Front Page Titles (by Subject) [V.ii.g] Taxes upon the Profit of particular Employments - Glasgow Edition of the Works and Correspondence Vol. 2b An Inquiry Into the Nature and Causes of the Wealth of Nations, Vol. 2
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[V.ii.g] Taxes upon the Profit of particular Employments - Adam Smith, Glasgow Edition of the Works and Correspondence Vol. 2b An Inquiry Into the Nature and Causes of the Wealth of Nations, Vol. 2 
An Inquiry Into the Nature and Causes of the Wealth of Nations, Vol. I and II, ed. R. H. Campbell and A. S. Skinner, vol. II of the Glasgow Edition of the Works and Correspondence of Adam Smith (Indianapolis: Liberty Fund, 1981).
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Taxes upon the Profit of particular Employments
1In some countries extraordinary taxes are imposed upon the profits of stock; sometimes when employed in particular branches of trade, and sometimes when employed in agriculture.
2Of the former kind are in England the tax upon hawkers and pedlars,1 that upon hackney coaches and chairs,2 and that which the keepers of ale–houses pay for a licence to retail ale and spirituous liquors.3 During the late war, another tax of the same kind was proposed upon shops. The war having been undertaken, it was said, in defence of the trade of the country, the merchants who were to profit by it, ought to contribute towards the support of it.
3 A tax, however, upon the profits of stock employed in any particular branch of trade, can never fall finally upon the dealers (who must in all ordinary cases have their reasonable aprofit, and, where the competition is free, can seldom have more than that profit),a but always upon the consumers, who must be obliged to pay in the price of the goods the tax which the dealer advances; and generally with some overcharge.
4A tax of this kind when it is proportioned to the trade of the dealer, is finally paid by the consumer, and occasions no oppression to the dealer. When it is not so proportioned, but is the same upon all dealers, though in this case too it is finally paid by the consumer, yet it favours the great, and occasions some oppression to the small dealer. The tax of five shillings a week upon every hackney coach, and that of ten shillings a year upon every hackney chair, so far as it is advanced by the different keepers of such coaches and chairs, is exactly enough proportioned to the extent of their respective dealings. It neither favours the great, nor oppresses the smaller dealer. The tax of twenty shillings a year for a licence to sell ale; of forty shillings for a licence to sell spirituous liquors; and of forty shillings more for a licence to sell wine, being the same upon all retailers, must necessarily give some advantage to the great, and occasion some oppression to the small dealers. The former must find it more easy to get back the tax in the price of their goods than the latter. The moderation of the tax, however, renders this inequality of less importance, and it may to many people appear not improper to give some discouragement to the multiplication of little ale–houses.4 The tax upon shops, it was intended, should be the same upon all shops. It could not well have been otherwise. It would have been impossible to proportion with tolerable exactness the tax upon a shop to the extent of the trade carried on in it, without such an inquisition as would have been altogether insupportable in a free country. If the tax had been considerable, it would have oppressed the small, and forced almost the whole retail trade into the hands of the great dealers. The competition of the former being taken away, the latter would have enjoyed a monopoly of the trade; and like all other monopolists would soon have combined to raise their profits much beyond what was necessary for the payment of the tax. The final payment, instead of falling upon the shopkeeper, would have fallen upon the consumer, with a considerable over–charge to the profit of the shopkeeper. For these reasons, the project of a tax upon shops was laid aside, and in the room of it was substituted the subsidy 1759.5
5What in France is called the personal taille6 is, perhaps, the most important tax upon the profits of stock employed in agriculture that is levied in any part of Europe.
6In the disorderly state of Europe during the prevalence of the feudal government,7 the sovereign was obliged to content himself with taxing those who were too weak to refuse to pay taxes. The great lords, though willing to assist him upon particular emergencies, refused to subject themselves to any constant tax, and he was not strong enough to force them. The occupiers of land all over Europe were, the greater part of them, originally bond–men. Through the greater part of Europe they were gradually emancipated. Some of them acquired the property of landed estates which they held by some base or ignoble tenure, sometimes under the king, and sometimes under some other great lord, like the antient copy–holders of England. Others, without acquiring the property, obtained leases for terms of years of the lands which they occupied under their lord, and thus became less dependent upon him. The great lords seem to have beheld the degree of prosperity and independency which this inferior order of men had thus come to enjoy, with bab malignant and contemptuous indignation, and willingly consented that the sovereign should tax them.8 In some countries this tax was confined to the lands which were held in property by an ignoble tenure; and, in this case, the taille was said to be real. The land–tax established by the late king of Sardinia, and the taille in the provinces of Languedoc, Provence, Dauphiné, and Brittany; in the generality of Montauban, and in the elections of Agen and Condom, as well as in some other districts of France, are taxes upon lands held in property by an ignoble tenure.9 In other countries the tax was laid upon the supposed profits of all those who held in farm or lease lands belonging to other people, whatever might be the tenure by which the proprietor held them; and in this case the taille was said to be personal. In the greater part of those provinces of France, which are called the Countries of Elections, the taille is of this kind. The real taille, as it is imposed only upon a part of the lands of the country, is necessarily an unequal, but it is not always an arbitrary tax, though it is so upon some occasions. The personal taille, as it is intended to be proportioned to the profits of a certain class of people, which can only be guessed at, is necessarily both arbitrary and unequal.
