TAX 



109 



TAX 



without an injurious pressure upon its resources. Ir is the 

 business of a government to provide these, when proved to 

 be necessary, in the best manner and at the least expense 

 consistent with their efficiency. 



The able and laborious committee of the House of Com- 

 mons upon public income and expenditure in 1828 'une- 

 quivocally declared their full assent to the principle, that no 

 government is justified in taking even the smallest sum of 

 money from the people, unless a case can be clearly esta- 

 blished to show that it will be productive of some essential 

 advantage to them, and of one that cannot be obtained by 

 a smaller sacrifice.' The committee truly added to the 

 statement of this just principle, that ' nothing requires 

 more wisdom and prudence than to fix the public expen- 

 diture at such an amount that the real wants of the people 

 shall not be made to give way to any imaginary wants of 

 the state : the latter arise from so many sources, that it is 

 frequently very difficult to prevent the operation of an 

 undue influence.' (Second Report, p. 4.) One of the first 

 duties of representatives of the people is to watch with 

 jealousy the expenditure of the public money. Every tax 

 should be viewed as the purchase-money paid for equi- 

 valent advantages given in return. This principle assumes 

 the necessity of moderation in levying taxes, and will 

 scarcely be denied by any one when stated in that form ; 

 yet it is not uncommon to hear it argued that so long as 

 taxes are spent in the country, the amount is not of conse- 

 quence, as the money is returned through various channels 

 to the people from whom it was derived. The principle 

 we have just laid down at once exposes the fallacy of this 

 doctrine, by reducing it to a simple question between 

 debtor and creditor. For example, by paying a million of 

 money every year, the people obtain the services of an 

 army : this we will suppose to be an equivalent, and we 

 will further aasume that the food and clothing of the force 

 are purchased, and that the entire pay of the men is spent, 

 within the country. The whole of the money will thus be 

 returned : but how? Not as a free gift, not as the repay- 

 ment of a loan, but in the purchase of articles equal in 

 to the whole sum. The only benefit obtained by this 

 i ctuni of the million is clearly nothing more than the 

 ordinary profits of trade ; for the community has already 

 provided the money, and then out of its own capital and 

 industry it produces what is equal to it in value, and this 

 it sells to the state, receiving as payment the very sum it 

 had itself contributed as a tax. 



In whatever manner taxes may be expended, they must 

 be regarded as injurious to the community. ' Every new 

 tax,' says Mr. Ricardo, 'becomes a new charge on produc- 

 tion, and raises the natural price. A portion of the labour 

 of the country which was before at the disposal of the con- 

 tributor to the tax is placed at the disposal of the state, 

 and cannot therefore be employed productively.' (Political 

 I'imy, chap, xii., p. 206.) 



GENERAL PRINCIPLES OF TAXATION. 



Having settled that taxation should be generally and in 

 amount as light as possible, it must be determined upon 

 what principles and in what manner taxes may best be 

 h'\ ii'd. No other branch of legislation is perhaps so im- 

 portant as the wise application of just principles in the 

 matter of taxation. The wealth, happiness, and even the 

 morals of the people are dependent upon the financial 

 policy of their government. 



Adam Smith lays down four general maxims, which we 

 shall briefly cite not only as being perfectly true in them- 

 selves and most, valuable, but as proceeding from an autho- 

 rity so high that not to notice them might be accounted 

 an omission. 



I. ' The subjects of every state ought to contribute to- 

 wards the support of the government as nearly as possible 

 in proportion to their respective abilities; that is, in pro- 

 portion to the revenue which they respectively enjoy under 

 the protection of the state.' 



II. 'The tax which each individual is bound to pay 

 ousht to be certain, and not arbitrary. The time of pay- 



t, the manner of payment, the quantity to be ^aid, 

 ought all to be clear and plain to the contributor, and to 



. other person.' 



III.' Every tax ought to be levied at the time or in the 

 manner most likely to be convenient for the contributor 

 ID pay it.' 



IV. ' Every tax ought to be so contrived as both to take 



out and keep out of the pockets of the people as little as 

 possible over and above what it brings into the public 

 treasury of the state.' 



