An Inquiry into the Principles of Political Oeconomy

Book V

    Of Taxes, and of the Proper Application of their Amount

Introduction

     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.

Chap. I

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

being misunderstood.

     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

in England.(1*)

     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

them.

     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