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There are no known copyright restrictions inthe United States on the use of the text.

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American Economic AssociationQuarterly

Formerly published under the title of Publicationsof the American Economic Association

THIRD SERIES. ISSUER QUARTERLY.Vou XX, Nu. 4. FslCEt $4.00 PER YEAR

PROGRESSIVE TAXATIONIN

THEORY and PRACTICEby

EDWIN R. A. SELIGMAN

DECEMBER 1908published by the

American Economic AssociationPrtnceton, N. j.

LONDON: SWAN SONNENSCHSIN & CO.

Entered as second class matter May 5, 1908, at the post oiEceat Princeton, N. J.,under the Act of Congress of July 16, 1894.

PRICE, IN PAPER, $i.2S; IN CLOTH $1.73


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AMERICAN ECCfJOMIC ASSOCIATIONOrganized at Saratoga, September 9, 1885.

EX-PRESIDENTSFrancis A. Walker i Arthur T. Hadley,

,; Massachusetts Institute of Technology. Yale University.' flpHiKegS F. Dunbar, Richard T. Ely, , ,Harvard University. University of Wisconaih.John B. Clark, Edwin R. A. SeligmanColumbia University. Columbia University^Henry C. Adams, Frank W. Taussig,University of Michigan. Harvard University.

Jeremiah W. Jenks,?Cornell University.OFFICERS FOR THE YEAR igo8

PresidentSimon N. Patten,

University of Pennsylvania.yice-Presii^Mis

Davis R. Dewey,Mass. Inst, of Technology.James B. Dill,East Orange, N. J.John M. Glenn,New York City.

Secretary and TreasurerWiNTHROP M. Daniels,Princeton University, Princeton, N. J.Publication Committee

Jacob H. Hollander, Chairman, A. W. Flux,Johns Hopkins Univeisityv Baltimore, Md. McGill UniveisityCharles J. Bullock, David Kinley,T ^w*^ University. University of Illinois.James W. Crook, William A. Scott.Amherst College. UUiversfty of Wisconsiii.

Editor of the Economic BulletinE. W. Kemmerer,

Cornell University, Ithaca, N. Y.Executive Committee

ElectedMembersx'Offlcio MembersThe PresidentThe Ex-PhesioentsThe Vice-Presidekts JThe SBCHETAI.y.T^I^^BThe Chairman Pobl. Com,Frank H. Dmok, Dattmonth CoUmef>nw C. Emwy, Yale Unlvt2tyJPB^. Gray; Univeraity ol Mto5tB, H. Mever, Uniirerait,VWwcSHeurv R. Seaoer, Columbia o2?r4y

Inqukiesand other comniunicattons regarding membership, BieetiiiKs and thr ..<


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Supplement toAmerican Economic AssociationQuarterlyVol. XINo. 2Juljr igio.

REVISED LIST OF ERRATAin

seligman's progressive taxation

PageIS

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No. ofNote Line

text

For314between one andten livres, one livre

Read313/between 10 and 40

livres, one livre ; be-tween one and ten


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American Economic AssociationQuarterly

Formerly published under the title of Publications of the Amekicah Economic Association

THIRD SERIES. ISSUED QUARTERLY.Vol. IX, No. 4. Prick, $4,00 per year

PROGRESSIVE TAXATIONIN

THEORY and PRACTICEby

EDWIN R. A. SELIGMANMcVicKAR Professor of Political Economy

Columbia University

SECOND EDITIONCOMPLETELY REVISED AND ENLARGED

igo8

iir


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iv American Economic AssociationThe socialistic theoryWagner, Paine, Guicciardini ; TheJacobins, Robespierre, Ramel, Babeuf; Decourdemanche,Obermtiller; The American Populists, Marshall, Daniels;von der Lith, v. Scheel, Dufay. The general-compensatorytheoryWalker, Royer, Villiaume, Courcelle-Seneuil. Thespecial-compensatory theoryGilardeau. General basis oftaxation.

CHAPTER II.The Benefit Theory 150

Leads to proportionClear-income theoryLeads to pro-gressionCriticismCost-of-service theory Abandonmentof these theories.

HISTORICAL APPENDIX I.The Benefit Theory Leads to Proportion 158

Hobbes, Grotius, PufendorfSully, Vauban, Petty, Quesnay,Turgot, Mirabeau, Montesquieu, Montyon Justi, AdamSmith, Bishop of Llandaff, McCuUoch, Senior, SargantMirabeau the younger, Thiers, Girardin, Baudrillart, Chau-vet, Ginoulhiac, Proudhon, Dupont, Batbie, Leroy-Beaulieu,BonnetSchlozer, Harl, Sartorius, Kroncke, Krehl, Kessler,Kremer, Rotteck, Faucher, Braun, Hock Compagnoni,BoccardoPastor.

HISTORICAL APPENDIX II.The Benefit Theory Leads to Non-Proportional Taxation. . 181

GandillotBentham, Robespierre, Forbonnais, Woodward,Steuart, AucklandSonnenfels, Behr, Jakob, Lotz, Malchus,Murhard, BiersackChailley, BenvenutiSismondiRous-seau, Graslin, Condorcet, Vernier, GamierEisenhart, Jud-eichVauthier, Fauveau.

CHAPTER III.The Faculty Theory 204

Faculty as propertyAs incomeClear incomeConsump-tion Equality of sacrificeConclusionsObjectionsUn-satisfied wantsMarginal-utility theoryThe Dutch writersMathematical theoryEquivalence theoryCriticism.

HISTORICAL APPENDIX III.The Faculty Theory Leads to Proportional Taxation 229

Bodin, Boxhorn, Besold, Klock, Sheridan, Frend, Parieu.


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Table of Contents vHISTORICAL APPENDIX IV.

The Faculty Theory Leads to Degressive Taxation 233MillRau, Umpfenbach, Bergius, Pfeiffer, Vocke, Helf-ferich.HISTORICAL APPENDIX V.

The Faculty Theory Leads to Progressive Taxation 239A. The Eighteenth Century 241Guicciardini, Charles of Baireuth, Montesquieu,

Graslin, Rousseau, de Jancourt, Tifaut de la Noue,Gosselin, Deverite, de Villiers; Justi, Scheide-mantel, Struensee.

B. The Nineteenth century French writers 251Montyon, Say, Du Mazet, Denis, Fauveau.

C. The English writers 256Paley, Hall, Craig, Buchanan, Sayer, Buckingham,Sidgwick.

D. The German writers 263Schon, Schmitthenner, Gross, Baumstark, Held,Neumann, Schaffle, Stein, Wagner, v. Scheel,MeyerCassel.E. The Dutch writers 278Pierson, Treub, Cohen-Stuart; Graziani; Piemas-Hurtado.

F. Recent American and English writers 285Edgeworth, Carver.

CHAPTER IV.Conclusion 290

FacultyProductionConsumptionUntenable obj ectionsValid criticismsResume.PART III.

Application of the Progressive Principle to AmericanTaxation. I. The general property tax 30S2. The income tax 3io 3. The corporation tax 3i6 4. The inheritance tax 3I9 5. Other taxesConclusion 3^3Bibliography 325Index 332


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PREFACE TO THE SECOND EDITION.The projected appearance of a French translation of

this book, as well as the great increase of interest recentlymanifested in the subject, has furnished the inducementto this revision. In the fourteen years that have elapsedsince the first edition was published, there have been manychanges in legislation, and not a few important contribu-tions to the discussion of the subject. An endeavor hastherefore been made to bring the book down to date fromboth points of view. This has necessitated an almostcomplete re-writing of the first part, and not inconsider-able changes in the second part. With every effort toavoid undue amplification, the volume has swollen to asize half as large again as the original. In all the essen-tial conclusions, however, I have found no occasion forany substantial modification of the views which wereoriginally set forth. Edwin R. A. Seligman

Columbia University,December, ipo8.


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PROGRESSIVE TAXATION IN THEORY ANDPRACTICE.INTRODUCTION.

The question of proportional versus progressive taxa-tion has not been settled in either theory or practice. Asurvey of the history of taxation will show repeated at-tempts made to introduce the progressive principle, fromthe early legislation of Solon down to the present time.If we confine ourselves to the nineteenth century we shallfind, indeed, that the general sentiment in many placesis in favor of proportional taxation, but that on theother hand almost every country has to some extentintroduced the progressive principle into its tax system.This is true not only in monarchies like those of con-tinental Europe and Japan, but in democracies like thoseof America, Australia and Switzerland. To give a fewinstances: we find progressive income taxes in mostof the German states, Austria, Sweden, Denmark, Hol-land and Belgium as well as in Switzerland ; progressiverental taxes in France and Australia; progressive prop-erty taxes in Switzerland, Holland and Australia; andprogressive inheritance taxes in France, Germany, Eng-land, Switzerland, Australia, Canada and elsewhere.Even in the United States, which is supposed to be parexcellence the home of proportional taxation, we have hada progressive property tax, like the federalist house tax,and some decidedly progressive income taxes, both nationaland local ; and we still have progressive income taxes, pro-gre.'-sive inheritance taxes, and progressive land taxes. Itis hence idle to claim that proportional taxation is the


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2 American Economic Association [5^4rule : on the contrary, practice seems to be tending moreand more to the partial or complete adoption of the pro-gressive principle. It may be useful, therefore, to pass inreview not only the facts of the case, but the arguments onboth sides in order to ascertain how, if at all, agreementmay be secured. This discussion seems all the more nec-essary because no comprehensive attempt to present eitherthe facts or the views of the chief representatives of thedifferent schools has yet been made.^A word first as to nomenclature. In a certain sense thedistinction between proportional and progressive taxationis illogical, for progression is also a kind of proportion.In the one case the tax may increase by a proportionate in-crement of the tax, the rate remaining the same; in theother case the tax may increase by a proportionate incre-ment of the rate, the rate changing pari passu with theamount. In both cases we have a proportion, although theresults of the proportion are very different. Strictly

There is one essay on the history of the theory by Lehr, Krit-ische Bemerkungen zu den wichtigeren fijr und wider den progress-iven Steuerfuss vorgebrachten Griinde, in Jahrbiicher fur Nation-albkonomie und Statistik, vol. 29 (1877), pp. I and igo. But Lehr'sessay is confused and not very critical. Moreover it is composedchiefly of long extracts from the German and a very few of theFrench authors, almost entirely disregarding all other countries.Finally it is antiquated, because most of the valuable discussion hastaken place in the last generation.^The best book on the facts isNeumann, Die progressive Einkommensteuer im Staats- und Ge-meinde-Haushalt, 1874. As the title indicates, this study is confinedto the income tax. It, also, is antiquated.

