XITAXATION
It is evident that to carry on the necessary business of a city, a county, the State, or the nation requires money. Also, since everybody shares in the benefits of government, every one should help pay the bill.
One of the most difficult problems of government is to devise a system of taxation that cannot be evaded, that will raise sufficient money for expenses, and that will treat every one with equal justice.
Taxation may be divided into two general classes, direct and indirect.Direct taxesare those imposed directly upon property or persons; such as taxes imposed upon land, personal property, or income. The termindirect taxis applied to taxes upon activities such as carrying on some business or upon buying, selling, manufacturing, or importing certain articles.
A direct tax, as a rule, cannot be evadedor shifted to some other person. Indirect taxes can be evaded by abstaining from the activity that is taxed. They can usually also be shifted to others, and are generally paid by the consumer, or user of the article that is taxed. In general, direct taxes are levied by the State and municipal governments, while the National government derives its revenue (with the exception of the income tax) mainly from indirect taxes.
Taxes for local purposes are levied largely on houses and land, on what is calledreal property.Personal property, which is movable property, such as mortgages, live stock, furniture, etc., is also subject to taxation, but it is assessed only upon the balance of its value in excess of the indebtedness of the person taxed. It is a more difficult tax to collect than the tax on real property, and is evaded to such a large extent that many economists believe that it should be abolished, and some tax substituted more possible to impose equally and to collect.
Village and school taxes are usually collected independently by village and school officials.[A]Town, county, State, and city taxes are assessed and collected at the same time.
Tax Districts: The State is divided intotax districts which have usually the boundaries of the township or city, and there are three tax assessors in each tax district elected by the people in the town, and usually appointed in the city.
How Taxes Are Assessed: The State Legislature decides the amount needed for carrying on the government of the State. The largest part of these expenses are met by special indirect State taxes. The remainder of the amount to be raised is apportioned among the counties according to the value of taxable property in each (see State Board of Equalization).
The county board of supervisors decides how much is needed for county affairs. The town meetings, or the town boards and the voters through voting on propositions submitted by the town boards, decide how much money is needed for the business of the towns. This sum is added to the total amount of taxes necessary for the county government, and to the county’s share of taxes for the State government, and the combined sum is the amount that must be levied on the property in that county. The amount needed to carry on the government of a city in the county is reported to the county board of supervisors and to this sum is added in thesame way the proportion of county and State taxes which the city must pay.
Assessing the amount each taxpayer shall pay is the duty of the assessors. They make up anAssessment rollwhich must contain the name of every person in the district who owns property, and the assessed value of his property. The way the assessors do this work varies largely. The policy governing assessments in rural districts is to place as low a valuation on property as possible, in order that the total assessed valuation for the county shall be kept down, so that the apportionment given to the county for State taxes shall be low, and the larger burden of taxation shall fall on the cities. When the assessment roll is completed the assessors notify the public that it is open for inspection, and a time and place are fixed for a hearing, when any one who thinks he has been unfairly treated may complain. If such a person is not satisfied with the decision of the local assessors he may appear before the County Board of Equalization with his complaint.
The County Board of Equalizationis the county board of supervisors. They have power to equalize the assessed value of the real property in any tax district in the county.They apportion the amount of State and county tax due from each town or city, add the town or city tax, then ascertain the amount each person shall pay according to the assessed valuation of his property. This sum is noted on the assessment roll opposite each person’s name and the roll then becomes the tax roll of the district.
A practical example: Suppose X owns a house and lot which the assessors value at $5,000. The county board of equalization finds that the city where X lives must raise $100,000 in taxes; $90,000 is required for the city government; $9,000 is the sum the city is required to contribute to the expenses of the county, and $1,000 is the share the city has to pay toward the government of the State. The value of taxable property in the city is $5,000,000. Every dollar of assessed property in the city must therefore pay two cents in taxes, and X’s taxes will be $100, of which $90 will go to the city, $9 to the county, and $1 to the State. A mortgage on the property does not decrease the amount to be paid.
Collecting Taxes:[3]If a person fails to payhis real-estate taxes the county treasurer is authorized to sell his property for the unpaid taxes. The property may be redeemed by the former owner on payment of back taxes with interest due and the cost and expenses of the tax sale.
Public buildings, religious and charitable institutions, are usually free from taxation; they are for the benefit of the entire community.
State Taxes: The ordinary expenses of the State government are met by revenues derived from special indirect State taxes, so that for years there was no direct State tax. State revenues are provided through taxes on stock transfers, mortgage taxes, inheritance taxes, excise, franchise, and corporation taxes. One-half the amount derived from the excise tax goes to the State and one-half to the community from which it comes.
Every stock company incorporated under any law of the State must pay a tax upon the amount of its capital stock and upon any subsequent increase. The earnings of corporations doing business in the State are also taxed.
An Inheritance Taxis a tax imposed on the transfer of property at death by will, or by operation of law in case of intestacy. The rate of this tax varies according to the value of the property or share of the recipient and his kinship to decedent. A higher rate is levied on a large bequest or share than on a small one, and a larger percentage is levied when the bequest or share goes to distant kin or to a stranger than when it goes to a close relative.
The direct property tax is now used to pay off the interest and gradually the principal of the State debt.
The estimated resources and revenues, not including the direct tax, for the State for 1918 are:
The Board of Equalizationmeets in Albany once a year to examine the reports from the different counties of the value of their taxable property, and to equalize the amount of their taxation. The State tax commissioners, who must personally visit the counties and examine the local rolls, and the land office commissioners form this board.