7In France the personal taille at present (1775) annually imposed upon the twenty generalities, called the Countries of Elections, amounts to 40,107,239 livres, 16 sous* . The proportion in which this sum is assessed upon those different provinces, varies from year to year, according to the reports which are made to the king’s council concerning the goodness or badness of the crops, as well as other circumstances, which may either increase or diminish their respective abilities to pay. Each generality is divided into a certain number of elections, and the proportion in which the sum imposed upon the whole generality is divided among those different elections, varies likewise from year to year, according to the reports made to the council concerning their respective abilities. It seems impossible that the council, with the best intentions, can ever proportion with tolerable exactness, either of those two assessments to the real abilities of the province or district upon which they are respectively laid. Ignorance and misinformation must always, more or less, mislead the most upright council. The proportion which each parish ought to support of what is assessed upon the whole election, and that which each individual ought to support of what is assessed upon his particular parish, are both in the same manner varied, from year to year, according as circumstances are supposed to require. These circumstances are judged of, in the one case, by the officers of the election; in the other by those of the parish; and both the one and the other are, more or less, under the direction and influence of the intendant. Not only ignorance and misinformation, but friendship, party animosity, and private resentment, are said frequently to mislead such assessors. No man subject to such a tax, it is evident, can ever be certain, before he is assessed, of what he is to pay.10 He cannot even be certain after he is assessed. If any person has been taxed who ought to have been exempted; or if any person has been taxed beyond his proportion, though both must pay in the mean time, yet if they complain and make good their complaints, the whole parish is reimposed next year in order to reimburse them. If any of the contributors become bankrupt or insolvent, the collector is obliged to advance his tax, and the whole parish is reimposed next year in order to reimburse the collector. If the collector himself should become bankrupt, the parish which elects him must answer for his conduct to the receiver–general of the election. But, as it might be troublesome for the receiver to prosecute the whole parish, he takes at his choice five or six of the richest contributors, and obliges them to make good what had been lost by the insolvency of the collector. The parish is afterwards reimposed in order to reimburse those five or six. Such reimpositions are always over and above the taille of the particular year in which they are laid on.
8When a tax is imposed upon the profits of stock in a particular branch of trade, the traders are all careful to bring no more goods to market than what they can sell at a price sufficient to reimburse them for advancing the tax. Some of them withdraw a part of their stocks from the trade, and the market is more sparingly supplied than before. The price of the goods rises, and the final payment of the tax falls upon the consumer. But when a tax is imposed upon the profits of stock employed in agriculture, it is not the interest of the farmers to withdraw any part of their stock from that employment. Each farmer occupies a certain quantity of land, for which he pays rent. For the proper cultivation of this land a certain quantity of stock is necessary; and by withdrawing any part of this necessary quantity, the farmer is not likely to be more able to pay either the rent or the tax. In order to pay the tax, it can never be his interest to diminish the quantity of his produce, nor consequently to supply the market more sparingly than before. The tax, therefore, will never enable him to raise the price of his produce, cso asc to reimburse himself by throwing the final payment upon the consumer. The farmer, however, must have his reasonable profit as well as every other dealer, otherwise he must give up the trade. After the imposition of a tax of this kind, he can get this reasonable profit only by paying less rent to the landlord.11 The more he is obliged to pay in the way of tax, the less he can afford to pay in the way of rent.12 A tax of this kind imposed during the currency of a lease may, no doubt, distress or ruin the farmer. Upon the renewal of the lease it must always fall upon the landlord.
