Chap 1: Taxes on Possessions

Chap 1: Taxes on Possessions

  • After the appropriation of land property, some lands were commonly assigned to maintain the government.
    • The free states of Greece had land set apart for this purpose.
    • Aristotle thought that private property should surround the royal lands because:
      • the people near a city were always for war,
      • they were sure of defence, and
      • the enemy would first come upon those lands near the boundaries1.
  • In all barbarous countries, lands are appropriated to the purposes of sovereignty.
    • These therefore have little occasion for taxes and customs.
    • We shall show that this is:
      • a bad policy, and
      • a cause of the slow progress of opulence.
  • An immense tract of land would be required to support the British government.
    • Its annual expense in peacetime is 3 million.
    • The whole land rents amount2 to 24 million3.
      • Therefore [239] the government must have 1/8th in its own hands.
  • The amount of land rent needed to cultivate that 1/8 would be prodigious.
    • That land could be half as well cultivated as the rest, but for many reasons this would not be the case.
      • In this case, the government should have 1/4 of the whole country.
      • This would then cause the country’s stock to be greatly reduced, and fewer people maintained.
  • After government becomes expensive, supporting it by a land rent is the worst possible method.
    • A civilized country’s government is much more expensive than a barbarous one.
    • A more expensive government means that its country is farther advanced in improvement than another.
    • An expensive government and a people not oppressed is to say that the people are rich.
  • There are many expenses necessary in a civilized country that is not needed in a barbarous one.
    • Armies, fleets, fortified places, public buildings, judges, and officers of the revenue must be supported.
    • If they be neglected, disorder will ensue.
    • A land rent to serve all these purposes, would be most improper.
  • All taxes may be considered under two divisions:
    • taxes on possessions and
      • An example is land tax.
    • taxes on consumption.
      • Examples are all taxes on commodities
  • These are the two ways of making the subjects contribute to the support of government.
  • Possessions are of three kinds:
    • land,
    • stock, and
    • money.
  • It is easy to levy a tax on land, because it is evident what amount everyone possesses.
    • But it is very difficult to lay a tax on stock or money without very arbitrary proceedings.
  • It is a hardship upon a man in trade to oblige him to show his books.
    • This is the [240only way to know how much he is worth.
    • It is a breach of liberty.
    • It can create very bad consequences by ruining his credit.
      • The circumstances of people in trade are sometimes far worse than others.
  • But if because this difficulty you were to tax land, and neither tax money nor stock, you would do a very great injustice.
  • It is difficult to tax money or stock without being oppressive.
    • But this method is used in several countries.
      • In France, in order to ascertain the circumstances of the subject, every bill is assigned, and all business transacted in presence of a public notary.
        • These are entered into his books, so that land, stock, and money are taxed in the same way.
      • Of these three only land is taxed in England, because to tax the other two has some appearance of despotism.
        • It would greatly enrage a free people.
        • Except the land tax, our taxes are generally on commodities.
          • Of these, there is a much greater inequality than in land taxes.
  • People’s consumptions are not always according to what they possess, but in proportion to their liberality.
    • When taxes are laid on commodities:
      • their prices must rise,
      • the concurrence of tradesmen is prevented,
      • an artificial dearth is created,
      • less industry is excited, and
      • fewer goods are produced.2
  • Taxes on land possessions have this great advantage, that they are levied without any great expense.
    • The whole land tax of England does not cost the government above £8,000 or £10,000.
    • Collectors are chosen by the gentlemen of the county.
      • They are obliged to [241] produce proper security for the money that they send to the exchequer.
  • The taxes of customs and excise produce such immense sums.
    • They are almost eaten up by the legions of officers employed to collect them.
      • These officers must have supervisors to examine their proceedings.
        • The supervisors have collectors over them.
          • Those collectors are under the commissioners, who have to account to the exchequer.
      • More must be levied to support these officers.
        • This is a manifest disadvantage.
  • Another advantage of a land tax is, that it does not raise the price of commodities.
    • Because it is not paid in proportion to the corn and cattle, but in proportion to the rent.
    • If the tenant pay the tax, he pays just so much less rent.
  • Excise taxes:
    • raise the price of commodities,
    • makes fewer people able to carry on business.
  • If a man buys £1000 worth of tobacco, he must pay £100 of tax.
    • He cannot deal as much as he would otherwise do.
  • Thus, as it requires more stock to carry on trade, the dealers must be fewer.
    • The rich have, as it were, a monopoly against the poor.
  • In England, no tax is laid on stock or money, but all on consumptions.
    • This was observed by looking into the circumstances of particular persons, which is apparently an infringement on liberty.
    • Whatever advantages this method may have, there is still an inequality in it.
  • The landlord who pays his annual land tax pays also a great part of the taxes on consumptions.
    • On this account, the people with lands quickly complain of wars and oppose them.
      • They think that:
        • the war’s burdens fall on them.
        • the monied men are consequently gainers.
      • This perhaps causes the continuance of the ‘Tory interest’.

