elling mostly on foot. His travels have been frequently reprinted in six volumes 12mo. He died, on his seventh journey to the east, at Moscow, in 1689.

TAVIRA, a seaport of Portugal, in the province of Algarves, at the mouth of the Seca, 21 miles E.N.E. of Faro. It is well built, with regular streets and several handsome squares; and it contains a governor's palace, several churches, and hospitals. Many of the people are employed in fishing; and there is a considerable coasting trade, as well as some traffic with the interior by means of the river. Pop. 8640.

TAVISTOCK, a parliamentary borough and market-town of England, Devonshire, in the beautiful valley of the Tavy, which is here crossed by two bridges, 11 miles N. of Plymouth. It covers the sides and bottom of the narrow valley, and is very irregularly laid out. Some remains are still to be seen of an ancient abbey; but most of them have been built into other edifices. A hotel occupies part of the site, and some portions of the old building have been removed to make way for it; one of the gatehouses is now occupied by a public library; the refectory forms a Unitarian chapel, and the abbot's lodge is made use of as a stable. The parish church of Tavistock is a handsome building in the perpendicular style, with a tower and triple chancel. The other places of worship in the town belong to Independents, Methodists, Quakers, and Unitarians. There are here a literary and scientific institution; a grammar school, national, British, and infant schools; almshouses, &c. Serge and woollen cloth are manufactured in the town; and there is also an iron-foundry. Copper mines are worked in the neighbourhood; and abundance of lead, tin, manganese, and iron are found. Weekly markets, chiefly for corn, are held here, as well as several cattle fairs. Tavistock is connected by canal with the river Tamar, and by it with the port of Plymouth. The borough is governed by a porrectee, and is represented in Parliament by two members. The abbey was originally founded in 961, and rebuilt on a larger scale after its destruction by the Danes at a subsequent period. In 1539 it was confiscated by Henry VIII., and bestowed on Lord Russel, the ancestor of the Duke of Bedford, to whom the ruins stillA TAX\(^1\) is a portion of the property of individuals which is taken from them by Government, and disposed of by it.

A tax may be either direct or indirect. It is said to be direct when it is taken immediately from income or capital; and indirect when it is taken from them by making their owners pay for articles on which it has been laid, or for leave to use certain articles, or exercise certain privileges.

A tax may be either general or particular; that is, it may affect all classes indiscriminately, or only one or more classes.

Taxation is the act of laying on or assessing taxes. It is sometimes, also, employed to express their aggregate amount; and is the name given to that branch of the science of political economy which explains the mode in which they may be most advantageously imposed and collected.

PART I.

GENERAL OBSERVATIONS ON TAXATION.

The necessity of raising a revenue for the service of the public is so very obvious, that to attempt to prove it by lengthened statements or reasonings would be worse than superfluous. It is enough to observe, that the ability to repel and avenge external attacks, the maintenance of internal tranquillity and good order, with the speedy and impartial administration of justice, are indispensable to the comfort and wellbeing of every man, as well as to the advancement of nations in population, civilization, and wealth. But the means by which these great ends are effected are not supplied gratuitously. The ships and fortresses, the sailors and soldiers, the judges, magistrates, and other functionaries necessary to provide for national independence and private security, cost large sums. And being required for the common benefit of all classes and individuals, it follows that these sums should be furnished by their united contributions. Hence the cardinal principle, that taxation should be equal and universal; that none should be so high or so low as not to feel its full pressure. It is contradictory to pretend that any man has any good ground for complaining that he is made to pay his fair share, be it great or small, of the public outgoings.

It may no doubt happen, from the impossibility of exactly apportioning the burden of taxation to the means of individuals, that some may be more or less heavily taxed than others. But at present we are only stating what is the general principle or rule with regard to taxation. And it will be afterwards seen that the unequal pressure of certain taxes is of less consequence than might be previously supposed, and is commonly balanced, either in whole or in part, by countervailing circumstances.

It is farther true that the public is frequently called upon to contribute larger sums than are required for the ends of good government. But, when such is the case, the abuse must originate either in the misconduct of administration, or in the defective organization of the state, and does not properly come within the scope of our inquiries. In treating of taxation, the political economist has not to inquire whether the revenue raised by the state exceeds its necessary wants, or is judiciously expended. His object is to point out the effect of taxation on the wealth of individuals and of the public; and, by analysing and comparing the various methods in which a revenue may be raised, to show which is most advantageous, or rather, which is least injurious.

The scheme of taxation now subsisting in modern Europe had its origin in the decline of the feudal system. According to its principles, the lands of a country were held as fiefs of the crown, on condition of their possessors 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 expense, was by far the most important. The tenants in chief of the great fiefs, or those who held directly under the sovereign, were either originally invested with, or subsequently usurped, the prerogative of distributing justice in their respective lordships; and in those days the administration of justice, instead of being a source of expense, became, in consequence of the abuses with which it was infected, a considerable source both of influence and emolument. The clergy were partly provided for out of their own estates, and partly by a tithe levied on 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 into that state of repair which the depressed situation of commerce, and the little intercourse between the different parts of the country, seemed to require. It was not even necessary to levy a tax for the support of the monarch and his court. The rents of the crown estates, or of those portions of the royal demesnes, which not having been granted

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\(^1\) Tax, from the Latin *tasso*, *taxare*, to estimate, appreciate, or value, and also, to charge with; the value of lands, houses, rents, &c., being usually ascertained or estimated before they are charged with a payment or tax. Dugange defines a tax as follows, viz.:—"Taxa, exactio, impositio, certum pretium, seu certa pecuniae quantitas, per vim exacta; nostra taxa, Rollis tassa." (Voce Tuxa.) General Observations on Taxation.

to others, remained in the immediate possession of the sovereign, were generally sufficient to defray this part of the public expenditure. When the feudal system was in its vigour, the demesnes of the crown were, in most countries, very extensive; and the alienations occasioned by the profusion and facility of some princes, were compensated by the forfeitures and escheats that were always taking place.

The vicious nature of this system is too obvious to require being pointed out; and it exercised, for a long series of years, a fatal influence over the peace and prosperity of Europe. But the progressive though slow advance of civilization ultimately occasioned its overthrow. Money payments were gradually substituted for personal services. And the establishment of standing armies in France by Charles VII., and their introduction into other countries, entirely broke the power and spirit of the feudal aristocracy; and enabled the different governments to introduce a regular plan of administration, and to enforce that system of pecuniary contribution now universally established.

The amount of a tax is not estimated by the bulk or species of the produce which it transfers from individuals to government, but by its value. When a fall takes place in the cost of producing an article, its price eventually declines in an equal degree; and its producers (supposing the value of money not to vary) are obliged to dispose of proportionally larger quantities to obtain the means of paying the same amount of taxes. But it is an obvious error to suppose, as is very commonly done, that the burden of taxation is consequently increased. If, owing to improvements in agriculture, machinery, or any other cause, two quarters of wheat, or two yards of cloth, were produced with the same expenditure of capital and labour that are now required to produce one quarter or one yard, it would be no hardship to have to give double the quantity of these commodities in payment of taxes.

The want of attention to the principle now stated has led to much erroneous reasoning on the subject of taxation. Even Smith made no sufficient allowance for the influence of improvements in enabling a country to bear additional burdens. Nothing, however, is better ascertained than that the portion of the produce of industry taken by the government as revenue, may be continuously increased in all countries in which the arts are progressive, without adding to the burdens of the people. Such new inventions and discoveries as facilitate the production of commodities and reduce their value, enable individuals to spare a larger quantity for the use of the state. The sacrifice incurred in the paying of taxes is not to be measured by the amount of money or of produce required for their payment, but by the amount of labour—that is, of toil and trouble—required to obtain the money or the produce. To pay L.100 or L.1000 to government, at this moment (1860), will cost a cotton manufacturer not less, perhaps, than forty or fifty times the quantity of cottons that would have sufficed to make the same payment in 1760. But as this reduction in the value of cottons has been occasioned by an equivalent reduction in the cost of their production, the manufacturer is not thereby placed in a worse situation, nor is he, in so far at least as cottons are concerned, making a greater sacrifice now than he did a century ago. And thus it appears, that governments have the same interests as their subjects in whatever tends to facilitate or lessen the expense of production; for, when it is lessened, they may make corresponding additions to the produce at their disposal, without really adding anything to the weight of taxation. And, on the contrary, a diminished facility of production must either diminish in an equal degree the produce appropriated by governments, or compel them to lay heavier burdens on their subjects. Public wealth is merely that portion of the wealth of individuals that has been transferred, by taxation or otherwise, from them to the government; and the greater the amount of such individual wealth, the greater will be the magnitude of the portion that may be conveniently spared for national purposes.

Though necessary taxation should always be kept within the narrowest limits possible. The most popular taxes either are those which are lightest; but there are none so light as not to occasion an increase of toil, or a diminution of enjoyments or of fortune. All taxes must ultimately be paid from the revenue of a country, or from its capital or stock; and there are very few, if any, whose produce is not partly derived from both these funds. No doubt, however, the greater part by far of all taxes which are judiciously imposed, and not carried to an oppressive 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 the taxes with which they are charged, either by increased industry or by curtailing their expenditure, without allowing them to encroach on their capitals. But the power to make increased exertions, and to save from expense, though not easily defined, is not illimitable. And whenever the burden of taxation is not fully compensated by increased production or increased saving, it must necessarily encroach on the means of future production, and the country will begin to retrograde. It is doubtful, however, whether any well-devised scheme of taxation ever had the effect now supposed, except, perhaps, during the heat or crisis of some great national struggle. It is obvious, indeed, that were it continued for any considerable period, it would, by diminishing capital, or the funds applicable to the support of industry, lessen the national revenue, the only fund out of which taxes can be permanently paid; and lay the sure foundation of public 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 of reproduction.

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; whereas an oppressive tax laid on income has in most cases to be, in part at least, 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. By diminishing the funds for the maintenance of labour, they in so far diminish the future taxable income of the country. The legacy-duty, as we shall afterwards see, has been supposed, though without sufficient reason, to be censurable on this ground.

The writers on finance, patronized by government, have sometimes evinced their gratitude, by endeavouring 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 every increase of the public burdens becomes the cause of a proportional increase in the industry of the people. The fallacy of this opinion, when advanced thus absolutely and without reservation, has been exposed by Hume in his Essay on Taxes. But it is certainly true, as has been already stated, that the desire to preserve their fortunes unimpaired, and to improve their condition, stimulates most men to endeavour to defray a moderate increase of taxation,

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2 It was on this occasion that the taille was first imposed in France. (Hallam's View of the Middle Ages, vol. I., p. 118.) by increased industry and economy, without allowing it to encroach on their fortunes, or even to lessen the rate at which they may have been increasing. And occasionally these efforts much more than counteract the influence of the additional taxation, and the public wealth is consequently augmented through its increase. We have seen in the article Political Economy, that this was strikingly shown during the progress of the war which grew out of the French Revolution. To the desire of rising in the world, the greater pressure of taxation superadded the fear of being cast down to a lower station; and the combined action of the two principles produced results that could not have been brought about by the unassisted operation of either. But we must beware of the abuse of this doctrine. An increase of taxation will not stimulate to new efforts unless the contributors believe that it is in their power to defray the whole or the greater part of its amount by additional industry and economy.

The effect of exorbitant taxes is not to stimulate industry, but to destroy it. Were taxation carried so high as to swallow up the whole, or even the greater part, of the earnings of the people above what is required to furnish mere necessaries, it would, 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, would produce only despair. The stimulus given by excessive taxation to industry has been not unfairly compared to that given by the lash to the labour of the slave; and the experience of all ages and nations has proved that the latter is as ineffective as it is inhuman, when compared to the stimulus which the expectation of improving his condition, and 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 disastrous influence of oppressive taxes over industry, by references to the history of most European nations. In 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 her 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. Oppressive taxes, however, not only prevented Spain from recovering from the wounds inflicted by the bigotry of her rulers, but went 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. This was a tax originally of tea, but subsequently of fourteen per cent., charged on all commodities, whether raw or manufactured, as often as they were sold, and rated always according to their selling price. Such a monstrous impost was of itself sufficient to annihilate industry. The manufactures of Castile and the other provinces subjected to its destroying influence were ruined. And Ustariz, Ulloa, and Campomanes, Spanish authors of the highest credit, agree in opinion with Mr. Townsend, that it was to their exemption from this odious tax that the comparatively flourishing state of industry in Catalonia and Valencia previously to the French Revolution, was entirely to be ascribed.

Besides contending that new taxes uniformly create a new ability in the people to bear them, the government financiers have also contended that taxes are not really lost to the contributors, but are restored to them through the expenditure of government and its agents! And notwithstanding the gross and almost obvious fallacy which this statement involves, it still not unfrequently occupies a prominent place in the answers made to those who complain of the pernicious influence of exorbitant taxes. To show its absurdity, let it be supposed that a farmer is taxed L50, and let us endeavour to ascertain whether the expenditure of this sum by the public functionary, or individual to whom it has been paid, affords any compensation to the farmer for its loss. If the receiver of the tax do not lay it out on commodities produced by the farmer, it cannot return to him, and he can derive no possible advantage 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 his produce, 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 L50; he next paid away these L50 to a tax-gatherer, and the latter, or the person who received the L50 from him, comes to the farmer and says, "You may have your money back on your paying me 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 enrich 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 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 buyers have supplied themselves, through their own industry or resources, with the money or other equivalents they offer for commodities. It is contradictory to suppose that either individuals or states can receive the smallest benefit from selling to persons to whom they have previously furnished the means of buying. This, however, is always the case with buyers who live on the produce of taxation. And to keep up useless regiments and overgrown establishments, on pretence of encouraging industry by increasing demand, is to the full as irrational as if a shopkeeper were to attempt to increase his business and get rich by supplying his customers with money to buy his goods.

"To argue," says Dr Hamilton, "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."

Hence, it results that the services of the functionaries to whom taxes are paid form the only compensation received in their stead by the tax-contributors. And it is undoubtedly true that these services are most valuable; and that when neither the numbers nor the salaries of the functionaries by whom they are rendered are too great, they are an ample return for the sums expended upon them. But whatever is laid out in maintaining unnecessary functionaries, or in overpaying them, is wholly lost, or yields no sort of equivalent to the contributors.

That security, protection, and good government, which it is the object of taxation to procure, are highly valuable, or rather indispensable, cannot be disputed; but like all

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1 For an instructive account of the effect of heavy taxes on the commerce and industry of Holland, see the second volume of the work of M. Luzez, De la Richesse de la Hollande.

2 This sophism is equally well exposed in the Lettres d'un Citoyen sur les Vingtèmes, &c. (p. 113), published in 1768. other values, the smaller the sacrifice for which they may be obtained so much the better. A diminution of taxation, or of the expense of government, benefits the public precisely in the same way that a diminution of the cost of food, or of any useful or desirable commodity, benefits individuals. There is no mystery in the manner in which government is supported and taxation operates. Government is not a producer; its expenditure is not defrayed out of its own labour or property, but out of that of its subjects. It is obvious, therefore, that the greater its expenses, the deeper must they encroach on the means of those by whom they are paid, unless, as previously stated, they be met by increased industry or saving, or both. But this last, though a powerful resource, is one which is not always to be depended upon, and hence the paramount duty of enforcing economy in the public expenditure.

Various and very discordant opinions have been entertained respecting the ultimate incidence and effect of taxes. Locke in England, and Quesnay and his followers in France and Italy, contended that all taxes, however imposed, fell ultimately on the land. This erroneous opinion proceeded from their supposing that agriculture is the only productive species of industry, whereas it is in no respect more productive than others. The truth is, that all burdens which directly or indirectly affect the producers of any article, fall ultimately on its consumers. A tax on hats, for example, raises their price, and a tax on leather raises the price of shoes; for, were it otherwise, the profits of the hatters and shoemakers would be reduced below the general level, and as they would not be satisfied with smaller profits than their neighbours, they would withdraw their capital from such losing businesses till, through the diminished supply of hats and shoes, their prices had been raised to their proper height, that is, to such a height as would yield the hatters and shoemakers 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 differ when they are laid on commodities required for the consumption of the labouring classes, and on those exclusively consumed by the higher classes. But before proceeding to inquire into the influence of particular taxes, we shall make a few observations on the maxims laid down by Adam Smith with regard to taxes in general, which are drawn up with singular judgment and comprehension.

Smith's maxims.

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, or to the extent of government to which they are subjected at a great nation is like the expenses of management to the joint-tenants of a great estate." In the observation, 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 quantity 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 praiseworthy 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 inconvenience 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, McCulloch's ed. 1 vol. 8vo, p. 371.)

In a theoretical point of view these maxims are alike comprehensive and accurate; and it follows, were it practicable, that the burden of taxation should be made to press on individuals in proportion to their respective revenues.

A, with an income of L.1000 a-year, ought to pay ten times the tax paid by B, who has only L.100 a-year, and the latter ten times as much as C, who has only a pittance of L.10.1 The state has been ingeniously compared by M. Thiers to a mutual insurance company, where the payments by the members are exactly proportioned to the sums they have insured, or to their interest in the company. And so it should be with the subjects of government. It is established for the common benefit of all—of those who labour, whether with the hand or the head; of those to whom property has descended, and by whom it has been acquired; and is indispensable to their wellbeing and to that of every one else. And being so, it results that all individuals should contribute to its support according to their stake in society or to their means.

Practically, however, it is not possible to attain to anything like perfect equality in taxation; and provided no tax be imposed in the view of trenching on this principle, or of making one class or order of people pay more in proportion to their means than others, equality of pressure is of inferior importance. In this, as in most departments of politics, we have only a choice of difficulties; and what is absolutely right must often give way to what is expedient and practicable. It is the business of the legislator to look at the practical influence of different taxes, and to resort in preference to those by which the revenue may be raised with the smallest inconvenience. Should the taxes least adverse to the public interests fall on the contributors according to their respective abilities, it will be an additional recommendation in their favour. But in this, as in every similar matter, the salus populi should be the prime consideration; and the tax which is best fitted to promote, or least opposed to that great end, though it may not press quite equally on the different orders of society, is to be preferred to a more equal but otherwise less advantageous tax.

Were Smith's first maxim restricted to taxes on property or income, it would be as true in a practical as in a theoretical point of view. Equality is the essence of such taxes; and whenever they cease to be equal, they become partial and unjust. But in laying down a practical rule that is to apply to all taxes, equality of contribution is a minor consideration. The distinguishing characteristic of the best tax is, not that it is most nearly proportioned to the means of individuals, but that it is easily assessed and collected, and is, at the same time, most conducive or least opposed, all things considered, to the public interests.

The truth is, that the greater number of taxes, including, we believe, every one that is least injurious, are imposed without any regard to their equally affecting different classes. They consist of duties payable by those who use certain articles, or exercise certain privileges, and by those only. Taxes of this sort, though not proportioned to the abilities of the consumers, are neither partial nor unfair; and pro-

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1 It is perhaps needless to say, that the incomes of the different parties are supposed to be perpetual, or of the same duration.

General Observations on Taxation.

We may refer, in illustration of this statement, to the duties on malt, spirits, wine, and tobacco. These produce a very large annual revenue, and though some of them might, perhaps, be advantageously reduced, they appear, supposing them to be properly assessed, to be, in all respects, unexceptionable. Other duties of this description, such as those on saddle-horses, carriages, and livery servants, fall only on the more opulent classes. But this is not the case with the more productive duties, and it must be admitted that the largest portion of the revenue derived from them is paid by the lower and poorer orders. This, however, is not, as has been often alleged, a consequence of the latter being overtaxed, but of their being so very numerous that the produce of the moderate duties to which they generally contribute, invariably exceeds the produce of the heavier duties that fall principally on the richer classes. The duties now under consideration act as a species of improved sumptuary laws, having all the useful, with few or none of the injurious, influences of these regulations. The articles on which they are imposed are rarely, if ever, indispensable; so that the duties may be partially or wholly evaded by those who prefer exercising a little self-denial to making the increased exertion necessary for their payment. But in nine instances out of ten the influence of the duty is of a compound description, infusing at one and the same time a greater spirit of industry and economy into the contributors. A taste for spirituous liquors, by the idleness and dissipation to which it leads, and the sacrifice of the immense sums expended in its gratification, is most injurious to the labouring classes. And hence the duties on such liquors are probably the best of any; for while they bring large sums into the public treasury, they help to suppress vicious indulgences, improve public morals, and save the money of the poor.

But though it will, perhaps, be generally admitted that reasonable duties on spirits, tobacco, and such like articles, cannot be justly objected to, it may be contended, with some show of reason, that duties on necessaries, or on bread, butcher's meat, salt, tea, sugar, &c., are unjust and unfair, because of their being indispensable to the consumption of the poor as well as of the rich. The injury, however, which is done to the poor by reasonable taxes on necessaries, is much more apparent than real; for, as will be afterwards shown, wages, in the great majority of cases, are increased in proportion to the amount of such taxes. And it commonly also happens, that the quantity of an article used previously to its being burdened with a moderate duty, may be diminished, or something else be substituted in its stead, or the duty be defrayed by the exercise of greater economy or industry, without entailing any very serious privations on the consumers.

Without, however, insisting on these considerations, we deny that taxes on necessaries can be fairly objected to on the ground of their being unjust. They may, if carried to too great a height, be oppressive; and they may sometimes, perhaps, be inexpedient; but the charge of injustice is not one that can ever be truly made against them. Government has nothing to do with the means of the parties who buy taxed articles. It has done its duty when it has imposed equal and moderate taxes on the articles best suited to bear them. Providence has not been charged with injustice because the corn and other articles used indifferently by the poor and the rich, cost the one class as much as they cost the other; and when such is the case, how can it be pretended that governments, in laying equal duties on these articles, commit injustice? A rich man will of course pay taxes, and everything else, with less inconvenience than one who is poor. But is that any reason why he should be unfairly treated? or mulcted of a part of his fortune by being subjected to peculiarly high rates of taxation? Riches are an evidence of superior good conduct; for, in the vast majority of cases, they are the result either of their possessors having themselves been, or of their having succeeded to progenitors who were comparatively enterprising, industrious, and frugal. The distinction of rich and poor is not artificial. It originates in, and is a consequence of, differences in the character and economy of individuals. A government which should attempt to obliterate this uneradicable distinction by varying duties so as to increase their pressure on the more opulent classes, would be guilty of flagrant injustice. And would, by discouraging the exercise of those virtues which are most essential to the public welfare, do its best to sap the foundations and weaken the springs of national prosperity.

Although, however, it be no valid objection to a large class of taxes that they are not proportioned to the means of the contributors, it may be laid down as a general practical rule that no tax, whether it be proportioned to their means or otherwise, can be a good tax unless it correspond pretty closely with the last three maxims of Smith. The Old French great defect, for example, in the system of taxation in France under the old regime, did not consist so much in its inconsistence, magnitude, or in the vexatious manner in which it was collected, as in its inequality. Instead of the whole body of citizens contributing to the wants of the state in proportion to their respective abilities, the privileged classes, consisting of the nobility and clergy, or those who had the largest fortunes and engrossed every situation of power and emolument, were entirely exempted from all the most burdensome direct taxes, which were contrived so as to fall with undue severity on the other, or inferior classes. The latter were truly hewers of wood and drawers of water, a misera contribuens plebs. And it is no longer a question, that the disgust occasioned by the unequal pressure of the public burdens, the impatience of the feudal privileges of the nobility, and of the abuses connected with the venal, partial, and infamous administration of justice, 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 of Smith. The amount of the contribution is fluctuating and arbitrary, not fixed and certain. In despotical countries, the various agents of government are despotists in their peculiar spheres; and though 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 government, may be called upon to pay as much, or more, 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 support and extend itself under a far greater weight of equable and well-defined taxes.

The establishment of the warehousing system, or the warehousing-granting of liberty to the merchant, on payment of a moderate rent, to deposit imported goods in public warehouses, agrees with the third maxim. Under the king's lock and his own, without being obliged to pay the duties until he find it convenient to withdraw the goods for consumption, has made an important branch of our taxation correspond very closely with the third maxim of Smith; that is, it has made a large class of duties be levied at the time and in the manner most convenient for the contributors. Previously to the act of the 43d of George

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1 For a good account of the effects of the arbitrary nature of eastern taxation, see Volney, Voyage en Syrie, tom. II., cap. xxxiii., xxxvii. III. cap. 132, establishing this system, the customs duties on imported articles, which amount to an immense sum, had either to be paid at the moment when the goods were imported, or a bond, with sufficient security for their future payment, had to be given to the revenue officers. The hardship and inconvenience of an arrangement of this sort are obvious. Sureties were often 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, when perhaps the market was already glutted. Neither was this its only injurious consequence. For the duties being payable at once, and not by degrees, as the goods were sold for consumption, their price was raised by the amount of the profit accruing on the capital required for their payment. Competition, too, was diminished, because of the greater command of funds required to carry on trade under such disadvantages; and a few rich individuals were thus, in great measure, enabled to monopolize the business of importing commodities charged with heavy duties. The old plan 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 entrepôt. It also prevented the importation of most 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 drawback to the exporters of such as had paid the duty, 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 operation of the old system; and it was the object of the famous Excise Scheme, proposed by him in 1733, to make the importers of tobacco and wine deposit them in public warehouses, and to relieve them from the necessity of paying the duties chargeable on these articles till they withdrew them for home consumption.

