When taxes have the effect of interrupting this harmony of expence, of restraining the liberty of squandering, or of saving, or of oppressing one set of men more than another, in all such cases, they are improperly imposed; and instead of being too high, as it is commonly supposed, I think it is a demonstration that they are really lower than they need to be. The classes of men in a modern state, resemble the horses in a team. When every horse draws fairly and equally, the whole force is exerted; but if any one happens to be strained by an overcharge thrown upon him, the force of the team is greatly diminished.

When proportional taxes are carried to their full extent, I then presume every one will be obliged to pay as much as possible; I do not mean that every one will be forced to pay to the extent of his abilities, but I say, that the generality will; and therefore, were cumulative, or personal taxes, to be superadded on those who already pay all they can, they would, by affecting them unequally, deprive many of their physical-necessary, or small profits; and consequently destroy the proper balance of their competition. The setting the lower classes free from cumulative taxes, will only have the effect of putting the growing wealth of the penurious and saving part of the industrious inhabitants out of the reach of taxation. This ought in good policy to be done, as has been shewn in another place. But, farther, we have observed, that taxes can only be increased in proportion to the spirit of dissipation in the people. To force money, therefore, out of the hands of those who do not incline to spend it, is forcing the spirit of the people; and if not tyranny, is at least great severity. Besides, we shall presently shew, how these savings cannot escape being taxed, whenever they begin to produce an income; and allowing that they may be greatly accumulated, and thrown into trade, yet still they must in one way or other appear in alienation, and become subject to the proportional taxes. The only part, therefore, of the savings not affected by taxes, will be confined to that which is locked up. This in a prodigal nation should never be touched. The inconveniencies resulting to the state from so small an inequality of taxation, is too trifling to be attended to, and too difficult to be prevented.

I come next to examine the extent of cumulative taxes.

If we suppose the proportional taxes to be carried to their full extent, there will be little place found for the cumulative, as has been said. The only objects left for them are the savings locked up, and the pure profits upon trade.

But let us suppose proportional taxes out of the question, as they must be when contrary to the spirit of a particular nation; and then inquire into the principles which regulate the imposition of cumulative taxes, in order to discover to what extent they may be carried, and what consequences may follow when they are brought to a height.

This branch has two objects; first, income, which is determinate; secondly, profits from industry, which are and must be very uncertain.

Income, I divide into two sorts; that which proceeds from every branch of solid property, capable of producing it: Land, houses, even cattle, furniture, &c. all may, in some respects, produce an income, more or less permanent according to circumstances. This sort of income is established by lease. The second sort is the interest of money, constituted by the contract of loan.

In imposing cumulative taxes upon income, it is very proper to consider the nature of every species of it, with respect to stability. Landed property is fixed, and can not escape taxation, were the tax to be carried to the extent of the full income, as has been observed. Were the same proportion to be laid on houses, they would soon fall to ruin, because the annual proprietor would not keep them up. Like circumstances must be attended to, in taxing every other article of revenue.

The method of ascertaining the value of this kind of property, is to oblige all leases to be recorded, under a sufficient penalty. This is the method in France, for the sake of the controle, which is exacted upon recording them; and this, no doubt, facilitates the raising of the twentieth penny, which operates upon all such incomes.

The value once ascertained, the whole income is at the mercy of the state, in proportion to the impossibility of avoiding it, by any change on the nature of the fund. It is from this circumstance that I call all such taxes arbitrary impositions. And I call them also cumulative; because the reason given by the statesman for imposing them, is, that it is just every one should pay a general tax, for the support of the state, in proportion to his abilities.

As these taxes cannot be carried beyond the value of the income which the proprietor cannot withdraw from under the burden, we see the impossibility of establishing them upon that income which proceeds from money. If a tax of so much per cent. be imposed upon money lent at interest; the lender may immediately call in his capital from his debtor, and send it away beyond the reach of the tax. If the calling it in be prohibited, then all credit is destroyed for the future, and no more money will be lent. If the statesman should incline to profit of the advantage found in securing money upon land-property; and if, trusting to the desire monied-people have of settling their capitals in that way, he should take one or more per cent. upon capitals so secured; it will still have the effect of hurting the credit of landed men, who have frequently no good security but their land to give.

It was formerly the practice to allow the landlords to retain a part of the interest, in consideration of the tax they paid upon that part of their land, which was pledged for the security of the money borrowed; but when credit is once established, that regulation has no other effect, than to oblige them to borrow so much dearer than other people, who have no retention to claim. Where indeed credit is precarious, such a regulation would be a premium for good security.

In general, I believe, we may safely determine, that all attempts to lay a tax upon the income of so fluctuating a property as money, where the capital is demandable, will prove unsuccessful.

