PENDING PROBLEMS IN PUBLIC FINANCE 195 



The next triumph of economic theory was to disclose the dangers 

 of a system of taxation resting on production and exchange. In 

 one sense indeed every tax that is not a tax on consumption may be 

 regarded as a tax on production, for all wealth consists either of 

 producers' goods or of consumers' goods. It would, therefore, seem 

 to be impossible to avoid the imposition of taxes on production. In 

 the sense in which the term has usually been employed, however, 

 a tax on production has denoted a tax imposed directly, and at a 

 late stage, on the process of completing the finished article. Re- 

 garded in this light, such taxes manifestly impede the process of 

 production and are to be deprecated because they affect the able 

 and the shiftless producer alike. Taxes on production often put a 

 premium on inefficiency and are apt to clog the wheel of industrial 

 progress. The tendency of modern statesmanship has accordingly 

 been away from reliance on such methods. 



Perhaps the greatest change in fiscal theory during the nineteenth 

 century has been, thirdly, to analyze and to explain the need of 

 taxing shares in distribution rather than consumption or production. 

 A vast amount of ingenuity has been expended upon the attempt 

 to disclose the real meaning of faculty or ability to pay as measured 

 by the property or the income of the individual. When we come to 

 consider the facts, however, there are two striking considerations 

 that confront us. The first is the pitifully small proportion that the 

 income tax bears to the total revenue. In France, for instance, 

 there is no income tax at all, and even in England and Germany the 

 proceeds of the income tax are utterly insignificant when compared 

 to the total revenue, state or local. The scientists may discuss and 

 do discuss the problems of progression and differentiation of taxation, 

 and all of the discussions rest on the assumption that the burdens 

 upon the individual must be in a certain proportion to this income; 

 yet we find as an actual fact that only a most beggarly proportion 

 of the taxes in the civilized countries of to-day stand in any direct 

 relation to the income of the taxpayer. 



Not alone do the income taxes form so small a part of the whole, 

 but furthermore, in most countries the so-called income taxes are 

 really not income taxes at all in the sense of taxes on the personal 

 income of the individual. In England, for example, it is well known 

 that the so-called income tax is merely a collection of taxes on the 

 thing which yields the income rather than on the person who receives 

 it. That is, it is a collection of taxes on produce and not on income. 

 The only exception is the famous schedule " D," which is notoriously 

 the least successful of all. It may be claimed indeed that in Prussia 

 the income tax is really what it purports to be, but all who have 

 made a study of the system know that when similar methods were 

 employed in England at the beginning of the nineteenth century, 



