Note 44, p. 347. and equitable; and partly " 'economic," Sources of Public Revenue apart from in the stricter sense, showing the proTaxation, Bk. V., ch. ii., part 1.-The ductiveness of different taxes. The chief general principle of this section is now difficulty lies in the meaning to be attached generally accepted; and when government to equality of taxation. This seems to mean undertakes industrial functions, it is con- at the same time equality of sacrifice, equal sidered best that the commodity or service proportions of revenue, and taxation proshould be supplied not to yield a revenue, portionate to the protection received from but simply to clear expenses. The prin- the state; but the three notions are by cipal exception is in the case of monop-no means co-extensive, and in many reolies. On the principles of state manage- spects are inconsistent. (Cf. Mill's "Prinment of industrial undertakings, see Jevons' ciples," Bk. V., ch. ii.) The idea of pay"Methods of Social Reform.' On the ment for protection as the equitable basis revenue at present derived by the United of taxation is interesting historically, as Kingdom from sources other than taxation, being the chief argument relied on by those see A. J. Wilson's "National Budget," p. who advocated the taxation of the Ameri126-for example, the government derives can colonies for imperial purposes, but is a considerable profit from the Suez Canal obviously unsound as a general principle, shares. The fact that government can for the poor are those who most of all borrow at three per cent., and that many require protection. Equality of sacrifice "safe" investments yield four per cent. and may be taken as the ideal to be aimed even more, has induced many people to at, and as furnishing a practical basis for believe that government might dispense the correction of any glaring inequity that with taxes altogether, or to a large extent. results from the application of the principle The objections to government trading and of equal proportions of revenue. Many speculating are well stated by Adam inequalities of sacrifice are contained in Smith, and increase with the progress of the present income-tax of this countrysociety-witness the recent experiments of the French Government. Adam Smith's remarks on the management of land by the state, and on the relative importance to the community of gross produce and rent, answer by anticipation the schemes for the nationalization of land. The total rental of the United Kingdom falls far short of the annual public expenditure (cf. "Tenant's Gain not Landlord's Loss," by present editor); and, as Adam Smith points out, "the revenue which, in any civilized 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." The proportion of rent which the government should reserve-in other words, the amount of the land-tax that is expedient, is examined in article 1 of part ii. of this chapter. On the general question cf. Walker's "Political Economy," p. 424; Sidgwick's "Principles," Bk. III., ch. viii.; Schönberg's "Handbuch," vol. ii., part 3.

for example, terminable incomes are rated as high as perpetual. (Cf. Fawcett's "Political Economy," Bk. IV., ch. i.) In his recent work on Political Economy, Professor Walker has often fallen into the error, generally only fatal to tyros in any subject, of straining after originality by under-rating the labours of his predecessors; and this is especially the case in his strictures on the canons of Adam Smith. A sufficient answer to his charge of "feebleness and emptiness" is found in the complete revolution the fiscal policy of this country has undergone under the influence of the doctrines of Adam Smith. Professor Walker's statement, that "Mr. Gladstone's Budget speeches, and Mr. Newmarch's papers on the National Debt, are the only important contributions to finance which have been made in this generation," is at least surprising when we consider the work done by Goschen, Inglis Palgrave, Cliffe Leslie, Dudley Baxter, Noble, Jevons, Giffen, and many others. "The History of Taxation in England," by Stephen Dowell (4 vols.), is a valuable and interesting work, which shows the progress made in taxation from the earliest times.

Note 46,
p. 352.

Taxes on the Rent of Land, Bk. V., ch. ii., part 2, art. 1.-There are several

But

The main object of the Tithe Commutation Act was to make the assessment easier, by determining the tithe according to the average price of corn during the last seven years. Hence the tithe proprietor does not

of stock. Further, the tithe proprietor (under the Act) gains nothing from the increased productiveness of the soil.

points in this section which deserve par- | cause by (2) he pays no rent, and since ticular attention at the present time, when by (1) he must get the ordinary rate of so many are found advocating the absorp- profit himself, the tax must be transferred tion of what is termed the "unearned in- to the consumer by a rise in price. crement" of rent. Adam Smith points this argument supposes that the demand out that a fixed land-tax will be hurtful will not be lessened by the rise in price, to the contributors, or to the state, accord- and that there are no foreign importations, ing to circumstances; and a similar argu- or else that they also are taxed. For an ment applies to the proposal that the state account of the principles and effects of the should purchase all the land. If, as he Commutation of the Tithes, see Fawcett's points out, money rises very much in value," Political Economy," Bk. IV., ch. iv. the state would gain by a fixed land-tax; if it falls, the landlords. Similarly, if the state were to purchase the land, and the value of gold were to rise, the state would lose. An addition to the national debt might be made, for example, with this get the advantage of a rise in the price object, of two thousand million sterling, the interest at three per cent. being sixty million. If, in the course of time, gold became appreciated, suppose one hundred per cent., rents would fall one-half, and government would still have to pay the sixty million interest. A land-tax which varies with every variation of rent would, no doubt, be the most equitable, as Adam Smith points out; but, as he also shows, unless care were taken, this would tend to check improvements. Adam Smith's opinions on freedom of cropping, the superiority of a system of tenant farms to the landlord and bailiff system, and on the equity of giving to both landlord and tenant the most perfect security that they shall enjoy the full recompense of their own industry, show that he was a century in advance of his time. In order to discourage the foolish practice of inserting restrictive clauses in leases, he would impose a higher tax on the rents so obtained than upon others -a suggestion capable of further application by analogy (for example, deer forests).

Note 47, p. 354.

Note 48, p. 357.

