DIRECT AND INDIRECT TAXES, the former are those which in theory the bearer cannot transfer to others, by adding correspond ent charges to goods or service; distin guished from indirect, those on goods for sale, which will be added to their selling price. Direct taxes are laid according to some fixed fact, as of personality, rank, property or earn ings, and are consequently assessed according to some list or roll. Indirect taxes are laid according to some changing, temporary, more or less accidental fact, the result of processes and transactions, and are laid and collected ac cording to tariffs. Direct taxes in current un derstanding include taxes on polls, property, incomes and privileges — that is, fees and licenses for doing business, keeping pets, car riages, etc. But the Supreme Court of the United States, in the income-tax cases, decided that only taxes on polls and property are direct; which is law for this country. The theory at best does not quite conform to facts. Taxes on real estate occupied by the owner, for ex ample, are not transferable ; but those on prop erty for rent are so much added rent charge, and as indirect as custoins,,duties.. The heavy license fees charged by many municipalities for doing certain classes of business are pro tont° an increase of the business expense, and must be met in the charges if the business is to live; often, indeed, they are used openly as "pro tective," to give industries of one State an ad vantage over others — this is especially so with insurance companies. On the other hand, in come taxes on salaries cannot in practice be transferred, as an employer will not raise sal aries on account of his employees' taxes; while those on mercantile incomes are in the same category as those on licenses, and can to some extent be recouped from customers. All State and municipal revenues in the United States are raised from direct taxes in the broader sense; the constitution prohibits them from laying duties on exports or imports, but not on internal manufactures, which, however, are also left en tirely to the general government. In American
usage, indirect taxes generally refer to customs and internal revenue duties. On the Continent of Europe they include the octroi and other forms of municipal taxes. Historically, indi rect taxes preceded direct taxes, because sov ereigns found it necessary to disguise the collec tion of revenue and secure it by methods more or less concealed. Although this motive no longer exists in its cruder aspects, there is no doubt that it is easier to collect revenue through increased prices of commodities than by direct payments to the treasury. Practically all of the Federal revenue is derived from indirect taxes. The Federal income tax is a notable ex ception. The cost of collecting indirect taxes is as a rule greater than that of direct taxes. Only six times in its history has the Federal government resorted to direct taxation, in the narrower sense above: in 1798, 1813, 1815 and 1816, on real estate and slaves; in August 1861 a levy of $20,000,000 for war expenses was laid on all house lots with dwellings and improve ments. The operation of the act was suspended 1 July 1862, when $15,000,000 had been collected; and the act of 2 March 1891 refunded it to the States ; and on 3 Oct. 1913 the Underwood Tariff Act imposed on every citizen of the United States, and every person residing in the United States a personal income tax on his en tire net income in excess of $3,000. Consult Bullock, 'Origin and Effect of the Direct-Tax Clause' in Political Science Quarterly, XV (1909) ' • Bastable, 'Public Finance' (2d ed,, 1895) ; Seligman, 'Essays in Taxation' (1897) ; Plehn, 'Introduction to Public Finance' (1909). See REVENUE TAX; INCOME TAX; IMPOSTS; TAXATION.