9In the countries where the personal taille takes place, the farmer is commonly assessed in proportion to the stock which he appears to employ in cultivation. He is, upon this account, frequently afraid to have a good team of horses or oxen, but endeavours to cultivate with the meanest and most wretched instruments of husbandry that he can. Such is his distrust in the justice of his assessors, that he counterfeits poverty, and wishes to appear scarce able to pay any thing for fear of being obliged to pay too much. By this miserable policy he does not, perhaps, always consult his own interest in the most effectual manner; and he probably loses more by the diminution of his produce than he saves by that of his tax. Though, in consequence of this wretched cultivation the market is, no doubt, somewhat worse supplied; yet the small rise of price which this may occasion, as it is not likely even to indemnify the farmer for the diminution of his produce, it is still less likely to enable him to pay more rent to the landlord. The publick, the farmer, the landlord, all suffer more or less by this degraded cultivation. That the personal taille tends, in many different ways, to discourage cultivation, and consequently to dry up the principal source of the wealth of every great country, I have already had occasion to observe in the third book of this inquiry.13
10What are called poll–taxes in the sourthern provinces of North America, and in the West dIndiand islands, annual taxes of so much a head upon every negro, are properly taxes upon the profits of a certain species of stock employed in agriculture. As the planters are, the greater part of them, both farmers and landlords, the final payment of the tax falls upon them in their quality of landlords without any retribution.
11Taxes of so much a head upon the bondmen employed in cultivation, seem antiently to have been common all over Europe. There subsists at present a tax of this kind in the empire of Russia. It is probably upon this account that poll–taxes of all kinds have often been represented as badges of slavery.14 Every tax, however, is to the person who pays it a badge, not of slavery, but of liberty. It denotes that he is subject to government, indeed, but that, as he has some property, he cannot himself be the property of a master. A poll–tax upon slaves is altogether different from a polltax upon freemen. The latter is paid by the persons upon whom it is imposed; the former by a different set of persons. The latter is either altogether arbitrary or altogether unequal, and in most cases is both the one and the other; the former, though in some respects unequal, different slaves being of different values, is in no respect arbitrary. Every master who knows the number of his own slaves, knows exactly what he has to pay. Those different taxes, however, being called by the same name, have been considered as of the same nature.
12eThe taxes which in Holland are imposed upon men and maid servants, are taxes, not upon stock, but upon expence; and so far resemble the taxes upon consumable commodities . The tax of a guinea a head for every man servant, which has lately been imposed in Great Britain,15 is of the same kind. It falls heaviest upon the middling rank. A man of two hundred a year may keep a single man servant. A man of ten thousand a year will not keep fifty. It does not affect the poor.e
13Taxes upon the profits of stock in particular employments can never affect the interest of money. Nobody will lend his money for less interest to those who exercise the taxed, than to those who exercise the untaxed employments. Taxes upon the revenue arising from stock in all employments, where the government attempts to levy them with any degree of exactness, will, in many cases, fall upon the interest of money. The Vingtieme, or twentieth penny, in France, is a tax of the same kind with what is called the land–tax in England, and is assessed, in the same manner, upon the revenue arising from land, houses, and stock. So far as it affects stock it is assessed, though not with great rigour, yet with much more exactness than that part of the land–tax of England which is imposed upon the same fund. It, in many cases, falls altogether upon the interest of money. Money is frequently sunk in France upon what are called Contracts for the constitution of a rent; that is, perpetual annuities redeemable at any time by the debtor upon frepaymentf of the sum originally advanced, but of which this redemption is not exigible by the creditor except in particular cases. The Vingtieme seems not to have raised the rate of those annuities, though it is exactly levied upon them all.
appendix to articles i and ii
Taxes upon the Capital Value of Lands, Houses, and Stock
1While property remains in the possession of the same person, whatever permanent taxes may have been imposed upon it, they have never been intended to diminish or take away any part of its capital value, but only some part of the revenue arising from it. But when property changes hands, when it is transmitted either from the dead to the living, or from the living to the living, such taxes have frequently been imposed upon it as necessarily take away some part of its capital value.
2The transference of all sorts of property from the dead to the living, and that of immoveable property, of alandsa and houses, from the living to the living, are transactions which are in their nature either publick and notorious, or such as cannot be long concealed. Such transactions, therefore, may be taxed directly. The transference of stock, or bmoveableb property, from the living to the living, by the lending of money, is frequently a secret transaction, and may always be made so. It cannot easily, therefore, be taxed directly. It has been taxed indirectly in two different ways; first, by requiring that the deed, containing the obligation to repay, should be written upon paper or parchment which had paid a certain stamp–duty, otherwise not to be valid; secondly, by requiring, under the like penalty of invalidity, that it should be recorded either in a publick or secret register, and by imposing certain duties upon such registration. Stamp–duties and duties of registration have frequently been imposed likewise upon the deeds transferring property of all kinds from the dead to the living, and upon those transferring immoveable property from the living to the living, transactions which might easily have been taxed directly.