Nothing can be clearer or more explicit than the statement made by Walpole, in vindication of his plan, when he submitted it to the House of Commons, and no doubt can now remain in the mind of any one, that its adoption would have been of the greatest advantage. But such and so powerful was the delusion generated in the public mind with respect to it, that its proposal nearly caused a rebellion. Most merchants had availed themselves of the facilities which the then customs' regulations 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 mal-practices, by making the public believe that it would be fatal to the commerce of the country. The efforts of the merchants were powerfully assisted by the spirit of party, which then ran very high. The 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 be subversive alike of the well-being 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 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 warehousing system, were very clearly pointed out 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 lasting was the impression made by the violent opposition to Walpole's scheme, that this signal improvement—the greatest, perhaps, that has been made in our financial and commercial policy—was not adopted till 1803.

The comparative facility and cheapness with which taxes may be collected should be particularly attended to in collecting their selection. The nett produce of a tax, or its produce after the expenses of collection are deducted, being alone applicable to national purposes, taxes which cost a great deal to collect impose a heavy burden on the people, for the sake of a small advantage to government. And hence they should be contrived, as Smith has stated in his fourth maxim, so as to take out, and keep out, of the pockets of the people as little as possible above what they bring into the public treasury. Sully states, in his Memoirs, that the expense of collecting a nett revenue of thirty millions of livres in France in 1598 cost the enormous sum of 120,000,000; or, in other words, that of a sum of 150,000,000 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 557,000,000 of livres was collected at an expense of fifty-eight millions, being about 10½ per cent.

The expense of collecting the public revenue of the United Kingdom, excluding the Post-Office, for the year ended 31st March 1857, amounted to £4,081,1½ per cent. on the gross produce. The portion raised in Ireland is collected at a much greater proportional expense than that raised in Britain. Most part of this excess of expense must be ascribed to the different situation of the two countries; but a good deal is owing to the more defective system of taxation which, till recently, was established in Ireland, and perhaps, also, to the greater corruption of the officers. The difference in the cost of collecting the post-office revenue of the two countries is the greatest.

Taxes may be collected by officers employed by government for that purpose; or government may let them in collecting farm to individuals for a rent certain, giving to the lessees or their servants power to collect 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 well defined, and may be collected without requiring any very minute inspection of the private concerns of individuals, it may generally be farmed with advantage. In such cases the proceedings of the farmers do not excite the prejudices of the contributors; and the greater skill and economy with which businesses are usually conducted by individuals who carry them on for their own behoof, would most likely enable the farmers to pay a larger sum to government on account of the tax, than it would have much chance of receiving from its own agents. But when a tax is not well defined, or requires a close examination of the affairs of individuals to assess it fairly, it should be collected by the servants of government. It is probable, indeed, that such tax might be more productive were it farmed; but this, though an important consideration, is not the only one to be attended to. All taxes which occasion any investigation into the private concerns of the contributors are necessarily unpopular; and this unpopularity will be sure to be greater when these investigations are conducted by parties who have a personal interest in prosecuting them with the greatest strictness, than when they are conducted by the

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1 The compulsory nature of the project was a mistake; had it been permissive merely (as is now the case), its beneficial influence would have been about equal, and the opposition, no doubt, a good deal less. agents of government, who in most cases derive none, and in all cases only a very slender benefit from the increased productivity of the tax. The mass of the people would 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 who are universally disliked. We admit that these suspicions and complaints are in most cases destitute of foundation. The farmers in enforcing payment of a tax must proceed according to the provisions of the law imposing it; and if its pressure be unequal or severe, or the mode of its collection vexatious and troublesome, the fault lies with the government, and not with the farmers. But, however groundless, the prejudice against the latter is one which will always exist, and should be respected. Perhaps we overrate its influence; but we have little doubt that an income-tax of 5 or 6 per cent., let in farm, would be generally considered as more oppressive and vexatious than a tax of twice that amount collected in the ordinary way. Although, therefore, we cannot concur with Smith in his opinion that all taxes should be collected by the officers of government (p. 409), still less can we concur with Bentham, who has endeavoured to prove that farming is in every case the preferable mode of collection. (Théorie des Peines et des Récompenses, tome ii., p. 203.) Taxes on stamped paper, houses, windows, horses, carriages, &c., and perhaps also the customs-duties, might be advantageously collected by letting them to farmers; but any attempt to farm taxes on income, excise-duties, 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.

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 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, tom. 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 George III., 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.

It is difficult, for the reasons stated in the previous section, to regard such taxes as are continuously paid out of taxes capital as permanent sources of public income. Capital being the fund which maintains and assists those who are engaged in the great work of production, whatever tends to diminish its amount tends at the same time to diminish the means of employing and facilitating labour. And this being the direct and ordinary effect of taxes on capital, they should be regarded, like the treasure accumulated in the temple of Saturn at Rome, as an extraordinary resource, to be used only in cases of the greatest emergency. The misapplication and destruction of the means of production which such taxes, provided they were carried to any considerable extent, could hardly fail to occasion, would not only defeat any attempt to render them permanent, but would, most likely, by impoverishing the contributors, make other taxes comparatively unproductive.

It is not from capital, therefore, but from revenue, that all permanent taxes should be derived. And as the revenue of all individuals not dependent on charity must be drawn from one or more of the three sources of rent, profit, or wages, it is plain that all taxes which do not fall on capital, must, however imposed, ultimately fall on one or other of these sources. Without further preface, therefore, we shall proceed to trace the incidence and effect of taxes laid directly on rent, profit, and wages. When we have ascertained the way in which they operate, it will be comparatively easy to investigate the effect of taxes meant to fall equally on the various sources of income.

Sect. I.—Taxes on Rent.

a. Taxes on the Rent of Land.—Adam Smith held that taxes on the rent of land, taking the term in its popular rent and broadest sense, fell wholly on the landlords. But this is an error. The sum paid to the landlords for rent properly so called—that is, for the use of the natural powers of the soil, might be entirely swept away by a tax, without their having it in their power to throw any portion of the burden on any one else; but in so far as the rent of land consists of the interest of capital expended on improvements or buildings, it could not be taken from the landlord by a tax on rent.

1. Practically it is impossible to separate the gross rent of land in an old-settled and highly improved country into its component parts, or to distinguish between the sums distinguished paid for the use of the soil and for the capital expended upon it. But supposing this separation to be effected, then, as the former portion, or that paid for the soil only, for the use forms a surplus over and above the cost of production, it of the soil might be entirely carried off by a tax, without affecting any and for the class other than the landlords. The heaviest tax on capital expended would not raise the price of raw produce; since nothing can affect its price which does not affect the cost of its production. Now, the real rent of land is extrinsic to, and independent on, that cost, and cannot, indeed, have any existence until the cultivators have been fully indemnified for the expense incurred in bringing produce to market, including the ordinary rate of profit on the capital vested in buildings, fences, &c., and in seed, labour, and implements. The prices of all sorts of farm produce would consequently, continue unaffected, though a tax were imposed absorbing all the real rent of land—that is, the sum paid for the soil only. 2. It would not, however, be possible for government, even if it were disposed to make the attempt, to appropriate, by means of direct taxes, the gross rent of the landlords, or the total sum paid them, as well for buildings, fences, drains, &c., as for the inherent powers of the soil. And in whatever degree the rent of land may consist of a return to, or interest upon, the capital laid out upon it; in that degree would a tax on it raise the price of raw produce, and fall eventually on the public.

Payments made to landlords for the use of the natural capacities or powers of the soil, or for unimproved land, depend entirely on their being its owners; whereas such further payments as may be made them, for or on account of improvements upon the land, do not depend on that circumstance, but on their being producers—that is, on their having capital employed in agriculture. And it is easy to see that such taxes as affect the profits of this capital must necessarily also affect the price of farm produce. Suppose, for example, that the gross rental of a farm is L500 a year, a half, or L250 thereof, being really paid as interest of capital laid out on improvements. If, in such case, a tax of 10 per cent. were laid on rent, only a half, or L25, of this tax would be permanently paid by the landlord. In the first instance, no doubt, the whole L50 would fall upon him; but L25 of this payment would, it is plain, be a deduction from the profits of the capital vested in improvements, and not from rent properly so called. And landlords being thus placed in a comparatively unfavourable situation, no more capital would be expended upon the soil, until the price of corn, and other raw produce had been raised, by the gradual diminution of its quantity, or the increase of demand, so as to place them in the same situation as other producers—that is, until they obtained the ordinary rate of profit from the capital laid out on improvements.

It appears, therefore, that although it might be possible to draw into the coffers of the treasury, by an exclusive tax, all that portion of the rent of land which is paid for the use of the original powers of the soil, the other portion, or that which is paid on account of improvements made on it, would not be permanently affected by an exclusive tax; and could, speaking generally, only be taxed to the same extent that the profits of capital employed in other industrial departments are taxed.

In a practical point of view, taxes on the rent of land are among the most unjust and impolitic that can be imagined. It is, as already stated, quite impossible to separate rent into its elements, or to say how much is paid for the soil and how much for improvements. No two agriculturists ever arrive, in any case of this kind, unless by accident, at the same conclusion; and the best judges affirm that, generally speaking, the distinction is utterly impracticable. When, therefore, a tax is laid on rent, it is necessarily proportioned to its gross amount, or to the total sum paid to the landlords, without regard to the sources whence it is derived. But any such tax has always been, and will unavoidably continue to be, a formidable barrier to improvements. For the return paid to a landlord for capital expended on the soil being included in the rent, a tax on it discourages or prevents all fresh outlays of capital, lest they should occasion a corresponding increase of the tax. The injustice of this impost is not less obvious. Two landlords are each in the receipt of an equal sum, say L1000 a year; the estate of one consisting of naturally fine land, on which but little capital has been laid out; and that of the other of very inferior land, on which a great deal of capital has been expended. A tax on the former merely abstracts a portion of what is, in fact, the spontaneous gift of nature, and costs nothing; whereas a tax on the latter abstracts a portion of what has been mainly produced by the labour and industry of man. Hence the injustice and oppressiveness of taxes on rent. We doubt, indeed, whether it be possible to suggest any tax more decidedly at variance with every sound principle, or more adverse to the progress of improvement.

The circumstance of rent unavoidably arising in the progress of society, has inclined some speculative individuals to think that it would be good policy for the governments of countries like the United States, which possess large tracts of fertile and unappropriated land, to retain it in property, letting it by public auction, in such portions, itself and for such number of years, as might be deemed advisable. This, however, is a very questionable position. The probability seems to be, that it would hinder the undertaking of many of those expensive improvements in drainage, and in the construction of houses, roads, and bridges, the formation of plantations, &c., necessary to the full development of the productive energies of the soil, that are entered into by individuals who have the absolute property of the land, and can bequeath it to their successors. It is true that these consequences might be, in part at least, obviated by increasing the length of the leases, so as to encourage a liberal outlay of capital. But, on the whole, there can be little, if any, doubt, that a right of private property in land is the best stimulus to its improvement. And it may further be observed, that where such right is established, the landlords prescribe and enforce such conditions for the management of the land, as, speaking generally, are effectual to hinder it from being worn out and impoverished previously to the expiration of leases. But it is easy to see that no such power of regulation and superintendence could be safely intrusted to government officers. And owing to the disinclination to make costly improvements on lands that are not one's own, and the deterioration of the land, originating in the want of the superintendence of landlords, there can be little question that a country would lose incomparably more in respect of wealth by adopting the project referred to than it would gain; at the same time that it would exert a most unfavourable influence over the conduct and character of the population.

And apart from these considerations, it is, at all events, clear that, wherever a right of private property in land is established, any attempt to impose peculiar taxes on its owners would subvert every principle of justice. All classes are bound to contribute, in proportion to their means, to the wants of the state; but the sources whence these means are derived are immaterial.

The principal part of the revenues of India, and of all Eastern the great monarchies of Asia, has, in all ages, been derived land-taxes from the soil. The land has been mostly held by the immediate cultivators, generally in small portions, with a perpetual and transferable title; but under the obligation to pay annually the government demand, which might be increased at the pleasure of the sovereign, the real proprietor of the soil. And, as might have been anticipated, this demand has everywhere been carried to an extravagant height, and is the principal cause of the poverty and barbarism in which the countries referred to have been and continue to be involved.

Lord Cornwallis, when Governor-General of India, endeavoured to obviate some of the defects of this system by making the land of Bengal private property. But though the Indian principle of the measure which he introduced was unexceptionable, the perpetual payment or quit rent which he imposed on the land was a great deal too heavy, and the interests of the ryots or cultivators were sacrificed in an attempt... Since this epoch attempts have been made in different parts of India to improve the methods of letting land to the cultivators, without, however, relinquishing its property. Some of these have succeeded better than others; but they all labour under the incurable defect of requiring too much interference and surveillance on the part of the agents of government, at the same time that the rents are everywhere much greater than they ought to be. And hence there is little, or rather no prospect of any real improvement being effected in India without an entire change in the present system of holding land. The grand object should be to give the ryots or cultivators a right of property in their holdings, and to absolve them from all tutelage or dependence on the collectors or other functionaries of government. But the difficulty is to reconcile a policy of this sort with the maintenance of a sufficient amount of revenue. Probably, on the whole, the better plan would be to assess a low, fixed, perpetual rent on the land; and then to sell it in convenient portions, as opportunities offered, to private parties. We have been assured, by gentlemen well acquainted with India, that a plan of this sort might be adopted without any obstruction that might not be easily surmounted. It was approved by the late Mountstuart Elphinstone, than whom none was better qualified to give an opinion on such a point. And were it once introduced and acted upon, it would do ten times more than anything else that appears practicable to promote the improvement of India, and the wellbeing of the population.

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 rude valuation of the lands in the kingdom having been made in the previous year. It resulted from it that a tax of one shilling on the pound of the ascertained rental afforded an annual clear revenue of L500,000. No change has since been made in the valuation of 1692. The tax, which was at first an annual one, has been generally as high as four shillings 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 those attached to the Stewarts. 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 tax, and in others to increase them.

b. Taxes on the Rent of Houses.—The principal part of the rent of houses usually consists of the return to the capital laid out in their construction, or, as it is more commonly termed, of building rent, a small part only, except in comparatively advantageous situations, being ground rent, or rent payable for the soil on which they are erected. It is evident, therefore, from the principles already established, supposing the supply of houses could be as easily diminished and increased as the supply of farm produce, that a tax on their rents would fall on the occupiers and ground landlords, in the proportion that the return to 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, a longer or shorter period would elapse, dependent principally on the growth of population and the demand for houses, before the builders would be able to relieve themselves of a tax on them. 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, it is clear that in the end the tax would fall wholly on the occupiers and ground-landlords in the proportions already mentioned.

Inasmuch as a tax on houses may in most cases be readily and fairly assessed, and as it cannot be evaded, and does not in anywise interfere with the plans of the builder, it would seem, while kept within due bounds, to have most part of the qualities that are desirable in a tax. It is certainly in all respects preferable to a duty on windows, which, however, has sometimes been substituted in its stead. The builders and proprietors of houses subject to the latter endeavour to reduce its amount by restricting the number of windows, though in doing so they seldom fail to make the houses gloomy, uncomfortable, and detrimental to the health of the occupiers. In Great Britain the existing house-tax affects those houses only that rent for L20 a year and upwards. But there is no good or even plausible reason for this restriction. The tax should undoubtedly extend to all houses; or if any exceptions be made, they should be confined to houses worth under L4 or L5 a year.

Sect. II.—Taxes on Profits.

A tax proportioned to the nett profits realized in all departments of industry, provided it could be imposed, 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 tax on all profits of farmers or manufacturers, an equal 5 or 10 per cent. would be laid on those of merchants, ship-owners, and other employers of capital. It is evident in such case that no individual could hope to evade the burden of the tax by changing his business; and it would not, therefore, occasion any transfer of capital from one employment to another. Neither would it occasion any variation in the supply and demand of commodities, or in their money prices. 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 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 would neither lessen the capital of the country nor the power to purchase its produce, it is obvious it would not occasion any variation in the 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

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1 This error appears to have been very recently repeated in Oude. 2 "As regards Indian measures, he advocated in stronger and more decisive language than was customary with him the gradual liberation of all land from government rent tenure, and the conversion of all into fee-simple; as far as government was concerned, he thought all lands belonging to government, whether under cultivation or not, should be sold in fee. He thought that taxation by rent, though originally the only practical resource—a necessity adopted by us at first as the only prevailing method—was in principle wrong, and became inappropriate as the country advanced in prosperity,—that the system stagnated the sources of wealth and the working of capital. He conceived that a cautious but definite course should be pursued of abolishing the relation of landlord and tenants between the Indian Government and its subjects, and that other sources of taxation should be gradually resorted to." (Letter in The Times, December, 1859.) consequently to feed and employ additional 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 their being balanced by increased exertion and economy, the ultimate and necessary effect of such taxes, is to check the accumulation of capital and the progress of population.

But it is material to bear in mind, that these conclusions are true only on the supposition that the tax is assessed so as to affect all profits to precisely the same extent. Practically, and in fact, however, this is an impossible condition. There are no means whatever by which to measure the rate of profit in different businesses, or even in any single business. Generally, indeed, it can only be guessed at, even by those engaged in carrying them on; and were an attempt made to tax profits, the great majority of individuals would underrate their amount, and, in the far greater number of businesses, it would be quite impossible for government officers to come to anything like an accurate conclusion as to their magnitude. It would, in consequence, be necessary to adopt some general rules for assessing the tax; and the vice of these is, that, being bottomed on supposed averages, they invariably make those engaged in unsuccessful speculations pay a great deal too much, while those engaged in peculiarly successful speculations pay only a comparatively small portion of what they should pay were they fairly assessed. In truth and reality, profits never have been and never can be taxed in proportion to their amount. And though it be important to know how a tax on profits would operate were it equally imposed, it must be kept in mind that this is altogether impracticable, and that the supposition is made merely to illustrate a principle.

A tax laid only on the profits of 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 an exclusive tax of 10 per cent. is laid on the profits of the shoemaker. The slightest consideration will show that such tax must make an equivalent addition to the price of shoes; for, if it did not, the shoemakers would gain less profit than those who carry on other businesses, and they would, in consequence, gradually withdraw from their employment until, through the diminished supply of shoes, their price had risen so as to yield them the average rate of profits, exclusive of the tax. For the same reason, exclusive taxes on the profits of hatters, clothiers, farmers, &c., would make proportional additions to the prices of hats, cloth, agricultural produce, &c. In these cases the producers have the power to raise prices, and consequently to throw the burden of the tax on the consumers; because they may withdraw from businesses in which profits are taxed, and engage in those in which they are not taxed. But were the profits of all sorts of businesses equally taxed, the producers would be deprived of this resource, and would have no means of raising prices or evading the tax.

It is easy to see, from the principles already established (provided they could be carried out in practice, which is rarely the case), that an equal tax on the profits of agricultural and other capital would not occasion any diminution of rent. When farmers are taxed equally with other producers, they have no motive 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, would it be affected by such tax. But if the tax, instead of being general and equal, were laid exclusively on the profits of the farmer, it would cause, provided foreign corn were excluded, an increase of rent. Rent, as has been seen in the preceding section, never enters into the cost of producing that portion of the required supply of raw produce which is raised by the agency of the capital last laid out on the land. It is impossible, therefore, that its A tax on producers could indemnify themselves for any burdens the profits laid on them by making an equivalent deduction from rent, of the far. And hence, when a tax is laid exclusively on the profits mer only of agricultural capital, the price of raw produce would in the end 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 that rise of price which is required, after a tax is imposed on profits, to remunerate those who raise corn that pays no rent, extends to all varieties of corn, however produced, it necessarily raises rents. Thus, on the 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.2 a quarter, the money rent of the first quality would be L.80, of the second L.60, of the third, L.40, 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.2 to L.2, 10s. a quarter, it is plain the rent of the first quality of land would be raised to L.100, the second to L.75, the third to L.50, 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 to which considerable importance has been attached. "That the profits of the farmer," says Ricardo, "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.)

Ricardo should, however, have added, that this statement is not true even in theory, unless foreign corn be excluded, or admitted under a duty equal to or exceeding the amount of the tax on the profits of the farmers. If foreign corn were freely admitted, or burdened with a less amount of duty than is laid on the agriculturists, it would follow, inasmuch as the market is in part supplied by parties not subject to the tax, or to an equivalent impost, that prices would not rise in proportion to its amount. Under these circumstances, the occupiers of the poorer land would inevitably be driven from their business, and rents would be in consequence proportionally reduced. And hence, in the event of a peculiar tax being imposed on the land, it is necessary, if we do justice to all parties, that an equivalent duty be laid on the importation of foreign agricultural produce.

These, however, being mere theoretical conclusions, are much modified in practice. Thus, it is evident, supposing the insuperable obstacles in the way of fairly assessing the profits of the farmers to be overcome, that the influence of a tax on them would not be nullified, or even materially affected by a duty on imported corn. The operation of the latter is indirect, remote, and in some measure doubtful; whereas the operation of the former is direct, immediate, and certain. And the desire to escape the pecuniary payment which it involves never fails, by generating an indisposition to undertake improvements, to be prejudicial alike to the landlords and the public. Those who, in matters of this sort, neglect or overlook these and similar considerations, may arrive at conclusions which, though correct enough under the assumed circumstances, are not really, in one case in ten, of the smallest value in a practical point of view. 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. But the difficulties in the way of estimating these from the amount of rent, or of the produce that had been raised, are too obvious to require being pointed out; and to avoid them, the French authorities were accustomed to resort to a different, and, if possible, a still more objectionable criterion, that is, to the amount of the capital or stock employed by the farmers. It is, however, all but needless to add, that it is practically impossible to ascertain, in one case in a hundred, the amount of such stock or capital with anything like precision. And as the decision really depended on the judgment or caprice of the assessors, they could at pleasure increase or diminish the burden of the tax. And besides the inequality, and consequent injustice, of the assessment, it tempted the farmers to counterfeit poverty, even when they were not poor; to employ the smallest possible quantity of capital; and to abstain from making any considerable or expensive improvement. The taille was also injurious in another respect; for, as it did not affect 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 anything 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 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, however occupied. It amounts, according to the best authorities, to from about a seventh to a fifth part of the net produce of the land—that is, of its produce, exclusive of the expenses of cultivation, but inclusive of rent. It is assessed with as much fairness as possible, and is moderate compared with the various charges with which landed property is burdened in most other countries. No doubt it is a very great improvement on the old system; but its injurious influence is, notwithstanding, strongly felt, and is dwelt upon by all writers on the agriculture of France.

On the whole, taxes on land, whether proportioned to its rent or its produce, are about the most impolitic that can be imagined. It may, and indeed frequently happens in rude states of society, or in countries where the arts are little advanced, or where the raising of raw produce forms the principal business, that land-taxes are the only or principal available sources of income. But wherever they are not the result of a low state of civilization, or of imperative circumstances, as in India and other eastern countries, ancient Rome, &c., they bear unquestionable evidence of the ignorance and short-sightedness of those by whom they have been imposed. They cannot be fairly assessed; and though this preliminary difficulty were (as it never will be) got over, the desire to escape or elude their pressure, and the practices to which it leads, are such as to render them in the last degree injurious. There are, in truth, but very few cases in which direct taxes, whether on fixed property or anything else, should be resorted to. They rarely fail to obstruct improvement, to promote fraud, and to retain the population in the barbarism in which they most commonly originate.

Sect. III.—Taxes on Wages.

The ordinary effect of taxes on wages, or on the commodities necessary for the subsistence of the labourer, is to cause a corresponding increase of wages.

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; that is, between the rate required to enable the labourers to subsist and continue their race, and the market rate, or the rate paid them at any particular period.

