Most states have
overthrown the system, yet in some it seems to be so
deeply embedded as to be a fixture.

Where a magistrate receives a fee for his services, jus-
tice is likely to be warped. This system of payment has
been given up in most of the larger tribunals, yet it re-
mains in some of the smaller, such as those of the justice
of the peace. The temptation exists to give the decision
in favor of the plaintiff, for if such a reputation is gained
that justice of the peace will get more and more cases to
try, for anyone bringing suit would much prefer such a
justice to one who had given many decisions in favor of
defendants.

Political Corruption. The payment of officials by fees
has been the cause of much political corruption. Sums
entirely out of proportion to the duties required have
been received, and are still received where the system
remains. Such positions make desirable political plums
to be given to the ward boss, who can afford to go almost
any length to secure the lucrative position. Reform comes
slowly, because the party in power has given the plums
in fulfillment of promises, while the defeated party is
promising to give them with the hope of gaining power.

These social and political evils have no doubt had a big
influence in arousing sentiment to abolish fee payments
to officials. The Central and Western states have taken
the lead, but much remains to be done in the Southern
and Eastern sections. It is here that the system has be-
come so deeply intrenched in the political machinery as
to be hard to remove.

77. Special Assessments Resemble Taxes and Fees.
A third form of revenue that forms an important part of
fiscal systems, especially those of municipalities, is what
is known as the special assessment. It is a payment re-



130 OUTLINES OF PUBLIC FINANCE

quired from owners of property because the property has
been specifically benefited by some public improvement.
A special assessment might be defined as a compulsory levy
against property in proportion to the benefits which have
accrued to it because of some service undertaken for the public
good. Usually the funds exacted are expected to be used
in defraying all or part of the cost of the service. Examples
most familiar to American students are the levies made
upon property by municipalities when streets are paved
or sidewalks built.

Special Assessments and Taxes. In some respects spe-
cial assessments resemble taxes, yet they are so dissimilar
as to warrant a separate classification. The primary
object of the levy, as in the case of taxes, is some common
benefit. Special assessments are also similar to taxes in
that the payment is compulsory, while the levy is a legal
process according to some general rule. A marked differ-
ence appears, however, in the measure of the individual
benefit which the payee receives. Taxes are paid without
reference to specific individual benefits, while in the case
of special assessments the basis of the levy is the benefit
which accrues to the property. The purpose for which
taxes are levied is usually more general and immaterial
that is for all sorts of general expenses while the special
assessment is for a definite purpose, usually of a material
nature, which adds to the capital account of the govern-
ment. In modern taxes much concern is given to the
ability of the payee to bear burdens, while the special
assessment is based entirely on the individual benefit
derived from the improvement to property.

Special Assessments and Fees. Certain similarities exist
between the fee and the class of revenue under discussion,
yet again the differences are such as to warrant a separate
classification. Both are levied by government authority,
and both represent a payment for individual benefit re-
ceived. The field for the use of the special assessment is
limited, however, while that for the fee is almost unlim-



FEES, SPECIAL ASSESSMENTS, REVENUES 131

ited. The former is a local phenomenon, and always in-
volves improvement to property; the latter is restricted
to neither locality nor property, but is usually general and
personal. Payments of a fee levy will continue to be made
with each repetition of the service, which may be frequent
or seldom, and there is no defmiteness as to how much
these levies will bring to the treasury. A special assess-
ment is a definite levy made once for all, while the exact
amount to be received is a part of the calculation. Be-
cause of these characteristics it adds to clearness to sep-
arate special assessments from both taxes and fees.

Special Taxes and Special Assessments. One should be
careful to distinguish between special taxes and special
assessments. Special taxes are those which are levied, the
expenditure of which will be for some particular purpose,
such as school taxes, or road taxes. The expenditure is
presumably made in the district where the tax is collected.
The special taxes are usually levied upon the same base
as other taxes, without reference to any individual benefit
which might be calculated to arise from their expenditure.
The wealthy unmarried man would be assessed for a
special school tax, while a poor man with several children
in school might escape. The special assessment is levied
for a special purpose, but upon those whom the f ulfillment
of the purpose will benefit.

