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chapter four: On Various Types of Taxes - Benjamin Constant, Principles of Politics Applicable to All Governments [1815]

Edition used:

Principles of Politics Applicable to a all Governments, trans. Dennis O’Keeffe, ed. Etienne Hofmann, Introduction by Nicholas Capaldi (Indianapolis: Liberty Fund, 2003).

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chapter four

On Various Types of Taxes

Some enlightened men in the last century recommended taxes on land as the most natural, simplest, and fairest. They even wanted to make them the sole form of taxation. Taxing the land is indeed a very seductive idea, one which speaks for itself and seems to rest on an incontestable truth. Land is the most obvious and durable source of wealth. Why pursue indirect, contrived, and complicated measures instead of going straight to this source?

If this doctrine has not been practiced, this has a lot less to do with people thinking they saw evils in land tax than with their feeling that even in raising it to the highest level, they could not draw from it the sums they wished to extract from the people. Other taxes have been combined with it; but in most of the countries of Europe, it has continued to be the most important one of all and in some sense the basis of the financial system.

This approach has meant that rejecting the principle has certainly not entailed, as it ought to have done, rejecting all its consequences. To reconcile the contradictions in this procedure, some people have had recourse to a theory whose outcomes are almost the same as those of the partisans of taxes on land. The latter claimed that in the last analysis all taxes bore on the land, while some of their opponents claimed that in the final analysis they were all paid by the consumer. While the former, arguing that taxes, so to speak, passed by way of the consumer before getting to the land, concluded from this that from the start taxes should be spared this detour and be imposed straight on the land, the latter, imagining that an opposite movement took taxes settled on the land back up to the consumer, thought it pointless to free the land of a burden which in reality it was not carrying.

[253] If we apply the rules we have established to the land tax, we will be led to very different conclusions.

On the one hand it is not true that all taxes on consumption fall on the land. Taxes on postal services do not fall on landowners qua owners. A landowner who takes neither tea nor tobacco pays no part of the taxes on these commodities at the points of their dispatch, their transportation, or sale. The taxes on consumption in no way fall on those groups which neither produce nor consume the items taxed.2

It is likewise false that the land tax has an effect on the price of the commodity, one borne by the purchaser. What determines the price of a commodity is not always what it costs to produce, but the demand for it. When demand exceeds supply, the price of the commodity rises. It falls when supply exceeds demand. Now land taxes, when they diminish production, ruin the producer, and when they do not diminish it, in no way increase demand. Here is the proof.

When a tax bears on the land, one of two things happens. Either it removes the whole of net product; that is, the production costs of the commodity exceed its sales revenue, and cultivation is necessarily abandoned, with the producer who abandons cultivation getting no advantage from the imbalance this may create between overall demand and the amount of the commodity he is no longer producing. Or the tax does not remove the whole net product; that is to say that the sales revenue of the commodity still exceeds costs, and the proprietor continues to cultivate. In this case, however, supply being the same after the tax as it was before, the balance between supply and demand remains the same and price cannot rise.

A tax on land therefore bears and—whatever may have been said—continues to bear, on the landed proprietor. The consumer pays no part of it, unless because of the gradual impoverishment of the farmer, the products of the land diminish so far as to occasion famine. This calamity, however, cannot be an element in the calculations of a tax system.

The land tax, such as it exists in many countries, is therefore [254] not consistent with the first rule we have enunciated. It does not bear equally on all, but falls especially on one group.

Secondly, this tax, whatever its amount, always blights part of the farmland in any country.

