Sources of Society's General or Public Revenue

The revenue which must defray, not only the expense of defending the society and of supporting the dignity of the chief magistrate, but all the other necessary expenses of government, for which the constitution of the state has not provided any particular revenue may be drawn, either, first, from some fund which peculiarly belongs to the sovereign or commonwealth, and which is independent of the revenue of the people; or, secondly, from the revenue of the people.

Revenue is needed to pay for defending society and maintaining the dignity of the chief magistrate. It must also cover all other necessary government expenses for which the state's constitution provides no specific revenue. This revenue may come from one of two sources. First, it may come from a fund belonging specifically to the sovereign or the commonwealth, independent of the people's income. Second, it may come from the people's income.

The funds, or sources, of revenue, which may peculiarly belong to the sovereign or commonwealth, must consist, either in stock, or in land.

The sources of revenue that may belong specifically to the ruler or the state must consist of either capital or land.

The sovereign, like, any other owner of stock, may derive a revenue from it, either by employing it himself, or by lending it. His revenue is, in the one case, profit, in the other interest.

Like any other owner of capital, the sovereign may earn income by using it himself or lending it. If he uses it himself, the income is profit. If he lends it, the income is interest.

The revenue of a Tartar or Arabian chief consists in profit. It arises principally from the milk and increase of his own herds and flocks, of which he himself superintends the management, and is the principal shepherd or herdsman of his own horde or tribe. It is, however, in this earliest and rudest state of civil government only, that profit has ever made the principal part of the public revenue of a monarchical state.

The revenue of a Tartar or Arabian chief consists of profit. It comes mainly from the milk and offspring of his own herds and flocks. He oversees their care himself and is the principal shepherd or herdsman of his own horde or tribe. But profit has been the main part of a monarchy’s public revenue only in this earliest and most primitive state of civil government.

Small republics have sometimes derived a considerable revenue from the profit of mercantile projects. The republic of Hamburgh is said to do so from the profits of a public wine-cellar and apothecary’s shop. {See Memoires concernant les Droits et Impositions en Europe, tome i. page 73. This work was compiled by the order of the court, for the use of a commission employed for some years past in considering the proper means for reforming the finances of France. The account of the French taxes, which takes up three volumes in quarto, may be regarded as perfectly authentic. That of those of other European nations was compiled from such information as the French ministers at the different courts could procure. It is much shorter, and probably not quite so exact as that of the French taxes.} That state cannot be very great, of which the sovereign has leisure to carry on the trade of a wine-merchant or an apothecary. The profit of a public bank has been a source of revenue to more considerable states. It has been so, not only to Hamburgh, but to Venice and Amsterdam. A revenue of this kind has even by some people been thought not below the attention of so great an empire as that of Great Britain. Reckoning the ordinary dividend of the bank of England at five and a-half per cent., and its capital at ten millions seven hundred and eighty thousand pounds, the neat annual profit, after paying the expense of management, must amount, it is said, to five hundred and ninety-two thousand nine hundred pounds. Government, it is pretended, could borrow this capital at three per cent. interest, and, by taking the management of the bank into its own hands, might make a clear profit of two hundred and sixty-nine thousand five hundred pounds a-year. The orderly, vigilant, and parsimonious administration of such aristocracies as those of Venice and Amsterdam, is extremely proper, it appears from experience, for the management of a mercantile project of this kind. But whether such a government as that of England, which, whatever may be its virtues, has never been famous for good economy; which, in time of peace, has generally conducted itself with the slothful and negligent profusion that is, perhaps, natural to monarchies; and, in time of war, has constantly acted with all the thoughtless extravagance that democracies are apt to fall into, could be safely trusted with the management of such a project, must at least be a good deal more doubtful.

Small republics have sometimes earned considerable revenue from commercial ventures. The republic of Hamburgh is said to earn revenue from a public wine cellar and an apothecary’s shop. {See Memoires concernant les Droits et Impositions en Europe, volume i, page 73. This work was compiled by order of the court for a commission. The commission had spent several years considering the best ways to reform France’s finances. The account of French taxes fills three quarto volumes and may be regarded as entirely authentic. The account of taxes in other European nations was compiled from information obtained by French ministers at the various courts. It is much shorter and probably not quite as accurate as the account of French taxes.} A state cannot be very large if its sovereign has time to trade as a wine merchant or apothecary. Profits from a public bank have provided revenue for larger states. They have done so not only for Hamburgh, but also for Venice and Amsterdam. Some people have even thought such revenue worthy of the attention of an empire as large as Great Britain. The Bank of England’s ordinary dividend is reckoned at five and a half percent, and its capital at £10,780,000. On that basis, its net annual profit, after management expenses, must amount, it is said, to £592,900. It is claimed that the government could borrow this capital at three percent interest. By taking over management of the bank, it could then make a clear profit of £269,500 a year. Experience suggests that the orderly, watchful, and thrifty administration of aristocracies like those of Venice and Amsterdam is extremely well suited to managing a commercial venture of this kind. But it is much more doubtful whether a government like England’s could safely be trusted to manage such a venture. Whatever its virtues, England’s government has never been famous for economy. In peacetime, it has generally behaved with the lazy and careless lavishness that may be natural to monarchies. In wartime, it has consistently shown all the thoughtless extravagance into which democracies are prone to fall.

The post-office is properly a mercantile project. The government advances the expense of establishing the different offices, and of buying or hiring the necessary horses or carriages, and is repaid, with a large profit, by the duties upon what is carried. It is, perhaps, the only mercantile project which has been successfully managed by, I believe, every sort of government. The capital to be advanced is not very considerable. There is no mystery in the business. The returns are not only certain but immediate.

The post office is essentially a commercial venture. The government pays to establish the offices and buy or hire the necessary horses or carriages. It recovers those costs, with a large profit, through fees charged on the mail it carries. It is perhaps the only commercial venture that has been successfully managed by every kind of government, I believe. The money needed to start it is not very great. There is nothing mysterious about the business. The returns are not only certain but immediate.

Princes, however, have frequently engaged in many other mercantile projects, and have been willing, like private persons, to mend their fortunes, by becoming adventurers in the common branches of trade. They have scarce ever succeeded. The profusion with which the affairs of princes are always managed, renders it almost impossible that they should. The agents of a prince regard the wealth of their master as inexhaustible; are careless at what price they buy, are careless at what price they sell, are careless at what expense they transport his goods from one place to another. Those agents frequently live with the profusion of princes; and sometimes, too, in spite of that profusion, and by a proper method of making up their accounts, acquire the fortunes of princes. It was thus, as we are told by Machiavel, that the agents of Lorenzo of Medicis, not a prince of mean abilities, carried on his trade. The republic of Florence was several times obliged to pay the debt into which their extravagance had involved him. He found it convenient, accordingly to give up the business of merchant, the business to which his family had originally owed their fortune, and, in the latter part of his life, to employ both what remained of that fortune, and the revenue of the state, of which he had the disposal, in projects and expenses more suitable to his station.

Princes, however, have often undertaken many other commercial ventures. Like private individuals, they have tried to improve their fortunes by entering ordinary branches of trade. They have hardly ever succeeded. Their affairs are always managed so extravagantly that success is almost impossible. A prince's agents regard their master's wealth as inexhaustible. They do not care what price they pay, what price they sell for, or how much they spend transporting his goods. These agents often live as extravagantly as princes. Sometimes, despite this extravagance, they also acquire princely fortunes through skillful bookkeeping. According to Machiavel, this was how Lorenzo of Medicis's agents carried on his trade, though Lorenzo was a prince of considerable ability. The republic of Florence was obliged several times to pay the debts their extravagance had brought upon him. He therefore found it convenient to give up being a merchant, the business to which his family had originally owed its fortune. In the later part of his life, he used what remained of that fortune for projects and expenses more suited to his station. He also used the state revenue at his disposal for the same purposes.

No two characters seem more inconsistent than those of trader and sovereign. If the trading spirit of the English East India company renders them very bad sovereigns, the spirit of sovereignty seems to have rendered them equally bad traders. While they were traders only, they managed their trade successfully, and were able to pay from their profits a moderate dividend to the proprietors of their stock. Since they became sovereigns, with a revenue which, it is said, was originally more than three millions sterling, they have been obliged to beg the ordinary assistance of government, in order to avoid immediate bankruptcy. In their former situation, their servants in India considered themselves as the clerks of merchants; in their present situation, those servants consider themselves as the ministers of sovereigns.

No two roles seem more incompatible than those of trader and sovereign. If the trading spirit of the English East India Company makes it a very bad sovereign, the spirit of sovereignty seems to have made it an equally bad trader. When the company was only a trader, it managed its trade successfully. Its profits allowed it to pay a modest dividend to its shareholders. Since it became a sovereign, it has had to beg for ordinary government assistance to avoid immediate bankruptcy. This is despite having a revenue said to have originally exceeded three million pounds sterling. Before, its servants in India saw themselves as merchants’ clerks. Now they see themselves as sovereigns’ ministers.

A state may sometimes derive some part of its public revenue from the interest of money, as well as from the profits of stock. If it has amassed a treasure, it may lend a part of that treasure, either to foreign states, or to its own subjects.

A state may sometimes earn some of its public revenue from interest on money, as well as from profits on capital. If it has accumulated a reserve of money, it may lend part of it to foreign states or its own citizens.

The canton of Berne derives a considerable revenue by lending a part of its treasure to foreign states, that is, by placing it in the public funds of the different indebted nations of Europe, chiefly in those of France and England. The security of this revenue must depend, first, upon the security of the funds in which it is placed, or upon the good faith of the government which has the management of them; and, secondly, upon the certainty or probability of the continuance of peace with the debtor nation. In the case of a war, the very first act of hostility on the part of the debtor nation might be the forfeiture of the funds of its credit. This policy of lending money to foreign states is, so far as I know peculiar to the canton of Berne.

The canton of Berne earns considerable revenue by lending part of its treasury to foreign states. It does this by investing in the government debt of various indebted European nations, chiefly France and England. The security of this revenue depends first on the security of those investments, or on the good faith of the government managing them. Second, it depends on whether peace with the debtor nation is certain or likely to continue. In a war, the debtor nation's very first hostile act might be to seize the funds it owes. As far as I know, this policy of lending money to foreign states is unique to the canton of Berne.

The city of Hamburgh {See Memoire concernant les Droites et Impositions en Europe tome i p. 73.}has established a sort of public pawn-shop, which lends money to the subjects of the state, upon pledges, at six per cent. interest. This pawn-shop, or lombard, as it is called, affords a revenue, it is pretended, to the state, of a hundred and fifty thousand crowns, which, at four and sixpence the crown, amounts to £33,750 sterling.

The city of Hamburgh {See Memoire concernant les Droites et Impositions en Europe tome i p. 73.} has established a kind of public pawnshop. It lends money to the state's subjects against pledges, at six percent interest. The pawnshop, or lombard, as it is called, supposedly brings the state an income of 150,000 crowns. At four shillings and sixpence per crown, this amounts to £33,750 sterling.

The government of Pennsylvania, without amassing any treasure, invented a method of lending, not money, indeed, but what is equivalent to money, to its subjects. By advancing to private people, at interest, and upon land security to double the value, paper bills of credit, to be redeemed fifteen years after their date; and, in the mean time, made transferable from hand to hand, like banknotes, and declared by act of assembly to be a legal tender in all payments from one inhabitant of the province to another, it raised a moderate revenue, which went a considerable way towards defraying an annual expense of about £4,500, the whole ordinary expense of that frugal and orderly government. The success of an expedient of this kind must have depended upon three different circumstances: first, upon the demand for some other instrument of commerce, besides gold and silver money, or upon the demand for such a quantity of consumable stock as could not be had without sending abroad the greater part of their gold and silver money, in order to purchase it; secondly, upon the good credit of the government which made use of this expedient; and, thirdly, upon the moderation with which it was used, the whole value of the paper bills of credit never exceeding that of the gold and silver money which would have been necessary for carrying on their circulation, had there been no paper bills of credit. The same expedient was, upon different occasions, adopted by several other American colonies; but, from want of this moderation, it produced, in the greater part of them, much more disorder than conveniency.

The government of Pennsylvania devised a way to lend its subjects the equivalent of money without building up a treasury. It lent private citizens paper bills of credit at interest, secured by land worth twice the amount of the loan. The bills were to be redeemed fifteen years after their issue. Meanwhile, they could pass from hand to hand like banknotes. An act of the assembly also made them legal tender for all payments between inhabitants of the province. This brought in a modest revenue that covered a considerable part of the government’s annual expenses. Those expenses came to about £4,500, the entire ordinary cost of that frugal and orderly government. The success of such a measure depended on three circumstances. First, there had to be demand for a means of trade besides gold and silver money. Alternatively, there had to be demand for enough consumable goods that buying them required sending abroad most of the province’s gold and silver money. Second, the government using this measure had to have good credit. Third, it had to use the measure in moderation. The total value of the paper bills of credit could never exceed the gold and silver money needed for circulation without them. Several other American colonies adopted the same measure on different occasions. But most of them used it without such moderation, causing much more disorder than convenience.

The unstable and perishable nature of stock and credit, however, renders them unfit to be trusted to as the principal funds of that sure, steady, and permanent revenue, which can alone give security and dignity to government. The government of no great nation, that was advanced beyond the shepherd state, seems ever to have derived the greater part of its public revenue from such sources.

Stock and credit, however, are unstable and can lose their value. They cannot be relied on as the main sources of a secure, steady, and lasting revenue. Only such revenue can give government security and dignity. No great nation that had advanced beyond the pastoral stage seems ever to have drawn most of its public revenue from these sources.

Land is a fund of more stable and permanent nature; and the rent of public lands, accordingly, has been the principal source of the public revenue of many a great nation that was much advanced beyond the shepherd state. From the produce or rent of the public lands, the ancient republics of Greece and Italy derived for a long time the greater part of that revenue which defrayed the necessary expenses of the commonwealth. The rent of the crown lands constituted for a long time the greater part of the revenue of the ancient sovereigns of Europe.

Land is a more stable and lasting source of revenue. Accordingly, rent from public lands has been the main source of public revenue for many great nations well beyond the shepherd stage. For a long time, the ancient republics of Greece and Italy drew most of the revenue needed for public expenses from the produce or rent of public lands. Rent from crown lands also made up most of the revenue of Europe’s ancient rulers for a long time.

War, and the preparation for war, are the two circumstances which, in modern times, occasion the greater part of the necessary expense or all great states. But in the ancient republics of Greece and Italy, every citizen was a soldier, and both served, and prepared himself for service, at his own expense. Neither of those two circumstances, therefore, could occasion any very considerable expense to the state. The rent of a very moderate landed estate might be fully sufficient for defraying all the other necessary expenses of government.

In modern times, war and preparations for war account for most of the necessary expenses of all great states. But in the ancient republics of Greece and Italy, every citizen was a soldier. Each served and prepared for service at his own expense. Neither war nor preparations for war, therefore, could cost the state very much. The rent from a very modest landed estate might be enough to cover all the other necessary expenses of government.

In the ancient monarchies of Europe, the manners and customs of the time sufficiently prepared the great body of the people for war; and when they took the field, they were, by the condition of their feudal tenures, to be maintained either at their own expense, or at that of their immediate lords, without bringing any new charge upon the sovereign. The other expenses of government were, the greater part of them, very moderate. The administration of justice, it has been shewn, instead of being a cause of expense was a source of revenue. The labour of the country people, for three days before, and for three days after, harvest, was thought a fund sufficient for making and maintaining all the bridges, highways, and other public works, which the commerce of the country was supposed to require. In those days the principal expense of the sovereign seems to have consisted in the maintenance of his own family and household. The officers of his household, accordingly, were then the great officers of state. The lord treasurer received his rents. The lord steward and lord chamberlain looked after the expense of his family. The care of his stables was committed to the lord constable and the lord marshal. His houses were all built in the form of castles, and seem to have been the principal fortresses which he possessed. The keepers of those houses or castles might be considered as a sort of military governors. They seem to have been the only military officers whom it was necessary to maintain in time of peace. In these circumstances, the rent of a great landed estate might, upon ordinary occasions, very well defray all the necessary expenses of government.

In the old monarchies of Europe, the customs of the time prepared most people well enough for war. When they went to war, the terms of their feudal landholdings required them or their immediate lords to pay for their support. This brought no new expense to the sovereign. Most other government expenses were very modest. As shown earlier, the administration of justice was a source of revenue rather than an expense. Rural workers labored for three days before harvest and three days afterward. This labor was thought sufficient to build and maintain all the bridges, roads, and other public works the country's trade was thought to require. In those days, the sovereign's main expense seems to have been supporting his own family and household. His household officers were therefore the great officers of state. The lord treasurer collected his rents. The lord steward and lord chamberlain managed his family's expenses. The lord constable and the lord marshal were in charge of his stables. His houses were all built as castles and seem to have been his main fortresses. The keepers of those houses or castles could be regarded as a kind of military governor. They seem to have been the only military officers who had to be kept on in peacetime. In these circumstances, the rent from a large landed estate could ordinarily cover all the necessary expenses of government.

In the present state of the greater part of the civilized monarchies of Europe, the rent of all the lands in the country, managed as they probably would be, if they all belonged to one proprietor, would scarce, perhaps, amount to the ordinary revenue which they levy upon the people even in peaceable times. The ordinary revenue of Great Britain, for example, including not only what is necessary for defraying the current expense of the year, but for paying the interest of the public debts, and for sinking a part of the capital of those debts, amounts to upwards of ten millions a-year. But the land tax, at four shillings in the pound, falls short of two millions a-year. This land tax, as it is called however, is supposed to be one-fifth, not only of the rent of all the land, but of that of all the houses, and of the interest of all the capital stock of Great Britain, that part of it only excepted which is either lent to the public, or employed as farming stock in the cultivation of land. A very considerable part of the produce of this tax arises from the rent of houses and the interest of capital stock. The land tax of the city of London, for example, at four shillings in the pound, amounts to £123,399: 6: 7; that of the city of Westminster to £63,092: 1: 5; that of the palaces of Whitehall and St. James’s, to £30,754: 6: 3. A certain proportion of the land tax is, in the same manner, assessed upon all the other cities and towns corporate in the kingdom; and arises almost altogether, either from the rent of houses, or from what is supposed to be the interest of trading and capital stock. According to the estimation, therefore, by which Great Britain is rated to the land tax, the whole mass of revenue arising from the rent of all the lands, from that of all the houses, and from the interest of all the capital stock, that part of it only excepted which is either lent to the public, or employed in the cultivation of land, does not exceed ten millions sterling a-year, the ordinary revenue which government levies upon the people, even in peaceable times. The estimation by which Great Britain is rated to the land tax is, no doubt, taking the whole kingdom at an average, very much below the real value; though in several particular counties and districts it is said to be nearly equal to that value. The rent of the lands alone, exclusive of that of houses and of the interest of stock, has by many people been estimated at twenty millions; an estimation made in a great measure at random, and which, I apprehend, is as likely to be above as below the truth. But if the lands of Great Britain, in the present state of their cultivation, do not afford a rent of more than twenty millions a-year, they could not well afford the half, most probably not the fourth part of that rent, if they all belonged to a single proprietor, and were put under the negligent, expensive, and oppressive management of his factors and agents. The crown lands of Great Britain do not at present afford the fourth part of the rent which could probably be drawn from them if they were the property of private persons. If the crown lands were more extensive, it is probable, they would be still worse managed.

In most civilized European monarchies today, the rent from all the land would perhaps barely equal the government's ordinary revenue, even in peacetime. This assumes the land was managed as it probably would be if it all belonged to one owner. Great Britain's ordinary revenue, for example, amounts to more than ten million pounds a year. This includes not only enough to cover the year's current expenses, but also enough to pay interest on the public debt and reduce part of the principal. Yet the land tax, at four shillings per pound, raises less than two million pounds a year. Despite its name, this tax is supposed to amount to one fifth of the rent from all land and houses. It is also supposed to cover one fifth of the interest on all capital in Great Britain, except capital lent to the government or used in farming. A considerable part of the tax revenue comes from house rents and interest on capital. For example, at four shillings per pound, the City of London's land tax amounts to £123,399: 6: 7. The City of Westminster's amounts to £63,092: 1: 5. The tax on the palaces of Whitehall and St. James's amounts to £30,754: 6: 3. In the same way, a share of the land tax is assessed on all the kingdom's other incorporated cities and towns. It comes almost entirely from house rents or from what is taken to be interest on trading and other capital. According to the assessment used for the land tax, then, the total annual income from land rents, house rents, and interest on capital does not exceed ten million pounds. Again, this excludes capital lent to the government or used in farming. That sum equals the ordinary revenue the government collects from the people, even in peacetime. Across the kingdom as a whole, the land tax assessment is no doubt far below the real value. Yet in several counties and districts, it is said to be close to that value. Many people have estimated the rent from land alone, excluding house rents and interest on capital, at twenty million pounds. This estimate is largely a guess, and I believe it is as likely to be too high as too low. But suppose Great Britain's land, as it is now cultivated, produces no more than twenty million pounds a year in rent. If it all belonged to one owner, it could hardly produce half that rent. Most likely it could not produce even a quarter, under the negligent, expensive, and oppressive management of his managers and agents. Britain's crown lands do not now produce a quarter of the rent they probably would if privately owned. If the crown lands were more extensive, they would probably be managed even worse.

The revenue which the great body of the people derives from land is, in proportion, not to the rent, but to the produce of the land. The whole annual produce of the land of every country, if we except what is reserved for seed, is either annually consumed by the great body of the people, or exchanged for something else that is consumed by them. Whatever keeps down the produce of the land below what it would otherwise rise to, keeps down the revenue of the great body of the people, still more than it does that of the proprietors of land. The rent of land, that portion of the produce which belongs to the proprietors, is scarce anywhere in Great Britain supposed to be more than a third part of the whole produce. If the land which, in one state of cultivation, affords a revenue of ten millions sterling a-year, would in another afford a rent of twenty millions; the rent being, in both cases, supposed a third part of the produce, the revenue of the proprietors would be less than it otherwise might be, by ten millions a-year only; but the revenue of the great body of the people would be less than it otherwise might be, by thirty millions a-year, deducting only what would be necessary for seed. The population of the country would be less by the number of people which thirty millions a-year, deducting always the seed, could maintain, according to the particular mode of living, and expense which might take place in the different ranks of men, among whom the remainder was distributed.

The income that most people derive from land depends on its produce, not on the rent paid for it. Each country’s land produces crops and other goods every year. Apart from what is saved for seed, all this produce is consumed each year by most people or exchanged for something they consume. Anything that keeps the land’s produce below its potential reduces most people’s income even more than it reduces landowners’ income. Land rent is the share of the produce that belongs to landowners. Almost nowhere in Great Britain is it thought to exceed a third of the total produce. Suppose that, under one method of cultivation, land yields an annual income of ten million pounds sterling. Under another method, suppose it would yield twenty million pounds in rent. In both cases, rent is assumed to be a third of the produce. The landowners’ income would then be only ten million pounds a year less than it could be. But the income of most people would be thirty million pounds a year less than it could be, minus what was needed for seed. The country’s population would be smaller by the number of people that thirty million pounds a year could support. Here too, the amount needed for seed must be deducted. The number would depend on the way of life and expenses of the different ranks of people among whom the remainder was distributed.

Though there is not at present in Europe, any civilized state of any kind which derives the greater part of its public revenue from the rent of lands which are the property of the state; yet, in all the great monarchies of Europe, there are still many large tracts of land which belong to the crown. They are generally forest, and sometimes forests where, after travelling several miles, you will scarce find a single tree; a mere waste and loss of country, in respect both of produce and population. In every great monarchy of Europe, the sale of the crown lands would produce a very large sum of money, which, if applied to the payment of the public debts, would deliver from mortgage a much greater revenue than any which those lands have ever afforded to the crown. In countries where lands, improved and cultivated very highly, and yielding, at the time of sale, as great a rent as can easily be got from them, commonly sell at thirty years purchase; the unimproved, uncultivated, and low-rented crown lands, might well be expected to sell at forty, fifty, or sixty years purchase. The crown might immediately enjoy the revenue which this great price would redeem from mortgage. In the course of a few years, it would probably enjoy another revenue. When the crown lands had become private property, they would, in the course of a few years, become well improved and well cultivated. The increase of their produce would increase the population of the country, by augmenting the revenue and consumption of the people. But the revenue which the crown derives from the duties or custom and excise, would necessarily increase with the revenue and consumption of the people.

No civilized state in Europe now receives most of its public revenue from rent on state-owned land. Yet in all the great monarchies of Europe, large tracts of land still belong to the crown. They are generally forests. In some of these forests, you can travel several miles and scarcely find a single tree. This land is simply wasted and lost, both for production and for population. In every great monarchy of Europe, selling the crown lands would raise a very large sum. If used to pay public debts, it would free a much greater revenue from debt payments than those lands have ever provided to the crown. In some countries, highly improved and cultivated land commonly sells for thirty times its annual rent. At the time of sale, such land yields about as much rent as can easily be obtained from it. In those countries, the unimproved, uncultivated crown lands, which yield low rents, might reasonably be expected to sell for forty, fifty, or sixty times their annual rent. The crown could immediately enjoy the revenue that this high price would free from debt payments. Within a few years, it would probably enjoy another source of revenue. Once the crown lands became private property, they would, within a few years, be well improved and cultivated. Their increased produce would increase the country's population by increasing the people's income and consumption. But the crown's revenue from customs and excise duties would necessarily increase along with the people's income and consumption.

The revenue which, in any civilized monarchy, the crown derives from the crown lands, though it appears to cost nothing to individuals, in reality costs more to the society than perhaps any other equal revenue which the crown enjoys. It would, in all cases, be for the interest of the society, to replace this revenue to the crown by some other equal revenue, and to divide the lands among the people, which could not well be done better, perhaps, than by exposing them to public sale.

In any civilized monarchy, the crown earns revenue from its lands. This revenue seems to cost individuals nothing. In reality, it costs society more than perhaps any other equal amount of revenue the crown receives. In all cases, society would benefit from replacing this revenue with an equal amount from another source. The crown lands should then be divided among the people, perhaps best by offering them for public sale.

Lands, for the purposes of pleasure and magnificence, parks, gardens, public walks, etc. possessions which are everywhere considered as causes of expense, not as sources of revenue, seem to be the only lands which, in a great and civilized monarchy, ought to belong to the crown.

Land used for pleasure and grandeur includes parks, gardens, and public walks. Everywhere, such property is seen as an expense, not a source of income. In a great and civilized monarchy, this seems to be the only kind of land the crown should own.

Public stock and public lands, therefore, the two sources of revenue which may peculiarly belong to the sovereign or commonwealth, being both improper and insufficient funds for defraying the necessary expense of any great and civilized state; it remains that this expense must, the greater part of it, be defrayed by taxes of one kind or another; the people contributing a part of their own private revenue, in order to make up a public revenue to the sovereign or commonwealth.

Public assets and public lands are two sources of revenue that may belong specifically to the sovereign or the state. Neither is a suitable or sufficient source of funding for the necessary expenses of a large, civilized state. Therefore, most of these expenses must be paid through taxes of one kind or another. People contribute part of their own private income to provide public revenue for the sovereign or the state.

The private revenue of individuals, it has been shown in the first book of this Inquiry, arises, ultimately from three different sources; rent, profit, and wages. Every tax must finally be paid from some one or other of those three different sources of revenue, or from all of them indifferently. I shall endeavour to give the best account I can, first, of those taxes which, it is intended should fall upon rent; secondly, of those which, it is intended should fall upon profit; thirdly, of those which, it is intended should fall upon wages; and fourthly, of those which, it is intended should fall indifferently upon all those three different sources of private revenue. The particular consideration of each of these four different sorts of taxes will divide the second part of the present chapter into four articles, three of which will require several other subdivisions. Many of these taxes, it will appear from the following review, are not finally paid from the fund, or source of revenue, upon which it is intended they should fall.

As shown in the first book of this Inquiry, individuals’ private income ultimately comes from three sources: rent, profit, and wages. Every tax must ultimately be paid from one or more of these three sources, or from all three equally. I will try to give the best account I can of four kinds of taxes. First are those intended to fall on rent. Second are those intended to fall on profit. Third are those intended to fall on wages. Fourth are those intended to fall equally on all three sources of private income. The detailed discussion of these four kinds of taxes will divide the second part of this chapter into four articles. Three of these will require further subdivisions. As the following review will show, many of these taxes are not ultimately paid from the source of income on which they are intended to fall.

Before I enter upon the examination of particular taxes, it is necessary to premise the four following maxims with regard to taxes in general.

Before examining particular taxes, I must set out the following four general principles of taxation.

1. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. The expense of government to the individuals of a great nation, is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim, consists what is called the equality or inequality of taxation. Every tax, it must be observed once for all, which falls finally upon one only of the three sorts of revenue above mentioned, is necessarily unequal, in so far as it does not affect the other two. In the following examination of different taxes, I shall seldom take much farther notice of this sort of inequality; but shall, in most cases, confine my observations to that inequality which is occasioned by a particular tax falling unequally upon that particular sort of private revenue which is affected by it.

1. The people of every state should contribute to the support of government as closely as possible in proportion to their means. In other words, they should contribute in proportion to the income they enjoy under the protection of the state. The cost of government to individuals in a great nation is like the cost of managing a great estate. The joint tenants of the estate must all contribute in proportion to their respective interests in it. Whether this principle is followed or neglected determines what is called equality or inequality of taxation. It should be noted once and for all that any tax ultimately falling on only one of the three kinds of income mentioned above is necessarily unequal. It is unequal because it does not affect the other two kinds. In examining different taxes, I shall seldom say much more about this kind of inequality. Instead, I shall usually focus on inequality caused by a particular tax falling unevenly on the particular kind of private income it affects.

2. The tax which each individual is bound to pay, ought to be certain and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-gatherer, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror of such aggravation, some present or perquisite to himself. The uncertainty of taxation encourages the insolence, and favours the corruption, of an order of men who are naturally unpopular, even where they are neither insolent nor corrupt. The certainty of what each individual ought to pay is, in taxation, a matter of so great importance, that a very considerable degree of inequality, it appears, I believe, from the experience of all nations, is not near so great an evil as a very small degree of uncertainty.

2. The tax each person must pay should be certain, not arbitrary. The time, method, and amount of payment should be clear to the taxpayer and everyone else. Otherwise, everyone subject to the tax is placed, to some degree, at the mercy of the tax collector. The collector can increase the tax on any taxpayer he dislikes. Or he can threaten to increase it and demand a gift or other benefit for himself. Uncertainty in taxation encourages arrogance and corruption among tax collectors. They are naturally unpopular, even when they are neither arrogant nor corrupt. I believe the experience of all nations shows how important certainty about each person's tax is. Even a considerable degree of inequality seems far less harmful than a very small degree of uncertainty.

3. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it. A tax upon the rent of land or of houses, payable at the same term at which such rents are usually paid, is levied at the time when it is most likely to be convenient for the contributor to pay; or when he is most likely to have wherewithall to pay. Taxes upon such consumable goods as are articles of luxury, are all finally paid by the consumer, and generally in a manner that is very convenient for him. He pays them by little and little, as he has occasion to buy the goods. As he is at liberty too, either to buy or not to buy, as he pleases, it must be his own fault if he ever suffers any considerable inconveniency from such taxes.

3. Every tax should be collected at the time or in the way most convenient for the taxpayer to pay it. A tax on the rent of land or houses can be due when rents are usually paid. It is then collected when it is most likely to be convenient for the taxpayer to pay it. That is when the taxpayer is most likely to have the money to pay it. Taxes on consumable luxury goods are all ultimately paid by the consumer, generally in a very convenient way. The consumer pays them little by little, as he needs to buy the goods. He is also free to buy them or not, as he pleases. So it must be his own fault if such taxes ever cause him considerable inconvenience.

4. Every tax ought to be so contrived, as both to take out and to keep out of the pockets of the people as little as possible, over and above what it brings into the public treasury of the state. A tax may either take out or keep out of the pockets of the people a great deal more than it brings into the public treasury, in the four following ways. First, the levying of it may require a great number of officers, whose salaries may eat up the greater part of the produce of the tax, and whose perquisites may impose another additional tax upon the people. Secondly, it may obstruct the industry of the people, and discourage them from applying to certain branches of business which might give maintenance and employment to great multitudes. While it obliges the people to pay, it may thus diminish, or perhaps destroy, some of the funds which might enable them more easily to do so. Thirdly, by the forfeitures and other penalties which those unfortunate individuals incur, who attempt unsuccessfully to evade the tax, it may frequently ruin them, and thereby put an end to the benefit which the community might have received from the employment of their capitals. An injudicious tax offers a great temptation to smuggling. But the penalties of smuggling must arise in proportion to the temptation. The law, contrary to all the ordinary principles of justice, first creates the temptation, and then punishes those who yield to it; and it commonly enhances the punishment, too, in proportion to the very circumstance which ought certainly to alleviate it, the temptation to commit the crime. {See Sketches of the History of Man page 474, and Seq.} Fourthly, by subjecting the people to the frequent visits and the odious examination of the tax-gatherers, it may expose them to much unnecessary trouble, vexation, and oppression; and though vexation is not, strictly speaking, expense, it is certainly equivalent to the expense at which every man would be willing to redeem himself from it. It is in some one or other of these four different ways, that taxes are frequently so much more burdensome to the people than they are beneficial to the sovereign.

4. Every tax should be designed to take and keep as little money as possible from people beyond what it brings into the public treasury. A tax may take or keep far more from people than it brings into the treasury in four ways. First, collecting the tax may require many officials, whose salaries may consume most of the revenue. Their extra payments may impose another tax on the people. Second, a tax may hinder people’s work and discourage them from entering certain businesses. Those businesses might otherwise support and employ great numbers of people. Thus, while requiring people to pay, the tax may reduce or perhaps destroy some of the resources that would make payment easier. Third, people who try and fail to evade a tax may suffer forfeitures and other penalties. These penalties may often ruin these unfortunate people. The community then loses the benefit it might have received from the use of their capital. An unwise tax offers a great temptation to smuggle. But penalties for smuggling must increase in proportion to the temptation. Contrary to all ordinary principles of justice, the law first creates the temptation and then punishes those who give in to it. The law also commonly increases the punishment in proportion to the very thing that should surely lessen it: the temptation to commit the crime. {See Sketches of the History of Man page 474, and following.} Fourth, a tax may subject people to frequent visits and hateful inspections by tax collectors. These may cause people much unnecessary trouble, irritation, and oppression. Though irritation is not, strictly speaking, an expense, it is certainly equivalent to what a person would be willing to pay to be free of it. In one or another of these four ways, taxes are often much more burdensome to the people than they are beneficial to the sovereign.

The evident justice and utility of the foregoing maxims have recommended them, more or less, to the attention of all nations. All nations have endeavoured, to the best of their judgment, to render their taxes as equal as they could contrive; as certain, as convenient to the contributor, both the time and the mode of payment, and in proportion to the revenue which they brought to the prince, as little burdensome to the people. The following short review of some of the principal taxes which have taken place in different ages and countries, will show, that the endeavours of all nations have not in this respect been equally successful.

The obvious fairness and usefulness of the principles just discussed have led all nations to give them some attention. All nations have tried, to the best of their judgment, to make their taxes as fair and predictable as possible. They have also tried to make both the timing and method of payment convenient for taxpayers. And they have tried to make taxes as little burdensome to the people as possible, relative to the revenue they brought the ruler. The following brief review examines some of the principal taxes used in different times and countries. It will show that not all nations have been equally successful in these efforts.

ARTICLE I.—Taxes upon Rent—Taxes upon the Rent of Land.

ARTICLE I. Taxes on Rent. Taxes on Land Rent.

A tax upon the rent of land may either be imposed according to a certain canon, every district being valued at a curtain rent, which valuation is not afterwards to be altered; or it may be imposed in such a manner, as to vary with every variation in the real rent of the land, and to rise or fall with the improvement or declension of its cultivation.

A tax on land rent may be imposed according to a fixed rule. Each district is assessed at a set rental value, and that assessment is not changed afterward. Alternatively, the tax may vary with every change in the land’s actual rent. It may rise or fall as cultivation improves or declines.

A land tax which, like that of Great Britain, is assessed upon each district according to a certain invariable canon, though it should be equal at the time of its first establishment, necessarily becomes unequal in process of time, according to the unequal degrees of improvement or neglect in the cultivation of the different parts of the country. In England, the valuation, according to which the different counties and parishes were assessed to the land tax by the 4th of William and Mary, was very unequal even at its first establishment. This tax, therefore, so far offends against the first of the four maxims above mentioned. It is perfectly agreeable to the other three. It is perfectly certain. The time of payment for the tax, being the same as that for the rent, is as convenient as it can be to the contributor. Though the landlord is, in all cases, the real contributor, the tax is commonly advanced by the tenant, to whom the landlord is obliged to allow it in the payment of the rent. This tax is levied by a much smaller number of officers than any other which affords nearly the same revenue. As the tax upon each district does not rise with the rise of the rent, the sovereign does not share in the profits of the landlord’s improvements. Those improvements sometimes contribute, indeed, to the discharge of the other landlords of the district. But the aggravation of the tax, which this may sometimes occasion upon a particular estate, is always so very small, that it never can discourage those improvements, nor keep down the produce of the land below what it would otherwise rise to. As it has no tendency to diminish the quantity, it can have none to raise the price of that produce. It does not obstruct the industry of the people; it subjects the landlord to no other inconveniency besides the unavoidable one of paying the tax. The advantage, however, which the land-lord has derived from the invariable constancy of the valuation, by which all the lands of Great Britain are rated to the land-tax, has been principally owing to some circumstances altogether extraneous to the nature of the tax.

A land tax like Great Britain’s is assessed on each district according to a fixed rule. Even if the tax is equal when first established, it must become unequal over time. This happens as cultivation improves or is neglected to different degrees in different parts of the country. In England, the valuation used to assess counties and parishes for the land tax was very unequal from the start. It was established in the fourth year of William and Mary. The tax therefore violates the first of the four maxims mentioned above to that extent. The tax is entirely consistent with the other three maxims. It is perfectly certain. The tax is due at the same time as the rent, which is as convenient as possible for the taxpayer. In every case, the landlord is the real taxpayer. But the tenant usually pays the tax in advance, and the landlord must deduct it from the rent. Far fewer officers collect this tax than any other that brings in nearly as much revenue. The tax on each district does not rise when rents rise. So the sovereign does not share in the profits from the landlord’s improvements. Those improvements do sometimes help to relieve other landlords in the district of some of their tax burden. But any resulting increase in the tax on a particular estate is always very small. It can never discourage improvements or keep the land’s produce below the level it would otherwise reach. Since the tax does not tend to reduce the quantity of produce, it cannot tend to raise its price. It does not obstruct the industry of the people. It causes the landlord no inconvenience beyond the unavoidable one of paying the tax. Landlords have benefited from the fixed valuation used to assess all land in Great Britain for the land tax. But this benefit has been due mainly to circumstances entirely unrelated to the nature of the tax.