Taxes on Rent of Houses, Bk. V., ch. ii., part 2, art. 1.- Cf. Fawcett's "Political Economy," Bk. IV., ch. vii.; Mill's "Principles," Bk. V., ch. iii., § 6. Compare also the works of Inglis Palgrave and Goschen, and the "Local Government and Taxation " of the Cobden Club, for the actual taxation on houses and the probable incidence. For a brief statement, see A. J. Wilson's "National Budget," p. 121.

Note 49, pp. 359, 362.

Tax on Profits, Bk. V., ch. ii., part 2, art. 2.-It is theoretically true that a tax on particular profits must fall on the consumer of the article concerned; but practically the transference of taxes is by no means so simple and necessary as the theory supposes. The law of "equality of profits' depends on a number of hypothetical conditions never fully realized in practice, and Taxes Proportional not to Rent but to amounts to little more than an assertion Produce-Tithes, Bk. V., ch. ii., part 2, that any rate above or below the average art. 1.-Adam Smith argues that a tithe is unstable. Cliffe Leslie is the best falls on the landlord, Ricardo that it falls authority on the point. Cf. his "Essay on the consumer. (Cf. Ricardo's "Prin- on Financial Reform" (Cobden Club Esciples," ch. xi.) A useful comparison of says, 1871-72), and "Essays on Moral the two views is given by Macculloch in and Political Philosophy," Essay XIII.). a supplemental note to his edition of Adam Theoretically, also, a tax on profits in Smith, p. 620. Ricardo in effect supposes general falls on the capitalist, affecting (1) that the farmer must get the ordinary neither the prices of commodities nor the rate of profit; (2) that the price of the distribution of capital; but practically produce is determined by its cost of pro- profits cannot be accurately assessed, and duction on the land that pays no rent. the equality of profits is only hypothetSince then the "man on the margin" can-ical. The "Death Duties" (Legacy and not throw the burden on the landlord, be- Succession) are at present anomalous and

unproductive. (Cf. Wilson's "National | expenses of the working-classes are taxed; Budget," p. 117.)

Note 50, p. 366.

Taxes on Wages, Bk. V., ch. ii., part 2, art. 3.-Adam Smith's argument in this section requires considerable modification. A tax which is so great as to affect the minimum rate of wages will tend to fall on the capitalist; but so long as there is any surplus above the minimum rate the labourer must himself bear the burden. It is only in the very lowest grades of agricultural labour that wages vary with the price of bread, and a tax on wages would in this case fall on the employers or the landowners. But a direct tax on wages in general-for example, for compulsory insurance, as has just been proposed in Germany-though paid in the first place by the capitalist, would no doubt be mainly transferred to the labourer. On the "Incidence of Imperial and Local Taxation on the Working Classes," cf. Essay XIII. in Cliffe Leslie's "Essays;" and Noble's "National Finance," ch. xiv., xv.

Note 51, p. 368.

and the possibility of a diminution in the tax giving an increase in the gross revenue is admitted. The comparative merits of direct and indirect taxation are still a matter of controversy. Perhaps the case against indirect taxation is put in the strongest manner possible by Cliffe Leslie in his "Essay on Financial Reform." But, on the other hand, the experience of Germany shows that the working-classes can only be reached by indirect taxation, and it cannot be maintained that the present excise and customs duties press very hardly upon them. Certainly a great reform of the direct taxes must take place before they can be mainly relied on. (Cf. Mill's "Principles," Bk. V., ch. vi.) Perhaps the best instance of the effect of duties in restraining trade is furnished by the timber duties. (Noble's "National Finance," pp. 20, 21.) The brochure of Jevons on the Match-Tax is an admirable example of the considerations to be taken account of in taxing any commodity.

Note 53, p. 404.

National Debts, Bk. V., ch. iii.-For Capitation Taxes, Bk. V., ch. ii., part 2, a history of the National Debt in this art. 4.-The modern form of the old poll-country see Leone Levi's "History of tax is the income-tax. For the general principles of an income-tax see Mill's "Principles," Bk. V., ch. ii., § 3. The income-tax as at present levied in this country is not really a single tax, but a group of many different taxes, being at once a tax on wages, profits, and rents of different kinds. The great objections to it are the inequality in the actual assessment owing to the inaccurate returns, and the inequality in taking the same proportion of incomes differing in kind. On the other hand, it is very convenient to the government, especially for "temporary" purposes. For the history of the income-tax see Noble's "National Finance."

Note 52, p. 385.

Taxes on Commodities, Bk. V., ch. ii., part 2, art. 4.-Many of the suggestions made by Adam Smith in this chapter have now been carried into effect: for example, the number of articles now paying customs duties is practically only four-spirits, tea, tobacco, and wine, most of the other articles in the tariff being for the purpose of counteracting some excise duty. Again, the bonding and warehousing system has been adopted; the luxurious and not the necessary

British Commerce," p. 90; Wilson's “National Budget" (appendix); Noble's "National Finance," p. 3 (note), explains in detail the method of effecting loans in the great French War. W. Newmarch ("Journal of Statistical Society," vol. xviii., pp. 104 and 242) partially defends the methods of funding employed. The chief controversies at present as regards the National Debt are (1) on the expediency of its payment; (2) on the best methods for doing so. The chief arguments against the payment are, that it would be unjust to the present generation; that justice demands further remission of taxation; that the burden is only nominal, since the interest is transferred simply from one portion of the community to another; that the country is continually growing more wealthy, and that it will be much easier to extinguish the debt at a future time; that the rate of interest will probably fall, and so the nominal debt can be reduced by mere financial operations (as in America recently). To these arguments is opposed the continuity of national life. As Adam Smith says, Though empires, like all other works of men, have all hitherto proved mortal, yet every empire aims at immortality," so that one generation should be willing to make

INDEX.