Separation of State and Local Revenues

The history of American state finance in the last thirty years reveals two major movements, one against excessive uniformity, the other against excessive decentralization. It has been found on the one hand that a uniform rate of taxation cannot successfully be applied to all forms of property, and we have the irresistible movement for classification of taxes. It has been found on the other hand that inter-community enterprises or property cannot successfully be taxed by local officials, and we have the inevitable movement towards central assessment and the emergence of the state tax commission. Surveying these movements, many students of taxation have essayed to project them into the future-always a necessary but a difficult and dangerous thing to do. These prognosticators have evolved as their ideal the separation of the sources of state and local revenues, which Professor Seligman would extend to cover the federal as well as the field of commonwealth finance. The tax whose base is broad is to be given to the superior jurisdiction; the tax whose base is narrow is to be used exclusively by the local jurisdictions. Concretely, in state finance the central government is to take over the tax on insurance companies, on railroads and similar enterprises carried on in all or nearly all parts of the state. The local governments are to be given for their exclusive use the general property tax, with an indefinite measure of home rule, so that they may abolish or modify the tax on personal property. The proposition apparently is that no tax shall be used in common but shall belong exclusively to the jurisdiction to which it has been assigned. Much of this program is obviously sound and in strict accord with fundamental tendencies, the reality of which cannot be questioned. The only difficulty is to determine its proper limits. Some seven years ago at the first meeting of the National Tax Association' the writer suggested that this program, as it was then generally for

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