The natural or necessary price of labour, like that of everything else which may be indefinitely increased or diminished, is determined by the cost of its production, labour. 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 amount of money he receives as wages, but on the quantity of food, necessaries, and conveniences essential to his support which that money will exchange for or buy. The natural rate of wages depends, in fact, on the cost of 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 seldom be far separated. Whatever may be the cost of the latter, work-people must always receive a quantity sufficient to enable them to support themselves and continue their race. If wages fell below this necessary level, they would be left destitute; there would, in consequence, be a rapid diminution of their numbers, which would necessarily raise wages; and if, on the other hand, wages were to rise considerably above this necessary level, a proportional stimulus would be given to population, and the increase of hands would, in the long run, lower wages.

The opinion of those who contend that the rate of wages does not depend on the cost of the subsistence of the labourers, but on the demand for their services compared with their numbers, has obviously originated in their confounding the principles which determine the market price of labour, at particular periods, with those which determine its natural or necessary price. It is undoubtedly true, that the market price of labour at any specified term depends on the state of the supply as compared with the demand; but it is easy to see that the supply would not, and, indeed, could not, be continuously brought to market unless the rate of wages were such as sufficed to maintain and bring up labourers—that is, if we may so speak, unless the cost of their production were paid. From whatever point of the political compass we may set out, this is the principle to which we must always come at last.

To illustrate its operation, suppose that, owing to a scarcity, the price of the quarter loaf rises to four or five shillings: it is plain, inasmuch as the same number of labourers would be seeking for employment after the rise as before, and as a scarcity would not increase the demand for labour, that wages would not be advanced; and the labourers being, in consequence, forced to economise, the rise of price would lessen consumption, and distribute 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, or by

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1 For a farther account of the taille, the reader is referred to Forbonnais, Recherches sur les Finances de France, tom. I., p. 107; Wealth of Nations, p. 355; and the treatise On Taxation by the author of this article, 2d ed., pp. 77-88. a tax, and that it will be permanent, the question is, will wages continue at their former rate, or will they rise? And in this case it is all but certain that they will 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, could barely subsist, would be reduced to a state of destitution, or rather, we should say, of absolute famine. Under 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, the amount of the population, or the ratio of its increase, or both, would in all likelihood be diminished; and this diminution would continue till, owing to the smaller supply of labour in the market, wages were raised to their natural rate; that is, as Adam Smith has defined it, to such a rate as would enable the labourers 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."

If a specific quantity of certain articles were necessary to the subsistence of the labourers, it would directly follow that the rate of wages could not be reduced for any considerable period below what would procure these articles. But there is no such absolute standard of natural wages. Their amount depends in great measure 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 bread and beef. In one country it is discreditable for the lower classes 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; 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 rate of wages has been regulated at different periods in the same countries, been less fluctuating and various. The articles which custom and habit render 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 wages has happily been raised, and the poor have been taught to form much more elevated notions respecting the quantity and the species of the articles which it would be discreditable for them to be without.

The natural or ordinary 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 considerable duration, be sunk below its contemporary natural rate, it is no less true that the one has a tendency to rise when the other rises, and conversely. The reason is, that the supply of labour can neither be speedily increased when wages rise, nor speedily diminished when they fall; and it is on this circumstance that the powerful influence which fluctuations in the market rate of wages have over the condition of the labouring classes principally depends. If the supply of labour were suddenly increased when wages rise, that rise would be of little or no advantage 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 necessaries and conveniences. And, on the other hand, if the supply of labour were suddenly diminished when wages fall, that fall would merely lessen the number of labourers, without having any tendency to lower the habits or the condition of those who survived. But in the actual state of things no rise of wages can be counterbalanced by an increased supply of workmen coming into the market until some sixteen or eighteen years after it has taken place; for there are few 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 an improved situation. He has a greater supply of wholesome food; he has better clothes and a better habitation; he is rendered more attentive to cleanliness; and as he rises higher in the scale of society, he learns to use more prudence and circumspection in forming 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 proportionally augmented.

But it is equally impossible rapidly to diminish the disadvantageous number of labourers when wages fall. Such diminution cannot, as already stated, be effected otherwise than by the fall of operation of increased mortality, or by a decrease in the wages, number of births, or both. But unless the fall were sudden and heavy, it would require a considerable period to render the effects of an increase of 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 momentum as before. Nor would the proportion of births to the population be materially diminished, until the misery occasioned by the restricted demand on the one hand, and the undiminished supply on the other, had been generally and widely felt. But if the country, instead of being stationary, were increasing in wealth and population, the result would be different, and a fall of wages would then be obviated with comparatively little inconvenience to the labourer.

In whatever way, therefore, wages may be restored to their natural level, when the market rate declines, whether it be by an increase of demand, by an increase of industry, or by a decrease in the number of births, it can never be the work of an instant. More or less time is always required, in which to allow the new circumstances to operate, and the new habits to be formed. And there is, in consequence, an obvious risk, if the fall of wages be considerable, lest the opinions of the labouring class, in regard to their condition and place in society, should be lowered in the interval. When wages are reduced, the poor are obliged to economise; and should the coarse and scanty fare, which may in the first instance be forced upon them by necessity, become congenial from habit, there would be no longer a motive to occasion increased exertion, or the exercise of a greater degree of moral restraint, so that the natural rate of wages would be reduced. This, however, is seldom or never the case in improved and prosperous communities. In these the labourers are always in the enjoyment of various conveniences and luxuries; and they generally contrive, by refraining from some of them and becoming more industrious, to meet and defeat a fall of wages, or to hinder it from having any permanently disastrous influence over their condition.

It is true, indeed, as is stated by Malthus, that to whatever extent wages fall, the labourers have the means, in every state of society, of raising them in the end, to their former, or even to a higher level; for if they understock the labour market, wages will continue high, notwithstanding the means of employment should be diminished; while, if they overstock that market, wages will be low, how much soever those means may be increased. But a mechanical theorem of this sort is more easily laid down than acted upon. It is very difficult to change the habits of a people with respect to marriage, and material alterations in this respect are seldom brought about except by slow degrees. Prudential considerations always operate with the greatest force on the middle and upper classes. Wherever, indeed, the bulk of the people are depressed and ignorant, these considerations have little or no practical effect. But in countries like England, Scotland, Holland, and the United States, where they are for the most part well instructed and well off, they exert a powerful influence over all but the very dregs of the population.

These considerations are of paramount importance in estimating the influence of taxes on tea, sugar, tobacco, and other articles consumed by the labourer. That they are paid by him, in the first instance, is obvious; but the question is, are they not really reimbursed to him, partly by increased exertion and economy, and partly by a rise of wages? And that such is really the case, is, we think, sufficiently evident. Sugar and tea having become necessaries, and the taste for tobacco, and, we regret to add, spirits, being generally diffused, an increase in their price, occasioned by a tax, operates in the same way, though not perhaps to so great an extent, as an increase in the price of bread, of houses, or of clothing; that is, it tends to make the labourers more thrifty, and less improvident in entering into matrimonial connections; and in this way it contributes to improve their habits, and to raise wages. Hence, it is found, that their condition is rarely, if ever, changed for the worse by the imposition of reasonable duties on the articles in greatest demand amongst them. The duties referred to above have been largely increased in Great Britain since the American war, and yet the condition of the poor has been greatly improved in the interval. And though other causes have co-operated to bring about this desirable result, there can be no doubt that their improved circumstances and conduct are, to some considerable extent, owing to the greater economy and prudence inspired by the increase of taxation.

The like results are seen in other countries. The lower classes are extremely well off in Holland, and yet they are apparently very heavily burdened with taxes. We say apparently, for, owing to the circumstances now explained, their habits have been improved, and their wages raised, through the agency of these taxes.

The truth of these statements will appear still more obvious, if we compare the condition of the lower classes in England and Holland with their condition in the great continental monarchies, in which the revenue is principally derived from direct taxes on lands, houses, trades, &c. Their superior wellbeing in the former is a fact not to be denied. They are better lodged, better clothed, and better fed; and though they work harder, that has no injurious influence over their health. On the contrary, the chances of life in England are at least 33\(\frac{1}{2}\) per cent. greater than in the countries referred to; and such, but for its humidity, would also be the case in Holland.

No doubt, therefore, there is a vast deal of fallacy in the statements so frequently put forth in regard to the operation of taxes laid on the articles principally consumed by the working classes. Their mischievous influence has been grossly exaggerated; sometimes through ignorance, and sometimes, and more frequently perhaps, from less excusable motives. In the great majority of cases, these taxes, provided they are kept within reasonable limits, and judiciously assessed, are counterbalanced, or more, by a corresponding rise of wages, or by increased industry and economy, or both. And instead of being injured, the condition of the labourer has, in truth, been materially improved through their instrumentality.

The want of providence, and the dissipated habits that are, unhappily, so very widely spread, are the real sources of the destitution and misery that prevail among the poor. It is mere driveling, or worse, to ascribe them to taxes on gin, tobacco, or beer, or even to those on tea and sugar.

Adam Smith has said, that "while the demand for labour and the price of provisions remain the same, a direct tax on Smith's wages of labour can have no other effect than to raise opinions in them somewhat higher than the tax" (p. 390). And he further supposes, that to whatever extent the wages of manufacturing labour may be increased by a tax, the burden will not fall on the manufacturers or merchants, but on the consumers, by an increase in the price of commodities; and that to whatever extent the tax may raise the wages of agricultural labour, it will not really fall on the farmer or the consumer, but on the landlord.

None of these conclusions are correct. The immediate effect of a direct tax on wages does not depend on the circumstance of the demand for labour continuing stationary, but on the mode in which the produce of the tax is expended. And the principles established in the article Political Economy show, that when wages are raised, either through their being taxed, or otherwise, that rise does not tend to raise the price of commodities or lower rent, but forms a deduction from that portion of the produce of industry that would otherwise go to the capitalists and other employers of labour.

To illustrate its operation, suppose that a tax of 10 per cent. is imposed on wages, or that all labourers are made to hand over 10 per cent. of their earnings to collectors appointed by government. Since no part of this tax is taken from the capitalists, it cannot in any way diminish their means of employing labour; and its effect will entirely depend on the mode in which it is expended. If the produce of the tax be laid out on additional troops or sailors, it is easy to see that it could not be productive of any immediate injury to the labourer; for were such the case, the agents of government would enter the market for labour with means of purchasing, derived, not from the capitalists, but from the labourers themselves; and in consequence of this greater competition, wages would be raised in exact proportion to the additional means in the hands of government, or, in other words, to the amount of the tax. An example will render this apparent. Suppose that the work-people in a particular country receive as wages L2,000,000 a year; and suppose further that government wish to increase the military force, and that to get the means of doing so, a tax of 10 per cent., or of L200,000, is laid on wages. The consequence will be, that the capitalists will still come into the market for labour with the L2,000,000 employed by them in the payment of wages, while the agents of government will also come into the same market with the L200,000 derived from the tax; so that, between the two, wages will be raised in proportion to the tax.

But if the tax were not laid out, as has been supposed, in paying the wages of additional troops, but in increasing the pay of those already embodied, or of the other functionaries employed by government, its effect would be different. In this case there would be no additional demand for labour. The individuals receiving the tax would, indeed, have a greater demand for the produce of labour; but their greater demand being merely equivalent to the diminished demand of the labourers by whom the tax had been paid, would make no real addition to the total demand of the country. And thus it appears, that when the produce of a direct tax on wages is employed to hire fresh individuals for the service of government, it raises, by taking so much labour out of the market, the price of the remainder in proportion to its amount. But when its produce is employed to increase the wages of public functionaries or troops already embodied, the quan- Direct Taxes.

tity of labour in the market is not lessened, and it must in consequence fall, in the first instance, wholly on the labourers. But, even in this last case, it is most probable that a tax on wages would not continue to be entirely or principally paid by them. Such tax, when first imposed, could hardly fail, by lessening the comforts, and perhaps also the necessaries, of the labourer, to stimulate economy and check the progress of population; and in this way its deleterious influence might be eventually neutralised.

But it is needless to dwell on theoretical and impossible questions of this sort. No government has ever attempted to lay direct taxes on wages; and were such an attempt made it would be sure to fail, insomuch as the tax could neither be assessed nor collected. It is otherwise, however, with indirect taxes on wages—that is, with taxes on articles consumed by work-people. Such taxes may, when the articles on which they are laid are judiciously selected, and they are kept within proper limits, be easily imposed and collected. And we have seen that, while they produce a large revenue, they improve the habits, increase the energies, and generally raise the condition of the class.

Impossible to estimate the amount of taxes falling on the working people.

It has sometimes been attempted to divide the population into classes, and to estimate the amount of taxation falling on each class, and on the individuals comprised in such classes. But conclusions of this sort, even when arrived at with the greatest care, are little better than mere rough guesses. It is not possible to draw any distinct line of demarcation between the different classes of the community, nor, supposing that to be done, to compute the income of each class. And though these results could be learned with considerable precision, the considerations now laid before the reader show that the information would be worth little or nothing. For it would be impossible to say, or even conjecture, with any considerable show of probability, how much that taxation, of which we were endeavouring to estimate the apparent influence, may have raised the incomes of the lower and depressed those of the upper classes. In such a vast and complicated system no one needs attempt to estimate the action or influence of any single portion as if it were separate and independent; and it were equally vain to attempt to trace and exhibit the reciprocal influence of the different parts of the machine on each other.

Having thus endeavoured to set before the reader the effects that would most likely result from the imposition of taxes separately affecting rent, profits, and wages, we shall now briefly inquire into the effects resulting from the imposition of a tax proportioned to the incomes of individuals.

Sect. IV.—Taxes on Income.

The reader may perhaps be disposed to regard this section as superfluous. All incomes being derived from rent, profit, or wages, it may seem that the previous discussions have exhausted the subject; and that, to estimate the operation of the tax in any particular instance, we have merely to ascertain the source whence the income of the party is derived, and then to apply the principles already laid down. But this would be a fallacious conclusion.

Taxes on professional incomes, or on the wages of professional men, differ widely in their operation from taxes on the wages of common labourers. And besides this, there are many nice and difficult questions to be examined before we are in a condition satisfactorily to appreciate the operation of taxes on income.

In considering this question, we may begin by admitting that an income-tax is, at first sight, apparently the fairest of all taxes. It seems to make every one contribute to the wants of the state, in proportion to the revenue which he enjoys under its protection; while, by falling equally on all, it occasions no change in the distribution of capital in the natural direction of industry, or in the prices of commodities. It were much to be wished that any tax could be imposed having such effects; but we are sorry to be obliged to state that none such has hitherto been discovered, and those who believe that they may be expected to result from the imposition of taxes on income are very wide indeed of the mark. An income-tax would, no doubt, have the supposed effects, were it possible fairly to assess it. But the practical difficulties which hinder this being done are not of a sort that can be overcome. So much is this the case that taxes on income, though theoretically equal, are, in their practical operation, the most unequal, oppressive, and vexatious of any that it is possible to imagine.

The difficulties in the way of assessing income are of two sorts:—1st, The difficulty of ascertaining the incomes of different individuals; and, 2d, Supposing them to be known, the difficulty of laying an equal tax on incomes derived from different sources.

1. It would be useless to dwell at any considerable length on the first of these heads. Incomes arising from the rents of land and houses, mortgages, funded property, and such like sources, may be learned with tolerable precision; but it has not been, and, we are bold to say, never will be, possible to determine the incomes of farmers, manufacturers, dealers of all sorts, and professional men, with anything like even the rudest approximation to accuracy. It is in vain to attempt to overcome this insuperable difficulty by instituting an odious inquiry into the affairs of individuals. It is not, indeed, very likely that any people, not altogether enslaved, would tolerate, in ordinary circumstances, such inquisitorial proceedings; but whether they did or did not, the result would be the same. The investigations would be worthless; and the commissioners of the income-tax would in the end have nothing to trust to but the declarations of the parties. Hence it is that the tax falls with its full weight upon men of integrity, while the millionaire of "easy virtue" may wellnigh escape it altogether. It operates, in fact, as a tax on honesty, and a bounty on, and an incentive to perjury and fraud; and if carried to any considerable height—to 10 or 15 per cent., for example—it would undoubtedly generate the most barefaced prostitution of principle, and do much to obliterate that nice sense of honour which is the only sure foundation of national probity and virtue.

2. But supposing it were possible (which it is not) to get over this fundamental objection, and that means were devised for ascertaining the incomes of individuals with facility and precision, we should have made but a very small progress towards the fair assessment of the tax. On one point, indeed, there can be no difficulty. Property-taxes ought undoubtedly to be laid on all sorts of property, and income-taxes on all sorts of income. But the question immediately occurs, whether the tax should be of the same magnitude on all incomes, how different soever their sources? And if this question be answered in the negative, we have next to inquire into the principle on which distinctions are to be made.

Those who affirm that an income-tax should be laid equally on all incomes, from whatever source derived, contend that the hardship of such a proceeding is not real, but apparent. According to them, the incomes of lawyers, physicians, clergymen, and other professional men, always bear a certain relation to the incomes of the other classes of the community; but if the former were not taxed to the same extent as the latter, this relation would be subverted;

Dupuynode, speaking of the income-tax, calls it "Ce tribut détestable ou tous les principes sont faussés, toutes les règles détruites." (De la Monnaie, du Crédit, &c., II. 122.) the condition of professional men would be relatively improved; and it is alleged that, under such circumstances, there would be a greater influx of members into professional businesses, whose competition would depress the incomes of those engaged in them, so as to place them once more on a level with landlords, capitalists, &c., on whom the full weight of the tax is supposed to fall. On this ground it is contended that the tax should be made to press equally on all incomes, and that there is no injustice in making the same deduction from the fees of a lawyer or physician that is made from the rent of a landlord, or the profit of a capitalist; for the former would be as much injured by the greater competition that would grow out of his exemption from the tax as he would be were he subjected to its full amount.

But these statements, though in some degree true, are in the main fallacious. Professional fees, when once fixed, are not easily altered. Notwithstanding the heavy fall of rents and profits after the peace of 1815, the fees of professional men did not materially vary; nor did they vary materially during the previous period of depreciation. We doubt whether the imposition of a peculiar tax, of a moderate amount, on professional incomes, or their total exemption from such tax, if laid on incomes arising from other sources, would have any sensible influence over fees. If it were very heavy it might, and most probably would, in the long run, affect them to a greater or less extent; but its operation could not be in any case immediate; and unless the tax exceeded all reasonable bounds, there is but little ground for thinking that it would very materially affect them.

But suppose it were really true that professional incomes vary at the same time and in the same degree as other incomes, that would not justify the laying an equal tax on them all. A landlord receives £500 a year of rent, and an attorney or an apothecary makes £500 a year by his business. But though the income of each be at present the same, their ability to pay taxes is materially different; for the income of the first arises from a comparatively lasting source, whereas that of the latter is dependent on his life and on his health. And hence, in order to lay the same burden on both parties, we must calculate the present value of the income enjoyed by each, and lay the same tax on it; or, which would come to the same thing, we must deduct from the income of the professional man such a portion as would effect an insurance on his life for a sum equivalent to the present value of his income, and assess the tax on the remainder. This is the only way in which, supposing incomes to be known, it is possible fairly to tax them. In point of fact, however, it would be all but impracticable to proceed in this way. To illustrate the principle, suppose that a clergyman (A) is forty years of age; that he has an income of £1,000 a year, and that it is required to decide how much he should contribute to a tax of 10 per cent. on all incomes considered as perpetuities. Here we are met at the very outset by the difficulty of deciding as to the standard by which to estimate A's expectation of life. If we take the Northampton table we shall obtain a certain result; if we take the Carlisle table we shall have another, and if we take Mr Finlayson's table we shall have a third result, all differing widely from each other. But suppose that the Carlisle table is selected, A's expectation will be 27'61 years. Having got thus far, we have next to decide upon the rate of interest at which the present value of A's annuity or income is to be estimated. Everybody knows that the answer to the question which we are endeavouring to solve depends materially on the assumed rate of interest; and there would be endless disputes as to which rate should be fixed upon. In the event, however, of 4 per cent. being selected, the present value of A's income would be £16,500, yielding a perpetual revenue of £660; so that he ought to contribute £66 annually to the tax.

This is the way in which taxes on income must be assessed, if they be imposed with any pretensions to fairness. It may be objected, perhaps, that the fundamental supposition on which the income is valued and the tax imposed, viz., that A being at present forty years of age, will live twenty-seven and a half years longer, is quite gratuitous; that it is merely an average rule deduced from observations made on a large number of individuals; and that for any thing we can affirm to the contrary, A may die to-morrow. But all this may be admitted without impeaching the principle laid down above; for the difference between A's actual income of £1,000 and the corresponding perennial income of £660, that is, £340, will, if accumulated for twenty-seven years and a half at 4 per cent., produce £16,500, and an insurance office would transact with A on that footing, or on one not very different.

These statements show how taxes on professional incomes ought to be imposed; and they also show how very difficult, or rather how impossible, it would be fairly to assess such incomes even if there were any means of learning their amount with so much as an approach to precision. It is to no purpose to talk about establishing uniform rates of deduction. Unless wholesale injustice is to be perpetrated, all uniformity in cases of this sort must be rejected. Each case must be judged of separately. The incomes of two lawyers may be the same, but if their ages differ, they cannot be taxed to the same amount without trampling on every principle of justice; nor when interest is 4 per cent. is the tax to be the same as when it is 3 or 5 per cent.

But it is said that the difficulty of taxing professional incomes is a good reason for exempting them wholly from the tax, which should fall only on the incomes of those possessed of real property. We take leave, however, to dissent entirely from this conclusion. The difficulty of assessing professional incomes may be a sufficient reason for rejecting an income-tax altogether; but it is assuredly no reason for making it partial, and consequently unjust. Professional men contribute to taxes on commodities; and if these be repealed, and an income-tax from which professions are exempted be imposed in their stead, an obvious injustice will be done to the other classes, who will be saddled with the whole of a burden of which they have hitherto borne a part only, and which should press equally on all ranks and orders.

And it is farther to be observed, were professional incomes exempted because of the difficulty of fairly assessing them, that the principle would require to be carried a great deal farther; for many incomes derived from real property are quite as evanescent as those of professional men, and must be computed in the same manner. It is needless to say that no proposal for exempting the owners of cotton or flax mills, ships, warehouses, houses, &c., from taxes laid on the property or incomes of landlords, fundholders, mortgagees, &c., would either be tolerated or, indeed, thought of for a moment. But in assessing the incomes of the owners of ships, mills, and similar property, most part of the difficulties would have to be encountered that make the taxing of professional incomes so impracticable. An estate, abstracting from the buildings and improvements made upon it, may be regarded as a lasting source of revenue; but a ship, a house, a mill, &c., are all perishable, and before the latter can be taxed in the same ratio as the former, the degree of their durability must be determined, and the income arising from them reduced to a perpetuity. Suppose, for example, that a tax of 10 per cent. is imposed on income arising from lands, funds, and mortgages, and that it is required to lay an equivalent tax on income arising from houses, shops, warehouses, mills, ships, canals, and such like property; in this case we should be obliged to begin by estimating the present value of the shop, mill, ship, or other property yielding the revenue proposed to be taxed. Having done this, we should next have to estimate the probable duration of such property; and then, in order to get the net taxable income, we should have to deduct from the gross income such a sum as would suffice, being accumulated at the ordinary interest of the day, to replace the shop, mill, &c., when it was worn out. If an income-tax be imposed on fair principles, and made to press with the same severity on all classes according to their ability to bear it, this is the mode in which it must be laid on. But the difficulties in the way of such a course are almost as great as those in the way of taxing professional incomes. There would evidently be great room for doubt, evasion, and fraud in the valuation of the property; and though this were got over, how is its probable duration to be ascertained? The power to determine a point of this sort could not be intrusted to officers; for if so, it would open a door to every sort of abuse. Neither is there any standard to which it is possible to refer in estimating durability, seeing that it must vary in every case from a thousand local and almost inappreciable circumstances. Although, therefore, it were conceded that taxes on income are in principle the best of any, the above statements show that this circumstance should go for nothing in the way of recommending them. It is of excessively little consequence whether a tax be theoretically good or bad; it is in a practical point of view only that we have to deal with it; and however well it may look in demonstrations on paper, if it be practically impossible fairly to assess it, it ought, in all ordinary cases, to be rejected without hesitation.

Even as applied to the rent of land, an income-tax is in most instances grossly unfair. Two estates yield the same rent, but one is naturally very inferior to the other,—its deficiencies having been balanced by the execution of expensive improvements. Where, then, would be the fairness or the policy of laying the same tax on the rental of both estates? A half, or perhaps two-thirds, of the rent of the one really consists of the interest of capital laid out on improvements, most of which are even less durable than either shops or cotton-mills. Hence the obvious injustice of laying the same tax on the rent of an improved as on that of an unimproved estate; and yet, as has been already seen, we could adopt no other criterion; for all the tax-collectors of the empire, even if they were assisted by as many farmers, would not be able to resolve the rent of an improved farm into its constituent parts; that is, to separate what is really paid for the natural and inherent powers of the soil from what is paid for the capital laid out in improvements, and to estimate the duration of the latter.