The case is different, when the capital is not demandable, as has been observed in the end of the 8th chapter upon public credit; where we were suggesting a reason for taxing the interest of national debts, when grown up to the full amount of all the income of a country. But a material distinction was there made, between those debts which were supposed to be consolidated into a permanent property, and new contracts which were to be considered as debts upon that property.

We see, therefore, the extent of cumulative taxes upon possessions which produce an income. Let us next examine how they may be made to affect other articles.

We have observed how improper, and how contrary to principles it is, to impose proportional taxes upon those branches of sale, which do not change the balance of wealth between the contracting parties. Yet cumulative taxes may then take place; because there is no reason to make them general, or proportional.

When lands, for example, carry titles along with them, as is the case in many countries; and when, as with us in Scotland they carry a right to vote for a member of parliament, a very heavy tax might be imposed upon the alienation of them. The same may be said of every other estate which requires a feudal investiture to compleat the right. Thus the Lods et vente in France, which is a portion of the price of such lands due to the superior or lord-paramount of the fee, amounting in many cases to the sixth part of the price, is a hint for a cumulative tax to be raised upon the alienation of this kind of property.

Were cumulative taxes properly laid upon personal service, a regularity in levying them at short intervals, and according to some determinate proportion, would do a great deal towards communicating to them all the advantages of those of the proportional kind.

Thus a tax laid upon those who work by the day, may be levied in such a manner as to be tolerably easy. A penny a day (or more if necessary) paid by every industrious man, regularly, once a week, would soon enable him to raise his price in that proportion. But then deductions must be allowed for all accidental impediments; and were a plan to be concerted, many other considerations would enter into it, which it would be superfluous here to mention, and which, perhaps, may occur in another place.

The two articles which, in analizing the extent of proportional taxes, we observed had escaped that imposition, to wit, money locked up, and the pure profits on trade constantly accumulated into the stock, are equally ill adapted to bear a cumulative tax. I can see no way of taxing money locked up, any more than money lent, without opening a door to the greatest oppression. And as to the pure profits on trade, although they appear to be income, I rather consider them as stock, which, according to principles, ought not to be taxed. My reason for not considering them as income, is because we have supposed them to be accumulated by the merchant into his trading stock. They resemble the annual shoots of a tree, which augment the mass of it, but are very different from the seed or fruit which is annually produced, and is annually separated from it. If they are spent by the merchants, then they are undoubtedly income, and will be affected by proportional taxes; but as they may also not be spent, and become stock, the cumulative tax will affect them in both cases.

Having endeavoured to deduce the principles of taxation, by examining the combinations which occur when we suppose it augmented to the highest degree, I must now look for new combinations, which will suggest themselves upon examining the consequences of a total, or a partial abolition of taxes.

So far as taxes are absolutely necessary for the support of government, no body, I suppose, can wish to see them abolished. The object, therefore, of a statesman’s attention in levying taxes for indispensable national purposes, should turn upon the principles we have been examining. What now follows relates to the consequences of abolishing taxes once established, so far as it proves a revolution in the oeconomy of a state. This will lead us to examine the consequences of taxes, considered as voluntary public contributions, independently of the absolute necessity of raising them to supply the exigencies of the state. We are therefore to examine the consequences of so great a change to the whole body of the society, considered as a nation, which requires a public stock, to which it may have recourse upon every extraordinary occasion.

When the interest of a whole people is examined with respect to taxes, they may very properly be divided into the following classes.

1mo, Those who receive the amount of taxes, viz. the creditors and servants of the state, and those to whom they give employment.

2do, Those who advance the taxes, viz. all the different classes of the industrious.

3tio, Those who pay the taxes, viz. all the rich and idle; or, in other words, all those who cannot draw back what they have paid.

In these classes are comprehended those who pay the taxes, and those who receive the amount of them; consequently, in whatever concerns taxes, the common interest of the whole taken together is what must regulate the conduct of the statesman.

In order to determine this first and general question, viz. the consequence of abolishing taxes relatively to the cumulative interest of a whole state, it is proper to inquire,

1mo, What will be the consequence of abolishing taxes, relatively to those who now receive the amount of them, viz. the creditors and servants of the public, and those to whom they give employment.

2do, What will be the consequences of abolishing taxes relatively to trade, industry, and manufactures: that is, whether these great objects are carried on to most advantage, when every individual contributes largely in providing a fund to be administred by a statesman; or when no body contributes any thing, but when every one retains the whole of his income, and the profits of his industry, and disposes of them as he thinks proper.

3tio, What will be the consequence of abolishing taxes, relatively to that part of the people who now complain that they are forced to contribute to every tax, although by their exclusion from the emoluments of lucrative employments, they bear a greater burden than others not better entitled to exemption, who thereby profit at their expence?

To determine so intricate a question, several combinations of circumstances must here be examined, and from the particulars resulting in every case, we shall, towards the end of this chapter, endeavour to point out the general conclusion. I begin by examining the consequences arising to the creditors, and to those who serve the state, from the cessation of those expences which flow from the produce of taxes, either in paying the interest of debts, or in defraying the whole actual expence of government.

