TAX, TAXATION. 



TAX, TAXATION. 



or illustration, although UM object is mart difficult of attainment. 

 The second maxim U of great importance, and the necessity of adhering 

 to it must be universally acknowledged. Unoertainty giro* rise to 

 fraud* and extortion ou the part of the Ux-gatherer, and to ill-will and 

 suspicion on that of the contributor, while it offers a most injurious 

 impediment to all the operation* of trade. Notwithstanding the many 

 evil* of uncertainty, it u by no meani an uncommon fault in modern 

 systems of taxation. 



Under the constitutional government* of Europe, the people do not 

 indeed suffer from violent exaction*, an in the Turkish empire and in 

 Pemia ; but imltutry and commerce are often reatrained by irregular 

 and ill-defined taxes. 



To levy a tax "at the time and in the manner most likely to be 



r on the 

 ) more 

 the evil 



effect* of high taxation, while it produces no revenue to the state. 

 Suppose, for example, that a merchant imports goods and is required 

 to pay a duty upon them immediately and before he has found a 

 market for them : he must either advance the money himself or 

 borrow it from others, and in either case he will be obliged to charge 

 the purchaser of the goods with the interest ; or he must sell the goods 

 at once, not on account of any commercial occasion for the sale, but in 

 order to avoid prepayment of the tax. If he pays the tix and holds 

 the goods, the consumer will have to repay not only the tax but the 

 interest ; and if he parts with them at a loss or inconvenience, trade is 

 injured, and the general wealth and consequent productiveness of 

 taxation proportionately diminished. To prevent these evils the 

 Bonding or Warehouseing system was established in this country, 

 which affords the most liberal convenience to the merchant and a 

 general facility to trade. Certain warehouses are appointed under the 

 charge of officers of the customs, in which goods may be deposited 

 without being chargeable with duty until they are cleared for con- 

 sumption, and thus the tax is paid when the article is wanted, and 

 when it is least inconvenient to pay it Similar accommodation is 

 granted on their own premises to the manufacturers of articles liable to 

 excise duties. At present the customs bonding-warehouses are con- 

 fined to the ports, and a few large towns. 



The evils resulting from inconvenient modes of assessing and col- 

 lecting taxes have been very seriously felt in this country under the 

 operation of the excise laws. When any manufacture is subject to 

 excise duties, the officers of the revenue have cognisance of every part 

 of the process, inspect and control the premises and machinery of the 

 manufacturer, and often even prescribe the mode of conducting and 

 the times of commencing and completing each process ; while the 

 observance of numberless minute regulations is enforced by severe 

 penalties, The manufacturer is put to great inconvenience and 

 expense, and his ingenuity and resources are constantly interfered with 

 in such a manner as to impede inventions and improvements, and to 

 Himini.il hJ profits. A London distiller stated to the Commissioners 

 of Excise Inquiry, that assuming that the duties on spirits distilled by 

 him should be fully secured to the revenue, " it would be well worth 

 his while to pay 3000/. a-year for the privilege of exemption from 

 excise interference." (' Digest of KeporU of Commissioners of Excise 

 Inquiry,' p. 15.) 



Any injury done to trade is injurious to the state by diminishing 

 the national wealth and the employment of labour. It bos the same 

 effect also upon the revenue as excessive taxation. The high price of 

 the article limit* the consumption and consequently the revenue 

 arising from it. The injurious effects of the excise restrictions " must 

 be felt in an accumulated degree by the public who arc the con- 

 against whom the tax ojierates by the addition made to the price of 

 the commodity, not only by its direct amount, but by the necessity of 

 compensating the manufacturer for his advance of capital in defraying 

 it, and also by the increased cost of production." ( Ibid.,' p. 15.) In 

 the case of a heavy tax, which also diminishes consumption, the state, 

 at least, derives some benefit ; but in the cose of onerous restrictions 

 and impediments to trade caused by the mode of collecting a tax, the 

 state gains nothing whatever, and the manufacturer and the consumer 

 are aeriouily injured, without an equivalent to any party. It tin- 

 consumer must suffer, it should, at least, be for tin- bent-tit of thu 

 revenue, fur tlieti his contributions may be diminished in some other 

 direction. During the last few years excise duties have been removed 

 entirely from several manufactures, and in the instance of bricks and 

 glajM, especially in the latter, the improvements in the manufacture, 

 and the remarkable diminution of price, have been of a most .striking 

 character, and produced the most beneficial effects. 



The net produce of a tax is all that the state is interested in, and 

 therefore any violation of the fourth tnTim of Adam Smith is liable 

 to the same objections as those already stated in reference to the third. 

 Such violation increases the amount of the tax directly, as the former 

 was shown to increase it indirectly, without any advantage to the state. 

 Facility of collection is a groat recommendation to any tax ; im-l. on 

 the contrary, a disproportion between the cost of collecting an 1 the 

 amount ultimately secured is a good ground for removing a tax, 

 though founded in other respects upon just principles. On this 

 account' alone, as well as for the general convenience of trade, it has 

 been a wise policy to reduce, as far as possible, the number of ai title* 



upon which customs duties are levied. The cost of collecting the duties 

 upon the larger and more productive articles of import bears only a 

 small proportion to the amount of the tax, while the expense of col- 

 lecting the duties on the smaller and lees productive srticlea bean a 



large proportion to the tax, and may in some eases exceed it. 



