PRINCIPLES OF TAXATION. 591 



deducible from such experience may be briefly summarized as 

 follows : 



Whenever a government imposes a tax on any product of in- 

 dustry so high as to sufficiently indemnify and reward an illicit or 

 illegal production of the same, then such product will be illicitly 

 or illegally manufactured ; and when that poirit is reached, the 

 losses and penalties consequent upon detection and conviction — 

 no matter how great may be the one or how severe the other — 

 will be counted in by the offenders as a part of the necessary ex- 

 penses of their business ; and the business, if forcibly suppressed 

 in one locality, will inevitably be renewed and continued in some 

 other. It is therefore a matter of the first importance for every 

 government, in framing laws for the assessment and collection of 

 taxes, to endeavor to determine, not only for fiscal but also for 

 moral purposes, when the maximum revenue point in the case of 

 each tax is reached, and to recognize that in going beyond that 

 point the government " overreaches " or cheats itself. 



Increase the duties (taxes) on imports beyond a certain point, 

 and smuggling springs up as by magic, and the most cruel and 

 unusual punishments utterly fail to prevent it. American inge- 

 nuity was never more fertile or manifested in a more remark- 

 able manner than in the evasion during the years 1864-'68 of a 

 tax, approximating fifteen hundred per centum, imposed by the 

 Federal Government on the manufacture and sale of distilled 

 spirits, resulting in a complete failure on the part of the Gov- 

 ernment, with almost unlimited military resources at command, 

 to enforce the law, and a final abandonment and repeal of the 

 tax.* The comparatively recent tax imposed by the United 

 States on oleomargarine, with a view of destroying its manu- 

 facture and preventing its use as an article of food, has been 

 so far ineffectual that its production and consumption have been 

 greater than they were before the law authorizing the tax was 

 enacted. 



More than a century ago Adam Smith pointed out that such 

 taxes "tempt persons to violate the laws of their country, who 

 are frequently incapable of violating those of natural justice, and 

 who would have been in every respect excellent citizens had not 

 those laws made that a crime which Nature never meant to 

 be so." 



Some other fallacies concerning the sphere and influence of 



* Out of a consumption of at least fifty railHon proof gallons of distilled spirits of do- 

 mestic production in the United States during the fiscal year 1867-68, the Federal Gov- 

 ernment collected a tax upon less than seven million gallons, the sale of the difference at 

 the current market rates of the year, less the average cost of production, returning to the 

 credit of corruption a sum approximating sixty million dollars. 



