AQ4 
consumption of every description were estab- 
lished. When taxes began to be treated scien- 
tifically, which was not till a long time after the 
different kinds had been invented and intro- 
duced, attempts were made to bring the whole 
mass of the existing taxes under a general sys- 
tem. 
All taxes may be arranged under the following 
classes: taxes on the possession, on the acguisi- 
tion, or on the enjoyment of property. In order 
to judge whether they are rightly distributed, it 
must first be considered, whether they can be 
paid regularly and continually from the net in- 
come or not. There may be a possession which 
brings no gain at all, as a library, a collection of 
pictures, &c. Ifan annual tax is Jaid upon such 
property, it would, sooner or later, consume the 
property if it were to be paid from it, and, con- 
sequently, would contradict the principles above 
laid down, that property should be taxed only so 
far as it affords a regular income. In like way, 
acquisitions can be taxed, according to the prin- 
ciples of political economy, only when they are a 
permanent source of gain. If, therefore, any one 
acquires an estate or a capital by purchase, ex- 
change, &c., and taxes are laid upon such an 
acquisition, the tax is taken from the capital, 
that is, from the means destined to produce pro- 
fit. As far as this happens or is in danger of 
happening, the system of taxation is defective. 
If, in fine, a tax is laid on enjoyment, or the value 
of things enjoyed, this can be justified only so far 
as he who purchases or enjoys such things can 
afford the expense, from an income which fur- 
nishes more than enough for his subsistence, and 
the source of which is not necessarily diminished 
by the tax. If we seek, therefore, for the prin- 
ciple of the distribution of taxes, which ought to 
serve at the same time as a rule for judging of 
the propriety of the distribution, this can be no 
other than the net zncome of the persons, or the 
net produce of the property. 
Net income or net profit is that part of income 
or profit which remains after the portion ne- 
cessary for the maintenance of the person, or the 
continuance of the property which produced the 
income or the profit, has been subtracted. An 
income and profit are produced either, 1. from 
land; 2. from capital; 3.from labour. All taxes 
will be just and useful only so far as they are a 
part of the net produce from these sources, and 
are imposed and distributed after this principle. 
But as it is difficult, and in many cases impossi- 
ble, in practice, to ascertain the net revenue of 
every one, the politician must: take different 
ways to find the just proportion. The first way 
is direct—to determine, from the statement of 
the parties concerned, or from official estimation, 
the net income of the persons, or the net produce 
of the land, and to assess the taxes according to 
the result. This kind of taxes is called direct. 
But as this mode leaves a large portion of net 
incomes doubtful, their amount is sought for in 
TAXES. 
an indirect way. It is supposed that he who 
receives more than the amount at which he has 
rated his income, will consume and enjoy more 
than this sum will warrant, and, in particular, 
that he will enjoy certain articles which the man 
of smaller income consumes not: at all, or not in 
equal quantity. If, now, the expense for articles 
of consumption is taxed, an additional sum can 
be generally drawn from all those who pay al- 
ready a direct tax on income, not sufficient, how- 
ever, to cover the expenses of the state. This 
sum they can pay from their net income, if their. 
affairs are properly arranged. In this way, 
something more is obtained from the net income’ 
of those who have concealed a part, than they’ 
would have contributed if they had been taxed 
merely according to their own statement. These 
taxes are termed indurect, as they are calculated 
like the others on the net income, but only in an 
indirect way. The art of reaching this net in- 
come by taxes on consumption, or other indirect 
taxes, still remains very imperfect. Its per- 
fection is, however, necessary, if the system of 
taxation is to be established according to just 
principles. 
Another signification is usually attached to the 
division of taxes into direct and indirect. The 
mode in which they are raised is made the prin- 
ciple of denomination. By direct taxes are un- 
derstood such as are laid immediately on the 
consumers ; by indirect taxes, such as are assessed 
on others in advance, who are left to remunerate 
themselves from the rest of the community. 
But this principle does not afford a logically 
correct division ; for the same tax can be raised 
at one time directly, at another indirectly. Thus 
all taxes of consumption may be raised as well 
from those who consume the articles, as from the 
tradesmen who deal in them. In like manner, 
many articles of luxury are taxed directly. Ne- 
vertheless, the taxes remain indirect, because the 
net income only is taxed according to the ex- 
travagance of individuals. Taxes imposed on 
goods at the time of their importation, are de- 
nominated customs, duties, or imposts. Adam 
Smith mentions one objection to this mode of 
raising revenue, as the importing merchant must 
enhance the price of his goods, not only by the 
amount of the duty advanced by him, but also. 
for interest, profit, and guarantee of that amount, 
so that the consumer must, in fact, pay more 
than the tax. This objection is avoided by an 
excise tax, which is levied on the goods in the 
hands of the person who uses them, or at the 
time of their coming into his hands. An annual 
excise is sometimes levied upon articles of a. 
durable nature, such as carriages, watches, &c.; 
and the principle on which this is apportioned, 
is to graduate it according to the supposed ex- 
penditure of the persons paying the tax, assuming 
that this will, as a general rule, be in some near 
proportion to their income. In respect to im- 
ported articles, the excise is either a substitute 