It has been owing in part, to the great prosperity of almost every part of the country, the rents of almost all the estates of Great Britain having, since the time when this valuation was first established, been continually rising, and scarce any of them having fallen. The landlords, therefore, have almost all gained the difference between the tax which they would have paid, according to the present rent of their estates, and that which they actually pay according to the ancient valuation. Had the state of the country been different, had rents been gradually falling in consequence of the declension of cultivation, the landlords would almost all have lost this difference. In the state of things which has happened to take place since the revolution, the constancy of the valuation has been advantageous to the landlord and hurtful to the sovereign. In a different state of things it might have been advantageous to the sovereign and hurtful to the landlord.

This has been due in part to the great prosperity of almost every part of the country. Since the valuation was first established, rents on almost all estates in Great Britain have continually risen. Hardly any have fallen. Almost all landlords have therefore gained the difference between two amounts. One is the tax they would have paid based on their estates’ current rents. The other is what they actually pay based on the old valuation. If conditions in the country had been different, rents might have gradually fallen as cultivation declined. In that case, almost all landlords would have lost this difference. Under the conditions that have prevailed since the revolution, the fixed valuation has benefited landlords and harmed the sovereign. Under different conditions, it might have benefited the sovereign and harmed landlords.

As the tax is made payable in money, so the valuation of the land is expressed in money. Since the establishment of this valuation, the value of silver has been pretty uniform, and there has been no alteration in the standard of the coin, either as to weight or fineness. Had silver risen considerably in its value, as it seems to have done in the course of the two centuries which preceded the discovery of the mines of America, the constancy of the valuation might have proved very oppressive to the landlord. Had silver fallen considerably in its value, as it certainly did for about a century at least after the discovery of those mines, the same constancy of valuation would have reduced very much this branch of the revenue of the sovereign. Had any considerable alteration been made in the standard of the money, either by sinking the same quantity of silver to a lower denomination, or by raising it to a higher; had an ounce of silver, for example, instead of being coined into five shillings and two pence, been coined either into pieces which bore so low a denomination as two shillings and seven pence, or into pieces which bore so high a one as ten shillings and four pence, it would, in the one case, have hurt the revenue of the proprietor, in the other that of the sovereign.

Because the tax is payable in money, the land is also valued in money. Since this valuation was established, the value of silver has remained fairly stable. The standard of the coin has not changed in weight or purity. If silver had risen considerably in value, the fixed valuation might have placed a heavy burden on the landlord. Silver seems to have risen in this way during the two centuries before the discovery of the mines of America. If silver had fallen considerably in value, the same fixed valuation would have greatly reduced this part of the sovereign’s revenue. Silver certainly did fall in value for at least a century after the discovery of those mines. The standard of the money might also have been changed considerably. The same quantity of silver might have been given either a lower or a higher face value. For example, instead of being coined into five shillings and two pence, an ounce of silver might have been coined into pieces worth only two shillings and seven pence. Or it might have been coined into pieces worth as much as ten shillings and four pence. The lower value would have hurt the landowner’s income. The higher value would have hurt the sovereign’s revenue.

In circumstances, therefore, somewhat different from those which have actually taken place, this constancy of valuation might have been a very great inconveniency, either to the contributors or to the commonwealth. In the course of ages, such circumstances, however, must at some time or other happen. But though empires, like all the other works of men, have all hitherto proved mortal, yet every empire aims at immortality. Every constitution, therefore, which it is meant should be as permanent as the empire itself, ought to be convenient, not in certain circumstances only, but in all circumstances; or ought to be suited, not to those circumstances which are transitory, occasional, or accidental, but to those which are necessary, and therefore always the same.

Under circumstances somewhat different from those that actually occurred, this fixed valuation might have greatly inconvenienced either the contributors or the commonwealth. Over the centuries, however, such circumstances must eventually arise. Although empires, like all other human creations, have so far all proved mortal, every empire aims to last forever. Every constitution meant to last as long as the empire itself should therefore be suitable in all circumstances, not just some. It should be suited not to circumstances that are temporary, occasional, or accidental, but to those that are necessary and therefore always the same.

A tax upon the rent of land, which varies with every variation of the rent, or which rises and falls according to the improvement or neglect of cultivation, is recommended by that sect of men of letters in France, who call themselves the economists, as the most equitable of all taxes. All taxes, they pretend, fall ultimately upon the rent of land, and ought, therefore, to be imposed equally upon the fund which must finally pay them. That all taxes ought to fall as equally as possible upon the fund which must finally pay them, is certainly true. But without entering into the disagreeable discussion of the metaphysical arguments by which they support their very ingenious theory, it will sufficiently appear, from the following review, what are the taxes which fall finally upon the rent of the land, and what are those which fall finally upon some other fund.

A group of French writers who call themselves the economists recommend a tax on land rent as the fairest tax of all. The tax would vary whenever rent changes, rising or falling as cultivation improves or is neglected. They claim that all taxes ultimately fall on land rent. Taxes should therefore be imposed equally on the fund that must ultimately pay them. It is certainly true that all taxes should fall as equally as possible on the fund that must ultimately pay them. The following review will show which taxes ultimately fall on land rent and which fall on some other fund. There is no need to enter into a disagreeable discussion of the metaphysical arguments supporting their very ingenious theory.

In the Venetian territory, all the arable lands which are given in lease to farmers are taxed at a tenth of the rent. {Memoires concernant les Droits, p. 240, 241.} The leases are recorded in a public register, which is kept by the officers of revenue in each province or district. When the proprietor cultivates his own lands, they are valued according to an equitable estimation, and he is allowed a deduction of one-fifth of the tax; so that for such land he pays only eight instead of ten per cent. of the supposed rent.

In Venetian territory, all farmland leased to farmers is taxed at one-tenth of the rent. {Memoires concernant les Droits, p. 240, 241.} The leases are recorded in a public register kept by revenue officers in each province or district. When an owner farms their own land, the land is valued according to a fair estimate. The owner is allowed a deduction of one-fifth of the tax. So the owner pays only eight percent of the estimated rent instead of ten percent.

A land-tax of this kind is certainly more equal than the land-tax of England. It might not, perhaps, be altogether so certain, and the assessment of the tax might frequently occasion a good deal more trouble to the landlord. It might, too, be a good deal more expensive in the levying.

A land tax of this kind is certainly fairer than England’s land tax. Perhaps it would not be quite as predictable, and assessing it might often cause landlords much more trouble. It might also cost much more to collect.

Such a system of administration, however, might, perhaps, be contrived, as would in a great measure both prevent this uncertainty, and moderate this expense.

However, a system of administration might perhaps be devised that would greatly reduce both this uncertainty and this expense.

The landlord and tenant, for example, might jointly be obliged to record their lease in a public register. Proper penalties might be enacted against concealing or misrepresenting any of the conditions; and if part of those penalties were to be paid to either of the two parties who informed against and convicted the other of such concealment or misrepresentation, it would effectually deter them from combining together in order to defraud the public revenue. All the conditions of the lease might be sufficiently known from such a record.

For example, the landlord and tenant could both be required to record their lease in a public register. Appropriate penalties could be imposed for concealing or misrepresenting any of its terms. Part of the penalty could be paid to either party who reported the other and secured a conviction. This would effectively prevent them from working together to defraud the public revenue. All the terms of the lease could be made sufficiently clear in the register.

Some landlords, instead of raising the rent, take a fine for the renewal of the lease. This practice is, in most cases, the expedient of a spendthrift, who, for a sum of ready money sells a future revenue of much greater value. It is, in most cases, therefore, hurtful to the landlord; it is frequently hurtful to the tenant; and it is always hurtful to the community. It frequently takes from the tenant so great a part of his capital, and thereby diminishes so much his ability to cultivate the land, that he finds it more difficult to pay a small rent than it would otherwise have been to pay a great one. Whatever diminishes his ability to cultivate, necessarily keeps down, below what it would otherwise have been, the most important part of the revenue of the community. By rendering the tax upon such fines a good deal heavier than upon the ordinary rent, this hurtful practice might be discouraged, to the no small advantage of all the different parties concerned, of the landlord, of the tenant, of the sovereign, and of the whole community.

Some landlords charge a renewal fee instead of raising the rent. In most cases, this is the tactic of a spendthrift. They sell future income of much greater value for cash on hand. The practice therefore harms the landlord in most cases. It often harms the tenant and always harms the community. The fee often takes so much of the tenant’s capital that it greatly reduces their ability to cultivate the land. As a result, the tenant finds it harder to pay a low rent than a high rent would otherwise have been. Anything that reduces the tenant’s ability to cultivate necessarily reduces the most important part of the community’s income. A much heavier tax on renewal fees than on ordinary rent might discourage this harmful practice. That would be a considerable benefit to everyone concerned: the landlord, the tenant, the sovereign, and the whole community.

Some leases prescribe to the tenant a certain mode of cultivation, and a certain succession of crops, during the whole continuance of the lease. This condition, which is generally the effect of the landlord’s conceit of his own superior knowledge (a conceit in most cases very ill-founded), ought always to be considered as an additional rent, as a rent in service, instead of a rent in money. In order to discourage the practice, which is generally a foolish one, this species of rent might be valued rather high, and consequently taxed somewhat higher than common money-rents.

Some leases require tenants to use a particular farming method and grow crops in a particular sequence throughout the lease. This condition generally results from the landlord’s belief in his own superior knowledge. In most cases, that belief is very poorly founded. The condition should always be treated as additional rent, paid in service rather than money. To discourage this generally foolish practice, this kind of rent could be valued rather highly. It could then be taxed somewhat more heavily than ordinary money rent.

Some landlords, instead of a rent in money, require a rent in kind, in corn, cattle, poultry, wine, oil, etc.; others, again, require a rent in service. Such rents are always more hurtful to the tenant than beneficial to the landlord. They either take more, or keep more out of the pocket of the former, than they put into that of the latter. In every country where they take place, the tenants are poor and beggarly, pretty much according to the degree in which they take place. By valuing, in the same manner, such rents rather high, and consequently taxing them somewhat higher than common money-rents, a practice which is hurtful to the whole community, might, perhaps, be sufficiently discouraged.

Some landlords require rent in goods, such as grain, cattle, poultry, wine, or oil, instead of money. Others require rent in the form of labor. Such rents always hurt the tenant more than they benefit the landlord. They either take more from the tenant, or keep more out of the tenant's pocket, than they put into the landlord's. In every country where such rents exist, tenants are poor and destitute, roughly in proportion to how common the rents are. Such rents might, perhaps, be valued relatively high in the same way and therefore taxed somewhat more heavily than ordinary money rents. This might sufficiently discourage a practice that hurts the whole community.

When the landlord chose to occupy himself a part of his own lands, the rent might be valued according to an equitable arbitration of the farmers and landlords in the neighbourhood, and a moderate abatement of the tax might be granted to him, in the same manner as in the Venetian territory, provided the rent of the lands which he occupied did not exceed a certain sum. It is of importance that the landlord should be encouraged to cultivate a part of his own land. His capital is generally greater than that of the tenant, and, with less skill, he can frequently raise a greater produce. The landlord can afford to try experiments, and is generally disposed to do so. His unsuccessful experiments occasion only a moderate loss to himself. His successful ones contribute to the improvement and better cultivation of the whole country. It might be of importance, however, that the abatement of the tax should encourage him to cultivate to a certain extent only. If the landlords should, the greater part of them, be tempted to farm the whole of their own lands, the country (instead of sober and industrious tenants, who are bound by their own interest to cultivate as well as their capital and skill will allow them) would be filled with idle and profligate bailiffs, whose abusive management would soon degrade the cultivation, and reduce the annual produce of the land, to the diminution, not only of the revenue of their masters, but of the most important part of that of the whole society.

When a landlord chose to farm part of his own land, local farmers and landlords could fairly assess its rental value. The landlord could then receive a moderate tax reduction, as in the Venetian territory. This reduction would apply only if the rental value of the land he farmed did not exceed a certain amount. It is important to encourage landlords to farm part of their own land. A landlord generally has more capital than a tenant. Even with less skill, he can often produce more. A landlord can afford to experiment and is generally willing to do so. His failed experiments cause him only a moderate loss. His successful experiments help improve farming throughout the country. It may be important, however, to limit how much land the tax reduction encourages him to farm. Suppose most landlords were tempted to farm all their own land. The country would then be filled with idle and wasteful bailiffs instead of sober and hardworking tenants. Tenants have an interest in farming as well as their capital and skill allow. The bailiffs’ mismanagement would soon make farming worse and reduce the land’s annual produce. This would reduce not only their masters’ income but also the most important part of the income of society as a whole.

Such a system of administration might, perhaps, free a tax of this kind from any degree of uncertainty, which could occasion either oppression or inconveniency to the contributor; and might, at the same time, serve to introduce into the common management of land such a plan of policy as might contribute a good deal to the general improvement and good cultivation of the country.

Such a system of administration might perhaps remove any uncertainty about this kind of tax that could burden or inconvenience taxpayers. At the same time, it might introduce a land management policy that would greatly improve the country and its cultivation.

The expense of levying a land-tax, which varied with every variation of the rent, would, no doubt, be somewhat greater than that of levying one which was always rated according to a fixed valuation. Some additional expense would necessarily be incurred, both by the different register-offices which it would be proper to establish in the different districts of the country, and by the different valuations which might occasionally be made of the lands which the proprietor chose to occupy himself. The expense of all this, however, might be very moderate, and much below what is incurred in the levying of many other taxes, which afford a very inconsiderable revenue in comparison of what might easily be drawn from a tax of this kind.

A land tax that changed whenever rent changed would no doubt cost somewhat more to collect than one based on a fixed valuation. Additional expenses would be necessary to establish registry offices in the different districts of the country. There would also be expenses for occasional valuations of land that the owner chose to occupy himself. These expenses, however, could be very modest. They could be much lower than the cost of collecting many other taxes. Those taxes bring in very little revenue compared with what a tax of this kind could easily raise.

The discouragement which a variable land-tax of this kind might give to the improvement of land, seems to be the most important objection which can be made to it. The landlord would certainly be less disposed to improve, when the sovereign, who contributed nothing to the expense, was to share in the profit of the improvement. Even this objection might, perhaps, be obviated, by allowing the landlord, before he began his improvement, to ascertain, in conjunction with the officers of revenue, the actual value of his lands, according to the equitable arbitration of a certain number of landlords and farmers in the neighbourhood, equally chosen by both parties: and by rating him, according to this valuation, for such a number of years as might be fully sufficient for his complete indemnification. To draw the attention of the sovereign towards the improvement of the land, from a regard to the increase of his own revenue, is one or the principal advantages proposed by this species of land-tax. The term, therefore, allowed, for the indemnification of the landlord, ought not to be a great deal longer than what was necessary for that purpose, lest the remoteness of the interest should discourage too much this attention. It had better, however, be somewhat too long, than in any respect too short. No incitement to the attention of the sovereign can ever counterbalance the smallest discouragement to that of the landlord. The attention of the sovereign can be, at best, but a very general and vague consideration of what is likely to contribute to the better cultivation of the greater part of his dominions. The attention of the landlord is a particular and minute consideration of what is likely to be the most advantageous application of every inch of ground upon his estate. The principal attention of the sovereign ought to be, to encourage, by every means in his power, the attention both of the landlord and of the farmer, by allowing both to pursue their own interest in their own way, and according to their own judgment; by giving to both the most perfect security that they shall enjoy the full recompence of their own industry; and by procuring to both the most extensive market for every part of their produce, in consequence of establishing the easiest and safest communications, both by land and by water, through every part of his own dominions, as well as the most unbounded freedom of exportation to the dominions of all other princes.

The most important objection to this kind of variable land tax seems to be that it might discourage improvements to land. A landlord would certainly be less willing to improve land if the sovereign shared the profits without contributing to the cost. Perhaps even this objection could be overcome. Before beginning improvements, the landlord could establish the land’s current value together with revenue officers. A number of local landlords and farmers, chosen equally by both parties, could determine a fair valuation. The landlord could then be taxed according to that valuation for enough years to fully recover the cost. One of the main proposed advantages of this kind of land tax is that it would draw the sovereign’s attention to improving land. It would do this by increasing the sovereign’s own revenue. The period allowed for the landlord to recover the cost should therefore not be much longer than necessary. Otherwise, the prospect of a return might be too distant to attract the sovereign’s attention. Still, the period had better be somewhat too long than in any way too short. No incentive to the sovereign can ever make up for even the smallest discouragement to the landlord. At best, the sovereign can give only very general and vague consideration to what might improve cultivation across most of the realm. The landlord, by contrast, can give close and detailed thought to the most profitable use of every inch of the estate. The sovereign’s main concern should be to encourage both landlords and farmers in every possible way. The sovereign should allow both to pursue their own interests in their own way, according to their own judgment. Both should have the fullest assurance that they will enjoy the full rewards of their own work. The sovereign should also provide both with the widest possible market for every part of their produce. This can be done by establishing the easiest and safest transport routes, by land and water, throughout the realm. It also requires the most unrestricted freedom to export to the realms of all other rulers.

If, by such a system of administration, a tax of this kind could be so managed as to give, not only no discouragement, but, on the contrary, some encouragement to the improvement or land, it does not appear likely to occasion any other inconveniency to the landlord, except always the unavoidable one of being obliged to pay the tax. In all the variations of the state of the society, in the improvement and in the declension of agriculture; in all the variations in the value of silver, and in all those in the standard of the coin, a tax of this kind would, of its own accord, and without any attention of government, readily suit itself to the actual situation of things, and would be equally just and equitable in all those different changes. It would, therefore, be much more proper to be established as a perpetual and unalterable regulation, or as what is called a fundamental law of the commonwealth, than any tax which was always to be levied according to a certain valuation.

If such a system of administration could encourage land improvement rather than discourage it, the tax would probably cause the landlord no other inconvenience. The unavoidable inconvenience, of course, would be having to pay the tax. Society may change, agriculture may improve or decline, and the value of silver and the standard of the coin may change. In all these circumstances, the tax would automatically adjust to the actual state of things, without any attention from the government. It would remain fair and equitable through all these changes. It would therefore be much more suitable as a permanent, unalterable regulation, or what is called a fundamental law of the commonwealth, than any tax always levied according to a fixed valuation.

Some states, instead of the simple and obvious expedient of a register of leases, have had recourse to the laborious and expensive one of an actual survey and valuation of all the lands in the country. They have suspected, probably, that the lessor and lessee, in order to defraud the public revenue, might combine to conceal the real terms of the lease. Doomsday-book seems to have been the result of a very accurate survey of this kind.

Some states have chosen a laborious and expensive survey and valuation of all the land in the country. They chose this instead of the simple and obvious solution of keeping a register of leases. They probably suspected that landlords and tenants might agree to conceal the real terms of their leases to cheat the public treasury. Doomsday-book seems to have resulted from a very accurate survey of this kind.

In the ancient dominions of the king of Prussia, the land-tax is assessed according to an actual survey and valuation, which is reviewed and altered from time to time. {Memoires concernant les Droits, etc. tom, i. p. 114, 115, 116, etc.} According to that valuation, the lay proprietors pay from twenty to twenty-five per cent. of their revenue; ecclesiastics from forty to forty-five per cent. The survey and valuation of Silesia was made by order of the present king, it is said, with great accuracy. According to that valuation, the lands belonging to the bishop of Breslaw are taxed at twenty-five per cent. of their rent. The other revenues of the ecclesiastics of both religions at fifty per cent. The commanderies of the Teutonic order, and of that of Malta, at forty per cent. Lands held by a noble tenure, at thirty-eight and one-third per cent. Lands held by a base tenure, at thirty-five and one-third per cent.

In the king of Prussia’s ancient dominions, the land tax is based on an actual survey and valuation. The survey and valuation are reviewed and changed from time to time. {Memoires concernant les Droits, etc. tom, i. p. 114, 115, 116, etc.} Based on that valuation, lay owners pay between twenty and twenty-five per cent of their revenue. Clergy pay between forty and forty-five per cent. The present king ordered a survey and valuation of Silesia, which was reportedly carried out with great accuracy. Based on that valuation, lands belonging to the bishop of Breslaw are taxed at twenty-five per cent of their rent. Other revenues of clergy of both religions are taxed at fifty per cent. The commanderies of the Teutonic order and the order of Malta are taxed at forty per cent. Lands held by noble tenure are taxed at thirty-eight and one-third per cent. Lands held by base tenure are taxed at thirty-five and one-third per cent.

The survey and valuation of Bohemia is said to have been the work of more than a hundred years. It was not perfected till after the peace of 1748, by the orders of the present empress queen. {Id. tom i. p.85, 84.} The survey of the duchy of Milan, which was begun in the time of Charles VI., was not perfected till after 1760. It is esteemed one of the most accurate that has ever been made. The survey of Savoy and Piedmont was executed under the orders of the late king of Sardinia. {Id. p. 280, etc.; also p, 287. etc. to 316.}

The survey and valuation of Bohemia are said to have taken more than a hundred years. They were not completed until after the peace of 1748, on the orders of the present empress queen. {Id. tom i. p.85, 84.} The survey of the duchy of Milan began during the reign of Charles VI. It was not completed until after 1760. It is regarded as one of the most accurate surveys ever made. The survey of Savoy and Piedmont was carried out on the orders of the late king of Sardinia. {Id. p. 280, etc., also p, 287. etc. to 316.}

In the dominions of the king of Prussia, the revenue of the church is taxed much higher than that of lay proprietors. The revenue of the church is, the greater part of it, a burden upon the rent of land. It seldom happens that any part of it is applied towards the improvement of land; or is so employed as to contribute, in any respect, towards increasing the revenue of the great body of the people. His Prussian majesty had probably, upon that account, thought it reasonable that it should contribute a good deal more towards relieving the exigencies of the state. In some countries, the lands of the church are exempted from all taxes. In others, they are taxed more lightly than other lands. In the duchy of Milan, the lands which the church possessed before 1575, are rated to the tax at a third only or their value.

In the king of Prussia’s dominions, church income is taxed much more heavily than the income of nonreligious landowners. Most church income is a burden on the rent from land. Little of it is used to improve land. Nor is it often used in ways that help increase the income of the great majority of people. The king of Prussia probably thought for this reason that church income should contribute much more to meeting the state’s urgent needs. In some countries, church lands are exempt from all taxes. In others, they are taxed less heavily than other lands. In the duchy of Milan, lands the church owned before 1575 are taxed at only a third of their value.

In Silesia, lands held by a noble tenure are taxed three per cent. higher than those held by a base tenure. The honours and privileges of different kinds annexed to the former, his Prussian majesty had probably imagined, would sufficiently compensate to the proprietor a small aggravation of the tax; while, at the same time, the humiliating inferiority of the latter would be in some measure alleviated, by being taxed somewhat more lightly. In other countries, the system of taxation, instead of alleviating, aggravates this inequality. In the dominions of the king of Sardinia, and in those provinces of France which are subject to what is called the real or predial taille, the tax falls altogether upon the lands held by a base tenure. Those held by a noble one are exempted.

In Silesia, land held by noble tenure is taxed three per cent more heavily than land held by base tenure. The king of Prussia probably thought that the honors and privileges attached to noble tenure would make up for the slightly higher tax. At the same time, the lighter tax on land held by base tenure would partly ease its humiliating inferiority. In other countries, the tax system makes this inequality worse instead of easing it. In the territories of the king of Sardinia, the tax falls entirely on land held by base tenure. The same is true in those provinces of France subject to what is called the real or predial taille. Land held by noble tenure is exempt.

A land tax assessed according to a general survey and valuation, how equal soever it may be at first, must, in the course of a very moderate period of time, become unequal. To prevent its becoming so would require the continual and painful attention of government to all the variations in the state and produce of every different farm in the country. The governments of Prussia, of Bohemia, of Sardinia, and of the duchy of Milan, actually exert an attention of this kind; an attention so unsuitable to the nature of government, that it is not likely to be of long continuance, and which, if it is continued, will probably, in the long-run, occasion much more trouble and vexation than it can possibly bring relief to the contributors.

A land tax based on a general survey and valuation may be fair at first. But within a fairly short time, it must become unfair. To prevent this, the government would have to monitor every change in the condition and output of every farm in the country. This would require constant, painstaking attention. The governments of Prussia, Bohemia, Sardinia, and the duchy of Milan do pay this kind of attention. But such attention is so unsuited to the nature of government that it is unlikely to last long. If it does continue, it will probably cause taxpayers far more trouble and frustration in the long run than it could possibly save them.

In 1666, the generality of Montauban was assessed to the real or predial taille, according, it is said, to a very exact survey and valuation. {Memoires concernant les Droits, etc. tom. ii p. 139, etc.} By 1727, this assessment had become altogether unequal. In order to remedy this inconveniency, government has found no better expedient, than to impose upon the whole generality an additional tax of a hundred and twenty thousand livres. This additional tax is rated upon all the different districts subject to the taille according to the old assessment. But it is levied only upon those which, in the actual state of things, are by that assessment under-taxed; and it is applied to the relief of those which, by the same assessment, are over-taxed. Two districts, for example, one of which ought, in the actual state of things, to be taxed at nine hundred, the other at eleven hundred livres, are, by the old assessment, both taxed at a thousand livres. Both these districts are, by the additional tax, rated at eleven hundred livres each. But this additional tax is levied only upon the district under-charged, and it is applied altogether to the relief of that overcharged, which consequently pays only nine hundred livres. The government neither gains nor loses by the additional tax, which is applied altogether to remedy the inequalities arising from the old assessment. The application is pretty much regulated according to the discretion of the intendant of the generality, and must, therefore, be in a great measure arbitrary.

In 1666, the generality of Montauban was assessed for the real or land-based taille. The assessment was reportedly based on a very exact survey and valuation. {Memoires concernant les Droits, etc. tom. ii p. 139, etc.} By 1727, this assessment had become entirely unequal. To remedy this problem, the government found no better solution than to impose an additional tax of 120,000 livres on the whole generality. This additional tax is assessed on all districts subject to the taille, according to the old assessment. But it is collected only from districts that are under-taxed by the old assessment in present circumstances. The money is used to relieve districts that are over-taxed by the same assessment. For example, consider two districts. In present circumstances, one should be taxed at 900 livres and the other at 1,100 livres. Under the old assessment, however, both are taxed at 1,000 livres. With the additional tax, both districts are assessed at 1,100 livres each. But the additional tax is collected only from the under-taxed district. All of it is used to relieve the over-taxed district, which consequently pays only 900 livres. The government neither gains nor loses from the additional tax. All of it is used to remedy the inequalities arising from the old assessment. How the money is used is largely left to the discretion of the generality's intendant. It must therefore be largely arbitrary.

Taxes which are proportioned, not in the Rent, but to the Produce of Land.

Taxes based on the produce of land rather than its rent.

Taxes upon the produce of land are, in reality, taxes upon the rent; and though they may be originally advanced by the farmer, are finally paid by the landlord. When a certain portion of the produce is to be paid away for a tax, the farmer computes as well as he can, what the value of this portion is, one year with another, likely to amount to, and he makes a proportionable abatement in the rent which he agrees to pay to the landlord. There is no farmer who does not compute beforehand what the church tythe, which is a land tax of this kind, is, one year with another, likely to amount to.

Taxes on the produce of land are really taxes on rent. Although the farmer may pay them initially, the landlord ultimately bears the cost. When a portion of the produce must be paid as tax, the farmer estimates its likely average value from year to year. The farmer then reduces the rent agreed with the landlord by a corresponding amount. Every farmer estimates in advance the likely average value of the church tithe, which is a land tax of this kind.

The tythe, and every other land tax of this kind, under the appearance of perfect equality, are very unequal taxes; a certain portion of the produce being in different situations, equivalent to a very different portion of the rent. In some very rich lands, the produce is so great, that the one half of it is fully sufficient to replace to the farmer his capital employed in cultivation, together with the ordinary profits of farming stock in the neighbourhood. The other half, or, what comes to the same thing, the value of the other half, he could afford to pay as rent to the landlord, if there was no tythe. But if a tenth of the produce is taken from him in the way of tythe, he must require an abatement of the fifth part of his rent, otherwise he cannot get back his capital with the ordinary profit. In this case, the rent of the landlord, instead of amounting to a half, or five-tenths of the whole produce, will amount only to four-tenths of it. In poorer lands, on the contrary, the produce is sometimes so small, and the expense of cultivation so great, that it requires four-fifths of the whole produce, to replace to the farmer his capital with the ordinary profit. In this case, though there was no tythe, the rent of the landlord could amount to no more than one-fifth or two-tenths of the whole produce. But if the farmer pays one-tenth of the produce in the way of tythe, he must require an equal abatement of the rent of the landlord, which will thus be reduced to one-tenth only of the whole produce. Upon the rent of rich lands the tythe may sometimes be a tax of no more than one-fifth part, or four shillings in the pound; whereas upon that of poorer lands, it may sometimes be a tax of one half, or of ten shillings in the pound.

The tithe and every similar land tax appear perfectly equal, but they are very unequal. The same share of the produce represents very different shares of the rent in different circumstances. Some very rich land produces so much that half the crop fully repays the farmer’s capital invested in cultivation. It also provides the ordinary profit earned by farmers in the neighborhood. Without a tithe, the farmer could afford to pay the other half, or its value, as rent to the landlord. But if a tenth of the produce is taken as a tithe, the farmer must demand a reduction of one fifth in the rent. Otherwise, the farmer cannot recover the capital invested and earn the ordinary profit. In this case, the landlord’s rent will amount to four tenths of the whole produce, rather than half, or five tenths. On poorer land, by contrast, the produce is sometimes so small and cultivation so expensive that four fifths of the whole produce are needed to repay the farmer’s capital and provide the ordinary profit. In this case, even without a tithe, the landlord’s rent could amount to no more than one fifth, or two tenths, of the whole produce. But if the farmer pays one tenth of the produce as a tithe, the farmer must demand an equal reduction in the landlord’s rent. The rent will then be reduced to just one tenth of the whole produce. The tithe may sometimes be a tax of no more than one fifth, or four shillings in the pound, on the rent of rich land. But on the rent of poorer land, it may sometimes be a tax of one half, or ten shillings in the pound.

The tythe, as it is frequently a very unequal tax upon the rent, so it is always a great discouragement, both to the improvements of the landlord, and to the cultivation of the farmer. The one cannot venture to make the most important, which are generally the most expensive improvements; nor the other to raise the most valuable, which are generally, too, the most expensive crops; when the church, which lays out no part of the expense, is to share so very largely in the profit. The cultivation of madder was, for a long time, confined by the tythe to the United Provinces, which, being presbyterian countries, and upon that account exempted from this destructive tax, enjoyed a sort of monopoly of that useful dyeing drug against the rest of Europe. The late attempts to introduce the culture of this plant into England, have been made only in consequence of the statute, which enacted that five shillings an acre should be received in lieu of all manner of tythe upon madder.

The tithe is often a very unequal tax on rent. It also always greatly discourages landlords from making improvements and farmers from cultivating their land. Landlords cannot risk making the most important improvements, which are generally the most expensive. Nor can farmers risk growing the most valuable crops, which are also generally the most expensive. The church pays none of the costs, yet takes such a large share of the profit. For a long time, the tithe confined the cultivation of madder to the United Provinces. These were Presbyterian countries and were therefore exempt from this destructive tax. As a result, they enjoyed a kind of monopoly over the rest of Europe in this useful dyeing substance. Only a recent law has led to attempts to introduce the cultivation of madder in England. The law provided for a payment of five shillings an acre in place of all tithes on madder.

As through the greater part of Europe, the church, so in many different countries of Asia, the state, is principally supported by a land tax, proportioned not to the rent, but to the produce of the land. In China, the principal revenue of the sovereign consists in a tenth part of the produce of all the lands of the empire. This tenth part, however, is estimated so very moderately, that, in many provinces, it is said not to exceed a thirtieth part of the ordinary produce. The land tax or land rent which used to be paid to the Mahometan government of Bengal, before that country fell into the hands of the English East India company, is said to have amounted to about a fifth part of the produce. The land tax of ancient Egypt is said likewise to have amounted to a fifth part.

In most of Europe, the church is mainly supported by a land tax. In many Asian countries, the state is supported in the same way. The tax is based on the land’s produce, not its rent. In China, the sovereign’s main revenue comes from a tenth of the produce of all the empire’s lands. However, this tenth is estimated so modestly that it is said to be no more than a thirtieth of the usual produce in many provinces. Before Bengal fell into the hands of the English East India Company, its Mahometan government collected a land tax or land rent. This payment is said to have amounted to about a fifth of the produce. The land tax in ancient Egypt is also said to have amounted to a fifth.

In Asia, this sort of land tax is said to interest the sovereign in the improvement and cultivation of land. The sovereigns of China, those of Bengal while under the Mahometan govermnent, and those of ancient Egypt, are said, accordingly, to have been extremely attentive to the making and maintaining of good roads and navigable canals, in order to increase, as much as possible, both the quantity and value of every part of the produce of the land, by procuring to every part of it the most extensive market which their own dominions could afford. The tythe of the church is divided into such small portions that no one of its proprietors can have any interest of this kind. The parson of a parish could never find his account, in making a road or canal to a distant part of the country, in order to extend the market for the produce of his own particular parish. Such taxes, when destined for the maintenance of the state, have some advantages, which may serve in some measure to balance their inconveniency. When destined for the maintenance of the church, they are attended with nothing but inconveniency.

In Asia, this kind of land tax is said to give the ruler an interest in improving and cultivating land. Accordingly, the rulers of China, Bengal under Mahometan rule, and ancient Egypt are said to have paid close attention to building and maintaining good roads and navigable canals. Their aim was to increase both the quantity and value of every part of the land’s produce as much as possible. They did this by giving every part of it access to the widest market available within their dominions. The church’s tithe is divided into such small shares that none of its owners can have a similar interest. A parish priest could never profit from building a road or canal to a distant part of the country. Even so, such a road or canal would expand the market for his own parish’s produce. When such taxes support the state, they have some advantages that may partly offset their disadvantages. When they support the church, they bring nothing but disadvantages.

Taxes upon the produce of land may be levied, either in kind, or, according to a certain valuation in money.

Taxes on the produce of land may be collected either in produce or in money based on a set valuation.

The parson of a parish, or a gentleman of small fortune who lives upon his estate, may sometimes, perhaps find some advantage in receiving, the one his tythe, and the other his rent, in kind. The quantity to be collected, and the district within which it is to be collected, are so small, that they both can oversee, with their own eyes, the collection and disposal of every part of what is due to them. A gentleman of great fortune, who lived in the capital, would be in danger of suffering much by the neglect, and more by the fraud, of his factors and agents, if the rents of an estate in a distant province were to be paid to him in this manner. The loss of the sovereign, from the abuse and depredation of his tax-gatherers, would necessarily be much greater. The servants of the most careless private person are, perhaps, more under the eye of their master than those of the most careful prince; and a public revenue, which was paid in kind, would suffer so much from the mismanagement of the collectors, that a very small part of what was levied upon the people would ever arrive at the treasury of the prince. Some part of the public revenue of China, however, is said to be paid in this manner. The mandarins and other tax-gatherers will, no doubt, find their advantage in continuing the practice of a payment, which is so much more liable to abuse than any payment in money.

A parish clergyman may sometimes find it useful to receive his tithe in goods rather than money. The same may be true of a gentleman of modest means who lives on his estate and receives rent in goods. The amounts and the areas involved are small enough for each man to oversee their collection and disposal personally. A wealthy gentleman living in the capital would face a different risk. If rent from a distant estate were paid in goods, he might lose much through his agents’ neglect and even more through their fraud. The sovereign’s losses from abuse and theft by tax collectors would necessarily be much greater. Even the most careless private person’s servants are perhaps more closely watched than those of the most careful prince. If public revenue were paid in goods, the collectors would mismanage it so badly that very little of what was taken from the people would reach the prince’s treasury. Some of China’s public revenue, however, is said to be paid in this way. The mandarins and other tax collectors will no doubt find it profitable to continue the practice. Payment in goods is much more open to abuse than payment in money.

A tax upon the produce of land, which is levied in money, may be levied, either according to a valuation, which varies with all the variations of the market price; or according to a fixed valuation, a bushel of wheat, for example, being always valued at one and the same money price, whatever may be the state of the market. The produce of a tax levied in the former way will vary only according to the variations in the real produce of the land, according to the improvement or neglect of cultivation. The produce of a tax levied in the latter way will vary, not only according to the variations in the produce of the land, but according both to those in the value of the precious metals, and those in the quantity of those metals which is at different times contained in coin of the same denomination. The produce of the former will always bear the same proportion to the value of the real produce of the land. The produce of the latter may, at different times, bear very different proportions to that value.

A tax on the produce of land may be collected in money in either of two ways. The produce may be valued according to its changing market price. Or it may be given a fixed value. For example, a bushel of wheat might always be valued at the same price, whatever the market price. The amount collected under the first method will vary only with changes in the land’s actual output, as cultivation improves or is neglected. Under the second method, the amount collected will vary with changes in the land’s output. It will also vary with changes in the value of precious metals and in the amount of those metals contained in coins of the same denomination at different times. The amount collected under the first method will always bear the same proportion to the value of the land’s actual produce. Under the second method, that proportion may vary greatly over time.

When, instead either of a certain portion of the produce of land, or of the price of a certain portion, a certain sum of money is to be paid in full compensation for all tax or tythe; the tax becomes, in this case, exactly of the same nature with the land tax of England. It neither rises nor falls with the rent of the land. It neither encourages nor discourages improvement. The tythe in the greater part of those parishes which pay what is called a modus, in lieu of all other tythe is a tax of this kind. During the Mahometan government of Bengal, instead of the payment in kind of the fifth part of the produce, a modus, and, it is said, a very moderate one, was established in the greater part of the districts or zemindaries of the country. Some of the servants of the East India company, under pretence of restoring the public revenue to its proper value, have, in some provinces, exchanged this modus for a payment in kind. Under their management, this change is likely both to discourage cultivation, and to give new opportunities for abuse in the collection of the public revenue, which has fallen very much below what it was said to have been when it first fell under the management of the company. The servants of the company may, perhaps, have profited by the change, but at the expense, it is probable, both of their masters and of the country.

When a fixed sum of money is paid in full for a tax or tithe, the tax becomes exactly like England’s land tax. This is true whether it replaces a fixed share of the land’s produce or the price of that share. The tax neither rises nor falls with the rent of the land. It neither encourages nor discourages improvement. The tithe in most parishes that pay what is called a modus instead of all other tithes is this kind of tax. During the Mahometan government of Bengal, most districts or zemindaries paid a modus instead of one-fifth of their produce in kind. This modus was said to be very moderate. Some servants of the East India company claimed they were restoring public revenue to its proper value. On that pretext, they replaced the modus with payment in kind in some provinces. Under their management, this change is likely both to discourage cultivation and to create new opportunities for abuse in collecting public revenue. That revenue has fallen far below what it was said to be when it first came under the company’s management. The company’s servants may perhaps have profited from the change. But they probably did so at the expense of both their masters and the country.

Taxes upon the Rent of Houses.

Taxes on House Rent.