It is unnecessary, we think, to say more on this branch of the subject. It has been seen, in the first place, that it is not possible to acquire any accurate information as to the magnitudes of the incomes enjoyed by some of the largest and most important classes; and it has next been seen, that though such information were obtained, the sources whence different incomes arise are so very various, and they are so very different in their degrees of durability, that all attempts to impose on them a really equal income-tax must prove utterly abortive. The truth is, that an income-tax, pressing equally on all classes, is a desideratum which is not destined ever to be supplied. After the legislature has done all that can be done to make it equal, it will be grossly unequal. To impose it only on certain classes of incomes, or to impose it on all incomes, without regard to their origin, is alike subversive of every principle of justice. Nothing, therefore, remains but to reject it altogether; or, at all events, to resort to it only when money must be had at all hazards,—when it is better that injustice should be deliberately perpetrated than that the public treasury should be empty. An unreasoning necessity of this sort, and nothing else, can ever justify either taxes on income or property.

It has been contended by Say and others, that a tax on Pernicious income should be imposed according to a graduated scale, operation and made to increase according to the increase of the incomes subject to its operation. A tax of L10 is said to be more severely felt by the possessor of an income of L100, than a tax of L100 or L1000 by the possessor of an income of L1000 or L10,000; and it is argued, that, in order fairly to proportion the tax to the ability of the contributors, such a graduated scale of duties should be adopted as would press lightly on the smaller class of incomes, and increase according as they became larger and more able to bear taxation. We take leave, however, to protest against this proposal, which is not more seductive than it is unjust and dangerous. No tax can be a just tax unless it leave individuals in the same relative condition in which it found them. It must of course depress, according to its magnitude, all on whom it falls; and it ought to fall on every one in proportion to the revenue which he enjoys under the protection of the state. If it either pass entirely over some classes, or press on some less heavily than on others, it is partial and unjust. Government in such case has stepped out of its proper province, and has assessed the tax, not for the legitimate purpose of meeting the public exigencies by appropriating a certain proportion of the revenues of its subjects, but that it might vary this proportion according to the presumed amount of the latter, that is, that it might depress one class and elevate another. A proceeding of this sort would be destructive of all sound principles. That an equal tax on property or income will be more severely felt by the poorer than by the richer classes is undeniable. But the same may be said of every imposition which does not subvert the relations subsisting among the different orders of society, and of all pecuniary obligations. The hardship in question is, in truth, a consequence of that inequality of fortune and condition which makes a part of the order of Providence; and to attempt to alleviate it by adopting such a graduated scale of duties as has been proposed, would really be to lay 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. Let it not be supposed that graduation may be carried to a certain extent, and then stopped.

Nullas semel ore receptus Pollutas patitur sanguis manuscere faucis.

There is no halting-place in the practice of confiscation. Having once admitted that greater may be taxed at a higher rate than smaller incomes, on what pretence can you refuse to seize upon all above L500 or L600 a-year, before you tax those that are less? And should this not be enough, you will be compelled to fix the limit of immunity at some lower point, at L300, L200, or L100 a-year, and confiscate all larger amounts! Wherever graduated taxes on income or property are adopted, there must be an end of all security. Socialism is in the ascendant. You are at sea without rudder or compass; there is no amount of folly you may not commit; and bankruptcy, or revolution, is the natural and all but inevitable consequence of your proceedings.

To furnish the means of defraying the enormous cost of Account of the war begun in 1793, Mr Pitt proposed, in 1797, to treble the late in the amount of the assessed taxes, or duties on houses, windows, horses, carriages, &c. This plan, however, did not

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1 That is, of course, supposing all revenues reduced to the same denomination, or to perpetuities. 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, incomes of less than L60 a year were exempted from assessment; an income of from L60 to L65 was taxed one one hundred and twentieth part; and the rate of duty increased through a variety of gradations, until the income reached L200 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 intrusted were chosen by the freeholders of counties and the electors of boroughs, 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 these functionaries were gratuitous; and they were sworn to preserve inviolable secrecy with respect to the affairs of individuals. They were authorised to call for returns from every person whose income they supposed to exceed L60 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 professions, manufacturing and commercial businesses, or from interest; the rental of landlords being, in most cases, learned from the terms of the leases held by their tenants; while the profits or incomes of the tenants were estimated to amount in England to three-fourths, and in Scotland to half the rent paid the landlords. 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 scrutinise 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. Infinite fraud and evasion were practised; and nothing could be more palpably unjust than the rule for estimating farmers' incomes. But the peculiar circumstances of the country at the time made this injustice be submitted to with comparatively little reluctance; and, on the whole, the provisions of the act were enforced better than could have been anticipated.

This tax was repealed in 1802, after the peace of Amiens, having produced, at 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 L60 a year, and gradually increased until the income reached L150 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 L50 were exempted from the tax; and incomes of that sort exceeding L50 and under L150, the limit at which they became subject to the full assessment of 10 per cent., were allowed deductions, varying inversely as their magnitude. This tax was finally repealed in 1816, and would not, it is probable, have been submitted to but for the conviction that it was indispensable for carrying on the desperate struggle in which we were then engaged.

We subjoin, from a parliamentary paper, 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 | L5,923,486 | | B. Houses, lands, and tenements | 2,734,451 | | C. Funded and stock properties | 2,885,505 | | D. Profits and gains of trade, professions, &c. | 3,831,083 | | E. Salaries, pensions, &c. | 1,174,456 |

Totals: L16,549,986

The following is the return of the value of the several species of property on which the assessment was made for the years ending the 5th April 1814 and 1815, viz:

| Schedules | 1813-14 | 1814-15 | |-----------|---------|---------| | A. | L56,701,923 | L60,138,339 | | B. | 36,335,883 | 38,396,144 | | C. | 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: L170,499,721 L178,589,966

The present income-tax was originally proposed by Sir Robert Peel in 1842 (5 and 6 Vict., cap. 35). It was organized nearly on income the same principle as the previous income-tax, except that it exempted all incomes under L150 a year, that it amounted to only 7½ in the pound sterling, or L2, 18s. 4d. per cent., and that the assessment on farms in England was limited to a half, and in Scotland to a third part of their rent. The measure was resorted to, partly to provide for the deficiency of revenue which then existed, and partly to enable its author to undertake those great commercial reforms which he soon after effected. When first imposed, the duration of the tax was fixed to three years; and though prolonged by Sir R. Peel, he did not intend that it should be perpetual, but that it should be repealed when the objects in view when it was granted were fully accomplished.

Although, however, it has undergone various modifications, it has not ceased to exist since 1842; and its repeal appears at present (1859), to be very problematical. In 1853 it was most properly extended to Ireland (16 and 17 Vict., c. 34); and it was at the same time assessed on all incomes of L100 and upwards, but at a lower rate on those below L150 than on those above that limit. During the war with Russia it varied on incomes of L150 and upwards, from 1s. 2d. to 1s. 4d. per pound. It was subsequently reduced to 5d. per pound on all incomes; and is now (1859) 6½d. on incomes under, and 8d. on those above L150.

The schedules under which the tax is now charged are the same as those in use previously to 1815. We subjoin an Account showing the Annual Amounts of Property and Income charged under each Schedule of the Income-Tax Act in England, Scotland, and Ireland, during the year ended 5th April 1857-58, with the Amount of Duty thereon.

| Schedules | 1856-57 | 1857-58 | |-----------|---------|---------| | | England | Scotland | Ireland | England | Scotland | Ireland | | A | 94,347,263 | 11,657,882 | 11,952,285 | 101,942,863 | 12,529,859 | 12,820,739 | | B | 24,425,954 | 2,806,855 | 2,582,538 | 29,020,300 | 3,397,365 | 2,804,248 | | C | 26,935,770 | 1,408,980 | 1,889,650 | 28,083,017 | 1,432,354 | 860,865 | | D | 69,110,522 | 6,856,105 | 4,280,182 | 73,106,832 | 7,156,287 | 4,210,470 | | E | 15,677,440 | 818,376 | 942,340 | 10,742,226 | 869,627 | 969,427 |

Total: 230,496,959 22,139,219 21,166,325 16,892,333 246,544,009 23,903,968 22,563,238 7,913,254 The expense of collecting the tax varies inversely as the rates of duty. In 1853 it amounted to L2.10s. 3d. per cent., and in 1855 to L1.16s. 11d. per do. We subjoin an Account showing the Rates of Duty, and the Gross and Nett amount of Duty, on Property and Income in each year from 1842 to 1860 inclusive.—N.B. From 1842 to 1853, the Tax affected Britain only, but since 1853 it has been extended to all parts of the United Kingdom.

| Year | Rates of Duty | Gross Amount of Duty | Nett Amount of Duty | |------|---------------|----------------------|---------------------| | 1842 | (7d. in the Pound on Incomes of L1.150 and upwards (Great Britain)) | 582,656 17 s 8 | 582,037 17 11 l | | 1843 | | 5,436,365 13 10 s | 5,387,455 9 11 l | | 1844 | | 5,448,380 19 s | 5,392,090 15 9 l | | 1845 | | 5,906,458 15 s | 5,818,649 9 9 l | | 1846 | | 6,654,365 13 10 s | 6,543,662 8 8 l | | 1847 | | 5,705,750 6 s | 5,612,654 8 5 l | | 1848 | | 5,691,759 7 s | 5,485,104 3 6 l | | 1849 | | 5,690,976 9 s | 5,564,833 7 3 l | | 1850 | | 5,617,275 16 s | 5,510,349 17 11 l | | 1851 | | 5,538,880 2 s | 5,440,349 16 10 l | | 1852 | | 5,749,338 10 s | 5,652,770 8 10 l | | 1853 | (7d. in the Pound on Incomes of L1.150 and upwards, and 5d. from L1.100 to L1.150, and extended to Ireland; 1s. 2d. in the Pound on Incomes of L1.150 and upwards, and 10d. from L1.100 to L1.150) | 5,816,990 1 s | 5,730,457 18 2 l | | 1854 | | 11,031,836 7 s | 10,922,286 16 9 l | | 1855 | | 15,402,901 14 s | 15,159,457 14 4 l | | 1856 | | 16,384,494 0 s | 16,050,670 0 0 l | | 1857 | Incomes of L1.150 and upwards, 7d. per Pound. Incomes between L1.100 and L1.150, 5d. per Pound from 5th April. | 11,767,305 0 s | 11,396,435 0 0 l | | 1858 | Incomes of L1.100 and upwards, 5d. per Pound from 5th April | 6,812,232 0 s | 6,610,102 0 0 l | | 1859 | Incomes of L1.150 and upwards, 94. per Pound. Incomes between L1.100 and L1.150, 6d. per Pound from 5th April | 9,789,483 0 s | 9,666,141 0 0 l | | 1860 | (Incomes of L1.150 and upwards, 104. per Pound. Incomes between L1.100 and L1.150, 7d. per Pound from 5th April) | |

The principal evasions of the tax take place in the assessments under schedule D, that is, on those on trades and professions. And these are quite excessive. It is abundantly certain, were the tax fairly assessed and collected, that schedule D would yield a much larger amount than schedule A, whereas it does not really yield more than about two-thirds the produce of the latter! This fact more than corroborates the statements we have previously made in regard to the extreme difficulty, or rather impossibility, of fairly assessing the tax. The truth is, that it sets the interest of the contributors in direct opposition to their duty; and when such is the case, it is easy to see which will be sacrificed. It may well be doubted whether any attempt to enforce a more correct and general assessment of the tax under schedule D would add anything considerable to the revenue; but there can be no manner of doubt that such an attempt, were it made, would give an enormous stimulus to chicane, fraud, and perjury. And it is better to admit inequalities, than to attempt, and that ineffectually, to obviate them at such a cost.

In further illustration of what is now stated, we beg to subjoin the following classified account of the individuals who were charged and assessed under schedule D, in the year ended 5th April 1856.

A Return showing the number of Persons charged to the Income-tax, under schedule (D), and other particulars (so far as relates to Great Britain), for the year ended 5th April 1856.

| Classes | Income on which the Duty is charged | Number of Persons in each class | Amount of Tax charged upon each class | |---------|------------------------------------|-------------------------------|-------------------------------------| | Under 100 a year | 1,319,069 | 29,916 | 63,203 | | L1.100, and under...L1.150 | 11,761,920 | 118,793 | 634,632 | | 150 | 200 | 6,384,928 | 40,290 | 494,329 | | 200 | 300 | 5,000,068 | 32,511 | 491,665 | | 300 | 400 | 4,772,654 | 14,948 | 318,177 | | 400 | 500 | 3,913,191 | 7,173 | 200,877 | | 500 | 600 | 2,785,583 | 5,414 | 185,705 | | 600 | 700 | 1,899,810 | 3,061 | 126,641 | | 700 | 800 | 1,453,681 | 2,003 | 95,913 | | 800 | 900 | 1,393,991 | 1,703 | 92,933 | | 900 | 1,000 | 752,406 | 804 | 50,161 | | 1,000 | 2,000 | 6,798,876 | 5,271 | 453,245 | | 2,000 | 3,000 | 3,488,180 | 1,503 | 232,546 | | 3,000 | 4,000 | 2,576,220 | 781 | 171,749 | | 4,000 | 5,000 | 1,942,048 | 434 | 129,468 | | 5,000 | 10,000 | 5,251,125 | 701 | 350,074 | | 10,000 | 50,000 | 8,213,536 | 445 | 547,568 | | 50,000 and upwards | 3,539,312 | 40 | 235,954 |

Total | ... | 256,891 | ...

Now, it appears from this table that of 256,891 persons assessed under this schedule, no fewer than 212,610 were charged upon incomes of less than L300 a-year, and 139,709 on incomes of less than L150 a-year! And can any one doubt when direct taxes are imposed on incomes of L1.100 and L1.150, that every possible effort will be made to evade them? It may, we believe, be safely affirmed that the aggregate incomes charged with duty under schedule D in the classes rated below L1.100 or L1.150 a-year, do not come up to half their real amount, while many thousands who should pay escape altogether. And yet this portion of the tax gives rise to a great deal of suffering and well-founded complaint. For though vast numbers succeed in eluding its pressure in whole or in part, there are many who, being either more honest or less skilful or successful in their attempts at evasion, feel the full severity of its pressure. The Commissioners of Inland Revenue complain, in their second Annual Report, of the many claims (about 250,000) for exemption from the duty or repayment thereof, and of "the painful appeals that are made to their compassion and forbearance" (p. 28). And these appeals mostly grow out of schedule D, and are inseparable from its existence, or, which is the same thing, from the existence of the tax. Indeed we hesitate not to say that this single schedule produces an incomparably greater amount of fraud, evasion, and dissatisfaction than is produced by the entire duties of customs and excise. And yet, despite the contradiction which it involves, we have latterly busied ourselves in increasing the former and diminishing the latter. This, however, is a policy that will perhaps turn out to be of the felo de se variety. Unless some very great change for the worse should unhappily be made in the constitution of parliament, it is not very likely that a heavy income-tax in time of peace will have any very lengthened duration.

And it is not desirable that it should be otherwise; for if a considerable income-tax be maintained during peace, how is the expenditure of a war to be provided for? There is every probability that the occurrence of a contest would injuriously affect our trade and industry, so that it might neither be advisable nor practicable to raise any considerable amount of revenue by increased customs or excise duties. And if, under such circumstances, the resource of an income-tax were either wholly or to a considerable extent forestalled, we might be compelled to resort to loans, or to some even more ruinous expedient. Hence the advantage of reserving taxes on income as a resource to be brought into the field in seasons of difficulty and danger when the usual sources of revenue are insufficient or dried up. To anticipate a reserve of this sort is extremely bad husbandry, being of a piece with the post obits of spend-thrifts and prodigals. The income-tax is suited to periods of war, or when money must be had at whatever cost. And those who exhaust it in seasons of tranquillity deprive themselves, when they are especially wanted, of the services of a most powerful engine, whether for defence or offence.

It is sometimes said that if the income-tax be maintained, it will gradually become less offensive and less objectionable; and if by that be meant that the public, by becoming more and more habituated to the fraud and injustice that are inseparable from it, will care less about them, the statement may, perhaps, be in some measure true; but otherwise it is, we apprehend, quite unfounded. The great majority of those who either are or ought to be among its contributors will never cease to endeavour, by every means in their power, to defeat its enactments. The schedule D of 1870 or 1880, supposing the tax to last so long, will be as much under the proportion which it should bear to schedules A, C, and E as it is at this moment. If the procedure for its fair assessment be improved, so will the stratagems and devices of those whose object is to make that impracticable, and in a contest of this sort the latter are pretty sure to succeed.

We have seen that, though the annual amounts of all incomes were known, we could not thence deduce their values, which form the only basis on which an income-tax can be fairly placed. One parcel of sugar may be worth 6d. per lb., another 8d. per do., and another 10d. or 1s. per do.; but who would propose subjecting them all to the same amount of duty per lb.? To do so would be flagrantly unjust. And differences of origin and duration have the same influence over incomes that differences of quality have over commodities. They render them, even when of equal amount, of very unequal value. To bring them all to an equality, or to the same denomination, their real values must be ascertained, and the revenue thence arising, considered as a perpetuity, is that on which the tax should be assessed. Unless this course be adopted, wholesale injustice must be committed. What is popularly called income is often no such thing, but a repayment or recovery of capital. If A vest a sum in consols or mortgages, there is no wear and tear of capital, and the dividend or interest which it produces is really income. But if B vest an equal sum in a ship, a mill, in professional education, or in some such way that it will be exhausted in some ten, twelve, or twenty years, a large portion of the annual return which it yields is not income properly so called, but a partial payment to repair the waste of capital; and to tax this portion of the return as if it were so much income, is a proceeding which it is impossible to vindicate.

This statement sets in a clear point of view the injustice that was done in subjecting the terminable and interminable funded annuities to the same rate of taxation. The latter are wholly income, whereas the former are only in part income, and may be, and sometimes are, mainly a return of capital. To subject receipts that are so very different to an equal duty, is in truth to confiscate a portion of the terminable annuities, or, which comes to the same thing, to subject them to a tax on capital as well as on income, whereas the interminable annuities are subjected to the latter only. But, as has been previously seen (ante, p. 17), the injustice done to the holders of terminable annuities is but an inconsiderable fraction of the vast mass of injustice that grows out of the circumstances now referred to, when all descriptions of incomes are subjected to the same rate of duty. And hence we are inclined to think that Sir Robert Peel acted wisely in declining to obviate this injustice in one instance, when there were thousands of others of the same sort in which it could not possibly be obviated. It is demonstrable, too, that no length of time can ever in any degree obviate or efface the injustice that is done, first, by imposing, and afterwards by increasing, an income-tax, which makes no distinction between terminable and perennial incomes.

It is, however, true, were an income-tax made perpetual and invariable, that the recurrence of the injustice to which we have referred would be, in some degree, obviated; for, in such case, the greater pressure of the tax on terminable incomes would be taken into account in the employment of capital and labour. Still, however, there would be a prodigious amount of injustice growing out of the circumstances under consideration, which it would be impossible to obviate, supposing the tax to be permanent, by any previous arrangements. All calculations in regard to the investment of capital, whether in businesses or in the education and training of individuals, are liable to be overthrown or modified by thousands of unforeseen circumstances; and practically it is found, that while some turn out to be incomparably more, there are others that prove to be incomparably less advantageous than was expected. And it is plain when such is the case, that a tax which deals with returns derived from investments of all sorts, as if they were universally of the same character and equally productive, must very often be in the last degree unequal and unjust; for though in some cases it will wholly fall on income, in others, and those unluckily not of rare occurrence, there is really no income, properly so called, to assess, so that the tax must wholly fall on capital. But it is needless to insist on what is so very obvious. It were, indeed, as idle to suppose that the continuance of the income-tax should free it from these results, as it would be to suppose that old age in man should bring back the bloom and vigour of youth.

It must not, however, be supposed, that no distinction is ever made, in dealing with the income-tax, between the portion of a return that is really income and that which is a replacement of capital. In very many instances this distinction is made, though with little or no regard to principle. The greater number of those who are engaged in various businesses in which capital is largely employed take especial care, in returning their incomes, to deduct a sum from their amount, which is much more than sufficient to repair the waste of capital. This, indeed, is one of the most efficient and favourite methods resorted to by those who wish to evade the fair pressure of the tax, that is, by the vast majority of those on whom it is assessed. But, though available to many, there are large classes that are unable to profit by this device. This is the case with numbers who derive their incomes from sundry descriptions of invested capital, including the occupiers of land who are assessed on the rent which they pay, and it is almost universally the case with the incomes of professional people. The latter consist in great part of a return, which is in most cases very inadequate, for the sums expended in fitting individuals for the discharge of their functions; and yet the instances are few and far between in which an abatement either is or can be made from their gross incomes on this account; and there is not so much as the shadow of a reason for thinking that it will be in any respect different in time to come.

It is nugatory, therefore, to imagine that the defects of an income-tax will ever be materially obviated by its becoming older. They are of its essence. Its incapacity of all real amendment is one of its distinguishing characteristics. Some of its more offensive features would be softened were it possible to reduce all incomes to perpetuities, and assess them accordingly. But it is not possible to do this. It would be easier, indeed, to wash the Ethiopian white than to make the tax fair or equitable. The obstacles that hinder this being done are not of a kind that can be either removed or materially diminished. We must take it such as it is, or reject it altogether; and hence its unsuitableness to serve as an ordinary source of revenue.

The difficulties attending its imposition are not, however, the only ones that encumber an income-tax. It may be objected to the principle on which it is imposed, that government is not entitled to pry into or lay bare the affairs of individuals. Why should those who ask nothing from the public, and who endeavour by rigid economy to make a good appearance on limited resources, be compelled to disclose the meanness of their circumstances? To subject such persons to the magnum pauperies approbrationem, is an act which nothing but the most urgent necessity can excuse. When taxes are indirect, people in great measure assess themselves; and if they dispense with taxed articles, they may escape them altogether. But an income-tax treats all classes as if they were mere machines without sentiment or reason. In dealing with it economy and forbearance are of no avail; and the contributors who try to evade its pressure, and to escape sacrifices which they may be unable to afford, are forced to resort to indirect methods, that is, to chicanery, fraud, and perjury! And yet this tax, though it has such deplorable consequences, may, like war, be sometimes necessary; but the circumstances that justify an appeal to arms can alone justify recourse to an impost so pregnant with every variety of abuse.

Sect. V.—Taxes on Property.

It has sometimes been proposed to substitute a tax on property for taxes on income; but such substitution would, in most respects, be highly objectionable. A tax on property would differ but little from a tax on capital, which we have seen would be about the worst that can be devised. And though such were not the case, all, or nearly all, the insuperable difficulties that have to be encountered in assessing a tax on income stand in the way of an assessment on property. How is the capital of merchants, manufacturers, or farmers to be ascertained? And supposing (which can never be the case) that its amount is learned, is it to be subjected to the same uniform rate of duty? Are the owners of ships in dock or unemployed, of furnaces out of blast and of lands out of lease, are merchants and farmers engaged in unsuccessful speculations, to be all taxed as highly as they would be if their property were employed to the greatest advantage? And if the injustice of subjecting productive and comparatively unproductive property to the same rate of duty be too obvious to be tolerated, on what principle are we to discriminate between them?

Property vested in books, pictures, statues, superior houses, ornamental grounds and plantations, and so forth, does not really differ substantially in the manner of its disposal from that which is vested in carriages, horses, wines, and all that is above mere necessaries. And is such property to be treated in the same way as that which is vested in mills, ships, mines, and farms? If so, the tax will discourage accumulation, whatever be the object of the accumulators, for it will equally affect capital whether it be employed to promote industrial undertakings, or be laid out on objects of taste, luxury, or embellishment. Hence, like the taille in France, it will make people conceal their wealth and affect poverty; and the reality in such cases soon harmonises with appearances.

