of economic and political science in the various universities, have played the role of umpire in the recurring intellectual combats over that driest and most forbidding of subjects— taxation.

In November, 1916, a special committee was appointed by the executive committee of the Association to prepare "a model plan for state and local taxation." A year later, at the Eleventh Annual Conference, in Atlanta, Ga., the committee submitted its first report, a mere outline of what was conceived to be the scope of its work. At a later meeting, held at Pass Christian, Miss., in the latter part of January, 1918, six of the nine members of the committee were present, together with the Association's secretary, Mr. A. E. Holcomb; and from these deliberations a comprehensive "preliminary report" resulted. This report has been officially published and furnished to all members of the Association, and is the basis of the present paper.

We quote at the outset from this monumental report a "fundamental declaration" of the essentials of the problem involved:

***

Whatever other purposes taxation may properly
have, its fundamental problem is to provide rev-
enue, which it will be agreed ought to be raised as
equally, certainly, conveniently and economically
as possible.
Therefore, the committee has
confined itself to one problem of immediate prac-
tical importance, which is that of devising methods
by which the large revenue now required by Amer-
ican state and local governments may be raised
with the greatest practicable degree of economy,
equality, certainty, convenience and economy.

The committee then adopted in brief the following underlying specifications:

A. The proposed system must yield the large revenues which our state and local governments require at the present time.

B. It must be practicable from an administrative standpoint, that is, it must be capable of being administered by such means and agencies as the

states have at their command and can reasonably be
expected to provide.

C. It must be adapted to a country with a fed-
eral form of government, and to this end must re-
concile the diverse claims of our several states and
the federal government itself, which now conflict
at many points, thereby producing unjust multiple
taxation and disregard of interstate comity.

D. It must respect existing constitutional limticable methods of constitutional amendment. ticable methods of constitutional amendment.

E. It must represent as nearly as possible a general concensus of opinion, and to this end must give careful consideration to the most influential body of opinion developed and formulated by the National Tax Association.

F. It must not propose measures wholly foreign to American experience and contrary to the ideas of the American people.

Three fundamental theorems were then laid down as having been "more or less clearly recognized by our law makers" and as having "very largely determined the provisions" of existing statutes:

(1) Every person having taxable ability should pay some sort of a direct personal tax to the government under which he is domiciled and from which he receives the personal benefits that government confers.

(2) Tangible property by whomsoever owned should be taxed by the jurisdiction in which it is located, because it there receives protection and other governmental benefits and services.

(3)

Business carried on for profit in any locality should be taxed for the benefits it there receives.

Then, after embracing them as altogether indispensable to a model system under modern conditions, the committee declared that the enumerated principles "undoubtedly represent hard facts which any new system of taxation must take into account."

The most difficult task encountered in devising a logical plan of taxation in a country having a federal form of government is, the committee found, the adjustment of the con

flicting claims of independent tax authorities. Double taxation through dual or shifting situs (actual or constructive) seems inevitable. And so this problem was made the chief point of attack upon the entire subject.

It was found that the only solution under the general property tax would be an agreement between states by which one tax would be levied, presumably at the actual situs of the property, and the proceeds thereof divided in equitable proportions between the state where the property has its situs and that in which the owner is domiciled. But such an agreement besides presenting administrative difficulties has been impossible to secure, and therefore unjust double taxation is tolerated because the only practicable alternative seemed to be the surrender of a claim which is in itself just. So in view of this inevitable dilemma, the committee saw only one method of reconciling the conflicting claims of the different states: adopt generally a diversified system of taxation which recognizes fully the three fundamental principles. This would provide a method by which without formal interstate agreement these principles may be logically and consistently applied. In the language of the report, the suggestion is:

We propose, therefore, a personal tax which shall be levied consistently upon the principle of taxing every one at his place of domicile for the support of the government under which he lives; a property tax upon tangible property, levied objectively where such property has its situs and without regard to ownership or personal conditions; and finally, for such states as desire to tax business, a business tax which shall be levied upon all business carried on within the jurisdiction of the authority levying such tax.

By this method we believe it is possible to satisfy every legitimate claim of every state without imposing unequal and unjust double taxation upon any class of income, property or business. We propose, in other words, nothing more than to ask the states to apply logically and consistently the principles that today underlie the greater part of their tax laws. By so doing, we are recommending

action along the line of least resistance, and for
our proposals we find many precedents in the legis-
lation of this and of other countries. ***

The personal income tax will reach every kind of
taxable income, and will make it unnecessary to at-
tempt to levy any tax upon intangible property,
thus eliminating the most serious difficulty con-
nected with property taxation. The property tax
will be applicable to every form of tangible proper-
ty that any state wishes to tax; and admits of
being levied upon such property uniformly, or ad-
mits of being levied under a proper classification
such as we shall hereafter suggest. And finally,
the business tax, since it will be levied purely as a
business tax and not as a part of a personal income
tax or a property tax, can be readily adjusted in
such manner as the needs of business and the situa-
tion of every state may require.

The plan which the committee recommends is, therefore, fundamentally a plan intended to reconcile the conflicting interests of the state, and to facilitate the proper classification of the subject of taxation. It involves nothing new in principle, and merely requires the logical application of principles already recognized by the tax laws of many states. It will bring about a full and adequate taxation of income, property, and business and will produce as much revenue as the state and local governments can expect to derive from these sources. Finally, it encounters no insuperable constitutional difficulties, and certainly will require no more changes in state constitutions than any other plan that would be adequate to the needs of the case.

Let us briefly note the outstanding and distinguishing features of the proposed threefold tax:

(1) The personal income tax. The forerunner of this tax is well known as the poll tax, already in force in nearly every commonwealth in the union. Discarding this ancient and admittedly unequal impost as "inadequate for the purpose in view," the committee gave passing consideration to a personal tax levied upon every man's net fortune, that is, upon the total of his assets in excess of his liabilities. For this tax there is precedent in several countries in Europe.

Such a tax levied at a moderate rate of say $3 per $1000 would correspond to a 6 per cent income tax upon investments yielding 5 per cent; but it would raise difficult constitutional questions, and would certainly not lead us "along the line of least resistance."

So the committee moved on to the third form-a presumptive income tax, one levied upon persons because of external indicia considered as a measure of taxable ability. House rent, for example, is offered as a fair test of ability to pay; but this is often such an imperfect index (some of us do not pay rent at all) that the committee reserves this form as a "last resort.”

The personal income tax as the fourth form is the one method which, since the coming of the federal income tax, it is believed would be most convenient to the tax payer. By the personal income tax is meant a tax levied upon persons with respect to their incomes, taxed not objectively as such, but as elements determining the taxable ability of the persons who receive them. Such a tax is already well administered in several states, notably Wisconsin and Massachusetts. In the opinion of the committee it is the best method of enforcing the personal obligation of the citizen "for the support of the government under which he lives." Since the purpose of a state income tax is to enforce the personal obligation of every citizen to the government under which he is domiciled, it is obvious that the tax must be levied upon persons and in the states where they are domiciled, and hence should not reach business concerns.

Another feature of the model system reaches property where located and the business where it is carried on; but the personal tax recognizes the right of a state to tax all persons within its jurisdiction on grounds peculiar to itself. The committee's recommendations are (1) that there should be no classification of sources of income, but (2) that the tax should apply to the citizen's entire income, whether funded or unfunded. The obligation of the citizen to support the government under which he lives is not affected by the form his investments may take, and to exempt any form can only bring about an unequal and there