the price of a certain portion, a certain sum of money is to be paid in
full compensation for all tax or tythe; the tax becomes, in this case,
exactly of the same nature with the land tax of England. It neither
rises nor falls with the rent of the land. It neither encourages nor
discourages improvement. The tythe in the greater part of those parishes
which pay what is called a modus, in lieu of all other tythe, is a tax
of this kind. During the Mahometan government of Bengal, instead of the
payment in kind of the fifth part of the produce, a modus, and, it is
said, a very moderate one, was established in the greater part of the
districts or zemindaries of the country. Some of the servants of the
East India company, under pretence of restoring the public revenue to
its proper value, have, in some provinces, exchanged this modus for a
payment in kind. Under their management, this change is likely both to
discourage cultivation, and to give new opportunities for abuse in the
collection of the public revenue, which has fallen very much below what
it was said to have been when it first fell under the management of the
company. The servants of the company may, perhaps, have profited by the
change, but at the expense, it is probable, both of their masters and of
the country.
_Taxes upon the Rent of Houses._
The rent of a house may be distinguished into two parts, of which the
one may very properly be called the building-rent; the other is commonly
called the ground-rent.
The building-rent is the interest or profit of the capital expended in
building the house. In order to put the trade of a builder upon a level
with other trades, it is necessary that this rent should be sufficient,
first, to pay him the same interest which he would have got for his
capital, if he had lent it upon good security; and, secondly, to keep
the house in constant repair, or, what comes to the same thing, to
replace, within a certain term of years, the capital which had been
employed in building it. The building-rent, or the ordinary profit of
building, is, therefore, everywhere regulated by the ordinary interest
of money. Where the market rate of interest is four per cent. the rent
of a house, which, over and above paying the ground-rent, affords six or
six and a-half per cent. upon the whole expense of building, may,
perhaps, afford a sufficient profit to the builder. Where the market
rate of interest is five per cent. it may perhaps require seven or seven
and a-half per cent. If, in proportion to the interest of money, the
trade of the builders affords at any time much greater profit than this,
it will soon draw so much capital from other trades as will reduce the
profit to its proper level. If it affords at any time much less than
this, other trades will soon draw so much capital from it as will again
raise that profit.
Whatever part of the whole rent of a house is over and above what is
sufficient for affording this reasonable profit, naturally goes to the
ground-rent; and, where the owner of the ground and the owner of the
building are two different persons, is, in most cases, completely paid
to the former. This surplus rent is the price which the inhabitant of
the house pays for some real or supposed advantage of the situation. In
country houses, at a distance from any great town, where there is plenty
of ground to chuse upon, the ground-rent is scarce any thing, or no more
than what the ground which the house stands upon would pay, if employed
in agriculture. In country villas, in the neighbourhood of some great
town, it is sometimes a good deal higher; and the peculiar conveniency
or beauty of situation is there frequently very well paid for.
Ground-rents are generally highest in the capital, and in those
particular parts of it where there happens to be the greatest demand for
houses, whatever be the reason of that demand, whether for trade and
business, for pleasure and society, or for mere vanity and fashion.
A tax upon house-rent, payable by the tenant, and proportioned to the
whole rent of each house, could not, for any considerable time at least,
affect the building-rent. If the builder did not get his reasonable
profit, he would be obliged to quit the trade; which, by raising the
demand for building, would, in a short time, bring back his profit to
its proper level with that of other trades. Neither would such a tax
fall altogether upon the ground-rent; but it would divide itself in such
a manner, as to fall partly upon the inhabitant of the house, and partly
upon the owner of the ground.
Let us suppose, for example, that a particular person judges that he can
afford for house-rent an expense of sixty pounds a-year; and let us
suppose, too, that a tax of four shillings in the pound, or of
one-fifth, payable by the inhabitant, is laid upon house-rent. A house
of sixty pounds rent will, in that case, cost him seventy-two pounds
a-year, which is twelve pounds more than he thinks he can afford. He
will, therefore, content himself with a worse house, or a house of fifty
pounds rent, which, with the additional ten pounds that he must pay for
the tax, will make up the sum of sixty pounds a-year, the expense which
he judges he can afford, and, in order to pay the tax, he will give up a
part of the additional conveniency which he might have had from a house
of ten pounds a-year more rent. He will give up, I say, a part of this
additional conveniency; for he will seldom be obliged to give up the
whole, but will, in consequence of the tax, get a better house for fifty
pounds a-year, than he could have got if there had been no tax. For as a
tax of this kind, by taking away this particular competitor, must
diminish the competition for houses of sixty pounds rent, so it must
likewise diminish it for those of fifty pounds rent, and in the same
manner for those of all other rents, except the lowest rent, for which
it would for some time increase the competition. But the rents of every
class of houses for which the competition was diminished, would
necessarily be more or less reduced. As no part of this reduction,
however, could for any considerable time at least, affect the
building-rent, the whole of it must, in the long-run, necessarily fall
upon the ground-rent. The final payment of this tax, therefore, would
fall partly upon the inhabitant of the house, who, in order to pay his
share, would be obliged to give up part of his conveniency; and partly
upon the owner of the ground, who, in order to pay his share, would be
obliged to give up a part of his revenue. In what proportion this final
payment would be divided between them, it is not, perhaps, very easy to
ascertain. The division would probably be very different in different
circumstances, and a tax of this kind might, according to those
different circumstances, affect very unequally, both the inhabitant of
the house and the owner of the ground.
The inequality with which a tax of this kind might fall upon the owners
of different ground-rents, would arise altogether from the accidental
inequality of this division. But the inequality with which it might fall
upon the inhabitants of different houses, would arise, not only from
this, but from another cause. The proportion of the expense of
house-rent to the whole expense of living, is different in the different
degrees of fortune. It is, perhaps, highest in the highest degree, and
it diminishes gradually through the inferior degrees, so as in general
to be lowest in the lowest degree. The necessaries of life occasion the
great expense of the poor. They find it difficult to get food, and the
greater part of their little revenue is spent in getting it. The
luxuries and vanities of life occasion the principal expense of the
rich; and a magnificent house embellishes and sets off to the best
advantage all the other luxuries and vanities which they possess. A tax
upon house-rents, therefore, would in general fall heaviest upon the
rich; and in this sort of inequality there would not, perhaps, be any
thing very unreasonable. It is not very unreasonable that the rich
should contribute to the public expense, not only in proportion to their
revenue, but something more than in that proportion.
The rent of houses, though it in some respects resembles the rent of
land, is in one respect essentially different from it. The rent of land
is paid for the use of a productive subject. The land which pays it
produces it. The rent of houses is paid for the use of an unproductive
subject. Neither the house, nor the ground which it stands upon, produce
any thing. The person who pays the rent, therefore, must draw it from
some other source of revenue, distinct from and independent of this
subject. A tax upon the rent of houses, so far as it falls upon the
inhabitants, must be drawn from the same source as the rent itself, and
must be paid from their revenue, whether derived from the wages of
labour, the profits of stock, or the rent of land. So far as it falls
upon the inhabitants, it is one of those taxes which fall, not upon one
only, but indifferently upon all the three different sources of revenue;
and is, in every respect, of the same nature as a tax upon any any other
sort of consumable commodities. In general, there is not perhaps, any
one article of expense or consumption by which the liberality or
narrowness of a man's whole expense can be better judged of than by his
house-rent. A proportional tax upon this particular article of expense
might, perhaps, produce a more considerable revenue than any which has
hitherto been drawn from it in any part of Europe. If the tax, indeed,
was very high, the greater part of people would endeavour to evade it as
much as they could, by contenting themselves with smaller houses, and by
turning the greater part of their expense into some other channel.
The rent of houses might easily be ascertained with sufficient accuracy,
by a policy of the same kind with that which would be necessary for
ascertaining the ordinary rent of land. Houses not inhabited ought to
pay no tax. A tax upon them would fall altogether upon the proprietor,
who would thus be taxed for a subject which afforded him neither
conveniency nor revenue. Houses inhabited by the proprietor ought to be
rated, not according to the expense which they might have cost in
building, but according to the rent which an equitable arbitration might
judge them likely to bring if leased to a tenant. If rated according to
the expense which they might have cost in building, a tax of three or
four shillings in the pound, joined with other taxes, would ruin almost
all the rich and great families of this, and, I believe, of every other
civilized country. Whoever will examine with attention the different
town and country houses of some of the richest and greatest families in
this country, will find that, at the rate of only six and a-half, or
seven per cent. upon the original expense of building, their house-rent
is nearly equal to the whole neat rent of their estates. It is the
accumulated expense of several successive generations, laid out upon
objects of great beauty and magnificence, indeed, but, in proportion to
what they cost, of very small exchangeable value.[58]
Ground-rents are a still more proper subject of taxation than the rent
of houses. A tax upon ground-rents would not raise the rent of houses;
it would fall altogether upon the owner of the ground-rent, who acts
always as a monopolist, and exacts the greatest rent which can be got
for the use of his ground. More or less can be got for it, according as
the competitors happen to be richer or poorer, or can afford to gratify
their fancy for a particular spot of ground at a greater or smaller
expense. In every country, the greatest number of rich competitors is in
the capital, and it is there accordingly that the highest ground-rents
are always to be found. As the wealth of those competitors would in no
respect be increased by a tax upon ground-rents, they would not probably
be disposed to pay more for the use of the ground. Whether the tax was
to be advanced by the inhabitant or by the owner of the ground, would be
of little importance. The more the inhabitant was obliged to pay for the
tax, the less he would incline to pay for the ground; so that the final
payment of the tax would fall altogether upon the owner of the
ground-rent. The ground-rents of uninhabited houses ought to pay no tax.
Both ground-rents, and the ordinary rent of land, are a species of
revenue which the owner, in many cases, enjoys without any care or
attention of his own. Though a part of this revenue should be taken from
him in order to defray the expenses of the state, no discouragement will
thereby be given to any sort of industry. The annual produce of the land
and labour of the society, the real wealth and revenue of the great body
of the people, might be the same after such a tax as before.
Ground-rents, and the ordinary rent of land, are therefore, perhaps, the
species of revenue which can best bear to have a peculiar tax imposed
upon them.
Ground-rents seem, in this respect, a more proper subject of peculiar
taxation, than even the ordinary rent of land. The ordinary rent of land
is, in many cases, owing partly, at least, to the attention and good
management of the landlord. A very heavy tax might discourage, too much,
this attention and good management. Ground-rents, so far as they exceed
the ordinary rent of land, are altogether owing to the good government
of the sovereign, which, by protecting the industry either of the whole
people or of the inhabitants of some particular place, enables them to
pay so much more than its real value for the ground which they build
their houses upon; or to make to its owner so much more than
compensation for the loss which he might sustain by this use of it.
Nothing can be more reasonable, than that a fund, which owes its
existence to the good government of the state, should be taxed
peculiarly, or should contribute something more than the greater part of
other funds, towards the support of that government.
Though, in many different countries of Europe, taxes have been imposed
upon the rent of houses, I do not know of any in which ground-rents have
been considered as a separate subject of taxation. The contrivers of
taxes have, probably, found some difficulty in ascertaining what part of
the rent ought to be considered as ground-rent, and what part ought to
be considered as building-rent. It should not, however, seem very
difficult to distinguish those two parts of the rent from one another.
In Great Britain the rent of houses is supposed to be taxed in the same
proportion as the rent of land, by what is called the annual land tax.