3The Vicesima Hereditatum, the twentieth penny of inheritances, imposed by Augustus upon the antient Romans, was a tax upon the transference of property from the dead to the living.1 Dion Cassius* , the author who writes concerning it the least indistinctly, says, that it was imposed upon all successions, legacies, and donations, in case of death, except upon those to the nearest relations, and to the poor.
4Of the same kind is the Dutch tax upon successions† . Collateral successions are taxed, according to the degree of relation, from five to thirty per cent. upon the whole value of the succession. Testamentary donations, or legacies to collaterals, are subject to the like duties. Those from husband to wife, or from wife to husband, to the fiftieth2 penny. The Luctuosa Hereditas, the mournful succession of ascendents to descendents, to the twentieth penny only. Direct successions, or those of descendents to ascendents, pay no tax. The death of a father, to such of his children as live in the same house with him, is seldom attended with any increase, and frequently with a considerable diminution of revenue; by the loss of his industry, of his office, or of some life–rent estate, of which he may have been in possession. That tax would be cruel and oppressive which aggravated their loss by taking from them any part of his succession. It may, however, sometimes be otherwise with those children who, in the language of the Roman law, are said to be emancipated; in that of the Scotch law, to be foris–familiated; that is, who have received their portion, have got families of their own, and are supported by funds separate and independent of those of their father. Whatever part of his succession might come to such children, would be a real addition to their fortune, and might, therefore, perhaps, without more inconveniency than what attends all duties of this kind, be liable to some tax.
5The casualties of the feudal law were taxes upon the transference of land, both from the dead to the living, and from the living to the living. In antient times they constituted in every part of Europe one of the principal branches of the revenue of the crown.
6The heir of every immediate vassal of the crown paid a certain duty, generally a year’s rent, upon receiving the investiture of the estate. If the heir was a minor, the whole rents of the estate, during the continuance of the minority, devolved to the superior without any other charge, besides the maintenance of the minor, and the payment of the widow’s dower, when there happened to be a dowager upon the land. When the minor came to be of age, another tax, called Relief, was still due to the superior, which generally amounted likewise to a year’s rent.3 A long minority, which in the present times so frequently disburdens a great estate of all its incumbrances, and restores the family to their antient splendor, could in those times have no such effect. The waste, and not the disincumbrance of the estate, was the common effect of a long minority.4
7By the feudal law the vassal could not alienate without the consent of his superior, who generally extorted a fine or composition for granting it. This fine, which was at first arbitrary, came in many countries to be regulated at a certain portion of the price of the land. In some countries, where the greater part of the other feudal customs have gone into disuse, this tax upon the alienation of land still continues to make a dveryd considerable branch of the revenue of the sovereign. In the canton of Berne it is so high as a sixth part of the price of all noble fiefs; and a tenth part of that of all ignoble ones* . In the canton of Lucerne the tax upon the sale of lands is not universal, and takes place only in certain districts. But if any person sells his land, in order to remove out of the territory, he pays ten per cent. upon the whole price of the sale† . Taxes of the same kind upon the sale either of all lands, or of lands held by certain tenures, take place in many other countries, and make a more or less considerable branch of the revenue of the sovereign.
8Such transactions may be taxed indirectly, by means either of stamp–duties, or of duties upon registration; and those duties either may or may not be proportioned to the value of the subject which is transferred.
9 In Great Britain the stamp–duties are higher or lower, not so much according to the value of the property transferred (an eighteen penny or half crown stamp being sufficient upon a bond for the largest sum of money) as according to the nature of the deed. The highest do not exceed six pounds upon every sheet of paper, or skin of parchment; and these high duties fall chiefly upon grants from the crown, and upon certain law proceedings, without any regard to the value of the subject. There are in Great Britain no duties on the registration of deeds or writings, except the fees of the officers who keep the register; and these are seldom more than a reasonable recompence for their labour. The crown derives no revenue from them.
10In Holland* there are both stamp–duties and duties upon registration; which in some cases are, and in some are not proportioned to the value of the property transferred. All testaments must be written upon stampt paper, of which the price is proportioned to the property disposed of, so that there are stamps which cost from three pence, or three stivers a sheet, to three hundred florins, equal to about twenty–seven fpoundsf ten shillings of our money. If the stamp is of an inferior price to what the testator ought to have made use of, his succession is confiscated. This is over and above all their other taxes on succession. Except bills of exchange, and some other mercantile bills, all other deeds, bonds, and contracts, are subject to a stamp–duty. This duty, however, does not rise in proportion to the value of the subject. All sales of land and of houses, and all mortgages upon either, must be registered, and, upon registration, pay a duty to the state of two and a half per cent. upon the amount of the price or gofg the mortgage. This duty is extended to the sale of all ships and vessels of more than two tons burthen, whether decked or undecked. These, it seems, are considered as a sort of houses upon the water. The sale of moveables, when it is ordered by a court of justice, is subject to the like duty of two and a half per cent.
