TaxationMarch 16, 2022
The object of all governments has been to:
- participate in the national wealth, and
- acquire the disposal of a greater share of the nation’s annual revenue.
Princes loaded their people with the heavy taxes because of:
- the ever increasing necessities of governments and
- the excessive expense of wars
Taxation has become a nearly intolerable burden.
The question is no longer how to make it easy, but to do the least possible evil. All the efforts of governments in this respect are limited.
Quesnay’s economists discovered in the net revenue of land the solitary source of wealth, might also believe in the advantage of a solitary species of taxation.
They rightly observe, that government should apply to him who is destined to pay the tax in the long run; because, if this tax is paid by one citizen, reimbursed by a second, who again is reimbursed by a third, not only will there be three persons instead of one incommoded by this payment, but the third will be so much the more incommoded, as it will be necessary for him to indemnify the preceding two for their advances of money.
Upon the same principle, the economists called the tax which weighs on the revenue of land a direct tax; to all others they gave the name of indirect, because those taxes arrive indirectly at the person who pays them at last. Their system has fallen, their definitions are no longer admitted, but their denominations have remained in general use.
I assign the source of all wealth to human labor. But I do not assign this labor to a single class citizens because labor is distributed among all the classes of the nation in various forms.
Therefore, taxation should follow them into all their ramifications.
Taxation ought to be considered by the citizens of a state as a recompense for the protection, which government grants to their = persons and properties.
It is just that all support this, in proportion to the advantages secured them by society, and to the expenses it incurs for them. The greater part of the charge arising from social establishments, is destined to defend the rich against the poor; because, if left to their respective strength, the former would very speedily be stripped.
It is hence just that the rich man contribute not only in proportion to his fortune, but even beyond it, to support a system which is so advantageous to him; in the same way as it is equitable to take from his superfluity rather than from the other’s necessaries. Most public labours, most charges for defence and for the administration of justice, have territorial rather than movable property in view; it is hence farther just, that the landed proprietor be taxed in proportion higher than others.
After the sources of income have become various, it cannot be supposed that a single tax will reach them all, unless it assume as a basis this income itself, the valuation of which, in any form, would give room to the most arbitrary and vexatious inquisitions. The tax, though single, would in that case lose all the advantages of simplicity.
It was better then, for contributors, as well as government, to multiply taxes, that each by itself might be lighter, and the whole might better reach every class of persons. Governments have therefore multiplied partial taxes.
They have taken wherever they have found any thing to take; and though flattering themselves with having thus reached all their subjects, it would be impossible for them to appreciate how much is asked of each class, and consequently to maintain the proportional equality which justice would have required. On the other hand, contributors like better to submit to this heavy inconvenience, than to the obligations of exhibiting an account of their incomes, which, often they do not know themselves, and to a division on arbitrary grounds, which most frequently would be intolerable.
In establishing those different taxes, four rules appear of essential importance for rendering each tax as little burdensome as possible. Each citizen must contribute, if he can do so, according to the proportion of his fortune; the collection must not be expensive, that so the tax may cost as little to the people as possible beyond what it brings into the treasury; the term of payment must be suitable to the contributor, who might frequently be. ruined by an unreasonable demand of what he could pay, without constraint, if his convenience were consulted; and, finally, the citizen’s liberty must be respected, that so he may not be exposed otherwise, than with extreme cautions to the inspection of revenue-officers, to the dependent, and all the vexatious measures too often connected with the levying of taxes.
Among the taxes that reach with any equality all classes of contributors, some are proportioned to the income of each, others to the expense of each. These two ways of estimating fortunes seem capable of being adopted indifferently. and, if the expense is not proportionate to the wealth, there is no inconvenience, if the impost, which is regulated by this expense, be, as it were, a bonus on economy, or a fine on prodigality. Tithes, the land-tax, the income-tax, are destined to reach what the contributor receives. Taxes on consumable articles are the chief species of contribution on expenditure. There remains, however, a great number of other taxes, which cannot be arranged under these two heads, and which, accordingly, are not in proportion to the contributor’s fortune.