The valuation, according to which each different parish and district is
assessed to this tax, is always the same. It was originally extremely
unequal, and it still continues to be so. Through the greater part of
the kingdom this tax falls still more lightly upon the rent of houses
than upon that of land. In some few districts only, which were
originally rated high, and in which the rents of houses have fallen
considerably, the land tax of three or four shillings in the pound is
said to amount to an equal proportion of the real rent of houses.
Untenanted houses, though by law subject to the tax, are, in most
districts, exempted from it by the favour of assessors; and this
exemption sometimes occasions some little variation in the rate of
particular houses, though that of the district is always the same.
Improvements of rent, by new buildings, repairs, &c. go to the discharge
of the district, which occasions still further variations in the rate of
particular houses.
In the province of Holland,[59] every house is taxed at two and a-half
per cent. of its value, without any regard, either to the rent which it
actually pays, or to the circumstance of its being tenanted or
untenanted. There seems to be a hardship in obliging the proprietor to
pay a tax for an untenanted house, from which he can derive no revenue,
especially so very heavy a tax. In Holland, where the market rate of
interest does not exceed three per cent., two and a-half per cent. upon
the whole value of the house must, in most cases, amount to more than a
third of the building-rent, perhaps of the whole rent. The valuation,
indeed, according to which the houses are rated, though very unequal, in
said to be always below the real value. When a house is rebuilt,
improved, or enlarged, there is a new valuation, and the tax is rated
accordingly.
The contrivers of the several taxes which in England have, at different
times, been imposed upon houses, seem to have imagined that there was
some great difficulty in ascertaining, with tolerable exactness, what
was the real rent of every house. They have regulated their taxes,
therefore, according to some more obvious circumstance, such as they had
probably imagined would, in most cases, bear some proportion to the
rent.
The first tax of this kind was hearth-money; or a tax of two shillings
upon every hearth. In order to ascertain how many hearths were in the
house, it was necessary that the tax-gatherer should enter every room in
it. This odious visit rendered the tax odious. Soon after the
Revolution, therefore, it was abolished as a badge of slavery.
The next tax of this kind was a tax of two shillings upon every
dwelling-house inhabited. A house with ten windows to pay four shillings
more. A house with twenty windows and upwards to pay eight shillings.
This tax was afterwards so far altered, that houses with twenty windows,
and with less than thirty, were ordered to pay ten shillings, and those
with thirty windows and upwards to pay twenty shillings. The number of
windows can, in most cases, be counted from the outside, and, in all
cases, without entering every room in the house. The visit of the
tax-gatherer, therefore, was less offensive in this tax than in the
hearth-money.
This tax was afterwards repealed, and in the room of it was established
the window-tax, which has undergone two several alterations and
augmentations. The window tax, as it stands at present (January 1775),
over and above the duty of three shillings upon every house in England,
and of one shilling upon every house in Scotland, lays a duty upon every
window, which in England augments gradually from twopence, the lowest
rate upon houses with not more than seven windows, to two shillings, the
highest rate upon houses with twenty-five windows and upwards.
The principal objection to all such taxes is their inequality; an
inequality of the worst kind, as they must frequently fall much heavier
upon the poor than upon the rich. A house of ten pounds rent in a
country town, may sometimes have more windows than a house of five
hundred pounds rent in London; and though the inhabitant of the former
in likely to be a much poorer man than that of the latter, yet, so far
as his contribution is regulated by the window tax, he must contribute
more to the support of the state. Such taxes are, therefore, directly
contrary to the first of the four maxims above mentioned. They do not
seem to offend much against any of the other three.
The natural tendency of the window tax, and of all other taxes upon
houses, is to lower rents. The more a man pays for the tax, the less, it
is evident, he can afford to pay for the rent. Since the imposition of
the window tax, however, the rents of houses have, upon the whole, risen
more or less, in almost every town and village of Great Britain, with
which I am acquainted. Such has been, almost everywhere, the increase of
the demand for houses, that it has raised the rents more than the window
tax could sink them; one of the many proofs of the great prosperity of
the country, and of the increasing revenue of its inhabitants. Had it
not been for the tax, rents would probably have risen still higher.
ART. II.--_Taxes upon Profit, or upon the Revenue arising from Stock._
The revenue or profit arising from stock naturally divides itself into
two parts; that which pays the interest, and which belongs to the owner
of the stock; and that surplus part which is over and above what is
necessary for paying the interest.
This latter part of profit is evidently a subject not taxable directly.
It is the compensation, and, in most cases, it is no more than a very
moderate compensation for the risk and trouble of employing the stock.
The employer must have this compensation, otherwise he cannot,
consistently with his own interest, continue the employment. If he was
taxed directly, therefore, in proportion to the whole profit, he would
be obliged either to raise the rate of his profit, or to charge the tax
upon the interest of money; that is, to pay less interest. If he raised
the rate of his profit in proportion to the tax, the whole tax, though
it might be advanced by him, would be finally paid by one or other of
two different sets of people, according to the different ways in which
he might employ the stock of which he had the management. If he employed
it as a farming stock, in the cultivation of land, he could raise the
rate of his profit only by retaining a greater portion, or, what comes
to the same thing, the price of a greater portion, of the produce of the
land; and as this could be done only by a reduction of rent, the final
payment of the tax would fall upon the landlord. If he employed it as a
mercantile or manufacturing stock, he could raise the rate of his profit
only by raising the price of his goods; in which case, the final payment
of the tax would fall altogether upon the consumers of those goods. If
he did not raise the rate of his profit, he would be obliged to charge
the whole tax upon that part of it which was allotted for the interest
of money. He could afford less interest for whatever stock he borrowed,
and the whole weight of the tax would, in this case, fall ultimately
upon the interest of money. So far as he could not relieve himself from
the tax in the one way, he would be obliged to relieve himself in the
other.
The interest of money seems, at first sight, a subject equally capable
of being taxed directly as the rent of land. Like the rent of land, it
is a neat produce, which remains, after completely compensating the
whole risk and trouble of employing the stock. As a tax upon the rent of
land cannot raise rents, because the neat produce which remains, after
replacing the stock of the farmer, together with his reasonable profit,
cannot be greater after the tax than before it, so, for the same
reason, a tax upon the interest of money could not raise the rate of
interest; the quantity of stock or money in the country, like the
quantity of land, being supposed to remain the same after the tax as
before it. The ordinary rate of profit, it has been shewn, in the first
book, is everywhere regulated by the quantity of stock to be employed,
in proportion to the quantity of the employment, or of the business
which must be done by it. But the quantity of the employment, or of the
business to be done by stock, could neither be increased nor diminished
by any tax upon the interest of money. If the quantity of the stock to
be employed, therefore, was neither increased nor diminished by it, the
ordinary rate of profit would necessarily remain the same. But the
portion of this profit, necessary for compensating the risk and trouble
of the employer, would likewise remain the same; that risk and trouble
being in no respect altered. The residue, therefore, that portion which
belongs to the owner of the stock, and which pays the interest of money,
would necessarily remain the same too. At first sight, therefore, the
interest of money seems to be a subject as fit to be taxed directly as
the rent of land.
There are, however, two different circumstances, which render the
interest of money a much less proper subject of direct taxation than the
rent of land.
First, the quantity and value of the land which any man possesses, can
never be a secret, and can always be ascertained with great exactness.
But the whole amount of the capital stock which he possesses is almost
always a secret, and can scarce ever be ascertained with tolerable
exactness. It is liable, besides, to almost continual variations. A year
seldom passes away, frequently not a month, sometimes scarce a single
day, in which it does not rise or fall more or less. An inquisition into
every man's private circumstances, and an inquisition which, in order to
accommodate the tax to them, watched over all the fluctuations of his
fortune, would be a source of such continual and endless vexation as no
person could support.
Secondly, land is a subject which cannot be removed; whereas stock
easily may. The proprietor of land is necessarily a citizen of the
particular country in which his estate lies. The proprietor of stock is
properly a citizen of the world, and is not necessarily attached to any
particular country. He would be apt to abandon the country in which he
was exposed to a vexatious inquisition, in order to be assessed to a
burdensome tax; and would remove his stock to some other country, where
he could either carry on his business, or enjoy his fortune more at his
ease. By removing his stock, he would put an end to all the industry
which it had maintained in the country which he left. Stock cultivates
land; stock employs labour. A tax which tended to drive away stock from
any particular country, would so far tend to dry up every source of
revenue, both to the sovereign and to the society. Not only the profits
of stock, but the rent of land, and the wages of labour, would
necessarily be more or less diminished by its removal.
The nations, accordingly, who have attempted to tax the revenue arising
from stock, instead of any severe inquisition of this kind, have been
obliged to content themselves with some very loose, and, therefore, more
or less arbitrary estimation. The extreme inequality and uncertainty of
a tax assessed in this manner, can be compensated only by its extreme
moderation; in consequence of which, every man finds himself rated so
very much below his real revenue, that he gives himself little
disturbance though his neighbour should be rated somewhat lower.
By what is called the land tax in England, it was intended that the
stock should be taxed in the same proportion as land. When the tax upon
land was at four shillings in the pound, or at one-fifth of the supposed
rent, it was intended that stock should be taxed at one-fifth of the
supposed interest. When the present annual land tax was first imposed,
the legal rate of interest was six per cent. Every hundred pounds stock,
accordingly, was supposed to be taxed at twenty-four shillings, the
fifth part of six pounds. Since the legal rate of interest has been
reduced to five per cent. every hundred pounds stock is supposed to be
taxed at twenty shillings only. The sum to be raised, by what is called
the land tax, was divided between the country and the principal towns.
The greater part of it was laid upon the country; and of what was laid
upon the towns, the greater part was assessed upon the houses. What
remained to be assessed upon the stock or trade of the towns (for the
stock upon the land was not meant to be taxed) was very much below the
real value of that stock or trade. Whatever inequalities, therefore,
there might be in the original assessment, gave little disturbance.
Every parish and district still continues to be rated for its land, its
houses, and its stock, according to the original assessment; and the
almost universal prosperity of the country, which, in most places, has
raised very much the value of all these, has rendered those inequalities
of still less importance now. The rate, too, upon each district,
continuing always the same, the uncertainty of this tax, so far as it
might be assessed upon the stock of any individual, has been very much
diminished, as well as rendered of much less consequence. If the greater
part of the lands of England are not rated to the land tax at half their
actual value, the greater part of the stock of England is, perhaps,
scarce rated at the fiftieth part of its actual value. In some towns,
the whole land tax is assessed upon houses; as in Westminster, where
stock and trade are free. It is otherwise in London.
In all countries, a severe inquisition into the circumstances of private
persons has been carefully avoided.
At Hamburg,[60] every inhabitant is obliged to pay to the state one
fourth per cent. of all that he possesses; and as the wealth of the
people of Hamburg consists principally in stock, this tax may be
considered as a tax upon stock. Every man assesses himself, and, in the
presence of the magistrate, puts annually into the public coffer a
certain sum of money, which he declares upon oath, to be one fourth per
cent. of all that he possesses, but without declaring what it amounts
to, or being liable to any examination upon that subject. This tax is
generally supposed to be paid with great fidelity. In a small republic,
where the people have entire confidence in their magistrates, are
convinced of the necessity of the tax for the support of the state, and
believe that it will be faithfully applied to that purpose, such
conscientious and voluntary payment may sometimes be expected. It is not
peculiar to the people of Hamburg.
The canton of Underwald, in Switzerland, is frequently ravaged by storms
and inundations, and it is thereby exposed to extraordinary expenses.
