Front Page Titles (by Subject) SECTION V: Rules to be observed in Taxing. - Sketches of the History of Man, vol. 2
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SECTION V: Rules to be observed in Taxing. - 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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Rules to be observed in Taxing.
The different objects of taxes, and the intricacy thereby occasioned, require general rules, not only for directing the legislature in imposing them, but for ena-bling others to judge what are beneficial, and what hurtful.
The first rule I shall suggest is, That, wherever there is an opportunity of smuggling, taxes ought to be moderate; for smuggling can never effectually be restrained, where the cheapness of imported goods is in effect an insurance against the risk; in which view, Swift humorously observes, that two and two do not always make four. A duty of 15 per cent. upon printed linen imported into France, encourages smuggling: a lower duty would produce a greater sum to the public, and be more beneficial to the French manufacturer. Bone-lace imported into France is charged with a duty of 20 per cent. in order to favour that manufacture at home: but in vain; for bone-lace is easily smuggled, and the price is little higher than before. The high duty on succus liquoritiae6 imported into Britain, being L. 7: 2: 6 per hundred weight, was a great encouragement for smuggling; for which reason it is reduced to 30 shillings per hundred weight (a) .
Smuggling of tea, which draws great sums from Britain, is much encouraged by its high price at home. As far as I can judge, it would be profitable, both to the public, and to individuals, to lay aside the importationduty, and to substitute in its stead a duty on the consumer. Freedom of importation would enable the East India company to sell so cheap, as effectually to banish smuggling; and the low price of tea would enable the consumer to pay a pretty smart duty, without being much out of pocket. The following mode is proposed, as a hint merely that may lead to improvements. Let every man who uses tea be subjected to a moderate tax, proportioned to his mode of living. Absolute precision cannot be expected in proportioning the tax on families; but gross inequality may easily be prevented. For instance, let the mode of living be determined by the equipage that is kept. A coach or chaise with two horses shall subject a family to a yearly tax of L. 10; heightening the tax in proportion to the number of horses and carriages; two servants in livery, without a carriage, to a tax of 40 s.; every other family paying 20 s. Every family where tea is used must be entered in the collector’s books, with its mode of living, under a heavy penalty; which would regulate the coach-tax, as well as that on tea. Such a tax, little expensive in levying, would undoubtedly be effectual: a master of a family is imprudent indeed, if he put it in the power of the vender, of a malicious neighbour, or of a disgusted servant, to subject him to a heavy penalty. This tax, at the same time, would be the least disagreeable of any that is levied without disguise; being in effect a voluntary tax, as the mode of living is voluntary. Nor would it be difficult to temper the tax, so as to afford a greater sum to the public than it receives at present from the importation-duty, and yet to cost our people no more for tea than they pay at present, considering the high price of the commodity.*
To favour our own cambric manufacture, the importation of it is prohibited. The unhappy circumstance is, that fine cambric is easily smuggled: the price is great, and the bulk small. Would it not be more politic, to admit importation under a duty so moderate as not to encourage smuggling. The duty applied for promoting our own cambric-manufacture, would in time so improve it, as to put us above the hazard of rivalship, with respect at least to our own consumption. It is pleasant to trace the progressive effects of such a plan. The importation-duties would at first be considerable; and yet no higher than necessary for nursing an infant manufacture. As the manufacture improves, more and more of it would be consumed at home; and the duty would fall in proportion. But then this small duty would be sufficient to encourage a manufacture, now approaching to perfection.7
High duties on importation are immoral, as well as impolitic; for, is it not unjustifiable in a legislature, first to tempt, and then to punish for yielding to the temptation.
As an Appendix to the rule for preventing smuggling, I add, that a tax upon a fashion, which can be laid aside at pleasure, can little be depended on. In the year 1767, a duty was laid on chip-hats, worn at that time by women of fashion. They were instantly laid aside, and the tax produced nothing.
A second rule is, That taxes expensive in the levying ought to be avoided; being heavy on the people, without a proportional benefit to the revenue. Our land-tax is admirable: it affords a great sum, levied with very little expence. The duties on coaches, and on gold and silver-plate, are similar; and so would be the tax on tea above proposed. The taxes that are the most hurtful to trade and manufactures, such as the duties on soap, candle, leather, are expensive in levying.8
A third rule is, To avoid arbitrary taxes. They are disgustful to all, not excepting those who are favourably treated; because self-partiality seldom permits a man to think that justice is done him. A tax laid on persons, in proportion to their trade, or their prudence, must be arbitrary, even where strict justice is intended; because it depends on vague opinion or conjecture: every man thinks himself injured; and the sum levied does not balance the discontent it occasions. The tax laid on the French farmer in proportion to his substance, is an intolerable grievance, and a great engine of oppression; if the farmer exert any activity in meliorating his land, he is sure to be doubly taxed. Hamburgh affords the only instance of a tax on trade and riches, that is willingly paid, and that consequently is levied without oppression. Every merchant puts privately into the public chest the sum that, in his own opinion, he ought to contribute; a singular example of integrity in a great trading town, for there is no suspicion of wrong in that tacit contribution. But this state is not yet corrupted by luxury.
