To tax (from the Latin taxo; "I estimate") is to impose a financial charge or other levy upon a taxpayer (an

individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities. Taxes consist of direct tax or indirect tax, and may be paid in money or as its labour equivalent (often but not always unpaid labour). A tax may be defined as a "pecuniary burden laid upon individuals or property owners to support the government [...] a payment exacted by legislative authority."[1] A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" and is "any contribution imposed by government [...] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name."[1]

34 Chapter II: The Classification Of Taxes And Fees; Definitions: Section 3 Perhaps the most common distinction is that made between direct and indirect taxes. This distinction first obtained theoretical importance in thewritings of the Physiocrats. By direct taxes they meant any of those taxes which were levied immediatelyupon the " produit net." There alone, they argued, could be the fund out of which taxes could be paid. To levy taxes anywhere else was indirect, because the burden would be shifted from one to another until it rested there. The assignment of any particular tax to one or the other of these categories was with them a mark of approval or condemnation. With the recognition that other economic processes besides those which added to the material property of the world created wealth, this peculiar theory of taxation drifted into abeyance. The same terms, however, have been widely used by officials and writers and have such prevalence that a recognition of them cannot be avoided. Rau and Wagner have made the most elaborate attempts to define the modern usage. In this they were only partly successful, because of irregularities in official usage. But despite these irregularities the terms arevaluable. Wagner's distinction is practically as follows. There are two ways in which direct and indirect taxes differ. (1) In the case of direct taxes, at least in the expectation of the law-giver, the tax-payer is also the tax-bearer ; any shifting of the burden to another is not expected, not desired, and sometimes, even, forbidden, or subject to penalty. Indirect taxes are, vice versa, those in which the tax-payer is not permanently the tax-bearer, or is not intended to be ; but a shifting of the burden to another is expected and desired, and may even be prescribed.1 But this element of shifting is not the only one that is essential to the idea. The second characteristicis what may be called the technical, administrativeconception of direct and indirect taxes. It is based on the method of procedure. (2) Direct taxes are such as are regularly laid according to some fixed fact (or one so treated, and at least somewhat fixed), something regularly recurrent, and hence previously ascertainable, a fact as of personality, of rank, of property, of earning, etc., and are, consequently, assessed according to some list or roll. (Cadastre.) Indirect taxes, on the other hand, are such as are laid according to some changing, temporary, more or less accidental fact which is, consequently, not previously ascertainable,

something the result of processes, events, transactions, and are laid and collected according to tariffs.

These two methods of distinction follow quite closely the usages of theoretical writers and of official bureaux. There are important exceptions in some countries. Thus in France the customs duties are not officially classed as indirect Exceptions in taxes, but form a class by themselves official usage. akin to direct taxes. In the United States at the time of the Civil War the income tax was viewed by the courts as an indirect tax, or at least not as a direct tax in the sense of the Constitution.1 This decision, however, was reversed in 1895 by a bare majority of the same court, which decided that a similar income tax was a direct tax in the meaning of the Constitution. This decision is in accord with the distinction made above. The principal direct taxes are : the land taxes, building taxes, property taxes, poll taxes, class taxes, income taxes, industry taxes; the indirect taxes : the customs duties (with the exception of the French), internal excisetaxes, transaction taxes, most fees and licenses. The inheritance taxes, or death duties, as they are called in England, are not easy to classify. In the first sense they are direct taxes, and in the second they are indirect. This is, perhaps, the only important tax that cannot be easily classified. The inheritance tax wherever it exists is used because it is expedient and without much cost yields a large return. It is levied at a time when the persons paying it are not in position to demand a strong justification. It is sometimes justified on the ground that it compensates for previously unpaid taxes. If this justification holds, then the inheritance tax must be classed as a direct tax.

The Classification Of Taxes And Fees; Definitions: Section 5

Following the lead of Adam Smith, various attempts have been made to classify taxes according as they fall upon one or the other of the different shares in distribution, rent, interest, profits, and wages. But, Bastable has well shown, the sources from which the different taxes are paid are generally a combination of several of these. The wealth or income of very few persons consists of simply one of these shares. The attempts to carry out such classifications consistently have failed. Bastable's attempted compromise by calling such taxes as can be traced directly to one or the other shares in distribution primary, and all others secondary, brings us to practically the same results that were gained by Wagner in the discussion of direct and indirect taxes. His primary taxes are those called direct taxes above, his secondary are the indirect.
1

Political Science Quarterly, VIL, p. 717.

One other important set of distinctions must receive our attention, because it has the sanction of two prominent authorities. Wagner suggested and Cohn accepted the classification into, taxes paid out of wealth at the time of its acquisition (Erwerb) or while in possession (Besitz) or upon

its consumption (Verbrauch). This distinction, according to the stage in which the tax finds the wealth from which it is paid, is often useful in showing the effects of certain taxes. Another very valuable distinction is that made by the term "taxes on revenue." Taxes on revenue are those that fall or are assessed on the revenue, or income yielded by different kinds of property. These are a species of taxes on acquisition. The three sets of terms which we have used in this work are : (1) direct and indirect taxes, (2) personal, property, and income taxes, (3) taxes paid on wealth at acquisition, in possession, and at the time of consumption. Another distinction based upon the method of fixing the rate is important because of the use made of it in the American Constitution. That is the distinction between apportioned and proportioned taxes. Taxes are apportioned when the whole amount to be raised is fixed and then divided among the different tax-payers. They are proportioned when the rate is fixed and then assessed on the base, which may be either the property or the income of the tax-payers.1