The rent of a house may be distinguished into two parts, of which the one may very properly be called the building-rent; the other is commonly called the ground-rent.

The rent of a house can be divided into two parts. One can properly be called the building rent. The other is commonly called the ground rent.

The building-rent is the interest or profit of the capital expended in building the house. In order to put the trade of a builder upon a level with other trades, it is necessary that this rent should be sufficient, first, to pay him the same interest which he would have got for his capital, if he had lent it upon good security; and, secondly, to keep the house in constant repair, or, what comes to the same thing, to replace, within a certain term of years, the capital which had been employed in building it. The building-rent, or the ordinary profit of building, is, therefore, everywhere regulated by the ordinary interest of money. Where the market rate of interest is four per cent. the rent of a house, which, over and above paying the ground-rent, affords six or six and a-half per cent. upon the whole expense of building, may, perhaps, afford a sufficient profit to the builder. Where the market rate of interest is five per cent. it may perhaps require seven or seven and a half per cent. If, in proportion to the interest of money, the trade of the builders affords at any time much greater profit than this, it will soon draw so much capital from other trades as will reduce the profit to its proper level. If it affords at any time much less than this, other trades will soon draw so much capital from it as will again raise that profit.

Building rent is the interest or profit on the capital spent building a house. To put the builder’s trade on an equal footing with other trades, this rent must be sufficient for two purposes. First, it must pay the builder the interest he could have earned by lending his capital on good security. Second, it must keep the house in constant repair. This is equivalent to replacing the capital spent on building it within a certain number of years. Building rent, or the ordinary profit from building, is therefore determined everywhere by the ordinary rate of interest. Where the market interest rate is four percent, a house’s rent may give the builder enough profit. To do so, it must cover the ground rent and yield six or six and a half percent on the total building cost. Where the market interest rate is five percent, it may need to yield seven or seven and a half percent. At any time, building may offer much greater profits than this relative to the interest rate. If so, it will soon draw enough capital from other trades to reduce the profit to its proper level. If building offers much less profit than this, other trades will soon draw enough capital away from it. This will raise the profit again.

Whatever part of the whole rent of a house is over and above what is sufficient for affording this reasonable profit, naturally goes to the ground-rent; and, where the owner of the ground and the owner of the building are two different persons, is, in most cases, completely paid to the former. This surplus rent is the price which the inhabitant of the house pays for some real or supposed advantage of the situation. In country houses, at a distance from any great town, where there is plenty of ground to chuse upon, the ground-rent is scarce anything, or no more than what the ground which the house stands upon would pay, if employed in agriculture. In country villas, in the neighbourhood of some great town, it is sometimes a good deal higher; and the peculiar conveniency or beauty of situation is there frequently very well paid for. Ground-rents are generally highest in the capital, and in those particular parts of it where there happens to be the greatest demand for houses, whatever be the reason of that demand, whether for trade and business, for pleasure and society, or for mere vanity and fashion.

Any part of a house’s total rent beyond what is needed to provide this reasonable profit naturally goes toward ground rent. Where the landowner and building owner are different people, this excess is usually paid entirely to the landowner. This extra rent is the price the resident pays for some real or supposed advantage of the location. For country houses far from any large town, where there is plenty of land to choose from, ground rent is almost nothing. It is no more than the land under the house would earn if used for farming. For country villas near a large town, ground rent is sometimes much higher. People there often pay a great deal for an especially convenient or beautiful location. Ground rents are generally highest in the capital and in those parts where demand for houses is greatest. This is true whatever the reason for that demand, whether trade and business, pleasure and social life, or mere vanity and fashion.

A tax upon house-rent, payable by the tenant, and proportioned to the whole rent of each house, could not, for any considerable time at least, affect the building-rent. If the builder did not get his reasonable profit, he would be obliged to quit the trade; which, by raising the demand for building, would, in a short time, bring back his profit to its proper level with that of other trades. Neither would such a tax fall altogether upon the ground-rent; but it would divide itself in such a manner, as to fall partly upon the inhabitant of the house, and partly upon the owner of the ground.

A tax on house rent could be paid by the tenant and based on the total rent for each house. Such a tax could not affect the building rent for any considerable time, at least. If builders did not earn a reasonable profit, they would have to leave the trade. This would increase the demand for building, and soon restore their profits to the proper level, equal to those in other trades. Nor would such a tax fall entirely on the ground rent. Instead, it would fall partly on the person living in the house and partly on the landowner.

Let us suppose, for example, that a particular person judges that he can afford for house-rent all expense of sixty pounds a-year; and let us suppose, too, that a tax of four shillings in the pound, or of one-fifth, payable by the inhabitant, is laid upon house-rent. A house of sixty pounds rent will, in that case, cost him seventy-two pounds a-year, which is twelve pounds more than he thinks he can afford. He will, therefore, content himself with a worse house, or a house of fifty pounds rent, which, with the additional ten pounds that he must pay for the tax, will make up the sum of sixty pounds a-year, the expense which he judges he can afford, and, in order to pay the tax, he will give up a part of the additional conveniency which he might have had from a house of ten pounds a-year more rent. He will give up, I say, a part of this additional conveniency; for he will seldom be obliged to give up the whole, but will, in consequence of the tax, get a better house for fifty pounds a-year, than he could have got if there had been no tax for as a tax of this kind, by taking away this particular competitor, must diminish the competition for houses of sixty pounds rent, so it must likewise diminish it for those of fifty pounds rent, and in the same manner for those of all other rents, except the lowest rent, for which it would for some time increase the competition. But the rents of every class of houses for which the competition was diminished, would necessarily be more or less reduced. As no part of this reduction, however, could for any considerable time at least, affect the building-rent, the whole of it must, in the long-run, necessarily fall upon the ground-rent. The final payment of this tax, therefore, would fall partly upon the inhabitant of the house, who, in order to pay his share, would be obliged to give up a part of his conveniency; and partly upon the owner of the ground, who, in order to pay his share, would be obliged to give up a part of his revenue. In what proportion this final payment would be divided between them, it is not, perhaps, very easy to ascertain. The division would probably be very different in different circumstances, and a tax of this kind might, according to those different circumstances, affect very unequally, both the inhabitant of the house and the owner of the ground.

Suppose, for example, that someone decides he can afford to spend sixty pounds a year on rent. Suppose, too, that a tax of four shillings in the pound, or one-fifth, is placed on rent. The person living in the house must pay the tax. A house with a rent of sixty pounds will then cost him seventy-two pounds a year. That is twelve pounds more than he thinks he can afford. So he will settle for an inferior house, with a rent of fifty pounds. That rent, plus the ten pounds he must pay in tax, comes to sixty pounds a year. This is the expense he thinks he can afford. To pay the tax, he will give up some of the extra comfort a house costing ten pounds more might have provided. I say some of the extra comfort, because he will seldom have to give up all of it. As a result of the tax, he will get a better house for fifty pounds a year than he could have gotten without it. The tax removes him as a competitor for houses renting at sixty pounds, so it must reduce competition for those houses. It must also reduce competition for houses renting at fifty pounds, and likewise for houses at every other rent. The exception is houses at the lowest rent, for which it would increase competition for some time. But rents would necessarily fall, more or less, for every class of houses facing reduced competition. For any considerable time, however, none of this reduction could affect the building-rent. In the long run, therefore, the whole reduction must necessarily fall on the ground-rent. The final burden of the tax would therefore fall partly on the person living in the house. To pay his share, he would have to give up some comfort. The burden would also fall partly on the owner of the ground. To pay his share, the owner would have to give up some revenue. Perhaps it is not very easy to determine how the final burden would be divided between them. The division would probably vary greatly in different circumstances. Depending on those circumstances, a tax of this kind might affect the person living in the house and the owner of the ground very unequally.

The inequality with which a tax of this kind might fall upon the owners of different ground-rents, would arise altogether from the accidental inequality of this division. But the inequality with which it might fall upon the inhabitants of different houses, would arise, not only from this, but from another cause. The proportion of the expense of house-rent to the whole expense of living, is different in the different degrees of fortune. It is, perhaps, highest in the highest degree, and it diminishes gradually through the inferior degrees, so as in general to be lowest in the lowest degree. The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich; and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be any thing very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.

A tax of this kind might fall unevenly on owners of different ground rents. This would arise entirely from accidental differences in how the tax is divided. But the tax might also fall unevenly on people living in different houses, for another reason. The share of total living expenses spent on house rent varies with a person's wealth. It is perhaps highest among the wealthiest people. It gradually decreases at lower levels of wealth, so that it is generally lowest among the poorest. Poor people spend most of their money on necessities. They struggle to get food and spend most of their small income on it. Rich people spend most of their money on luxuries and vanities. A magnificent house enhances and shows off all their other luxuries and vanities to best advantage. A tax on house rents would therefore generally fall hardest on the rich. Perhaps there would be nothing very unreasonable about this kind of inequality. It is not very unreasonable for the rich to contribute to public expenses somewhat more than in proportion to their income.

The rent of houses, though it in some respects resembles the rent of land, is in one respect essentially different from it. The rent of land is paid for the use of a productive subject. The land which pays it produces it. The rent of houses is paid for the use of an unproductive subject. Neither the house, nor the ground which it stands upon, produce anything. The person who pays the rent, therefore, must draw it from some other source of revenue, distinct from and independent of this subject. A tax upon the rent of houses, so far as it falls upon the inhabitants, must be drawn from the same source as the rent itself, and must be paid from their revenue, whether derived from the wages of labour, the profits of stock, or the rent of land. So far as it falls upon the inhabitants, it is one of those taxes which fall, not upon one only, but indifferently upon all the three different sources of revenue; and is, in every respect, of the same nature as a tax upon any other sort of consumable commodities. In general, there is not perhaps, any one article of expense or consumption by which the liberality or narrowness of a man’s whole expense can be better judged of than by his house-rent. A proportional tax upon this particular article of expense might, perhaps, produce a more considerable revenue than any which has hitherto been drawn from it in any part of Europe. If the tax, indeed, was very high, the greater part of people would endeavour to evade it as much as they could, by contenting themselves with smaller houses, and by turning the greater part of their expense into some other channel.

House rent resembles land rent in some ways, but differs from it in one essential respect. Land rent is paid for the use of something productive. The land itself produces the rent paid for it. House rent is paid for the use of something unproductive. Neither the house nor the ground it stands on produces anything. The person paying the rent must therefore draw it from some other source of income, separate from and independent of the house. To the extent that a tax on house rent falls on the occupants, it must come from the same source as the rent itself. It must be paid from their income, whether from wages, profits on capital, or land rent. To that extent, it is a tax that falls equally on all three sources of income, not just one. In every respect, it is the same kind of tax as a tax on any other consumer good. In general, perhaps no single expense shows better than house rent how generously or sparingly a person spends overall. A proportional tax on house rent might perhaps raise more revenue than any such tax has yet raised anywhere in Europe. If the tax were very high, however, most people would try to avoid as much of it as possible. They would settle for smaller houses and spend more of their money in other ways.

The rent of houses might easily be ascertained with sufficient accuracy, by a policy of the same kind with that which would be necessary for ascertaining the ordinary rent of land. Houses not inhabited ought to pay no tax. A tax upon them would fall altogether upon the proprietor, who would thus be taxed for a subject which afforded him neither conveniency nor revenue. Houses inhabited by the proprietor ought to be rated, not according to the expense which they might have cost in building, but according to the rent which an equitable arbitration might judge them likely to bring if leased to a tenant. If rated according to the expense which they might have cost in building, a tax of three or four shillings in the pound, joined with other taxes, would ruin almost all the rich and great families of this, and, I believe, of every other civilized country. Whoever will examine with attention the different town and country houses of some of the richest and greatest families in this country, will find that, at the rate of only six and a-half, or seven per cent. upon the original expense of building, their house-rent is nearly equal to the whole neat rent of their estates. It is the accumulated expense of several successive generations, laid out upon objects of great beauty and magnificence, indeed, but, in proportion to what they cost, of very small exchangeable value. {Since the first publication of this book, a tax nearly upon the above-mentioned principles has been imposed.}

The rent of houses could easily be determined accurately enough by the same kind of method needed to determine ordinary land rents. Uninhabited houses should pay no tax. A tax on them would fall entirely on the owner. The owner would thus be taxed for property that provided neither convenience nor income. Houses occupied by their owners should be assessed according to the rent they would likely bring if leased to a tenant. An impartial judgment could determine that rent. They should not be assessed according to what they may have cost to build. If they were, a tax of three or four shillings per pound, combined with other taxes, would ruin almost all the rich and great families in this country. I believe it would do the same in every other civilized country. Anyone who carefully examines the town and country houses of some of this country’s richest and greatest families will find the following. Their house rent, calculated at only six and a half or seven percent of the original building costs, nearly equals the entire net rent from their estates. The building costs accumulated over several generations. They were spent on things of great beauty and magnificence, indeed, but of very little exchange value compared with their cost. {Since this book was first published, a tax based nearly on the principles described above has been imposed.}

Ground-rents are a still more proper subject of taxation than the rent of houses. A tax upon ground-rents would not raise the rent of houses; it would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground. More or less can be got for it, according as the competitors happen to be richer or poorer, or can afford to gratify their fancy for a particular spot of ground at a greater or smaller expense. In every country, the greatest number of rich competitors is in the capital, and it is there accordingly that the highest ground-rents are always to be found. As the wealth of those competitors would in no respect be increased by a tax upon ground-rents, they would not probably be disposed to pay more for the use of the ground. Whether the tax was to be advanced by the inhabitant or by the owner of the ground, would be of little importance. The more the inhabitant was obliged to pay for the tax, the less he would incline to pay for the ground; so that the final payment of the tax would fall altogether upon the owner of the ground-rent. The ground-rents of uninhabited houses ought to pay no tax. Both ground-rents, and the ordinary rent of land, are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expenses of the state, no discouragement will thereby be given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents, and the ordinary rent of land, are therefore, perhaps, the species of revenue which can best bear to have a peculiar tax imposed upon them.

Ground rents are an even better subject for taxation than house rents. A tax on ground rents would not raise house rents. It would fall entirely on the owner who collects the ground rent. That owner always acts as a monopolist, charging the highest rent available for the use of the land. The amount depends on whether competing tenants are richer or poorer. It also depends on how much they can afford to spend to satisfy their desire for a particular site. In every country, the capital has the largest number of rich competitors. That is why the highest ground rents are always found there. A tax on ground rents would not increase the wealth of those competitors. So they would probably not be willing to pay more for the use of the land. It would make little difference whether the occupant or the landowner paid the tax upfront. The more the occupant had to pay in tax, the less they would be willing to pay for the land. So the final burden of the tax would fall entirely on the owner who collects the ground rent. Ground rents for unoccupied houses should not be taxed. Both ground rents and ordinary land rents are forms of income that owners often enjoy without any effort or attention. Even if part of this income were taken to pay state expenses, it would not discourage any kind of industry. The annual output of society's land and labor might be the same after such a tax as before. So might the real wealth and income of the great majority of the people. Ground rents and ordinary land rents are therefore perhaps the forms of income best able to bear a special tax.

Ground-rents seem, in this respect, a more proper subject of peculiar taxation, than even the ordinary rent of land. The ordinary rent of land is, in many cases, owing partly, at least, to the attention and good management of the landlord. A very heavy tax might discourage, too much, this attention and good management. Ground-rents, so far as they exceed the ordinary rent of land, are altogether owing to the good government of the sovereign, which, by protecting the industry either of the whole people or of the inhabitants of some particular place, enables them to pay so much more than its real value for the ground which they build their houses upon; or to make to its owner so much more than compensation for the loss which he might sustain by this use of it. Nothing can be more reasonable, than that a fund, which owes its existence to the good government of the state, should be taxed peculiarly, or should contribute something more than the greater part of other funds, towards the support of that government.

In this respect, ground rent seems even more suitable for a special tax than ordinary land rent. Ordinary land rent often owes at least part of its value to the landlord’s care and good management. A very heavy tax might discourage landlords from taking such care and managing their land well. Ground rent above the level of ordinary land rent owes its entire value to the ruler’s good government. By protecting the work of the whole population or of people in a particular place, good government enables them to pay much more than the land’s real value for the ground they build their houses on. This payment more than compensates the owner for any loss caused by putting the land to that use. Nothing could be more reasonable than a special tax on a source of income that owes its existence to good government. It should contribute somewhat more than most other sources of income to the support of that government.

Though, in many different countries of Europe, taxes have been imposed upon the rent of houses, I do not know of any in which ground-rents have been considered as a separate subject of taxation. The contrivers of taxes have, probably, found some difficulty in ascertaining what part of the rent ought to be considered as ground-rent, and what part ought to be considered as building-rent. It should not, however, seem very difficult to distinguish those two parts of the rent from one another.

Although many European countries have taxed house rents, I know of none that have taxed ground rents separately. Those who devise taxes have probably found it difficult to determine how much of the rent is ground rent and how much is building rent. But it should not be very difficult to distinguish between the two.

In Great Britain the rent of houses is supposed to be taxed in the same proportion as the rent of land, by what is called the annual land tax. The valuation, according to which each different parish and district is assessed to this tax, is always the same. It was originally extremely unequal, and it still continues to be so. Through the greater part of the kingdom this tax falls still more lightly upon the rent of houses than upon that of land. In some few districts only, which were originally rated high, and in which the rents of houses have fallen considerably, the land tax of three or four shillings in the pound is said to amount to an equal proportion of the real rent of houses. Untenanted houses, though by law subject to the tax, are, in most districts, exempted from it by the favour of the assessors; and this exemption sometimes occasions some little variation in the rate of particular houses, though that of the district is always the same. Improvements of rent, by new buildings, repairs, etc. go to the discharge of the district, which occasions still further variations in the rate of particular houses.

In Great Britain, house rents are supposed to be taxed at the same rate as land rents under the annual land tax. The valuation used to assess each parish and district for this tax never changes. It was extremely unequal from the start, and it remains so. In most of the kingdom, the tax still falls more lightly on house rents than on land rents. Only a few districts were originally assessed at a high rate and have seen house rents fall considerably. In those districts, the land tax of three or four shillings in the pound is said to equal that proportion of the actual rent of houses. Although vacant houses are legally subject to the tax, assessors in most districts allow them to be exempt. This exemption sometimes causes small variations in the tax rate on individual houses, although the district’s rate remains the same. Increases in rent from new buildings, repairs, and the like help pay the district’s tax. This causes further variations in the rate on individual houses.

In the province of Holland, {Memoires concernant les Droits, etc. p. 223.} every house is taxed at two and a-half per cent. of its value, without any regard, either to the rent which it actually pays, or to the circumstance of its being tenanted or untenanted. There seems to be a hardship in obliging the proprietor to pay a tax for an untenanted house, from which he can derive no revenue, especially so very heavy a tax. In Holland, where the market rate of interest does not exceed three per cent., two and a-half per cent. upon the whole value of the house must, in most cases, amount to more than a third of the building-rent, perhaps of the whole rent. The valuation, indeed, according to which the houses are rated, though very unequal, is said to be always below the real value. When a house is rebuilt, improved, or enlarged, there is a new valuation, and the tax is rated accordingly.

In the province of Holland, {Memoires concernant les Droits, etc. p. 223.} every house is taxed at two and a half percent of its value. The tax applies regardless of the rent actually paid or whether the house is occupied. It seems unfair to make an owner pay tax on an empty house that produces no income, especially such a heavy tax. In Holland, the market interest rate does not exceed three percent. A tax of two and a half percent on a house’s full value must therefore usually amount to more than a third of the building rent, and perhaps of the entire rent. The valuations used to assess houses are said to be very unequal, but always below their actual value. When a house is rebuilt, improved, or enlarged, it is valued again, and the tax is adjusted accordingly.

The contrivers of the several taxes which in England have, at different times, been imposed upon houses, seem to have imagined that there was some great difficulty in ascertaining, with tolerable exactness, what was the real rent of every house. They have regulated their taxes, therefore, according to some more obvious circumstance, such as they had probably imagined would, in most cases, bear some proportion to the rent.

The designers of the various taxes imposed on houses in England over the years seem to have thought it very difficult to determine each house’s actual rent with reasonable accuracy. They therefore based the taxes on more obvious features. They probably thought these features would, in most cases, bear some proportion to the rent.

The first tax of this kind was hearth-money; or a tax of two shillings upon every hearth. In order to ascertain how many hearths were in the house, it was necessary that the tax-gatherer should enter every room in it. This odious visit rendered the tax odious. Soon after the Revolution, therefore, it was abolished as a badge of slavery.

The first tax of this kind was hearth-money, a tax of two shillings on every hearth. To count the hearths in a house, the tax collector had to enter every room. People hated these visits, and so they hated the tax. Soon after the Revolution, the tax was therefore abolished as a badge of slavery.

The next tax of this kind was a tax of two shillings upon every dwelling-house inhabited. A house with ten windows to pay four shillings more. A house with twenty windows and upwards to pay eight shillings. This tax was afterwards so far altered, that houses with twenty windows, and with less than thirty, were ordered to pay ten shillings, and those with thirty windows and upwards to pay twenty shillings. The number of windows can, in most cases, be counted from the outside, and, in all cases, without entering every room in the house. The visit of the tax-gatherer, therefore, was less offensive in this tax than in the hearth-money.

The next tax of this kind was two shillings on every occupied house. A house with ten windows had to pay four shillings more. A house with twenty or more windows had to pay eight shillings. The tax was later changed. Houses with at least twenty but fewer than thirty windows had to pay ten shillings. Those with thirty or more windows had to pay twenty shillings. In most cases, the windows can be counted from outside. In every case, they can be counted without entering every room in the house. A visit from the tax collector was therefore less intrusive under this tax than under the hearth tax.

This tax was afterwards repealed, and in the room of it was established the window-tax, which has undergone two several alterations and augmentations. The window tax, as it stands at present (January 1775), over and above the duty of three shillings upon every house in England, and of one shilling upon every house in Scotland, lays a duty upon every window, which in England augments gradually from twopence, the lowest rate upon houses with not more than seven windows, to two shillings, the highest rate upon houses with twenty-five windows and upwards.

This tax was later repealed and replaced by the window tax. The window tax has since been changed and increased twice. As of January 1775, it charges three shillings for every house in England and one shilling for every house in Scotland. It also charges a tax on every window. In England, the rate rises gradually from twopence per window for houses with no more than seven windows to two shillings per window for houses with twenty-five windows or more.

The principal objection to all such taxes is their inequality; an inequality of the worst kind, as they must frequently fall much heavier upon the poor than upon the rich. A house of ten pounds rent in a country town, may sometimes have more windows than a house of five hundred pounds rent in London; and though the inhabitant of the former is likely to be a much poorer man than that of the latter, yet, so far as his contribution is regulated by the window tax, he must contribute more to the support of the state. Such taxes are, therefore, directly contrary to the first of the four maxims above mentioned. They do not seem to offend much against any of the other three.

The main objection to all such taxes is that they are unequal. This inequality is of the worst kind, because these taxes must often fall much more heavily on the poor than on the rich. A house in a country town that rents for ten pounds may sometimes have more windows than a London house that rents for five hundred pounds. The person living in the country house is likely to be much poorer than the person living in the London house. Yet under the window tax, the poorer person must contribute more to the support of the state. Such taxes therefore directly contradict the first of the four principles mentioned above. They do not seem to conflict much with any of the other three.

The natural tendency of the window tax, and of all other taxes upon houses, is to lower rents. The more a man pays for the tax, the less, it is evident, he can afford to pay for the rent. Since the imposition of the window tax, however, the rents of houses have, upon the whole, risen more or less, in almost every town and village of Great Britain, with which I am acquainted. Such has been, almost everywhere, the increase of the demand for houses, that it has raised the rents more than the window tax could sink them; one of the many proofs of the great prosperity of the country, and of the increasing revenue of its inhabitants. Had it not been for the tax, rents would probably have risen still higher.

The window tax, like all other taxes on houses, naturally tends to lower rents. The more a person pays in tax, the less they can afford to pay in rent. Since the window tax was introduced, however, rents have generally risen to some degree in almost every town and village in Great Britain that I know. Almost everywhere, demand for houses has increased enough to raise rents more than the window tax could lower them. This is one of many signs of the country’s great prosperity and its inhabitants’ rising incomes. Without the tax, rents would probably have risen even higher.

ARTICLE II.—Taxes upon Profit, or upon the Revenue arising from Stock.

ARTICLE II. Taxes on Profit, or Income from Capital.

The revenue or profit arising from stock naturally divides itself into two parts; that which pays the interest, and which belongs to the owner of the stock; and that surplus part which is over and above what is necessary for paying the interest.

The income or profit from capital naturally divides into two parts. One part pays the interest and belongs to the owner of the capital. The other is the surplus beyond what is needed to pay the interest.

This latter part of profit is evidently a subject not taxable directly. It is the compensation, and, in most cases, it is no more than a very moderate compensation for the risk and trouble of employing the stock. The employer must have this compensation, otherwise he cannot, consistently with his own interest, continue the employment. If he was taxed directly, therefore, in proportion to the whole profit, he would be obliged either to raise the rate of his profit, or to charge the tax upon the interest of money; that is, to pay less interest. If he raised the rate of his profit in proportion to the tax, the whole tax, though it might be advanced by him, would be finally paid by one or other of two different sets of people, according to the different ways in which he might employ the stock of which he had the management. If he employed it as a farming stock, in the cultivation of land, he could raise the rate of his profit only by retaining a greater portion, or, what comes to the same thing, the price of a greater portion, of the produce of the land; and as this could be done only by a reduction of rent, the final payment of the tax would fall upon the landlord. If he employed it as a mercantile or manufacturing stock, he could raise the rate of his profit only by raising the price of his goods; in which case, the final payment of the tax would fall altogether upon the consumers of those goods. If he did not raise the rate of his profit, he would be obliged to charge the whole tax upon that part of it which was allotted for the interest of money. He could afford less interest for whatever stock he borrowed, and the whole weight of the tax would, in this case, fall ultimately upon the interest of money. So far as he could not relieve himself from the tax in the one way, he would be obliged to relieve himself in the other.

This latter part of profit is clearly not something that can be taxed directly. It compensates the person employing the capital for the risk and trouble involved. In most cases, it is no more than very modest compensation. The employer must receive this compensation. Otherwise, he cannot continue employing the capital without acting against his own interest. If he were taxed directly on his whole profit, he would have two choices. He would have to raise his rate of profit or charge the tax against the interest on money, by paying less interest. If he raised his rate of profit in proportion to the tax, he might pay the tax upfront. But one of two different groups would ultimately pay it. Which group paid would depend on how he employed the capital under his management. If he used it as farming capital to cultivate land, he could raise his profit rate only by keeping more of the land’s produce, or the price of a greater share of it. He could do this only by reducing the rent he paid. So the landlord would ultimately pay the tax. If he used the capital for trade or manufacturing, he could raise his profit rate only by raising the price of his goods. In that case, the consumers of those goods would ultimately pay the entire tax. If he did not raise his rate of profit, he would have to charge the whole tax against the part of his profit set aside for interest on money. He could afford to pay less interest on any capital he borrowed. In this case, the whole burden of the tax would ultimately fall on the interest on money. To the extent that he could not relieve himself of the tax in one way, he would have to do so in the other.

The interest of money seems, at first sight, a subject equally capable of being taxed directly as the rent of land. Like the rent of land, it is a neat produce, which remains, after completely compensating the whole risk and trouble of employing the stock. As a tax upon the rent of land cannot raise rents, because the neat produce which remains, after replacing the stock of the farmer, together with his reasonable profit, cannot be greater after the tax than before it, so, for the same reason, a tax upon the interest of money could not raise the rate of interest; the quantity of stock or money in the country, like the quantity of land, being supposed to remain the same after the tax as before it. The ordinary rate of profit, it has been shewn, in the first book, is everywhere regulated by the quantity of stock to be employed, in proportion to the quantity of the employment, or of the business which must be done by it. But the quantity of the employment, or of the business to be done by stock, could neither be increased nor diminished by any tax upon the interest of money. If the quantity of the stock to be employed, therefore, was neither increased nor diminished by it, the ordinary rate of profit would necessarily remain the same. But the portion of this profit, necessary for compensating the risk and trouble of the employer, would likewise remain the same; that risk and trouble being in no respect altered. The residue, therefore, that portion which belongs to the owner of the stock, and which pays the interest of money, would necessarily remain the same too. At first sight, therefore, the interest of money seems to be a subject as fit to be taxed directly as the rent of land.

At first sight, interest on money seems just as suitable for direct taxation as rent from land. Like land rent, interest is a net return. It remains after the risk and trouble of employing capital have been fully compensated. A tax on land rent cannot raise rents. The net return left after replacing the farmer’s capital and providing a reasonable profit cannot be greater after the tax than before it. For the same reason, a tax on interest could not raise the interest rate. This assumes that the country’s supply of capital or money remains the same after the tax, just as its supply of land does. As shown in the first book, the ordinary rate of profit is determined everywhere by the amount of capital available for use. It depends on how much capital is available in proportion to the amount of business it must carry out. But a tax on interest could neither increase nor decrease the amount of business to be done with capital. If the amount of capital available also remained unchanged, the ordinary rate of profit would necessarily remain the same. But the share of that profit needed to compensate the person using the capital for risk and trouble would also remain the same. The risk and trouble would not have changed in any way. The rest of the profit would therefore necessarily remain the same too. This is the share that belongs to the owner of the capital and pays the interest on money. At first sight, then, interest on money seems just as suitable for direct taxation as rent from land.

There are, however, two different circumstances, which render the interest of money a much less proper subject of direct taxation than the rent of land.

However, two circumstances make interest on money much less suitable for direct taxation than rent from land.

First, the quantity and value of the land which any man possesses, can never be a secret, and can always be ascertained with great exactness. But the whole amount of the capital stock which he possesses is almost always a secret, and can scarce ever be ascertained with tolerable exactness. It is liable, besides, to almost continual variations. A year seldom passes away, frequently not a month, sometimes scarce a single day, in which it does not rise or fall more or less. An inquisition into every man’s private circumstances, and an inquisition which, in order to accommodate the tax to them, watched over all the fluctuations of his fortune, would be a source of such continual and endless vexation as no person could support.

First, the amount and value of the land a man owns can never be secret. Both can always be determined very precisely. But the total capital he owns is almost always secret and can hardly ever be determined with reasonable precision. It also changes almost constantly. It seldom goes a year without rising or falling, often not a month, and sometimes hardly a day. An investigation into every man’s private affairs would cause continual and endless trouble. To adjust the tax to his circumstances, it would have to track every change in his fortune. No one could bear such an investigation.

Secondly, land is a subject which cannot be removed; whereas stock easily may. The proprietor of land is necessarily a citizen of the particular country in which his estate lies. The proprietor of stock is properly a citizen of the world, and is not necessarily attached to any particular country. He would be apt to abandon the country in which he was exposed to a vexatious inquisition, in order to be assessed to a burdensome tax; and would remove his stock to some other country, where he could either carry on his business, or enjoy his fortune more at his ease. By removing his stock, he would put an end to all the industry which it had maintained in the country which he left. Stock cultivates land; stock employs labour. A tax which tended to drive away stock from any particular country, would so far tend to dry up every source of revenue, both to the sovereign and to the society. Not only the profits of stock, but the rent of land, and the wages of labour, would necessarily be more or less diminished by its removal.

Second, land cannot be moved, but capital can easily be moved. A landowner is necessarily a citizen of the country where his land lies. The owner of capital is, properly speaking, a citizen of the world. He is not necessarily tied to any particular country. He would be likely to leave a country where he faced intrusive questioning so that he could be assessed for a burdensome tax. He would move his capital to another country, where he could conduct his business or enjoy his wealth more comfortably. By moving his capital, he would put an end to all the economic activity it had supported in the country he left. Capital cultivates land. Capital employs workers. A tax that tended to drive capital out of a country would, to that extent, tend to dry up every source of revenue for both the government and society. The loss of capital would necessarily reduce not only profits, but also land rents and wages, to a greater or lesser extent.

The nations, accordingly, who have attempted to tax the revenue arising from stock, instead of any severe inquisition of this kind, have been obliged to content themselves with some very loose, and, therefore, more or less arbitrary estimation. The extreme inequality and uncertainty of a tax assessed in this manner, can be compensated only by its extreme moderation; in consequence of which, every man finds himself rated so very much below his real revenue, that he gives himself little disturbance though his neighbour should be rated somewhat lower.

Accordingly, nations that have tried to tax income from capital have had to rely on very rough estimates. They have used these estimates instead of conducting such a rigorous investigation. The estimates are therefore more or less arbitrary. A tax assessed this way is extremely unequal and uncertain. Only an extremely low rate can compensate for these faults. As a result, every man finds that his tax is based on far less than his actual income. He is therefore little troubled if his neighbour is assessed somewhat lower.

By what is called the land tax in England, it was intended that the stock should be taxed in the same proportion as land. When the tax upon land was at four shillings in the pound, or at one-fifth of the supposed rent, it was intended that stock should be taxed at one-fifth of the supposed interest. When the present annual land tax was first imposed, the legal rate of interest was six per cent. Every hundred pounds stock, accordingly, was supposed to be taxed at twenty-four shillings, the fifth part of six pounds. Since the legal rate of interest has been reduced to five per cent. every hundred pounds stock is supposed to be taxed at twenty shillings only. The sum to be raised, by what is called the land tax, was divided between the country and the principal towns. The greater part of it was laid upon the country; and of what was laid upon the towns, the greater part was assessed upon the houses. What remained to be assessed upon the stock or trade of the towns (for the stock upon the land was not meant to be taxed) was very much below the real value of that stock or trade. Whatever inequalities, therefore, there might be in the original assessment, gave little disturbance. Every parish and district still continues to be rated for its land, its houses, and its stock, according to the original assessment; and the almost universal prosperity of the country, which, in most places, has raised very much the value of all these, has rendered those inequalities of still less importance now. The rate, too, upon each district, continuing always the same, the uncertainty of this tax, so far as it might he assessed upon the stock of any individual, has been very much diminished, as well as rendered of much less consequence. If the greater part of the lands of England are not rated to the land tax at half their actual value, the greater part of the stock of England is, perhaps, scarce rated at the fiftieth part of its actual value. In some towns, the whole land tax is assessed upon houses; as in Westminster, where stock and trade are free. It is otherwise in London.

England’s land tax was intended to tax stock at the same proportion as land. The land tax was four shillings per pound, or one fifth of the estimated rent. Stock was meant to be taxed at one fifth of its estimated interest. When the current annual land tax was first imposed, the legal interest rate was six percent. Every £100 of stock was therefore supposed to be taxed at 24 shillings, one fifth of £6. Since the legal interest rate was reduced to five percent, every £100 of stock is supposed to be taxed at only 20 shillings. The sum raised by the land tax was divided between the countryside and the principal towns. Most of it was charged to the countryside. Of the amount charged to the towns, most was assessed on houses. The remainder was to be assessed on the stock or trade of the towns. Stock on the land was not meant to be taxed. The amount assessed on the towns’ stock or trade was far below its real value. Any inequalities in the original assessment therefore caused little disturbance. Each parish and district is still assessed for its land, houses, and stock according to the original assessment. The country’s almost universal prosperity has greatly increased the value of all three in most places. This has made the inequalities even less important now. The amount charged to each district also remains the same. This has greatly reduced the uncertainty of how much of the tax might be assessed on any individual’s stock. It has also made that uncertainty much less consequential. If most of England’s land is assessed for the land tax at less than half its actual value, most of England’s stock is perhaps assessed at hardly one fiftieth of its actual value. In some towns, the whole land tax is assessed on houses. This is the case in Westminster, where stock and trade are exempt. It is otherwise in London.

In all countries, a severe inquisition into the circumstances of private persons has been carefully avoided.

In all countries, people have carefully avoided closely investigating the private affairs of individuals.

At Hamburg, {Memoires concernant les Droits, tom. i, p.74} every inhabitant is obliged to pay to the state one fourth per cent. of all that he possesses; and as the wealth of the people of Hamburg consists principally in stock, this tax maybe considered as a tax upon stock. Every man assesses himself, and, in the presence of the magistrate, puts annually into the public coffer a certain sum of money, which he declares upon oath, to be one fourth per cent. of all that he possesses, but without declaring what it amounts to, or being liable to any examination upon that subject. This tax is generally supposed to be paid with great fidelity. In a small republic, where the people have entire confidence in their magistrates, are convinced of the necessity of the tax for the support of the state, and believe that it will be faithfully applied to that purpose, such conscientious and voluntary payment may sometimes be expected. It is not peculiar to the people of Hamburg.

In Hamburg, {Memoires concernant les Droits, tom. i, p.74} every resident must pay the state one quarter of one percent of everything they own. The wealth of Hamburg’s people consists mainly of stock, so this tax may be considered a tax on stock. Each person assesses their own wealth and, once a year, puts a sum of money into the public treasury in the presence of a magistrate. They declare under oath that the sum is one quarter of one percent of everything they own. But they do not have to declare the total value of their possessions or answer any questions about it. The tax is generally believed to be paid very honestly. In a small republic, people may sometimes be expected to pay so conscientiously and voluntarily. They must have complete confidence in their magistrates, be convinced that the tax is necessary to support the state, and believe that it will be faithfully used for that purpose. This behavior is not unique to the people of Hamburg.

The canton of Underwald, in Switzerland, is frequently ravaged by storms and inundations, and it is thereby exposed to extraordinary expenses. Upon such occasions the people assemble, and every one is said to declare with the greatest frankness what he is worth, in order to be taxed accordingly. At Zurich, the law orders, that in cases of necessity, every one should be taxed in proportion to his revenue; the amount of which he is obliged to declare upon oath. They have no suspicion, it is said, that any of their fellow citizens will deceive them. At Basil, the principal revenue of the state arises from a small custom upon goods exported. All the citizens make oath, that they will pay every three months all the taxes imposed by law. All merchants, and even all inn-keepers, are trusted with keeping themselves the account of the goods which they sell, either within or without the territory. At the end of every three months, they send this account to the treasurer, with the amount of the tax computed at the bottom of it. It is not suspected that the revenue suffers by this confidence. {Memoires concernant les Droits, tom. i p. 163, 167,171.}

The canton of Underwald, in Switzerland, is often ravaged by storms and floods, which cause extraordinary expenses. On such occasions, the people assemble. Everyone is said to declare quite frankly what they are worth, so they can be taxed accordingly. At Zurich, the law requires everyone to be taxed according to their income in cases of necessity. Each person must declare that income under oath. It is said that they have no suspicion that any of their fellow citizens will deceive them. At Basil, the state's main revenue comes from a small duty on exported goods. All citizens swear to pay all taxes imposed by law every three months. All merchants, and even all innkeepers, are trusted to keep their own accounts of goods they sell, whether within or outside the territory. At the end of every three months, they send these accounts to the treasurer, with the tax calculated at the bottom. No one suspects that this trust reduces the revenue. {Memoires concernant les Droits, tom. i p. 163, 167,171.}

To oblige every citizen to declare publicly upon oath, the amount of his fortune, must not, it seems, in those Swiss cantons, be reckoned a hardship. At Hamburg it would be reckoned the greatest. Merchants engaged in the hazardous projects of trade, all tremble at the thoughts of being obliged, at all times, to expose the real state of their circumstances. The ruin of their credit, and the miscarriage of their projects, they foresee, would too often be the consequence. A sober and parsimonious people, who are strangers to all such projects, do not feel that they have occasion for any such concealment.

