a tax on mortgages is a tax on the borrower, and that in no manner can it be virtually collected from the lender. This was maintained by the Maryland Tax Commission of 1880.1 The Massachusetts Commission took a more scientific position in declaring that "in certain cases taxes will undoubtedly equalize and diffuse themselves; but as a uniform doctrine it is condemned by facts, and justified by no sound economic theory. Instead of diffusing themselves, the tendency of taxes is to stay where they are laid; in other words, the tendency is that they must be paid by the actual persons upon whom they are levied. . . . Moreover, if the diffusion of taxes be granted in a given instance . . . the important question arises whether this diffusion is an equal and a just one . . . it can hardly be doubted that in this shifting process a disproportionate burden always falls upon the poor." Perhaps the next most noteworthy idea is that taxes are capitalized in the property taxed, so that a permanent discount continues on the selling value, by which fact the subsequent purchasers are virtually exempt. This doctrine is historically associated with the English land tax liquidations. Recently an important application of the principle has been made to the theory of the taxation of corporate indebtedness.3 A discussion of the merits of these questions, as well as of the problems of incidence in general, beyond this passing notice, would be inappropriate here, and it has been most ably treated elsewhere.*

1 Report, 1888, p. 75.

2 Mass. Tax Com., 1872, pp. 22-4.

Seligman, Taxation of Corp., op. cit., 674.

4 Cf. Seligman, On the Incidence and Shifting of Taxation.

CHAPTER II.

IN the United States the problems of double taxation are evidently of peculiar importance. The fact that each of the forty-four States of the Union has independent powers of taxation results in a conflict of law to which no other nation, except the German Empire and the Swiss Confederation, can afford a parallel. The federal government has its conflicts with other nations; it has also its relations with the various commonwealths that divide its territory; and these again have their conflicts, not only with the nations of the world, but also with each other. There are other taxing authorities within the United States; but their authority is delegated, and not original. The taxes levied by the territorial governments are authorized by acts of Congress. The taxes levied by the counties, municipalities, and other subordinate political organizations of the commonwealths, are authorized by the laws of their respective legislatures. In the systems of taxation practiced by these delegate bodies, naturally there can be no conflict of jurisdiction; there may be, however, internally unequal or double taxation arising from the application of improper principles. That double taxation may exist under the system practiced by the federal government, as respects the determination of taxable subjects within its jurisdiction, is evident, and these come properly within the scope of this inquiry. It is also clear that double taxation may exist as between that system and those practiced by other national governments, and here a complete discussion would necessitate an examination in detail of their systems. As to the relation of the federal system to those of the commonwealths, it is not a matter of conflict; that the citizens are taxed by both authorities

involves no double taxation, since the jurisdictions are properly concurrent.1 The systems, both national and state, may be, however, themselves unequal internally. Apart from the fact that both jurisdictions are independent, the circumstances are the same as in cases of inconsistent taxation of commonwealths and their municipalities. As to the commonwealth systems of taxation, it is clear there is a conflict of law as between them and foreign nations, and also, in a similar way, between each other. Their relation to the national government has already been referred to. Within their own organization minor delegate taxing bodies exist, such as counties, cities, towns, villages, school districts, etc. In the commonwealth system, and also in these delegated systems, may exist forms of taxation which are contrary to the canons of equality. But the matter is then strictly internal.

The taxing power of the United States, within the constitution, is sovereign and unlimited; so, also, the taxing power in the commonwealths is plenary, except as limited by their own constitutions and the constitution of the United States. The constitutional limitations are absolute, and bind both the federal government and the commonwealths. The limitations of the federal constitution are of two kinds; first, those expressed in the letter of the constitution; second, those implied from the purpose of that instrument. In the first class are the provisions that Congress shall not tax exports; shall not levy any direct or capitation taxes, except by apportionment, according to the population in the several states; and that all taxes shall be uniform throughout the United States; and as respects the states only, that they shall not levy any tax on exports or imports, or levy tonnage duties without the consent of Congress."

In the second class, i. e., the limitations implied in the instrument, the first general restriction is that neither the federal gov2 U. S. Const., art. I, § 9.

1 Federalist, no. xxxvi. 3 Ibid., art. I, § 9.

ernment nor the commonwealth shall embarrass the other in the exercise of its constitutional powers.' This is a necessary implication. It has been said by high authority that "the power to tax involves the power to destroy; that the power to destroy may defeat and render useless the power to create; that there is a plain repugnancy in conferring on one government a power to control the constitutional measures of another."

Whatever may be thought of the absolute correctness of the first proposition, it can be confidently asserted to be good political science and good political economy, as well as settled law, that neither the federal government nor the commonwealths should tax the public property of the other. It is also justly maintained that they should not tax the public processes of law and administration, or any property or privilege or action which has a purely public end and distinct from private gain; further, that any institution or agency established for public advantage, but which, at the same time, is an instrument of private gain, should not be taxed in respect to that private interest, in a manner which shall discriminate against it, and thus embarrass the proper measures of the government establishing it. This, however, is the proper limit of this doctrine, certainly, from an economic standpoint, and the political argument in support of this limitation becomes every day of increased weight. The courts have not stopped here, but have extended it in a manner not logically demanded by the principle, inconsistent in itself, and at the same time in violation of the dictates of science, and of the just rights of the other governments. The discussion of this topic cannot be further pursued here, except to note its bearing on the present subject. For so far as these exemptions are established, equal distribution of taxation on the incomes of the persons or property taxable is made impossible.

1 Cooley, Law of Taxation, p. 83.

2 Marshall, C. J., in McCulloch vs. Md. (1823), 4 Wheat., 316.

3 Cf. Thompson vs. Pacific Ry. Co. (1869), 9 Wall., 579.

The conspicuous examples of complete or partial exemption which fall under this limitation are the property of either government, the bonds,' notes and debts of the United States," which are by law exempt, the property of the national banks, the franchises granted to corporations, the salary of United States and state officers, and the property in patents granted by the United States; of these the exemption of some is admittedly proper, of others, decidedly not.

In regard to commerce there are positive restrictions which have been already noted. The prohibition of the commonwealths from taxing imports and exports has been extended in interpretation to include certain other taxes which are not such directly. This is the case, for example, with taxes on auctioneers' sales of imported goods, which are forbidden on the ground that "a tax on the sale of an article, imported only for sale, is a tax on the article itself," and "a tax on the occupation of an importer is, in like manner, a tax on importation.' The court has set the limit, as to the period for which imported goods retain their quality as imports, to the time they remain in unbroken packages. The application of this legal principle to the constitutional prohibition is not satisfactory. It compels the exemption of certain classes from occupation taxes. Where, however, the purpose is police regulation, as the license of vendors of imported liquors, the right of the state has been affirmed.8

1 Weston vs. Charleston (1829), 2 Peters, 449; Bank Tax Case (1864), 2 Wall.,

200.

2 Bank vs. Mayor, 7 Wall., 16; Bank vs. Supervisors, 7 Wall., 26.

3 Rev. Stat. U. S., § 5219.

'California vs. Pacific Ry. Co. (1887), 127 U. S., 1; Dartmouth College vs. Woodward (1819), 4 Wheat., 518, Opinion of Story, J.; State R. R. Tax Cases (1875), 92 U. S., 575.

5 Webber vs. Virginia (1880), 103 U. S., 344.

Brown vs. Md., 12 Wheat., 419.

Ibia.

* License Cases (1847), 5 How., 504; cf. Cooley, Taxation, p. 12.