The revenue most easily attained by taxation is that which proceeds from land; because this species of wealth cannot be concealed from sight; because, without the proprietor’s declaration, the value of it may be known, and because, in gathering the produce at the moment when nature grants it, we are sure exactly to meet the proprietor’s convenience for paying it. But economists are divided in opinion as to the two modes of collecting this tax, the one in kind from the unaltered product, the other in money from the proprietor’s net revenue.
Tithes, a tax, according to the first of those methods, is leveled at the moment of abundance, before the producer has in any shape taken possession of his property. The rule, according to which tithes are established, is so universal, that few discussions or vexations arise from it, and this gives it a great appearance of equality. The collection of a tax in kind requires a great number of clerks and warehouses, and hence it is expensive; but this inconvenience might be repaid, if government, after the collection, kept in its granaries the corn delivered to it, till a period more favourable for sale. As cultivators generally cannot wait for this period, the loss suffered by a premature sale would, perhaps, of itself, cover all the charges of collection. Combining such advantages, a national impost in the shape of tithes has seduced many political speculators. Tithes have also been defended with obstinacy by the powerful body to whom they are in general abandoned. Those advantages do not extend to what are called small tithes, an impost vexatious in all its details; the difficult collection of which is an ever fresh root of hatred between the curate and his parishioners, though the impost was intended to unite them all as a single family.
But the advantages of tithes, in any shape, are more than compensated by their real inequality, and the obstacles they oppose to industry. The expense of cultivation is far from being the same in good and in bad soils; in good and bad years; yet the reimbursement of that expense is made by part of the crop, and this part at least should not be subjected to any tax, for fear of destroying the reproduction of the following year. It is not the revenue alone that is tithed; but at the same time all the seed, the manure, the days of labour, which have produced the crop= for all this, the latter ought to restore. In good years, and good soils, two sheaves in ten may represent all these advances= in bad years or soils, eight in ten scarcely cover them; it is not very rare even that the whole crop is insufficient to pay the expenses. Tithes, however, are equally levied in all those cases; from the first they take an eighth part of the land revenue; from the second a half; from the third, which is nothing, they take a portion of the capital destined to produce the following crop; and their inequality is the more cruel, because it is always the poor whom they oppress, taking most from the very persons whose necessity requires most moderation.
Again, the more productive a mode of cultivation is, the more advances does it need to have committed to the ground. Tithes, which are but the seventh or eighth part of the revenue in a pasturage, become the fifth in a field of corn, the third in a vineyard, the half in a hop-yard or in a field of hemp, and the whole in a garden. Thus whilst the national interest incessantly requires the raw produce to be incessantly increased by committing larger advances to the ground-tithes instruct the cultivator incessantly to diminish his advances, and follow that species of culture which gives back least to the nation, but which also least exposes him who undertakes it to be punished for his industry.
The land tax has not the same inconveniences; it affects only the net revenue; it is enabled to reach it with equality enough, and above all, with a regularity which screens the contributor from every arbitrary proceeding, and which, therefore, is to him more precious than justice itself. On being established, it strips the proprietor of a considerable portion of his fortune, for he loses all at once a part of the very capital whose rent alone must pay the tax; but this loss, after having stuck him, is never repeated. From that time he no longer looks upon this capital as belonging to him; a new purchaser, on buying the land, does not pay him any price for this portion; the state has become thenceforth its true proprietor.
On the other hand, this territorial impost often requires money from such as have none; it forces them to sell their commodities to obtain the quantity wanted, perhaps at the most unfavourable moment; and it thus contributes to cause a glut in the market at the moment of harvest, and a scarcity at the year’s end. Besides, if too heavy, it discourages the proprietor from laying out new advances upon land which he looks upon as scarcely any longer his.
If the capitalist could as easily be come at as the proprietor of land, it would be quite as just to tax him directly for the support of a government which guards his property. The interest of money would be a taxable material, fully as suitable as the rent of land. But the capitalist’ s wealth cannot be known without a vexatious inquest, which, in trading counties, would be destructive to credit. Capitals, moreover, are not attached to the soil, and if loaded with imposts, the capitalist would be induced to transmit them into other counties, often without emigrating himself. He would thus deprive his country of all the labour which those capitals would support; he would diminish the national revenues in a proportion immensely superior to the advantages which the treasury could expect from the new tax.