In discussing the merits of particular taxes and classes of 

 taxes, we shall have to considerwith some minuteness the ap- 

 plication of Adam Smith's first maxim. Its justice requires 

 no enforcement or illustration, although unhappily the ob- 

 ject is most difficult of attainment. The second maxim is of 

 great importance, and the necessity of adhering to it must 

 be universally acknowledged. Uncertainty gives rise to 

 frauds and extortion on the part of the tax-gatherer, and to 

 ill-will and suspicion on that of the contributor, while it 

 offers a most injurious impediment to all the operations of 

 trade. Notwithstanding the many evils of uncertainty, it 

 is by no means an uncommon fault even in modern sys- 

 tems of taxation. We would pass over the practices oi 

 Eastern despotisms, where uncertainty and caprice prevaL 

 instead of fixed rules, but that the vices of their taxation 

 are so exaggerated as to show the evils of a departure 

 from just principles in the broadest light. All taxation is 

 forbidden by the Koran, and although the prohibition has 

 been evaded and broken through by the Turkish govern- 

 ment in particular instances, it has always been an ob- 

 struction to any general system of imposts. In the absence 

 of regular taxes, partial and irregular exactions are resorted 

 to for supplying the wants of the sultan. Plunder becomes 

 the business of every governor of a province, and thus the 

 Koran, instead of defending Moslems from tax-gatherers, 

 gives them up to public robbers. ' No man is secure in 

 his property for an instant ; all are compelled carefully to 

 conceal their . possessions, lest they should lose their 

 liberty or possibly their lives and their property too. In- 

 dustry is thus not merely cramped, but almost prevented 

 or extirpated, by men being deprived of all confidence in 

 their enjoyment of its rewards. The country, fertile in its 

 resources of all kinds, is left waste, or only cultivated as 

 far as the absolute necessities of providing sustenance 

 may require. The nearer you approach the seat of govern- 

 ment, this is more the case ; and the neighbourhood of the 

 capital, which in other countries is naturally the scene of 

 extended labour, thick population, and great cultivation, 

 is in Turkey marked by barrenness and neglect. Constan- 

 tinople can only be approached on the land side by tra- 

 velling through extensive wastes without either man or 

 beast or tillage.' (Political Philosophy, ch. 3.) 



In Persia the same uncertain and oppressive mode o. f 

 exacting money for the use of the sovereign is resorted to 

 and is followed by similar results. 



Under the more constitutional governments of Europe, 

 the people do not indeed suffer from violent exactions, 

 but industry, production, and commerce are too often re- 

 strained by irregular and ill-defined taxes. Spain unhap- 

 pily affords many examples of misgovernment, and the 

 injurious character of its taxation is shown in reference to 

 this as well as other principles. To select one instance of 

 uncertainty : ' Every landowner is liable to have his pro- 

 perty taken in execution for government taxes, if he is not 

 prepared to pay a half-year or more in advance, according 

 to the difficulties of the Exchequer ; consequently he is 

 often compelled to make great sacrifices in order to meet 

 such exigencies.' (Madrid in 1835, vol. ii., p. 107.) 



Perhaps there is no better example of the evils of uncer- 

 tainty than that of the Stade duties levied by the king of 

 Hanover upon all ships passing up the Elbe from the sea, 

 and upon their cargoes. The tariff taxes 2368 articles of 

 commerce, and lays several duties upon the same articles, 

 so that the whole number of duties is 6688. ' There are 

 35 different duties upon iron ; 32 duties upon yarn or 

 twist ; 18 duties upon sugar ; 42 upon leather ; 36 upon 

 oil ; 126 upon wood, and so on with respect to other im- 

 portant articles of trade.' The tariff also ' resorts to all 

 modes and devices of taxation, by weight, by measure, by 

 number, by value ; and what is worse, it vests in the cus- 

 tomhouse officers the sole discretion of determining by 

 what standard they will charge the duty. The collector 

 imposes that kind of duty which will produce the most 

 money in the particular case. The consequence of this to 

 the merchant is most serious. He cannot calculate or in- 

 form himself beforehand how much his goods will have to 

 pay at Brunshausen.' (Edinburgh Review, No. el., p. 

 361 ; Hutt's Stade Duties.} There are also arbitrary fines 

 for trivial informalities in the ship's papers, and which are 

 said to rest practically with the subordinate officers, who 



