The _oppression_ of levying excises does not, in any proportion, so much

affect those who really _pay_ them, as those who only advance them for

the consumers.

This distinction which we have already made, will appear well founded,

upon examining the complaints which are commonly made against the

collectors of this duty.

We have seen that in the taxes upon salt and tobacco in France, there

are no duties collected upon the people; the farmers of the salt have

all the salt marshes and salt pits assigned to them by the King; no

person, not privileged, is allowed to make salt for the consumption of

those provinces which are subjected to the Gabelle.

In like manner the distribution and sale of tobacco is exclusively in

the hands of the farmers: they buy it either from Great Britain, or from

the Dutch at second hand; they manufacture it themselves, and sell it

over all France, at the price set upon it by the King; and we saw, that

during the last war, they paid thirty millions down for a permission to

raise the price of it 10 _per cent._ during ten years. This price fixed

upon the sale of tobacco, answers exactly to what we know under the name

of assize, which ought constantly to attend all excises[42]: for want of

observing exactly that regulation, the publicans and victuallers in

England raised the price of their strong beer one halfpenny _per_ quart,

in consequence of an additional duty of three shillings _per_ barrel

imposed _anno_ 1761, which is at the rate only of one farthing _per_

quart[43].

Footnote 42:

When excises are imposed upon any commodity, it is contrary to all

principles in fixing the assize, not to superadd the whole duty

imposed to the former selling price. This however is sometimes

omitted, with an intention to make part of the duty fall upon the

manufacturer, to the ease of the subject. The consequences are,

1_mo_, The manufacturers blow up the spirit of the people against the

tax, who never would think of making an outcry, were they not excited

to it by the interested motives of the manufacturers. Were high

profits allowed on imposing the tax, manufacturers would be quiet: and

if the profits were afterwards found to be too high, it would then be

a popular measure to reduce the selling price, and also a means of

setting people on the side of government, against the manufacturers,

who are their real tax-gatherers.

2_do_, It is impossible to compass the end proposed. A proportional

tax, rightly imposed, must be drawn back; and all attempts to prevent

it, only occasion a multiplication of frauds, and a bad manufacture.

In fixing assizes upon the manufacture of goods, which in different

years vary in their price, regard should be had to such variations;

otherwise the manufacturer is distressed, and the public is ill

served: and the one or the other happening, the people are animated

against such duties.

The only expedient to share the profits of the manufacturers of

exciseable commodities, is to lay them under some cumulative tax which

they cannot draw back, such as making them pay for a licence.

Footnote 43:

It must, however, be observed, that the price of beer was not raised,

either by the brewers, or by the victuallers, on account of the

additional malt-duty, _anno_ 1760.

When the sale of an exciseable commodity is vested in a company who

manufacture it, by exclusive privilege, the whole oppression of

collection is avoided; because the company itself then pays the duty,

and they draw their reimbursement from proportional profits on the sale

of the goods.

This is the greatest advantage of the farm above the public management

of a tax.

When excises are levied upon those who manufacture the commodity

excised, the oppression of the laws falls upon the manufacturers,

although they only advance the tax, and draw it back from the consumers

upon the sale of the commodity.

It is greatly for the advantage of every consumer in the kingdom, that

no fraud in the collections should pass unobserved; because all the

profits arising from frauds belong to the manufacturer, who in reality

is the tax-gatherer, as much as the farmers in France, when they sell

their salt and tobacco. But as the farmers appear in the light of King’s

officers, and that the collectors seem to bear hard on those with whom

they live, people foolishly imagine, that were brewers, for example,

more gently dealt with, beer would come the cheaper to themselves. This

is a mere delusion; because no brewer whatever will sell his beer

cheaper than either an assize, or the ordinary rate obliges him to do,

let his profit, from frauds, be ever so great, and his address in

committing them ever so successful; and the less productive the tax

turns out to be, the more the other impositions upon the people must be

augmented, in order to make up the deficiency.

If we compare therefore the oppression of excise-laws felt by those who

only _advance_ these impositions, with the ease which the consumers find

who really _pay_ them, we may judge of the advantages which the

proportional taxes have over the cumulative.

The excise, as paid by the brewer, is really of the cumulative kind. The

exciseman demands money of him, at a time when no alienation takes

place, and perhaps when he is not prepared to make the advance for his

customers, who must refund it to him with profit: besides the hopes of

being able to defraud is disappointed, and it is always disagreeable to

be disappointed in what we either wish or hope.

Were all mankind honest, the inconveniences of levying such taxes would

be less; but as that is not the case, methods must be fallen upon to

disappoint the intention of committing fraud. The only way to accomplish

this, is, to render it difficult and dangerous. While every individual

has a liberty to manufacture an exciseable commodity in whatever place

he thinks fit to enter for that purpose, when every one has a liberty to

sell liquors, which, upon retail only, are subjected to excise (as is

the case in France) must not collectors be multiplied in proportion to

the occupation which such policy implies? And will not these collectors

oppose frauds to frauds, in order to profit by them, at the expence of

the merchant or manufacturer? This will sow discord and hatred between

two classes of the same society, and thereby the state is hurt. All

discord hurts a state, as it does a private family.

It is out of my way to lay down plans for preventing such

inconveniences. It would require an intimate knowledge of every

circumstance relating to the country for which the remedy is intended.

I shall therefore endeavour only to throw out some useful hints, by

mentioning the impositions where the inconveniences in levying are the

least; and by comparing these with other impositions, where the

oppression in levying appears to be greater, the contrast of

circumstances will suggest the principles upon which a plan might be

formed.

There are many more frauds and difficulties in collecting excises in the

country than in cities, from the number of manufacturers employed in

them. It is just so with the _aides_ in France, from the number of

retailers. There are very few frauds and little difficulty in gathering

the malt-tax; because the object is unwieldy, and the places of

manufacture are fewer.

The frauds upon tobacco and salt in France, do not proceed from those

who manufacture them, but from those who introduce foreign goods to

supply the place of those manufactured by the company. This shews that

excises should be made as general as possible over a country; because

local exemptions introduce, as it were, a foreign country into the

center of a state.

Stamp-duties are seldom defrauded by forging the stamp; but in France,

where they extend to almost every _deed_ of alienation, the public is

defrauded by private bargains.

Customs are defrauded by the liberty given to trade in every port; and

from the want of convenient public magazines, as a proper repository for

all goods brought by sea.

It may be said, in general, that frauds are most frequent upon the new

establishment of taxes; that those who complain most of the oppression

of them, are precisely those who have the least reason for it; and that

the cause of their complaint proceeds rather from the inconvenience in

paying when they are not prepared, and the disappointment in defrauding,

than from any real oppression arising from the laws of excise: the

hardships of these laws are owing to the necessity of general rules to

prevent frauds; and such rules would be unnecessary, could the liberty

of committing frauds be circumscribed.

One very good method of raising proportional taxes, without great

expence or oppression, when the situation of a country will admit of it,

is to levy no such duties, but at the gates of towns and villages, which

in this light appear to be political inclosures. At those gates every

produce of the lands, and every manufacture not made in the town, might

pay a tax upon coming in; every manufacture made in the town, might pay

a tax on going out: all fruits consumed in the country might be free;

all manufactures made and consumed in the towns might be free also. If

we consider the quantity of exchange between the inhabitants of towns

and those of the country, and between town and town; that fund, I

believe, would be found sufficient to raise more by proportional taxes

than what is raised in any country in Europe.

A second method of diminishing the expence, and also the burden of

proportional taxes, is to exact nothing of the manufacturers, but to

prohibit the delivery of the manufacture to any one who does not present

a permit from the excise office, signifying that the tax has been paid.

This is the method observed in the Austrian low countries, where excises

are carried to a very great height. There the transporters or carriers

of exciseable goods, are formed into a corporation, and none else dare

to transport them.

Whoever has seen the execution of those regulations will not be very

fond of them; but the inconveniences which occur proceed from the

political situation of all those towns, the public debts of which are so

enormous, that to pay the interest of them excises have been carried so

high as to banish manufacturers into the country, where few excises are

levied. It is from the country and many considerable villages, which

have not the privilege of running in debt, that the manufactures of that

country are carried on. No industrious man can afford to live in the

towns of the Austrian Netherlands, except he who supplies their

consumption; and in no place, I know of, is work so dear as there.

Were great excises levied upon the furnishers of the goods, as is the

case in Great Britain, and were as little restraint laid upon their

frauds, those duties would not produce what they do; and the oppression

would be intolerable; whereas by the policy established, nothing but the

high price of goods is complained of. A third method of avoiding both

expence and oppression in levying proportional taxes, would be to

confine the fabrication of all articles charged with them to certain

places properly inclosed. Were those undertakings few and large, were

spacious magazines of all sorts prepared, at the public expence, in all

sea-port towns, and surrounded with walls, an entire liberty might be

allowed within the inclosures, and no questions would be asked, but on

going in and coming out. Under such regulations a state would reap great

benefit. 1_st_, There would be considerable savings in collecting.

2_dly_, There would be great savings on the number of hands employed in

manufacturing: forty men, in a large brew-house, make more beer than an

hundred disposed as they are in country villages. This resembles the

introduction of machines into manufactures.

The objection from the infringement of liberty is more a pretext, in

order to facilitate fraud, than any thing else. Are not those who

manufacture exciseable commodities, the servants of the state? Are they

not even the collectors of the public revenue? With what face then can

they pretend to be indulged in the means of defrauding their customers

of those taxes which they wish to put into their own pockets, by

withholding them from the public. Has liberty any other meaning, but an

entire permission to do whatever is not forbid by general and wholesome

laws, calculated for the universal good of the society; and shall this

class of men, who are enriching themselves as much by the profits they

have in advancing the taxes, as by their industry, be considered in as

favourable a light as another who is paying a cumulative tax out of his

income, one farthing of which he never can draw back?

If any should misinterpret the doctrine of this chapter, I must put them

in mind of my original plan, which was to keep constantly in view those

virtuous statesmen who think of nothing but the good of their subjects.

Taxes and impositions in their hands, are the wealth of the father of

the family; who therewith feeds, clothes, provides for, and defends

every one within his house. The increase of taxes on this supposition is

national oeconomy, as shall be afterwards shewn; frauds are the thefts

of servants impairing the public good, and particularly the means o£

self-defence against the incroachments of ambitious neighbours.

As it is the duty of every statesman to make his people happy and

flourishing, perhaps the speculations of one whose only interest in

throwing them upon paper is to fill up his leisure agreeably, may some

time or other tend to promote so glorious a purpose.

------------------------------------------------------------------------

CHAP. VI.

_Cumulative and proportional Taxes compared with one another, and

farther examined._

After examining separately the nature and effects of cumulative and

proportional taxes, it remains, for the more fully understanding this

subject, to take a view of them together; the better to find out wherein

they really differ, and how far the difference is only apparent.

It has been observed, that the payment of taxes diminishes no part of

the produce of either land, or industry; the whole amount of these

remains entire to the subjects of the state.

The taxes are paid out of the money which circulates in the alienation

of them: from which we have concluded that they must constantly be

confined within a certain proportion to alienation. We have also

observed, that the imposition of taxes augments the mass of circulation,

and makes it requisite for a statesman to contrive some method of

increasing money in proportion to their increase. I hope these

propositions have acquired an additional confirmation, from what has

been already said in the preceeding chapters.

We have also seen how the amount of proportional taxes is ultimately

taken from the superfluity of the rich, whom we have called the idle

consumers: and how they are advanced by one set of the industrious, and

refunded by another, until at last they fall upon those who cannot draw

them back from any body. These last have been said to _pay_ the taxes,

the others only to _advance_ them.