In those Swiss cantons, it seems, requiring every citizen to declare their wealth publicly under oath is not considered a hardship. In Hamburg, it would be considered the greatest hardship. Merchants involved in risky trading ventures all tremble at the thought of having to reveal their true financial situation at all times. They foresee that this would too often ruin their credit and cause their ventures to fail. A sober and thrifty people, unfamiliar with such ventures, do not feel any need for such secrecy.

In Holland, soon after the exaltation of the late prince of Orange to the stadtholdership, a tax of two per cent. or the fiftieth penny, as it was called, was imposed upon the whole substance of every citizen. Every citizen assesed himself, and paid his tax, in the same manner as at Hamburg, and it was in general supposed to have been paid with great fidelity. The people had at that time the greatest affection for their new government, which they had just established by a general insurrection. The tax was to be paid but once, in order to relieve the state in a particular exigency. It was, indeed, too heavy to be permanent. In a country where the market rate of interest seldom exceeds three per cent., a tax of two per cent. amounts to thirteen shillings and four pence in the pound, upon the highest neat revenue which is commonly drawn from stock. It is a tax which very few people could pay, without encroaching more or less upon their capitals. In a particular exigency, the people may, from great public zeal, make a great effort, and give up even a part of their capital, in order to relieve the state. But it is impossible that they should continue to do so for any considerable time; and if they did, the tax would soon ruin them so completely, as to render them altogether incapable of supporting the state.

In Holland, soon after the late prince of Orange became stadtholder, a tax was imposed on every citizen’s entire wealth. It was two percent, or the fiftieth penny, as it was called. As in Hamburg, each citizen assessed and paid the tax himself. The tax was generally believed to have been paid with great honesty. At the time, the people had great affection for their new government, which they had just established through a general uprising. The tax was to be paid only once, to help the state meet a particular emergency. Indeed, it was too heavy to be permanent. In a country where the market interest rate rarely exceeds three percent, a two percent tax is substantial. It amounts to thirteen shillings and four pence in the pound on the highest net income commonly earned from capital. Very few people could pay such a tax without drawing to some extent on their capital. In an emergency, people may be so devoted to the public good that they make a great effort to help the state. They may even give up part of their capital. But they cannot continue to do so for any considerable time. If they did, the tax would soon ruin them so completely that they would be unable to support the state at all.

The tax upon stock, imposed by the land tax bill in England, though it is proportioned to the capital, is not intended to diminish or, take away any part of that capital. It is meant only to be a tax upon the interest of money, proportioned to that upon the rent of land; so that when the latter is at four shillings in the pound, the former may be at four shillings in the pound too. The tax at Hamburg, and the still more moderate taxes of Underwald and Zurich, are meant, in the same manner, to be taxes, not upon the capital, but upon the interest or neat revenue of stock. That of Holland was meant to be a tax upon the capital.

England’s land tax bill imposes a tax on stock based on its capital value. But the tax is not intended to reduce or take away any of that capital. It is meant only to tax interest on money at a rate proportional to the tax on land rent. So when the tax on land rent is four shillings in the pound, the tax on interest may be four shillings in the pound too. The tax at Hamburg works the same way, as do the even lower taxes at Underwald and Zurich. They are meant to tax the interest or net income from stock, not the capital itself. The tax in Holland, however, was meant to tax the capital.

Taxes upon the Profit of particular Employments.

Taxes on the Profits of Particular Occupations.

In some countries, extraordinary taxes are imposed upon the profits of stock; sometimes when employed in particular branches of trade, and sometimes when employed in agriculture.

In some countries, special taxes are imposed on profits from capital. Sometimes these taxes apply to capital used in particular trades, and sometimes to capital used in agriculture.

Of the former kind, are in England, the tax upon hawkers and pedlars, that upon hackney-coaches and chairs, and that which the keepers of ale-houses pay for a licence to retail ale and spiritous liquors. During the late war, another tax of the same kind was proposed upon shops. The war having been undertaken, it was said, in defence of the trade of the country, the merchants, who were to profit by it, ought to contribute towards the support of it.

In England, taxes of the former kind include those on hawkers and peddlers, hackney coaches and sedan chairs. They also include the license fees paid by alehouse keepers to sell ale and spirits. During the recent war, another tax of the same kind was proposed on shops. It was said that the war had been undertaken to defend the country’s trade. The merchants who would profit from the war should therefore contribute to its support.

A tax, however, upon the profits of stock employed in any particular branch of trade, can never fall finally upon the dealers (who must in all ordinary cases have their reasonable profit, and, where the competition is free, can seldom have more than that profit), but always upon the consumers, who must be obliged to pay in the price of the goods the tax which the dealer advances; and generally with some overcharge.

A tax on profits from capital invested in any particular trade, however, can never ultimately fall on the dealers. In all ordinary cases, dealers must earn a reasonable profit. Where competition is free, they can seldom earn more than that. Instead, the tax always falls on consumers. They must pay it through the price of goods, after the dealer has paid it upfront. They generally pay some extra amount as well.

A tax of this kind, when it is proportioned to the trade of the dealer, is finally paid by the consumer, and occasions no oppression to the dealer. When it is not so proportioned, but is the same upon all dealers, though in this case, too, it is finally paid by the consumer, yet it favours the great, and occasions some oppression to the small dealer. The tax of five shillings a-week upon every hackney coach, and that of ten shillings a-year upon every hackney chair, so far as it is advanced by the different keepers of such coaches and chairs, is exactly enough proportioned to the extent of their respective dealings. It neither favours the great, nor oppresses the smaller dealer. The tax of twenty shillings a-year for a licence to sell ale; of forty shillings for a licence to sell spiritous liquors; and of forty shillings more for a licence to sell wine, being the same upon all retailers, must necessarily give some advantage to the great, and occasion some oppression to the small dealers. The former must find it more easy to get back the tax in the price of their goods than the latter. The moderation of the tax, however, renders this inequality of less importance; and it may to many people appear not improper to give some discouragement to the multiplication of little ale-houses. The tax upon shops, it was intended, should be the same upon all shops. It could not well have been otherwise. It would have been impossible to proportion, with tolerable exactness, the tax upon a shop to the extent of the trade carried on in it, without such an inquisition as would have been altogether insupportable in a free country. If the tax had been considerable, it would have oppressed the small, and forced almost the whole retail trade into the hands of the great dealers. The competition of the former being taken away, the latter would have enjoyed a monopoly of the trade; and, like all other monopolists, would soon have combined to raise their profits much beyond what was necessary for the payment of the tax. The final payment, instead of falling upon the shop-keeper, would have fallen upon the consumer, with a considerable overcharge to the profit of the shop-keeper. For these reasons, the project of a tax upon shops was laid aside, and in the room of it was substituted the subsidy, 1759.

A tax of this kind is ultimately paid by the consumer when it is proportional to the dealer’s trade. It causes the dealer no hardship. When the tax is the same for all dealers, it is still ultimately paid by the consumer. But it favors large dealers and causes some hardship to small ones. There is a tax of five shillings a week on each hackney coach and ten shillings a year on each hackney chair. Insofar as the owners pay these taxes upfront, they are proportional enough to the size of their respective businesses. The taxes neither favor large dealers nor burden smaller ones. A license to sell ale is taxed at twenty shillings a year. A license to sell spirits is taxed at forty shillings, and a license to sell wine at another forty shillings. These taxes are the same for all retailers. They must therefore give some advantage to large dealers and cause some hardship to small ones. Large dealers must find it easier than small dealers to recover the tax through the prices of their goods. The taxes are moderate, however, which makes this inequality less important. Many people may also think it proper to discourage the spread of small alehouses. The proposed tax on shops was intended to be the same for every shop. It could hardly have been otherwise. It would have been impossible to match the tax even reasonably closely to the trade done in each shop. Doing so would have required an investigation that would have been completely intolerable in a free country. If the tax had been substantial, it would have burdened small dealers and forced almost all retail trade into the hands of large ones. Without competition from small dealers, the large dealers would have enjoyed a monopoly of the trade. Like all other monopolists, they would soon have joined together to raise their profits far beyond what was needed to pay the tax. The tax would ultimately have fallen on the consumer rather than the shopkeeper. The consumer would also have paid considerably more, to the shopkeeper’s profit. For these reasons, the proposed tax on shops was abandoned, and the subsidy of 1759 was introduced in its place.

What in France is called the personal taille, is perhaps, the most important tax upon the profits of stock employed in agriculture, that is levied in any part of Europe.

In France, the personal taille is a tax on profits from capital invested in agriculture. It is perhaps the most important tax of its kind in Europe.

In the disorderly state of Europe, during the prevalence of the feudal government, the sovereign was obliged to content himself with taxing those who were too weak to refuse to pay taxes. The great lords, though willing to assist him upon particular emergencies, refused to subject themselves to any constant tax, and he was not strong enough to force them. The occupiers of land all over Europe were, the greater part of them, originally bond-men. Through the greater part of Europe, they were gradually emancipated. Some of them acquired the property of landed estates, which they held by some base or ignoble tenure, sometimes under the king, and sometimes under some other great lord, like the ancient copy-holders of England. Others, without acquiring the property, obtained leases for terms of years, of the lands which they occupied under their lord, and thus became less dependent upon him. The great lords seem to have beheld the degree of prosperity and independency, which this inferior order of men had thus come to enjoy, with a malignant and contemptuous indignation, and willingly consented that the sovereign should tax them. In some countries, this tax was confined to the lands which were held in property by an ignoble tenure; and, in this case, the taille was said to be real. The land tax established by the late king of Sardinia, and the taille in the provinces of Languedoc, Provence, Dauphine, and Britanny; in the generality of Montauban, and in the elections of Agen and Condom, as well as in some other districts of France; are taxes upon lands held in property by an ignoble tenure. In other countries, the tax was laid upon the supposed profits of all those who held, in farm or lease, lands belonging to other people, whatever might be the tenure by which the proprietor held them; and in this case, the taille was said to be personal. In the greater part of those provinces of France, which are called the countries of elections, the taille is of this kind. The real taille, as it is imposed only upon a part of the lands of the country, is necessarily an unequal, but it is not always an arbitrary tax, though it is so upon some occasions. The personal taille, as it is intended to be proportioned to the profits of a certain class of people, which can only be guessed at, is necessarily both arbitrary and unequal.

During the disorderly period of feudal government in Europe, the sovereign had to settle for taxing those too weak to refuse payment. The great lords were willing to help him in particular emergencies, but they refused to pay any regular tax. And he was not strong enough to force them. Across Europe, most people who occupied land had originally been bond-men. In most of Europe, they were gradually freed. Some acquired ownership of landed estates, which they held under a low or non-noble form of tenure. They held their land sometimes from the king and sometimes from another great lord, like the ancient copyholders of England. Others did not acquire ownership, but obtained leases for a fixed number of years on the lands they occupied under their lord. This made them less dependent on him. The great lords seem to have viewed the prosperity and independence these people of lower rank had gained with spiteful and contemptuous indignation. They willingly agreed to let the sovereign tax them. In some countries, this tax applied only to lands owned under a non-noble form of tenure. In these cases, the taille was called real. The land tax established by the late king of Sardinia was a tax on lands held in this way. So was the taille in the provinces of Languedoc, Provence, Dauphine, and Britanny, in the generality of Montauban, in the elections of Agen and Condom, and in some other districts of France. In other countries, the tax was imposed on the supposed profits of all who farmed or leased land belonging to others. It applied regardless of the form of tenure under which the owner held the land. In these cases, the taille was called personal. In most of the French provinces called the countries of elections, the taille is personal. The real taille is necessarily unequal because it is imposed on only some of the country's lands. But it is not always arbitrary, though it is on some occasions. The personal taille is intended to be proportional to the profits of a certain class of people. Since those profits can only be guessed at, the tax is necessarily both arbitrary and unequal.

In France, the personal taille at present (1775) annually imposed upon the twenty generalities, called the countries of elections, amounts to 40,107,239 livres, 16 sous. {Memoires concernant les Droits, etc tom. ii, p.17.} the proportion in which this sum is assessed upon those different provinces, varies from year to year, according to the reports which are made to the king’s council concerning the goodness or badness of the crops, as well as other circumstances, which may either increase or diminish their respective abilities to pay. Each generality is divided into a certain number of elections; and the proportion in which the sum imposed upon the whole generality is divided among those different elections, varies likewise from year to year, according to the reports made to the council concerning their respective abilities. It seems impossible, that the council, with the best intentions, can ever proportion, with tolerable exactness, either of these two assessments to the real abilities of the province or district upon which they are respectively laid. Ignorance and misinformation must always, more or less, mislead the most upright council. The proportion which each parish ought to support of what is assessed upon the whole election, and that which each individual ought to support of what is assessed upon his particular parish, are both in the same manner varied from year to year, according as circumstances are supposed to require. These circumstances are judged of, in the one case, by the officers of the election, in the other, by those of the parish; and both the one and the other are, more or less, under the direction and influence of the intendant. Not only ignorance and misinformation, but friendship, party animosity, and private resentment, are said frequently to mislead such assessors. No man subject to such a tax, it is evident, can ever be certain, before he is assessed, of what he is to pay. He cannot even be certain after he is assessed. If any person has been taxed who ought to have been exempted, or if any person has been taxed beyond his proportion, though both must pay in the mean time, yet if they complain, and make good their complaints, the whole parish is reimposed next year, in order to reimburse them. If any of the contributors become bankrupt or insolvent, the collector is obliged to advance his tax; and the whole parish is reimposed next year, in order to reimburse the collector. If the collector himself should become bankrupt, the parish which elects him must answer for his conduct to the receiver-general of the election. But, as it might be troublesome for the receiver to prosecute the whole parish, he takes at his choice five or six of the richest contributors, and obliges them to make good what had been lost by the insolvency of the collector. The parish is afterwards reimposed, in order to reimburse those five or six. Such reimpositions are always over and above the taille of the particular year in which they are laid on.

In France, the personal taille imposed each year on the twenty generalities called the countries of elections currently amounts to 40,107,239 livres and 16 sous (1775). {Memoires concernant les Droits, etc tom. ii, p.17.} Each province’s share of this sum varies from year to year. It depends on reports to the king’s council about good or bad harvests and other circumstances affecting each province’s ability to pay. Each generality is divided into a number of elections. The share imposed on each election likewise varies from year to year. It depends on reports to the council about each election’s ability to pay. Even with the best intentions, the council seems unable to make either assessment reasonably match the actual ability of each province or district to pay. Ignorance and misinformation must always mislead even the most upright council to some degree. The share that each parish must bear of its election’s assessment also varies from year to year. So does each individual’s share of the parish’s assessment. Both vary according to what circumstances are thought to require. Officers of the election judge these circumstances for the parishes. Officers of the parish judge them for individuals. Both groups are under the intendant’s direction and influence to some degree. These assessors are said to be frequently misled not only by ignorance and misinformation, but also by friendship, hostility between parties, and personal resentment. Clearly, no one subject to such a tax can know what he must pay before he is assessed. He cannot even be certain afterward. Someone may have been taxed who should have been exempt, or someone may have been taxed more than his share. Both must pay in the meantime. But if they complain and prove their complaints justified, the whole parish is taxed again the next year to reimburse them. If any of the taxpayers becomes bankrupt or insolvent, the collector must advance his tax payment. The whole parish is then taxed again the next year to reimburse the collector. If the collector himself becomes bankrupt, the parish that elects him must answer for his conduct to the receiver-general of the election. But prosecuting the whole parish might be troublesome for the receiver. So he chooses five or six of the richest taxpayers and makes them cover the loss caused by the collector’s insolvency. The parish is afterward taxed again to reimburse those five or six. Such additional taxes are always imposed on top of the taille for the year in which they are levied.

When a tax is imposed upon the profits of stock in a particular branch of trade, the traders are all careful to bring no more goods to market than what they can sell at a price sufficient to reimburse them from advancing the tax. Some of them withdraw a part of their stocks from the trade, and the market is more sparingly supplied than before. The price of the goods rises, and the final payment of the tax falls upon the consumer. But when a tax is imposed upon the profits of stock employed in agriculture, it is not the interest of the farmers to withdraw any part of their stock from that employment. Each farmer occupies a certain quantity of land, for which he pays rent. For the proper cultivation of this land, a certain quantity of stock is necessary; and by withdrawing any part of this necessary quantity, the farmer is not likely to be more able to pay either the rent or the tax. In order to pay the tax, it can never be his interest to diminish the quantity of his produce, nor consequently to supply the market more sparingly than before. The tax, therefore, will never enable him to raise the price of his produce, so as to reimburse himself, by throwing the final payment upon the consumer. The farmer, however, must have his reasonable profit as well as every other dealer, otherwise he must give up the trade. After the imposition of a tax of this kind, he can get this reasonable profit only by paying less rent to the landlord. The more he is obliged to pay in the way of tax, the less he can afford to pay in the way of rent. A tax of this kind, imposed during the currency of a lease, may, no doubt, distress or ruin the farmer. Upon the renewal of the lease, it must always fall upon the landlord.

When a tax is imposed on profits from capital in a particular trade, all the traders take care to limit their supply. They bring only as many goods to market as they can sell at a price high enough to recover the tax they have paid. Some withdraw part of their capital from the trade, so the market is less well supplied than before. The price of the goods rises, and the consumer ultimately pays the tax. But when a tax is imposed on profits from capital used in agriculture, farmers have no interest in withdrawing any of that capital. Each farmer occupies a certain amount of land and pays rent for it. A certain amount of capital is needed to cultivate this land properly. If the farmer withdraws any of that necessary capital, he is unlikely to be better able to pay the rent or the tax. To pay the tax, it can never be in his interest to reduce his output. Nor can it be in his interest to supply the market less generously than before. The tax will therefore never enable him to raise the price of his produce enough to recover its cost by passing it on to the consumer. The farmer, however, must make a reasonable profit, like every other trader. Otherwise, he must give up farming. After such a tax is imposed, he can make this reasonable profit only by paying less rent to the landlord. The more he must pay in tax, the less he can afford to pay in rent. A tax of this kind imposed during a lease may, no doubt, cause the farmer hardship or ruin him. When the lease is renewed, the tax must always fall on the landlord.

In the countries where the personal taille takes place, the farmer is commonly assessed in proportion to the stock which he appears to employ in cultivation. He is, upon this account, frequently afraid to have a good team of horses or oxen, but endeavours to cultivate with the meanest and most wretched instruments of husbandry that he can. Such is his distrust in the justice of his assessors, that he counterfeits poverty, and wishes to appear scarce able to pay anything, for fear of being obliged to pay too much. By this miserable policy, he does not, perhaps, always consult his own interest in the most effectual manner; and he probably loses more by the diminution of his produce, than he saves by that of his tax. Though, in consequence of this wretched cultivation, the market is, no doubt, somewhat worse supplied; yet the small rise of price which this may occasion, as it is not likely even to indemnify the farmer for the diminution of his produce, it is still less likely to enable him to pay more rent to the landlord. The public, the farmer, the landlord, all suffer more or less by this degraded cultivation. That the personal taille tends, in many different ways, to discourage cultivation, and consequently to dry up the principal source of the wealth of every great country, I have already had occasion to observe in the third book of this Inquiry.

In countries where the personal taille is imposed, a farmer’s tax is usually based on the capital he appears to use for cultivation. Because of this, he is often afraid to have a good team of horses or oxen. Instead, he tries to farm with the poorest and most wretched tools he can. He so distrusts the fairness of the tax assessors that he pretends to be poor. He wants to appear barely able to pay anything, for fear of being forced to pay too much. By following this miserable policy, he may not always serve his own interests most effectively. He probably loses more from his reduced harvest than he saves on his tax. This wretched farming undoubtedly leaves the market somewhat less well supplied. But the small rise in prices that may result is unlikely even to compensate the farmer for his reduced harvest. It is still less likely to enable him to pay more rent to the landlord. The public, the farmer, and the landlord all suffer to some degree from this degraded farming. In the third book of this Inquiry, I have already observed that the personal taille discourages cultivation in many ways. It consequently tends to dry up the principal source of wealth in every great country.

What are called poll-taxes in the southern provinces of North America, and the West India islands, annual taxes of so much a-head upon every negro, are properly taxes upon the profits of a certain species of stock employed in agriculture. As the planters, are the greater part of them, both farmers and landlords, the final payment of the tax falls upon them in their quality of landlords, without any retribution.

In the southern provinces of North America and the West India islands, poll-taxes are annual taxes charged per head on every negro. These are really taxes on the profits from a particular kind of capital used in agriculture. Most planters are both farmers and landlords. So they ultimately bear the tax as landlords, without any compensation.

Taxes of so much a head upon the bondmen employed in cultivation, seem anciently to have been common all over Europe. There subsists at present a tax of this kind in the empire of Russia. It is probably upon this account that poll-taxes of all kinds have often been represented as badges of slavery. Every tax, however, is, to the person who pays it, a badge, not of slavery, but of liberty. It denotes that he is subject to government, indeed; but that, as he has some property, he cannot himself be the property of a master. A poll tax upon slaves is altogether different from a poll-tax upon freemen. The latter is paid by the persons upon whom it is imposed; the former, by a different set of persons. The latter is either altogether arbitrary, or altogether unequal, and, in most cases, is both the one and the other; the former, though in some respects unequal, different slaves being of different values, is in no respect arbitrary. Every master, who knows the number of his own slaves, knows exactly what he has to pay. Those different taxes, however, being called by the same name, have been considered as of the same nature.

Taxes charging a fixed amount for each bondman working in agriculture seem to have been common throughout Europe in ancient times. A tax of this kind still exists in the Russian Empire. This is probably why poll taxes of all kinds have often been described as marks of slavery. Yet every tax is a mark of liberty, not slavery, for the person who pays it. It shows that he is subject to government. But it also shows that he has some property and so cannot himself be the property of a master. A poll tax on slaves is entirely different from one on free people. Free people pay the tax imposed on them. The tax on slaves is paid by a different group of people. A poll tax on free people is either entirely arbitrary or entirely unequal. In most cases it is both. A poll tax on slaves is unequal in some respects, since different slaves have different values. But it is not arbitrary in any respect. Every master knows how many slaves he owns and exactly what he must pay. Yet because these different taxes have the same name, they have been treated as if they were the same kind of tax.

The taxes which in Holland are imposed upon men and maid servants, are taxes, not upon stock, but upon expense; and so far resemble the taxes upon consumable commodities. The tax of a guinea a-head for every man-servant, which has lately been imposed in Great Britain, is of the same kind. It falls heaviest upon the middling rank. A man of two hundred a-year may keep a single man-servant. A man of ten thousand a-year will not keep fifty. It does not affect the poor.

In Holland, taxes on male and female servants are taxes on spending, not on capital. In that respect, they resemble taxes on goods people consume. The tax recently imposed in Great Britain of one guinea for each male servant is of the same kind. It falls most heavily on the middle rank. A man with an income of 200 a year may keep one male servant. A man with an income of 10,000 a year will not keep fifty. The tax does not affect the poor.

Taxes upon the profits of stock, in particular employments, can never affect the interest of money. Nobody will lend his money for less interest to those who exercise the taxed, than to those who exercise the untaxed employments. Taxes upon the revenue arising from stock in all employments, where the government attempts to levy them with any degree of exactness, will, in many cases, fall upon the interest of money. The vingtieme, or twentieth penny, in France, is a tax of the same kind with what is called the land tax in England, and is assessed, in the same manner, upon the revenue arising upon land, houses, and stock. So far as it affects stock, it is assessed, though not with great rigour, yet with much more exactness than that part of the land tax in England which is imposed upon the same fund. It, in many cases, falls altogether upon the interest of money. Money is frequently sunk in France, upon what are called contracts for the constitution of a rent; that is, perpetual annuities, redeemable at any time by the debtor, upon payment of the sum originally advanced, but of which this redemption is not exigible by the creditor except in particular cases. The vingtieme seems not to have raised the rate of those annuities, though it is exactly levied upon them all.

Taxes on profits from capital in particular businesses can never affect interest rates. Nobody will lend money at a lower rate to people in taxed businesses than to those in untaxed businesses. But taxes on income from capital in all businesses will, in many cases, fall on interest. This happens where the government tries to collect them with some degree of accuracy. The vingtieme, or twentieth penny, in France is a tax like the land tax in England. It is assessed in the same way, on income from land, houses, and capital. The tax on capital is not assessed very strictly. Yet it is assessed much more accurately than the part of the English land tax imposed on the same source. In many cases, the vingtieme falls entirely on interest. In France, money is often invested through what are called contracts for the constitution of a rent. These are perpetual annuities that the debtor can redeem at any time by repaying the original sum advanced. The creditor, however, cannot demand repayment except in particular cases. The vingtieme does not seem to have raised the rate paid on those annuities, though it is collected accurately on all of them.

While property remains in the possession of the same person, whatever permanent taxes may have been imposed upon it, they have never been intended to diminish or take away any part of its capital value, but only some part of the revenue arising from it. But when property changes hands, when it is transmitted either from the dead to the living, or from the living to the living, such taxes have frequently been imposed upon it as necessarily take away some part of its capital value.

As long as property stays with the same owner, any permanent taxes on it have never been intended to reduce its capital value. They have been intended to take only part of the income it produces. But property can pass from one person to another, whether from the dead to the living or between living people. When this happens, taxes have often been imposed that necessarily reduce its capital value.

The transference of all sorts of property from the dead to the living, and that of immoveable property of land and houses from the living to the living, are transactions which are in their nature either public and notorious, or such as cannot be long concealed. Such transactions, therefore, may be taxed directly. The transference of stock or moveable property, from the living to the living, by the lending of money, is frequently a secret transaction, and may always be made so. It cannot easily, therefore, be taxed directly. It has been taxed indirectly in two different ways; first, by requiring that the deed, containing the obligation to repay, should be written upon paper or parchment which had paid a certain stamp duty, otherwise not to be valid; secondly, by requiring, under the like penalty of invalidity, that it should be recorded either in a public or secret register, and by imposing certain duties upon such registration. Stamp duties, and duties of registration, have frequently been imposed likewise upon the deeds transferring property of all kinds from the dead to the living, and upon those transferring immoveable property from the living to the living; transactions which might easily have been taxed directly.

The transfer of all kinds of property from the dead to the living is naturally public and well known, or cannot be concealed for long. The same is true of transfers of land and houses from one living person to another. These transactions can therefore be taxed directly. The transfer of stock or movable property from one living person to another through lending money is often secret. It can always be made secret. Such transfers therefore cannot easily be taxed directly. They have been taxed indirectly in two ways. First, the document containing the promise to repay had to be written on paper or parchment that had been subject to a stamp duty. Otherwise, the document was invalid. Second, the document had to be entered in a public or secret register, again under penalty of invalidity. Duties were charged for this registration. Stamp duties and registration duties have also often been imposed on documents transferring property of all kinds from the dead to the living. These duties have also been imposed on documents transferring land and houses from one living person to another. These transactions could easily have been taxed directly.

The vicesima hereditatum, or the twentieth penny of inheritances, imposed by Augustus upon the ancient Romans, was a tax upon the transference of property from the dead to the living. Dion Cassius, { Lib. 55. See also Burman. de Vectigalibus Pop. Rom. cap. xi. and Bouchaud de l’impot du vingtieme sur les successions.} the author who writes concerning it the least indistinctly, says, that it was imposed upon all successions, legacies and donations, in case of death, except upon those to the nearest relations, and to the poor.

The vicesima hereditatum, or the twentieth penny of inheritances, was a tax Augustus imposed on the ancient Romans. It taxed the transfer of property from the dead to the living. Dion Cassius writes about the tax more clearly than any other author. { Lib. 55. See also Burman. de Vectigalibus Pop. Rom. cap. xi. and Bouchaud de l’impot du vingtieme sur les successions.} He says it applied to all inheritances, legacies, and gifts made upon death. Those passing to the nearest relatives and to the poor were exceptions.

Of the same kind is the Dutch tax upon successions. {See Memoires concernant les Droits, etc. tom i, p. 225.} Collateral successions are taxed according to the degree of relation, from five to thirty per cent. upon the whole value of the succession. Testamentary donations, or legacies to collaterals, are subject to the like duties. Those from husband to wife, or from wife to husband, to the fiftieth penny. The luctuosa hereditas, the mournful succession of ascendants to descendants, to the twentieth penny only. Direct successions, or those of descendants to ascendants, pay no tax. The death of a father, to such of his children as live in the same house with him, is seldom attended with any increase, and frequently with a considerable diminution of revenue; by the loss of his industry, of his office, or of some life-rent estate, of which he may have been in possession. That tax would be cruel and oppressive, which aggravated their loss, by taking from them any part of his succession. It may, however, sometimes be otherwise with those children, who, in the language of the Roman law, are said to be emancipated; in that of the Scotch law, to be foris-familiated; that is, who have received their portion, have got families of their own, and are supported by funds separate and independent of those of their father. Whatever part of his succession might come to such children, would be a real addition to their fortune, and might, therefore, perhaps, without more inconveniency than what attends all duties of this kind, be liable to some tax. The casualties of the feudal law were taxes upon the transference of land, both from the dead to the living, and from the living to the living. In ancient times, they constituted, in every part of Europe, one of the principal branches of the revenue of the crown.

The Dutch tax on inheritances is of the same kind. {See Memoires concernant les Droits, etc. tom i, p. 225.} Inheritances by relatives other than direct descendants or ancestors are taxed according to their degree of kinship. The tax ranges from five to thirty percent of the full value of the inheritance. Gifts left in a will to such relatives are subject to the same taxes. Gifts from husband to wife, or from wife to husband, are taxed at two percent. The luctuosa hereditas, the mournful inheritance by parents or other ancestors from their descendants, is taxed at only five percent. Direct inheritances by descendants from their ancestors are not taxed. When a father dies, his children who live with him seldom gain income and often lose a considerable amount. They may lose the income from his work, his office, or an estate he held for life. A tax that took any part of their inheritance would add to their loss. It would be cruel and oppressive. But the position may sometimes be different for children who have received their portion and established their own families. In Roman law, such children are said to be emancipated. In Scotch law, they are said to be foris-familiated. They support themselves with funds separate from and independent of their father’s. Any inheritance they received from him would be a real addition to their wealth. It might therefore perhaps be subject to some tax, without greater inconvenience than attends all taxes of this kind. The casualties of feudal law were taxes on transfers of land, both from the dead to the living and between living people. In ancient times, they were one of the principal sources of crown revenue in every part of Europe.

The heir of every immediate vassal of the crown paid a certain duty, generally a year’s rent, upon receiving the investiture of the estate. If the heir was a minor, the whole rents of the estate, during the continuance of the minority, devolved to the superior, without any other charge besides the maintenance of the minor, and the payment of the widow’s dower, when there happened to be a dowager upon the land. When the minor came to be of age, another tax, called relief, was still due to the superior, which generally amounted likewise to a year’s rent. A long minority, which, in the present times, so frequently disburdens a great estate of all its incumbrances, and restores the family to their ancient splendour, could in those times have no such effect. The waste, and not the disincumbrance of the estate, was the common effect of a long minority.

The heir of every vassal who held land directly from the crown paid a fee upon receiving the estate. The fee was generally equal to a year’s rent. If the heir was a minor, the superior received all the estate’s rents until the heir came of age. The superior had no other expense beyond maintaining the minor and paying the widow’s dower, if there was a widow entitled to it. When the minor came of age, another tax, called relief, was still owed to the superior. This also generally amounted to a year’s rent. In modern times, a long minority so often frees a great estate from all its debts and restores the family to its former splendor. In those times, it could have no such effect. Instead, a long minority commonly left the estate wasted rather than free of debt.

By a feudal law, the vassal could not alienate without the consent of his superior, who generally extorted a fine or composition on granting it. This fine, which was at first arbitrary, came, in many countries, to be regulated at a certain portion of the price of the land. In some countries, where the greater part of the other feudal customs have gone into disuse, this tax upon the alienation of land still continues to make a very considerable branch of the revenue of the sovereign. In the canton of Berne it is so high as a sixth part of the price of all noble fiefs, and a tenth part of that of all ignoble ones. {Memoires concernant les Droits, etc, tom.i p.154} In the canton of Lucern, the tax upon the sale of land is not universal, and takes place only in certain districts. But if any person sells his land in order to remove out of the territory, he pays ten per cent. upon the whole price of the sale. {id. p.157.} Taxes of the same kind, upon the sale either of all lands, or of lands held by certain tenures, take place in many other countries, and make a more or less considerable branch of the revenue of the sovereign.

Under feudal law, a vassal could not transfer land without the consent of his superior. The superior generally demanded a fee or settlement in exchange for consent. At first, the fee was set at the superior’s discretion. In many countries, it later became a fixed proportion of the land’s price. In some countries, most other feudal customs have fallen out of use. Yet this tax on land transfers still provides a very substantial part of the sovereign’s revenue. In the canton of Berne, it is as high as one-sixth of the price of all noble fiefs. It is one-tenth of the price of all ignoble fiefs. {Memoires concernant les Droits, etc, tom.i p.154} In the canton of Lucern, the tax on land sales is not universal. It applies only in certain districts. But anyone who sells land in order to leave the territory pays ten percent of the full sale price. {id. p.157.} Similar taxes apply in many other countries, either to the sale of all land or to land held under certain forms of tenure. They provide a greater or smaller part of the sovereign’s revenue.

Such transactions may be taxed indirectly, by means either of stamp duties, or of duties upon registration; and those duties either may, or may not, be proportioned to the value of the subject which is transferred.

Such transactions may be taxed indirectly through stamp duties or registration duties. These duties may or may not be proportional to the value of the property transferred.

In Great Britain, the stamp duties are higher or lower, not so much according to the value of the property transferred (an eighteen-penny or half-crown stamp being sufficient upon a bond for the largest sum of money), as according to the nature of the deed. The highest do not exceed six pounds upon every sheet of paper, or skin of parchment; and these high duties fall chiefly upon grants from the crown, and upon certain law proceedings, without any regard to the value of the subject. There are, in Great Britain, no duties on the registration of deeds or writings, except the fees of the officers who keep the register; and these are seldom more than a reasonable recompence for their labour. The crown derives no revenue from them.

In Great Britain, stamp duties depend less on the value of the property transferred than on the type of document. A stamp costing eighteen pence or half a crown is enough for a bond for even the largest sum of money. The highest duties are no more than six pounds per sheet of paper or piece of parchment. These high duties fall mainly on grants from the crown and on certain legal proceedings, regardless of the value involved. In Great Britain, there are no duties on registering deeds or other documents. There are only fees paid to the officials who keep the register. These fees are seldom more than reasonable payment for their work. The crown receives no revenue from them.

In Holland {Memoires concernant les Droits, etc. tom. i. p 223, 224, 225.} there are both stamp duties and duties upon registration; which in some cases are, and in some are not, proportioned to the value of the property transferred. All testaments must be written upon stamped paper, of which the price is proportioned to the property disposed of; so that there are stamps which cost from three pence or three stivers a-sheet, to three hundred florins, equal to about twenty-seven pounds ten shillings of our money. If the stamp is of an inferior price to what the testator ought to have made use of, his succession is confiscated. This is over and above all their other taxes on succession. Except bills of exchange, and some other mercantile bills, all other deeds, bonds, and contracts, are subject to a stamp duty. This duty, however, does not rise in proportion to the value of the subject. All sales of land and of houses, and all mortgages upon either, must be registered, and, upon registration, pay a duty to the state of two and a-half per cent. upon the amount of the price or of the mortgage. This duty is extended to the sale of all ships and vessels of more than two tons burden, whether decked or undecked. These, it seems, are considered as a sort of houses upon the water. The sale of moveables, when it is ordered by a court of justice, is subject to the like duty of two and a-half per cent.

In Holland {Memoires concernant les Droits, etc. tom. i. p 223, 224, 225.} there are both stamp duties and registration duties. In some cases, these duties are proportional to the value of the property transferred, but in others they are not. All wills must be written on stamped paper, priced according to the value of the property being left. A sheet of stamped paper costs anywhere from three pence, or three stivers, to three hundred florins. The latter amount is equal to about twenty-seven pounds and ten shillings in our money. If a person uses a cheaper stamp for a will than required, the estate is confiscated. This is in addition to all the other taxes on inheritances. All deeds, bonds, and contracts are subject to a stamp duty, except bills of exchange and some other commercial bills. This duty, however, does not rise in proportion to the value of the property involved. All sales of land and houses, and all mortgages on either, must be registered. On registration, a duty of two and a half per cent of the sale price or mortgage is paid to the state. This duty also applies to the sale of all ships and vessels over two tons burden, whether decked or undecked. These, it seems, are considered a sort of house on the water. Sales of movable property ordered by a court are subject to the same duty of two and a half per cent.

In France, there are both stamp duties and duties upon registration. The former are considered as a branch of the aids of excise, and, in the provinces where those duties take place, are levied by the excise officers. The latter are considered as a branch of the domain of the crown and are levied by a different set of officers.

In France, there are both stamp duties and registration duties. Stamp duties are considered a branch of excise revenue. In the provinces where stamp duties apply, excise officers collect them. Registration duties are considered a branch of the crown’s revenue and are collected by a different group of officers.

Those modes of taxation by stamp duties and by duties upon registration, are of very modern invention. In the course of little more than a century, however, stamp duties have, in Europe, become almost universal, and duties upon registration extremely common. There is no art which one government sooner learns of another, than that of draining money from the pockets of the people.

Taxes on stamps and registration are very recent inventions. Yet in just over a century, stamp duties have become almost universal in Europe, and registration duties have become extremely common. There is no art that one government learns from another more quickly than draining money from people’s pockets.

Taxes upon the transference of property from the dead to the living, fall finally, as well as immediately, upon the persons to whom the property is transferred. Taxes upon the sale of land fall altogether upon the seller. The seller is almost always under the necessity of selling, and must, therefore, take such a price as he can get. The buyer is scarce ever under the necessity of buying, and will, therefore, only give such a price as he likes. He considers what the land will cost him, in tax and price together. The more he is obliged to pay in the way of tax, the less he will be disposed to give in the way of price. Such taxes, therefore, fall almost always upon a necessitous person, and must, therefore, be frequently very cruel and oppressive. Taxes upon the sale of new-built houses, where the building is sold without the ground, fall generally upon the buyer, because the builder must generally have his profit; otherwise he must give up the trade. If he advances the tax, therefore, the buyer must generally repay it to him. Taxes upon the sale of old houses, for the same reason as those upon the sale of land, fall generally upon the seller; whom, in most cases, either conveniency or necessity obliges to sell. The number of new-built houses that are annually brought to market, is more or less regulated by the demand. Unless the demand is such as to afford the builder his profit, after paying all expenses, he will build no more houses. The number of old houses which happen at any time to come to market, is regulated by accidents, of which the greater part have no relation to the demand. Two or three great bankruptcies in a mercantile town, will bring many houses to sale, which must be sold for what can be got for them. Taxes upon the sale of ground-rents fall altogether upon the seller, for the same reason as those upon the sale of lands. Stamp duties, and duties upon the registration of bonds and contracts for borrowed money, fall altogether upon the borrower, and, in fact, are always paid by him. Duties of the same kind upon law proceedings fall upon the suitors. They reduce to both the capital value of the subject in dispute. The more it costs to acquire any property, the less must be the neat value of it when acquired.