As to the creditors, this question has been already discussed. We have seen that the withholding the interest due to them would have the consequence of bringing on such a convulsion in the state, by the breach of faith, and ruin of public credit, as would throw every thing into confusion. But with respect to the servants of the state, we must inquire, whether the raising taxes for defraying this article of expence be more hurtful to the people in general, than the consequences of such a revolution in circulation and employment, which would follow, if the taxes were to be suppressed, and the servants employed by the state dismissed.

When the necessity of raising taxes is out of the question, the hurt they do in general to a country is when, by the imposition, the money is taken out of those hands who would have employed it for the advancement of the prosperity of the state, in order to throw it into those who will employ it otherwise. From this let us now draw some conclusions.

1mo, That if money be taken from those who would have employed it in feeding themselves, and in continuing their industry, the cessation of such a tax is in a manner giving bread to those who are starving.

2do, If money were to be taken from those who, having more than bare necessaries, would, by its use, increase the demand for domestic industry, and were that money bestowed on a set of men who would employ it in the purchase of foreign commodities; the cessation of taxes, in such a case, would, so far, take the bread out of the mouths of foreigners, and give it to our own countrymen.

The abolition of the first species of taxes is advantageous to a state in every combination, let the money arising from it be ever so well employed. As to the second species, the abolition is not necessary; because the vice lies only in the misapplication of the amount.

Let us then suppose taxes to become unnecessary, and all those of the hurtful kind, depriving the industrious of bread, and enriching foreigners at the expence of citizens, to be taken off.

Suppose that after all, there should still remain more taxes than are sufficient for supplying all the necessary charges of government, when administred with prudence and with oeconomy, and that this surplus is bestowed in gratifying individuals, beyond the value of all the services they do the state: I ask whether this superfluous expence is immediately to be cut off, and taxes diminished in proportion; or whether it would not be more proper to let the taxes subsist, and to think of a better method of applying the amount of them?

I answer, that according to the state of the question, the body of the people, who are all made to contribute towards the enriching of a few of their number, may justly complain of the inequality of their condition, and have a title to demand an abolition of their taxes, unless it can evidently be made appear, that by granting their request, there would follow a prejudice to the state, which would affect their own interests as individuals.

To discover how far this may be the case, let us form as many combinations as we can, relative to the effects of diminishing taxes, and candidly examine the most natural consequences of every one. If we find that the mass of a people gain, in general, more than they lose by paying taxes imposed with moderation and propriety, and still more if it appears that their ease and prosperity depend upon the levying and expending of such taxes; I think we may conclude, that all diminutions of them which hurt the interest of the greater body, are in general hurtful to the society.

Let me first suppose a general reform of all unnecessary expence to take place at once, and a proportional abolition of taxes to go hand in hand with it. Would not all those who at present subsist by the superfluous expences of government, be reduced to misery? Would not all those who supply unnecessary wants, equal to the whole amount of the taxes suppressed, be forced to be idle in proportion? The millions who contribute in paying those sums would be differently affected. Those who pay out of a fixed and certain income, would feel an immediate benefit from it; those who contribute by proportional taxes would also be gainers, providing they be of the idle class; but all the industrious would lose in proportion, if the prices of subsistence should not fall with the diminution of their taxes. All the manufacturers of exciseable goods, who had been used to advance the taxes, as we have observed, would gain considerably. For the diminution of the taxes would be total as to them, though not to their customers; because traders would never want pretences for keeping up the price of their commodities beyond the proportion of what it ought to be, when duties are taken off.

I decide with the greater certainty as to this particular, from the analogy it bears to the consequence of changing the denominations of the coins in France, which long experience shews never to have the immediate effect of regulating prices proportionally.

But as we are here considering the consequences of a sudden abolition of taxes, let us, for a moment, consider, with an eye of humanity, the scenes which would unavoidably open to our view, both in the formerly opulent habitations of those who were wont to wallow in public money, and in the comfortable dwellings of many others of every denomination, who, either as the reward of merit, or as the recompence of painful industry, had supplied the wants of useless armies, navies, arsenals, dock-yards, &c. formerly paid out of taxes, now abolished, and who thereby had subsisted and brought up their families.

Are not all these children of the state? Have they not had fathers and mothers who have been greatly relieved by procuring such outlets for them? Have they not children who are educated and brought up with the amount of their salaries, and profits of their service? Have they not had people of every class of industry, who have gained their bread by providing for their wants, while they were supplying those of the state, now become superfluous? In one word, does not the money they receive, circulate and return to the grand river, as I may call it, in the same manner as that of other members of the state?

