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

Author: Benjamin Constant
Editor: Etienne Hofmann
Translator: Dennis O’Keeffe
Introduction: Nicholas Capaldi

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BOOK XI

On Taxation

Ch. 1. The object of this book. 205
Ch. 2. The first right of the governed with regard to taxation. 205
Ch. 3. The second right of the governed with regard to taxation. 207
Ch. 4. On various types of taxes. 207
Ch. 5. How taxation becomes contrary to individual rights. 212
Ch. 6. That taxes bearing on capital are contrary to individual rights. 214
Ch. 7. That the interest of the state in matters of taxation is consistent with individual rights. 215
Ch. 8. An incontestable axiom. 219
Ch. 9. The drawback of excessive taxation. 220
Ch. 10. A further drawback of excessive taxation. 221

chapter one

The Object of This Book

The nature of this work does not allow profound research into the theory of taxation, nor into the best type of taxes one might set up. Such research would involve us in details which belong only in treatises devoted solely to this question. Our only aim must be to determine the respective rights of governors and governed in this matter.

chapter two

The First Right of the Governed with Regard to Taxation

The government, having to provide for the internal defense and external security of the State, has the right to ask individuals to sacrifice a portion of their substance to defray the expenses which the accomplishment of these duties necessitates.

The governed have the right for their part to demand of the government that the sum of all taxes does not exceed what is necessary for the purpose it must attain. This condition can be fulfilled only by political arrangements which put limits on the demands and thereby on the prodigality and greed of the governors. Traces of such arrangements can be found in the institutions of the most untrammeled monarchies, such as most of the German principalities or the hereditary States of the House of Austria; and the principle is solemnly recognized by the French constitution.1

[250] The details of these arrangements are not within our purview, yet I think one observation must not be omitted.

The right to say yea or nay to taxes can be considered from two viewpoints, as a limit on government or as a tool of financial economy. It has been said a thousand times that a government being unable to wage war, or even survive domestically, without its necessary expenses being defrayed, the ability to refuse taxes puts into the people’s hands or into those of their representatives, a most efficacious weapon, which, used bravely, empowers them to make the government not just keep the peace with its neighbors but also respect the freedom of the governed. Those reasoning thus forget that what seems at first glance compelling at the theoretical level is often impossible practically. When a government has begun a war, even an unjust one, to deny it the resources to sustain it is not to punish only the government but also the nation, innocent of its faults. It is the same with refusing taxation on the grounds of domestic malpractices or harassment. The government indulges in despotic acts. The legislative body thinks it can be disarmed if no monies are voted. Even supposing, however, which is difficult, that in this extreme crisis everything happens constitutionally, on whom will this struggle rebound? The influence of the executive will secure it temporary wherewithal, in funds already put at its disposal, in loans from those who, profiting from its favors or even its injustices, will not wish it reversed, and from yet further people who, believing it will win, will be speculating in its present requirements. The first victims will be lower-grade workers, entrepreneurs of all types, the State’s creditors, and as a side effect the creditors of all these groups. Before the government succumbs or gives way, all private wealth will have been badly hit. The result will be universal hatred of Parliament, which the government will accuse of all the personal privations of citizens. The latter will not examine the reason for Parliament’s resistance and without giving their attention, amid their hardship, to questions of law or political theory, they will blame it for their indigence and misfortune.

The right to reject taxation is not, then, on its own, a sufficient [251] guarantee for the curbing of excessive executive power. We can consider this right as an administrative means of ameliorating the nature of the taxes or as an economizing device for diminishing their volume. For Parliaments to be able to protect liberty, however, there have to be many other prerogatives. A nation can have so-called representatives endowed with this illusory right and yet be groaning the while in the most complete slavery. If the body charged with this function does not enjoy great prestige and independence, it will become the agent of the executive power, and its assent will be only a vain and illusory formula. For the freedom to vote on taxation to be other than a frivolous ceremony, political freedom must exist in its entirety, just as in the case of the human body, all the parts must be healthy and well constituted if the functions of a given one are to take place regularly and fully.

chapter three

The Second Right of the Governed with Regard to Taxation

A second right of the governed with regard to taxes is that their nature and mode of collection should cause as little hardship as possible for the taxpayers, tending neither to harass nor to corrupt them and not giving rise, by way of pointless expenditures, to further taxation.

