Of the Sources of the General
or Public Revenue of the Society
Adam Smith
[Chapter II, The Wealth of Nations (an abridgement)]
The revenue which must defray, not only the expense of defending the
society and of supporting the dignity of the chief magistrate, but all
the other necessary expenses of government for which the constitution
of the state has not provided any particular revenue, may be drawn
either, first, from some fund which peculiarly belongs to the
sovereign or commonwealth, and which is independent of the revenue of
the people; or, secondly, from the revenue of the people.
Part 1:
Of the Funds or Sources of Revenue
which may peculiarly belong to the Sovereign or Commonwealth
The revenue which the great body of the people derives from land is
in proportion, not to the rent, but to the produce of the land. The
whole annual produce of the land of every country, if we except what
is reserved for seed, is either annually consumed by the great body of
the people, or exchanged for something else that is consumed by them.
Whatever keeps down the produce of the land below what it would
otherwise rise to keeps down the revenue of the great body of the
people still more than it does that of the proprietors of land. The
rent of land, that portion of the produce which belongs to the
proprietors, is scarce anywhere in Great Britain supposed to be more
than a third part of the whole produce. If the land which in one state
of cultivation affords a rent of ten millions sterling a year would in
another afford a rent of twenty millions, the rent being, in both
cases, supposed a third part of the produce, the revenue of the
proprietors would be less than it otherwise might be by ten millions a
year only; but the revenue of the great body of the people would be
less than it otherwise might be by thirty millions a year, deducting
only what would be necessary for seed. The population of the country
would be less by the number of people which thirty millions a year,
deducting always the seed, could maintain according to the particular
mode of living and expense which might take place in the different
ranks of men among whom the remainder was distributed.
Though there is not at present, in Europe, any civilised state of any
kind which derives the greater part of its public revenue from the
rent of lands which are the property of the state, yet in all the
great monarchies of Europe there are still many large tracts of land
which belong to the crown. They are generally forest; and sometimes
forest where, after travelling several miles, you will scarce find a
single tree; a mere waste and loss of country in respect both of
produce and population. In every great monarchy of Europe the sale of
the crown lands would produce a very large sum of money, which, if
applied to the payment of the public debts, would deliver from
mortgage a much greater revenue than any which those lands have ever
afforded to the crown. In countries where lands, improved and
cultivated very highly, and yielding at the time of sale as great a
rent as can easily be got from them, commonly sell at thirty years'
purchase, the unimproved, uncultivated, and low-rented crown lands
might well be expected to sell at forty, fifty, or sixty years'
purchase. The crown might immediately enjoy the revenue which this
great price would redeem from mortgage. In the course of a few years
it would probably enjoy another revenue. When the crown lands had
become private property, they would, in the course of a few years,
become well improved and well cultivated. The increase of their
produce would increase the population of the country by augmenting the
revenue and consumption of the people. But the revenue which the crown
derives from the duties of customs and excise would necessarily
increase with the revenue and consumption of the people.
The revenue which, in any civilised monarchy, the crown derives from
the crown lands, though it appears to cost nothing to individuals, in
reality costs more to the society than perhaps any other equal revenue
which the crown enjoys. It would, in all cases, be for the interest of
the society to replace this revenue to the crown by some other equal
revenue, and to divide the lands among the people, which could not
well be done better, perhaps, than by exposing them to public sale.
Lands for the purposes of pleasure and magnificence- parks, gardens,
public walks, etc., possessions which are everywhere considered as
causes of expense, not as sources of revenue- seem to be the only
lands which, in a great and civilised monarchy, ought to belong to the
crown.
Public stock and public lands, therefore, the two sources of revenue
which may peculiarly belong to the sovereign or commonwealth, being
both improper and insufficient funds for defraying the necessary
expense of any great and civilised state, it remains that this expense
must, the greater part of it, be defrayed by taxes of one kind or
another; the people contributing a part of their own private revenue
in order to make up a public revenue to the sovereign or commonwealth.
Part 2:
Of Taxes
Article I: Taxes upon Rent. Taxes upon the Rent of Land
A tax upon the rent of land may either every district being valued at
a certain rent, be imposed according to a certain canon, which
valuation is not afterwards to be altered, or it may be imposed in
such a manner as to vary with every variation in the real rent of the
land, and to rise or fall with the improvement or declension of its
cultivation.
