TAXATION.
Definition.
A TAX is a portion of the produce of the capital and labour of individuals, taken from them by authority of Government, and placed at its disposal.
A tax may be either direct or indirect. It is said to be direct when it is immediately taken from income or capital; and indirect when it is taken from them by making their owners pay for liberty to use certain articles, or to exercise certain privileges.
A tax may be either general or particular—that is, it may be made either to affect all classes indiscriminately, or to affect only one or more classes.
TAXATION is the general term used to express the aggregate of particular taxes. It is also the name given to that branch of the science of Political Economy which explains the mode in which the revenue required for the public service may be most advantageously raised.
PART I.—GENERAL OBSERVATIONS ON TAXATION.
Necessity of Taxation—Present System of Taxation originated in the decline of the Feudal System—Taxes estimated by Values, and not by Quantities—Every Improvement in the Arts, a Means of enabling a Country to bear Additional Taxes—Opposite Effects of Moderate and Heavy Taxes—Fallacy of the Doctrine of those who contend that Taxes are not really lost to the Contributors, but that they are again restored to them by the Expenditure of Government or its Agents—Erroneous Opinion of Locke and Quesnay with respect to the ultimate Incidence of all Taxes on the Land—Maxims to be observed in the Imposition of Taxes—Agreement or Disagreement of certain Taxes with these Maxims—Excise Scheme of Sir Robert Walpole—Expense and Mode of collecting Taxes—Corvées.
We conceive it would be quite superfluous to enter into any lengthened argument to show the utility, or rather necessity, of raising a revenue for the use of the public. It is sufficient to observe, that security from foreign invasion, the speedy and impartial administration of justice, and the maintenance of good order and tranquillity, are absolutely indispensable to the successful exertion of industry, and to the advancement of society in the career of civilization and refinement. And when such is the case—when it is admitted on all hands, that security and good order are productive of universal advantage—and that, without them, there could be no considerable accumulation of national wealth—it is plain no individual can justly complain that he is made to contribute, in the same proportion to his means as others, for their attainment; or, which is the same thing, that he is made to pay his fair share of the sum required to procure the services of the soldiers and sailors necessary to repel hostile aggression; and to support the various institutions and public functionaries necessary to maintain the internal peace of the country, to promote its prosperity, and to protect every citizen in the undisturbed enjoyment of his property and rights. It is certainly true, that the public are frequently made to contribute larger sums than are necessary for the ends of good government. But, as this abuse must obviously originate either in the misconduct of administration, or in the defective political organization of the State, it does not properly come within the scope of our inquiries. In treating of taxation, the object of the Political Economist is not to inquire whether the revenue raised by the State exceeds its necessary wants, or whether it has been judiciously ex-
General Ob- pended; but to point out the general effect of taxa-
erations on tion on individual and public wealth; and, by analy-
Taxation. zing the various methods in which a revenue may be
raised, and comparing them together, to show which
is most advantageous, or rather which is least injuri-
ous, to the State.
Present Sys- The scheme of taxation now in force in modern
tem of Taxa- Europe had its origin in the decline of the feudal
tion rose out of the system. According to the principles of that sys-
tem, all the lands of a country were held by their
actual possessors as fiefs of the Crown, on con-
dition of their performing certain stipulated services;
of which the obligation to support the sovereign
when he took the field, with a body of retainers,
armed and maintained at their own expence, was by
far the most important. The tenants in chief of the
great fiefs, or those who held directly under the so-
vereign, were either originally invested with, or sub-
sequently usurped, the prerogative of distributing
justice in their respective lordships; and, in those
days, the administration of justice, instead of being a
source of expence, became, in consequence of the
corruption and abuses with which it was infected, a
considerable source not of influence only, but also of
emolument. The expence of the clergy was either
defrayed from the produce of their own estates, or by
a tithe levied from the estates of others. And the
labour of the peasantry, during a few days before and
after harvest, sufficed to put the roads and bridges in-
to that state of repair, which the depressed situation
of commerce, and the little intercourse between the
different parts of the country, seemed to require.
Nor was it even necessary to levy a tax for the sup-
port of the monarch and his court. The produce of
the Crown estates, or of the royal demesnes which
had not been feued to others, but which remained in
the immediate possession of the sovereign, were ge-
nerally sufficient to defray this part of the public ex-
penditure. When the feudal system was in its vig-
our, the demesnes of the Crown were, in most
countries, very extensive; and the alienations occa-
sioned by the profusion of some princes, and the
thoughtlessness of others, were compensated by the for-
feitures and escheats that were always taking place.
The vicious and defective nature of this system of
policy is too obvious to require to be pointed out;
and it had for a long series of years the most de-
structive influence on the peace and prosperity of
Europe. But the progressive, though slow, advance
of civilization, ultimately led to its overthrow. Mo-
ney payments were gradually substituted for per-
sonal services; and the institution of standing
armies, in France,* by Charles VII., an institution
which was soon after introduced into other countries,
entirely broke the power and spirit of the feudal
aristocracy; and enabled the different governments
to introduce a regular plan of government, and to
impose that system of pecuniary contribution now
universally established.
The amount of a tax is not to be estimated by the General Ob-
servations on bulk or species of the produce transferred from indivi-
duals to government, but exclusively by its value. Taxation.
A heavy taxation consists in the abstraction of a large value, and a light taxation in the abstraction of a small value. When a fall takes place in the cost of producing any particular commodity, its price necessarily declines in an equal degree; and, supposing the value of money, the medium in which taxes are most commonly estimated, to continue invariable, the producers will be obliged to dispose of a proportionally larger quantity of that commodity whose price has fallen, to obtain the means of paying the same amount of taxes. It is plainly, however, an error to suppose, as is very commonly done, that the burden of taxation is thereby increased. The value paid by the producers has remained the same; and it is by values, and not by quantities, that the weight of taxation is always to be measured. If, owing to an improvement in agriculture, in machinery, or any other cause, we could produce two quarters of wheat, or two yards of cloth, with the same expenditure of capital and labour it now takes to produce one quarter or one yard, it could not certainly be considered as any hardship to have to give double the quantity of those commodities in payment of our taxes.
The want of attention to the principle we have now stated, has led to much erroneous reasoning on the subject of taxation. Even Dr Smith made no sufficient allowance for the effects of improvements, in enabling a country to bear additional taxes. Nothing, however, can be more certain than that the amount of the produce of national industry taken by the Government as revenue, may be regularly increased, in every country in which the arts are progressive, without occasioning any additional burden to the people. Every new invention and discovery, by which the production of commodities can be facilitated, and their value reduced, enables individuals to spare a larger quantity of them for the use of the state. The sacrifice we make in paying taxes really consists in the sacrifice of the labour and expence necessary to procure the money or commodities wherewith to pay them. But every increase in the productive powers of industry, by diminishing the labour and expence required in production, gives us the means of transferring a proportionally greater quantity of commodities to the state, without subjecting ourselves to any additional inconvenience. To pay a given sum of money, or a given value, to Government at this moment, will cost a cotton manufacturer not less, perhaps, than ten or twenty times the quantity of cottons that would have been sufficient to make the same payment in 1760: But as this reduction in the value of cottons has been the effect of an equivalent diminution in the expences of their production, the manufacturer is not thereby placed in any respect in a worse situation; nor is he really making
* It was on this occasion that the taille was first imposed in France. Hallam's History of the Middle Ages, I. p. 118.
a greater sacrifice now than he did before. This shows, that Governments have precisely the same interest as their subjects in facilitating production. Every increase of the powers of industry affords the means of putting them in possession of a larger quantity of useful and agreeable products; while every diminution of those powers must either diminish the quantity of produce at their disposal, or force them to lay heavier burdens on their subjects. A rich people is the foundation of a rich treasury. Public wealth is merely a portion of private wealth transferred from individuals to Government; and the greater the wealth of individuals, the greater will be the magnitude of the portion they can conveniently spare for public purposes.
Though taxation be necessary, it ought always to be kept within the narrowest limits possible. All taxes occasion inconvenience and privations. The best are those which are lightest; but there are none so light as not to be productive either of an increase of toil, or of a diminution of enjoyments, or of fortune. All taxes must ultimately fall either on the revenue of a country, or on its capital or stock. Perhaps there is no one tax whose produce has not been partly derived from the one of these funds, and partly from the other. There can be no doubt, however, that by far the largest proportion of all taxes judiciously imposed, and not carried to too great a height, is paid out of revenue. The desire which every one has to preserve his place in society, stimulates most people to exert themselves to defray their taxes, either by increased industry, or by making a corresponding diminution in their expenditure, without allowing them to encroach on their capitals. But the power to make increased exertions, and to save from expence, though not easily defined, is not illimitable. Every fresh increase of taxation must obviously contribute to its exhaustion: and whenever this has been effected, whenever the burden of taxation is not fully compensated by increased production, or increased saving, it must encroach on the means of future production, and the country will begin to retrograde. Taxation, when carried to this extent, is one of the severest scourges to which any people can be subjected. By diminishing capital, or the funds destined to support productive industry, it lessens the revenue of the people, the only fund out of which taxes can be permanently paid; and thus lays the sure foundation of national poverty and disgrace, in the destruction of individual fortunes. Like falling bodies, which are precipitated with a constantly and rapidly increasing velocity, a system of taxation acting on capital multiplies pauperism and distress in a geometrical proportion, and destroys alike the desire and the means to reproduce.
It would, however, be an error to suppose, that a tax is necessarily a tax on capital, because it is laid on capital, or a tax on income, because it is laid on income. A moderate tax laid on capital may be, and generally is, defrayed out of a saving of income;
while an oppressive tax laid on income has in most cases to be paid from capital. But of all species of taxes, those are plainly the most injurious which necessarily fall on capital, without giving the contributors an opportunity to defray them from revenue. Every such tax, by diminishing the funds for the maintenance of labour, must in so far diminish the future taxable income of the country. The legacy-duty is, as we shall afterwards show, chiefly censurable on this ground.
Most of the writers on finance, patronized by the Governments of the different European countries, have laboured to show that taxation is never a cause of diminished production; but that, on the contrary, every new tax creates a new ability in the subject to bear it, and that every increase of the public burdens becomes the cause of a proportional increase in the industry of the people. The fallacy and absurdity of this opinion has been ably exposed by Mr Hume in his Essay on Taxes. It is indeed true, as we have already stated, that the desire to preserve their capitals unimpaired, and to improve their condition, will stimulate most men to endeavour to discharge the burden of a moderate tax, by an increase of labour and exertion, or by a saving in articles of unproductive expenditure, without allowing it to encroach on their capitals, or even to lessen the rate at which they may have been previously increasing them. But although this holds good in the case of moderate taxes, we are not to conclude from thence that it continues to hold good to whatever extent they may be carried! An individual might be able to defray a tax of L. 50, by increased exertion and economy, while it might be utterly impossible for him to defray a tax of twice or three times that amount without sacrificing a portion of his capital. The truth is, that the effect of exorbitant taxes is not to stimulate industry, but to destroy it. No man will ever be really and perseveringly industrious, whose industry does not yield him a visible increase of comforts and enjoyments. If taxation be carried so high as to swallow the whole, or even the greater part, of the produce of industry above what is required to furnish us with more necessaries, it must, by destroying the hope and the means of rising in the world, take away the most powerful motive to industry and frugality, and, instead of producing increased exertion, will produce only despair. The stimulus given by excessive taxation to industry has been not unaptly compared to the stimulus given by the lash to the labour of the slave—a stimulus which the experience of all ages and nations has proved to be as ineffective as it is inhuman, when compared to that which the expectation of improving his condition, and of enjoying the fruits of his industry without molestation, gives to the productive energies of the moderately taxed citizen of a free state.
It would be easy to illustrate the effects of oppressive taxation in destroying industry, by references to the History of most European nations. In Spain.
* For an instructive account of the effect of heavy taxes on the commerce and industry of Holland, see the second volume of the excellent work of M. Luzac, De la Richesse de la Hollande.
Spain they have been particularly fatal. The decline of that country has been commonly ascribed to the expulsion of the Jews and Moors, and to the emigrations to America. But had the policy of the Spanish Government been otherwise sufficiently liberal—had industry been properly protected, and moderate and equal taxes levied, the losses occasioned by the expulsion of so many of her most industrious citizens would have been gradually repaired, and the emigration to America would have acted only as a stimulus to population. But oppressive taxes have not only prevented Spain from recovering from the wounds inflicted on her by the bigotry of her rulers, but have gone far to extinguish the very spirit of industry. Of the taxes most instrumental in producing this effect, the alcavala is justly entitled to the pre-eminence. The alcavala is a tax originally of ten, but subsequently of fourteen per cent., charged on all commodities, whether raw or manufactured, as often as they are sold, and rated always according to their selling price. Such a monstrous impost was of itself sufficient to annihilate all industry. The manufactures of Castile and the other provinces subjected to its destroying influence were irretrievably ruined. And Ustariz, Ulloa, and Campomanes, Spanish authors of the highest credit, agree in opinion with Mr Townsend, that it is to their exemption from this odious tax that the comparatively flourishing state of industry in Catalonia and Valencia is entirely to be ascribed.
Besides contending that the effect of taxes is to create a new ability in the people to bear them, the Government financiers have also contended that the value of the taxes is not really lost to the consumers, but that it is again restored to them by the expenditure of Government and its agents! And notwithstanding the gross and almost obvious fallacy which this statement involves, it still forms the substance of the answers most commonly made to those who complain of the injurious effects of heavy taxes. To show its absurdity, let us suppose that a farmer is taxed to the extent of L. 50, and let us endeavour to ascertain whether the expenditure of this sum by the public functionary, or individual to whom it has been paid by the tax-gatherer, affords any compensation to the farmer for its loss. If the receiver of the tax does not lay it out on commodities produced by the farmer, it is obvious it cannot again return to him, and he can derive no advantage whatever from its expenditure. But let us suppose, which is the most favourable hypothesis for the argument we are combating, that the tax receiver comes to the farmer to buy produce from him, and let us trace the successive steps and effect of the whole transaction. First of all, then, the farmer sold as much corn, or other produce, as was worth L. 50; he next paid away these L. 50 to a tax-gatherer; and the person who received the L. 50 from the tax-gatherer now comes to the farmer and offers them back to him, on condition of his receiving an equivalent in corn or other produce.
This is the way in which the money drawn from the pockets of the public by taxation always reverts to them; and if it enriches any one, it is obvious it must do so by making him pay twice for the same sum of money! It is to no purpose to endeavour to escape from this reductio ad absurdum, by telling us that industry is always benefited by every extension of the market, and that the consumption of soldiers and sailors is advantageous, because it increases demand! To benefit industry a market must be a real, not a nominal one—it must be one in which the demanders have themselves produced the equivalents they offer for commodities. It is plainly absurd to suppose that either individuals or states can ever receive the smallest benefit from the demand of those whom they have been previously obliged to furnish with the means of buying. Such, however, is always the case with the demand of those who live on the produce of taxation; and to keep up useless regiments and overgrown establishments, on pretence of encouraging and stimulating industry by increasing demand, is to the full as inconsequential and irrational, as if a shopkeeper were to attempt to increase his business and get rich, by furnishing his customers with money to buy his goods.
The fallacy of the doctrine against which we have been contending has been forcibly illustrated by Dr Hamilton. "To argue," says he, "that the money raised in taxes being spent among those who pay it, is, therefore, no loss to them, is no less absurd than the defence of a housebreaker, who, being convicted of carrying off a merchant's money, should plead that he did him no injury, for the money would be returned to him in the purchase of the commodities in which he dealt."*
It is obvious, therefore, that the services rendered by the public functionaries, or by those who receive taxes, form the only compensation given by them to those who pay them. And when neither the number nor the salary of those functionaries is too great, these services are a sufficient return for the sums they receive. But every shilling that is drawn from the people by means of taxes, to be expended in maintaining unnecessary functionaries, or in paying them higher salaries than would suffice to procure the services of others, is absolutely and totally lost to them—as much so as if it were thrown into the sea or the fire.
That security, protection, and good government, which it is the object of taxation to procure, are highly valuable, cannot be disputed. But they are like all other values—the smaller the sacrifice for which they can be obtained, so much the better. Every means by which the expences of Government can be diminished and taxation reduced, is an advantage to the public precisely of the same kind that a diminution in the cost of procuring any useful or agreeable commodity is to an individual. There is really no mystery whatever in the manner in which Government is supported and taxation operates.
* This sophism is equally well exposed in the Lettres d'un Citoyen sur les Vingtièmes, &c. (p. 113), published in 1768.
Government is not a producer: its expenditure is not defrayed from the produce of its own labour, but from the produce of the labour of its subjects. And hence it is obvious, that the higher the expences of Government become, the deeper must they encroach on the income or capital of its subjects, and conversely. In other words, all countries are impoverished by an increase of taxation, and enriched by its reduction: and M. Say is perfectly correct when he says, that the best system of finance is to spend little; and the best of all taxes, the least. Le meilleur de tous les plans de finance est de dépenser peu, et le meilleur de tous les impôts est le plus petit.
Various and very discordant opinions have been entertained respecting the ultimate incidence and effect of particular taxes. Mr Locke in England, and M. Quesnay and his followers in France and Italy, contended that all taxes, in whatever manner they might be imposed, fell ultimately on the land. This erroneous opinion proceeded from their supposing the industry employed in the cultivation of the land to be the only really productive species of industry; whereas it is in no respect more productive than the rest. The truth is, that every burden, directly or indirectly, affecting those engaged in the production of any class of commodities, falls ultimately on its consumers. A tax on hats, for example, must raise the price of hats, as a tax upon leather must raise the price of shoes; for, if this were not the case, the profits of the hatter and shoe-maker would be reduced below the general level; and as there can be no reason why they should be satisfied with a lower rate of profits than their neighbours, they would begin to withdraw their capital from such losing businesses, and would continue to do so until the diminution of the supply of their particular commodities had raised their prices to their proper height, or to such a height as would yield them the average profits of stock exclusive of the tax. There are natural limits, however, to the extent to which taxes on commodities can be carried; and their effects are widely different according as they are laid on commodities required for the consumption of the labouring class, or on those which are exclusively consumed by the higher classes. But before proceeding to examine the effects of particular taxes, we shall make a few observations on the following maxims laid down by Dr Smith with regard to all taxes, and which are drawn up with singular judgment and comprehension, viz:—
First maxim. "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 expence of Government to the individuals of a great nation is like the expence of management to the joint tenants of a great estate. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation."
Second, "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 quan-
tity to be paid, ought all to be clear and plain to the contributor and to every other person. When 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, 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."
Third, "Every tax ought to be levied at the time and 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 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 wherewithal 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 buys them by little and little, as he has occasion to buy the goods; and 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."
Fourth, "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."—(Wealth of Nations, III. p. 255.)
A system of taxation may be pronounced to be either good or bad, according as it approaches to or recedes from these maxims. For example, the great defect in the system of taxation in France and Spain under the old regime, consisted not so much in its magnitude, or in the oppressive manner in which it was collected, as in its inequality. Instead of all the citizens contributing to supply the wants of the state in proportion to their respective abilities, those who had the largest fortunes, and who, consequently, derived the greatest advantage from the security and protection afforded by Government, were entirely relieved from the burden of direct taxation. The nobility and clergy, at the same time that they engrossed every situation of power and emolument to themselves, were, as far as possible, exempted from contributing any thing to the support of Government. And it is now no longer a question that the disgust occasioned by this inequality of taxation, the impatience of the feudal privileges of the nobility, and the desire of equal rights, were the leading causes of those revolutions which have made so much havoc amongst the ancient institutions of the Continent.
The system of taxation generally established in Eastern countries has the defect of not corresponding with the second maxim laid down by Dr Smith. The amount of the contribution is fluctuating and arbitrary, not fixed and certain. In despotic coun-
General Ob-
servations on
Taxation.
tries, all the agents of Government are despots in their own peculiar sphere; and although the sum demanded by the Sultan should be defined and ascertained, there are no limits to the extortion and rapacity of his agents. An individual who has paid the tax imposed by the Sultan has no guarantee against being called upon to pay three or four times as much to the Pacha of the province. The security of property is thus completely subverted; and the arbitrary nature of the public burdens is entirely destructive of that spirit of industry which might have supported and extended itself under a far greater weight of equitable and well defined taxes.*
Warehousing
Syst. m
agrees with
the Third
Maxim.
The establishment of the warehousing system, or the granting of liberty to the merchant, on payment of a moderate rent, to deposit his imported goods in public warehouses, under the King's lock and his own, without his being obliged to pay the duties until he finds it convenient to withdraw them, has powerfully contributed to make a large branch of our taxation correspond very closely to the third maxim laid down by Dr Smith; or to cause a large class of duties to be levied at the time and in the manner which is most convenient for the contributor to pay them. Previously to the act of the 43d of George III., establishing the warehousing system, the duties on all goods imported, and which amount to a very large proportion of the public revenue, had either to be paid at the moment of their importation, or a bond, with sufficient security for their future payment, had to be given to the revenue officers. The hardship and inconvenience of such a system is obvious. Sureties were very difficult to be obtained, and the merchant, in order to raise funds to pay the duties, was frequently reduced to the ruinous necessity of selling his goods immediately on their arrival, at a time when perhaps the market was already glutted. Neither was this the only injury entailed on the country by this system; for the duties having to be paid all at once, and not by degrees, as the goods were sold for consumption, their price was raised by the amount of the profit on the capital advanced in payment of the duties; competition, too, was diminished in consequence of the greater command of funds required to carry on trade under such disadvantages; and a few rich individuals were thus, in a great measure, enabled to monopolize the business of importing those commodities on which heavy duties were payable. The system had, besides, an obvious tendency to discourage the carrying trade of the country, and to endanger the security of the revenue. For the necessity of paying import duties even on those commodities which were destined for re-exportation, deprived us of all chance of ever becoming considerable as an entrepot; by preventing the importation of almost all foreign commodities, except those colonial products of which we had a monopoly, that were not likely to be speedily required for home consumption; at the same time that the difficulties attending the granting of a really equivalent draw-
back to the exporters of such as had paid the duty, General Ob-
servations on
Taxation.
opened a door for the commission of every species of fraud.
Sir Robert Walpole appears to have had a very clear conception of the injurious consequences of this system; and it was the object of the famous Excise Scheme, proposed by him in 1733, to allow the importers of tobacco and wine to deposit them in public warehouses, and to relieve them from the necessity of paying the duties chargeable on such commodities until they chose to withdraw them for home consumption. The celebrity of this scheme, and the misconceptions that have been so very generally entertained respecting it, incline us to think that we shall only be gratifying our readers by quoting the following passages from the speech made by Sir Robert on submitting his plan to the consideration of the House of Commons.
"The duties now payable upon tobacco, on importation," said Sir Robert, "amount to 6d. and one-third part of a penny per pound weight; all which must be paid down in ready money upon importation, with the allowance of ten per cent. upon prompt payment; or otherwise there must be bonds given, with sufficient sureties, for the payment thereof; which is often a great loss to the public, and is always a great inconvenience to the merchant importer. Whereas, by what I am to propose, the whole duties to be paid for the future will amount to no more than 4d. and three farthings per pound weight; and this duty not to be paid till the tobacco comes to be sold for home consumption. So that, if the merchant exports his tobacco, he will be quite free from all payment of duty, or giving bond therefor, or finding out proper sureties for joining in such bond: he will have nothing to do but unload his tobacco on board a ship for exportation, without being at the trouble to attend for having his bonds cancelled, or for taking out debentures for the drawbacks; all which, I conceive, must be a great ease to the fair trader; and to every such trader, the preventing of frauds must be a great advantage, because it will put all the tobacco traders in Britain upon the same footing; which is but just and equal, and what ought certainly to be accomplished, if it be possible.
"Now, in order to make this ease effectual to the fair trader, and to contribute to his advantage by preventing as much as possible any frauds in time to come, I propose, as I have said, to join the laws of excise to those of the customs, and to leave the one penny, or rather three farthings, per pound, called the further subsidy, to be still charged at the custom-house upon the importation of any tobacco; which three farthings shall be payable to his Majesty's civil list as heretofore. And I propose, that all tobacco, for the future, after being weighed at the custom-house, and charged with the said three farthings per pound, shall be lodged in a warehouse or warehouses, to be appointed by the commissioners of the excise for that purpose, of which
* For an excellent account of the effects of the arbitrary nature of Eastern taxation, see Volney, Voyage en Syrie, Tom. II. cap. 33, and cap. 37.
warehouse the merchant importer shall have one lock and key, and the warehouse-keeper to be appointed by the said commissioners shall have another, in order that the tobacco may lie safe in that warehouse till the merchant finds a market for it, either for exportation or home-consumption. And if his market be for exportation, he may apply to his warehouse-keeper, and take out as much for that purpose as he has occasion for, which, when weighed at the custom-house, shall be discharged of the three farthings per pound with which it was charged upon importation; so that the merchant may then export it without any farther trouble. But if his market be for home-consumption, that he shall then pay the three farthings charged upon it at the custom-house upon importation; and that then, upon calling his warehouse-keeper, he may deliver it to the buyer, on paying an inland duty of 4d. per pound weight to the proper officer appointed to receive the same."