In such circumstances people would be tempted, or rather would all but compelled, to send their savings abroad. Were force capable of prophecy to foretell that in a few years she would seem as if she had been visited by the destroying angel. Those noble residences that embellish all parts of the country would be abandoned; the woods by which it is sheltered, and which give it so rich and luxuriant an appearance would be cut down; everything ornamental would be proscribed; and all of the wreck that could be scraped together would be sent across the Channel or the Atlantic, to beautify and fertilise the Continental or American states. And yet, strange to say, this, and the other direct taxes, whose destructive influence we have endeavoured to illustrate, are the nostrums which mob orators recommend as infallible specifics, by which to improve the condition of the working classes! Perhaps, however, they presume too much on the ignorance and gullibility of their auditors. That the paralysing influence of these taxes would be experienced, in the first instance, by capitalists and men of property, is most true; but you cannot injure them without at the same time injuring those who depend upon them. The welfare of the one class rests on that of the other; and to separate them even in imagination, infers a total ignorance of the most obvious principles.

It is of little use, after these decisive considerations, to dwell on others. But it is obvious that the project for the last taxing property, supposing it were to be carried into effect, would entirely subvert the relations that at present exist among the various ranks and classes of the community. Suppose that the same sums that have been laid out on the education and training of lawyers and physicians, who are making certain incomes by their professions, have been vested by other parties in land or businesses that yield an equal annual rent or profit. Where, may we ask, would be the justice or common sense of taxing the landlords and tradesmen, and exempting the professional men? Because, we shall be told, the property of the former is realised and tangible, which that of the latter is not! But though the best, or rather the only one that can be given, this answer will not bear handling. Probably, indeed, the incomes of the lawyers and physicians may be as well secured as those of the others. They are, no doubt, exposed to accidents and casualties; but so are estates, ships, mines, railways, and most descriptions of property; and the same system of insurance that makes some provision against contingencies happening to the latter, will also help to provide against those that happen to the former. Nothing, therefore, could be more unjust than the proposed plan, were it practicable, which, happily, it is not, to act upon it. It would exempt certain classes of persons from burdens, to impose them on other classes who are equally entitled to protection, and who, it is needless to add, should only bear their fair share of the general burden. A bishop with a palace and L5,000 or L10,000 a year, a lord chancellor, a chief-justice, or a field-marshal may have no property; and under this precious project these high functionaries would enjoy an immunity from that taxation which is to fall with its full weight on the owner of a cottage or patch of land, the depositor of a few pounds in a savings bank, or the annuitant deriving a pittance from an investment in the funds. But it is needless, even if our space permitted, to dwell further on a quackish scheme of this sort. Its only claim to notice is derived from the eminence of some of those who have condescended to become its apologists. But despite all that rhetoricians may say in its favour, its palpable injustice, and the ruinous consequences which it would not fail to produce, are a sufficient guarantee against its being adopted. PART III.

INDIRECT TAXES.

Sect. I.—Advantages and Disadvantages of Indirect Taxes.

Though most governments have had recourse to direct taxes, they have rarely, at least in Europe, formed the sole or even principal source of their revenue. Indirect taxes have been pretty generally the greatest favourites both of princes and subjects; and there are very sufficient 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 amount of income taken from him by government. We are all, however, extremely averse from parting with property, except we obtain some more acceptable equivalent in its stead. And as the benefits derived from the institution of government, though of the highest importance, are not so very obvious or striking as to be easily and readily felt and appreciated by the bulk of the people, there is, in the great majority of cases, a decided disinclination to the payment of direct taxes. It is principally for this reason that recourse has so generally been had to those that are indirect. Instead of exciting the prejudices of their subjects by openly demanding a specific portion of their incomes, governments have taxed the articles on which these incomes are usually expended. This ingenious plan conceals the amount of taxation, and makes its payment in some measure voluntary. The tax being commonly 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 which they receive seems the fair equivalent of the sacrifice made in acquiring it. Such taxes have also the advantage of being paid by degrees, in small portions, at the time when the commodities are wanted for consumption, or when it is most convenient for the consumers to pay them.

Besides their greater facility of imposition, indirect taxes have the further advantage of acting as a powerful 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'improvisation 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 ces 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 détourner la consommation, ne semblent-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

It may, however, be assumed that moderate taxes on income, provided they were fairly assessed, would have about the same influence in stimulating economy that Garnier ascribes to taxes on expenditure. But it must be kept in mind that this is their whole effect. It is different, however, with taxes on expenditure, and the difference is of fundamental importance, for they give a strong stimulus to invention as well as economy. When a tax or duty is laid upon a commodity, the wits and energies of its producers, in every part of the kingdom, are forthwith directed to the various methods of its production; they are carefully analyzed and reflected upon in every point of view, and thousands of efforts are simultaneously made to reduce its cost, so that the producers may be able to pay the tax without raising its price or narrowing its supply. It is not easy to exaggerate the influence which judiciously imposed taxes on commodities exert in the way now stated over their production. Everybody knows that it is most powerful; and, in the great majority of cases, they more than nullify the contrary effect of an increase of taxation.

It is not, of course, meant to deny that taxes on commodities labour under certain disadvantages. That, however, is not a defect peculiar to them, but which attaches to all taxes. It is impossible to name one to which objections of one sort or other may not be made. But it is sufficient to vindicate the superiority of indirect taxes, that the injurious influence attributed to them has been greatly exaggerated; that when properly imposed, and confined within reasonable bounds, they act as powerful incentives to invention and economy; and that, when most mischievous, they are innocuous compared with direct taxes on property, income, and so forth.

It is alleged of taxes on commodities, that they alter the distribution of the capital and industry of a country, natural distribution and force them into less advantageous channels; because, as already seen, when a tax is laid on a particular class of commodities, the producers, if they cannot defray it by greater ingenuity and economy, raise the price of the articles by diminishing their supply in the market, and transferring a portion of the capital employed in their production to other businesses. But this effect, if it be ever sensible, is experienced only on the first imposition of a duty; for, after a short while, it is blended with the cost of production, and has no farther influence over the distribution of capital.

It is, moreover, alleged that duties on commodities being almost always paid by the producers or importers before prices of commodities are increased not only by the amount of the duties, but also by the profits accruing to the parties by whom they have been advanced. But though this circumstance the amount may sometimes operate to increase prices, its influence in of the tax, this respect has been absurdly overrated by Richardson, Say, Sismondi, and others. The latter has calculated that a tax of 4000 francs, paid originally by a manufacturer whose profits were 10 per cent., would, if the manufactured commodity only passed through the hands of five different persons before reaching the consumer, cost the latter 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,

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1 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. "Remissionem," says Tacitus, "specie magis quam ei, quia cum venditor penderet jubeatur, in partem pretii emporiorum accercerat." (Annales, lib. xiii., cap. 32.)

2 It may be said to have been burlesqued in some statements made by the Liverpool Financial Association, which are so very wide of the mark as not to require any notice. 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 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. 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).

The encouragement they sometimes give to smuggling is the worst effect of duties on commodities. "They tempt," says Adam 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" (p. 378). In consequence of this tendency, such duties require the employment of a number of revenue officers; and as they expose the producers of the taxed articles to considerable inconvenience and hardship from domiciliary visits, they indemnify themselves by making a corresponding addition to the price of their goods. But these inconveniences are not, after all, a legitimate consequence of duties being laid on commodities: they are occasioned by their abuse, or by their being carried to an oppressive extent; and even when greatest, they are altogether inconsiderable compared with those that attach to the lowest taxes on property or income. So long as duties on commodities are confined within reasonable limits, the temptation which they create to engage in illegal transactions may be very easily obviated. And it will be immediately seen, that duties so restricted are uniformly more productive than those which are carried to such a height as to hold out any great encouragement to smuggling.

It may be said that duties on commodities do not fall on individuals in proportion to their means of paying them; and that, while they press with undue severity on persons with large families, or who occupy prominent stations, they may be almost wholly avoided by rich misers and those in obscure stations. But in taxation we have only a choice of difficulties. However desirable, we have shown that it is quite impossible to tax individuals in proportion to their incomes; and that any attempt to impose an equal income-tax must certainly fail, and be attended with disastrous results. We should, therefore, resort to the best practicable taxes; that is, to duties on commodities. And it does not really appear, for the reasons previously stated, that they can be considered as either unjust or oppressive. If duties be laid on sugar or wine, those who abstain from their use will, of course, escape them; surely, however, those who use such articles have no good right to complain of this, seeing that they may also, by being equally self-denying, exempt themselves from the duties.

Sect. II.—Inquiry into the Incidence and Effect of Indirect Taxes.

1. Taxes on Commodities.—It is clear that if a duty be laid on one commodity, and not on others, its price, unless some corresponding facility be at the same time given to its production, will sustain an equal rise; for if it did not so rise, the profits of its 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. Taxes on necessaries, consumed by landlords and capitalists, or by the wealthier classes, are wholly defrayed by them. This, however, is very rarely the case with taxes on such necessaries as are required for the use of the labourers; for they are generally made up to the latter by a proportional increase of wages, or partly in that way, and partly by infusing a greater spirit of industry and economy into the labourer. Hence it is seldom possible to predicate at the outset what will be the ultimate effect of a tax on such articles as enter into the subsistence of the poor, inasmuch as that depends on a great variety of circumstances, which it is very difficult, if not impossible, to estimate beforehand. But this is never the case with duties on costly articles, such as coaches, race-horses and hounds, pictures, statues, vases, and so forth, or on articles consumed only by the rich and the great. Such duties may, indeed, and most probably will, even in their case, reduce or limit the demand for the articles on which they are laid. But whether this be so or not, the taxed articles being wholly superfluous, and nowise necessary for the subsistence of those by whom they are bought, the latter have no means or power by which to shift any portion of the tax with which they are charged from themselves to any one else. But it is nevertheless indispensable that the greatest moderation be observed in imposing such duties, for otherwise they invariably tempt the wealthier classes to evade them by resorting to other countries; and usually, also, induce some of them to take their capitals along with them.

2. Ad valorem Taxes on Commodities.—An equal ad valorem duty, were it laid on all descriptions of commodities, would, of course, affect them all to the same extent. And commodities were universally supposed, down to the publication of the edition of the Wealth of Nations by the author of this article, that the imposition of such a duty would in no degree modify or change the relation or proportion which commodities previously bore to each other. But though such a duty would affect commodities in the same proportion, it would not affect the profits of their producers in the same, but in very different proportions; and it is by the degree in which the latter are affected that the relation of commodities to each other is determined. If all classes of producers uniformly employed the same proportions of fixed and circulating capital, an equal ad valorem duty would affect them all equally, and the values of their products, as compared with each other, would not be affected by its imposition. But this is not the actual state of things; different sorts of commodities are produced by the agency of very different proportions of fixed and circulating capital; and hence, were an equal ad valorem duty laid on them all, it would not affect profits equally, and would consequently cause a transfer of capital from one business to another, and a variation in the value of commodities, raising some and sinking others. To illustrate this, assuming that profits are 10 per cent., let it be supposed, in the first place, that A advances L.1000 in wages at the commencement of the year, and that he receives the produce, which must, by the supposition, be worth, at least, L.1100 at the end of the year; in the second place, let it be supposed that B has a capital of L.11,000 vested in a highly durable machine, which is capable of performing its work without any, or with but very little, manual labour; the annual produce of this machine being, it is obvious, under the circumstances supposed, wholly, or all but wholly, made up of profits, and necessarily selling for about L.1100; and

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1 It is, of course, taken for granted that the fixed capitals are of the same degree of durability, and that the circulating capitals are returnable in the same periods. Lastly, let it be supposed that an equal ad valorem duty of 10 per cent. is laid on commodities. Now, it is plain that in this case A and B will each bring, at the end of the year, commodities worth L1,100 to market, and will therefore be respectively taxed L110. But L100 only of the value of A's goods consists of profits, the rest consisting of the capital laid out on wages; whereas the whole value of B's goods consists of profits. Hence it results, that while the duty would swallow up the whole of A's profits and L10 of his capital, it would only take 10 per cent. of B's profits. We have chosen a case that sets the unequal operation of the tax in a striking point of view. But whenever there was any considerable difference in the proportions of fixed and circulating capital employed in producing different commodities, an equal ad valorem duty would operate in the way now pointed out. Such a duty would, therefore, be among the worst that could be imposed. It would cause an immediate derangement in all the channels of industry, and in the value of most descriptions of commodities. Capital would be driven from employments principally carried on by hand to those principally carried on by machinery; and while the value of the commodities produced by the former would rise, the value of those produced by the latter would fall, until they had been adjusted so as to yield the same rate of profit to the producers.

It may, however, be observed, that though the determination of the question, with respect to the incidence of an equal ad valorem duty on commodities, be of considerable importance in regard to the theory of the science, it is one that can never be brought to any practical test. An equal ad valorem duty might perhaps be imposed with considerable fairness on some commodities imported from abroad; but it is quite out of the question to suppose that such a duty, even were it as desirable as it is the reverse, should ever be imposed on the infinite varieties of commodities produced within any extensive country. The greatest imaginable number of the most skilful and zealous officers would not suffice either to assess or to collect such a duty.

The duties on commodities in this country are divided into those charged on certain articles produced at home, denominated Excise Duties, and those charged on imported articles, or Customs Duties.

3. Excise Duties.—We have given, under this head, in a previous part of this work, some account of the origin of this class of duties, and of the mode in which they are imposed. Here, therefore, it is enough to lay the following statements before the reader:

**Account of the Quantities of the Articles charged with Duties of Excise in the United Kingdom, in the year ended 31st March 1859, with the Rates of Duty, and the Produce of the Duties:**

| Articles | Quantities | Rates of Duty | Produce of Duty | |-------------------|------------------|---------------|-----------------| | Spirits (gallons) | 23,198,984 | 8s. | L9,177,667 | | Malt (barrels) | 42,794,044 | 2s., 7d. and 2s. plus 5 per cwt. | 5,800,669 | | Hops (lbs.) | 53,125,101 | 2s. | 464,842 | | Paper (lbs.) | 199,015,820 | 1½d. | 1,306,039 |

Total: L16,749,117

Exclusive of the above, the duties on licenses, railways, hackney carriages, and race-horses, are usually reckoned among the excise duties. But they have no claim to be so classed, except that they are assessed and collected by the same officers. For full details with respect to these duties, the reader is referred to the treatise *On Taxation* by the author of this article.

The excise duties that were formerly imposed on salt, beer, soap, glass, leather, candles, bricks, and other less important articles, have been repealed within these few years. And there is not one of the existing duties of which it can be justly said, that it is assessed on an improper article, that it is too high, or that it operates injuriously on the manufacture of the article. Whatever may have been the case formerly, the excise is now fully entitled to the eulogium passed upon it by Arthur Young. "Excises," said he, "are by much the fairest, most equal, and least burdensome of all taxes. They are paid voluntarily. Not a shilling is contributed but in proportion to the free consumption. The Dutch, who have been deservedly esteemed the wisest nation in Europe in all matters of taxation, have been enabled to preserve their industry, under burdens of which we have no experience, and scarcely any conception, principally by their having adopted this mode of taxation. (*Political Arithmetic*, Part II., p. 48.)

It may, indeed, be made a question whether the excise duties have not been too much reduced. Those on salt and soap, for example, had they been properly assessed, and not too heavy, would have produced a large amount of revenue, with but little inconvenience. A duty of 15s. a bushel on salt was, indeed, most oppressive. But nothing of the sort could have been alleged of the duty had it been 3s., or even 5s. a bushel; and yet there is good reason for thinking that the lower would have been more productive than the higher duty. To repeal a tax, especially if it press on an article in general demand, is always an acceptable measure, and is apt to be hastily agreed to by a weak or popularity-hunting government. But before proceeding to repeal any tax, it should be inquired, can its produce be spared? and if not, how is it to be replaced? Nothing can be more futile than the repeal of a tax, if we have to impose in its stead another that is equally, or more than equally, objectionable.

The duty on paper, though in some respects objectionable, is moderate in the extreme. It is also easily collected, and the manufacture is rapidly increasing. Its repeal might be of some little service to booksellers and publishers, who might, perhaps (for even that is doubtful), buy their paper on somewhat lower terms, yet not so much lower as to affect the price of their works. To the public at large the effect of the repeal on the price of paper would be altogether inappreciable. And to enable a futile measure of this sort to be accomplished, a copious source of revenue would have to be sacrificed, and above L1,200,000 a year added to the income-tax! These results have happily been prevented by the firmness and intelligence of the House of Lords.

4. Customs-Duties, or Duties on the Importation and Custom Exportation of Commodities.—These, like all other duties on exports, are paid by the consumers of the articles 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, by whom they are purchased; for the foreigners would not supply them unless they got their full price, 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 nation to raise a sufficient revenue by laying duties on the commodities which it exports, such revenue would be wholly derived from others, while it would be entirely relieved from the burden of taxation. No doubt, however, were a country which has no peculiar facilities of production, to attempt to raise a revenue by laying duties on exports, other states would do the same; and as the imports are almost always as great,

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1 The duty seldom amounts to more than 3d. or 4d. on a 12s. or 18s. volume. On school-books it usually varies from ½d. to 1½d. each, rarely rising to 3½d. or 4½d. On Collenso's *Arithmetick*, a popular school-book, which sells at 4s. 6d., the duty is exactly 3½d. and commonly, indeed, much greater than the exports, a country which should adopt a system of this sort, would, most likely, lose as much on the one hand as it gained on the other, or more. But when a country has any exclusive advantages in the production of one or more descriptions of commodities, duties on their exportation would seem, if cautiously imposed, to be among the best that can be imagined. They must not, however, be carried to such a height as to equal the peculiar advantages enjoyed in their production, nor to diminish materially the demand for them in foreign countries. But supposing that these limitations are kept in view, they seem to be, in most respects, unexceptionable.

It may be said, perhaps, that there are either none, or but few articles of the kind now referred to. But they are a good deal more numerous than is usually supposed. And in proof of this we may specify the teas of China; the opium of Hindostan; the finer wines of France; the sulphur and olive-oil of Naples and Sicily; and the coal and iron, and perhaps, also, some of the manufactured goods of England.

The Chinese lay a duty of about 1½d. per lb. on tea when exported; and it has never been alleged that this duty has the smallest influence over its exportation. It might, indeed, be easily raised to 3d. or 4d. per lb. And were the Chinese government as powerful as that of England or France, we have little doubt that this would be done, and the imperial exchequer replenished by the greater duty paid by the "barbarian" tea-drinkers of Great Britain and the United States.

The tax on the opium sent from India is a still more striking instance of an unobjectionable duty on exports. It yields a large revenue to India, while, by raising the price of opium, it tends to lessen its consumption by the Chinese, to whom, if taken in excess, it would be highly injurious. Hence it is beneficial, alike as a fiscal and a sanitary engine.

Though it be difficult, if not impossible, to find another article so well suited as opium to be charged with a duty on exportation, yet there is probably no country which has not some article of the sort. The superior wines of France seem to belong to this class; and it may be doubted, supposing them to be charged with an ad valorem duty of 10 or 15 per cent., whether the quantities of them sent abroad would be materially affected.

Few articles seem to be better suited than the sulphur and olive-oil of Sicily and the olive-oil of Naples (Gallipoli) to be charged with duties on being exported. A vague perception of their aptitude to be made productive of revenue in the way now mentioned, and of their importance to the foreigner, seems, indeed, to have made their exportation be frequently interfered with. But unluckily in dealing with them the government, for the most part, acted capriciously and arbitrarily, and, therefore, injuriously. Whereas, had it followed an uniform system, and systematically enforced, moderate duties on their export, they would have produced a considerable amount of revenue, without injuriously affecting the demand for the articles.

It has been proposed to impose a duty on coal exported from the United Kingdom; and, as the question in regard to the exhaustion of the mines, though of vital importance, needs not be agitated in this place, the policy of such a duty would mainly depend on the fact, whether British coal be necessary, or of considerable consequence, to the progress of manufactures, arts, and navigation in foreign countries. If it be, then certainly it would be good policy to preserve the superiority which we derive from the possession of coal by prohibiting its exportation, or burdening it when exported with a considerable duty. But if the possession of British coal be not necessary, or of considerable importance to the foreigner, such prohibition or duty would encourage the working of foreign mines and discourage our own, without yielding any corresponding advantage. We are told that it is not easy to pronounce positively in regard to this question. On the whole, however, there does not appear to be any ground for doubting that a supply of British coal, though not, perhaps, indispensable, is of the greatest service to the foreigner, and enables him to prosecute with advantage various undertakings in which he could not otherwise engage with much chance of success. France has various coal-mines, but their produce is inconsiderable in quantity, and is, at the same time very inferior in quality, compared with the produce of the mines of this country. Everybody who has ever been in Paris knows that fuel is at least twice as dear in that capital as in London. And hence, notwithstanding coal has been, by a policy which we shall not stop to characterise, burdened with heavy duties on being imported into France, she has for some years drawn large supplies from England, and also from Belgium and Rhenish Prussia. In 1859 we exported no fewer than 1,391,009 tons coal to France. And now that the high duties (in part discriminating in favour of Belgian coal) on English coal are to be reduced, a large increase in the exports to France may be anticipated.

The produce of the Belgian and Prussian, like that of the French, is in no respect equal to the produce of the English mines; and though it were otherwise, they are too far inland to admit of coal from them coming into successful competition with ours in the markets of the world. The same remarks apply to the coal of the United States. Instead of supplying others with this valuable product, the latter are themselves large importers of English coal, having taken from us in 1858 no fewer than 301,004 tons.

Such being the case, and considering that coal is the mainspring, the causa causans, of our manufacturing pre-eminence, we have always regarded the repeal in 1845, of the duty of 4s. a ton laid on it when exported, as being in all respects a most unwise measure. The retention of the duty would not have materially affected the exportation of coal, at the same time that it would have yielded a considerable amount of revenue, wholly derived from the foreigner. But British coal is, in consequence of the vast extension of steam navigation, of incomparably more importance to our foreign rivals at present than in 1845. Indeed it is difficult to say whether it be now more valuable as a manufacturing or a belligerent agent. Its disposal is consequently a matter of the greatest national interest. And though it might, perhaps, be wrong entirely to prohibit its exportation, there cannot, we apprehend, be a doubt that it should be charged, when exported, with a duty of 5s., or rather of 6s. or 7s. a ton. Such a duty would not be innoxious merely, but highly advantageous; and would probably produce from L1,500,000 to L2,000,000 a year.

But, Diis aliter visum! A clause in the late commercial treaty with France stipulates that for ten years to come, no duty or restriction of any kind shall be laid on the export of coal from the United Kingdom (§ 11), and that the duties which are at present laid on British coal imported into France shall be reduced. That we should have assented to such an arrangement seems not a little astonishing. We appear, indeed, to have parted with the great instrument of our prosperity without any hesitation, and for even a less consideration than was received by Esau when he sold his birthright for a mess of pottage. And as we have sufficient modesty not to pretend to the gift of prophecy, we take a leap in the dark, and engage, however circumstances may change in the interval, that the free exportation of coal shall continue for a series of years! Nor do we stop even here; for we endeavour to force it upon the French, and stipulate that they shall repeal or reduce the duties by which they sought to lessen its importation. And, Indirect doubtless, had we been consulting how we might best promote the interests of France, and give new life to her manufactures and industry, this was the precise course to be recommended. But that, to say the very least of it, was no business of ours. The French have shown that they were well able to take care of themselves. The special interests of England were those for which our negotiators were bound to provide, and keep steadily in view. And, though we hope it will turn out differently, we much fear that they have been entirely lost sight of on this occasion.

But coal, though the principal, is not the only article that might be advantageously subjected to a duty on exportation. The peculiar advantages we enjoy for the production of pig and bar iron, and most sorts of metallic goods, are such that they might be charged with a duty of 10 or 15 per cent. ad valorem on being sent abroad, without sensibly limiting the demand for them. And we have heard it alleged that this, also, is the case with cotton stuffs and yarn. But, without presuming to express any very decided opinion with regard to the latter statement, we are fully satisfied that reasonable duties on coal and iron when exported, are among the least exceptionable which it is possible to suggest.

These observations may perhaps be enough to show under what conditions and limitations duties may be advantageously laid on exports. So long, indeed, as the mercantile or protective system was in the ascendant, any proposal for their imposition would have been scouted on all hands. And since its overthrow, they have been regarded with much jealousy by most writers on finance. But when the articles on which duties are to be imposed are of the proper description, and the duties are properly limited, there can be no better taxes.

On the whole, however, there is no great reason to think, except in a few anomalous cases, that duties on exports will ever be made productive of any very considerable amount of revenue. Hence it is satisfactory to know that moderate duties on imports are about the most productive and least objectionable of taxes. They are collected with the greatest possible facility, involving no inquiry into the circumstances of individuals, as is the case with taxes on income or property; nor any interference of any sort with the processes carried on in the arts, as is sometimes the case with excise duties. By allowing imported goods to be lodged in bonded warehouses, under the joint locks of the king and the importer, the revenue is protected without its being necessary for the importer to pay the duties till the goods be withdrawn for consumption; so that, as already stated, but little additional capital is required by the importing merchant, and little addition is made to the price of the goods through the previous advance of the duties. The total gross receipt of the customs-revenue of the United Kingdom amounted, during the year ending the 31st March 1858, to L23,603,770, collected at an expense of L3,11s. 6d. per cent. on the gross, and of 1s. 12s. 6d. on the net receipts; and we will venture to affirm that no equal amount of revenue was ever raised in any country, or in any period of time, with so little difficulty and inconvenience.