Upon such occasions the people assemble, and every one is said to
declare with the greatest frankness what he is worth, in order to be
taxed accordingly. At Zurich, the law orders, that in cases of
necessity, every one should be taxed in proportion to his revenue; the
amount of which he is obliged to declare upon oath. They have no
suspicion, it is said, that any of their fellow-citizens will deceive
them. At Basil, the principal revenue of the state arises from a small
custom upon goods exported. All the citizens make oath, that they will
pay every three months all the taxes imposed by law. All merchants, and
even all inn-keepers, are trusted with keeping themselves the account of
the goods which they sell, either within or without the territory. At
the end of every three months, they send this account to the treasurer,
with the amount of the tax computed at the bottom of it. It is not
suspected that the revenue suffers by this confidence.[61]
To oblige every citizen to declare publicly upon oath, the amount of his
fortune, must not, it seems, in those Swiss cantons, be reckoned a
hardship. At Hamburg it would be reckoned the greatest. Merchants
engaged in the hazardous projects of trade, all tremble at the thoughts
of being obliged, at all times, to expose the real state of their
circumstances. The ruin of their credit, and the miscarriage of their
projects, they foresee, would too often be the consequence. A sober and
parsimonious people, who are strangers to all such projects, do not feel
that they have occasion for any such concealment.
In Holland, soon after the exaltation of the late prince of Orange to
the stadtholdership, a tax of two per cent. or the fiftieth penny, as it
was called, was imposed upon the whole substance of every citizen. Every
citizen assessed himself, and paid his tax, in the same manner as at
Hamburg, and it was in general supposed to have been paid with great
fidelity. The people had at that time the greatest affection for their
new government, which they had just established by a general
insurrection. The tax was to be paid but once, in order to relieve the
state in a particular exigency. It was, indeed, too heavy to be
permanent. In a country where the market rate of interest seldom exceeds
three per cent., a tax of two per cent. amounts to thirteen shillings
and four pence in the pound, upon the highest neat revenue which is
commonly drawn from stock. It is a tax which very few people could pay,
without encroaching more or less upon their capitals. In a particular
exigency, the people may, from great public zeal, make a great effort,
and give up even a part of their capital, in order to relieve the state.
But it is impossible that they should continue to do so for any
considerable time; and if they did, the tax would soon ruin them so
completely, as to render them altogether incapable of supporting the
state.
The tax upon stock, imposed by the land tax bill in England, though it
is proportioned to the capital, is not intended to diminish or take away
any part of that capital. It is meant only to be a tax upon the interest
of money, proportioned to that upon the rent of land; so that when the
latter is at four shillings in the pound, the former may be at four
shillings in the pound too. The tax at Hamburg, and the still more
moderate taxes of Underwald and Zurich, are meant, in the same manner,
to be taxes, not upon the capital, but upon the interest or neat revenue
of stock. That of Holland was meant to be a tax upon the capital.
_Taxes upon the Profit of particular Employments._
In some countries, extraordinary taxes are imposed upon the profits of
stock; sometimes when employed in particular branches of trade, and
sometimes when employed in agriculture.
Of the former kind, are in England, the tax upon hawkers and pedlars,
that upon hackney-coaches and chairs, and that which the keepers of
ale-houses pay for a licence to retail ale and spiritous liquors. During
the late war, another tax of the same kind was proposed upon shops. The
war having been undertaken, it was said, in defence of the trade of the
country, the merchants, who were to profit by it, ought to contribute
towards the support of it.
A tax, however, upon the profits of stock employed in any particular
branch of trade, can never fall finally upon the dealers (who must in
all ordinary cases have their reasonable profit, and, where the
competition is free, can seldom have more than that profit), but always
upon the consumers, who must be obliged to pay in the price of the goods
the tax which the dealer advances; and generally with some overcharge.
A tax of this kind, when it is proportioned to the trade of the dealer,
is finally paid by the consumer, and occasions no oppression to the
dealer. When it is not so proportioned, but is the same upon all
dealers, though in this case, too, it is finally paid by the consumer,
yet it favours the great, and occasions some oppression to the small
dealer. The tax of five shillings a-week upon every hackney coach, and
that of ten shillings a-year upon every hackney chair, so far as it is
advanced by the different keepers of such coaches and chairs, is exactly
enough proportioned to the extent of their respective dealings. It
neither favours the great, nor oppresses the smaller dealer. The tax of
twenty shillings a-year for a licence to sell ale; of forty shillings
for a licence to sell spiritous liquors; and of forty shillings more for
a licence to sell wine, being the same upon all retailers, must
necessarily give some advantage to the great, and occasion some
oppression to the small dealers. The former must find it more easy to
get back the tax in the price of their goods than the latter. The
moderation of the tax, however, renders this inequality of less
importance; and it may to many people appear not improper to give some
discouragement to the multiplication of little ale-houses. The tax upon
shops, it was intended, should be the same upon all shops. It could not
well have been otherwise. It would have been impossible to proportion,
with tolerable exactness, the tax upon a shop to the extent of the trade
carried on in it, without such an inquisition as would have been
altogether insupportable in a free country. If the tax had been
considerable, it would have oppressed the small, and forced almost the
whole retail trade into the hands of the great dealers. The competition
of the former being taken away, the latter would have enjoyed a monopoly
of the trade; and, like all other monopolists, would soon have combined
to raise their profits much beyond what was necessary for the payment of
the tax. The final payment, instead of falling upon the shop-keeper,
would have fallen upon the consumer, with a considerable overcharge to
the profit of the shop-keeper. For these reasons, the project of a tax
upon shops was laid aside, and in the room of it was substituted the
subsidy, 1759.
What in France is called the personal taille, is perhaps, the most
important tax upon the profits of stock employed in agriculture, that is
levied in any part of Europe.
In the disorderly state of Europe, during the prevalence of the feudal
government, the sovereign was obliged to content himself with taxing
those who were too weak to refuse to pay taxes. The great lords, though
willing to assist him upon particular emergencies, refused to subject
themselves to any constant tax, and he was not strong enough to force
them. The occupiers of land all over Europe were, the greater part of
them, originally bond-men. Through the greater part of Europe, they were
gradually emancipated. Some of them acquired the property of landed
estates, which they held by some base or ignoble tenure, sometimes under
the king, and sometimes under some other great lord, like the ancient
copy-holders of England. Others, without acquiring the property,
obtained leases for terms of years, of the lands which they occupied
under their lord, and thus became less dependent upon him. The great
lords seem to have beheld the degree of prosperity and independency,
which this inferior order of men had thus come to enjoy, with a
malignant and contemptuous indignation, and willingly consented that the
sovereign should tax them. In some countries, this tax was confined to
the lands which were held in property by an ignoble tenure; and, in this
case, the taille was said to be real. The land tax established by the
late king of Sardinia, and the taille in the provinces of Languedoc,
Provence, Dauphine, and Brittany; in the generality of Montauban, and in
the elections of Agen and Condom, as well as in some other districts of
France; are taxes upon lands held in property by an ignoble tenure. In
other countries, the tax was laid upon the supposed profits of all those
who held, in farm or lease, lands belonging to other people, whatever
might be the tenure by which the proprietor held them; and in this case,
the taille was said to be personal. In the greater part of those
provinces of France, which are called the countries of elections, the
taille is of this kind. The real taille, as it is imposed only upon a
part of the lands of the country, is necessarily an unequal, but it is
not always an arbitrary tax, though it is so upon some occasions. The
personal taille, as it is intended to be proportioned to the profits of
a certain class of people, which can only be guessed at, is necessarily
both arbitrary and unequal.
In France, the personal taille at present (1775) annually imposed upon
the twenty generalities, called the countries of elections, amounts to
40,107,239 livres, 16 sous.[62] The proportion in which this sum is
assessed upon those different provinces, varies from year to year,
according to the reports which are made to the king's council concerning
the goodness or badness of the crops, as well as other circumstances,
which may either increase or diminish their respective abilities to pay.
Each generality is divided into a certain number of elections; and the
proportion in which the sum imposed upon the whole generality is divided
among those different elections, varies likewise from year to year,
according to the reports made to the council concerning their respective
abilities. It seems impossible, that the council, with the best
intentions, can ever proportion, with tolerable exactness, either of
these two assessments to the real abilities of the province or district
upon which they are respectively laid. Ignorance and misinformation must
always, more or less, mislead the most upright council. The proportion
which each parish ought to support of what is assessed upon the whole
election, and that which each individual ought to support of what is
assessed upon his particular parish, are both in the same manner varied
from year to year, according as circumstances are supposed to require.
These circumstances are judged of, in the one case, by the officers of
the election, in the other, by those of the parish; and both the one and
the other are, more or less, under the direction and influence of the
intendant. Not only ignorance and misinformation, but friendship, party
animosity, and private resentment, are said frequently to mislead such
assessors. No man subject to such a tax, it is evident, can ever be
certain, before he is assessed, of what he is to pay. He cannot even be
certain after he is assessed. If any person has been taxed who ought to
have been exempted, or if any person has been taxed beyond his
proportion, though both must pay in the mean time, yet if they complain,
and make good their complaints, the whole parish is reimposed next year,
in order to reimburse them. If any of the contributors become bankrupt
or insolvent, the collector is obliged to advance his tax; and the whole
parish is reimposed next year, in order to reimburse the collector. If
the collector himself should become bankrupt, the parish which elects
him must answer for his conduct to the receiver-general of the election.
But, as it might be troublesome for the receiver to prosecute the whole
parish, he takes at his choice five or six of the richest contributors,
and obliges them to make good what had been lost by the insolvency of
the collector. The parish is afterwards reimposed, in order to reimburse
those five or six. Such reimpositions are always over and above the
taille of the particular year in which they are laid on.
When a tax is imposed upon the profits of stock in a particular branch
of trade, the traders are all careful to bring no more goods to market
than what they can sell at a price sufficient to reimburse them from
advancing the tax. Some of them withdraw a part of their stocks from the
trade, and the market is more sparingly supplied than before. The price
of the goods rises, and the final payment of the tax falls upon the
consumer. But when a tax is imposed upon the profits of stock employed
in agriculture, it is not the interest of the farmers to withdraw any
part of their stock from that employment. Each farmer occupies a certain
quantity of land, for which he pays rent. For the proper cultivation of
this land, a certain quantity of stock is necessary; and by withdrawing
any part of this necessary quantity, the farmer is not likely to be more
able to pay either the rent or the tax. In order to pay the tax, it can
never be his interest to diminish the quantity of his produce, nor
consequently to supply the market more sparingly than before. The tax,
therefore, will never enable him to raise the price of his produce, so
as to reimburse himself, by throwing the final payment upon the
consumer. The farmer, however, must have his reasonable profit as well
as every other dealer, otherwise he must give up the trade. After the
imposition of a tax of this kind, he can get this reasonable profit only
by paying less rent to the landlord. The more he is obliged to pay in
the way of tax, the less he can afford to pay in the way of rent. A tax
of this kind, imposed during the currency of a lease, may, no doubt,
distress or ruin the farmer. Upon the renewal of the lease, it must
always fall upon the landlord.
In the countries where the personal taille takes place, the farmer is
commonly assessed in proportion to the stock which he appears to employ
in cultivation. He is, upon this account, frequently afraid to have a
good team of horses or oxen, but endeavours to cultivate with the
meanest and most wretched instruments of husbandry that he can. Such is
his distrust in the justice of his assessors, that he counterfeits
poverty, and wishes to appear scarce able to pay any thing, for fear of
being obliged to pay too much. By this miserable policy, he does not,
perhaps, always consult his own interest in the most effectual manner;
and he probably loses more by the diminution of his produce, than he
saves by that of his tax. Though, in consequence of this wretched
cultivation, the market is, no doubt, somewhat worse supplied; yet, the
small rise of price which this may occasion, as it is not likely even to
indemnify the farmer for the diminution of his produce, it is still
less likely to enable him to pay more rent to the landlord. The public,
the farmer, the landlord, all suffer more or less by this degraded
cultivation. That the personal taille tends, in many different ways, to
discourage cultivation, and consequently to dry up the principal source
of the wealth of every great country, I have already had occasion to
observe in the third book of this Inquiry.
