FINANCES. The first direct State tax was levied in 1785, but was discontinued in 1789. Taxes were very unpopular and the State pected to cover its expenditures by income from public property, sale of public lands, etc. Some taxes were introduced in the beginning of the nineteenth century, but in 1810 the revenue from them amounted only to 20 per of the total receipts. In 1825 there were no direct State taxes. About this time the construction of pub lic improvements, which had been going on in a quiet way since 1789, became the cry of the day. Loans were the only available source of necessary means. In 1821 the public debt incurred during the War of 1812 amounted only to $1.230.000. but new loans followed one another in great rapidity. Canals. roads, bridges, and railroads were built. Between 1789 and 1828 more than $22.000.000 was spent on these improvements. In 1834 the system of canals and railroads to connect Pittsburg and Philadelphia was com pleted at the cost of more than $14,500,000, and lateral canals were added in 1838 at the cost of almost $6,500.000. The large sum (more than which the United States Bank fur nished in 1837, partly as a bonus and partly as a loan to the State, in exchange for a State charter, further stimulated this feverish activity. The State debt NV a $24,500,000 in 1835 and in 1S42 reached $40,000,000. Expecting large re turns from these improvements, the State did not provide a thorough system of taxation. Interest had to be paid by means of further loans. The credit of the Commonwealth was therefore so much impaired in 1S40 that failure was threaten ing. The income from the improvements did not even cover their expenses, and a law was passed in 1840 imposing small taxes on banks, personal property. and salaries. The revenue from this law did not cover even a tenth part of the ex penditures, and the interest on the bonds tinued to be paid by issue of special bonds. In 1844 a radical change was made in the financial system. A comprehensive tax was imposed upon
all property, stocks, incomes, etc., and cash pay ment of interest was resumed the next year. For 15 years the debt remained on the same level; the State was not able to cancel any of its obli gations and kept on refunding the maturing bonds. In 1857 and 1858 the State works, which were built at the expense of over $75,000,000, were sold for $11,000,000 to the Pennsylvania Railroad Company and Sunbury and Erie Rail road Company, and a gradual reduction of the State debt dates from that time.
In 1860 the debt decreased to $38,000,000, but the military loan of 1861 increased it by $3,000, 000. A steady decline came after the war. In 1870 the debt was $28.980,071; in 1880, in $12.349,920; and from 1895 to 1902 it remained $6,815.299. In 1902 bonds to the amount of $2,008,650 were bought at a nigh premium by the sinking fund and the debt was reduced to $4,806,649, against which the sinking fund had $4.432.023. These results were only possible by vigorous taxation. The law of 1344 taxed all property, but real estate was released from State taxation in 1867. The income tax survives, but contributes a trilling sum. The taxes on personal property and inheritances are productive of more revenue. The main sources, however, are the taxes on corporation stocks and receipts and various licenses. Pennsylvania hav ing introduced the bigh-lieense principle.
During the fiscal year 1901-02 the receipts were $22,947,890 and expenditures $17,787,106. Dis counting the operations of the sinking fund, the receipts were $19,374,093, and the expenditures $15,210,793. The cash balance in the sinking fund was $3,717,440, and in the general fund $9,151,366. Of the expenditures more than 50 per cent. was for schools and 17 per cent. for charitable institutions.