If therefore we suppose all desire of defrauding out of the way, we

shall find the whole burden of proportional taxes confined to the

inconvenience of advancing their amount by the industrious, and to the

payment of them by the rich, which proportionally diminishes their

income. Where credit therefore is well established, where payments are

regularly made by buyers to sellers, and where people proportion their

expence to their free income, the weight of proportional taxes will be

very small. I appeal to experience for the truth of this.

Let us next examine the nature of cumulative taxes, as we have called

them, in order to distinguish them from the others.

In these, alienation is not necessary at the time they are paid; from

which it follows, that, in many cases, they cannot be drawn back. When a

man pays his land-tax out of his rent, what remains to him will not buy

more of any thing than if he had paid nothing. Nay, were the state to

indulge him and take his tax in corn, the corn which remains to him

would not bear an advanced price, unless the state should export the

quantity he had given; and then indeed, by diminishing the supply, it

might raise the price of grain in general; but every one having grain to

sell would profit of the rise upon the price, as well as the landlord,

whose share does not commonly amount to one third of the crop.

But were a tax laid on in so regular a proportion to the value of any

property, as to prevent the proprietor from making use of that part

which the public intends to take from him, those who pay cumulative

taxes would thereby acquire one very great alleviation of their burden.

I have said that when a brewer pays the excise, the tax, as to him, is

of the cumulative nature. It is so in a certain degree, no doubt, as may

be seen without farther explanation; but it still so far retains its own

nature as to be easily drawn back from the consumer. But how can a

soldier draw back the tax he pays to Chelsea?

From this material distinction between the two impositions, I conclude,

that no objection can lie against proportional taxes, so far as they

affect the industrious; because they draw them compleatly back: and that

great objections lie against cumulative taxes, when they affect the

industrious, because they cannot draw them back; and consequently, they

may affect the physical-necessary of the contributor, in case no profit

should remain to him upon his labour. On the other hand, I think little

objection can be made to cumulative taxes, when they are imposed upon

possessions, which produce a visible annual revenue, clear to the

proprietor. This is the nature of the _dixiemes_ and _vingtiemes_ in

France; where the whole amount of the person’s income is taken upon

proper proof, and taxed in proportion to it, without any subsidiary or

second levy’s taking place, to make up a determinate sum.

Cumulative taxes would also be far less burdensome to the lower class,

could they be levied, so as, first, to preserve the proportion of them

to the actual profits on industry: secondly, to make that proportion

sensible to the people: and in the last place, to _retain_ the tax,

instead of allowing them first to receive it, and afterwards obliging

them to refund it.

In proportion as these three requisites do not take place, such taxes

become grievous to all who have no fixed income.

To put a tax upon a man’s dwelling house, in proportion to its windows,

or hearths, when the house produces no fixed income to him, and when he

has none independent of it, may take away a part of his

physical-necessary. To put a tax upon him because he has a head, is more

grievous than to put a tax upon his hands, in proportion to what they

daily gain.

If cumulative and proportional taxes be compared, with respect to the

different effects they are found to have upon our opinions as to taxes

in general, we find that both of them deceive the contributors, but in

different ways.

In the cumulative taxes, the person who pays does not always perceive

the reason of his paying. He imagines that he is taxed only because it

is known that he is able to pay a certain sum.

In the proportional, the deceit is of another nature. When a person buys

a consumable commodity, which has paid an excise, he does not perceive

that the price he pays for it comprehends a tax upon his past gains, in

favour of the public; but he concludes the whole to be necessary, in

order to procure what he has an inclination to consume. An example will

make this plain.

Suppose a tax laid upon wheel carriages, and that every person in the

state were liable to pay a certain sum in proportion to the number of

carriages he has for his convenience. The tax-gatherer comes at the end

of the year and demands the sum. The person complains that he is not at

liberty to have a coach or a chaise without paying duty for it; and that

while he has occasion for one carriage only, and has but one pair of

horses, he is obliged to pay for several sets of wheels.

Now, suppose this cumulative tax were turned into a proportional one,

and that wheels were to pay a stamp-duty, or the like, in the hands of

the wheelwright. The price would immediately rise; but this rise would

soon become familiar to the man who has the carriage; and he would then

be no more hurt by this additional expence, than if it had proceeded

from some new and expensive fashion of wheels: in short, wheels would

generally begin to bear an advanced price, and very soon no body would

inquire how it came about, nor once complain of the tax.

To set this in another light, the difference between the two impositions

resembles that between long and short accounts, which to poor people is

very great. When the expence of living is insensibly and universally

augmented, by the effect of proportional taxes, then the industrious

man, who enjoys neither superfluity or idleness, may and can augment the

price of his work in proportion. This augmentation forms then a part of

what has been called his (A), which he draws fully back when he comes to

market. But if the same, or even a less sum be raised upon him by a

cumulative tax, it comes upon him at the end of the year, or at the end

of the quarter, and let him be ever so provident, he cannot draw it

back, or raise the price of his work, because of the unequal competition

of other people of his own class, who, from a variety of circumstances,

cannot all be so equally loaded by the cumulative as by the proportional

taxes. Besides, they may not be so provident as himself, and may work

for subsistence, without making any allowance for what they are to pay

the state at the end of the year. Thus a double inconvenience ensues.

The industrious poor are oppressed by the tax-gatherers, and the tax is

ill levied. In the other case, the first never see a tax-gatherer, and

the money is paid. Besides these advantages in favour of proportional

taxes, there is still another, that if this tax be improperly laid on,

the defect will manifest itself by checking consumption only; whereas in

the other case, it will be known by the distress of individuals.

If the liberty not to consume be taken away, as in the gabelle in some

provinces in France, then the imposition changes its nature and becomes

a cumulative tax, as may be easily perceived[44].

Footnote 44:

The _gabelle_, or salt-tax in France, is not levied in every province;

because of certain privileges of exemption, which some have all along

enjoyed.

This opens a door to the greatest abuse, by smuggling salt from places

where it is free, into places where the tax is imposed, at many 100

_per cent._ above the value; and obliges the King to use great

severity upon those who are loaded with this duty.

The consumption of every family is fixed to a certain quantity; and if

it be found that they have not bought, from the King’s granaries, to

the full extent of what is reckoned necessary for them, it is supposed

that the deficiency has been made up from contraband salt, and the

deficiency is exacted.

It has been said, that so far as the three inconveniences of the

cumulative taxes can be prevented, they cease to be oppressive. From

which we see the reason why excises are so easily paid when those who

manufacture the commodities charged with them, are contented to compound

for them. This changes the tax into one of the cumulative kind; but

gives it every requisite to make it easy. Let me take an example.

A brewer who pays excise for all he brews, is exposed to the daily visit

of the excise-man, to whom he pays the duty. Here the brewer’s

imposition participates of several of the inconveniences attending

cumulative taxes. But let me suppose that after a certain time he finds

that 100_l._ is the annual amount of his excise. If he makes a

composition for it at that rate, he comes under a regular cumulative

composition, with every advantage. He thinks no more of frauds; he no

more grudges what he pays; and becomes in a manner collector of that

imperceptible duty paid by all his customers.

The easy method of transforming those taxes into one another, shews

their resemblance sufficiently, and the differences which we have

pointed out, shew the principles which regulate the proper manner of

imposing them.

------------------------------------------------------------------------

CHAP. VII.

_Consequence of Taxes when the amount of them is properly applied._

We have now seen the objects affected by taxes, and the inconveniences

which result to those who are obliged to pay them.

It comes next to be examined, whether or not taxes of all kinds be a

great load upon a people, a grievous infringement of their liberty, a

means of bringing many honest and industrious people to great distress,

and a great discouragement to marriage. I answer without hesitation,

that taxes may be, and most commonly are accompanied with all these and

many more inconveniences; but I must add, that they proceed from the

abuse, and not from the nature of taxes.

In my inquiries, I have constantly in my eye, how man _may_ be governed,

and never how _he is_ governed. How a righteous and intelligent

statesman may restrain the liberty of individuals, in order to promote

the common good; never how an ignorant and unrighteous statesman may

destroy public liberty, for the sake of individuals.

Raising money by taxes must always be burdensome, less or more, to those

who pay it; and the advantages resulting from taxes can only proceed

from the right application of the money when raised.

When individuals only make a profit of the inconvenience of taxes, the

public loses, no doubt; because they are paid for the advantage of the

public, not for that of private people. If the money raised be more

beneficially employed by the state, than it would have been by those who

have contributed it, then I say the public has gained, in consequence of

the burden laid upon individuals; consequently, the statesman has done

his duty, both in imposing the taxes, and in rightly expending them.

Taxes, in this last view, may be considered as a saving out of every

private fortune, in order to procure a public fund to be expended for

the public benefit.

I have frequently recourse to the familiar examples of private oeconomy,

in order to make applications from it to the political; which, however

different it may appear, will be found easily deducible from the same

principles.

Let me suppose two persons, (A) and (B), living in the same

neighbourhood, of the same rank and fortune, enjoying great superfluity,

but spending yearly the whole of their income in different ways.

Let the income of both be supposed to be 2100_l._ sterling; and let the

branches of their expence be ranged under six different heads. Let (A)

be supposed to spend upon the first 100_l._ on the second 200_l._ on the

third 300_l._ on the fourth 400_l._ on the fifth 500_l._ on the sixth

600_l._ in all 2100_l._

Let us suppose (A) to enjoy in every one an ample sufficiency.

(B), on the other hand, spends upon his first article 1600_l._ and upon

each of the other five, no more than 100_l._ Here the first article of

(B’s) expence is sixteen times greater than any of the rest; and by the

supposition, 100_l._ is supposed to denote an ample sufficiency upon

each article.

I come to (A), and I say to him, you disapprove of the extravagance of

your neighbour (B) upon his first article of expence, where he spends

sixteen parts of his income, and where you spend but one; and yet you

must allow that upon every other article of his expence, he is a better

oeconomist than you. Would it not be for your interest to bring the

other articles of your expence down to his standard, without increasing

any thing upon your first article, which is already within the compass

of what may be called sufficient.

To what purpose, says (A), would you advise me to so strict an oeconomy?

And what should I do with so great a saving on my annual income? Be in

no pain about that, I shall lay it out for you in discharging your

debts; in providing for your children, and giving them a good education;

in improving your estate; repairing your house; making up your

inclosures; all shall be usefully spent; and out of 600_l._ a year, you

shall have every thing necessary for your family.

Here is the representation of a scheme between a good statesman, and a

people whose interest he consults.

After the imposition of taxes, the individuals of a state, whose income

is already formed, begin to pay greatly more than they used to do for

every thing they consume. A great part of this additional price goes to

the public, and is thereby laid out for national purposes. The whole of

such expences are thrown into circulation, as much as if the rich

proprietors had laid it out upon articles entirely adapted to their own

taste.

Is it not evident, that in this way of appropriating the income of a

country, it must produce a more extensive encouragement to industry of

all kinds, than if the proprietors only had spent it? They never would

have thought of becoming merchants, or of setting up manufactures for

the supply of foreign markets: their whole expence would have been

calculated to supply their own wants; and it would have been indifferent

to them whether these were supplied by natives or by strangers.

Let us apply this doctrine to common experience. Let us compare the

nature of circulation in a trading town, with that of a country place,

where many gentlemen of large fortunes reside. How extensive the objects

of the first! how contracted those of the latter!

Let us compare again the exigencies of government, with those of a

trading city, what a variety of _new_ wants here occur to be supplied,

which the city never could have occasion for?