What are called poll-taxes in the southern provinces of North America,
and the West India islands, annual taxes of so much a-head upon every
negro, are properly taxes upon the profits of a certain species of stock
employed in agriculture. As the planters, are the greater part of them,
both farmers and landlords, the final payment of the tax falls upon them
in their quality of landlords, without any retribution.
Taxes of so much a head upon the bondmen employed in cultivation, seem
anciently to have been common all over Europe. There subsists at present
a tax of this kind in the empire of Russia. It is probably upon this
account that poll-taxes of all kinds have often been represented as
badges of slavery. Every tax, however, is to the person who pays it, a
badge, not of slavery, but of liberty. It denotes that he is subject to
government, indeed; but that, as he has some property, he cannot himself
be the property of a master. A poll-tax upon slaves is altogether
different from a poll-tax upon freemen. The latter is paid by the
persons upon whom it is imposed; the former, by a different set of
persons. The latter is either altogether arbitrary, or altogether
unequal, and, in most cases, is both the one and the other; the former,
though in some respects unequal, different slaves being of different
values, is in no respect arbitrary. Every master, who knows the number
of his own slaves, knows exactly what he has to pay. Those different
taxes, however, being called by the same name, have been considered as
of the same nature.
The taxes which in Holland are imposed upon men and maid servants, are
taxes, not upon stock, but upon expense; and so far resemble the taxes
upon consumable commodities. The tax of a guinea a-head for every
man-servant, which has lately been imposed in Great Britain, is of the
same kind. It falls heaviest upon the middling rank. A man of two
hundred a-year may keep a single man-servant. A man of ten thousand
a-year will not keep fifty. It does not affect the poor.
Taxes upon the profits of stock, in particular employments, can never
affect the interest of money. Nobody will lend his money for less
interest to those who exercise the taxed, than to those who exercise the
untaxed employments. Taxes upon the revenue arising from stock in all
employments, where the government attempts to levy them with any degree
of exactness, will, in many cases, fall upon the interest of money. The
vingtieme, or twentieth penny, in France, is a tax of the same kind with
what is called the land tax in England, and is assessed, in the same
manner, upon the revenue arising upon land, houses, and stock. So far as
it affects stock, it is assessed, though not with great rigour, yet with
much more exactness than that part of the land tax in England which is
imposed upon the same fund. It, in many cases, falls altogether upon the
interest of money. Money is frequently sunk in France, upon what are
called contracts for the constitution of a rent; that is, perpetual
annuities, redeemable at any time by the debtor, upon payment of the sum
originally advanced, but of which this redemption is not exigible by the
creditor except in particular cases. The vingtieme seems not to have
raised the rate of those annuities, though it is exactly levied upon
them all.
APPENDIX TO ARTICLES I. AND II.--_Taxes upon the Capital Value of Lands,
Houses, and Stock._
While property remains in the possession of the same person, whatever
permanent taxes may have been imposed upon it, they have never been
intended to diminish or take away any part of its capital value, but
only some part of the revenue arising from it. But when property changes
hands, when it is transmitted either from the dead to the living, or
from the living to the living, such taxes have frequently been imposed
upon it as necessarily take away some part of its capital value.
The transference of all sorts of property from the dead to the living,
and that of immoveable property of land and houses from the living to
the living, are transactions which are in their nature either public and
notorious, or such as cannot be long concealed. Such transactions,
therefore, may be taxed directly. The transference of stock or moveable
property, from the living to the living, by the lending of money, is
frequently a secret transaction, and may always be made so. It cannot
easily, therefore, be taxed directly. It has been taxed indirectly in
two different ways; first, by requiring that the deed, containing the
obligation to repay, should be written upon paper or parchment which had
paid a certain stamp duty, otherwise not to be valid; secondly, by
requiring, under the like penalty of invalidity, that it should be
recorded either in a public or secret register, and by imposing certain
duties upon such registration. Stamp duties, and duties of registration,
have frequently been imposed likewise upon the deeds transferring
property of all kinds from the dead to the living, and upon those
transferring immoveable property from the living to the living;
transactions which might easily have been taxed directly.
The vicesima hereditatum, or the twentieth penny of inheritances,
imposed by Augustus upon the ancient Romans, was a tax upon the
transference of property from the dead to the living. Dion Cassius,[63]
the author who writes concerning it the least indistinctly, says, that
it was imposed upon all successions, legacies and donations, in case of
death, except upon those to the nearest relations, and to the poor.
Of the same kind is the Dutch tax upon successions.[64] Collateral
successions are taxed according to the degree of relation, from five to
thirty per cent. upon the whole value of the succession. Testamentary
donations, or legacies to collaterals, are subject to the like duties.
Those from husband to wife, or from wife to husband, to the fiftieth
penny. The luctuosa hereditas, the mournful succession of ascendants to
descendants, to the twentieth penny only. Direct successions, or those
of descendants to ascendants, pay no tax. The death of a father, to such
of his children as live in the same house with him, is seldom attended
with any increase, and frequently with a considerable diminution of
revenue; by the loss of his industry, of his office, or of some
life-rent estate, of which he may have been in possession. That tax
would be cruel and oppressive, which aggravated their loss, by taking
from them any part of his succession. It may, however, sometimes be
otherwise with those children, who, in the language of the Roman law,
are said to be emancipated; in that of the Scotch law, to be
foris-familiated; that is, who have received their portion, have got
families of their own, and are supported by funds separate and
independent of those of their father. Whatever part of his succession
might come to such children, would be a real addition to their fortune,
and might, therefore, perhaps, without more inconveniency than what
attends all duties of this kind, be liable to some tax.
The casualties of the feudal law were taxes upon the transference of
land, both from the dead to the living, and from the living to the
living. In ancient times, they constituted, in every part of Europe, one
of the principal branches of the revenue of the crown.
The heir of every immediate vassal of the crown paid a certain duty,
generally a year's rent, upon receiving the investiture of the estate.
If the heir was a minor, the whole rents of the estate, during the
continuance of the minority, devolved to the superior, without any other
charge besides the maintenance of the minor, and the payment of the
widow's dower, when there happened to be a dowage upon the land. When
the minor came to be of age, another tax, called relief, was still due
to the superior, which generally amounted likewise to a year's rent. A
long minority, which, in the present times, so frequently disburdens a
great estate of all its incumbrances, and restores the family to their
ancient splendour, could in those times have no such effect. The waste,
and not the disincumbrance of the estate, was the common effect of a
long minority.
By a feudal law, the vassal could not alienate without the consent of
his superior, who generally extorted a fine or composition on granting
it. This fine, which was at first arbitrary, came, in many countries, to
be regulated at a certain portion of the price of the land. In some
countries, where the greater part of the other feudal customs have gone
into disuse, this tax upon the alienation of land still continues to
make a very considerable branch of the revenue of the sovereign. In the
canton of Berne it is so high as a sixth part of the price of all noble
fiefs, and a tenth part of that of all ignoble ones.[65] In the canton
of Lucern, the tax upon the sale of land is not universal, and takes
place only in certain districts. But if any person sells his land in
order to remove out of the territory, he pays ten per cent. upon the
whole price of the sale.[66] Taxes of the same kind, upon the sale
either of all lands, or of lands held by certain tenures, take place in
many other countries, and make a more or less considerable branch of the
revenue of the sovereign.
Such transactions may be taxed indirectly, by means either of stamp
duties, or of duties upon registration; and those duties either may, or
may not, be proportioned to the value of the subject which is
transferred.
In Great Britain, the stamp duties are higher or lower, not so much
according to the value of the property transferred (an eighteen-penny or
half-crown stamp being sufficient upon a bond for the largest sum of
money), as according to the nature of the deed. The highest do not
exceed six pounds upon every sheet of paper, or skin of parchment; and
these high duties fall chiefly upon grants from the crown, and upon
certain law proceedings, without any regard to the value of the subject.
There are, in Great Britain, no duties on the registration of deeds or
writings, except the fees of the officers who keep the register; and
these are seldom more than a reasonable recompense for their labour. The
crown derives no revenue from them.
In Holland[67] there are both stamp duties and duties upon registration;
which in some cases are, and in some are not, proportioned to the value
of the property transferred. All testaments must be written upon stamped
paper, of which the price is proportioned to the property disposed of;
so that there are stamps which cost from three pence or three stivers
a-sheet, to three hundred florins, equal to about twenty-seven pounds
ten shillings of our money. If the stamp is of an inferior price to what
the testator ought to have made use of, his succession is confiscated.
This is over and above all their other taxes on succession. Except bills
of exchange, and some other mercantile bills, all other deeds, bonds,
and contracts, are subject to a stamp duty. This duty, however, does not
rise in proportion to the value of the subject. All sales of land and of
houses, and all mortgages upon either, must be registered, and, upon
registration, pay a duty to the state of two and a-half per cent. upon
the amount of the price or of the mortgage. This duty is extended to the
sale of all ships and vessels of more than two tons burden, whether
decked or undecked. These, it seems, are considered as a sort of houses
upon the water. The sale of moveables, when it is ordered by a court of
justice, is subject to the like duty of two and a-half per cent.
In France, there are both stamp duties and duties upon registration. The
former are considered as a branch of the aids of excise, and, in the
provinces where those duties take place, are levied by the excise
officers. The latter are considered as a branch of the domain of the
crown, and are levied by a different set of officers.
Those modes of taxation by stamp duties and by duties upon registration,
are of very modern invention. In the course of little more than a
century, however, stamp duties have, in Europe, become almost universal,
and duties upon registration extremely common. There is no art which one
government sooner learns of another, than that of draining money from
the pockets of the people.
Taxes upon the transference of property from the dead to the living,
fall finally, as well as immediately, upon the persons to whom the
property is transferred. Taxes upon the sale of land fall altogether
upon the seller. The seller is almost always under the necessity of
selling, and must, therefore, take such a price as he can get. The buyer
is scarce ever under the necessity of buying, and will, therefore, only
give such a price as he likes. He considers what the land will cost him,
in tax and price together. The more he is obliged to pay in the way of
tax, the less he will be disposed to give in the way of price. Such
taxes, therefore, fall almost always upon a necessitous person, and
must, therefore, be frequently very cruel and oppressive. Taxes upon the
sale of new-built houses, where the building is sold without the ground,
fall generally upon the buyer, because the builder must generally have
his profit; otherwise he must give up the trade. If he advances the tax,
therefore, the buyer must generally repay it to him. Taxes upon the sale
of old houses, for the same reason as those upon the sale of land, fall
generally upon the seller; whom, in most cases, either conveniency or
necessity obliges to sell. The number of new-built houses that are
annually brought to market, is more or less regulated by the demand.
Unless the demand is such as to afford the builder his profit, after
paying all expenses, he will build no more houses. The number of old
houses which happen at any time to come to market, is regulated by
accidents, of which the greater part have no relation to the demand. Two
or three great bankruptcies in a mercantile town, will bring many houses
to sale, which must be sold for what can be got for them. Taxes upon the
sale of ground-rents fall altogether upon the seller, for the same
reason as those upon the sale of lands. Stamp duties, and duties upon
the registration of bonds and contracts for borrowed money, fall
altogether upon the borrower, and, in fact, are always paid by him.
