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 Front Page arrow Titles (by Subject) arrow 195.: NECESSITY OF REVISING THE PRESENT SYSTEM OF TAXATION EXAMINER, 13 JAN., 1833, PP. 19-20 - The Collected Works of John Stuart Mill, Volume XXIII - Newspaper Writings August 1831 - October 1834 Part II

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Subject Area: Political Theory
Collection: The Collected Works of John Stuart Mill

195.: NECESSITY OF REVISING THE PRESENT SYSTEM OF TAXATION EXAMINER, 13 JAN., 1833, PP. 19-20 - John Stuart Mill, The Collected Works of John Stuart Mill, Volume XXIII - Newspaper Writings August 1831 - October 1834 Part II [1831]

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The Collected Works of John Stuart Mill, Volume XXIII - Newspaper Writings August 1831 - October 1834 Part II, ed. Ann P. Robson and John M. Robson, Introduction by Ann P. Robson and John M. Robson (Toronto: University of Toronto Press, London: Routledge and Kegan Paul, 1986).

Part of: Collected Works of John Stuart Mill, in 33 vols.

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195.

NECESSITY OF REVISING THE PRESENT SYSTEM OF TAXATION

EXAMINER, 13 JAN., 1833, PP. 19-20

This article (probably with its continuation, No. 196) is said by Mill in his letter of 27 Dec., 1832, to have been already written (see No. 186); they are referred to again in a letter to Carlyle of 16 Jan., in which Mill says he has written little and published only this (EL, CW, Vol. XII, p. 141). Both are leading articles in the “Political Examiner,” headed as title. This one is described in Mill’s bibliography as “An article headed ‘Necessity of revising the present system of taxation,’ in the Examiner of the same date [as No. 194]” (MacMinn, p. 24). In the Somerville College set of the Examiner, it is listed as “Necessity of revising the present method of Taxation” and enclosed in square brackets.

among the most urgent duties of the parliament which is about to assemble, will be the revisal of our present fiscal system. Others of our abuses and grievances may be equally great, some possibly greater, but none are more palpable and glaring. We are overtaxed, and mistaxed. To the overtaxation many eyes have long been open; to the mistaxation, fewer. But the manner of our taxation begins at length to be thought of by popular constituencies, as well as the amount: and the voice which is raised for the repeal of so many taxes is not, as it was wont to be, a mere inarticulate outcry of the overburthened, eager to have the weight taken off their own particular shoulders, but a deliberate protest against an unjust mode of distributing the common load, and a claim to have the apportionment made on principle, with a due regard to the strength and convenience of all.

The two pervading evils of most fiscal systems, and of our own among others, are inequality and waste. There is inequality, when, to supply the public revenue, a greater sacrifice is required from one part of the people than from another part. There is waste, when a needlessly large portion of the proceeds of a tax is swallowed up in the expense of collection, or when the tax necessitates or encourages bad processes of production, or diverts labour and capital from the channels into which, being the most productive, they would spontaneously flow. In the revenue system of this country all these forms of evil abound. Nor are there wanting striking examples of a still worse mischief, taxes operating immorally; by precluding or discouraging the exercise of some virtue, (as the taxes on soap, and on insurance,)1 by obstructing access to wholesome instruction, (as the taxes on paper, pamphlets, newspapers, and book advertisements,)2 or, finally, by holding out a premium to smuggling; as is done by all high duties on importation, and in England, particularly, by those on foreign spirits and tobacco.3 But the objection of immorality applies to some parts only of our revenue system; the vices of inequality and waste pervade nearly the whole.

For instance, all our direct taxes proceed on the avowed principle of sparing the rich: the very poor are also, in some instances, spared; but the rich invariably. Thus the window tax stops at a certain maximum: a limit is fixed, beyond which windows in any number may be added without being taxed.4 The disgraceful inequalities of the house tax5 have lately attracted universal attention, though the whole extent of them is not even yet known to the public. The house tax besides, even if fairly assessed according to the common standard of fairness, that is, in proportion to the bonâ fide rent, must still be an unequal tax; for a person of moderate income generally expends a larger proportion of that income in the rent of his house or apartments, than the very rich: and the houseroom a man requires is proportioned, not to his riches, but rather to the number of his children; that is, to his poverty. The tax on probates of wills, a most objectionable impost on many accounts, stops, like the window tax, at a maximum.6 The same principle is carried into some branches of our indirect taxation. Thus the stamp duty on receipts does not rise in proportion to the amount of the sum paid: the ascending scale stops at a certain value.7 The legacy duty presents an inequality which, to a person unacquainted with the composition of the legislature by whom that duty was imposed, would look like an unaccountable anomaly: it is laid exclusively on what is called personal property; land is exempted.8

Further, all taxes on articles of consumption, which either nature or universal habit has placed among the necessaries of life, are unequal in the highest degree: for of such articles the poor consume as much, or nearly as much, as the rich, sometimes far more. The tax on foreign corn, considered merely as a source of revenue, and apart from its other evils, has all the iniquity of a poll tax; for the poor man, unless he is actually starving, must eat as much bread as the rich, and (if we count children only, and not servants) has as many mouths to feed. The duty on raw cotton, recently substituted for the still worse tax on the manufactured article, is objectionable on the same ground.9 Cottons are the dress, not so much of the rich as of the poor; and the coarser article consumed by the poorer purchaser, contains more of the raw material, and consequently pays a higher duty thereon, than the fine muslins worn by the higher ranks.