Sir Robert concluded his speech by saying, "I look upon this as a most innocent scheme; it can be hurtful to none but smugglers and unfair traders. I am certain it will be of great benefit to the revenue, and will tend to make LONDON A FREE PORT, AND, BY CONSEQUENCE, THE MARKET OF THE WORLD. If I had thought otherwise of it, I should never have ventured to propose it in this place."
Nothing can be more clear and explicit than this statement; and no doubt can now remain in the mind of any one, that the adoption of the scheme would have been of the greatest advantage to the commerce and revenue of the country. But such and so powerful was the delusion generated in the public mind with respect to it, that its proposal had well nigh caused a rebellion. Most of the merchants of the day had availed themselves of the facilities which the existing system afforded of defrauding the revenue; and they dexterously endeavoured to thwart the success of a scheme which would have given a serious check to such practices, by making the public believe that it would be fatal to the commercial prosperity of the country. The efforts of the merchants were powerfully assisted by the spirit of party, which then ran very high. The political opponents of the ministry, anxious for an opportunity to prejudice them in the public estimation, contended that the scheme was only the first step towards the introduction of such an universal system of excise, as would inevitably prove alike subversive of the comfort and liberty of the subject! In consequence of these artful misrepresentations, the most violent clamours were everywhere excited against the scheme. On one occasion the minister narrowly escaped falling a sacrifice to the ungovernable fury of the mob, which beset all the avenues to the House of Commons: and after many violent and lengthened debates, the scheme was ultimately abandoned.
The disadvantages of the old plan, and the benefits to be derived from the establishment of the warehouse system, were very clearly and forcibly stated by Dean Tucker in his Essay on the Comparative Advantages and Disadvantages of Great Britain and France with respect to Trade; published in 1750. But so powerful was the impression made by the violent opposition to Sir Robert Walpole's scheme, and such is the force of habit and ignorant prejudice, that it was not until 1803 that this obvious and signal improvement—the greatest, perhaps, that has been made in the financial and commercial system of the country—was adopted.
The comparative facility and cheapness with which taxes can be collected, ought to be particularly attended to in their imposition. Every tax should, as Dr Smith has stated in his fourth maxim, be contrived so as to take out, and keep out, of the pockets of the people as little as possible above what it puts into the public treasury. The principle of this maxim is obvious—it is the nett produce of taxation, or the sum which it yields after the expences of collection are deducted, that is alone applicable to national purposes; and to impose taxes which it costs a great deal to collect, is to impose a heavy burden on the people for the sake of a small advantage to Government. It is stated by Sully, in his Memoirs, as an unquestionable fact, that the expence of collecting a nett revenue of thirty millions of livres in France in 1598, cost the enormous sum of 120 millions; or, in other words, that of a sum of 150 millions taken from the people by means of taxation, only thirty millions found their way into the coffers of the treasury! Under the administration of M. Necker, a revenue of about 557 millions of livres was collected at an expence of 58 millions; being about 10% per cent.
The expence of collecting the public revenue of Great Britain, for the year ended the 5th January 1822, amounted to L. 6, 6s. 7d. per cent. on the nett produce; while in Ireland its expence for the same year amounted to L. 22, 2s. 9d. per cent. or to more than three times as much as in England. A good deal of this difference of expence must be ascribed to the different situation of the two countries; but a good deal is also owing to the more defective system of taxation established in Ireland, and to the greater corruption of the officers. The difference in the cost of collecting the Post-office revenue of the two countries is the most extraordinary. In Britain the nett produce for the year ended 5th January 1822 was collected at an expence of L. 38, 18s. 10d. per cent.; while in Ireland it cost L. 118, 4s. 10d. per cent.! The adoption of the plans and suggestions of the commissioners appointed to inquire into the state of Irish revenue, will undoubtedly be productive of a great saving in the expence of its collection.
Taxes may be collected by officers employed by
* Tindal's Continuation of Rapin, VIII. p. 154. ed. 1769; Coxe's Sir R. Walpole, I. p. 372, 410 ed. Had the resolutions with respect to tobacco been carried, those regarding wine, which were to have been exactly similar, would have been proposed.
General Ob-
servations on
Taxation.
Government to receive them directly from the contributors; or Government may let them in farm to individuals for a rent certain, giving to such individuals or their servants the power of collecting them. The question, Which of these modes of collection should be adopted? depends on a variety of circumstances, and does not admit of any general solution. Where a tax is very well defined, and its collection may be effected without requiring any very minute inspection of the private concerns of individuals, it may be almost uniformly farmed with advantage. In such a case the proceedings of the farmers could not excite the prejudices of the contributors; and the greater skill and economy with which all businesses carried on by individuals on their own account are conducted, would enable the farmers to pay, exclusive of the profits made by them, a larger sum to Government on account of the tax, than it would have any chance of receiving from its own agents. But if a tax were not very well defined, or if it required a close examination of the affairs of individuals to assess it fairly, there cannot, we think, be a doubt that it ought to be directly collected by the servants of Government. It is indeed extremely probable that such a tax would be more productive were it farmed; but this, though an important one, is not the only consideration to be attended to. All taxes which occasion any investigation into the private concerns of individuals are necessarily unpopular; and it is obvious that this unpopularity must be immeasurably greater when these investigations are conducted by those who have a direct personal interest in prosecuting them with the greatest strictness, than when they are conducted by the agents of Government—by persons who, in most cases, derive none, and in all cases only a very slender benefit from the increased productiveness of the tax. The mass of the people would most assuredly ascribe much of the hardship of such taxes to the vigilance and keenness of the farmers; and would be disposed to believe that a considerable portion of their produce went into their pockets, and that they were not only assessed to defray the charges of the State, but to add to the fortunes of a class of persons who are universally objects of popular indignation. We admit that these suspicions and complaints are in most cases totally destitute of foundation. The farmers can only enforce payment of a tax according to the provisions in the law imposing it; and if its pressure is either unequal or severe, or the mode of its collection vexatious and troublesome, it is plain the fault lies with those who imposed it, and not with the farmers. But however groundless the public prejudice against the farmers of the revenue may be supposed to be, it is one which will always exist, and ought to be respected. Perhaps we overrate its influence; but really we have very little doubt that, had an income-tax of 5 or 6 per cent., let in farm, been established in the place of the late income-tax of 10 per cent., it would have been generally considered as the most oppressive and vexatious of the two! Although, therefore, we cannot concur with Dr Smith, in his opinion, that all taxes ought to be collected by the officers of Government (III. p. 386), neither can we concur
with Mr Bentham, who has endeavoured to prove that farming is in every case the preferable mode of collection. (Theorie des Peines et des Recompenses, Tome II. p. 203.) We certainly think that all taxes laid on such articles as stamped paper, houses, windows, horses, carriages, &c., and perhaps also the duties on exportation and importation, might be very advantageously collected by letting them to farmers; but any attempt to farm taxes on income, or taxes which require an examination of and interference with private affairs, would excite the most violent clamour and irritation, and could not be otherwise than pernicious.
General Ob-
servations on
Taxation.
The corvée system, or the compelling of individuals to execute public works by requisitions of labour, is one of the worst species of taxation. Those who get no pay for their labour, and who are made to work against their will, waste their time and industry: and there is, besides, a very great loss incurred by the interruption of the regular pursuits of the labourers. When Turgot entered on his administration, he sent a circular letter to the Road-surveyors and Engineers of the different provinces of France, ordering them to transmit estimates, framed on the most liberal scale, of the sums of money for which the usual repairs might be made on the old roads, and the ordinary number of new ones constructed. The aggregate of the different estimates showed that a money contribution of about ten millions of livres a-year would suffice for the repair and construction of all the roads in the kingdom; whereas Turgot showed, that the execution of these repairs and constructions by contributions of forced labour, or corvées, cost not less than forty millions, or four times as much as the other! (Say, Traité d'Economie Politique, II. p. 345.) The method of repairing roads, by contributions of labour instead of money, was at one time general throughout Europe, and is still acted on in many countries. In Scotland the agricultural population of the country were compelled, by an act passed in 1669, to work six days each year at the public roads. This contribution was denominated statute-labour, and was commuted, in the early part of the reign of his late Majesty, for a tax on land, rated according to its valuation in the cess-books. This commutation has been productive of the greatest advantage. Previously to its taking place, our roads were, perhaps, the very worst, and they have since become among the very best in Europe.
PART II.—DIRECT TAXES.
It is impossible, for the reasons we have stated in Direct the previous section, to regard such taxes as really fall on capital as a permanent source of public income. Capital consists of that portion of the produce of industry which has been saved from immediate consumption, and which is applied partly to maintain those who are engaged in the great work of production, and partly to facilitate their labours. It is by its amount that the amount of the productive industry of every country must always be regulated. And such being the case, it is plain that whatever has a tendency to diminish capital, or to convert it into revenue, must, by diminishing the means of em-
playing and facilitating labour, and consequently the annual produce of the country, be a most fruitful source of pauperism and misery. This, however, would be the precise effect of taxes on capital; and it is for this reason that they ought always to be regarded in the light of an extraordinary resource, and ought never to be imposed except in cases of very urgent necessity. The misapplication and destruction of the means of production which they infallibly occasion, would not only defeat every attempt to render them permanent, but would, by impoverishing and exhausting the country, render all other taxes comparatively unproductive.
It is not from capital, therefore, but from revenue, that all permanent taxes ought to be derived. And the revenue of every individual in every country, who does not subsist on the produce of taxation, being derived either from rent, profit, or wages, it is plain that all taxes which do not fall on capital must, howsoever imposed, ultimately fall on one or other of these three sources. Without further preface, therefore, we shall now proceed to trace the ultimate incidence and effect of such taxes as are laid directly on rent, profit, and wages; and when we have ascertained the way in which they operate, it will be comparatively easy to investigate the effect of those direct taxes which are meant to fall equally on all the various sources of income.
SECT. I.—Taxes on Rent.
1. Taxes on the Rent of Land.—A tax on the rent of land, properly so called, or on the sum paid by a tenant to a landlord for the use of the natural and inherent powers of the soil, would fall wholly on the landlord. Rent is entirely a consequence of the decreasing productiveness of the capital and industry successively applied to the land. If capital could have been always applied to the best soils with equal advantage, it is plain no one would ever have thought of resorting to those of an inferior degree of fertility, and no such thing as rent would ever have been heard of. But this is not the case. The best lands in every improving country are speedily exhausted; and it is always found to be more advantageous to lay out capital on the inferior soils, which require a greater expenditure to make them yield the same supplies, than to continue forcing the best lands. Suppose, to illustrate the effect of this constantly operating principle, that a series of soils of various degrees of fertility are in cultivation, and that they respectively yield, in return for the same expenditure of capital, 100, 90, 80, 70, 60, &c. quarters, it is plain, as there cannot be two prices of the same article, at the same time and in the same market; that, when two or more of these soils are cultivated, their produce must all sell for the same price; and it is farther plain, that this price must be such as will sufficiently remunerate the cultivators of the worst soil, for otherwise they would not continue to employ their capital in its cultivation. But
the price which will remunerate the cultivators of the worst land, will more than remunerate the cultivators of the more fertile lands, precisely in proportion to the greater quantity of produce obtained from them. Now, as there cannot be two rates of profit in the same country, any more than two prices, this excess of produce necessarily constitutes rent. Thus, when five qualities of land are cultivated, the rent of the first quality would be 40 quarters; for such is the difference between its produce (100), and the produce (60) of the fifth and last quality of land cultivated. In like manner, the rent of the second quality would be 30 quarters, or 90—60; the rent of the third 20 quarters, or 80—60; and the rent of the fourth 10 quarters, or 70—60. But it is obvious no rent would be paid by the cultivators of the soil of the fifth quality, and which was last taken into cultivation; nor is it really possible to conceive a case in which rent could enter, for any considerable period, into the cost of that portion of the produce of a country which is raised by the agency of the capital last applied to the soil, whether it be laid out on new land or in the improvement of the old. For, if it did, it would be a proof that agriculture was the best of all businesses, and, in consequence, capital would be immediately attracted to the land, and would most certainly continue flowing in that direction until the produce raised by the portions last employed in cultivation would only yield the common and ordinary rate of profit. It may, therefore, be laid down as a general principle, and one from which there are really no exceptions; that, wherever industry is free, raw produce is always sold at its necessary price—that is, at the price which is just sufficient to yield the common and average rate of profit, and no more, to the producers of that portion of the necessary or required supply which is raised in the most unfavourable circumstances, or by means of the capital last laid out on the soil.*
It results, from this principle, that a tax on rent A Tax on Rent, properly so called, would not raise Prices, and would fall entirely on the Landlords. would have to be entirely defrayed by the landlords. Such a tax would neither raise the price of raw produce, nor operate as a discouragement to cultivation; for, as we have just seen, that that portion of raw produce which regulates the price of all the rest pays no rent, it is impossible it could be affected by its imposition. In fact, all sorts of farm produce would continue at precisely the same price after the tax had been laid on as before, and there would be just the same motives to extend cultivation. In so far, therefore, as the income of the landlords really consists of rent, it might be entirely taken from them by means of direct taxes, without its being possible for them to elude their pressure, and without their occasioning any injury to the other classes of the community. This arises from the circumstance of the landlords not being producers, but only receivers of income. Rent is altogether extrinsic to the cost of production. It really consists of the excess, or of the value of the excess, of the produce
* For a further account of the origin and nature of rent, see the Article POLITICAL ECONOMY, Part III. Sect. 3, in this Supplement.
obtained from the best soils, or by the agency of the capital first laid out on the land, over that which is obtained from the worst soils under tillage, or by the agency of the capital last laid out on the land. That the consumers must pay the value of this excess to some one or other is certain; for such payment is one of the absolutely indispensable conditions to their obtaining the necessary supplies of raw produce, and must be made the moment that the increase of population has compelled recourse to be had to inferior soils. But it is plainly of no consequence whatever to them whether they have to pay it to the proprietors of the land, or to a tax-gatherer.
It must be observed, however, that a tax on rent, in the common acceptance of the word, would not have quite the same effect that we have now stated, and would not wholly fall on the landlord. By rent is commonly meant the whole sum paid by a tenant to a landlord, as well for the use of the buildings, fences, &c. on a farm, as for the use of the natural and inherent powers of the soil. But the sum paid by a tenant for buildings and improvements is not really rent, but interest on the capital expended on them. To whatever extent, therefore, the gross or nominal rent of a farm is made up of interest on capital, to the same extent would a tax on it operate to raise the price of its produce. Suppose, for example, that the gross rent of a farm is L.500, and that L.250 are interest of capital laid out on its improvement. If a tax of 10 per cent. were laid on rent, only L.25 would have to be permanently paid by the landlord. The other L.25 might be paid by him for a short period; but, as it would form a deduction from profits, capital would, in consequence, be withdrawn from the soil until the diminished supply of produce had raised prices to their proper level—that is, to such a level as would yield the common and ordinary rate of profit on the capital still employed in cultivation. This part of a tax on gross rent would not, therefore, fall on the landlord, or the farmer, but on the consumer of raw produce.
The circumstance of rent unavoidably arising in the progress of society, inclines us to think that it would be good policy for the governments of countries such as the United States, who are possessed of large tracts of fertile and unappropriated land, to retain the property of this land in their own hands, and to let it by public auction, in such portions, and for such a number of years, as might be deemed advisable. Such a system might perhaps discourage some of those expensive and ostentatious undertakings entered into by individuals who have the absolute property of the lands which they occupy; but there are no grounds whatever for thinking that it would contribute in the smallest degree to prevent any of those improvements which are really conducive to the raising of raw produce. The leases might be made of such a length as to encourage every necessary outlay of capital; and the tenants who had the State for their landlord would certainly run a less risk than those who occupy the estates of individuals of being disturbed in their possession, or of being harassed by vexatious prosecutions. But
if no real disadvantage would arise from the adoption of this system, it would be productive of many very great advantages. According as population increased, and as the expences of Government were necessarily augmented, an increasing revenue would be provided to meet them—a revenue, too, it must be recollected—raised without hardship to any individual whatever—and which, even though the Government should not take it, would notwithstanding exist, and have to be paid by the consumers of raw produce. "Under such a system the owners of capital would enjoy its profits; the class of labourers would enjoy their wages, without any deduction whatsoever; and every man would employ his capital in the way which was really most advantageous, without receiving any inducement, by the mischievous operation of a tax, to remove it from a channel in which it was more, to one in which it would be less productive to the nation."—(Mill's Elements of Political Economy, p. 199.)
But after land has been appropriated and converted into private property, it would certainly be unjust to lay the burden of supporting the State exclusively on the landlords. Mr Mill is, however, of opinion, that this exemption from exclusive taxation ought only to extend to the present rent, and that the State has a just right to enact that all future increase of rent shall be applied to its use. We cannot assent to this proposition. When an absolute right of property has once been established in land, the owners seem to us to be fairly entitled not only to all the advantages now derivable from it, but to all those of which it may hereafter be made productive. Mr Mill contends, that inasmuch as Government may, by their own act, and without any effort on the part of the landlords, raise rent, there can be no good reason why they should not appropriate to themselves all the excess they have created. But if we establish this principle in one instance, it is difficult to see why it should not be established in others. It is possible for the Government, by repealing the corn laws, and admitting the free importation of raw produce, to raise the profits of stock. But no one would, therefore, contend, that Government would be justified in laying a tax on profits equivalent to the rise that had thus been occasioned; and if not, why should they be justified in laying an exclusive tax on rent when it rises in consequence of any measure of theirs? All classes should be made to contribute, in the same proportion to their means, to the support of the State. But it would certainly be a departure from this just principle to tax those who have acquired a property in land to a greater extent than others, or to give to the State all the advantages they would otherwise have derived from the growing prosperity and improvement of the country.
The greater part of the revenues of the principal monarchies of Asia seems, in all ages, to have been derived from the soil. "The land has been held by the immediate cultivators, generally in small portions, with a perpetual and transferable title; but under an obligation of paying, annually, the government demand, which might be increased at the pleasure of the sovereign, and seldom amounted to less
Taxes on Rent. than a full rent." (Mill's Elements of Political Economy, p. 199.)8
Land-Taxes in England. The scutages on knights' fees, the assessment of hydage on other lands, and the subsidies chargeable on the proprietors of estates, so often referred to in the history of England, were, to all intents and purposes, land-taxes. (Blackstone, I. p. 312.) But the existing land-tax has supplanted all those more ancient assessments. This tax was first imposed in 1693; a new valuation of all the lands in the kingdom having been made in the previous year. According to this valuation, it was found that a tax of 1s. on the pound of the ascertained rental, afforded an annual clear revenue of £500,000. No change has ever been made in the valuation of 1692. The tax, which was at first an annual one, has been generally as high as 4s. a pound of the valued rent: In 1798, it was made perpetual at that rate, leave being, at the same time, given to the proprietors to redeem it.
The land-tax was very unequal at its first imposition. For such proprietors as were friendly to the Revolutionary establishment, generally returned their estates at a much higher value than the proprietors who were attached to the Stuarts. The different degrees of improvement that have since taken place in the various districts of the country, have, in some instances, tended to correct the inequalities in the original imposition of the land-tax, and, in others, to increase them.
2. Taxes on the Rent of Houses.—The principal part of the rent of houses generally consists of the profits of the capital laid out in their construction, or, as it is more commonly termed, of building rent, a comparatively small part only being ground rent, or rent payable for the soil on which they are erected. It is evident, therefore, from the principles already established, that, if the supply of houses could be as easily diminished and increased as the supply of raw produce, a tax on their rents would fall entirely on the occupiers and ground landlords, in the proportion that the profits of the capital laid out on them bore to the rent of the land on which they stood. But as the supply of houses is not susceptible of speedy diminution, the builders would have no means of immediately raising rents when a tax was laid on them; and, unless the capital of the country, and, consequently, the population and demand for houses, were rapidly increasing, a considerable number of years would necessarily elapse before they would be able to relieve themselves of the tax. Houses, however, though slowly, are yet certainly perishable; and, as no more of them would be built after they had been taxed, until the increasing demand had raised their rents so as to indemnify the builders for the tax, and to elevate their profits to the common level, there can be no question that, in the end, the tax
would be thrown wholly on the occupiers and ground landlords in the proportions already mentioned.
SECT. II.—Taxes on Profits.
A tax proportioned to the nett profits derived from the capital employed in every branch of industry would fall wholly on profits.
Such a tax would affect all capitalists to precisely the same extent. When 5 or 10 per cent. was laid on the profits of the farmer or manufacturer, an equal 5 or 10 per cent. would be laid on the profits of the merchant, the ship-owner, and of all the other employers of capital. It is evident no individual could hope to evade the burden of such a tax by changing his business; and it could not, therefore, occasion any transference of capital from one employment to another. Neither would it occasion any variation in the supply and demand of commodities, nor in their money price. For, as the tax does not fall on capital, but on profits, the means of producing would not be impaired by its imposition; the means of purchasing possessed by those who live on profits, previously to the imposition of the tax, would indeed be diminished; but, as the means of purchasing, possessed by the Government and its agents who receive the tax, would be proportionally augmented, the aggregate demand of the society would continue the same—and hence, as the tax could neither lessen the quantity of capital in the country, nor the power to purchase its produce, it is obvious it could not, supposing the value of money to continue invariable, occasion any variation in the money prices of commodities.
The immediate effect of an equal and universal tax on profits would, therefore, be to sink them in the same proportion. And as the power to accumulate capital, and consequently to feed and employ an additional number of people, must ever be in direct proportion to the rate of profit, it follows that the tendency, and, when they are carried to such a height as to prevent them being balanced by increased exertion and economy, the ultimate and necessary effect of all such taxes is, to check the accumulation of capital and the progress of population.
A tax laid only on the profits of the capital employed in a particular business would have a different effect: it would raise prices, and would not, therefore, fall on the capitalists, except in so far as they were themselves consumers of their own produce. Suppose, for example, that a tax of 10 per cent. is laid exclusively on the profits of the shoemaker. The slightest consideration will show that such a tax must make an equivalent addition to the price of shoes; for, if it did not, the shoemakers would gain less profit than was gained by those engaged in other businesses, and they would, in consequence, have an immediate inducement to withdraw
8 For a full and excellent account of the taxation of Eastern countries, see the same author's History of India, Vol. I. chap. Taxes. Some curious and valuable details, with respect to the land-taxes of the ancient Egyptians, may be found in the first volume, liv. i. § 4, of the admirable work of the President De Goguet, Sur l'Origine des Loix, &c.
Taxes on Profits. from their employment; nor can there be a question that they would continue so to withdraw, until, by diminishing the supply of shoes, their price had reached such a height as would yield the common and average rate of profits, exclusive of the tax. For the same reason, an exclusive tax on the profits of the hatter, the clothier, the farmer, &c. would make a proportional addition to the price of hats, cloth, and agricultural produce, &c. In these cases the capitalists have the power to raise prices, and consequently to throw the burden of the tax on the consumers; because they have the power to withdraw from those businesses in which profits are taxed, and to employ their capital in those which are not taxed. But, when the profits arising from the capital employed in every different business are equally taxed, the capitalists are deprived of this resource; and have no means either of raising prices or of evading the tax.
An equal and general Tax on Profits would not affect Rent.
It is easy to see, from the principles we have already established, that a general and equal tax on the profits of agricultural and other capital could not occasion any diminution of rent. When the farmers are taxed equally with all other producers, there will obviously be no motive to induce them to withdraw capital from the land, and no variation will take place in the price of corn; nor, as rent consists in the excess of the produce obtained by the capital first applied to the land over that which is obtained by the capital last applied, will it be affected by such a tax. But if the tax, instead of being a general and equal one, were laid exclusively on the profits of the farmer, it would really cause an immediate increase of rent. No rent, as we have shown in the preceding section, ever enters into the cost of producing that portion of the required supply of raw produce raised by the agency of the capital last laid out on the land. It is plainly impossible, therefore, that its raisers could indemnify themselves for any burdens laid on them by making an equivalent deduction from rent. And hence, when a tax is laid exclusively on the profits of agricultural capital, the price of raw produce must sustain a corresponding rise; for in the event of its not rising, the producers of that portion which pays no rent would abandon their business, and the necessary supplies would not be obtained. Inasmuch, however, as the rise of price which is required to remunerate those who raise corn that pays no rent, after a tax is imposed on profits, must be universal, it must raise rent. Thus, on our former supposition, that five equal capitals applied to soils of various degrees of fertility, respectively yield 100, 90, 80, 70, and 60 quarters, their corn rents would be 40, 30, 20, and 10 quarters; and if the price required to remunerate the cultivators of the fifth and worst quality of land which pays no rent were L. 4 a quarter, the money rent of the first quality would be L. 160, of the second L. 120, of the third L. 80, and so on. Suppose, now, that an exclusive tax is laid on the profits of agricultural capital, and that, to remunerate the cultivators of the worst land, the price rises from L. 4 to L. 4, 10s. a quarter, it is plain the rent of the first quality would be immediately raised to L. 180, the second to L. 135, the third to L. 90, and so on; being an increase of L. 20 on the rent of
the first, of L. 15 on the rent of the second, of L. 10 on the third, &c.