A land-tax which, like that of Great Britain, is assessed upon each
district according to a certain invariable canon, though it should be
equal at the time of its first establishment, necessarily becomes
unequal in process of time, according to the unequal degrees of
improvement or neglect in the cultivation of the different parts of
the country. In England, the valuation according to which the
different countries and parishes were assessed to the land-tax by the
4th of William and Mary was very unequal even at its first
establishment. This tax, therefore, so far offends against the first
of the four maxims above mentioned. It is perfectly agreeable to the
other three. It is perfectly certain. The time of payment for the tax,
being the same as that for the rent, is as convenient as it can be to
the contributor though the landlord is in all cases the real
contributor, the tax is commonly advanced by the tenant, to whom the
landlord is obliged to allow it in the payment of the rent. This tax
is levied by a much smaller number of officers than any other which
affords nearly the same revenue. As the tax upon each district does
not rise with the rise of the rent, the sovereign does not share in
the profits of the landlord's improvements. Those improvements
sometimes contribute, indeed, to the discharge of the other landlords
of the district. But the aggravation of the tax which may sometimes
occasion upon a particular estate is always so very small that it
never can discourage those improvements, nor keep down the produce of
the land below what it would otherwise rise to. As it has no tendency
to diminish the quantity, it can have none to raise the price of that
produce. It does not obstruct the industry of the people. It subjects
the landlord to no other inconveniency besides the unavoidable one of
paying the tax.
The advantage, however, which the landlord has derived from the
invariable constancy of the valuation by which all the lands of Great
Britain are rated to the land-tax, has been principally owing to some
circumstances altogether extraneous to the nature of the tax.
It has been owing in part to the great prosperity of almost every
part of the country, the rents of almost all the estates of Great
Britain having, since the time when this valuation was first
established, been continually rising, and scarce any of them having
fallen. The landlords, therefore, have almost all gained the
difference between the tax which they would have paid according to the
present rent of their estates, and that which they actually pay
according to the ancient valuation. Had the state of the country been
different, had rents been gradually falling in consequence of the
declension of cultivation, the landlords would almost all have lost
this difference. In the state of things which has happened to take
place since the revolution, the constancy of the valuation has been
advantageous to the landlord and hurtful to the sovereign. In a
different state of things it might have been advantageous to the
sovereign and hurtful to the landlord.
As the tax is made payable in money, so the valuation of the land is
expressed in money. Since the establishment of this valuation the
value of silver has been pretty uniform, and there has been no
alteration in the standard of the coin either as to weight or
fineness. Had silver risen considerably in its value, as it seems to
have done in the course of the two centuries which preceded the
discovery of the mines of America, the constancy of the valuation
might have proved very oppressive to the landlord. Had silver fallen
considerably in its value, as it certainly did for about a century at
least after the discovery of those mines, the same constancy of
valuation would have reduced very much this branch of the revenue of
the sovereign. Had any considerable alteration been made in the
standard of the money, either by sinking the same quantity of silver
to a lower denomination, or by raising it to a higher; had an ounce of
silver, for example, instead of being coined into five shillings and
twopence, been coined either into pieces which bore so low a
denomination as two shillings and sevenpence, or into pieces which
bore so high a one as ten shillings and fourpence, it would in the one
case have hurt the revenue of the proprietor, in the other that of the
sovereign.
In circumstances, therefore, somewhat different from those which have
actually taken place, this constancy of valuation might have been a
very great inconveniency, either to the contributors, or to the
commonwealth. In the course of ages such circumstances, however, must,
at some time or other, happen. But though empires, like all the other
works of men, have all hitherto proved mortal, yet every empire aims
at immortality. Every constitution, therefore, which it is meant
should be as permanent as the empire itself, ought to be convenient,
not in certain circumstances only, but in all circumstances; or ought
to be suited, not to those circumstances which are transitory,
occasional, or accidental, but to those which are necessary and
therefore always the same.