Sir Robert Peel abolished, during the progress of his late re-commercial reforms, a great many customs duties imposed on articles which mostly produced small amounts of revenue; and during the present year this policy has been carried a great deal further. We believe, indeed, that it has been pushed to an injurious extreme; and that it were much better had a good many articles, which may now be imported duty free, continued to be charged with moderate duties. In the aggregate they would have produced a large sum, while their greater number added to the breadth and stability of our customs system. It also often happens, owing to the fluctuations of trade and fashion, that articles which at one time are but little in demand, are much sought after at another and no very distant period; and, in such cases, they furnish, when they are subjected to duties, a proportional increase of revenue. But it is difficult, after a duty has been repealed, to procure its re-imposition; and, therefore, unless there be something otherwise objectionable about them, or the amount they produce be very trifling indeed, the greater the number of articles subject to customs duties the better. When such duties apply to a great variety of articles, it is seen that they directly affect, in one way or other, every class of the community. But when they are confined to a few leading articles, and especially to those which enter largely into the consumption of the lower classes, a belief is pretty certain to grow up that they are unfair and partial in their operation. And what else can be said of a system such as ours has been rendered? For, at the same time that it admits the luxuries of the rich and the great, including the most recherché wines at very low duties, and the finest laces, silks, gloves, china-ware, bronzes, &c., free of all charge, it imposes extremely heavy duties on the tea and sugar, which are indispensable to the labouring poor, and on the tobacco, the spirits, and the beer, which constitute their luxuries. Is not a customs policy of this sort pretty sure to be considered by the mass of the people as alike unfair and offensive? It has indeed been said that the partiality it discovers is not real, but apparent merely; and that, as has been shown in a previous part of this article, wages have been adjusted so as to compensate the labouring classes for the high duties imposed on the products referred to. But admitting the fact to be as stated, this is a case in which, practically considered, appearances are all but everything, and realities little or nothing. That the tobacco of the poor should be subjected to four or five times as high a rate of duty as the claret and champagne of the rich, is, prima facie, not a little revolting. And though it may be shown to the satisfaction of a well-informed economist that the poor are not really injured by this flagrant inequality, does any one suppose that they will ever be brought to believe that such is the case? They will see the inequality, but they will see no more. It will be held up to public scorn as a scandalous abuse. A general outcry will be raised against it, which, in the long-run, it will be found impossible to resist.

And though the defects and inequalities of the existing customs system were less obvious than they really are, yet, when the public attention is fixed on a few great articles, there is every reason to apprehend that the duties on them will, in no long time, come to be regarded as highly objectionable and oppressive. This is the more likely now that the great majority of the electoral body, that is, of the body in whose hands the power to impose taxes either is or is about to be vested, have very little chance of being called upon to contribute to taxes on income or property. And it is astonishing how soon people who have the power find reasons, satisfactory to themselves, for attempting to throw a burden off their own shoulders on to those of their neighbours. There cannot, indeed, be a doubt that attempts of this sort will be made and vigorously prosecuted; and we regret that they should have been provoked and facilitated by the late abolition of so many unexceptionable duties. We have narrowed the area of indirect taxation, when we should have widened it as much as possible; and have made it comprise various articles of export as well as the great bulk of those of import. To give up a tax

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1 See the very able speech of Mr Thomas Baring, Commons' Debates, 24th Feb. 1860. Indirect taxation against which no good objection can be made, is, to a nation situated as we are, as unwise in a financial as the abandonment of a fortress or a fleet would be in a military or naval point of view. It encourages fresh attacks, while it lessens the ability to resist them. Instead of shortening the list of articles subject to excise and customs duties, we should have taken every opportunity of lengthening it. This, at all events, should have been our policy, if we wish the system of indirect taxation to be maintained; and unless it be maintained, and to a very great extent too, a financial convulsion involving the most serious consequences cannot be very far distant. Among the articles the customs duties of which have been repealed in the course of the present year (1860) may be specified—

| Article | Duty (£) | |--------------------------|---------| | Butter, producing in 1857-58 about | 103,000 | | Cheese | 48,315 | | Eggs | 21,377 | | Tallow | 76,222 | | Oranges and lemons | 39,000 | | Silk manufactures, 1859 | 304,747 | | Leather gloves | 64,793 | | Plaiting | 12,585 | | Artificial flowers | 19,137 | | Toys | 4,069 | | Caoutchouc manufactures | 7,144 | | Lace | 4,577 | | Musical instruments | 12,276 | | Watches | 16,242 | | Clocks | 8,951 |

with a host of other articles, some of more and some of less importance. The duties on the articles marked * have been repealed under the treaty with France. The entire duties repealed under that treaty produced in 1859 no less than £573,447; and the duties reduced under the same improvident arrangement will involve a much greater loss of revenue. (See Sup. to Com. Dictionary.)

Now, we are clear that not one of these articles should have been exempted from duty. The duties on butter, cheese, eggs, and tallow, were so very moderate that their influence over the prices of the articles was practically imperceptible; and we have yet to learn that there are any articles better fitted to be taxed than silks, gloves, plaiting, toys, and so forth. Had the revenue been largely in excess of expenditure, something might perhaps have been found to say in favour of the repeal of these duties; but a measure of that sort, when the revenue was seriously deficient, is one of which we confess ourselves quite unable to perceive either the reasonableness or the expediency.

We may be told, perhaps, that the duties on silks, watches, gloves, &c., have not been repealed from fiscal considerations, but because they were protective, and added proportionally to the price of the like goods produced in this country. But whatever these duties may have been originally, they had long ceased to be of this description. The modifications introduced by Sir Robert Peel had rendered them too low to have the alleged effect. In so far, indeed, as respects silk, the only article to which it is necessary specially to refer, the exports have, of late years, very greatly exceeded the imports, showing that, as a protective engine, the duty must have been in great measure, or rather entirely, inoperative. In the event, however, of the negotiations with France making it desirable to do something in the matter of silk, the duty might have been reduced from 15 to 10 or 12 per cent. ad valorem. Such reduction would have had little or no effect upon the revenue, and though we had exported no silk goods, a 10 or 12 per cent. duty on imports could not have sensibly influenced the prices of those manufactured at home.

The reduction of the duties on brandy and wine might, under other circumstances, have been proper enough, but at present it is not more defensible than the repeal of the duties now referred to.

It is considered by some to be a sufficient reply to statements like those now laid before the reader, to affirm that they are inconsistent with or opposed to what they choose to call the principles of free trade. But it is not too much Customs to say that those who raise a cuckoo-cry of this sort know duties not extremely little of the principles they are so ready to invoke. All who know anything of the matter, know that neither Free trade nor protection is, in itself, either good or bad. Everything depends on circumstances, or on its influence over the wellbeing of those by whom it is practised. Speaking generally, freedom of trade is found to be most advantageous, and therefore it should, on the first blush of the matter, be preferred. But when it can be shown, as in the case of the exportation of coal, that it is injurious, then it should be at once suspended, and prohibition or restriction substituted in its stead. It is on what conduces to the salus populi, and not on abstract doctrines, that the attention of a prudent statesman should be fixed. And it is further to be borne in mind that the imposition of reasonable duties on imports and (in some cases) exports, is in no respect inconsistent with the freedom of trade. But as this branch of the subject has recently been treated and disposed of by a very high authority, we shall content ourselves with quoting his short, clear, and conclusive statements. "It is important that the country should clearly understand what is the true meaning of free trade. It means trade freed, not from those necessary duties which are raised only for purposes of revenue, but trade freed from all charges or duties which arise either from an ignorant jealousy of other countries, or from an equally foolish impression that it is our interest to foster unnatural productions in our own country, rather than to receive them from other countries, whence, being produced under more favourable circumstances, they can be obtained in larger quantities, of better quality, and at a lower price. This I apprehend to be the true meaning of free trade. It was so understood and described in the celebrated petition of the merchants of London, presented to Parliament in the year 1820: 'As long as the necessity for the present amount of revenue subsists, your petitioners cannot expect so important a branch of it as the customs to be given up, or to be materially diminished, unless some substitute less objectionable be suggested; but it is against every restricted regulation of trade not essential to the revenue, against all duties merely protective from foreign competition, and against an excess of such duties as are partly for the purpose of revenue and partly for that of protection, that the prayer of the present petition is respectfully submitted to the wisdom of Parliament.' My Lords, are not the duties now proposed to be repealed, in the full sense of the words, 'essential to the revenue?' And can we consider the substitute suggested, namely, a heavy income-tax, as less objectionable? Every one of the duties proposed to be abolished in consequence of this treaty might be retained without any violation of the principles of free trade." (Lord Overstone's Speech, 15th March 1860.)

The customs duties that are still in existence might, perhaps, in one or two instances, be advantageously modified. But in the great majority of cases they are so moderate, that they might be increased so as to produce a large additional revenue, with but little inconvenience either to our trade or to anything else. Such increase will, however, be a much more difficult matter now, when there are but few articles subject to duties, than when they were comparatively numerous. But, despite this disadvantage, it will probably be found, in the event of any considerable increase of revenue being required, that it may be better raised by judicious changes in the duties of customs and excise, than by any other means hitherto suggested.

Duties on imports and exports have been levied in almost every country which has 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 from the different ports of 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 consultibus et tribunis plebis institute, aceritiam populii Romani tum libertate. (Annal. lib. xiii. cap. 50.)

The rates at which they were charged were fluctuating and various, and little is now known respecting them. Cicero informs us (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 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. v.)

Customs seem to have existed in England before the Conquest. But the king's first claim to them was established by statute, 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 1855, to which 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 allowed on the exportation of particular kinds of British goods. See these lists, with the subsequent modifications, in the Commercial Dictionary, article Tariff.

5. Taxes on Raw Produce.—The question respecting the ultimate incidence of taxes laid on the raw produce of the soil, is one of considerable nicety and difficulty. If land yielded no surplus to its possessors above the ordinary profit of the capital employed in its cultivation, the imposition of a tax on its produce, such, for example, as tithe, would occasion an equivalent increase of 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 is no reason why agriculturists should be contented with lower profits than are realised in other employments, as soon as a tithe was imposed they would set about transferring a portion of their stock to some more lucrative business; and this transfer would continue until the diminution of supply raised prices to their proper level, and restored the equilibrium of profit. In such a state of things, tithe would make a precisely 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 generally introduced, it is not so easy to trace the ultimate incidence and effect of tithes. They then appear to occasion a diminution of rent rather than a rise of prices. Farms which are tithe-free always bring a 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, tithe has not been considered as increasing the price of raw produce to the consumer, but as falling on rent, and as diverting a portion of it into the pockets of its rightful owners, the clergymen and lay impropiators.

"Taxes upon the produce of land," says Adam 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 is, one year with another, likely to amount to, and he 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."

Conclusive, however, as this statement appears on a first view, it is only under certain conditions and limitations that it holds good. It has been repeatedly shown, that a very large proportion of the raw produce raised in every extensive country is produced by means of capital laid out on the land in the view of obtaining the customary profit of the time, and without its yielding any rent. It must also be observed, that the cost of producing this portion of the required supply of raw produce determines the price of the rest: for it is produced under the most unfavourable circumstances; and unless its producers were repaid their expenses and profits, it would not be brought to market, and a scarcity would ensue. But when a tithe is imposed, it affects, of course, the producers of this portion of the required supply in common with the others. Inasmuch, however, as they pay no rent, it is clear they cannot throw the burden of tithe on a landlord; and as they would not continue in their business unless they obtained the same rate of profit as their neighbours, it appears unavoidably to follow, that either the price of corn must rise proportionally to the tithe, or that the former supply will no longer be brought to market.

This last is the view that Ricardo took of the operation of tithe. But, however ingenious, the same remark is applicable to his theory as to Smith's, that it is only under certain conditions and restrictions that it is correct. It is clear, for example, that the effect ascribed by Ricardo to the imposition of a tithe depends, first, on the demand for corn or its consumption remaining about the same after it is charged with tithe as before; and, second, on the tithe being made to affect all, or nearly all, the land of a country, and on its being exacted from such foreign corn as may be imported. If either of these conditions be wanting, Ricardo's conclusions will be more or less vitiated; the tithe will not then occasion an equivalent increase of prices, nor fall wholly on the consumers.

The commutation of tithe, effected some years ago, has made the investigation of these and other questions connected with tithes of comparatively little interest. It is, however, easy to see that when the price of corn, or anything else, is raised by the imposition of a tithe or other tax, its consumption is, ceteris paribus, always more or less diminished; and it is equally easy to see that, if a considerable portion of the land in a country be exempted from the tithe which is laid on the residue, or if foreign corn be admitted duty free, the tithe will in the former case be but slightly felt, while in the latter it will have no sensible influence over prices; and that, consequently, it will fall principally or wholly on rent.

The truth is, that tithes or taxes on the produce of land injurious are more injurious from their indirect operation, and more operation unpopular from the mode in which they are assessed, than of tithes; from the magnitude of the burden which they lay on the public. They are imposed and collected in a vexatious

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1 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. 23.

2 "Habe vero proprie vectigalibus denominatio convenit, quippe pro vehendis mercibus (unde vectigal), saluto." (Burman, De Vectigalibus Pop. Rom., cap. v.) and irritating manner; and have, in consequence, an incomparably greater effect in discouraging industry and exciting discontent than many heavier but more judiciously assessed taxes. Tithe is said, by its apologists, to have the same influence, in as far as the interests of the farmers are concerned, as an equivalent amount of rent. But this, though plausible, is a fallacious statement. Rent, when once fixed, must continue the same during the currency of the lease. Though an industrious and enterprising farmer should raise five or ten 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. Hence it is that, practically, tithes operate as a premium on idleness, and as a heavy and constantly increasing tax on industry. By preventing the cultivator from deriving the entire advantage of superior skill and increased exertion, they discourage his efforts, and contribute to render him indolent 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 vexatious charge seldom believes that he realizes the same profits as his neighbours in tithe-free farms; and we are told by Mr Stevenson, the well-informed author of the Agricultural Survey of the County of Surrey, that it used to be the common opinion, that a farm tithe-free was better worth twenty shillings an acre, than a tithed farm equally favoured in soil and situation was worth thirteen shillings. 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 which they make to the expense of cultivating bad land.

Paley, who cannot be reckoned unfriendly to the real interests of the church, says, that "of all institutions 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 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. 1809; see also Wealth of Nations, p. 377.)

A just sense of the injurious influence of tithe in obstructing agricultural improvement, and involving the clergy in unseemly contests with their parishioners, had long excited a general wish among well-informed individuals for their commutation; and this has been effected under the provisions of the act 6th and 7th Will. IV., cap. 71. This act directed that the average value of the tithes in each parish, during the seven years ending with 1835, should be ascertained, and distributed into equivalent quantities of wheat, barley, and oats, which are made a fixed and invariable rent-charge upon the land; and the clergy are to receive the value of these quantities, in all time to come, according to the current prices of the day. By this means they are liable only to fluctuations in the value of corn; and to these they would have been liable though no commutation had been effected.

The influence of tithes and such like taxes, in countries where they are imposed, has been urged as a reason for laying equivalent duties on raw produce when brought into their markets; for, if this be not done, it is alleged that the farmers in the importing countries, having to contend with subject to untaxed competitors, will be placed under a disadvantage, and subjected to an unfair competition. But this principle applies more to the case of manufacturers than of farmers' imported. If, to illustrate its operation, it be supposed that a peculiar corn tax, say of 10 per cent., is laid on the huts produced in the United Kingdom, at the same time that those imported are exempted from duty, in such case the native hatters could hardly escape being ruined. But the free importation of untaxed foreign corn, while that raised at home is subject to a tithe, would not have the same influence over the agriculturists: for while huts, and most sorts of manufactured goods, are produced under the same, or nearly similar circumstances, corn is produced under widely different circumstances, or from lands of very different degrees of fertility. And though its importation free of duty might, and most probably would, in cases like that now supposed, reduce prices and the rents of the superior lands, its unfavourable influence over agriculture would be limited to that carried on upon the worst descriptions of land. And if the country were advancing in population and wealth, it would rather tend to make such land be more slowly taken into cultivation than to make its tillage be relinquished.

It was contended, on the grounds now stated, when the restrictions formerly laid on the importation of corn were repealed, that duties should be laid on all raw produce when imported, sufficient to counteract the peculiar burdens falling on the land. And this, no doubt, was the course which a strict regard to principle would have pointed out as just and proper. But there were practical difficulties in the way which prevented it from being followed. It was denied that the agriculturists were more heavily taxed than the other classes; and though the converse was easily shown, it was difficult to estimate the surplus taxation falling on the land, or to say what would be a fair countervailing duty. And at what rate soever the latter might have been fixed, it would at all times have afforded a convenient handle for misrepresentation and abuse; so that, on the whole, it was best to make an end of the matter by allowing the free importation of corn under a nominal duty.

Taxes on raw produce, when they raise the prices of the Taxes on articles required for the food of the labourer, tend to raise wages and lower profits; and, by so doing, they have been supposed to be peculiarly disadvantageous. But it does not follow, as Ricardo supposed, that every rise of wages is necessarily accompanied by a corresponding fall of profits. On the contrary, as we have already shown (article Political Economy), both wages and profits may simultaneously rise; and this is always the case when a rise of wages is accompanied or followed by a corresponding increase in the productiveness of industry. It is found, too, that practically this is the usual effect of an increase either of wages or taxes. Such increase stimulates the producers to endeavour, by fresh displays of industry, invention, and economy, to preserve unimpaired their accustomed profits, and the markets for their goods. And the impetus thus given is, in very many cases, more than enough to secure both results.

6. Stamp and Legacy Duties.—Stamp-duties are laid on the paper or parchment on which certain deeds, contracts, legal proceedings, receipts, acquaintances, &c., are written. They derive their name from the paper being impressed Indirect Taxes.

Adam Smith has said, that duties 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, he says, 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" (p. 389). But though Smith's statement may apply in some rare instances, there can be very little doubt that, in the great majority, it is quite inapplicable. Here there are, at all times, large amounts of capital seeking investments; and there is nothing which is so much run upon as land, or which brings so high a price, compared with the rent or profits derived from it. The converse of Smith's statement would, indeed, be much nearer the mark. And there are really no good grounds for thinking, supposing the stamp-duties on conveyances were abolished, that the price of land would be sensibly lessened.

That the existing system of conveying land is injurious, by obstructing its easy transfer from one individual to another, is admitted on all hands. That, however, depends on the difficulty of making up a good title to land, and not on the duty laid on the paper employed. The repeal of the latter would not, in any degree, facilitate proceedings. That must be effected by totally different means—by adopting a system of registration; and perhaps, also, by giving, in doubtful cases, a parliamentary title to land, as has been done with the encumbered estates in Ireland. Like other duties, those on the transfer of property should be reasonable, and they should affect all properties in the same proportion. If the stamp on the transfer of property worth L.1000 be L.10, that on the transfer of property worth L.10,000 or L.100,000 should be L.100 or L.1000; and so for all other amounts, whether greater or smaller.

Taxes on law proceedings fall upon the suitors; and consequently lay obstructions in the way of an injured party seeking redress in a court of justice. The impolicy and injustice of such taxes were ably exposed by Bentham, in his Protest against Law Taxes.

Stamp-duties on the voluntary sale of commodities fall, like other taxes on them, wholly on the consumer; for, unless such were the case, the commodities would not be offered for sale subsequently to the imposition of the duties. Thus, the duties on cards and dice, newspapers, &c., are wholly paid by those who use them. Such, too, is the case with the duties payable on licenses, to retail goods, to exercise professions, &c. The taxed party 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 others, that of the rectigal chartas, 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-

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.

Duties on Successions, or on the transfer of property from the dead to the living, are a very common species of tax. Duties in The viresima hereditatum, or twentieth penny of inheritances, imposed by Augustus on the Romans, is the earliest example of such a tax. Dion Cassius (lib. lv.) 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 viresima, he calls it tributum tolerabile et facile hereditibus dumtaxat extraneis, domesticiis grave. And a little after he adds, Iotaque illis (that is, strangers) irrogatum, his (that is, near relations) remissum, videlicet, quod manifestius erat, quanto cum dolore latiri, seu potius non latiri homines essent, distingi aliquid et abradi bonis, qua sanguine, gentilitate, sacrorum denique societate meruisent, quaeque nunquam ut aliena et speranda, sed ut sua semperque possessa, ae deincepts proximo cuique transmittenda, cepissent (Panegyricus, cap. 37). In addition to these cogent reasons for exempting the successions of near relations from the viresima, 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 heavy tax must be a serious aggravation of their loss. But if taxes on successions be always paid with much 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 reasonable duties as may be laid on it with the greatest goodwill.

In England a stamp-duty has been charged since 1694 on the probates of wills disposing of personal property, and on letters of administration in cases where the possessors of such property have died intestate. The duties in both cases are as follows, viz.: (See Table, next page.)

Though sound in principle, these duties are assessed so as to be open to two very serious objections. In the first place, those on probates are very decidedly heavier when the successions are small and moderate than when they are large; and in the second place, those on letters of administration are heavier than those on probates.

In illustration of the first and most important of these unjust objections, the probate duty, as seen above, on a succession of L.1000, is L.50; and it follows, were the duty fairly sure of the assessed, that it should amount to L.1500 on a succession of L.50,000, and to L.3000 on a succession of L.100,000; whereas it really amounts to L.750 on the former, and to L.1500 on the latter; that is, to only half what it should be were the larger as heavily taxed as the smaller sums. It is impossible to say a word in excuse of a preference of this sort, which is as scandalous as it is unjust. If the duties on probates for the lower class of successions be too high, let them be reduced; but whether

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1 Beckman's History of Inventions, vol. i., p. 479, Eng. Trans.

Duties on Probates of Wills and Letters of Administration.

| Values | Probate rate of duty | Letters of Administration rate of duty | |--------|----------------------|---------------------------------------| | Above the value of L.20 and under | L.50 | L.10 | | 50 | 100 | 0 0 0 1 0 0 | | 20 | 100 | 0 10 0 0 0 0 | | 100 | 200 | 2 0 0 3 0 0 | | 200 | 300 | 5 0 0 8 0 0 | | 300 | 450 | 8 0 0 11 0 0 | | 600 | 800 | 15 0 0 22 0 0 | | 800 | 1000 | 22 0 0 30 0 0 | | 1000 | 1500 | 30 0 0 45 0 0 |

And so on to L.1,000,000 and upwards, which pays a probate duty of L.15,000, and a duty on letters of administration of L.22,500. (See tables annexed to the act 55 Geo. III. c. 184.)

The duties on letters of administration and probates should be identical, and should extend to all sorts of property.

This be done or not, an end should, at all events, be made of the offensive and contradictory anomaly that now exists, by subjecting all probates, whether the successions be great or small, to the same rate of duty.

The charging letters of administration with higher duties than probates, is equivalent to imposing higher duties on property left intestate than if it were left by will. But it is difficult to discover any sufficient reason for such a distinction. The intestacy of individuals is always prejudicial to their heirs; and to impose a higher duty on property so left appears to be a wanton aggravation of the injury done to the latter by accidental circumstances, or by the neglect or carelessness of their predecessors.

But the principal defect of the probate and administration duties does not, after all, consist so much in their inequality, as in the contracted sphere of their operation. They affect only personal property. But there is no ground whatever why it should be subjected to a peculiar tax of this description. The duty should either be repealed or extended to all sorts of property. And supposing the latter alternative is adopted, and the duty made to apply equally to all descriptions and amounts of property, it would not be open to a single good objection, and would yield a large sum. But as at present (1860) constituted, the duties on probates and administrations are partial, unjust, and, in truth, subversive of all sound principle.

Besides those on probates and letters of administration, duties are imposed on legacies and successions to real and other property. These vary in amount according to the propinquity of the legatees or heirs to the deceased. They are 1 per cent. on property passing to a child or parent, or to any lineal descendant or ancestor of the deceased; 3 per cent. when it passes to a brother or sister, or their descendants; 5 per cent. when it passes to uncles or aunts, or their descendants; 6 per cent. when it passes to great uncles and aunts, &c.; and 10 per cent. when it passes to other relations or strangers.

