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113 



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who is intended to pay it ; but if a very heavy tax were 

 imposed, it would discourage the occupation of houses, 

 lessen the demand for them, and thereby diminish the 

 rent of the landlord, or, in other words, transfer the ac- 

 tual payment to him. (Adam Smith, book 5, chap ii. ; 

 Ricardo's Political Economy, chap, xiv.) Such a 1ax 

 would be attended with very bad consequences ; it would 

 compel many persons to live in inferior houses or in lodg- 

 ings, and thus diminish their comforts and deteriorate 

 their habits of life ; and by reducing the demand for 

 houses it would limit the employment of capital and 

 labour in building. The direct taxes upon horses, car- 

 riages, hair-powder, armorial bearings &c., being paid 

 voluntarily by the rich to gratify their own taste for 

 luxury or display, are not likely to meet with many ob- 

 jectors. The use of such articles generally indicates the 

 scale of income enjoyed by the contributor, and the tax is 

 too light to discourage expenditure or to make any sensi- 

 ble deduction from his means. 



A very fair principle of levying a direct tax is exhibited 

 by the assessment of property in every parish in England 

 and Wales to the poor rates. Local knowledge renders 

 a perfectly correct valuation possible, and every person 

 owning or occupying land, houses, or other property 

 within the parish, is assessed so much in the pound upon 

 the annual value thereof, to raise the necessary funds for 

 the support of the poor. 



The various modes of direct taxation are too numerous 

 to enter upon, especially as many of them involve the 

 discussion of principles of political economy which would 

 carry us far beyond our limits. For arguments and illus- 

 trations concerning the incidence of tithes, of taxes upon 

 profits, upon wages, and other descriptions of direct im- 

 posts, we refer to the able works of Adam Smith, Ricardo, 

 M'Culloch, and other eminent writers upon political 

 economy. 



II. Indirect Taxes. 



In preferring one tax to another, a statesman may be in- 

 fluenced by political considerations as well as by strict 

 views of financial expediency, and nothing is more likely 

 to determine his choice than the probability of a cheerful 

 acquiescence on the part of the people. All taxes are dis- 

 liked, and the more directly and distinctly they are re- 

 quired to be paid, the more hateful they become. On 

 this, as well as on other grounds, ' indirect taxes,' or taxes 

 upon the consumption of various articles of merchandize, 

 have been in high favour with most governments. ' Taxes 

 upon merchandize,' says Montesquieu, 'are felt the least 

 by the people, because no formal demand is made upon 

 them. They can be so wisely contrived, that the people 

 shall scarcely know that they pay them. For this end it 

 is of great consequence that the seller shall pay the tax. 

 He knows well that he does not pay it for himself; and 

 the buyer, who pays it in the end, confounds it with 

 the price.' (Esprit des Lois, livre xiii., chap, vii.) This 

 effect of indirect taxes is apt to be undervalued by writers 

 on political economy ; but it is undoubtedly a great merit 

 in any system of taxation (which is but a part of general 

 government) that it should be popular and not give rise 

 to jarring and discontent. A tax that is positively injurious 

 to the very parties who pay it without thought, is, cer- 

 tainly not to be defended merely on the ground that no 

 complaints are made of it ; but it may be safely admitted 

 as a principle, that of two taxes equally good in other re- 

 spects, that is the best which is most acceptable to the 

 people. The very facility, however, with which indirect 

 taxes may be levied, makes it necessary to consider the 

 incidents and effects of them with peculiar caution. The 

 statesman has no warning, as in the case of direct taxes, 

 that evils are caused by an impost which is productive 

 and which every one seems willing to pay. When any 

 branch of industry is visibly declining, and its failure can 

 be traced to no other cause than the discouraging pressure 

 of a tax, the necessity of relief is felt at once ; but if trade 

 and manufactures are nourishing, and the country ad- 

 vancing in prosperity, it is difficult to detect the latent in- 

 fluence of taxes in restraining that progress, which but 

 for them would have been greater ; and still more diffi- 

 cult to imagine the new sources of wealth which might 

 have been laid open if such taxes had not existed, or had 

 been less heavy, or had been collected at different times j 

 or in different ways. 



