Government Revenue and Expenditure.
Government is an enormous business enterprise, maintained and operated
by its citizens, that certain duties of a general interest and benefit
may be performed. The magnitude of the work performed necessarily
requires the expenditure of vast sums of money. The chief source from
which these sums are derived is taxation. Taxes have been defined to be
"the legally determined and legally collected contributions of
individuals for meeting the necessary and general expenses of the
State."[1] In the large majority of cases this is a good definition, but
in a few instances it is too narrow. There are some taxes that are
levied not primarily for the purpose of raising an income to meet the
expenses of the government, but to subserve some other purpose. For
instance, the maintenance of our high duties on articles imported into
the United States from foreign countries has for its main purpose the
protection of our industries from European competition. The large
revenues that are derived therefrom are incidental. High liquor
licenses, also, are maintained for the express purpose of lessening the
consumption of intoxicating beverages.
[Footnote 1: Carl Knies.]
The aim of every good government is to distribute its burdens of
taxation, as well as its benefits, fairly and equitably among its
citizens. It is the duty of every citizen to assist in the realization
of this aim, by an intelligent, honest and disinterested vote. Equality
of taxation means equality of sacrifice. Each person should contribute
towards the support of the government in proportion to his means and the
benefits enjoyed. It is the duty of every citizen, first to see that
just and expedient tax laws are passed, then to pay his proper
proportion, and lastly, to see that his neighbors likewise contribute
their share. To obtain an equitable system of government revenue and
expenditure has been the great motive force which, in the past, has
urged the people forward in their efforts to secure popular forms of
government.
The power to tax is legislative, and, according to our theory, can be
exercised only by representatives directly elected by the people. The
refusal of England in the last century to extend this principle of "no
taxation without representation" to her colonies in America, lost her
these possessions. A government to be stable and efficient must possess
adequate powers for the collection of its revenue. The miserable
condition to which the old Confederation was reduced by reason of the
inadequacy of its powers in this respect, has already been discussed.
Says Fiske: "Between the old Continental Congress and the government
under which we have lived since 1789, the differences were many; but by
far the most essential difference was that the new government could
raise money by taxation, and was thus enabled properly to carry on the
work of governing."[1]
[Footnote 1: _Civil Government_, p. 77.]
The sources of government revenue other than taxes, are various, and
differ in different countries. In our consideration of the revenues and
expenditures of our national, state, and local governments we shall have
occasion to notice the various means by which their treasuries are
filled.
_#The Federal Government#_ raises its revenues independently of the
other governing bodies, from different sources, and by a different set
of officials. Besides taxation, the principal source of revenue is from
the sale of public lands. Federal taxes are of two kinds:
1. Customs duties.
2. Excise or internal revenue duties.
Of these, much the greater sum is raised from customs duties. For the
year 1889,[1] the total net receipts were $387,050,058. Of this
$223,832,741 was derived from customs, and $130,894,434 from the
internal revenue duties. The sale of public lands yielded in that year
$8,038,651. The miscellaneous revenues amounted to $24,297,151.
[Footnote 1: For fiscal purposes the year begins July 1st.]
Customs or tariff duties are taxes which have to be paid on a large
class of goods imported into this country from foreign countries. These
charges are collected by Government collectors, stationed in all our
principal seaport cities, who inspect all incoming vessels and determine
the amount to be paid, according to the rate determined by Congress.
This system constitutes the so-called protective tariff policy of our
country. Those commodities not so taxed are said to be on the "free
list." How much, and on what articles these duties shall be levied, is
the question upon which the Republican and Democratic parties differ;
the former favoring high, and the latter low rates, that is to say
merely enough to support the Government, or, as it is termed, "a tariff
for revenue only."
Internal revenue duties are those taxes collected by the government from
its own citizens upon a small class of articles produced in this
country. The chief items of this class are distilled liquors, tobacco,
and oleomargarine. In 1889, out of the $130,894,434 received from
internal revenue, there was derived from spirits and fermented liquor
$98,036,041; tobacco, $31,866,861; oleomargarine and miscellaneous,
$991,532. These duties are collected by Government collectors stationed
in every United States district, who visit the distilleries, collect the
taxes, and see that the law is enforced. In several Southern States
attempts to evade the law are very frequent and difficult of detection.