This duty was first imposed in 1780. But for a lengthened period it only affected personal property; and it was not till 1853 that it was extended to all sorts of property, whether personal or real (16 and 17 Vict. c. 51). Besides being required to obviate the injustice of exempting one description of property from a duty that was imposed on others, it was supposed that the extended tax would yield a large amount of revenue. But in this respect the anticipations of its projectors have not been realised. Owing, however, to the returns of the tax on real and personal property being mixed up together, it is not possible to specify the exact amount of each. But of L.2,211,822, the entire produce of the succession duty in the year ended 31st March 1859, it is believed that not more than from L.650,000 to L.750,000 was derived from real property. This comparatively limited produce appears to be a consequence partly of fixed property descending more in the direct line than personal property, and of a greater portion of it being in consequence subjected to the low duty of 1 per cent. We believe, however, that the mode of assessing the tax on real property has been mainly instrumental in reducing its produce below what was anticipated. If a stranger were to succeed to L.10,000 personal property, he would be charged with 10 per cent., or L.1,000 of duty; but if he succeed to land, or other real property worth an equal sum, he is otherwise treated. In this case he is not regarded as an absolute proprietor, but merely as an annuitant. And the present value of the annuity to which he has succeeded is deduced from a computation founded on the annual value (under certain specified deductions) of the property, the age of the successor or legatee, and the annuity tables appended to the act. We cannot, however, but think that the mode of charging the duty, as well as the duty itself, should be identical on all sorts of property; and that if an individual succeed to an estate or other real property, which is worth, or would sell for a certain sum, the duty should be imposed on that amount. This would be a plain and apparently an equitable proceeding; for it is not easy to see why one variety of property should be dealt with in one way, and another in a different way.

It may be said, perhaps, that the reason of the discrepancy is to be found in the fact that real property is frequently subjected to entails and family settlements, and that its inheritors are then merely annuitants. But, though this be the case, still it is to be borne in mind that a vast deal of property is not subject to such fetters; and that, in the great majority even of the cases in which it is fettered, the heirs are the very parties to whom the holders would leave the property were it at their free disposal; so that, in these instances, it is really equivalent to a perpetuity, and may, without any sort of injustice, be treated as such. On the whole, therefore, and admitting that it might at first occasion some hardship, we are clear that the tax should be imposed in the same way on fixed as on personal property. Its operation, in time to come, being known to all who have settlements to make, their successors could not complain of the tax affecting them injuriously; for, if it really subjected them to any peculiar inconvenience, the blame would not be ascribable to it, but to those by whom the property had been settled.

The result of the present system of assessing the tax on real property is such, that it is not supposed to yield a third part of what it would yield were it assessed in the same way that it is assessed on money and other personal property. And it would require very conclusive reasons to justify a distinction of this sort. But, as we have seen, none such really exist. The sooner, therefore, that this discrepancy is terminated, and the duty assessed in the same Indirect Taxes.

way on all descriptions of property, the better will it be for all parties. Anything like even the appearance of favouritism in taxation should be carefully guarded against. It is uniformly productive of the worst results; and is especially objectionable when, as in the present case, it is manifested on the side of the richer and more powerful classes.

Apart from any inequality in their assessment, it has been objected to taxes on successions, or on the transfer of property from the dead to the living, that they mostly fall on capital, without occasioning any effort to replace it, either by increased exertion or economy. If a legacy of L100 be subject to a tax of L100, the legatee considers, it is said, his legacy as only L900, and feels no particular inclination to save the L100 from his expenditure; whereas, had he received the whole L1000, and been required to pay L100 in taxes on income or commodities, the desire to preserve his capital unimpaired would have prompted him to endeavour to defray the tax by greater industry and economy. But we doubt whether much weight should be attached to these statements. The great bulk of property goes to immediate descendants; and on that the tax is so inconsiderable, that, though it were doubled, as has sometimes been suggested, it would have but little influence. And as those who leave property to strangers or distant relations know that it will be subject to the tax, that circumstances must have more or less influence in leading them to make some provision for its payment. The tax, too, is charged at the time when it is most convenient for the contributors to pay it, that is, when the legacies, or properties on which it is levied, are acquired. And being easily assessed and collected, it appears, supposing it to be properly limited, and justly imposed, to be in most respects as little injurious as the greater number of other taxes.

7. 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 industrial undertakings which appear to be better managed by them than they could be by private individuals. This species of conveyance was originally established by the Roman emperors for the safe, regular, and speedy transmission of the public despatches 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 expense of the establishment, have rendered it productive of a considerable revenue. Nor, while the rates of postage are judiciously restricted, 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. (Blackstone's Commentaries, i., p. 321.)

A great change was effected in 1839 in the postage of letters. Previously to that date they were charged at rates varying with the distance conveyed, but so that, at an average, the postage amounted to about 7d. or 7½d. for a single letter. And the fact that the post-office revenue had continued nearly stationary during the twenty years ending with 1838, notwithstanding the vast increase in that period of population and of the intercourse between the different parts of the empire, was a conclusive proof that the rates of postage had been carried to a vicious excess; and that in the arithmetic of the post-office, as well as of the customs, two and two, instead of always making four, sometimes make only two. The effectual reduction of these rates was therefore urgently required, not only because of the importance to a commercial and manufacturing community, of having the charge for the conveyance of correspondence fixed at a moderate amount, but because it was all but certain that moderate rates of postage would be more productive of revenue. It did not however follow that because an average charge of 7d. or 7½d. each, on all letters conveyed by post, was very decidedly too much, that an invariable charge of 1d., whether the letter were conveyed one mile or 1000 miles, was the precise limit that should be adopted. This was to rush from one extreme to another, and to endanger a considerable amount of revenue without any equivalent advantage. It must, indeed, be admitted that the proposal brought forward by Mr (now Sir) Rowland Hill for a uniform penny rate of postage had many recommendations in its favour. Being calculated at once to obviate trouble and save expense, it could not fail to be acceptable (what reduction of taxation is not?) to a large portion of the public, particularly to persons engaged in business. We believe, however, that the scheme was more indebted for its popularity to the oppressiveness of the old rates of postage than to any intrinsic merits of its own. Had these been reduced four or five years previously to a reasonable amount; that is, had letters of ½ oz. weight coming from Scotland or Ireland to London been reduced to 2d. or 3d., and other letters in proportion, and mercantile circulars been allowed to pass under covers open at the ends at 1d. or 2d. each, we venture to say that the clamour for a uniform rate of penny postage would not have made any way. But in this, as usually happens on similar occasions, those who refuse to make reasonable and necessary concessions at the outset, are in the end compelled to concede a great deal more than would at first have been satisfactory. This, at all events, was eminently true in the present instance. The clamour for a uniform penny rate became too powerful to be resisted; and parliament, whether it were so inclined or not, was obliged to lend its sanction to the measure. And under the provisions of the act 3 and 4 Victoria, cap. 96, it has been enacted that all inland letters, without regard to the number of enclosures, or the distance conveyed, provided they be paid when posted or despatched, are—

If not exceeding ½ oz. weight, charged 1d.; 1 oz., 2½d.; 2 oz., 4d.; 3 oz., 5½d.; and so on, 2d. being added for every additional ounce. At the outset of the system, all packets that weighed more than 16 oz. were sent to the Dead Letter Office, except—

1. Parliamentary petitions and addresses to Her Majesty. 2. Parliamentary proceedings. 3. Letters and packets addressed to or received from places beyond sea. 4. Letters and packets to and from public departments. 5. Deeds, if sent open, or in covers open at the sides. They may be tied with string and sealed, in order to prevent inspection of the contents, but they must be open at the sides, that it may be seen that they are entitled to the privilege. 6. Bankers' parcels, despatched from London, and specially delivered at the General Post-Office, under certain regulations.

But now (1860) there are no limits to the weight, but merely to the bulk of the parcels sent by the post.

All letters not paid when they are posted or despatched, are charged double the above rates.

All parliamentary and official franking has been put an end to; but members of either house of parliament are entitled to receive petitions and addresses to Her Majesty, and petitions to parliament, free of charge, provided such petitions and addresses be sent in covers open at the ends, and do not exceed 32 oz. weight.

The punctual delivery of letters may be insured by getting them registered when posted. A fee of 6d., in the shape of additional stamps for that amount, is charged for the registration of each letter over and above the rate of postage to which it may be liable.

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1 Bergier, Histoire des Grands Chemins de l'Empire Romain, tom. i., p. 109. To facilitate the working of the plan, government furnish adhesive stamps of 1d., &c., each, which being pasted on letters, they are of course delivered to those to whom they are addressed, free of any further charge for postage, and it also furnishes stamped envelopes at the low rate of 2½d.; the 3d. being for the paper and manufacture. Hence, as any quantity of stamps or of stamped envelopes may, in most parts of the country, be procured beforehand, the inconvenience that must otherwise have attended the paying the postage at the moment when letters are posted has been pretty well obviated.

Such are the more prominent features of the new system, and no doubt it has the recommendations of simplicity (if we may apply such a phrase to a uniform charge for services costing widely different sums) and cheapness in its favour, and has greatly facilitated correspondence. But it may, notwithstanding, be easily shown that it should not have been adopted. It is, indeed, very convenient for merchants, bankers, middlemen, retail-dealers, and, in fact, for most persons, to get letters for 1d. that previously cost them 7½d. or 7½d.; but this conveniency is not the only thing to be attended to in forming a fair estimate of the measure. The public exigencies require that a sum of about £70,000,000 a year should be raised one way or other; and so long as we are pressed by an unreasoning necessity of this sort, it is not much to say in favour of the repeal or diminution of any tax, that those on whom it fell with the greatest severity are well pleased with its reduction. Sugar has, in England, become a necessary of life; and its consumption, to say the least, is quite as indispensable to the bulk of the people, and especially to the labouring classes, as the writing of letters. But would it, therefore, be a wise measure to repeal the duty on sugar, or to reduce it to 1s. a cwt.? It has been alleged, indeed, that taxes on the transmission of letters are objectionable on principle, and should be repealed, independently altogether of financial considerations! But it is easier to make an allegation of this sort than to prove it. All taxes, however imposed, if they be carried (as was the case with the old rates of postage) beyond their proper limits, are objectionable; but provided these be not exceeded, we have yet to learn why a tax on a letter should be more objectionable than a tax on the paper on which it is written, on the food of the writer, or on fifty other things.

It was contended, when the plan was under discussion, New system that there would be no loss of revenue, and that the increase thereon has occasioned of correspondence growing out of the reduction of the increased postage would be so immense as fully to balance the reduced able loss of rate of charge! But though there has been a great increase revenue in the number of letters, it has fallen far short of this. Notwithstanding all that has been said about the furor scribendi, letter-writing is, perhaps, more generally looked upon as a duty than a pleasure; and it does not follow, when the expense of postage is reduced, that the occasions for writing letters are proportionally increased.

The total gross receipt of the post-office revenue of the United Kingdom, deducting overcharges and returned letters, amounted, in 1838 (before the changes began), to £2,346,278, while the expenses of the establishment for the same year amounted to £686,768, leaving a nett revenue of £1,659,510. In 1858, however, eighteen years after the new system had been in full operation, and the post-office had been converted into a great carrying establishment for the conveyance of books, &c., its gross revenue amounted to only £3,087,535, while the expenses of the establishment for the same year amounted to £1,926,103, leaving a nett revenue of only £1,161,427, being £498,083 under its amount in 1838. This, however, is not all. Of the post-office revenue in 1838, £45,156 consisted of postage paid by public offices, which, being a mere charge by one government department against others, must be deducted in order to learn the nett available revenue produced by the post-office. Owing, however, to the abolition of franking, the postage charged against government departments is now greatly increased, and in 1858 amounted to no less than £1,138,631. Hence it will be found, on deducting these sums, that in 1838, the post-office produced to government, over and above all charges, a clear and available income of £1,614,354, which, in 1858, was sunk to £1,022,796, being a nett diminution of £591,558! The subjoined account sets these important particulars in the clearest point of view:

| Years | Gross Revenue* | Cost of Management | Net Revenue | Postage charged on Government Departments | Net Revenue excluding charges on Government Departments | |-------|----------------|--------------------|-------------|------------------------------------------|-----------------------------------------------------| | 1837 | 2,339,737 | 687,313 | 1,652,424 | 38,528 | 1,613,896 | | 1838 | 2,346,278 | 686,768 | 1,659,510 | 45,156 | 1,614,354 | | 1839 | 2,399,763 | 756,999 | 1,633,764 | 44,277 | 1,589,487 | | 1840 | 1,359,466 | 858,677 | 500,789 | 90,761 | 410,028 | | Average of five years, 1841–45 | 1,658,214 | 1,901,405 | 656,809 | 112,468 | 544,341 | | " | 1846–50 | 2,143,717 | 1,304,772 | 838,944 | 728,146 | | " | 1851–55 | 2,559,836 | 1,441,334 | 1,128,502 | 971,499 | | 1855 | 2,867,954 | 1,669,229 | 1,207,725 | 154,229 | 1,053,496 | | 1857 | 3,035,713 | 1,720,815 | 1,314,898 | 135,617 | 1,179,381 | | 1858 | 3,087,535 | 1,926,103 | 1,161,427 | 138,631 | 1,022,796 |

* Namely, the gross receipts after deducting the returns for "refused letters," &c.

† 1838 was the last complete year before the general reduction of postage.

‡ On 5th December 1839, the maximum inland postage for a single letter was reduced to 4½d.

§ On 10th January 1840, the postage on all inland letters weighing not more than half an ounce was reduced to a uniform charge of 1d.

It is plain, therefore, that the adoption of the new post-office system has occasioned the sacrifice of nearly £600,000 a year of revenue, as compared with the revenue of 1838. And considering the extraordinary progress of the country in the interval, and especially the increase of population and commerce, the loss will immediately be seen to be very much greater, perhaps more than double that amount. And though it be true that this great sacrifice might not, under other circumstances, have been of much consequence, it is to be borne in mind that it was incurred when the revenue was inadequate to meet the expenditure, and when, consequently, the deficiency had to be otherwise provided for. We should not, however, have thought the loss of revenue, nor even the introduction of a uniform penny rate, a valid objection to the new plan, had there been no means other than its adoption of getting rid of the inconveniences attached to Indirect Taxes.

the old system. But such was not the case. All its defects might have been effectually obviated without any, or with but a very inconsiderable loss of revenue. Had franking been abolished, and the old rates of postage so reduced that the average charge might have been about 2½d. or 3d. a letter, the revenue would not, probably, have lost anything, while every really advantageous object effected by the present system would have been secured. Indeed, we see no good reason why the present rate of postage should not be considerably increased. Were the 1d., for example, which is now charged upon letters weighing ½ an oz. increased to 2½d., the 2½d. on letters weighing an oz. to 3½d., and so on, adding 1½d. to each of the present rates of charge, the revenue would, it is probable, be nearly doubled, with little or no inconvenience to the public.

It redounds nothing to the credit of the new system that the post-office revenue increases while it is maintained, that being a consequence of the increasing population, wealth, commerce, and education of the country. The revenue would increase quite as fast under any reasonably well-contrived system; all taxes on articles in general use are sure, provided they be not excessive, to increase with every increase of population and wealth.

The abolition of franking, which, however, is in nowise connected with a penny rate of postage, was by far the least exceptionable of the alterations introduced in 1839. Franked letters were in most instances addressed to those who could best afford to pay the expense of postage; and who in this way escaped a burden that fell with its full weight on their less opulent and less known neighbours.

8. License Duties.—These, as the name implies, consist of duties or charges laid on those persons who exercise certain trades or professions, or who undertake or perform certain works or acts. They are principally levied upon the keepers of hotels and public-houses, brewers, distillers, maltsters, dealers in beer, spirits, wines, coffee, tea and tobacco, bankers, &c.; and during the current year (1860) a variety of petty charges have been imposed in connection with the loading and unloading of goods, their removal when under bond, &c. Though easily imposed and collected, these duties are very often unequal and unfair. It is but seldom that they can be assessed according to the amount of business transacted by those who pay them; and unless this be done, they press very heavily upon those who carry on limited businesses, while they are hardly felt by extensive traders. In all, they have recently produced about L1,650,000 a year.

The limits within which this article must be confined will not allow us to inquire at greater length into the incidence of duties on commodities. And referring for further details on that matter to our Treatise on Taxation, we proceed briefly to investigate the limits within which taxes on commodities should be confined so as to produce the greatest amount of revenue.

Sect. III.—Circumstances which determine the extent to which Taxes should be laid on Commodities—Causes of Smuggling—Means by which it may be prevented.

The capacity of taxes on commodities to raise a revenue depends, first, on the nature and extent of the demand for the commodities; and, second, on the facility with which they may be prevented from being smuggled. Every tax tends, by raising the price of the commodity on which it is laid, 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 a duty of 1s. a bottle 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 increase of duty. And hence, whenever the duties on commodities are carried beyond a certain limit—a limit, however, which it is impossible to define, and which must necessarily vary according to the nature of the commodities on which 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 were 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 a reduction in the price of commodities, whose natural cost is very considerable, and which can, therefore, be used only by the rich, will not have so powerful an effect in increasing consumption as a corresponding reduction would have were it made from the price of cheaply-produced commodities in general demand. A fall of 50 per cent. in the price of coaches would not add greatly to their sale; for, notwithstanding this reduction, they would still be luxuries, which none but the rich could afford to use; whereas a fall of 50 per cent. in the price of spirits, beer, tobacco, sugar, or any article in general request, would extend its sale in a much greater ratio. The reason is, that the middle and poorer classes form by far the most numerous portion of society; and as such commodities are even now extensively used by them, a fall of 50 per cent. in their price would bring them fully within their command, and thereby add greatly to their consumption. The truth of this observation is strikingly exemplified in the case of cotton goods. At the accession of George III. in 1760, the price of cottons, owing to the difficulty of their production, was extremely high, and the value of the cotton goods annually brought to market did not exceed L200,000. But, thanks to the genius and inventions of Hargreaves, Watt, Arkwright, Whitney, Crompton, and others, the price of cottons has been so far sunk that they have been brought within reach of the poorest individuals; and the increase of demand growing out of this fall of price has been so vast that the value of the cottons annually manufactured in Great Britain, and either disposed of at home or sent abroad, amounts, according to a moderate estimate, to the amazing sum of fifty-two millions! It is obvious, however, had cottons been loaded with high duties, and that reduction in their price which has been a consequence of the improvement of machinery been brought about by a reduction of the duties affecting them, the result would have been the same. The demand would have equally increased; and the greater consumption of low-taxed articles would have rendered the reduced duties more productive than the higher. Similar effects have uniformly followed from similar causes; low or reasonable duties on commodities in general demand being invariably found to be more productive than when they are carried to an oppressive height, and more productive than high duties on commodities used only by the rich.

Besides diminishing the revenue by diminishing consumption, too high duties tend to diminish it by encouraging and promoting the ruinous 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 rate; and whenever the duties exceed its amount, smuggling will be 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

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1 But, as already seen, this tendency may be, and often is, partially, and sometimes wholly, counteracted by the greater economy and invention of the producers. natural and efficient mode 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 suppress smuggling without reducing duties, by establishing a more vigilant system of collection, and by increasing the number and severity of the penalties affecting the smuggler. But these attempts have for the most part proved signally 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 commodities 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 injure the fair trader, it is idle to expect that the bulk of society should regard those who furnish them with cheap tea, gin, whisky, brandy, &c., as guilty of any very heinous offence.

"To pretend," says Adam 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 hardiest and most determined violators of the laws of society" (p. 407). See also Montesquieu, *Esprit des Lois*, liv. xiii., 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 feelings of the people, and makes them take an interest in the worst characters—for such smugglers generally are—espouse their cause, and avenge their wrongs. A punishment not proportioned to the offence, and which does not carry the sanction of public opinion along with it, is never productive of any good effect. The true way to suppress smuggling is to render it unprofitable; to diminish the temptation to engage in it; and this is not to be done by surrounding the coasts with cordons of troops, multiplying oaths and penalties, and making the country the theatre of ferocious contests in roads and bye-lanes, and of perjury and chicanery in the courts of law, but simply by reducing the duties on smuggled commodities. We must seek in this, and in this only, 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 of smuggling depends more on the directly as proportion which the duty bears to the price of the commodity than on the circumstance of its being absolutely high or low. To illustrate this principle, let us suppose that a taxed commodity, as soap, costs, exclusive of duty, 10d. per lb. If a duty of a penny per lb. 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 a penny per lb. 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 vary inversely as the price of commodities; that is, instead of raising them when the cost of producing the articles on which they are laid is diminished, and reducing them when it is increased, they should be made to vary directly as this cost—rising when it rises, and falling when it falls. Disproportionally heavy taxes are the great cause of smuggling; and they have the further and most injurious effect of preventing its being corrected by its natural and proper punishment; that is, by the confiscation of the smuggled 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 Lois*, liv. xiii., cap. 8.)

Certain commodities, from their greater bulk, from their susceptibility of being impressed with a permanent stamp, or other cause, are less liable to be smuggled than others, and may therefore be loaded with comparatively high duties. But, as a general rule, it cannot be doubted, that, to prevent fraud, the duties should 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 furnishes numerous, conclusive, and well-established proofs of the soundness of this conclusion, we shall take this opportunity to bring one or two of them under the notice of our readers. They may be classed under two different heads—the first consisting of instances in which a reduction of duty has been followed by an increase of revenue; and the second, of instances in which an increase of duties has been followed by a diminution of revenue.

1. The reductions made in the duties on tea in 1745 and History of 1784 strikingly evince the superior productiveness of low duties on articles in general demand. Previously to 1745, the excise duty of 4s. a lb. on tea yielded, at an average, about L150,000 a year; showing, had there been no smuggling or adulteration, that the consumption was equal to about 750,000 lb. But it was well known that smuggling was then carried to a great height, and that the real was much greater than the apparent consumption of tea. To put a stop to this clandestine importation, a bill was introduced into Parliament in 1746, in pursuance of the recommendation of a committee of the House of Com- Indirect taxes, 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 signalized successful. 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 L243,309. But to exhibit the effects of this wise and salutary measure in a still clearer point of view, we subjoin an account of the nett produce of the tea duties, from 1743 to 1748 both inclusive.

| Year | Amount | |------|--------| | 1743 | L151,959 | | 1744 | 147,065 | | 1745 | 146,830 | | 1746 (duties reduced) | 233,309 | | 1747 | 257,937 | | 1748 | 306,545 |

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 anything 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 118,000,000 lb. weight of tea were exported from China to Europe in ships belonging to the continent, and about 50,000,000 lb. 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 13,000,000 lb. a year, the consumption of the continent did not exceed 5,500,000 lb. 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 revenue officers. But this was not the worst effect of the high duties; for many of the retail dealers who purchased tea at the East India Company's sales, being in great measure beaten out of the market, were tempted, that they might put themselves in a condition to stand the competition of the smugglers, to adulterate their teas by mixing them with sloe and ash leaves. At length, in 1784, after every other resource for the suppression of smuggling had been tried in vain, Mr Pitt 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 statement shows that the quantity of tea sold by the East India Company was about trebled in the course of the two years immediately following the reduction.

The quantity of tea sold at the East India Company's sales amounted to, in

| Year | Amount | |------|--------| | 1781 | 5,923,419 lb. | | 1782 | 6,283,664 | | 1783 | 5,557,883 | | 1784 (duties reduced) | 10,148,237 | | 1785 | 16,207,433 | | 1786 | 15,693,952 | | 1787 | 16,692,425 |

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 lb., declined with still greater rapidity, and, in 1791, was reduced to only 2,291,500 lb.

The duties on tea, at an average of the five or six years preceding 1784, produced about L700,000 a-year. And, at the same time that they were reduced to 12½ per cent., an additional duty, estimated to produce L600,000, was laid on windows as a commutation tax, to compensate for the deficiency which it was supposed would take place in the revenue formerly derived from tea. But instead of the duties falling off in the proportion of 119 to 12½, or from L700,000 to L73,000, they only fell off, in consequence of the increased consumption, in the proportion of about two to one, or from L700,000 to L340,000. The commutation act has been always regarded as one of the most successful financial measures adopted in the course of Mr Pitt's administration. It was generally understood at the time to have been suggested by Mr Richardson, accountant-general to the East India Company. But the popularity of the measure was so great as to induce 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 proposed the plan did not belong either to Mr Richardson, or to any one of those who then claimed it. Such of our readers as will take the trouble to look into a pamphlet by Sir Matthew Decker (Serious Considerations on the present High Duties), published in 1743, will find that the measure adopted in 1784 had been strenuously recommended forty years previously.