Since the present work was originally published, a young Italian,Mase-Dari, has written a book of over 700 pages under the title ofLa hnposta Progressiva, Indagini di Storia e d'Economia deltaFmanza, 1897. Excellent as is the work in many respects, it isunnecessarily elaborate, and is replete with all manner of discussionswhich have only the slightest connection with progressive taxation.Cf. also the two essays of Max Grabein, Beitrage zur Geschichteder Lehre von der Steuerprogression in Finanz Archiv, vol xii(189s), and vol. xiii (1896).


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565] Progressive Taxation in Theory and Practice 3speaking, therefore, the distinction ought to be drawn,not between proportion and progression, but between twokinds of proportionregular proportion and progressiveproportion. Again, the progression, if we adopt the term,may itself be either proportional or progressive: a pro-portional progression being an increase of the rate at anarithmetical ratio, a progressive progression being an in-crease at a geometrical ratio.

Passing by these rather subtle objections, however,and accepting the commonly received distinction as suffi-ciently obvious for all practical purposes, let us see whatis really meant by progressive taxation.A tax may be said to be proportional when the math-ematical relation between the amount of the tax and thatof the thing taxed remains the same. A tax is progressivewhen the relation varies in such a way that, as the amounttaxed itself increases, the tax will represent a continuallylarger fraction of that amount. Ordinarily this meansthat the rate increases with the amount taxed. This is,however, not necessarily the case. For the rate may re-main the same, while the change in the relation may beeffected by an alteration in the amount assessed; that is,by applying the same rate of tax to a continually smallerincrement of the thing taxed. Practically, of course, theresult is identical ; for if we start with a given rate and agiven amount, the same rate on a smaller amount is equiv-alent to a higher rate on the same amount.The term commonly employed in England is graduated

taxation. This is misleading. If a tax is graduated inlieu of being proportional, the graduation may be eitherupward or downward. Proportional taxation in the ordi-narily accepted signification means the same rate on allquantities of the thing taxed, whether this consists ofproperty or of income or of anything else; graduated


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4 American Economic Association [566taxation may mean that the rate either decreases or in-creases as the amount of property or of income increases.When the rate increases with the amount of the income,for instance, we have progressive taxation; and that iswhat the EngHsh writers generally mean by graduatedtaxation. But when the rate decreases as the incomeincreases, the tax is also graduated. The technical termfor such taxation is regressive taxationwhat the Frenchcall upside-down progressive taxation {progression a fe-bours).^ Graduated taxation in the wider sense thusincludes both progressive and regressive taxation.

Finally, a third method is possible. The tax ratemay increase up to a certain amount, but remain con-stant beyond that fixed point. There may be progressionup to a definite limit, and proportion thereafter. Theusual term for this is degressive taxation.* The propor-tional rate is regarded as the normal one, but on all sumscounted downward below this limit the tax rate graduallydiminishes. Degressive taxation is also graduated taxa-tion, and one of its most common forms.

Whether we call the tax progressive or degressive de-pends entirely on the point from which we count up ordown ; for even in progressive taxes the progression everywhere stops at a certain limit. The highest point knownto history as actually enforcedjs^iliirty-seven and a halfper cent. It could not conceivably exceed one hundred percent. Nevertheless from one point of view the distinctionbetween progression and degression is tenable. In de-

Buckingham, National Evils and Practical Remedies, 1849, p.338, speaks of a tax being graduated the wrong way.' The term 'progressional tax, used in a somewhat similar sense

is due to Joseph Gamier. It has not been generally adopted, anddoes not mean exactly the same thing as a degressive tax Itmight best be translated as a moderate and limited progressivetax, as we shall see when we discuss Garnier below


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567] Progressive Taxation in Theory and Practice 5gression the ideal is proportional taxation, although a con-cession is made, through lower rates or exemptions orabatements, to the poorest classes who ought theoreticallyto pay the same rate but who are deemed to be unable todo so. In progression, the ideal is not proportional taxa-tion: the wealthier classes pay higher rates because, ac-cording to the theory, they ought to assume a more thanproportional burden. In progressive taxation graduationordinarily begins from the point at which in the case ofdegressive taxation graduation stops and proportion be-gins. Nevertheless this precise point at which graduationcommences is somewhat arbitrary. What one personwould call degressive taxation another would call pro-gressive taxation.* While degressive and progressivetax-rates, however, have much in common, and are reallytwo different ways of expressing what is essentially thesame idea, degressive and regressive tax-rates are, in onesense, as we have seen, the very opposites of each other.The terms progressive tax or graduated tax are

also used in another way. If a different rate is levied ondifferent kinds (not different amounts) of property or in-come, we speak not of a graduation but of a differentia-tion of the tax. But if different rates are levied on in-heritances or bequests according to the degree of relation-ship of the heir or successor, the tax is sometimes calleda graduated or progressive tax. In ordinary casesprogression denotes a changed rate for altered amounts;

*EIy, Taxation in American States, p. 77, uses the term digres-sive, which is obviously a misprint. His explanation, however,like that of Daniels, Public Finance, p. 89, is inadequate. We havedegressive taxes not only when a certain amount is entirely ex-empted, as we are told, but also when the smaller amounts below amoderate limit are taxed at a lower rate. The statement of Bastable,Public Finance, p. 292, is also inexact. In the 3rd ed. (1903), p.316, the inexactness of the statement is only partly remedied.


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6 American Economic Association [5^8in this case it denotes changed rates for the same amountsgoing to different persons. In the remainder of the pres-ent monograph the term will be employed in conformitywith the ordinary usage which has come to apply to thecollateral inheritance taxes of this kind the designationof graduated taxation.The question of progressive taxation is not confined to

the income tax. We may have progression in other directtaxes like the property tax, the house tax, the land tax,and the inheritance tax. There may even be progressionin indirect taxes, and that, too, in a double sense. In thefirst place, the rates of certain imposts like stamp taxes,business taxes, or taxes on commodities may increase withcriteria like the amount of the transaction, or sales, orcapital, or capacity or production.^ Secondly, the pro-gressive principle may be introduced into the general taxscheme by an arrangement in virtue of which articles ofluxury are taxed at increasingly greater rates than articlesof comfort or necessity. The discussion, however, hasbeen limited almost entirely to direct taxation, and usuallyeven to the income tax. There is no good reason why this

This is the sense in which progression is used by Josef Dierschke,Progressive Besteuerung des Grossbetriebes bei einigen Verbrauchs-steuern. 1903, and Clement Charpentier, La Progression dans lesImpots Indirects en Allemagne, igo8, in whicli the so-called Staffel-steuern are studied For these, see below, Part I, 7.

This idea has been elaborately set forth recently by Franz Graf,Das Problem der Luxussteuern, 1905. Dr. Graf bases his contentionon the principle that taxes on luxuries wiirden den Progressions-gedanken, wenn auch nicht tadellos nach den finanzwissenschaft-lichen Regeln, so doch in der Hauptsache, nachdriicklich zur Geltungbringen. Op. cit., p. 25. In a very ingenious work by a Frenchengineer, Louis-Leger Vauthier, De V Impot Progressif, tude surI' Application de ce Mode de Prelevement a un Impot quelconque,1851, an attempt is made to show how the progressive principle maybe logically and arithmetically applied to any kind of tax. See esp.chap. 6, and the formulas, pp. 87-91.


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569] Progressive Taxation in Theory and Practice 7should be the case. In the following pages we shall treatof progression in general, taking up first the history andthe actual condition of progressive taxation; secondly, thetheory of progression in its historical and positive aspectsand finally the applicability of progression to the condi-tions as they exist in the United States at the present time.


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PART {THE HISTORY OF PROGRESSIVETAXATION.


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I. Classic Antiquity.The earliest example of progressive taxation of whichwe have any knowledge is found in Athens. The facts

are, however, not entirely beyond dispute. The directtax (el(j)(ropd) as levied in the time of Solon (B. C. 596)was a tax on property chiefly in the form of land, and waslevied on the basis of the produce.^ The population wasdivided into four classes (Ti/j,rj/u,aTa), as follows:

1. The Pentakosiomedimni, or those whose producewas valued at five hundred measures of dry products(medimnus) or liquid products (metrete).

2. The Knights (tTTTT^?), or those who produced threehundred measures and could support a horse.

3. The, Zeugitae, or owners of a yoke of cattle, whoproduced two hundred (or, according to others, one hun-dred and fifty) measures.