Duties of the same kind upon law proceedings fall upon the suitors. They
reduce to both the capital value of the subject in dispute. The more it
costs to acquire any property, the less must be the neat value of it
when acquired.
All taxes upon the transference of property of every kind, so far as
they diminish the capital value of that property, tend to diminish the
funds destined for the maintenance of productive labour. They are all
more or less unthrifty taxes that increase the revenue of the sovereign,
which seldom maintains any but unproductive labourers, at the expense of
the capital of the people, which maintains none but productive.
Such taxes, even when they are proportioned to the value of the property
transferred, are still unequal; the frequency of transference not being
always equal in property of equal value. When they are not proportioned
to this value, which is the case with the greater part of the stamp
duties and duties of registration, they are still more so. They are in
no respect arbitrary, but are, or may be, in all cases, perfectly clear
and certain. Though they sometimes fall upon the person who is not very
able to pay, the time of payment is, in most cases, sufficiently
convenient for him. When the payment becomes due, he must, in most
cases, have the money to pay. They are levied at very little expense,
and in general subject the contributors to no other inconveniency,
besides always the unavoidable one of paying the tax.
In France, the stamp duties are not much complained of. Those of
registration, which they call the Controle, are. They give occasion, it
is pretended, to much extortion in the officers of the farmers-general
who collect the tax, which is in a great measure arbitrary and
uncertain. In the greater part of the libels which have been written
against the present system of finances in France, the abuses of the
controle make a principal article. Uncertainty, however, does not seem
to be necessarily inherent in the nature of such taxes. If the popular
complaints are well founded, the abuse must arise, not so much from the
nature of the tax as from the want of precision and distinctness in the
words of the edicts or laws which impose it.
The registration of mortgages, and in general of all rights upon
immoveable property, as it gives great security both to creditors and
purchasers, is extremely advantageous to the public. That of the greater
part of deeds of other kinds, is frequently inconvenient and even
dangerous to individuals, without any advantage to the public. All
registers which, it is acknowledged, ought to be kept secret, ought
certainly never to exist. The credit of individuals ought certainly
never to depend upon so very slender a security, as the probity and
religion of the inferior officers of revenue. But where the fees of
registration have been made a source of revenue to the sovereign,
register-offices have commonly been multiplied without end, both for the
deeds which ought to be registered, and for those which ought not. In
France there are several different sorts of secret registers. This
abuse, though not perhaps a necessary, it must be acknowledged, is a
very natural effect of such taxes.
Such stamp duties as those in England upon cards and dice, upon
newspapers and periodical pamphlets, &c. are properly taxes upon
consumption; the final payment falls upon the persons who use or consume
such commodities. Such stamp duties as those upon licences to retail
ale, wine, and spiritous liquors, though intended, perhaps, to fall upon
the profits of the retailers, are likewise finally paid by the consumers
of those liquors. Such taxes, though called by the same name, and levied
by the same officers, and in the same manner with the stamp duties above
mentioned upon the transference of property, are, however, of a quite
different nature, and fall upon quite different funds.
ART. III.--_Taxes upon the Wages of Labour._
The wages of the inferior classes of workmen, I have endeavoured to show
in the first book are everywhere necessarily regulated by two different
circumstances; the demand for labour, and the ordinary or average price
of provisions. The demand for labour, according as it happens to be
either increasing, stationary or declining; or to require an increasing,
stationary, or declining population; regulates the subsistence of the
labourer, and determines in what degree it shall be either liberal,
moderate, or scanty. The ordinary average price of provisions determines
the quantity of money which must be paid to the workman, in order to
enable him, one year with another, to purchase this liberal, moderate,
or scanty subsistence. While the demand for the labour and the price of
provisions, therefore, remain the same, a direct tax upon the wages of
labour can have no other effect, than to raise them somewhat higher than
the tax. Let us suppose, for example, that, in particular place, the
demand for labour and the price of provisions were such as to render ten
shillings a-week the ordinary wages of labour; and that a tax of
one-fifth, or four shillings in the pound, was imposed upon wages. If
the demand for labour and the price of provisions remained the same, it
would still be necessary that the labourer should, in that place, earn
such a subsistence as could be bought only for ten shillings a-week; or
that, after paying the tax, he should have ten shillings a-week free
wages. But, in order to leave him such free wages, after paying such a
tax, the price of labour must, in that place, soon rise, not to twelve
shillings a-week only, but to twelve and sixpence; that is, in order to
enable him to pay a tax of one-fifth, his wages must necessarily soon
rise, not one-fifth part only, but one-fourth. Whatever was the
proportion of the tax, the wages of labour must, in all cases rise, not
only in that proportion, but in a higher proportion. If the tax for
example, was one-tenth, the wages of labour must necessarily soon rise,
not one-tenth part only, but one-eighth.
A direct tax upon the wages of labour, therefore, though the labourer
might, perhaps, pay it out of his hand, could not properly be said to be
even advanced by him; at least if the demand for labour and the average
price of provisions remained the same after the tax as before it. In all
such cases, not only the tax, but something more than the tax, would in
reality be advanced by the person who immediately employed him. The
final payment would, in different cases, fall upon different persons.
The rise which such a tax might occasion in the wages of manufacturing
labour would be advanced by the master manufacturer, who would both be
entitled and obliged to charge it, with a profit, upon the price of his
goods. The final payment of this rise of wages, therefore, together with
the additional profit of the master manufacturer, would fall upon the
consumer. The rise which such a tax might occasion in the wages of
country labour would be advanced by the farmer, who, in order to
maintain the name number of labourers as before, would he obliged to
employ a greater capital. In order to get back this greater capital,
together with the ordinary profits of stock, it would be necessary that
he should retain a larger portion, or, what comes to the same thing, the
price of a larger portion, of the produce of the land, and,
consequently, that he should pay less rent to the landlord. The final
payment of this rise of wages, therefore, would, in this case, fall upon
the landlord, together with the additional profit of the farmer who had
advanced it. In all cases, a direct tax upon the wages of labour must,
in the long-run, occasion both a greater reduction in the rent of land,
and a greater rise in the price of manufactured goods than would have
followed from the proper assessment of a sum equal to the produce of the
tax, partly upon the rent of land, and partly upon consumable
commodities.
If direct taxes upon the wages of labour have not always occasioned a
proportionable rise in those wages, it is because they have generally
occasioned a considerable fall in the demand of labour. The declension
of industry, the decrease of employment for the poor, the diminution of
the annual produce of the land and labour of the country, have generally
been the effects of such taxes. In consequence of them, however, the
price of labor must always be higher than it otherwise would have been
in the actual state of the demand; and this enhancement of price,
together with the profit of those who advance it, must always be finally
paid by the landlords and consumers.
A tax upon the wages of country labour does not raise the price of the
rude produce of land in proportion to the tax; for the same reason that
a tax upon the farmer's profit does not raise that price in that
proportion.
Absurd and destructive as such taxes are, however, they take place in
many countries. In France, that part of the taille which is charged upon
the industry of workmen and day-labourers in country villages, is
properly a tax of this kind. Their wages are computed according to the
common rate of the district in which they reside; and, that they may be
as little liable as possible to any overcharge, their yearly gains are
estimated at no more than two hundred working days in the year.[68] The
tax of each individual is varied from year to year, according to
different circumstances, of which the collector or the commissary, whom
the intendant appoints to assist him, are the judges. In Bohemia, in
consequence of the alteration in the system of finances which was begun
in 1748, a very heavy tax is imposed upon the industry of artificers.
They are divided into four classes. The highest class pay a hundred
florins a-year, which, at two-and-twenty pence half penny a-florin,
amounts to L.9 : 7 : 6. The second class are taxed at seventy; the third
at fifty; and the fourth, comprehending artificers in villages, and the
lowest class of those in towns, at twenty-five florins.[69]
The recompence of ingenious artists, and of men of liberal professions,
I have endeavoured to show in the first book, necessarily keeps a
certain proportion to the emoluments of inferior trades. A tax upon this
recompence, therefore, could have no other effect than to raise it
somewhat higher than in proportion to the tax. If it did not rise in
this manner, the ingenious arts and the liberal professions, being no
longer upon a level with other trades, would be so much deserted, that
they would soon return to that level.
The emoluments of offices are not, like those of trades and professions,
regulated by the free competition of the market, and do not, therefore,
always bear a just proportion to what the nature of the employment
requires. They are, perhaps, in most countries, higher than it requires;
the persons who have the administration of government being generally
disposed to regard both themselves and their immediate dependents,
rather more than enough. The emoluments offices, therefore, can, in most
cases, very well bear to be taxed. The persons, besides, who enjoy
public offices, especially the more lucrative, are, in all countries,
the objects of general envy; and a tax upon their emoluments, even
though it should be somewhat higher than upon any other sort of revenue,
is always a very popular tax. In England, for example, when, by the
land-tax, every other sort of revenue was supposed to be assessed at
four shillings in the pound, it was very popular to lay a real tax of
five shillings and sixpence in the pound upon the salaries of offices
which exceeded a hundred pounds a-year; the pensions of the younger
branches of the royal family, the pay of the officers of the army and
navy, and a few others less obnoxious to envy, excepted. There are in
England no other direct taxes upon the wages of labour.
ART. IV.--_Taxes which it is intended should fall indifferently upon
every different Species of Revenue._
The taxes which it is intended should fall indifferently upon every
different species of revenue, are capitation taxes, and taxes upon
consumable commodities. These must be paid indifferently, from whatever
revenue the contributors may possess; from the rent of their land, from
the profits of their stock, or from the wages of their labour.
_Capitation Taxes._
Capitation taxes, if it is attempted to proportion them to the fortune
or revenue of each contributor, become altogether arbitrary. The state
of a man's fortune varies from day to day; and, without an inquisition,
more intolerable than any tax, and renewed at least once every year, can
only be guessed at. His assessment, therefore, must, in most cases,
depend upon the good or bad humour of his assessors, and must,
therefore, be altogether arbitrary and uncertain.
Capitation taxes, if they are proportioned, not to the supposed fortune,
but to the rank of each contributor, become altogether unequal; the
degrees of fortune being frequently unequal in the same degree of rank.
Such taxes, therefore, if it is attempted to render them equal, become
altogether arbitrary and uncertain; and if it is attempted to render
them certain and not arbitrary, become altogether unequal. Let the tax
be light or heavy, uncertainty is always a great grievance. In a light
tax, a considerable degree of inequality may be supported; in a heavy
one, it is altogether intolerable.
In the different poll-taxes which took place in England during the reign
of William III. the contributors were, the greater part of them,
assessed according to the degree of their rank; as dukes, marquises,
earls, viscounts, barons, esquires, gentlemen, the eldest and youngest
sons of peers, &c. All shop-keepers and tradesmen worth more than three
hundred pounds, that is, the better sort of them, were subject to the
same assessment, how great soever might be the difference in their
fortunes. Their rank was more considered than their fortune. Several of
those who, in the first poll-tax, were rated according to their supposed
fortune, were afterwards rated according to their rank. Serjeants,
attorneys, and proctors at law, who, in the first poll-tax, were
assessed at three shillings in the pound of their supposed income, were
afterwards assessed as gentlemen. In the assessment of a tax which was
not very heavy, a considerable degree of inequality had been found less
insupportable than any degree of uncertainty.
