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.

 

  • Let us conceive what 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.
  • If we further conceive how such a tract of land would be cultivated, the amount needed would be prodigious.
  • Allow it but to be half as well cultivated as the rest, which for many reasons would not be the case, the government would have in its hands 1/4 of the whole country.
  • By this therefore, the country’s stock would be greatly reduced, and fewer people maintained.
  • After government becomes expensive, it is the worst possible method to support it by a land rent.
  • The government in a civilized country is much more expensive than in a barbarous one.
  • When we say that one government is more expensive than another, it is the same as if we said that the one country is farther advanced in improvement than another.
  • To say that the government is expensive and the people not oppressed is to say that the people are rich.
  • There are many expenses necessary in a civilized country for which there is no occasion in one that is barbarous.
  • 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 the most improper thing in the world.
  • 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 quantity 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, which is the [240only way in which we can 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 at others.
  • But if because this difficulty you were to tax land, and neither tax money nor stock, you would do a very great injustice.
  • But though it be a difficult thing to tax money or stock without being oppressive, yet this method is used in several countries.
  • In France, for example, in order to ascertain the circumstances of the subject, every bill is assigned, and all business transacted in presence of a public notary, and entered into his books, so that land, stock, and money are there all taxed in the same manner.
  • Of these three only land is taxed in England, because to tax the other two has some appearance of despotism, and would greatly enrage a free people.
  • Excepting the land tax, our taxes are generally upon commodities, and in these there is a much greater inequality than in the taxes on land possession.
  • The consumptions of people are not always according to what they possess, but in proportion to their liberality.
  • When taxes are laid upon commodities, their prices must rise, the concurrence of tradesmen must be prevented, an artificial dearth occasioned, less industry excited, and a smaller quantity of goods produced.2
  • Taxes upon 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 eight or ten thousand pounds.
  • Collectors are chosen by the gentlemen of the county, and are obliged to [241] produce proper security for their carrying safely to the exchequer the money which they collect.
  • The taxes of customs and excise, which produce such immense sums, are almost eaten up by the legions of officers that are employed in collecting them.
  • These officers must have supervisors over them to examine their proceedings.
  • The supervisors have over them collectors, who are under the commissioners, who have to account to the exchequer; to support these officers there must be levied a great deal more than the government requires, which is a manifest disadvantage.
  • Another advantage of a land tax is, that it does not tend to raise the price of commodities, as 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 raises the price of commodities, and makes fewer people able to carry on business.
  • If a man purchase £1000 worth of tobacco, he has 100 pounds of tax to pay.
  • He therefore cannot deal to such an extent as he would otherwise do.
  • Thus, as it requires greater stock to carry on trade, the dealers must be fewer, and the rich have, as it were, a monopoly against the poor.
  • It was observed before that in England, from a kind of delicacy with regard to examining into the circumstances of particular persons, which is apparently an infringement upon liberty, no tax is laid upon stock or money, but all upon consumptions.
  • Whatever advantages this method may have, there is evidently in it an inequality.
  • The landlord who pays his annual land tax pays also a great part of the taxes on consumptions.
  • On this account the landed interest complains first of a war, thinking the burden of it falls upon them, while on the other hand the monied men are gainers, and therefore oppose them.
  • This perhaps occasions the continuance of what is called 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 of which is kept by the commissioner of the customs, and another 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 down the price to the merchant and the custom to the commissioner.
  • This method is much the same with the famous excise scheme of Sir Robert Walpole, which was at last his ruin.
  • It was to this effect, that a general excise should be established, and all goods imported deposited in a public warehouse, and the tax should only be paid upon the inland sale of them.
  • This scheme was liable to inconveniences such as subjecting the owner to anxiety from not having his goods entirely in his own power.
  • But it is plainly this which gives the Dutch so great an advantage over all the other European nations.
  • The Dutch are the carriers of the other Europeans.
  • They bring corn from the Baltic and those places where it is cheap, and wines from those places where there has been a good vintage.
    • The Dutch keep them by them until they hear of a dearth.
    • They then export them to the places where it is.
  • But in England, the moment you bring the commodities to the country, you must pay the tax and sell them where you please.
    • Thus, the merchant may lie out of his interest for a long time.
    • Therefore, he must sell his commodities dearer.
  • The Dutch have no tax to pay but on inland sale.
    • They can sell cheaper than the English or 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 possessed of 1,000 pounds of land-rent feels very sensibly a 100 pounds 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 when an additional tax is laid upon beer, its price must be raised.
    • But the mob do not directly vent their malice against the government, who are the proper objects of it, but on the brewers, as they confound the tax price with the natural one.