Federal Taxes: The United States government even before the war required an enormous amount of money with which to conduct its business. In the past its chief sources of revenue have been custom duties and internal-revenue taxes.
Custom Dutiesare taxes levied on the importation of articles into the United States from foreign countries. The tariff, which fixes the rates of the impost taxes, has been a constant subject for dispute between the major political parties. Whether the tariff should be imposed “for revenue only,” or whether it should be “a protective tariff” to protect American industries and American labor from the cheap labor of other countries, has been the chief point of difference between Republicans and Democrats at National elections. Impost taxes are indirect taxes which eventually come out of the pockets of the people in increased pricesof the articles imported, and incidentally they raise the prices of similar articles of domestic manufacture.
Internal RevenueorExcise Taxesare taxes imposed on business or on the manufacture and sale of articles in the United States. The most important taxes of this character are those on the manufacture and sale of liquor and tobacco. The manufacture and sale of cosmetics, perfumes, oleomargarine, and playing-cards are also subject to internal-revenue taxes. In many cases these taxes are paid by the sale of stamps to the manufacturer, who has to affix them to the article before it is sold. As with many other kinds of taxation, the public, the ultimate consumer, pays this tax.
The Income Taxis a tax on the income of a person. Many who do not own land or other tangible property enjoy an income. As a farmer has to pay a tax on his farm, so a lawyer who has a lucrative practice, but does not own land or stocks, and the man who has an income from investments, are all required to pay their share of government expenses.
The income-tax law of 1916 taxes all incomes of married couples in excess of $4,000, and all incomes of unmarried persons inexcess of $3,000. To provide further war revenue, an additional tax was imposed in 1917 on the income of every unmarried person in excess of $1,000 a year, and of every married couple in excess of $2,000 a year. The rate of these taxes increases with the size of the income. The combined income taxes may amount to as much as 67 per cent. in case of the largest incomes.
Public Debt; Bonds: If the government needs more money than it wishes to raise by taxation, it can borrow it by issuing bonds. A bond is a promise to pay a certain definite sum of money at a certain time with a fixed rate of interest. United States government bonds are the safest investment in the world. The State and municipalities may also issue bonds, although the amount a city may borrow may be limited by the value of its assessed property. The interest on bonds and the payment of the principal must be met by taxation.
Bonds should not be issued to pay for the running expenses of government, because that is putting on future generations the unjust burden of paying for something for which they receive no return. Their legitimate use is to meet the cost of some improvement which will continue to benefit those who go on paying for it.
When bonds are issued provision should be made for the redemption of their principal. This is done in New York State by raising annually by direct taxation a fixed sum to be invested and kept as a separate fund called a “sinking fund,” to be used only for this purpose. A sinking fund for the payment of the interest and for the redemption of the debt of the State is required by the State constitution.
The Budget: Before undertaking an enterprise a wise man considers how much it is going to cost, and where the money is coming from. A budget is a summary of the estimated expenses for the following year of the different departments of the government. It is a business-like method of determining the amount of money which should be raised by a State or municipality to meet its necessary expenses. The budget for New York State is made by the Legislature from an estimate furnished by each of the administrative departments of the State. It includes in detail the amount of salaries, traveling expenses, and maintenance of each department.
The making of a budget for a city is of the greatest importance to the taxpayers. Public hearings are held on it, when taxpayersmay be heard for or against the use of the money in the designated way, and when they may ask for additional appropriations for some city activity. Public servants in this, as in every other department of service, work best under supervision. The taxpayer owes it to himself to maintain adequate representation at these hearings. It is on the basis of the budget as finally adopted that taxes are adjusted for the following year. (See Chapter IV on Greater New York.)
The National government has not yet adopted the budget plan, and the President has not the power to veto any item of an appropriation bill unless he vetoes the entire measure.
This is a limitation which is greatly deplored, as it prevents him from cutting out any provision in the bill which he may think unwarranted or extravagant, or which has come out of the “pork-barrel.” This is a term applied to appropriations given by Congress to certain local communities for some Federal building or for the development of some local resource which is not of advantage to the National government, and which is given not because there is any need for it, but because the representative fromthat district in Congress wants to make himself popular with his constituents by getting for them some public plunder.
Every Dollar That Is Spent in Any Department of Government Comes Out of the Pockets of the People: It is not easy for the public to realize this. The Congressman who gets an extra appropriation for a post-office or other public building that is not needed, in order to please his home people, may get more votes, but he is adding to the public burden. In return for a vote for his post-office he may have to give his vote to a fellow-Congressman for an unnecessary expenditure in another State. The chain so formed is practically endless, and its inevitable effect is to raise the cost of government unwarrantably. Every such expenditure, every unnecessary public salary, every dishonest public official, every tax-dodger, every incompetent piece of public work, adds to the burden of taxation which the people have to pay.
FOOTNOTES:[3]In some counties local arrangements make it difficult for absent owners of property to know when and where taxes are due. Every tax-collector should be obliged to follow the usage of any good business house and mail a bill for taxes.
[3]In some counties local arrangements make it difficult for absent owners of property to know when and where taxes are due. Every tax-collector should be obliged to follow the usage of any good business house and mail a bill for taxes.
[3]In some counties local arrangements make it difficult for absent owners of property to know when and where taxes are due. Every tax-collector should be obliged to follow the usage of any good business house and mail a bill for taxes.