Chap 2: Consumption Taxes

  • Taxes on possessions are naturally equal.
    • But taxes on consumptions are naturally unequal.
    • Sometimes they are paid by:
      • the merchant
      • the consumer, or
      • the importer, who must be repaid it by the consumer.
  • In Holland, all goods are deposited in a public warehouse.
    • One key is kept by the commissioner of the customs.
    • Another key is kept by the owner of the goods.
  • If the goods are exported, no tax is advanced.
    • But if they go into the country, the consumer pays:
      • the price to the merchant and
      • the custom to the commissioner.
  • This method is the same with the famous excise scheme of Sir Robert Walpole, which was finally his ruin.
    • This scheme aimed to:
      • establish a general excise
      • have all imported goods deposited in a public warehouse,
      • have the tax only paid on their inland sale.
    • This scheme gave anxiety to the owner from not having his goods entirely in his own power.
  • But having the power over goods is plainly what gives the Dutch so great an advantage over other European nations.
    • The Dutch are the carriers of the other Europeans.
    • They bring corn from the Baltic and where it is cheap, and wines from good areas.
    • The Dutch keep them until they hear of a dearth.
    • They are then exported to those places.
  • But in England, the moment you bring the commodities to the country, you must pay the tax and sell them where you please.
    • The merchant may lie out of his interest for a long time.
    • Therefore, he must sell his commodities dearer.
  • The Dutch only pay tax on inland sales.
    • They can sell cheaper than any other nation.

 

  • However, taxes on consumption have some advantage over taxes on possessions.
    • They are not felt, being paid [243] imperceptibly.
    • But a person with £1,000 of land-rent feels very sensibly £100 going from him.
  • The taxes on consumption are not so much murmured against, because they are laid on the merchant.
    • He lays them on the price of goods.
    • They are thus insensibly paid by the people.
  • When we buy a pound of tea, we do not reflect that the most part of the price is a duty paid to the government.
    • We therefore pay it contentedly, as though it were only the natural price of the commodity.
    • In the same way, beer prices rise when an additional tax is laid on it.
    • But the mob does not directly vent their malice against the government, who is the proper object of it.
      • It vents it on the brewers, as they confound the tax price with the natural price.
  • Therefore, taxes on consumption paid by the merchant seem most to favour liberty.
    • Such taxes will always be favoured by this government.
  • In Holland, they buy a hogshead of wine.
    • They first pay the price to the merchant.
    • Then they pay so much to the officers of excise to allow the people to drink it.
  • We do the same thing.
    • But as we do not feel it immediately, we imagine it all one price.
    • We never reflect that we might drink port wine below sixpence a bottle, were it not for the duty.
  • Taxes on consumptions have another advantage over those on possessions.
    • If a person has a land-rent of £100 per annum, and this estate is valued at a high rate, he perhaps pays £20 to the government.
    • The collector must be paid at a certain time of the year.
    • Few people have so much self-command as to lay up money to be ready.
    • Therefore, he has to borrow £20 to answer his present demands.
    • When the next payment comes, he has not only the tax to pay, but also the interest of the money borrowed the former year.
    • He begins to encumber his estate.
      • Thus, many landholders have been ruined.
    • The best method of [244] preventing this is to make the tenant pay the land tax in part payment of his rent.
  • The taxes on consumptions are not liable to this inconvenience.
    • When a person finds that he is spending too much on luxuries, he can immediately reduce his consumption.
  • Taxes on consumptions are therefore more eligible than taxes on possessions, as they do not have a tendency to ruin the circumstances of individuals.

