undoubtedly derives particularly great force where expenditures for general convenience, health and pleasure are very extensive. It is true that a part of this is met by such persons in the taxes they pay on the real and personal property held and used there and also in their contributions through special assessments. On the other hand there are large net advantages to the community in the attraction of such persons, who promote the material prosperity of the city in many ways. It may be held, however, that these persons are not adequately taxed. One method of remedying this defect has been proposed by Dr. Schanz who suggests that the place where the property lies or the income accrues should tax three-fourths of the value thereof, and the place where the person resides should tax one-fourth. Apart from the arbitrary character of this division, it seems objectionable as depriving the community of productive acquisition of a portion of its proper tax material.

Consumption taxes of various kinds might be levied in order that persons residing within the state, but owning no property, nor deriving any income therein, might contribute their share. Inheritance taxes might also be used for that purpose. A more practicable expedient might be found in the expansion of the system of special assessments.

Relying then on the principles stated above, a classification may be made, and the taxability systematically tabulated. We shall first make a general division based on the source of production, whether within or without the state, at home or abroad; under this we shall next consider residence or non

1" Wenn und insoweit Wohnsitz (bezw. Konsumption) und Einkommensquelle auseinanderfallen, ist die wirtschaftliche Zugehörigkeit geteilt; zum kleineren Teil fällt sie der Konsumptionsgemeinschaft zu, zum grösseren und intensiverer Weise derjenigen Gemeinschaft, in der die Einkommensquelle liegt, wo der Erwerb sich vollzieht. Desshalb dürfte hier eine passende Norm sein, wenn das Gemeinwesen der Einkommensquelle 34 und das Gemeinwessen des Wohnsitzes 4 der nach seinen Bestimmungen schuldigen Steuer in Anspruch nimmt."Schanz, Finanz-Archiv., 1892, ii, s. II.

residence as the next most important circumstance; finally, and of least significance, whether the person be a citizen or alien.

Tabulating on the above basis we have:

I. Property (or income therefrom) situated in the state.
Ist, held by a resident who may be,

(a) a citizen, or

(b) an alien.

2d, or held by a non-resident, who may be,
(c) a citizen, or

(d) an alien.

II. Property (or income therefrom) situated without the state. 3d, held by a resident, who may be,

(e) a citizen, or

(f) an alien.

4th, or held by a non-resident, who may be,

(g) a citizen, or

(h) an alien.

There can be no doubt that the property in a state of a resident citizen is taxable (a): there is certainly no other taxable jurisdiction. Property in the state of a resident alien (b): this, to a large extent, is taxed by all states, and needs no justification. Property in the state of a non-resident citizen (c): whether the tax system is based on nationality or territory, liability is clearly established here, at least for all tangible property. Property in the state held by a non-resident alien (d): this is also taxable; political citizenship cannot be held to be superior to the fundamental economic conditions of society. Hence we again conclude that all property in a state is taxable, by whomsoever possessed. The property held abroad by a resident citizen (e): this is often considered taxable. It is the reverse of the case of property held within the state by a non-resident alien; that was held taxable, and if double taxation is to be avoided, this should be deemed exempt. The state should choose one rule as to taxation and not two

contrary ones, to gain a financial advantage. If indeed such property were not taxable at its actual situs, some degree of justice might be asserted. Perhaps this would apply, for example, to property in barbarous lands. Even in semi-civilized countries, where extra-territorial jurisdiction is largely exercised, there may be some practical justification. Property abroad of a resident alien (f): that the alien is taxable may be readily admitted, but not on property held without the state. The jurisdiction of the state over him is based on a material fact; its right to tax him has the same limits. Property without the state, held by a non-resident citizen (g): to consider this taxable the most rigorous basis of citizenship would be required, which no nation could consistently adopt. Property held abroad by a non-resident alien (h): the state has no right whatever to tax such property and it has not generally the power; rationally it is not open to discussion. Hence we find again that in every case property without the state is not justly taxable.