This is a principle of the highest importance. It shows the unfounded nature of the complaints made by the landlords of the injuries they suffer from the operation of taxes on agricultural industry: It shows that such taxes as fall equally on agriculture and on other businesses neither affect rents nor prices, and cannot, therefore, be injurious to the landlords: And it further shows that such taxes as fall exclusively on agricultural profits must, by raising the relative value of corn, raise rents, and materially improve their condition! "That the profits of the farmer," says Mr Ricardo, who was the first to discover and establish this important principle, "only should be taxed, and not the profits of any other capitalist, would be highly beneficial to the landlords. It would, in fact, be a tax on the consumers of raw produce, partly for the benefit of the state, and partly for the benefit of the landlords." (Principles of Political Economy, 3d edit. p. 241.)
In estimating the profits of the farmers under the Mode of estimating the Profits of the Farmer under the Income-Tax Act. income-tax act, it was assumed that in England they amounted, in all cases, to three-fourths, and in Scotland to a half of the rent; and power was given to the commissioners to make a new valuation of the farm at the end of every seven years during the currency of the lease, and if they found it was then worth a higher rent than was paid by the tenant, his income-tax was proportionally augmented. Many complaints were made against this method of assessing the profits of farmers; and certainly nothing could be more arbitrary and fallacious than the assumed rule for estimating them. But, notwithstanding the general opinion to the contrary, it is not very difficult to discover that the inequalities it occasioned in the collection of the tax were really advantageous to the farmer. The reason is, that while the farmers who occupied rich and well-situated lands, whose rents were comparatively high, were taxed far above their profits, those who occupied poorer lands, the rents of which were comparatively low, were not taxed to the extent of their profits. In these circumstances, the tax had necessarily a two-fold operation: In the first place, its effect was to lower the profits of the capital employed in farming proportionally to its pressure on those tenants who occupied the worst lands—for it is by the profits that they make that the profits of all other stock whatever must be regulated: And, in the second place, it had the effect of lowering the rent of the superior lands, by burdening it with all the excess of tax falling on the profits of those by whom they were occupied, over that which fell on the profits of the occupiers of the inferior lands. Such was the only way in which, as the tax was actually imposed, the indestructible level of profit among the farmers of the various descriptions of land could be preserved. And it is plain, that if the tax had pressed to its full extent on the occupiers of the worst lands in cultivation, it would have made a much greater deduction from the profits of all classes of farmers, at the same time that it would have made no deduction from rent.
The income-tax fell equally on the profits derivable from the other branches of industry as on those
of the farmer: If his profits had been exclusively taxed, the inequalities in the tax would have been corrected, and the burden thrown off his shoulders to those of the consumers, partly by a rise of prices, and partly by a decline of the rents of the best lands.
The taille, such as it subsisted in France at the epoch of the Revolution, was intended to be a tax on the profits of the farmer. Instead, however, of attempting to estimate these profits by the amount of his rent, or by endeavouring to ascertain the value of the produce remaining in his possession after his rent and other outlays had been deducted, they were commonly estimated by the amount of the capital employed by him in cultivation. In consequence of resorting to this criterion for estimating profits, the tax had the effect of inducing the farmer to employ the smallest possible quantity of capital, and of deterring him from making any considerable or expensive improvement. The taille was also injurious in another respect; for, as it did not affect the nobles who farmed their own lands, but fell exclusively on those who rented lands of another, or who possessed lands held by a base tenure, it was considered as a degrading tax, and as a mark of the ignoble, or rather servile condition of those by whom it was paid. All who made any thing by farming were thus rendered anxious to withdraw from so degraded a business; while rich merchants and capitalists were prevented from becoming tenants. Not only, therefore, did the taille hinder the greater part of the capital generated on the land from being laid out on it, but it turned from it all the capital that had been accumulated in other employments! It is very difficult to suppose that any tax could have been devised better calculated to retain agriculture in a rude and infant state, and to extinguish all emulation and enterprise among the farmers. And considering the long period to which France was subjected to this tax, our wonder is, not that her agriculture was in a very backward and depressed condition at the Revolution, but that it was so far advanced as it really was.*
The present French land-tax—contribution foncière—equally affects all lands, by whomsoever they may be occupied. It amounts, according to Garnier, to about an eighth part of the net produce of the land—that is, of its produce, exclusive of the expenses of cultivation, but inclusive of rent. Garnier says that the tax is very fairly assessed, and that it is very moderate compared with the various charges with which landed property is burdened in most other countries. It is certainly a very great improvement on the old system. (Richesse des Nations, par Garnier, Tome VI. p. 404.)
The common and ordinary effect of direct taxes on wages, or on the commodities necessary for the subsistence of the labourer, is to cause a proportional increase of wages and fall of profits.
In every discussion respecting the effect of taxes on wages, or on the necessaries consumed by the labourer, it is of the greatest importance to distinguish between the natural or necessary rate of wages, or the rate which is required to enable the labourers to exist and continue their race, and the market rate, or the rate which they really receive at any particular period.
The natural or necessary price of labour, like the Natural price of every thing else which is bought and sold, and which may be indefinitely increased or diminished, is determined by the cost of its production. The capacity of the labourer to support himself, and to rear as many children as may be required to keep up the supply of labourers, does not, it is plain, depend on the quantity of money he receives as wages, but on the quantity of food, necessaries, and conveniences essential to his support, for which that money will exchange. The natural rate of wages must, therefore, depend on the cost of producing the food, and other necessaries, required for the maintenance of the labourer. A rise in the market rate of wages does not always coincide with a rise in the price of necessaries; but they can never be very far separated. However high the price of necessaries may rise, the labourers, it is quite clear, must always receive such a quantity as is sufficient to enable them to support themselves and to continue their race. For if wages were to fall below this necessary level, the labourers would be left destitute; there would, in consequence, be a rapid diminution of their numbers; and this diminution would raise wages: and if, on the other hand, they were to rise considerably above it, a proportional stimulus would be given to the principle of population, and the increase of labourers would lower wages.
The opinion maintained by those who contend, that the rate of wages does not depend on the cost of producing the articles consumed by the labourers, but on the demand for their exertions compared with their numbers, has obviously originated in their confounding the principles which govern the market price of labour, at a particular period, with those which govern its natural or necessary price. It is undoubtedly true that the market price of labour at any given moment depends on the state of the supply as compared with the demand; but it is easy to see that the supply cannot be permanently brought to market unless the rate of wages is such as will suffice to maintain and bring up labourers—that is, unless the cost of their production be paid. From whatever point of the political compass we may set out, this is the grand principle to which we must always come at last. Let us suppose, to illustrate this principle, that, owing to a scarcity, the price of the quarter loaf rises to 5s.: It is plain, inasmuch as the same number of labourers would be seeking for employment after the rise as before, and as there is no reason why a scarcity should increase the demand
* For a farther account of the taille the reader is referred to Forbonnais, Recherches sur les Finances de France, Tome I. p. 107; Wealth of Nations, III. p. 303; and to Storch, Cours d'Economie Politique (ed. de Say), III. p. 191.
for labour, that wages would not be advanced; the labourers would, in consequence, be forced to economise, and the rise of price would thus have the effect of lessening consumption, and of distributing the pressure equally throughout the year. But suppose that the rise, instead of being occasioned by a deficient crop, has been occasioned by an increased difficulty of production, and that it will be permanent, the question is, Will wages continue at their former rate, or will they rise? Now, in this case, it is plain that wages must rise: For the comforts of all classes of labourers would be greatly impaired by the rise of prices; and those who, previously to its taking place, had only wherewithal to subsist, would be reduced to a state of extreme destitution, or rather, we should say, of absolute famine. In such circumstances, an increase of mortality could hardly fail to take place; while the greater difficulty of providing subsistence would interpose a powerful check to the formation of matrimonial connections and the increase of population. By these means, therefore, either the amount of the population, or the ratio of its increase, or both, would be diminished; and this diminution would continue until the smaller supply of labourers in the market had enabled them to raise wages to their natural rate; that is, as Dr Smith has defined it, to such a rate as would enable them to obtain "not only the commodities which are indispensably 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."
specting the quantity and the species of the articles which it would be disgraceful for them to be without.
The natural rate of wages is not, therefore, a fixed and unvarying quantity; and though it be strictly true that the market rate of wages can never, when reference is made to periods of average duration, be sunk below its contemporary natural rate, it is no less true that the natural rate has a tendency to rise when the market rate rises, and to fall when it falls. The reason is, that the supply of labour in the market can neither be speedily increased when wages rise, nor speedily diminished when they fall; and it is also on this circumstance that the powerful influence which fluctuations in the market rate of wages have on the condition of the labouring classes principally depends. If the supply of labour could be suddenly increased when wages rise, that rise would be of no advantage whatever to the existing labourers. It would increase their number, but it would not enable them to mount in the scale of society, or to obtain a greater command of the necessaries and conveniences of life. And, on the other hand, if the supply of labour could be suddenly diminished when wages fall, that fall would merely lessen the numbers of labourers, without having any tendency to degrade the habits or to lower the condition of those who survived. But in the actual state of things no rise of wages can ever be counteracted by an increased supply of workmen coming into the market until eighteen or twenty years after it has taken place; for there are few or no branches of industry in which an active and skilful labourer can be bred in a shorter period. During all this interval, therefore, the labourer is placed in a greatly improved situation. He has a greater supply of wholesome and nutritious food; he has better clothes and better habitations; he is rendered more attentive to personal cleanliness; and as he rises higher in the scale of society, he naturally uses more providence and circumspection in the forming of matrimonial connections. In short, his opinions respecting what is necessary for his decent and comfortable subsistence are raised, and the natural rate of wages is in consequence proportionally augmented.
But it is equally impossible suddenly to diminish the number of the labourers when wages fall. Such a diminution cannot, as we have already stated, be effected otherwise than by the operation of increased mortality, or by a decrease in the number of births. But unless the fall were very sudden and extensive, it would require a considerable number of years to render the effects of increased mortality very apparent; and it is so difficult to change the habits of a people, that, though the demand for labour were to decline, it would, notwithstanding, continue for a while to flow into the market with nearly the same rapidity as before. Nor would the ratio of the increase of population be sufficiently diminished, until the misery occasioned by the restricted demand on the one hand, and the undiminished supply on the other, had been very generally and widely felt.
In whatever way, therefore, wages may be restored to their natural level when the market rate declines—whether it be by an increase of mortality, or
If a given specific quantity of certain articles were necessary to enable the labourers to exist, it would clearly and directly follow that the rate of wages could not be reduced, for any considerable period, below what would procure them these articles. But there is no such absolute standard of natural wages. It depends essentially on custom and habit. The articles considered as necessaries are perpetually changing. The labourers of Hindostan principally subsist on rice, those of Ireland on potatoes, and those of England on wheaten bread and beef. In one country it is discreditable for the lowest class of labourers to be destitute of comfortable clothing, and of shoes and stockings, while in others shoes and stockings are looked upon as luxuries to be used only by the rich. In many provinces of France and Spain a certain allowance of wine is considered indispensable to existence; and in England the labouring class entertain nearly the same opinion with respect to beer and porter. Nor have the habits of the people, and the standard by which the natural rate of wages has been regulated at different periods in the same countries, been less fluctuating and various. The articles which custom and habit have rendered necessary for the comfortable subsistence of the English and Scottish labourers of the present day are as widely different from those which were judged necessaries by their ancestors, in the reigns of Elizabeth, James I., and Charles I., as they are from those which form the ordinary subsistence of the labourers of France and Spain. The standard of natural wages has been raised, and the poor have been taught to form much more elevated notions re-
a decrease in the number of births, or both—it can never be the work of an instant. It must always require a considerable time before it can be effected; and there is in consequence an obvious risk lest the habits of the labouring class should be degraded in the interim. When wages are considerably reduced the poor are obliged to economise; and should the coarse and scanty fare that is thus, in the first instance, forced upon them by necessity, ultimately become congenial from habit, no check would be given to population, and the natural rate of wages would be permanently reduced. In such a case the cost of raising labourers would be diminished; and it is by this cost that the natural rate of wages, with which the market rate must generally correspond, is always regulated. A fall of wages is, therefore, as peculiarly injurious to the labourers as a rise of wages is peculiarly beneficial to them. Its obvious tendency is to sink the natural rate of wages, and to degrade the condition of the largest and not least valuable class in society; and wherever the labourers can bear to retrench, or to descend from a higher to a lower station, it will have this effect, unless their desire to preserve their place in society should occasion a greater prevalence of moral restraint, and a slower increase of population. It is certain, indeed, that to whatever extent wages may fall, the labourers always possess the means of raising them to their former, or to a higher level. If they understock the market with labour, wages will continue high, notwithstanding the means of employment should be diminished; while, if they overstock the market with labour, wages will be low, notwithstanding these means should be very considerably increased. The labourers are thus really in a great measure the arbiters of their own fortune. Nor is there any very great reason to think that their condition will ever be materially improved until they are made acquainted with the circumstances which govern the rate of wages, and are impressed with a full conviction of the important truth, that they are themselves the masters of the only means by which their command over the necessaries and luxuries of life can be really extended.
Dr Smith has said, that, "while the demand for labour and the price of provisions remain the same, a direct tax on the wages of labour can have no other effect than to raise them somewhat higher than the tax." (III. p. 323.) It is plain, however, from the principles we have just laid down, that in the event of the demand for labour continuing the same after the tax had been imposed as before, the rise of wages could only be gradually effected; and it would, in consequence, depend entirely on the circumstance of the opinions and habits of the people undergoing no degradation during the period of the rise taking place, whether wages would regain their former elevation. But Mr Ricardo has shown that, in the great majority of cases, the demand for labour would not, as Dr Smith has supposed, continue the same after the imposition of the tax. Sup-
pose, for the sake of illustration, that Government lays a direct tax on wages; as no part of this tax is taken from the capital of the masters, it is obvious it cannot lessen their means of employing labour; and it is equally obvious that it must make an equivalent addition to the means of employing labour, or of purchasing the produce of labour, possessed by the Government or its agents who have received the tax. As soon, therefore, as these increased means are brought into market, the greater competition will infallibly raise wages, so as to place the labourers in their previous condition.
This is the way in which taxes are generally expended. But if we suppose that the produce of the tax, instead of being laid out at home, had been remitted as a subsidy to a foreign state, the demand for labour would not be increased in consequence of the competition of Government, and wages could only be raised by slow degrees in the way we have previously described. In all those cases, however, in which the produce either of direct or indirect taxes on wages is laid out at home, they never fail to occasion an equal and immediate rise of wages. The agents of Government then enter the market for labour with means of purchasing which have not been derived from the capitalists, but from the labourers themselves, and wages are thus necessarily raised precisely in proportion to these additional means; or, in other words, to the amount of the tax. Although, therefore, Dr Smith failed in demonstrating his proposition, that a direct tax on the wages of labour is never defrayed by the labourer, the proposition is, nevertheless, strictly true in all those cases in which the tax is laid out at home; and it is also true in those cases in which it is sent abroad as a subsidy, provided the habits of the people and their opinions, respecting what is necessary for their comfortable subsistence, undergo no change after the tax is imposed.
We have already shown that every rise of wages must necessarily occasion a corresponding fall in the rate of profit.* It is, therefore, really the same to the capitalists whether a tax on labour, which is to be spent at home, be laid directly on profits or on wages. The capitalists must defray it either at first or second hand. And hence it is that the real injury which such taxes inflict on the labourer does not consist in their immediate but in their remote effects. By falling on profits, their direct tendency is to diminish the power to accumulate capital; and when carried so far as to have this effect, they must, unless the stimulus previously given to population be at the same time diminished by the more powerful operation of the principle of moral restraint, depress the condition of the labourers, and lower the natural rate of wages.
It must, however, be observed, that this is not an effect peculiar to a tax laid directly on profits or wages, but to every tax which is not defrayed either from rent or from a duty on exported goods. Labourers cannot, in any circumstances, be made to
Taxes on Wages. contribute considerably to the wants of the state; and if they were sufficiently alive to their own interests, and made a proper use of the power which they possess of regulating the quantity of labour in the market, no tax, even though the produce were remitted to a foreign country, could ever occasion any permanent reduction of the natural rate of wages. It is from profits and rent, therefore, that almost all taxes must be derived. And it is not really of much importance, provided the sum demanded of a capitalist be ascertained, whether he is made to pay it by a direct tax or by taxes on expenditure. If L. 500, for example, be his fair proportion of the revenue required by the state, "the virtue of taxation consists in making sure that he shall pay this sum, neither more nor less." (Ricardo's Principles, &c. p. 183, 3d edit.)
It is alleged, however, and the allegation is undoubtedly true, that, when the rate of profit, in a particular country, is as low, or but very little higher than the rate of profit among the countries in the vicinity, a heavy direct tax on profits or wages would, by reducing the rate of profit below the common level, have a powerful tendency to cause the transfer of capital to other countries, whereas heavy taxes on expenditure merely occasion the emigration of individuals or families, without prompting them to take their stock along with them. But, although it cannot be doubted that an efflux of capital is much more injurious than an emigration of individuals, still, as the emigrants would thereby avoid taxes laid on expenditure, it is obvious, that if no taxes were laid directly on profits and rents, they would escape taxation altogether, and a disproportionately heavy burden would, in consequence, be thrown on those who continued to reside at home. The truth is, that it is quite impossible to carry either direct or indirect taxes beyond moderate limits, without encountering difficulties. Inasmuch, however, as equality of pressure is one of the very highest recommendations of a system of taxation, and inequality of pressure one of its greatest defects, the objection to such direct taxes as can be fairly assessed, that they tend to force capital abroad, ought not to be held as conclusive. So long as an individual derives a revenue from capital, so long ought that revenue be made to contribute, in the same proportion as the rest, to the supply of the wants of the country in which the capital is employed. If you cannot draw the L. 500 of taxes, which a capitalist ought to pay, from him, by means of duties on wines, horses, or coaches, or any other article of expenditure, you ought certainly to resort to direct taxation: For, if you do not, this capitalist will not furnish his proper quota of the public revenue, and other individuals will have to pay the portion not paid by him. To prevent taxes on profits or expenditure from forcing either capital or individuals abroad, the only way is to keep them as low as possible. In this respect, as in most others, there is no difference between the expenditure of a state and that of a family. And in both it will be found, as Cicero long ago observed, that Optimum, et in privatis familiis, et in res publica vectigal est, PARSIMONIAM.
Having thus endeavoured to trace and exhibit the effects that would result from the imposition of
taxes separately affecting rent, profits, and wages; we shall now proceed briefly to inquire into the effects that would result from the imposition of a tax proportioned to the income of each individual.
SECT. IV.—Taxes on Income.
As all income must either be derived from rent, profit, or wages, the effects of a tax on income would necessarily vary according as the incomes of the contributors were derived from one or other of these sources. In so far as income is derived from rent, a tax on it would be really a tax on rent, and would fall wholly on the landlords; and in so far as income is derived from profits, a tax on it would be really a tax on profits, and would fall wholly on the capitalists: But such would not be the case with a tax laid on that part of the income of a country which consists of wages; for, we have already shown, that when the produce of a tax on wages is laid out at home, it causes them to rise to an equal extent; and is, therefore, really the same in its effects as if a tax calculated to raise the same sum were laid directly on profits; and that, when the produce of the tax is remitted abroad, the same rise is brought about, though not so immediately, by the operation of increased mortality, or by a diminished increase of population.
By tracing the effects of this principle, we discern the fallacy of the objection to an income-tax, on account of its pressing with equal severity on all incomes, from whatever sources they may be derived. There is certainly a great appearance of truth in the statement of those who affirm that it is a monstrous hardship and injustice to make the same deduction from the income of a lawyer or a physician, on whose exertions a numerous family may perhaps be dependent, as from the rent of a landlord or the profit of a capitalist. But if it can be shown that the condition of professional men must be affected by every tax laid exclusively on the incomes of landlords and capitalists, exactly to the same extent as if it had been extended to them, these objections must obviously fall to the ground, and there can be neither hardship nor injustice in making the tax universal. Now it is not very difficult to demonstrate that this would really be the case; and that, in point of fact, it is altogether immaterial to professional men whether, when a tax is laid on income, they pay their full share, or obtain a total exemption.
The revenue or wages of professional men depends partly on the expence necessarily incurred in their education, and partly on the peculiar habits of the society in which they live, and the station they must support. If their wages amounted only to a bare compensation for the expences of education, it is easy to see they could not be permanently affected by a tax on income; for, as soon as the tax was imposed, their wages would become insufficient for their remuneration, and while young men would thus be deterred from entering on professional pursuits, those already engaged in them would have a powerful temptation to withdraw; nor would this double operation cease, until it had, by diminishing the supply, raised the wages of those who remained to their proper level;—that is, until it
had increased them by the whole amount of the tax. It is clear, therefore, that no lasting or real injury could be done to those professional men, whose earnings are proportioned to the necessary expences of their education, by subjecting them to a tax on income.
It may be supposed, however, that the effect would be different in the case of those whose incomes are not regulated so much by the expence of their education, as by the expence of maintaining themselves in the station in which custom and the habits of society require they should live. But this circumstance does not really make the slightest difference on the result. The situation of professional men must always bear some certain relation to the situation of those among whom they reside. If you either improve or depress the condition of the landlords and capitalists of a country, it will be found to be utterly impossible to maintain professional men in their previous situation. Their interests are inseparably and indissolubly connected with those of the other classes: they must rise when they rise, and they must fall when they fall. Suppose, to illustrate this principle, that a tax is laid on the incomes of landlords and capitalists, from which the incomes of professional men are exempted. It is plain, that the immediate effect of such a tax would be to derange the previously subsisting relations among the different classes and orders of society. The condition of professional men, as compared with that of landlords, farmers, manufacturers, and merchants, would be improved. But this improvement would be of very short duration. For the greater inducements, which the exemption from the tax would hold out to young men to enter on professional pursuits, would not fail to attract additional numbers, until, by the increase of competition, their wages had declined so as to balance the advantage of exemption from the tax, and to place them in the same relative situation as before. If we reverse this hypothesis, and suppose, that, instead of professional incomes being exempted from an income-tax, it is laid exclusively on them, the result will be precisely similar. The situation of professional men, as compared with that of the other classes, would in this case be changed to the worse. There would, in consequence, be a greater disinclination to engage in professional pursuits: and the usual supply of entrants not being obtained, their numbers would be progressively diminished, until the greater competition for their services had again restored them to their proper relative situation; or to the situation they would have occupied, had the tax been levied equally on all classes.
Still, however, it may be said, that though no injustice is done to professional men by taxing them to the same extent as capitalists, when an income-tax forms a permanent source of revenue, an injustice would be done them were they taxed to the full extent of the other classes, in the event of its only being imposed during the continuance of a war; because, in such a case, sufficient time would not be afforded to permit the natural principles of adjustment we have described to operate their full effect. But this objection is as untenable as the former. Wars are calamities to which every people must always be
liable; and if it were once known that the supplies required to defray their expence were to be raised within the year, by an equal income-tax, the chances of being subjected to this tax would most certainly enter into the calculations of all professional men, and the rate of their natural or necessary wages would be regulated accordingly. In every case, therefore, whether an income-tax is made one of the ordinary sources of revenue, or is only resorted to on extraordinary emergencies, professional incomes ought to be taxed to the same extent as others. To give abatements in their favour, serves only to introduce an apparent inequality into the tax, and to render its collection more difficult, without doing them any real service. If you give them an abatement, their fees will be diminished; and if you do not give it, they will be raised; so that, in either case, they will preserve the same relative situation with respect to the other classes of society.
The only class in whose favour it would be just and equitable to grant an abatement from the full charge on account of an income-tax, are those who derive their incomes from fixed and terminable annuities. It is obvious, that such a tax would press with greater severity on them than on landlords or capitalists, whose incomes are derived from what may be considered as inexhaustible sources; and it would also press with greater severity on them than on professional men, whose incomes would be augmented in consequence of its imposition; and, therefore, it would be necessary to avoid laying any greater burden on the possessors of terminable annuities, than on the other classes; or, to preserve them in the same relative situation, to make an abatement in their favour in an inverse proportion to the duration of their annuities.
If an income-tax were extended to the wages of common labourers, it would not really fall upon them, but on the capitalists who employ them. And it would, therefore, be necessary, in the event of such a tax being imposed, to increase the proportion affecting the rents of the landlords; for otherwise they would be less heavily taxed than the capitalists, who would have to pay the portion which falls on wages.