For these reasons, I say, that taxes once properly imposed, and brought to circulate through a certain channel for a long time, cannot, suddenly, be suppressed, without occasioning far greater misery and distress than can arise from them, when levied with any degree of intelligence. This is nowise peculiar to the suppression of taxes; it is equally the same, in every sudden revolution of property. When the Templers were universally rooted out of Christendom, who doubts of the afflictions, misery, and distress, which followed to every class of inhabitants employed by them, in every kingdom in Europe? Could so large a consumption as that of so great an order cease at once, without drawing along with it numberless inconveniences? Did not the reformation itself, otherwise so great a blessing, starve a multitude of poor who were fed by the monastries? Did not the secularization of so many ecclesiastical benefices do great prejudice to many families, by blotting out an infinity of ways of procuring an easy livelihood for their children? Let those who do not feel the truth of what I here advance, examine the state of the protestant nobility in Germany, where you find the same hardships still subsisting, though in a degree much inferior to what it must have been at the time of this sudden revolution, which took bread from thousands of the younger sons of noble families.

Such revolutions have happened; such inconveniences have been felt: but they were not the deliberate act of any particular statesman. They were the effect of those convulsions which the human passions occasion. No body can justly impute them as necessary consequences of a reformation in religion. But let any statesman now, from a cool reflection upon the unnecessary load of employments in church, state, army, navy, finances, and law, and from a principle of distributive justice, abolish at once all that is superfluous, and the taxes, at the same time, out of which the emoluments arise, he will very soon set before the eyes of his people, such a scene of compassion, as will quickly blot out the remembrance of the favour.

We should not then find some individuals reduced to want, but numerous families; not a parcel of beggars starved, but industrious manufacturers; not a set of ecclesiastics, who from their state of celibacy and retreat, appeared already, in a manner, separated from the commonwealth, but a multitude of people connected by marriage, by society, and by all the tender bonds which unite mankind. Such a scene, I say, would not fail to excite compassion in the heart of those very men in whose favour the desolation was to be brought on; and the statesman would thereby lose the whole merit of his ill judged zeal for distributive justice, and be considered in the most unfavourable light that passion or prejudice could suggest.

This is a digression introduced with no intention to favour a misapplication of public money, but to point out how far a reformation in this particular is a delicate operation.

A good physician never attacks a disease by violent remedies, when mild ones, with time, may be made to produce the same effect. Nothing can resemble an ingrained disease in a human body, more than an ingrained vicious habit in a state. The spirit of a nation is influenced, as has been said, by the administration of its government. So large a sum of misapplied money creates a political disease, which must be purged away by degrees; and new doors must be opened to receive those whose former method of subsistence is thereby intended to be cut off.

Let me next examine the consequence of a gradual and insensible reduction of taxes, relatively to trade, industry, and manufactures.

It would be both tedious and superfluous to trace the steps by which such an operation ought to be conducted. Let me suppose it compleat; but let it not be so very gradual as to blot out all remembrance of the age of taxes, and of their effects.

We have sufficiently analized the whole progress of circulation; we have shewn how it must constantly be in proportion to alienation, and how, when deficient, industry suffers a check. Even when peace is restored after an expensive war, we have shewn how circulation diminishes, from the abatement of public expences, how money stagnates, and how it is consolidated upon property of a more permanent nature.

Let us now apply these principles to the question before us. Let taxes be abolished ever so gradually, the circulation of the exchequer must cease in proportion; consequently, the whole alienation, and the whole industry which is the object of that alienation, must cease also. The money issued from thence at present, continues its progress from hand to hand, and all is found necessary for circulation, in this age of taxation, as we have called it. What a deal of industry is implied in the circulation of a sum equal to all the taxes! Let those who choose to calculate, state the following proportion, because I will not here interrupt my subject.

As the whole money of the country is to all the alienations performed by it, so is the sum of taxes to that part of alienation which will fall with them.

If a gradual diminution of taxes must have the effect of extinguishing so much industry, it will have the effect of starving the industrious who lived by it. But before they starve, the price of work must fall below the price of the narrowest subsistence: because the never failing foreign demand for subsistence, will keep it above the rate of their slender abilities, as long as any trade remains.

To imagine a foreign outlet for cheap manufactures, while the subsistence of workmen is at par with other nations, is against all principles; as it is against experience, to see a country without revenue, and without taxes, carrying on with success the operations of industry and foreign trade.

Compare, therefore, the situation of such manufacturers with those in the age of taxes. Compare those who would augment a supply far beyond all the demand for it, with those who are paying large taxes, and as regularly drawing them back, either upon the sale of their work, or in consequence of wages which enable them to be idle two or three days in a week.

In such a situation, how ardently would the former wish to see the idle consumers furnishing again a copious supply of money to government, for removing such inconveniences. They would then quickly perceive that they had not been of that class which had felt the load of taxes; they would recal to mind the joyful hours they had spent in public houses; the fortunes which every industrious man might hope to accumulate, while every branch of industry was kept alive, by the means of a copious circulation.