4. The Thetes, who produced less than the above.Solon's design seems to have been to estimate the net

produce of land at one-twelfth of the property. Reckon-ing a measure of produce as worth one drachma (about17/^ cents), the property of a Pentakiosiomedimnus wasassessed at a talent, i. e., twelve times 500 measures or6,000 drachmas. According to the same calculation thevalue of a knight's property should have been fixed at

^Cf. Boeckh, Public Economy of the Athenians, book iv, chap. 5(pp. 639-665 of the American translation, or vol. ii, pp. 25 et seq.,of the London edition of 1828). For Beloch's interpretation, whichis somewhat different, see his article Das Volksvermogen vonAttika in Hermes, vol. xx, 1885, pp. 237 et seq. Lecrivain alsothinks that this is merely an hypothesis. See his article el(r^opd inDaremberg and Saglio, Dictionnaire des Antiquites Grecques etRemains, 1887. Cf. also P. Guiraud, Studes jSconomiques surI'Antiquite, 2 ed., 1905, pp. 77-79-


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12 American Economic Association [574twelve times 300 measures or 3,600 drachmas, and thatof the next class at twelve times 150 measures or 1,800drachmas. The progressive (or degressive) principle,however, was introduced by assessing the property of theknights at only 3,000 drachmas, and that of the Zeugitaeat only i ,000 drachmas, while the lowest class was entirelyexempted. In other words, instead of changing the rateof the tax, a modification was made in the assessable por-tion of the property. The highest class was assessed atthe full valuation of the property ; in the second class theappraised valuation was fixed at five-sixths of the valueof the property; while in the third class only five-ninthsof the property was assessed. The rate remained thesame, but the ratable valuation changed. The tax, there-fore, was graduated.The next account of the tax that has come down to us

is during the archonship of Nausinicus (B. C. 380), al-though the tax may have been levied occasionally in theinterval. By this time the property assessed included notonly real estate but personalty. There were still fourclasses, but with no exemption for the lowest class andwith a graduation in the tax. While there is some doubtas to the exact figures, it seems probable that the tax wasnow a progressive income tax. The rate was one percent on the lowest class, composed of all those with an in-come below 25 minas (about $427) ; five per cent on thesecond class, with incomes from 25 to 50 minas ; ten percent on the third class, with incomes from 50 to 100minas; and twenty per cent on the fourth class, with in-comes above 100 minas. ^ We possess no further details

''This is the explanation given by Rodbertus, Untersuchungenzur Geschichte der romischen Tributsteuer seit Augustus '' in Hil-debrand's Jahrbiicher fur National-Oekonomie und Statistik Bandviii (1867), pp. 453 et seq. Although the figures are somewhat arbi-trary, his explanation is preferable to the very involved interpreta-


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575] Progressive Taxation in Theory and Practice 13of its workings.

In Rome, during the republic as well as the empire,nothing is known of any form of progression.^ Directtaxation played a very small role in the fiscal economy,and there is no evidence to show that a graduation of thetax was ever attempted. We must remember, more-over, that in Greece, as well as in Rome, direct taxes werelevied only as a last resort and in the most extraordinaryexigencies.tion of Boeckh, who calls the tax not a pure income tax, but, as itwere, composed of a property and income tax, without clearly ex-plaining the connection. Public Economy of the Athenians, p. 669.Parieu, Traite des Impots, i, p. 416, who gives an account of this taxbased on Boeckh's explanation, wrote before Rodbertus had pub-lished his investigations.

' M. G. Platon has written a book to show the alleged clearlyprogressive nature of the public revenues in classic antiquity. Seehis La Democratie et le Regime. Fiscal a Athenes, a Rome et de nosJours, 1899, esp. pp. 210-21 1. When his so-called facts, however,come to be examined, they will be found to vanish into thin air. Thearticles originally appeared in the Socialist periodical, Devenir Social.


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2. The Middle Ages.With the growth of direct taxation in the middle ages

we find several examples of progression, due in great p&rtto the growth of the democratic spirit. It is hence naturalthat the chief mediaeval progressive taxes should originateand develop in the towns and communes where the demo-cratic spirit asserted itself most vigorously. It is true,indeed, that there are a few isolated examples of a pro-gressive scale in the general state taxes. These were,however, in the main, class taxes or classified poll taxes,where the upper classes were made to bear the highercharges on the humanitarian principle of le fort portantle faible, as it is expressed in the French and Englishlaws, or as the Latin ordinance of 1367 reads: ita quodpauperes per divites supportentur. In France we findthis especially in the case of the fouages. A fouage was atax or iaille assessed on the feux or hearths, feu meaninga family or number of persons living under the same roof.A survival of this is the Sicilian focatico, which createdso much disorder only a few years ago. The tax wasoriginally so much per feu or family. This, however, be-came manifestly unjust in proportion as the propertyof the different families began to vary considerably. Thusthe custom arose of levying the tax at different rates. Notonly were the townsmen assessed at a higher sum than thepeasants, but the rate imposed on different individuals wasgraded. Unfortunately the assessors generally invertedthe legal principle and made the poor pay higher ratesthan the rich.^

' Clamageran, Histoire de I'Lnpot en France, 1867, i, p. 402.


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577] Progressive Taxation in Theory and Practice 15Based in part on these French laws were the EngHsh

graduated poll tax of 1379 (in which the tax ranged from4d. to 6, ly. 46.), and the poll tax of 1380 (whichranged from 2d. to 20s.). ^ The rates of the tax of 1379were repeated in 1513, and slightly increased in 1614;^while the same principle was applied at occasional inter-vals during the seventeenth century/ the last instance ofthe classified poll tax being in 1698. In practice, however,the poll taxes were levied chiefly on the poor. They neverbecame a part of the regular revenue in England, as theydid in France.

In the mediaeval property and income taxes, the pro-gressive scale is likewise occasionally found. Thus theFrench cinquantieme, or fiftieth, of 1295 was in part grad-uated. It was a combination of a property and an incometax. All persons having less than one hundred sols prop-erty paid a tax on their income from wages. On yearlywages the tax was a day's wage or one three hundred andsixty-fifth; on monthly or daily wages, the tax was fixedat six deniers. On property up to ten livres the rate of thetax was one-half of one per cent ; from ten to one thou-sand livres the rate was two per cent, or a fiftieth (whencethe name) ; while above one thousand livres the tax wasfixed at twenty livres? It was thus a somewhat singularcombination of degressive, proportional and fixed taxa-tion. The tax was again levied in 1297 and 1301.

In England we find some sporadic examples of suchproperty and income taxes. Thus in 1435 ^ graduated in-come tax was levied in three classes, the rates being 6d.,

' Dowell, A History of Taxation and Taxes in England, 2nd ed.,1888, i, p. 94.

'Ibid., i, pp. 129, 161.*In 1660, 1666, 1677 and 1689-1698. Ibid., ii, pp. 29, 45. Clamageran, Histoire de I'l-mpot en, France, i, p. 31^.


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1 American Economic Association [57^8c?. and 2s. in the pound respectively, according as theyearly income was below f loo, between f loo and 400,or above 400, incomes below 5 being exempt. Thatis, the rates were two and a half, three and a third, andten per cent. In 1449-1450 the tax was repeated, withslight changes, the rates now being two and a half, five,and ten per cent, respectively, with the limit of exemptionreduced to 1.'^

In the mediaeval German empire progressive generalproperty taxes are also occasionally found, as for instancein the case of the Reichsdbschied of 1512, when a pro-gressive tax was imposed in order that the poor shouldnot be so grievously burdened. ^On the other hand, the general state taxes were some-times regressive, instead of progressive. Thus the Frenchordinance of 1356 provided for a subsidy on incomesfrom real estate, salaries and mortgages. The rate wasfor all revenues above 100 livres, four livres for the first100 and two livres for each succeedingtween 40 and 100, two livres; between ._,one hvre That is to say, if we take the lower figuresin each class the rate would be ten per cent for 10 livres,five per cent for 40 livres, four per cent for 100 livres,and two per cent above 100 livres. Moreover, the richerclasses were exempt on all income above 1,000 or 5,000livres, according as they were composed of non-noblesor nobles. So again in the next year a similar subsidy wasgranted with a rate of four per cent on revenues up to100 livres, and two per cent on revenues exceeding that

' Dowell, op. cit., i, p. 113.''Ibid., i, p. 116. Damit der Arme nicht so hochbeschwert und dem Reichen

auch aufgesetzt werde, das er tragen moge, Judeich, Die Renten-steuer im Kbnigreiche Sachsen, 1857, p. 6.

Clamageran, op. cit., i, p. 36II'


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579] Progressive Taxation in Theory and Practice 17amount. Similarly in England Henry VIII levied anincome tax on the regressive principle. Incomes weredivided into four classes, fi-5, 5-10, 10-20 and over20. The rates were in the case of movables A^d., M.,IS. 4d. and 2s respectively; in the case of immovables8d., IS. 4d., 2s. and 35-. respectively. ^^

Progressive taxation was thus by no means a distin-guishing feature of the general state taxation. Politicaland economic relations were dominated by the feudalsystem, and the feudal system was essentially aristocraticin its nature. The financial conditions, as a reflex of theeconomic situation, necessarily had an aristocratic im-print.

In the communes and towns on the other hand therewas more play for the democratic movement. At firstwhen property was fairly equal, the ideal of justiceseemed to be a proportional general property tax, whichis found almost universally in England as well as on thecontinent, whenever resort was taken to extraordinarysources of revenue. ^^ In several towns, however, a some-what deeper analysis was made of the underlying prin-ciple, and the general property tax, instead of being pro-gressive, was made regressive up to a certain point. Theexplanation of this phenomenon is not difficult. Indi-vidual faculty or ability to pay taxes was supposed to bein some manner determined by income. Property obvi-ousy yielded one kind of incomefunded or unearnedincome as it is called in modern times. But income fromlaborearned or unfunded income in the modern par-lancewas also deemed to constitute a portion of taxable

' Clamageran, op. cit., i, p. 367. Vocke, Geschichte der Steuern des hritischen Reichs, 1866, p. 510.Dowell does not mention this tax.^ See Seligman, Essays in Taxation, Sth ed., 1905, ch. v.


