An Inquiry into the Principles of Political Oeconomy
Of Taxes, and of the Proper Application of their Amount
The subject of taxes is so closely connected with every
branch of political oeconomy, that I have not been able to avoid
anticipating a subject, which, according to my plan, is left for
the conclusion of this work.
What has been hitherto introduced concerning taxation, in
treating of industry, trade, money, credit, and debts, relates
principally to the effects of taxes upon circulation, prices, and
several other things relating to those subjects.
What therefore remains, not as yet touched upon, chiefly
concerns the principles which determine the nature of every tax,
relatively to the interest it is intended to affect.
To investigate the different consequences of taxes when
imposed upon possessions, and when upon consumption, are
questions which relate directly to the principles of taxation.
But in this book I shall also have occasion to trace out, farther
than as yet I have done, certain combinations concerning the
effects which taxes have in multiplying the fund of circulation:
and as the augmentation of taxes tends greatly to increase money,
I am thence led to examine, how far the advantage gained by the
suppression of taxes may not be more than compensated to a
nation, by the inconveniences proceeding from so great a
diminution of circulation.
Taxes have all along been supposed to enhance the price of
living; we shall therefore have an opportunity of investigating
the proper extent to be allowed to that general proposition.
Of the different Kinds of Taxes
Taxes have been established in all ages of the world, under
different names of tribute, tithe, tally, impost, duty, gabel,
custom, subsidy, excise; and many others needless to
recapitulate, and foreign to my subject to examine.
Though in every species of this voluminous class, there are
certain characteristic differences; yet one principle prevails in
all, upon which the definition may be founded.
I understand therefore by tax, in its most general
acceptation, a certain contribution of fruits, service, or money,
imposed upon the individuals of a state, by the act or consent of
the legislature, in order to defray the expences of government.
This definition may, I think, include, in general, all kinds
of burdens which can possibly be imposed. By fruits are
understood either those of the earth, of animals, or of man
himself. By service, whatever man can either by labour or
ingenuity produce, while he himself remains free. And under money
is comprehended the equivalent given for what may be exacted in
the other two ways.
I have no occasion to consider the nature of such taxes as
are not in use in our days. Tributes of slaves from conquered
nations are as little known in our times, as contributions of
subsistence from the subjects of the state.
I divide, therefore, modern taxes into three classes.
1. Those upon alienation, which I call proportional: 2. Those
upon possessions, which I call cumulative or arbitrary: and 3.
Those exacted in service, which I call personal. These terms must
now be fully explained, that I may use them hereafter without
A proportional tax presents a simple notion.
It is paid by the buyer, who intends to consume, at the time
of the consumption, while the balance of wealth is turning
against him; and is consolidated with the price of the commodity.
Examples of this tax are all excises, customs, stamp-duties,
postage, coinage, and the like.
By this definition, two requisites are necessary for fixing
the tax upon any one: first, he must be a buyer; secondly, he
must be a consumer. Let this be retained.
A cumulative or arbitrary tax, presents various ideas at
first sight, and cannot well be defined until the nature of it
has been illustrated by examples.
It may be known, First, By the intention of it; which is to
affect the possessor in such a manner, as to make it difficult
for him to augment his income, in proportion to the tax he pays.
Secondly, By the object; when instead of being laid upon any
determinate piece of labour or article of consumption, it is made
to affect past and not present gains.
Thirdly, by the circumstances under which it is levied; which
imply no transition of property from hand to hand, nor any change
in the balance of wealth between individuals.
Examples of cumulative taxes are land-taxes, poll-taxes,
window-taxes, duties upon coaches and servants, that upon
industrie, in France, and many others.
A personal tax is known by its affecting the person, not the
purse of those who are laid under it.
Examples of it are the corvée, in France; the six days labour
on the high roads, and the militia service before pay was allowed
Having thus explained what I mean by proportional,
cumulative, and personal taxes, it is proper to observe, that
however different they may prove in their effects and
consequences, they all agree in this, that they ought to impair
the fruits and not the fund; the expences of the person taxed,
not the savings; the services, not the persons of those who do
This holds true in every denomination of taxes. In former
days, when annual tributes of slaves were made, and even at
present among the Turks, where it is customary to recruit the
seraglios of great men by such contributions, I consider the
young women who are sent, as part of the fruits of the people who
send them. This is a fundamental principle in taxation; and
therefore public contributions, which necessarily imply a