Local Taxes.—The greater portion of the taxation levied by cities, counties, towns, and villages is in the form of taxes on property. This is a direct tax and as a rule it is levied on all private property, of whatever sort, at a uniform rate of so much per thousand dollars of valuation. |The general property tax.| A tax levied in this uniform way on all private property is called a general property tax. In some states, however, provision has been made for classifying the various kinds of property and taxing each kind at a different rate. Property is first classified into two divisions, real property, and personal property.[[217]] Real property (or real estate) consists of land, buildings, and other fixtures established on the land; personal property consists of, first, tangible things of a movable nature such as household furniture, machinery, merchandise; and second, intangibles such as bonds, mortgages, and bank deposits. |The classified property tax.| Where there is a classified property tax, each of these three forms (real property, tangibles, and intangibles) is taxed at a different rate. One reason for taxing them at different rates is that real estate requires a great deal more in the way of public services (for example, in paved streets, water supply, sewerage, etc.); another reason is that while real property cannot evade taxation intangibles can usually do so when the tax is too heavy.[[218]] If the rate of taxation on intangibles is lowered, the temptation to evade is not so great. It will usually be found that more money will come into the public treasury from a moderate rate of taxes on stocks and bonds than from an oppressively high rate.
Other local taxes.
A few communities also obtain some revenue from another direct tax, the poll tax, which amounts to one or two dollars per year on each adult. In some cities franchise taxes are laid upon public service companies (such as gas, electric lighting, and street railway companies). The proceeds from these sources do not form any large proportion of the total revenue.
Assessments for purposes of taxation.
All collecting of taxes is preceded by a formal step known as assessment. No tax can be legally collected unless it has been assessed in ways prescribed by law. Property of all kinds is valued for taxation by officials known as assessors. Usually they are county or city officials, sometimes appointed, sometimes elected. They re-value property at stated intervals and set their assessment at what they believe to be the market value (unless they are instructed to assess at a percentage of the market value as is the case in some states). Income taxes, corporation taxes, and inheritance taxes are assessed by the tax officials on the basis of sworn statements made to them by the taxpayers.
Special assessments.
In the case of such public improvements as sewers, street pavements, and sidewalks it is the custom in many cities to levy a special assessment upon the owners of the property that is benefited. These special assessments are levied in proportion to the benefit received; they are not taxes in the ordinary sense. |Taking property for public use.| When the nation or state or city requires land for public improvements it has the right to acquire it from the owner, even though he be unwilling to sell. The public authorities, by their right of eminent domain, can take land or other property for public use at any time, but must give the owner just compensation. If the amount of compensation cannot be agreed upon between the government and the private owner, it is fixed by the courts.
The sources of state revenue.
State Taxes.—The states obtain their revenue in various ways. One common method is by requiring the cities, counties, or towns to pay over to the state a certain fraction of the sums which they collect on property. Thus, when the citizen gets his bill for local taxes he finds it itemized—so much for state taxes, so much for county taxes, and so much for city or town taxes. Most of the states also levy taxes on corporations, including railways, telephone companies, insurance companies, and banks. These taxes may be calculated upon capital or net earnings or deposits or upon some other basis. A few states tax inheritances and a few levy a state income tax. Taxes on inheritances are usually progressive, that is, the rate is higher in the case of large inherited fortunes. State income taxes are levied upon the net earnings of individuals or partnerships, a certain minimum income being left exempt. Most of the states have other miscellaneous sources of revenue, some of them important, as, for example, the annual license fees imposed upon all owners of motor vehicles.
Income and excess profits taxes.