78. The Special Assessment Has Been Used More Ex-
tensively in the United States than in Europe. The first
example of a levy of the nature of a special assessment
may be found in Europe, yet the real development of the
system can be traced through the American colonies and
states. As early as the latter part of the seventeenth cen-
tury provision was made in New York for the use of the
principle. It did not, however, receive extensive develop-
ment here, nor was it copied to any extent elsewhere until
well into the nineteenth century. The real impetus to
its use came with the growth of internal improvements.
At present its most prominent place is found in municipal



132 OUTLINES OF PUBLIC FINANCE

finances, although its use by counties and states is in-
creasing with the demand for building improved roads.
In a number of cities, at various times, the receipts from
special assessments have exceeded those from taxes. Some
of the many purposes for which it is used are for laying
out and building streets, sidewalks, and roads, for light-
ing and sprinkling streets, for building sewers and laying
water pipes, for planting shade trees, and for developing
parks.

The special assessment, or betterment tax, is compara-
tively little used in European countries, although numer-
ous attempts have been made to have it introduced more
extensively. Great Britain has perhaps been more an-
tagonistic than other countries, and practically all at-
tempts to use the principle have met with such objections
that they have been given up. One situation which makes
its use more difficult is that land or site values are seldom
used in levying taxes; the tax is levied on the base of
annual rental upon the occupier rather than upon the
owner of the land. The " iniquitous American scheme"
is gaining ground, however, and is used to a greater extent
in the countries on the continent.

79. The Justice of Special Assessments Has Not Been
Destroyed by Difficulties Encountered in Their Use.
Some difficulties have arisen in the use of the special as-
sessment. A number of these difficulties constitute the
chief objections that Europeans have to the principle.
One which quickly suggests itself is that of making an
assessment in proportion to the increase in property value,
and in determining the proper district over which to make
the levy. The paving of a street benefits not only abutting
property, but also property in the immediate vicinity.
An expression commonly used is, "only a block from a
paved street." Evidently property in the vicinity of a
paved street is enhanced in value, even though an exact
measure of the increase may be difficult. The base upon
which the levy is to be made is also troublesome at times.



FEES, SPECIAL ASSESSMENTS, REVENUES 133

Frontage is often used, but this is sometimes so obviously
unjust that area or selling value may also be considered.

It has been objected, frequently, that the use of the
special assessment is dangerous because it may compel
the property owners to meet the expense of improvements
which the nonproperty owners may desire, or that exorbi-
tant assessments may be placed by unscrupulous poli-
ticians under the guise of conferring a benefit. In so far
as the assessment is measured by the actual benefit to
property, the first objection can have but little weight.
The improvements will mean increased differentials which
will be reflected in higher rents, so that much of the
burden will rest on the nonproperty owning class if paying
for a benefit actually received can be called a burden.
Much fraud and injustice have arisen in making special
assessments, and there is no doubt that the amount ex-
acted has often been far in excess of any benefits accruing
to property. Anyone familiar with the Tweed rule in
New York City has sufficient evidence of this. The de-
cision of the courts, however, that any exaction in excess
of benefits is taking of property without just compensa-
tion, has done much to alleviate this difficulty.

The principle of the system, in spite of the numerous
difficulties, has appealed so much to the sense of justice
that it is being more firmly embedded in municipal fiscal
policies. If a public improvement to the property of one
individual gives an increase hi value which does not come
to the general public, it is but just that some return should
be made for this increased value. Great care, however,
should be exercised by the administrative authorities in
fixing the assessment district and in determining the base
and amount of the assessment, so as to alleviate as much
as possible injustice and inequality. This admonition ap-
plies, however, not only to special assessments, but to
other forms of revenue as well.

80. Prices Are Paid for Commercial Services Supplied
by the Government. Numerous examples occur where



134 OUTLINES OF PUBLIC FINANCE

the state supplies services of a commercial nature which
might be supplied by individuals. These are not the same
in all countries, nor at all times in the same country.
Where services are thus supplied, they are usually such
as are given by the post office, waterworks, gas plants,
lighting plants, telegraphs, telephones, railroads, canals,
and other industries of a similar nature. They are the
industries in which the degree of public interest is large,
and in which the reason for the government's taking over
the industry is usually other than to secure revenue.

Governments may, however, conduct an industry so as
to get the highest revenue; that is, in the same manner
as an individual would conduct it. Various government
monopolies, such as the French tobacco monopoly, the
Indian opium monopoly, or the older salt monopolies, are
examples of this condition. The public interest is negli-
gible, and the consumer buys from the state on the same
basis as if he were buying from an individual. There is
no benefit in state ownership except that it is getting re-
turns from industry that otherwise would go to individ-
uals. The charge is made on the same principle as if it
had been made by private management, and has been
called a quasi-private price.