Taxes on property transferred from the dead to the living fall immediately and ultimately on the people receiving it. Taxes on land sales fall entirely on the seller. The seller almost always needs to sell and must therefore accept whatever price is available. The buyer hardly ever needs to buy and will therefore pay only a price they find acceptable. The buyer considers the total cost of the land, including both the tax and the price. The more the buyer must pay in tax, the less they will be willing to pay for the land. These taxes therefore fall almost always on someone in need. They must therefore often be very harsh and oppressive. Taxes on the sale of newly built houses generally fall on the buyer when the building is sold without the land. This is because the builder must generally make a profit or give up the trade. If the builder pays the tax upfront, the buyer must generally repay it. Taxes on the sale of old houses generally fall on the seller, for the same reason as taxes on land sales. In most cases, either convenience or necessity forces the seller to sell. The number of newly built houses brought to market each year is regulated more or less by demand. The builder will build no more houses unless demand allows him a profit after all expenses. The number of old houses on the market at any time is regulated by chance events. Most of these events have no connection to demand. Two or three major bankruptcies in a trading town will bring many houses to market. These houses must be sold for whatever they can fetch. Taxes on the sale of ground rents fall entirely on the seller, for the same reason as taxes on land sales. Stamp duties and registration fees on bonds and contracts for borrowed money fall entirely on the borrower. In fact, the borrower always pays them. Similar duties on legal proceedings fall on the parties to the case. These duties reduce the capital value of the property in dispute for both parties. The more it costs to acquire property, the lower its net value must be once acquired.

All taxes upon the transference of property of every kind, so far as they diminish the capital value of that property, tend to diminish the funds destined for the maintenance of productive labour. They are all more or less unthrifty taxes that increase the revenue of the sovereign, which seldom maintains any but unproductive labourers, at the expense of the capital of the people, which maintains none but productive.

All taxes on the transfer of property tend to reduce the funds available to support productive workers. They do so to the extent that they reduce the capital value of the property. All such taxes are wasteful to some degree. They increase the ruler's revenue at the expense of the people's capital. The ruler's revenue seldom supports anyone but unproductive workers, while the people's capital supports only productive workers.

Such taxes, even when they are proportioned to the value of the property transferred, are still unequal; the frequency of transference not being always equal in property of equal value. When they are not proportioned to this value, which is the case with the greater part of the stamp duties and duties of registration, they are still more so. They are in no respect arbitrary, but are, or may be, in all cases, perfectly clear and certain. Though they sometimes fall upon the person who is not very able to pay, the time of payment is, in most cases, sufficiently convenient for him. When the payment becomes due, he must, in most cases, have the more to pay. They are levied at very little expense, and in general subject the contributors to no other inconveniency, besides always the unavoidable one of paying the tax. In France, the stamp duties are not much complained of. Those of registration, which they call the Controle, are. They give occasion, it is pretended, to much extortion in the officers of the farmers-general who collect the tax, which is in a great measure arbitrary and uncertain. In the greater part of the libels which have been written against the present system of finances in France, the abuses of the controle make a principal article. Uncertainty, however, does not seem to be necessarily inherent in the nature of such taxes. If the popular complaints are well founded, the abuse must arise, not so much from the nature of the tax as from the want of precision and distinctness in the words of the edicts or laws which impose it.

Even when these taxes are proportional to the value of the property transferred, they are still unequal. Property of equal value does not always change hands equally often. When the taxes are not proportional to the property’s value, they are even more unequal. This is true of most stamp duties and registration duties. These taxes are in no respect arbitrary. In all cases, they are, or can be, perfectly clear and certain. Though they sometimes fall on someone who cannot easily pay, the time of payment is usually convenient enough. When payment is due, he will usually have more money to pay it. The taxes cost very little to collect. In general, they cause taxpayers no inconvenience beyond the unavoidable one of paying the tax. In France, people do not complain much about stamp duties. They do complain about registration duties, which they call the Controle. The officers of the farmers-general who collect the tax are said to practice much extortion. The tax is largely arbitrary and uncertain. The abuses of the controle are a major topic in most of the pamphlets attacking France’s present financial system. Yet uncertainty does not seem to be a necessary feature of such taxes. If the public complaints are justified, the abuse must arise less from the nature of the tax than from imprecise and unclear wording in the edicts or laws that impose it.

The registration of mortgages, and in general of all rights upon immoveable property, as it gives great security both to creditors and purchasers, is extremely advantageous to the public. That of the greater part of deeds of other kinds, is frequently inconvenient and even dangerous to individuals, without any advantage to the public. All registers which, it is acknowledged, ought to be kept secret, ought certainly never to exist. The credit of individuals ought certainly never to depend upon so very slender a security, as the probity and religion of the inferior officers of revenue. But where the fees of registration have been made a source of revenue to the sovereign, register-offices have commonly been multiplied without end, both for the deeds which ought to be registered, and for those which ought not. In France there are several different sorts of secret registers. This abuse, though not perhaps a necessary, it must be acknowledged, is a very natural effect of such taxes.

Registering mortgages and all other rights to real estate is extremely useful to the public. It gives both creditors and buyers great security. Registering most other kinds of legal documents is often inconvenient and even dangerous for individuals, with no benefit to the public. No registers that are admittedly meant to be kept secret should ever exist. A person’s credit should certainly never depend on the mere honesty and religious principles of lower-ranking revenue officers. But when registration fees have become a source of revenue for the sovereign, registration offices have commonly multiplied without end. They register both documents that should be registered and those that should not. In France there are several kinds of secret registers. This abuse is not perhaps a necessary effect of such taxes, but it must be acknowledged as a very natural one.

Such stamp duties as those in England upon cards and dice, upon newspapers and periodical pamphlets, etc. are properly taxes upon consumption; the final payment falls upon the persons who use or consume such commodities. Such stamp duties as those upon licences to retail ale, wine, and spiritous liquors, though intended, perhaps, to fall upon the profits of the retailers, are likewise finally paid by the consumers of those liquors. Such taxes, though called by the same name, and levied by the same officers, and in the same manner with the stamp duties above mentioned upon the transference of property, are, however, of a quite different nature, and fall upon quite different funds.

Stamp duties in England on cards and dice, newspapers and periodical pamphlets, and similar goods are properly taxes on consumption. The people who use or consume these goods ultimately pay the tax. Stamp duties on licenses to sell ale, wine, and spirits are also ultimately paid by consumers of those drinks. This is true even though the duties may be intended to fall on retailers’ profits. These taxes have the same name as the stamp duties on property transfers mentioned above. They are also collected by the same officials in the same way. But they are quite different in nature and fall on quite different sources of income.

ARTICLE III.—Taxes upon the Wages of Labour.

ARTICLE III. Taxes on Wages.

The wages of the inferior classes of work men, I have endeavoured to show in the first book are everywhere necessarily regulated by two different circumstances; the demand for labour, and the ordinary or average price of provisions. The demand for labour, according as it happens to be either increasing, stationary, or declining; or to require an increasing, stationary, or declining population, regulates the subsistence of the labourer, and determines in what degree it shall be either liberal, moderate, or scanty. The ordinary average price of provisions determines the quantity of money which must be paid to the workman, in order to enable him, one year with another, to purchase this liberal, moderate, or scanty subsistence. While the demand for the labour and the price of provisions, therefore, remain the same, a direct tax upon the wages of labour can have no other effect, than to raise them somewhat higher than the tax. Let us suppose, for example, that, in a particular place, the demand for labour and the price of provisions were such as to render ten shillings a-week the ordinary wages of labour; and that a tax of one-fifth, or four shillings in the pound, was imposed upon wages. If the demand for labour and the price of provisions remained the same, it would still be necessary that the labourer should, in that place, earn such a subsistence as could be bought only for ten shillings a-week; so that, after paying the tax, he should have ten shillings a-week free wages. But, in order to leave him such free wages, after paying such a tax, the price of labour must, in that place, soon rise, not to twelve shillings a week only, but to twelve and sixpence; that is, in order to enable him to pay a tax of one-fifth, his wages must necessarily soon rise, not one-fifth part only, but one-fourth. Whatever was the proportion of the tax, the wages of labour must, in all cases rise, not only in that proportion, but in a higher proportion. If the tax for example, was one-tenth, the wages of labour must necessarily soon rise, not one-tenth part only, but one-eighth.

In the first book, I have tried to show that two conditions necessarily govern the wages of lower-paid workers everywhere. These are the demand for labour and the usual average price of necessities. The demand for labour may be rising, steady, or falling. It may require a growing, stable, or declining population. This demand determines how well workers can live, whether generously, moderately, or meagrely. The usual average price of necessities determines how much money workers must be paid. Their pay must enable them to purchase this generous, moderate, or meagre living from year to year. Therefore, as long as the demand for labour and the price of necessities remain unchanged, a direct tax on wages can only raise wages by somewhat more than the tax. Suppose, for example, that in a particular place, the demand for labour and the price of necessities make ten shillings a week the usual wage. Suppose a tax of one-fifth, or four shillings in the pound, is imposed on wages. If the demand for labour and the price of necessities remained unchanged, workers there would still need the living that only ten shillings a week could buy. So, after paying the tax, a worker would need ten shillings a week left over. But for workers to have that amount left after paying the tax, wages there would soon have to rise. They would have to rise not merely to twelve shillings a week, but to twelve shillings and sixpence. In other words, to enable workers to pay a tax of one-fifth, their wages must soon rise not by one-fifth, but by one-fourth. Whatever the proportion of the tax, wages must in all cases rise by more than that proportion. If the tax were one-tenth, for example, wages would soon have to rise not by one-tenth, but by one-eighth.

A direct tax upon the wages of labour, therefore, though the labourer might, perhaps, pay it out of his hand, could not properly be said to be even advanced by him; at least if the demand for labour and the average price of provisions remained the same after the tax as before it. In all such cases, not only the tax, but something more than the tax, would in reality be advanced by the person who immediately employed him. The final payment would, in different cases, fall upon different persons. The rise which such a tax might occasion in the wages of manufacturing labour would be advanced by the master manufacturer, who would both be entitled and obliged to charge it, with a profit, upon the price of his goods. The final payment of this rise of wages, therefore, together with the additional profit of the master manufacturer would fall upon the consumer. The rise which such a tax might occasion in the wages of country labour would be advanced by the farmer, who, in order to maintain the same number of labourers as before, would be obliged to employ a greater capital. In order to get back this greater capital, together with the ordinary profits of stock, it would be necessary that he should retain a larger portion, or, what comes to the same thing, the price of a larger portion, of the produce of the land, and, consequently, that he should pay less rent to the landlord. The final payment of this rise of wages, therefore, would, in this case, fall upon the landlord, together with the additional profit of the farmer who had advanced it. In all cases, a direct tax upon the wages of labour must, in the long-run, occasion both a greater reduction in the rent of land, and a greater rise in the price of manufactured goods than would have followed from the proper assessment of a sum equal to the produce of the tax, partly upon the rent of land, and partly upon consumable commodities.

A direct tax on wages, then, might perhaps be paid by the worker himself. But the worker could not properly be said even to advance the money. This is true at least if the demand for labor and the average price of provisions remain unchanged after the tax. In all such cases, the worker’s immediate employer would in fact advance not only the tax, but more than the tax. Who would ultimately bear the cost would vary from case to case. The owner of a manufacturing business would advance any rise in manufacturing wages caused by such a tax. The owner would be both entitled and obliged to add the cost, with a profit, to the price of the goods. The consumer would therefore ultimately pay for the wage increase and the manufacturer’s additional profit. The farmer would advance any rise in agricultural wages caused by such a tax. To keep the same number of workers, the farmer would have to use more capital. To recover this greater capital, together with the usual profit on it, the farmer would have to keep more of the land’s produce. The farmer could instead keep the price of a larger share, which comes to the same thing. As a result, the farmer would pay less rent to the landlord. In this case, then, the landlord would ultimately pay for the wage increase and the additional profit of the farmer who advanced it. In all cases, a direct tax on wages must, in the long run, cause a greater reduction in land rents and a greater rise in manufactured goods prices. Both effects would be greater than if a sum equal to the tax revenue were properly assessed, partly on land rents and partly on goods for consumption.

If direct taxes upon the wages of labour have not always occasioned a proportionable rise in those wages, it is because they have generally occasioned a considerable fall in the demand of labour. The declension of industry, the decrease of employment for the poor, the diminution of the annual produce of the land and labour of the country, have generally been the effects of such taxes. In consequence of them, however, the price of labour must always be higher than it otherwise would have been in the actual state of the demand; and this enhancement of price, together with the profit of those who advance it, must always be finally paid by the landlords and consumers.

If direct taxes on wages have not always caused wages to rise proportionately, it is because they have generally caused a considerable fall in demand for labor. Such taxes have generally led to a decline in industry, less employment for the poor, and a reduction in the country’s annual output from land and labor. However, these taxes must always make wages higher than they otherwise would be at the existing level of demand for labor. Landlords and consumers must ultimately pay for this increase, along with the profit of those who pay the wages in advance.

A tax upon the wages of country labour does not raise the price of the rude produce of land in proportion to the tax; for the same reason that a tax upon the farmer’s profit does not raise that price in that proportion.

A tax on farm workers’ wages does not raise the price of raw produce in proportion to the tax. This is for the same reason that a tax on farmers’ profits does not raise that price in proportion to the tax.

Absurd and destructive as such taxes are, however, they take place in many countries. In France, that part of the taille which is charged upon the industry of workmen and day-labourers in country villages, is properly a tax of this kind. Their wages are computed according to the common rate of the district in which they reside; and, that they may be as little liable as possible to any overcharge, their yearly gains are estimated at no more than two hundred working days in the year. {Memoires concernant les Droits, etc. tom. ii. p. 108.} The tax of each individual is varied from year to year, according to different circumstances, of which the collector or the commissary, whom intendant appoints to assist him, are the judges. In Bohemia, in consequence of the alteration in the system of finances which was begun in 1748, a very heavy tax is imposed upon the industry of artificers. They are divided into four classes. The highest class pay a hundred florins a year, which, at two-and-twenty pence half penny a-florin, amounts to £9:7:6. The second class are taxed at seventy; the third at fifty; and the fourth, comprehending artificers in villages, and the lowest class of those in towns, at twenty-five florins. {Memoires concernant les Droits, etc. tom. iii. p. 87.}

Absurd and destructive as these taxes are, they exist in many countries. In France, part of the taille is charged on the work of laborers and day laborers in country villages. This is a tax of that kind. Their wages are calculated at the usual rate in their district. To minimize the risk of overcharging them, their annual earnings are estimated at only 200 working days. {Memoires concernant les Droits, etc. tom. ii. p. 108.} Each person’s tax varies from year to year according to different circumstances. The collector or the commissioner appointed by the intendant to assist him judges those circumstances. In Bohemia, a very heavy tax is imposed on the work of craftspeople. This tax followed a change in the financial system that began in 1748. Craftspeople are divided into four classes. The highest class pays 100 florins a year. At 22 and a half pence per florin, this amounts to £9:7:6. The second class is taxed at 70 florins, and the third at 50. The fourth class is taxed at 25 florins. It includes craftspeople in villages and the lowest class of those in towns. {Memoires concernant les Droits, etc. tom. iii. p. 87.}

The recompence of ingenious artists, and of men of liberal professions, I have endeavoured to show in the first book, necessarily keeps a certain proportion to the emoluments of inferior trades. A tax upon this recompence, therefore, could have no other effect than to raise it somewhat higher than in proportion to the tax. If it did not rise in this manner, the ingenious arts and the liberal professions, being no longer upon a level with other trades, would be so much deserted, that they would soon return to that level.

In the first book, I tried to show that skilled artists and professionals necessarily earn a certain amount relative to less skilled workers. A tax on their earnings could therefore have no effect except to raise them by somewhat more than the tax. If their earnings did not rise this way, the arts and professions would no longer pay as well as other trades. So many people would leave them that their earnings would soon return to the same level relative to other trades.

The emoluments of offices are not, like those of trades and professions, regulated by the free competition of the market, and do not, therefore, always bear a just proportion to what the nature of the employment requires. They are, perhaps, in most countries, higher than it requires; the persons who have the administration of government being generally disposed to regard both themselves and their immediate dependents, rather more than enough. The emoluments of offices, therefore, can, in most cases, very well bear to be taxed. The persons, besides, who enjoy public offices, especially the more lucrative, are, in all countries, the objects of general envy; and a tax upon their emoluments, even though it should be somewhat higher than upon any other sort of revenue, is always a very popular tax. In England, for example, when, by the land-tax, every other sort of revenue was supposed to be assessed at four shillings in the pound, it was very popular to lay a real tax of five shillings and sixpence in the pound upon the salaries of offices which exceeded a hundred pounds a-year; the pensions of the younger branches of the royal family, the pay of the officers of the army and navy, and a few others less obnoxious to envy, excepted. There are in England no other direct taxes upon the wages of labour.

Unlike earnings from trades and professions, the pay and benefits of public offices are not set by free market competition. They are therefore not always fairly proportioned to the demands of the job. In most countries, they are perhaps higher than the work requires. Those who run the government generally tend to favor themselves and their immediate dependents rather more than they should. In most cases, therefore, the pay and benefits of public offices can easily bear a tax. Moreover, people who hold public office are generally envied in every country, especially those in the more lucrative positions. A tax on their pay and benefits is therefore always very popular, even if it is somewhat higher than taxes on other income. In England, for example, the land tax supposedly assessed every other kind of income at four shillings per pound. At the time, it was very popular to impose an actual tax of five shillings and sixpence per pound on official salaries over a hundred pounds a year. Pensions for younger members of the royal family, the pay of army and navy officers, and a few others less likely to attract envy were exempt. In England, there are no other direct taxes on workers’ wages.

ARTICLE IV.—Taxes which it is intended should fall indifferently upon every different Species of Revenue.

ARTICLE IV. Taxes intended to apply equally to every kind of income.

The taxes which it is intended should fall indifferently upon every different species of revenue, are capitation taxes, and taxes upon consumable commodities. Those must be paid indifferently, from whatever revenue the contributors may possess; from the rent of their land, from the profits of their stock, or from the wages of their labour.

Taxes intended to fall equally on every kind of income are poll taxes and taxes on goods people consume. People must pay these taxes regardless of their source of income. Their income may come from rent on their land, profits on their capital, or wages from their work.

Capitation Taxes.

Poll Taxes.

Capitation taxes, if it is attempted to proportion them to the fortune or revenue of each contributor, become altogether arbitrary. The state of a man’s fortune varies from day to day; and, without an inquisition, more intolerable than any tax, and renewed at least once every year, can only be guessed at. His assessment, therefore, must, in most cases, depend upon the good or bad humour of his assessors, and must, therefore, be altogether arbitrary and uncertain.

If poll taxes are set according to each person’s wealth or income, they become entirely arbitrary. A person’s financial situation changes from day to day. It can only be guessed at without an investigation repeated at least once a year. Such an investigation would be more intolerable than any tax. In most cases, therefore, the amount a person is charged must depend on the mood of the assessors. The assessment must therefore be entirely arbitrary and uncertain.

Capitation taxes, if they are proportioned, not to the supposed fortune, but to the rank of each contributor, become altogether unequal; the degrees of fortune being frequently unequal in the same degree of rank.

If head taxes are based on each contributor’s rank rather than their estimated wealth, they become entirely unequal. This is because people of the same rank often have unequal wealth.

Such taxes, therefore, if it is attempted to render them equal, become altogether arbitrary and uncertain; and if it is attempted to render them certain and not arbitrary, become altogether unequal. Let the tax be light or heavy, uncertainty is always a great grievance. In a light tax, a considerable degree of inequality may be supported; in a heavy one, it is altogether intolerable.

Therefore, attempts to make such taxes equal make them entirely arbitrary and uncertain. But attempts to make them certain and not arbitrary make them entirely unequal. Whether a tax is light or heavy, uncertainty is always a great burden. When a tax is light, considerable inequality can be tolerated. When a tax is heavy, such inequality is completely intolerable.

In the different poll-taxes which took place in England during the reign of William III. the contributors were, the greater part of them, assessed according to the degree of their rank; as dukes, marquises, earls, viscounts, barons, esquires, gentlemen, the eldest and youngest sons of peers, etc. All shop-keepers and tradesmen worth more than three hundred pounds, that is, the better sort of them, were subject to the same assessment, how great soever might be the difference in their fortunes. Their rank was more considered than their fortune. Several of those who, in the first poll-tax, were rated according to their supposed fortune were afterwards rated according to their rank. Serjeants, attorneys, and proctors at law, who, in the first poll-tax, were assessed at three shillings in the pound of their supposed income, were afterwards assessed as gentlemen. In the assessment of a tax which was not very heavy, a considerable degree of inequality had been found less insupportable than any degree of uncertainty.

In the various poll taxes imposed in England during the reign of William III, most contributors were assessed according to rank. These ranks included dukes, marquises, earls, viscounts, barons, esquires, gentlemen, and the eldest and youngest sons of peers. All shopkeepers and tradesmen worth more than three hundred pounds paid the same amount, however much their fortunes differed. These were the better-off shopkeepers and tradesmen. Their rank mattered more than their wealth. Several people assessed according to their supposed wealth under the first poll tax were later assessed according to rank. Serjeants, attorneys, and proctors at law were assessed at three shillings per pound of their supposed income under the first poll tax. Later, they were assessed as gentlemen. In assessing a tax that was not very heavy, considerable inequality had proved more tolerable than any uncertainty.

In the capitation which has been levied in France, without-any interruption, since the beginning of the present century, the highest orders of people are rated according to their rank, by an invariable tariff; the lower orders of people, according to what is supposed to be their fortune, by an assessment which varies from year to year. The officers of the king’s court, the judges, and other officers in the superior courts of justice, the officers of the troops, etc are assessed in the first manner. The inferior ranks of people in the provinces are assessed in the second. In France, the great easily submit to a considerable degree of inequality in a tax which, so far as it affects them, is not a very heavy one; but could not brook the arbitrary assessment of an intendant.

France has levied a capitation tax without interruption since the beginning of this century. People of the highest ranks are taxed according to their rank, at fixed rates. People of the lower ranks are taxed according to their estimated wealth, with assessments that vary from year to year. Officers of the king’s court, judges and other officers of the higher courts, military officers, and others are taxed by the first method. People of lower rank in the provinces are taxed by the second. In France, the wealthy and powerful readily accept considerable inequality in a tax that is not very heavy for them. But they could not tolerate an arbitrary assessment by an intendant.

The inferior ranks of people must, in that country, suffer patiently the usage which their superiors think proper to give them.

In that country, people of lower rank must patiently accept whatever treatment their superiors choose to give them.

In England, the different poll-taxes never produced the sum which had been expected from them, or which it was supposed they might have produced, had they been exactly levied. In France, the capitation always produces the sum expected from it. The mild government of England, when it assessed the different ranks of people to the poll-tax, contented itself with what that assessment happened to produce, and required no compensation for the loss which the state might sustain, either by those who could not pay, or by those who would not pay (for there were many such), and who, by the indulgent execution of the law, were not forced to pay. The more severe government of France assesses upon each generality a certain sum, which the intendant must find as he can. If any province complains of being assessed too high, it may, in the assessment of next year, obtain an abatement proportioned to the overcharge of the year before; but it must pay in the mean time. The intendant, in order to be sure of finding the sum assessed upon his generality, was empowered to assess it in a larger sum, that the failure or inability of some of the contributors might be compensated by the overcharge of the rest; and till 1765, the fixation of this surplus assessment was left altogether to his discretion. In that year, indeed, the council assumed this power to itself. In the capitation of the provinces, it is observed by the perfectly well informed author of the Memoirs upon the Impositions in France, the proportion which falls upon the nobility, and upon those whose privileges exempt them from the taille, is the least considerable. The largest falls upon those subject to the taille, who are assessed to the capitation at so much a-pound of what they pay to that other tax. Capitation taxes, so far as they are levied upon the lower ranks of people, are direct taxes upon the wages of labour, and are attended with all the inconveniencies of such taxes.

In England, the various poll taxes never raised as much as expected. Nor did they raise as much as people thought they could have, if collected in full. England’s mild government set rates for different ranks of people and accepted whatever those rates happened to yield. It demanded no compensation for the revenue lost from those who could not pay. Nor did it demand compensation for those who would not pay. There were many such people, and the lenient enforcement of the law did not force them to pay. The more severe government of France assigns a fixed sum to each generality, which the intendant must raise somehow. If a province complains that its assessment is too high, it may receive a reduction the next year. The reduction may equal the amount overcharged the year before. But the province must pay in the meantime. To ensure that he could raise the sum assigned to his generality, the intendant could assess a larger sum. This allowed the overcharge on some contributors to make up for others who failed or were unable to pay. Until 1765, the intendant had complete discretion to set this extra amount. In that year, however, the council took this power for itself. The author of the Memoirs upon the Impositions in France was exceptionally well informed. He observes that nobles and others whose privileges exempt them from the taille pay the smallest share of provincial capitation. The largest share falls on those subject to the taille. They are assessed for capitation at a fixed amount per pound of what they pay in taille. Capitation taxes on the lower ranks of people are direct taxes on wages and bring all the disadvantages of such taxes.

Capitation taxes are levied at little expense; and, where they are rigorously exacted, afford a very sure revenue to the state. It is upon this account that, in countries where the case, comfort, and security of the inferior ranks of people are little attended to, capitation taxes are very common. It is in general, however, but a small part of the public revenue, which, in a great empire, has ever been drawn from such taxes; and the greatest sum which they have ever afforded, might always have been found in some other way much more convenient to the people.

Capitation taxes cost little to collect. When strictly enforced, they provide a very reliable source of revenue for the state. For this reason, they are very common in countries where little attention is paid to the ease, comfort, and security of the lower classes. In a great empire, however, such taxes have generally provided only a small part of public revenue. Even the largest amount they have ever raised could always have been collected in some other way that was much more convenient for the people.

Taxes upon Consumable Commodities.

Taxes on Consumer Goods.

The impossibility of taxing the people, in proportion to their revenue, by any capitation, seems to have given occasion to the invention of taxes upon consumable commodities. The state not knowing how to tax, directly and proportionably, the revenue of its subjects, endeavours to tax it indirectly by taxing their expense, which, it is supposed, will, in most cases, be nearly in proportion to their revenue. Their expense is taxed, by taxing the consumable commodities upon which it is laid out.

A per-person tax cannot tax people in proportion to their income. This difficulty seems to have led to the invention of taxes on goods people consume. The state does not know how to tax its subjects' income directly and proportionately. So it tries to tax their income indirectly by taxing their spending. Spending is assumed to be roughly proportional to income in most cases. The state taxes spending by taxing the goods people buy and consume.

Consumable commodities are either necessaries or luxuries.

Consumable goods are either necessities or luxuries.

By necessaries I understand, not only the commodities which are indispensibly necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably, though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty, which, it is presumed, nobody can well fall into without extreme bad conduct. Custom, in the same manner, has rendered leather shoes a necessary of life in England. The poorest creditable person, of either sex, would be ashamed to appear in public without them. In Scotland, custom has rendered them a necessary of life to the lowest order of men; but not to the same order of women, who may, without any discredit, walk about barefooted. In France, they are necessaries neither to men nor to women; the lowest rank of both sexes appearing there publicly, without any discredit, sometimes in wooden shoes, and sometimes barefooted. Under necessaries, therefore, I comprehend, not only those things which nature, but those things which the established rules of decency have rendered necessary to the lowest rank of people. All other things I call luxuries, without meaning, by this appellation, to throw the smallest degree of reproach upon the temperate use of them. Beer and ale, for example, in Great Britain, and wine, even in the wine countries, I call luxuries. A man of any rank may, without any reproach, abstain totally from tasting such liquors. Nature does not render them necessary for the support of life; and custom nowhere renders it indecent to live without them.

By necessities, I mean more than the goods essential to sustain life. I also mean whatever a country’s customs make it improper for respectable people to go without, even at the lowest level of society. A linen shirt, for example, is not strictly necessary for life. I suppose the Greeks and Romans lived very comfortably, though they had no linen. But today, in most of Europe, a respectable day laborer would be ashamed to appear in public without a linen shirt. People would take its absence as a sign of disgraceful poverty. They assume that no one can fall into such poverty without extreme misconduct. In the same way, custom has made leather shoes a necessity of life in England. The poorest respectable person, whether man or woman, would be ashamed to appear in public without them. In Scotland, custom has made leather shoes a necessity for men of the lowest rank, but not for women of the same rank. Those women can walk barefoot without any loss of respect. In France, leather shoes are necessities for neither men nor women. Men and women of the lowest rank sometimes appear in public there in wooden shoes, and sometimes barefoot, without any loss of respect. By necessities, then, I mean not only what nature makes necessary for the lowest rank of people. I also mean what established rules of decency make necessary for them. I call everything else a luxury. By calling these things luxuries, I do not mean to criticize their moderate use in the slightest. For example, I call beer and ale luxuries in Great Britain, and wine a luxury even in wine-producing countries. A person of any rank may avoid drinking such beverages entirely without being criticized. Nature does not make them necessary to sustain life, and nowhere does custom make it improper to live without them.

As the wages of labour are everywhere regulated, partly by the demand for it, and partly by the average price of the necessary articles of subsistence; whatever raises this average price must necessarily raise those wages; so that the labourer may still be able to purchase that quantity of those necessary articles which the state of the demand for labour, whether increasing, stationary, or declining, requires that he should have. {See book i.chap. 8} A tax upon those articles necessarily raises their price somewhat higher than the amount of the tax, because the dealer, who advances the tax, must generally get it back, with a profit. Such a tax must, therefore, occasion a rise in the wages of labour, proportionable to this rise of price.

Wages everywhere depend partly on the demand for labor and partly on the average price of basic necessities. Anything that raises that average price must therefore raise wages. This allows workers to keep buying the quantity of necessities required by the state of the demand for labor, whether it is increasing, steady, or declining. {See book i.chap. 8} A tax on necessities raises their price by somewhat more than the tax itself. This is because the dealer who pays the tax in advance must generally recover it, along with a profit. Such a tax must therefore cause wages to rise in proportion to the rise in prices.

It is thus that a tax upon the necessaries of life operates exactly in the same manner as a direct tax upon the wages of labour. The labourer, though he may pay it out of his hand, cannot, for any considerable time at least, be properly said even to advance it. It must always, in the long-run, be advanced to him by his immediate employer, in the advanced state of wages. His employer, if he is a manufacturer, will charge upon the price of his goods the rise of wages, together with a profit, so that the final payment of the tax, together with this overcharge, will fall upon the consumer. If his employer is a farmer, the final payment, together with a like overcharge, will fall upon the rent of the landlord.

In this way, a tax on life’s necessities works exactly like a direct tax on workers’ wages. Though the worker may pay the tax directly, he cannot be said to pay it in advance for long. In the long run, his immediate employer must always advance it to him through higher wages. If the employer is a manufacturer, he will add the wage increase to the price of his goods, along with a profit. The consumer will therefore ultimately pay the tax and this extra charge. If the employer is a farmer, the tax and a similar extra charge will ultimately be paid from the landlord’s rent.

It is otherwise with taxes upon what I call luxuries, even upon those of the poor. The rise in the price of the taxed commodities, will not necessarily occasion any rise in the wages of labour. A tax upon tobacco, for example, though a luxury of the poor, as well as of the rich, will not raise wages. Though it is taxed in England at three times, and in France at fifteen times its original price, those high duties seem to have no effect upon the wages of labour. The same thing maybe said of the taxes upon tea and sugar, which, in England and Holland, have become luxuries of the lowest ranks of people; and of those upon chocolate, which, in Spain, is said to have become so.

Taxes on what I call luxuries are different, even when the poor enjoy them. A rise in the price of taxed goods will not necessarily cause wages to rise. For example, a tax on tobacco will not raise wages, although tobacco is a luxury for both poor and rich. In England, tobacco is taxed at three times its original price, and in France at fifteen times. Yet these high taxes seem to have no effect on wages. The same can be said of taxes on tea and sugar. In England and Holland, these have become luxuries even for the poorest people. The same is true of taxes on chocolate, which is said to have become a luxury for the poorest in Spain.

The different taxes which, in Great Britain, have, in the course of the present century, been imposed upon spiritous liquors, are not supposed to have had any effect upon the wages of labour. The rise in the price of porter, occasioned by an additional tax of three shillings upon the barrel of strong beer, has not raised the wages of common labour in London. These were about eighteen pence or twenty pence a-day before the tax, and they are not more now.

The various taxes imposed on spirits in Great Britain during this century are not thought to have affected workers’ wages. An additional tax of three shillings per barrel of strong beer raised the price of porter. But it did not raise the wages of ordinary workers in London. They earned about eighteen or twenty pence a day before the tax, and they earn no more now.

The high price of such commodities does not necessarily diminish the ability of the inferior ranks of people to bring up families. Upon the sober and industrious poor, taxes upon such commodities act as sumptuary laws, and dispose them either to moderate, or to refrain altogether from the use of superfluities which they can no longer easily afford. Their ability to bring up families, in consequence of this forced frugality, instead of being diminished, is frequently, perhaps, increased by the tax. It is the sober and industrious poor who generally bring up the most numerous families, and who principally supply the demand for useful labour. All the poor, indeed, are not sober and industrious; and the dissolute and disorderly might continue to indulge themselves in the use of such commodities, after this rise of price, in the same manner as before, without regarding the distress which this indulgence might bring upon their families. Such disorderly persons, however, seldom rear up numerous families, their children generally perishing from neglect, mismanagement, and the scantiness or unwholesomeness of their food. If by the strength of their constitution, they survive the hardships to which the bad conduct of their parents exposes them, yet the example of that bad conduct commonly corrupts their morals; so that, instead of being useful to society by their industry, they become public nuisances by their vices and disorders. Through the advanced price of the luxuries of the poor, therefore, might increase somewhat the distress of such disorderly families, and thereby diminish somewhat their ability to bring up children, it would not probably diminish much the useful population of the country.

The high price of such goods does not necessarily reduce the ability of poorer people to raise families. For sober and hardworking poor people, taxes on these goods act like laws restricting luxury. The taxes encourage them to use fewer luxuries, or give them up altogether, because they can no longer easily afford them. This forced thrift does not reduce their ability to raise families. Instead, the tax may often increase it. Sober and hardworking poor people generally raise the largest families. They are also the main source of useful labor. Of course, not all poor people are sober and hardworking. Those who are self-indulgent and disorderly might continue to consume these goods just as before, despite the higher price. They might do so without regard for the hardship this could bring to their families. Such people, however, seldom raise large families. Their children generally die because of neglect, poor care, and food that is scarce or unhealthy. Some children may have strong enough constitutions to survive the hardships caused by their parents’ bad conduct. Even so, their parents’ bad example commonly corrupts their morals. As a result, instead of serving society through hard work, they become public nuisances through their vices and disorderly behavior. Higher prices for the luxuries of the poor might therefore increase the hardship of such disorderly families somewhat. This might in turn reduce their ability to raise children somewhat. But it would probably not greatly reduce the country’s useful population.

Any rise in the average price of necessaries, unless it be compensated by a proportionable rise in the wages of labour, must necessarily diminish, more or less, the ability of the poor to bring up numerous families, and, consequently, to supply the demand for useful labour; whatever may be the state of that demand, whether increasing, stationary, or declining; or such as requires an increasing, stationary, or declining population.

Any rise in the average price of necessities must reduce poor people’s ability to raise large families, unless wages rise proportionately. As a result, it must also reduce their ability to supply the demand for useful labor. This holds whether that demand is rising, steady, or falling, or requires a growing, stable, or shrinking population.

Taxes upon luxuries have no tendency to raise the price of any other commodities, except that of the commodities taxed. Taxes upon necessaries, by raising the wages of labour, necessarily tend to raise the price of all manufactures, and consequently to diminish the extent of their sale and consumption. Taxes upon luxuries are finally paid by the consumers of the commodities taxed, without any retribution. They fall indifferently upon every species of revenue, the wages of labour, the profits of stock, and the rent of land. Taxes upon necessaries, so far as they affect the labouring poor, are finally paid, partly by landlords, in the diminished rent of their lands, and partly by rich consumers, whether landlords or others, in the advanced price of manufactured goods; and always with a considerable overcharge. The advanced price of such manufactures as are real necessaries of life, and are destined for the consumption of the poor, of coarse woollens, for example, must be compensated to the poor by a farther advancement of their wages. The middling and superior ranks of people, if they understood their own interest, ought always to oppose all taxes upon the necessaries of life, as well as all taxes upon the wages of labour. The final payment of both the one and the other falls altogether upon themselves, and always with a considerable overcharge. They fall heaviest upon the landlords, who always pay in a double capacity; in that of landlords, by the reduction, of their rent; and in that of rich consumers, by the increase of their expense. The observation of Sir Matthew Decker, that certain taxes are, in the price of certain goods, sometimes repeated and accumulated four or five times, is perfectly just with regard to taxes upon the necessaries of life. In the price of leather, for example, you must pay not only for the tax upon the leather of your own shoes, but for a part of that upon those of the shoemaker and the tanner. You must pay, too, for the tax upon the salt, upon the soap, and upon the candles which those workmen consume while employed in your service; and for the tax upon the leather, which the saltmaker, the soap-maker, and the candle-maker consume, while employed in their service.

Taxes on luxuries do not tend to raise the price of any goods except those taxed. Taxes on necessities raise workers’ wages. They therefore tend to raise the price of all manufactured goods, reducing their sales and consumption. Consumers ultimately pay taxes on luxuries, without compensation. These taxes fall equally on every kind of income: wages, profits from capital, and rent from land. Taxes on necessities, insofar as they affect the working poor, are ultimately paid partly by landlords through reduced rents. Rich consumers, whether landlords or others, pay the rest through higher prices for manufactured goods. In every case, they pay considerably more than the original tax. Some manufactured goods are necessities of life and are intended for consumption by the poor. Coarse woolen cloth is one example. When the price of such goods rises, the poor must be compensated by a further increase in wages. If the middle and upper classes understood their own interests, they would always oppose all taxes on necessities and wages. They ultimately pay the full cost of both kinds of tax, always with a considerable added charge. These taxes fall most heavily on landlords, who always pay in two ways. As landlords, they receive less rent. As rich consumers, they face higher expenses. Sir Matthew Decker observed that certain taxes are sometimes repeated and accumulated four or five times in the price of certain goods. His observation is entirely correct when it comes to taxes on necessities. In the price of leather, for example, you must pay the tax on the leather in your own shoes. You must also pay part of the tax on the leather in the shoemaker’s and the tanner’s shoes. You must also pay the taxes on the salt, soap, and candles those workers consume while working for you. And you must pay the tax on the leather that the saltmaker, soap-maker, and candle-maker consume while working for them.