It has been urged by M. Say, and other able economists, that an income-tax ought not to bear the same relation to all incomes. A tax of L. 10, for example, is said to be more severely felt by the possessor of an income of L. 100, than a tax of L. 100 or L. 1000, by the possessor of an income of L. 1000 or L. 10,000; and it is contended, that, in order fairly to proportion the tax to the ability of the payers, such a graduated scale of duties should be adopted, as would press lightly on the smaller incomes, and increase according as they became larger, and more able to bear taxation. We cannot, however, concur with those who hold this opinion. It is surely no part of the business of Government to impose taxes, in the view of regulating the incomes of the contributors, or for the purpose of depressing one class and elevating another. Every just tax will leave individuals in the same relative situation in which it found them; and it cannot do this otherwise, than by taking the same proportion of their incomes from each. That such a tax will be more acutely
felt by the poorer than by the wealthier classes is undeniable; but the something is true of taxes on commodities, and of every imposition which does not subvert the already subsisting relations among the different orders of society. The hardship in question is, in fact, one of the evils of poverty, and not of equal taxation; and to attempt to alleviate it, by adopting such a graduated scale of duties as has been proposed, would really be to impose taxes on the wealthier part of the community, for the benefit of their less opulent brethren, and not for the sake of the public revenue. The establishment of such a principle would be most mischievous; if carried to its full extent, it would sanction the total exemption of limited incomes from the burden of taxation, until those that were higher had been reduced to the same level; and would thus be subversive of almost every motive to industry and economy.
The objections to an equal income-tax, on the ground of its making "no distinction between the income which has a numerous family to support, and that of the retired bachelor or the unexpensive maiden,"* are still more destitute of foundation. In fact, the peculiar excellence of an income-tax consists in its making no such distinction,—in its sweeping, with indiscriminating severity, its equal demands from all. If taxes be not laid on income, they must be laid on expenditure; and it is obvious, that while an individual who has an expensive station or a large family to support, must contribute largely to taxes on expenditure, misers and those who have no families may nearly escape them altogether. It has been suggested, that this inequality might be got rid of by making distinctions in the duties on commodities, proportioned to the relative condition of those who buy them; or by enacting, that those who have so many children shall pay a certain duty, and those who have so many more, a different duty. But the extreme complexity of such a plan, and the facilities it would give to every species of fraud and evasion, will always prevent its adoption. Supposing, however, that it could be adopted, it would be, in the highest degree, unjust and inexpedient:—unjust, in as much as a reduction of duties in favour of those who have small incomes, would proportionally depress the wealthier classes, and change the relative situation of individuals; and inexpedient, in as much as a reduction in favour of those who have large families, would act as a stimulus to marriage, which, if it ought not to be discouraged, certainly stands in no need of encouragement. So long, therefore, as taxes affect only expenditure, those who are obliged to spend must unavoidably pay more than their just proportion of the public revenue. But a fairly levied tax on income would obviate this defect, and would make misers, bachelors, and maidens, contribute equally with the other classes to the demands of the state.
sible to impose. It may, however, be laid down as an indisputable axiom, that every tax which affords a great facility of evasion is essentially defective; and there are very cogent reasons for thinking that this must always be the case with an income-tax. The income derived from lands, houses, and other fixed property, may be learned without much difficulty; but it has hitherto been found to be quite impossible to ascertain the wages of professional persons, or the profits of the capital engaged in manufacturing and commercial undertakings with any thing like tolerable precision. It is this extreme difficulty of making an equal and impartial assessment, that constitutes the real and only good objection to an income-tax. By setting the interests of the contributors in direct opposition to their duties, and tempting them to conceal and underrate their incomes, it obviously operates as a bounty on perjury and fraud; and, if carried to a very great height, it would undoubtedly generate the most flagrant and barefaced prostitution of principle, and would do much to obliterate that nice sense of honour which is the only sure foundation of national probity and virtue. The discovery of means by which these highly injurious effects might be obviated, and incomes ascertained without the necessity of instituting an odious and generally ineffectual inquisition into the private affairs of individuals, would be the greatest practical improvement which it seems possible to make in the science of taxation. But until such means are devised,—and we are not certainly very sanguine in our expectations on the subject,—an income-tax must, besides its injury to public morals, be partial and unequal in its operation, and ought not, therefore, to be imposed, except in cases when a large revenue must be raised.
In order to furnish the means of defraying the enormous cost of the war begun in 1793, Mr Pitt the late In-proposed, in 1797, to triple the amount of the assessed taxes, or duties on houses, windows, horses, carriages, &c. This plan, however, did not answer the expectations of its projectors, and next year it was abandoned, and a tax on income substituted in its stead. According to the provisions of the act imposing this tax, all incomes of less than L. 60 a year were exempted from assessment; an income of from L. 60 to L. 65 was taxed one one hundred and twentieth part; and the rate of duty increased through a variety of gradations, until the income reached L. 200, or upwards, when it amounted to a tenth part, which was its utmost limit; a variety of deductions being at the same time granted, on account of children, &c. The commissioners to whom the management of this tax was entrusted were chosen by the freeholders of counties, and the electors of burghs, in the same way as their representatives in Parliament, only that a smaller qualification was sufficient to enable any one to be elected a commissioner. The services of the commissioners were gratuitous; and they were sworn to preserve the most inviolable secrecy with respect to the affairs of individuals. They
* Glover On the Character and Tendency of the Property-Tax. Pamphleteer, Vol. VIII. p. 563.
were authorized to call for returns from every person whose income they supposed to exceed L. 60 a year; and in the event of their being dissatisfied with these returns, they were empowered to call for written explanations, and ultimately for the oath of the party. But this examination was rarely necessary, except in the case of incomes derived from wages, from capital employed in manufacturing and commercial business, or from the interest of loans; the rental of landlords being, in most cases, learned from the terms of the leases held by their tenants; and the profits of the tenants being, as we have already observed, estimated at a certain proportion of the rent. The commissioners were assisted, or rather overlooked, by the tax-surveyors appointed by Government, who were required to see the provisions of the act strictly enforced, and whose duty it was to scrutinize all returns of income, to challenge such as they considered fraudulent, to object to the deductions allowed by the ordinary commissioners, and to bring the matter under the review of the commissioners of appeal, whose sentence was final. Notwithstanding the apparent complexity of these regulations, they worked extremely well; and though much fraud and evasion were certainly practised, yet, on the whole, the tax was collected with infinitely less difficulty, and with greater fairness and equality, than could have been rationally anticipated.
This tax was repealed in 1802, after the peace of
Amiens, having produced, on an average, about five millions and a half annually.
In 1803 the income-tax, under the name of property-tax, was again revived. The assessment began, as before, on incomes so low as L. 60 a year, and gradually increased until the income reached L. 150 a year, when it amounted to 5 per cent., which was its highest rate. An addition was made to this tax in 1805; and in 1806, during the short-lived administration of Mr Fox and Lord Grenville, the assessment was raised to 10 per cent. on all incomes, however small, arising from land or capital; professional incomes under L. 50 were exempted from the tax; and incomes of that sort exceeding L. 50, and under L. 150, the limit at which they became subject to the full assessment of 10 per cent., were allowed deductions, varying inversely as their magnitude. A very great outcry was made against the ministers who proposed this addition to the income-tax; but it may safely be affirmed that, in the then situation of the country, it was a highly necessary measure, and one for which they really deserved the thanks of the public. The income-tax was finally repealed in 1816.
We subjoin, from a Parliamentary paper presented to the House of Commons on the 26th February 1823, a return of the total gross and net assessments to the property or income-tax, for the year ending 5th of April 1815:—
| Gross Assessment. |
Net Assessment. |
|
|---|---|---|
| A. Lands, Tenements, Hereditaments, or Heritages | L. 5,923,486 ... | L. 5,923,189 |
| B. Houses, Lands, and Tenements | 2,734,451 ... | 2,176,228 |
| C. Funded and Stock Properties | 2,885,505 ... | 2,885,505 |
| D. Profits and Gains of Trade | 3,831,088 ... | 3,146,332 |
| E. Salaries, Pensions, &c. | 1,174,456 ... | 1,167,678 |
| Totals | L. 16,548,985 | L. 15,298,982 |
The following is the Return of the Value of the several species of Property on which the Assessment
was made for the Years ending 1813 and 1814, ending the 5th April 1814 and 1815, viz.—
| Schedules. | 1813. | 1814. |
|---|---|---|
| A. .... | L. 56,701,923 ... | L. 60,138,330 |
| B. .... | 36,336,883 ... | 38,396,144 |
| D. .... | 36,080,167 .. | 38,310,935 |
| E. .... | 11,380,748 ... | 11,744,557 |
| C. not stated, but estimated at | 30,000,000 ... | 30,000,000 |
| Totals | L. 170,499,721 | L. 178,589,966 |
SECT. V.—Poor Rates.
The incidence and effect of poor rates depend on the mode in which they are imposed. If they were laid exclusively on the land, and levied proportionally to its rent, they would be really a tax on rent, and would be wholly defrayed by the landlords. If they were laid exclusively on the rent of houses, they would, in certain circumstances, fall wholly on the occupiers, in others on the builders, and in others on the occupiers and ground landlords; and, if they were laid on profits, they would fall equally on farmers, manufacturers, and merchants, or on capitalists in general. In the actual state of things in this coun-
try, we believe that a much larger proportion of the poor rates falls on the farmer than on any one else; and they, consequently, contribute to raise the price of his produce just as any other tax affecting either his crop or the instruments used by him in cultivation. Mr Ricardo has made an allowance for this greater pressure of the poor rates on the farmer in his estimate of the countervailing duty to be laid on foreign corn, to balance the excess of taxes affecting that which is raised at home.
Having thus endeavoured to exhibit the operation, and to trace the ultimate incidence and effect of such taxes as fall directly on income, we come now to the second branch of our subject, or to the
Advantages and Disadvantages of Indirect Taxes. consideration of those taxes which fall indirectly on income.
Reasons recommending the Imposition of Indirect Taxes. Though most governments have had recourse to direct taxes, they have rarely formed the sole or even principal source of their revenue. Indirect taxes have almost invariably been the greatest favourites both of princes and their subjects; and there are a variety of reasons why this should be the case. The burden of direct taxation is palpable and obvious. It admits of no species of disguise or concealment, but makes every one fully sensible of the exact value of the portion of his income taken from him by government. There is, however, a natural and inherent repugnance in the human breast to part with the produce of industry, except for the purpose of obtaining some more acceptable equivalent in its stead. And as the benefits derived from the institution of government are neither so very obvious nor striking as to be easily and readily felt and appreciated by the great body of the people, there is, in the great majority of cases, an extreme disinclination to pay a large amount of direct taxes. It is for this reason that governments have so generally had recourse to indirect taxes. Instead of exciting the prejudices of their subjects by openly demanding a certain specific portion of their incomes, they have taxed the articles on which these incomes are in general expended! The effect of this ingenious plan is to conceal the amount of taxation, and to make its payment appear in some measure voluntary. The tax being generally paid, in the first instance, by the producers, the purchasers confound it with the natural price of the commodity. No separate demand being made upon them for the tax, it escapes their recollection; and the article they have received seems a full equivalent for the sacrifice they have made in acquiring it. Such taxes have also the advantage of being paid by degrees, in small portions, and at the time when the commodities are wanted for consumption, or when it is most convenient for the consumers to pay them.
Moderate Indirect Taxes stimulate Industry. Besides their greater facility of imposition, indirect taxes have been frequently supposed to have the further and exclusive advantage of acting as a stimulus to industry. "Dans la perception, directe," says the Marquis Garnier, "l'impôt se montre sans nul déguisement; il vient sans être attendu, à cause de l'imprévoyance si ordinaire au commun des hommes, et il apporte toujours avec lui de la gêne et du découragement. Mais l'impôt indirect, en ajoutant successivement un surcroît de prix aux articles de consommation générale et journalière, au moment où tous les membres de la société ont
contracté l'habitude des ses consommations, rend ses divers articles un peu plus coûteux à acquérir, c'est-à-dire, qu'il donne lieu à ce qu'il faille, pour se les procurer, un surcroît proportionné de travail et d'industrie. Or, si cet impôt est mesuré de manière à ne pas aller jusques à décourager la consommation, ne semble-t-il pas, dans ce cas, agir comme un stimulant universel sur la partie active et industrielle de la société, qui l'excite à un redoublement d'efforts, pour n'être pas obligé de renoncer à des jouissances que l'habitude lui a rendues presque nécessaires, et qui, en conséquence, donne un plus grand développement aux facultés productives du travail et aux ressources de l'industrie? Ne doit-il pas en résulter, qu'après l'impôt, il y a la même somme de travail et d'industrie qu'auparavant pour fournir aux besoins et aux jouissances habituelles des hommes qui composent la classe laborieuse, plus la somme de travail et d'industrie qui a dû pourvoir au surcroît de prix destiné à l'impôt? Or, cet impôt, ou ce surcroît de produit que se paye, étant dépensé par le gouvernement qui le recueille, sert à alimenter une nouvelle classe des consommateurs, qui forment des demandes qui l'impôt les met à portée de payer." (Preface à la Traduction de la Richesse des Nations, Tome I. p. 66, ed. 2de.)
Advantages and Disadvantages of Indirect Taxes. The truth of the greater part of this statement cannot be disputed. It is, however, essential to observe, that the whole effect ascribed by M. Garnier to indirect taxes, in stimulating industry, depends on the circumstance of their being so moderate as not to discourage consumption; or, which is really the same thing, that they are so moderate as to give the contributors the power of defraying them by increased exertion and economy. If this were not the case, they would have a precisely opposite effect, and instead of acting as a stimulus to production, they would certainly occasion its decline. But we can perceive no grounds for supposing that a moderate income-tax would have a different effect on industry from moderate taxes on expenditure. It would most undoubtedly serve as a spur to excite every one to make additional exertions, otherwise he would be unable to preserve his capital unimpaired, and to retain his former command over the necessaries and luxuries of life. Increase of exertion is not an exclusive consequence of indirect taxation; but it is an exclusive consequence of moderate taxation, whether it be direct or indirect. Just as a decay of industry, and a general impoverishment, is not the exclusive consequence of any particular species of taxation, but of all taxes whatever, when they are carried to an excessive height.
We doubt, therefore, whether the generality of Disadvantages of Indirect Taxes. taxes on expenditure possess any real advantage over taxes on income, except in the facility of imposition, while they certainly labour under many very considerable disadvantages. In the first place, taxes on commodities necessarily alter the natural distribution of Capital.
* Nero was supposed to have abolished the duty of 4 per cent. on the slaves sold in Rome, when he really did no more than order it to be paid by the seller instead of the buyer. "Remissum," says Tacitus, "specie magis quam vi; quia cum venditor pendere juberetur, in partem pretii emptoribus accrescebat." Annal. lib. 13, cap. 32.
bution of the capital and industry of the country, and force them into less advantageous channels. They do this, because, when a tax is laid on a particular class of commodities, the producers, in order to raise the price proportionally to the tax, diminish the supply in the market, by transferring a portion of the capital employed in the production of the taxed commodities to some other business. But an equal income-tax would operate as an equal tax on profits; and when all profits are equally taxed, no advantage would be gained by transferring capital from one business to another, and the producers would have no means whatever of raising prices. Under the operation of such a tax, every individual would continue, just as he would have done had he not been taxed at all, to employ himself in those businesses which are naturally most advantageous. Capital and industry would not be forced into artificial channels. The pay of troops and of public functionaries would not be raised, because of a rise of prices occasioned by taxation; at the end of a war, every thing would be found in its proper position; there would be no revulsion; and we should be immediately enabled to avail ourselves to the utmost of all our natural and acquired resources.
In the second place, taxes on commodities are almost always paid by the producers before they are sold to the consumers, and are frequently, indeed, advanced in an early stage of the manufacture. Their effect is, therefore, not only to increase the price of the commodity, by the whole amount of the duty, but also by the profit due to the manufacturer for the time it has been advanced by him. But it should be observed, that though this circumstance undoubtedly operates to increase prices, its influence in this respect has been greatly over-rated by Sir Matthew Decker, M. Say, and M. Sismondi. The latter has calculated that a tax of 4000 francs, paid originally by a manufacturer, whose profits were 10 per cent. would, if the commodity manufactured only passed through the hands of five different persons, be raised to the consumer to the sum of 6734 francs! This calculation proceeds on the supposition, that he who first advanced the tax would receive from the next manufacturer 4400 francs, and he, again, from the next 4840 francs; so that at each step 10 per cent. on its value should be added to it. "But this," as Mr Ricardo has justly observed, "is to suppose that the value of the tax would be accumulating at compound interest; not at the rate of 10 per cent. per annum, but at an absolute rate of 10 per cent. at every step of its progress. M. Sismondi's statement would be correct, if five years elapsed between the first advance of the tax and the sale of the taxed commodity to the consumer; but if one year only elapsed, a remuneration of 400 francs, instead of 2734, would give a profit at the rate of 10 per cent. per annum, to all who had contributed to the advance of the tax, whether the commodity had passed through the hands of five manufacturers or fifty." (Principles, &c. 3d edit. p. 459.)
In the third place, duties on commodities encourage smuggling. "They tempt," says Dr Smith, "persons to violate the laws of their country, who
are frequently incapable of violating those of natural justice, and who would have been in every respect excellent citizens, had not the laws of their country made that a crime which nature never meant to be so." (III. p. 378.) In consequence of this tendency, duties on commodities require the employment of a great number of revenue officers; and as they expose the producers of the taxed articles to considerable inconvenience and hardship from domiciliary visits, they force them to indemnify themselves by making a corresponding addition to the price of their goods.
But the great objection to taxes on expenditure consists in their inequality. We have already shown that such taxes cannot possibly be rendered equal and impartial in their operation; that they do not affect the different classes of society in proportion to their ability to bear them; and that, while they may be almost wholly evaded by rich misers, and those in unexpensive stations, they press with disproportionate severity on those who have large families and expensive stations to support. At the same time it should be remembered, that in taxation we have only a choice of difficulties. And notwithstanding it does not appear possible to free taxes on expenditure from these very weighty objections, the greater readiness with which they are paid, combined with the extreme difficulty of laying an income-tax equally on rent, profits, and professional wages, will always prevent their abolition. Neither, perhaps, would it be really desirable to take off those duties which affect only luxuries. But without entering on the discussion of this question, we are satisfied that if the difficulties, in the way of a fair income-tax, could be removed, it would be among the least objectionable of any; and if it were not exclusively adopted, it ought at all events to be made one of the principal sources of the public income. It is unnecessary, however, after what we have previously stated, to insist farther on this point; and we shall, therefore, proceed to inquire into the effects on their price, of taxes on commodities, and on whom they ultimately fall.
SECT. II.—Inquiry into the Incidence and Effect of Indirect Taxes.
1. Taxes on a particular Commodity.—With regard to the effect of taxes on the price of commodities, it is clear that if a duty be laid on a particular commodity, and not on others, its price will sustain an equal rise; for, if it did not rise to this extent, the profits of the producers would be sunk below the common level, and their business would be abandoned. But it depends on the circumstance of the commodity being of the class denominated luxuries, whether a tax on it will fall wholly on the consumers. In so far as necessaries are consumed by landlords or capitalists, taxes on them are also defrayed by the consumers; but, in so far as they are required for the consumption of labourers, the effect of taxes on them is in no respect different from the effect of an equal amount of taxes laid directly on wages: And we have already shown that there are very few cases in which taxes affecting wages are really defrayed by the labourers; and that their common and ordinary effect is to cause an immediate
Taxes on Commodities. and equivalent rise in the rate of wages, and a proportional fall of profits. It appears, therefore, that taxes on necessaries do not wholly fall on the consumers; but that they are partly defrayed by them, and partly also by the proprietors of stock, in consequence of their reducing the rate of profits. Such, however, is never the case with taxes on luxuries, or on commodities used only by the rich. A duty on velvets, on claret, and on coaches, for example, falls immediately on the consumers, and cannot be thrown on any one else. Such articles not being used by labourers, a duty on them can neither raise wages nor affect the rate of profit.
Taxes on all Commodities. 2. Ad valorem Taxes on all Commodities.—It is not so easy to trace the effects, on their price, of an equal ad valorem duty on all commodities. Such a duty could not, it is obvious, at all affect their values relatively to each other; and supposing their quantity and the quantity of money in the country to continue the same, it has been contended that it could occasion no rise of prices. But a very few words will be sufficient to show the fallacy of this statement. The Government must receive the tax either in money or in goods. Now suppose, for the sake of illustration, that the duty is ten per cent., and that it is paid in kind; in this case the supply of produce remaining in the market after the tax is paid being diminished one-tenth, the purchasers will only get nine-tenths of the commodities they previously got in return for the same quantity of money, or, in other words, prices will rise ten per cent. If the Government receives the tax in money, the result will be precisely similar. The purchasers will still have to reimburse the producers for the tax, or to pay them ten per cent. additional for their goods. For if this were not really the case—if the purchasers who do not directly pay the tax to Government, continued to get the same quantity of produce for the same sum of money, after its imposition as before, there would be no cause in operation to occasion the smallest diminution of individual consumption; and it is plainly impossible that the tax could, in such circumstances, give the Government the means of obtaining an increased share of the produce of the country, which is absurd. Not only, therefore, is it certain that a tax on a particular class of commodities will raise their price; but it is also certain that an equal ad valorem duty on all commodities will, without any increase of money, occasion an equal and universal rise of prices. The real effect of every such tax is to transfer a portion of the produce of the industry of the country into the hands of Government, and consequently to cause a less portion of that produce to come into the hands of every individual whose means of purchasing are not increased. Such a rise of prices is widely different from the rise which is occasioned by an increase in the quantity of money. When it is increased prices rise, because more money is given for the same quantity of goods; but when an ad valorem duty is levied, prices rise, because the same sum of money is given for a less quantity of goods, a portion of them having been transferred to Government.
Taxes on Raw Produce. 3. Taxes on Raw Produce.—It has been very generally supposed that the taxes laid on the raw produce of the soil have a different incidence from taxes
laid on manufactured commodities; and that, instead of raising prices, and falling on the consumer, they have no influence on prices, and fall wholly on the landlord. We believe, however, that we shall be able to show that this opinion is entirely without foundation; and that the real effect of taxes on raw produce is to cause a proportional rise of prices, and to affect all classes equally in proportion to their respective consumption of the taxed articles.
If land yielded no surplus to its possessors above Tithes. the common and ordinary profit of the capital employed in its cultivation, it is plain that the imposition of a tax on its produce, a tithe, for example, would occasion an equivalent increase of its price. The level of profit may be temporarily, but it cannot be permanently, elevated or depressed in any particular branch of industry. And as there can be no reason why the agriculturists should content themselves with a reduced rate of profit, when all other employments are yielding a higher rate, as soon as tithes were imposed they would set about transferring a portion of their stock to some more lucrative business; and this transference would be continued until the diminution of supply had raised prices to their proper level, and restored the equilibrium of profit. In such a state of things, tithes would indisputably operate precisely as an equivalent addition to the price of raw produce. But after various qualities of soil have been brought under cultivation, and rents have, in consequence, been pretty generally introduced, it is not so easy to trace their ultimate incidence and effect. They then appear to occasion rather a diminution of the rent of the landlord than a rise of prices. Farms which are tithe-free always bring a proportionally higher rent than such as are subject to that charge; and it is naturally concluded, that, were tithes abolished, the depressed rents would be raised to the same level as the others. For this reason, in an advanced stage of society tithes have not been considered as increasing the price of raw produce to the consumers, but as falling on rent, and as diverting a portion of it into the pockets of its rightful owners, the clergymen and lay-impropriators. "Taxes on the produce of land," says Dr Smith, "are in reality taxes upon 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, one year with another, is likely to amount to, and makes a proportional abatement in the rent which he agrees to pay to the landlord. There is no farmer who does not compute, beforehand, what the church tithe, which is a land-tax of this kind, is, one year with another, likely to amount to." (III. p. 274.)
That this is the general opinion on the subject can- Error of this not be doubted; but notwithstanding the high autho- Opinion. rity by which it is supported, it is most certainly Tithes and without foundation. We have shown, in treating of other Taxes on Raw Produce, that in every country that portion of produce do not the required supply of raw produce which is raised fall on the by the agency of the capital last applied to the soil, Landlord, and which governs the price of all the rest, never but on the yields any rent but merely the common and average Consumers rate of profit to the landlord or the occupier. Now of Raw Produce.
this principle is decisive as to the effect of tithes and other taxes on raw produce. If tithes were only levied from the superior soils, they would not, after inferior soils had been cultivated, occasion any rise of price, but would fall entirely on the rent of the landlord. But this is not the case with tithes. They affect every quality of land indiscriminately, and being exacted equally from the produce raised in the least favourable, as from that which is raised in the most favourable circumstances, occasion only an increase of prices. Suppose no tithes are levied, and that the wheat raised on the poorest lands, or with the capital last applied to the soil, and which determines the price of the whole crop, yields a sufficient profit to the cultivator, and no more, when it sells for 70s. a quarter—the price must rise to 77s. before the same profit can be obtained after tithes are imposed. In this case the tithe cannot possibly occasion any diminution of rent; for this produce pays no rent; so that if it were not compensated to the cultivators by an increase of prices, they would withdraw their capital from cultivation, and the necessary supplies would no longer be obtained.