Other species of revenue escape still more easily from direct contribution. A considerable revenue in the state, for example, is the profit of trade and that of manufacture; but, on being directly taxed, it is almost sure to be annihilated. Another very considerable revenue is that of workmen, who gain but a mere wage; the great number of those who enjoy it, makes up for the slenderness of the portion belonging to each. Such also are the revenues of all those classes whose labours leave no products which are substantial and capable of accumulation. Most men who live by those different means, do not even know the extent of their revenue; because, receiving it day by day, and expending it in the same manner, they think they have nothing when their labour is all that remains. They form the poorest class of society, but also the most numerous; and, if we add up the annual consumption of all the day-labourers, it is greatly superior in value to that of all the rich.
But before we think of taxing this revenue, we must remember, that nothing can be more absurd, as well as cruel, than to take away a part of the necessary emolument of productive workmen; for, either it must actually be paid by them, in which case they would suffer, languish, and at last die of penury, and with them would also be destroyed the national revenue, which should spring from their labour; or else they would succeed in obtaining reimbursement for their contribution, either on the class which employs them, or on that of consumers. F or this purpose, they would raise either all their wages, or the price of all their produce. Thus they would raise manufactures, or, at least, shut foreign markets; and, by a circuit a little longer, they would equally arrest production, and destroy the national revenue. No operation, however, could be more difficult than to separate, in a poor man’s revenue, the necessary from the superfluous, which alone can be taxed. Besides, such a tax would be to fix contribution on labour and industry; or, in some degree, to inflict a penalty on those qualities which it is the most essential to encourage; it would be to arrest, at their source, the wealth and prosperity of states. Such are the motives which have generally prevented a universal tax on income; or, at least, have prevented it from reaching the industrious classes completely enough to become productive.
But those different kinds of income, which cannot be appreciated for taxation, at their origin, are always employed in consumption; and this is the moment when taxation can reach them with far less inconvenience. By taxing every kind of goods, in the purchasing of which wealth may be employed, we are sure to make that wealth contribute, and we need not know to whom it belongs. For such a contribution there is not required any declaration of fortune, any inquisition, any distinction of poor and rich; it does not attach taxation to labour; it does not punish what ought, above all other things, to be encouraged. Besides, each contributor pays his taxes on consumption, as it were in a voluntary manner, at the time when he has money, and finds himself enabled to purchase the thing taxed; he reimburses the merchant, who has already advanced the impost, and he scarcely perceives that himself has paid any.
Taxes on consumption are, however, very far from being able to reach the revenue in a correct manner, by means of the expenditure. It is required, for example, that every kind of fortune, every kind of industry, protected by the state, should pay the treasury ten per cent. of the revenue which they give. At first view it appears that this object would be obtained by taxing every consumption, every expense, of what nature soever, at ten per cent. of its value. But if we attempt to come at every kind of consumption, we must subject to the same tax the commodities produced in the interior of families by domestic industry, those produced by the national manufactures, and those introduced by foreign commerce. By making exceptions to this rule, not only would the principle of equality he destroyed, in a very unjust manner, but also each would be induced to serve himself, greatly to the prejudice of manufactures, trade, and the division of labour, which much increases its productive power. On the other hand, by following it rigorously out, each family would be subjected to an inspection of its domestic economy, absolutely insupportable.
The universality of such a tax would have a still more fatal inconvenience, if it were extended to commodities of prime necessity. By exempting such commodities, a very considerable portion of the national expenditure is left out; but, in taxing them, the risk is run of confounding the necessary with the superfluous, in the poor man’s consumption; and, should the former be encroached on, of arresting the reproduction of revenue, either by the penury and death of the workman, or by the rising of his wages.
In the last place, no idea could be entertained of taxing goods destined for exportation; because, whenever the price of them was raised, foreign consumers would provide themselves elsewhere; it would be necessary, in that case, to restore, by drawbacks, all the customs levied on them. But how could endless frauds upon this principle be avoided? The vexatious laws intended to subject foreign commerce to a constant superintendence, to prevent such frauds, would alone be equivalent to a heavy contribution.