In Great Britain, the principal taxes upon the necessaries of life, are those upon the four commodities just now mentioned, salt, leather, soap, and candles.

In Great Britain, the main taxes on necessities are on the four goods just mentioned: salt, leather, soap, and candles.

Salt is a very ancient and a very universal subject of taxation. It was taxed among the Romans, and it is so at present in, I believe, every part of Europe. The quantity annually consumed by any individual is so small, and may be purchased so gradually, that nobody, it seems to have been thought, could feel very sensibly even a pretty heavy tax upon it. It is in England taxed at three shillings and fourpence a bushel; about three times the original price of the commodity. In some other countries, the tax is still higher. Leather is a real necessary of life. The use of linen renders soap such. In countries where the winter nights are long, candles are a necessary instrument of trade. Leather and soap are in Great Britain taxed at three halfpence a-pound; candles at a penny; taxes which, upon the original price of leather, may amount to about eight or ten per cent.; upon that of soap, to about twenty or five-and-twenty per cent.; and upon that of candles to about fourteen or fifteen per cent.; taxes which, though lighter than that upon salt, are still very heavy. As all those four commodities are real necessaries of life, such heavy taxes upon them must increase somewhat the expense of the sober and industrious poor, and must consequently raise more or less the wages of their labour.

Salt has been taxed for a very long time and almost everywhere. The Romans taxed it. I believe it is now taxed in every part of Europe. Each person consumes so little salt each year, and can buy it so gradually, that even a fairly heavy tax seemed unlikely to be felt much. In England, salt is taxed at three shillings and fourpence a bushel, about three times its original price. In some other countries, the tax is even higher. Leather is a real necessity of life. The use of linen makes soap a necessity too. In countries with long winter nights, candles are a necessary tool of trade. In Great Britain, leather and soap are taxed at three halfpence a pound, and candles at a penny a pound. These taxes may amount to about eight or ten percent of the original price of leather, about twenty or twenty-five percent for soap, and about fourteen or fifteen percent for candles. Though lighter than the tax on salt, they are still very heavy. All four goods are real necessities of life. Such heavy taxes on them must somewhat increase the living expenses of the sober and hardworking poor. They must consequently raise their wages to some extent.

In a country where the winters are so cold as in Great Britain, fuel is, during that season, in the strictest sense of the word, a necessary of life, not only for the purpose of dressing victuals, but for the comfortable subsistence of many different sorts of workmen who work within doors; and coals are the cheapest of all fuel. The price of fuel has so important an influence upon that of labour, that all over Great Britain, manufactures have confined themselves principally to the coal counties; other parts of the country, on account of the high price of this necessary article, not being able to work so cheap. In some manufactures, besides, coal is a necessary instrument of trade; as in those of glass, iron, and all other metals. If a bounty could in any case be reasonable, it might perhaps be so upon the transportation of coals from those parts of the country in which they abound, to those in which they are wanted. But the legislature, instead of a bounty, has imposed a tax of three shillings and threepence a-ton upon coals carried coastways; which, upon most sorts of coal, is more than sixty per cent. of the original price at the coal pit. Coals carried, either by land or by inland navigation, pay no duty. Where they are naturally cheap, they are consumed duty free; where they are naturally dear, they are loaded with a heavy duty.

In a country with winters as cold as Great Britain’s, fuel is a necessity of life during that season. It is needed not only for cooking food, but also for the comfortable livelihood of many kinds of indoor workers. Coal is the cheapest of all fuels. The price of fuel has such an important effect on the price of labor that manufacturing throughout Great Britain has concentrated mainly in the coal-producing counties. Other parts of the country cannot produce goods as cheaply because fuel costs so much. Coal is also essential to some industries, including glassmaking and the production of iron and all other metals. If a subsidy could ever be reasonable, it might perhaps be reasonable for transporting coal. It could help move coal from parts of the country where it is abundant to those where it is needed. But instead of offering a subsidy, the legislature has taxed coal transported by sea along the coast. The tax is three shillings and threepence per ton. For most kinds of coal, this is more than sixty percent of the original price at the mine. Coal transported by land or inland waterways pays no tax. Where coal is naturally cheap, it is consumed tax-free. Where it is naturally expensive, it is burdened with a heavy tax.

Such taxes, though they raise the price of subsistence, and consequently the wages of labour, yet they afford a considerable revenue to government, which it might not be easy to find in any other way. There may, therefore, be good reasons for continuing them. The bounty upon the exportation of corn, so far as it tends, in the actual state of tillage, to raise the price of that necessary article, produces all the like bad effects; and instead of affording any revenue, frequently occasions a very great expense to government. The high duties upon the importation of foreign corn, which, in years of moderate plenty, amount to a prohibition; and the absolute prohibition of the importation, either of live cattle, or of salt provisions, which takes place in the ordinary state of the law, and which, on account of the scarcity, is at present suspended for a limited time with regard to Ireland and the British plantations, have all had the bad effects of taxes upon the necessaries of life, and produce no revenue to government. Nothing seems necessary for the repeal of such regulations, but to convince the public of the futility of that system in consequence of which they have been established.

Although such taxes raise the price of basic necessities, and consequently wages, they provide the government with considerable revenue. The government might not easily find that revenue elsewhere. There may therefore be good reasons to keep these taxes. The subsidy for exporting grain has all the same bad effects, insofar as it raises the price of this necessity under current farming conditions. And instead of providing revenue, the subsidy often causes the government great expense. High duties on imported foreign grain amount to a ban in years of moderate abundance. The law also ordinarily imposes an absolute ban on imports of live cattle or salted provisions. Because of the scarcity, this ban is currently suspended for a limited time for Ireland and the British plantations. All these restrictions have had the bad effects of taxes on the necessities of life, and they provide no government revenue. To repeal such regulations, it seems necessary only to convince the public that the system behind them is futile.

Taxes upon the necessaries of life are much higher in many other countries than in Great Britain. Duties upon flour and meal when ground at the mill, and upon bread when baked at the oven, take place in many countries. In Holland the money-price of the bread consumed in towns is supposed to be doubled by means of such taxes. In lieu of a part of them, the people who live in the country, pay every year so much a-head, according to the sort of bread they are supposed to consume. Those who consume wheaten bread pay three guilders fifteen stivers; about six shillings and ninepence halfpenny. Those, and some other taxes of the same kind, by raising the price of labour, are said to have ruined the greater part of the manufactures of Holland {Memoires concernant les Droits, etc. p. 210, 211.}. Similar taxes, though not quite so heavy, take place in the Milanese, in the states of Genoa, in the duchy of Modena, in the duchies of Parma, Placentia, and Guastalla, and the Ecclesiastical state. A French author {Le Reformateur} of some note, has proposed to reform the finances of his country, by substituting in the room of the greater part of other taxes, this most ruinous of all taxes. There is nothing so absurd, says Cicero, which has not sometimes been asserted by some philosophers.

Taxes on necessities are much higher in many other countries than in Great Britain. Many countries tax flour and meal when they are ground at the mill, and bread when it is baked. In Holland, such taxes are thought to double the price of bread consumed in towns. Instead of paying some of these taxes, people in the countryside pay an annual amount per person. The amount depends on the kind of bread they are thought to consume. Those who eat wheat bread pay three guilders and fifteen stivers, or about six shillings and ninepence halfpenny. These and some similar taxes are said to have raised the price of labor. In doing so, they are said to have ruined most of Holland’s manufactures {Memoires concernant les Droits, etc. p. 210, 211.}. Similar taxes, though not quite as heavy, exist in the Milanese, the states of Genoa, and the duchy of Modena. They also exist in the duchies of Parma, Placentia, and Guastalla, and in the Ecclesiastical state. A French author of some note {Le Reformateur} has proposed reforming his country’s finances. He would replace most other taxes with this most ruinous of all taxes. As Cicero says, nothing is so absurd that some philosophers have not at some time asserted it.

Taxes upon butcher’s meat are still more common than those upon bread. It may indeed be doubted, whether butcher’s meat is any where a necessary of life. Grain and other vegetables, with the help of milk, cheese, and butter, or oil, where butter is not to be had, it is known from experience, can, without any butcher’s meat, afford the most plentiful, the most wholesome, the most nourishing, and the most invigorating diet. Decency nowhere requires that any man should eat butcher’s meat, as it in most places requires that he should wear a linen shirt or a pair of leather shoes.

Taxes on meat are even more common than taxes on bread. Indeed, one may doubt whether meat is a necessity of life anywhere. Experience shows that grain and other vegetables, together with milk, cheese, and butter, can provide a plentiful, wholesome, nourishing, and invigorating diet. Where butter is unavailable, oil can take its place. Such a diet can be the most plentiful, wholesome, nourishing, and invigorating without any meat at all. Nowhere do standards of decency require anyone to eat meat. Yet in most places, they do require a person to wear a linen shirt or a pair of leather shoes.

Consumable commodities, whether necessaries or luxuries, may be taxed in two different ways. The consumer may either pay an annual sum on account of his using or consuming goods of a certain kind; or the goods may be taxed while they remain in the hands of the dealer, and before they are delivered to the consumer. The consumable goods which last a considerable time before they are consumed altogether, are most properly taxed in the one way; those of which the consumption is either immediate or more speedy, in the other. The coach-tax and plate tax are examples of the former method of imposing; the greater part of the other duties of excise and customs, of the latter.

Goods that are consumed, whether necessities or luxuries, may be taxed in two ways. Consumers may pay an annual tax for using or consuming goods of a certain kind. Or the goods may be taxed while still in the dealer’s hands, before they reach the consumer. The first method is most suitable for goods that last a long time before being used up. The second is most suitable for goods consumed immediately or more quickly. The taxes on coaches and silver plate are examples of the first method. Most other excise taxes and customs duties are examples of the second.

A coach may, with good management, last ten or twelve years. It might be taxed, once for all, before it comes out of the hands of the coach-maker. But it is certainly more convenient for the buyer to pay four pounds a-year for the privilege of keeping a coach, than to pay all at once forty or forty-eight pounds additional price to the coach-maker; or a sum equivalent to what the tax is likely to cost him during the time he uses the same coach. A service of plate in the same manner, may last more than a century. It is certainly-easier for the consumer to pay five shillings a-year for every hundred ounces of plate, near one per cent. of the value, than to redeem this long annuity at five-and-twenty or thirty years purchase, which would enhance the price at least five-and-twenty or thirty per cent. The different taxes which affect houses, are certainly more conveniently paid by moderate annual payments, than by a heavy tax of equal value upon the first building or sale of the house.

A coach may last ten or twelve years if properly maintained. It could be taxed once, before it leaves the coachmaker. But it is certainly more convenient for the buyer to pay four pounds a year for the privilege of keeping a coach. The alternative is to pay the coachmaker an extra forty or forty-eight pounds all at once. That extra price would equal what the tax is likely to cost the buyer while using the same coach. Similarly, a set of silver plate may last more than a century. A consumer can pay five shillings a year for every hundred ounces of plate, nearly one percent of its value. That is certainly easier than paying the annual tax in advance at twenty-five or thirty years' purchase. Such a payment would increase the price by at least twenty-five or thirty percent. The various taxes on houses are certainly more convenient to pay in moderate annual payments. The alternative is an equally valuable but heavy tax when the house is first built or sold.

It was the well-known proposal of Sir Matthew Decker, that all commodities, even those of which the consumption is either immediate or speedy, should be taxed in this manner; the dealer advancing nothing, but the consumer paying a certain annual sum for the licence to consume certain goods. The object of his scheme was to promote all the different branches of foreign trade, particularly the carrying trade, by taking away all duties upon importation and exportation, and thereby enabling the merchant to employ his whole capital and credit in the purchase of goods and the freight of ships, no part of either being diverted towards the advancing of taxes, The project, however, of taxing, in this manner, goods of immediate or speedy consumption, seems liable to the four following very important objections. First, the tax would be more unequal, or not so well proportioned to the expense and consumption of the different contributors, as in the way in which it is commonly imposed. The taxes upon ale, wine, and spiritous liquors, which are advanced by the dealers, are finally paid by the different consumers, exactly in proportion to their respective consumption. But if the tax were to be paid by purchasing a licence to drink those liquors, the sober would, in proportion to his consumption, be taxed much more heavily than the drunken consumer. A family which exercised great hospitality, would be taxed much more lightly than one who entertained fewer guests. Secondly, this mode of taxation, by paying for an annual, half-yearly, or quarterly licence to consume certain goods, would diminish very much one of the principal conveniences of taxes upon goods of speedy consumption; the piece-meal payment. In the price of threepence halfpenny, which is at present paid for a pot of porter, the different taxes upon malt, hops, and beer, together with the extraordinary profit which the brewer charges for having advanced than, may perhaps amount to about three halfpence. If a workman can conveniently spare those three halfpence, he buys a pot of porter. If he cannot, he contents himself with a pint; and, as a penny saved is a penny got, he thus gains a farthing by his temperance. He pays the tax piece-meal, as he can afford to pay it, and when he can afford to pay it, and every act of payment is perfectly voluntary, and what he can avoid if he chuses to do so. Thirdly, such taxes would operate less as sumptuary laws. When the licence was once purchased, whether the purchaser drunk much or drunk little, his tax would be the same. Fourthly, if a workman were to pay all at once, by yearly, half-yearly, or quarterly payments, a tax equal to what he at present pays, with little or no inconveniency, upon all the different pots and pints of porter which he drinks in any such period of time, the sum might frequently distress him very much. This mode of taxation, therefore, it seems evident, could never, without the most grievous oppression, produce a revenue nearly equal to what is derived from the present mode without any oppression. In several countries, however, commodities of an immediate or very speedy consumption are taxed in this manner. In Holland, people pay so much a-head for a licence to drink tea. I have already mentioned a tax upon bread, which, so far as it is consumed in farm houses and country villages, is there levied in the same manner.

Sir Matthew Decker famously proposed that all goods should be taxed in this way, even those consumed immediately or quickly. Dealers would advance no tax. Instead, consumers would pay a fixed annual sum for a licence to consume certain goods. His scheme aimed to promote every branch of foreign trade, particularly the carrying trade, by removing all import and export duties. Merchants could then use all their capital and credit to buy goods and pay for shipping. None of their capital or credit would be diverted to advancing taxes. But taxing goods consumed immediately or quickly in this way seems open to four very important objections. First, the tax would be less equal than a tax imposed in the usual way. It would not be as closely proportioned to each contributor’s spending and consumption. The taxes on ale, wine, and spirits are advanced by dealers. Consumers ultimately pay them in exact proportion to how much they consume. But if people paid the tax by buying a licence to drink those liquors, the sober person would pay much more in proportion to consumption than the drunkard. A family that showed great hospitality would be taxed much more lightly than one that entertained fewer guests. Second, paying for an annual, half-yearly, or quarterly licence to consume certain goods would greatly reduce a principal convenience of taxes on goods consumed quickly: payment in small amounts. A pot of porter now costs threepence halfpenny. Of that price, the taxes on malt, hops, and beer, together with the extra profit the brewer charges for advancing them, may perhaps amount to about three halfpence. If a workman can conveniently spare those three halfpence, he buys a pot of porter. If he cannot, he makes do with a pint. And since a penny saved is a penny earned, he gains a farthing through his temperance. He pays the tax in small amounts, as and when he can afford it. Every payment is entirely voluntary, and he can avoid it if he chooses. Third, such taxes would do less to discourage excessive consumption. Once a person had bought a licence, the tax would be the same whether he drank much or little. Fourth, a workman might often suffer great hardship if he had to pay a tax in one yearly, half-yearly, or quarterly sum. The sum would equal what he now pays, with little or no inconvenience, on all the pots and pints of porter he drinks in such a period. It therefore seems clear that this method of taxation could never raise nearly as much revenue as the present method without causing the most grievous oppression. The present method raises that revenue without any oppression. In several countries, however, goods consumed immediately or very quickly are taxed in this way. In Holland, people pay a fixed amount per head for a licence to drink tea. I have already mentioned a tax on bread. In Holland, the tax is collected in the same way on bread consumed in farmhouses and country villages.

The duties of excise are imposed chiefly upon goods of home produce, destined for home consumption. They are imposed only upon a few sorts of goods of the most general use. There can never be any doubt, either concerning the goods which are subject to those duties, or concerning the particular duty which each species of goods is subject to. They fall almost altogether upon what I call luxuries, excepting always the four duties above mentioned, upon salt, soap, leather, candles, and perhaps that upon green glass.

Excise duties are imposed mainly on goods produced at home for domestic consumption. They apply to only a few kinds of goods in general use. There can never be any doubt about which goods are subject to these duties. Nor can there be any doubt about the duty imposed on each kind of goods. These duties fall almost entirely on what I call luxuries. The exceptions are the four duties mentioned above, on salt, soap, leather, and candles, and perhaps the duty on green glass.

The duties of customs are much more ancient than those of excise. They seem to have been called customs, as denoting customary payments, which had been in use for time immemorial. They appear to have been originally considered as taxes upon the profits of merchants. During the barbarous times of feudal anarchy, merchants, like all the other inhabitants of burghs, were considered as little better than emancipated bondmen, whose persons were despised, and whose gains were envied. The great nobility, who had consented that the king should tallage the profits of their own tenants, were not unwilling that he should tallage likewise those of an order of men whom it was much less their interest to protect. In those ignorant times, it was not understood, that the profits of merchants are a subject not taxable directly; or that the final payment of all such taxes must fall, with a considerable overcharge, upon the consumers.

Customs duties are much older than excise duties. They seem to have been called customs because they were customary payments that had existed for time immemorial. They appear to have originally been regarded as taxes on merchants’ profits. During the barbarous times of feudal anarchy, merchants were considered little better than freed bondmen. The same was true of all other inhabitants of towns. They were despised, and their earnings were envied. The great nobles had agreed to let the king tax the profits of their own tenants. So they were willing to let him tax the profits of a class they had even less interest in protecting. In those ignorant times, people did not understand that merchants’ profits cannot be taxed directly. Nor did they understand that consumers must ultimately pay all such taxes, along with a considerable additional charge.

The gains of alien merchants were looked upon more unfavourably than those of English merchants. It was natural, therefore, that those of the former should be taxed more heavily than those of the latter. This distinction between the duties upon aliens and those upon English merchants, which was begun from ignorance, has been continued front the spirit of monopoly, or in order to give our own merchants an advantage, both in the home and in the foreign market.

The profits of foreign merchants were viewed less favorably than those of English merchants. It was natural, therefore, to tax foreign merchants’ profits more heavily. This difference in duties began in ignorance. But it has continued because of the spirit of monopoly, to give our own merchants an advantage in both domestic and foreign markets.

With this distinction, the ancient duties of customs were imposed equally upon all sorts of goods, necessaries as well its luxuries, goods exported as well as goods imported. Why should the dealers in one sort of goods, it seems to have been thought, be more favoured than those in another? or why should the merchant exporter be more favoured than the merchant importer?

With this distinction, the old customs duties applied equally to all goods. They applied to necessities and luxuries, and to exports and imports. Why, people seem to have thought, should dealers in one kind of goods be favored over dealers in another? Or why should merchants who export goods be favored over those who import them?

The ancient customs were divided into three branches. The first, and, perhaps, the most ancient of all those duties, was that upon wool and leather. It seems to have been chiefly or altogether an exportation duty. When the woollen manufacture came to be established in England, lest the king should lose any part of his customs upon wool by the exportation of woollen cloths, a like duty was imposed upon them. The other two branches were, first, a duty upon wine, which being imposed at so much a-ton, was called a tonnage; and, secondly, a duty upon all other goods, which being imposed at so much a-pound of their supposed value, was called a poundage. In the forty-seventh year of Edward III., a duty of sixpence in the pound was imposed upon all goods exported and imported, except wools, wool-felts, leather, and wines which were subject to particular duties. In the fourteenth of Richard II., this duty was raised to one shilling in the pound; but, three years afterwards, it was again reduced to sixpence. It was raised to eightpence in the second year of Henry IV.; and, in the fourth of the same prince, to one shilling. From this time to the ninth year of William III., this duty continued at one shilling in the pound. The duties of tonnage and poundage were generally granted to the king by one and the same act of parliament, and were called the subsidy of tonnage and poundage. The subsidy of poundage having continued for so long a time at one shilling in the pound, or at five per cent., a subsidy came, in the language of the customs, to denote a general duty of this kind of five per cent. This subsidy, which is now called the old subsidy, still continues to be levied, according to the book of rates established by the twelfth of Charles II. The method of ascertaining, by a book of rates, the value of goods subject to this duty, is said to be older than the time of James I. The new subsidy, imposed by the ninth and tenth of William III., was an additional five per cent. upon the greater part of goods. The one-third and the two-third subsidy made up between them another five per cent. of which they were proportionable parts. The subsidy of 1747 made a fourth five per cent. upon the greater part of goods; and that of 1759, a fifth upon some particular sorts of goods. Besides those five subsidies, a great variety of other duties have occasionally been imposed upon particular sorts of goods, in order sometimes to relieve the exigencies of the state, and sometimes to regulate the trade of the country, according to the principles of the mercantile system.

The old customs duties were divided into three branches. The first, and perhaps the oldest of all these duties, was on wool and leather. It seems to have been mainly or entirely an export duty. When woolen manufacturing became established in England, a similar duty was imposed on woolen cloth. This prevented the king from losing any of his customs revenue on wool exported as cloth. The second branch was a duty on wine, charged at a fixed rate per ton and called tonnage. The third was a duty on all other goods, charged per pound of their estimated value and called poundage. In the forty-seventh year of Edward III, a duty of sixpence per pound was imposed on all exports and imports. Wool, wool-felts, leather, and wine were excepted because they were subject to separate duties. In the fourteenth year of Richard II, the general duty was raised to one shilling per pound. But three years later, it was reduced again to sixpence. It was raised to eightpence in the second year of Henry IV, and to one shilling in his fourth year. From then until the ninth year of William III, the duty remained at one shilling per pound. Parliament generally granted the king the duties of tonnage and poundage in a single act. Together, they were called the subsidy of tonnage and poundage. The poundage subsidy remained at one shilling per pound, or five percent, for so long that “subsidy” acquired a special meaning in customs. It came to mean a general duty of this kind at five percent. This duty, now called the old subsidy, is still collected according to the book of rates established in the twelfth year of Charles II. The practice of using a book of rates to determine the value of goods subject to the duty is said to predate James I. The new subsidy, imposed in the ninth and tenth years of William III, added five percent on most goods. The one-third and two-third subsidies were proportionate parts of another five percent, which they made up between them. The subsidy of 1747 added a fourth five percent on most goods. That of 1759 added a fifth five percent on certain kinds of goods. Besides these five subsidies, many other duties have sometimes been imposed on particular kinds of goods. Some were imposed to meet urgent state needs, and others to regulate the country's trade according to mercantile principles.

That system has come gradually more and more into fashion. The old subsidy was imposed indifferently upon exportation, as well as importation. The four subsequent subsidies, as well as the other duties which have since been occasionally imposed upon particular sorts of goods, have, with a few exceptions, been laid altogether upon importation. The greater part of the ancient duties which had been imposed upon the exportation of the goods of home produce and manufacture, have either been lightened or taken away altogether. In most cases, they have been taken away. Bounties have even been given upon the exportation of some of them. Drawbacks, too, sometimes of the whole, and, in most cases, of a part of the duties which are paid upon the importation of foreign goods, have been granted upon their exportation. Only half the duties imposed by the old subsidy upon importation, are drawn back upon exportation; but the whole of those imposed by the latter subsidies and other imposts are, upon the greater parts of the goods, drawn back in the same manner. This growing favour of exportation, and discouragement of importation, have suffered only a few exceptions, which chiefly concern the materials of some manufactures. These our merchants and manufacturers are willing should come as cheap as possible to themselves, and as dear as possible to their rivals and competitors in other countries. Foreign materials are, upon this account, sometimes allowed to be imported duty-free; spanish wool, for example, flax, and raw linen yarn. The exportation of the materials of home produce, and of those which are the particular produce of our colonies, has sometimes been prohibited, and sometimes subjected to higher duties. The exportation of English wool has been prohibited. That of beaver skins, of beaver wool, and of gum-senega, has been subjected to higher duties; Great Britain, by the conquests of Canada and Senegal, having got almost the monopoly of those commodities.

That system has gradually become more popular. The old subsidy was imposed equally on exports and imports. With a few exceptions, the four later subsidies applied only to imports. So did the other duties occasionally imposed on particular kinds of goods. Most of the old duties on exports of goods produced and manufactured at home have been reduced or removed altogether. In most cases, they have been removed. Bounties have even been given for exporting some of these goods. Refunds of import duties have also been granted when foreign goods are exported. Sometimes the whole duty is refunded, but in most cases only part is. Only half the import duties imposed by the old subsidy are refunded on export. But for most goods, all the duties imposed by the later subsidies and other charges are refunded on export. This growing favor toward exports and discouragement of imports have had only a few exceptions. These chiefly concern the materials used in some manufactures. Our merchants and manufacturers want these materials to be as cheap as possible for themselves. They also want them to be as expensive as possible for their rivals and competitors in other countries. For this reason, foreign materials are sometimes allowed into the country duty-free. Examples include Spanish wool, flax, and raw linen yarn. Exports of materials produced at home or produced particularly in our colonies have sometimes been prohibited. At other times, they have been subject to higher duties. The export of English wool has been prohibited. Higher duties have been imposed on exports of beaver skins, beaver wool, and gum-senega. By conquering Canada and Senegal, Great Britain gained almost a monopoly on these commodities.

That the mercantile system has not been very favourable to the revenue of the great body of the people, to the annual produce of the land and labour of the country, I have endeavoured to show in the fourth book of this Inquiry. It seems not to have been more favourable to the revenue of the sovereign; so far, at least, as that revenue depends upon the duties of customs.

In the fourth book of this Inquiry, I have tried to show that the mercantile system has not greatly benefited most people’s income. Nor has it greatly benefited the country’s annual production from land and labor. It seems to have been no more beneficial to the sovereign’s revenue, at least insofar as that revenue comes from customs duties.

In consequence of that system, the importation of several sorts of goods has been prohibited altogether. This prohibition has, in some cases, entirely prevented, and in others has very much diminished, the importation of those commodities, by reducing the importers to the necessity of smuggling. It has entirely prevented the importation of foreign wollens; and it has very much diminished that of foreign silks and velvets, In both cases, it has entirely annihilated the revenue of customs which might have been levied upon such importation.

As a result of that system, imports of several kinds of goods have been banned altogether. The ban has forced importers to smuggle these goods. In some cases, it has completely stopped their import. In others, it has greatly reduced it. The ban has completely stopped imports of foreign woolens and greatly reduced imports of foreign silks and velvets. In both cases, it has completely eliminated the customs revenue that could have been collected on those imports.

The high duties which have been imposed upon the importation of many different sorts of foreign goods in order to discourage their consumption in Great Britain, have, in many cases, served only to encourage smuggling, and, in all cases, have reduced the revenues of the customs below what more moderate duties would have afforded. The saying of Dr. Swift, that in the arithmetic of the customs, two and two, instead of making four, make sometimes only one, holds perfectly true with regard to such heavy duties, which never could have been imposed, had not the mercantile system taught us, in many cases, to employ taxation as an instrument, not of revenue, but of monopoly.

High duties have been imposed on many kinds of foreign goods to discourage their consumption in Great Britain. In many cases, these duties have only encouraged smuggling. In all cases, they have brought in less customs revenue than more moderate duties would have raised. Dr. Swift said that in the arithmetic of customs, two and two sometimes make only one instead of four. His saying is perfectly true of such heavy duties. They could never have been imposed if the mercantile system had not taught us to use taxation for monopoly rather than revenue in many cases.

The bounties which are sometimes given upon the exportation of home produce and manufactures, and the drawbacks which are paid upon the re-exportation of the greater part of foreign goods, have given occasion to many frauds, and to a species of smuggling, more destructive of the public revenue than any other. In order to obtain the bounty or drawback, the goods, it is well known, are sometimes shipped, and sent to sea, but soon afterwards clandestinely re-landed in some other part of the country. The defalcation of the revenue of customs occasioned by bounties and drawbacks, of which a great part are obtained fraudulently, is very great. The gross produce of the customs, in the year which ended on the 5th of January 1755, amounted to £5,068,000. The bounties which were paid out of this revenue, though in that year there was no bounty upon corn, amounted to £167,806. The drawbacks which were paid upon debentures and certificates, to £2,156,800. Bounties and drawbacks together amounted to £2,324,600. In consequence of these deductions, the revenue of the customs amounted only to £2,743,400; from which deducting £287,900 for the expense of management, in salaries and other incidents, the neat revenue of the customs for that year comes out to be £2,455,500. The expense of management, amounts, in this manner, to between five and six per cent. upon the gross revenue of the customs; and to something more than ten per cent. upon what remains of that revenue, after deducting what is paid away in bounties and drawbacks.

Bounties are sometimes paid on exports of domestic produce and manufactured goods. Drawbacks, or refunds of duties, are paid when most foreign goods are re-exported. These payments have given rise to much fraud and a form of smuggling more destructive to public revenue than any other. As is well known, goods are sometimes shipped and sent to sea to obtain the bounty or drawback. Soon afterward, however, they are secretly brought ashore elsewhere in the country. Bounties and drawbacks greatly reduce customs revenue, and many of these payments are obtained fraudulently. In the year ending on January 5, 1755, gross customs revenue amounted to £5,068,000. Bounties paid out of this revenue amounted to £167,806, although there was no bounty on corn that year. Drawbacks paid on debentures and certificates amounted to £2,156,800. Together, bounties and drawbacks amounted to £2,324,600. After these deductions, customs revenue amounted to only £2,743,400. Management expenses, including salaries and other costs, came to £287,900. After those expenses were deducted, net customs revenue for the year was £2,455,500. Management expenses therefore amounted to between five and six percent of gross customs revenue. They amounted to just over ten percent of the revenue left after bounties and drawbacks were deducted.

Heavy duties being imposed upon almost all goods imported, our merchant importers smuggle as much, and make entry of as little as they can. Our merchant exporters, on the contrary, make entry of more than they export; sometimes out of vanity, and to pass for great dealers in goods which pay no duty gain a bounty back. Our exports, in consequence of these different frauds, appear upon the custom-house books greatly to overbalance our imports, to the unspeakable comfort of those politicians, who measure the national prosperity by what they call the balance of trade.

Heavy duties are imposed on almost all imported goods. As a result, our merchant importers smuggle as much as they can and declare as little as possible. Our merchant exporters, by contrast, declare more than they export. Sometimes they do this out of vanity, to appear to be major dealers in goods that pay no duty and earn a bounty back. As a result of these different frauds, exports appear in the customs records to greatly exceed imports. This brings unspeakable comfort to those politicians who measure national prosperity by what they call the balance of trade.

All goods imported, unless particularly exempted, and such exemptions are not very numerous, are liable to some duties of customs. If any goods are imported, not mentioned in the book of rates, they are taxed at 4s:9¾d. for every twenty shillings value, according to the oath of the importer, that is, nearly at five subsidies, or five poundage duties. The book of rates is extremely comprehensive, and enumerates a great variety of articles, many of them little used, and, therefore, not well known. It is, upon this account, frequently uncertain under what article a particular sort of goods ought to be classed, and, consequently what duty they ought to pay. Mistakes with regard to this sometimes ruin the custom-house officer, and frequently occasion much trouble, expense, and vexation to the importer. In point of perspicuity, precision, and distinctness, therefore, the duties of customs are much inferior to those of excise.

All imported goods are subject to customs duties unless specifically exempted. There are not many exemptions. If imported goods are not listed in the book of rates, they are taxed at 4 shillings and 9¾ pence for every 20 shillings of value, as sworn by the importer. This amounts to nearly five subsidies, or five poundage duties. The book of rates is extremely comprehensive and lists a great variety of goods. Many are little used and, therefore, not well known. As a result, it is often unclear how particular goods should be classified and, consequently, what duty they should pay. Mistakes about classification sometimes ruin the customs officer and often cause the importer much trouble, expense, and frustration. Customs duties are therefore much less clear, precise, and distinct than excise duties.

In order that the greater part of the members of any society should contribute to the public revenue, in proportion to their respective expense, it does not seem necessary that every single article of that expense should be taxed. The revenue which is levied by the duties of excise is supposed to fall as equally upon the contributors as that which is levied by the duties of customs; and the duties of excise are imposed upon a few articles only of the most general used and consumption. It has been the opinion of many people, that, by proper management, the duties of customs might likewise, without any loss to the public revenue, and with great advantage to foreign trade, be confined to a few articles only.

Most members of a society should contribute to public revenue in proportion to their spending. To achieve this, it does not seem necessary to tax every item they buy. Excise duties are thought to fall as equally on those who pay them as customs duties do. Yet excise duties are imposed on only a few widely used and consumed goods. Many people have believed that, with proper management, customs duties could likewise be limited to a few goods. This could be done without any loss of public revenue and with great benefit to foreign trade.

The foreign articles, of the most general use and consumption in Great Britain, seem at present to consist chiefly in foreign wines and brandies; in some of the productions of America and the West Indies, sugar, rum, tobacco, cocoa-nuts, etc. and in some of those of the East Indies, tea, coffee, china-ware, spiceries of all kinds, several sorts of piece-goods, etc. These different articles afford, the greater part of the perhaps, at present, revenue which is drawn from the duties of customs. The taxes which at present subsist upon foreign manufactures, if you except those upon the few contained in the foregoing enumeration, have, the greater part of them, been imposed for the purpose, not of revenue, but of monopoly, or to give our own merchants an advantage in the home market. By removing all prohibitions, and by subjecting all foreign manufactures to such moderate taxes, as it was found from experience, afforded upon each article the greatest revenue to the public, our own workmen might still have a considerable advantage in the home market; and many articles, some of which at present afford no revenue to government, and others a very inconsiderable one, might afford a very great one.

The foreign goods most widely used and consumed in Great Britain today seem to be chiefly foreign wines and brandies, and some products of America and the West Indies, including sugar, rum, tobacco, and coconuts. They also include some products of the East Indies, such as tea, coffee, china, spices of all kinds, and several kinds of cloth. These goods perhaps provide most of the revenue now collected from customs duties. Apart from the few goods listed above, most current taxes on foreign manufactures were imposed for monopoly, not revenue. Their purpose was to give our own merchants an advantage in the home market. All prohibitions could be removed, and all foreign manufactures could be subject to moderate taxes. Experience would show which tax rate brought the greatest public revenue from each article. Our own workers might still have a considerable advantage in the home market. Many goods might also bring in substantial revenue, although some now provide none and others very little.

High taxes, sometimes by diminishing the consumption of the taxed commodities, and sometimes by encouraging smuggling frequently afford a smaller revenue to government than what might be drawn from more moderate taxes.

High taxes sometimes reduce consumption of taxed goods and sometimes encourage smuggling. As a result, high taxes often bring in less government revenue than more moderate taxes would.

When the diminution of revenue is the effect of the diminution of consumption, there can be but one remedy, and that is the lowering of the tax. When the diminution of revenue is the effect of the encouragement given to smuggling, it may, perhaps, be remedied in two ways; either by diminishing the temptation to smuggle, or by increasing the difficulty of smuggling. The temptation to smuggle can be diminished only by the lowering of the tax; and the difficulty of smuggling can be increased only by establishing that system of administration which is most proper for preventing it.

When revenue falls because consumption has decreased, there is only one remedy: lower the tax. When revenue falls because smuggling has been encouraged, there may be two remedies. One is to reduce the temptation to smuggle. The other is to make smuggling more difficult. The temptation to smuggle can be reduced only by lowering the tax. Smuggling can be made more difficult only by establishing the administrative system best suited to preventing it.

The excise laws, it appears, I believe, from experience, obstruct and embarrass the operations of the smuggler much more effectually than those of the customs. By introducing into the customs a system of administration as similar to that of the excise as the nature of the different duties will admit, the difficulty of smuggling might be very much increased. This alteration, it has been supposed by many people, might very easily be brought about.

Experience seems to show, I believe, that excise laws hinder smugglers much more effectively than customs laws. Smuggling could be made much harder by administering customs duties as much like excise duties as their different natures allow. Many people have thought this change could be made very easily.

The importer of commodities liable to any duties of customs, it has been said, might, at his option, be allowed either to carry them to his own private warehouse; or to lodge them in a warehouse, provided either at his own expense or at that of the public, but under the key of the custom-house officer, and never to be opened but in his presence. If the merchant carried them to his own private warehouse, the duties to be immediately paid, and never afterwards to be drawn back; and that warehouse to be at all times subject to the visit and examination of the custom-house officer, in order to ascertain how far the quantity contained in it corresponded with that for which the duty had been paid. If he carried them to the public warehouse, no duty to be paid till they were taken out for home consumption. If taken out for exportation, to be duty-free; proper security being always given that they should be so exported. The dealers in those particular commodities, either by wholesale or retail, to be at all times subject to the visit and examination of the custom-house officer; and to be obliged to justify, by proper certificates, the payment of the duty upon the whole quantity contained in their shops or warehouses. What are called the excise duties upon rum imported, are at present levied in this manner; and the same system of administration might, perhaps, be extended to all duties upon goods imported; provided always that those duties were, like the duties of excise, confined to a few sorts of goods of the most general use and consumption. If they were extended to almost all sorts of goods, as at present, public warehouses of sufficient extent could not easily be provided; and goods of a very delicate nature, or of which the preservation required much care and attention, could not safely be trusted by the merchant in any warehouse but his own.

It has been suggested that importers of goods subject to customs duties should have a choice. They could take the goods to their own private warehouse. Or they could store them in a warehouse provided either at their own expense or at public expense. The second warehouse would be kept locked by a customs officer and opened only in the officer’s presence. If merchants took the goods to their own warehouses, they would pay the duties immediately. The duties would never be refunded. A customs officer could visit and inspect the warehouse at any time. This would establish whether the quantity stored there matched the quantity on which duty had been paid. If merchants took the goods to the public warehouse, they would pay no duty until they removed them for domestic consumption. Goods removed for export would be duty-free, provided proper security was always given to ensure their export. Wholesale and retail dealers in these goods would also be subject to visits and inspections by customs officers at any time. They would have to provide proper certificates showing that duty had been paid on everything in their shops or warehouses. The so-called excise duties on imported rum are now collected in this way. Perhaps the same system could be extended to all duties on imported goods. But those duties would have to be limited, like excise duties, to a few kinds of goods in the most general use and consumption. If duties covered almost all kinds of goods, as they do now, large enough public warehouses could not easily be provided. Nor could merchants safely entrust very delicate goods, or goods requiring much care and attention to preserve, to any warehouse but their own.

