Thoughts on the mechanism of societies

The fate of the various kinds of taxes, is similar to that of political operations, which pretty regularly bring about the very contrary of what had been expected from them: thus if you tax the consumption of the rich, presently the poor alone will pay the impost, and will continue to pay it till an insurrection will make you sensible that he is brought too low; now this insurrection is commonly the consequence of a trifling scarcity, which, it seems, Providence sends to the unfortunate in order to encourage his asking for justice, in the only manner that is likely to prove successful: on the contrary, let the tax be laid on the general consumption, without sparing that of the poor, the man who possesses, shall be, no doubt, necessitated to pay for the man who has nothing, if the former wishes to enjoy the labour of the latter; and on the very same day, when the tax is laid on the consumption of the labouring man, he will not hesitate to demand an increase of wages to the full amount.... How is he to be deceived?—If it be well to deceive the poor as long as possible, then tax nothing but the consumption of the rich. But whatever be the manner in which the impost is laid, as soon as its effect shall be general, the burden will prove null (save the injuries inseparable from all other taxes, but those that bear upon consumption): this effect is no more than a general advance in all the prices: an advance, it is true, already acknowledged necessary with regard to the taxed articles, but dreaded hitherto in regard to all the rest, where it ought to have been wished for; universally felt, but never justly estimated; the nullity of the burden of the debt would have been determined by the estimation.

The poll-tax, supposed to be established by Divine Justice, would enhance the price of labour, and of its products, but by a fraction equal to that which the amount of the tax should be, in the mass of both revenues, land and industry. Ten millions of a poll-tax on a revenue of 120, would increase the prices of every thing by one twelfth; and every man thus taxed, would evidently after the advance of prices, in consequence of such a poll-tax, find himself in the very same state he stood in before the tax; yet one twelfth more must be given for every thing, but then one twelfth more would be received for every thing.

All other kinds of taxes, as well as the poll-tax, seem to affect only the article on which they are laid; but this article comprehends the three interests, and trebles the action of the tax when the interest of the labouring man, that is, the price of his day’s work, constitutes, as it does in England, nearly one third of the revenue.—How could it be supposed that the taxing of industry in its products, was granting to its capitalist the right of increasing his price by the whole amount of the tax, without making it necessary for the land proprietor to enhance the price of his commodities at the same rate? And how could it be supposed that the products of agriculture and industry, happening to be, by a very just re-action, (whether it originates with the one or the other), increased in price in the same proportion, agriculture and industry should not be compelled to increase of course the price of labour which procured those products? If therefore you advance by 10 millions, the prices either of all the productions of the earth, by taxing agriculture, or of all the productions of the arts, by taxing industry, you equally compel the untaxed part to advance its prices to the whole amount of the 10 millions laid on the corresponding part, otherwise goods to the amount of 10 millions would evidently remain unsold. Now the influence of those new prices will enforce by degrees an increase on the price of labour, and this increase will soon be followed by a fresh one on the value of its products; whence it appears at last, that after all the necessary re-actions, the same tax of 10 millions, which by a general equitable poll-tax, supposed as equitable as it is impossible to make it so, would only raise the prices by one twelfth, or 8⅓ per cent.; if laid, either on the land, or luxury, or general consumption, would necessarily advance the prices, sooner or later, to 25 per cent.; the very precise period whereat every one would find himself in the exact state in which he was previous to the tax, paying, it is true, every thing 25 per cent. dearer, but being himself paid 25 per cent. dearer too.

Alter the proportion of the usual price of labour, by supposing a country so far barren as to make it necessary to appropriate one half of the revenue to the labouring people; in such case a tax of 10 millions laid on a revenue of 60 would increase by 30 per cent. the price of labour, and of its products; 30 per cent. would raise the revenue from 60 to 78 millions: now 39 being the half of 78, as 30 is that of 60, the burden of the tax would then prove equally null, after every article should have been raised 30 per cent.

Alter again the proportion of the common price of labour, by supposing that the cultivator is allowed only one fourth of the revenue; this division may take place in a country extremely fertile; in this case, a tax of 10 millions on a revenue of 60, would only add 20 per cent. to the former prices; instead of raising the revenue of 60 millions to 75, as in the case of three equal shares, or to 78, as in the supposition of the revenue being divided in halves, the tax would then carry it only to 72. Now the 4th part of 72 is 18, as 15 is the 4th of 60; therefore if, after the tax is imposed, you give 18 wherever you paid only 15 before that period, the burden will clearly be null again, since the increase in the price of labour, must have followed the advanced price of its products, an advance necessitated by the impost.

Here, methinks, I hear the enthusiasts exclaim, How! the fertility of the land is then of no advantage, but to its greedy owners!—I am in hopes that before I conclude this Pamphlet, I shall be able to find, to the great satisfaction of all good men, how many advantages remain in the hands of the most opulent land proprietor; nay I hope to prove that in a fertile land there is nothing lost to any of its inhabitants, unless extraordinary efforts be used to concenter within that spot the general benefit which must result from it. I shall content myself at present with requesting the reader to compare my thoughts on the taxes, with the two following problems, so often debated both in England and in France. How is it that France has constantly retrieved her errors and her misfortunes? How comes it that England has not yet sunk under the burden of her taxes? The French exciseman says: It is because the more the people are loaded, the better they walk; and very sensible men in England used to say, “Reason and experience seem to prove that taxes stimulate industry, and that the poor, to live as well as before, perform more work without demanding more for their labour.” (D. Hume’s Essay VIII. on Taxes). It seems to me that the above two problems are more humanely solved by the reasons I have produced, and that those reasons destroy all idea of a miracle, or of the necessity of loading the people in order to spur their industry, and encourage them to work: on the contrary, to forward those two great points, it is necessary to increase the price of their labour in the same proportion as that of its products is raised by the taxes; and this will suffice to render evidently null the burden of all taxes whatever.