Taxation. (Chapter 5)

Article excerpt

The Economics of Taxation

IN BROWN'S EARLY YEARS AT THE UNIVERSITY OF MISSOURI, he taught the advanced undergraduate course in what was then titled "Public Revenues." As not infrequently occurs, years of interaction with students in a particular subject coupled with the publication of several articles dealing with the same subject culminated in the writing of a textbook. In Brown's case the decision to develop a specialization in the field of public finance was clearly motivated by its close relation to his advocacy of land value taxation. In 1924 The Economics of Taxation was published by Henry Holt and Co. The book was reprinted in 1938 by Lucas Brothers and in 1979 by the University of Chicago Press (Midway Reprints). The initial reviews by Henry Simons, Frank Knight and Fred Rogers Fairchild were favorable; however, each reviewer expressed certain objections. (1) Simons concluded,

Professor Brown has contributed a great deal of acute analysis to a more or less specific field of inquiry in which most the stuff that is written and preached is of exceedingly unattractive quality. (2)

Knight noted, "the economic analysis is at all points careful, thorough and competent, and is stated with admirable lucidity." (3) Fairchild, a successful author of textbooks, had similar praise for the book. Overseas the book was praised by W. Twerdocleboff, a Russian professor of the University of Leningrad, in a review article as one of the most important of recent publications. (4) Aside from this single reference there is no evidence of awareness of The Economics of Taxation outside of North America. (5) Several of the contributions of Brown's text were to be noted only many years later. In 1979, Arnold Harberger in a publisher's blurb for the reprint stated, "This is truly a classic." (6)

Preface and Comments

Brown's preface to the text was a noteworthy comment on contemporary approaches to the study and instruction of economics. He argued that with few exceptions advanced or intermediate courses in economics were less rigorous in terms of theory than the introductory "principles" courses. The tendency was to elaborate on an area of economics, such as public finance, in a narrative or descriptive fashion rather than attempt to deepen the student's theoretical grasp of the economic principles involved. Brown objected: "Only a thorough study of the cause and effect relations in taxation can, in fact, make one a competent leader of opinion on tax problems." (7) Thus, Brown's approach was to present ten chapters dealing primarily with tax shifting and incidence. This was done without the usual historical background found in McCulloch, Bastable, or Seligman. Brown generalized about the type of tax to be discussed. For example, he treated the incidences of taxes on capital and land in lieu of examining the effects of a property tax per se. A tax on labor income would be studied prior to considering income taxes. This prompted Fairchild to object: "This book deals exclusively with abstract theory, telling us virtually nothing of the relation of these theories to the facts of present day problems." (8)

That at least a part of this criticism was anticipated by Brown is evident in his preface. He believed it was unwieldy to deal with specific tax forms as opposed to basic taxation, whether realistic or not, of commodities, labor, land and capital. He felt that the development of general principles of taxation would be better served in this way. Moreover, he recognized and regretted the lack of inductive or empirical verification of the theory he presented. While welcoming empirical studies along the lines of Fisher and Mitchell, Brown argued that those who would criticize the book for being too theoretical were likely to be ignorant of the difficulty of the required statistical analysis. (9)

In his introductory chapter, Brown placed the study of taxation within the broader area of public finance. …