11In France there are both stamp–duties and duties upon registration. The former are considered as a branch of the aides or excise, and in the provinces where those duties take place, are levied by the excise officers. The latter are considered as a branch of the domain of the crown, and are levied by a different set of officers.
12Those modes of taxation, by stamp–duties and by duties upon registration, are of very modern invention. In the course of little more than a century, however, stamp–duties have, in Europe, become almost universal, and duties upon registration extremely common. There is no art which one government sooner learns of another than that of draining money from the pockets of the people.5
13Taxes upon the transference of property from the dead to the living, fall finally as well as immediately upon the person to whom the property is transferred. Taxes upon the sale of land fall altogether upon the seller. The seller is almost always under the necessity of selling, and must, therefore, take such a price as he can get. The buyer is scarce ever under the necessity of buying, and will, therefore, honly giveh such a price as he likes. He considers what the land will cost him in tax and price together. The more he is obliged to pay in the way of tax, the less he will be disposed to give in the way of price. Such taxes, therefore, fall almost always upon a necessitous person, and must, therefore, be frequently very cruel and oppressive. Taxes upon the sale of new–built houses, where the building is sold without the ground, fall generally upon the buyer, because the builder must generally have his profit; otherwise he must give up the trade. If he advances the tax, therefore, the buyer must generally repay it to him. Taxes upon the sale of old houses, for the same reason as those upon the sale of land, fall generally upon the seller; whom in most cases either conveniency or necessity obliges to sell. The number of new–built houses that are annually brought to market, is more or less regulated by the demand.6 Unless the demand is such as to afford the builder his profit, after paying all expences, he will build no more houses. The number of old houses which happen at any time to come to market is regulated by accidents of which the greater part have no relation to the demand. Two or three great bankruptcies in a mercantile town, will bring many houses to sale, which must be sold for what can be got for them. Taxes upon the sale of ground rents fall altogether upon the seller; for the same reason as those upon the sale of land. Stamp duties, and duties upon the registration of bonds and contracts for borrowed money, fall altogether upon the borrower, and, in fact, are always paid by him. Duties of the same kind upon law proceedings fall upon the suitors. They reduce to both the capital value of the subject in dispute. The more it costs to acquire any property, the less must be the ineati value of it when acquired.
14All taxes upon the transference of property of every kind, so far as they diminish the capital value of that property, tend to diminish the funds destined for the maintenance of productive labour. They are all more or less unthrifty taxes that increase the revenue of the sovereign, which seldom maintains any jbutj unproductive labourers; at the expence of the capital of the people, which maintains none but productive.7
15Such taxes, even when they are proportioned to the value of the property transferred, are still unequal; the frequency of transference not being always equal in property of equal value. When they are not proportioned to this value, which is the case with the greater part of the stamp–duties, and duties of registration, they are still more so. They are in no respect arbitrary, but are or may be in all cases perfectly clear and certain. Though they sometimes fall upon the person who is not very able to pay; the time of payment is in most cases sufficiently convenient for him. When the payment becomes due, he must in most cases have the money to pay. They are levied at very little expence, and in general subject the contributors to no other inconveniency besides always the unavoidable one of paying the tax.
16In France the stamp–duties are not much complained of. Those of registration, which they call the Contrôle, are. They give occasion, it is pretended, to much extortion in the officers of the farmers general who collect the tax, which is in a great measure arbitrary and uncertain. In the greater part of the libels which have been written against the present system of finances in France, the abuses of the Contrôle make a principal article. Uncertainty however, does not seem to be necessarily inherent in the nature of such taxes. If the popular complaints are well founded, the abuse must arise, not so much from the nature of the tax, as from the want of precision and distinctness in the words of the edicts or laws which impose it.
17The registration of mortgages, and in general of all rights upon immoveable property, as it gives great security both to creditors and purchasers, is extremely advantageous to the publick. That of the greater part of deeds of other kinds is frequently inconvenient and even dangerous to individuals, without any advantage to the publick. All registers which, it is acknowledged, ought to be kept secret, ought certainly never to exist. The credit of individuals ought certainly never to depend upon so very slender a security as the probity and religion of the inferior officers of revenue. But where the fees of registration have been made a source of revenue to the sovereign, register offices have commonly been multiplied without end, both for the deeds which ought to be registered, and for those which ought not. In France there are several different sorts of secret registers. This abuse, though not perhaps a necessary, it must be acknowledged, is a very natural effect of such taxes.
