372 POPULAR SCIENCE MONTHLY. 



PKINCIPLES OF TxYXATIOK 



By DAVID A. WELLS, LL. D., D. C. L., 



CORRESPONDANT 1)E L'INSTITUT DE FRANCE, ETC, 



XVIII. THEORY AND PRACTICE OF INCOME TAXATION. (CONTINUED.) 



THE income-tax experiences of tlie United States are so little in 

 accord with tliose of any other people or countries that their 

 consideration with a view of obtaining a practical acquaintance and 

 comprehension of the whole subject would seem to be best facili- 

 tated by grouping their most important characteristics under three 

 heads — namely, their origin and history and undoubted influence on 

 the political and fiscal policy of the nation. 



Under the great financial necessities of the Federal Government 

 by reason of the war the attention of Congress w^as directed to an in- 

 come tax as a source of revenue as early as the summer of 1861; and 

 in that and the following year laws establishing such a tax were 

 enacted. Their provisions were, however, so complicated, and the 

 methods authorized by them so inquisitorial, that the Commissioner 

 of Internal Revenue reported in IS Go that they deprived the tax 

 " of all claims to public favor." The revenue returns under such 

 circumstances were very moderate: $2,Y41,858 in 1863, and $20,- 

 294,000 in 1864. In this latter year a more comprehensive and 

 effective law was enacted, which was followed by better results, the 

 collections to the credit of the income tax rising from $32,050,000 

 in 1865 to $72,982,000 in 1866, and $66,014,000 in 1867. But as 

 the necessity for very large revenues on the part of the Government 

 ceased with the termination of the war, and the spirit of patriotism 

 engendered by the w^ar on the part of the people abated, the collec- 

 tions fell oft" very rapidly. Thus, between 1866 and 1867 the total 

 receipts on account of the income tax, without any change in the 

 law, declined from $72,982,159 to $66,014,000; and in 1872, with 

 an exemption of $2,000, only 72,949 persons in the United States, 

 out of a population of over 39,000,000, admitted under oath that 

 they were in receipt of any income liable to taxation in excess of the 

 exemption. Those only who w^ere ofiicially and intimately connected 

 at this time with the Internal Revenue Department of the United 

 States Treasury can form any adequate idea of the amount of perjury 

 and fraud that characterized and pervaded the country, during the 

 years 1867 to 1872, as the outcome of the then existing system of 

 internal revenue. And American ingenuity was never more strik- 

 ingly illustrated — not even by the exhibits of the patent ofiice — 

 than it was at that time in devising and successfully carrying out 

 methods for evading the taxes on incomes and distilled spirits. 



