Front Page Titles (by Subject) 8: Blows Directed Against Commerce: Taxes on Consumption - Commerce and Government Considered in their Mutual Relationship
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8: Blows Directed Against Commerce: Taxes on Consumption - Étienne Bonnot, Abbé de Condillac, Commerce and Government Considered in their Mutual Relationship 
Commerce and Government Considered in their Mutual Relationship, translated by Shelagh Eltis, with an Introduction to His Life and Contribution to Economics by Shelagh Eltis and Walter Eltis (Indianapolis: Liberty Fund, 2008).
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This book was originally published by Edward Elgar Publishing in 1997, copyright 1997 by Shelagh Eltis and Walter Eltis. Reprinted by permission of Edward Elgar Publishing.
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Blows Directed Against Commerce: Taxes on Consumption
The true way to make everyone contribute was to place taxes on consumption and our four monarchs placed them on every kind. They persuaded themselves that this imposition would be very productive for them and at the same time an indifferent burden on their subjects. Because in matters of administration one often reconciles the contradictory.
But they deceived themselves, both on the yield which is not as great as it appears, and on the burden which is greater than they thought.
First of all, the yield is not as large as it appears.
It is true that since everyone is forced to consume, everyone is forced to pay; and if one pauses at that consideration alone, one can see that the yield grows by reason of the number of consumers.
But one must first deduct the expenses of collection; expenses which themselves grow by virtue of the number of companies to which one farms out or gives the administration of each of these taxes, and by virtue of the number of employees they have on their payroll.
Besides, these companies alone know the potential yield of each of these taxes, and they put all their skill into concealing it from the government, which itself often closes its eyes to the abuses it sees. The collection would enlighten the public if it was simple, and would be less expensive: but they deliberately make it more complex, as it is not on them that the expenses fall; and it is all the easier for them to make the collection complicated, as the mass of taxes ends by making a totally incomprehensible science from this part of the administration.*
There you have a large part of the yield which is bound to be wasted; and the best that one can imagine for the monarch is that about half the yield comes to him.* But he deceives himself further if he believes that his income is increased by this half.
Taxes, multiplied like consumption, have made everything more expensive for the monarch as for his subjects; and this price rise bears on all expenditure since it raises the cost of labour in every type of work. Should one estimate his revenue to be increased by a third, he would not be richer if for what he used to pay an ounce of silver he in future paid an ounce and a half.
He thinks he is only placing the tax on his subjects and he is placing it on himself. He pays his share and this share is all the larger as he is compelled to greater expenditure. For industry which consumes, this tax is only an advance which it is forced to make. It makes the law in its turn and it forces even the sovereign to reimburse it.
The raw materials on which one works in manufacturing pass through the hands of many artisans and many merchants before they reach the consumers; and with each artisan and each merchant they take on an increase in price, because one must replace turn by turn the taxes that have been paid. So one thinks one is only paying the final tax, placed on the merchandise one is buying, and yet one is reimbursing many more still.
I do not intend to seek the result of these increases through calculations; an Englishman has done it.† It is enough for me to make it understood how much taxes placed on consumption necessarily increase the price of everything; and that consequently the king’s revenues do not grow by virtue of the yield that they pour into his coffers. Let us see if they are burdensome for the peoples.
The government did not suspect they were. It assumed that everyone can at his discretion place such limits to his consumption as he judges right; and it drew the conclusion that no one would pay more than he was willing to pay. According to it, this levy did no harm to anyone. Could one imagine a less onerous one? It left complete freedom.
The government, which reasoned thus, probably only considered as subjects the rich men who consume lavishly at the court or in the capital; and I agree with them that those people had the power to reduce their own consumption, and that it would have been desirable that they should have used the freedom given them. I agree besides that all those who lived in ease could also use this freedom, which is only so in name, since in reality one is compelled to do without what has become necessary.
But the subjects, who only earn from one day to the next just enough for themselves and their families to subsist, are they free to cut back their consumption? However, there you have the majority, and perhaps the government is unaware that there are many among them who scarcely have bread: because I am not talking about those who are begging, many of whom have only been reduced to it by the errors of government itself.
But I want everyone to be free to cut back his consumption; what will be the effects of this supposed freedom?
The monarch, I assume, will be the first to set an example. Economies will be suggested to him, and sooner or later he will have to make them, as, at the high price to which everything has risen, his income is no longer adequate for his expenditure.
I might note at this point that these economies are an evil; because they are at the expense of the cultivator, the artisan and the merchant, who no longer sell the same amount of goods. Consequently, agriculture and trade suffer. But let us go on.
I assume similar economies at the court and in the capital; I also assume like ones in other towns: and step by step I reach the cultivator, who having no surplus on which he can economise does so on the number of his animals, his horses, his ploughs. The final outcome of these economies is thus harmful to agriculture.
Do you wish to see them all from another standpoint? I shall say: comfortably-off men will make fewer clothes. As a result less cloth will be sold from the merchants and less will be made at the drapers, and fewer sheep will be raised in the countryside. So when we follow all these economies in every type of consumption, we see, as a result, the ruin of several manufactures in the towns, and the ruin of agriculture in the countryside. Then a host of citizens who previously found work will seek it in vain. Those unable to find it will beg or steal: and those who do find it will be forced to offer their labour on the cheap and will subsist wretchedly.
In this state of affairs the sovereign, who does not understand why his income is falling, doubles taxes and his income falls again. So it is that, through the economies, which he does not weary of forcing blow by blow on his subjects, he finally succeeds in ruining the arts and agriculture.
I pass over a demonstration of the constraints that the inspections at the gates of towns place on commerce; the processes needed to value the goods, the disputes and law-suits to which these processes often give rise; the harassment by employees who often only look for excuses to make charges; the losses that merchants sustain when, forced to leave their goods at the customs, they lose the right moment for sale. I could yet point out that the duties that are placed on entry and departure are necessarily arbitrary and unfairly distributed. Wine in the cask, for instance, which is only worth ten ounces of silver, will pay as much as a cask worth fifty; and, for the one as for the other, this tax will be the same in a year of scarcity and in a year of plenty, that is to say when they will each of them have changed in price. But, without repeating platitudes already repeated so often and always uselessly, it is enough to have shown that the duties on consumption are the deadliest of all.
[* ] One knows how Sully, who was naturally clear-sighted, had difficulty in unravelling this chaos.
[* ] There are writers who claim that for a million to come into the king’s coffers the subjects must pay three. I am not in a position to make exact calculations on this matter.
[† ] See Remarques sur les avantages et les désavantages de la France et de la Grande-Bretagne par rapport au Commerce [Louis-Joseph Plumart de Dangeul (Paris, 1754)], 394, where the English work [Matthew Decker, An Essay on the Causes of the Decline of the Foreign Trade (Edinburgh, 1743)] is cited.