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i8 American Economic Association [580faculty. Many towns hence added to the general prop-erty tax a tax on the income from labor. That, as weknow, was the method transplanted from Europe to theNew England colonies. Other towns, however, soughtto attain the same result in another way. It was assumedand under the conditions of the time the assumptionwas roughly accuratethat the smaller the income fromproperty the greater the income from labor; or in otherwords that the minor burghers who worked for theirliving would possess little, if any, property, and that up toa certain point the more property a man had, the less likelyhe would be to resort to manual labor. Hence, in theabsence of an income tax, it would be necessary to assessthe smaller property at a slightly higher rate than thelarger property ; for the higher rate on the smaller prop-erty would represent a property tax plus a labor-incometax, while in the case of the larger property the ratewould represent simply a property tax. In this way itwas thought that a rough proportion would be attained.The best example of this method of taxation is found

in the mediaeval German towns. In Basel, whose financialhistory has been elaborately investigated, we find that theextraordinary property taxes were levied on this principle.In 1429, for instance, a tax was assessed at the generalrate of two per cent on the highest member of each class.But on all property below two thousand gulden, the taxwas divided into ten classes, the rate rising in each in-ferior class until in the lowest class (ten gulden and be-low) the tax was fixed at such an amount that the rateexceeded seventeen per cent on the ten gulden. 1* Of the The law fixed, not the rates, but the lump sums payable on eachclass of property assessed. The rate would thus differ accordingas the property was at the bottom or the top of the class. The fol-lowing table will show the rates


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581 J Progressive Taxation in Theory and Practice 192,536 tax payers only 126, or five per cent, possessedproperty of over 2,000 gulden, although they paid 32 percent of the tax; while the tax payers in the two lowestclasses, 48.9 per cent of the total number, paid only 10.8per cent of the tax. Again in 1451 the rate of the prop-erty tax was one per cent for the first 100 gulden andone-half of one per cent for every successive 100 gulden,thus constituting a slightly regressive tax. It is notnecessary to go into the details of the other instances,as the principle was virtually the same.

In many of the mediaeval towns this originally demo-cratic character of the tax was modified by aristocraticand feudal influences ; and even the ostensible proportion-ality of taxation frequently became a real inequality,pressing more heavily on the poorer classes. This wasprobably true in the great mass of cases. We know that itwas a fact in the German towns,^^ as well as in the Frenchcommunes. In the latter instance this was due not only tothe natural proclivities of the assessors, but also to thefrequent purchases of exemption from taxation. When

Class Gulden Per cent.1 0- 10 1000 -17.12 10- 50 45-103 SO- 100 14.7- 7-54 100- ISO 9.9-6.65 ISO- 300 13-3- 6.66 300- soo 8.3- 57 soo- 750 5-9- 48 7S0- 1000 4.6- 3.S9 1000- 1500 3.9-2.610 isoo- 2000 2.9- 2.211 2000- 2500 2.4- 2

Cf. Schonberg, Finanzverhaltnisse der Stadt Basel im xiv. undXV. Jahrhundert, 1879, p. 17s. Ihid., p. 284.^ Zeumer, Die deutschen Stddtesteuern im xii. und xiii. Jahrhun-dert, 1878, pp. 90, 91-


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20 American Economic Association [5^^the history of English local finance comes to be written indetail, the same will probably be found to be the casethere. In the provincial income taxes in France duringthe sixteenth century it was even provided that no onecould be held to pay more than a definite sum, no matterhow great his fortune. In Lille this limit was fixed atone thousand florins. The wealthier the tax payer, thelower the rate of the tax.^

In some places, however, where the differences ofwealth became very marked, the democratic spirit asserteditself at times more vigorously. This is especially true ofthe Italian republics at the period of their great com-mercial prosperity, when the conditions of the towns re-sembled those of modern times more closely than at anyother period or in any other country. The Italian cities,and especially Florence, are therefore the chief examplesof actual progressive taxation in the middle ages.Houdoy, L'Impdt sur le Revenu au xvi. sUcle.. Les Btats de

Lille et le Due d'Albe, 1873, chap, iii, p. 345. In the earlier centurieswe find occasional examples of progressive taxation in the townsas at Donai in the case of the forced loan of 1302, where in additionto the ordinary rate of ten per cent on movables, an extra tax oftwo per cent was levied on all property over fifty livers in value.Cf. G. Espinas, Les Finances de la Commune de Donai des Originesan xv siecle, 1902, p. 141. *^


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3- The Italian Republics.In Florence, as in the other mediaeval towns, the general

property tax was employed whenever it became necessaryto secure extraordinary revenues. The original propertytax or estimo was supplanted in 1427 by the catasto,which was a tax on the capitalized value of incomes frommovables as well as immovables. The capitalization wasmade at different rates. This is not the place to trace thevarious steps in the development which finally led to theinstitution of the deciina or tenth, a tax on the incomefrom immovables only. What interests us here is not thefortune of the general property tax,^ but the applicationof the progressive principle, under the general name ofscala. JBOne of the chief reasons^Hr the introduction of pro-

gression was the evasion by the wealthy of the propor-tional tax on persomlty. It was hoped in this way tomake the rich pay at all events their share of the burden,and thus in some sort to re-establish the balance. TheMedici eagerly seized upon this democratic reasoning andconverted the graduated tax into an engine for ruiningtheir wealthy rivals. What was begun by the Medici,however, was continued by the democratic governmentwhich supplanted them.The progressive rate was first applied to the general

property tax or catasto in 1443. The tax was known asthe graziosa or gracious tax, because so favorable tothe lower classes who had hitherto borne the chief bur-*A history of the Florentine tax will be found in G. Canestrini,

La Scienza e I'Arte di Siato, desunta dagli Atti officiali delta Repuh-hlica Fiorentina e dei Medici. Ordinamenti Economici.Delia Fin-anza.. Parte I, L' Imposta sulla Rkchezsa Mobile e Immobile.Firenze 1862.


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22 American Economic Association [5^4den. The gracious tax divided the tax payers intofourteen classes, the rate varying from four to thirty-three and a third per cent of the income, which was thencapitalized.- To this was added a poll tax, likewise infourteen classes, varying from one to eighty soldi. In1447 the second progressive tax was levied. The numberof classes remained the same, but the tax was now leviedonly on income, and the rates now varied from eight tofifty per cent. This was known as the decina dispiacenteor displeasing tax, and continued at these rates forseveral years.

In 1480 the scala or progressive rate was applied notto the general property or income tax, but to the new taxon income from immovables only. There were now nineclasses with rates from seven to twenty-two per cent, andthere was joined to this ^^aduated poll tax. Hence-forth the progressive rate^S generally applied to all theextraordinary direct taxes, whatever their name or form.Sometimes it was applied to the caiasto or capitalizedgeneral income tax, sometimes and more frequently tothe decima* or income tax on realty, sometimes to both thecatasto and the decima when they were levied simulta-neously. All kinds of combinations were made. At

^ The six classes up to 300 florins were graded by diflferences ofSO florins; from 300 to 700 florins the steps were 100 florins; thencame three additional classes with steps of 300, 200 and 300 florinsrespectively, until the final class included revenues of 1500 florinsand over.Canestrini, op. cit., p. 217.

It was called decina because assessed by ten officials. Sometimesthe taxes were assessed by a different number of officials, and theyreceived the names of I'eiitine, novine, settine, etc. Ibid., p. 178. Thedistinction between a piacente and dispiacente was as follows: Oldassessment rolls were often brought into requisition. When theassessor selected the highest roll, the tax was displeasing; whenthe choice was left to the tax payer, it was pleasing. Ibid., p. 186.

* The decima or tenth must not be confused with the decina,mentioned in the preceding note.


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585] Progressive Taxation in Theory and Practice 23times the rates were definitely fixed according to whatwas called the regola or norma; at other times the wholematter was left to the discretion of the assessors andhence known as I'arbitrio. In the intervals between theofficial valuations of the catasto the old lists were oftentaken out and the individual assessments arbitrarily in-creased or decreased. The tax was then known respec-tively as I'aggravo or lo sgravo.^ Sometimes the rateof progression was high, sometimes it was moderate,sometimes low, according as the whole scale, a half scale,or a third of a scale was adopted.The history of the Florentine decima scalata has been

utilized as a warning example of the inherent evils ofprogressive taxation. It can certainly not be denied thatthe results were disastrous, that individuals were fre-quently reduced to beggary, and that forced sales of prop-erty in order to pay the taxes were of common occurrence,notwithstanding the fact that as in all early times directtaxes were regarded as compulsory loans to the govern-ment, and that the tax payers were inscribed to the extentof the taxes as creditors of the state. M. Leon Say es-pecially waxes eloquent over the abuses of the progres-sive system. He forgets, however, that the authorityfrom which he takes all his facts expressly states that thefault lay not so much in the graduation as in the fre-quency and enormous extent, of the tax.'' AlthoughCanestrini himself does not favor progressive taxation,he is fair-minded enough to say that we must distinguishbetween the progressive tax under modern conditions and

Canestrini, op. cit., p. l8s.' Leon Say, La Question des Impots, 1886, i, chap. 4.'Canestrini, op. cit., p. 204: Incltre vuolsi notare che non era

precisamente la scala o la progressione dell' imposta che atterriva erovinava i piu ricchi, ma bensi la soverchia frequenza e la intol-lerabile enormezza delle imposte.