I have shewn that the great amount of taxes is taken from the income of

those individuals whose fortune is already made, or whose daily profits

are considerable: I have suggested how circumscribed the expence of this

class must be, when considered with respect to the employment it

procures to the body of a people. Does not the experience of former ages

show how apt private opulence is to sink into treasures, when a taste

for industry does not animate the lower classes to create new objects of

desire in the wealthy? Wherein is a state benefited by the luxurious

gratifications of the rich, unless it be by the employment they procure

for those who provide the objects of luxury? Those very gratifications

are, in one sense, taxes upon the rich in favour of the industrious:

they increase expence, and throw money into circulation. In Spain and

Portugal, where industry is not introduced among the lower classes, it

is the strangers who in effect levy such taxes upon them. Were the taxes

they pay, properly applied to the encouragement of the arts, instead of

being appropriated to private purposes, and to enriching private men,

whose taste for expence is always circumscribed to the objects of their

own wants, how soon should we see them vying with us in every market of

Europe, and supplying themselves as far as their country is calculated

for it.

The reciprocal wants of industrious nations, resemble the reciprocal

wants of tradesmen; all may be employed in supplying one another, as

well as themselves.

When the amount of taxes is properly laid out in premiums, for the

encouragement of the industrious, the prices of labour upon articles of

exportation, may be brought so low, that all nations who do not follow

the example, must languish and decay. Luxury at home will then cease to

hurt the trade of the nation. In her treaties of commerce, she may throw

open her ports to many articles of foreign consumption, without running

any risk by such allowances; and on the other hand, she will reap the

greatest advantages from a reciprocal permission.

The example I have given, by which I have illustrated the nature of

public contributions, must not be understood to tally with respect to

proportion. It would be both ridiculous and impossible to reduce all the

expences of rich men to the purely sufficient. All I meant was, to shew

how taxes, when properly applied, _may_ be considered as public

oeconomy; and how the levying of them has no direct tendency to hurt a

nation in point of ease and prosperity.

------------------------------------------------------------------------

CHAP. VIII.

_Of the extent of Taxation._

One good way to discover the nature of taxes, is, to examine how far it

may be possible to carry them. This is my intention in this chapter.

I have said that the object of taxes was income, and not stock. I have

shewn how those of the proportional kind affect the income of stock

already made, and persons who enjoy large profits upon their daily

industry. I have pointed out the impropriety of cumulative taxes, when

imposed upon such as draw nothing more from their industry than an easy

subsistence; and I have given a general preference to those of the

proportional kind; because they constantly imply both alienation and

consumption: alienation in those who _advance_ the taxes, _consumption_

in those who pay them.

Could, therefore, taxes be levied upon every alienation, where

consumption is implied, and that in proportion to the whole superfluity

of those who are to consume, proportional taxes would be carried to

their utmost extent.

I shall now analize this subject, in order to discover how far that

extent may reach; and by this inquiry, the principles of taxation will

be the better understood.

The objects of alienation comprehend all that is in commerce among men,

moveable and immoveable.

What is moveable is generally consumable, what is immoveable is

generally not so.

As consumption is a requisite, together with alienation, in order to

form a proper basis for proportional taxes, we see how contrary to

principles it would be, to tax the alienation of lands, houses, &c. in

the same proportion as consumable commodities. These are _funds_, not

_income_; and the money with which they are purchased, must be

considered in the light of a fund, while it is in the hands of the

buyer. When once it comes into the hands of the seller of the immoveable

objects, it frequently, indeed, partakes of the nature of income; that

is to say, it is spent in the consumption of fruits, and of the labour

of man; and then it will be affected by taxes.

This may suffice to recal to mind the principles we laid down in the

26th chapter of the second book, concerning the effects of the vibration

of the balance of wealth between the members of a modern state.

The next thing we are to consider, is the state of circulation. As to

that, we have frequently observed, how it must be in proportion to

alienation.

This proportion is not determined by the value, or denominations of the

money circulating; but by that value combined with the frequency of

transitions from hand to hand; as the force of a cannon ball is

estimated by the weight of the ball, and the swiftness of the motion at

the time it strikes.

Let us now lay aside the consideration of immoveable property; and

examine the nature of consumption, alienation, and sale, with respect to

other things.

Consumption comprehends every thing produced by the earth, or by man;

alienation is confined to that part which is exchanged between men; and

sale to that part of alienation which is exchanged for an equivalent in

money.

Whatever part is consumed without alienation, ought, I think, to be out

of the reach of proportional taxes, unless, by some circumstance or

other, it can be made to fall under the eye of the public, in a manner

_resembling_ its coming to market. Thus a tax upon malt is levied at the

malt-house, as if it were sold to the maltster, although it be made for

the consumption of the grower of the barley. In like manner, a tax upon

corn for bread may be levied either at the mill where it is ground, or

at the oven where it is baked[45].

Footnote 45:

Examples of these kinds of taxes were familiar in former times.

Vassals were obliged to grind in their Lord’s mill, bake in his oven,

press their wine in the public press of the territory, &c.

This was found very useful, in ages when alienation and sale were

little known; but now they are considered as oppressive, and so I

think they are, when compared with proportional taxes, which only take

place upon the sale of the commodity: but still they are far

preferable to many taxes of the cumulative kind.

The worst kind of proportional taxes are those which are levied upon

_private_ manufacturing, and upon unmanufactured consumption, where no

alienation takes place. An example of the first we have in the excise

upon malt, cyder, candles, &c. made in private houses for private use:

the last is known in Holland, where a man cannot kill his own pig, or

his own calf, without paying a tax. Were taxes of that nature extended

to the making of bread, cooking of victuals, &c. I apprehend they would

become of a nature more burdensome than any hitherto invented, unless

public cooks were established, as public ovens are in many parts of

France; in such cases, taxes might be levied upon every part of

consumption.

Investigations of this nature are so disagreeable, that it is with

reluctance I mention them; but when, in fact, such taxes are found

established in different countries, it is highly proper, that the nature

of them should be inquired into.

Taxes in Holland are so multiplied, as to descend to this category, in

many places, as we have seen by the example just given; but even these,

however oppressive they may appear to those who are not accustomed to

them, are still less so than many of the cumulative kind we have

mentioned, particularly the tax upon industry and the capitation in

France. They approach nearer to proportional taxes, and derive every

alleviation of their burden from that circumstance. He who pays such

taxes, sees that he can avoid them, by retrenching his consumption; and

when they fall upon the necessaries of life, he may draw them back,

providing he be an industrious man, and that every one who enters into

competition with him for employment, be equally subjected to the same

burden. But they are more burdensome than those where sale takes place;

because when a poor man, who wishes to consume, wants money, he

considers himself in the same light as if the thing were not to be sold;

but when he has that which he has acquired by his labour, and cannot

consume it for want of money to pay for a permission, as it were, he

must either starve for hunger in the midst of plenty, or be reduced,

perhaps, to beggary, for having preserved his life by defrauding the

tax.

What has been said, is, I think, sufficient to shew the varieties which

occur, when taxes are imposed upon bare consumption, where no alienation

takes place: they must, in every respect, be ranged under those of the

proportional kind, although some principal requisites be wanting to

engage any one to approve of their institution.

It appears still more difficult to establish a proportional tax upon

barter, or the exchange of commodities one for another, unless sale be

understood. This would be the case were a private person, not subject to

the excise upon malt made in his own house, to pay in that commodity. He

would not there escape the imputation of fraud; and might, with

propriety, be considered as a retailer. I do not, however, doubt but

examples of taxes upon barter might be found; some even occur to myself;

but they are almost too trifling to mention[46].

Footnote 46:

Two gentlemen in France exchange casks of their wine, they are both

obliged to pay a tax upon removing the wine from their cellar. This

duty is called _Remuage_.

The last and principal requisite, to render proportional taxes easy and

light, is sale. There the burden must be proportional to the buyers

purse; and if it prevents the consumption of the thing taxed, the defect

will manifest itself.

Of these taxes we may say, that they are in proportion to circulation;

and accordingly, we see how difficult it was to raise them, so long as

circulation remained confined to the small quantity of coin in the

country. As money increased, both by the increase of trade and

alienations, they became more productive; and were the nature of them

rightly understood, and were they properly imposed, they would soon be

more generally adopted.

In treating of public credit, I have said that it is the duty of a

statesman to augment the quantity of money, in proportion as he intends

to multiply taxes on his people. I shall now, before I conclude this

chapter, explain the meaning of what was there thrown out relatively to

another subject.

The money of a country, we have said, bears no determinate proportion to

circulation; it is the money circulating, multiplied by the number of

transitions from hand to hand. Again, we have said, that the prices of

all things are determined by demand and competition. The meaning of

this, as it concerns the present question, is, that in proportion to the

competition of those who appear with money, in order to acquire what

comes to market, a larger or a smaller sum is brought into circulation.

Now, according to the principles laid down in the first chapter, we saw

how the full value of the industrious seller’s expence and profit were

made up to him in the sale of his work; and if he even advanced any tax

upon any part of his work or consumption, that it was refunded to him by

the buyer, who, if he consumes in the light of an idle man, pays for the

whole.

Farther, when a proportional tax is imposed, we said it was, in a

manner, as if the state interposed at the time of alienation, and

exacted of the purchaser a certain value in money, in proportion to the

commodity, as the price of the permission to acquire what his own

industry had not produced. From this I draw the following consequence,

that in proportion to the tax an additional sum of money is drawn into

circulation, which would otherwise have remained in the pocket of the

purchaser; consequently, on imposing proportional taxes, they cannot, at

first, exceed that proportion of money which is found in the pockets of

the consumers, over and above what they used to pay for what they

consumed.

The truth of this proposition is established upon many facts. First, in

countries where people keep their money locked up, proportional taxes

are very well paid. Hence the great amount of the _alcavala_ and

_cientos_ in Spain, which amount together to 14 _per cent._ upon every

consecutive alienation of the commodities, chiefly indeed for the

consumption of the rich.

Secondly, When excises were augmented in England, in the reign of King

William, Davenant tells us, that the price of the goods excised fell.

Thirdly, When a war has lasted any time in France, taxes cease to be so

productive.

Are not all these, and many other appearances, resolved upon the same

principle, viz. that taxes must come out of that money which exceeds

what was necessary for carrying on alienation before they were imposed?

In Spain they draw money from the chests of the hoarders, and increase

circulation for a while.

In England, during King William’s wars, the quantity of money being very

small, and trade being very low, the tax upon malt could come out of no

other fund than the price usually given for barley.

In France, people are better acquainted with taxes, and the great bulk

of excises are administred by the farmers, who never lower their price;

so that the diminution of the mass of coin diminishes consumption.

But when methods can be fallen upon to increase money according to the

uses found for it, taxes will continue to produce, consumption will not

diminish, and circulation will keep pace with them.

Could we suppose, that before the imposition of taxes, every person in a

state had laid it down as a rule, to spend the whole of his income, but

none of his treasure, in the consumption of what is brought to market,

it is plain, that in a luxurious nation, taxes might be carried so high

as to draw the last farthing of the treasure into circulation, even

though it were supposed to exceed the value which demand had fixed for

all that was brought to market. But without a luxurious turn this would

not be the case. There are countries abounding with coin, which it is

impossible to come at by proportional taxes. The reason is plain: the

value which demand fixes upon the total of the articles of consumption

exposed to sale in the country, bears but a trifling proportion to the

coin which remains locked up. This was the case in ancient Greece. In

that case, proportional taxes can never exhaust the treasure; because

were they to be made high upon articles of the first necessity, all the

poor would starve; if upon articles of superfluity, demand would stop.

Proportional taxes, therefore, can only be raised in proportion to the

desire of spending money; and as this desire depends upon the spirit of

the people, so must the extent of taxes.