Nature of Public Price. Generally, however, when a
government takes over an industry, the item of revenue
is not the only consideration in fact, it is usually inci-
dental. The feeling exists that the general public has an
interest in the conduct of the industry which an individ-
ual operator cannot or will not recognize. It is to supply
the demands of this public interest that the industry is
run by the government, and the amount charged for the
service is known as a public price. A public price might
be defined, therefore, as a more or less voluntary payment,
made for a commercial service, by individuals who receive a
special benefit from the service. The word ' ' rate ' ' has some-
times been used to designate this charge, but this only
adds greater confusion to the already too numerous mean-



FEES, SPECIAL ASSESSMENTS, REVENUES 135

ings of "rate." Various charges are known as rates, as
passenger and freight rates, there is also the rate of tax-
ation, while in England the local taxes are known as
"rates."

The amount of the public price is usually governed by
the degree of public interest in the conduct of the industry.
If the public interest is negligible, as has already been
indicated, the basis of the charge will be the same as if
the industry were in the hands of an individual. If the
conduct of the industry becomes of more importance to
the general public, the price charged may be reduced
until the service is given at cost. As the public concern
becomes more vital, the charges are reduced until the re-
turns do not begin to meet the cost. In this situation the
price partakes somewhat of the nature of a fee. The dif-
ference remains, however, that the payment of the price
is voluntary that is, a man may ride on the municipally
owned street railway and pay the price, but he may avail
himself of any other means of going to town he may choose,
and not pay the price. In the case of fees, the avenue for
supplying the service is usually limited to the government,
while in the case of a price many avenues may be avail-
able. The deficit is made up from general taxes. The
government may even go so far as to make no charge to
the recipients, and meet all expenses from the general
tax fund. In such cases the interest of the industry to the
public is, or should be, of paramount importance.

Reduction in Public Prices. The general tendency has
been toward a reduction in public prices. Examples may
be found representing the various conditions of charge
from the quasi-private price down to where no individual
charge is made for the service. Public education, as has
been previously indicated, has passed through the various
stages, and the cost is now met out of the common fund.
The same is true of the maintenance of highways and
bridges, while a few years ago the cost was partially met
from tolls, The public interest has varying effects on



136 OUTLINES OF PUBLIC FINANCE

postal charges, as has previously been pointed out. Postal
rates indicate that some parts of a service may be con-
sidered as of greater public interest than others, and
prices are fixed accordingly. In this way low magazine
rates, and postage-free newspapers within the county of
publication, can be justified. Likewise, no individual
charge is usually made for water used in sprinkling the
streets. There is no doubt that this tendency will
continue, and that a greater amount of services will be
given by the government, the cost of which will be partly
or entirely met from general taxes.

81. States Have Sources of Revenue of Minor Impor-
tance. Taxes, fees, special assessments, and prices
charged for commercial products compose by far the
larger part of revenues. A few sources of minor impor-
tance exist, however, which should be noted. Some held
a prominent place in earlier fiscal systems, but have
gradually lost their importance.

Gifts. A form of revenue of this character is gifts.
Most political units still receive gifts, but they are usually
for some particular purpose, such as a library, hospital, or
educational building. Oftentimes it takes the form of a
trust fund for some definite purpose. A form of gift of
less importance makes up the " conscience fund." Indi-
viduals often repent of having defrauded the government
and will send in, perhaps years afterward, a sum to
square themselves with the government and to ease their
conscience. Often these gifts are so small that the cost
of the clerical work in properly recording them makes
this an expensive form of revenue.

Escheat and Eminent Domain. Property may come into
the hands of the state by escheat or reversion, or by the
exercise of the right of eminent domain. The amount
received under the first category is, of course, inconsider-
able, for there is little property that cannot be claimed
by some other ownership than the state. In exercising
the right of eminent domain net revenue is not expected



FEES, SPECIAL ASSESSMENTS, REVENUES 137

to accrue, since a just compensation is expected to be
given in return for the property. If the property thus
secured should increase in value over a period of time, and
then be sold, the state would be the gainer.

Penalties and Fines. Receipts from penalties and fines
are found in all governmental units, and frequently amount
to sums which are not inconsiderable. They are levied,
not with the idea of getting revenue, but against some one
who has committed a misdeed. It is expected that the
penalty or fine will act as a deterrent against violation of
law. They come under the penal power of the government,
and the amounts thus secured are so variable that they
are not usually seriously considered as a part of fiscal
systems.