CHAPTER XIX NATIONAL FINANCE NATIONAL TAXES 243. The National Tax System. The financial powers Financial conferred upon Congress by the Constitution are very ex- powers of Congress. tensive. In order that the national government may meet its expenses, Congress has the right "to lay and collect taxes, duties, imposts, and excises," provided that "all Constituduties, imposts, and excises shall be uniform throughout tion, Art. I, § 8, cls. 1, 2 the United States," and "to borrow money on the credit of the United States." Under the Confederation, Congress had been dependent on the States for its revenue, but Hinsdale, since the adoption of the Constitution, Congress has been independent of the States in financial as in other matters, and the powers granted by the Constitution have enabled our national government to accomplish the tasks which the central authority of every nation must assume. Am. Gov't, §§ 341-352. Financial needs of national A casual examination of national expenditures shows us that in times of peace much more than one half of the money paid out by the United States government is for government. the army and navy, or for pensions and interest on the public debt. This proportion is, of course, greatly increased in time of war. It is therefore necessary that the national tax system be capable of considerable expansion during crises, although part of the revenue required for war expenses must be obtained through loans. Bullock ings in Pub. 39-49. The financial needs of the government have been met in History of different ways since the adoption of the Constitution. We national may distinguish three periods in the history of national tax taxation. Howe, Revenue ation.' The first of these was brief, lasting from 1789 to 1802. Various forms of customs, duties, and internal reveSystem, 1-8. nue were tried, in addition to direct taxes on land, houses, and slaves. The second period, from 1802 to 1861, was marked by an almost exclusive dependence upon duties, except during the second war with England. The third dates from 1862, when permanent internal revenue taxes were created, and temporary taxes upon incomes and manufacturing were used.2 Free and dutiable goods. Conant, C. A., in Rev. of Revs., 16 (1897), 167-174. Merits and demerits of customs. 244. Duties on Imported Goods. A little more than 50 per cent of the articles brought into the United States from other countries are dutiable. On many articles, imported even in large quantities, no duty is paid at the port of entry, these being placed upon the "free list." Most of the imports subject to duty are manufactured products that come into competition with the productions of our American factories. Upon these goods the rates vary widely, sometimes being as low as 25 per cent of what they cost abroad, as with common earthenware, and again, as with worsted yarns, being as high as 140 per cent of their original purchase price. The chief advantage of custom duties is that the tax is not felt by the person who eventually pays it, for the im 1 These periods correspond to the periods of political dominance by different parties. The Federalists controlled the financial policy of the national government until 1801. From that time until the Civil War the party which at first was called Republican and afterward Democratic was supreme. Since 1861 the policy has been that practically of the present Republican party. 2 The net expenditures of the government for the fiscal year ending June 30, 1907, were $578,360,592, of which more than 363 millions was for the army, navy, pensions, and public debt. The revenue for the same year from customs was $333,230,126 and from internal revenue $270,309,388. For the period from 1789 to 1907, the receipts from customs amounted to $10,338,196,831 and from internal revenue to $7,544,014,084, in a total of $20,141,734,986. 8 The rates upon imported goods are either ad valorem, i.e. according to the value, or specific, dependent upon weight or bulk. Fierce controversies have been waged by the advocates of the two systems. On the value of a tariff to industry, see § 236. Finance, 467-473. Plehn, Public Finance, 182-191. Collection of duties. Davis, O.K., in Century, 68 (1904), 55-64. and evasion porter simply adds the amount of the tax to the cost of the Adams, goods, and the customer does not realize how much of a tax he has paid. Its chief disadvantage is that in times of prosperity, when national expenditures would naturally be light, the revenue from the tax is great, while in time of war, when expenditures are heavy, the imports of goods decrease visibly and the duties are correspondingly reduced. The duties are collected at ports of entry in the borders of this country. There is some smuggling, especially on the part of travelers who object to paying duty on articles purchased while abroad. Importers sometimes seek to evade the customs laws by very greatly undervaluing their goods, but, if detected, are obliged to pay a heavy penalty. Instances have occurred of connivance between importers and the appraisers of customs, resulting in enormous losses to the government, but fortunately these are quite rare. 564-570. 245. Internal Revenue. — To-day the national government Rates and obtains as much money from internal taxes as from those history. upon foreign commerce. The rates are quite high, and the articles taxed at present include spirits, fermented liquors, and the different forms of tobacco. Our present internal revenue system is a heritage left us by the Civil War, dur 3 1 There are one hundred and twenty-four ports of entry, which are in charge of collectors of customs, assisted by over 5,000 persons. 2 Travelers returning from abroad are allowed to bring back one hundred dollars' worth of clothing purchased in other countries, but must pay duty upon everything else. 8 When an importer purchases goods abroad, he makes out three invoices, or bills of goods. One of these he ships with the goods, one is left at the consulate nearest the place of purchase, and the third is sent by the consul to the port at which the goods are to be entered. Incoming vessels are met by revenue officers, who take charge of the cargo. After the vessel has been "entered," the invoices of goods are compared with those sent from abroad, a part of the articles being examined by appraisers to ascertain whether they correspond in number and quality with those described in the invoices. The assessment is determined by the appraiser, and the collection of duties then performed by assistant collectors. The consuls ascertain so far as they are able whether the goods actually cost the amounts named in the invoices, but this is almost impossible. The government relies more upon secret service agents in Europe and at the chief ports to ferret out cases of extreme undervaluation of goods. Little, L. B., in Cosmopolitan, 28 (1900), Hart, Actual Gov't, § 178. |