contributions of private companies to the public treasury. In a strongly individualistic community like the United States, we should expect that the line of development would be as follows: (1) a recognition of abuses; (2) a protest against those abuses and a trial of various methods of remedy; and finally, and only if remedial measures failed, a radical departure from precedent in the abolition of private property within those fields where it had been shown unfit longer to exist.

The evidence thus far presented follows this line of development. There is a general recognition of abuses and a vigorous and widespread demand for a change, which has apparently taken the form of a movement toward municipal ownership. It is, however, in the nature of things, altogether probable that this movement will expend itself in accomplishing much-needed reforms. This conclusion is supported by other than inferential evidence. The demand for municipal ownership is already resulting in important concessions to public sentiment on the part of private companies, which promise to accomplish the desired ends without resort to drastic measures. In brief, private companies are offering to accept shorter franchises, to improve their service, to reduce their rates, to increase their contributions to the public treasuries, and to take the public into their confidence. They make these concessions, it is true, under practical compulsion; but they are none the less important on that account.

CHAPTER VII

FEES

22. The Nature of Fees: Eheberg's Views. Ever since the time of Rau1 most writers have treated fees as a distinct branch of public revenue. There has been, however, no general agreement concerning the precise definition of a fee. Rau himself gave the following definition : 2

Fees are charged upon occasions when the citizen comes into contact with the government or some of its agencies. They can be considered a partial compensation for the expenditure which the particular act of government occasions, and so far resemble a payment made for a service rendered by a private person. But on the other hand, the governmental institution which gives occasion for the collection of a fee is not conducted for the purpose of obtaining such dues; on the contrary, it arises from the duty of the state to seize upon all expedient means of fulfilling its purposes."

1 Even before Rau, however, Adam Smith had recognized the existence of fees. Smith said, for instance :

66

The expense of the administration of justice, too, may, no doubt, be considered as laid out for the benefit of the whole society. There is no impropriety, therefore, in its being defrayed by the general contribution of the whole society. The persons, however, who give occasion to this expense are those who, by their injustice in one way and another, make it necessary to seek redress or protection from the courts of justice. The persons, again, most immediately benefited by this expense are those whom the courts of justice either restore to their rights or maintain in their rights. The expense of the administration of justice, therefore, may very properly be defrayed by the particular contribution of the one or other, or both of those different sets of persons, according as different occasions may require, that is, by the fees of court." Wealth of Nations, Bk. V, ch. 1.

2 Finanzwissenschaft, § 227.

8 With this definition we should compare other more recent ones.

Roscher says

that fees are "payments made for individual acts of government, by those persons who have been the direct occasion of the action." Finanzwissenschaft, § 22. Wagner

The following account of the nature of fees is from a representative German writer, K. T. Eheberg:1

Fees are special charges fixed by the state for special demands upon public officials or institutions, and are paid by the persons who have occasioned these demands for the services or action of the government. Accordingly the distinguishing characteristic of the fee, that which differentiates it from a tax, is the fact that a fee is collected in connection with some definite action of public agents and as compensation therefor.

Fees arise only in connection with such public institutions and officials as are maintained for the sake of the general public welfare in order to secure essential public ends. These institutions would have to be maintained in any case even if their services were seldom needed, but their action is occasioned by the demands of particular persons. The occasion for the demands, and therefore for the payment of a fee, may be of two sorts either the individual calls for the intervention of the public agencies in cases where his personal interest is the same as that of the public, or he seeks in his own interest to obtain special privileges. The first case arises, for example, in connection with many of the fees for administering justice or inspecting weights and measures; the second arises where the individual obtains special advantages through exemption from legal regulations or special concessions, such as patent rights and similar privileges. In all these cases the institution itself, which serves partly public and partly private ends, is maintained wholly or partly at public expense; but the cost of the individual acts is defrayed more conveniently, in whole or in part, by fees collected from those who have occasioned the expense.

From these remarks we can deduce the leading principle for

says: "Fees are charges, arbitrarily fixed by a government in amount and method of payment, which individuals or groups of individuals pay as a special compensation for some service rendered by a public body, or for some expense which the individuals have caused the state in the exercise of its functions." Finanzwissenschaft, § 277. And Seligman gives the following definition : A fee is a payment to defray the cost of each recurring service undertaken by the government primarily in the public interest, but conferring a measurable special advantage on the fee-payer." Essays in Taxation, 304.

1 Finanzwissenschaft, §§ 71-73.

determining the amount of a fee. In the first case just described, the expense which the individual has occasioned should be the basis for determining the sum charged him; in the second case, the measure of the fee should be the value of the privilege which is accorded him. In this measurement it is necessary to consider how great the public interest is in the service or act performed. The greater the public interest in the particular branch of administration, the lower should be the fees charged therefor; the smaller the public interest, the higher the fees ought to be. For this reason fees are fixed according to the value of the service, when special legal advantages are granted or an exception is made in the application of a general law.

On account of the varied nature of fees it happens, to be sure, that these two principles for measuring their amount pass over into one another. And since the actual adjustment of fees in different countries is materially affected by historical conditions and by the other public charges, we can in practice demand no more than that the principle just laid down shall be generally followed. In general we can say merely that, as a rule, charges should be no higher than is necessary to meet the average cost of running the office concerned, and that in particular cases the fee may be above or below this average level.

It is contrary to the nature of a fee that the ability of the particular contributor should be considered in determining the amount. That does not prevent us from exempting persons from fees in case of poverty, or straitened circumstances combined with special merit, in order to secure even to the poor the benefit of public institutions, such as courts of justice and schools. Exemption from the fee in the first case is charity; in the second a reward, bestowed upon persons without means at the expense of those better circumstanced.

By the characteristics above mentioned fees can be, at least in theory, sharply separated from all other forms of income. They are distinguished from the economic income of the state by the fact that, with economic income, the use of and resort to the services of the state is free and the price is governed by competition; while with the fee the state, by its power of compulsion, obliges the individual to resort to public agencies and fixes arbitrarily the payment made therefor. And they are dis

tinguished from taxes by the fact that, with fees, the ruling principle is special payment for special service, of special reckoning in each case between the treasury and the contributors; while, with taxes, the ruling principle is general contributions for general services, that is, general contributions for the expense of maintaining order and promoting the welfare and culture of the people. If the duty to pay taxes follows from the fact of membership in the state, the duty of paying fees arises only as a result of making a special demand upon public institutions.

Of course in practice taxes and fees easily pass over into one another. Not infrequently charges known as fees are so high that there is no relation between the cost of service and the charges in question. Also occasionally charges which are nothing but taxes are called fees, either as a result of their historical relations or because they are actually associated with fees. That is true particularly of duties upon the transfer of property, for this transfer not only is attended with fees, since it requires some action by public officials, but it gives occasion many times for the imposition of taxes.

23. The Fee System of our Federal Government. Professor T. K. Urdahl, in his detailed study of the fee system in the United States, gives the following account1 of the fees collected by the federal government:

A. PATENT AND COPYRIGHht Fees

To the public generally the best-known system of fees collected under the federal laws is undoubtedly that connected with the National Patent Office. This office is one of the institutions which were conceived and established by Jefferson in 1790. Before that date some of the states had by legislative acts granted copyrights and patents for short periods of years, but none of them had any complete system. True to the ideas. then current, that fees should pay salaries directly, and should only be sufficient to make the public institutions self-supporting,

1 Reprinted, by permission of the author, from The Fee System in the United States, pp. 141-147. Published in the Transactions of the Wisconsin Academy of Sciences, Vol. XII (1898).