Part 4 / Book 5 — BOOK V. OF TAXES, AND OF THE PROPER APPLICATION OF THEIR AMOUNT. (continued 2)

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 532which 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 533income, 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 534formerly 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 535then 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; 536but 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, 537or 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].

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 538the 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 539to 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.

540It 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 541to 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.

542

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.

1mo, Those who receive the amount of taxes, viz. the creditors and servants of the state, and those to whom they give employment.

2do, Those who advance the taxes, viz. all the different classes of the industrious.

3tio, 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.

543In 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,

1mo, 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.

2do, 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.

3tio, 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 544breach 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.

1mo, 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.

2do, 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 545that 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 546of 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 547and 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 548the 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.

549Let 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 550felt 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 551extorted 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 552may 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].

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 553when 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, 554that 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.

1mo, 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.

2do, 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.

3tio, 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 555are 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.

556

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 557kind 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 558time, 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 559slaves, 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 560off 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 561gratuitously, 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 562been 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 563the 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.

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 564be 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.

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 565consist 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.

566In 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.

567All 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 568Marechal 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.

569I 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.

570What 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.

Most of the great estates consist of fee-farm rents. A man of three thousand a year land estate, covers sometimes with his nominal property (dominium directum) a whole country of fifty parishes; but the real property (dominium utile) of this vast extent is subdivided into a number of small fees, of which he is only lord paramount; and what remains is the property of the lower classes, who pay what is called Rentes Seignoriales, or noble rents, consisting in money and grain. These rents can nowise be affected by any tithe imposed, because they bear no proportion to the produce: and supposing they did, as in some provinces, where they are called agriers, (which is the ⅙ or ⅛ sheaf paid to the lord) the tithe, instead of taking a tenth of the agrier, takes a tenth of the whole crop; consequently, only one tenth of this sixth or eighth sheaf falls upon the lord; the tithe of all the rest falls upon the poor proprietor or lessee, who the more he is industrious is oppressed the more by this imposition; because it carries off the tenth of his expence and labour, as well as of the farm which he rents.

This is the tax which the Marechal de Vauban recommended to be raised universally over all the land-property of France, when the tithe was at the highest. To this the late reformer adheres; but proposes the twentieth instead of the tenth; and after a nice calculation 571of the gross produce of France, he estimates one twentieth part of it to be worth about 95 millions of livres per annum. Hence I conclude, that the twentieth part of the income, or one shilling in the pound of all the revenue of solid property in France, fairly collected, would not much exceed one third of that sum, or about 30 millions, or 1 333 333l. sterling. This first part, therefore, of the Marechal’s tithe, imposed at ¹⁄₂₀, would lay a tax equal to three shillings in the pound on the poor lessees and vassals of the nobles, while, contrary to his express intention, the whole fee-farm and noble rents of France, would escape taxation. From this we may conclude, that no tax upon land-rents can possibly be raised by way of tithe: as also that when it is taken in kind it is the most oppressive, the most unequal, and the most discouraging to industry, that ever was contrived.

The Marechal’s principal motive for proposing this mode of taxation, was to avoid the difficulty of obliging the nobles to pay the taille. He found also, that there would be great ease in collecting this revenue for the King, without demanding money of the lower classes. The consequence, however, would have been, either to ruin all lessees, if they continued to pay the same rent for the lands as formerly; or to introduce the greatest inequality imaginable among proprietors, if the tithe had been totally cast upon their rents: but as to the method of settling accounts between master and tenant, in consequence of this tithe, both the Marechal and the reformer are totally silent.

The Marechal’s Dixme royale, with all its defects, is a book of great value, from two considerations.

The first, that he had all possible access to come at the true state of the nation. The second, that he wrote with great impartiality, and with a sincere desire to serve the landed interest, without intending to hurt that of the King his master. From this book, we have an opportunity of judging of his notions of taxation; and from the consequences he himself points out, we discover the miserable 572state of the common people in France, whose situation at this day is not much changed for the better.

The Marechal’s scheme was to reduce the whole revenue of France under four heads.

The first, a general tithe of all the fruits of the earth, without distinction, which we have already explained.

The second, a tithe upon every income whatsoever, even upon the profits of labour, servants wages, employments, possessions, and trades of all denominations.