If, therefore, the industrious classes of a people cannot be benefited by an abolition of taxes; let us next inquire, to whom the advantage would accrue.

It has been said, that the idle consumers pay all taxes of the proportional kind; the proprietors of lands, houses, &c. bear every where a very large share of taxes both proportional and cumulative. This class of men, therefore, are those who bid the fairest to reap a benefit from an abolition of them. But the proprietors of lands are by no means included in the class of idle consumers, in every respect; altho’ they may be considered in that light, with respect to such taxes upon their consumption as they do not draw back from their direct industry, in producing some manufacture which they may sell again, with a profit proportional to the tax they paid. They are masters of a property, which, in a country of industry, is daily augmenting in its value. Their fortunes, often swell faster than those of any one class of the industrious; but they augment by annual income; the fortunes of all the rest, increase by the capital. Every penny raised in a landlord’s rent, is equivalent to half a crown gained by a merchant.

If it be true that taxes, rightly imposed, do no prejudice to any of the manufacturing, or any-wise industrious classes of a people; and if it be true, that an abolition of those taxes, by contracting circulation, would discourage industry; then we may determine that the landlords would lose much more in finding the improvement of their lands interrupted, than all they can gain by adding their taxes to their present fortunes.

Combinations of this sort are so involved, that I cannot pretend to unfold them step by step, as might be done in cases of a more simple nature. The conclusions therefore drawn from researches of this kind, do not command that assent, which we find in a manner extorted from us upon other occasions. In this chapter, I have not undertaken to demonstrate that the judicious imposition of taxes is advantageous to a country in every respect. My view is to point out the advantages they actually have. The common opinion is that they are hurtful. Our feelings, however, have raised doubts with many great men concerning the truth of that proposition. If my investigations, however imperfect, and however liable to objections, should facilitate to others the clearing up a point, which is beyond the reach of my capacity to extricate, this consideration will be a sufficient encouragement for me to proceed.

Let me, therefore, lay aside the thoughts of analizing the effects of taxes, with such accuracy as to form a demonstration of their being more beneficial than hurtful to an industrious nation, and that the throwing them back into circulation does more good, than the raising them does harm. But let me shew, in general, that the interest of landed men, who, I think have, beyond all doubt, been proved to be those who, in the first place, pay a considerable part of proportional taxes, does by no means require an abolition of them.

The proprietors of lands, whom we have hitherto considered as being of the class of the idle consumers, advance their rents by the great demand produced for subsistence, in consequence of industry. This, if it does not raise the price of subsistence, keeps it, at least, at an equal standard; and that standard must bear a proportion to what it is worth in other nations, as long as trade subsists. But let trade decay, let domestic industry fail, it will not be the foreign price which will then support the rate of our markets. What a multitude of circumstances contribute to the exportation of our superfluity! I can send from Charing-cross, any parcel whatever, to the distance of fifty miles, cheaper than from my own country habitation, where I can have a man, with a cart, for two shillings a day. From Charing-cross, I can send, at an hour’s warning, many thousand tuns weight: here I could not do the same in many weeks. Near London, an extended common may be inclosed and improved in a season: here, the improvement of a small field is the business of a man’s life. Let me even consider how matters are changed within these fifty years. Undertakings which now are executed with little difficulty, were then absolutely impracticable. An army was necessary thirty years ago to make a road of a hundred miles, and the inhabitants were astonished at the execution of it^[48].

Were it necessary, at this time, to do as much every year, if money be but provided, hands will not be wanting, either to conduct or execute the plan.

The number of people, well employed, makes the prosperity of a state; and the profits of the opulent classes, by the augmentation of industry, more than compensates all the burden of their taxes. They grow in relative wealth; and the acquisitions they make, are commonly exempted from the cumulative taxes raised upon their possessions. In proportion to their industry in improving their lands, their fortunes augment. The present system of taxes does not interrupt their operations. Were any great change in that particular to take place, which might sink the market prices of subsistence, even allowing that it would prove an advantage to foreign trade, they, I am sure, would be the first who would feel the inconvenience.

It may be wondered, why I have not suggested, as a consequence of taxes, the increase upon the price of the earth’s productions, which is a direct indemnification to all the landed interest, more than equivalent to the taxes they pay. But taxes upon land, do not augment the price of grain, as they raise the price of exciseable goods. The reason is plain. The tax upon land affects only the proprietor’s share of the produce of his lands: were he to attempt to raise the price of his grain, in proportion to the tax he pays, his farmer, who pays no land-tax for his portion, would undersell him in the market. A tax never can raise a price, except when it is laid on so universally, as to make it impossible for any person to avoid it, who sells in competition with another who pays the duty. It is from this principle that smuggling often ruins fair traders: the smuggled goods are sold cheaper than those which pay duty, and the fair trader is thereby forced to sell below what he can afford.