In the capitation which has been levied in France, without any
interruption, since the beginning of the present century, the highest
orders of people are rated according to their rank, by an invariable
tariff; the lower orders of people, according to what is supposed to be
their fortune, by an assessment which varies from year to year. The
officers of the king's court, the judges, and other officers in the
superior courts of justice, the officers of the troops, &c. are assessed
in the first manner. The inferior ranks of people in the provinces are
assessed in the second. In France, the great easily submit to a
considerable degree of inequality in a tax which, so far as it affects
them, is not a very heavy one; but could not brook the arbitrary
assessment of an intendant.
The inferior ranks of people must, in that country, suffer patiently the
usage which their superiors think proper to give them.
In England, the different poll-taxes never produced the sum which had
been expected from them, or which it was supposed they might have
produced, had they been exactly levied. In France, the capitation always
produces the sum expected from it. The mild government of England, when
it assessed the different ranks of people to the poll-tax, contented
itself with what that assessment happened to produce, and required no
compensation for the loss which the state might sustain, either by those
who could not pay, or by those who would not pay (for there were many
such), and who, by the indulgent execution of the law, were not forced
to pay. The more severe government of France assesses upon each
generality a certain sum, which the intendant must find as he can. If
any province complains of being assessed too high, it may, in the
assessment of next year, obtain an abatement proportioned to the
overcharge of the year before; but it must pay in the mean time. The
intendant, in order to be sure of finding the sum assessed upon his
generality, was empowered to assess it in a larger sum, that the failure
or inability of some of the contributors might be compensated by the
overcharge of the rest; and till 1765, the fixation of this surplus
assessment was left altogether to his discretion. In that year, indeed,
the council assumed this power to itself. In the capitation of the
provinces, it is observed by the perfectly well informed author of the
Memoirs upon the Impositions in France, the proportion which falls upon
the nobility, and upon those whose privileges exempt them from the
taille, is the least considerable. The largest falls upon those subject
to the taille, who are assessed to the capitation at so much a-pound of
what they pay to that other tax.
Capitation taxes, so far as they are levied upon the lower ranks of
people, are direct taxes upon the wages of labour, and are attended with
all the inconveniencies of such taxes.
Capitation taxes are levied at little expense; and, where they are
rigorously exacted, afford a very sure revenue to the state. It is upon
this account that, in countries where the ease, comfort, and security of
the inferior ranks of people are little attended to, capitation taxes
are very common. It is in general, however, but a small part of the
public revenue, which, in a great empire, has ever been drawn from such
taxes; and the greatest sum which they have ever afforded, might always
have been found in some other way much more convenient to the people.
_Taxes upon Consumable Commodities._
The impossibility of taxing the people, in proportion to their revenue,
by any capitation, seems to have given occasion to the invention of
taxes upon consumable commodities. The state not knowing how to tax,
directly and proportionably, the revenue of its subjects, endeavours to
tax it indirectly by taxing their expense, which, it is supposed, will,
in most cases, be nearly in proportion to their revenue. Their expense
is taxed, by taxing the consumable commodities upon which it is laid
out.
Consumable commodities are either necessaries or luxuries.
By necessaries I understand, not only the commodities which are
indispensibly necessary for the support of life, but whatever the custom
of the country renders it indecent for creditable people, even of the
lowest order, to be without. A linen shirt, for example, is, strictly
speaking, not a necessary of life. The Greeks and Romans lived, I
suppose, very comfortably, though they had no linen. But in the present
times, through the greater part of Europe, a creditable day-labourer
would be ashamed to appear in public without a linen shirt, the want of
which would be supposed to denote that disgraceful degree of poverty,
which, it is presumed, nobody can well fall into without extreme bad
conduct. Custom, in the same manner, has rendered leather shoes a
necessary of life in England. The poorest creditable person, of either
sex, would be ashamed to appear in public without them. In Scotland,
custom has rendered them a necessary of life to the lowest order of men;
but not to the same order of women, who may, without any discredit, walk
about barefooted. In France, they are necessaries neither to men nor to
women; the lowest rank of both sexes appearing there publicly, without
any discredit, sometimes in wooden shoes, and sometimes barefooted.
Under necessaries, therefore, I comprehend, not only those things which
nature, but those things which the established rules of decency have
rendered necessary to the lowest rank of people. All other things I call
luxuries, without meaning, by this appellation, to throw the smallest
degree of reproach upon the temperate use of them. Beer and ale, for
example, in Great Britain, and wine, even in the wine countries, I call
luxuries. A man of any rank may, without any reproach, abstain totally
from tasting such liquors. Nature does not render them necessary for the
support of life; and custom nowhere renders it indecent to live without
them.
As the wages of labour are everywhere regulated, partly by the demand
for it, and partly by the average price of the necessary articles of
subsistence; whatever raises this average price must necessarily raise
those wages; so that the labourer may still be able to purchase that
quantity of those necessary articles which the state of the demand for
labour, whether increasing, stationary, or declining, requires that he
should have.[70] A tax upon those articles necessarily raises their
price somewhat higher than the amount of the tax, because the dealer,
who advances the tax, must generally get it back, with a profit. Such a
tax must, therefore, occasion a rise in the wages of labour,
proportionable to this rise of price.
It is thus that a tax upon the necessaries of life operates exactly in
the same manner as a direct tax upon the wages of labour. The labourer,
though he may pay it out of his hand, cannot, for any considerable time
at least, be properly said even to advance it. It must always, in the
long-run, be advanced to him by his immediate employer, in the advanced
state of wages. His employer, if he is a manufacturer, will charge upon
the price of his goods the rise of wages, together with a profit, so
that the final payment of the tax, together with this overcharge, will
fall upon the consumer. If his employer is a farmer, the final payment,
together with a like overcharge, will fall upon the rent of the
landlord.
It is otherwise with taxes upon what I call luxuries, even upon those of
the poor. The rise in the price of the taxed commodities, will not
necessarily occasion any rise in the wages of labour. A tax upon
tobacco, for example, though a luxury of the poor, as well as of the
rich, will not raise wages. Though it is taxed in England at three
times, and in France at fifteen times its original price, those high
duties seem to have no effect upon the wages of labour. The same thing
may be said of the taxes upon tea and sugar, which, in England and
Holland, have become luxuries of the lowest ranks of people; and of
those upon chocolate, which, in Spain, is said to have become so.
The different taxes which, in Great Britain, have, in the course of the
present century, been imposed upon spiritous liquors, are not supposed
to have had any effect upon the wages of labour. The rise in the price
of porter, occasioned by an additional tax of three shillings upon the
barrel of strong beer, has not raised the wages of common labour in
London. These were about eighteen pence or twenty pence a-day before the
tax, and they are not more now.
The high price of such commodities does not necessarily diminish the
ability of the inferior ranks of people to bring up families. Upon the
sober and industrious poor, taxes upon such commodities act as sumptuary
laws, and dispose them either to moderate, or to refrain altogether from
the use of superfluities which they can no longer easily afford. Their
ability to bring up families, in consequence of this forced frugality,
instead of being diminished, is frequently, perhaps, increased by the
tax. It is the sober and industrious poor who generally bring up the
most numerous families, and who principally supply the demand for useful
labour. All the poor, indeed, are not sober and industrious; and the
dissolute and disorderly might continue to indulge themselves in the use
of such commodities, after this rise of price, in the same manner as
before, without regarding the distress which this indulgence might bring
upon their families. Such disorderly persons, however, seldom rear up
numerous families, their children generally perishing from neglect,
mismanagement, and the scantiness or unwholesomeness of their food. If,
by the strength of their constitution, they survive the hardships to
which the bad conduct of their parents exposes them, yet the example of
that bad conduct commonly corrupts their morals; so that, instead of
being useful to society by their industry, they become public nuisances
by their vices and disorders. Though the advanced price of the luxuries
of the poor, therefore, might increase somewhat the distress of such
disorderly families, and thereby diminish somewhat their ability to
bring up children, it would not probably diminish much the useful
population of the country.
Any rise in the average price of necessaries, unless it be compensated
by a proportionable rise in the wages of labour, must necessarily
diminish, more or less, the ability of the poor to bring up numerous
families, and, consequently, to supply the demand for useful labour;
whatever may be the state of that demand, whether increasing,
stationary, or declining; or such as requires an increasing, stationary,
or declining population.
Taxes upon luxuries have no tendency to raise the price of any other
commodities, except that of the commodities taxed. Taxes upon
necessaries, by raising the wages of labour, necessarily tend to raise
the price of all manufactures, and consequently to diminish the extent
of their sale and consumption. Taxes upon luxuries are finally paid by
the consumers of the commodities taxed, without any retribution. They
fall indifferently upon every species of revenue, the wages of labour,
the profits of stock, and the rent of land. Taxes upon necessaries, so
far as they affect the labouring poor, are finally paid, partly by
landlords, in the diminished rent of their lands, and partly by rich
consumers, whether landlords or others, in the advanced price of
manufactured goods; and always with a considerable overcharge. The
advanced price of such manufactures as are real necessaries of life, and
are destined for the consumption of the poor, of coarse woollens, for
example, must be compensated to the poor by a farther advancement of
their wages. The middling and superior ranks of people, if they
understood their own interest, ought always to oppose all taxes upon the
necessaries of life, as well as all taxes upon the wages of labour. The
final payment of both the one and the other falls altogether upon
themselves, and always with a considerable overcharge. They fall
heaviest upon the landlords, who always pay in a double capacity; in
that of landlords, by the reduction, of their rent; and in that of rich
consumers, by the increase of their expense. The observation of Sir
Matthew Decker, that certain taxes are, in the price of certain goods,
sometimes repeated and accumulated four or five times, is perfectly just
with regard to taxes upon the necessaries of life. In the price of
leather, for example, you must pay not only for the tax upon the leather
of your own shoes, but for a part of that upon those of the shoemaker
and the tanner. You must pay, too, for the tax upon the salt, upon the
soap, and upon the candles which those workmen consume while employed in
your service; and for the tax upon the leather, which the salt-maker,
the soap-maker, and the candle-maker consume, while employed in their
service.
In Great Britain, the principal taxes upon the necessaries of life, are
those upon the four commodities just now mentioned, salt, leather, soap,
and candles.
Salt is a very ancient and a very universal subject of taxation. It was
taxed among the Romans, and it is so at present in, I believe, every
part of Europe. The quantity annually consumed by any individual is so
small, and may be purchased so gradually, that nobody, it seems to have
been thought, could feel very sensibly even a pretty heavy tax upon it.
It is in England taxed at three shillings and fourpence a bushel; about
three times the original price of the commodity. In some other
countries, the tax is still higher. Leather is a real necessary of life.
The use of linen renders soap such. In countries where the winter nights
are long, candles are a necessary instrument of trade. Leather and soap
are in Great Britain taxed at three halfpence a-pound; candles at a
penny; taxes which, upon the original price of leather, may amount to
about eight or ten per cent.; upon that of soap, to about twenty or
five-and-twenty per cent.; and upon that of candles to about fourteen or
fifteen per cent.; taxes which, though lighter than that upon salt, are
still very heavy. As all those four commodities are real necessaries of
life, such heavy taxes upon them must increase some what the expense of
the sober and industrious poor, and must consequently raise more or less
the wages of their labour.