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24 American Economic Association [5^6the abuse of the principle by the Medici in medijeval Flor-ence. In fact we may go further, and say that the realsource of the trouble was not the fact of progression atall, but the utter arbitrariness in the whole administrationof the direct tax. It was the discretion left to the officialsin levying the direct tax on personalty and on incomewhich was mainly responsible for the actual abuses. Itis perhaps true that the existence of the graduated scalerendered it somewhat easier for the government to ruinits adversaries, and there is no doubt that the rate ofprogression was at times extravagant. But it is quiteerroneous to assume that the proportional rate denotedcertainty, while the progressive rate involved uncertainty.In both cases the assessments were entirely arbitrary ; andwhere the assessments are arbitrary there is practicallynothing to choose between proportion and progression.The evils of progressive taxation under the later Medici,were no worse than the evils of proportional taxationunder their predecessors ; the abuses of progressive taxa-tion in Florence were not a whit more glaring than theabuses of proportional taxation under the later Romanemperors.Even after the expulsion of the Medici the republic,

notwithstanding the reaction of the first few years, soonreintroduced the system of progressive taxes under thestress of political complications. The scale of graduationwas somewhat reduced and some of the abuses were rec-tified. We find the scala from 1499 to 1506 and againduring the troubles of 1529. But with the capitulation ofFlorence in the next year the system of progressive taxa-

' II perche dagli economist doverebbesi distinguere il principiodella scala e la sua applicazione nelle condizioni speciali della Re-publica fiorentina, e 1' abuso del principio e della pratica di essoper opera dei Medici, dalla teorica e dalla sua attuazione nelle pre-sent condizioni sociali e politiche degli Stati. Ibid.


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587] Progressive Taxation in Theory and Practice 25tion came to an end, with the exception of a single attemptto reintroduce a modified form of the old system in1710.

Canestrini, op. cit., p. 307.


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4- The Seventeenth and Eighteenth Centuries.During the seventeenth century we hear but little of

progressive taxation. The scheme was proposed in Spainin 1676, where the industrials of Aragon suggested aprogressive class tax to the Cortes of Calatayud.^ Dur-ing the eighteenth century, however, the instances be-come more frequent, until the revolution of 1789, andespecially that of 1848, gave the signal for a far morewidespread application of the principle during the nine-teenth century.

In the first half of the eighteenth century there areto be noted a few examples of progressive taxationlevied on extraordinary occasions. Thus in Holland aclassified income tax was imposed in 1748, varying fromone to two and a half per cent.^ So in 1742 the ElectorFrederick Augustus, of Saxony, established a progressivegeneral income tax, in six classes, with rates varyingfrom one to eight per cent. The tax was so arrangedthat each increment of the income paid a separate rateaccording to the class to which that increment belonged.^The tax lasted until 1746, and was replaced by a clas-

' Colmeiro, Historia de la Economia Politica in Espana, 1863, ii,p. S76.

^ Parieu, Histoire des Impots Generaux sur la Propriete et le Rev-enu, 1856, p. 88, quoting from Engels, De Geschiedenis der Belastin-gen in Nederland. This tax can be traced back to 1715 when it wasimposed with slightly different rates and lasted for a year. It waslevied again in 174.?, 1745 and 1747. Cf. Sickenga, Geschiedenis derNederlansche Belastingen, 1878-1883.'For instance an income over 25,000 thalers, the highest class,would pay one per cent for the first 1,000, two per cent for the next9,000, three per cent for the next 2,000, four per cent for the next3,000, five per cent for the next 5,000, six per cent for the next 5,000,and eight per cent for the remainder. Judeich, Die Rentensteuer imKonigreiche Sachsen. p. 12.


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589] Progressive Taxation m Theory and Practice 27sified poll tax. In Geneva, on the other hand, where theextraordinary property tax of 1690 was levied on the pro-gressive principle, graduation was imposed as a perma-nent system in the taxe des gardes, which was first leviedin 1709. The rates were one-half of one per cent for thefirst 10,000 ecus, and one per cent for the surplus.*

During the eighteenth century the principle of pro-gression was applied within somewhat narrow limits toother taxes besides those on income. Thus the tax oninhabited houses in England, introduced by Lord Northin 1778, provided for rates of 6d. and is. in the pound re-spectively, according as the annual value of the house wasbelow or above 50. In 1779 the scale was slightly al-tered, and the tax was graduated in three classes at 6c?.,gd. and is respectively. Although the three classes weremaintained in the following years, the rates weresomewhat changed, and in 1808 they were fixed at is.6d., 2s. 3d. and 2s. lod. in the pound respectively. Minoralterations were made during the next two decades, untilthe tax itself was repealed in 1834. When the tax wasreimposed in 1850 it was no longer graduated accordingto rental value but simply classified according to the pur-pose for which the building was used.^The most important applications, however, of the pro-

gressive principle during the eighteenth century are to befound in France, where, during the revolutionary period,several attempts were made to impose a progressive tax.When the direct income taxes in France were abol-

ished by the Revolution, an effort was made in 1791 tosubstitute for them a so-called personal and movablestax, taxe personelle et mobiliere, levied in great part on

* Schanz, Die Steuern der Schweiz in ihrer Entwickelung seit Be-ginn des igten Jahrhunderts, iv, pp. 19S, 196-

Dowell, History of Taxation and Taxes in England, iii, pp. 178-192.


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28 American Economic Association [59^the basis of house rent. The rental value was regardedas a rough presumptive index of the occupier's income,on the assumption that the greater the income, the smallerthe portion devoted to house rent. In order, therefore,to attain a relatively proportional rate on the actual in-come, the scale of the rentals tax was made progressive.The rate of the tax was the same in every casefive percentbut the houses were divided into eighteen classes.In the lowest class, with a rental value of lOO livres orless, the income was assumed to be twice the rental valuein the next class, with rental value to 500 livres, the in-come was assumed to be three times as great; and so onuntil in the eighteenth class, comprising rental values of12,000 livres, the income was assumed to be twelve and ahalf times as great. In other words, the occupier of a500 franc apartment paid the five per cent tax on 2,000francs; the occupier of a 12,000 franc apartment paid thetax on 150,000 francs.^ The tax, although nominallyprogressive in character, was supposed to conform to theprinciple of real proportionality ; it was progressive inrelation to house rent, but proportional to real income,since expenditures for house rent grow, up to a certainpoint, faster than does income. This is brought outclearly in the report of Representative De Fermond, whofirst suggested it.^ The tax itself worked rather badlyand was suspended in the year III.

Stourm, Les Finances de I'Ancien Regime et la Revolution,i, (1886), p. 250.

Le tarif presente a raison de la difference des loyers, una pro-gression croissante; progression que nous croyons indispensable,parce qu'il est reconnu que le pauvre preleve sur son revenu unesomme plus forte pour la depense de son loyer, et, comme c'estsur le revenu que I'imposition doit porter, il est necessaire pourla rendre toujours proportionnelle au revenu, qu'en prenant pourbase de I'indication des facultes une nature de depense qui est d'au-tant plus forte que le revenu est plus faible, la progression du taux


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591 ] Progressive Taxation in Theory and Practice 29This French tax served in part as the model of the pro-

gressive direct tax imposed by the federal governmentof the United States in 1798. Secretary Wolcott's planfor the direct tax comprised three taxes : on dwelling-houses, on slaves and on lands. He proposed in the caseof houses a progressive tax with a fixed rate for each classof houses.'^ Hamilton's project was a progressive tax,graduated according to the number of the rooms. Thescheme finally adopted was due to Gallatin, who suggesteda progressive tax graded according to market value. Thetax, however, differed from the French tax of 179 1 in thatthe progression attached not to the coefficient, but to therate itself. That is, the houses were divided into nineclasses, the lowest class comprising houses of the value offrom $100 to $500, and the upper limit of each succeedingclass being i, 3, 6, 10, 1.5, 20, and 30 thousand dollarsselling value. The rate of the tax varied from two to tenper mill respectively. This was the only progressive taxever levied by the United States government until theperiod of the Civil War.The French rentals tax was therefore an instance of

ostensible, rather than of real progression. It was notlong, however, before this experiment was followed byexamples of actual progression. This forms so interest-ing and important a phase in the history of the subjectthat we shall deal with it in a separate section.de r imposition soit en raison inverse du rapport de cette nature dedepense avec le revenu sur lequel elle est prelevee. Gomel, His-toire Financiere de I'AssemhUe Constituante, ii (1897), p. 336. Thisis also the view of Mathieu-Bodet, Les Finances Frangaises de 1S70d 1878, ii, p. 72. M. Stourm, however, considers it a progressivetax. Op. cit., p. 232.

'' Cf. the plan in American State Papers, Finance, i, p. 589. Ham-ilton's plan will be found in his works (Ford's edition), iii, p. 53.The plan actually adopted was that of the act of July 14th, 1798.


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5- The French Revolution.With the progress of the Revolution, the radical senti-

ment grew stronger, and under the Convention variousefforts were made to realize the progressive principle.^The first was at the close of 1792. The various towns

had issued paper currency known as Billets de Confi-ance, which were now made unnecessary by the newnational Assignats . A law of November 8, 1792, pro-vided that this municipal paper issue be redeemed throughthe proceeds of loans or taxes. Cambon, who broughtin the Committee report, declared that the taxes oughtto be progressive and that the principle should be totax le citoyen riche infiniment plus que celui qui n'aqu'une fortune mediocre. He based his contention onthe ground that the chief advantages of these paper issueshad accrued to the rich. Another reason, not so openlyavowed, was that the depreciation of the paper issues waslaid at the door of the anti-revolutionary wealthy class.A few weeks later the principle was applied to Paris,which redeemed its issue by levying an impost supplemen-tary to the land tax and the movables tax {contributionsfonciere et mobiliere), according to a progressive scaleranging from i/300th to i/6oth of the tax payers' in-come.^ On the same date a somewhat similar tax was

' Cf. two essays by C. H. Gomel, one entitled L'Impot Progressifet rimpot Arbitraire en 1793, in the Journal des Economistes, tomeSO (1902), pp. I and 161; the other entitled Les Taxes Revolution-naires sous la Convention, in Seances et Travaux de I'Academiedes Sciences Morales et Politiques, 6se Annee, nouv. Serie, vol. 64(1905), PP- S9-8o. The article by Stourm, La Revolution et I'lmpotProgressif, in L'Economiste Frangais (1899), p. 664, is of slightvalue.