On the whole, I believe that when this question is thoroughly understood, it will be found, that taxes affect prices far less than any one could imagine; except in the case of excises, rightly imposed, and levied without fraud. There indeed they have their effect; but in every other mode of imposing them, I am apt to believe that they do not produce the consequences commonly ascribed to them. I have already suggested the reason in a former chapter upon this subject; where the influences of competition in the markets where commodities are sold, has been proved to work more irresistible effects in regulating the price of work in general, than any thing that taxes, not immediately imposed upon the very article of consumption, can produce. But if in spite of all that has been said, it should be urged that the prices of labour and manufactures rise in proportion to taxes, I answer, that the difficulties resulting upon this hypothesis, would be many more than could be objected to the other theory. Could, for example, any man assign a reason why a pound of the best snuff in England should be sold dearer than in France, where it pays a duty of above two shillings sterling; why many articles of manufacture can be afforded cheaper in England, than in Scotland, where taxes are certainly lower, and although a day-labourer in the first be paid a shilling, and in the last little more than eight pence; why subsistence should be absolutely dearer in Scotland than in England, taken upon an average; why universal experience should prove, that when the price of subsistence is raised by scarcity, work instead of rising, is constantly lower than at other times?

From all these appearances, added to the arguments I have used to prove that taxes are not prejudicial to industry, I conclude, that the theory I have attempted to give is just in the main; and that when taxes are judiciously imposed, and actually levied without oppression, they enrich a nation.

1mo, By putting into the hands of a good statesman, the means of removing every abuse; of rendering the state respected by its enemies; of supporting every class of industrious inhabitants, when their particular branch falls under distress; of providing an outlet for many young people, who in time become ornaments to their country, and instruments of her defence; of supporting foreign trade by bounties on exportation; of encouraging the improvement of lands, the establishment of colonies, the extension of fisheries, and every other scheme for augmenting the production of subsistence and manufactures.

2do, That the multiplication of taxes, exclusive of the encouragements just mentioned, which are bestowed gratuitously on trade and manufactures, do, of themselves, and independently of the proper application of their amount, augment, demonstratively, the mass of circulation, alienation and industry; and in this respect may be considered as a voluntary contribution, in the first place at least, from the rich who pay them, to the industrious who directly draw them back.

3tio, As to that part of the people, who pay their taxes without sharing the advantages of those who serve the state in lucrative employments, I say the industrious part of them pay nothing; and the demand for what they produce, is greatly increased by the expence of those very men who are the objects of their envy: and farther, that if an alteration were to be made on the revenue, by any abolition of taxes, those who imagine themselves hurt at present, might find, by sad experience, a much greater, and much more real hurt, from what would disturb the harmony of the present system.

To conclude, we have a tolerable notion of the state of industry in former times, when taxes were little known: we may see the progress it is making in countries where, at present, impositions are comparatively lower than elsewhere; and we may compare the state of those countries with our own, as to ease and happiness. From such inquiries, nothing, I apprehend, can be concluded in favour of the progress of industry, from an abolition of taxes.

That such an abolition may produce some good effect, as yet unknown, I shall not pretend to deny: we have not lived long enough to see any experiment of this kind put in practice.

From the exposition I have given of this matter, there arises a great difficulty to be solved.

Taxes are paid, no doubt, and no body according to this theory seems to pay them. The industrious draw them back; the proprietors of land and solid property are said to be indemnified; prices, it would appear, are not to fall by a diminution of taxes, in favour even of the most idle consumer; they are not made to rise in consequence of an augmentation on them: Whence then do taxes proceed? From what fund do they arise? What interest do they affect? I can solve all these difficulties, by an answer to another question. From whence arises the value of a small parcel of flax, when wrought into fine lace? It arises from the price paid for time well employed; which produces nothing when spent in idleness. This is the fund out of which the greatest part of taxes is paid; it is a fund created by the industrious Britons, which I hope will increase for many centuries, tho’ taxes should increase in proportion. It is worth more than ten times all the taxes which could be raised, and all the landed property without it. Let that time be spent in idleness, and the whole produce of this island would not supply the expences of government for a month.

It is not easy to find out, a priori, how taxes should prove a spur to industry. What makes several people adopt this opinion is their feelings, in consequence of many circumstances arising from experience, rather than what reason, or the nature of the thing has pointed out. But as nothing can be produced without an adequate and natural cause, it is proper to examine this political problem, by an application of the principles we have laid down in the former chapters. If these be just, we shall discover by them, how it happens that in countries where taxes are high, where living is dear, and where every circumstance seems to render the means of subsistence difficult to obtain, people live in the greatest plenty, are best and most easily subsisted, and that industry there makes the greatest progress.

For the solution of this question, let us call to mind the principles which influence the multiplication of mankind, and the increase of labour and industry, laid down in the first book. We there explained how the wants of mankind promote their multiplication.