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. on teas above 2s. per lb. The influence of these duties on consumption, and of the many changes that have since taken place, may be seen in the Commercial Dictionary, article "Tea."

The narrow policy on which ministers have too frequently 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, in proof of the superior productiveness of diminished taxation. There are, however, some others which deserve to be pointed out. In 1742, the high prohibitory duties upon spirituous liquors, and umn licenses for retailing the same, were abolished, and such moderate duties imposed, to commence after Ladyday 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 advantageous alike to the revenue and the morals of the people. (History of our Debts and Taxes, part iv, p. 110.)

Previously to 1732, the duty on coffee amounted to 2s. Reduction a pound; but an act was then passed, in compliance with the solicitations of the West India planters, reducing the duty to 1s. 6d. a pound; at which it stood for many years, producing, at an average, about L10,000 a-year. In consequence, however, of the prevalence of smuggling, caused by the too great magnitude of the duty, the revenue declined, in 1783, to L2,869, 10s. 10½d. And, having been found impossible otherwise to check the practice of clandestine importation, the duty was reduced, in 1784, to 6d. The consequences of this wise and salutary measure were most beneficial. Instead of being reduced, the revenue was immediately raised to above two and a half times its previous amount, or to L7200, 15s. 9½d., showing that the consumption of legally imported coffee must have increased in a nearly ninefold proportion; a conclusive proof, as Mr Bryan Edwards has observed, of the effects of heavy taxa-

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1 See Treatise on Taxation by the author of this article, 2d ed., pp. 342-346. The history of the coffee trade abounds with similar and even more striking examples of the superior productiveness of low duties. In 1807, the duty was 1s. 8d. a pound; and the quantity entered for home consumption amounted to 1,170,164 lbs., yielding a revenue of L161,245, 11s. 4d. In 1808, the duty was reduced from 1s. 8d. to 7d.; and in 1809 there were no fewer than 9,251,847 lbs. entered for home consumption, yielding, notwithstanding the reduction of duty, a revenue of L245,856, 8s. 4d. The duty having been raised in 1819 from 7d. to 1s. a pound, the quantity entered for home consumption in 1824 was 7,993,041 lbs., yielding a revenue of L407,544, 4s. 3d. In 1824, however, the duty being again reduced from 1s. to 6d., the quantity entered for home consumption in 1825 was 11,082,970 lbs. In 1830 it had increased to 22,669,253 lbs., producing a net revenue of L579,363. Various changes have since taken place in the rate of duty, which amounts at present (1859) to 3d. per lb. In 1858, no fewer than 35,208,932 lbs. were entered for consumption, producing a revenue of L440,475; and it is to be observed that this great increase in the consumption of coffee has taken place, not only without any diminution, but with a very material increase, in the consumption of tea.

The history of other countries abounds with equally conclusive examples of the superior productiveness of moderate duties. In 1775, Turgot deducted a half from the customs and other duties chargeable on the fish sold in the Paris market; and notwithstanding this reduction, the amount of the duties collected was not diminished. The demand for fish must therefore have been doubled, in consequence of the inhabitants being enabled to buy it at a comparatively cheap rate.

In 1813, all sugar imported into the French empire paid a duty of 1 franc 60 cent. the livre or pound. The quantity imported that year amounted to about 14,000,000 of pounds, which, as France, and the countries then incorporated with her, contained about 42,000,000 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 30 cent. the pound; and though the population of France had then been reduced from 42,000,000 to about 28,000,000, the average annual importations of 1814 and 1815 amounted to 44,000,000 of pounds, being upwards of 1½ lbs. 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 yielded very nearly as large a revenue as the high duty. (Richesse des Nations, par Garnier, v., p. 304, 2de ed.)

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 Necker, who had the best means of coming to a correct conclusion, at 9½ lbs. to each individual, and at 18 lbs. in the pays redimés, 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 numerous provinces with cordons of troops, and would have put a stop to that smuggling of salt, which occasioned the sending of between 3000 and 4000 persons every year either to prison or the galleys. (Arthur Young's Indirect Travels in France, vol. i., p. 598.)

Ustariz gives a variety of instructive details respecting the disastrous effects which certain taxes have had on industry in Spain, and of the advantages resulting from the repeal and modification of others. We shall give a single instance on example. Valencia, he tells us, though barren of grain and vines in flocks, and not equal in extent to two-thirds of Aragon, paid a much larger revenue to the royal treasury. This, he says, 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."

But the superior productiveness of low duties on articles in general demand may be equally shown from the inconsequences of the attempts to increase them beyond their proper limits. The history of the wine duties is, in this respect, highly important. During the three years ending with 1792, when the duty on French wines was 3s. 9d., and on Portuguese 2s. 6d. per wine gallon, the consumption in Great Britain amounted, at an average, to 7,410,947 gallons a year, producing about L900,000 of revenue. It is probable, had the increase taken place gradually, that these duties might have been doubled without any material diminution of consumption. But in 1795 and 1796 they were raised to 8s. 6d. per gallon on French, and to 5s. 8½d. per gallon on Portuguese and Spanish wine; and the consequence of this sudden and inordinate increase was, that the consumption fell from nearly 7,000,000 gallons in 1795, to 5,732,383 in 1796, and to 3,970,901 in 1797. But this unanswerable demonstration of the ruinous effect of heavy and sudden additions to the duties did not prevent their being raised, in 1804, to 11s. 5½d. on French, and to 7s. 8d. on Portuguese and Spanish wine. They continued at this rate till 1825; and such was their influence, assisted, no doubt, by the greater prevalence of temperate habits, that, notwithstanding the vast increase of wealth and population since 1790, and the general improvement in the style of living, the consumption of wine, during the three years ending with 1824, amounted, at an average, to only 5,248,767 gallons a year, being 2,162,180 gallons under the annual consumption of the three years ending with 1792! It may therefore be truly said, making allowance for the increase of population, that the consumption of wine in Great Britain fell off more than 50 per cent. between 1790 and 1824.

Had Mr Vansittart continued in power, it is difficult to say when this system might have terminated; but no sooner had Mr Robinson (late Lord Ripon) become Chancellor of the Exchequer, than he resolved upon the effectual reduction of the wine duties. In pursuance of this determination, he took, in 1825, nearly 50 per cent. from the previously existing duties; and notwithstanding the spirit duties were at the same time reduced in a still greater degree, the consumption of wine was largely increased, while the loss of revenue was but inconsiderable. We are therefore justified in affirming that this measure was entirely successful, and that it is a valuable example of the superior productiveness of low duties.

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1 Say, Traité d'Economie Politique, tom. ii., p. 339. Lord Kames, in his Sketches of the Hist. of Man, states that these duties amounted to 48 per cent. ad valorem. Vol. II., p. 406, edit. 1788. 2 Theory and Practice of Commerce, vol. ii., p. 310, Eng. Trans. The duties, as reduced by Mr. Robinson, were 7s. 3d. per imperial gallon on French wines, 4s. 10d. per do. on all other foreign wines, and 2s. 5d. on those of the Cape of Good Hope. They continued on this footing till the equalization act (1 and 2 Will. IV., c. 30), which imposed a duty of 5s. 6d. per imperial gallon on all foreign wines, and of 2s. 9d. on those of the Cape.

But, notwithstanding this reduction, the opinion has been gaining ground for some years past, that the wine duties were still too high. And it is not unlikely, had it been possible to assess them on an ad valorem principle, that they would have been placed years ago on an entirely different footing. But the difficulties in the way of assessing a duty on wine on the principle referred to were found to be insuperable; and as it was plain that no modification of the duty would be of much consequence which did not permit of the inferior continental wines being introduced at low prices, its reduction to 1s. a gallon began to be strongly recommended. And this project has been so far adopted, that from and after the 1st January 1861, such wines as contain less than 18 per cent. proof spirit are to be admitted at the low duty of 1s. per gallon; while those that contain more than 18 and under 26 per cent. spirit, are to pay 1s. 6d.; and those that contain from 26 to 40 per cent. spirit, 2s. per gallon. Wine containing above 40 per cent. proof spirit is (as at present) to be excluded. In the meantime, all wines pay 3s. per gallon.

Such is the new measure in regard to the wine duties, and it will not be denied that it is of a bold and decisive character. Almost all the lowest, and many of the higher varieties of wine will be admitted at the low duty; and though the price of the superior wines is naturally so high that they will be but little affected by the reduction of the duty, such is not the case with the lower qualities of wine, of which the consumption will, it is probable, be a good deal increased. We doubt, however, whether it is desirable that they should make, or that they ever will make, any considerable way among the lower classes, or to such an extent as seriously to affect the consumption of beer or spirits. If they did, it would be necessary, to maintain the equality of taxation and do justice to all parties, to make considerable changes in the existing duties on malt and spirits. Experience, however, can alone enable us to form correct conclusions with respect to these matters. It is not possible to estimate beforehand, on anything like satisfactory grounds, what may be the ultimate effect of a measure which, like that now under our notice, involves so many conflicting considerations. We, however, are inclined to think that it will not be nearly so great as many suppose; and that, despite a large increase of consumption, there will be in the end a very considerable loss of revenue.

There are perhaps no better objects of taxation than spirituous and fermented liquors, and none in which the injurious effects of over-taxation have been more strikingly manifested. They are essentially luxuries; and while, in consequence of their being very generally used, moderate duties on them are exceedingly productive, the increase of price which they occasion tends to lessen 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, sometimes to increase the revenue, and partly to place them beyond the reach of the poorer classes, have very generally loaded them with such oppressively high duties as have entirely defeated both objects. The imposition of duties does not take away the appetite for spirits. And as no vigilance of the officers, or severity of the laws, has 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 the injurious consequences of the too great increase of spirit duties been more distinctly manifested than in Ireland. In proof of this, we may mention, on the authority of the Fifth Report of the Commissioners of Inquiry into the State of the 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, Irish measure; while, in 1822, when the duty was 5s. 6d., only 2,950,647 gallons were brought to the charge. The Commissioners estimated the annual consumption of spirits in Ireland, at the same time, at about ten millions of gallons; and as scarcely three millions paid duty, it followed that upwards of seven millions were 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" (Report, p. 8). It is material, too, to observe, that this extraordinary amount of smuggling occurred 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 by 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).

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, and seriously injured the morals and industry of the people in the mountainous districts, where it was principally carried on.

To put an end to such evils, the commissioners recommended that the duty on spirits should be reduced from 5s. 6d. to 2s. the wine gallon (2s. 4d. the imperial gallon); and government having wisely consented to act upon this recommendation, illicit distillation ceased forthwith.

Since this epoch, the duties on spirits have undergone many alterations. Down to a late period, the rates of which they were subjected differed in the different parts of the United Kingdom, which necessarily led to the imposition of sundry restraints on their conveyance from the one to the other, and to a great deal of smuggling. The mischievous influence of this differential arrangement was long obvious, but the difficulties in the way of the equalization of the duties were such that it has only been recently effected. Now, however, spirits are charged with the same duties whether they are produced or consumed in England, Scotland, or Ireland, and entire freedom has been given to the home trade in them. We fear, however, that the duty of 8s. a gallon with which they are charged will be found to be too high. It is true that the former facilities for illicit distillation have of late years been materially diminished both in Scotland and Ireland. But, despite this circumstance, the new duty is so very heavy, that it is affirmed by persons well-informed on the subject, that under its protecting influence, illicit practices will, most probably, be revived. ### Indirect Account of the Quantities of Home-made Spirits charged with Consumption Duties, and specifying the Rates of Indirect Duty in each Division of the Empire since 1800, with the total Amount of the Duty.

| Years | England | Scotland | Ireland | United Kingdom | |-------|---------|----------|---------|----------------| | | Imperial Galls charged with Consumption Duty | Imperial Galls charged with Consumption Duty | Imperial Galls charged with Consumption Duty | Total Gallons | Total Amount of Duty | | 1800 | 4,352,888 | 1,277,596 | 1,330,500 | 6,960,984 | 1,370,034 | | 1801 | 2,555,920 | 295,931 | 335,106 | 3,206,957 | 723,992 | | 1802 | 3,981,072 | 1,153,558 | 4,715,098 | 9,854,728 | 1,956,313 | | 1803 | 5,370,377 | 2,022,409 | 4,343,053 | 11,735,881 | 2,508,286 | | 1804 | 3,690,745 | 1,889,757 | 3,543,599 | 9,124,101 | 2,678,413 | | 1805 | 4,932,645 | 1,625,987 | 3,868,233 | 10,244,865 | 3,122,820 | | 1806 | 4,094,985 | 1,812,237 | 3,858,107 | 9,755,329 | 2,877,502 | | 1807 | 4,747,365 | 2,653,478 | 5,507,204 | 12,908,047 | 3,883,053 | | 1808 | 5,390,884 | 2,683,342 | 3,575,430 | 11,649,656 | 3,825,442 | | 1809 | 4,035,825 | 1,535,135 | 1,360,386 | 6,711,346 | 1,873,147 | | 1810 | 4,787,555 | 1,748,140 | 4,728,522 | 11,264,217 | 2,643,404 | | 1811 | 4,776,330 | 1,551,092 | 6,378,479 | 13,105,901 | 2,969,136 | | 1812 | 5,242,470 | 1,687,905 | 4,009,301 | 10,939,676 | 2,176,977 | | 1813 | 4,292,477 | 1,234,291 | 3,158,693 | 8,683,461 | 1,922,546 | | 1814 | 4,956,965 | 1,474,137 | 5,393,713 | 11,824,866 | 2,637,011 | | 1815 | 4,658,967 | 1,291,148 | 4,323,844 | 11,333,978 | 2,497,066 | | 1816 | 4,745,484 | 918,859 | 3,547,209 | 9,241,545 | 2,011,981 | | 1817 | 4,138,083 | 1,095,350 | 3,586,932 | 9,626,941 | 2,577,766 | | 1818 | 5,259,662 | 2,066,988 | 4,284,347 | 11,610,997 | 4,496,709 | | 1819 | 4,146,505 | 1,232,150 | 3,676,516 | 9,948,171 | 3,913,705 | | 1820 | 4,284,798 | 1,863,987 | 3,239,650 | 9,448,435 | 4,012,707 | | 1821 | 4,125,616 | 2,285,495 | 3,311,462 | 9,822,573 | 4,085,673 | | 1822 | 4,694,055 | 2,225,124 | 2,910,483 | 9,829,662 | 4,252,010 | | 1823 | 3,803,312 | 2,393,286 | 3,490,376 | 9,698,974 | 3,407,449 | | 1824 | 4,392,611 | 4,350,301 | 6,690,315 | 15,433,227 | 3,895,285 | | 1825 | 3,084,049 | 5,931,549 | 9,262,744 | 18,928,342 | 3,884,830 | | 1826 | 7,407,204 | 3,988,788 | 6,834,867 | 18,230,850 | 4,125,598 | | 1827 | 6,571,562 | 4,752,199 | 8,280,664 | 19,684,425 | 4,178,508 | | 1828 | 7,759,687 | 5,716,180 | 9,937,903 | 23,413,770 | 4,933,552 | | 1829 | 7,700,766 | 5,777,280 | 9,212,224 | 22,690,270 | 4,818,781 | | 1830 | 7,732,101 | 6,007,631 | 9,064,539 | 22,447,271 | 5,209,590 | | 1831 | 7,434,047 | 5,700,889 | 8,710,672 | 21,845,408 | 5,189,651 | | 1832 | 7,281,000 | 5,407,097 | 8,857,756 | 21,316,753 | 5,074,854 | | 1833 | 7,717,306 | 5,898,536 | 8,168,595 | 21,745,455 | 5,253,119 | | 1834 | 7,644,301 | 6,045,043 | 9,708,416 | 23,397,760 | 5,243,439 | | 1835 | 7,315,053 | 6,013,932 | 11,381,223 | 24,710,208 | 5,073,276 | | 1836 | 7,875,702 | 6,020,826 | 12,487,177 | 25,745,500 | 5,458,853 | | 1837 | 7,133,486 | 6,124,035 | 11,225,635 | 24,450,628 | 5,157,927 | | 1838 | 7,899,490 | 6,250,711 | 12,926,342 | 26,486,579 | 5,151,792 | | 1839 | 8,186,552 | 6,188,582 | 10,815,709 | 25,150,843 | 5,352,220 | | 1840 | 8,278,148 | 6,180,138 | 7,401,051 | 21,859,337 | 5,208,040 | | 1841 | 8,166,985 | 5,892,905 | 6,485,443 | 20,642,556 | 5,161,160 | | 1842 | 7,956,054 | 5,595,186 | 5,290,650 | 18,841,590 | 5,040,813 | | 1843 | 7,724,051 | 5,593,798 | 5,546,483 | 18,846,332 | 4,903,201 | | 1844 | 8,234,440 | 5,922,948 | 6,451,137 | 20,608,525 | 5,171,181 | | 1845 | 9,076,381 | 6,441,011 | 7,605,196 | 23,122,588 | 6,749,794 | | 1846 | 9,179,530 | 6,975,091 | 7,952,076 | 24,166,697 | 6,934,359 | | 1847 | 8,400,165 | 6,193,249 | 6,057,383 | 20,639,797 | 5,234,003 | | 1848 | 8,581,327 | 6,548,190 | 7,072,933 | 22,202,450 | 5,504,578 | | 1849 | 9,053,678 | 6,935,003 | 6,973,333 | 22,992,012 | 5,747,218 | | 1850 | 9,331,512 | 7,122,987 | 7,408,086 | 23,862,585 | 5,948,467 | | 1851 | 9,695,368 | 6,830,710 | 7,550,518 | 23,976,596 | 6,017,218 | | 1852 | 9,820,608 | 7,172,015 | 8,208,256 | 25,200,879 | 6,255,708 | | 1853 | 10,350,307 | 6,634,548 | 8,135,362 | 25,021,317 | 6,760,422 | | 1854 | 10,889,611 | 6,553,239 | 8,440,734 | 25,883,584 | 7,600,778 | | 1855 | 10,384,100 | 5,944,319 | 6,228,856 | 21,957,275 | 7,617,582 | | 1856 | 9,343,549 | 7,175,339 | 6,781,068 | 23,300,556 | 6,896,624 | | 1857 | no return | no return | 6,920,046 | 24,150,433 | 9,025,835 | | 1858 | 10,448,572 | 6,830,037 | 6,402,142 | 23,656,751 | 9,195,154 |

The duties on brandy and other foreign spirits have been reduced in the course of the present year (1860) to the same level as those on English spirits—that is, they have been reduced from 15s. to 8s. 6d. a gallon—the 6d. being intended to compensate for the inconvenience inflicted on the producers of British spirits by being subjected to the excise. But this reduction appears to have been either wholly or in great measure unnecessary. It involves, what we could not afford, a very considerable loss of revenue; and in whatever degree the consumption of brandy and Geneva may be increased, there will be a nearly corresponding diminution in the consumption of British spirits and rum. A reduction of the duty on brandy, &c., to 12s. a gallon might, perhaps, have been expedient; but that is the lowest limit to which it should have been reduced.

Brandy being a more valuable or costly spirit than gin or whisky, it ought, in justice to the producers of the latter, to have been subjected to a higher duty. But their interests, as well as those of others, appear to have been entirely forgotten in our zeal to open new markets for the products of France.

Sect. V.—Method of Comparing the Amount of Taxation in Different Countries.

It has been usual to endeavour to ascertain the comparative weight of the public burdens of different countries by comparing them with their population. But this is obviously a most 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 had in 1851 a population of 6,552,000, could afford to pay more than twice the amount of the taxes paid by Scotland, which had only a population of 2,889,000. So far, however, from this being the case, the revenue of Scotland is nearly the same as that of Ireland or greater; and yet there is no reason for thinking that the pressure of taxation is felt more severely here than among our neighbours.

The amount of the capital belonging to different countries has been suggested as a test by which to ascertain the comparative weight of their burdens. But this would also lead to the most erroneous results; for it is plain that a small capital, where profits are high, may be more productive than a large one where profits are low. The market rate of interest, which is always proportional to the customary rate of profit, is usually about twice as great in the United States as in England. One million of capital employed in America must therefore be about as productive—that is, it must yield about as large an annual income—as two millions employed 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 or 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 capital of a country that its capacity to bear taxes is to be determined. These, as has been already seen, really consist of a portion of the incomes of individuals transferred from them to the state; and hence, to determine whether they are higher or lower in one country than in another, it is necessary to ascertain the respective incomes of the inhabitants compared together, the number of their inhabitants, and the amount of their burdens. Supposing, for example, that the income of Great Britain, which has 23 millions of inhabitants, is four hundred millions of pounds sterling, which is believed to be pretty near its actual amount, and that its taxes, in countries excluding poor-rates, tithes, and public burdens of every description, be learned amount to eighty millions, this sum deducted from the former would leave three hundred and twenty millions, which would give a free income of about £14 a year to every individual, in Great Britain's income.

Suppose, now, that the income of France is four hundred and fifty with the millions, and that the aggregate amount of her taxes and public burdens of every description is seventy-five millions; the three hundred and seventy-five millions of remainder, when divided among a population of thirty-six millions, would only leave a free their income of £10, 8s. to each. There is reason to think that these demands 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 larger population, and a smaller absolute amount of taxes.

The taxes on tea and sugar are those which fall heaviest on necessaries, and consequently exercise the greatest influence over wages. But we do not believe that they are at all too high, nor do we suppose that the revenue which they yield could be raised with less injury in any other way. We do not, however, make this statement to excuse either these or any other taxes being kept at a higher level than is absolutely necessary. Every practicable effort should at all times be made to lighten the pressure on the national resources, and to add to the comfort and wellbeing of the population. And this will be best effected by avoiding unnecessary expenditure, and resorting to those taxes which we have shown are least productive of public inconvenience.

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; in the Statistical Account of the British Empire, and the Treatise on Taxation, by the author of this article; and in a variety of other publications.

Account of the different items composing the Public Revenue of the United Kingdom in the years ended the 31st March 1858 and 1859.

| Income | 1858 | 1859 | |--------|------|------| | Customs and Excise | 918,071 | 893,371 | | Spirits | 1,381,693 | 1,284,948 | | Malt | 8,963,874 | 8,805,195 | | Hop Duty | 5,256,023 | 5,612,777 | | Wine Duty | 321,475 | 398,206 | | Sugar and Molasses | 1,212,292 | 1,157,875 | | Tea | 5,587,822 | 5,970,329 | | Coffee | 5,361,165 | 5,671,703 | | Tobacco and Snuff | 474,594 | 425,828 | | Butter | 5,272,471 | 5,463,226 | | Cheese | 103,004 | 91,798 | | Carrageens and Raisins | 48,315 | 44,280 | | Corn | 488,026 | 582,864 | | Silk | 231,490 | 235,073 | | Paper | 1,130,683 | 1,133,687 | | Candles and Tallow | 76,742 | 84,933 | | Glassware | 4,926 | 4,414 | | Timber | 559,571 | 574,226 | | Excise Licenses | 1,424,653 | 1,436,929 | | Post-Horse Duties | 80,130 | 82,094 | | Hackney Carriages | 118,561 | 124,594 | | Railways | 348,511 | 339,569 | | Miscellaneous of Customs and Excise | 686,006 | 711,425 | | Total Customs and Excise | 5,045,000 | 5,955,605 |

| Income | 1858 | 1859 | |--------|------|------| | Stamps | 1,331,789 | 1,336,273 | | Deeds and other Instruments | 3,632,433 | 3,638,218 | | Probates and Legacies | 319,508 | 265,224 | | Insurance | 1,356,069 | 1,402,533 | | Bills of Exchange | 594,092 | 625,209 | | Bankers' Notes | 153,429 | 145,404 | | Newspapers and Advertisements | 281,115 | 418,115 | | Receipts | 402,201 | 442,753 | | Other Stamp Duties | 7,470,627 | 7,904,035 |

| Income | 1858 | 1859 | |--------|------|------| | Assessed & Land Taxes | 1,142,174 | 1,131,758 | | Land Taxes | 754,944 | 763,900 | | Houses | 192,760 | 193,302 | | Servants | 331,000 | 348,307 | | Horses | 300,597 | 306,036 | | Carriages | 197,604 | 191,659 | | Dogs | 14,328 | 15,253 | | Additional 10 per cent. | 158,257 | 209,531 | | Other Assessed Taxes | 3,150,762 | 3,100,756 | | Property and Income Tax | 11,295,435 | 6,610,109 | | Post-Office | 3,038,113 | 3,175,561 | | Crown Lands | 417,909 | 420,229 | | Other Ordinary Revenue and other Resources | 1,296,887 | 2,125,944 | | Total Income | 66,257,000 | 65,387,252 |

(J. B. M.)