^ Gomel, Histoire Financiere de la Legislative et de la Convention,i, (1902), p. 273.


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593] Progressive Taxation in Theory and Practice 31authorized for Lyons, in order to purchase food for thepeople. One-half of the sum was to be raised as a pro-portional addition to the land tax, the other half from aprogressive addition to that part of the Mobiliere whichwas levied on house rentals. Since the tax on house ren-tals was supposed to equal i /300th part of the presumedincome, the new additional tax was arranged in sixteenclasses, so that the lowest class, with a presumed incomeof from 500 to 1,000 livres, paid only a simple addi-tion, while the highest class with a presumed income ofover 100,000 livres, paid an additional tax of five timesthe amount. Presumed incomes under 500 livres wereexempted. The attempt of Mallarme to increase the ex-emption to 1,500 livres failed to secure the assent of theConvention.* On December 3 the same plan was ex-tended to Rouen, and on February 7, 1793, to Paris, pre-sumed incomes under 900 livres being in these cases ex-empt, and the taxables being divided into fifteen classes.It was in connection with this tax that Cambon made hisearnest plea for progression, regarding the scheme as of-frant aux infortunes les secours qu'ils reclament, faisantpayer aux riches la protection que leur accorde la loi etne lesant que le Tresor public. The scheme was re-peated twice in the next few weeks ; first for Lyons, be-cause of the stoppage of the silk industry on February18 ; and then for Paris, because of the bread riots, on Feb-ruary 23. In the case of Lyons the progressive scale ad-vanced from 1/300 to 1/20 of the presumed income.*On January 6, 1793, Roland, the Minister of the In-terior, made a long report in which he proposed thereplacement of the contribution mobiliere by a progressive

Gomel, op. cit., p. 313. For a fuller scale see Andre de Retz deServiez, De I'Impot Progressif dans I'Histoire en France de 1789 a1870, (1904), p. 83.

* Gomel, op. cit, 1, pp. 377-379.


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32 American Economic Association [S94income tax in thirty classes,^ but it was not adopted as theConvention was not yet ready for a general application ofthe progressive principle. It was not long, however, be-fore this was accomplished. On March 9th the Communeof Paris sent an address to the Convention demanding awar tax to be levied on the rich. It read as follows:La classe pauvre a fait constamment les sacrifices; tout,jusqu'a son sang a ete prodigue pour la liberte. II esttemps que le riche egoiste partage les charges que lapauvre seul a supportes. Nous demandons qu'il soit im-pose sur cette classe d'hommes une taxe de guerre. Thisraised such enthusiasm that it was easy for the Jacobin,Thuriot, to persuade the Convention to accept, virtuallywithout further debate, the motion to inaugurate thescheme of a war tax on the i-ich and to refer it to a com-mittee for study. On the next day Carnot brought inhis draft of a declaration of rights, the 17th article ofwhich contains in germ the progressive tax

La societe a le droit d' etablir les contributions qui sontnecessaires au maintien de 1' independance et de la pros-perite nationale, ainsi que de fixer le mode de leur percep-tion, pourvu que ces contributions . . . portentuniquement sur les portions superflues du revenu terri-torial ou industriel de chacun des citoyens, avant que depeser sur les besoins de premiere necessite.'^On March 18 Barere came out boldly for a general pro-

gressive tax. C'est, he said, une institution infinimentjuste, quoique quelques personnes I'aient crue impossi-ble. When he proposed to have the Committee on wartaxes study it further, one of the members, Ramel-No-

Archives parlcmcntaircs, 1 scrie, Ivi, p. 692. Cf. de Retz deServiez, op. cit., p. 8.^.

Gomel, op. cit.. i ,pp. 389-390.'Carnot, Correspondence Gcncrale, edited by Charavay, i, (1898),

p. 42.


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595] Progressive Taxation in Theory and Practice 33garet, declared that there was no objection to apportion-ing les charges pubHques d'apres des taxes progressivesportant principalement sur le luxe et le superflu des riches.He therefore proposed the immediate adoption of a de-cree : Pour atteindre a une proportion plus exacte descharges que chaque citoyen doit supporter en raison deses facultes, il sera etabli un impot gradue et progressifsur le luxe et les richesses tant foncieres que mobilieres.This was adopted at once. Thus the Convention entereddefinitely upon the path of progressive taxation.^ AfeAv days later, on March 23, Vernier made a report forthe Committee on Taxation, in the course of which hewarmly defended the progressive principle.On account of its importance the Minister of Finance,Claviere, had been asked in the mean time for his opinionon this suggestion. On February ist he wrote, approvingit in the following terms : La Citoyen Vernier proposeune contribution graduelle sur les parties du revenu descitoyens qui excedent le veritable necessaire. On ne pentnier qu'elle soit conforme aux meilleurs principes sociaux,et si la classe fortunee se degage des prejuges de I'ego-isme, elle s'en plaindra d'autant moins que tout ce qui estnecessaire au retablissement du credit lui est necessaire etavantageux. ^ But neither on this day, nor on the suc-ceeding day, March 26th, when Vernier made a supple-mentary proposition in favor of a progressive tax, did theConvention decide to follow him. Vernier's first planwas to exempt as the necessaire physique 1,000 livresfor each parent and 500 livres for each child, and to havethe rate of taxation commence with 2j^ per cent and rise

^ Gomel, op. cit., i, pp. 421-2. As to Ramel and Barere see also R.Stourm, BihUographie Historique des Finances de la France au Dix-Huitieme Steele, 1895, pp. 225-6.This will be discussed below in Part II. Gomel, op. cit, i, p. 43i-


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34 American Economic Association [S96to 9 per cent on incomes over 47,000 livres. His secondplan was to double the exemption, while the rate of taxa-tion was to begin at 2 per cent and to rise until it reached50 per cent on incomes of 100,000 livres.^^The movement was, however, growing. On April 27

and May 13 the Convention approved of the decision ofthe Department of Herault to levy a forced loan of fivemillions on the rich, in the shape of a progressive tax ; andon May 3 it approved of a similar forced loan of twelvemillions to be raised by the Commune in Paris. ^^ In thelast place the exemption was fixed at 1,500 livres for thehead of the family, and 1000 livres for every other mem-ber of the family, while on the surplus above this mini-mum, incomes from 1,000 to 2,000 livres paid 30 livres:those from 2,000 to 3,000 livres paid 50 livres, the taxrising at a rapid rate, until incomes from 40,000 to50,000 livres paid 20,000 livres, (or 50 per cent of thelower figure), while incomes over 50,000 livres paid 100per cent, i. e., were subject to entire confiscation.^^ Thiswas evidently going as far as it was possible to do.

All this, however, was insignificant compared with thenational forced loan of 1,000 million livres. On January22nd, the Convention decided that this should be leviedonly on those having an income of over 10,000 livres, ifmarried, or over 6,000 livres if single. But on September3-7, when the details were adopted, this minimum wasdropped. According to the law, as finally enacted, i ,000livres were exempt for each member of the family ( ex-cept that married men and widows with children enjoyedan exemption up to 1,500 livres) ; of the surplus over theexemption the first 1,000 livres were taxed 10 per cent, Gomel, op. cit., pp. 429, 434. Ihid., i, pp. 46s, 483.'^Ibid., i, p. 468. De Retz de Serviez, op. cit., errs in saying that

the rate was only 50 per cent.


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597] Progressive Taxation in Theory and Practice 35the second thousand 20 per cent, and so on until the wholesurplus over 9,000 livres was taxed 100 per cent; that is,taken entirely by the State. ^*

This virtual confiscation was so extreme that it gaverise to the greatest possible embarrassments and com-plaints, and although the period of collection was spreadover two years it yielded only about one-fifth of the sumthat had been anticipated.Under the Directorate the experiment of a forced loan

was repeated twice. The first project, which was adoptedby the Council of Five Hundred on the 15th Frimaire,year IV, (December 17, 1795) and which became law fourdays later, levied a forced loan of 600 million livres.This was arranged in sixteen classes, the last class com-prising all those who possessed a capital of more than500,000 livres and who were held to pay from 1,500 to6,000 livres, according to their faculties. It yieldedonly eight millions. Nothing daunted, the Ancientsadopted a similar scheme on the 19th Thermidor, yearVII (August 6, 1798). The forced loan of one hundredmillions was to assume the form of a supplement to thereal estate tax. Those assessed to this tax at less than 300livres were exempt ; on assessments from 300 to 400 livresan addition of three-tenths was imposed, the rate risinggradually until on assessments from 1,000 to 1,100 livresthe addition was equal to the original assessment ; and onassessments from 3,000 to 4,000 livres it was double theoriginal assessment. On assessments over 4,000 livresthe matter was left to a jury with the sole provision thatthe real estate tax plus the addition of the forced loanwas not to exceed three-fourths of the annual income. Asthe real estate tax was supposed to amount to fifteen per-cent of the income, this means that the supplementary

' Gomel, op. cit., i, pp. 114-121.


