defended on the ground of a makeweight to the upside-down progressive indirect taxes, which would still remain. In other words, Caillaux contented himself with what we have elsewhere called the compensatory theory of progressive taxation.1 The objection that if we once insert the entering wedge of progression there would be no stopping, Caillaux characterized as an outworn schoolboy's thesis. In his final speech of March, 1909,2 he took up again in turn all the principal objections that had been advanced in the course of the two years' discussion, namely, the stock arguments of inquisitorial procedure, of fraud, of the threatened flight of capital, of socialism, and of reaction on the poorer classes. Particularly effective was his reply to the last contention that in levying a higher tax on the rich, the bill was really imposing burdens on the poor. Amid enthusiastic applause Caillaux quoted from authorities to show that precisely the same arguments had been urged at the time of the Revolution against the suppression of the corvées and against the abolition of the privileges of the nobility and the clergy. So admirable was his succinct presentation that the Chamber ordered it to be printed and placarded throughout France.

As soon as the bill was introduced, it was at once recognized that a majority of the house was practically pledged to its enactment into law, and a heated discussion throughout the country kept pace with that in the Chamber. The old guard, like Leroy-Beaulieu, Stourm, and Neymarck, as well as deputy Roche, poured forth their broadsides against the income tax in the dailies, weeklies, and quarterlies. But a new generation of economists had arisen, who took a different attitude. These now began to contribute most effectively to the discussion. Among them were men like Jèze, Allix, Gaston-Gros, and Ingenbleek, ably seconded by statesmen like

1 Supra, page 31.

2 Op. cit., pp. 465-535.

3 Cf. the numerous articles in the Économiste Français, Le Monde Économique, Journal des Économistes, Revue des deux Mondes.

4 Jèze, Science des Finances, 1909; Allix, Traité Élémentaire de Science des Finances, 1907; Gaston-Gros, l'Impôt sur le Revenu, 1907; Ingenbleek, Impôts

Senator Gauthier. Some of these writers, like Gaston-Gros, did indeed not approve of the details of Caillaux's bill, but they all approached the problem from a new and progressive point of view, and contributed in no small measure to the passage of the bill.

§ 10. The Provisions of the Income-Tax Bill as adopted

The chief provisions of the bill as it was passed by the Chamber of Deputies are as follows: 2 —

The revenues or incomes are divided into seven schedules, namely, incomes from houses, from land, from movable capital, from business profits, from agricultural profits, from wages and salaries, and finally from professional earnings and all other sources not otherwise charged. The rates are fixed at four per cent in the first three schedules, three and one half per cent in the fourth schedule, and three per cent in the remaining schedules.

Directs et Indirects sur le Revenu, 1908. Cf. also Michel Impôts sur les Revenus 1907; Canon, L'Impôt sur le Revenu, son Passé, ses Modes d'Application, ses Effets sur la Rente et les Valeurs Étrangères, 1906; Faure, Le nouveau Projet d'Impôt sur le Revenu, 1907; Eybert, L'Impôt sur les Revenus Commerciaux et Industriels, 1907; Pelletan, L'Impôt sur le Revenu, 1907; L'Impôt sur le Revenu: où en sommes-nous? 1908; Aimond, La Réforme Fiscale et le Projet Caillaux, 1908; and for the earlier period Vigne, L'Impôt Général sur le Revenu. Rapport présenté au Conseil Communal de Gand, 1903; Duclos, L'Impôt sur le Revenu, 1904. 1 La Réforme Fiscale par l'Impôt sur le Revenu. Par A. E. Gauthier, Paris, 1908.

2 The bill as passed will be found in Géraud-Bastet, op. cit. pp. 204-254. It is reprinted with the date of adoption of each section, and with the names of the participants in the discussion, in the bulky volume entitled Impôt sur le Revenu et Impôt Complémentaire sur l'Ensemble du Revenu. Texte complet du Projet de Loi, voté par la Chambre des Députés le 9 Mars, 1909. Notice Historique du Projet de Loi et Table par Article des Débats de la Chambre. Paris, 1910. It is also found in L'Impôt sur Le Revenu referred to above on p. 314. The bill is entitled Law embodying the Suppression of the Direct Taxes and establishing a General Tax on Incomes and a Complementary Tax on the whole income. "Loi portant Suppression des Contributions Directes et établissant un Impôt Général sur les Revenus et un Impôt Complémentaire sur l'Ensemble du Revenu." 8 Art. 3.

Y

The house-tax schedule is virtually a continuation of the existing house tax according to which, by the law of 1900, the assessable income is fixed at the net revenue i.e. the rental value, less twenty-five per cent in the case of dwellings, and forty per cent in that of factories. In the land-tax schedule the assessable income is the rental value of the land, less a deduction of one-fifth. Fresh valuations are to be made every ten years.2 In this second schedule abatements are made for smaller incomes. Where the total income does not exceed 1250 francs, 625 francs are completely exempt; where the income is between 1250 and 5000 francs there is an abatement of three-fourths on the first 625 francs, an abatement of onehalf of the income between 626 and 1000 francs, and an abatement of one-fourth on incomes from 1001 to 1250 francs.