This account of tithes, is nowise inconsistent with the admitted fact, that farms which are free from this burden bring a proportionally higher rent. The expenses attending their cultivation are not increased by the levying a tithe from the produce of other farms; but, as there cannot be two prices, their occupiers obtain the same increased price for their produce which is necessary to indemnify the cultivators of the tithed lands. There must, however, be an equality of profits, as well as of prices; and hence, whatever advantage the occupier of a tithe-free farm may gain by being relieved from a burden to which his neighbours are subjected, is compensated by a corresponding increase of rent.
Thus it appears, that, if tithes were abolished, the rent of such farms as pay tithe would not rise to a level with the rent of those which are tithe-free, but the rents of the latter would fall to the level of the former. As raw produce is uniformly sold at its necessary price, or the price necessary to afford the customary rate of profit to the cultivators of the worst land, it would fall the moment they had been relieved from this heavy charge. And the advantage previously enjoyed by the proprietors of tithe-free lands, and which was the only cause of their obtaining a higher rent, being done away, their rents would decline to the level of those around them.
If rents were uniformly paid in kind, the imposition of tithes would undoubtedly diminish the share of the produce paid to the landlord; but as its value would be increased in the precise proportion that its quantity had been diminished, this reduced share would continue to exchange for the same quantity of all other commodities. Thus, if lands of the qualities Nos. 1, 2, 3, &c. respectively produced, in return for the same expenditure, 100, 90, 80, &c. quarters, the rent of No. 1 would be twenty quarters, of No. 2, ten, and so on. But they would no longer preserve that proportion after the imposition of tithes; for, supposing a tenth to be deducted from their gross produce, the remaining quantities would be 90, 81, 72, &c.; and, therefore, the corn rent of No. 1 would be reduced to 18, and of No. 2 to nine quarters. It
is clear, however, that their money rents, or their rents estimated in any other commodity except corn, would not be at all affected. If corn sold at L. 4 before the imposition of the tithe, it would afterwards sell at L. 4, 8s. 10d.; for, unless ninety quarters now brought as much as one hundred quarters previously brought, the cultivators of those soils, or the employers of those capitals which pay no rent, would not be able to realize the common and average rate of profit. Money rents would, therefore, continue unaltered; on the land No. 1, they would still be L. 80, and on No. 2, L. 40.
It appears, therefore, that in every state of society, whether rents are high or low, and whether they are paid in kind or in money, the charge of tithes is defrayed entirely by the consumers of raw produce. They do not consist of a portion of the rent of land belonging to the clergy, or the lay-impropriator; but they are a burden which falls equally on every individual in the kingdom—on the poorest beggar as well as the richest lord—in proportion to their respective consumption of the articles from which a tithe is levied.
But, independently of these considerations, the fact that tithes and other taxes on raw produce do not form a deduction from rent, but go to increase the price of produce, is obvious from the circumstance that the tithe of expensive crops, and which require a great expenditure in their cultivation, frequently amounts to four or five times the rent of the land. The Rev. Mr Howlett, by far the ablest advocate of tithes, and whose authority cannot, therefore, be questioned, informs us that the tithe of an acre of hops, raised on land worth 40s. or 50s. an acre, is, after deduction of drying and duty, generally worth from L. 3 to L. 4; and he farther states, that he had known L. 7 or L. 8 paid for the tithe of an acre of carrot-seed where the land was not worth 20s. In such cases, it is plainly as great an absurdity to affirm that tithes fall exclusively on the rent of the landlord, as it would be to affirm that a part is greater than a whole. Tithes cannot justly be objected to on the ground of their being a partial tax. It is a mistake to suppose that they are borne by any particular class. They are not a local but a general burden; and fall equally on the consumers of the tithed articles. Had the raiser of carrot-seed been relieved from the burden of tithes, he would have obtained precisely the same rate of profit by selling his produce for L. 7 or L. 8 less; nor, had such been the case, would it have been optional with him to have made this reduction; the competition of his neighbours would infallibly have forced him, whether he were so disposed or not, to make a corresponding diminution in his prices. (Influence on Tithes on Agriculture, p. 4.)
An abolition of tithes is not, therefore, a measure in which landlords and farmers only are interested. It is obviously one of the greatest importance to the public in general. If 80s. be a remunerating price for wheat when tithes are levied, 72s. would be an equally high remunerating price were they remitted. When wheat sells at 80s., tithes, supposing them to be rigorously exacted, are really equivalent to a tax of 1s. a bushel, or 8s. a quarter. And as the average annual consumption of the different kinds of grain by each individual, when reduced to the standard of
Taxes on Raw Produce. wheat, has been estimated, apparently on good grounds, at a quarter, it follows, that when the medium price of wheat is 80s., a tithe on corn is really the same thing as a capitation tax of 8s.; and consequently constitutes an item of 40s. in the expenditure of every family of five persons.
Tithes increase according to the increase of gross Produce. But tithes are objectionable on other grounds. They are not a permanent and fixed tax, but they increase according as the difficulty of raising raw produce increases; and are infinitely more burdensome and oppressive in a year of scarcity than in a year of plenty. If the price necessary to afford a sufficient supply of corn were 60s. a quarter, the tithe would be equal to a direct tax of 6s. a quarter; but if, in consequence of being forced to resort to inferior lands, the increased difficulties of production had raised the price to 80s., the tithe would be 8s.; when prices rose to 100s., the tithe would be 10s., and so on. Nor is this all.—The tithe is not only increased in value, but it is also increased in amount, according as cultivation is extended. When land of the first quality, and which we have supposed would yield 100 quarters, was cultivated, the tithe would be 10 quarters: But after land of the second quality, and which only yields 90 quarters, had been cultivated, the tithe would be levied on 190 quarters: When land of the third quality had been cultivated, it would be levied on 100 + 90 + 80, or 270 quarters, and would go on progressively increasing, both in value and quantity, as fresh soils were brought under tillage.
"Not only," says Mr Ricardo, "is the amount of the tax increased from 100,000 quarters to 200,000 quarters, when the produce is increased from one to two millions of quarters, but, owing to the increased labour necessary to produce the second million, the relative value of raw produce is so advanced, that the 200,000 may be, though only twice in quantity, yet in value three or four times that of the 100,000 quarters which were paid before.
If an equal value were raised for the Church by any other means, increasing in the same manner as tithes increase, proportionably with the difficulty of cultivation, the effect would be the same. The Church would be constantly obtaining an increased portion of the net produce of the land and labour of the country. In an improving state of society, the net produce of the land is always diminishing in proportion to its gross produce; but it is from the net income of a country that all taxes are ultimately paid, either in a progressive or in a stationary country. A tax increasing with the gross income, and falling on the net income, must necessarily be a very burdensome and a very intolerable tax. Tithes are a tenth of the gross, and not of the net produce of the land; and, therefore, as society improves in wealth, they must, though the same proportion of the gross produce, become a larger and larger portion of the net produce."
Tithe is certainly in one respect the same as rent; both the one and the other are portions of the produce of the soil converted into a revenue, for the sup-
port of those who bear no share of the trouble and expense of its cultivation. But in every other respect they are entirely dissimilar. Rent, when once fixed, must continue the same during the currency of the lease. Though an industrious and enterprising farmer should raise ten or twenty times the quantity of produce raised by a sluggard, his rent would not, therefore, be increased; and he would reap, as he ought, all the advantages of his greater industry and intelligence. Such, however, is not the case with tithes. To the sluggard they are invariable; to the industrious man they become more and more oppressive, and increase with every fresh outlay of capital and labour. It is indisputable, therefore, that in their practical effect, tithes operate as a premium on idleness, and as a heavy and constantly increasing tax on industry! By preventing the cultivator from deriving the full and entire advantage of superior skill and increased exertion, they discourage his efforts, and powerfully contribute to render him indolent, careless, and indifferent. A farmer pays his rent willingly to the landlord; but, he considers the clergyman as an interloper, who, without having contributed in any way to raise the crop, claims a tenth part of its gross amount. The occupier of a farm, subject to this galling and vexatious charge, can never be brought to consider himself as realizing the same rate of profit from the capital he employs, as his neighbours in tithe-free farms; and so strong is this feeling, that we are told by Mr Stevenson, the well-informed author of the Agricultural Survey of the County of Surrey, that it is the common opinion that a farm tithe-free is better worth 20s. an acre, than a tithed farm equally favoured in soil and situation is worth 13s. In this way, tithes contribute indirectly as well as directly to raise prices—indirectly by generating an indisposition to apply fresh capital to the improvement of the soil, and directly by the positive addition they make to the expense of cultivating bad land.
Tithes a surely be reckoned unfriendly to the real interests of great discouragement to improvements. "adverse to cultivation and improvement, none is so noxious as that of tithes. A claimant here enters into the produce, who contributed no assistance whatever to the production—when years, perhaps, of care and toil have matured an improvement—when the husbandman sees new crops ripening to his skill and industry—the moment he is ready to put his sickle to the grain, he finds himself compelled to divide the harvest with a stranger. Tithes," Dr Paley continues, "are a tax not only upon industry, but upon that industry which feeds mankind—upon that species of exertion which it is the object of all wise laws to cherish and promote." (Paley's Works, II. p. 105, ed. 1819.)
"Tithe," says Dr Smith, "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 rear the most valuable, which are
generally, too, the most expensive crops, when the church, which lays out no part of the expence, is to share so largely in the profit. The cultivation of madder was for a long time confined by the tithe 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 cultivation of this plant into England have been made only in consequence of the statute which enacted that 5s. an acre should be received in lieu of all manner of tithe upon madder." (III. p. 275.) As a farther illustration of the principle here stated, we may mention, that the cultivation of flax and hemp in Ireland never succeeded until a low modus had been fixed by law; since then it has made a most rapid progress.
The effect of tithes and other taxes on the price of raw produce has been urged as a reason why an equal duty should be imposed on all such produce when imported from abroad. But all foreign corn imported must be paid either directly or indirectly by an exportation of some species of manufactured commodities; and it is, therefore, clear, that the home producers of corn can have no claim whatever to a protecting duty on the importation of foreign corn, unless the tithes, and other taxes falling on raw produce, exceed those which fall on manufactured goods. A tax which equally affects every description of products, leaves their relative values exactly where it found them. It does not render any particular class less able to withstand the unrestricted competition of foreigners than the others, and cannot, therefore, entitle them to a protecting duty. But if higher duties be laid on a particular class of commodities, the case is different. If, for example, while the duty on commodities in general is only 10 per cent., a duty of 20 per cent. were laid on a particular class, their price must rise 10 per cent. higher than the price of the rest, in order to maintain their producers in the same relative situation as before. It is plain, however, that in the event of the ports being opened to the importation of every description of foreign goods free of duty, the producers of the heavily-taxed commodities will be deprived of the means of limiting their supply, and consequently of raising their price, so as to indemnify them for the excess of the tax. The 10 per cent. excess of duty would then really operate as a bounty on the importation of the class of commodities on which it is charged; and if it were not defeated by a protecting duty of 10 per cent., the home producers of that class would be placed in a relatively disadvantageous situation, and would abandon their business.
But this principle only holds in the case of duties affecting manufactured products. If a direct tax of 10 per cent. were laid exclusively on the hats produced in England, and on no other commodity, the hatters would most likely be ruined were foreigners permitted to import hats duty free. Manufactured goods are produced under the same, or, at all events, under very similar circumstances; so much so, that foreign competition must either be injurious to all the manufacturers of a particular description of goods, or to none. But in agriculture the case is otherwise. Corn is produced under very different
circumstances, or from soils of very different degrees of fertility; and though the cultivators of the worst lands in tillage at any particular period might be injuriously affected by the unrestricted admission of foreign corn, the other cultivators, instead of being injured, would be really benefited by the rise of profit which must always follow every permanent reduction in the price of raw produce. Thus, suppose no duties are imposed on manufactured commodities, and that the ports are thrown open to the importation of foreign corn, without any protecting duty to balance the tithe—the whole effect of such a measure would be to cause such a small additional quantity of bad land to be thrown out of tillage as would enable the cultivators to obtain eleven quarters for the same outlay that had previously been required to produce ten quarters. As soon as this contraction of tillage had been effected, the farmers would have nothing to fear from foreign competition. They would still obtain the same rate of profit that was obtained by the undertakers of other businesses; and the consumers would be able to purchase their corn for ten per cent. less than if a protecting duty had been imposed.
But notwithstanding it is thus most certainly true, that the cultivators are always in a condition to relieve themselves of such taxes as affect them to a greater extent than they affect the other classes of society; yet, as they can only do this by contracting tillage and withdrawing capital from the cultivation of inferior soils, the effect of admitting foreign corn without a protecting duty equivalent to the excess of taxation affecting the home-growers, would be to cause a diminution of rent. We have already shown that rent consists of the difference between the produce obtained from the best and worst lands under cultivation; and if, by admitting foreign corn duty free, bad land should be thrown out of cultivation, the rent of the landlords would be reduced, and their relative situation lowered. Although, therefore, it is not necessary for the protection of the cultivators that any countervailing duty should be laid on raw produce imported from abroad; still, if it be really true that higher duties are laid on the raw produce raised at home than on manufactured goods, justice to the landlords requires that a duty should be laid on all foreign raw produce equivalent to the excess of duty affecting home produce. Such a duty, by fitting all classes equally to withstand foreign competition, will preserve them in the same relative situation after the opening of the ports as previously; and will treat all parties, as they ever ought to be treated, with the same equal and impartial justice.
To whatever extent a countervailing duty might be laid on a foreign commodity, it would be proper to give the home producers of the same commodity an equal, or nearly equal drawback. If the home producers were refused such a drawback, they might say, "Before your duty, and before the price of our produce was raised in consequence of it, we could compete with the foreign grower in foreign markets; by making the remunerating price of our corn higher, you have deprived us of that advantage, therefore give us a drawback equal to the duty, and you, in every respect, restore us to the position, both as it regards our own countrymen, as producers of other
commodities less heavily taxed, and foreign growers of raw produce, in which we were before placed." On every principle of justice, says Mr Ricardo, and consistently with the best interests of the country, this demand should be acceded to. (On Protection to Agriculture, p. 16.)
Mr Ricardo thinks that the tithes and other taxes exclusively affecting raw produce, over those affecting manufactured goods, may be taken at about 10s. a quarter; and he therefore proposes that foreign corn should be freely admitted on paying this duty, and that a drawback of 7s. should be allowed on exportation. "The duty of 10s. a quarter is, I am sure, rather too high as a countervailing duty for the peculiar taxes which are imposed on the corn-grower, over and above those which are imposed on the other classes of producers in the country; but I would rather err on the side of a liberal allowance than of a scanty one; and it is for this reason that I do not propose to allow a drawback quite equal to the duty." (Ibid. p. 80.)
The necessity of imposing this countervailing duty, originating, as it almost entirely does, in the imposition of tithes, affords another and a very powerful argument in favour of their abolition or commutation. Were tithes abolished, the protecting duty proposed by Mr Ricardo might be reduced to 3s. or 4s. a quarter, and the drawback to 2s. or 2s. 6d.
Taxes on raw produce, by raising the price of the articles required for the food of the labourer, necessarily raise wages and lower profits. Such taxes, therefore, fall with double weight on the capitalists; affecting them both as employers of labour, and as consumers. Indeed, the principal disadvantage of taxes on raw produce consists in their tendency to lower profits. "With a permanently high price of corn," says Mr Ricardo, "proportional wages would be high; and, as commodities would not rise on account of the rise of wages, profits would necessarily fall. If goods, worth L.1000, require, at one time, labour which cost L.800, and, at another time, the price of the same quantity of labour is raised to L.900, profits will fall from L.200 to L.100. They will fall not in one trade only, but in all. High wages equally affect the profits of the farmer, the manufacturer, and the merchant; nor is there any other way of keeping profits up than by keeping wages down. In this view of the law of profits, it is at once seen how important it is that so essential a necessary as corn, which so powerfully affects wages, should be sold at a low price; and how injurious it must be to the community generally, that, by prohibitions against importation, we should be driven to the cultivation of our poorer lands to feed our increasing population."
4. Custom Duties, or Duties on the Importation and Exportation of Commodities.—These, like all other duties, are paid by the consumers of the com-
modities on which they are laid. When a government lays a duty on the foreign commodities which enter its ports, the duty falls entirely on its own subjects who purchase such commodities; for the foreigners would cease supplying their markets with them, if they did not get the full price of the commodities exclusive of the tax; and, for the same reason, when a government lays a duty on the commodities which its subjects are about to export, the duty does not fall on them, but on the foreigners by whom they are bought. If, therefore, it were possible for a country to raise a sufficient revenue by laying duties on exported commodities, such revenue would be wholly derived from others, and it would itself be entirely relieved from the burden of taxation; except in so far as duties might have been imposed by foreigners on the commodities it imports from them! Care, however, must be taken in imposing duties on exportation, not to lay them on such commodities as can be produced at nearly the same cost by foreigners, for the effect of the duty would then be to put an entire stop to their exportation, by causing the market to be supplied by others. But when a country possesses any exclusive, natural, or acquired advantage, in the production of commodities, a duty on their exportation is really the most unexceptionable of all taxes. Such a duty would not fall upon itself, but upon its foreign customers; and if it were not carried so high as to balance the superior facilities of production, it would have only a very slight tendency to diminish the demand for the taxed articles. If the Chinese chose to act on this principle, they might derive a very considerable revenue from a duty on exported teas, which would have to be entirely paid by the English and other foreigners who buy them. And there is perhaps no country which does not possess some commodity demanded by foreigners that might not be advantageously charged with a moderate duty on exportation. The coal and tin, and probably also some species of the manufactured goods of Great Britain, seem to be in this predicament.
It was the great object of the professors of the mercantile system of political economy to facilitate the exportation of commodities of domestic growth, and to fetter and restrict the importation of those produced abroad; and it is to the prevalence of this system in modern Europe, and its influence on financial legislation, that we are to ascribe the almost total exemption of exported commodities from duties, and the ruinous extent to which they have been heaped on those that are imported.
Duties on imports and exports have been levied in almost every country which had any foreign commerce. The Athenians laid a tax of a fifth on the corn and other merchandise imported from foreign countries, and also on several of the commodities exported from Attica.* The portoria,† or customs payable on the commodities imported into, and exported
* Anacharsis's Travels, IV. p. 375, Eng. Trans. The quantity of corn usually imported from the countries on the Euxine into Athens amounted to about 400,000 medimni. See Clarke On the Connection between the Roman and English Coins, p. 58.
† Huic vero proprie vectigalis denominatio convenit quippe pro vehendis mercibus (unde vectigal), solito. Burman, De Vectigalibus Pop. Rom. cap. 5.
from, the different ports in the Roman empire, formed a very ancient and important part of the public revenue. They were imposed, as Tacitus has observed, when the spirit of liberty ran highest among the people. A consulibus et tribunis plebis institutæ, acriter etiam populi Romani tum libertate. (Annal. lib. 13, cap. 50.) The rates at which they were charged were fluctuating and various, and little is now known respecting them. Cicero informs us (Cic. in II. Ver. cap. 75), that the duties on corn exported from the ports of Sicily were, in his time, 5 per cent. Under the Imperial Government the amount of the portoria depended as much on the caprice of the Prince as on the real exigencies of the state. Though sometimes diminished, they were never entirely remitted, and were much more frequently enlarged. Under the Byzantine Emperors they were as high as 12½ per cent. (Burman, De Vectigalibus Pop. Rom. cap. 5, passim.)
Customs seem to have existed in England before the Conquest. But the King's first claim to them was established by statute of the 3d Edward I. The inconveniences arising from the multiplicity of the various separate acts relative to the customs, caused Mr Pitt to introduce a bill, in 1787, for their consolidation. This bill was passed into a law, and several similar consolidations have since been effected. The last was by a statute passed in 1819. To this statute are subjoined tables, containing lists, ranged in alphabetical order, of the various articles of import and export, with the duties payable on each, and the drawbacks and bounties allowed on the exportation of particular sorts of British goods.
5. Duties on the Coinage of Gold and Silver.—For an account of the incidence and effect of these duties, the reader is referred to the article MONEY in this Supplement, cap. Seignorage.
6. Stamp and Legacy Duties.—Stamp duties are duties laid on the paper or parchment, on which certain deeds, contracts, legal proceedings, receipts, acquittances, &c. are written. They are called stamp duties, from the paper being impressed with a public stamp, stating the amount of the duty. The ultimate incidence of these duties varies according to the nature of the deed or writing, for which it is necessary to use stamped paper. The duties payable on the sale of land, or on the paper used in its conveyance from one party to another, commonly fall on the seller. This arises, as Dr Smith has observed, from the circumstance of "the seller being almost always under the necessity of selling, which forces him to take such a price as he can get. The buyer is scarce ever under the necessity of buying; he 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." (III. p. 318.) It is ob-
vious that the same reasoning must hold in the case of the duties chargeable on the granting of mortgages; and that they will commonly fall on the borrower or poorer party.
This, however, is not the only objection to the imposition of duties on the transference of property. Both M. Say and Mr Ricardo have observed, that the tendency of such duties is to prevent property from coming into the hands of those who would use it most advantageously; and consequently to prevent the national capital from being distributed in the best way for the community. For the general prosperity, there cannot be too much facility given to the conveyance and exchange of all kinds of property, as it is by such means that capital of every species is likely to find its way into the hands of those who will best employ it in increasing the productions of the country. "Why," asks M. Say, "does an individual wish to sell his land? it is because he has another employment in view in which his funds will be more productive. Why does another wish to purchase this same land? it is to employ a capital which brings him too little, which was unemployed, or the use of which he thinks susceptible of improvement. This exchange will increase the general income, since it increases the income of these parties. But if the charges are so exorbitant as to prevent the exchange, they are an obstacle to this increase of the general income."
Taxes on law proceedings fall upon the suitors; and consequently operate as a check to prevent an injured party from seeking redress in a court of justice. The impolicy, hardship, and injustice of such taxes, have been admirably exposed by Mr Bentham, in his Protest against Law Taxes.
Stamp duties, on the voluntary sale of all those articles which are the produce of human industry, fall, like all other taxes on such articles, wholly on the consumer; for, unless such were the case, the articles would not be offered for sale, subsequently to the imposition of the duties. Thus, the duties on cards and dice, on advertisements, newspapers, &c. are all paid by those who use them. Such, too, is the case with the stamp duties, payable on licences to retail any species of goods, or to exercise any profession. The taxed party invariably adds as much to the price of the articles in which he deals, or of the services which he performs, as is sufficient to indemnify him for the tax.
Stamp duties were first levied in Holland. Most of the accustomed methods of taxation having been resorted to, the Republic, in order to provide additional funds for carrying on her contest with the Spanish monarchy, offered a considerable reward to any one who should devise the best new tax! Among many other taxes, that of the vectigal char-tæ, or stamp duty, was suggested; and having been approved of, it was introduced by an Ordinance issued in 1624, setting forth its necessity, and the benefits which it was supposed would result from its imposition. † Since that period, stamp duties have
* Ricardo, Principles, &c. p. 167. 3d Ed. and Say, Traité d'Économie Politique, Tome II. p. 351.
† Beckman's History of Inventions, Vol. I. p. 379. Eng. Trans.
Stamp and Legacy Duties. become almost universal, and now form a very prominent branch of the revenue of almost every country; affording a striking example of the justice of Dr Smith's remark, that "There is no art which one government sooner learns of another, than that of draining money from the pockets of the people." (III. p. 317.)
Stamp duties were introduced into England in 1671, by a statute entitled, "An act for laying impositions on proceedings at law." The duties were at first granted for only nine years, and were afterwards continued for three years more, when they were allowed to expire. They were again revived in 1693, and have since been gradually and greatly increased.
