(e) Taxes may be levied on selected agencies of industry or on the process of business; such are business taxes, licenses, taxes on investment in business, and corporation taxes. These burdens are diffused and rest eventually on some income, rarely to be ascertained exactly.
§ 10. Defective tax "systems." The actual tax laws of each division of government in a country combine the various forms in different proportions. Most of the federal taxes are from tariff duties and from internal revenues, the latter in clude a variety of special business and property taxes and, since 1913, the federal income tax. The largest receipts of states, of counties, and of minor divisions are from property taxes, some special but most of them general in form. Among the various states a wide diversity is found. Some use the general property tax for all the divisions (state and local), while others (several of the northern states and California) have separated the sources of state and local taxation, taxing corporations for state purposes and most other forms of wealth for local purposes. Some states, particularly those of the South, make large use of licenses and taxes on business both for state and local purposes.
The tax laws of many states have been much modified of late and are still in process of change. It is only in a loose sense that one can speak of the tax "system" of any state, made up as it is of so many diverse elements, each used to tap in some independent way some source of private income for public purposes. Every tax "system" has grown up more or less accidentally, guided by no more of a general principle than the advice of the cynical old statesman—so to pluck the feathers of the goose that it will squawk as little as possible. Thus, everywhere, the existing situation must be largely accounted for by custom and ignorance, by the weak ness of some classes and the undue influence of other classes, rather than by clearly thought out principles soundly ad ministered.
§ 11. Various standards of justice suggested. There have not been lacking earnest attempts to arrive at some general principles. Various standards have been suggested to meas ure the distribution of the burden of taxation, the chief being benefit, equality, ability, sacrifice, and social welfare.
Each of these terms is capable of various interpretations which have changed from time to time. The benefit de rived by any citizen from most of the public services evidently cannot be applied in any literal sense to strong and weak, to rich and poor. It is possible, however, to interpret equal ity with reference not to objective goods, but to the psychic sacrifice occasioned by taxation. Ability is of many kinds and may be differently understood. Some think ability to bear taxation is "in exact proportion to the money income" ; others believe that it increases at a greater rate than money income, and favor, therefore, progressive taxation, that is, higher rates on the larger incomes. The standard of sacrifice is closely related to that of ability, looking, how ever, to the psychic effect of depriving the taxpayer of his income. It lends itself even more readily than does the standard of ability to the application of the marginal princi ple of valuation, and results in progressive taxation.
Exemptions from taxation are granted liberally in most states to-day on some kinds of wealth and to some classes of citizens, because of their supposed relations to the public interest. Real estate and equipment devoted to educational, religious, and charitable purposes, the homes of priests and ministers, homesteads purchased with pension money, as well as all public lands, buildings, and equipment, are exempt.