In a country where the winters are so cold as in Great Britain, fuel is,
during that season, in the strictest sense of the word, a necessary of
life, not only for the purpose of dressing victuals, but for the
comfortable subsistence of many different sorts of workmen who work
within doors; and coals are the cheapest of all fuel. The price of fuel
has so important an influence upon that of labour, that all over Great
Britain, manufactures have confined themselves principally to the coal
countries; other parts of the country, on account of the high price of
this necessary article, not being able to work so cheap. In some
manufactures, besides, coal is a necessary instrument of trade; as in
those of glass, iron, and all other metals. If a bounty could in any
case be reasonable, it might perhaps be so upon the transportation of
coals from those parts of the country in which they abound, to those in
which they are wanted. But the legislature, instead of a bounty, has
imposed a tax of three shillings and threepence a-ton upon coals carried
coastways; which, upon most sorts of coal, is more than sixty per cent.
of the original price at the coal pit. Coals carried, either by land or
by inland navigation, pay no duty. Where they are naturally cheap, they
are consumed duty free; where they are naturally dear, they are loaded
with a heavy duty.
Such taxes, though they raise the price of subsistence, and consequently
the wages of labour, yet they afford a considerable revenue to
government, which it might not be easy to find in any other way. There
may, therefore, be good reasons for continuing them. The bounty upon the
exportation of corn, so far as it tends, in the actual state of tillage,
to raise the price of that necessary article, produces all the like bad
effects; and instead of affording any revenue, frequently occasions a
very great expense to government. The high duties upon the importation
of foreign corn, which, in years of moderate plenty, amount to a
prohibition; and the absolute prohibition of the importation, either of
live cattle, or of salt provisions, which takes place in the ordinary
state of the law, and which, on account of the scarcity, is at present
suspended for a limited time with regard to Ireland and the British
plantations, have all had the bad effects of taxes upon the necessaries
of life, and produce no revenue to government. Nothing seems necessary
for the repeal of such regulations, but to convince the public of the
futility of that system in consequence of which they have been
established.
Taxes upon the necessaries of life are much higher in many other
countries than in Great Britain. Duties upon flour and meal when ground
at the mill, and upon bread when baked at the oven, take place in many
countries. In Holland the money-price of the bread consumed in towns is
supposed to be doubled by means of such taxes. In lieu of a part of
them, the people who live in the country, pay every year so much a-head,
according to the sort of bread they are supposed to consume. Those who
consume wheaten bread pay three guilders fifteen stivers; about six
shillings and ninepence halfpenny. These, and some other taxes of the
same kind, by raising the price of labour, are said to have ruined the
greater part of the manufactures of Holland[71]. Similar taxes, though
not quite so heavy, take place in the Milanese, in the states of Genoa,
in the duchy of Modena, in the duchies of Parma, Placentia, and
Guastalla, and the Ecclesiastical state. A French author[72] of some
note, has proposed to reform the finances of his country, by
substituting in the room of the greater part of other taxes, this most
ruinous of all taxes. There is nothing so absurd, says Cicero, which has
not sometimes been asserted by some philosophers.
Taxes upon butcher's meat are still more common than those upon bread.
It may indeed be doubted, whether butcher's meat is any where a
necessary of life. Grain and other vegetables, with the help of milk,
cheese, and butter, or oil, where butter is not to be had, it is known
from experience, can, without any butcher's meat, afford the most
plentiful, the most wholesome, the most nourishing, and the most
invigorating diet. Decency nowhere requires that any man should eat
butcher's meat, as it in most places requires that he should wear a
linen shirt or a pair of leather shoes.
Consumable commodities, whether necessaries or luxuries, may be taxed in
two different ways. The consumer may either pay an annual sum on account
of his using or consuming goods of a certain kind; or the goods may be
taxed while they remain in the hands of the dealer, and before they are
delivered to the consumer. The consumable goods which last a
considerable time before they are consumed altogether, are most properly
taxed in the one way; those of which the consumption is either immediate
or more speedy, in the other. The coach-tax and plate-tax are examples
of the former method of imposing; the greater part of the other duties
of excise and customs, of the latter.
A coach may, with good management, last ten or twelve years. It might be
taxed, once for all, before it comes out of the hands of the
coach-maker. But it is certainly more convenient for the buyer to pay
four pounds a-year for the privilege of keeping a coach, than to pay all
at once forty or forty-eight pounds additional price to the
coach-maker; or a sum equivalent to what the tax is likely to cost him
during the time he uses the same coach. A service of plate in the same
manner, may last more than a century. It is certainly easier for the
consumer to pay five shillings a-year for every hundred ounces of plate,
near one per cent. of the value, than to redeem this long annuity at
five-and-twenty of thirty years purchase, which would enhance the price
at least five-and-twenty or thirty per cent. The different taxes which
affect houses, are certainly more conveniently paid by moderate annual
payments, than by a heavy tax of equal value upon the first building or
sale of the house.
It was the well-known proposal of Sir Matthew Decker, that all
commodities, even those of which the consumption is either immediate or
speedy, should be taxed in this manner; the dealer advancing nothing,
but the consumer paying a certain annual sum for the licence to consume
certain goods. The object of his scheme was to promote all the different
branches of foreign trade, particularly the carrying trade, by taking
away all duties upon importation and exportation, and thereby enabling
the merchant to employ his whole capital and credit in the purchase of
goods and the freight of ships, no part of either being diverted towards
the advancing of taxes. The project, however, of taxing, in this manner,
goods of immediate or speedy consumption, seems liable to the four
following very important objections. First, the tax would be more
unequal, or not so well proportioned to the expense and consumption of
the different contributors, as in the way in which it is commonly
imposed. The taxes upon ale, wine, and spiritous liquors, which are
advanced by the dealers, are finally paid by the different consumers,
exactly in proportion to their respective consumption. But if the tax
were to be paid by purchasing a licence to drink those liquors, the
sober would, in proportion to his consumption, be taxed much more
heavily than the drunken consumer. A family which exercised great
hospitality, would be taxed much more lightly than one who entertained
fewer guests. Secondly, this mode of taxation, by paying for an annual,
half-yearly, or quarterly licence to consume certain goods, would
diminish very much one of the principal conveniences of taxes upon goods
of speedy consumption; the piece-meal payment. In the price of
threepence halfpenny, which is at present paid for a pot of porter, the
different taxes upon malt, hops, and beer, together with the
extraordinary profit which the brewer charges for having advanced them,
may perhaps amount to about three halfpence. If a workman can
conveniently spare those three halfpence, he buys a pot of porter. If he
cannot, he contents himself with a pint; and, as a penny saved is a
penny got, he thus gains a farthing by his temperance. He pays the tax
piece-meal, as he can afford to pay it, and when he can afford to pay
it, and every act of payment is perfectly voluntary, and what he can
avoid if he chuses to do so. Thirdly, such taxes would operate less as
sumptuary laws. When the licence was once purchased, whether the
purchaser drunk much or drunk little, his tax would he the same.
Fourthly, if a workman were to pay all at once, by yearly, half-yearly,
or quarterly payments, a tax equal to what he at present pays, with
little or no inconveniency, upon all the different pots and pints of
porter which he drinks in any such period of time, the sum might
frequently distress him very much. This mode of taxation, therefore, it
seems evident, could never, without the most grievous oppression,
produce a revenue nearly equal to what is derived from the present mode
without any oppression. In several countries, however, commodities of an
immediate or very speedy consumption are taxed in this manner. In
Holland, people pay so much a-head for a licence to drink tea. I have
already mentioned a tax upon bread, which, so far as it is consumed in
farm houses and country villages, is there levied in the same manner.
The duties of excise are imposed chiefly upon goods of home produce,
destined for home consumption. They are imposed only upon a few sorts of
goods of the most general use. There can never be any doubt, either
concerning the goods which are subject to those duties, or concerning
the particular duty which each species of goods is subject to. They fall
almost altogether upon what I call luxuries, excepting always the four
duties above mentioned, upon salt, soap, leather, candles, and perhaps
that upon green glass.
The duties of customs are much more ancient than those of excise. They
seem to have been called customs, as denoting customary payments, which
had been in use for time immemorial. They appear to have been originally
considered as taxes upon the profits of merchants. During the barbarous
times of feudal anarchy, merchants, like all the other inhabitants of
burghs, were considered as little better than emancipated bondmen, whose
persons were despised, and whose gains were envied. The great nobility,
who had consented that the king should tallage the profits of their own
tenants, were not unwilling that he should tallage likewise those of an
order of men whom it was much less their interest to protect. In those
ignorant times, it was not understood, that the profits of merchants are
a subject not taxable directly; or that the final payment of all such
taxes must fall, with a considerable overcharge, upon the consumers.
The gains of alien merchants were looked upon more unfavourably than
those of English merchants. It was natural, therefore, that those of the
former should be taxed more heavily than those of the latter. This
distinction between the duties upon aliens and those upon English
merchants, which was begun from ignorance, has been continued from the
spirit of monopoly, or in order to give our own merchants an advantage,
both in the home and in the foreign market.
With this distinction, the ancient duties of customs were imposed
equally upon all sorts of goods, necessaries as well as luxuries, goods
exported as well as goods imported. Why should the dealers in one sort
of goods, it seems to have been thought, be more favoured than those in
another? or why should the merchant exporter be more favoured than the
merchant importer?
The ancient customs were divided into three branches. The first, and,
perhaps, the most ancient of all those duties, was that upon wool and
leather. It seems to have been chiefly or altogether an exportation
duty. When the woollen manufacture came to be established in England,
lest the king should lose any part of his customs upon wool by the
exportation of woollen cloths, a like duty was imposed upon them. The
other two branches were, first, a duty upon wine, which being imposed at
so much a-ton, was called a tonnage; and, secondly, a duty upon all
other goods, which being imposed at so much a-pound of their supposed
value, was called a poundage. In the forty-seventh year of Edward III.,
a duty of sixpence in the pound was imposed upon all goods exported and
imported, except wools, wool-felts, leather, and wines which were
subject to particular duties. In the fourteenth of Richard II., this
duty was raised to one shilling in the pound; but, three years
afterwards, it was again reduced to sixpence. It was raised to
eightpence in the second year of Henry IV.; and, in the fourth of the
same prince, to one shilling. From this time to the ninth year of
William III., this duty continued at one shilling in the pound. The
duties of tonnage and poundage were generally granted to the king by one
and the same act of parliament, and were called the subsidy of tonnage
and poundage. The subsidy of poundage having continued for so long a
time at one shilling in the pound, or at five per cent., a subsidy came,
in the language of the customs, to denote a general duty of this kind of
five per cent. This subsidy, which is now called the old subsidy, still
continues to be levied, according to the book of rates established by
the twelfth of Charles II. The method of ascertaining, by a book of
rates, the value of goods subject to this duty, is said to be older than
the time of James I. The new subsidy, imposed by the ninth and tenth of
William III., was an additional five per cent. upon the greater part of
goods. The one-third and the two-third subsidy made up between them
another five per cent. of which they were proportionable parts. The
subsidy of 1747 made a fourth five per cent. upon the greater part of
goods; and that of 1759, a fifth upon some particular sorts of goods.
Besides those five subsidies, a great variety of other duties have
occasionally been imposed upon particular sorts of goods in order
sometimes to relieve the exigencies of the state, and sometimes to
regulate the trade of the country, according to the principles of the
mercantile system.