The third, was a modification of the gabelle, or the duty upon salt.

The fourth, which he calls the fixed revenue, was to be composed of the domain, and several other branches of taxes which he allowed to subsist, judging them, I suppose, not hurtful to the state.

I shall now shew wherein the Marechal’s plan of taxation is contrary to principles, and leave the reader to make his conclusions.

First, he has declared in many places, that his intention was only to impose a tax upon the income of land, which he understands to be that part which remains after the deduction of all expences of cultivation &c. in other words, what every one understands by land-rent, and which, no doubt, is the only proper object of taxation: but in order to impose upon this part his royal dixme when at the real tenth, he takes the tenth part of the whole produce, instead of the tenth part of what goes for the rent; and, as far as I have been able to discover, he never perceives that there is the greatest difference between these two quantities.

The second article was the tithe of every income, not consisting of the fruits of the earth.

Where an income arises from a branch of property which can render it determinate, I shall form no objection to a tithe or two shillings in the pound upon it. But when he comes to tax lawyers, attorneys, physicians, &c. according to the value of their emoluments, I own I cannot find a possibility of preventing abuse in the collection, or inequality in the imposition of the tax.

573The Marechal’s principal point in view was agreeable to the standing maxim in France, to make every one contribute according to his income. Very right, so far as it is possible, without implying much greater inconveniences than what can be compensated by this imaginary equality. I call it imaginary, because in the execution it will be found, that no body will really pay what they ought, except those whose income cannot be concealed. Whenever any part can be hid, there must, in my opinion, result a great inequality, and great oppression, in endeavouring to ascertain it.

A short observation will suffice to give a view of his notions with regard to merchants and trade in general. His intention was to be very indulgent to this class of inhabitants; and he feels all the advantages of trade. He proposes, however, to proscribe all notes of hand payable to bearer, as it is a method of concealing wealth and exacting interest for money; which he supposes to be contrary to scripture. Trade would be ill carried on with the Marechal’s restrictions.

When he comes to the lower classes, which he supposes to comprehend one half of the people, to wit, all tradesmen, manufacturers, and day-labourers, their wives and children; he takes the example of a weaver, as a middle term, to judge of the gains of the tradesmen and manufacturers. He supposes this weaver to have a wife and family, to work 180 days only (because of the many holidays, as well as accidental avocations) at 10½d. sterling a day. This makes his year’s labour worth 7l. 17s. 5d. sterling. Of this he takes 10s. 10½d. for the greatest tithe. Besides this, he exacts of him for his salt-tax, for four persons in his family, 12s. 9d. So that this man, whose whole labour is only worth 7l. 17s. 5d. sterling, is to pay 1l. 3s. 7½d. of cumulative taxes out of it, which is above ⅐ of the whole fund of his poor subsistence: after which he adds, “This, in my opinion, is a tax high enough for a weaver, who has only his two hands to gain his bread with, and who has house rent, meat and clothes to provide for a family, who frequently can gain very little for themselves.” To this I must agree.

574I shall give one specimen more of what the Marechal considered as an ease procured to day-labourers, in their then situation; which relief, however, they have not hitherto obtained.

These he also supposes to work 180 days in the year, at not quite 8¾d. sterling. He values his year’s labour at 6l. 10s. 6d. sterling, and here is the employment of this sum according to the plan.

He is to pay for tithe of his industrie £ 0 8 8½

For his salt-tax 0 12 9

For five English quarters of rye 4 7 1

For clothes to the family, utensils, and repairs 1 1 11½

6 10 6

I have been the more particular upon this part of the plan, because it gives us a notion of what the Marechal thought a moderate easy tax laid upon 8 000 000 of inhabitants, to wit, 2 000 000 men and 6 000 000 women and children, according to his calculation.

I come next to the tax he proposed to lay upon salt, of which mention has been made.

This tax is of the nature of an excise, and is called the gabelle, which we have explained already in a note; and the objections to it, as the Marechal has proposed them, are no less than three very material ones.

First, the proportion of the duty is far too great, considering the value of the commodity. The second is, that being imposed upon an article of subsistence, it operates immediately on the price of the salt, and only consequentially on the price of labour. This is no great objection, were the proportion moderate; because insensibly the price of labour would rise, were the tax generally and exactly levied in proportion to the consumption: but this was not the case; and this circumstance opens the last objection, and the greatest of all, to wit, that the tax, proportional in its nature, is rendred cumulative, by being raised at the end of the year, in order to oblige every one to consume the salt required.

