PRINCIPLES OF TAXATION. 319 



under a seventy and ninety cent rate. Sucli a result is undoubt- 

 edly referable in the main to the economic law that a reduction 

 in the price of a commodity encourages its consumption (in this 

 instance for industrial as well as stimulant purposes), and in a 

 degree to the fact that a fifty-cent tax, with its accompaniment 

 of stringent penalties, greatly diminished the incentive for illicit 

 production. A wonderfully striking illustration of the strength 

 of temptation for the evasion of the revenue created by the pre- 

 vious high taxation, which had little other reason than mere sen- 

 timent for its imposition, is also afforded by the fact that while 

 the Government in 1872, under a tax of fifty cents per proof gal- 

 lon, took cognizance of an average annual tax-paid consumption 

 on the part of the people of the United States of 1"63 gallons per 

 capita, it was only able to recognize in 1868, under a two-dollar 

 tax, a similar average annual consumption of about 0"38 proof gal- 

 lon per capita. 



The second point of interest in connection with the foregoing 

 tabular exhibit is the demonstration it affords of the very curious 

 variations which occurred in the successive years from 1870 to 

 1894, inclusive, in the quantity of spirits that annually paid taxes 

 to the Government, and which may be regarded as constituting 

 an approximately accurate measure of the average annual per 

 capita consumption of this commodity by the entire population 

 of the country. The explanation of such changes is not diflScult. 

 They are in general unquestionably referable to immediately 

 antecedent or contemporary changes in the business condition of 

 the country, which in turn are determinative in a high degree of 

 the popular ability to consume an article like distilled spirits 

 of comparatively high cost and largely a luxury, popular tastes 

 and habits and restrictive moral influences remaining constant. 

 Thus, passing by the year 1870, in which there was a great in- 

 crease (from altogether abnormal causes) in the number of gal- 

 lons produced and made subject to taxation, the increase in the 

 tax-paid product and in the average per capita consumption dur- 

 ing the succeeding fiscal years 1872 and 1873, when the business 

 of the country was fairly prosperous, was regular and not incon- 

 siderable. The commencement of the next fiscal year (1874) was 

 signalized by one of the most memorable financial panics in 

 American history and a general prostration of business, from 

 which last there was no decided recovery until 1879. 



During all this period the domestic production of distilled 

 spirits of which the Government took cognizance continued to 

 decline, and the average per capita of consumption touched the 

 exceedingly low proportions of 1*07 and 1*09 gallons in the fiscal 

 years of 1878 and 1879 respectively. With a renewal of active 

 and profitable business throughout the country in 1880, the 