Di/m*t Kindt of Taxei. In selecting taxes I 

 of a state, the principles already discussed should be adhered to as far 



i for raising the revenue 



as possible ; but these do not point out any particular mode of taxation 

 as preferable to others. Whatever mode of raising the necessary funds 

 may be found to press most equally upon different members of the 

 community, to be least liable to objections of uncertainty, or inconve- 

 nience in the mode or times of payment, or to be attended with the 

 least expense, is fairly open to the choice of a statesman; unless 

 objections of some other nature can be proved to outweigh these 



:<' :..l.i--n- i.it :< -::- 



The two great divisions under which most taxes may be classed are 

 dirtrt and indirect, 



Dirtct Taxtt. All taxes ought to be paid from the income of the 

 community. To derive revenue from capital is to act the part of a 

 spendthrift ; and such a practice as, in private life, must be condemned. 

 If the taxes of any country should become so disproportioued to its 

 income, that, in order to pay them, continual demands must be made 

 upon its capital, its resources would fail, employment of labour would 

 decrease, and the revenue must necessarily be reduced by the general 

 impoverishment of the tax-payers. Such a system could not long con. 

 tinue as regards all capital, but it may affect particular branches of 

 capital, or all capital in certain conditions. In whatever degr. 

 permitted to operate, it is injurious. A tax upon legacies is a 

 deduction from capital, and on that account objectionable, although it 

 is proli table to the treasury, and very easily collected. (Li 

 PROBATE.] The same observations apply to the probate duty, and to 

 duties charged upon succession to the personal property of intestates. 



With these exceptions, it has been the object of the British legisla- 

 ture to derive all taxes from income, either by direct assessment or 

 by means of the voluntary expenditure of the people upon taxed 

 commodities. 



Direct taxes upon the land have been universally resorted to by all 

 nations. In countries without commerce, laud is the only source from 

 which a revenue can be derived. In most of the Eastern monarchies 

 the greater part of the revenue has usually been raised by heavy taxes 

 upon the soil ; and in Spain, at the present time, the taxes upon Uie 

 soil are most oppressive and injurious. 



In England, under the Saxon kings, there was a land-tax. When 

 the invasions of the Danes became frequent, it was customary to pur- 

 chase their forbearance by large sums of money ; and, as the ordinary 

 revenues of the crown were not sufficient, a tax was imposed on every 

 hide of land in the kingdom. This tax seems to have been first 

 imposed A.D. 991, and was called Danegeld, or Danish tax or tribute. 

 [DANEOELD.] It was abolished about seventy years after the Norman 

 Conquest, but a revenue still continued to be derived, under ditU-ient 

 names, from assessments upon all persons holding lands, which, how- 

 ever, became merged in the general subsidies introduced in the reigns 

 of Hicharil II. and Henry IV. During the troubles in the reign of 

 Charles 1. and the Commonwealth, the practice of laying weekly and 

 monthly assessments of specific sums upon the several counties was 

 resorted to, and was found so profitable, that after the Restoration t In- 

 ancient mode of granting subsidies was renewed on two occasions only. 

 In lt>92 a new valuation of estates was made, and certain payments 

 were apportioned to each county and hundred, or other divi-ion 1 <.i 

 upwards of a century the tax was payable under annual acts, and 

 varied in amount from one shilling in the |>und to four shillings, at 

 which latter sum it was made perpetual by the 3!i Ueo. 111., 

 subject, however, to redemption by the landowners upon certa: 

 ditions. But no new valuation of the land has been made, and the 

 proportion chargeable to each district has continued the same as it wan 

 in the time of King William III., as regulated by the act of 

 That assessment is said not to have been accurate even at thai 

 and of course improved cultivation and the application of capital have 

 since completely changed the relative value of ditlerent |K>rtions of tin- 

 soil. On account of the generally increased productiveness of laud, 

 the tax bears upon the whole a trilling proportion to the runt, . 

 inequality is very great. Adam Smith imagined that thin tax was 

 borne entirely by the landlords, but this opinion has U.-n proved to bo 

 erroneous by modern political economist-, who hold that the tax 

 increases the price of the produce of the laud, and is therefore jmd l.y 

 the consumers. The tax is also obviously objectionable ou the > 

 of inequality. 



A tax upon the gross rent of hind would fall upon the landlord, and 

 would be in fact a tax upon his annual income, and as such would fall 

 with undue severity upon him, unless other classes of the community 

 should be liable to a proportionate deduction fiom their respective 

 incomes for thu benefit of the state. This brings us to consider the 

 expediency of a general tax upon all incomes. 



In whatever form the Ux may Ixs levied, the contribution should be 

 paid from income, and not fro; .ml. accordingly, the simplest 



and most equitable mode of taxation would apjiear to be that whi.-h, 

 after nnsimring the annual income of each person arising from all 

 sources, should take from him, directly, a certain proportion of his 