  • Taxes on consumption paid by the merchant therefore, seem most to favour liberty.
    • Such taxes will always be favoured by this government.
  • In Holland, they buy a hogshead of wine and first pay the price to the merchant, and then so much to the officers of excise, as it were to get leave to drink it.
  • We do the very 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 still another advantage over those on possessions.
  • If a person be possessed of a land-rent of an hundred pounds per annum, and this estate be valued at a high rate, he perhaps pays £20 to the government.
  • The collector must be paid at a certain time of the year, and few people have so much self-command as to lay up money to be ready.
  • He has therefore £20 to borrow to answer his present demands.
  • When 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; and thus upon examination it will be found that 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 the elegancies of life, he can immediately diminish his consumption.
  • Taxes upon consumptions are therefore more eligible than taxes upon possessions, as they have not so great a tendency to ruin the circumstances of individuals.
  • It is to be observed that taxes both on consumptions and possessions are more or less advantageous to industry according to the manner in which they are levied.
  • The land tax in England is permanent and uniform, and does not rise with the rent, which is regulated by the improvement of the land;
  • notwithstanding modern improvements it is the same that it was formerly.
  • In France the tax rises proportionably to the rent, which 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 upon the improvement of our lands.
  • We are better financiers than the French, as we have also the advantage of them in the following particulars.
  • In the method of levying our customs we have an advantage over the French.
  • Our customs are all paid at once by the merchants, and goods, after their entry in the custom house books, may be carried by a permit through any part of the country without molestation and expense, except some trifles upon tolls, &c.
  • In France a duty is paid at the end of almost every town they go into, equal, if not greater, to what is paid by us at first; inland [245] industry is embarrassed by theirs, and only foreign trade by ours.
  • We have another advantage in levying our taxes by commission, while theirs are levied by farm, by which means not one half of what they raise goes into the hands of the government.
  • In England the whole expense of levying above seven millions does not come to £300,000.
  • In France 24 millions are levied every year, and not above 12 goes to the expense of the government, the rest goes for defraying the expense of levying it, and for the profit of the farmer.
  • In England no excise officers are requisite but at the seaports, except a few up and down the country.
  • The profits of the farmers in France would pay the expense of them all.
  • In the collecting of our excise there is a regular subordination of officers who have their fixed salaries and nothing more, but in France the highest bidder has the place, and, as the man who undertakes it must advance the sum at a certain time, and runs a risk of not getting it up, he deserves a very high profit: besides, in an auction of this kind there are few bidders, as none are capable of undertaking the office but those who are brought up to business, and are possessed both of a great stock and credit, and 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.
  • Upon the whole we may observe that the English are the best financiers in Europe, and their taxes are levied with more propriety than those of any country whatever.
  • Upon this subject it is in general to be observed that taxes upon exportation are much more hurtful than [246] those upon importation.
  • When the inhabitants of a country are in a manner prohibited by high taxes from exporting the produce of their industry, they are confined to home consumption, and their motives to industry are diminished.
  • Taxes upon importation, on the contrary, encourage the manufacturing of these particular commodities.
  • The tax upon Hamburgh linen, for example, hinders the importation of great quantities of it, and causes more linen to be manufactured at home.
  • In general, however, all taxes upon importation are hurtful in this respect, that they divert the industry of the country 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 upon exportation are still more pernicious.
  • This is one great cause of the poverty of Spain; they have imposed a high tax on the exportation of every commodity, and think that by this means the taxes are paid by foreigners, whereas, if they were to impose a tax on importation, it would be paid by their own subjects, not reflecting that by bringing a burden on the exportation of commodities, they so far confine the consumption of them, and diminish industry.
  • To conclude all that is to be said of taxes, we may observe that the common prejudice that wealth consists in money has not been in this respect so hurtful as might have been imagined, and has even given occasion to regulations not very inconvenient.
  • Those nations to whom we give more goods than we receive, generally send us[247] manufactured goods;
  • those on the contrary, 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.
  • To Russia, for example, we send fine linen and other manufactured goods, and for a small quantity of these receive, in return, great quantities of unmanufactured goods.
  • This kind of trade is very advantageous, because goods in an unmanufactured and rude state afford employment and maintenance to a great number of persons.
  • It is merely from the absurd notion that wealth consists in money, that the British encourage most of those branches of foreign trade, where the balance is paid in money.
  • There are still some other species of taxes.
    • But their nature are much the same, so it is unnecessary to mention them.
  • Taxes are connected to stocks.
    • We will next discuss:
      • the nature of stocks and
      • the causes of their rising and falling.

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