198 PUBLIC FINANCE 



study the forces which affect the distribution of the social income. 

 The individual point of view is not only inadequate in itself, but 

 fails to explain the development of modern taxation. The social 

 point of view, resting upon a combination of the absorption and 

 diffusion theories, is alone in harmony with the facts of fiscal life. 

 It is safe to predict that when once this is accepted, the most fruitful 

 work of the future in the science of finance will consist in the elabora- 

 tion in detail of the conditions and the limits of the absorption and 

 diffusion theories. 



IV . 



Regarded from this point of view, a new light is thrown on the 

 practical problems throughout the world. The most important of 

 these pressing problems are as follows : First, the reform of so-called 

 indirect taxation. The social consequences of indirect taxation are 

 now recognized to an ever-increasing extent. So far as taxes on con- 

 sumption are concerned, it is fairly well appreciated that the com- 

 modity taxed must possess the mingled qualities of a necessity and 

 a luxury; if it possess only the characteristics of a luxury the revenue 

 will be insignificant; if it possess only the qualities of a necessity, 

 it will fall with undue severity on the modest consumer; if, however, 

 it combines both characteristics, namely, that of wide use and at 

 the same time that of a certain degree of dispensability, the revenue 

 is apt to be large and -elastic and the burden not too severe. The 

 number of consumable commodities that unite both these charac- 

 teristics is small, and hence we find everywhere throughout the 

 civilized world the tendency to restrict taxes on consumption to 

 very few but very lucrative articles. 



In the second place we find well-nigh everywhere the abandonment 

 of the old general property tax regarded as a personal impost. In 

 England and Germany it disappeared during the eighteenth century; 

 in France it was abolished by the Revolution; in America, where the 

 economic conditions brought it into life during the eighteenth century 

 and the early part of the nineteenth, it is beginning to break up 

 in those sections where the agricultural economy is giving way to 

 a commercial and industrial economy. 



Thirdly, we notice everywhere the replacing of the general property 

 tax by taxes on the thing rather than on the person. In the local 

 tax on real estate this process has been carried almost to completion. 

 In Europe, for instance, the taxes levied on the land and on the house 

 are assessed irrespective of the owner or of the relations that may 

 be entered into between owner and tenant. Everywhere in Europe 

 the tax is a tax on the produce of the land or house that is, upon 

 what it yields in the shape of rent or of profits equivalent to rent. In 

 some countries, as in England, the tax is not paid by the owner at 