From this right it follows that the governed may also demand that taxes fall equally on all, proportionately to their wealth, that they leave nothing uncertain nor arbitrary as to their incidence or mode of collection, that they do not render any property or industry unproductive, that they are wholly cost-efficient, and finally that their basis is reasonably stable.

Setting up a new tax always causes a perturbation which spreads from taxed activities to untaxed ones too. Much labor and capital flow into the latter to escape the impositions hitting the former. Profits fall in the former because of the tax and in the latter because of the competition. Equilibrium is restored only slowly. Whatever change takes place is therefore irksome for a given period.

[252] It is by applying these rules to diverse forms of taxation that one can judge which are and which are not admissible.

It is not within our brief to examine all of them. We will choose only certain examples to convey a sense of the mode of reasoning which seems to us the best.

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.

chapter five

How Taxation Becomes Contrary to Individual Rights

Taxes become contrary to individual rights when by definition they authorize the harassment of citizens. One example is Spain’s Alcavala, which enforces its duties on the sale of all things, transferable or fixed, each time they change hands.

Taxes also become contrary to individual rights when they bear on objects which are easy to hide from the knowledge of the authority charged with their collection. In aiming the tax against objects which are easily purloined, you make visits and inquisitions necessary. You are led to demand from the citizens spying and reciprocal denunciations. You reward these shameful actions and your tax falls into the category of those which are inadmissible because their collection is morally harmful.

It is the same with taxes so high they invite fraud. The ease, more or less great, with which an object can be kept from the knowledge of the authorities, is constituted by material facility, which can derive from the nature of the object, and by the interest people have in such concealment. When profits are considerable they can be divided among more hands and the cooperation in the fraud of a greater number of agents makes up for any physical difficulty the collecting agent would have been able to count on. When the object the tax bears on does not permit this kind of evasion, the tax sooner or later annihilates the branch of business or the type of transaction on which it presses. It must, then, be rejected as contrary to the rights of property or industry.

It is obvious that individuals have the right to limit their consumption according to their means and wills and to forgo objects they do not want to consume or cannot do so. [259] Consequently, indirect taxes become unjust when instead of resting on voluntary consumption, they are based on enforced consumption. What was odious about the gabelle, which was so absurdly intended to blend in with the salt tax, was its ordering citizens to consume a given quantity of this commodity. This harassment excited in them a just and natural indignation against a government which prescribed their lives even to the extent of needs they ought to have.

To establish a tax on a commodity, one should never forbid industry or an individual establishment6 to produce that commodity, as formerly happened in some parts of France, in relation to salt, and as happens in several European countries today in relation to tobacco. This is a manifest violation of property and an unjust harassment of industry. To secure compliance with these interdictions severe penalties are required, and these penalties prove repulsive both for their severity and their iniquity.

Indirect taxes must bear as little as possible on commodities which are basic necessities, otherwise all their advantages disappear. The consumption of these commodities is not voluntary. It does not fit itself to the situation or proportion itself to the wealth of the consumer.

It is not true, as has too often been said, that taxes on basic necessities, by making them dearer, increase the price of labor. On the contrary, the more expensive commodities needed for subsistence are, the more the need to work grows. The competition of those whose labor is on offer exceeds the demand from employers and the price of labor falls, at the very moment it should be better paid so that workers can live. Taxes on basic necessities produce the same effect as years of sterility and dearth.7

There are taxes which are easy to collect and yet have to be rejected because they tend directly to the corruption and perversion of men. No tax, for example, is so pleasurably paid as the lottery. Government needs no coercive force to guarantee the collection of this revenue. But lotteries, offering a way to wealth which does not derive from industry, work, and prudence, throw into people’s calculations the most dangerous sort of disorder. The many opportunities delude people over the improbability [260] of winning. The cheapness of the betting encourages repeated attempts. Trouble, financial embarrassment, ruin, and crime are the results. The lower orders of society, victims of the seductive dreams with which they are intoxicated, commit crimes against the property within their reach, deluding themselves that a favorable outcome will permit them to hide their baseness by correcting it. No fiscal logic can justify institutions which entail such consequences.

