62 
Urdahl—Historical Survey of Fee Systems. 
taxes is of vital importance, inasmuch as each must be levied 
according to an entirely distinct set of economic and financial 
principles. A fee should be judged distinctly as a fee; a tax 
should be levied according to the principles of taxation. 1 
F. PUBLIC PURPOSE IN FEES. 
Professor Patten 2 says: “ The test of a good tax is that it 
creates more wealth than it destroys. If the courts, post office, 
parks, gas and waterworks, street, river and harbor improve¬ 
ments and the public works do not increase the prosperity of 
society, they should not be conducted by the state. ” So the es¬ 
sential justification of fees must be found in the existence of 
many public activities and their effect upon individuals. 
The tendency of public activity in modern times is in two di¬ 
rections: (1), limitation; (2), extension. It is toward limita¬ 
tion in that all those public activities which are not actuated 
by the motive of public purpose, are gradually abandoned to 
private initiative; for example, the manufacture of gunpowder. 
The tendency is toward extension in that activities and institu¬ 
tions which at first were left entirely to private enterprise, are 
changed into public institutions or industries. The reason for 
the change is that the public has gradually acquired a greater 
interest in the institution, until finally it is deemed advisable 
1 These distinctions between fees, special assessments, and taxes are 
essentially the same as those outlined by Professor Seligman in his 
Essay on the Classification of Public Revenues. But the general 
application of the theory of special benefit, especially in its relation to li¬ 
cense fees, is radically different from the view taken by Professor Selig¬ 
man; because he seems to forget that cost here cannot represent the meas¬ 
ure of the special benefit to the licensee. (Ibid., p. 281.) In the same way 
his contention, so frequently emphasized, that special benefit to the indi¬ 
vidual tends to disappear wherever the payment made therefor exceeds or 
falls short of the cost of the service, is, when analysed, simply a return to 
the old theory that costs determine the existence and size of fees. By re¬ 
fusing to recognize the existence of a special benefit where the charge does 
not equal the cost, Professor Seligman really makes cost the criterion; 
though he claims throughout that special benefit is the controlling consid¬ 
eration . 
2 Dynamic Economics, p. 104. 