If, by such a system of administration, smuggling to any considerable extent could be prevented, even under pretty high duties; and if every duty was occasionally either heightened or lowered according as it was most likely, either the one way or the other, to afford the greatest revenue to the state; taxation being always employed as an instrument of revenue, and never of monopoly; it seems not improbable that a revenue, at least equal to the present neat revenue of the customs, might be drawn from duties upon the importation of only a few sorts of goods of the most general use and consumption; and that the duties of customs might thus be brought to the same degree of simplicity, certainty, and precision, as those of excise. What the revenue at present loses by drawbacks upon the re-exportation of foreign goods, which are afterwards re-landed and consumed at home, would, under this system, be saved altogether. If to this saving, which would alone be very considerable, were added the abolition of all bounties upon the exportation of home produce; in all cases in which those bounties were not in reality drawbacks of some duties of excise which had before been advanced; it cannot well be doubted, but that the neat revenue of customs might, after an alteration of this kind, be fully equal to what it had ever been before.

Suppose such a system of administration could prevent smuggling on a significant scale, even with fairly high duties. Suppose, too, that each duty was raised or lowered from time to time, whichever would bring the state the most revenue. Taxes would always be used to raise revenue, never to create a monopoly. Under these conditions, it seems quite possible that import duties could be levied on only a few widely used and consumed goods. These duties might bring in revenue at least equal to the present net revenue from customs. Customs duties might thus become as simple, certain, and precise as excise duties. Under this system, the government would recover all the revenue it now loses through drawbacks on re-exported foreign goods. These goods are later brought back into the country and consumed at home. This saving alone would be very considerable. Suppose export bounties on domestic produce were also abolished, except where they were really refunds of excise duties already paid. Then there can be little doubt that net customs revenue would, after such a change, be fully equal to what it had ever been before.

If, by such a change of system, the public revenue suffered no loss, the trade and manufactures of the country would certainly gain a very considerable advantage. The trade in the commodities not taxed, by far the greatest number would be perfectly free, and might be carried on to and from all parts of the world with every possible advantage. Among those commodities would be comprehended all the necessaries of life, and all the materials of manufacture. So far as the free importation of the necessaries of life reduced their average money price in the home market, it would reduce the money price of labour, but without reducing in any respect its real recompence. The value of money is in proportion to the quantity of the necessaries of life which it will purchase. That of the necessaries of life is altogether independent of the quantity of money which can be had for them. The reduction in the money price of labour would necessarily be attended with a proportionable one in that of all home manufactures, which would thereby gain some advantage in all foreign markets. The price of some manufactures would be reduced, in a still greater proportion, by the free importation of the raw materials. If raw silk could be imported from China and Indostan, duty-free, the silk manufacturers in England could greatly undersell those of both France and Italy. There would be no occasion to prohibit the importation of foreign silks and velvets. The cheapness of their goods would secure to our own workmen, not only the possession of a home, but a very great command of the foreign market. Even the trade in the commodities taxed, would be carried on with much more advantage than at present. If those commodities were delivered out of the public warehouse for foreign exportation, being in this case exempted from all taxes, the trade in them would be perfectly free. The carrying trade, in all sorts of goods, would, under this system, enjoy every possible advantage. If these commodities were delivered out for home consumption, the importer not being obliged to advance the tax till he had an opportunity of selling his goods, either to some dealer, or to some consumer, he could always afford to sell them cheaper than if he had been obliged to advance it at the moment of importation. Under the same taxes, the foreign trade of consumption, even in the taxed commodities, might in this manner be carried on with much more advantage than it is at present.

If this change in the system caused no loss of public revenue, the country’s trade and manufacturing would certainly benefit greatly. Trade in untaxed goods, which are by far the largest group, would be completely free. These goods could be traded to and from all parts of the world on the most favorable terms. They would include all the necessities of life and all manufacturing materials. Free imports of necessities would lower their average money price in the home market. To that extent, they would also lower money wages, but without reducing workers’ real compensation in any way. The value of money depends on how much it can buy of the necessities of life. The value of those necessities is entirely independent of how much money they can be sold for. The fall in money wages would necessarily bring a proportional fall in the price of all goods manufactured at home. These goods would therefore gain some advantage in all foreign markets. The price of some manufactured goods would fall even more because of free imports of raw materials. If raw silk could be imported duty-free from China and Indostan, English silk manufacturers could greatly undersell those in France and Italy. There would be no need to prohibit imports of foreign silks and velvets. The low price of their goods would secure our workers not only the home market but also a very large share of the foreign market. Even trade in taxed goods would be carried on more advantageously than it is now. Goods released from the public warehouse for export would be free of all taxes. Trade in them would therefore be completely free. Under this system, the carrying trade in all kinds of goods would enjoy every possible advantage. If goods were released from the warehouse for consumption at home, the importer would not have to pay the tax in advance. The tax would not be due until the importer had a chance to sell the goods to a dealer or consumer. The importer could therefore always afford to sell them more cheaply than if the tax had been due upon importation. With the same taxes, foreign trade in goods for consumption, even taxed goods, could thus be carried on much more advantageously than it is now.

It was the object of the famous excise scheme of Sir Robert Walpole, to establish, with regard to wine and tobacco, a system not very unlike that which is here proposed. But though the bill which was then brought into Parliament, comprehended those two commodities only, it was generally supposed to be meant as an introduction to a more extensive scheme of the same kind. Faction, combined with the interest of smuggling merchants, raised so violent, though so unjust a clamour, against that bill, that the minister thought proper to drop it; and, from a dread of exciting a clamour of the same kind, none of his successors have dared to resume the project.

Sir Robert Walpole's famous excise scheme aimed to establish a system for wine and tobacco much like the one proposed here. The bill brought before Parliament covered only those two goods. But people generally assumed it was meant to introduce a broader scheme of the same kind. Political factions joined with merchants involved in smuggling to raise a fierce but unjust outcry against the bill. The minister therefore decided to withdraw it. None of his successors have dared to revive the plan, for fear of provoking a similar outcry.

The duties upon foreign luxuries, imported for home consumption, though they sometimes fall upon the poor, fall principally upon people of middling or more than middling fortune. Such are, for example, the duties upon foreign wines, upon coffee, chocolate, tea, sugar, etc.

Taxes on foreign luxuries imported for domestic use sometimes affect the poor. But they mainly affect people with moderate or greater wealth. Examples include taxes on foreign wines, coffee, chocolate, tea, and sugar.

The duties upon the cheaper luxuries of home produce, destined for home consumption, fall pretty equally upon people of all ranks, in proportion to their respective expense. The poor pay the duties upon malt, hops, beer, and ale, upon their own consumption; the rich, upon both their own consumption and that of their servants.

Taxes on cheaper luxuries produced and consumed at home fall fairly equally on people of all ranks, according to their spending. The poor pay taxes on the malt, hops, beer, and ale they consume. The rich pay taxes on their own consumption and that of their servants.

The whole consumption of the inferior ranks of people, or of those below the middling rank, it must be observed, is, in every country, much greater, not only in quantity, but in value, than that of the middling, and of those above the middling rank. The whole expense of the inferior is much greater titan that of the superior ranks. In the first place, almost the whole capital of every country is annually distributed among the inferior ranks of people, as the wages of productive labour. Secondly, a great part of the revenue, arising from both the rent of land and the profits of stock, is annually distributed among the same rank, in the wages and maintenance of menial servants, and other unproductive labourers. Thirdly, some part of the profits of stock belongs to the same rank, as a revenue arising from the employment of their small capitals. The amount of the profits annually made by small shopkeepers, tradesmen, and retailers of all kinds, is everywhere very considerable, and makes a very considerable portion of the annual produce. Fourthly and lastly, some part even of the rent of land belongs to the same rank; a considerable part to those who are somewhat below the middling rank, and a small part even to the lowest rank; common labourers sometimes possessing in property an acre or two of land. Though the expense of those inferior ranks of people, therefore, taking them individually, is very small, yet the whole mass of it, taking them collectively, amounts always to by much the largest portion of the whole expense of the society; what remains of the annual produce of the land and labour of the country, for the consumption of the superior ranks, being always much less, not only in quantity, but in value. The taxes upon expense, therefore, which fall chiefly upon that of the superior ranks of people, upon the smaller portion of the annual produce, are likely to be much less productive than either those which fall indifferently upon the expense of all ranks, or even those which fall chiefly upon that of the inferior ranks, than either those which fall indifferently upon the whole annual produce, or those which fall chiefly upon the larger portion of it. The excise upon the materials and manufacture of home-made fermented and spirituous liquors, is, accordingly, of all the different taxes upon expense, by far the most productive; and this branch of the excise falls very much, perhaps principally, upon the expense of the common people. In the year which ended on the 5th of July 1775, the gross produce of this branch of the excise amounted to £3,341,837:9:9.

In every country, the lower ranks of people consume far more than the middle and upper ranks. Their consumption is greater not only in quantity but also in value. The lower ranks spend much more in total than the upper ranks. First, almost all of every country’s capital is distributed each year among the lower ranks as wages for productive labor. Second, a great part of the income from both land rent and profits on capital also goes to them each year. They receive it as wages and maintenance for domestic servants and other unproductive workers. Third, some profits on capital belong to the lower ranks as income from the use of their small amounts of capital. The yearly profits of small shopkeepers, tradespeople, and retailers of all kinds are very considerable everywhere. They make up a very considerable share of the annual produce. Fourth and last, some land rent also belongs to the lower ranks. A considerable share goes to those somewhat below the middle rank, and a small share even to the lowest rank. Common laborers sometimes own an acre or two of land. Though individual people in the lower ranks spend very little, together they always account for by far the largest share of society’s total spending. What remains of the country’s annual produce from land and labor for the upper ranks to consume is always much smaller. It is smaller not only in quantity but also in value. Taxes on spending that fall chiefly on the upper ranks therefore apply to the smaller share of annual produce. They are likely to raise much less revenue than taxes that fall equally on the spending of all ranks. They are also likely to raise much less than taxes that fall chiefly on the spending of the lower ranks. In other words, they are likely to raise less than taxes that apply equally to the whole annual produce, or chiefly to its larger share. Accordingly, of all taxes on spending, the excise on the materials and manufacture of domestically made fermented and distilled alcoholic drinks raises by far the most revenue. This branch of the excise falls heavily, perhaps chiefly, on the spending of ordinary people. In the year ending on July 5, 1775, its gross revenue amounted to £3,341,837:9:9.

It must always be remembered, however, that it is the luxuries, and not the necessary expense of the inferior ranks of people, that ought ever to be taxed. The final payment of any tax upon their necessary expense, would fall altogether upon the superior ranks of people; upon the smaller portion of the annual produce, and not upon the greater. Such a tax must, in all cases, either raise the wages of labour, or lessen the demand for it. It could not raise the wages of labour, without throwing the final payment of the tax upon the superior ranks of people. It could not lessen the demand for labour, without lessening the annual produce of the land and labour of the country, the fund upon which all taxes must be finally paid. Whatever might be the state to which a tax of this kind reduced the demand for labour, it must always raise wages higher than they otherwise would be in that state; and the final payment of this enhancement of wages must, in all cases, fall upon the superior ranks of people.

It must always be remembered, however, that taxes should fall on the luxuries of the lower classes, not their necessities. The upper classes would ultimately pay any tax on the necessities of the lower classes. The tax would fall on the smaller share of annual production, not the larger one. Such a tax must always either raise wages or reduce the demand for labor. If it raised wages, the upper classes would ultimately pay the tax. If it reduced the demand for labor, it would reduce the country's annual production from land and labor. That production is the fund from which all taxes must ultimately be paid. However much such a tax reduced the demand for labor, it would still raise wages above what they otherwise would be at that level of demand. In every case, the upper classes would ultimately pay for this increase in wages.

Fermented liquors brewed, and spiritous liquors distilled, not for sale, but for private use, are not in Great Britain liable to any duties of excise. This exemption, of which the object is to save private families from the odious visit and examination of the tax-gatherer, occasions the burden of those duties to fall frequently much lighter upon the rich than upon the poor. It is not, indeed, very common to distil for private use, though it is done sometimes. But in the country, many middling and almost all rich and great families, brew their own beer. Their strong beer, therefore, costs them eight shillings a-barrel less than it costs the common brewer, who must have his profit upon the tax, as well as upon all the other expense which he advances. Such families, therefore, must drink their beer at least nine or ten shillings a-barrel cheaper than any liquor of the same quality can be drank by the common people, to whom it is everywhere more convenient to buy their beer, by little and little, from the brewery or the ale-house. Malt, in the same manner, that is made for the use of a private family, is not liable to the visit or examination of the tax-gatherer but, in this case the family must compound at seven shillings and sixpence a-head for the tax. Seven shillings and sixpence are equal to the excise upon ten bushels of malt; a quantity fully equal to what all the different members of any sober family, men, women, and children, are, at an average, likely to consume. But in rich and great families, where country hospitality is much practised, the malt liquors consumed by the members of the family make but a small part of the consumption of the house. Either on account of this composition, however, or for other reasons, it is not near so common to malt as to brew for private use. It is difficult to imagine any equitable reason, why those who either brew or distil for private use should not be subject to a composition of the same kind.

In Great Britain, fermented drinks brewed and spirits distilled for private use rather than sale are not subject to excise duties. This exemption is meant to spare private families the unwelcome visits and inspections of the tax collector. But it often makes the burden of these duties much lighter for the rich than for the poor. Distilling for private use is not very common, although it is sometimes done. But in the country, many middle-income families and almost all rich and wealthy families brew their own beer. Their strong beer therefore costs them eight shillings a barrel less than it costs the commercial brewer. The brewer must make a profit on the tax as well as on all the other expenses he pays upfront. Such families must therefore drink their beer at least nine or ten shillings a barrel more cheaply than ordinary people can drink liquor of the same quality. Ordinary people everywhere find it more convenient to buy their beer a little at a time from the brewery or the alehouse. Similarly, malt made for a private family’s use is not subject to the tax collector’s visits or inspections. But in this case, the family must pay a fixed tax of seven shillings and sixpence per person. That is equal to the excise duty on ten bushels of malt. This amount is fully equal to what all the members of a sober family, men, women, and children, are likely to consume on average. But rich and wealthy families often entertain guests in the country. In such households, the malt drinks consumed by family members make up only a small part of the household’s consumption. However, either because of this fixed payment or for other reasons, making malt for private use is much less common than brewing. It is hard to imagine any fair reason why those who brew or distill for private use should not have to pay a similar fixed tax.

A greater revenue than what is at present drawn from all the heavy taxes upon malt, beer, and ale, might be raised, it has frequently been said, by a much lighter tax upon malt; the opportunities of defrauding the revenue being much greater in a brewery than in a malt-house; and those who brew for private use being exempted from all duties or composition for duties, which is not the case with those who malt for private use.

It has often been said that a much lighter tax on malt could raise more revenue than all the current heavy taxes on malt, beer, and ale. This is because there are many more opportunities to evade taxes in a brewery than in a malt-house. Also, people who brew for private use are exempt from all duties or payments in place of duties. Those who make malt for private use are not exempt.

In the porter brewery of London, a quarter of malt is commonly brewed into more than two barrels and a-half, sometimes into three barrels of porter. The different taxes upon malt amount to six shillings a-quarter; those upon strong ale and beer to eight shillings a-barrel. In the porter brewery, therefore, the different taxes upon malt, beer, and ale, amount to between twenty-six and thirty shillings upon the produce of a quarter of malt. In the country brewery for common country sale, a quarter of malt is seldom brewed into less than two barrels of strong, and one barrel of small beer; frequently into two barrels and a-half of strong beer. The different taxes upon small beer amount to one shilling and fourpence a-barrel. In the country brewery, therefore, the different taxes upon malt, beer, and ale, seldom amount to less than twenty-three shillings and fourpence, frequently to twenty-six shillings, upon the produce of a quarter of malt. Taking the whole kingdom at an average, therefore, the whole amount of the duties upon malt, beer, and ale, cannot be estimated at less than twenty-four or twenty-five shillings upon the produce of a quarter of malt. But by taking off all the different duties upon beer and ale, and by trebling the malt tax, or by raising it from six to eighteen shillings upon the quarter of malt, a greater revenue, it is said, might be raised by this single tax, than what is at present drawn from all those heavier taxes.

In London’s porter breweries, a quarter of malt is usually brewed into more than two and a half barrels of porter. Sometimes it produces three barrels. The various taxes on malt amount to six shillings per quarter. Those on strong ale and beer amount to eight shillings per barrel. So, in porter breweries, the taxes on malt, beer, and ale total between twenty-six and thirty shillings per quarter of malt brewed. In country breweries supplying ordinary local sales, a quarter of malt rarely produces less than two barrels of strong beer and one barrel of small beer. It often produces two and a half barrels of strong beer. The various taxes on small beer amount to one shilling and fourpence per barrel. So, in country breweries, the taxes on malt, beer, and ale rarely total less than twenty-three shillings and fourpence per quarter of malt brewed. They often total twenty-six shillings. Taking the kingdom as a whole, the average total duties on malt, beer, and ale cannot be estimated at less than twenty-four or twenty-five shillings per quarter of malt brewed. But some say that a single malt tax could raise more revenue than all those heavier taxes now bring in. This would involve removing all the duties on beer and ale and tripling the malt tax from six to eighteen shillings per quarter.

Under the old malt tax, indeed, is comprehended a tax of four shillings upon the hogshead of cyder, and another of ten shillings upon the barrel of mum. In 1774, the tax upon cyder produced only £3,083:6:8. It probably fell somewhat short of its usual amount; all the different taxes upon cyder, having, that year, produced less than ordinary. The tax upon mum, though much heavier, is still less productive, on account of the smaller consumption of that liquor. But to balance whatever may be the ordinary amount of those two taxes, there is comprehended under what is called the country excise, first, the old excise of six shillings and eightpence upon the hogshead of cyder; secondly, a like tax of six shillings and eightpence upon the hogshead of verjuice; thirdly, another of eight shillings and ninepence upon the hogshead of vinegar; and, lastly, a fourth tax of elevenpence upon the gallon of mead or metheglin. The produce of those different taxes will probably much more than counterbalance that of the duties imposed, by what is called the annual malt tax, upon cyder and mum.

The old malt tax includes a tax of four shillings per hogshead of cider and another of ten shillings per barrel of mum. In 1774, the cider tax raised only £3,083:6:8. This was probably somewhat less than usual, since all the different cider taxes raised less than usual that year. The tax on mum is much higher, but it raises even less because less of that drink is consumed. But to offset the usual revenue from those two taxes, the country excise includes several others. First, there is the old excise of six shillings and eightpence per hogshead of cider. Second, there is an equal tax per hogshead of verjuice. Third, there is a tax of eight shillings and ninepence per hogshead of vinegar. Finally, there is a tax of elevenpence per gallon of mead or metheglin. These taxes will probably raise much more than the duties on cider and mum under the annual malt tax.

Malt is consumed, not only in the brewery of beer and ale, but in the manufacture of low wines and spirits. If the malt tax were to be raised to eighteen shillings upon the quarter, it might be necessary to make some abatement in the different excises which are imposed upon those particular sorts of low wines and spirits, of which malt makes any part of the materials. In what are called malt spirits, it makes commonly but a third part of the materials; the other two-thirds being either raw barley, or one-third barley and one-third wheat. In the distillery of malt spirits, both the opportunity and the temptation to smuggle are much greater than either in a brewery or in a malt-house; the opportunity, on account of the smaller bulk and greater value of the commodity, and the temptation, on account of the superior height of the duties, which amounted to 3s. 10 2/3d. upon the gallon of spirits. {Though the duties directly imposed upon proof spirits amount only to 2s. 6d per gallon, these, added to the duties upon the low wines, from which they are distilled, amount to 3s 10 2/3d. Both low wines and proof spirits are, to prevent frauds, now rated according to what they gauge in the wash.}

Malt is used not only to brew beer and ale, but also to make low wines and spirits. If the malt tax were raised to eighteen shillings per quarter, some reductions in excise duties might be necessary. These reductions would apply to the particular kinds of low wines and spirits made partly from malt. In what are called malt spirits, malt usually makes up only one-third of the ingredients. The other two-thirds are either raw barley, or one-third barley and one-third wheat. In distilling malt spirits, both the opportunity and the temptation to smuggle are much greater than in a brewery or malt-house. The opportunity is greater because spirits are less bulky and more valuable. The temptation is greater because the duties are higher, amounting to 3s. 10 2/3d. per gallon of spirits. {The duties imposed directly on proof spirits amount to only 2s. 6d. per gallon. But added to the duties on the low wines from which the spirits are distilled, they amount to 3s. 10 2/3d. To prevent fraud, both low wines and proof spirits are now assessed according to their measured quantity in the wash.}

By increasing the duties upon malt, and reducing those upon the distillery, both the opportunities and the temptation to smuggle would be diminished, which might occasion a still further augmentation of revenue.

Raising taxes on malt and lowering them on distilling would reduce both the opportunities and the temptation to smuggle. This could increase revenue even further.

It has for some time past been the policy of Great Britain to discourage the consumption of spiritous liquors, on account of their supposed tendency to ruin the health and to corrupt the morals of the common people. According to this policy, the abatement of the taxes upon the distillery ought not to be so great as to reduce, in any respect, the price of those liquors. Spiritous liquors might remain as dear as ever; while, at the same time, the wholesome and invigorating liquors of beer and ale might be considerably reduced in their price. The people might thus be in part relieved from one of the burdens of which they at present complain the most; while, at the same time, the revenue might be considerably augmented.

For some time, Great Britain has tried to discourage the consumption of spirits. This policy is based on the belief that spirits ruin the health and corrupt the morals of ordinary people. In keeping with this policy, taxes on distilling should not be reduced enough to lower the price of spirits at all. Spirits could remain as expensive as ever, while the prices of wholesome, invigorating beer and ale could be lowered considerably. People could thus be partly relieved of one of the burdens they now complain about most. At the same time, government revenue could increase considerably.

The objections of Dr. Davenant to this alteration in the present system of excise duties, seem to be without foundation. Those objections are, that the tax, instead of dividing itself, as at present, pretty equally upon the profit of the maltster, upon that of the brewer and upon that of the retailer, would so far as it affected profit, fall altogether upon that of the maltster; that the maltster could not so easily get back the amount of the tax in the advanced price of his malt, as the brewer and retailer in the advanced price of their liquor; and that so heavy a tax upon malt might reduce the rent and profit of barley land.

Dr. Davenant’s objections to this change in the current system of excise duties seem unfounded. He argues that the tax now falls fairly equally on the profits of the maltster, the brewer, and the retailer. Under the proposed change, any effect on profits would fall entirely on the maltster. He also argues that the maltster could not recover the tax as easily by raising the price of malt. The brewer and retailer, he says, can recover it more easily by raising the price of their liquor. Finally, he argues that such a heavy tax on malt might reduce the rent and profit from barley land.

No tax can ever reduce, for any considerable time, the rate of profit in any particular trade, which must always keep its level with other trades in the neighbourhood. The present duties upon malt, beer, and ale, do not affect the profits of the dealers in those commodities, who all get back the tax with an additional profit, in the enhanced price of their goods. A tax, indeed, may render the goods upon which it is imposed so dear, as to diminish the consumption of them. But the consumption of malt is in malt liquors; and a tax of eighteen shillings upon the quarter of malt could not well render those liquors dearer than the different taxes, amounting to twenty-four or twenty-five shillings, do at present. Those liquors, on the contrary, would probably become cheaper, and the consumption of them would be more likely to increase than to diminish.

No tax can reduce the profit rate in any particular trade for long. It must always remain level with profit rates in other local trades. The current duties on malt, beer, and ale do not affect the profits of dealers in those goods. They all recover the tax through higher prices and make an additional profit. A tax may, of course, make goods so expensive that people consume less of them. But malt is consumed in malt liquors. A tax of eighteen shillings per quarter of malt could hardly make those liquors more expensive than the current taxes do. Those taxes amount to twenty-four or twenty-five shillings. On the contrary, the liquors would probably become cheaper. Consumption would be more likely to rise than to fall.

It is not very easy to understand why it should be more difficult for the maltster to get back eighteen shillings in the advanced price of his malt, than it is at present for the brewer to get back twenty-four or twenty-five, sometimes thirty shillings, in that of his liquor. The maltster, indeed, instead of a tax of six shillings, would be obliged to advance one of eighteen shilling upon every quarter of malt. But the brewer is at present obliged to advance a tax of twenty-four or twenty-five, sometimes thirty shillings, upon every quarter of malt which he brews. It could not be more inconvenient for the maltster to advance a lighter tax, than it is at present for the brewer to advance a heavier one. The maltster does not always keep in his granaries a stock of malt, which it will require a longer time to dispose of than the stock of beer and ale which the brewer frequently keeps in his cellars. The former, therefore, may frequently get the returns of his money as soon as the latter. But whatever inconveniency might arise to the maltster from being obliged to advance a heavier tax, it could easily be remedied, by granting him a few months longer credit than is at present commonly given to the brewer.

It is not easy to see why the maltster should have more difficulty recovering eighteen shillings by raising his malt price. The brewer already recovers twenty-four or twenty-five shillings, sometimes thirty, by raising the price of his beer. The maltster would, it is true, have to pay eighteen shillings in tax upfront on every quarter of malt instead of six. But the brewer already has to pay twenty-four or twenty-five shillings, sometimes thirty, on every quarter of malt he brews. Paying a lighter tax upfront could not be more inconvenient for the maltster than paying a heavier one is for the brewer. The maltster does not always keep a stock of malt that takes longer to sell than the beer and ale the brewer often keeps in his cellars. The maltster may therefore often recover his money as soon as the brewer does. But any inconvenience to the maltster from having to pay a heavier tax upfront could easily be remedied. He could be given a few months longer to pay than the brewer is now usually allowed.

Nothing could reduce the rent and profit of barley land, which did not reduce the demand for barley. But a change of system, which reduced the duties upon a quarter of malt brewed into beer and ale, from twenty-four and twenty-five shillings to eighteen shillings, would be more likely to increase than diminish that demand. The rent and profit of barley land, besides, must always be nearly equal to those of other equally fertile and equally well cultivated land. If they were less, some part of the barley land would soon be turned to some other purpose; and if they were greater, more land would soon be turned to the raising of barley. When the ordinary price of any particular produce of land is at what may be called a monopoly price, a tax upon it necessarily reduces the rent and profit of the land which grows it. A tax upon the produce of those precious vineyards, of which the wine falls so much short of the effectual demand, that its price is always above the natural proportion to that of the produce of other equally fertile and equally well cultivated land, would necessarily reduce the rent and profit of those vineyards. The price of the wines being already the highest that could be got for the quantity commonly sent to market, it could not be raised higher without diminishing that quantity; and the quantity could not be diminished without still greater loss, because the lands could not be turned to any other equally valuable produce. The whole weight of the tax, therefore, would fall upon the rent and profit; properly upon the rent of the vineyard. When it has been proposed to lay any new tax upon sugar, our sugar planters have frequently complained that the whole weight of such taxes fell not upon the consumer, but upon the producer; they never having been able to raise the price of their sugar after the tax higher than it was before. The price had, it seems, before the tax, been a monopoly price; and the arguments adduced to show that sugar was an improper subject of taxation, demonstrated perhaps that it was a proper one; the gains of monopolists, whenever they can be come at, being certainly of all subjects the most proper. But the ordinary price of barley has never been a monopoly price; and the rent and profit of barley land have never been above their natural proportion to those of other equally fertile and equally well cultivated land. The different taxes which have been imposed upon malt, beer, and ale, have never lowered the price of barley; have never reduced the rent and profit of barley land. The price of malt to the brewer has constantly risen in proportion to the taxes imposed upon it; and those taxes, together with the different duties upon beer and ale, have constantly either raised the price, or, what comes to the same thing, reduced the quality of those commodities to the consumer. The final payment of those taxes has fallen constantly upon the consumer, and not upon the producer.

Nothing could reduce the rent and profit from barley land without reducing the demand for barley. But a change in the tax system would be more likely to increase that demand than reduce it. The change would lower the duties on a quarter of malt brewed into beer and ale from twenty-four and twenty-five shillings to eighteen shillings. Besides, the rent and profit from barley land must always be nearly equal to those from equally fertile and equally well cultivated land. If they were lower, some barley land would soon be put to another use. If they were higher, more land would soon be used to grow barley. When the ordinary price of a particular crop is what might be called a monopoly price, a tax on it necessarily reduces the rent and profit from the land where it is grown. Consider those precious vineyards whose wine supply falls far short of the demand from buyers willing and able to pay. Their wine always sells for more than its natural proportion to the produce of equally fertile and equally well cultivated land. A tax on the produce of these vineyards would necessarily reduce their rent and profit. The wines already sell for the highest price obtainable for the quantity usually sent to market. The price could not rise further without reducing that quantity. And the quantity could not be reduced without an even greater loss, because the land could not produce any other crop of equal value. The whole burden of the tax would therefore fall on rent and profit, or more precisely, on the rent of the vineyard. Whenever a new tax on sugar has been proposed, our sugar planters have often complained that the whole burden falls on the producer, not the consumer. They have never been able to raise the price of sugar after a tax above what it was before. It seems that the price before the tax was a monopoly price. The arguments offered to show that sugar was an improper subject for taxation perhaps demonstrated that it was a proper one. The gains of monopolists are certainly the most proper of all subjects for taxation, whenever they can be reached. But the ordinary price of barley has never been a monopoly price. The rent and profit from barley land have never been above their natural proportion to those from equally fertile and equally well cultivated land. The various taxes imposed on malt, beer, and ale have never lowered the price of barley. They have never reduced the rent and profit from barley land. The price brewers pay for malt has always risen in proportion to the taxes imposed on it. Those taxes, together with the various duties on beer and ale, have always either raised the price consumers pay or reduced the quality they receive. The latter amounts to the same thing. The final payment of those taxes has always fallen on the consumer, not the producer.

The only people likely to suffer by the change of system here proposed, are those who brew for their own private use. But the exemption, which this superior rank of people at present enjoy, from very heavy taxes which are paid by the poor labourer and artificer, is surely most unjust and unequal, and ought to be taken away, even though this change was never to take place. It has probably been the interest of this superior order of people, however, which has hitherto prevented a change of system that could not well fail both to increase the revenue and to relieve the people.

The only people likely to suffer from the proposed change are those who brew for their own use. But these wealthier people are now exempt from very heavy taxes paid by poor laborers and craftspeople. This exemption is surely very unjust and unfair. It ought to be removed, even if the proposed change never takes place. However, the interests of these wealthier people have probably prevented the change so far. The change could hardly fail both to increase government revenue and to ease the burden on the people.

Besides such duties as those of custom and excise above mentioned, there are several others which affect the price of goods more unequally and more indirectly. Of this kind are the duties, which, in French, are called peages, which in old Saxon times were called the duties of passage, and which seem to have been originally established for the same purpose as our turnpike tolls, or the tolls upon our canals and navigable rivers, for the maintenance of the road or of the navigation. Those duties, when applied to such purposes, are most properly imposed according to the bulk or weight of the goods. As they were originally local and provincial duties, applicable to local and provincial purposes, the administration of them was, in most cases, entrusted to the particular town, parish, or lordship, in which they were levied; such communities being, in some way or other, supposed to be accountable for the application. The sovereign, who is altogether unaccountable, has in many countries assumed to himself the administration of those duties; and though he has in most cases enhanced very much the duty, he has in many entirely neglected the application. If the turnpike tolls of Great Britain should ever become one of the resources of government, we may learn, by the example of many other nations, what would probably be the consequence. Such tolls, no doubt, are finally paid by the consumer; but the consumer is not taxed in proportion to his expense, when he pays, not according to the value, but according to the bulk or weight of what he consumes. When such duties are imposed, not according to the bulk or weight, but according to the supposed value of the goods, they become properly a sort of inland customs or excise, which obstruct very much the most important of all branches of commerce, the interior commerce of the country.

Besides the customs and excise duties mentioned above, several other duties affect goods prices more unevenly and indirectly. These include duties called peages in French and duties of passage in old Saxon times. They seem to have been established originally for the same purpose as our turnpike tolls and tolls on canals and navigable rivers. That purpose was to maintain the road or waterway. When used for these purposes, such duties are most appropriately charged according to the bulk or weight of the goods. These duties were originally local and provincial, and were used for local and provincial purposes. In most cases, they were therefore administered by the town, parish, or lordship where they were collected. These communities were supposed to be accountable in some way for how the money was used. In many countries, the sovereign, who is not accountable at all, has taken over the administration of these duties. Although he has greatly increased the duty in most cases, he has in many cases entirely neglected its intended use. If Great Britain’s turnpike tolls ever become a source of government revenue, the example of many other nations shows what would probably happen. Consumers ultimately pay such tolls, no doubt. But they are not taxed in proportion to their spending when they pay according to the bulk or weight of what they consume, rather than its value. When such duties are charged according to the supposed value of the goods, rather than their bulk or weight, they are properly a kind of inland customs or excise duty. They greatly obstruct the most important branch of commerce, trade within the country.

In some small states, duties similar to those passage duties are imposed upon goods carried across the territory, either by land or by water, from one foreign country to another. These are in some countries called transit-duties. Some of the little Italian states which are situated upon the Po, and the rivers which run into it, derive some revenue from duties of this kind, which are paid altogether by foreigners, and which, perhaps, are the only duties that one state can impose upon the subjects of another, without obstruction in any respect, the industry or commerce of its own. The most important transit-duty in the world, is that levied by the king of Denmark upon all merchant ships which pass through the Sound.

Some small states impose duties similar to passage duties on goods crossing their territory. The goods travel by land or water from one foreign country to another. In some countries, these are called transit duties. Some small Italian states on the Po and its tributaries earn revenue from these duties. Foreigners pay the duties in full. Perhaps these are the only duties one state can impose on the subjects of another without hindering its own industry or commerce in any way. The most important transit duty in the world is imposed by the king of Denmark on all merchant ships passing through the Sound.

Such taxes upon luxuries, as the greater part of the duties of customs and excise, though they all fall indifferently upon every different species of revenue, and are paid finally, or without any retribution, by whoever consumes the commodities upon which they are imposed; yet they do not always fall equally or proportionally upon the revenue of every individual. As every man’s humour regulates the degree of his consumption, every man contributes rather according to his humour, than proportion to his revenue: the profuse contribute more, the parsimonious less, than their proper proportion. During the minority of a man of great fortune, he contributes commonly very little, by his consumption, towards the support of that state from whose protection he derives a great revenue. Those who live in another country, contribute nothing by their consumption towards the support of the government of that country, in which is situated the source of their revenue. If in this latter country there should be no land tax, nor any considerable duty upon the transference either of moveable or immoveable property, as is the case in Ireland, such absentees may derive a great revenue from the protection of a government, to the support of which they do not contribute a single shilling. This inequality is likely to be greatest in a country of which the government is, in some respects, subordinate and dependant upon that of some other. The people who possess the most extensive property in the dependant, will, in this case, generally chuse to live in the governing country. Ireland is precisely in this situation; and we cannot therefore wonder, that the proposal of a tax upon absentees should be so very popular in that country. It might, perhaps, be a little difficult to ascertain either what sort, or what degree of absence, would subject a man to be taxed as an absentee, or at what precise time the tax should either begin or end. If you except, however, this very peculiar situation, any inequality in the contribution of individuals which can arise from such taxes, is much more than compensated by the very circumstance which occasions that inequality; the circumstance that every man’s contribution is altogether voluntary; it being altogether in his power, either to consume, or not to consume, the commodity taxed. Where such taxes, therefore, are properly assessed, and upon proper commodities, they are paid with less grumbling than any other. When they are advanced by the merchant or manufacturer, the consumer, who finally pays them, soon comes to confound them with the price of the commodities, and almost forgets that he pays any tax. Such taxes are, or may be, perfectly certain; or may be assessed, so as to leave no doubt concerning either what ought to be paid, or when it ought to be paid; concerning either the quantity or the time of payment. What ever uncertainty there may sometimes be, either in the duties of customs in Great Britain, or in other duties of the same kind in other countries, it cannot arise from the nature of those duties, but from the inaccurate or unskilful manner in which the law that imposes them is expressed.

Taxes on luxuries include most customs duties and excise taxes. They fall equally on every kind of income. In the end, whoever consumes the taxed goods pays the tax without being reimbursed. Yet these taxes do not always fall equally or proportionally on each person’s income. Each person’s tastes determine how much they consume. So people contribute according to their tastes rather than in proportion to their income. Those who spend freely contribute more than their proper share, while those who are thrifty contribute less. A person with a great fortune usually contributes very little through consumption while still a minor. Yet the state’s protection provides that person with a large income. People who live abroad contribute nothing through consumption to the government of the country where their income originates. That country may have no land tax or substantial tax on transfers of movable or immovable property. This is the case in Ireland. In such circumstances, these absentees may receive a large income thanks to a government’s protection. Yet they contribute not a single shilling to its support. This inequality is likely to be greatest where one country’s government is subordinate and dependent on another in some respects. In that case, those who own the most property in the dependent country will generally choose to live in the governing country. Ireland is precisely in this situation. We should not wonder, therefore, that a proposed tax on absentees is so popular there. Perhaps it would be somewhat difficult to determine what kind or length of absence would make someone liable for the tax. It might also be difficult to establish precisely when the tax should begin or end. Apart from this very peculiar situation, however, the cause of the inequality more than compensates for it. Each person’s contribution is entirely voluntary. Everyone can choose whether or not to consume the taxed goods. So when such taxes are properly assessed on suitable goods, people complain about them less than about any other taxes. When a merchant or manufacturer pays the tax in advance, the consumer ultimately pays it. The consumer soon comes to confuse the tax with the price of the goods and almost forgets paying any tax. Such taxes are, or can be, perfectly certain. They can be assessed so that there is no doubt about how much must be paid or when. Customs duties in Great Britain and similar duties elsewhere may sometimes be uncertain. But any such uncertainty cannot arise from the nature of the duties. It must arise from inaccurate or unskilled wording in the law that imposes them.

Taxes upon luxuries generally are, and always may be, paid piece-meal, or in proportion as the contributors have occasion to purchase the goods upon which they are imposed. In the time and mode of payment, they are, or may be, of all taxes the most convenient. Upon the whole, such taxes, therefore, are perhaps as agreeable to the three first of the four general maxims concerning taxation, as any other. They offend in every respect against the fourth.

Taxes on luxuries are generally paid in installments, and they can always be paid this way. People pay them as they buy the taxed goods. In their timing and method of payment, these taxes are, or can be, the most convenient of all taxes. Overall, then, such taxes perhaps comply with the first three of the four general principles of taxation as well as any others. They violate the fourth in every respect.

Such taxes, in proportion to what they bring into the public treasury of the state, always take out, or keep out, of the pockets of the people, more than almost any other taxes. They seem to do this in all the four different ways in which it is possible to do it.

Compared with the revenue they bring into the public treasury, such taxes always take or keep more money from people's pockets than almost any other taxes. They seem to do this in all four possible ways.