From the fact that individuals have the right to demand that the way taxes are collected be the least onerous possible for those who pay them, it follows that governments must not adopt an essentially oppressive and tyrannical mode of administration in this matter. I want to speak about the practice of contracting out collection. This puts the governed at the mercy of certain individuals who do not have even as much interest as the government in treating them considerately. It is to create a class of men who, sanctioned by the force of law and supported by government, whose cause they seem to uphold, daily invent new harassments and call for the most sanguinary measures. Tax farmers in all countries are, so to speak, the natural representatives of injustice and oppression.8

chapter six

That Taxes Bearing on Capital Are Contrary to Individual Rights

Whatever the kinds of taxes a country adopts, they must bear on income and never encroach upon capital. This is to say that they must never confiscate more than part of annual production and never touch previously accumulated assets. These assets are the sole means of reinvestment, of feeding the workers, of generating abundance.9

Though governments and many writers fail to recognize it, this proposition can be proved evidentially.

If taxes are trained on capital rather than on income alone, the result will be capital diminished each year by a sum equal to what the tax extracts. By this very fact annual reinvestment is diminished proportionately to the diminution of assets. This diminution [261] in reinvestment, diminishing incomes and the tax remaining the same, every year a larger sum of assets will be confiscated and therefore every year a smaller sum of incomes will be reinvested. This double progression is exponential.

Imagine a landowner who makes his property worthwhile. He needs three things: his land, his personal industry, and his capital. If he had no land, his capital and his industry would be pointless.10 Without his industry, his land and capital would be unproductive. If he had no capital, his industry would be pointless and his land sterile, since he would not be able to supply the funding indispensable to his production; he would not have the wherewithal for farming, fertilizing, sowing, or livestock. These are all the things which constitute his capital. Therefore whichever of these three things you attack, you impoverish the taxpayer equally. If, instead of taking away from him each year some of his capital, you take away some of his land, equivalent to some given sum, what will happen? In the next year, in taking away from him the same amount of land, you will deprive him of a relatively larger part of his property and so on and on, until he finds himself utterly dispossessed. The same happens when you tax his capital. The effect is less obvious but no less inevitable.

For any individual, whatever work he does, his capital is to him what a plough is to the farmer. Now, if you take from the farmer a sack of wheat he has just gathered, he goes back to work and produces another the following year. If you take his plough, however, he cannot produce more wheat.

Let it not be thought that the economizing of individuals can remedy this setback, creating capital stocks afresh. If you tax capital, you diminish individual incomes by taking away the means of replenishing these incomes. On just what are they then supposed to economize?

Let it not be said either that capital reproduces itself. Capital is only accumulated assets, gradually taken out of income. The more you encroach on capital, the more income declines, the less asset accumulation can happen, and the less capital can reproduce itself.

The State which taxes capital therefore prepares the ruin of individuals. It gradually takes away their property. Now, the security of that property being one of the State’s obligations, it is apparent [262] that individuals have the right to reassert that obligation against a system of taxation with results contrary to that end.

chapter seven

That the Interest of the State in Matters of Taxation Is Consistent with Individual Rights

Let us now show that the interest of the State in matters of taxation is consistent with individual rights. For unfortunately it is not enough to show what is just. One has also to convince government that what is just is no less functional.

We have shown the iniquity of the land tax when it exceeds the level necessary to make landowners contribute their due part in the payment of taxes. The same tax is hurtful to government both by being expensive to collect and by its effects on agriculture. It keeps the majority of the working class in poverty. It keeps a crowd of workers employed only to collect it in barren activity. It soaks up assets which, not being reinvested, are removed from individual wealth and lost to public wealth. Our costs of enforcement, our innumerable deputy bailiffs, the armed force spread over the countryside to effect the gathering of overdue taxes should have convinced us of these truths. It has been shown that the raising of 250 million via this mode of taxation entailed 50 million just in enforcement costs. As a result the nation most famous for its adroit financial management, so far from making the land tax the basis of its revenue, does not take it any further than to a twelfth of total taxation.11

We have condemned taxes on patents as assaults on the sacred rights of work, assaults aimed at the occupations the poor man can engage in. By reason of its organization, this tax is one of the least easy to collect and involves the most unproductive efforts, that is to say the most losses to the exchequer.