Money, the instrument of alienation, was represented as the primum mobile in this operation; a desire in the rich of acquiring every thing with money, that is demand, was shewn to be the spur to industry in the poor. It was said, that if riches did not inspire a taste for luxury, that is for the consumption of the labour of man, these riches would not circulate; and that they would then be adored rather as a god, than made subservient to the uses of men.

Connect herewith that the imposition of taxes is a method of bringing money into circulation; that those of the proportional kind have the effect of drawing from the rich, an additional price upon every thing they buy, which goes for the use of the state, and which otherwise would not have entered into circulation at that time.

From these principles, I conclude, that taxes promote industry; not in consequence of their being raised upon individuals, but in consequence of their being expended by the state; that is, by increasing demand and circulation.

From the principles above laid down, I cannot discover the shadow of a reason, to conclude that the taking arbitrarily away from some individuals, a part of their gains by cumulative taxes, or proportionally from others, by augmenting the price of what they buy and consume, must in any respect imply an incitement in the consumers to demand more; and without this it never can excite the industrious to augment the supply.

I readily allow that every one who has been obliged to pay a tax, may have a desire to indemnify himself of the expence he has been put to, by augmenting his industry; but if on the other hand, taxes have put every one to a considerable additional expence, in proportion to his estate, it would be absurd to allege this diminution of his fortune, as the cause of a desire to augment his consumption.

Examine on the other hand, the use made by the state of the money raised, and you will easily perceive the justness, I think, of the above mentioned principles. This money belongs to the public, and is administred by private people. Public expence is defrayed with a full hand; they who bestow the money, bestow it for the public, not for themselves; and they who work for the public, find, or ought to find, the greatest encouragement to be diligent.

Every application of public money implies a want in the state; and every want supplied, implies an encouragement given to industry. In proportion, therefore, as taxes draw money into circulation, which otherwise would not have entered into it at that time, they encourage industry; not by taking the money from individuals, but by throwing it into the hands of the state, which spends it; and which thereby throws it directly into the hands of the industrious, or of the luxurious who employ them.

It is no objection to this representation of the matter, that the persons from whom the money is taken, would have spent it as well as the state. The answer is, that it might be so, or not: whereas when the state gets it, it will be spent undoubtedly. Besides, had it been spent by individuals, it would have been laid for the supply of private wants, which are not near so extensive as those of the public: and farther, when money is so taken from rich individuals, it obliges them to find out a way of procuring more, out of their solid property; and when this facility is not procured for them by their statesman, we see how taxes become both oppressive and ill paid. On the contrary, when it is provided, either by the returns of foreign trade, which greatly augment the coin of a country; or by banks, which melt down property into paper circulation; we see taxes augmenting constantly, without creating any impediment to consumption, or discouragement to industry. All these consequences hang in a chain, and hence the solidity of the principles upon which they depend may be gathered.

After this solution of the question proposed, let those who are versed in history combine circumstances, and examine whether facts do not prove the truth of what I have said.

During the time of the Roman empire, when the riches of Asia flowed into the coffers of Rome, and were constantly exhausted by the prodigality of the emperors, we perceive, from many circumstances, to what a degree the consumption of superfluities augmented. The price of certain commodities rose to an excessive height; industrious people, of the lowest extraction, were daily seen to amass prodigious fortunes: these are proofs of circulation. But when we consider the expences of a Lucullus, or of a Crassus, who consumed, it is said, the work of ten thousand slaves, and compare the consequence of that consumption with the expence of a modern, who should consume the industry of ten thousand freemen, we shall find a wonderful difference in the effects of the one and of the other, with respect to circulation, and the encouragement given to industry.

There was no alienation between Crassus and his ten thousand slaves, notwithstanding all the work consumed; consequently, the only circulation implied by this consumption was in proportion to the necessaries which the master was obliged to purchase for so great a multitude: and if we still suppose all those necessaries to have been produced by their own labour, then the state of Rome could not, but by an arbitrary imposition laid upon Lucullus and Crassus, draw one farthing out of their coffers; consequently, industry could not increase in proportion to the loads of wealth brought from Asia by those generals. Whereas were Lucullus now at London, or at Paris, he would not be able to spend a shilling, without giving a penny, and perhaps more, out of his treasure to the state, which would immediately throw it back into circulation.

As we are now on the subject of circulation among the ancients, let me briefly trace the progress of it in Europe, through different modifications, to our own times, and so close this chapter.

When the seat of empire was translated to Constantinople, and all the Asiatic provinces attached to the Emperors of the East, a stop was put to the augmentation of coin and bullion in the empire of the West. A considerable part of what had formerly been there returned to Constantinople, and the remainder fell a prey to the barbarous nations which overran it. This may be called the first period.

These barbarians, by enslaving all the ancient inhabitants, and by forcing them to perform every kind of service, must have had little use for coin. What they coined appears to have been broad and thin.

