tion. In 1816 most of the tolls or internal customs duties which had been so widespread in the Middle Ages were abolished, and in 1818 a general customs tariff for the entire state was adopted, with practically free trade as between the separate provinces - a great step forward in political development.1 In 1819 the old general excise was definitely abandoned, and the excise duties which were now made applicable to the entire state were limited to taxes on tobacco, beer, wine and brandy. Prussia thus reached in this respect a position which England did not attain until several decades later, with the important exception, however, that the salt monopoly (Salzverkaufsregal) still continued, even though the old and vexatious obligation of purchasing a certain quantity of salt (Salzconscription) was abolished in 1816.

In 1820 the business tax, which was now uniform throughout Prussia, was remodelled. The various kinds of business were divided into a number of classes, some of which were taxed according to external criteria, as in France. In other cases, however, the interesting expedient was devised of assessing a lump sum upon the particular trade as a whole in each locality and then providing for a repartition of a tax to each individual through the medium of tax associations (Steuergesellschaften) — one in each trade. As a matter of fact, although it is not commonly known, this was an old scheme, which can be traced back to medieval Spain.2 Thus was attained a kind of personal tax in indirect fashion; but the tax was light and the yield very small. In 1822 a new and uniform stamp tax was imposed, which replaced all the local and provincial stamp taxes. In the case of the chief source of revenue, however, the so-called land tax, which was actually a tax on all real estate, it proved to be impossible to bring

1 This aspect of the law is well elucidated in G. Schmoller, Rectoratsrede über das Preussische Handels- und Zollgezetz von 1818. Berlin, 1898. Cf. also the same author's "Die Epochen der Preussichen Finanzpolitik" in HoltzendorffBrentano's Jahrbuch für Gesetzgebung, etc., vol. i (1877), pp. 31 et seq.

2 The same is true, as we have seen above, p. 52, of the French vingtièmes d'industrie. Wagner was evidently ignorant of both these facts when he spoke of the Prussian system as a "Singularität." Finanzwissenschaft, op. cit., p. 20.

large capitalists, the higher middle classes, the small tradesmen and the day laborers. Hoffmann therefore considered the class tax far superior to any practicable income tax.

From our point of view it may be conceded that the class tax was perhaps as great a step in advance as was possible at the time. As Gneist, the distinguished jurist, forcibly expressed it many years later: "The founders of the class tax and especially Hoffmann, with that practical insight which characterized them, recognized that an income tax could not be forthwith introduced among a people where more than nine-tenths of the families were not accustomed, nor even able, to calculate their revenues and expenditure in money, and to strike a balance of income. It was also recognized that even for the privileged and exempted classes of the population, an assessment of income, without reference to any personal distinctions, would seem to them as unfamiliar as it was in contradiction to their conceptions of rank."1 Entirely apart, however, from the fact that the class tax did not apply at all to the large cities, it carried out only to a very slight degree the principle of ability to pay, and possessed no machinery calculated to make the enrolment in the various classes conform to the real wealth of the taxpayers. In fact, even by 1846 there were only 346 persons enrolled in the highest class paying 144 thalers annually. The overwhelmingly large part of the yield was derived from the lower and the lowest classes. It was therefore inevitable that after a time the demand for putting a greater share of the burden on those better able to pay should make itself heard. This demand took the form of a recommendation of the income tax.

§ 2. The Movement toward the Income Tax

The general opinion as to the desirability of an income tax was considerably divided. Among the public at large and in government circles the judgment was undoubtedly adverse,

1 Die Preussische Finanz Reform durch Regulirung der Gemeindesteuern. Von Rudolf Gneist. 2 Held, op. cit., p. 284.

Berlin, 1881.

for very much the same reasons that had made the old income tax so unpopular in England. Among the scientists the matter was slightly different. The old writers on finance during the first half of the nineteenth century were for the most part content to adopt Adam Smith's first rule (which, it will be remembered, declared that the norm of taxation was the revenue that the individual enjoyed under the protection of the state), without, however, taking up in any detail the question as to whether this general ideal was to be reached by an income tax.1 When they began to discuss the income tax as such, most of the authoritative writers, like Rau, preferred a continuance of the system of taxes on product as it existed or was being developed.2 On the other hand, so prominent an author as Murhard was a warm advocate not only of an

1 The most important of these writers were :—

C. Kröncke, Das Steuerwesen nach seiner Natur und Wirkungen untersucht. Darmstadt, 1804; and Ausführliche Anleitung zur Regulirung der Steuern. Giessen, 1810; Christian von Schlözer, Anfangsgründe der Staatswirthschaft. Riga, 1805; Stockar von Neuforn, Finanzwissenschaft. Rothenburg, 1808; D. H. Eschenmayer, Vorschlag zu einem einfachen Steuersysteme. Heidelberg, 1808 [E. was opposed to the excise]; J. P. Harl, Vollständiges Theoretisch-praktisches Handbuch der gesammten Steuerregulirungen oder der Steuerwissenschaft. Erlangen, 1816; E. Kröncke, Ueber die Grundsätze einer gerechten Besteuerung. Heidelberg, 1819; D. Krehl, Das Steuersystem nach den Grundsätzen des Staatsrechts und der Staatswirthschaft. Erlangen, 1816; Georg F. v. Sartorius, Ueber die gleiche Besteuerung des Königreichs Hannover. Göttingen, 1815; W. J. Behr, Die Lehre von der Wirthschaft des Staats, oder Pragmatische Theorie der Finanzgesetzgebung und Finanzverwaltung. Leipzig, 1822; J. F. E. Lotz, Handbuch der Staatswirthschaftlehre. Erlangen, 1822; L. H. von Jakob. Die Staatsfinanzwissenchaft theoretisch und praktisch dargestellt. Halle, 1823; A. S. von Kremer, Darstellung des Steuerwesens. Wien, 1825; C. A. von Malchus, Handbuch der Finanzwissenschaft und Finanzverwaltung. Stritgart, 1830; F. C. Fulda, Handbuch der Finanzwissenschaft. Tübingen, 1827; and Ueber die Wirkung der verschiedenen Arten der Steuern auf die Moralität, den Fleiss, und die Industrie des Volks. Stuttgart, 1837; J. Schön, Die Grundsätze der Finanz. Eine kritische Entwickelung. Breslau, 1832; A. L. V. Seutter, Die Besteuerung der Völker, rechts- und geldwissenschaftlich untersucht. Speyer, 1828; K. V. Rotteck, Lehrbuch der ökonomischen Politik. 1835. A fuller treatment of some of these authors will be found in Seligman, Progressive Taxation, 2d. ed., 1908, pp. 176 et seq.; 187 et seq.