Let me now trace a little the progress of money brought into circulation

by proportional taxes in a luxurious nation. I shall call the value,

fixed by demand, for all that comes to market (Y). The sum levied in

consequence of the alienation of it, or in other words, the sum of the

proportional taxes (X). And the whole money of the country (Z). This

premised, it will follow, from what has been said, that so soon as all

the money of the country is brought into circulation, then (Z) will be

exactly equal to the sum of (Y) and (X).

Let us next suppose the whole alienation to be made at once. Will not

(Z) then immediately appear divided into (Y) and (X)? What then will

become of those two sums which we suppose to enter into circulation at

the same time? I answer, that (Y) will go entirely free to the

industrious seller: that it is, or should be, nearly equal to the former

value of what came to market before taxes were imposed: and that (X) is

an additional sum drawn from the idle consumers, who live upon an income

already made. But suppose (X) to be augmented, until it exceeds the

quantity of money formerly superfluous for carrying on alienation: then

I say, that either taxes will become proportionally less productive, or

consumers must melt down the capital of their funds into paper money, to

the amount of the deficiency of (X); and this will supply circulation

with the additional sum required in consequence of the imposition of

taxes.

Now, I think, it is a lucky circumstance, that the additional sum of

taxes should be paid by those very people who are the best able to

borrow it upon their funds.

Let us proceed to examine the progress of (Y) and (X) as they continue

in circulation. (Y) is no sooner come into the hands of the industrious

seller, but he has occasion to go to market: that moment I consider him

as one of the rich; and the money which, at the time he sold, had

acquired the denomination of (Y), now resumes that of (Z). When he comes

to buy a commodity with what was formerly his (Y), there is immediately

a part of it converted into a new (X), and the remainder keeps the

denomination of (Y) in the hands of him from whom he buys. By this

progress it is plain, that after a certain number of alienations, or

transitions from hand to hand, the whole quantity (Y) will be converted

into (X).

Experience shews this to be the fact; because the amount of taxes, in a

short time, far exceeds the value of all the money of a country.

Let us next follow the progress of (X).

Upon the first alienation of any part of what comes to market for the

consumption of the proprietors of (Z), a proportional part of (Z) is

transformed into (X), and is carried into the public coffers. Were it

there to be locked up, and not thrown back into circulation, it is

plain, that in a short time the whole of (Z) would be converted into

(X), and would be shut up in the exchequer.

When the amount of taxes, therefore, is sent out of the country in time

of war, must not this produce a similar effect? Has not the exporting

that amount the same effect with the locking it up, since the one and

the other equally take it out of circulation? Does it not then follow,

that if more money be not obtained, either by borrowing it back from

strangers, or by melting down more solid property, that selling must

stop, and (Y) disappear as well as (X). The rich, therefore, must give

over buying, and the proprietors of all that comes to market must deal

by barter with one another.

How naturally do all these consequences follow one upon the other! and

how exactly do they correspond to the principles which run through that

part of the last book where we treated of banks and public credit!

Taxes are not raised, at this time, to remain in treasures, but to

answer the exigencies of the state. The moment, therefore, that the

money arising from them comes out of the public coffers, it loses the

character of (X) and resumes that of (Z), in the same manner that (Y)

was transformed into (Z), by being brought to market to buy a commodity.

This new (Z), as we may call it, no sooner returns into circulation,

than it becomes again converted into (Y) and (X), with this difference,

however, that what came from the exchequer, so far as it is converted

into (X), returns directly into it again.

Hence it follows, that states commonly pay their servants the full of

their salaries, and make them refund a part in consequence of cumulative

taxes, instead of proportionally diminishing what is due to them. And

when the salaries themselves are intended to be laid under poundage,

which in fact is an actual diminution of them, they choose that the tax

should appear to be a deduction out of what is supposed due; because it

seems less arbitrary to impose a tax, than to diminish a salary, without

assigning any reason for it; but indeed, besides this reason, it

commonly happens, that the particular appropriations and administration

of the revenue render that method easier.

With respect to proportional taxes they affect the expences of the state

in the same manner as those of individuals; with this difference, as we

have said, that the part (X) returns into the exchequer; but the part

(Y) is fairly spent by the state, as by the idle consumer.

From what has been said, we may gather the principles which lead to the

most extensive establishment of proportional taxes, viz. either to draw

by particular regulations, the whole real and gross produce of land and

work to market; or at least to bring it under the eye of the state, in

consequence of some modification or manufacture performed upon it, as

was observed with respect to malt-houses, mills, and public ovens. When,

by such contrivances, the whole gross produce falls under taxation, the

proportional taxes must be gently laid on, and gradually raised until

they begin to interrupt consumption; then they must be diminished for a

while, until dissipation increases; a case which will probably happen,

as it commonly keeps pace with industry.

If we suppose the rich to set out on a plan of living upon their

capitals, instead of living upon their incomes, as we have hitherto

supposed, then indeed taxes may augment to a degree not to be estimated.

This combination has already found a place in the 26th chapter of the

second book, where we examined it with regard to the progress of

industry. In that place it was said, that in proportion to credit and

industry, it might be possible in the compass of a year, to produce

commodities to the value of the whole property of the most extended

kingdom. Were that the case, to what a height might not taxes be

carried?

(Y) then would represent the whole value of the country, and

consequently, (X) would swell in proportion, according to the

competition among the inhabitants, to purchase every particular article.

Subsistence and necessaries might be taxed low in proportion to the

abilities of those of the lower classes; articles of luxury might be

taxed in a higher proportion, in order to draw the more into the

exchequer.

Were taxes thus carried to their utmost extent, still every person in

the state must be left at liberty to save, or to spend the whole, or any

part of his stock, or income; which is not the case when cumulative

taxes are imposed. Proportional taxes, tho’ carried to their utmost

extent, will not deprive an industrious man of his physical-necessary,

nor of the reward of his ingenuity, nor of that rank in wealth, to which

his birth or expence entitles him[47].

Footnote 47:

A man’s rank, in a modern society, seems to be determined more

according to his birth, or to his expence, than according to his

stock, or income.

When taxes have the effect of interrupting this harmony of expence, of

restraining the liberty of squandering, or of saving, or of oppressing

one set of men more than another, in all such cases, they are improperly

imposed; and instead of being too high, as it is commonly supposed, I

think it is a demonstration that they are really lower than they need to

be. The classes of men in a modern state, resemble the horses in a team.

When every horse draws fairly and equally, the whole force is exerted;

but if any one happens to be strained by an overcharge thrown upon him,

the force of the team is greatly diminished.

When proportional taxes are carried to their full extent, I then presume

every one will be obliged to pay as much as possible; I do not mean that

every one will be forced to pay to the extent of his abilities, but I

say, that the generality will; and therefore, were cumulative, or

personal taxes, to be superadded on those who already pay all they can,

they would, by affecting them unequally, deprive many of their

physical-necessary, or small profits; and consequently destroy the

proper balance of their competition. The setting the lower classes free

from cumulative taxes, will only have the effect of putting the growing

wealth of the penurious and saving part of the industrious inhabitants

out of the reach of taxation. This ought in good policy to be done, as

has been shewn in another place. But, farther, we have observed, that

taxes can only be increased in proportion to the spirit of dissipation

in the people. To force money, therefore, out of the hands of those who

do not incline to spend it, is forcing the spirit of the people; and if

not tyranny, is at least great severity. Besides, we shall presently

shew, how these savings cannot escape being taxed, whenever they begin

to produce an income; and allowing that they may be greatly accumulated,

and thrown into trade, yet still they must in one way or other appear in

alienation, and become subject to the proportional taxes. The only part,

therefore, of the savings not affected by taxes, will be confined to

that which is locked up. This in a prodigal nation should never be

touched. The inconveniencies resulting to the state from so small an

inequality of taxation, is too trifling to be attended to, and too

difficult to be prevented.

I come next to examine the extent of cumulative taxes.

If we suppose the proportional taxes to be carried to their full extent,

there will be little place found for the cumulative, as has been said.

The only objects left for them are the savings locked up, and the pure

profits upon trade.

But let us suppose proportional taxes out of the question, as they must

be when contrary to the spirit of a particular nation; and then inquire

into the principles which regulate the imposition of cumulative taxes,

in order to discover to what extent they may be carried, and what

consequences may follow when they are brought to a height.

This branch has two objects; first, income, which is determinate;

secondly, profits from industry, which are and must be very uncertain.

Income, I divide into two sorts; that which proceeds from every branch

of solid property, capable of producing it: Land, houses, even cattle,

furniture, &c. all may, in some respects, produce an income, more or

less permanent according to circumstances. This sort of income is

established by lease. The second sort is the interest of money,

constituted by the contract of loan.

In imposing cumulative taxes upon income, it is very proper to consider

the nature of every species of it, with respect to stability. Landed

property is fixed, and can not escape taxation, were the tax to be

carried to the extent of the full income, as has been observed. Were the

same proportion to be laid on houses, they would soon fall to ruin,

because the annual proprietor would not keep them up. Like circumstances

must be attended to, in taxing every other article of revenue.

The method of ascertaining the value of this kind of property, is to

oblige all leases to be recorded, under a sufficient penalty. This is

the method in France, for the sake of the _controle_, which is exacted

upon recording them; and this, no doubt, facilitates the raising of the

twentieth penny, which operates upon all such incomes.

The value once ascertained, the whole income is at the mercy of the

state, in proportion to the impossibility of avoiding it, by any change

on the nature of the fund. It is from this circumstance that I call all

such taxes arbitrary impositions. And I call them also cumulative;

because the reason given by the statesman for imposing them, is, that it

is just every one should pay a general tax, for the support of the

state, in proportion to his abilities.

As these taxes cannot be carried beyond the value of the income which

the proprietor cannot withdraw from under the burden, we see the

impossibility of establishing them upon that income which proceeds from

money. If a tax of so much _per cent._ be imposed upon money lent at

interest; the lender may immediately call in his capital from his

debtor, and send it away beyond the reach of the tax. If the calling it

in be prohibited, then all credit is destroyed for the future, and no

more money will be lent. If the statesman should incline to profit of

the advantage found in securing money upon land-property; and if,

trusting to the desire monied-people have of settling their capitals in

that way, he should take one or more per cent. upon capitals so secured;

it will still have the effect of hurting the credit of landed men, who

have frequently no good security but their land to give.

It was formerly the practice to allow the landlords to retain a part of

the interest, in consideration of the tax they paid upon that part of

their land, which was pledged for the security of the money borrowed;

but when credit is once established, that regulation has no other

effect, than to oblige them to borrow so much dearer than other people,

who have no retention to claim. Where indeed credit is precarious, such

a regulation would be a premium for good security.

In general, I believe, we may safely determine, that all attempts to lay

a tax upon the income of so fluctuating a property as money, where the

capital is demandable, will prove unsuccessful.

The case is different, when the capital is not demandable, as has been

observed in the end of the 8th chapter upon public credit; where we were

suggesting a reason for taxing the interest of national debts, when

grown up to the full amount of all the income of a country. But a

material distinction was there made, between those debts which were

supposed to be consolidated into a permanent property, and new contracts

which were to be considered as debts upon that property.

We see, therefore, the extent of cumulative taxes upon possessions which

produce an income. Let us next examine how they may be made to affect

other articles.

We have observed how improper, and how contrary to principles it is, to

impose proportional taxes upon those branches of sale, which do not

change the balance of wealth between the contracting parties. Yet

cumulative taxes may then take place; because there is no reason to make

them general, or proportional.

