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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 wellimproved 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.

i The income which the Crown derived from the estates vested in that dignity

has been commuted for a fixed annual sum paid to the inonarch, and the man

Lands for the purposes of pleasure and magnificence, parks, gardens, public walks, &c., 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 II.

of Taxes.1

THE private revenue of individuals, it has been shown in the First Book of this Inquiry, arises ultimately from three different sources: rent, profit, and wages. Every tax must finally be paid from some one or other of those three different sorts of revenue, or from all of them indifferently. I shall endeavour to give the best account I can, first, of those taxes which, it is intended, should fall upon rent; secondly, of those which, it is intended, should fall upon profit; thirdly, of those which, it is intended, should fall upon wages; and, fourthly, of those which, it is intended, should fall indifferently

agement of the estates is transferred to the Woods and Forests office. It is to be regretted that those lands, except such as are ornamental, are not sold, since the wasto incurred in the management of the estates is enormous and scandalous. A similar course of policy would be advantageous in the case of the Duchy of Cornwall, the income of which is vested in the eldest son of the monarch, and which might be beneficially commuted for an annual allowance.

The principle on which taxation is justified altogether is that which Smith dwelt on as fundamental in economical inquiries, the division, namely, of labour or employments. If everybody could protect himself, and interpret his own

rights justly, there would be no need for administration, for police, military or domestic, or for the machinery of justice. But this cannot be, and it is therefore cheaper, as well as safer, that those functions should be delegated to others, and exercised on behalf of those by whom they are delegated. There is therefore no right in any person or body of persons to govern, to legislate, to administer public affairs, to levy a revenue, except in so far as the right is conferred on such official personages. We have long outlived any theory of innate or transcendental right on the part of rulers, any indefeasible or indelible duty on the part of subjects. Assertions to the contrary can only rest on superstition or fraud.

The par

all those three different sources of private revenue. upon ticular consideration of each of these four different sorts of taxes will divide the Second Part of the present chapter into four articles, three of which will require several other subdivisions. Many of those taxes, it will appear from the following review, are not finally paid from the fund, or source of revenue, upon which it was intended they should fall.

Before I enter upon the examination of particular taxes, it is necessary to premise the four following maxims with regard to taxes in general.

I. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue

1 This word, notwithstanding Smith's explanation of it, is open to question, standing as it does in the first and most important of these famous canons of taxation. If we understand it of capacity to bear taxation, then there is danger of such an interpretation as will justify a graduated property-tax. If it means the enjoyments of life, then a miser would escape taxation, seeing that he does not expend his income. If the emphasis be laid on protection, then women and children being more protected than other persons should pay a heavier tax-a proposal which might indeed restore the usages of a past age, but which is revolting to the conscience of the public mind. The fact is we do not know what income or abilities are, until we recognise that taxation can be levied only on that which a man can save.

The basis of all woalth is labour. To this there is but one exception, rent; rent being a subduction from the profits of labour, due to the fact that land in fully-settled countries is limited in extent, and has been appropriated, while the demands of population enable the agri culturist to sell his produce at a higher cost than is sufficient to compensate him for the outlay he has been at in cultivation, the labour he has bestowed, and the ordinary profit on capital.

Again, it is manifest, since labour is the source of wealth, that labour must be maintained in order to be productive. Take away the maintenance of labour, and the labour itself ceases to be, and to produce. It is therefore impossible to

subtract anything by way of taxation from the resources which the labourer has and uses for the purpose of maintaining himself, any more than it is to take away any part of the coals necessary in order to create a certain amount of steam-power. In short, taxation can be based only on that which is the excess of value over cost.

Again, it is necessary that the charges which are incurred in fitting the labourer for his employment should be replaced. Economically considered, the maintenance and education of labour are as much an investment of capital as the charges incurred for draining a field, or for constructing a machine, or breeding horses and other cattle for the market. This fact would never have been lost sight of had it not been for the inordinate alarms about excess of population, to which the Malthusian theory, under a mistakon interpretation of facts, and in the utter absence of intelligible and easy inductions, has given birth.

The ordinary way in which most of that capital is replaced which is worn out in the exhaustion of the individual labourer, is in the maintenance and education of other labour which is to fill the place of that which is exhausted. Not that this is all. The labourer is bound to provide for that part of his own life which is pro longed beyond his industrial activity. He must insure himself against sickness and old age, or he must depend on the efforts of others for his maintenance in the event of these contingencies. Here are then three deductions from the gross wages of labour 1st, the maintenance of activo

which they respectively enjoy under the protection of the state. The expense of government to the individuals of a great nation, is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim consists, what is called the equality or inequality of taxation. Every tax, it must be observed once for all, which falls finally upon one only of the three sorts of revenue above-mentioned, is necessarily unequal, in so far as it does not affect the other two.1 In the following examination of different taxes I shall seldom take much further notice of this sort of inequality, but shall, in most cases, confine my observations to that inequality which is occasioned by a particular tax falling unequally even upon that particular sort of private revenue which is affected by it.

II. The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-gatherer, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror of such aggravation, some present or perquisite to himself. The uncertainty of taxation encourages the insolence and favours the corruption of an order of men who are naturally unpopular, even where they are neither

labour; and, the replacement of capital invested in active labour; 3rd, the insurance needed to provide for human life during the temporary or permanent suspension of active labour.

It will be scen that taxation can be levied only on that part of wages or profits (in so far as profits are wages dis guised), which remains over and above the above-named necessary outgoings. But this is what a man can save or spend, apart from necessary spending or necessary saving, and it is in this margin of profit, or value over cost, that ability to contribute, revenue, enjoyment, and whatever else constitutes Adam Smith's capacity, consist.

Furthermore, in so far as a system of taxation violates this rule, it is unjust and partial. It is because the conviction, that all income cannot be taxed, is general and sound, that Mr. Mill urges that savings

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insolent nor corrupt. The certainty of what each individual ought to pay is, in taxation, a matter of so great importance, that a very considerable degree of inequality, it appears, I believe, from the experience of all nations, is not near so great an evil as a very small degree of uncertainty.

III. Every tax ought to be levied at the time, or in the manner in which it is most likely to be convenient for the contributor to pay it. A tax upon the rent of land or of houses, payable at the same term at which such rents are usually paid, is levied at the time when it is most likely to be convenient for the contributor to pay; or, when he is most likely to have wherewithal to pay. Taxes upon such consumable goods as are articles of luxury, are all finally paid by the consumer, and generally in a manner that is very convenient for him. He pays them by little and little, as he has occasion to buy the goods. As he is at liberty too, either to buy, or not to buy as he pleases, it must be his own fault if he ever suffers any considerable inconveniency from such taxes.

IV. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state. A tax may either take out or keep out of the pockets of the people a great deal more than it brings into the public treasury, in the four following ways. First, the levying of it may require a great number of officers, whose salaries may eat up the greater part of the produce of the tax, and whose perquisites may impose another additional tax upon the people. Secondly, it the people. Secondly, it may obstruct the industry of the people, and discourage them from applying to certain branches of business which might give maintenance and employment to great multitudes. While it obliges the people to pay, it may thus diminish, or perhaps destroy some of the funds, which might enable them more easily to do so. Thirdly, by the forfeitures and other penalties which those unfortunate individuals incur who attempt unsuccessfully to evade the tax, it may frequently ruin them, and thereby put an end to the benefit which the community might have received from the employment of their capitals.

1 Smith was a Scotch Commissioner of Customs, and must no doubt have noticed what Macpherson records, that the Scotch customs were frequently so small

in amount as to leave nothing, after expenses were paid, for transmission to the Exchequer in London.

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