A tax upon the rent of land which varies with every variation of the
rent, or which rises and falls according to the improvement or neglect
of cultivation, is recommended by that sect of men of letters in
France who call themselves The Economists as the most equitable of all
taxes. All taxes, they pretend, fall ultimately upon the rent of land,
and ought therefore to be imposed equally upon the fund which must
finally pay them. That all taxes ought to fall as equally as possible
upon the fund which must finally pay them is certainly true. But
without entering into the disagreeable discussion of the metaphysical
arguments by which they support their very ingenious theory, it will
sufficiently appear, from the following review, what are the taxes
which fall finally upon the rent of the land, and what are those which
fall finally upon some other fund.
In the Venetian territory all the arable lands which are given in
lease to farmers are taxed at a tenth of the rent. The leases are
recorded in a public register which is kept by the officers of revenue
in each province or district. When the proprietor cultivates his own
lands, they are valued according to an equitable estimation, and he is
allowed a deduction of one-fifth of the tax, so that for such lands he
pays only eight instead of ten per cent of the supposed rent.
A land-tax of this kind is certainly more equal than the land-tax of
England. It might not, perhaps, be altogether so certain, and the
assessment of the tax might frequently occasion a good deal more
trouble to the landlord. It might, too, be a good deal more expensive
in the levying.
Such a system of administration, however, might perhaps be contrived
as would, in a great measure, both prevent this uncertainty and
moderate this expense.
The landlord and tenant, for example, might jointly be obliged to
record their lease in a public register. Proper penalties might be
enacted against concealing or misrepresenting any of the conditions;
and if part of those penalties were to be paid to either of the two
parties who informed against and convicted the other of such
concealment or misrepresentation, it would effectually deter them from
combining together in order to defraud the public revenue. All the
conditions of the lease might be sufficiently known from such a
record.
Some landlords, instead of raising the rent, take a fine for the
renewal of the lease. This practice is in most cases the expedient of
a spendthrift, who for a sum of ready money sells a future revenue of
much greater value. It is in most cases, therefore, hurtful to the
landlords. It is frequently hurtful to the tenant, and it is always
hurtful to the community. It frequently takes from the tenant so great
a part of his capital, and thereby diminishes so much his ability to
cultivate the land, that he finds it more difficult to pay a small
rent than it would otherwise have been to pay a great one. Whatever
diminishes his ability to cultivate, necessarily keeps down, below
what it would otherwise have been, the most important part of the
revenue of the community. By rendering the tax upon such fines a good
deal heavier than upon the ordinary rent, this hurtful practice might
be discouraged, to the no small advantage of all the different parties
concerned, of the landlord, of the tenant, of the sovereign, and of
the whole community.
Some leases prescribe to the tenant a certain mode of cultivation and
a certain succession of crops during the whole continuance of the
lease. This condition, which is generally the effect of the landlord's
conceit of his own superior knowledge (a conceit in most cases very
ill founded), ought always to be considered as an additional rent; as
a rent in service instead of a rent in money. In order to discourage
the practice, which is generally a foolish one, this species of rent
might be valued rather high, and consequently taxed somewhat higher
than common money rents.
Some landlords, instead of a rent in money, require a rent in kind,
in corn, cattle, poultry, wine, oil, etc.; others, again, require a
rent in service. Such rents are always more hurtful to the tenant than
beneficial to the landlord. They either take more or keep more out of
the pocket of the former than they put into that of the latter. In
every country where they take place the tenants are poor and beggarly,
pretty much according to the degree in which they take place. By
valuing, in the same manner, such rents rather high, and consequently
taxing them somewhat higher than common money rents, a practice which
is hurtful to the whole community might perhaps be sufficiently
discouraged.
When the landlord chose to occupy himself a part of his own lands,
the rent might be valued according to an equitable arbitration of the
farmers and landlords in the neighbourhood, and a moderate abatement
of the tax might be granted to him, in the same manner as in the
Venetian territory, provided the rent of the lands which he occupied
did not exceed a certain sum. It is of importance that the landlord
should be encouraged to cultivate a part of his own land. His capital
is generally greater than that of the tenant, and with less skill he
can frequently raise a greater produce. The landlord can afford to try
experiments, and is generally disposed to do so. His unsuccessful
experiments occasion only a moderate loss to himself. His successful
ones contribute to the improvement and better cultivation of the whole
country. It might be of importance, however, that the abatement of the
tax should encourage him to cultivate to a certain extent only. If the
landlords should, the greater part of them, be tempted to farm the
whole of their own lands, the country (instead of sober and
industrious tenants, who are bound by their own interest to cultivate
as well as their capital and skill will allow them) would be filled
with idle and profligate bailiffs, whose abusive management would soon
degrade the cultivation and reduce the annual produce of the land, to
the diminution, not only of the revenue of their masters, but of the
most important part of that of the whole society.