It is a great inconvenience of taxes on consumption, that it never can be known at their establishment who is to pay them in the long run. The legislature always proposes to make them be reimbursed by the consumer; but sometimes they do not reach his distance; at other times, they do not stop at him, and the consumer is anew reimbursed for them by those for whom he labours. To make the consumer pay the whole tax, the nation must be in a state of increasing prosperity; for otherwise, as the consumer is not richer than before the tax, he cannot devote more money than formerly to his enjoyments, and must, therefore, in some shape, diminish his consumption. The producer, on his side, no longer selling the whole of his goods, must diminish his production, or consent to pay a portion of the tax. If a public calamity happens, a scarcity or even a state of embarrassment in trade, consumption still further diminishes; and the producer, compelled to dispose of his goods, pays the whole tax; till, no longer finding any profit in his labour, he abandons it entirely.
On the other hand, when taxes and consumption have raised the price of every thing, industrious men, who form a numerous class among consumers, no longer find in their industry sufficient resources to support them. His wages no longer furnish the day-labourer with those limited enjoyments which are to be reckoned among the necessaries of life, since life, or the power of labouring, could not long be maintained in an individual deprived of every pleasure. He struggles, therefore, with all his strength, to get his wages increased; the manufacturer and merchant, in like manner, to get their profits increased. As the total sale diminishes, it is necessary for their subsistence that they obtain more for each separate article. Their joint efforts soon succeed in raising the price of all goods coming from their hands, but especially goods of prime necessity, because the sellers of these give the law to buyers, who cannot do without such goods. A rise in the price of those commodities reacts anew on wages and profits; the disorganisation becomes complete; national productions cost much higher than those of countries not oppressed by a similar system; they cannot support a competition in foreign markets; exportation ceases, demand is not renewed, and the nation sinks under a frightful distress.
If a universal impost on consumption presents insuperable difficulties, partial imposts are equally liable to inconveniences. When one kind of goods has been taxed by universal custom, as salt is, a considerable sum of money has indeed been raised; but a tax on consumption has been changed into a sort of capitation, which weighs equally upon the poor and upon the rich, without any regard to the contributor’s fortune, or his means of making payment. The salt tax, when so considerable that the day-labourer feels the weight of it, is, perhaps, the most unequal of all imposts. The poorest house consumes as much as the richest; but the poor must take, from what is essentially necessary to their subsistence, a sum which the rich scarcely notice in their superfluity.
It were vain to seek, among articles of consumption, for one which is proportioned to expenditure or to wealth; some are sought after by the rich alone, hut they do not use them in proportion to their riches. A duty of consumption on tea, sugar, spices, does not reach a class so numerous as a duty on salt; but among those paying it, this duty is proportioned only to what a single individual can employ in his use. It spares the poor, but it weighs not upon the rich; it is, consequently, very unproductive, whilst duties extending to the smallest consumption are the only ones which bring in much to government.
By degrees, duties on consumption have been extended to every kind of production. It has been imagined that if the rich man was made to pay a first capitation on salt, a second on light, a third on drink, a fourth on food, a fifth on clothes, there would be established a kind of proportion between his contributions and his fortune; because he would pay a much greater number of taxes than the poor man, although each tax, being limited by the individual’s physical wants, was disproportioned to his wealth. The impossibility of establishing a uniform and universal law, was clearly felt; and the attempt was made of approximating to it, by a multitude of partial laws.
Hence has arisen a fourfold division of duties on consumption, which are adopted in almost all countries; namely, the gabelle, custom, excise, and tolls. The gabelle comprises those commodities of which the government claims a monopoly, salt and tobacco, for example; it sells them alone, at a high price, by its agents or favourites, and prosecutes by rigorous penalties all such as attempt to take a share in their manufacture or trade. Customs are destined to levy a proportionate duty on goods imported from foreign counties; and the excise, or aids on goods produced in the country itself. The former is only established in the confines of the territory; and although the advancement in price of those taxed commodities is equally felt over the whole state, the vexations which accompany the levying of duties are confined to the frontiers alone. The latter is to levy the tax wherever industry is exercised; it consequently must comprehend, under its inspection, all productive workmen, all the most useful citizens of the state; and it cannot reach them, except by an inquisition almost constantly destructive of security and freedom. Tolls, in the last place, established at the gates of towns, form the fourth class of duties on consumption. As the most important department of the national exchange is that between the industry of towns and the industry of the country, tolls are destined to reach the latter, and to subject the goods produced by agriculture to a proportionate tax, at the moment when they come to be consumed by the inhabitants of towns.
