FINANCE, LOCAL. As a result of the division of authority and functions between central and local governments, a distinction is coming to be clearly drawn between general and local financial operations. The extent of the latter has been treated at the beginning of this article; it is here necessary to emphasize sonic of the chief principles of local as distinguished from general finance.
expenditures which re sult in purely local advantages are most naturally borne by the local government. Such, for exam ple, are those which are incurred for local im provements and the costs of local administration. Besides these expenditures, there are sonic which are of general interest, but are best placed under the control of local bodies, so as to he more nearly under the supervision of the public. Examples of expenditures of this kind are those which are incurred in the support of primary education. and for poor relief and the adn l i !! istration of justice. It is these classes of expenditures which ore increasing most rapidly.
Rercilue.—If local government is in possess real :111i 0110111y, it must possess independent sources of revenue. Certain classes of taxation cannot be employed by local governments. Such, for example. are the income and general excise taxes, import and export duties; taxes fin be quests and inheritance. These forms of taxation are difficult to collect by local authorities; and if practice is not uniform throughout the State individuals and industries will escape taxation by shifting from one locality to another. There remain taxes on real property, and on local occu pations. Neither of these objects of taxation can escape the local assessor. Franchise taxes fre quently afford a considerable local revenue. Further revenues may be secured through charges for special benefits, e. g., water-rates, and special assessments (q.v.) may be employed to cover the outlay for some of the more burdensome local improvements. It remains true, however, that the revenues which can be obtained from local sources are frequently insufficient to cover the expenditures which are incurred by the local gov ernment. In many countries it has become cus
tomary to supplement local revenues by grants from the central treasury. In England, up to 1887, many grants for specific purposes were made; since that year various duties, collected by the central authority, have been marked off for local uses. In the United States the most familiar application of this principle Is the grant of State funds for educational purposes.
local government, even more than the central authority, is often compelled to incur debts to cover the cost of undertakings which are too extensive to be paid for out of current rev enues. A large proportion of local expenditures are productive, and should therefore be met by loans which distribute the cost over a long period. Local authorities are, however, frequently in clined to be reckless in the expenditure of re sources thus gained. For this reason the central government usually exercises close supervision over the creation of local debts. In the United States, State constitutions frequently fix a limit beyond which localities cannot go in incurring debts; in many cases debt-limitation is provided in municipal charters. In Great Britain a spe cial act of Parliament is required in order to authorize a municipal loan: and a similar prac tice is followed in France and other Continental countries. in England the central government acts as an intermediary in securing loans for local bodies, thus giving to the latter the advantages of the national credit; in Belgium the national treasury keeps a fund out of which loans are made to municipalities; and in Germany the funds reserved in the public treasury for the relief of invalids are loaned in this manner. h e TAX AND TAXATION; MUNICIPAL GOVERNMENT.
Bliu.tonnAcnv. The principal comprehensive works in English are Bastable, Public Finance (New York, 1892) ; llenry C. Adams. Science of Finance (New York, 189S) ; W. Df. Daniels, Ele ments of Public Finance (New York, 1899) ; and C. C. Plehn, Introduction to Public Finance (New York, 1898). See ltunnEr ; DEBT, PUBLIC ; CUS• TOMS DUTIES; NTERNAL REVENUE; TARIFF ; REPUDIATION; INDEPENDENT TREASURY.