There are lands which by reason of the soil or the situation yield nothing and are therefore left fallow. There are those which produce only the tiniest bit more than nothing. This progression mounts until you have lands which yield the most remarkable output possible. Imagine it as a series of numbers running from 1 to 100. Imagine 1 represents a level of output so small it is indivisible. The tax on land removes part of the output of each of these holdings. Even if it is the smallest conceivable, it will not be less than 1. Therefore, all the holdings which yielded only 1, and would have been cultivated in the absence of the tax, are put among the nonproductive holdings by the tax, and join the class of uncultivated ones. If the tax goes up to 2, all the holdings yielding only 2 suffer the same fate and so on. Thus, if the tax rose to 50, all holdings up to 50 would remain idle. It is therefore clear that when the tax goes up, it removes from cultivation a portion of the holdings proportionate to the increase, and when it falls, it restores a portion proportionate to the fall. If the counterargument is that the land tax is not fixed but proportional, this will not resolve my objection. The proportional tax bears on gross production. Now, costs constituting a more or less great part of gross production, it always follows that if you fix the tax at an eighth of gross output, lands which cost 9 to cultivate in order to yield 10 will be rendered idle by the tax. If the tax is fixed at a quarter, those which cost 8 to yield 10 will suffer the same fate and so on.

That the tax has this effect is proved precisely by the actual precautionary measures taken by governments. The more enlightened, like the English and Dutch, have exempted all rented land below a certain rent value from all taxation.3 The most brutal have declared all lands their proprietors have left uncultivated, confiscated. What owner would leave his holding unworked, however, if he stood to gain from working it? None, since the rich man himself would either lease [255] it or give it to the poor man. Lands are left idle only for the reasons developed above or because they are incapable of yielding output or because taxation takes away the output they could produce. Thus governments punish individuals for ills they themselves have done to them. This law of confiscation is as odious as it is unjust, as absurd as it is pointless. The fact is, in whatever hands the government places confiscated lands, if the costs of working them exceed the revenue therefrom, someone may well try and cultivate them; but assuredly he will not continue thus. In this second case, the land tax strays again from one of the conditions necessary if a contribution is to be justifiable, in that it makes individuals’ property unproductive.

Thirdly, the tax on landed property rests on the foresight of the cultivator, who, in order to be in a condition to pay it, has to put aside in advance some largish sums. The working class just do not have this foresight; and they cannot struggle constantly against the temptations of the moment. Many a one who will pay off his taxes daily, in detail, almost without knowing, if they are intertwined with his habitual purchases, will never accumulate in a given period the sum needed to pay things off en masse. The gathering of the land tax, though elementary, is therefore by no means easy. The coercive measures required make it very expensive. From this last point of view, the land tax is vicious, in that it incurs collection costs which another mode of taxation might avoid.

I do not conclude from this that the land tax should be done away with. As there are taxes on consumption which landowners can avoid, they should properly carry some share of public taxation, in their capacity as property holders. Since, however, the other groups in society do not pay any land taxes, the amount landowners pay should not exceed their proper due proportion. There is no justice therefore in making the land tax the sole or even the main tax.

[256] We have just said that the land tax taken beyond a certain point blights the property of its owners. A tax on patents makes industry unproductive. By removing freedom to work it establishes a rather ridiculous vicious circle. The man who is not working cannot pay anything, yet if people have previously not paid, the government forbids them the work they are suited for. The tax on patents is therefore an attack on the rights of individuals. It does not take away from them only a portion of their profits. It also dries up the source of their livelihood, unless they possess prior means of maintaining this, a quite unjustified supposition.

This tax may nevertheless be bearable if it is restricted to jobs which by their nature imply a certain prior affluence. This is then an advance the individual makes to the government, one he compensates himself for out of the returns to his own efforts. This is like the merchant who pays duties on the commodity he trades in, includes them then in the price of the commodity and gets the consumer to pay them. Aimed at trades marked by poverty, however, the tax on patents is revoltingly iniquitous.

