"The inheritance tax in one form or another has come to stay, and new States are being added every year to the list of those which have adopted it. Five years ago it was found in only nine States of the Union—Pennsylvania, Maryland, Delaware, New York, West Virginia, Connecticut, Massachusetts, Tennessee, and New Jersey. During the first half of 1893 Ohio, Maine, California, and Michigan were added to the list, though the Michigan law was afterward annulled because of an unusual provision in the State Constitution which was not complied with. In 1894 Louisiana revived her former tax on foreign heirs; Minnesota adopted a constitutional amendment permitting a progressive inheritance tax which has not yet been given effect by the Legislature; and Ohio added to her collateral inheritance tax a progressive tax on direct successions. In 1895 progressive inheritance taxes were adopted in Illinois and Missouri, and an old proportional tax was revived in Virginia; and last year Iowa adopted in part the inheritance tax recommendation of her revenue commission."[52]
The real problems are to be encountered in local taxation. The many different methods used in the different States, the want of uniformity in the local divisions of each State, and the extraordinary diversity in the interpretation or application of tax laws by the courts and executive authorities of the States have introduced a confusion, to end which, many would invoke the intervention of the Federal Government. The haphazard manner in which the laws have been framed and passed is only the least notable explanation of the variety of phrase and interpretation to be found. Even were the Federal Government to establish definitions, and frame rules of uniform assessment, there would still be room for difference. The customs tariff is known to be variously applied in the different ports of the country, and there is greater certainty in the tariff rate than could be found in a tax resting on the assessed valuation of land, for example.
The difficulty encountered by France in its attempt to determine the net income from land for the purposes of taxation carries an important lesson. Failing to obtain uniformity of appraisement of this net income under the crude method first employed—of basing it on the character of soil and nature of cultivation, deducting the expenses of cultivation—a cadastre was decreed.[53] In this cadastre each particular piece of property was recorded, with its boundaries, its manner of cultivation, and its net rental. Begun in 1807, it was not completed until 1850, and proved of little value, as no provision had been made for recording the changes in cultivation, rentals, or other conditions, except those of ownership, buildings, and exemption from taxes. Instead of proving a successful means to a desired end, it "turned out to be a stupendous disillusionment." "The experience of both the western Prussian provinces and of France showed that the newly constructed cadastre was of considerable service in equalizing the land tax within a relatively small area, but not as a basis for alterations in the contingents to be paid by large and widely separated regions. The officials in charge of the cadastre on the Rhine, as well as those in France, themselves admitted that any computation of net income was uncertain; that the coincidence of the figures obtained by the cadastral computation with the actual net income could never be assured; that the figures afforded by the cadastre were rather of the nature of a proportion, while uniformity of assessment was to be attained rather by observation of the business transacted than by depending on the figures obtained by computation."[54] This effort to discover and record the net income from land was a failure.
So thorough an experiment, carried through so long a time, and presenting an example to be avoided, was in fact imitated by Prussia under a law of 1865. In each division (Kreis) was appointed a commissioner, who was chairman of a committee, the size of which ranged from four to ten members, according to the size of the division. One half of this committee was appointed by the representatives of the division and one half by the central Government. A number of divisions formed a department, with its commissioner and committee of similar composition as in the division, and above all was a central committee, presided over by the Minister of Finance. The valuation was accomplished in less than four years. The method was applied only to land employed in agriculture or forests; a separate law provided for the taxation of buildings and gardens. In the end the results were no better than those obtained in France. In either case a plan too refined to work to advantage had been employed, and, apart from its simplest function, that of making a general survey of the land and the uses to which it was applied, it could not advance the theory of a proper land tax. No modification could make it a better instrument of taxation. The gross income from land as a taxing basis would involve heavy injustice, and further supervision by government officers could not do away with the mechanical difficulties of securing uniformity. The English plan of making rental value the foundation is more easily applied and gives better results.
If land be difficult of assessment, personal property offers a very much more difficult problem. On this particular question this country has much to learn from the experience of other governments. In Great Britain a Royal Commission has been making a study of local taxation, and, in a preliminary report, concludes that an alteration in the law for the purpose of obtaining a uniform basis of valuation in England and Wales is a necessary preliminary to any revision of the existing system of local taxation. It has been already stated that the poor rate constituted the basis of valuation of property for local rates. In its development the system has become more complicated. Two valuations of the same property may be made for raising imperial taxes—namely, one for the income tax, and one for the land tax. Three valuations of the same property may be made for raising local rates—namely, one for the poor rate, one for the county rate, and one for the borough rate. Here, then, are five different valuations in activity.