Legacy Duties in Rome. Legacy Duties, or duties on the transference of property from the dead to the living, are now a very common species of tax. The vicesima hereditatum, or the twentieth penny of inheritances, imposed by Augustus on the Romans, is the earliest example of a tax on successions. Dion Cassius (lib. 55) informs us, that this duty was laid on all successions, legacies, and donations in case of death, except upon those to the nearest relations and to the poor. Pliny has given some of the reasons for this exception; in speaking of the Vicesima, he calls it tributum tolerabile et facile hæredibus duntaxat extraneis, domesticis grave. And a little after he adds, Itaque illis (that is strangers) irrogatum, his (that is near relations) remissum, videlicet, quod manifestum erat, quanto cum dolore laturi, seu potius non laturi homines essent, distringi aliquid et abradi bonis, quæ sanguine, gentilitate, sacrorum denique societate meruissent, quæque nunquam ut aliena et speranda, sed ut sua semperque possessa, ac deinceps proximo cuique transmittenda, cepissent. (Panegyricus, cap. 37.) In addition to these very cogent reasons for exempting the successions of near relations from the vicesima, it may be observed, that the death of a father is seldom attended with any increase, and frequently with a considerable diminution, of revenue to such of his children as live in the same house with him; and when this is the case, the burdening of his inheritance with a tax must plainly be a very galling and cruel aggravation of their loss. But, if taxes on successions are always paid with very great reluctance by the children and immediate relations of the deceased, it is quite otherwise when they fall to distant relations or strangers. Those on whom an unexpected or remote inheritance devolves, are glad to accept it on any condition; and uniformly pay such moderate duties as may be laid on it with greater good will than any other impost whatever!
In England. In Great Britain, a duty of one per cent. is laid on all successions devolving either to the children, or to any lineal descendant of the children of the deceased, or to his father or mother, or to any of his lineal ancestors; a duty of three per cent. is charged on successions devolving to brothers and sisters; of four per cent. on those devolving to cou-
sins; and of ten per cent. on those devolving to strangers. Exclusive of this, a farther duty, varying according to the amount of the property left by the deceased, is also charged on the probates of all wills, without regard to the propinquity of the successors. This duty amounts, at present, to L. 11 on a property worth from L. 450 to L. 600; to L. 22 on a property worth from L. 800 to L. 1000; and to L. 180 on a property worth from L. 8000 to L. 10,000, increasing according to the farther increase of the property. This tax presses more severely on lineal successors, and is more objected to by them than the legacy duty.
Stamp and Legacy Duties. The great objection to taxes on successions, or on transference of property from the dead to the living, consists in the circumstance of their falling wholly on capital, without occasioning any effort to replace it, either by increased exertion or economy. If a legacy of L. 1000 be subject to a tax of L. 100, the legatee considers his legacy as only L. 900, and feels no particular inclination to save the L. 100 from his expenditure; whereas, had he received the whole L. 1000, and been required to pay L. 100 in taxes on income or commodities, the desire to preserve his capital unimpaired would have prompted him to endeavour to defray the tax by increased industry and economy. The real advantage of the legacy duties consists in the facility with which they are collected; for by tending directly and necessarily to diminish capital, they are, in most other respects, extremely injurious.
Postage of Letters. The conveyance of letters by post has, in almost all countries, been conducted by the agents of government; and it is one of the few industrious undertakings which appear to be better managed by them, than they could be by private individuals. This species of conveyance was originally established, and kept up by the Roman Emperors, for the safe, regular, and speedy transmission of the public dispatches to the most remote parts of their dominions; and such was also the purpose for which posts were first established in modern Europe, by Louis XI. Subsequently, however, private individuals were allowed to avail themselves of this institution, for the conveyance of their letters; and governments, by imposing higher duties, or rates of postage, on the letters and packages sent through the post-office than are sufficient to defray the expence of the establishment, have rendered it productive of a considerable revenue.* Nor, while the rates of postage are confined within reasonable limits, is there perhaps a more eligible species of tax. The English post-office was placed on nearly its present footing in 1649, by the exertions of Mr Edmund Prideaux, Attorney-General to the Commonwealth. (See Blackstone's Commentaries, I. p. 321.)
Postage of Letters. The limits within which this article must be confined will not allow us to enter at greater length into the inquiry concerning the incidence of taxes on commodities. We shall, therefore, proceed briefly to investigate their capacity to produce a revenue.
* Bergier, Histoire des Grands Chemins de l'Empire Romain, I. p. 199.
SECT. III.—Circumstances which determine the extent to which Taxes ought to be laid on Commodities—Causes of Smuggling—Means by which it may be prevented.
With regard to the capacity of a tax on a commodity to raise a revenue, it depends, first, on the nature and extent of the demand for the commodity; and, second, on the means of preventing its being smuggled. Every tax, by raising the price of the commodity on which it is laid, has a tendency to bring it within the command of a smaller number of purchasers, and to lessen its consumption. An individual who might be able and disposed to pay 1s. a bottle of duty on wine, might neither have the means nor the inclination to pay 2s. or 3s.; and instead of being augmented, the revenue might be diminished by such an increase of duty. And hence, whenever the duties on commodities are raised beyond a certain limit—a limit, however, which it is impossible to define, and which must necessarily vary according to the nature of the commodity on which the duties are laid, and the varying tastes and circumstances of society—their effect is to depress consumption to such an extent, as to render them less productive than if they had been lower.
Variations in the amount of the duties affecting commodities have exactly the same effect on their price, and consequently on their consumption, as corresponding variations in the cost of their production. But it is clear that any reduction in the price of commodities, whose natural cost is very considerable, and which can, therefore, be used only by the rich, could not have so powerful an effect, in increasing consumption, as would follow the same proportional reduction in the price of easily produced commodities in general demand. A reduction of 50 per cent. from the price of coaches would not add greatly to the demand for them; for, notwithstanding this reduction, they would still be luxuries, for which none but the rich could afford to pay; whereas, a reduction of 50 per cent. from the price of whisky, gin, beer, tea, sugar, or any article in general request, would extend the demand for it in a much greater ratio. The reason is plain:—The poorer classes form by far the most numerous portion of society; and as such commodities are even now partially used by them, a fall of 50 per cent. in their price would bring them fully within their command, and would thereby add prodigiously to their consumption. The truth of this observation may be strikingly exemplified by a reference to the case of cotton goods. At the Accession of his late Majesty, in 1760, the price of cottons, owing to the difficulty of producing them, was extremely high; and the value of the manufactured cottons annually brought to market did not exceed £200,000. But thanks to the genius and inventions of Hargreaves, Watt, Arkwright, Crompton, and others, the price of cottons has been so far sunk, as to bring them within reach of the poorest individual; and yet, such has been the vast increase of demand, that, notwithstanding this reduction of price, the value of the cottons annually manufactured in Great Britain, and either disposed of at home, or sent abroad, a-
mounts, according to the very lowest estimate, to the amazing sum of FORTY MILLIONS! It is obvious, however, that if cottons had been loaded with high duties; and if the same reduction in them, which has been brought about by the improvement in machinery, had been brought about by a reduction of the duties affecting them, precisely the same effects would have followed. The demand would have equally increased; and the greater consumption of the low taxed articles would have rendered the reduced duties more productive than the higher. Similar effects have uniformly followed from similar causes: low duties on commodities in general demand being invariably found to be more productive than when they are carried to a greater height—and more productive than high duties on commodities used only by the rich.
Besides diminishing the revenue by diminishing consumption, oppressively high duties tend to diminish it by encouraging and promoting the ruinous destructive trade of smuggling. The risk of being detected in the smuggling of commodities, under any system of fiscal regulations, may always be valued at a certain average rate; and whenever the duties exceed this rate, smuggling will be immediately practised. Now, there are plainly but two ways of checking this nefarious practice—either the temptation to smuggle must be diminished by lowering the duties, or the difficulties in the way of smuggling must be increased. The first is obviously the most natural and efficient method of effecting the object in view; but the second has been most generally resorted to. In the great majority of cases, governments have attempted to put down smuggling, without reducing the duties, by establishing a more vigilant system of collection, and by increasing the number and severity of the penalties affecting the smuggler. As might have been expected, these attempts have, in the great majority of cases, proved signal unsuccessful. And it has been, almost invariably, found that no vigilance on the part of the revenue officers, and no severity of punishment, can prevent the smuggling of those commodities which are loaded with oppressive duties. The smuggler is generally a popular character; and though we have no desire to become the apologists of those who endeavour to defraud the revenue, and to injure the fair trader, it is idle to expect that the bulk of society will ever be brought to consider that those who furnish them with cheap tea, gin, whisky, brandy, &c. are guilty of any very heinous offence.
"To pretend," says Dr Smith, "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 any body, seems 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: and from being at first, perhaps, rather imprudent than criminal, he at last too often becomes one of the hardest and most determined violators of the laws of society."—(III. p. 378. See also Montesquieu, Esprit des Loix, liv. 13, cap. 8.)
To create, by means of high duties, an overwhelming temptation to indulge in crime, and then to punish men for indulging in it, is a proceeding completely subversive of every principle of justice. It revolts the natural feelings of the people, and teaches them to feel an interest in the worst characters—for such smugglers generally are—to espouse their cause, and to avenge their wrongs. A punishment which is not proportioned to the offence, and which does not carry the sanction of opinion along with it, can never be productive of any good effect. The true way to put down smuggling is to render it unprofitable—to diminish the temptation to engage in it; and this is to be done, not by surrounding the coasts with cordons of troops, by the multiplication of oaths and penalties, and making the country the theatre of ferocious and bloody contests in the field, and of perjury and chicanery in the courts of law, but simply and exclusively by reducing the duties on the smuggled commodities. It is in this, and in this only, that we must seek for an effectual check to smuggling. Whenever the profits of the fair trader become nearly equal to those of the smuggler, the latter is forced to abandon his hazardous profession. But so long as oppressively high duties are kept up, or, which is really the same thing, so long as a high bounty is held out to encourage the adventurous, the needy, and the profligate, to enter on this career, we may be assured, that an army of excise officers, backed by the utmost severity of the revenue laws, will be insufficient to hinder them. The truth is, that the too great severity of these laws prevents their execution. "It stimulates the trader to corrupt the officer to conceal a fraud; and it influences the officer to overlook what he would otherwise discover." (Hamilton On the Principles of Taxation, p. 244.)
Heavy duties on any description of commodities will occasion smuggling; but, it is chiefly caused by their being laid on commodities in general demand, whose natural or necessary price is not very considerable. It is commonly said, when a proposal is made for laying a heavy duty on a low priced article, that its lowness of price fits it to bear such a duty, and that, notwithstanding its imposition, it may still be brought to market at a sufficiently moderate rate. But the encouragement to smuggling depends more on the proportion which the duty bears to the price of the commodity, than on the circumstance of the duty being absolutely high or low. To illustrate this principle, let us suppose, that a taxed commodity, as soap, costs, exclusive of duty, 10d. a pound. If a duty of 1d. per lib. were laid on it, the inducement to smuggle would be equal to 10 per cent. of the value of the article, and if the duty were 2d. the inducement would be 20 per cent., and so on. Now, let us suppose, that the cost of producing the soap, or its natural price, falls to 5d.: a duty of 1d. per lib. would then make an inducement to smuggle of 20
per cent. of its value, and a duty of 2d. would make an inducement of no less than 40 per cent.! And hence, it is obvious, that, in order to prevent smuggling, a system should be adopted, precisely the reverse of that which is generally followed in the imposition of taxes. Instead of making duties to vary inversely as the price of commodities, or of raising them when the natural prices of the taxed articles fall, and reducing them when they rise, they ought to be made to vary directly as these prices—to rise when they rise, and to fall when they fall. Disproportionally heavy taxes are the great cause of smuggling; and they have the farther and most injurious effect of preventing its being corrected by its natural and proper punishment, the confiscation of the commodities. Recourse is, in consequence, had to extraordinary pains and penalties, and all proportion of punishment being done away, "men who," as Montesquieu observes, "can hardly be considered as culpable, must be punished as atrocious criminals." (Esprit des Loix, liv. 13, cap. 8.)
Certain commodities, from their greater bulk, from their susceptibility of being impressed with a permanent stamp, or from any other cause, are less liable to be smuggled than others, and may, therefore, be loaded with comparatively higher duties. But as a general rule, it cannot be doubted, that, in order to prevent fraud, the duties should always be proportioned to the cost of the articles on which they are laid.
SECT. IV.—Comparative Productiveness of High and Low Taxes.
The arguments adduced in the foregoing section are sufficient to establish the superior productiveness of moderate taxes. But the subject deserves to be treated at greater length: and as the history of taxation, both in this and other countries, furnishes numerous direct, conclusive, and well established proofs of the same principle, we shall take this opportunity to bring a few of them under the notice of our readers. We shall class them under two different heads: the first, consisting of instances wherein a reduction of duty has been followed by an increase of revenue; and the second, of instances wherein an increase of duties has been followed by a diminution of revenue.
1. The effects produced by the reduction of the History of tea duties, in 1745 and 1784, are among the most striking examples of the superior productiveness of Duties. low duties on articles in general demand. Previously to 1745, the excise duty of 4s. a pound on tea yielded, at an average, about L. 150,000 a year; which, had there been no smuggling or adulteration, would have shown that the consumption was equal to about 750,000 lbs. But it was well known that smuggling was then carried to a very great height, and that the real consumption of tea was much greater than the apparent consumption. To put a stop to this clandestine importation, a bill was introduced into Parliament in 1745, in pursuance of the recommendation of a Committee of the House of Commons, and passed into a law, by which the excise duty of 4s. was reduced to 1s., and 25 per cent. ad valorem. This measure was signally successful.
Comparative Productiveness of High and Low Taxes.
In 1746, the year immediately subsequent to the reduction, the sales of tea for home consumption amounted to above two MILLIONS of pounds weight, and the revenue was increased to L. 243,309! But to set the effects of this wise and salutary measure in a still clearer point of view, we shall subjoin an account of the net produce of the tea duties from 1743 to 1748, both inclusive.
| In 1743 it amounted to | L. 151,959 |
| 1744 | — — 147,065 |
| 1745 | — — 145,630 |
| 1746 (Duties reduced) | 243,309 |
| 1747 | — — 257,937 |
| 1748 | — — 303,545.* |
But notwithstanding this unanswerable demonstration of the superior productiveness of low duties, they were again increased in 1748; and fluctuated, between that epoch and 1784, from 64 to 119 per cent. ad valorem. The effects which followed this inordinate extension of the duties are equally instructive with those which followed their reduction. The revenue was not increased in any thing like a corresponding proportion; and as the use of tea had become general, smuggling was carried to an infinitely greater extent than at any former period. In the nine years preceding 1780, above 118 millions of pounds weight of tea were exported from China to Europe, in ships belonging to the Continent, and about 50 millions of pounds in ships belonging to England. But from the best information attainable, it appears that the real consumption was almost exactly the reverse of the quantities imported; and that, while the consumption of the British dominions amounted to above 13 millions of pounds, the consumption of the Continent did not exceed 5½ millions! If this statement be nearly correct, it follows that an annual supply of about eight millions of pounds must have been clandestinely imported into this country, in defiance of the utmost vigilance on the part of the revenue officers. But this was not the worst effect of the high duties; for many of the retail merchants, who purchased tea at the East India Company's sales, being in a great measure beat out of the market, were, in order to put themselves in a condition to stand the competition of the smugglers, tempted to adulterate their teas, by mixing them with sloe and ash leaves.† At length, in 1784, ministers, after having in vain tried every other resource for the suppression of smuggling, resolved to follow the precedent of 1745, and reduced the duty on tea from 119 to 12½ per cent. This measure was as successful as the former. Smuggling and the practice of adulteration were immediately put an end to. The following official statement shows, that the quantity of tea sold by the East India Company was about tripled in the course of the two years immediately following the reduction!
| In 1781, the quantity of tea sold at the East India Company's sales amounted to | 5,023,419 lbs. | Comparative Productiveness of High and Low Taxes. |
| 1782 | — — 6,283,664 | |
| 1783 | — — 5,857,883 | |
| 1784 (Duties reduced) | 10,148,257 | |
| 1785 | — — 16,307,433 | |
| 1786 | — — 15,093,952 | |
| 1787 | — — 16,692,426‡ |
While the quantity of tea sold at the Company's sales was thus rapidly augmenting in consequence of the reduction of the duty, the quantity of tea imported into the Continent from China, which had, in the year 1784, amounted to 19,027,300 lbs., declined with still greater rapidity, and, in 1791, was reduced to only 2,291,500 lbs.§
The duties on tea, on an average of the five or six years preceding 1784, produced about L. 700,000 a year. And, at the same time that Parliament reduced them to 12½ per cent., they laid an additional duty on windows, estimated to produce L. 600,000, as a commutation tax, to compensate the deficiency which it was supposed would take place to that extent in the revenue formerly derived from tea. But instead of the duties falling off in the proportion of 119 to 12½, or from L. 700,000 to L. 73,000, owing to the increased consumption, they only fell off in the proportion of about two to one, or from L. 700,000 to L. 340,000! The commutation act has been always regarded, and with justice, as one of the most successful financial measures adopted in the course of Mr Pitt's administration. The plan was generally understood, at the time, to have been suggested by Mr Richardson, Accountant-General of the East India Company. But the popularity of the measure was so great as to induce several other individuals to claim this honour, and even to occasion some hot disputes on the subject in the House of Commons. In point of fact, however, the merit of having first suggested the plan did not really belong either to Mr Richardson, or to any of those who then claimed it; and such of our readers as will take the trouble to look into a pamphlet of Sir Matthew Decker's (Serious Considerations on the Present High Duties), published in 1743, will find that the measure adopted in 1784 had been strenuously recommended forty years before.
But the principle of the commutation act, and the striking advantage that had resulted from the reduction of the duty, were soon lost sight of. In 1795, the duty was increased to 25 per cent.; and after successive augmentations in 1797, 1798, 1800, and 1803, it was raised, in 1806, to 96 per cent. ad valorem, at which it continued till 1819, when it was raised to 100 per cent. Now, although it cannot be disputed that the duty on tea yields, at present, a vastly greater revenue than was derived from it in 1795, there are the strongest possible reasons for believing that the revenue would have been considerably greater,
* Hamilton's Principles of Taxation, Appendix, No. 19; and Postlethwaite's History of the Revenue, p. 293.
† Macpherson's Commerce with India, p. 208. Milburn's Oriental Commerce, Vol. II. p. 540.
‡ Macpherson's Commerce with India, p. 416. § Ibid. p. 210.
Comparative Productiveness of High and Low Taxes. had the duty not been carried so high. The quantity of tea sold by the East India Company in 1795 and 1796 amounted to very nearly 20 millions of pounds a year, and in 1799, to very nearly 25 millions of pounds (24,853,508). Since then, there has been no increase. For, according to the account given in the Lords' Report on the East India Trade (p. 334), the average quantity of tea sold at the Company's sales in 1818, 1819, and 1820, is rather under 25 millions of pounds a year. But the population of Great Britain, which is ascertained by the late census to amount to 14,379,000, amounted to only 10,817,000 in 1800; and had there been no diminution of the individual consumption of the Company's tea in the interval between these enumerations, their sales ought plainly to have been increased in the proportion of 10,817 to 14,379, or from 25 to 33 millions of pounds. Nor is this all. The sales made by the East India Company supply the markets of Ireland as well as Britain; and, if we take into account the extraordinary increase of population in that part of the empire, the diminution of consumption will appear still more striking. But, notwithstanding the Company's sales have thus continued stationary since 1795, it is, we believe, pretty generally admitted, that the individual consumption of tea, or rather of the compound sold under its name, has not been considerably diminished in the towns, while it has increased greatly in the country since that epoch. It is plain, however, that this increased supply can have been obtained only by clandestine importation, or adulteration; and, as there was no opportunity of smuggling during the latter part of the war, and as the powerful force that has been employed in the preventive service since the return of peace, must have rendered it extremely difficult to import any considerable quantity of foreign tea, we should be disposed to conclude, that the vacuum, caused by the high duties, has been chiefly supplied by adulteration,—and such, we find, is really the case. There is, indeed, every reason to think that the practice of adulterating by the intermixture of ash and sloe leaves, and by drying tea that has been already infused, and mixing it with fresh tea, is carried to a greater extent at this moment than in 1784. In proof of this, we may mention, that, in London, in 1818, upwards of twenty grocers were convicted of having spurious tea in their possession. And it is worthy of remark, that in the case of the King v. Owen, the counsel for the defendant declared, that the practice was so general, that his client was not aware of the existence of any law by which it was forbidden! Since then, several additional convictions have taken place; but it is not in the nature of things that the evil can be materially diminished by such means. If we are really desirous of putting a stop to the practice of adulteration, we must follow Mr Pitt's example, and take 50 or 60 per cent. from the present duties. The experience of the effects of the reductions in 1745 and 1784, enable us confidently to predict, that such
a reduction would not be followed by any corresponding diminution of revenue; while, besides putting an instant stop to smuggling and adulteration, it would be a considerable boon to the lower classes, to whom tea is now become an article of prime necessity, and would powerfully contribute to extend our commerce with China.
We have been thus particular in noticing the variations in the tea duties, because the Company's sales afford the means of ascertaining the precise effect of their increase and diminution on consumption. The results are both curious and instructive; and would of themselves be sufficient to establish the truth of Dr Swift's observation, that, in the arithmetic of the Customs, two and two do not always make four, but sometimes only one!
The narrow and contracted policy on which most ministers have generally acted, puts it out of our power to refer to many such conclusive instances as the reduction of the tea duties in 1745 and 1784, to prove the superior productiveness of diminished taxation; there are, however, one or two others which deserve to be pointed out. In 1742, the high prohibitory duties upon spirituous liquors, and upon licences for retailing the same, were abolished, and such moderate duties imposed, to commence after Lady Day 1743, as were expected to increase the revenue by increasing the legal consumption of spirits. This measure was vehemently opposed by the Bishops; but their opposition was ineffectual; and the increase of the duties, and diminution of smuggling which followed, proved that the measure was alike advantageous to the revenue and to the morals of the people. (History of our Debts and Taxes, Part IV. p. 110.) In 1787, Mr Pitt reduced the duty on wine and spirits 50 per cent. and the revenue was, notwithstanding, considerably augmented. Perhaps, however, the progress of the duties on coffee illustrates this principle in a still more striking manner. In 1805, they were raised a third, and that year their produce fell off an eighth instead of increasing a third; in 1806, they had increased only a sixteenth, so that the consumption had diminished above a fourth. But it was at length found that the tax had been overdone, and it was lowered from 2s. to 7d. the cwt. Mark the immediate effects of this step. The average annual produce of the high duty for the three years, previous to 1808, when it was lowered, was L.166,000; and the average annual produce of the reduced duty for the next three years was L.195,000—a proof that the consumption had been increased in a quadruple proportion.*
The history of other countries abounds with equally conclusive examples of the superior productiveness of moderate duties. In 1775, M. Turgot deducted a half from the customs and other duties chargeable on the fish sold in the Paris market; but, notwithstanding this reduction, the amount of the duties collected was not diminished. The demand for fish must, therefore, have been doubled, in con-
* Mr Brougham's Speech on the State of the Nation in 1817, p. 57.
Comparative sequence of the inhabitants being enabled to supply themselves, at a comparatively cheap rate, with a nutritious and agreeable food.
In 1813, all sugar imported into the French empire paid a duty of one franc sixty cent. the livre or pound. The quantity imported that year amounted to about fourteen millions of pounds, which, as France, and the countries then incorporated with her, contained about forty-two millions of inhabitants, gives the third part of a pound weight to each. In 1814, this exorbitant duty was reduced to about a fifth part, or to thirty cent. the pound; and, though the population of France had now been reduced from forty-two to about twenty-eight millions, the average annual importations of 1814 and 1815 amounted to forty-four millions of pounds, being upwards of a pound and a half to each individual; or about five times as much as the consumption had amounted to under the high duty. In consequence of this increase of consumption, the low duty yielded very near as large a revenue as the high duties; and, since 1815, both consumption and revenue have continued to increase. (Richesse des Nations, par Garnier, V. p. 304, 2de Ed.)
Ustariz gives a variety of instructive details respecting the disastrous effects which the levying of certain taxes have had on the industry of the Spaniards, and of the advantage which has resulted from the repeal and modification of others. We shall give a single example. Valencia, he tells us, though very barren of grain and flocks, and not equal in extent to two-thirds of Arragon, paid a much larger revenue to the Royal Treasury. He says, that this was owing to the comparatively flourishing state of commerce and manufactures in Valencia; and he then adds—"This increase and improvement in manufactures and commerce is ascribed to the equitable and kind treatment the weavers receive in that province, and to his Majesty's goodness in reducing the excessive taxes which were charged upon flesh meat and other provisions; and his taking off wholly that which was laid on bread in ancient times; as also, the imposts known by the name of ancient duties and generalities. These duties were partly replaced by others, but in such a manner that they were rendered much lighter, the people in general eased, and the royal revenue improved."