 

  • Taxes on consumptions and possessions are more or less advantageous to industry according to how they are levied.
    • England’s land tax is permanent and uniform.
    • It does not rise with the rent, which is regulated by the land’s improvement.
    • Notwithstanding modern improvements, it is the same that it was formerly.
  • In France, the tax rises proportionably to the rent.
    • This is a great discouragement to the landholder.
    • It has much the same effect with the tithes in England.
    • When we know that the produce is to be divided with those who lay out nothing, it hinders us from laying out what we would otherwise do on the improvement of our lands.
  • We are better financiers than the French, because of the following.

 

  • Our method of levying our customs is better.
    • Our customs are all paid at once by the merchants.
    • After their entry in the custom house books, goods may be carried by a permit through any part of the country without molestation and expense, except some trifles on tolls, etc.
  • In France, a duty is paid at the end of almost every town they go into.
    • It is equal, if not greater, to what is paid by us at first.
    • Their inland [245] industry is embarrassed by their duties.
    • Whereas only our foreign trade is embarrassed by our customs.

 

  • We levy our taxes by commission.
    • The French levy theirs by farm.
      • It causes less than half of what they raise to go into the government.
  • In England, the whole cost of levying over £7 million is less than £300,000.
    • In France, 24 million is levied every year.
    • No more than 12 million goes to government expenses.
    • The rest goes to:
      • defraying the cost of levying it, and
      • the farmer’s profit.
  • In England, excise officers are only needed at the seaports and a few up and down the country.
    • The farmers’ profits in France would pay the expense of them all.
    • In the collecting of our excise there is a regular subordination of officers who only have their fixed salaries.
  • But in France, the highest bidder has the place.
    • The man who undertakes it deserves a very high profit because he:
      • must advance the sum at a certain time, and
      • runs a risk of not getting it up.
    • Besides, in an auction of this kind there are few bidders.
      • The only ones capable of it are those who:
        • are brought up to business, and
        • have both of a great stock and credit
        • can produce good security.
    • When there are few bidders, they can easily:
      • enter into an association among themselves, and
      • have the whole at a very easy rate.
  • Overall, the English are the best financiers in Europe.
    • Their taxes are levied with more propriety than those of any country.

 

  • Taxes on exportation are much more hurtful than [246] those on importation.
  • When the inhabitants of a country are prohibited by high taxes from exporting the produce of their industry, they are confined to home consumption.
    • Their motives to industry are reduced.
  • Import taxes, on the contrary, encourage manufacturing.
    • For example, the tax on Hamburgh linen hinders its importation.
      • It causes more linen to be manufactured at home.
  • Generally, however, all import taxes are hurtful by diverting the country’s industry to an unnatural channel.
    • The more stock there is employed in one way, there is the less to be employed in another.
    • But the effects of taxes on exportation are still more pernicious.
  • This is one great cause of Spain’s poverty.
    • They have imposed a high tax on the exportation of every commodity.
    • They think that those taxes are paid by foreigners.
    • They think that import taxes are paid by their own subjects.
    • They do not reflect that by bringing a burden on exports, they confine their consumption and reduce industry.

 

  • In conclusion, the common prejudice that wealth consists in money has not been in this respect so hurtful as imagined.
    • It has even created regulations that are not very inconvenient.
  • Those nations to whom we give more goods than we receive, generally send us[247] manufactured goods.
    • On the contrary, those from whom we receive more goods than we give, or with respect to whom the balance is in our favour, generally send us unmanufactured goods.
  • For example, we send a few amounts of fine linen and other manufactured goods to Russia.
    • In return, we get great amounts of unmanufactured goods.
    • This kind of trade is very advantageous, because goods in an unmanufactured and rude state afford employment and maintenance to many people.
  • It is merely from the absurd notion that wealth consists in money, that the British encourage the foreign trade where the balance is paid in money.

 

  • There are other species of taxes.
    • But their nature is much the same, so it is unnecessary to mention them.
  • Stocks have some connection to taxes.
    • We will next discuss:
      • the nature of stocks and
      • the causes of their rising and falling.

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