We have said12 that taxes became contrary to individual rights when they authorized persecutory investigations. We [263] cited the Alcavala in Spain, a tax which subjected every sale of any article, whether transferable assets or real estate, to a charge. Don Ustariz considers it the cause of the decay of Spanish finances.13

We have rejected taxes which encourage fraud. Is there any need to show how deadly this struggle between government and citizens is? And can one not see at a glance that it is ruinous even in financial terms? We added that when excessive taxes wiped out a branch of commerce, this was an attack on industry. Spain was punished for just such an attack. Several of her mines in Peru remain undeveloped because the tax due to the King absorbs the whole output of their proprietors. This hurts both the treasury and individual people.14

We condemned lotteries, though their revenue is easily collected, because they have the effect of corrupting men. Governments themselves, however, pay the penalty for that corruption. First of all, the harm lotteries do to production diminishes reinvestment and therefore national wealth. Secondly, the crime they cause among the working class is, when we put all moral questions to one side and think of it only in fiscal terms, a public expense. Thirdly, minor officials let themselves be seduced by the spell of lotteries, and the costs fall on governments. There were under the Directory in a single year twelve million francs’ worth of bankruptcies among tax collectors, and it was shown that about two-thirds of these collectors had been ruined by the lottery. Finally, the gathering of a tax of this sort, though easy, is nonetheless expensive. To make lotteries pay, you must multiply the temptations, and to multiply the temptations you must also multiply the offices. Hence the high collection costs. In M. Necker’s day, income from the lotteries stood at 11,500,000. Collection cost 2,400,000 or close to 21 percent, such that the most immoral tax was at the same time the most costly to the state.15

[264] We showed lastly that taxes should never bear on anything save incomes. When they cut into capital, first of all they ruin individuals and then the government. The reason is simple.

All men with some idea of political economy know that expenditures fall into two types: the productive and unproductive. The first are those which create wealth, and the second those which create nothing. A forest which is cut down to build ships or a town is used up as much as one consumed by a fire. In the first case, however, the fleet or city which has been built more than replaces the forest which has disappeared; in the second only ashes remain.

Unproductive expenditures can be necessary. Each person commits part of his income to food. This expenditure is unproductive but indispensable. A state of war with neighboring countries consumes a part of public resources for the subsistence of the armed forces and so that they may be supplied with the war munitions needed for attacking and defending. This is not wasted expenditure though it is an unproductive one. Even so, if unproductive expenditures are often necessary to secure the lives or security of individuals and nations, it is only productive expenditures which can augment the wealth of either. That which is consumed unproductively is always an excusable and legitimate loss when the need requires it, but crazy and inexcusable when it does not.

The money called into play between all productions as a medium of exchange has served to spread a certain obscurity on this question. Since money is used without destroying itself, it has been believed that however it was used, it came to the same thing. It ought to have been thought that money could be used for reinvestment or it could be used without producing anything. If a government spends ten million making an army march in different directions or on giving magnificent parties, spectacles, illuminations, dances, firework displays, the ten million thus consumed is not destroyed. The nation is not made poorer by ten million. Yet this ten million has produced nothing. The society retains only the ten million it originally possessed. If, on the contrary, [265] this ten million has been used to build factories or buildings suitable for any kind of manufacturing or industry, to improve land, in brief, to reinvest in some commodity, the nation would have had on the one hand the ten million consumed in this way and on the other the assets this ten million would have produced.

I would like to expand somewhat on this important subject, since there is a disastrous viewpoint which holds that all the uses of capital are the same. This opinion is popularized by all those who benefit from government squandering and by those who repeat on trust maxims they do not understand. Doubtless money, the sign of wealth, does no more in all cases than pass from one hand to another. But when it is used in reinvestment expenditures, then its value is twofold; when the expenditure is nonproductive, there is only one value. Since in order to be dissipated in unproductive expenditures, money is snatched away from the class which would have used it productively, the nation, if not made poorer in money terms, is deprived of all the production which has not taken place. The nation keeps the sign but loses the reality. The Spanish example is sufficient instruction to us that the sign of money is anything but real wealth.

