The American Tax Ameri can tax system is composed of two elements —the State and local system 'and the Federal system. The State and local system has gone through several stages. At the end of the 18th century the slight revenue that was needed by the States and localities was derived chiefly from fees, together with poll taxes, taxes on land and taxes on a few articles of personal property. The land taxes were levied first ac cording to quantity, then on gross produce or location and finally according to selling value. The separate property taxes gradually developed into a general property tax, which became the chief source of State and local revenue— the State tax being added to the local tax before the annual rate of taxation was determined. With the progress of society and especially with the growth of intangible personalty, personal property slowly slipped out of the assessment lists, so that the general property tax again became in fact, if not in law, a real property tax in great measure. This led, in the third quarter of the century, to an attempt to tax per sonal property through special taxes on certain corporations. Toward the close of the century the corporation taxes were supplemented by inheritance taxes. In several States liquor license taxes were added. Only in the Southern States do we also find a system of business or occupation or so-called privilege tax, as a sur vival of the Slavery system, where the planta tion owners attempted to roll off the taxes on urban occupation.
The addition of corporation and inheritance taxes did not entirely solve the problem of the personal property tax. A two-fold movement accordingly developed in the 20th century. On the one hand we find the tendency toward the classified property tax, with lower rates for certain classes of personalty like money, securi ties, mortgages, etc. On the other hand came the moveinent for the replacement of the per sonal property tax by the income tax. Wis consin took the lead in 1911, Massachusetts followed in part in 1915 and New York im posed a corporate income tax in 1916 and a personal income tax in 1919. Several other States have followed their example. The trend is now strongly toward a system whereby real estate will be taxed for local purposes and the State revenues be derived from an income tax, an inheritance tax and a corporation tax, part of the proceeds of which will be distributed to the local divisions.
The Federal tax system has also gone through several stages. At the beginning the Federal revenues were derived from import duties as well as from a variety of internal ex cises—including for a short time also a direct tax on land and on slaves. The advent to
power of the Anti-Federalists in 1802 caused an abandonment of the so-called internal reve nue taxes. From that year until the Civil War the sole reliance of the government was on im port duties, except during the period of the war with England when the internal revenue taxes were restored. Shortly after the outbreak of the Civil War a comprehensive system of in ternal revenue taxes was initiated. These were abandoned one by one after the close of the war until only the taxes on tobacco and liquor remained. This system of import duties to gether with a few internal excises existed, with a slight interruption during the Spanish War, until 1909. In that year began the fourth period—the supplementing of the tariff by direct as well as by indirect internal taxes. First came the corporation tax in 1909, then the in come tax in 1913. With the advent of the World War, finally, there came not only the re introduction of many indirect internal taxes but also the inheritance tax and the excess profits tax as well as taxes on expenditure. Of these the two former are likely to remain per manently.
Thus while the land tax will continue to be levied primarily by the States, while import duties can be imposed only by the Federal gov ernment, and while internal taxes on com modities will probably be reserved more or less exclusively by the Federal government, the in come tax, the inheritance tax, the business or excess profits tax and the corporation tax will probably be imposed by both Federal and State governments. The great problem of the future will thus be the fiscal relation of State and Nation.
H. C.,