worn out long before the debt was paid-such as hose for the fire department or equipment for the street cleaning force. It is generally conceded that such departmental needs should be paid for by tax budget appropriations.

Emergency needs, however, such as money for snow removal or for sanitary measures to curb an epidemic, which cannot be estimated in advance, are taken care of by special short-term bonds. But the borrowed money is always paid back in the next year's budget.

When a city has borrowed money on long-term bonds a sinking fund must usually be established, either for the purpose of paying the investor the face value of the bonds when they fall due, or to wipe out the debts before they fall due. The sinking fund is made up of certain sums of money set aside each year out of the city income. Sometimes certain city revenues are permanently set aside for the sinking fund. In other cases the sinking fund is itself invested, and thereby earns interest which helps to augment it. The amount set aside by a city each year for sinking fund purposes takes up a considerable share of the budget.

Another of the large items in the city's budget is the amount of interest that must be paid during the coming year to its bondholders.

The city's debt-incurring power is largely determined in the charter granted by the state legislature. It may be vested in the chief executive or in the city council. In the latter case, the mayor participates because of his veto power.

5. THOSE WHO ARE EMPOWERED TO SPEND THE CITY'S MONEY

The authorities who actually spend the city's money have two functions. One is to determine whether the expenditures in question have been authorized by law or by the proper authority; and to determine whether the goods have been delivered or the services rendered for which the money is to be paid. The other is to make the actual payment of the money. The former function is that of the comptroller or the auditor, the chief

financial officer of the city; the second is the duty of the treasurer or chamberlain.

The comptroller is at the head of the city's finances. His office, the city department of finance, receives taxes, rents, interest on city investments, and other sums due the city; it keeps the city's books, and audits and examines the city payroll, and all other city accounts and expenditures. The comptroller is almost invariably appointed by the city council or elected by the people. Thus the financial control of our cities is usually not in the power of the mayor.

The city treasurer or chamberlain and his subordinates are under bond. All money collected by the finance or other departments is turned over to his care, and usually deposited by him in banks or in trust companies. He makes no payments of city money except on warrants signed by the comptroller, or by the comptroller and the mayor. The treasurer is sometimes appointed by the mayor or by the council, and sometimes elected by the people.

6. STATE INCOME AND EXPENDITURE

The state as well as the city needs an income to pay the salaries of its many officials; to maintain the charitable, educational, and other public institutions, such as asylums, state universities, state prisons; to keep up public buildings and public works, and to do its share toward the community schools.

We have already seen that the lion's share of the work of administering public welfare, public safety and public utilities falls to the local community. Therefore we are not surprised to learn that the expenditures of a state government are far less than the total amount spent by certain cities within its boundaries. The tax levy in New York City is almost twice as large as the total revenue receipts of New York State.

The main source of state revenue is the general property tax. A number of states, however, levy taxes on particular occupations and trades. Further sources of income are from licenses, inheritance taxes, corporation taxes, and income taxes.

Most of the state income from all these sources is assessed and collected by the same local officials who assess and collect local taxes, the town and city tax assessors and collectors. After the legislature has determined the state tax rate, the collectors add this quota to the city and county taxes, and all three are collected on the same bill. Thus the citizen is relieved of the trouble of paying three different sets of taxes at different times. Then when the receipts come in, the local authorities retain the share of the local government, and pass the balance on to the county and state.

Because local assessors may be tempted to value local property at too low a figure and thus try to shift part of the burden of taxation to a neighbor community, there is usually a State Board of Equalization. This Board examines, compares, and revises the valuations made by local assessors to make sure that all taxable property in each community is equally and fairly valued, and that no community is shifting part of its tax to another.

7. FEDERAL INCOME AND EXPENDITURE

The federal government also needs money to carry on its many activities. The salaries of a great number of officials, from the President down to a clerk in a department office, must be paid. Public buildings, including the White House, the Capitol, the hundreds of post offices, and the other federal buildings in Washington and throughout the United States must be kept up. The work of the Executive departments, including the research and educational work of the Bureau of Public Health Service, the investigations of the Department of Labor into industrial conditions, the experimental work of the Department of Agriculture to aid our farmers-to mention only a few-cost money. But the major part of our federal tax dollar goes into the fund that pays the cost of past wars, and toward maintaining the army and the navy.

Taxes levied by the local and state authorities are usually called direct taxes, because they are paid by the owner of the

property which is taxed, and not shifted by him to some one else. When we examine the sources of federal revenue, we find that, with the exception of the income tax, federal taxes are indirect taxes. That is, the person who pays a federal tax

Courtesy of the Annals of the American Academy of Political and Social Science * THE REVENUE OF THE FEDERAL GOVERNMENT FROM TAXATION, IN 1920

finally shifts it to some one else, and gets his money back. When an importer pays the duty on foreign perfumes, which he is bringing into this country, he adds the amount of tax to the sale price, and the tax is really paid by the person who finally

*From "Expenditures and Revenues of the Federal Government," by Edward B. Rosa, Ph. D., of the U. S. Bureau of Standards.

buys the perfume. A cigar manufacturer who buys an internal revenue stamp which the law requires him to affix to a box of

Courtesy of the Annals of the American Academy of Political and Social Science* THE EXPENDITURES OF THE FEDERAL GOVERNMENT IN 1920 (not including Loans and Trust Funds)

93 per cent. of the total, including interest and surplus applied to debt reduction, went to pay the cost of wars.

cigars, adds the cost of the stamp to the purchase price of the cigars, and the ultimate buyer pays the tax. In the case of the importer, the tax is called a tariff, or a customs duty. The tax

* From "Expenditures and Revenues of the Federal Government," by Edward B. Rosa, Ph. D., of the U. S. Bureau of Standards.