The third schedule comprises the revenue from personal property (capitaux mobiliers) including government securities, with some exceptions of a public nature. This tax is assessed, as far as possible, on the corporations and associations that pay the interest or dividends. In the case of mortgages and the like, the tax is levied by means of a stamp. In the case of all securities, foreign or otherwise, the interest or dividends of which are paid through the medium of bankers or other agents, the tax is assessed upon these agents, who must keep two lists or registers of the transactions to be preserved for at least two years, and always open to the inspection of the government officials.4

The fourth schedule deals with business profits, or so-called profits of industrial and commercial enterprises. The tax is here assessed on the average of three years' income, and the taxpayers are invited to make a declaration of their revenue. This declaration is compulsory, however, only in the case of incomes over 5000 francs. The declaration is presented to the comptroller cf taxes (contrôleur). In case he is dissatisfied, he may ask the taxpayer to modify the declaration within twenty days. If this is not done, he may proceed to 8 Arts. 16-17.

1 Art. 7.

2 Arts. 8-10.

4 Arts. 20-26.

make an official assessment, which is subject to an appeal to the administrative courts. In this appeal the comptroller may defend his assessment by any information at his disposal, and the taxpayer may in turn present what documents he chooses. In no case, however, can the taxpayer be required to show his books. In case of false declaration, the penalty is double the tax.1 In this fourth schedule, certain deductions or abatements are made. In every case incomes of less than 1250 francs are exempt. In incomes under 20,000 francs the abatements are as follows: so much of the income as is under 1500 francs enjoys an abatement of six-sevenths; in the fraction of income from 1500 to 2500 francs two-thirds are deducted; in the fraction of income from 2500 to 5000 francs, one-fourth is deducted. The residue is taxed in full.2

The fifth schedule comprises agricultural profits, that is, the income from the actual operations of agriculture, rather than from the ownership of land. The income is here deemed to be equal to one-half of the actual rental value of the property for the fraction of the rental value under 500 francs and two-thirds of this value for the fraction over 5000 francs. Where the rental value does not exceed 12,000 francs, 1250 francs are exempt in every case, while abatements are made for two-thirds between 1251 and 2000 francs, and for one-third between 2001 and 3000 francs. In the case of private parks and pleasure grounds, the income is deemed equal to the total rental value, without any exemptions or deductions.3

The sixth schedule includes wages, salaries, and pensions. Here the tax is advanced by the individuals, associations, or governments, which pay the respective incomes. Every business man or company is required to hand in a list of employees with special details. In the case of salaries under 5000 francs two-thirds of the income is exempt, and abatements are made calculated partly according to the size of the income, and partly according to the number of inhabitants.4

The seventh and final schedule concerns itself with the 3 Arts. 37, 38. 4 Arts. 39-46.

1 Art. 30.

2 Arts. 32-34.

incomes from the liberal professions. Here also abatements and deductions are made, calculated on the same principle as in the preceding schedule. Every taxpayer is required to file a declaration of his income from this source. It will be observed that this is the only schedule to which compulsory declaration applies; and even here provision is made that no professional secrets shall be divulged.1

The scheduled income tax, in which the principle of stoppage at source is observed as far as possible, is supplemented by what is called the complementary tax on the entire income. This is imposed only upon individuals, and not, as the preceding part of the tax, upon corporations as well. The tax is assessed upon the head of the family, who is responsible for his own income as well as that of his wife and children, except when the wife lives apart, and when the children have an independent income. It is levied only on individuals whose income exceeds 5000 francs, and applies to all individuals who have their domicile in France. In the case of those who reside in France, without having their domicile there, the income is deemed to be seven times the amount of their house rent. The rate of the complementary tax is progressive, and is graduated as follows: The first 5000 francs income are deducted; the next 5000 francs are counted at one-fifth of their real amount; the next 5000 francs at two-fifths; the next 5000 francs at three-fifths; the next 5000 francs at four-fifths. It is only after 25,000 francs have been reached that the full rate of five per cent is imposed. In other words, each successive fraction of 5000 francs pays one per cent additional tax until the full rate of five per cent is reached at 25,000 francs.

As to the administrative provisions of the supplementary tax, the comptroller of direct taxes makes up a list of all those subject to taxation. Each of these must file a declaration which, however, need contain only the name of the taxpayer, his residence, the abatements which he claims, and the amount of income from foreign property or business. It is only in the case of the revenue from personal property that he is 2 Arts. 62-65.

1 Arts. 47-51.

8 Art. 66.