When lands, for example, carry titles along with them, as is the case in

many countries; and when, as with us in Scotland they carry a right to

vote for a member of parliament, a very heavy tax might be imposed upon

the alienation of them. The same may be said of every other estate which

requires a feudal investiture to compleat the right. Thus the _Lods et

vente_ in France, which is a portion of the price of such lands due to

the superior or lord-paramount of the fee, amounting in many cases to

the sixth part of the price, is a hint for a cumulative tax to be raised

upon the alienation of this kind of property.

Were cumulative taxes properly laid upon personal service, a regularity

in levying them at short intervals, and according to some determinate

proportion, would do a great deal towards communicating to them all the

advantages of those of the proportional kind.

Thus a tax laid upon those who work by the day, may be levied in such a

manner as to be tolerably easy. A penny a day (or more if necessary)

paid by every industrious man, regularly, once a week, would soon enable

him to raise his price in that proportion. But then deductions must be

allowed for all accidental impediments; and were a plan to be concerted,

many other considerations would enter into it, which it would be

superfluous here to mention, and which, perhaps, may occur in another

place.

The two articles which, in analizing the extent of proportional taxes,

we observed had escaped that imposition, to wit, money locked up, and

the pure profits on trade constantly accumulated into the stock, are

equally ill adapted to bear a cumulative tax. I can see no way of taxing

money locked up, any more than money lent, without opening a door to the

greatest oppression. And as to the pure profits on trade, although they

appear to be income, I rather consider them as stock, which, according

to principles, ought not to be taxed. My reason for not considering them

as income, is because we have supposed them to be accumulated by the

merchant into his trading stock. They resemble the annual shoots of a

tree, which augment the mass of it, but are very different from the seed

or fruit which is annually produced, and is annually separated from it.

If they are spent by the merchants, then they are undoubtedly income,

and will be affected by proportional taxes; but as they may also not be

spent, and become stock, the cumulative tax will affect them in both

cases.

------------------------------------------------------------------------

CHAP. IX.

_The consequences of an Abolition of Taxes._

Having endeavoured to deduce the principles of taxation, by examining

the combinations which occur when we suppose it augmented to the highest

degree, I must now look for new combinations, which will suggest

themselves upon examining the consequences of a total, or a partial

abolition of taxes.

So far as taxes are absolutely necessary for the support of government,

no body, I suppose, can wish to see them abolished. The object,

therefore, of a statesman’s attention in levying taxes for indispensable

national purposes, should turn upon the principles we have been

examining. What now follows relates to the consequences of abolishing

taxes once established, so far as it proves a revolution in the oeconomy

of a state. This will lead us to examine the consequences of taxes,

considered as voluntary public contributions, independently of the

absolute necessity of raising them to supply the exigencies of the

state. We are therefore to examine the consequences of so great a change

to the whole body of the society, considered as a nation, which requires

a public stock, to which it may have recourse upon every extraordinary

occasion.

When the interest of a whole people is examined with respect to taxes,

they may very properly be divided into the following classes.

1_mo_, Those who receive the amount of taxes, viz. the creditors and

servants of the state, and those to whom they give employment.

2_do_, Those who advance the taxes, viz. all the different classes of

the industrious.

3_tio_, Those who pay the taxes, viz. all the rich and idle; or, in

other words, all those who cannot draw back what they have paid.

In these classes are comprehended those who pay the taxes, and those who

receive the amount of them; consequently, in whatever concerns taxes,

the common interest of the whole taken together is what must regulate

the conduct of the statesman.

In order to determine this first and general question, viz. the

consequence of abolishing taxes relatively to the cumulative interest of

a whole state, it is proper to inquire,

1_mo_, What will be the consequence of abolishing taxes, relatively to

those who now receive the amount of them, viz. the creditors and

servants of the public, and those to whom they give employment.

2_do_, What will be the consequences of abolishing taxes relatively to

trade, industry, and manufactures: that is, whether these great objects

are carried on to most advantage, when every individual contributes

largely in providing a fund to be administred by a statesman; or when no

body contributes any thing, but when every one retains the whole of his

income, and the profits of his industry, and disposes of them as he

thinks proper.

3_tio_, What will be the consequence of abolishing taxes, relatively to

that part of the people who now complain that they are forced to

contribute to every tax, although by their exclusion from the emoluments

of lucrative employments, they bear a greater burden than others not

better entitled to exemption, who thereby profit at their expence?

To determine so intricate a question, several combinations of

circumstances must here be examined, and from the particulars resulting

in every case, we shall, towards the end of this chapter, endeavour to

point out the general conclusion. I begin by examining the consequences

arising to the creditors, and to those who serve the state, from the

cessation of those expences which flow from the produce of taxes, either

in paying the interest of debts, or in defraying the whole _actual_

expence of government.

As to the creditors, this question has been already discussed. We have

seen that the withholding the interest due to them would have the

consequence of bringing on such a convulsion in the state, by the breach

of faith, and ruin of public credit, as would throw every thing into

confusion. But with respect to the servants of the state, we must

inquire, whether the raising taxes for defraying this article of expence

be more hurtful to the people in general, than the consequences of such

a revolution in circulation and employment, which would follow, if the

taxes were to be suppressed, and the servants employed by the state

dismissed.

When the necessity of raising taxes is out of the question, the hurt

they do in general to a country is when, by the imposition, the money is

taken out of those hands who would have employed it for the advancement

of the prosperity of the state, in order to throw it into those who will

employ it otherwise. From this let us now draw some conclusions.

1_mo_, That if money be taken from those who would have employed it in

feeding themselves, and in continuing their industry, the cessation of

such a tax is in a manner giving bread to those who are starving.

2_do_, If money were to be taken from those who, having more than bare

necessaries, would, by its use, increase the demand for domestic

industry, and were that money bestowed on a set of men who would employ

it in the purchase of foreign commodities; the cessation of taxes, in

such a case, would, so far, take the bread out of the mouths of

foreigners, and give it to our own countrymen.

The abolition of the first species of taxes is advantageous to a state

in every combination, let the money arising from it be ever so well

employed. As to the second species, the abolition is not necessary;

because the vice lies only in the misapplication of the amount.

Let us then suppose taxes to become unnecessary, and all those of the

hurtful kind, depriving the industrious of bread, and enriching

foreigners at the expence of citizens, to be taken off.

Suppose that after all, there should still remain more taxes than are

sufficient for supplying all the necessary charges of government, when

administred with prudence and with oeconomy, and that this surplus is

bestowed in gratifying individuals, beyond the value of all the services

they do the state: I ask whether this superfluous expence is immediately

to be cut off, and taxes diminished in proportion; or whether it would

not be more proper to let the taxes subsist, and to think of a better

method of applying the amount of them?

I answer, that according to the state of the question, the body of the

people, who are all made to contribute towards the enriching of a few of

their number, may justly complain of the inequality of their condition,

and have a title to demand an abolition of their taxes, unless it can

evidently be made appear, that by granting their request, there would

follow a prejudice to the state, which would affect their own interests

as individuals.

To discover how far this may be the case, let us form as many

combinations as we can, relative to the effects of diminishing taxes,

and candidly examine the most natural consequences of every one. If we

find that the mass of a people gain, in general, more than they lose by

paying taxes imposed with moderation and propriety, and still more if it

appears that their ease and prosperity depend upon the levying and

expending of such taxes; I think we may conclude, that all diminutions

of them which hurt the interest of the greater body, are in general

hurtful to the society.

Let me first suppose a general reform of all unnecessary expence to take

place at once, and a proportional abolition of taxes to go hand in hand

with it. Would not all those who at present subsist by the superfluous

expences of government, be reduced to misery? Would not all those who

supply unnecessary wants, equal to the whole amount of the taxes

suppressed, be forced to be idle in proportion? The millions who

contribute in paying those sums would be differently affected. Those who

pay out of a fixed and certain income, would feel an immediate benefit

from it; those who contribute by proportional taxes would also be

gainers, providing they be of the idle class; but all the industrious

would lose in proportion, if the prices of subsistence should not fall

with the diminution of their taxes. All the manufacturers of exciseable

goods, who had been used to _advance the taxes_, as we have observed,

would gain considerably. For the diminution of the taxes would be total

as to them, though not to their customers; because traders would never

want pretences for keeping up the price of their commodities beyond the

proportion of what it ought to be, when duties are taken off.

I decide with the greater certainty as to this particular, from the

analogy it bears to the consequence of changing the denominations of the

coins in France, which long experience shews never to have the immediate

effect of regulating prices proportionally.

But as we are here considering the consequences of a sudden abolition of

taxes, let us, for a moment, consider, with an eye of humanity, the

scenes which would unavoidably open to our view, both in the formerly

opulent habitations of those who were wont to wallow in public money,

and in the comfortable dwellings of many others of every denomination,

who, either as the reward of merit, or as the recompence of painful

industry, had supplied the wants of useless armies, navies, arsenals,

dock-yards, &c. formerly paid out of taxes, now abolished, and who

thereby had subsisted and brought up their families.

Are not all these children of the state? Have they not had fathers and

mothers who have been greatly relieved by procuring such outlets for

them? Have they not children who are educated and brought up with the

amount of their salaries, and profits of their service? Have they not

had people of every class of industry, who have gained their bread by

providing for their wants, while they were supplying those of the state,

now become superfluous? In one word, does not the money they receive,

circulate and return to the grand river, as I may call it, in the same

manner as that of other members of the state?

For these reasons, I say, that taxes once properly imposed, and brought

to circulate through a certain channel for a long time, cannot,

_suddenly_, be suppressed, without occasioning far greater misery and

distress than can arise from them, when levied with any degree of

intelligence. This is nowise peculiar to the suppression of taxes; it is

equally the same, in every sudden revolution of property. When the

Templers were universally rooted out of Christendom, who doubts of the

afflictions, misery, and distress, which followed to every class of

inhabitants employed by them, in every kingdom in Europe? Could so large

a consumption as that of so great an order cease at once, without

drawing along with it numberless inconveniences? Did not the reformation

itself, otherwise so great a blessing, starve a multitude of poor who

were fed by the monastries? Did not the secularization of so many

ecclesiastical benefices do great prejudice to many families, by

blotting out an infinity of ways of procuring an easy livelihood for

their children? Let those who do not feel the truth of what I here

advance, examine the state of the protestant nobility in Germany, where

you find the same hardships still subsisting, though in a degree much

inferior to what it must have been at the time of this sudden

revolution, which took bread from thousands of the younger sons of noble

families.

Such revolutions have happened; such inconveniences have been felt: but

they were not the deliberate act of any particular statesman. They were

the effect of those convulsions which the human passions occasion. No

body can justly impute them as necessary consequences of a reformation

in religion. But let any statesman now, from a cool reflection upon the

unnecessary load of employments in church, state, army, navy, finances,

and law, and from a principle of distributive justice, abolish _at once_

all that is superfluous, and the taxes, at the same time, out of which

the emoluments arise, he will very soon set before the eyes of his

people, such a scene of compassion, as will quickly blot out the

remembrance of the favour.

We should not then find some individuals reduced to want, but numerous

families; not a parcel of beggars starved, but industrious

manufacturers; not a set of ecclesiastics, who from their state of

celibacy and retreat, appeared already, in a manner, separated from the

commonwealth, but a multitude of people connected by marriage, by

society, and by all the tender bonds which unite mankind. Such a scene,

I say, would not fail to excite compassion in the heart of those very

men in whose favour the desolation was to be brought on; and the

statesman would thereby lose the whole merit of his ill judged zeal for

distributive justice, and be considered in the most unfavourable light

that passion or prejudice could suggest.

This is a digression introduced with no intention to favour a

misapplication of public money, but to point out how far a reformation

in this particular is a delicate operation.