2. But the superior productiveness of low duties on articles in general request may be equally shown from the consequences of the attempts to increase them beyond their proper limits. The history of the sugar duties is, in this respect, extremely important. In the three years from 1803 to 1806, the former duties were increased about 50 per cent. Now, the average produce of the old duties, for the three years before that rise, was L. 2,778,000. The produce of 1804, after they had been raised 20 per cent., was not L. 3,333,000, as it ought to have been, had the
Effects of the Increase of the Sugar Duties.
consumption remained the same, but only L. 2,537,000, being L. 241,000 less than the produce of the low duty; and the average produce of 1806 and 1807, after the whole 50 per cent. was added, was only L. 3,133,000, instead of L. 4,167,000; which it should have been had there been no falling off since 1804. Thus, both consumption and revenue declined, in consequence of the increase of duty in 1804; and the consumption has declined, in consequence of the succeeding augmentations, while the revenue has gained very little. The duties on leather, after being stationary for nearly a century, were doubled in 1813. In 1812, the low duties produced L. 394,000; but, instead of being doubled, or of producing L. 788,000, when the tax was doubled, the annual revenue has scarcely ever since exceeded half a million, and has frequently fallen short of that sum.
The duties on foreign wines have been tripled since 1792. The last increase took place in 1815, when L. 30 per ton was added to the former duty on French, and L. 20 to that on Portuguese wine. Now, observe what has been the effect of this increase of duty. In the Second Report of the Lords' Committee on the Silk and Wine Trade (ordered by the House of Commons to be printed, 28th June 1821), a series of accounts are given, showing the quantity of wine imported into Great Britain, and re-exported, for a considerable number of years past, and the amount of the duties. From these accounts, we have drawn up the following Table of the number of tons of wine imported into Britain from 1809 to 1820, both inclusive; the number of tons re-exported during the same period; and the quantity remaining for home consumption.
| Tons imported. | Do. re-exported. | Remains for Home Consumption. | Average annual Consumption during the five years previous to 1815. | |
|---|---|---|---|---|
| 1809 | 49,762 | 14,501 | 35,261 | Tons. 28,489 |
| 1810 | 47,058 | 12,729 | 34,329 | |
| 1811 | 20,787 | 5,928 | 14,859 | |
| 1812 | 35,082 | 6,716 | 28,366 | |
| § 1813 | — | — | — | |
| 1814 | 31,465 | 11,838 | 29,627 | Do. for five years subsequent to 1815. 21,027 |
| 1815 | 30,874 | 5,855 | 25,019 | |
| 1816 | 18,218 | 5,163 | 13,055 | |
| 1817 | 27,073 | 4,457 | 22,616 | |
| 1818 | 35,763 | 4,021 | 31,742 | |
| 1819 | 23,408 | 3,843 | 19,565 | |
| 1820 | 22,782 | 4,625 | 18,157 | |
| Average annual diminution of the consumption of wine for the five years subsequent to 1815, as compared with the five preceding years. | 7,462 | |||
* Say, Traité d'Economie Politique, Tome II. p. 339. Lord Kames, in his Sketches of the History of Man, states, that these duties amounted to 48 per cent. ad valorem. Vol. II. p. 406. Edit. 1788.
† Theory and Practice of Commerce, Vol. II. p. 310. Eng. Trans.
‡ Mr Brougham's Speech on the State of the Nation in 1817, p. 54.
§ The Records for the year 1813 were destroyed by fire.
Thus, it appears, that the increase of the duties on wine in 1815 has occasioned a diminution in the consumption of 7462 tons a year, or of ONE-FOURTH part of the total quantity annually consumed, on an average of the five years preceding the increase. Let us next see whether any augmentation of revenue has taken place to balance this diminution of the comforts of the people, and the loss of the market for the products which were previously exchanged for the wine.
From a Table in the same Report (p. 78), it appears that the produce of the duties of excise on the wines consumed in England from 1810 to 1820, both inclusive, has been as follows:
| Average annual duty for the five years previous to 1815. | ||
|---|---|---|
| 1810 | L. 1,406,417 | L. 1,162,382 |
| 1811 | 1,215,507 | |
| 1812 | 1,065,159 | |
| 1813 | 1,061,604 | |
| 1814 | 1,065,223 | |
| 1815 | 1,277,481 | Do. for the five years subsequent to 1815. |
| 1816 | 943,987 | |
| 1817 | 928,473 | |
| 1818 | 1,195,427 | |
| 1819 | 1,085,500 | |
| 1820 | 949,328 | L. 1,020,540 |
The average drawback, as given in the same Table, for the five years previous to 1815, is L. 63,674; and for the five years subsequent to 1815, L. 48,676; and, deducting these sums from the above, we have L. 1,098,708 for the amount of the average annual excise duty on wine for the five years preceding 1815; and L. 971,867 for the average annual amount of that duty for the five years after it had been increased about 20 per cent.; showing that the revenue, instead of being augmented, has sustained a diminution of L. 126,841 a year by this increase of duty.
The effect of the increase on the Custom duty has been equally striking. The accounts laid before Parliament do not go farther back than 1814; but in that year the low Custom duties amounted to L. 1,061,416. In 1816, the high duties only amounted to L. 780,238; and except in 1818, when they amounted to L. 1,056,894, they have never since reached one million.
It is unnecessary to make any commentary on this decisive statement. The facts we have brought forward prove, beyond all question, that the revenue, the comforts of the people, and the commerce of the country, have all been diminished by this inordinate extension of the duties; and entitle us to conclude, that they would be all increased by their diminution.
There are, perhaps, no better objects of taxation than spirituous and fermented liquors, and none in which the injurious effects of over taxation are more
striking and obvious. They are essentially luxuries; and while moderate duties on them are, in consequence of their being very generally used, exceedingly productive, the increase of price which they occasion has a tendency to limit their consumption by the poor, to whom, when taken in excess, they are extremely pernicious. Few governments, however, have been satisfied with the imposition of moderate duties on spirits; but, partly with the view of increasing the revenue, and partly with the view of placing them beyond the reach of the lower classes, they have almost invariably loaded them with such oppressively high duties as have entirely defeated both objects. The imposition of such duties does not take away the appetite for spirits; and as no vigilance of the officers, or severity of the laws, have been sufficient to secure a monopoly of the market to the legal distillers, the real effect of the high duties has been to throw the supply of a large portion of the demand into the hands of the illicit distiller, and to superadd the crimes and vices of the smuggler to those of the drunkard.
Nowhere, perhaps, have these injurious consequences been more distinctly manifested than in Ireland. In proof of this, we may mention, on the authority of the official statements in the Fifth Report* of the Commissioners of Inquiry into the State of Irish Revenue (p. 19), that in 1811, when the duty on spirits was 2s. 6d. per gallon, duty was paid in Ireland on 6,500,361 gallons; while in 1822, when the duty was 5s. 6d., only 2,950,647 gallons were brought to the charge. The commissioners estimate the annual consumption of spirits in Ireland at about ten millions of gallons; and as scarcely three millions pay duty, it follows that upwards of seven millions are illegally supplied; and "taking one million of gallons as the quantity fraudulently furnished for consumption by the licensed distillers, the produce of the unlicensed stills may be estimated at six millions of gallons!" (p. 8.) It is material, too, to observe, that this extraordinary increase of smuggling took place in defiance of the utmost efforts of the revenue officers, police, and military, to prevent it. The only result of these efforts being the exasperation of the populace, and the committal of atrocities, both by them, and those employed in the collection of the revenue, that are hardly to be matched in the annals of civil warfare. "In Ireland," say the Commissioners, "it will appear, from the evidence annexed to this Report, that parts of the country have been absolutely disorganized, and placed in opposition not only to the civil authority, but to the military force of the Government. The profits to be obtained from the evasion of the law have been such as to encourage numerous individuals to persevere in these desperate pursuits, notwithstanding the risk of property and life with which they have been attended." (p. 1.)†
* Printed, by order of the House of Commons, 30th May 1823.
† The revenue and morals of no country, perhaps, have suffered so much from the injudicious extent to which taxes have been laid on commodities in general request as Ireland. This, however, is a subject on which our limits will not permit us to enter more at large; but our readers will find most of the necessary information in an article on High and Low Taxes in No. LXXII. of the Edinburgh Review.
The too great height to which the duties were carried, and the injudicious mode in which they were charged and collected, produced similar effects in Scotland. The system of illicit distillation made great progress of late years, and had the most injurious influence on the morals and industry of the people in the mountainous districts, where it was principally carried on.
Such having been the effects of their excessive increase, we have great satisfaction in stating, that the duties on both Scotch and Irish spirits have been reduced during the last session of Parliament (sess. 1822—23), from 5s. 6d. per gallon to 2s. 9d. Leave has also been given to use stills of a much smaller size,—a regulation which will have the effect of enabling minor capitalists to engage in the business of distillation, and which, by increasing competition, will tend both to improve the quality and to reduce the cost of the spirits. The country is indebted for this change of system to the recommendations in the excellent Reports of the Commissioners on Irish Revenue. It will certainly go far to suppress smuggling; and there is every reason to expect that the greatly increased consumption of legally distilled spirits, which the reduction of the duties will occasion, will make it have the same beneficial effects on the revenue as the reduction of duties in 1743 and 1787.
In England, the duty on spirits is as high as 10s. 6d. a gallon; and the trade in spirits between it and the other divisions of the empire is prohibited. This system is liable to many objections; but owing to the decided preference given by the lower classes in England to malt liquors over spirits, it has not given so great a stimulus to smuggling and illicit distillation as might have been expected.
The revenue collected within the United Kingdom on spirits distilled from grain, and the number of gallons on which it was paid in the year 1822, were respectively as follows:
| Revenue. | Gallons. | |
|---|---|---|
| England..... | L.2,749,372 | L.5,222,094 |
| Scotland..... | 687,467 | 2,499,880 |
| Ireland..... | 811,428 | 2,950,647 |
| Totals... | L.3,248,267 | L.10,672,621* |
In France, previously to the Revolution, the average annual consumption of salt, in the provinces subjected to the grande gabelle, or high duty on salt, was estimated by M. Necker, who had the best means of coming to a correct conclusion, at 9½ lib. to each individual; and at 18 libs. in the pays redimées, or provinces that had purchased an exemption from the greater part of this hateful tax. (Administration des Finances, Tom. II. p. 12.) It is evident, from this well authenticated statement, that a very great reduction might have been made from the duty paid on the salt consumed in the heavily taxed provinces,
without occasioning any diminution of revenue; while, besides directly increasing the comforts of the people, it would have relieved Government from the necessity of surrounding particular provinces with cordons of troops, and would have put an instant stop to that smuggling of salt, which occasioned the sending of between 3000 and 4000 persons every year either to prison or to the galleys. (Arthur Young's Travels in France, Vol. I. p. 598.)
SECT. V.—Method of Comparing the Amount of Taxation in Different Countries—Circumstances which Depress the Rate of Profit—Its Fall in this Country rather a Consequence of the Corn Laws and of Tithes, than of Taxation.
It has been usual to endeavour to ascertain the relative weight of the public burdens of different countries by comparing them with their population. But this is obviously a most false and erroneous criterion. In proof of this, we may observe, that, if the amount of population in a country were a true test of its capacity to bear taxes, it would follow that Ireland, which has a population of seven millions, could afford to pay three times the amount of the taxes paid by Scotland, which has only a population of two millions. So far, however, from this being the case, the actual revenue of Scotland is very little less than that of Ireland; and yet there is no reason whatever to think that the pressure of taxation is felt more severely here than amongst our neighbours.
The amount of the capital belonging to different countries has been suggested as a test by which to ascertain the relative weight of their burdens. But this would also lead to the most erroneous results; for, it is plain that a small capital in a country where profits are high may be more productive than a large one in a country where profits are low. The market rate of interest, which is always proportional to the customary rate of profit, is at this moment only about 4 or 5 per cent. in England, while it is not less than 8 or 10 per cent. in the United States. One million of capital laid out in America must, therefore, be about as productive, that is, it must yield about as large an annual income as two millions laid out in this country. And, hence it is obvious, that, if taxation, as compared with the amount of capital, were the same in both countries, it would, as compared with the profits on revenue derived from that capital, be about twice as heavy in England as in America.
It is not, therefore, by the amount either of the population or the capital of a country, that its capacity to bear taxes is to be determined. Taxes, as we have already shown, really consist of a portion of the incomes of individuals transferred from the public to the State; and hence, to determine whether they are relatively higher or lower in one country than in another, it is necessary to ascertain the respective incomes of the States to be compared together, the number of their inhabitants, and the amount of their
* Report on Distilleries, p. 1.
Taxation of burdens. Supposing, for example, that the income of different Countries. Great Britain, which has fourteen millions of inhabitants, is three hundred millions of pounds Sterling, which is believed to be very near its actual amount, and that its taxes, including poor rates, tithes, and public burdens of every description, amount to seventy millions, this sum deducted from the former would leave two hundred and thirty millions, which would give a free income of L. 16, 9s. a-year to every individual in the empire: Suppose, now, that the income of France is four hundred and fifty millions, and that the aggregate amount of her taxes, and public burdens of every description, is fifty millions, the four hundred millions of remainder, when divided among a population of thirty millions, would only leave a free income of L. 13, 6s. to each. There is good reason to think, that these estimates are not very wide of the mark: we do not, however, give them as being correct, for in such matters it is impossible to attain to any thing like accuracy; but as illustrations of the method to be followed in comparing the burdens laid on different countries; and as showing that, in proportion to her means of paying, a country with a small population, and a large absolute amount of taxes, may be really less heavily taxed than a country with a much larger population, and a smaller absolute amount of taxes.
Circumstances which have depressed the Rate of Profit. The depression in the rate of profit—a depression which can only proceed either from heavy taxes on the necessaries of life, or from the effects of monopoly enhancing their price, or both—is by far the most unfavourable symptom in the economical situation of this country. The common and ordinary rate of profit is the sum which usually remains to those capitalists who employ their stock in productive businesses, after all their outlays, including a premium for the insurance of the capital itself, are compensated. It is by its amount, therefore, that the productive powers of industry are to be estimated. Wherever the rate of profit is relatively high, as in the United States, there is a proportional power of accumulation; and, provided the right of property be well secured, the capital, and, of course, also the population of the country, increase with comparative rapidity: But in countries such as Holland, where the rate of profit is relatively low, there is but little power of accumulation; and not only is their progress in wealth and population proportionally slow, but there is, besides, a very powerful motive to transmit capital to those countries where it is more productive. It is plainly, therefore, of the utmost consequence that the rate of profit, in every country, should be maintained at as high a level as possible. This, however, can only be effected by allowing the labourer to purchase his food in the cheapest market, and by exempting, as far as it can possibly be done, the necessaries of life from taxation: For we have shown, * that profits always
vary inversely as wages—that they fall when wages rise, and rise when wages fall. Now, as the labourer must always have wherewithal to subsist and continue his race, it is plainly impossible to go on constantly adding to the price of the articles necessary for his subsistence, either by forcing him to purchase in dearer markets, or by loading them with taxes, without, at the same time, raising his wages and depressing profits. It is undoubtedly very difficult to say how much of the decline of the rate of profit in this country is to be ascribed to the effect of taxes laid on the necessaries of life, and how much to the corn-laws and other restrictive regulations. But that these laws must have a powerful influence in this respect is abundantly clear; for, in ordinary years, their effect is to maintain the price of corn in this country at nearly double its elevation in any other country! Tithes also contribute to raise the price of corn; and as corn, though not the sole, is the main regulator of wages, we are inclined to think that it is to the combined operation of the corn-laws and tithes that the decline in the rate of profit in this country is chiefly to be ascribed.
The taxes on tea, sugar, soap, candles, and beer, are those which, with the exception of tithes, fall heaviest on necessaries, and consequently exercise the greatest influence on profits. We think we are entitled to conclude, from the preceding investigations, that a very considerable reduction might be made in the amount of the duties affecting them, without occasioning any decrease, and even with a positive increase, of revenue. At all events, it is clear that the public interests imperiously require that every practical effort should be made to lighten the pressure on the national resources, and to check the efflux of capital to other countries, by adding to the productive powers of industry, or, in other words, by increasing the rate of profit. And this will be most effectually done by making every possible deduction from the taxes affecting necessaries, and by ceasing to bolster up and protect any single species of industry at the expence of the rest.
Tables illustrative of the progress of the public revenue of Great Britain have been given in Postlethwaite's and Sir John Sinclair's Histories of the Revenue, Chalmers's Comparative Estimate, Dr Colquhoun's Treatise on the Wealth and Resources of the British Empire, and a variety of other publications. We subjoin a copy of the Parliamentary paper (No. 157, Session 1822), which gives an account of the gross and net aggregate revenue of the united kingdom for the year ending 5th of January 1822, at the same time that it exhibits the amount of each separate branch of revenue in England, Scotland, and Ireland, and the expences of its collection. (s. s.)
A Return of the Gross and Net Amount of the Revenue of the United Kingdom, in the year ending the 5th January 1822, for England and Wales, Scotland and Ireland; distinguishing each Country, and stating the Amount of the Charges of Management, and the Rate per cent. on the Gross and on the Net Receipt under each distinct Head of Revenue.
| HEADS OF REVENUE. | GROSS REVENUE | NET REVENUE | CHARGES | Rate per Centum | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Accrued | Accrued | of | the Gross | the Net | ||||||||||||
| within the Year. | within the Year. | MANAGEMENT. | Revenue. | Revenue. | ||||||||||||
| L. | s. | d. | L. | s. | d. | L. | s. | d. | L. | s. | d. | L. | s. | d. | ||
| CUSTOMS, | England and Wales | 11,845,789 | 19 | 8½ | 9,068,375 | 13 | 6 | 921,238 | 3 | 2 | 7 | 15 | 6 | 10 | 3 | 2 |
| Scotland | 759,796 | 7 | 9½ | 405,156 | 2 | 11 | 148,042 | 5 | 5 | 19 | 9 | 8 | 36 | 10 | 9 | |
| Ireland | 2,184,118 | 17 | 8½ | 1,586,167 | 9 | 9 | 410,307 | 1 | 10½ | 18 | 15 | 9 | 25 | 17 | 4 | |
| United Kingdom | 14,789,705 | 5 | 2½ | 11,059,699 | 6 | 2 | 1,479,587 | 10 | 5½ | 10 | 0 | 1 | 13 | 7 | 7 | |
| EXCISE, | England and Wales | 27,406,561 | 3 | 9 | 24,822,559 | 11 | 8½ | 964,515 | 19 | 4½ | 3 | 10 | 5 | 3 | 17 | 9 |
| Scotland | 2,408,972 | 0 | 2½ | 2,035,401 | 11 | 7 | 169,403 | 18 | 11½ | 7 | 0 | 8 | 8 | 6 | 5 | |
| Ireland | 1,997,452 | 9 | 9½ | 1,668,004 | 7 | 5½ | 287,048 | 13 | 1 | 14 | 7 | 5 | 17 | 4 | 2 | |
| United Kingdom | 31,812,985 | 13 | 9½ | 28,525,965 | 10 | 9 | 1,420,968 | 11 | 5½ | 4 | 9 | 4 | 4 | 19 | 8 | |
| STAMPS, | England and Wales | 6,146,537 | 5 | 4 | 5,785,708 | 8 | 1½ | 151,225 | 1 | 10½ | 2 | 9 | 2 | 2 | 12 | 3 |
| Scotland | 480,274 | 5 | 1½ | 438,172 | 5 | 7½ | 32,542 | 11 | 3 | 6 | 15 | 6 | 7 | 8 | 6 | |
| Ireland | 452,159 | 2 | 1½ | 398,602 | 3 | 7½ | 42,312 | 13 | 3½ | 9 | 7 | 2 | 10 | 12 | 3 | |
| United Kingdom | 7,078,970 | 12 | 7½ | 6,622,482 | 17 | 4½ | 226,080 | 6 | 5½ | 3 | 3 | 10 | 3 | 8 | 3 | |
| LAND & AS- SESSED TAXES, |
Eng. & Wales | 7,210,058 | 0 | 10 | 6,910,672 | 7 | 5½ | 299,385 | 13 | 4½ | 4 | 3 | 1 | 4 | 6 | 8 |
| Scotland | 470,311 | 2 | 5½ | 432,223 | 13 | 6 | 38,087 | 8 | 11 | 8 | 2 | 0 | 8 | 16 | 3 | |
| Ireland | 361,935 | 1 | 9½ | 308,486 | 11 | 1½ | 53,448 | 10 | 8 | 14 | 15 | 4 | 17 | 6 | 7 | |
| United Kingdom | 8,042,304 | 5 | 0½ | 7,651,382 | 12 | 1 | 390,921 | 12 | 11½ | 4 | 17 | 3 | 5 | 2 | 2 | |
| POST OFFICE, | England & Wales | 1,700,933 | 19 | 8½ | 1,204,188 | 10 | 10 | 468,578 | 8 | 10 | 27 | 11 | 0 | 38 | 18 | 3 |
| Scotland | 168,250 | 10 | 7 | 120,855 | 6 | 0½ | 47,395 | 4 | 6½ | 28 | 3 | 5 | 39 | 4 | 4 | |
| Ireland | 175,618 | 6 | 1½ | 68,187 | 18 | 9½ | 101,082 | 8 | 9½ | 57 | 11 | 2 | 148 | 4 | 10 | |
| United Kingdom | 2,044,802 | 16 | 5 | 1,393,231 | 15 | 8 | 617,056 | 2 | 2½ | 30 | 3 | 6 | 44 | 5 | 9 | |
| One Shilling and Sixpence Duty, and Duty on Pensions and Salaries. |
England and Wales | 74,409 | 1 | 6½ | 72,469 | 8 | 10½ | 1,939 | 12 | 8 | 2 | 12 | 2 | 2 | 13 | 6 |
| Scotland | 4,963 | 2 | 11 | 4,833 | 2 | 11 | 130 | 0 | 0 | 2 | 12 | 5 | 2 | 13 | 10 | |
| Ireland | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | |
| United Kingdom | 79,372 | 4 | 5½ | 77,302 | 11 | 9½ | 2,069 | 12 | 8 | 2 | 12 | 2 | 2 | 13 | 7 | |
| Hackney Coaches | 26,248 | 2 | 6 | 22,148 | 11 | 7 | 4,099 | 10 | 11 | 15 | 12 | 5 | 18 | 10 | 3 | |
| Hawkers and Pedlars | 31,655 | 3 | 3 | 25,817 | 19 | 0 | 5,837 | 4 | 3 | 18 | 8 | 9 | 22 | 12 | 2 | |
| Poundage Fees | Ireland | 4,269 | 13 | 11½ | 4,269 | 13 | 11½ | — | — | — | — | — | — | — | — | — |
| Pells Fees | Do. | 853 | 18 | 5½ | 853 | 18 | 5½ | — | — | — | — | — | — | — | — | — |
| Casualties | Do. | 3,815 | 15 | 9½ | 3,815 | 15 | 9½ | — | — | — | — | — | — | — | — | — |
| Treasury Fees and Hospital Fees | Do. | 985 | 4 | 4½ | 985 | 4 | 4½ | — | — | — | — | — | — | — | — | — |
| Small Branches of the Hereditary Revenue. |
Alienation Fines | 11,255 | 10 | 0 | 10,108 | 2 | 0 | 1,147 | 8 | 0 | — | — | — | — | — | — |
| Post Fines | 685 | 10 | 0½ | 610 | 2 | 8½ | 75 | 7 | 4 | 4 | 2 | 8 | 4 | 6 | 2 | |
| Seizures, Compositions, Poffers, &c. &c. |
4,154 | 19 | 9 | 4,154 | 19 | 9 | — | — | — | — | — | — | — | — | — | |
| Crown Lands | 106,621 | 13 | 8 | 102,773 | 8 | 11½ | 3,848 | 4 | 8½ | — | — | — | — | — | — | |
| TOTAL of ORDINARY REVENUES | 54,038,686 | 9 | 5½ | 55,505,602 | 10 | 6½ | 4,151,691 | 11 | 4½ | 6 | 9 | 8 | 7 | 9 | 7 | |
| EXTRAORDINARY RESOURCES | 745,774 | 0 | 4½ | 735,632 | 5 | 9½ | 10,141 | 14 | 7 | — | — | — | — | — | — | |
| TOTAL PUBLIC INCOME OF THE UNITED KINGDOM (exclusive of Loans) |
64,784,460 | 9 | 10 | 56,241,234 | 16 | 4½ | 4,161,833 | 5 | 11½ | — | — | — | — | — | — | |
| GROSS REVENUE | NET REVENUE | CHARGES | Rate per Centum of expense for Collecting |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Accrued within the Year. |
Accrued within the Year. |
of MANAGEMENT. |
The Gross Revenue. |
The Net Revenue. |
|||||||||||
| L. | s. | d. | L. | s. | d. | L. | s. | d. | L. | s. | d. | L. | s. | d. | |
| England and Wales | 54,564,910 | 10 | 1½ | 48,029,587 | 4 | 6½ | 2,821,890 | 14 | 6½ | 5 | 3 | 5 | 5 | 17 | 6 |
| Scotland | 4,292,567 | 9 | 1½ | 3,436,642 | 2 | 7½ | 435,601 | 9 | 1 | 10 | 2 | 11 | 12 | 18 | 6 |
| Ireland | 5,181,208 | 10 | 2½ | 4,039,373 | 3 | 4½ | 894,199 | 7 | 8½ | 17 | 5 | 2 | 22 | 2 | 9 |
| Total Ordinary Revenues of the United Kingdom |
64,038,686 | 9 | 5½ | 55,505,602 | 10 | 6½ | 4,151,691 | 11 | 4½ | 6 | 9 | 8 | 7 | 9 | 7 |
| Extraordinary Resources | 745,774 | 0 | 4½ | 735,632 | 5 | 9½ | 10,141 | 14 | 7 | — | — | — | — | — | — |
| Total Public Income of the United Kingdom (exclusive of Loans) |
64,784,460 | 9 | 10 | 56,241,234 | 16 | 4½ | 4,161,833 | 5 | 11½ | — | — | — | — | — | — |
TELEGRAPH, so named from two Greek words, τελες, end or distance, and γραφω, to write, is a machine so constructed as to enable two persons to converse with each other at a distance, either by sentences, words, or letters, according to a convention previously agreed upon by the parties. Such a mode of communicating ideas beyond the reach of hearing is not, however, confined to any particular machine; the fingers of the human hand are quite sufficient, as every young boarding-school lady knows, for the purpose; and, when so applied, may be called a Telegraph. Thus also, the signal flags used on board ships to communicate with each other, by making them represent letters or numbers, or both, constitute a Telegraph; as may also the sending up of sky-rockets, blue-lights, the suspension of lanterns, the making of fires on beacons, high hills, &c. be considered as Telegraphic communications.