Not only is inequality chargeable upon nearly the whole of our taxes, but from the additional evil of waste, in some one or other of its forms, very few of them are exempt. There are not many of our excise duties which do not subject the producers or dealers to vexatious and burthensome regulations, interfering, in many ways, with the best and cheapest processes of production. Our custom duties cause much unnecessary expense and annoyance to the merchants, for which the latter indemnify themselves at the cost of the consumer; and so far as those duties affect articles which can be produced in the country itself, or in the colonies, they are almost always purposely shaped to protect (as the phrase is) home and colonial industry; a term which always means, to set home or colonial industry upon producing some particular article (which it would not naturally take to) in preference to producing some other article, through the medium of which it could obtain the first in greater quantity and at a less expense. The loss to the mother country, from the discriminating duties on timber alone,10 is moderately estimated at a million sterling a-year. The measure, an approximation to which the machinations of the Tories defeated in 1831,11 would, if carried, have saved such a sum to the nation, as would have enabled us, without adding to any of the public burthens, to get rid of all the taxes on knowledge at one blow.

We had no intention to enter into a minute analysis of the vices of our revenue system; as a brief abstract the above may suffice. The question of most moment is, seeing the badness of most of the existing taxes, seeing, at the same time, that taxes of some one or other kind must be had, what should they be?

On this matter a principle is establishing itself in the public mind, which we consider an extremely salutary one; that among the modes of raising a revenue, those are commonly the most eligible which are the most direct. A tax which blends itself with the price of a commodity has indeed the seeming advantage, that by consenting to forego the use of the commodity it is possible to escape the tax, while from a direct tax on income or on property there is no escape: and this, no doubt, is one of the causes why a nation will submit to be taxed much more heavily when the taxes come in that shape. But this increased willingness to endure a burthen, which hitherto has almost always been too readily borne, is at least a doubtful advantage. On the other hand, the more direct you make your taxation—that is, the nearer you approach to making the person who is to pay it ultimately, pay it at once and avowedly—the greater is your security both against inequality and against waste. In the case of all indirect taxes, there is an apparent uncertainty hanging over the question, who pays them? an uncertainty at least sufficient to leave room for doubt and cavil; so that there being no sure standard acknowledged by all, to determine the real weight with which the taxes fall on different classes of the payers, an excuse may always be found for overcharging those who ought, on the contrary, to be relieved. We had an example of this in Lord Althorp’s budget, when it was proposed to tax the fundholder on the unfounded hypothesis that he was greatly undertaxed.12 It is further to be remarked, that all taxes on commodities, and on the transfer of commodities, have more or less effect in diverting production from its natural and most beneficial course; independently of which, by limiting the demand for the taxed article, they operate as a discouragement to all those improvements in production, which in order to be introduced with advantage, require that the productive operations should be on a large scale.

Taxes, therefore, ought, if possible, to be direct. But a direct tax, if it aims at equality at all, must be a property tax. To a property tax, therefore, we must come. There are difficulties of detail in valuing the different kinds of property, and assessing them to the revenue so as to avoid inequality, without doing violence to the feelings of individuals. But, to surmount these difficulties, we cannot believe anything more to be necessary, than that the practical skill and sagacity which exist in the community, should fairly turn themselves to the task. That skill and sagacity daily effect things far more difficult. In the meanwhile, now is the time for clearing up thoroughly the question of principle; setting right every incorrectness in any of the conceptions commonly entertained of a property tax, and rendering the idea of such a tax definite and tangible. And this we propose to attempt in our next number.13

[1 ]10 Anne, c. 19 (1711), soap (and paper); 22 George III, c. 48 (1782), and 35 George III, c. 63 (1795), amended by 9 George IV, c. 49 (1828), insurance.

[2 ]For details on the stamp duties, see No. 177, n2.

[3 ]9 George IV, c. 44 (1828).

[4 ]48 George III, c. 55 (1808).

[5 ]Ibid.

[6 ]55 George III, c. 184 (1815).

[7 ]23 George III, c. 49 (1783).

[8 ]Also by 55 George III, c. 184 (1815).

[9 ]1 & 2 William IV, c. 16 (1831), replacing 7 & 8 George IV, c. 56 (1827).

[10 ]See 2 & 3 William IV, c. 84 (1832).

[11 ]For the debate on the timber duties (18 Mar., 1831), see PD, 3rd ser., Vol. 3, cols. 540-76. The measure was lost by 236 to 190. For earlier discussion, see No. 86.

[12 ]For earlier discussion, see No. 86.

[13 ]No. 196 did not appear until two weeks later.