P. C., No. 1502. 



The government is directly interested in the increase of 

 national wealth, and taxes upon commodities should be 

 allowed to interfere with it as little as possible. On this 

 account duties upon raw materials are very objectionable. 

 They increase the price of such materials, and thus limit the 

 power of the manufacturer to purchase them, and to em- 

 ploy labour in increasing their value, and in adding to the 

 production and capital of the country. They discourage 

 foreign commerce and the employment of shipping ; for as 

 the power of buying is restrained, so also is that of selling, 

 and the interchange of merchandize between different 

 countries is checked. Moreover, by increasing the price 

 of the exported manufactures, they limit the demand for 

 them abroad and subject them to dangerous competition. 

 Similar objections may be urged against taxes upon 

 domestic manufactures, since by increasing the price 

 they diminish consumption, and consequently discourage 

 the manufactures, which if left to themselves would have 

 given employment to more capital and labour, and would 

 have added greatly to the amount of national wealth and 

 prosperity. The object of a government should always 

 be to collect its revenue from the results of the successful 

 employment of capital and industry, and not to press 

 upon any intermediate stage of production. 



Adopting this view of the objects of taxation, the Bri- 

 tish legislature has of late years very wisely repealed or 

 reduced various duties upon raw materials and upon 

 manufactures. Of the former we may instance the cus- 

 toms' duties on barilla ; on raw, waste, or thrown silk ; on 

 cotton-wool and sheep's wool, unwrought-iron, hemp, and 

 flax ; which have been from time to time very much re- 

 duced. Of the latter, the taxes on printed goods, on 

 candles, and on tiles, have been altogether removed; and 

 those on plate and flint glass, on malt, and on soap, have 

 been partially remitted. There are still many similar 

 taxes which need revision. Of these perhaps the most 

 injurious are the heavy duties upon foreign timber, which 

 we shall show other reasons for condemning, in treating of 

 protective duties ; but in this place they must be particularly 

 censured, as offering a serious obstruction to ship-build"- 

 ing (one of the most important branches of national in- 

 dustry in a maritime country), and to the construction of 

 buildings for the convenience of trade and manufactures. 

 The amended tariff of 1842, which for many reasons is a 

 most important change in the financial policy of this 

 country, has reduced the duty on colonial timber to a rate 

 perhaps unnecessarily low ; that on foreign timber, though 

 much reduced, is still too high. 



One of the chief recommendations of indirect taxes is> 

 that, when placed upon the proper description of articlesj 

 the payment of them by the consumer is optional. If 

 charged upon what may be strictly called the necessaries 

 of life, their payment becomes compulsory, and falls with 

 unequal weight upon labour. Competition generally 

 reduces a large proportion of the working classes to a 

 state which allows them but little if anything beyond 

 necessaries ; consequently a duty upon these, as it will 

 have no effect in diminishing the competition of labour 

 and in raising wages, must reduce the comforts and stint 

 the subsistence of labouring men. 



That class of articles commonly called luxuries, of 

 which the consumption is optional, is a very fair subject 

 of taxation. In principle there is no objection to such 

 taxes : they do not interfere with industry or production, 

 but are paid out of the incomes of the contributors, anc 

 paid willingly, and for the most part without undue pres- 

 sure upon their means. But in laying on taxes upon par 

 ticular articles of this description care must be taken ti 

 proportion the charge to the value of the article. Exces- 

 sive duties fail in the very object they have in view, by 

 rendering the revenue less productive than moderate 

 duties ; while the causes of their failure are injurious U 

 the wealth of the country by discouraging consumption, 

 and to its morals by offering an inducement to smuggling. 

 It is only by experience that the precise point can be 

 found at which the revenue is most productive, consistently 

 with an unchecked consumption and an absence of smug- 

 gling ; but it may be assumed as certain that whenever a 

 tax adds very greatly to the price of an article of general 

 consumption, it puts it out of the reach of many who 

 are anxious to purchase it, and tempts smugglers, by the 

 chance of a large profit, to evade the payment of the duty. 

 On the contrary, when a duty is moderate, it adds so little 



VOL. XXIV. Q 