The expenses of the vast postal system conducted by the Federal
Government are very nearly defrayed by the charges made for postage, and
the amount received by fees more than equals the expense of the Patent
Office.
_#The State and Local Taxes#_ are generally, for convenience, collected
at the same time, and by the same officials, but independently of the
Federal government. The Constitution of the United States forbids the
States to derive a revenue from duty upon goods imported or exported.
The States are, therefore, for the most part, restricted to a direct tax
on property for the support of their governments.
The general method for raising this tax is as follows: The legislature
of the State, having determined what income is needed, apportion this
sum among the counties, or, in New England, directly among the
townships, in proportion to the value of the property situated within
them, or establish a certain percentage tax on all property, to be
collected in the same manner. So, similarly, the counties apportion
among the cities and townships within their areas, in proportion to the
value of their taxable property, not only what they have to pay to the
State, but also the sums they have to raise for county purposes. Thus
when the township or city authorities assess and collect taxes from the
individual citizens, they collect at one and the same time three
distinct taxes--the State tax, the county tax, and the city or township
tax. Retaining the last for local purposes, they hand on the two former
to the county authorities, who, in turn, retain the county tax, handing
on to the State what it requires. Thus trouble and expense are saved in
the process of collection, and the citizen sees on one tax paper all
that he has to pay. The chief tax is the property tax, based on a
valuation of property, and generally of all property, real and personal.
Of this, by far the greater sum is realized from the tax on real
property, (land and buildings on it). Cities and other local
subdivisions, as has been stated, are raising their revenues more and
more from the sale, taxation, or operation of such public franchises and
rights as street-car lines, gas and waterworks. Those who fix the value
of taxable property and thus determine the amount the owners are to pay,
are called assessors. Those collecting taxes are called collectors. The
revenue of the States is seldom large in proportion to the wealth and
number of the inhabitants, because the chief burden of administration is
borne not by the States, but by the Federal government, on the one hand,
and the local subdivisions of the States on the other. The total revenue
of all the States is barely one-third that of the Federal government.
_#The Expenditures#_ of all the governing bodies, Federal, State, and
local, are kept entirely independent of each other. Those of the Federal
government are for the benefit of all the States, while those of the
other bodies are only for their own individual benefit. The Federal
government receives much more than it expends, and has yearly a surplus
on hand in the Treasury. The States and local bodies have in the past
expended more than their revenues, making up their deficiency by loans
on their credit.
The chief objects of Federal expenditure (in addition to the postal
system already considered and for the most part supported by its own
revenue) are: 1st, interest on the public debt; 2d, pensions to disabled
soldiers; 3d, for the support of the civil branch of the government;
4th, war and naval expenditures.
Total expenditures for the year 1889 were $299,288,988. The chief items
were:
1. Interest on the public debt, $41,000,484
2. Pensions, 87,624,779
3. Civil service, 80,664,064
4. War and Navy, 65,815,079
5. Indians, 6,892,207
Money can be expended by the government only after it has been
appropriated by Congress in its annual appropriation bills. The
appropriation of supplies by Congress is the most important business
that it transacts. Every year the heads of all the different departments
frame estimates of the amounts of money needed to support their
departments during the following year, which estimates they send to the
Secretary of the Treasury, who, after considering and revising them,
transmits them to Congress in his "Annual Letter." This letter is
considered by the Appropriation Committee, whose duty it is to consider
and frame bills for the appropriation of moneys. Though guided by these
estimates, supplies frequently depart widely from them. After being
reported to the House and passed, money bills are sent to the Senate,
where they are invariably amended by increasing the appropriations and
are returned to the House. A conference committee is then appointed from
the House and Senate Committees on Appropriations, who, after mutual
concessions, agree upon such appropriations as will be passed by both
houses. The House then amends the bill as agreed upon, passes it, and
sends it to the Senate again, which in turn passes it, and sends it to
the President for his signature. All bills for raising money must, by
the Constitution, originate in the House. Besides the appropriations for
the expenses of government there is annually authorized a large
expenditure for improvement of rivers and harbors. Many of the
expenditures authorized by these bills are undoubtedly unnecessary, but
they are passed by general consent of the members, each of whom desires
to increase his popularity at home by getting public money spent in his
district.
