Front Page Titles (by Subject) SECTION III: Different Sorts of Taxes, with their Advantages and Disadvantages. - Sketches of the History of Man, vol. 2
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SECTION III: Different Sorts of Taxes, with their Advantages and Disadvantages. - Henry Home, Lord Kames, Sketches of the History of Man, vol. 2 
Sketches of the History of Man Considerably enlarged by the last additions and corrections of the author, edited and with an Introduction by James A. Harris (Indianapolis: Liberty Fund, 2007). 3 Vols. Vol. 2.
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Different Sorts of Taxes, with their Advantages and Disadvantages.
All taxes are laid upon persons; but in different respects: a tax laid on a man personally, for himself and family, is termed a capitation-tax; a tax laid on him for his property, is termed a tax on goods. The latter is the only rational tax, because it may be proportioned to the ability of the proprietor. It has only one inconvenience, that his debts must be overlooked; because to take these into the account, would lead to endless intricacies. But there is an obvious remedy for that inconvenience: let the man who complains free himself of debt, by selling land or moveables; which will so far relieve him of the tax. Nor ought this measure to be considered as a hardship: it is seldom the interest of a landholder to be in debt; and with respect to the public, the measure not only promotes the circulation of property, but is favourable to creditors, by procuring them payment. A capitation-tax goes upon an erroneous principle, as if all men were of equal ability. What prompts it is, that many men, rich in bonds and other moveables that can easily be hid from public inspection, cannot be reached otherwise than by a capitation-tax. But as, by the very supposition, such men cannot be distinguished from the mass of the people, that mode of taxing, miserably unequal, is rarely practised among enlightened nations. Russia labours under a capitation-tax.3 Some years ago, a capitation-tax was imposed in Denmark, obliging even day-labourers to pay for their wives and children. Upon the same absurd plan, a tax was imposed on marriage. One would be tempted to think, that population was intended to be discouraged. The Danish ministry have been sensible of the impropriety of such taxes; for a tax imposed on those who obtain titles of honour from the crown, is applied for relieving husbandmen of their capitation-tax. But a tax of this kind lies open to many other objections. It cannot fail to raise the price of labour, a poisonous effect in a country of industry; for the labourer will relieve himself of the tax, by heightening his wages: more prudent it would be to lay the tax directly on the employer, which would remove the pretext for heightening wages. The taxing of day-labourers, whether by capitation or in any other manner, has beside an effect contrary to what is intended: instead of increasing the public revenue, it virtually lessens it, by raising the pay of soldiers, sailors, and of every workman employed by government.
Taxes upon goods are of two kinds, viz. upon things consumable, and upon things not consumable. I begin with the latter. The land-tax in Britain, paid by the proprietor according to an invariable rule, and levied with very little expence, is of all taxes the most just, and the most effectual. The proprietor, knowing beforehand the sum he is subjected to, prepares accordingly: and as each proprietor contributes in proportion to his estate, the tax makes no variation in their relative opulence. The only improvement it is susceptible of, is the Athenian regulation, of exempting small estates that are no more than sufficient to afford bread to the frugal proprietor. In France, the land-tax seems to have been established on a very false foundation, viz. That the clergy perform their duty to the state by praying and instructing, that the noblesse fight for the state; and consequently, that the only duty left to the farmer, is to defray the charges of government. This argument would hold, if the clergy were not paid for praying, nor the noblesse for fighting. Such a load upon the poorest members of the state, is an absurdity in politics. And to render it still more absurd, the tax on the farmer is not imposed by an invariable rule: every one is taxed in proportion to his apparent circumstances, which in effect is to tax industry. Nor is this all. Under pretext of preventing famine, the exporting of corn, even from province to province, is frequently interrupted; by which it happens, that the corn of a plentiful year is destroyed by insects, and in a year of scarcity is engrossed by merchants. Suppose a plan were desiderated for discouraging agriculture, here is one actually put in execution, the success of which is infallible. “Were it related,” observes a French writer, “in some foreign history, that there is a country extremely fertile, in a fine climate, enjoying navigable rivers, with every advantage for the commerce of corn; and yet that the product is not sufficient for the inhabitants: would not one conclude the people to be stupid and barbarous? And yet this is the case of France.” He adds the true reason, which is, the discouragement husbandry lies under by oppressive taxes. We have Diodorus Siculus for our authority, that the husbandman was greatly respected in Hindostan. Among other nations, says he, the land during war lies untilled; but in Hindostan, husbandmen are sacred, and no soldier ventures to lay a hand on them. They are considered as servants of the public, who cannot be dispensed with.
It is a gross error to maintain, that a tax on land is the same with a tax on the product of land. The former, which is the English mode, is no discouragement to industry and improvements: on the contrary, the higher the value of land is raised, the less will the tax be in proportion. The latter, which is the French mode, is a great discouragement to industry and improvements; because the more a man improves, the deeper he is taxed. The tenth part of the product of land, is the only tax that is paid in China. This tax, of the same nature with the tithe paid among us to the clergy, yields to the British mode of taxing the land itself, and not its product; but is less exceptionable than the land-tax in France, because it is not arbitrary. The Chinese tax, paid in kind, is stored in magazines, and sold from time to time for maintaining the magistrates and the army, the surplus being remitted to the treasury. In case of famine, it is sold to the poor people at a moderate price. In Tonquin, there is a land-tax, which, like that in France, is laid upon the peasants, exempting people of condition, and the literati in particular. Many grounds that bear not corn, contribute hay for the king’s elephants and cavalry: which the poor peasants are obliged to carry to the capital, even from the greatest distance; a regulation no less injudicious than slavish.
