Essay 8, Part 2

Taxes

There is a prevailing maxim that:

  • every new tax creates a new ability in the subject to bear it
  • each encrease of public burdens proportionally encreases the people’s industry

This maxim is most likely to be abused. It is so much more dangerous, because it cannot be denied. It has some foundation in reason and experience when kept within certain bounds.

When a tax is laid on commodities consumed by the common people, the poor must :

  • retrench something from their way of living, or
  • raise their wages, so as to make the tax fall entirely on the rich, or
  • encrease their industry, perform more work, and live as well as before, without demanding more for their labour.

This naturally follows if:

  • taxes are moderate
  • laid on gradually, and
  • do not affect the necessaries of life

These difficulties often excite the people’s industry and render them more opulent and laborious, than others, who enjoy the greatest advantages.

Most commercial nations do not always have fertile land. But they have laboured under many natural disadvantages. Tyre, Athens, Carthage, Rhodes, Genoa, Venice, Holland, are strong examples.

Only three countries have large and fertile lands with much trade: the Netherlands, England, And France. Netherlands and England had advantages of:

  • their maritime situation
  • the need of going overseas to get what was unavailable at home.

Trade came late to France. It came from the reflection and observation in an ingenious and enterprizing people. They saw the riches of their neighbours, so they cultivated navigation and commerce.

Cicero mentioned places with the greatest commerce in his time: Alexandria (Egypt), Colchus (Georgia), Tyre and Sidon (Lebanon), Andros (Greece), Cyprus, Pamphylia and Lycia (Turkey), Rhodes (Greece), Chios, Byzantium, Lesbos, Smyrna, Miletum, Coos.

All these, except Alexandria, were either small islands, or narrow territories. Alexandria owed its trade entirely to the happiness of its situation. Some natural necessities or disadvantages are favourable to industry.

Why do artificial burdens not have the same effect?

Sir William Temple ascribes the industry of the DUTCH entirely to necessity coming from their natural disadvantages. He compares them with Ireland:

“by the largeness and plenty of the soil, and low population, all things necessary to life are so cheap. An industrious man, by two days labour, may gain enough to feed him the rest of the week. This is the cause of Irish laziness. For men naturally prefer ease over labour, and will not take pains if they can live idle and have gotten used to idleness. Nor perhaps is the change harder, from constant ease to labour, than from constant labour to ease.”

He then enumerates the ancient and modern places where trade has most flourished. He observes that narrow confined territories beget a necessity for industry.

The best taxes are those levied on luxuries consumptions because such taxes are:

  • least felt by the people as the tax is confounded with the natural price of the commodity
  • voluntary, since a man may choose how far he will use the taxed commodity.
  • paid gradually and insensibly.
  • naturally produce sobriety and frugality, if judiciously imposed.

Their only disadvantage is, that they are expensive in the levying. Taxes on possessions are levied without expence. But it has every other disadvantage.

Most states, however, go for them to supply the deficiencies of the other tax. But the most pernicious of all taxes are the arbitrary.

They are commonly converted, by their management, into punishments on industry. By their unavoidable inequality, are more grievous, than by the real burden which they impose. It is surprising to see them among any civilized people.

All poll-taxes are commonly arbitrary. Even if they are not, they are dangerous because it is so easy for the sovereign to add a little more and more that these taxes become oppressive. On the other hand, a duty on commodities checks itself. A prince will find that an encrease of the impost does not increase his revenue.

It is not easy to be ruined by such taxes.

One of the chief causes of the fall or the Roman empire was Constantine’s change in taxation. He created a universal poll-tax, in lieu of almost all the tithes, customs, and excises, which formerly composed the revenue of the empire. The people were so grinded and oppressed by the publicans. They were glad to take refuge under the barbarians. The barbarians had fewer necessities and less art and were preferable to the refined tyranny of the Romans.

Some political writers say that since all taxes, as they pretend, fall ultimately on land, it were better to tax land and abolish every duty on consumptions. But all taxes do not fall ultimately on land.

If a duty were laid on any commodity, consumed by an artisan, he can pay for it in two ways:

  1. he may reduce his expence, or
  2. he may encrease his labour.

Both these resources are more easy and natural, than that of raising the price of his wages. In years of scarcity, the weaver either consumes less or labours more. It is just that he should have the same for the sake of the public which gives him protection.

How can he raise the price of his labour?

His manufacturer-employer will not give him more because the merchant, who exports the cloth, cannot raise its price, being limited by the price which it yields in foreign markets. Every man wants to from himself from any tax by laying it on others. But every man has the same inclination. No set of men can prevail altogether in this contest.

Why should the landed gentleman be the victim of the whole, and not be able to defend himself?

All tradesmen would willingly prey on him, and divide him among them, if they could. They have always had this inclination even if no taxes were levied.

The same methods which the landed gentleman uses to guard against tradesmen will serve him afterwards. These will make them share the burden.

Only very heavy taxes, very injudiciously levied cannot be shared. An example is a tax which raise the price of labour. In taxation, the consequences of things are diametrically opposite to what we should intially expect.

The Turkish government’s fundamental maxim is from the Grand Signior. He is the absolute master of the lives and fortunes of each individual. But he has no authority to impose a new tax. Every Ottoman prince, who has tried either:

  • has been obliged to retract, or
  • has found its fatal effects.

We would think that this prejudice were the firmest barrier against oppression. Yet its effect is contrary. The emperor has no regular way to increasing his revenue. So he must allow all the bashaws and governors to oppress his subjects. He then squeezes those governors. But if he imposes a new tax, then his people will fight him. He would find that a large tax raised so generally would be better than a small tax raised directly.

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