In this manner, the establishment of taxes on consumption has covered Europe with four hosts of clerks, inspectors, agents, who, by incessantly struggling with each citizen about pecuniary interests, have contributed to render authority odious to the people, and accustomed men to elude the law, to violate truth, to disobey, and to deceive. The more heavy and multiplied these taxes are, the more rapidly will immorality make progress. Goods destined for the consumption of the rich, presenting, in the same bulk, a much greater value than goods consumed by the poor, offer a much more powerful encouragement to smuggling; they have hence been necessarily subjected to far lower duties, that fraud might not altogether escape with them from taxation; and by pushing things to extremes, the most unjust inequality has been established among contributors; liberty has been encroached on by vexatious inquisitions; the manufactures, the trade, even the existence of those who labour and who should create every kind of wealth, have been endangered. Those counties which have enjoyed the highest prosperity are exactly those in which this aggravation of indirect taxes threatens every kind of industry with the most complete ruin.
Governments have not been contented with taxing revenues and expenditure; they have gone forth to seek out all the acts of civil life which might afford them an opportunity of asking money. Some have established capitations, which, weighing equally on the poor and the rich, force the man to pay who has nothing, for whom society does nothing, equally with him who has too much; for whom society lays out enormous expenses. Others have attacked with considerable imposts, inheritances, sales, and all exchange of property; though, in thus encroaching on capital, not on revenue, they diminish the productive cause of wealth, nearly as if tithes were levied on the seed, instead of being levied on the crop. Others have established imposts on loans, by pledge and judicial acts, on stamps, and a train of accidents which ought to be taken as Symptoms of poverty, not of riches. Others, in fine, by establishing lotteries, have profited by encouraging a ruinous vice.
This review of the different kinds of taxation shows clearly, that one of the most essential qualities which a nation can ask in its government is economy. States, in the vigour lent them by freedom, in the full enjoyment of all their advantages, give way to all the dreams of ambition; they listen to all the suggestions of pride, of jealousy, or of vengeance; under the pretext of being on their guard against distant or imaginary dangers, they rush headlong, with light hearts, into ruinous wars, and persist in them with obstinacy; though the voice of humanity calls for peace in vain, the superiority of their nation does not yet appear sufficiently established, their enemy is not yet sufficiently humbled; the work which they thought accomplished has been overturned; it must be reestablished at any price. Present resources, however, are exhausted, and recourse is had to borrowing= credit is still entire; the national capitals are drained away from commerce, and placed, one after another, at the disposal of a minister, who dissipates them, and replaces them by assignments on the future; and the passion which blinded men for a few months, condemns their posterity to suffering for ages.
Perhaps no invention was ever more fatal to men than that of public loans= none is yet enveloped with more illusions. The passions excited by politics are so violent; the questions to be decided by negotiations or by arms so important; all sacrifices become so natural, when the prosperity, the existence, the honour of all are at stake, that governments and the people, before yielding, are to exhaust every resource to the very uttermost. They will send out the last man to battle, they will expend their last shilling, if they can possibly dispose of either; and they will do this not alone for the safety of the people, but for any war, any quarrel in which they happen to engage, because there is no one in which their offended pride may not be confounded with honour, in which they cannot honestly say what is true only in extreme cases, that a nation had better cease to exist than exist dishonoured.