The window-tax, the coach-tax, and the plate-tax, come under the present head, being taxes upon things not consumable. In Holland horses are taxed; and there is a tax on domestic servants, which deserves well to be imitated. Vanity in Britain, and love of show, have multiplied domestics, far beyond necessity, and even beyond convenience. A number of idlers collected in a luxurious family, become vitious and debauched; and many useful hands are withdrawn from husbandry and manufactures. In order that the tax may reach none but the vain and splendid, those who have but one servant pay nothing: two domestics subject the master to five shillings for each, three to ten shillings for each, four to twenty shillings, five to forty shillings, and so on in a geometrical progression. In Denmark, a farmer is taxed for every plough he uses. If the tax be intended for discouraging extensive farms, it is a happy contrivance, agreeable to sound policy; for small farms increase the number of temperate and robust people, fit for every sort of labour.
Next of taxes upon things consumable. The taxes that appear the least oppressive, because disguised, are what are laid on our manufactures: the tax is advanced by the manufacturer, and drawn from the pur-chaser as part of the price. In Rome, a tax was laid upon every man who purchased a slave. It is reported by some authors, that the tax was remitted by the Emperor Nero; and yet no alteration was made, but to oblige the vender to advance the tax. Hear Tacitus on that subject (a) . “Vectigal quintae et vicesimae venalium mancipiorum remissum, specie magis quam vi; quia cum venditor pendere juberetur, in partem pretii emptoribus accrescebat.”* Thus, with respect to our taxes on soap, shoes, candles, and other things consumable, the purchaser thinks he is only paying the price, and never dreams that he is paying a tax. To support the illusion, the duty ought to be moderate: to impose a tax twenty times the value of the commodity, as is done in France with respect to salt, raises more disgust in the people as an attempt to deceive them, than when laid on without disguise. Such exorbitant taxes, which are paid with the utmost reluctance, cannot be made effectual but by severe penalties, equal to what are inflicted on the most atrocious criminals; which, at the same time, has a bad effect with respect to morals, as it blends great and small crimes together, and tends to lessen the horror one naturally conceives at the former.
Such taxes are attended with another signal advantage: they bear a proportion to the ability of the contributors, the opulent being commonly the greatest consumers. The taxes on coaches and on plate are paid by men of fortune, without loading the industrious poor; and, on that account, are excellent; being imposed, however, without disguise, they are paid with more reluctance by the rich, than taxes on consumption are by the poor.
I add one other advantage of taxes on consumption. They are finely contrived to connect the interest of the sovereign with that of his subjects; for his profit arises from their prosperity.
Such are the advantages of a tax on consumption; but it must not be praised, as attended with no inconvenience. The retailer, under pretext of the tax, raises the price higher than barely to indemnify himself; by which means the tax is commonly doubled on the consumer. The inconvenience, however, is but temporary. “Such extortion,” says Davenant, “cannot last long; for every commodity in common use finds in the market its true value and price.”
There is another inconvenience much more distressing, because it admits not a remedy, and because it affects the state itself. Taxes on consumption, being commonly laid on things of the greatest use, raise a great sum to the public, without much burdening individuals; the duty on coal, for example, on candle, on leather, on soap, on salt, on malt, and on malt-liquor. These duties, however, carry in their bosom a slow poison, by raising the price of labour and of manufactures. De Wit observes, that the Dutch taxes upon consumption have raised the price of their broad cloth forty per cent.; and our manufactures, by the same means, are raised at least thirty per cent. Britain has long laboured under this chronical distemper; which, by excluding her from foreign markets, will not only put an end to her own manufactures, but will open a wide door to the foreign, as smuggling cannot be prevented where commodities imported are much cheaper than our own. The Dutch taxes on consumption are exceedingly high; and yet necessary, not only for defraying the expence of government, but for guarding their frontier, and, above all, for keeping out the sea! The industry, however, and frugality of the people, enable them to bear that heavy burden without murmuring. But other European nations have now acquired a share of the immense commerce formerly carried on by the Dutch alone. Their trade, accordingly, is on the decline; and, when it sinks a little lower, the heavy taxes will undoubtedly depopulate their country.4
Nor ought it to be overlooked, that taxes on consumption are not equally proper in every case. They are proper in a populous country, like Holland; because the expence of collecting is but a trifle, compared with the sums collected. But, in a country thinly peopled, such taxes are improper; because the expence of collecting makes too great a proportion of the sums collected: in the highlands of Scotland, the excise on ale and spirits defrays not the expence of levying; the people are burdened, and the government is not supported. I suspect that the window-tax in Scotland lies open to the same objection.5
A lottery is a sort of tax different from any that have been mentioned. It is a tax, of all, the most agreeable, being entirely voluntary. An appetite for gaming, inherent even in savages, prompts multitudes to venture their money in hopes of a high prize; though they cannot altogether hide from themselves the inequality of the play. But it is well, that the selfish passions of men can be made subservient to the public good. Lotteries, however, produce one unhappy effect. They blunt the edge of industry, by directing the attention to a more compendious mode of gain. At the same time, the money acquired by a lottery, seldom turns to account; for what comes without trouble, goes commonly without thought.
[3. ]“Russia labours under a capitation-tax”: added in 2nd edition.
[(a) ]Annal. lib. 13.
[* ]“The tax of a twenty fifth upon slaves to be sold was remitted more in appearance than in reality; because when the seller was ordered to pay it, he laid it upon the price to the buyer.”
[4. ]“The Dutch taxes . . . depopulate their country”: added in 2nd edition.
[5. ]“I suspect that . . . the same objection”: added in 2nd edition.