Because many vices that poison a nation, arise from inequality of fortune, I propose it as a fourth rule, to remedy that inequality as much as possible, by relieving the poor, and burdening the rich. Heavy taxes are lightly born by men of overgrown estates. Those proprietors especially, who wound the public by converting much land from profit to pleasure, ought not to be spared. Would it not contribute greatly to the public good, that a tax of L. 50 should be laid on every house that has 50 windows; L. 150 on houses of 100 windows; and L. 400 on houses of 200 windows? By the same principle, every deer-park of 200 acres ought to pay L. 50; of 500 acres L. 200; and of 1000 acres L. 600. Fifty acres of pleasure-ground to pay L. 30; 100 such acres L. 80; 150 acres L. 200; and 200 acres L. 300. Such a tax would have a collateral good effect: it would probably move high-minded men to leave out more ground for maintaining the poor, than they are commonly inclined to do.
A fifth rule of capital importance, as it regards the interest of the state in general, is, That every tax which tends to impoverish the nation ought to be rejected with indignation. Such taxes contradict the very nature of government, which is to protect, not to oppress. And, supposing the interest of the governing power to be only regarded, a state is not measured by the extent of its territory, but by what the subjects are able to pay annually without end. A sovereign, however regardless of his duty as a father of his people, will regard that rule for his own sake: a nation impoverished by oppressive taxes will reduce the sovereign at last to the same poverty; for he cannot levy what they cannot pay.
Whether taxes imposed on common necessaries, which fall heavy upon the labouring poor, be of the kind now mentioned, deserves the most serious deliberation. Where they tend to promote industry, they are highly salutary: where they deprive us of foreign markets, by raising the price of labour and of manufactures, they are highly noxious. In some cases, industry may be promoted by taxes, without raising the price of labour and of manufactures. Tobolski in Siberia is a populous town, the price of provisions is extremely low, and the people on that account are extremely idle. While they are masters of a farthing, they work none: when they are pinched with hunger, they gain in a day what maintains them a week: they never think of to-morrow, nor of providing against want. A tax there upon necessaries would probably excite some degree of industry. Such a tax, renewed from time to time, and augmented gradually, would promote industry more and more, so as to squeeze out of that lazy people three, four, or even five days labour weekly, without raising their wages, or the price of their work. But beware of a general rule. The effect would be very different in Britain, where moderate labour without much relaxation is requisite for living comfortably: in every such case, a permanent tax upon necessaries fails not in time to raise the price of labour. It is true, that, in a single year of scarcity, there is commonly more labour than in plentiful years. But, suppose scarcity to continue many years successively, or suppose a permanent tax on necessaries, wages must rise till the labourer find comfortable living; if the employer obstinately stand out, the labourer will in despair abandon the work altogether, and commence beggar; or will retire to a country less burdened with taxes. Hence a salutary doctrine, That, where expence of living equals, or nearly equals, what is gained by bodily labour, moderate taxes renewed from time to time after considerable intervals, will promote industry, without raising the price of labour; but that permanent taxes will unavoidably raise the price of labour, and of manufactures. In Holland, the high price of provisions and of labour, occasioned by permanent taxes, have excluded from the foreign market every one of their manufactures that can be supplied by other nations. Heavy taxes have annihilated their once flourishing manufactures of wool, of silk, of gold and silver, and many others. The prices of labour and of manufactures have in England been immoderately raised by the same means.