That system has come gradually more and more into fashion. The old
subsidy was imposed indifferently upon exportation, as well as
importation. The four subsequent subsidies, as well as the other duties
which have since been occasionally imposed upon particular sorts of
goods, have, with a few exceptions, been laid altogether upon
importation. The greater part of the ancient duties which had been
imposed upon the exportation of the goods of home produce and
manufacture, have either been lightened or taken away altogether. In
most cases, they have been taken away. Bounties have even been given
upon the exportation of some of them. Drawbacks, too, sometimes of the
whole, and, in most cases, or a part of the duties which are paid upon
the importation of foreign goods, have been granted upon their
exportation. Only half the duties imposed by the old subsidy upon
importation, are drawn back upon exportation; but the whole of those
imposed by the latter subsidies and other imports are, upon the greater
parts of the goods, drawn back in the same manner. This growing favour
of exportation, and discouragement of importation, have suffered only a
few exceptions, which chiefly concern the materials of some
manufactures. These our merchants and manufacturers are willing should
come as cheap as possible to themselves, and as dear as possible to
their rivals and competitors in other countries. Foreign materials are,
upon this account, sometimes allowed to be imported duty-free; Spanish
wool, for example, flax, and raw linen yarn. The exportation of the
materials of home produce, and of those which are the particular produce
of our colonies, has sometimes been prohibited, and sometimes subjected
to higher duties. The exportation of English wool has been prohibited.
That of beaver skins, of beaver wool, and of gum-senega, has been
subjected to higher duties; Great Britain, by the conquests of Canada
and Senegal, having got almost the monopoly of those commodities.
That the mercantile system has not been very favourable to the revenue
of the great body of the people, to the annual produce of the land and
labour of the country, I have endeavoured to show in the fourth book of
this Inquiry. It seems not to have been more favourable to the revenue
of the sovereign; so far, at least, as that revenue depends upon the
duties of customs.
In consequence of that system, the importation of several sorts of goods
has been prohibited altogether. This prohibition has, in some cases,
entirely prevented, and in others has very much diminished, the
importation of those commodities, by reducing the importers to the
necessity of smuggling. It has entirely prevented the importation of
foreign wollens; and it has very much diminished that of foreign silks
and velvets. In both cases, it has entirely annihilated the revenue of
customs which might have been levied upon such importation.
The high duties which have been imposed upon the importation of many
different sorts of foreign goods in order to discourage their
consumption in Great Britain, have, in many cases, served only to
encourage smuggling, and, in all cases, have reduced the revenues of the
customs below what more moderate duties would have afforded. The saying
of Dr. Swift, that in the arithmetic of the customs, two and two,
instead of making four, make sometimes only one, holds perfectly true
with regard to such heavy duties, which never could have been imposed,
had not the mercantile system taught us, in many cases, to employ
taxation as an instrument, not of revenue, but of monopoly.
The bounties which are sometimes given upon the exportation of home
produce and manufactures, and the drawbacks which are paid upon the
re-exportation of the greater part of foreign goods, have given occasion
to many frauds, and to a species of smuggling, more destructive of the
public revenue than any other. In order to obtain the bounty or
drawback, the goods, it is well known, are sometimes shipped, and sent
to sea, but soon afterwards clandestinely re-landed in some other part
of the country. The defalcation of the revenue of customs occasioned by
bounties and drawbacks, of which a great part are obtained fraudulently,
is very great. The gross produce of the customs, in the year which ended
on the 5th of January 1755, amounted to L.5,068,000. The bounties which
were paid out of this revenue, though in that year there was no bounty
upon corn, amounted to L.167,800. The drawbacks which were paid upon
debentures and certificates, to L.2,156,800. Bounties and drawbacks
together amounted to L.2,324,600. In consequence of these deductions,
the revenue of the customs amounted only to L.2,743,400; from which
deducting L.287,900 for the expense of management, in salaries and other
incidents, the neat revenue of the customs for that year comes out to be
L.2,455,500. The expense of management, amounts, in this manner, to
between five and six per cent. upon the gross revenue of the customs;
and to something more than ten per cent. upon what remains of that
revenue, after deducting what is paid away in bounties and drawbacks.
Heavy duties being imposed upon almost all goods imported, our merchant
importers smuggle as much, and make entry of as little as they can. Our
merchant exporters, on the contrary, make entry of more than they
export; sometimes out of vanity, and to pass for great dealers in goods
which pay no duty and sometimes to gain a bounty or a drawback. Our
exports, in consequence of these different frauds, appear upon the
custom-house books greatly to overbalance our imports, to the
unspeakable comfort of those politicians, who measure the national
prosperity by what they call the balance of trade.
All goods imported, unless particularly exempted, and such exemptions
are not very numerous, are liable to some duties of customs. If any
goods are imported, not mentioned in the book of rates, they are taxed
at 4s. 9-9/20d. for every twenty shillings value, according to the oath
of the importer, that is, nearly at five subsidies, or five poundage
duties. The book of rates is extremely comprehensive, and enumerates a
great variety of articles, many of them little used, and, therefore, not
well known. It is, upon this account, frequently uncertain under what
article a particular sort of goods ought to be classed, and,
consequently what duty they ought to pay. Mistakes with regard to this
sometimes ruin the custom-house officer, and frequently occasion much
trouble, expense, and vexation to the importer. In point of perspicuity,
precision, and distinctness, therefore, the duties of customs are much
more inferior to those of excise.
In order that the greater part of the members of any society should
contribute to the public revenue, in proportion to their respective
expense, it does not seem necessary that every single article of that
expense should be taxed. The revenue which is levied by the duties of
excise is supposed to fall as equally upon the contributors as that
which is levied by the duties of customs; and the duties of excise are
imposed upon a few articles only of the most general use and
consumption. It has been the opinion of many people, that, by proper
management, the duties of customs might likewise, without any loss to
the public revenue, and with great advantage to foreign trade, be
confined to a few articles only.
The foreign articles, of the most general use and consumption in Great
Britain, seem at present to consist chiefly in foreign wines and
brandies; in some of the productions of America and the West Indies,
sugar, rum, tobacco, cocoa-nuts, &c. and in some of those of the East
Indies, tea, coffee, china-ware, spiceries of all kinds, several sorts
of piece-goods, &c. These different articles afford, perhaps, at
present, the greater part of the revenue which is drawn from the duties
of customs. The taxes which at present subsist upon foreign
manufactures, if you except those upon the few contained in the
foregoing enumeration, have, the greater part of them, been imposed for
the purpose, not of revenue, but of monopoly, or to give our own
merchants an advantage in the home market. By removing all prohibitions,
and by subjecting all foreign manufactures to such moderate taxes, as it
was found from experience, afforded upon each article the greatest
revenue to the public, our own workmen might still have a considerable
advantage in the home market; and many articles, some of which at
present afford no revenue to government, and others a very
inconsiderable one, might afford a very great one.
High taxes, sometimes by diminishing the consumption of the taxed
commodities, and sometimes by encouraging smuggling, frequently afford a
smaller revenue to government than what might be drawn from more
moderate taxes.
When the diminution of revenue is the effect of the diminution of
consumption, there can be but one remedy, and that is the lowering of
the tax.
When the diminution of revenue is the effect of the encouragement given
to smuggling, it may, perhaps, be remedied in two ways; either by
diminishing the temptation to smuggle, or by increasing the difficulty
of smuggling. The temptation to smuggle can be be diminished only by the
lowering of the tax; and the difficulty of smuggling can be increased
only by establishing that system of administration which is most proper
for preventing it.
The excise laws, it appears, I believe, from experience, obstruct and
embarrass the operations of the smuggler much more effectually than
those of the customs. By introducing into the customs a system of
administration as similar to that of the excise as the nature of the
different duties will admit, the difficulty of smuggling might be very
much increased. This alteration, it has been supposed by many people,
might very easily be brought about.
The importer of commodities liable to any duties of customs, it has been
said, might, at his option, he allowed either to carry them to his own
private warehouse; or to lodge them in a warehouse, provided either at
his own expense or at that of the public, but under the key of the
custom-house officer, and never to be opened but in his presence. If the
merchant carried them to his own private warehouse, the duties to be
immediately paid, and never afterwards to be drawn back; and that
warehouse to be at all times subject to the visit and examination of the
custom-house officer, in order to ascertain how far the quantity
contained in it corresponded with that for which the duty had been paid.
If he carried them to the public warehouse, no duty to be paid till they
were taken out for home consumption. If taken out for exportation, to be
duty-free; proper security being always given that they should be so
exported. The dealers in those particular commodities, either by
wholesale or retail, to be at all times subject to the visit and
examination of the custom-house officer; and to be obliged to justify,
by proper certificates, the payment of the duty upon the whole quantity
contained in their shops or warehouses. What are called the excise
duties upon rum imported, are at present levied in this manner; and the
same system of administration might, perhaps, be extended to all duties
upon goods imported; provided always that those duties were, like the
duties of excise, confined to a few sorts of goods of the most general
use and consumption. If they were extended to almost all sorts of goods,
as at present, public warehouses of sufficient extent could not easily
be provided; and goods of a very delicate nature, or of which the
preservation required much care and attention, could not safely be
trusted by the merchant in any warehouse but his own.
If, by such a system of administration, smuggling to any considerable
extent could be prevented, even under pretty high duties; if every duty
was occasionally either heightened or lowered according as it was
likely, either the one way or the other, to afford the greatest revenue
to the state; taxation being always employed as an instrument of
revenue, and never of monopoly; it seems not improbable that a revenue,
at least equal to the present neat revenue of the customs, might be
drawn from duties upon the importation of only a few sorts of goods of
the most general use and consumption; and that the duties of customs
might thus be brought to the same degree of simplicity, certainty, and
precision, as those of excise. What the revenue at present loses by
drawbacks upon the re-exportation of foreign goods, which are afterwards
re-landed and consumed at home, would, under this system, be saved
altogether. If to this saving, which would alone be very considerable,
were added the abolition of all bounties upon the exportation of home
produce; in all cases in which those bounties were not in reality
drawbacks of some duties of excise which had before been advanced; it
cannot well be doubted, but that the neat revenue of customs might,
after an alteration of this kind, be fully equal to what it had ever
been before.
If, by such a change of system, the public revenue suffered no loss, the
trade and manufactures of the country would certainly gain a very
considerable advantage. The trade in the commodities not taxed, by far
the greatest number would be perfectly free, and might be carried on to
and from all parts of the world with every possible advantage. Among
those commodities would be comprehended all the necessaries of life, and
all the materials of manufacture. So far as the free importation of the
necessaries of life reduced their average money price in the home
market, it would reduce the money price of labour, but without reducing
in any respect its real recompense. The value of money is in proportion
to the quantity of the necessaries of life which it will purchase. That
of the necessaries of life is altogether independent of the quantity of
money which can be had for them. The reduction in the money price of
labour would necessarily be attended with a proportionable one in that
of all home manufactures, which would thereby gain some advantage in all
foreign markets. The price of some manufactures would be reduced, in a
still greater proportion, by the free importation of the raw materials.
If raw silk could be imported from China and Indostan, duty-free, the
silk manufacturers in England could greatly undersell those of both
France and Italy. There would be no occasion to prohibit the importation
of foreign silks and velvets. The cheapness of their goods would secure
to our own workmen, not only the possession of a home, but a very great
command of the foreign market. Even the trade in the commodities taxed,
would be carried on with much more advantage than at present. If those
commodities were delivered out of the public warehouse for foreign
exportation, being in this case exempted from all taxes, the trade in
them would be perfectly free. The carrying trade, in all sorts of goods,
would, under this system, enjoy every possible advantage. If these
commodities were delivered out for home consumption, the importer not
being obliged to advance the tax till he had an opportunity of selling
his goods, either to some dealer, or to some consumer, he could always
afford to sell them cheaper than if he had been obliged to advance it at
the moment of importation. Under the same taxes, the foreign trade of
consumption, even in the taxed commodities, might in this manner be
carried on with much more advantage than it is at present.