Such a system of administration might, perhaps, free a tax of this
kind from any degree of uncertainty which could occasion either
oppression or inconveniency of the contributor; and might at the same
time serve to introduce into the common management of land such a plan
or policy as might contribute a good deal to the general improvement
and good cultivation of the country.
The expense of levying a land-tax which varied with every variation
of the rent would no doubt be somewhat greater than that of levying
one which was already rated according to a fixed valuation. Some
additional expense would necessarily be incurred both by the different
register offices which it would be proper to establish in the
different districts of the country, and by the different valuations
which might occasionally be made of the lands which the proprietor
chose to occupy himself. The expense of all this, however, might be
very moderate, and much below what is incurred in the levying of many
other taxes which afford a very inconsiderable revenue in comparison
of what might easily be drawn from a tax of this kind.
The discouragement which a variable land-tax of this kind might give
to the improvement of land seems to be the most important objection
which can be made to it. The landlord would certainly be less disposed
to improve when the sovereign, who contributed nothing to the expense,
was to share in the profit of the improvement. Even this objection
might perhaps be obviated by allowing the landlord, before he began
his improvement, to ascertain, in conjunction with the officers of
revenue, the actual value of his lands according to the equitable
arbitration of a certain number of landlords and farmers in the
neighborhood, equally chosen by both parties, and by rating him
according to this valuation for such a number of years as might be
fully sufficient for his complete indemnification. To draw the
attention of the sovereign towards the improvement of the land, from a
regard to the increase of his own revenue, is one of the principal
advantages proposed by this species of land-tax. The term, therefore,
allowed for the indemnification of the landlord ought not to be a
great deal longer than what was necessary for that purpose, lest the
remoteness of the interest should discourage too much this attention.
It had better, however, be somewhat too long than in any respect too
short. No incitement to the attention of the sovereign can ever
counterbalance the smallest discouragement to that of the landlord.
The attention of the sovereign can be at best but a very general and
vague consideration of what is likely to contribute to the better
cultivation of the greater part of his dominions. The attention of the
landlord is a particular and minute consideration of what is likely to
be the most advantageous application of every inch of ground upon his
estate. The principal attention of the sovereign ought to be to
encourage, by every means in his power, the attention both of the
landlord and of the farmer, by allowing both to pursue their own
interest in their own way and according to their own judgment; by
giving to both the most perfect security that they shall enjoy the
full recompense of their own industry; and by procuring to both the
most extensive market for every part of their produce, in consequence
of establishing the easiest and safest communications both by land and
by water through every part of his own dominions as well as the most
unbounded freedom of exportation to the dominions of all other
princes.
If by such a system of administration a tax of this kind could be so
managed as to give, not only no discouragement, but, on the contrary,
some encouragement to the improvement of land, it does not appear
likely to occasion any other inconveniency to the landlord, except
always the unavoidable one of being obliged to pay the tax.
A land-tax assessed according to a general survey and valuation, how
equal soever it may be at first, must, in the course of a very
moderate period of time, become unequal. To prevent its becoming so
would require the continual and painful attention of government to all
the variations in the state and produce of every different farm in the
country. The governments of Prussia, of Bohemia, of Sardinia, and of
the duchy of Milan actually exert an attention of this kind; an
attention so unsuitable to the nature of government that it is not
likely to be of long continuance, and which, if it is continued, will
probably in the long-run occasion much more trouble and vexation than
it can possibly bring relief to the contributors.