The expenses of the State governments are not heavy, and are devoted to
but few objects. The chief expenditures are for:--(1) the salaries of
officials; (2) judicial expenditures; (3) the State volunteer militia;
(4) grants to public schools; (5) public charities and institutions, as
prisons, insane asylums, etc., (6) interest on State debts; (7) internal
improvements and public buildings.
The methods of appropriations are similar to those employed by the
Federal government.
The expenditures of the local bodies, and particularly cities, are much
larger, in proportion to their population, than those of the States, and
are increasing at a greater rate than the increase of population. The
objects of expenditure are numerous and very important. The chief ones
are: (1) Interest on local debts; (2) maintenance and care of the
streets and roads; (3) lighting of streets; (4) police; (5) salaries of
officials.
The following are outlines of the receipts and expenditures of the State
of Maryland for 1888, and for the City of Baltimore for 1887. These
figures are given not because they of themselves possess any especial
importance, but because from them can be obtained an idea of the
activity of a typical State and city.
_#Maryland.#_[1]--The total receipts from all sources were $2,542,130;
and there was paid out $2,016,060. The chief receipts were from:
General Taxes, $793,301
Licenses, 487,969
Corporation Tax, 73,553
Railroad Tax, 58,455
Inheritance Tax, 57,767
Income from Stocks and Bonds owned, 206,175
Fees, 17,585
_#Baltimore.#_[2]--The gross receipts into the treasury for the year
ending December 31, 1887, were $8,446,439, and were chiefly from the
following sources:
Taxes, $4,210,112
Public schools, tuition fees, etc., 6,766
Market houses, rent of stalls, 58,287
Wharfage and rent of wharves, 33,561
General licenses, 44,609
Auction duties, 7,431
Dividends on stock in B. & O. R.R., 130,000
Water rents, 745,446
Passenger railway companies, 132,167
From the State for public schools, 147,403
Temporary loan, 1,510,000
Receipts to pay interest on loans, 896,704
Sale of stock, 243,285
The total disbursements were $8,403,930. Of this $4,541,357 was spent on
account of expenses of city government, the following being the
principal items of expense:
Interest on the public debt, $915,987
Expenses of law courts, 118,906
Expenses of jail, magistrates, &c., . . 103,587
Public schools (less amount paid by State), 594,089
Expenses of poor, 210,739
Police department, 702,882
Street-cleaning department, 263,934
Fire department, 214,226
Street lighting, 221,203
Parks, &c., 52,080
Salaries, 72,624
City council, 52,925
[Footnote 1: Finance Statistics of the American Commonwealths: E.E.
Seligman. Publications of Am. Statistical Asso., Dec., 1889.]
[Footnote 2: R.T. Ely, _Taxation in Am. States and Cities_.]
Nearly all of our State and local governments, as well as the national
government, have contracted large public debts, the interest payments
upon which constitute one of the chief items in their lists of
expenditures. The present debt of the Federal Government is largely the
result of the enormous expenditures occasioned by the Civil War. In
1865, August 31, it reached its highest point $2,381,530,294, with an
annual interest charge of $150,977,697. Since then it has been steadily
reduced until in 1889 the total interest-bearing debt was but
$829,853,990, with an annual interest charge of $33,752,354. The
principal of the national debt is mainly in the form of interest-bearing
bonds held by the National banks and private individuals. These bonds
are of various denominations and are promises of the government to pay
the sums named on their face, at the expiration of a certain period. The
bonds at present unpaid, and as such constituting the major portion of
our national debt, are principally of two kinds; those bearing four and
one-half per cent, annual interest and falling due in 1891, and those
bearing four per cent, interest and falling due in 1907.
The debts of most of the States were contracted by ill-advised and
untimely systems of internal improvements. The total state indebtedness
June I, 1890, as shown by the Eleventh Census, was $238,396,590, a
decrease of slightly over $58,000,000 in ten years. The tendency now
seems to be for States to withdraw from the money market as borrowers,
and for the county and city governments to take their place.
The local debts are very large, and have shown a marked increase during
the last twenty years. They have been for the most part incurred in
improvements and construction of public works, which have in most
instances well repaid the debts incurred.