To prevent a total downfall of our manufactures, several political writers hold, that the labouring poor ought to be disburdened of all taxes. The royal tithe proposed for France, instead of all other taxes, published in the name of Mareschal Vaubhan, or such a tax laid upon land in England, early imposed, might have produced wonders. But the expedient would now come too late, at least in England: such profligacy have the poor-rates produced among the lower ranks, that to relieve them from taxes, would probably make them work less, but assuredly would not make them work cheaper. It is vain therefore to think of a remedy against idleness and high wages, while the poor-rates subsist in their present form. Davenant pronounces, that the English poor-rates will in time be the bane of their manufactures. He computes, that the persons receiving alms in England amounted to one million and two hundred thousand; the half of whom at least would have continued to work, had they not relied on parish-charity. But of this more at large in a separate sketch.9
Were the poor-rates abolished, a general act of naturalization would not only augment the strength of Britain, by adding to the number of its people, but would compel the natives to work cheaper, and consequently to be more industrious.
If these expedients be not relished, the only one that remains for preserving our manufactures, is, to encourage their exportation by a bounty, such as may enable us to cope with our rivals in foreign markets. But, where is the fund for a bounty so extensive? It may be raised out of land, like the Athenian tax above mentioned, burdening great proprietors in a geometrical proportion, and freeing those who have not above L. 100 of land-rent. That tax would raise a great sum to the public, without any real loss to those who are burdened; for comparative riches would remain the same as formerly. Nay, such a tax would in time prove highly beneficial to land-proprietors; for, by promoting industry and commerce, it would raise the rent of land much above the contribution. The sums contributed, laid out upon interest at five per cent. would not produce so great profit.10 To make landholders embrace the tax, may it not be thought sufficient, that, unless for some bounty, our foreign commerce must vanish, and land be reduced to its original low value? Can any man hesitate about paying a shilling, when it prevents the loss of a pound?
I shall close with a rule of deeper concern than all that have been mentioned, which is, To avoid taxes that require the oath of party. They are destructive to morals, as being a temptation to perjury. Few there are so wicked, as to hurt others by perjury: at the same time, not many of the lower ranks scruple much at perjury, when it prevents hurt to themselves. Consider the duty on candle: those only who brew for sale, pay the duty on malt-liquor; and to avoid the brewer’s oath, the quantity is ascertained by officers who attend the process: but the duty on candle is oppressive, as comprehending poor people who make no candle for sale; and is subversive of morals, by requiring their oath upon the quantity they make for their own use. Figure a poor widow, burdened with five or six children: she is not permitted to make ready a little food for her infants by the light of a rag dipped in grease, without paying what she has not to pay, or being guilty of perjury. However upright originally, poverty and anxiety about her infants, will tempt her to conceal the truth, and to deny upon oath—a sad lesson to her poor children: ought they to be punished for copying after their mother, whom they loved and revered? Whatever she did appears right in their eyes. The manner of levying the salt-tax in France is indeed arbitrary; but it has not an immoral tendency: an oath is avoided; and every master of a family pays for the quantity he is presumed to consume. French wine is often imported into Britain as Spanish, which pays less duty. To check that fraud, the importer’s oath is required; and, if perjury be suspected, a jury is set upon him in exchequer. This is horrid: the importer is tempted by a high duty on French wine to commit perjury; for which he is prosecuted in a sovereign court, open to all the world: he turns desperate, and loses all sense of honour. Thus custom-house oaths have become a proverb, as meriting no regard; and corruption creeping on, will become universal. Some goods imported pay a duty ad valorem; and to ascertain the value, the importer’s oath is required. In China, the books of the merchants are trusted, without an oath. Why not imitate so laudable a practice? If our people be more corrupted, perjury may be avoided, by ordaining the merchant to deliver his goods to any who will demand them, at the rate stated in his books; with the addition of ten per cent. as a sufficient profit to himself. Oaths have been greatly multiplied in Britain since the Revolution, without reserve, and contrary to sound policy. New oaths have been invented against those who are disaffected to the government; against fictitious titles in electing parliament-members; against defrauding the revenue, &c. &c. They have been so hackneyed, and have become so familiar, as to be held a matter of form merely. Perjury has dwindled into a venial transgression, and is scarce held an imputation on any man’s character. Lamentable indeed has been the conduct of our legislature: instead of laws for reforming or improving morals, the imprudent multiplication of oaths has not only spread corruption through every rank, but, by annihilating the authority of an oath over conscience, has rendered it entirely ineffectual.
[6. ]Licorice juice; still used for the treatment of ulcers.
[(a) ]7th Geo. III. cap. 47.
[* ]In Holland, a person is prohibited from drinking tea without license, for which he pays a yearly sum. [[Note added in 3rd edition.]]
[7. ]Paragraph added in 2nd edition.
[8. ]Paragraph added in 3rd edition.
[9. ]See book II, sketch X (“Public Police with respect to the Poor”).
[10. ]“The sums contributed . . . so great profit”: added in 2nd edition.