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36 American Economic Association [59^progressive tax might be 400 per cent of the real estatetax. But in the case of certain other individuals whowere supposed not to have been taxed at a sufficientlyhigh rate, the jury might assess their entire income. ^^The jury was composed of citizens not subject to the tax,and eveiy tax-payer was invited to send in details as tothe wealth of other tax payers.

This law was passed only after much discussion and ob-jection, both^ in and out^'^ of the legislature ; and its pas-sage led almost to a crisis. The arbitrariness of the ad-ministration was so great that the tax proved exceedinglyunequal in its operation; the wealthy generally escapedand the lower middle class as usual bore the chief burden.The yield moreover was deplorably small. After two andone-half months only sixty-one million livres out of theone hundred millions had been assessed, and of this lessthan half seemed possible of collection. In Paris out ofthe twelve millions anticipated, only 900,000 livres wereactually collected. Before the period of collection ex-pired, however, the coup d'etat of the i8th Brumaire tookplace, a revolution to which the attempt to levy this forcedloan had contributed not a little.^A few days later, on November 13, 1799, the new Min-'^ Le jury evaluerait en son ame et conscience la fortune de ceux

qui par leurs entreprises, fournitures ou speculations auraient acquisune fortune non sufBsament atteinte par la base des contributions.Albert Vandal, Les Causes Directes du Dix-Huit Brumaire. III.Impot Progressif et Loi des Otages.'' Revue des Deux Mondes,vol. 159 (1900), p. I.A list of the oificial reports of committees, etc., for and againstthe progressive principle will be found in Stourm, BibliographieHistorique, etc., pp. 296 et seq.Among the chief protests were the following: Jolivet, PStitionau Conseil des Cinq Cents contre I'Emploi des Progressions dans lesContributions et Emprunts forces. An. VII (1798) ; Saint-Aubin,Encore quelques Reflexions isolees sur I'Emprunt Force, Paris, n. d.Vandal, op. cit., p. 11.


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599] Progressive Taxation in Theory and Practice 37ister of Finance, Gaudin, sent in a most unfavorable re-port containing this scathing passage: The disastroussystem of progressive taxation, so well disguised underthe name of forced loan, vsras bound to produce the doubleconsequence of increasing the depreciation of property bycompromising the wealth of the property owners, and ofdepriving the industrious classes of their means of sub-sistence, which can no longer be found in their laborwhen the wealth of the property owner has disappeared.Such has indeed been the result of a law which could notbut produce just resentment and from which no real in-come was to be expected. It is a matter for those whocherish the public credit to bring about the speedy disap-pearance from our code of a law which only dishonorsit. i

And Thibault for the commission reported in some-what more measured, but equally unfavorable, terms : Lacommission vous propose de mettre un terme aux mal-heurs publics dont la cotisation progressive admise pourI'emprunt force est devenue la source . . . L'expe-rience et le raisonnement concourent a demontrer que lacotisation progressive produit une foule d'effets nuisiblesa la nation qui veut faire usage de cet instrument.This was for a long time the end of progressive taxa-tion in France, with the exception of a very minor imposton official salaries. The same year which witnessed the Le systeme desastreux de Timpot progressif, si parfaitement

deguise sous la denomination de Temprunt force, devait produirele double efifet d'aj outer a I'avilissement des proprietes en corapro-mettant la fortune des proprietaires, et de priver la classe indus-trieuse des moyens d'existence, qu'elle ne trouve plus dans sontravail lorsque I'aisance des proprietaires a disparu. Tel a ete eneffel, I'unique resultat d'une mesure qui ne pouvait produire que dejustes mecontentements et de laquelle on ne devait attendre aucuneressource. II import au credit public de faire disparaitre prompte-ment au code de notre legislation une loi qui le deshonore.


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38 American Economic Association [600passage of the last forced loan also saw the enactmentof a tax on official salaries according to a progressivescale. Salaries of 600 francs were exempt, while

From 600 to 2000 francs they paid i/io 2000 3000 1/6 3000 4000 i/S

Over 4,000 francs they paid 1/4.This experiment with official salaries was repeated in

1816, and again in 183 1. In 1816 the rates varied fromI per cent in the first class (from 501 to 1,000 francs)up to 30 per cent in the thirty-third class (150,000 to300,000 francs). In 1831 the rates varied from 2 percent in the first class (salaries below 2,000 francs), up to25 per cent in the twenty-fourth class (salaries over20,000 francs).^

In some of the other countries of the European con-tinent, where the French influence was strong, we noticethe growth of a tendency toward the adoption of the pro-gressive principle. Thus in the Helvetic Republic severalpamphlets were written in favor of adopting the Frenchtheories,^^ and the experiment itself was actually tried in1800, although in a much modified form. By the law ofthat year salaries were taxed at one per cent and two percent respectively, according to their amount. Similarlaws were adopted in the cantons of Lucerne and Schafif-hausen.^^

In most of the continental countries, however, the oc-casional high progressive taxes of this period were dueto the extraordinary straits in which the governmentsfound themselves. Thus in Holland, in 1796, the pro-gression was so severe as to become almost a confiscation.The rate of the income tax varied from three per cent to^Cf. Vautier, De I'Impot Progressif, 1851, p. 21.^ Cf. the details in Schanz, Die Steuern der Schweiz. i, p. g.'^ Ibid., i, p. III.


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6oi J Progressive Taxation in Theory and Practice 39thirty-seven and a half per cent. Although this lastedonly a year, it was followed in 1 798 by a progressive tax,ranging from four to ten per cent; in 1800, from two toseven per cent; and in 1804, from one to twenty percent.^^ In Austria a class tax was imposed in 1799,and continued with a few changes until 1830, dividingincomes into twenty-three classes, with rates varying fromtwo and a half to twenty per cent. In Baden the produceand property tax (Erwerbs- und Vermogensteuer) of1808-18 1 3 taxed incomes at rates varying from one-half of one per cent to six per cent; while in Russia therate of the extraordinary property tax of 1812 variedfrom three to five per cent.^* With a few exceptions,however, the principle of progression was not applied tothe regular taxes during the first half of the nineteenthcentury. The one important exception is that of theincome tax in England which we shall now proceed tostudy. Cf. E. van Voorthuijsen, De directe Belastingen inzonderheid

die op de Inkomsten. Eene staatshuishoudkundige Proeve, 1848,ii, pp. 193-227.These examples may be found in Parieu, Histoire des Impotsgeneraux sur la Propriete et le Revenu, pp. 152-154. Cf. also hisTraits des Impots, i, pp. 442 et seq.


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6. England.The scheme of the income tax was first introduced in

England by Pitt in 1798, in the Triple Assessment.^The arrangement in brief was this : As to the taxpayers

who possessed taxable carriages, horses or men ser-vants, the assessment of the previous year, if under 25,was increased three times; from 25-30, three and ahalf times; from 30-40, four times; from 40-50, fourand a half times, and over 50, five times. As to thosepaying taxes on inhabited houses, windows, dogs, clocksor watches, the assessments of the previous year werealtered or diminished as follows

1 -2 J4 i2y2-is 2542 - 3 y^ IS -^0 33 -5 H 20 -30.... zVis - yyi I 30 -40 47J4-IO ij4 40 -so 4^210 -izYi 2 over so S

As to those paying taxes on lodgings or shops the as-sessment was changed as follows

^3 - 5 Vio i2j4-is Va5 -75^ Vs IS -20 17>^-io J4 20 -25 i^10 -12^ Yi 2S -30 154

over 30 2The total payment was so arranged that incomes under

60 were exempt, incomes from 60-200 paid fromone hundred and twentieth to one-tenth of the respectiveamounts, i. e., five-sixths of one per cent to ten per cent,

^ As the statements of Dowell, History, etc., ii, p. 220 and iii, p. 87,are very incomplete and partly inexact the ofBcial figures are heregiven as contained in the First Report from the Select Committeeon the Income and Property Tax, i8S2, pp. i-S, and in the act itself,Statute 38 George II, chap. 16, The Aid and Contribution Act.


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603] Progressive Taxation in Theory and Practice 41while all incomes over 200 paid ten per cent.^ Parentsof four to seven, eight to nine, and ten or more children,could claim ten, fifteen and twenty per cent abatementrespectively.When Pitt introduced his general income tax in 1799,*after the comparative failure of the Triple Assessment,the same arrangement was retained as to the total exemp-tion of 60, as well as to the graduation between 60-200, and the ten per cent rate on all incomes over 200.Minor changes were made in abatements allowed forchildren. When the general income tax was repealed andthe system of schedules introduced in 1803, the system ofgraduation was somewhat altered.* 60 were free as be-fore ; from 60-70 the rate was three pence in the pound,and the rate increased one penny for every additional tenpounds income, until 150 was reached, above which therate was uniformly one shilling in the pound. In 1805one-quarter was added to the rates, but the graduation inthe smaller incomes still proceeded on the same principle.In 1806, when the rate of the tax was fixed at ten percent, the limit of total exemption was decreased from 60

' The exact figures were as followsOn incomes from 60- 65 the tax was not to exceed 1/120 of the income.

65- 7070- 757S-80

and so on to loo-iosIOS-noiio-iiS

and so on to 150-155155-160160-165

and so on to over 200'The Tax on Property and Employments. 39 George III, chap.

13-* An Act for granting a Contribution on the Profits arising from

Property, Professions, Trades and Oifices, 43 George III, chap. 122.

1/95


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42 American Economic Association [604to 50, while the system of abatement was so changedthat for every pound income below 150 one shilling taxshould be deducted. Thus at50 the charge was 100^. The abatement was looi. The tax was os.51 I02S. 99J. zs.52 104J. ' p&fi 6i.