Taxes which are proportioned, not to the Rent, but to the Produce
of Land
Taxes upon the produce of land are in reality taxes upon the rent;
and though they may be originally advanced by the farmer, are finally
paid by the landlord. When a certain portion of the produce is to be
paid away for a tax, the farmer computes, as well as he can, what the
value of this portion is, one year with another, likely to amount to,
and he makes a proportionable abatement in the rent which he agrees to
pay to the landlord. There is no farmer who does not compute
beforehand what the church tithe, which is a land-tax of this kind,
is, one year with another, likely to amount to.
The tithe, and every other land-tax of this kind, under the
appearance of perfect equality, are very unequal taxes; a certain
portion of the produce being, in different situations, equivalent to a
very different portion of the rent. In some very rich lands the
produce is so great that the one half of it is fully sufficient to
replace to the farmer his capital employed in cultivation, together
with the ordinary profits of farming stock in the neighbourhood. The
other half, or, what comes to the same thing, the value of the other
half, he could afford to pay as rent to the landlord, if there was no
tithe. But if a tenth of the produce is taken from him in the way of
tithe, he must require an abatement of the fifth part of his rent,
otherwise he cannot get back his capital with the ordinary profit. In
this case the rent of the landlord, instead of amounting to a half or
five-tenths of the whole produce, will amount only to four-tenths of
it. In poorer lands, on the contrary, the produce is sometimes so
small, and the expense of cultivation so great, that it requires
four-fifths of the whole produce to replace to the farmer his capital
with the ordinary profit. In this case, though there was no tithe, the
rent of the landlord could amount to no more than one-fifth or
two-tenths of the whole produce. But if the farmer pays one-tenth of
the produce in the way of tithe, he must require an equal abatement of
the rent of the landlord, which will thus be reduced to one-tenth only
of the whole produce. Upon the rent of rich lands, the tithe may
sometimes be a tax of no more than one-fifth part, or four shillings
in the pound; whereas upon that of poorer lands, it may sometimes be a
tax of one-half, or of ten shillings in the pound.
The tithe, as it is frequently a very unequal tax upon the rent, so
it is always a great discouragement both to the improvements of the
landlord and to the cultivation of the farmer. The one cannot venture
to make the most important, which are generally the most expensive
improvements, nor the other to raise the most valuable, which are
generally too the most expensive crops, when the church, which lays
out no part of the expense, is to share so very largely in the profit.
The cultivation of madder was for a long time confined by the tithe to
the United Provinces, which, being Presbyterian countries, and upon
that account exempted from this destructive tax, enjoyed a sort of
monopoly of that useful dyeing drug against the rest of Europe. The
late attempts to introduce the culture of this plant into England have
been made only in consequence of the statute which enacted that five
shillings an acre should be received in lieu of all manner of tithe
upon madder.
Taxes upon the produce of land may be levied either in kind, or,
according to a certain valuation, in money.
A tax upon the produce of land which is levied in money may be levied
either according to a valuation which varies with all the variations
of the market price, or according to a fixed valuation, a bushel of
wheat, for example, being always valued at one and the same money
price, whatever may be the state of the market. The produce of a tax
levied in the former way will vary only according to the variations in
the real produce of the land, according to the improvement or neglect
of cultivation. The produce of a tax levied in the latter way will
vary, not only according to the variations in the produce of the land,
but according to both those in the value of the precious metals and
those in the quantity of those metals which is at different times
contained in coin of the same denomination. The produce of the former
will always bear the same proportion to the value of the real produce
of the land. The produce of the latter may, at different times, bear
very different proportions to that value.
When, instead either of a certain portion of the produce of land, or
of the price of a certain portion, a certain sum of money is to be
paid in full compensation for all tax or tithe, the tax becomes, in
this case, exactly of the same nature with the land-tax of England. It
neither rises nor falls with the rent of the land.