A good physician never attacks a disease by violent remedies, when mild

ones, with time, may be made to produce the same effect. Nothing can

resemble an ingrained disease in a human body, more than an ingrained

vicious habit in a state. The spirit of a nation is influenced, as has

been said, by the administration of its government. So large a sum of

misapplied money creates a political disease, which must be purged away

by degrees; and new doors must be opened to receive those whose former

method of subsistence is thereby intended to be cut off.

Let me next examine the consequence of a gradual and insensible

reduction of taxes, relatively to trade, industry, and manufactures.

It would be both tedious and superfluous to trace the steps by which

such an operation ought to be conducted. Let me suppose it compleat; but

let it not be so very gradual as to blot out all remembrance of the age

of taxes, and of their effects.

We have sufficiently analized the whole progress of circulation; we have

shewn how it must constantly be in proportion to alienation, and how,

when deficient, industry suffers a check. Even when peace is restored

after an expensive war, we have shewn how circulation diminishes, from

the abatement of public expences, how money stagnates, and how it is

consolidated upon property of a more permanent nature.

Let us now apply these principles to the question before us. Let taxes

be abolished ever so gradually, the circulation of the exchequer must

cease in proportion; consequently, the whole alienation, and the whole

industry which is the object of that alienation, must cease also. The

money issued from thence at present, continues its progress from hand to

hand, and all is found necessary for circulation, in this age of

taxation, as we have called it. What a deal of industry is implied in

the circulation of a sum equal to all the taxes! Let those who choose to

calculate, state the following proportion, because I will not here

interrupt my subject.

As the whole money of the country is to all the alienations performed by

it, so is the sum of taxes to that part of alienation which will fall

with them.

If a gradual diminution of taxes must have the effect of extinguishing

so much industry, it will have the effect of starving the industrious

who lived by it. But before they starve, the price of work must fall

below the price of the narrowest subsistence: because the never failing

foreign demand for subsistence, will keep it above the rate of their

slender abilities, as long as any trade remains.

To imagine a foreign outlet for cheap manufactures, while the

subsistence of workmen is at par with other nations, is against all

principles; as it is against experience, to see a country without

revenue, and without taxes, carrying on with success the operations of

industry and foreign trade.

Compare, therefore, the situation of such manufacturers with those in

the age of taxes. Compare those who would augment a supply far beyond

all the demand for it, with those who are paying large taxes, and as

regularly drawing them back, either upon the sale of their work, or in

consequence of wages which enable them to be idle two or three days in a

week.

In such a situation, how ardently would the former wish to see the idle

consumers furnishing again a copious supply of money to government, for

removing such inconveniences. They would then quickly perceive that they

had not been of that class which had felt the load of taxes; they would

recal to mind the joyful hours they had spent in public houses; the

fortunes which every industrious man might hope to accumulate, while

every branch of industry was kept alive, by the means of a copious

circulation.

If, therefore, the industrious classes of a people cannot be benefited

by an abolition of taxes; let us next inquire, to whom the advantage

would accrue.

It has been said, that the idle consumers pay all taxes of the

proportional kind; the proprietors of lands, houses, &c. bear every

where a very large share of taxes both proportional and cumulative. This

class of men, therefore, are those who bid the fairest to reap a benefit

from an abolition of them. But the proprietors of lands are by no means

included in the class of idle consumers, in every respect; altho’ they

may be considered in that light, with respect to such taxes upon their

consumption as they do not draw back from their direct industry, in

producing some manufacture which they may sell again, with a profit

proportional to the tax they paid. They are masters of a property,

which, in a country of industry, is daily augmenting in its value. Their

fortunes, often swell faster than those of any one class of the

industrious; but they augment by annual income; the fortunes of all the

rest, increase by the capital. Every penny raised in a landlord’s rent,

is equivalent to half a crown gained by a merchant.

If it be true that taxes, rightly imposed, do no prejudice to any of the

manufacturing, or any-wise industrious classes of a people; and if it be

true, that an abolition of those taxes, by contracting circulation,

would discourage industry; then we may determine that the landlords

would lose much more in finding the improvement of their lands

interrupted, than all they can gain by adding their taxes to their

present fortunes.

Combinations of this sort are so involved, that I cannot pretend to

unfold them step by step, as might be done in cases of a more simple

nature. The conclusions therefore drawn from researches of this kind, do

not command that assent, which we find in a manner extorted from us upon

other occasions. In this chapter, I have not undertaken to demonstrate

that the judicious imposition of taxes is advantageous to a country in

every respect. My view is to point out the advantages they actually

have. The common opinion is that they are hurtful. Our feelings,

however, have raised doubts with many great men concerning the truth of

that proposition. If my investigations, however imperfect, and however

liable to objections, should facilitate to others the clearing up a

point, which is beyond the reach of my capacity to extricate, this

consideration will be a sufficient encouragement for me to proceed.

Let me, therefore, lay aside the thoughts of analizing the effects of

taxes, with such accuracy as to form a demonstration of their being more

beneficial than hurtful to an industrious nation, and that the throwing

them back into circulation does more good, than the raising them does

harm. But let me shew, in general, that the interest of landed men, who,

I think have, beyond all doubt, been proved to be those who, in the

first place, pay a considerable part of proportional taxes, does by no

means require an abolition of them.

The proprietors of lands, whom we have hitherto considered as being of

the class of the idle consumers, advance their rents by the great demand

produced for subsistence, in consequence of industry. This, if it does

not raise the price of subsistence, keeps it, at least, at an equal

standard; and that standard must bear a proportion to what it is worth

in other nations, as long as trade subsists. But let trade decay, let

domestic industry fail, it will not be the foreign price which will then

support the rate of our markets. What a multitude of circumstances

contribute to the exportation of our superfluity! I can send from

Charing-cross, any parcel whatever, to the distance of fifty miles,

cheaper than from my own country habitation, where I can have a man,

with a cart, for two shillings a day. From Charing-cross, I can send, at

an hour’s warning, many thousand tuns weight: here I could not do the

same in many weeks. Near London, an extended common may be inclosed and

improved in a season: here, the improvement of a small field is the

business of a man’s life. Let me even consider how matters are changed

within these fifty years. Undertakings which now are executed with

little difficulty, were then absolutely impracticable. An army was

necessary thirty years ago to make a road of a hundred miles, and the

inhabitants were astonished at the execution of it[48].

Footnote 48:

Wade’s road through the highlands of Scotland.

Were it necessary, at this time, to do as much every year, if money be

but provided, hands will not be wanting, either to conduct or execute

the plan.

The number of people, _well employed_, makes the prosperity of a state;

and the profits of the opulent classes, by the augmentation of industry,

more than compensates all the burden of their taxes. They grow in

relative wealth; and the acquisitions they make, are commonly exempted

from the cumulative taxes raised upon their possessions. In proportion

to their industry in improving their lands, their fortunes augment. The

present system of taxes does not interrupt their operations. Were any

great change in that particular to take place, which might sink the

market prices of subsistence, even allowing that it would prove an

advantage to foreign trade, they, I am sure, would be the first who

would feel the inconvenience.

It may be wondered, why I have not suggested, as a consequence of taxes,

the increase upon the price of the earth’s productions, which is a

direct indemnification to all the landed interest, more than equivalent

to the taxes they pay. But taxes upon land, do not augment the price of

grain, as they raise the price of exciseable goods. The reason is plain.

The tax upon land affects only the proprietor’s share of the produce of

his lands: were he to attempt to raise the price of his grain, in

proportion to the tax he pays, his farmer, who pays no land-tax for his

portion, would undersell him in the market. A tax never can raise a

price, except when it is laid on so universally, as to make it

impossible for any person to avoid it, who sells in competition with

another who pays the duty. It is from this principle that smuggling

often ruins fair traders: the smuggled goods are sold cheaper than those

which pay duty, and the fair trader is thereby forced to sell below what

he can afford.

On the whole, I believe that when this question is thoroughly

understood, it will be found, that taxes affect prices far less than any

one could imagine; except in the case of excises, rightly imposed, and

levied without fraud. There indeed they have their effect; but in every

other mode of imposing them, I am apt to believe that they do not

produce the consequences commonly ascribed to them. I have already

suggested the reason in a former chapter upon this subject; where the

influences of competition in the markets where commodities are sold, has

been proved to work more irresistible effects in regulating the price of

work in general, than any thing that taxes, not immediately imposed upon

the very article of consumption, can produce. But if in spite of all

that has been said, it should be urged that the prices of labour and

manufactures rise in proportion to taxes, I answer, that the

difficulties resulting upon this hypothesis, would be many more than

could be objected to the other theory. Could, for example, any man

assign a reason why a pound of the best snuff in England should be sold

dearer than in France, where it pays a duty of above two shillings

sterling; why many articles of manufacture can be afforded cheaper in

England, than in Scotland, where taxes are certainly lower, and although

a day-labourer in the first be paid a shilling, and in the last little

more than eight pence; why subsistence should be absolutely dearer in

Scotland than in England, taken upon an average; why universal

experience should prove, that when the price of subsistence is raised by

scarcity, work instead of rising, is constantly lower than at other

times?

From all these appearances, added to the arguments I have used to prove

that taxes are not prejudicial to industry, I conclude, that the theory

I have attempted to give is just in the main; and that when taxes are

judiciously imposed, and actually levied without oppression, they enrich

a nation.

1_mo_, By putting into the hands of a good statesman, the means of

removing every abuse; of rendering the state respected by its enemies;

of supporting every class of industrious inhabitants, when their

particular branch falls under distress; of providing an outlet for many

young people, who in time become ornaments to their country, and

instruments of her defence; of supporting foreign trade by bounties on

exportation; of encouraging the improvement of lands, the establishment

of colonies, the extension of fisheries, and every other scheme for

augmenting the production of subsistence and manufactures.

2_do_, That the multiplication of taxes, exclusive of the encouragements

just mentioned, which are bestowed gratuitously on trade and

manufactures, do, of themselves, and independently of the proper

application of their amount, augment, demonstratively, the mass of

circulation, alienation and industry; and in this respect may be

considered as a voluntary contribution, in the first place at least,

from the rich who pay them, to the industrious who directly draw them

back.

3_tio_, As to that part of the people, who pay their taxes without

sharing the advantages of those who serve the state in lucrative

employments, I say the industrious part of them pay nothing; and the

demand for what they produce, is greatly increased by the expence of

those very men who are the objects of their envy: and farther, that if

an alteration were to be made on the revenue, by any abolition of taxes,

those who imagine themselves hurt at present, might find, by sad

experience, a much greater, and much more real hurt, from what would

disturb the harmony of the present system.

To conclude, we have a tolerable notion of the state of industry in

former times, when taxes were little known: we may see the progress it

is making in countries where, at present, impositions are comparatively

lower than elsewhere; and we may compare the state of those countries

with our own, as to ease and happiness. From such inquiries, nothing, I

apprehend, can be concluded in favour of the progress of industry, from

an abolition of taxes.

That such an abolition may produce some good effect, as yet unknown, I

shall not pretend to deny: we have not lived long enough to see any

experiment of this kind put in practice.

From the exposition I have given of this matter, there arises a great

difficulty to be solved.

Taxes are paid, no doubt, and no body according to this theory seems to

pay them. The industrious draw them back; the proprietors of land and

solid property are said to be indemnified; prices, it would appear, are

not to fall by a diminution of taxes, in favour even of the most idle

consumer; they are not made to rise in consequence of an augmentation on

them: Whence then do taxes proceed? From what fund do they arise? What

interest do they affect? I can solve all these difficulties, by an

answer to another question. From whence arises the value of a small

parcel of flax, when wrought into fine lace? It arises from the price

paid for time well employed; which produces nothing when spent in

idleness. This is the fund out of which the greatest part of taxes is

paid; it is a fund created by the industrious Britons, which I hope will

increase for many centuries, tho’ taxes should increase in proportion.

