbed. True, some people are more prosperous than others; some are rich, others are poor. But these differences are regarded as defensible—nay, in the unqualified support of the existing social order are thought to be in accord with the maxims of ideal justice. Since taxes must be levied and since it is hopeless to measure either the cost of the public services rendered to any individual or the benefits to him of the services, let all be treated alike and let all be called on to contribute the same proportion of income. The social system thus remains undisturbed by the tax levy; it was equitable before and it remains so.
A somewhat different view but one leading to the same result is that the existing distribution of property and income should not be disturbed by taxation. If it is to be disturbed, let other machinery for doing so be adopted. This view implies neither approval or disapproval of the gulf between rich and poor, merely indifference or aloofness. The tax gatherer, it is said, should not be distracted by having to consider such large and difficult social questions. His task, even in its simplest form, is troublesome enough: to devise ways of securing the needed revenue without arousing discontent beyond endurance. This may be described as the pure fiscal principle of taxation, according to which taxation should concern itself solely with the problem of raising the money for public expenses. It leads,
like the view first described, to proportional levy and to the rejection of progression.
Still another "fiscal" principle of taxation may be noted; one that perhaps should be called the cynical principle. According to this, the essential task for the legislator is to get the revenue in such way as to cause the minimum of vexation and opposition. Any tax is good which brings in a large net revenue without causing much protest from the payers, or at least from those payers who have political influence. If in a democratic community high progressive taxes on the rich bring in substantial returns, without trouble in administration and without causing many voters to revolt, let them be imposed. And on the other hand if taxes on an article consumed in great quantities, such as sugar or coffee, promise a large revenue and can be levied by a hoodwinking process which prevents the masses from realizing the burden, let them too be imposed. "Pluck the goose with as little squawking as possible." This cynical view is hardly ever advocated in so many words; but a great deal of legislation rests upon it. Every finance minister has constantly to face demands for additional revenue and also opposition from those whom he proposes to tax. The temptation is well-nigh irresistible to follow the path of least resistance. The very great part which indirect taxes on commodities play in the finances of all modern countries is explicable chiefly on this ground.
The question of justice in taxation is at least ostensibly kept in mind in most discussions. A consciousness of it underlies the trains of reasoning in favor of strict proportion, which have just been stated—both that which affirms the distribution of wealth to be now just, and therefore rightly to be left undisturbed by taxation, and that which simply would keep taxation disentangled from questions of social reform. Both of these opinions have the merit of facing squarely a truth which many writers on this much-debated topic have failed to face; namely, that the question of equity in taxation cannot be discussed independently of the equity of the whole existing social order.