In imitation of the French, however, we have almost indiscriminately adopted the use of the word Semaphore for the Telegraph, which is perhaps of more extensive application, being derived from σημα, a sign, and φειν, to bear; and may, consequently, be applied universally to whatever means may be used to communicate intelligence by signs or signals. Thus the firing of guns a certain number of times, at certain intervals,—the notes of a trumpet, bugle, French horn, or other wind instrument,—the strokes on a drum,—may be used to convey information to a limited extent. The troops and marines which landed on the coast of America in the last war, when scouring the woods in detached parties, were regulated by the notes of the bugle, which were so clearly understood, that no false movements were ever
made. The immense number of barges and boats which crowd the Imperial Canal of China are directed in their movements, both by night and day, by the sound of the gong. The Indians of America convey intelligence from hill to hill, by throwing out their arms with or without staves in them; by spreading their cloaks, holding up skins, &c.; and even the savage Hottentots, called Bosjeismans, the lowest probably in the scale of human beings, communicate with each other by arranging fires on the sides of the hills in certain positions.
It is rather surprising that an art so simple as that of conveying ideas by means of signals, so well understood in remote antiquity, and practised even by savages, should have made such little progress in its improvement, that it may be said to have remained in its original rude state nearly down to our own times, when it has almost at once been brought to that state of perfection, of which it appears to be capable.
One of the arguments usually adopted to prove that the art of conveying intelligence by signals was known in the very early ages of Greece, is deduced from the opening of the Agamemnon of Æschylus, where the man on the watch-tower, at the top of the palace, announces the fire-signals having communicated the fall of Troy, long before any of the Greeks had returned from the siege; and Clytemnestra afterwards relates the stations; but this event of the burning of Troy, supposed thus to have been known in Greece soon after it happened, proves nothing more than that the use of signals was known to the poet who wrote eight or nine hundred years after the event. Mention, however, is made by Jeremiah (Ch. vi. v. 1), who was at least 200 years before
Telegraph. Æschylus, of "setting up a sign of fire in Beth-haccerem;" and such signals are often alluded to by the prophets, as notices of the approach of an enemy.
The earliest decisive proof of telegraphic communications, except those by fires (pyraus), being in use among the Greeks, is found in the methods described by Polybius. (See Ency. Brit. under word TELEGRAPH.) The Romans had their vexillarii, and used flags and other contrivances for regulating the movements of their armies; and they had hollow tubes constructed in the walls of their cities, by which they could communicate with the several ports or works by sound, as is done in our times in some manufactories by means of pipes or trumpets. Wherever the Romans pitched their camp, an elevated spot was selected for the signal station, to convey intelligence to the foraging parties or detachments, but it is nowhere stated to what extent this was carried. Vegetius alludes to something like a beam in the air, on the same principle perhaps as our Semaphore.
In modern times, Kircher, who had more learning and less sense than any man of his day, and who has written on almost every subject, gives an idea of telegraphic communication; and so does the ingenious Marquis of Worcester, in his Century of Inventions; but so vague as to convey no notion of the means he was to employ, except the use of colour; for the "discourse" to be held, is stated to be "as far as eye can discover black from white." He also throws out a hint for a night telegraph, by which the same may be done, "though as dark as pitch is black." But almost every modern invention is supposed to exist in the mysterious "scantlings" of the Marquis of Worcester.
The first telegraph on record in modern times, applicable to universal purposes, is that of Dr Hooke, described in the Philosophical Transactions of the year 1684. He minutely details the mode in which the stations should be selected, their height and intermediate ground, so that the refraction of the air may not disturb the clear appearance of the object; the telescopes to be used; the characters to represent the alphabet, which, he says, may be varied ten thousand ways, and "none but the two extreme correspondents shall be able to discover the information conveyed;" and so convinced is he of the practical efficiency of his telegraph, as to leave no doubt on his mind, "that the same character may be seen at Paris within a minute after it hath been exposed in London." His method consisted in exposing in succession as many different shaped figures or signs, at least, as the alphabet consists of letters. If used in the day-time, they might be squares, circles, triangles, &c. made of deals; if at night, torches or other lights disposed in a certain order. These characters or signs were to be brought forth from behind a screen on rods, as they might be wanted, and exposed to view. The accompanying figure, where A is the screen, and one of the signs exhibited, will convey an idea of Dr Hooke's telegraph.
Monsieur Amantons, of the Royal Academy of Paris, made an experiment to convey intelligence, which
was highly approved of by the other members, and several persons of distinction belonging to the Court. Telegraph. By the description given of the machine, it seems to have differed very little from that of Hooke already published in the Philosophical Transactions; the signals being either large letters of the alphabet, or figures of various shapes to represent them; the latter being the more valuable, as, by a change of key, the nature of the communication might be kept a secret from those actually employed in making the signals.
It has been supposed that electricity might be the means of conveying intelligence, by passing given numbers of sparks through an insulated wire in given spaces of time. A gentleman of the name of Ronalds has written a small treatise on the subject; and several persons on the Continent and in England have made experiments on Galvanic or Voltaic telegraphs, by passing the stream at the two extremities or stations through phials of water; but there is reason to think that, ingenious as the experiments are, they are not likely ever to become practically useful.
Necessity is said to be the mother of invention; she is also frequently the foster-mother, who calls forth into action, and displays the utility of, inventions abandoned by their natural parent. Both Hooke's invention and Amantons' modification were published all over Europe, the former as early as 1684; yet they were not practically applied to any useful purpose till the year 1794, when Citizen Barrere, in a report made to the Convention, ascribed the invention then in use to Citizen Chappe.
Chappe's telegraph consists of a beam of wood, moveable on a pivot at the summit of an upright post; at each of the extremities of this beam is a moveable arm, as in the figure. The different positions in which both the beam and its two arms may be placed at angles of 45° give to this telegraph considerable powers; but it is a too complicated machine not to be liable to many mistakes, unless worked by long experienced operators.
In the year 1784, Mr Lovell Edgeworth produced his plan of a numerical telegraph, claiming, at the same time, the merit of having invented a mode of distant communication as far back as 1767, by employing a common windmill, and arranging the various positions of its arms and sails so as to represent a certain number of signals arranged in numerical order.
Mr Edgeworth's telegraph consisted of four wedges or cones, moveable on four upright posts, as under, which, by their different positions, might be used either numerically or alphabetically.
In the year 1795, when the advantages had been made evident which the French derived from M. Chappe's telegraph, the inventive faculties of our countrymen were called into action. Among other proposals, the Rev. J. Gamble produced two plans of a telegraph: the one consisting of five boards, one above the other, which, by opening and shutting singly, or according to all the combinations of which they were capable, gave
Telegraph. a certain number of distinct signals, representing either numbers or letters, as might be deemed most expedient. The arrangement of the shutters was as in this figure. The other plan was that of five beams of wood, turning on the summit of a post, so as to form five radii of a semicircle at equal angles of with each other, as under.
Among other projects about this time was that of dividing a large circle into twenty-four parts, to represent the letters of the alphabet, round which a moveable radius was to traverse; then, by placing corresponding divisions, by means of wires, before the object-glass of the telescope, the coincidence of the two radii would mark out the letter meant to be designated. Of this kind, a plan by Mr Garnet approached nearest to efficiency; but, at best, could only be applied to very short distances.
In the same year (1795), Lord George Murray presented his plan of a six-shutter telegraph to the Admiralty, which was the one adopted and made use of during the whole war, and until the year 1816, when it was changed for a simplified Semaphore, which will be noticed hereafter. The annexed figure represents that of Lord George Murray.
On the same principle as the radiated telegraph of Mr Gamble, but differently arranged, the French, on the commencement of the second war in 1803, erected signal-posts along the coast, to which they gave the name of Semaphores, being two or three beams of wood on the same post, but turning on different pivots.
In 1807, Captain (now Colonel) Pasley published his Polygrammatic Telegraph, which differed only from the French Semaphore in having two beams turning on one pivot on the same post, and multiplying the number of posts; which he afterwards (in 1810) changed so far as to place three sets of beams or arms, two in each set, on one post, and thus approaching still nearer to the French Semaphore.
First Polygrammatic Telegraph.
Second Polygrammatic Telegraph.
In the year 1816, Sir Home Popham, who had already introduced a new code of signals into the navy, which was admitted on all hands as a great improvement on the old system, both as regarding the number, the arrangement, and the shape of the flags, now turned his attention to the land Semaphore, and proposed one on a construction of the same nature with those of M. Chappe and Colonel Pasley, but much simplified. It was, in fact, nothing more than two moveable arms on separate pivots on the same mast, as under.
This machine, on account of its simplicity, had obviously the advantage over all others that had been proposed; and being found of sufficient power and efficiency for all required purposes, it was adopted by the Admiralty, instead of the shutter telegraph, which had been in use since the year 1795.
Colonel Pasley, however, in 1822, still farther simplified this useful machine, at the expence of sacrificing a small portion of its powers, by making the two arms revolve on the same pivot, as under, to which he has given the name of the "Universal Telegraph."
The last, but by far the most persevering and voluminous writer on telegraphs, is Lieut.-Colonel Macdonald, who, in 1808, published what he deems improvements in the system of telegraphic communications, both as they regard the machine itself, and the dictionary to be used with it. He not only gives the preference, but is so much attached, to the shutter machine, that he is quite indignant at its being supplanted by the Semaphore; and so far from being satisfied with the powers of which a six-shutter telegraph is capable, he has extended his to no less than thir-
Telegraph. teen different boards, as under, by which he certainly gains power enough, but not without producing confusion and perplexity.
As the use of telegraphs is chiefly confined to public purposes, and more especially to convey speedy information respecting naval and military armaments and operations, the machine to be adopted, and the system of working it, ought to possess—power—certainty—simplicity—celerity—and secrecy. The power of the machine, or the number of distinct combinations of its moveable parts, should be equal to the conveyance of every possible order or information, either by numbers, representing the letters of the alphabet, or words, or sentences. To ensure certainty, the moveable parts or signs should be so well and clearly defined, so wholly within the field of the telescope, and so completely removed from all ambiguity, as not to be liable to the mistaking of one signal for another; hence, the advantage of the simplicity of the machine. And as one of the main uses of the telegraph is to convey instructions or intelligence in a speedier way than the intermediate distance can be travelled over, it is evident, that celerity is an important quality of telegraphic communication. It is equally obvious that, if such instructions or intelligence could not be conveyed in secrecy from him who sent it, to him who was to receive it, such a system would be highly defective and objectionable.
Bearing these observations in mind, we shall not have much difficulty in determining on the merits of the several telegraphic machines above mentioned. The choice, indeed, appears to lie between the six-shutter telegraph, so long used at the Admiralty, to communicate with the several ports,—the Semaphore of Sir Home Popham, which superseded it, and is now in use,—and the Universal Telegraph of Colonel Pasley. Colonel Macdonald, who conceives the shutter telegraph as the perfection of the art, boldly asserts, that "the Semaphore arm of proper dimensions is not to be seen in clear weather so well as the common sized boards, and in cloudy weather by no means so well;" and consequently that, "for this climate, the boarded telegraph is, in all respects, more advantageous." This would be important if correct; but it is evident, that the Colonel is not aware of the discussion which took place on this very important part of the subject, on the first adoption of the boarded telegraph; had he read the clear and decisive observations of Mr Gamble, he would scarcely have ventured upon such an assertion.
"It is a theorem in optics," says Mr Gamble, "that the apparent magnitude of an object varies nearly in the inverse ratio of its distance. Hence, it follows, that the larger its dimensions, to the greater
distance will it be visible. But the nature of our atmosphere, even in its most transparent state, is such as to render any calculation, grounded on this principle, extremely erroneous; and in general its density so obstructs, and its refracting powers cause such confusion in, the rays issuing from those surfaces which are not placed sufficiently distant to be distinct, that their image falling upon the retina is frequently so ill defined, as to render it difficult to determine either their figure or position; for which reasons, that which I shall term insulation, is generally a quality more requisite to give distinctness to an object, than magnitude of superficial dimensions."
This is unquestionably true; but Mr Gamble illustrates his position thus: "An example of this distinctness arising from insulation cannot be more readily obtained than by taking a page of printed paper, and fixing the eye on some particular letter (as I); then retiring from it, the letter will be so confused with the surrounding ones, as not to be easily distinguished: but if the same letter (I) be printed on a plain sheet of paper, standing by itself (or insulated), the eye will then not only discern it at a much greater distance, but the image falling single and unencumbered upon the retina, we shall be able to determine whether it be inclined to the right or to the left, or whether it be placed horizontally on the paper."
The shutter telegraph is the printed page, and the arm of the semaphore is the letter (I) on a plain sheet of paper.
But actual experiment has completely proved the fallacy of Colonel Macdonald's assertion, and the justice of Mr Gamble's theory. Every officer serving on the line of telegraphs has stated, that at all times, and more especially in cloudy weather, the arms of the semaphore are seen much better than the boards of the telegraph ever were. Lieutenant Pace, who for many years superintended the Admiralty station, declared that on the first day after the West Square semaphore was erected, he could clearly distinguish the positions of the arms without a telescope, and accurately take down any signals that could be made, which he had never been able to do under any circumstance whatever with the shutter telegraph. He also stated that he had frequently an open communication with the semaphore at West Square, whilst St Paul's was capt by a fog, which was at all times considered by him and his assistant as the conclusive sign that the boarded telegraph could not be worked. But in order to set the matter entirely at rest, the shutter telegraph on Nunhead, near Newcross, was left standing on the same hill with the new semaphore, in order to try their comparative distinctness, for a whole winter. The result was, that the semaphore was frequently distinctly visible when the boarded telegraph was so much enveloped in mist or fog, that the particular boards, shut or thrown open, could not be distinguished: and it appeared by a journal kept by this officer, that in the course of the winter, the days on which the semaphore was visible exceeded those on which the shutters could be seen by fully one-third. If, then, this be the case with a six-boarded telegraph, how much more objectionable must one of twelve
Telegraph shutters be, which must necessarily be placed so near to each other as to make it at all times a matter of difficulty to discern at once how many, and which of them, are closed, and which open? Even in the six-shutter telegraph, one board has frequently been mistaken for the other: for it may be remarked, that such a mass of timber as is required for a shutter telegraph is seldom free from haze.
It will probably be urged, that the arms of the semaphore, having to describe a larger circle, must be slower in their operations: but this increased slowness is so amply compensated by the ease and certainty of reading off the signals as to render any such objection of little or no weight: it may make the difference of one second in each signal, whilst the machinery by which the semaphore is worked is as simple and as little liable to be out of order as that of the boarded telegraph.
The six-shutter telegraph, it is true, has greater powers than the two-armed semaphore, and much greater than the universal semaphore of Colonel Pasley; that is to say, the number of combinations of which it is capable of making without using the stop-signal (or signal which separates one word, or one sentence, from another), is much greater than in either of the other two; but all of them have sufficient powers, and a sufficient number of combinations, to convey with facility and dispatch any communication whatsoever, and in any language, either by letters, words, or sentences. Their respective powers may be seen by the following tables of their positions.
| No. of Signal, or of Shutters closed. | Signi- fication. | No. of Signal, or of Shutters closed. | Signi- fication. | No. of Signal, or of Shutters closed. | Signi- fication. |
|---|---|---|---|---|---|
| 1 | A | 123 | 9 | 1235 | |
| 2 | Z | 124 | 6 | 1236 | |
| 3 | X | 125 | 5 | 1245 | |
| 4 | W | 126 | 4 | 1246 | |
| 5 | B | 134 | 0 | 1256 | |
| 6 | F | 135 | 1 | 1345 | |
| 12 | L | 136 | 2 | 1346 | |
| 13 | O | 145 | 6 | 1356 | |
| 14 | V | 146 | 3 | 1456 | |
| 15 | U | 156 | 8 | 2345 | |
| 16 | H | 234 | G | 2346 | |
| 23 | Qu | 235 | C | 2356 | |
| 24 | R | 236 | D | 2456 | |
| 25 | T | 245 | E | 3456 | |
| 26 | S | 246 | Y | 12345 | |
| 34 | P | 256 | 12346 | ||
| 35 | N | 345 | 12356 | ||
| 36 | I | 346 | 12456 | ||
| 45 | O | 356 | 13456 | ||
| 46 | K | 456 | 23456 | ||
| 56 | M | 1234 | 123456 |
In all—62 separate and distinct signals; which may be made consecutively in any order, without requiring any stop-signal, when applied to spelling. The letters of the alphabet opposite to the signals, and the numbers from 1 to 0, may be changed in every possible way.
When spelling is intended to be used, the number
of changes need not of course exceed that of the alphabet; the rest, as in the table, may be applied to numbers; and what still remains may be made to represent words that are most commonly in use; as, for instance, admiral, captain, ship of the line, frigate, arrived, sailed, harbour, &c. in the navy; or, if military, general, regiment, camp, &c.
| No. of Signal by 1 and 2 Arms. | Signi- fication. | No. of Signal by 1 and 2 Arms. | Signi- fication. | No. of Signal by 1 and 2 Arms. | Signi- fication. |
|---|---|---|---|---|---|
| 1 | 1 | 15 | G | 43 | X |
| 2 | 2 | 16 | H | 44 | Y |
| 3 | 3 | 21 | I | 45 | Z |
| 4 | 4 | 22 | K | 46 | |
| 5 | 5 | 23 | L | 51 | |
| 6 | 6 | 24 | M | 52 | |
| 1 | A | 25 | N | 53 | |
| 2 | B | 26 | O | 54 | |
| 3 | C | 31 | P | 55 | |
| 4 | D | 32 | Qu | 56 | |
| 5 | E | 33 | R | 61 | |
| 6 | F | 34 | S | 62 | |
| 11 | 7 | 35 | T | 63 | |
| 12 | 8 | 36 | U | 64 | |
| 13 | 9 | 41 | V | 65 | |
| 14 | 0 | 42 | W | 66 |
In all—48 separate and distinct signals; being the whole which the two arms are capable of making, as under; in which the two arms actually exhibited (in black lines) represent the number 16 or H, according to the table or key, as above arranged.
We have here, in addition to the alphabet and the numeral digits, 13 signs over, applicable to the names of stations, preparative, finish, stop-signals, &c.
| No. of Signals. | Signi- fication. | No. of Signals. | Signi- fication. | No. of Signals. | Signi- fication. |
|---|---|---|---|---|---|
| 1 | A | 15 | L | 36 | V |
| 2 | B | 16 | M | 37 | W |
| 3 | C | 17 | N | 45 | X |
| 4 | D | 23 | O | 46 | Y |
| 5 | E | 24 | P | 47 | Z |
| 6 | F | 25 | Qu | 56 | |
| 7 | G | 26 | R | 57 | |
| 12 | H | 27 | S | 67 | |
| 13 | I | 34 | T | ||
| 14 | K | 35 | U |
In all—28 separate and distinct signals; containing a sufficient number for expressing the letters of the alphabet, and, consequently, for spelling any message; but not a sufficient number left to express the numeral digits by single signs. The signal, No. 4, is besides, as Colonel Pasley is aware, liable to be mistaken, it being a mere elongation of the mast, which, at a great distance, and owing to the refractive power of the atmosphere, will always be ambiguous when exhibited as a single signal. But Colonel Pasley has added a short arm which he calls an indicator, as below at A; and which, when made moveable, more than compensates for this defect.
It was with a different view, however, that he has added this indicator. It was suggested to him by a Captain in the navy, who had experienced the greatest inconvenience, in using Sir Home Popham's ship Semaphores, from the signal men confounding the positions of the arms when seen in reverse.
We apprehend no experienced signal men could possibly make any mistake in merely changing the right hand for the left.
The respective powers of the three telegraphs, in making single, or, what may be called, primary signals, are, as appears from the tables, 62, 42, and 28. In making two changes, with a stop between them (that is, three signals) to represent a word or sentence, their powers will be as 3844, 1764, and 784. In making three changes (or, with the stop, four signals), as 238,328—74,088—21,952. Now, as the telegraphic dictionary of Sir Home Popham, which has been, and still is, used in the navy, does not exceed 13,000 words and sentences, and has never been found deficient in any of its divisions of subjects, it is evident that even the lowest power of the three is more than sufficient for all useful purposes; and that those compilers, who have swelled out their telegraphic dictionaries to upwards of 100,000 (one mentioned by Colonel Pasley has extended his labours to 140,000), have made them nearly useless, by the difficulty and loss of time, in finding the required phrase or sentence. We have actually seen in one telegraphic dictionary 126 pages, of 3 columns in each page, and 60 sentences in each column, containing upwards of 20,000 sentences (about one-third of the number of words in Johnson's Dictionary), and each of these sentences beginning with the personal pronoun HE; 20 pages with IF, &c. Compared with the use of such a dictionary, spelling the sentences is infinitely preferable as to certainty, and in many cases as to celerity. Indeed, we should say that the abbreviated nature of communications made by telegraph renders spelling by far the most elegant mode. In clear weather, the rapidity of working single signals, the short compass within which any message may be condensed, the impossibility of committing any mistake that cannot be immediately rectified, more than compensates for the difference of a few minutes, which the use of sentences may probably save. In cloudy or foggy weather, the latter method will al-
ways be liable to mistake. If experience may be assumed as a guide, the practice at the Admiralty, of spelling all sentences for the last thirty years, must decide in favour of that system.
In making use of the alphabetical table, much time may be saved, by condensing the message into the briefest form possible, leaving out of the sentences such words as may not alter the sense, and generally the vowels of words. For instance, "Order the Agamemnon out of harbour, and direct her to proceed to Spithead." To convey this message alphabetically, it would be quite enough to say, "Agmemn to Spthed." If from Spithead into harbour, "Agmemn nto hrbr." In spelling, too, it is very desirable, especially in our foggy climate, that the intelligence to be conveyed should be compressed as much as possible into the early part of the message. By not observing this rule, a curious mistake is said to have been made in the course of the Peninsular war. The Admiral at Plymouth endeavoured to send up a message, but a fog coming on, part of it only on that day reached London. It began thus: "Wellington defeated"—and the rest was stopped by the fog: the anxiety for the remainder may readily be conceived; it came, however, complete towards the evening, and conveyed the intelligence, that "Wellington defeated the French," &c. Had the message been thus framed, "French defeated at," &c. (the word Wellington being quite superfluous), the anxiety for the particulars would have been of a very different kind. Much, therefore, depends, as far as celerity and certainty is concerned, on the construction of the sentence containing the intelligence to be conveyed.
The methods suggested for making use of telegraphic communications by night have not been less numerous than those for the day, though on land there are very few occasions on which they can be of the least possible use. A regiment might perhaps be ordered to move, at a moment's notice, in order to reach a particular point at a given time; or, as an extreme case, the enemy's fleet might be seen towards the close of the day in a particular quarter, which would make it desirable to have the intelligence conveyed in various directions; but no naval movement could take place during the night at any of the ports. So little useful, indeed, does a night telegraph, for the navy, appear to have been considered, that, with all the facility of applying lamps to the shutter-telegraph at the Admiralty, no attempt was ever made for carrying such a purpose into execution. Colonel Pasley's description of the application of his Universal Telegraph to night signals will suffice to show one method (as good as any other perhaps) of adopting the machine to this purpose.
"For night signals, one lantern, called the centre light, is fixed to the top of the post; and one lantern (1) as an indicator is fixed to a light crane or derrick, attached to the post, by night only, as under.
"These lanterns are stationary, and appear on the same level. Two other lan-