18Such stamp–duties as those in England upon cards and dice, upon newspapers and periodical pamphlets, &c. are properly taxes upon consumption; the final payment falls upon the persons who use or consume such commodities. Such stamp–duties as those upon licences to retail ale, wine and spirituous liquors, though intended, perhaps, to fall upon the profits of the retailers, are likewise finally paid by the consumers of those liquors. Such taxes, though called by the same name, and levied by the same officers and in the same manner with the stamp–duties above mentioned upon the transference of property, are however of a quite different nature, and fall upon quite different funds.8
Taxes upon the Wages of Labour
1The wages of the inferior classes of workmen, I have endeavoured to show in the first book, are every where necessarily regulated by two different circumstances; the demand for labour, and the ordinary or average price of provisions. The demand for labour, according as it happens to be either increasing, stationary, or declining; or to require an increasing, stationary, or declining population, regulates the subsistence of the labourer, and determines in what degree it shall be, either liberal, moderate, or scanty. The ordinary or average price of provisions determines the quantity of money which must be paid to the workman in order to enable him, one year with another, to purchase this liberal, moderate, or scanty subsistence.1 While the demand for labour and the price of provisions, therefore, remain the same, a direct tax upon the wages of labour can have no other effect than to raise them somewhat higher than the tax. Let us suppose, for example, that in a particular place the demand for labour and the price of provisions were such, as to render ten shillings a week the ordinary wages of labour; and that a tax of one–fifth, or four shillings in the pound, was imposed upon wages. If the demand for labour and the price of provisions remained the same, it would still be necessary that the labourer should in that place earn such a subsistence as could be bought only for ten shilling a week, or that after paying the tax he should have ten shillings a week free wages. But in order to leave him such free wages after paying such a tax, the price of labour must in that place soon rise, not to twelve shillings a week only, but to twelve and sixpence; that is, in order to enable him to pay a tax of one–fifth, his wages must necessarily soon rise, not one–fifth part only, but one–fourth. Whatever was the proportion of the tax, the wages of labour must in all cases rise, not only in that proportion, but in a higher proportion. If the tax, for example, was one–tenth, the wages of labour must necessarily soon rise, not one–tenth part only, but one–eighth.
2A direct tax upon the wages of labour, therefore, though the labourer might perhaps pay it out of his hand, could not properly be said to be even advanced by him; at least if the demand for labour and the average price of provisions remained the same after the tax as before it. In all such cases, not only the tax, but something more than the tax, would in reality be advanced by the person who immediately employed him. The final payment would in different cases fall upon different persons. The rise which such a tax might occasion in the wages of manufacturing labour would be advanced by the master manufacturer, who would both be entitled and obliged to charge it, with a profit, upon the price of his goods. The final payment of this rise of wages, therefore, together with the additional profit of the master manufacturer, would fall upon the consumer. The rise which such a tax might occasion in the wages of country labour would be advanced by the farmer, who, in order to maintain the same number of labourers as before, would be obliged to employ a greater capital. In order to get back this greater capital, together with the ordinary profits of stock, it would be necessary that he should retain a larger portion, or what comes to the same thing, the price of a larger portion, of the produce of the land, and consequently that he should pay less rent to the landlord.2 The final payment of this rise of wages, therefore, would in this case fall upon the landlord, together with the additional profit of the farmer who had advanced it. In all cases, a direct tax upon the wages of labour must, in the long run, occasion both a greater reduction in the rent of land, and a greater rise in the price of manufactured goods, than would have followed from the proper assessment of a sum equal to the produce of the tax, partly upon the rent of land, and partly upon consumable commodities.
3If direct taxes upon the wages of labour have not always occasioned a proportionable rise in those wages, it is because they have generally occasioned a considerable fall in the demand for labour. The declension of industry, the decrease of employment for the poor, the diminution of the annual produce of the land and labour of the country, have generally been the effects of such taxes. In consequence of them, however, the price of labour must always be higher than it otherwise would have been in the actual state of the demand: and this enhancement of price, together with the profit of those who advance it, must always be finally paid by the landlords and consumers.