It is worth more than ten times all the taxes which could be raised, and

all the landed property without it. Let that time be spent in idleness,

and the whole produce of this island would not supply the expences of

government for a month.

------------------------------------------------------------------------

CHAP. X.

_Are taxes a spur to industry, as some pretend?_

It is not easy to find out, _a priori_, how taxes should prove a spur to

industry. What makes several people adopt this opinion is their

feelings, in consequence of many circumstances arising from experience,

rather than what reason, or the nature of the thing has pointed out. But

as nothing can be produced without an adequate and natural cause, it is

proper to examine this political problem, by an application of the

principles we have laid down in the former chapters. If these be just,

we shall discover by them, how it happens that in countries where taxes

are high, where living is dear, and where every circumstance seems to

render the means of subsistence difficult to obtain, people live in the

greatest plenty, are best and most easily subsisted, and that industry

there makes the greatest progress.

For the solution of this question, let us call to mind the principles

which influence the multiplication of mankind, and the increase of

labour and industry, laid down in the first book. We there explained how

the wants of mankind promote their multiplication.

Money, the instrument of alienation, was represented as the primum

mobile in this operation; a desire in the rich of acquiring every thing

with money, that is _demand_, was shewn to be the spur to industry in

the poor. It was said, that if riches did not inspire a taste for

luxury, that is for the consumption of the labour of man, these riches

would not circulate; and that they would then be adored rather as a god,

than made subservient to the uses of men.

Connect herewith that the imposition of taxes is a method of bringing

money into circulation; that those of the proportional kind have the

effect of drawing from the rich, an additional price upon every thing

they buy, which goes for the use of the state, and which otherwise would

not have entered into circulation at that time.

From these principles, I conclude, that taxes promote industry; not in

consequence of their being raised upon individuals, but in consequence

of their being expended by the state; that is, by increasing demand and

circulation.

From the principles above laid down, I cannot discover the shadow of a

reason, to conclude that the taking arbitrarily away from some

individuals, a part of their gains by cumulative taxes, or

proportionally from others, by augmenting the price of what they buy and

consume, must in any respect imply an incitement in the consumers to

demand more; and without this it never can excite the industrious to

augment the supply.

I readily allow that every one who has been obliged to pay a tax, may

have a desire to indemnify himself of the expence he has been put to, by

augmenting his industry; but if on the other hand, taxes have put every

one to a considerable additional expence, in proportion to his estate,

it would be absurd to allege this diminution of his fortune, as the

cause of a desire to augment his consumption.

Examine on the other hand, the use made by the state of the money

raised, and you will easily perceive the justness, I think, of the above

mentioned principles. This money belongs to the public, and is

administred by private people. Public expence is defrayed with a full

hand; they who bestow the money, bestow it for the public, not for

themselves; and they who work for the public, find, or ought to find,

the greatest encouragement to be diligent.

Every application of public money implies a want in the state; and every

want supplied, implies an encouragement given to industry. In

proportion, therefore, as taxes draw money into circulation, which

otherwise would not have entered into it at that time, they encourage

industry; not by taking the money from individuals, but by throwing it

into the hands of the state, which spends it; and which thereby throws

it directly into the hands of the industrious, or of the luxurious who

employ them.

It is no objection to this representation of the matter, that the

persons from whom the money is taken, would have spent it as well as the

state. The answer is, that it might be so, or not: whereas when the

state gets it, it will be spent undoubtedly. Besides, had it been spent

by individuals, it would have been laid for the supply of private wants,

which are not near so extensive as those of the public: and farther,

when money is so taken from rich individuals, it obliges them to find

out a way of procuring more, out of their solid property; and when this

facility is not procured for them by their statesman, we see how taxes

become both oppressive and ill paid. On the contrary, when it is

provided, either by the returns of foreign trade, which greatly augment

the coin of a country; or by banks, which melt down property into paper

circulation; we see taxes augmenting constantly, without creating any

impediment to consumption, or discouragement to industry. All these

consequences hang in a chain, and hence the solidity of the principles

upon which they depend may be gathered.

After this solution of the question proposed, let those who are versed

in history combine circumstances, and examine whether facts do not prove

the truth of what I have said.

During the time of the Roman empire, when the riches of Asia flowed into

the coffers of Rome, and were constantly exhausted by the prodigality of

the emperors, we perceive, from many circumstances, to what a degree the

consumption of superfluities augmented. The price of certain commodities

rose to an excessive height; industrious people, of the lowest

extraction, were daily seen to amass prodigious fortunes: these are

proofs of circulation. But when we consider the expences of a Lucullus,

or of a Crassus, who consumed, it is said, the work of ten thousand

slaves, and compare the consequence of that consumption with the expence

of a modern, who should consume the industry of ten thousand freemen, we

shall find a wonderful difference in the effects of the one and of the

other, with respect to circulation, and the encouragement given to

industry.

There was no alienation between Crassus and his ten thousand slaves,

notwithstanding all the work consumed; consequently, the only

circulation implied by this consumption was in proportion to the

necessaries which the master was obliged to purchase for so great a

multitude: and if we still suppose all those necessaries to have been

produced by their own labour, then the state of Rome could not, but by

an arbitrary imposition laid upon Lucullus and Crassus, draw one

farthing out of their coffers; consequently, industry could not increase

in proportion to the loads of wealth brought from Asia by those

generals. Whereas were Lucullus now at London, or at Paris, he would not

be able to spend a shilling, without giving a penny, and perhaps more,

out of his treasure to the state, which would immediately throw it back

into circulation.

As we are now on the subject of circulation among the ancients, let me

briefly trace the progress of it in Europe, through different

modifications, to our own times, and so close this chapter.

When the seat of empire was translated to Constantinople, and all the

Asiatic provinces attached to the Emperors of the East, a stop was put

to the augmentation of coin and bullion in the empire of the West. A

considerable part of what had formerly been there returned to

Constantinople, and the remainder fell a prey to the barbarous nations

which overran it. This may be called the first period.

These barbarians, by enslaving all the ancient inhabitants, and by

forcing them to perform every kind of service, must have had little use

for coin. What they coined appears to have been broad and thin.

Let any one reflect upon the insensible waste of silver plate, and the

still greater loss on coin which circulates; the vast sums carried off

in the time of the Croisades; the quantities buried or thrown into

rivers in times of devastation; and add to these circumstances, that

from the fifth century after Christ, till the discovery of the Indies,

there was, probably, little or no silver or gold brought into Europe;

and it will appear very natural, that coin should have been at that time

much more scarce than formerly.

How contracted circulation was during the 13th and 14th centuries, may

be gathered from the anecdote concerning alienation in France, mentioned

in the third chapter upon public credit.

But farther, the great subordination established by the feudal form of

government, and the military services to which such numbers were bound,

had the effect of preserving the ancient simplicity of manners, so

unfavourable to industry. The consequence was, that Princes could raise

no taxes; and that all the money the people had was locked up in their

chests. We know there were in those days abundance of wealthy people;

but their wealth inspired them with no disposition to consume at the

expence of ready money.

The discovery of the Indies opened a third period, and threw great

riches into the hands of the Spaniards: the house of Austria was the

first enriched, and appeared with great splendor for some time. Charles

V. by his extensive dominions, had an opportunity of distributing this

new gotten treasure among his subjects in Flanders, his native country:

this set industry to work in that quarter. The Portugueze discovered the

East Indies: a new enticement to luxury; a new motive to become

expensive. The Hollanders became a trading people, and with the money

which their industry had drawn from the magnificent Spaniard, they shook

off his yoke. Money insensibly began to circulate. Princes immediately

found, as has been said in the second book, that it was necessary for

them also to augment their revenue, in order to maintain a proper

superiority over their subjects in point of riches. The increase of

circulation among individuals made it more easy to raise taxes; and the

throwing the amount of them back again, in gratifications to the chief

people of the state, engaged those who came by money in a manner

gratuitously, to expend it as freely as they received it. No wonder,

then, if Princes found it an easy matter to load their subjects. They

were supported in this scheme by the great men of the state, who found a

benefit from it. This revolution has totally changed the face of affairs

in the present period of circulation. Courts are splendid; armies are

numerous; buildings, in cities and in the country, are magnificent; an

old city, compared with a new one, appears hideous; all public works are

carried on with that solidity which we admire in those of ancient

Princes and states, when nations led into captivity were employed to

perform them. In those days the magnificence of Princes was in

proportion to the groans of their subjects; now they are in proportion

to their wealth and ease. Whence proceeds the difference, the effects

are the same? From good government, and a well regulated political

oeconomy.

------------------------------------------------------------------------

CHAP. XI.

_Considerations upon Land-Taxes, with some Observations upon those of

England and France._

Of all the kinds of cumulative taxes, that which is properly imposed

upon lands seems the best: that is, it implies the fewest inconveniences

to the persons paying, and to the state in raising it. That it is an

unequal imposition is plain and certain: this character is unavoidably

attached to every species of cumulative taxes, in one way or other. It

has also the effect of casting a general discredit upon the purchase and

improvement of land; because the proprietors are naturally exposed to

augmentations, which may, almost with the same ease, be carried to the

total amount of the income, as to any proportional part of it. This has

been mentioned in a former chapter, where the interest of a nation’s

debts was supposed to increase so as to equal the value of all the

land-rents, and the whole revenue of individuals.

Land-taxes are imposed in various forms in different countries, and all

are supposed to bear a determinate proportion to the rent. This,

however, is never, nor indeed can it ever be the case. The value of land

is varying perpetually, from the industry of the inhabitants. Besides

this inequality, there are other inconveniences proceeding from the

unequal distribution of property. In Scotland, for instance, land is

divided into large portions; very few small lots are to be found. The

class of farmers, for the most part, labour the lands of others, who

have large possessions. This is less the case, I believe, in England,

and still less in France and in Germany. A land-tax, therefore, being

supposed universal, would, in Scotland, do little harm: in England, it

falls heavier upon the small proprietors; because the sum exacted bears

a greater proportion to the supposed superfluity of the proprietor. In

France, it is still worse; for there the exemptions of the numerous

class of nobles, and many other circumstances mentioned above, entirely

destroy even the shadow of proportion. It is out of my way to enter into

any long detail upon this head, with respect to different countries.

I shall therefore confine myself to a very few observations upon the

method of laying this tax in England; and upon a project which has been

long in agitation in France, to raise their land-tax by way of tithe

upon the fruits.

This scheme was first proposed to the late King of France by the

_Marechal de Vauban_, in 1699, and the proposal was renewed some years

ago in a performance called the _Reformateur_. But as it would prove

hurtful and burdensome to France, in a great degree, from a circumstance

which has not been attended to, the examination of this system of

taxation will serve as a good illustration of this part of our subject.

The land-tax in England has, in my humble opinion, two remarkable

defects. First, The sums imposed at so many shillings in the pound[49]

upon every district of the kingdom, whether cities, towns, universities,

or open country, even upon the King’s palaces, inns of court, &c. are

not distributed according to any rule of proportion upon the property of

individuals; but this operation is left to assessors.

Footnote 49:

That the assessments, in the annual act for the land-tax, are

generally understood to be at the rate of 1, 2, 3, or 4 shillings in

the pound, is true; but it is to be observed, that no such rate is

mentioned in the statute with respect to real estates or land. The

rate of a certain number of shillings in the pound occurs only with

regard to personal property.

Secondly, All personal estates, except property in the public funds, and

stock upon land, supposed necessary for agriculture, are charged in the

same proportion as land-rents.

I shall now point out the inconveniences and bad consequences of these

two capital defects.

