7° UNIVERSITY OF COLORADO STUDIES 
3. A tax should be so contrived that its assessment and collection 
may be made with a minimum of expense. Its levy should be simple, 
requiring no detailed inquisition into the affairs of the taxpayer, as this 
will tend to deprive it of public support by affording apparent justifica- 
tion for its resistance. 
These are the principal canons of taxation laid down by Adam Smith 
and if carefully followed undoubtedly furnish the basis of an ideal 
revenue system. 
As a substitute for the tax on personal property the tax on rentals, 
or “habitation tax” as it has been called, has been recommended as 
conforming in large measure to the above principles. This is a tax 
levied upon the occupiers of residences according to the rental value of 
the places they occupy. In order to attain substantial justice, the rentals 
of property below a certain amount are exempt from the tax. This 
exemption is felt to be necessary because the smaller properties are now 
bearing far more than their proportion of taxation, and again, a certain 
amount must be expended for subsistence before any considerable 
degree of tax-paying ability emerges. In the more recent proposals 
of this tax it applies only to the rentals of buildings occupied as dwel- 
lings. Business properties are exempt. It is felt that such buildings 
are effectively reached by other kinds of taxes. 
This tax is not proposed as a sufficient source of revenue. From a 
financial point of view it is defective in elasticity, as are all taxes levied 
at a flat rate upon property which does not vary greatly from year to 
year. It is therefore necessary to provide in some of the other taxes 
for the variations to be introduced as the fiscal needs change. This 
should not be omitted, as an inelastic system of taxation by bringing in 
a surplus of revenue in prosperous years may lead to extravagant under- 
takings and unwarranted expenditures on the part of the legislators, and 
it is wise to shield them from the temptations of an overflowing treasury. 
The habitation tax is brought forward as a supplemental tax to serve 
as a part of a general system. It is offered as a substitute for the tax 
on personalty and it is believed to contain features that will make it 
adaptable to modern conditions and various localities with a minimum 
of friction. 