4A tax upon the wages of country labour does not raise the price of the rude produce of land ain proportion to the taxa for the same reason that a tax upon the farmers profit does not raise that price bin that proportionb
5Absurd and destructive as such taxes are, however, they take place in many countries. In France that part of the taille which is charged upon the industry of workmen and day–labourers in country villages, is properly a tax of this kind. Their wages are computed according to the common rate of the district in which they reside, and that they may be as little liable as possible to any over–charge, their yearly gains are estimated at no more than two hundred working days in the year* . The tax of each individual is varied from year to year according to different circumstances, of which the collector or the commissary, whom the intendant appoints to assist him, are the judges. In Bohemia, in consequence of the alteration in the system of finances which was begun in 1748, a very heavy tax is imposed upon the industry of artificers. They are divided into four classes. The highest class pay a hundred florins a year; which, at two and twenty–pence halfpenny a florin, amounts to 9l. 7s. 6d. The second class are taxed at seventy; the third at fifty; and the fourth, comprehending artificers in villages, and the lowest class of those in towns, at twenty–five florins† .
6The recompence of ingenious artists and of men of liberal professions, I have endeavoured to show in the first book,3 necessarily keeps a certain proportion to the emoluments of inferior trades. A tax upon this recompence, therefore, could have no other effect than to raise it somewhat higher than in proportion to the tax. If it did not rise in this manner, the ingenious arts and the liberal professions, being no longer upon a level with other trades, would be so much deserted that they would soon return to that level.
7The emoluments of offices are not, like those of trades and professions, regulated by the free competition of the market, and do not, therefore, always bear a just proportion to what the nature of the employment requires.4 They are, perhaps, in most countries, higher than it requires; the persons who have the administration of government being generally disposed to reward both themselves and their immediate dependents rather more than enough. The emoluments of offices, therefore, can in most cases very well bear to be taxed. The persons, besides, who enjoy publick offices, especially the more lucrative, are in all countries the objects of general envy; and a tax upon their emoluments, even though it should be somewhat higher than upon any other sort of revenue, is always a very popular tax. In England, for example, when by the land–tax every other sort of revenue was supposed to be assessed at four shillings in the pound, it was very popular to lay a real tax of five shillings dand sixpenced in the pound upon the salaries of offices which exceeded a hundred pounds a year; ethe pensions of the younger branches of the royal family, the pay of the officers of the army and navy,e and a few others less obnoxious to envy excepted.5 There are in England no other direct taxes upon the wages of labour.
Taxes which, it is intended, should fall indifferently upon every different Species of Revenue
1The taxes which, it is intended, should fall indifferently upon every different species of revenue, are capitation taxes, and taxes upon consumable commodities. These must be paid indifferently from whatever revenue the contributors may possess; from the rent of their land, from the profits of their stock, or from the wages of their labour.
[1 ]Among others by 8 and 9 William III, c. 25 (1696); 9 William III, c. 27 (1697) in Statutes of the Realm, vii.397–9; 9 and 10 William III in Ruffhead’s edition; 12 and 13 William III, c. 11 (1700); 3 and 4 Anne, c. 18 (1704) in Statutes of the Realm, viii.370–6; 3 and 4 Anne, c. 4 in Ruffhead’s edition. Hawkers and pedlars are mentioned above, III.iii.2.
[2 ]14 Charles II, c. 2 (1662) in Statutes of the Realm, v.351–7; 13 and 14 Charles II, c. 2 in Ruffhead’s edition; 9 Anne, c. 16 (1710) in Statutes of the Realm, ix.447–72; 9 Anne, c. 23 in Ruffhead’s edition.
[3 ]5 and 6 Edward VI, c. 25 (1551).
[a–a]profit), and where the competition is free can seldom have more than that profit 1–4 <corrected 4e–6>
[4 ]The multiplication of ale houses is mentioned at II.v.7.
[5 ]32 George II, c.10 (1758). See below, V.ii.k.23.
[6 ]With regard to the taille, see above, III.ii.19.
[7 ]Smith refers to ‘times of feudal anarchy’ at III.ii.7 and also V.iii.1.
[8 ]See above, III.ii.19. The original status of bond–men is described in III.ii and the process of change in land–tenure in III.iv.
[9 ]See above, V.ii.c.27.
[* ]Memoires concernant les Droits, &c. tome ii. p. 17.
[10 ]Smith refers above, IV.ix.3, to the ‘arbitrary and degrading taxes’ which were imposed on the cultivators in France.
[11 ]See above, V.ii.f.2. A similar point is made in the discussion of taxes on wages at V.ii.i.2 and cf. V.iii.54.
[12 ]A similar point is made in the discussion of taxes on tithes, V.ii.d.1.
[13 ]See above, III.ii.19.