2 Karl H. Rau, Grundsätze der Finanzwissenschaft. 1832-1837. Held, op. cit., p. 248, attempts rather unsuccessfully to explain away Rau's objections.

income tax, but of a single income tax to replace all the exist ing taxes on product.1

This discussion of the single tax in Germany, of which we have only sporadic examples in the earlier period,2 came into the foreground as a result of the fiscal reform in Saxony. The Saxon system was a survival of earlier conditions, consisting of an old land tax and a combination of business and poll tax known as the Quatembersteuern. The latter had become of minor importance since the introduction, at the beginning of the eighteenth century, of the general excise supplemented by a grist tax. When the constitution of 1831 was adopted, and especially after Saxony joined the customs union (Zollverein), thus instituting a reform of existing tax methods, preparation was made to introduce a more equitable system. A number of pamphlets now appeared containing the suggestion of a single income tax. Among these the most important was by Lucius, who was an enthusiastic advocate of the scheme. An attempt to refute the views of Lucius was made by an anonymous writer. In this work, which contains good arguments designed to show that the fiscal difficulties would be aggravated by any kind of a single

1 Karl Murhard, Theorie und Politik der Besteuerung. Göttingen, 1834.

2 Cf., for instance, A. Lips, Ueber die allein Wahre und Einzige Steuer, die Einkommentaxe und ihre Ausführbarkeit. Erlangen, 1812. The same idea was repeated in his Deutschland's National-Oeconomie. Giessen, 1830, pp. 210 et seq. See also Breitenstein, Nur Eine Steuer und deren Catastrirung, Erhebung und Verrechnung, mit vorausgeschickter praktischer Betrachtung aller bisherigen directen und indirecten Auflagen. Gotha, 1826. The essay of Lips was sharply criticised by Strelin, Revision der Lehre von den Auflagen. Erlangen, 1821, pp. 113 et seq. Cf. also Seeger, Ueber das vorzüglichste Abgabensystem. 3d. ed., 1815. A somewhat later discussion may be found in the anonymous Ueber verhältnissmässige Besteuerung oder wie jeder Staatsangehörige nach der Grösse seiner finanziellen Kraft zu den Allgemeinlasten beitragen würde. Leipzig 1834.

3 Plan zur Einführung einer Steuer im Königreiche Sachsen. Vom Gerichtsdirector und Advocat Lucius in Borna. Leipzig, 1833. A similar pamphlet was issued by Cunow which, however, simply repeats the arguments of Lucius.

4 Die Einkommenssteuer als Einzige Abgabe, aus staatsrechtlichem, nationalökonomischem und finanziellem Gesichtspuncte und mit besonderer Beziehung auf den vom Gerichts-Director Lucius herausgegebenen Planentwurf beleuchtet. Von W. R. Leipzig, 1833.

tax, the author inveighed against the use of the income tax at all, and gave a peculiar interpretation of the English income tax in order to bolster up his theories. He concluded with quoting from a nameless writer whom he characterized as "one of our greatest and most experienced fiscal experts," as follows: "I consider the income tax an instructive and horrible example of the radical unsuitability of all direct taxes designed to produce great results, and as a striking proof of the error of all the delusive theories which attempt to show that this tax is bound up with the liberty and prosperity of nations." 2

The Saxon government, while not inclined to the scheme of Lucius, was, nevertheless, induced to adopt a part of his project and succeeded in 1834 in enacting a law for a new business and personal tax (Gewerbe und Personalsteuer). The business part of the tax was, like its Prussian predecessor, based on external criteria. The personal part of the tax likewise endeavored to reach by indirect methods all other incomes except those from land, which were supposed to be hit by the land tax. The administrative methods of both parts of the tax were so arranged as to avoid as completely as possible all inquisitorial procedure.3

The Saxon development exerted at the time no further influence either in Prussia or in the other German states. With the enactment of Peel's income tax in England, however, and especially with the democratic upheaval of 1848, the inadequacy of the Prussian class tax forced itself upon popular notice and led to a determined effort at reform.

The ball was set rolling in 1842 by Benda, who was a violent opponent of the modern system of public debts, and especially of what he called the "stock-exchange swindles."

1 He maintained, for instance, that the entire burden of the English income tax had fallen on the landowners and the salaried classes, and that the tax had been abolished for this reason. See p. 36.

2 Op. cit., p. 48.

8 Cf., for a summary of the details of the law, Zeitschrift des Königlichen Sächsichen Statistischen Bureaus. Leipzig, 1858, pp. 55 et seq.