Property situated within the state, or the revenue derived therefrom, or business done within its confines, should form the basis of taxation. Regarding the state itself, we recognize that this constitutes its actual economic strength. That the property is owned by a non-resident, or the income received from property or business goes to a person residing without the state, should not be allowed to diminish the state's power of taxation, even though it may be felt that it is necessary to thus permit the diminution of its wealth. The alien who invests his wealth in property within a state, of his own free will, joins in the economic life of the community; he acquires property and revenues therein under the laws of that community; his rights to obtain it, to keep it, to transfer it, are all by its authority and consent. It may refuse to let him enter its borders, it may banish him thence, and it may deprive him of that property which he has acquired situated within its jurisdiction. In levying a tax, the state merely appropriates

that portion of its property which it finds necessary for its purposes. It cannot recognize that the ownership of an alien, which it has permitted, forms any bar to its expropriation if it sees fit. And though the state may for its advantage do so, yet this would be foreign to the most elementary principles which lie at the basis of just and scientific taxation. It would be proper only in exceptional circumstances. The object sought in levying the tax is to absorb from its territories and possessions such revenue as it deems necessary. It is immaterial to the state, in a certain sense, whether the funds are obtained from public domain or from private owners. The tax is above all other considerations material. The basis of the tax is by logical necessity a material basis; in its broadest terms, it is the aggregate of the economic productivities within its jurisdiction. To adopt therefore a basis of citizenship, of caste or class, or of residence, is utterly inconsistent therewith.

Before proceeding to the particular consideration of the subject in the United States, it is necessary to note certain necessary limitations to the discussion of the problem, which are both theoretical and practical. Tax systems must be first of all efficient for the purpose of producing revenue, and the minor details of equality are often necessarily subordinated. Therefore, it cannot be expected that a uniform or even perfectly consistent method will be adopted. Superior, also, to absolute equality are questions of public policy, by which a confessed discrimination is often made in order to gain or preserve more important advantages. But, apart from this practical view, to which we shall return again later on, there are questions of economic theory which make this problem very much more abstruse from a purely theoretical standpoint. It is evident that any discussion of double taxation is con. cerned only with direct taxes, by which is meant taxes such as are levied on property, incomes or occupations, with the expectation that the burden will lie on the person assessed. Consumption taxes, therefore, though they may be used, are

not open to discussion, simply because it would be impossible to arrive at any definite conclusions. They might be investigated experimentally, perhaps; but, beyond the conclusion that they were almost invariably unequal in burden, no result would be arrived at.

This

With direct taxes it is otherwise, yet, even here we are met by complicated problems of incidence. In general, for the purposes of this inquiry, it will be assumed that the taxes are borne by those who pay them, that when the law has levied an equal and universal tax on the abilities of persons, such a tax is, in fact, an equal burden, unless there are particular reasons for further discussion. No treatment of taxation is adequate which does not keep in mind this difficult question, yet it may be granted that a solution of the prima facie forms of double taxation is first desirable. It is the very vagueness of the general opinion on this subject, and the appeals to unscientific doctrines of incidence, that are largely responsible for much unequal taxation that exists at present. The doctrine which has seized the popular mind with greatest force is that taxes diffuse themselves. forms a convenient defense for any system of taxation. This doctrine was broadly asserted by the New York tax commission' in their report in 1871 and again in the report of 1872. It was stated in the latter as an absolute and invariable principle. The Commissioners say "they further maintain that all taxes equate and diffuse themselves, and that if levied with certainty and uniformity upon tangible property and fixed signs of property, they will, by a diffusion and repercussion, reach and burden all visible, and also all invisible and intangible property, with unerring certainty and equality." Usually, however, such extreme doctrines have received little recognition. In the United States, this fact is conclusively shown by the attempts to tax all property. But it has been commonly advanced to support particular propositions, as, for example, that 1 Report, 1871, p. 26. 2 Ibid., 1872, p. 47.