[14 ]See above, III.iii.2. ‘A capitation [tax] is more natural to slavery; a duty on merchandise is more natural to liberty, by reason it has not so direct a relation to the person.’ (Montesquieu, Esprit, XIII.xiv.1.)
[15 ]17 George III, c.39 (1777); 18 George III, c.30 (1778) made special arrangements for its collection in Scotland.
[b–b]immoveable 1 <corrected 4e–6>
[1 ]‘When different men had proposed different schemes, he [Augustus] approved none of them, but established the tax of five per cent. on the inheritances and bequests which should be left by people at their death to any except very near relatives or very poor persons, representing that he had found this tax set down in Caesar’s memoranda. It was, in fact, a method which had been introduced once before, but had been abolished later, and was now revived.’ (Dio’s Roman History, iv.25, translated by E. Cary in Loeb Classical Library (1917), vi.461.)
[* ]Lib. 55. See also Burman de Vectigalibus pop. Rom. cap. xi. and Bouchaud de l’impot du vingtieme sur les successions [published in 1714 and 1766 respectively].
[2 ]De Beaumont says ‘quinzième’, and in the context of the next sentence ‘fiftieth’ should obviously read ‘fifteenth’.
[3 ]LJ (B) 160, ed. Cannan 117, points out that ‘As the feudal lord possessed the lands during a minority, before the minor could recover his estate he was obliged to pay what is called a relief.’ LJ (A) i.125–6 discusses the burdens of wardenage and marriage, and points out that that of relief or suffrage sometimes involved more than a year’s rent. See also LJ (A) ii.17–18; LJ (B) 53–7, ed. Cannan 36–40. Feudal casualties are also discussed in LJ (A) iv.127–9.
[4 ]See above, III.iv.9 and n.26.
[* ]Memoires concernant les Droits, &c. tome i. p. 154.
[† ]Id. p. 157. [‘. . . mais lorsqu’un particulier vent abdiquer son droit d’habitant & emporter sa fortune en pays étranger, il paye Dix pour cent de la vente de son bien.’ (De Beaumont, Mémoires, i.157.)]
[5 ]In Letter 228 addressed to Grey Cooper, dated 2 June 1783, Smith wrote: ‘I acknowledge, I had not the most distant idea that the stamp duties could have afforded such resources as my Lord John Cavendish had shewn that they can . . . tho’ I had turned over in my mind the subject of our national resources with as much attention as I could, I must own that none occured to me that would be so little burdensome to the People as these that have been fallen upon.’ As Chancellor, Cavendish introduced a receipts tax in the budget of 1782–3.
[h–h]give only 1
[6 ]Smith comments on the demand for new houses at V.ii.e.20.
[7 ]Above, II.iii.2.
[8 ]See below, V.ii.k.6, where Smith discusses the incidence of taxes on luxuries, including spirituous liquors.
[1 ]See above, I.viii.52.
[2 ]The incidence of taxation on rent is discussed, for example, at V.ii.f.2, V.ii.g.8, V.iii.54.
[*cc]Memoires concernant les Droits, &c.c tom. ii. p. 108. [‘. . . leur cote sera établie sur le pied que se paye la journée dans le pays, & à raison seulement de deux cents journées de travail par année.’ (De Beaumont, Mémoires, ii.108.)]
[† ]Id. tom. iii. p. 37. [Not as cited, but De Beaumont, Mémoires, i. 87.]
[4 ]See above, I.x.a.1.
[e–e]those of the judges 1–2
[5 ]By 31 George II, c.22 (1757) a tax of 1s. in the £ was levied on offices with an income exceeding £100. Smith apparently adds 1s. to the 4s. of the land tax. 5s. 6d. is a mistake, as Smith himself became aware. In Letter 208 addressed to Andreas Holt, dated 26 October 1780, Smith cites the original formulation of this passage as a blunder, the ‘grossest in the whole Book, and which arose from trusting too much to memory’, even although it ‘does not in the least affect the reasoning, or conclusion it was brought to support’. In correcting the passage, Smith remarked to Holt that ‘The tax upon salaries amounts, not to five shillings only, but to five and sixpence in the pound; and the salaries of Judges are not exempted from it. The only salaries exempted are the pensions of the younger branches of the Royal family, and the pay of the Officers of the army and Navy.’
[*cc]Memoires concernant les Droits, &c.c tom. ii. p. 108. [‘. . . leur cote sera établie sur le pied que se paye la journée dans le pays, & à raison seulement de deux cents journées de travail par année.’ (De Beaumont, Mémoires, ii.108.)]
[e]Id. tom. 1–2