If the possibility of making such preternatural exertions could be furnished to nations, and reserved at the same time for an extraordinary necessity, no doubt a great service would be done to human society, which is shaken to its foundation every time that one of its members is overthrown. But each mean of defence becomes in its turn a mean of attack. The invention of artillery, happy for society if it could have been employed only in the defence of towns, has served to overthrow them= the invention of standing armies has opposed discipline to discipline, and talent to talent; the invention of conscriptions has opposed all the youth of one nation to all the youth of another; the invention of landsthurms and levees en masse, has made even women and old men descend to the field of battle to assist regular troops; the invention of loans has attacked and defended the present generation, with all the hope and all the labour of posterity. The strength of nations, though becoming still more formidable, has continued still in same proportion. The state, in danger, has not found deliverance more easily. but humanity herself has been sacrificed, and, amid those gigantic combats, it is she that must perish.
As, after those destructive expenses rendered possible by loans, there remains an apparent wealth, which has been named the public funds, and which figures as an immense capital, the different portions of which constitute the fortunes of opulent individuals, some have believed, or affected to believe, that this dissipation of national capital was not so great an evil, but rather a circulation, which caused wealth to spring up again under another shape; and that mysterious advantages existed for great states in this immaterial opulence, which was seen to pass from hand to hand on the market of the public stocks.
No very powerful logic was needed, to persuade ministers of the advantages arising from dissipation; stock-jobbers, of the national profit attached to their commerce; state creditors, of the importance of their rank in society; capitalists, eager to lend, of the service they did to the public, by taking from it an interest superior to that of trade. Thus all appeared amply satisfied with regard to the unintelligible doctrine by which it was pretended to demonstrate the advantage of public funds.
In place of following this subtle reasoning, we shall endeavour to show that stocks are nothing else but the imaginary capital, which represents that portion of the annual revenue set apart for paying the debt. An equivalent capital has been dissipated; it is this which gives name to the loan; but it is not this which stocks represent, for this does not any where exist. New wealth, however, must spring from labour and industry. A yearly portion of this wealth is assigned beforehand to those who have lent the wealth already destroyed; the loan will abstract this portion from its producer, to bestow it on the state creditor, according to the proportion between capital and interest usual in the country= and an imaginary capital is conceived to exist, equivalent to what would yield the annual revenue which the creditors are to receive.
As, in lending to a merchant or a landed proprietor, we acquire a right to part of the revenue which arises from the merchant’s trade, or from the proprietor’s land, but diminish their revenue by the precise sum which increases our own; so in lending to government we acquire a right to that part of the merchant’s or proprietor’s revenue, which government will seize by taxation to pay us. We are enriched only as contributors are impoverished. Private and public credit are a part of individual, but not of national wealth; for nothing is wealth but what gives a revenue, and credit gives none to the nation. If all public and private debts were abolished in a day, there would be a frightful overturning of property. one family would be ruined for the profit of another, but the nation would neither be richer nor poorer, and the one party would have gained what the other had lost. This has not, however, in any case, been the result of public bankruptcies; because governments, whilst suppressing their debts, have maintained the taxation which belonged to their creditors; or rather they have broken their faith to the latter, and have continued notwithstanding to encroach on the property of contributors.
A government which borrows, after leaving dissipated its capital, makes posterity perpetually debtor in the clearest part of the profit arising from its work. An overwhelming burden is cast upon it, to bow down, one generation after another. Public calamities may occur, trade may take a new direction, rivals may supplant us. The reproduction which is sold beforehand may never reappear; yet not withstanding we are loaded with a debt above our strength, with a debt of hypothecating our future labour, which we shall not perhaps be able to accomplish.
The necessity of paying this debt begets oppressive imposts of one kind or another; all become equally fatal when too much multiplied. They overwhelm industry, and destroy that reproduction which is already sold beforehand. The more that it has paid already, the less capable does the nation become of paying farther. One part of the revenue was to spring from agriculture - but taxation has ruined agriculture; another proceeded from manufactures, but taxation has closed up those establishments; another yet from trade, but taxation has banished trade. The suffering continues to increase, all the resources to diminish. The moment arrives at last, when a frightful bankruptcy becomes inevitable. And doubts are entertained whether it should not even be hastened, that the salvation of the state may yet be attempted. There remains no chance to shield the whole subjects of the state from ruin; but if the creditors are allowed to perish first, perhaps the debtors will escape; if the debtors perish from penury, with them will be extinguished the last hope of the creditors, who must soon perish in their turn.