149 29&f. IS. 2973.150 300J. OS. 300s.

Moreover the abatements were limited to incomes fromlabor, and the allowance for children was abolished, be-cause of the frauds practiced.The tax was repealed in 181 6. When it was reintro-

duced in 1842 the system of graduation was not adopted,but all incomes below 150 were entirely exempted. In1853, however, the principle of graduation was againapplied, but in a simplified form. The limit of total ex-emption was changed to 100; on incomes from 100-150the rate was ^d. in the pound; on incomes above 150 itwas yd. In 1863 another change was made by which therate was made the same on all incomes, but with the pro-viso that incomes below a certain sum should be absolutelyexempt, while on incomes up to another limit a definiteand unchangeable amount should be deducted. Thisprinciple still exists at present, although the figures havebeen slightly altered. Thus in 1863 100 were exempt,while on incomes between 100-200 an abatement of 60was made. In 1873 an abatement of 80 was allowed onincomes under 300. In 1876 the limit of absolute ex-emption was again raised to 150, while on incomes under400 an abatement of 120 was made.In 1894 the abatements and exemptions were againextended. On incomes between 160 and 400 the abate-ment was raised from 120 to 160, and on incomesbetween 400 and 500, 100 were now deducted. In


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605] Progressive Taxation in Theory and Practice 431898 this last abatement was increased to 150, and twonew classes were added, so that the arrangement becamethe following, the limit of complete exemption remainingat 160:

On sums from i6o-4CX) the abatement is 160 400- 500 ISO 500- 600 120 600- 700 70

the full rate being levied only on incomes of over 700.This is the system enforced at present; but the move-

ment for the adoption of a more general progressive sys-tem has attained such proportions that a select committeewas recently appointed to consider the whole subject. Thecommittee brought in its report in 1906. It recommendedan extension of the limit of abatements to 1000, butfavored leaving the assessment of the tax according toschedtiles, through stoppage at the source as at present.It stated, however, that on incomes over 5000 it waspracticable to introduce a system of general progressionby levying what they called a super-tax assessedthrough personal declaration on the income as a whole.The committee also recommended the introduction of theprinciple of differentiation between earned and unearned

'Graduation of the income tax by an extension of the existingsystem of abatements is practicable. But it could not be applied toall incomes from the highest to the lowest, with satisfactory results.The limits of prudent extension would be reached when a largeincrease in the rate of tax to be collected at the source was necessi-tated, and the total amount which was collected in excess of whatwas ultimately retained became so large as to cause serious inconve-nience to trade and commerce and to individual taxpayers. Thoselimits would not be exceeded by raising the amount of income onwhich an abatement would be allowed to 1,000 or even more. Re-port from the Select Committee on Income Tax; with the Pro-ceedings of the Committee, 1906, no. 365, page 8, sec. 30, para-graph I.


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44 American Economic Association [606incomes, stating it to be their opinion that this was prac-ticable if Hmited to earned incomes of not over 3000.In the budget of 1907 the principle of differentiation wasaccepted, and earned incomes up to 2000 henceforthpay -eiy 25 per cent of the full rates. Up to the presenttime, however, (1908) a super-tax scheme has not beenintroduced by the government.

In England, therefore, the principle of graduation hasbeen applied to incomes only in the sense of a degressivetax. The general theory is that of proportional taxation,but a slight allowance is made through the system ofabatement on the smallest incomes.At present, outside of the degression in the income

tax, graduation is found only in the so-called death dutiesor inheritance tax. The old probate duty and accountduty as changed in 1881 varied from ij/a per cent to 3per cent, while the estate duty levied in 1889, imposed anadditional tax of i per cent on successions over 10,000,thus increasing the progressive nature of the charge. In1894, however, a new estate duty was imposed to replacethese three duties. The estate duty was graduated ac-cording to the following scale

Estates. Rates.100 to 300 30 sh.300 500 50 SOD 1,000 2%

1,000 10,000 3%10,000 25,000 4%25,000 50,000 4 /^%50,000 75.000 5%75,000 100,000 514%100,000 150,000 6%

150,000 250,000 6^%250,000 500,000 7%500,000 1,000,000 7^%Over 1,000,000 8%


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607] Progressive Taxation in Theory and Practice 45In 1901 the estate tax on estates exceeding 150,000was increased as follows

iiSo.ooo to 250,000 yijo250,000 500,000 Sio500,000 750,000 99 ,750,000 1,000,000 lO'^o

1,000,000 1,500,000^ fiifc1,500,000 2,000,000

I2,000,000 2,500,000 )2,500,000 3,000,000Over 3,000,000

10% on firstmillion and

12J0

14%15%

on re-mainder.

In addition to this estate duty payable on the value ofthe estate as a whole, collateral heirs are still chargeablewith the legacy and succession duty, rising from 3 to 10per cent according to relationship, and payable on the dis-tributive shares of what remains after the estate duty ispaid. The highest actual rate is thus about 23 per cent.'^As is pointed out by the Select Committee of 1906 onthe income tax, if the income tax and the death dutiesbe regarded together as a form of the taxation of in-comes, there is already a very substantial graduation oftaxation on incomes derived from large estates, and adifferentiation between large incomes derived from per-sonal exertion and those derived from inherited prop-erty.^

' Cf. for details. West, The Inheritance Tax, 2nd ed., 1908,pp. 62-64. Columbia University Series in History, Economics andPublic Law, vol. iv, no. 2.

^ Report from the Select Committee on the Income Tax, igo6, p. 8.The application of the progressive principle to the income tax inEngland had previously been discussed unfavorably by G. H. Blun-don, A Progressive Income Tax, in The Economic Journal, v(1895), p. 527-


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7- Germany.In Germany the progressive principle has been intro-

duced in both commonwealth and local finance, first in theincome tax, then in the inheritance tax, and finally in theunearned increment taxes. ^The most important instance was until recently that of

the Prussian income tax. Originally instituted in 1820as a class tax, or species of graduated poll tax, it wasdivided in 185 1 into a class tax and a classified incometax. This latter tax was so arranged that the lowestincome in each class paid a rate of three per cent. In1873 the system was slightly modified, the rate in theclass tax varying approximately from three-quarters ofone per cent to two and a half per cent, while in theincome tax the maximum was still three per cent. Finally,in 1891, the class tax was abolished and the income taxwas made somewhat more progressive than the classtax had been. Incomes below 900 marks are exempt;incomes from 900 to 1050 marks pay six marks tax,i. e., 62/100 per cent of the mean. The scale is then sofixed that the rate gradually rises until four per cent is

' Cf. in general for the income taxes Handworterbuch der Staats-wissenschaften, 3rd ed., 1909, vol. iii, where all the latest details aregiven. Cf. also Gustav Schmitt, Systematisch-Kritische Darstellungder sur Zeit in Deutschland und Oesterreich bestehenden allgemein-en Einkommensteuergesetze, 1900. See also M. v. Heckel, Die Fort-schritte der direkten Besteuerung in den deutschen Staaten, 1904, andthe same author's Lehrbuch der Pinanswissenschaft, i, 1907. Themost recent and comprehensive account will be found in the authori-tative official document entitled Denkschriftenband sur Begriindungdes Entwurfs eines Gesetses betreffend Aenderungen im Finanz-wesen. Band I, Das Finanzwesen der offentlichen KorperschaftenDeutschlands, 1908. An account of the German income taxes willalso be found in the British blue book, Reports from his Majesty'sRepresentatives abroad respecting Graduated Income Taxes inForeign States. Miscellaneous, no. 2, 1905. Cd. 2587.


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609] Progressive Taxation in Theory and Practice 47reached at an income of 100,000 marks ($25,000), be-yond which point the rate remains the same.^ In 1906an amendment was adopted appHcable to Hmited Habilitycompanies. Up to that time corporations had been sub-ject to the same scale of the income tax as individuals;but an income of 3}^per cent on the capital was in all casesexempt. Now this exemption was removed in the case oflimited liability companies which are henceforth taxableon their entire income. The rates, however, are some-what higher, rising according to the scale printed on thenext page but one.

While a few of the smaller German commonwealthshave a proportional income tax, almost all of the incometaxes in the larger states are arranged on the progressiveprinciple, some as in Prussia, with fixed taxes for eachclass of income, others with fixed rates for each class.In almost every case, however, the number of classes islarge, so that the increase of rate is very gradual. InBaden the progressive principle is applied in a peculiarway through what is known as Steueranschldge, or tax-able valuations. For each class of assessed income onlya certain sum is taxable, the amount being only one-fifthof the lowest assessed income in the first class (900-1,000

From M. 900 to


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48 American Economic Association [610marks) and gradually increasing until when the income is25,000 marks, the total assessed income is also the totaltaxable income. The rate, as fixed every year by law, isthen levied on these taxable valuations. This system, itwill be recognized, is the same as that formerly practicedin the case of the progressive direct tax in Athens. Theincome tax was first applied in Bavaria in 1899, and inWiirtemberg in 1903 ; in Baden and Saxony the systemis somewhat older, the Saxon law, however, having beenamended in 1902, the Baden law in 1900 and again in1906.

In order to bring out clearly the differences in themethods of graduation, the rates for the important com-monwealths which possess a general income tax are ap-pended :

PRUSSIA (1891).Income, Marks Tax, Marks Income, Marks Tax, Marks900-1050 6 4200- 4500 10410SO-1200 9 4500- sooo 1181200-1350 12 5000- ssoo 1321350-1500 16 5500- 6000 1461500-1650 21 6000- 6500 1601650-1800 26 6500- 7000 1761800-2100 31 70

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