Ground-rents are a still more proper subject of taxation than the
rent of houses. A tax upon ground-rents would not raise the rents of
houses. It would fall altogether upon the owner of the ground-rent,
who acts always as a monopolist, and exacts the greatest rent which
can be got for the use of his ground. More or less can be got for it
according as the competitors happen to be richer or poorer, or can
afford to gratify their fancy for a particular spot of ground at a
greater or smaller expense. In every country the greatest number of
rich competitors is in the capital, and it is there accordingly that
the highest ground-rents are always to be found. As the wealth of
those competitors would in no respect be increased by a tax upon
ground-rents, they would not probably be disposed to pay more for the
use of the ground. Whether the tax was to be advanced by the
inhabitant, or by the owner of the ground, would be of little
importance. The more the inhabitant was obliged to pay for the tax,
the less he would incline to pay for the ground; so that the final
payment of the tax would fall altogether upon the owner of the
ground-rent. The ground-rents of uninhabited houses ought to pay no
tax.
Both ground-rents and the ordinary rent of land are a species of
revenue which the owner, in many cases, enjoys without any care or
attention of his own. Though a part of this revenue should be taken
from him in order to defray the expenses of the state, no
discouragement will thereby be given to any sort of industry. The
annual produce of the land and labour of the society, the real wealth
and revenue of the great body of the people, might be the same after
such a tax as before. Ground-rents and the ordinary rent of land are,
therefore, perhaps, the species of revenue which can best bear to have
a peculiar tax imposed upon them.
Ground-rents seem, in this respect, a more proper subject of peculiar
taxation than even the ordinary rent of land. The ordinary rent of
land is, in many cases, owing partly at least to the attention and
good management of the landlord. A very heavy tax might discourage
too, much this attention and good management. Ground-rents, so far as
they exceed the ordinary rent of land, are altogether owing to the
good government of the sovereign, which, by protecting the industry
either of the whole people, or of the inhabitants of some particular
place, enables them to pay so much more than its real value for the
ground which they build their houses upon; or to make to its owner so
much more than compensation for the loss which he might sustain by
this use of it. Nothing can be more reasonable than that a fund which
owes its existence to the good government of the state should be taxed
peculiarly, or should contribute something more than the greater part
of other funds, towards the support of that government.
By what is called the land-tax in England, it was intended that stock
should be taxed in the same proportion as land. When the tax upon land
was at four shillings in the pound, or at one-fifth of the supposed
rent, it was intended that stock should be taxed at one-fifth of the
supposed interest. When the present annual land-tax was first imposed,
the legal rate of interest was six per cent. Every hundred pounds
stock, accordingly, was supposed to be taxed at twenty-four shillings,
the fifth part of six pounds. Since the legal rate of interest has
been reduced to five per cent every hundred pounds stock is supposed
to be taxed at twenty shillings only. The sum to be raised by what is
called the land-tax was divided between the country and the principal
towns. The greater part of it was laid upon the country; and of what
was laid upon the towns, the greater part was assessed upon the
houses. What remained to be assessed upon the stock or trade of the
towns (for the stock upon the land was not meant to be taxed) was very
much below the real value of that stock or trade. Whatever
inequalities, therefore, there might be in the original assessment
gave little disturbance. Every parish and district still continues to
be rated for its land, its houses, and its stock, according to the
original assessment; and the almost universal prosperity of the
country, which in most places has raised very much the value of all
these, has rendered those inequalities of still less importance now.
The rate, too, upon each district continuing always the same, the
uncertainty of this tax so far as it might be assessed upon the stock
of any individual, has been very much diminished, as well as rendered
of much less consequence. If the greater part of the lands of England
are not rated to the land-tax at half their actual value, the greater
part of the stock of England is, perhaps, scarce rated at the fiftieth
part of its actual value. In some towns the whole land-tax is assessed
upon houses, as in Westminster, where stock and trade are free. It is
otherwise in London.