Indirect taxes, bearing on consumer goods, get mixed up with that consumption. The consumer who pays them when he buys what he needs or likes does not experience, amid the feeling of satisfaction he is procuring himself, the repugnance the paying of direct taxation inspires. He pays them at his convenience. These taxes adapt themselves to times and circumstances, to various options, to individual tastes. They divide into imperceptible fractions.4 The same weight we bear easily when it is shared across the whole body would become intolerable bearing on a single part. Just so the weight of the air spread across the whole body of a man exceeds thirty thousand liters. He can take it without noticing, while a much lighter weight trained on a single part of the [257] body would be unendurable.5 The incidence of indirect taxation organizes itself, so to speak, by way of consumption, which is voluntary. Considered in this light, indirect taxes in no way offend the rules we have established. They do have three grave drawbacks, however. First, they are liable to be multiplied indefinitely, in an almost imperceptible way. Second, their collection is difficult, vexatious, and often corrupting in several respects. Thirdly, they create an artificial crime, smuggling.

The first drawback can be remedied by the authority which votes the taxes. If you suppose the authority independent, it will be able to block the growth of pointless taxes. If it is not independent, whatever the nature of the tax, do not hope to limit the sacrifices which will be demanded of the people. It will be defenseless in this respect, and in all others.

The second drawback is more difficult to prevent. Even so, I find in the first one itself some proof that the second can be prevented. For if one of the vices of indirect taxes is their ability to grow almost imperceptibly, then their collection must be organized in such a way that they are not insupportable. As to the third, I am more disposed than anyone to lessen it. I have said more than once that artificial duties tended to drive men to abandon real ones. Those who break the laws against smuggling soon break those against theft and murder. They run no more danger and their conscience gets used to the revolt against the social order.

If we think about it carefully, however, we will see that the real cause of smuggling is less in indirect taxes than in prohibitions. Governments sometimes disguise their prohibitions as taxes. They hit goods whose entry they wish to prevent with duties disproportionate to their value. If all prohibitive systems were abolished, this disproportion would never occur. Then smuggling, that apprenticeship in crime, that school of lies and intrepidity, all the more dire in that it gains a certain nobility from its likeness to soldiering and from the credit which skill and courage give rise to, would not find encouragement and irresistible temptation in the huge profits this [258] disproportion leads it to expect.

[2. ]See Constant’s Note A at the end of Book XI.

[3. ]See Constant’s Note B at the end of Book XI.

[4. ]See Constant’s Note C at the end of Book XI.

[5. ]See Constant’s Note D at the end of Book XI.

[A. [Refers to page 208.]]Say, Economie politique, Livre V, Ch. 13.26

[B. (Refers to page 209.)]In Holland £30, and in England £20 sterling.

[C. (Refers to page 211.)]The land tax in England raises only £2,037,627. It causes a lot of repeated complaint. The tax on barley on its own, in its various forms, raises £3,000,000. [270] It is barely noticed. Sinclair, On the public revenue of England.27

[D. (Refers to page 211.)]See Encylopédie. Article: Atmosphère.28

[A. [Refers to page 208.]]Say, Economie politique, Livre V, Ch. 13.26

[C. (Refers to page 211.)]The land tax in England raises only £2,037,627. It causes a lot of repeated complaint. The tax on barley on its own, in its various forms, raises £3,000,000. [270] It is barely noticed. Sinclair, On the public revenue of England.27

[D. (Refers to page 211.)]See Encylopédie. Article: Atmosphère.28

[26]Jean-Baptiste Say, Traité d’économie politique ou simple exposition de la manière dont se forment, se distribuent et se consomment les richesses, Paris, Impr. de Crapelet, an XI, 1803, t. II, pp. 480–494.

[27]This example has been made available by Charles Ganilh, Essai politique sur le revenu public des peuples de l’antiquité, du moyen-age, des siècles modernes et spécialement de la France et de l’Angleterre, depuis le milieu du XVe siècle jusqu’au XIXe, Paris, Giguet et Michaud, 1806, t. II, p. 350: “In England the land tax which at four shillings in the pound produces £2,037,627, about 47,000,000 francs, occasions lots of grumbling, while the barley tax in its various forms yields £3,000,000, about 69,000,000 francs, and is barely felt.”

[28]In the article “Atmosphère” in the Encyclopédie, signed by d’Alembert, it is said that a man carries a weight of 33,600 pounds.