Of these the parish was the first and most important division, having been introduced in the sixteenth century, when the dissolution of the monasteries had raised the question of poor relief. It was adopted for convenience, as the contributions were at first entirely voluntary; but as the problem of the poor increased in importance, compulsion was applied, and at the beginning of the seventeenth century, by the acts of Elizabeth of 1597 and 1601, compulsion was fully established and the parish adopted as the area for levying rates for the relief of its poor. It now became necessary to define more specifically the persons liable for this rate, but the law framed no system by which assessments were to be made or rates collected. A distinction was made between the occupier of certain properties (such as lands, houses, coal mines, or salable underwoods) and an inhabitant of the parish. The occupier was to be taxed upon the basis of the annual benefit arising from the property situated in the parish; but the inhabitant was taxed not in respect to any specified subjects, implying an intention to tax them upon some other basis. This raised the question of "ability," and how that question was to be determined. The act said nothing that could point to personal property, "and it was only on the ground of his being an inhabitant that any owner of personal property could be rated for that property, because there was no word in that statute to include him, except the word inhabitant. Under that statute, therefore, there was necessarily a distinction between residents and nonresidents, because the resident would be ratable for his personalty within the place, the nonresident not. The distinction, however, under that statute applied only to those kinds of property which the statute did not specify, for the occupier of lands, houses, etc., and whatever the statute enumerated, was ratable whether he were resident or not."[55] And when the judge of assize was asked to give an opinion he decided that lands should be taxed equally and indifferently, but an additional tax could be laid on the "personal visible ability" of the parishioner. Further, "all things which are real, and a yearly revenue must be taxed to the poor." Yet there were limitations on this apparently wide interpretation, and as early as 1633 it was only visible properties, both real and personal, of the inhabitants within the parish, and only within the parish, that could be taxed. The property to be assessed must be local, visible, and productive; it must consist only of the surplus left after deducting debts; it must be rated according to the profit produced; and its nature must be distinctly specified. "Consequently, such subjects as wages, pensions, easements, profits derived from labor and talent, profits from money invested or lent elsewhere, and furniture, were exempt."
The absence of all attempts to tax or value property other than what was visible and tangible continued to the reign of Queen Anne, when a single decision of the court pointed to the taxation of the stock in trade of a tradesman, a decision that does not appear to have been acted upon. As late as 1775 Lord Mansfield said, "In general, I believe neither here nor in any other part of the kingdom is personal property taxed to the poor." At all events, it could not be taxed unless usage could support it. Toward the end of the century, when taxation for the Napoleonic wars was touching more intimately the concerns of the people, the idea of subjecting personal property to the poor rate was favored, but nearly half a century passed before it attracted attention. In their report for 1843 on local taxation the poor-law commissioners gave the following summary of the status of this question:
"The practice of rating stock in trade never prevailed in the greater part of England and Wales. It was, with comparatively few exceptions, confined to the old clothing districts of the south and west of England. It gained ground just as the stock of the wool staplers and clothiers increased, so as to make it an object with the farmers and other rate payers, who still constituted a majority in their parishes, to bring so considerable a property within the rate. They succeeded by degrees, and there followed upon their success a more improvident practice in giving relief than had ever prevailed before in England.... When the practice of rating stock in trade was fully established in this district, the ancient staple trade rapidly declined there and withdrew itself still more rapidly into the northern clothing districts, where no such burden was ever cast upon the trade."
A final determination of the question was imposed upon Parliament by the pressure of the manufacturing and commercial classes arising from a decision in the case of R. vs. Lumsdaine, in 1839, looking to the taxation of personal property. In consequence, an act was passed (3 and 4 Vict., c. 89), and has remained in force until the present time, exempting an inhabitant from any tax "in respect of his ability derived from the profits of stock in trade or any other property, for or toward the relief of the poor." Thus it is that the English local taxation has managed to keep clear from the bog of assessing personal property, and the annual value of immovable property, such as lands and houses, within the parish has come to be selected as the simplest and most practicable basis for assessments. The history is of high importance, because the basis of the poor rate was adopted as the basis for all other rates levied in local taxation. Whatever confusion has been introduced has arisen from other causes, such as the constituting poor-law unions containing more than one parish, the levying of county rates, a county having a boundary other than a parish or a union, and the assessing for rates by parish officers who acted independently of each other. Many efforts have been made to introduce a uniform system of assessment, but without success. One of the clearest thinkers on this subject was Sir George Cornewall Lewis. In appearing before a committee on taxation, in 1850, he said: "We have never recognized the principle of having one valuation for all the different rates. If that principle were once admitted, the inducement to have an accurate and complete valuation would be at its maximum, because then you would know that whatever charge might be imposed it would be imposed upon that valuation, whereas if there is one assessment for one rate and another assessment for another rate, and an amended assessment for a third rate, no one cares much about making any assessment perfect. This is one defect of the present system of valuation."
The defect has persisted and become more aggravated each year. In 1870 a special commission came to the resolution that "the great variety of rates levied by different authorities, even in the same area, on different assessments, with different deductions and by different collectors, has produced great confusion and expense; and that in any change of the law as regards local taxation, uniformity and simplicity of assessment and collection, as well as of economy of management, ought to be secured as far as possible." When it is considered that for the five independent valuations for raising rates on property there are in England and Wales more than one thousand valuation authorities, the hopelessness of obtaining uniformity is apparent. With such a multiplicity of agents it is useless to look for good results. There is no fixed or necessary time for making the valuation lists; no uniform system of or scale for making deductions for arriving at the ratable values of certain classes of property; exemptions and allowances are said to be given unduly, through undue pressure on the assessing authorities; and the assessment committees have no statutory power to ascertain from owners or occupiers the rentals and other particulars needed to determine values. The reforms needed are a geographical redistribution of taxing limits and uniform rules of assessments.