Chapter 1 Part 3 of Lectures on Jurisprudence by Adam Smith

Taxes on Possessions Icon

September 9, 2015

After the appropriation of land property, some lands were commonly assigned to maintain the government. The free states of Greece had land set apart for this purpose.

Aristotle thought that private property should surround the royal lands because=

  • the people near a city were always for war,
  • they were sure of defence, and
  • the enemy would first come upon those lands near the boundaries

In all barbarous countries, lands are appropriated to the purposes of sovereignty. These therefore have little occasion for taxes and customs duties.

This is a bad policy and a cause of the slow progress of opulence.

An immense tract of land would be required to support the British government.

  • Its annual expense in peacetime is 3 million.
  • The whole land rents amount to 24 million

Therefore the government must have 12.5% in its own hands. If we further conceive how such a tract of land would be cultivated, the amount needed would be prodigious.

Allow it but to be half as well cultivated as the rest, which for many reasons would not be the case, the government would have in its hands 1/4 of the whole country.

By this therefore, the country’s stock would be greatly reduced, and fewer people maintained. After government becomes expensive, it is the worst possible method to support it by a land rent. The government in a civilized country is much more expensive than in a barbarous one. When we say that one government is more expensive than another, it is the same as if we said that the one country is farther advanced in improvement than another.

To say that the government is expensive and the people not oppressed is to say that the people are rich. There are many expenses necessary in a civilized country for which there is no occasion in one that is barbarous. Armies, fleets, fortified places, public buildings, judges, and officers of the revenue must be supported. If they be neglected, disorder will ensue. A land rent, to serve all these purposes, would be the most improper thing in the world. All taxes may be considered under two divisions=

taxes on possessions and An example is land tax. taxes on consumption. Examples are all taxes on commodities These are the two ways of making the subjects contribute to the support of government.

There are three kinds of possessions=

  1. Land
  2. Stock
  3. Money

It is easy to levy a tax on land, because it is evident what quantity everyone possesses. But it is very difficult to lay a tax on stock or money without very arbitrary proceedings. It is a hardship upon a man in trade to oblige him to show his books, which is the only way in which we can know how much he is worth. It is a breach of liberty.

It can create very bad consequences by ruining his credit. The circumstances of people in trade are sometimes far worse than at others. But if because this difficulty you were to tax land, and neither tax money nor stock, you would do a very great injustice. But though it be a difficult thing to tax money or stock without being oppressive, yet this method is used in several countries. In France, for example, in order to ascertain the circumstances of the subject, every bill is assigned, and all business transacted in presence of a public notary, and entered into his books, so that land, stock, and money are there all taxed in the same manner. Of these three only land is taxed in England, because to tax the other two has some appearance of despotism, and would greatly enrage a free people. Excepting the land tax, our taxes are generally upon commodities, and in these there is a much greater inequality than in the taxes on land possession. The consumptions of people are not always according to what they possess, but in proportion to their liberality. When taxes are laid upon commodities, their prices must rise, the concurrence of tradesmen must be prevented, an artificial dearth occasioned, less industry excited, and a smaller quantity of goods produced.2

Taxes upon land possessions have this great advantage, that they are levied without any great expense;

  • the whole land tax of England does not cost the government above eight or ten thousand pounds.

Collectors are chosen by the gentlemen of the county, and are obliged to produce proper security for their carrying safely to the exchequer the money which they collect. The taxes of customs and excise, which produce such immense sums, are almost eaten up by the legions of officers that are employed in collecting them. These officers must have supervisors over them to examine their proceedings. The supervisors have over them collectors, who are under the commissioners, who have to account to the exchequer; to support these officers there must be levied a great deal more than the government requires, which is a manifest disadvantage. Another advantage of a land tax is, that it does not tend to raise the price of commodities, as it is not paid in proportion to the corn and cattle, but in proportion to the rent.

If the tenant pay the tax, he pays just so much less rent. Excise raises the price of commodities, and makes fewer people able to carry on business. If a man purchase £1000 worth of tobacco, he has 100 pounds of tax to pay. He therefore cannot deal to such an extent as he would otherwise do. Thus, as it requires greater stock to carry on trade, the dealers must be fewer, and the rich have, as it were, a monopoly against the poor. It was observed before that in England, from a kind of delicacy with regard to examining into the circumstances of particular persons, which is apparently an infringement upon liberty, no tax is laid upon stock or money, but all upon consumptions. Whatever advantages this method may have, there is evidently in it an inequality.

The landlord who pays his annual land tax pays also a great part of the taxes on consumptions. On this account the landed interest complains first of a war, thinking the burden of it falls upon them, while on the other hand the monied men are gainers, and therefore oppose them.

This perhaps occasions the continuance of what is called the Tory interest.

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