575Now by this mode of levying the tax it loses every advantage, and becomes an addition to the tithe laid upon the industry of the consumer. If every man in England were to be rated at the end of the year, in proportion to the excise of as much beer as he may reasonably be supposed to consume, would that be an excise? certainly not. It would be a poll-tax to all intents and purposes, which no man could draw back.

I have little or nothing to object to the fourth article of the Marechal’s plan. He proposed no essential change, either as to the imposition, or method of levying the taxes which composed it. The principal heads of them are,

1mo, The royal domain, or the king’s landed estate, together with all casualties attached to royalty, or feudal superiority; stamp-duties, and the controle of public acts by notaries.

2do, The customs upon importation and exportation.

3tio, Certain taxes of the purely proportional kind; among which was one upon tobacco, and one upon liquors drank in public houses in the country. Here entire liberty is left to the consumers; and the taxes are principally calculated to affect, or, as he calls it, to punish luxury, intemperance, and vanity. With this view, he wittily proposes an imposition upon large and ridiculous wigs, at that time much in fashion, and upon several other articles of extravagance.

This is a short sketch of the Marechal’s system of royal tithe, considered as to the principles only, upon which the several taxes were intended to be imposed. The treatise contains several admirable things; especially with regard to recapitulations of inhabitants, lands, houses, animals, &c. highly deserving the attention of the statesman, who intends to execute any plan for national improvement.

I shall now set before the reader the Marechal’s calculation, as to the amount of the four articles, when at the lowest, and at the highest taxation. 576When the tithe is understood to mean the 20th part of the fruits, &c.

I. The tithe of the lands 60 000 000

II. The tithe of all revenue and industry 15 422 500

III. The salt-tax at eighteen livres the minot^[51] 23 400 000

IV. The fixed revenue 18 000 000

Total of the four articles, when at the lowest taxation 116 822 500

When the tithe is understood to mean the tenth part of the fruits, the two first articles are just double of what they are stated at above, viz. 150 845 000

The salt-tax at thirty livres the minot 39 000 000

The fixt revenue never changes, and stands always at 18 000 000

Total of the four articles, when at the highest taxation 207 845 000

In imposing this tax upon the fruits, he allowed no exemptions, not even in favours of the princes of the blood: for this he gave an excellent reason. Tithes, said he, were the ancient patrimony of kings. The Roman emperors and kings of France enjoyed them. From those duties no noble was exempted. This appears from the ecclesiastical tithe, which, he alledged, to be nothing but the royal patrimony, alienated in favour of the church; consequently, 577there is nothing derogatory in paying the tithe, although nothing be more so than paying the taille. So great is the difference between terms, when the ideas of a nation are connected with them!

CHAP. XII. Miscellaneous Questions relating to Taxes.

The subjects of credit, debts, and taxes, have been so extensively treated of in the two last books, that I hope no question I now can propose will serve for any purpose, but to suggest the solution of it, so far as it comes under the principles we have been deducing.

Quest. 1. What is the most proper method for imposing a land tax?

I answer, that according to equity and justice, all impositions whatsoever ought to fall equally and proportionally on every one, according to his superfluity; but in land-taxes this equality is not so essential as in most others. The great hurt arising from inequality in taxation proceeds from the inequality occasioned thereby in the competition between the classes of the industrious. When the same tax affects people of the same class differently, those who bear the heaviest load gain less, though their industry be equal. But in land-taxes the case is different: the tax there only diminishes an income already made, and in fact diminishes the value of the property; so that were land-taxes made perpetual deductions, the whole loss of the tax would fall at once upon the actual possessors at the time it is imposed. Every subsequent purchaser, by deducting the land-tax out of the rent, would calculate the value 578of the remainder only; and the consequence of the tax would be, virtually, to transfer a part of the land-property to the state.

The consequences of such a change upon property may produce a variety of new combinations. The state may then sell this portion of their property; they may with the price received pay off part of their debts; they may acquire certain districts of the country, where, being both sovereign and proprietor, they may abolish taxes, which would then in a great measure affect themselves only, and establish manufactures for foreign exportation.