Theory of Fees. 
55 
of the taxing power, because they are compulsory contributions 
arbitrarily levied by the sovereign. But a tax is a “one-sided 
transfer of goods or services” ;* a fee is not. The latter is in 
the nature of an exchange or sale, in that there is special bene¬ 
fit to the individual, for which the fee is paid. 
The idea of benefit is of course present in a tax, but it is al¬ 
most wholly public benefit. The benefit to the individual may 
be great or small without changing the amount of the tax which 
he pays. In other words, the benefit accruing to the individual 
from a tax cannot be measured, and if it could, no system of 
taxation could be based upon it. Taxes are based on the indi¬ 
vidual ability of the tax-payer. It is no objection to a tax, 
that the payer receives no benefit from the burden, nor does it 
change the nature of the payment if such is the case. While 
a payment ceases to be a fee the moment the special services 
cease. 
Particular advantage to an individual may exist in a tax, but 
that does not increase or diminish the share of the tax-payer; 
while, in the case of a fee, the particular advantage is the very 
reason and justification of the payment. Many writers lay em¬ 
phasis on the fact that the fee should not exceed the cost to the 
government of the particular services rendered to the individ¬ 
ual. Wagner and others maintain with very plausible argu¬ 
ments, that, as soon as a payment exceeds the cost of the serv¬ 
ice, just so soon does it cease to be a fee and becomes a tax. 
In some cases this is true; but cost is not always the stan¬ 
dard according to which fees may be gauged. It is applicable 
only where the government exhibits some positive activity for 
which the payment is made. In other words, it can be applied 
in those cases only where the value of the services resolves 
itself into, or is measured by, its cost. 
Value, as we know, is fixed by marginal utility. The utility 
of a commodity to an individual is measured by its uses, that 
is, by the amount of benefit which he thinks he is about to ob¬ 
tain from it. In all competitive enterprises in which the com¬ 
modity is reproducible at will, it is generally agreed that the 
1 Ely, Taxation in American States and Cities , p. 6. 