Let any one reflect upon the insensible waste of silver plate, and the still greater loss on coin which circulates; the vast sums carried off in the time of the Croisades; the quantities buried or thrown into rivers in times of devastation; and add to these circumstances, that from the fifth century after Christ, till the discovery of the Indies, there was, probably, little or no silver or gold brought into Europe; and it will appear very natural, that coin should have been at that time much more scarce than formerly.

How contracted circulation was during the 13th and 14th centuries, may be gathered from the anecdote concerning alienation in France, mentioned in the third chapter upon public credit.

But farther, the great subordination established by the feudal form of government, and the military services to which such numbers were bound, had the effect of preserving the ancient simplicity of manners, so unfavourable to industry. The consequence was, that Princes could raise no taxes; and that all the money the people had was locked up in their chests. We know there were in those days abundance of wealthy people; but their wealth inspired them with no disposition to consume at the expence of ready money.

The discovery of the Indies opened a third period, and threw great riches into the hands of the Spaniards: the house of Austria was the first enriched, and appeared with great splendor for some time. Charles V. by his extensive dominions, had an opportunity of distributing this new gotten treasure among his subjects in Flanders, his native country: this set industry to work in that quarter. The Portugueze discovered the East Indies: a new enticement to luxury; a new motive to become expensive. The Hollanders became a trading people, and with the money which their industry had drawn from the magnificent Spaniard, they shook off his yoke. Money insensibly began to circulate. Princes immediately found, as has been said in the second book, that it was necessary for them also to augment their revenue, in order to maintain a proper superiority over their subjects in point of riches. The increase of circulation among individuals made it more easy to raise taxes; and the throwing the amount of them back again, in gratifications to the chief people of the state, engaged those who came by money in a manner gratuitously, to expend it as freely as they received it. No wonder, then, if Princes found it an easy matter to load their subjects. They were supported in this scheme by the great men of the state, who found a benefit from it. This revolution has totally changed the face of affairs in the present period of circulation. Courts are splendid; armies are numerous; buildings, in cities and in the country, are magnificent; an old city, compared with a new one, appears hideous; all public works are carried on with that solidity which we admire in those of ancient Princes and states, when nations led into captivity were employed to perform them. In those days the magnificence of Princes was in proportion to the groans of their subjects; now they are in proportion to their wealth and ease. Whence proceeds the difference, the effects are the same? From good government, and a well regulated political oeconomy.

CHAP. XI.
Considerations upon Land-Taxes, with some Observations upon those of England and France.

Of all the kinds of cumulative taxes, that which is properly imposed upon lands seems the best: that is, it implies the fewest inconveniences to the persons paying, and to the state in raising it. That it is an unequal imposition is plain and certain: this character is unavoidably attached to every species of cumulative taxes, in one way or other. It has also the effect of casting a general discredit upon the purchase and improvement of land; because the proprietors are naturally exposed to augmentations, which may, almost with the same ease, be carried to the total amount of the income, as to any proportional part of it. This has been mentioned in a former chapter, where the interest of a nation’s debts was supposed to increase so as to equal the value of all the land-rents, and the whole revenue of individuals.

Land-taxes are imposed in various forms in different countries, and all are supposed to bear a determinate proportion to the rent. This, however, is never, nor indeed can it ever be the case. The value of land is varying perpetually, from the industry of the inhabitants. Besides this inequality, there are other inconveniences proceeding from the unequal distribution of property. In Scotland, for instance, land is divided into large portions; very few small lots are to be found. The class of farmers, for the most part, labour the lands of others, who have large possessions. This is less the case, I believe, in England, and still less in France and in Germany. A land-tax, therefore, being supposed universal, would, in Scotland, do little harm: in England, it falls heavier upon the small proprietors; because the sum exacted bears a greater proportion to the supposed superfluity of the proprietor. In France, it is still worse; for there the exemptions of the numerous class of nobles, and many other circumstances mentioned above, entirely destroy even the shadow of proportion. It is out of my way to enter into any long detail upon this head, with respect to different countries.

I shall therefore confine myself to a very few observations upon the method of laying this tax in England; and upon a project which has been long in agitation in France, to raise their land-tax by way of tithe upon the fruits.

This scheme was first proposed to the late King of France by the Marechal de Vauban, in 1699, and the proposal was renewed some years ago in a performance called the Reformateur. But as it would prove hurtful and burdensome to France, in a great degree, from a circumstance which has not been attended to, the examination of this system of taxation will serve as a good illustration of this part of our subject.

The land-tax in England has, in my humble opinion, two remarkable defects. First, The sums imposed at so many shillings in the pound^[49] upon every district of the kingdom, whether cities, towns, universities, or open country, even upon the King’s palaces, inns of court, &c. are not distributed according to any rule of proportion upon the property of individuals; but this operation is left to assessors.