Appendix to Articles I and II
Taxes upon the transference of property from the dead to the living
fall finally as well as immediately upon the person to whom the
property is transferred. Taxes upon the sale of land fall altogether
upon the seller. The seller is almost always under the necessity of
selling, and must, therefore, take such a price as he can get. The
buyer is scarce ever under the necessity of buying, and will,
therefore, only give such a price as he likes. He considers what the
land will cost him in tax and price together. The more he is obliged
to pay in the way of tax, the less he will be disposed to give in the
way of price. Such taxes, therefore, fall almost always upon a
necessitous person, and must, therefore, be frequently very cruel and
oppressive. Taxes upon the sale of new-built houses, where the
building is sold without the ground, fall generally upon the buyer,
because the builder must generally have his profit, otherwise he must
give up the trade. If he advances the tax, therefore, the buyer must
generally repay it to him. Taxes upon the sale of old houses, for the
same reason as those upon the sale of land, fall generally upon the
seller, whom in most cases either conveniency or necessity obliges to
sell. The number of new-built houses that are annually brought to
market is more or less regulated by the demand. Unless the demand is
such as to afford the builder his profit, after paying all expenses,
he will build no more houses. The number of old houses which happen at
any time to come to market is regulated by accidents of which the
greater part have no relation to the demand. Two or three great
bankruptcies in a mercantile town will bring many houses to sale which
must be sold for what can be got for them. Taxes upon the sale of
ground-rents fall altogether upon the seller, for the same reason as
those upon the sale of land. Stamp-duties, and duties upon the
registration of bonds and contracts for borrowed money, fall
altogether upon the borrower, and, in fact, are always paid by him.
Duties of the same kind upon law proceedings fall upon the suitors.
They reduce to both the capital value of the subject in dispute. The
more it costs to acquire any property, the less must be the net value
of it when acquired.
All taxes upon the transference of property of every kind, so far as
they diminish the capital value of that property, tend to diminish the
funds destined for the maintenance of productive labour. They are all
more or less unthrifty taxes that increase the revenue of the
sovereign, which seldom maintains any but unproductive labourers, at
the expense of the capital of the people, which maintains none but
productive.
Such taxes, even when they are proportioned to the value of the
property transferred, are still unequal, the frequency of transference
not being always equal in property of equal value. When they are not
proportioned to this value, which is the case with the greater part of
the stamp-duties and duties of registration, they are still more so.
They are in no respect arbitrary, but are or may be in all cases
perfectly clear and certain. Though they sometimes fall upon the
person who is not very able to pay, the time of payment is in most
cases sufficiently convenient for him. When the payment becomes due,
he must in most cases have the money to pay. They are levied at very
little expense, and in general subject the contributors to no other
inconveniency besides always the unavoidable one of paying the tax.
It must always be remembered, however, that it is the luxurious and
not the necessary expense of the inferior ranks of people that ought
ever to be taxed. The final payment of any tax upon their necessary
expense would fall altogether upon the superior ranks of people; upon
the smaller portion of the annual produce, and not upon the greater.
Such a tax must in all cases either raise the wages of labour, or
lessen the demand for it. It could not raise the wages of labour
without throwing the final payment of the tax upon the superior ranks
of people. It could not lessen the demand for labour without lessening
the annual produce of the land and labour of the country, the fund
from which all taxes must be finally paid. Whatever might be the state
to which a tax of this kind reduced the demand for labour, it must
always raise wages higher than they otherwise would be in that state,
and the final payment of this enhancement of wages must in all cases
fall upon the superior ranks of people.
After all the proper subjects of taxation have been exhausted, if the
exigencies of the state still continue to require new taxes, they must
be imposed upon improper ones. The taxes upon the necessaries of life,
therefore, the wisdom of that republic which, in order to acquire and
to maintain its independency, has, in spite of its great frugality,
been involved in such expensive wars as have obliged it to contract
great debts. The singular countries of Holland and Zeeland, besides,
require a considerable expense even to preserve their existence, or to
prevent their being swallowed up by the sea, which must have
contributed to increase considerably the load of taxes in those two
provinces. The republican form of government seems to be the principal
support of the present grandeur of Holland. The owners of great
capitals, the great mercantile families, have generally either some
direct share or some indirect influence in the administration of that
government. For the sake of the respect and authority which they
derive from this situation, they are willing to live in a country
where their capital, if they employ it themselves, will bring them
less profit, and if they lend it to another, less interest; and where
the very moderate revenue which they can draw from it will purchase
less of the necessaries and conveniences of life than in any other
part of Europe. The residence of such wealthy people necessarily keeps
alive, in spite of all disadvantages, a certain degree of industry in
the country. Any public calamity which should destroy the republican
form of government, which should throw the whole administration into
the hands of nobles and of soldiers, which should annihilate
altogether the importance of those wealthy merchants, would soon
render it disagreeable to them to live in a country where they were no
longer likely to be much respected.
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