7. Taxation and Finance
In the fields of taxation and public finance we have not much to learn from the Romans, save by way of warning. Most of the revenue of the state came from the provinces, and for several centuries was collected by tax-farmers.[21] We are familiar enough in more recent times with the exploitation of provinces, or colonies, as we call them, by the state or the great trading company, because most modern nations have followed Rome’s policy of making their colonies subserve the interests of the mother country. In Sicily, the first overseas territory which the Romans acquired, they took over the system of taxation which they found in vogue there. That system rested on the Oriental theory that the land belonged to the sovereign, and that those who held the land paid rent for its use. This was the basis of taxation in all the later provinces also. Next in importance to the tribute were the customs duties. They brought in a large revenue, but were a great impediment to trade. Rome held almost all the civilized world. Consequently duties collected on the frontiers of the empire would not have amounted to much. What the Romans did was to divide the empire into tariff districts, and collect duties from those entering these districts. Trade suffered in consequence, as it did in France before the Revolution under similar conditions. The only other important tax in this connection was the five per cent inheritance tax imposed on property left to others than near relatives. It was instituted by Augustus, was levied on Roman citizens, and met with violent opposition. This system, taken in its entirety, relieved Italy from the burden of taxation.
The grant of Roman citizenship to practically all freemen in the provinces by Caracalla in 212 was therefore a severe blow to Italy, because it raised the provinces to the level of the peninsula, and paved the way for Diocletian to apply his fiscal reforms to the whole Roman world.[22] His system of taxation was one of the most complete and methodical that has ever been known. We can speak of only a few of its salient features here. The population was divided into three classes, the owners of land or other property, merchants, and laborers. For the first class, the class most important for the purpose of taxation, the fiscal unit was the caput or iugum. The caput was the working power of a man in good health. A iugum was a piece of land from which a fixed return might be expected. The number of capita and iuga was determined by a careful census at fixed intervals, and each land owner paid according to the number of laborers and iuga on his estate. The tax paid by merchants depended on the capital invested in their business. Laborers paid a poll tax. The plan was well thought out, but the failure of the government to reduce the valuation of property as the prosperity of the empire declined, and its inability to reduce its own expenses made the taxes an intolerable burden, and contributed largely to impoverish the people and ruin local self-government. The Roman system of taxation, with some modifications, continued in use after the dissolution of the Empire and exerts an influence on our modern systems. Duties were still collected on wares in transit at frontiers, at bridges and at other points on the public highways. A quota of the produce was required from the owners of land, and the property of those who died without leaving a will went to the crown. It is clear that most of the Roman taxes, for instance, customs duties, the inheritance tax, a tax on landed property, and a poll tax, have been taken over by us, and find a place in our modern systems of taxation.
The funds which came into the imperial treasury from the different sources mentioned above were spent mainly on the government of the provinces, on roads, bridges, and other public works, on religion, on the army and navy, and on the city of Rome. It is impossible to find out the size of these different items. It has been calculated that in the early part of the first century the army cost 160,000,000 sesterces a year, a sum which, with some hesitation, one may roughly estimate had the purchasing value of $8,000,000. An imperial procurator in one of the provinces received an annual salary which ranged from $3,000 to $15,000. The expense of provincial government was tremendously increased from the second century on by the development of an elaborate bureaucratic system. The outgo for the city of Rome included expenditures for the construction and maintenance of public works, for religious purposes, and to provide food and amusement for the populace. We notice the absence from the list of charges of certain items like appropriations for education and charity which form an important part of a modern budget.
Under the republic the control of finances rested mainly with the senate; under the empire it was divided between the emperor and the senate. The republican system of financial administration would seem to us very loose, and surprising in the case of so practical a people as the Romans. Under it the senate appropriated money for a period of five years to be used by the censors in the construction of public works, and lump sums were voted for expenditure by the other civil magistrates, and itemized accounts were not required of them. As happened in so many other matters, with the empire a better system of financial administration came in. The government collected most of the taxes through its own agents. The supervision of receipts and expenditures was more thorough, and we hear of something approaching an itemized budget. The lion’s share of the revenues went into the imperial fiscus. The funds at the emperor’s disposal were also materially augmented by the development of crown property and of the emperor’s private fortune. Many large private estates were confiscated by the emperor, and many legacies were left to him. Indeed it was often a hazardous thing for a rich man to pass over the emperor in his will. The hereditary principle of succession was never formally recognized in the Roman constitution, but it was practically followed from Augustus to Nero, so that the interesting distinction which we make today between crown property and the patrimony of the emperor was not adopted before the year 69.
The minting of Roman money had the same history as the control of the budget. The senate had charge of it under the republic. Under the empire the emperor directed the gold and silver coinage; the senate issued bronze coins. Two episodes in the history of Roman coinage are of interest to the student of modern economic conditions. If Professor Frank’s conclusions in a recent number of Classical Philology[23] are correct, Rome had a real bimetallic standard from 340 to 150 B.C. This was maintained by changing from time to time the amount of metal entering respectively into the silver and bronze coins of the period in question. The Roman system did not, however, involve the free and unlimited coinage of both metals, because the state limited its issue of money to the estimated needs of the community. The other incident occurs under the empire. It has its parallel in the unlimited issue of paper money today by many European governments. The Roman government was hard pressed to meet its obligations. It did so by debasing the coinage. This process was carried so far that in the third century it refused to receive its own silver coins in payment of taxes. Constantine brought order out of this confusion, by making the gold solidus the standard. This coin became the parent of the gold coinages both of the East and the West. It was accepted by the barbarian states. From the time of Pepin it was struck in silver and was current until 1793. The modern French word sou is of course an abbreviation of its name.