When a tax is imposed at so many shillings in the pound upon the income

of a whole district, every article of the property which produces it

ought to be specified. If this be omitted, there is a legislative

authority vested in those who make the distribution.

The articles which compose the whole property, and the revenue of each

article being once determined, the state has it in its power to impose

the tax according to what proportion it thinks fit; of one, two, or more

shillings in the pound. But then, in favour of the contributors, the

different articles which produce the supposed total, ought either to be

specified in the law, or reference should be made to a book of valuation

where they are recorded.

It is no easy matter to frame the valuation of all the property of a

country: and it is a scheme I should be very far from proposing, unless

the spirit of a nation took such a turn as to wish for it. But where a

determinate sum has been in use to be levied upon a certain district, it

does not appear so difficult to make a proportional distribution of it

according to equity, and to adhere for the future to that distribution,

considering it as a _proportional_ valuation, if not a _real_ one. This

is done every year, and without it no such tax could be raised. But when

annual distributions are made, discontents constantly arise; and the

pretended equality thereby observed, produces worse effects than the

inequalities which would follow from the other scheme: because the

change in the relative value of possessions would then be chiefly owing

to the industry of every proprietor in improving his lot.

How valuations in England were made originally I cannot tell[50]; but in

Scotland, it is very certain, that as to lands they were all set down in

a book of valuation at their supposed rents at that time. So let the sum

raised be what it will, every man at least knows that his proportion

must be according to his valuation in the general register.

Footnote 50:

There is no vestige in the history of England, since Dooms-day book,

of any regular valuation being made of all the _lands_ of the kingdom,

nor of any tax imposed, _singly_, on that branch of property.

The subsidies, monthly assessments, and pound rates, in the different

stages of the monarchy, have all been mixed duties; composed of a

charge upon the lands, upon the money and personal estates of the

subject, and frequently including a poll-tax, where qualities, that is

rank, were differently charged.

The whole operation of distributing and raising this duty, has been by

commissioners named by the King, or by parliament, who sometimes upon

oath, and sometimes not, inquired into the extent of every one’s

private fortune, and assessed them accordingly. Whoever wishes to have

a more full account of this confused method of raising a land-tax in

England, may consult Davenant’s Ways and Means, Article of Monthly

Assessments, and Aids upon a Pound-rate.

In England, the case is totally different. The proportion every district

is to pay, is indeed recorded by an original distribution made many

years ago in King William’s time. By this it appears what every city,

county, university, &c. is to pay according as the tax is imposed at

one, two, three, or four shillings in the pound. This is precisely the

regulation in France, as shall be more fully observed; but still such

regulations nowise prevent the most grievous inconveniences which attend

this tax; because the burden of it does not consist in the total amount,

so much as in the partial distribution upon the inhabitants in every

subdivision.

In England, let me suppose the proportion of the general sum for a

particular district to be ten thousand pounds, at four shillings in the

pound. How is this to be levied as the law stands? Instead of books of

valuation, which shew at least the proportion of every man’s property,

if not the real value of it, assessors are constantly called in, who

examine the rents of all the lands according to the last leases of them.

If they have been improved and let at a higher rent than formerly, the

proportion of the tax is augmented. If they have not been let, but still

remain in the possession of him who improved them, the tax is not

augmented. If the tax be found to fall too heavy upon the lands and

houses, then personal estates are made to contribute, as is the case in

London. All questions or disputes about the repartition of the tax are

determined, without appeal to the courts of law, by the commissioners

appointed for laying on the tax; as in France they are determined by the

Intendant. Without this regulation all would run into confusion, for the

reason I am now going to mention, and which regards the second defect in

this tax.

Any proprietor of lands is entitled, from the words of the statute, to

insist that the whole personal estates of those of the district shall

enter into computation of the total value upon which the sum imposed is

to be assessed. Were such questions to come before a court of law, where

the judges are obliged to determine almost according to the letter of

it, I believe no land-tax could be levied in that kingdom. But manners,

not laws, govern mankind. The spirit of the English nation is such, as

to be incompatible with every thing which savours of oppression. Hence

the few complaints against the assessors, or those who judge between

parties. And as the land-tax is levied without any complaints, except as

to the total amount; while that remains the case, the fewer the

innovations made upon it are, the better.

In France, the sum of the _taille_ to be raised upon the kingdom for the

year is determined in the King’s council; and the proportion of every

district (called an _Election_) is there particularly specified. The

district of an Intendant is called a generality, and comprehends in it

several elections. The Intendant, therefore, makes the distribution of

the general sum imposed upon every election, and upon every town,

village, and parish in it, according to a certain proportion; and rules

are prescribed to the collectors of every parish, concerning the method

of taxing every species of income, every emolument of industry, even

every animal in the possession of those who are subject to this tax.

This proportion is calculated to carry the most scrupulous attention to

every man’s gain, upon all effects belonging to him, and upon every

possibility of making profit by industry. All this is carried into

execution with the greatest seeming equality in the minute subdivisions.

But as the first imposition of the tax is not proportioned to the actual

value of the income it is intended to affect, and as the Intendant does

not set out by a particular valuation of every man’s possession, before

he distributes the tax upon the several parishes, he is obliged to make

up the deficiencies by second and third distributions.

Although this _taille_ affects every species of property producing an

income, as well as every kind of industry and employment, it does not

affect every landlord for his rent, so much as every cultivator under

lease, for his supposed profits.

Land-rents in France belong, for the most part, to the higher classes;

and these, whether they be well born or not, are exempted from this tax,

providing they be _noble_; a word which has no reference to birth, but

to certain privileges which any man, who has money, may acquire.

It was in order to avoid this exemption, that the Marechal de Vauban

wanted to substitute a tenth instead of the present _taille_; for a

reason we shall presently see.

All the land-rents, therefore, of the nobles are exempted from the

taille, and are only affected by vingtiemes and dixiemes but when they

cultivate their own lands, their privilege of exemption from the taille

is confined to as much as four ploughs can labour; and this farming must

be carried on by menial servants, unmarried, in order to prevent such

proprietors from defrauding the tax, by really letting their lands under

pretext of holding them in farm.

This exemption, as to their land-rents, is more apparent, however, than

real. It is not the _lands_ of the nobles, but the _rent_ paid out of

them which is exempted from the taille; consequently, by imposing an

exorbitant taille upon the lessee, very little remains for the

land-rent; and this tax being laid upon a set of people who are loaded

with many others, is in the end more burdensome to the proprietor, than

if he paid it himself. But a change in this policy is impracticable. The

gentlemen of France will probably never submit to a _taille_; and

although, by yielding up that point of delicacy, their rents might be

raised in the end; yet as matters stand, they know they enjoy the rents

they have, free of tax, and if once they were made to pay any part of

them, they do not know where such payments might terminate.

To avoid the infinite oppression which results from the French principle

of sharing every man’s profit as soon as he makes it, the Marechal de

Vauban proposed to abolish the taille, as it is paid at present,

together with the _capitation_, _industrie_, and all the train of

cumulative taxes committed to the management of the Intendants; and to

establish in their room what he called a royal Tenth, meaning by this

term, a proportion of all the fruits of the earth, similar to what is

established in favour of the clergy. This he proposed to lay on,

according to the exigencies of the state, from one twentieth part to one

tenth upon every article of the gross produce of land, over all France.

This he imagined to be equal to one tenth of the land-rent. And the

author of a book published under the title of the _Reformateur_,

containing a new plan of taxation, in which there are some things worthy

of observation, follows in this particular the Marechal de Vauban,

without ever considering the true nature of a tax of this kind.

Of all the taxes upon the income of land-property, the tithe is the

worst; and it has undoubtedly been established among men, before

agriculture or taxes were understood. Lands in all countries are of

different qualities: some are proper for bearing rich crops of grain,

others are indifferent; some produce pasture, others forrest; the

revenue of some consists in wine, in mines, and in a thousand different

productions, which cost, some more, some less expence to cultivate. The

tithe takes without distinction a determinate proportion of the fruits,

in which is comprehended the tithe of all the industry and expence

bestowed to bring them forward. As an example of this, let me suppose a

field of corn, which cannot pay the proprietor above ¼ of the grain it

produces, many I know cannot pay above ⅕, but let me suppose it ¼:

another may pay with ease ⅓; another even ⅖; the fields about Padoua pay

½; grass fields pay still more; and rich hay fields will pay in some

places ⅔, and even ¾.

How then is it possible there should be any equality in a tax which

carries off, without distinction, a certain proportion of the fruits,

when those fruits bear no determinate proportion at all to the expence

of raising them? But besides the inequality of this tax among

proprietors, I ask how it is possible that any rent should be determined

for lands, which are subject to a _variable_ tithe, sometimes at 1⁄10,

sometimes at 1⁄20 of the produce? Let me demonstrate the impossibility

of such a plan, by an example.

I suppose the Marechal’s plan established, and that the tithe to be

imposed is to be deducted from the rent stipulated between master and

tenant. This was his intention: he has in many places declared, that all

tithes were to come out of the land-rent, which indeed is the only fund

upon which a land-tax ought to be established. And he has as often

declared that he never intended this land-tax should exceed one tenth of

the rent, or two shillings in the pound.

I suppose a field, producing every year 1000 bushels of grain, to be

let: it is to pay a variable tithe, sometimes of 100 bushels, sometimes

of 50, according to the exigencies of the state. I farther suppose one

third of the produce to be equal to what the farmer can pay the landlord

for rent. And I suppose the rent to be paid in bushels of grain.

According to these suppositions, the rent must be 333⅓ bushels subject

to the tithe. Suppose it to be laid on at ⅒, or 100 bushels. Deduct this

from 333⅓, remains to the proprietor 233⅓. The tithe comes next year to

1⁄20; this makes 50 of deduction, remains to him 283⅓. So instead of 10

_per cent._ of his rent, he pays in the first case 30 _per cent._ and

when at the lowest, he pays _15 per cent._ which is thrice as much as

the Marechal proposed to take.

But how are masters and tenants to reckon with one another? Lands are

not let according to a determinate proportion of increase. Suppose an

estate in lands of different kinds, how is the tithe to be deducted

then? Is the master to take the tenant’s word both for the quantity and

the value of every article he has paid as tithe, of every field, of

every article in his possession, even of the chickens in his yard? If on

the other hand, this variable tithe is to be thrown upon the possessor,

which, indeed, is the only possible supposition, which way are lands to

be let, when we see that the difference of the imposition, at different

times, is no less than 15 _per cent._ or three shillings in the pound?

This, however, would be the only method for masters and tenants to

reckon.

But let me suppose another proprietor to let a grass field adjacent to

that which bears grain, and that both were to be of an equal rent,

supposing all tithes out of the way. The gross produce of the grass

would be to the rent, little above the proportion of 4 to 3. Let us then

call the gross produce 1000, as in the other case, ¾ of which would be

750, for the rent. One tenth of the whole taken from that would leave

the rent at 650, or little above 13½ _per cent._ deduction at the

highest tithe, and 6¾ _per cent._ at the lowest.

What inequality, therefore, would not such an imposition occasion upon

land-rents, and what inextricable difficulties in letting of grounds?

From what has been said, without farther inquiry, we may declare that no

land-tax can possibly be raised, with any equality, by a royal tithe;

and the Marechal has never considered farther, than how the King could

with certainty and ease to himself, appropriate a portion of the lands

in his kingdom, leaving the proprietors and their tenants to settle

accounts the best way they could.

On the whole, nothing can make us approve of the Marechal’s, royal

tithe, unless it be the present oppression which proceeds from the

method of levying the taille; by which it happens that in France few

incline to acquire the full property of lands.