First, the levying of such taxes, even when imposed in the most judicious manner, requires a great number of custom-house and excise officers, whose salaries and perquisites are a real tax upon the people, which brings nothing into the treasury of the state. This expense, however, it must be acknowledged, is more moderate in Great Britain than in most other countries. In the year which ended on the 5th of July, 1775, the gross produce of the different duties, under the management of the commissioners of excise in England, amounted to £5,507,308:18:8¼, which was levied at an expense of little more than five and a-half per cent. From this gross produce, however, there must be deducted what was paid away in bounties and drawbacks upon the exportation of exciseable goods, which will reduce the neat produce below five millions. {The neat produce of that year, after deducting all expenses and allowances, amounted to £4,975,652:19:6.} The levying of the salt duty, and excise duty, but under a different management, is much more expensive. The neat revenue of the customs does not amount to two millions and a-half, which is levied at an expense of more than ten per cent., in the salaries of officers and other incidents. But the perquisites of custom-house officers are everywhere much greater than their salaries; at some ports more than double or triple those salaries. If the salaries of officers, and other incidents, therefore, amount to more than ten per cent. upon the neat revenue of the customs, the whole expense of levying that revenue may amount, in salaries and perquisites together, to more than twenty or thirty per cent. The officers of excise receive few or no perquisites; and the administration of that branch of the revenue being of more recent establishment, is in general less corrupted than that of the customs, into which length of time has introduced and authorised many abuses. By charging upon malt the whole revenue which is at present levied by the different duties upon malt and malt liquors, a saving, it is supposed, of more than £50,000, might be made in the annual expense of the excise. By confining the duties of customs to a few sorts of goods, and by levying those duties according to the excise laws, a much greater saving might probably be made in the annual expense of the customs.

First, collecting such taxes requires many customs and excise officers, even when the taxes are imposed with the greatest care. Their salaries and extra payments are a real tax on the people, yet they bring nothing into the state treasury. Still, this expense is admittedly lower in Great Britain than in most other countries. In the year ending July 5, 1775, the various duties managed by the commissioners of excise in England brought in £5,507,308:18:8¼ before expenses. The cost of collecting them was just over five and a half percent. But payments of bounties and refunds of duties on exported goods subject to excise must be deducted from that total. These payments reduce the net proceeds to less than five million pounds. {That year’s net proceeds, after deducting all expenses and allowances, came to £4,975,652:19:6.} Collecting the salt duty, which is an excise duty but is managed separately, is much more expensive. Net customs revenue is less than two and a half million pounds. The cost of collecting it is more than ten percent, including officers’ salaries and other expenses. But customs officers’ extra payments are everywhere much greater than their salaries. At some ports, the extra payments are more than double or triple their salaries. Officers’ salaries and other expenses therefore amount to more than ten percent of net customs revenue. So the total cost of collecting that revenue, including both salaries and extra payments, may exceed twenty or thirty percent. Excise officers receive few or no extra payments. The excise administration was also established more recently and is generally less corrupt than the customs administration. Over time, many abuses have entered the customs administration and become accepted. It is thought that more than £50,000 a year could be saved in excise collection costs by charging the whole revenue now raised by duties on malt and malt liquors to malt alone. A much greater annual saving in customs expenses could probably be made by limiting customs duties to a few kinds of goods and collecting those duties under excise laws.

Secondly, such taxes necessarily occasion some obstruction or discouragement to certain branches of industry. As they always raise the price of the commodity taxed, they so far discourage its consumption, and consequently its production. If it is a commodity of home growth or manufacture, less labour comes to be employed in raising and producing it. If it is a foreign commodity of which the tax increases in this manner the price, the commodities of the same kind which are made at home may thereby, indeed, gain some advantage in the home market, and a greater quantity of domestic industry may thereby be turned toward preparing them. But though this rise of price in a foreign commodity, may encourage domestic industry in one particular branch, it necessarily discourages that industry in almost every other. The dearer the Birmingham manufacturer buys his foreign wine, the cheaper he necessarily sells that part of his hardware with which, or, what comes to the same thing, with the price of which, he buys it. That part of his hardware, therefore, becomes of less value to him, and he has less encouragement to work at it. The dearer the consumers in one country pay for the surplus produce of another, the cheaper they necessarily sell that part of their own surplus produce with which, or, what comes to the same thing, with the price of which, they buy it. That part of their own surplus produce becomes of less value to them, and they have less encouragement to increase its quantity. All taxes upon consumable commodities, therefore, tend to reduce the quantity of productive labour below what it otherwise would be, either in preparing the commodities taxed, if they are home commodities, or in preparing those with which they are purchased, if they are foreign commodities. Such taxes, too, always alter, more or less, the natural direction of national industry, and turn it into a channel always different from, and generally less advantageous, than that in which it would have run of its own accord.

Secondly, such taxes necessarily obstruct or discourage certain branches of industry. They always raise the price of the taxed goods, discouraging consumption and therefore production. If the goods are grown or manufactured at home, less labor is employed in producing them. If the tax raises the price of foreign goods, similar goods made at home may gain an advantage in the domestic market. More domestic labor may then be directed toward producing them. But although the higher price of foreign goods may encourage one branch of domestic industry, it necessarily discourages almost every other branch. The more a Birmingham manufacturer pays for foreign wine, the less he necessarily receives for the hardware he uses to buy it. The same is true if he buys the wine with money earned from selling the hardware. That portion of his hardware is therefore worth less to him, and he has less incentive to produce it. Similarly, the more consumers in one country pay for another country’s surplus goods, the less they necessarily receive for the surplus goods they use to buy them. The same is true if they buy the foreign goods with money earned from selling their own surplus goods. That portion of their surplus goods becomes less valuable to them, and they have less incentive to produce more. All taxes on goods for consumption therefore tend to reduce the amount of productive labor below what it would otherwise be. If the taxed goods are domestic, the taxes reduce the labor used to produce them. If the goods are foreign, the taxes reduce the labor used to produce the goods with which they are purchased. Such taxes also always change the natural direction of a nation’s industry to some degree. They turn it in a direction different from the one it would have taken on its own, and generally less advantageous.

Thirdly, the hope of evading such taxes by smuggling, gives frequent occasion to forfeitures and other penalties, which entirely ruin the smuggler; a person who, though no doubt highly blameable for violating the laws of his country, is frequently incapable of violating those of natural justice, and would have been, in every respect, an excellent citizen, had not the laws of his country made that a crime which nature never meant to be so. In those corrupted governments, where there is at least a general suspicion of much unnecessary expense, and great misapplication of the public revenue, the laws which guard it are little respected. Not many people are scrupulous about smuggling, when, without perjury, they can find an easy and safe opportunity of doing so. To pretend to have any scruple about buying smuggled goods, though a manifest encouragement to the violation of the revenue laws, and to the perjury which almost always attends it, would, in most countries, be regarded as one of those pedantic pieces of hypocrisy which, instead of gaining credit with anybody, serve only to expose the person who affects to practise them to the suspicion of being a greater knave than most of his neighbours. By this indulgence of the public, the smuggler is often encouraged to continue a trade, which he is thus taught to consider as in some measure innocent; and when the severity of the revenue laws is ready to fall upon him, he is frequently disposed to defend with violence, what he has been accustomed to regard as his just property. From being at first, perhaps, rather imprudent than criminal, he at last too often becomes one of the hardiest and most determined violators of the laws of society. By the ruin of the smuggler, his capital, which had before been employed in maintaining productive labour, is absorbed either in the revenue of the state, or in that of the revenue officer; and is employed in maintaining unproductive, to the diminution of the general capital of the society, and of the useful industry which it might otherwise have maintained.

Thirdly, the hope of avoiding such taxes through smuggling often leads to confiscations and other penalties that completely ruin the smuggler. A smuggler is certainly highly blameworthy for breaking the laws of his country. Yet he is often incapable of violating the laws of natural justice. He would have been an excellent citizen in every respect if his country’s laws had not made a crime of something nature never meant to be criminal. In corrupt governments, people generally suspect at least that much money is wasted and public revenue is badly misused. There, the laws protecting that revenue are not much respected. When people can smuggle easily and safely, without committing perjury, few have scruples about doing so. Buying smuggled goods clearly encourages violations of revenue laws and the perjury that almost always accompanies them. Yet in most countries, anyone claiming to have scruples about buying such goods would be regarded as pedantically hypocritical. Far from earning anyone’s respect, such a person would only be suspected of being a greater scoundrel than most of his neighbors. This public tolerance often encourages the smuggler to continue his trade. It teaches him to regard the trade as innocent to some degree. When he faces the full severity of the revenue laws, he is often ready to defend with violence what he has come to regard as his rightful property. At first, he may have been more imprudent than criminal. In the end, he too often becomes one of the boldest and most determined violators of society’s laws. When the smuggler is ruined, his capital is absorbed into either the state’s revenue or that of the revenue officer. Previously, the capital supported productive labor. It is now used to support unproductive labor. This reduces society’s total capital and the useful industry that capital might otherwise have supported.

Fourthly, such taxes, by subjecting at least the dealers in the taxed commodities, to the frequent visits and odious examination of the tax-gatherers, expose them sometimes, no doubt, to some degree of oppression, and always to much trouble and vexation; and though vexation, as has already been said, is not strictly speaking expense, it is certainly equivalent to the expense at which every man would be willing to redeem himself from it. The laws of excise, though more effectual for the purpose for which they were instituted, are, in this respect, more vexatious than those of the customs. When a merchant has imported goods subject to certain duties of customs; when he has paid those duties, and lodged the goods in his warehouse; he is not, in most cases, liable to any further trouble or vexation from the custom-house officer. It is otherwise with goods subject to duties of excise. The dealers have no respite from the continual visits and examination of the excise officers. The duties of excise are, upon this account, more unpopular than those of the customs; and so are the officers who levy them. Those officers, it is pretended, though in general, perhaps, they do their duty fully as well as those of the customs; yet, as that duty obliges them to be frequently very troublesome to some of their neighbours, commonly contract a certain hardness of character, which the others frequently have not. This observation, however, may very probably be the mere suggestion of fraudulent dealers, whose smuggling is either prevented or detected by their diligence.

Fourth, these taxes subject at least the dealers in taxed goods to frequent visits and unpleasant inspections by tax collectors. These visits and inspections sometimes expose dealers to some degree of oppression, no doubt. They always cause them much trouble and frustration. As already said, frustration is not strictly an expense. But it is certainly equivalent to what anyone would willingly pay to be free of it. Excise laws are more effective for their intended purpose than customs laws. But they are also more troublesome in this respect. A merchant may import goods subject to customs duties, pay those duties, and store the goods in a warehouse. In most cases, the merchant then faces no further trouble or frustration from customs officers. It is different with goods subject to excise duties. Dealers have no relief from the continual visits and inspections of excise officers. For this reason, excise duties are more unpopular than customs duties. So are the officers who collect them. People claim that excise officers commonly develop a certain hardness of character that customs officers often lack. Perhaps excise officers generally do their duty just as well as customs officers. Yet their duty requires them to cause some of their neighbours frequent trouble. This observation about their character, however, may very probably be nothing more than a suggestion made by dishonest dealers. The diligence of excise officers prevents or detects these dealers' smuggling.

The inconveniencies, however, which are, perhaps, in some degree inseparable from taxes upon consumable communities, fall as light upon the people of Great Britain as upon those of any other country of which the government is nearly as expensive. Our state is not perfect, and might be mended; but it is as good, or better, than that of most of our neighbours.

However, taxes on consumable goods perhaps inevitably cause some difficulties. These difficulties fall as lightly on the people of Great Britain as on those of any other country with a nearly as expensive government. Our condition is not perfect and could be improved. But it is as good as, or better than, that of most of our neighbors.

In consequence of the notion, that duties upon consumable goods were taxes upon the profits of merchants, those duties have, in some countries, been repeated upon every successive sale of the goods. If the profits of the merchant-importer or merchant-manufacturer were taxed, equality seemed to require that those of all the middle buyers, who intervened between either of them and the consumer, should likewise be taxed. The famous alcavala of Spain seems to have been established upon this principle. It was at first a tax of ten per cent. afterwards of fourteen per cent. and it is at present only six per cent. upon the sale of every sort of property whether moveable or immoveable; and it is repeated every time the property is sold. {Memoires concernant les Droits, etc. tom. i, p. 15} The levying of this tax requires a multitude of revenue officers, sufficient to guard the transportation of goods, not only from one province to another, but from one shop to another. It subjects, not only the dealers in some sorts of goods, but those in all sorts, every farmer, every manufacturer, every merchant and shopkeeper, to the continual visit and examination of the tax-gatherers. Through the greater part of the country in which a tax of this kind is established, nothing can be produced for distant sale. The produce of every part of the country must be proportioned to the consumption of the neighbourhood. It is to the alcavala, accordingly, that Ustaritz imputes the ruin of the manufactures of Spain. He might have imputed to it, likewise, the declension of agriculture, it being imposed not only upon manufactures, but upon the rude produce of the land.

Some people believed that duties on consumer goods were taxes on merchants’ profits. As a result, some countries charged these duties again each time the goods were sold. If the profits of an importing merchant or manufacturer were taxed, fairness seemed to require taxing all the middlemen between them and the consumer. Spain’s famous alcavala seems to have been established on this principle. It was originally a tax of ten percent, later fourteen percent, and is now only six percent. It applies to the sale of every kind of property, whether movable or immovable, and is charged again each time the property is sold. {Memoires concernant les Droits, etc. tom. i, p. 15} Collecting this tax requires many revenue officers. There must be enough to monitor goods moving between provinces and even between shops. The tax subjects dealers in all kinds of goods to constant visits and inspections by tax collectors. This includes every farmer, manufacturer, merchant, and shopkeeper. In most of a country where such a tax exists, nothing can be produced for sale in distant places. Each part of the country must produce only enough to meet local demand. Ustaritz therefore blames the alcavala for the ruin of Spain’s manufacturing. He might also have blamed it for the decline of agriculture, since it is imposed on raw produce as well as manufactured goods.

In the kingdom of Naples, there is a similar tax of three per cent. upon the value of all contracts, and consequently upon that of all contracts of sale. It is both lighter than the Spanish tax, and the greater part of towns and parishes are allowed to pay a composition in lieu of it. They levy this composition in what manner they please, generally in a way that gives no interruption to the interior commerce of the place. The Neapolitan tax, therefore, is not near so ruinous as the Spanish one.

In the kingdom of Naples, there is a similar tax of three percent on the value of all contracts. This includes all contracts of sale. The tax is lower than the Spanish tax. Most towns and parishes are also allowed to pay a fixed sum instead. They collect this sum however they choose, generally without disrupting trade within the town or parish. The Neapolitan tax is therefore nowhere near as ruinous as the Spanish tax.

The uniform system of taxation, which, with a few exception of no great consequence, takes place in all the different parts of the united kingdom of Great Britain, leaves the interior commerce of the country, the inland and coasting trade, almost entirely free. The inland trade is almost perfectly free; and the greater part of goods may be carried from one end of the kingdom to the other, without requiring any permit or let-pass, without being subject to question, visit or examination, from the revenue officers. There are a few exceptions, but they are such as can give no interruption to any important branch of inland commerce of the country. Goods carried coastwise, indeed, require certificates or coast-cockets. If you except coals, however, the rest are almost all duty-free. This freedom of interior commerce, the effect of the uniformity of the system of taxation, is perhaps one of the principal causes of the prosperity of Great Britain; every great country being necessarily the best and most extensive market for the greater part of the productions of its own industry. If the same freedom in consequence of the same uniformity, could be extended to Ireland and the plantations, both the grandeur of the state, and the prosperity of every part of the empire, would probably be still greater than at present.

The same system of taxation applies throughout the united kingdom of Great Britain, with a few minor exceptions. This leaves trade within the country, both inland and along the coast, almost entirely free. Inland trade is almost perfectly free. Most goods can be carried from one end of the kingdom to the other without a permit or pass. They can also travel without questions, visits, or inspections from tax officers. There are a few exceptions, but they cannot interrupt any important branch of the country's inland trade. Goods carried along the coast do require certificates or coastal passes. Apart from coal, however, almost all such goods are free of duties. This freedom of trade within the country results from the uniform tax system. It is perhaps one of the main causes of Great Britain's prosperity. Every large country is necessarily the best and largest market for most of what its own industries produce. If the same freedom could be extended to Ireland and the plantations through the same uniform tax system, both the greatness of the state and the prosperity of every part of the empire would probably be greater than they are now.

In France, the different revenue laws which take place in the different provinces, require a multitude of revenue officers to surround, not only the frontiers of the kingdom, but those of almost each particular province, in order either to prevent the importation of certain goods, or to subject it to the payment of certain duties, to the no small interruption of the interior commerce of the country. Some provinces are allowed to compound for the gabelle, or salt tax; others are exempted from it altogether. Some provinces are exempted from the exclusive sale of tobacco, which the farmers-general enjoy through the greater part of the kingdom. The aides, which correspond to the excise in England, are very different in different provinces. Some provinces are exempted from them, and pay a composition or equivalent. In those in which they take place, and are in farm, there are many local duties which do not extend beyond a particular town or district. The traites, which correspond to our customs, divide the kingdom into three great parts; first, the provinces subject to the tariff of 1664, which are called the provinces of the five great farms, and under which are comprehended Picardy, Normandy, and the greater part of the interior provinces of the kingdom; secondly, the provinces subject to the tariff of 1667, which are called the provinces reckoned foreign, and under which are comprehended the greater part of the frontier provinces; and, thirdly, those provinces which are said to be treated as foreign, or which, because they are allowed a free commerce with foreign countries, are, in their commerce with the other provinces of France, subjected to the same duties as other foreign countries. These are Alsace, the three bishoprics of Mentz, Toul, and Verdun, and the three cities of Dunkirk, Bayonne, and Marseilles. Both in the provinces of the five great farms (called so on account of an ancient division of the duties of customs into five great branches, each of which was originally the subject of a particular farm, though they are now all united into one), and in those which are said to be reckoned foreign, there are many local duties which do not extend beyond a particular town or district. There are some such even in the provinces which are said to be treated as foreign, particularly in the city of Marseilles. It is unnecessary to observe how much both the restraints upon the interior commerce of the country, and the number of the revenue officers, must be multiplied, in order to guard the frontiers of those different provinces and districts which are subject to such different systems of taxation.

In France, revenue laws differ from province to province. As a result, many revenue officers must guard not only the kingdom’s borders, but also those of nearly every province. They must either prevent certain goods from entering or collect duties on them. This greatly disrupts trade within the country. Some provinces are allowed to pay a fixed sum instead of the gabelle, or salt tax. Others are exempt from it altogether. Some provinces are exempt from the tobacco monopoly that the farmers-general enjoy throughout most of the kingdom. The aides, which correspond to England’s excise taxes, vary greatly among provinces. Some provinces are exempt from them and pay a fixed sum or equivalent instead. In provinces where the aides apply and are farmed out, many local duties extend only to a particular town or district. The traites, which correspond to our customs duties, divide the kingdom into three great parts. First are the provinces subject to the tariff of 1664, called the provinces of the five great farms. They include Picardy, Normandy, and most of the kingdom’s inland provinces. Second are the provinces subject to the tariff of 1667, called the provinces reckoned foreign. They include most of the border provinces. Third are the provinces said to be treated as foreign. Because they are allowed to trade freely with foreign countries, their trade with other French provinces faces the same duties as trade with foreign countries. These are Alsace, the three bishoprics of Mentz, Toul, and Verdun, and the three cities of Dunkirk, Bayonne, and Marseilles. The provinces of the five great farms take their name from an old division of customs duties into five great branches. Each branch was originally farmed out separately, though all five are now united in one farm. Both in these provinces and in those reckoned foreign, many local duties extend only to a particular town or district. There are even some such duties in the provinces treated as foreign, particularly in the city of Marseilles. Clearly, guarding the borders of provinces and districts with such different tax systems must greatly increase both the restrictions on trade within the country and the number of revenue officers.

Over and above the general restraints arising from this complicated system of revenue laws, the commerce of wine (after corn, perhaps, the most important production of France) is, in the greater part of the provinces, subject to particular restraints arising from the favour which has been shown to the vineyards of particular provinces and districts above those of others. The provinces most famous for their wines, it will be found, I believe, are those in which the trade in that article is subject to the fewest restraints of this kind. The extensive market which such provinces enjoy, encourages good management both in the cultivation of their vineyards, and in the subsequent preparation of their wines.

The complicated system of revenue laws places general restrictions on trade. In most provinces, the wine trade faces additional restrictions because some provinces and districts favor their vineyards over others. Wine is perhaps France’s most important product after grain. I believe the provinces most famous for their wines are those where the wine trade faces the fewest such restrictions. The large markets these provinces enjoy encourage good management, both in growing grapes and in preparing wine afterward.

Such various and complicated revenue laws are not peculiar to France. The little duchy of Milan is divided into six provinces, in each of which there is a different system of taxation, with regard to several different sorts of consumable goods. The still smaller territories of the duke of Parma are divided into three or four, each of which has, in the same manner, a system of its own. Under such absurd management, nothing but the great fertility of the soil, and happiness of the climate, could preserve such countries from soon relapsing into the lowest state of poverty and barbarism.

Such varied and complicated tax laws are not unique to France. The small duchy of Milan is divided into six provinces. Each province has its own system of taxation for several kinds of goods people consume. The duke of Parma’s even smaller territories are divided into three or four provinces. Each province likewise has its own tax system. Under such absurd management, only the rich soil and favorable climate could keep such countries from soon falling into the lowest state of poverty and barbarism.

Taxes upon consumable commodities may either be levied by an administration, of which the officers are appointed by govermnent, and are immediately accountable to government, of which the revenue must, in this case, vary from year to year, according to the occasional variations in the produce of the tax; or they may be let in farm for a rent certain, the farmer being allowed to appoint his own officers, who, though obliged to levy the tax in the manner directed by the law, are under his immediate inspection, and are immediately accountable to him. The best and most frugal way of levying a tax can never be by farm. Over and above what is necessary for paying the stipulated rent, the salaries of the officers, and the whole expense of administration, the farmer must always draw from the produce of the tax a certain profit, proportioned at least to the advance which he makes, to the risk which he runs, to the trouble which he is at, and to the knowledge and skill which it requires to manage so very complicated a concern. Government, by establishing an administration under their own immediate inspection, of the same kind with that which the farmer establishes, might at least save this profit, which is almost always exorbitant. To farm any considerable branch of the public revenue requires either a great capital, or a great credit; circumstances which would alone restrain the competition for such an undertaking to a very small number of people. Of the few who have this capital or credit, a still smaller number have the necessary knowledge or experience; another circumstance which restrains the competition still further. The very few who are in condition to become competitors, find it more for their interest to combine together; to become copartners, instead of competitors; and, when the farm is set up to auction, to offer no rent but what is much below the real value. In countries where the public revenues are in farm, the farmers are generally the most opulent people. Their wealth would alone excite the public indignation; and the vanity which almost always accompanies such upstart fortunes, the foolish ostentation with which they commonly display that wealth, excite that indignation still more.

Taxes on goods people consume can be collected in two ways. The government may appoint officials who answer directly to it. In that case, its revenue will vary from year to year as tax receipts change. Or the government may lease the right to collect the tax for a fixed payment. The leaseholder, known as a tax farmer, may appoint his own officers. These officers must collect the tax as the law directs, but they work under his direct supervision and answer to him. Farming out a tax can never be the best or cheapest way to collect it. The tax farmer must cover the agreed payment, the officers’ salaries, and all the costs of administration. Beyond that, he must also draw a profit from the tax receipts. This profit must at least compensate him for the money he advances, the risk he takes, and the trouble involved. It must also compensate him for the knowledge and skill needed to manage such a complicated undertaking. The government could establish the same kind of administration under its own direct supervision. It could then at least save this profit, which is almost always excessive. To farm any substantial part of public revenue requires either great capital or access to substantial credit. These requirements alone would limit competition for the contract to very few people. Of those with the capital or credit, still fewer have the necessary knowledge or experience. This limits competition even further. The very few who can compete find it more profitable to join together as partners rather than compete. When the tax farm is auctioned, they offer a payment far below its real value. In countries where public revenues are farmed out, the tax farmers are generally the wealthiest people. Their wealth alone would arouse public anger. The vanity that almost always accompanies such newly acquired fortunes makes people still angrier. So does the foolish display they commonly make of their wealth.

The farmers of the public revenue never find the laws too severe, which punish any attempt to evade the payment of a tax. They have no bowels for the contributors, who are not their subjects, and whose universal bankruptcy, if it should happen the day after the farm is expired, would not much affect their interest. In the greatest exigencies of the state, when the anxiety of the sovereign for the exact payment of his revenue is necessarily the greatest, they seldom fail to complain, that without laws more rigorous than those which actually took place, it will be impossible for them to pay even the usual rent. In those moments of public distress, their commands cannot be disputed. The revenue laws, therefore, become gradually more and more severe. The most sanguinary are always to be found in countries where the greater part of the public revenue is in farm; the mildest, in countries where it is levied under the immediate inspection of the sovereign. Even a bad sovereign feels more compassion for his people than can ever be expected from the farmers of his revenue. He knows that the permanent grandeur of his family depends upon the prosperity of his people, and he will never knowingly ruin that prosperity for the sake of any momentary interest of his own. It is otherwise with the farmers of his revenue, whose grandeur may frequently be the effect of the ruin, and not of the prosperity, of his people.

Tax farmers, who collect public revenue in return for a fixed payment, never think laws against tax evasion are too harsh. They have no compassion for taxpayers, who are not their subjects. If all taxpayers went bankrupt the day after a tax farmer's contract expired, it would hardly affect his interests. In the state's greatest emergencies, the sovereign is naturally most anxious to receive his full revenue. At such times, tax farmers almost always complain that they need harsher laws than those in force. Without them, they say, they cannot pay even the usual rent. In such moments of public distress, their demands cannot be disputed. As a result, revenue laws gradually become more severe. The bloodiest laws are always found in countries where tax farmers collect most public revenue. The mildest are found where revenue is collected under the sovereign's direct supervision. Even a bad sovereign feels more compassion for his people than can ever be expected from his tax farmers. He knows that his family's lasting greatness depends on his people's prosperity. He will never knowingly ruin that prosperity for the sake of a temporary advantage to himself. The tax farmers are different. Their greatness may often result from the ruin of his people rather than from their prosperity.

A tax is sometimes not only farmed for a certain rent, but the farmer has, besides, the monopoly of the commodity taxed. In France, the duties upon tobacco and salt are levied in this manner. In such cases, the farmer, instead of one, levies two exorbitant profits upon the people; the profit of the farmer, and the still more exorbitant one of the monopolist. Tobacco being a luxury, every man is allowed to buy or not to buy as he chuses; but salt being a necessary, every man is obliged to buy of the farmer a certain quantity of it; because, if he did not buy this quantity of the farmer, he would, it is presumed, buy it of some smuggler. The taxes upon both commodities are exorbitant. The temptation to smuggle, consequently, is to many people irresistible; while, at the same time, the rigour of the law, and the vigilance of the farmer’s officers, render the yielding to the temptation almost certainly ruinous. The smuggling of salt and tobacco sends every year several hundred people to the galleys, besides a very considerable number whom it sends to the gibbet. Those taxes, levied in this manner, yield a very considerable revenue to government. In 1767, the farm of tobacco was let for twenty-two millions five hundred and forty-one thousand two hundred and seventy-eight livres a-year; that of salt for thirty-six millions four hundred and ninety-two thousand four hundred and four livres. The farm, in both cases, was to commence in 1768, and to last for six years. Those who consider the blood of the people as nothing, in comparison with the revenue of the prince, may, perhaps, approve of this method of levying taxes. Similar taxes and monopolies of salt and tobacco have been established in many other countries, particularly in the Austrian and Prussian dominions, and in the greater part of the states of Italy.

Sometimes a tax is farmed out for a fixed rent, and the tax farmer also has a monopoly on the taxed commodity. In France, the duties on tobacco and salt are collected this way. In such cases, the farmer takes two excessive profits from the people instead of one. One is the profit of the tax farmer, and the other is the even more excessive profit of the monopolist. Tobacco is a luxury, so everyone may choose whether to buy it. But salt is a necessity, and everyone is required to buy a certain quantity from the farmer. The reason is that anyone who did not buy that quantity from the farmer would, it is presumed, buy it from a smuggler. The taxes on both commodities are excessive. As a result, many people cannot resist the temptation to smuggle. At the same time, the harshness of the law and the vigilance of the farmer’s officers make yielding to that temptation almost certainly ruinous. Every year, salt and tobacco smuggling sends several hundred people to the galleys and a very considerable number to the gallows. Collected in this way, these taxes bring the government a very considerable revenue. In 1767, the tobacco farm was leased for 22,541,278 livres a year, and the salt farm for 36,492,404 livres a year. Both leases were to begin in 1768 and last for six years. Those who count the blood of the people as nothing compared with the prince’s revenue may perhaps approve of this method of collecting taxes. Similar taxes and monopolies on salt and tobacco have been established in many other countries. These include, in particular, the Austrian and Prussian dominions and most of the states of Italy.

In France, the greater part of the actual revenue of the crown is derived from eight different sources; the taille, the capitation, the two vingtiemes, the gabelles, the aides, the traites, the domaine, and the farm of tobacco. The five last are, in the greater part of the provinces, under farm. The three first are everywhere levied by an administration, under the immediate inspection and direction of government; and it is universally acknowledged, that in proportion to what they take out of the pockets of the people, they bring more into the treasury of the prince than the other five, of which the administration is much more wasteful and expensive.

In France, most of the crown's actual revenue comes from eight sources: the taille, the capitation, the two vingtiemes, the gabelles, the aides, the traites, the domaine, and the tobacco farm. In most provinces, the last five are collected by tax farmers. The first three are collected everywhere by an administration under the government's direct supervision and control. Everyone agrees that, relative to what they take from the people, the first three bring more into the crown's treasury than the other five. The administration of the other five is much more wasteful and expensive.

The finances of France seem, in their present state, to admit of three very obvious reformations. First, by abolishing the taille and the capitation, and by increasing the number of the vingtiemes, so as to produce an additional revenue equal to the amount of those other taxes, the revenue of the crown might be preserved; the expense of collection might be much diminished; the vexation of the inferior ranks of people, which the taille and capitation occasion, might be entirely prevented; and the superior ranks might not be more burdened than the greater part of them are at present. The vingtieme, I have already observed, is a tax very nearly of the same kind with what is called the land tax of England. The burden of the taille, it is acknowledged, falls finally upon the proprietors of land; and as the greater part of the capitation is assessed upon those who are subject to the taille, at so much a-pound of that other tax, the final payment of the greater part of it must likewise fall upon the same order of people. Though the number of the vingtiemes, therefore, was increased, so as to produce an additional revenue equal to the amount of both those taxes, the superior ranks of people might not be more burdened than they are at present; many individuals, no doubt, would, on account of the great inequalities with which the taille is commonly assessed upon the estates and tenants of different individuals. The interest and opposition of such favoured subjects, are the obstacles most likely to prevent this, or any other reformation of the same kind. Secondly, by rendering the gabelle, the aides, the traites, the taxes upon tobacco, all the different customs and excises, uniform in all the different parts of the kingdom, those taxes might be levied at much less expense, and the interior commerce of the kingdom might be rendered as free as that of England. Thirdly, and lastly, by subjecting all those taxes to an administration under the immediate inspection and direction or government, the exorbitant profits of the farmers-general might be added to the revenue of the state. The opposition arising from the private interest of individuals, is likely to be as effectual for preventing the two last as the first-mentioned scheme of reformation.

France’s finances, in their present state, seem to allow three very obvious reforms. First, the taille and the capitation could be abolished. The number of vingtiemes could then be increased to raise as much additional revenue as those taxes now produce. This could preserve the crown’s revenue while greatly reducing the cost of collection. It could entirely prevent the hardship that the taille and capitation cause the lower ranks of people. And it might not burden the upper ranks more than most of them are burdened now. As I have already noted, the vingtieme is much like the English land tax. The burden of the taille is acknowledged to fall ultimately on landowners. Most of the capitation is assessed on people subject to the taille, at a fixed amount per pound of that tax. So the final payment of most of the capitation must also fall on landowners. The number of vingtiemes could therefore be increased to raise as much additional revenue as both taxes produce. Even so, the upper ranks might not be more burdened than they are now. Many individuals, no doubt, would pay more, because the taille is commonly assessed very unequally on different people’s estates and tenants. The interests and opposition of these favored subjects are the obstacles most likely to prevent this or any similar reform. Second, the gabelle, the aides, the traites, the tobacco taxes, and all other customs and excise duties could be made uniform throughout the kingdom. These taxes could then be collected at much less expense. Commerce within the kingdom could also be made as free as it is in England. Third and last, all these taxes could be administered under the government’s direct inspection and control. The exorbitant profits of the farmers-general could then be added to the state’s revenue. Opposition arising from individuals’ private interests is likely to prevent the last two reforms as effectively as the first.

The French system of taxation seems, in every respect, inferior to the British. In Great Britain, ten millions sterling are annually levied upon less than eight millions of people, without its being possible to say that any particular order is oppressed. From the Collections of the Abbé Expilly, and the observations of the author of the Essay upon the Legislation and Commerce of Corn, it appears probable that France, including the provinces of Lorraine and Bar, contains about twenty-three or twenty-four millions of people; three times the number, perhaps, contained in Great Britain. The soil and climate of France are better than those of Great Britain. The country has been much longer in a state of improvement and cultivation, and is, upon that account, better stocked with all those things which it requires a long time to raise up and accumulate; such as great towns, and convenient and well-built houses, both in town and country. With these advantages, it might be expected, that in France a revenue of thirty millions might be levied for the support of the state, with as little inconvenience as a revenue of ten millions is in Great Britain. In 1765 and 1766, the whole revenue paid into the treasury of France, according to the best, though, I acknowledge, very imperfect accounts which I could get of it, usually run between 308 and 325 millions of livres; that is, it did not amount to fifteen millions sterling; not the half of what might have been expected, had the people contributed in the same proportion to their numbers as the people of Great Britain. The people of France, however, it is generally acknowledged, are much more oppressed by taxes than the people of Great Britain. France, however, is certainly the great empire in Europe, which, after that of Great Britain, enjoys the mildest and most indulgent government.

The French tax system seems inferior to the British system in every respect. In Great Britain, less than eight million people pay ten million pounds in taxes each year. Yet no particular class can be said to be oppressed by them. The Collections of the Abbé Expilly and the observations of the author of the Essay upon the Legislation and Commerce of Corn suggest that France, including Lorraine and Bar, probably has about twenty-three or twenty-four million people. That is perhaps three times the population of Great Britain. France has better soil and a better climate than Great Britain. It has also been under improvement and cultivation for much longer. As a result, it has more of the things that take a long time to build and accumulate. These include large towns and convenient, well-built houses, both in towns and in the country. Given these advantages, one might expect France to raise thirty million pounds in state revenue with as little hardship as Great Britain raises ten million. In 1765 and 1766, however, the total revenue paid into the French treasury usually came to between 308 and 325 million livres. These are the best figures I could obtain, though I admit they are very imperfect. The amount was less than fifteen million pounds. It was less than half what might have been expected if the French people had contributed as much per person as the people of Great Britain. Yet it is generally acknowledged that the people of France are much more oppressed by taxes than the people of Great Britain. France, however, is certainly the great empire in Europe that, after Great Britain, enjoys the mildest and most lenient government.

In Holland, the heavy taxes upon the necessaries of life have ruined, it is said, their principal manufacturers, and are likely to discourage, gradually, even their fisheries and their trade in ship-building. The taxes upon the necessaries of life are inconsiderable in Great Britain, and no manufacture has hitherto been ruined by them. The British taxes which bear hardest on manufactures, are some duties upon the importation of raw materials, particularly upon that of raw silk. The revenue of the States-General and of the different cities, however, is said to amount to more than five millions two hundred and fifty thousand pounds sterling; and as the inhabitants of the United Provinces cannot well be supposed to amount to more than a third part of those of Great Britain, they must, in proportion to their number, be much more heavily taxed.

In Holland, heavy taxes on necessities are said to have ruined the country’s principal manufacturers. These taxes are also likely to gradually discourage its fisheries and shipbuilding trade. In Great Britain, taxes on necessities are minor, and so far they have ruined no industry. The British taxes that weigh most heavily on manufacturing are duties on some imported raw materials, particularly raw silk. However, the revenue of the States-General and the different cities is said to total more than £5,250,000 sterling. The population of the United Provinces can hardly be supposed to exceed one third of Great Britain’s. So, relative to their numbers, the inhabitants of the United Provinces must be much more heavily taxed.

After all the proper subjects of taxation have been exhausted, if the exigencies of the state still continue to require new taxes, they must be imposed upon improper ones. The taxes upon the necessaries of life, therefore, may be no impeachment of the wisdom of that republic, which, in order to acquire and to maintain its independency, has, in spite of its great frugality, been involved in such expensive wars as have obliged it to contract great debts. The singular countries of Holland and Zealand, besides, require a considerable expense even to preserve their existence, or to prevent their being swallowed up by the sea, which must have contributed to increase considerably the load of taxes in those two provinces. The republican form of government seems to be the principal support of the present grandeur of Holland. The owners of great capitals, the great mercantile families, have generally either some direct share, or some indirect influence, in the administration of that government. For the sake of the respect and authority which they derive from this situation, they are willing to live in a country where their capital, if they employ it themselves, will bring them less profit, and if they lend it to another, less interest; and where the very moderate revenue which they can draw from it will purchase less of the necessaries and conveniencies of life than in any other part of Europe. The residence of such wealthy people necessarily keeps alive, in spite of all disadvantages, a certain degree of industry in the country. Any public calamity which should destroy the republican form of government, which should throw the whole administration into the hands of nobles and of soldiers, which should annihilate altogether the importance of those wealthy merchants, would soon render it disagreeable to them to live in a country where they were no longer likely to be much respected. They would remove both their residence and their capital to some other country, and the industry and commerce of Holland would soon follow the capitals which supported them.

Once all suitable sources of tax revenue have been exhausted, the state may still need to raise more money. If so, it must tax unsuitable sources. Taxes on life’s necessities may therefore be no sign of poor judgment by that republic. To gain and maintain its independence, the republic fought costly wars despite its great frugality. Those wars forced it to take on large debts. Moreover, the unusual lands of Holland and Zealand require considerable spending just to preserve them from being swallowed by the sea. This expense must have added considerably to the tax burden in those two provinces. Holland’s republican form of government seems to be the main support of its present greatness. The owners of large fortunes, the great merchant families, generally have either a direct role or indirect influence in government. Their position brings them respect and authority, and for its sake they are willing to live in Holland. Yet if they invest their capital themselves, it will bring them less profit there. If they lend it to someone else, it will bring them less interest. Moreover, the very modest income they can earn from it will buy fewer necessities and comforts there than anywhere else in Europe. The presence of such wealthy people necessarily sustains a certain level of industry in the country, despite all its disadvantages. A public disaster might destroy the republican form of government and place the whole administration in the hands of nobles and soldiers. It might also destroy the importance of those wealthy merchants altogether. Holland would then soon become an unpleasant place for them to live, since they would no longer be likely to enjoy much respect there. They would move themselves and their capital to another country. Holland’s industry and commerce would soon follow the capital that supported them.