Taxes by David Hume Simplified

THERE is a prevailing maxim that:a

  • every new tax creates a new ability in the subject to bear it
  • each encrease of public burdens proportionally encreases the people’s industry
    • This maxim is most likely to be abused.
    • It is so much more dangerous, because it cannot be denied.
    • It has some foundation in reason and experience when kept within certain bounds.

*85

  • When a tax is laid on commodities consumed by the common people the following occurs:
    • The poor must :
      • retrench something from their way of living, or
      • raise their wages, so as to make the tax fall entirely on the rich, or
      • encrease their industry, perform more work, and live as well as before, without demanding more for their labour.
        • This naturally follows if:
          • taxes are moderate
          • laid on gradually, and
          • do not affect the necessaries of life
        • These difficulties often excite the people’s industry and render them more opulent and laborious, than others, who enjoy the greatest advantages.
        • Most commercial nations do not always have fertile land.
          • But they have laboured under many natural disadvantages.
          • TYRE, ATHENS, CARTHAGE, RHODES, GENOA, VENICE, HOLLAND, are strong examples.
          • There are only three instances of large and fertile countries with much trade; the NETHERLANDS, ENGLAND, and FRANCE.
            • The two former had advantages of:
              • their maritime situation
              • the need of going overseas to get what was unavailable at home.
            • Trade came late to France.
              • It came from the reflection and observation in an ingenious and enterprizing people.
                • They saw the riches of their neighbours, so they cultivated navigation and commerce.
  • CICERO mentioned places with *86 the greatest commerce in his time: ALEXANDRIA, COLCHUS, TYRE, SIDON, ANDROS, CYPRUS, PAMPHYLIA, LYCIA, RHODES, CHIOS, BYZANTIUM, LESBOS, SMYRNA, MILETUM, COOS.
    • All these, except ALEXANDRIA, were either small islands, or narrow territories.
      • Alexandria owed its trade entirely to the happiness of its situation.

 

  • Some natural necessities or disadvantages are favourable to industry.
  • Why do artificial burdens not have the same effect?
  • Sir WILLIAM TEMPLE, *87 ascribes the industry of the DUTCH entirely to necessity.
    • It proceeds from their natural disadvantages.
    • He compares them with IRELAND:
      • “by the largeness and plenty of the soil, and scarcity of people, all things necessary to life are so cheap.
      • An industrious man, by two days labour, may gain enough to feed him the rest of the week.
      • I take it be a very plain ground of the laziness attributed to the Irish.
      • For men naturally prefer ease before labour, and will not take pains if they can live idle;
      • though when, by necessity, they have been inured to it, they cannot leave it, being grown a custom necessary to their health, and to their very entertainment.
      • Nor perhaps is the change harder, from constant ease to labour, than from constant labour to ease.”
      • He then enumerates the places where trade has most flourished, in ancient and modern times;
      • and which are commonly observed to be such narrow confined territories, as beget a necessity for industry.
        b

The best taxes are such as are levied upon consumptions, *88 especially on luxury because such taxes are least felt by the people.

  • They seem, in some measure, voluntary; since a man may chuse how far he will use the commodity which is taxed:
  • They are paid gradually and insensibly:
  • c They naturally produce sobriety and frugality, if judiciously imposed: And being confounded with the natural price of the commodity, they are scarcely perceived by the consumers.
  • Their only disadvantage is, that they are expensive in the levying.

 

  • Taxes upon possessions are levied without expence;
  • But it has every other disadvantage.
  • Most states, however, go for them to supply the deficiencies of the other tax.

 

  • But the most pernicious of all taxes are the arbitrary.
    *89
  • They are commonly converted, by their management, into punishments on industry
  • By their unavoidable inequality, are more grievous, than by the real burden which [346] they impose.
  • It is surprising to see them among any civilized people.

 

  • In general, all poll-taxes,6 even when not arbitrary, which they commonly are, are dangerous:
  • Because it is so easy for the sovereign to add a little more, and a little more, to the sum demanded, that these taxes are apt to become altogether oppressive and intolerable.
  • On the other hand, a duty upon commodities checks itself.
    • A prince will soon find, that an encrease of the impost is no encrease of his revenue.
    • It is not easy to be ruined by such taxes.

 

  • One of the chief causes of the destruction of the Roman state, was Constantine’s change in taxation.
    • He created a universal poll-tax, in lieu of almost all the tithes, customs, and excises, which formerly composed the revenue of the empire.7
    • The people were so grinded and oppressed by the publicans.
    • They were glad to take refuge under the barbarians.
      • The barbarians had fewer necessities and less art.
      • They were preferable to the refined tyranny of the Romans.

d Some political writers say that since all taxes, as they pretend, fall ultimately on land, it were better to tax land and abolish every duty on consumptions.

  • But all taxes do not fall ultimately on land.
  • If a duty were laid on any commodity, consumed by an artisan, he can pay for it in two ways:
    • he may reduce his expence, or
    • he may encrease his labour.
  • Both these resources are more easy and natural, than that of heightening his wages.
  • In years of scarcity, the weaver either:
    • consumes less or
    • labours more.
  • It is just that he should have the same for the sake of the public which gives him protection.
  • How can he raise the price of his labour?
  • His manufacturer-employer will not give him more because the merchant, who exports the cloth, cannot raise its price, being limited by the price which it yields in foreign markets.
  • Every man wants to from himself from any tax by laying it on others.
    • But every man has the same inclination.
    • No set of men can prevail altogether in this contest.
    • Why should the landed gentleman be the victim of the whole, and not be able to defend himself?
      • All tradesmen would willingly prey upon him, and divide him among them, if they could:
      • They have always had this inclination even if no taxes were levied.
      • The same methods which the landed gentleman uses to guard against tradesmen will serve him afterwards.
        • These will make them share the burden. e
        • Only very heavy taxes, very injudiciously levied cannot be shared.
          • An example is a tax which raise the price of labour.

 

  • In taxation, the consequences of things are diametrically opposite to what we should intially expect
    • The Turkish government’s fundamental maxim is from the Grand Signior.
      • He is the absolute master of the lives and fortunes of each individual.
      • But he has no authority to impose a new tax
      • Every Ottoman prince, who has tried either:
        • has been obliged to retract, or
        • has found its fatal effects.
      • One would imagine, that this prejudice or established opinion were [348] the firmest barrier in the world against oppression.
      • Yet its effect is quite contrary.
      • The emperor, having no regular method of encreasing his revenue, must allow all the bashaws and governors to oppress and abuse the subjects.
        • He then squeezes them after their return from their government.
      • But if imposes a new tax, like our European princes, his interest would be united with his people.
        • He would immediately feel its bad effects.
        • He would find, that a pound, raised by a general imposition, would have less bad effects, than a shilling taken in so unequal and arbitrary a manner.

[349]

 

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