It is therefore certain that the only means of prosperity for a nation is the use of capital in productive expenditures.

Now, even the wisest governments cannot use funds taken from individuals except in unproductive expenditures. The costs of the salaries of public functionaries of all sorts, the maintenance of order, of the law courts, of war finance, of all branches of the civil service, are expenditures of this type. When the State uses only a part of income for these expenditures, the assets remaining in the hands of individuals secure the necessary reinvestment. If the State deflects assets from their intended purpose, however, reinvestment shrinks, and since it becomes necessary then every year, as we have shown above, to confiscate proportionately more assets, reinvestment will finish by ceasing completely and State and individuals alike will be ruined.

“Just as the wastrel who consumes beyond his income,” says Ganilh in his history of public revenue,16 “diminishes his property by the whole amount by which he has exceeded his income and soon sees income and property disappear, [266] the State which taxes property17 and consumes its product like income, is marching to certain and fast-approaching decadence.”

So then, in matters of taxation as in all things, the laws of equity are the best ones to follow, even were one to think of them only in terms of their utility. The government which violates justice in the hope of some wretched gain pays dearly for this violation; and the rights of individuals should be respected by governments even when these have only their own interests in mind.

chapter eight

An Incontestable Axiom

In indicating, as we have done in this section, necessarily in a very abbreviated way, some of the rules regarding taxation, our intention was to suggest to the reader ideas he could enlarge on, rather than develop any of them. This task would have taken us well beyond the confines we have set ourselves. One incontestable axiom no sophism can obfuscate is that any tax, of any sort, always has a more or less unfortunate influence.18 If the use of the tax sometimes produces a benefit, its levying always produces an ill.19 The ill may be necessary. Like all such ills, however, it must be rendered as small as possible. The more resources are left at the disposal of individual activity, the more a State prospers. A tax, just because it takes some portion or other of these resources away from those efforts, is inevitably harmful. The more money is taken away from the various nations, says M. de Vauban in The Royal Tithe,20 the more it is taken away from commerce. The best-employed money in the realm is that which stays in the hands of individuals, where it is never pointless nor idle.

[267] Rousseau, who was uninformed in things financial, followed many others in saying that in monarchies the excessive surplus of the subjects must be consumed in the opulence of the prince, because it was better that this surplus be absorbed by government than dissipated by individuals.21 This doctrine reveals an absurd mix of monarchical prejudices and republican opinions. The prince’s opulence, far from discouraging that of individuals, gives it encouragement and example. It must not be thought that in despoiling them he is reforming them. He can plunge them into poverty; but he cannot bring them back to innocence. All that happens is that the poverty of some occurs in combination with the opulence of others, the most deplorable of all combinations.

Equally inconsequent arguments have concluded that because the most heavily taxed countries, such as England and Holland, are also the richest, they are richest because most heavily taxed. They take the effect for the cause. “People are not rich because they contribute. They contribute because they are rich.”22

“Everything which goes beyond real needs,” says a writer of incontestable authority on this subject,23 “loses its legitimacy. The only difference between personal violations and those of the sovereign, is that the injustice of the former results from straightforward ideas which everybody can easily distinguish, while the latter are linked to mixed causes as vast as they are complicated, such that no one can judge them other than conjecturally.”

chapter nine

The Drawback of Excessive Taxation

Everywhere that the constitution of the State does not block [268] the arbitrary proliferation of taxes, everywhere the government is not held up by insurmountable barriers to its ever growing demands, as when no one ever contests them, neither justice, nor morality, nor individual freedom can be respected. Neither the government which takes away from the laboring classes their hard-won subsistence, nor these oppressed classes who see that subsistence snatched away to enrich greedy masters, can stay faithful to the laws of equity in this scandalous struggle of weakness against violence, of poverty against greed, of want against theft. Any pointless tax is a theft which the force accompanying it renders no more legitimate than any other outrage of this nature. It is a theft all the more odious in being carried out with all the solemnity of the law. It is a theft all the more culpable in that it is the rich who carry it out against the poor. It is a theft all the more cowardly in that it is committed by an armed government against the unarmed individual. Government itself will not have to wait long to be punished for it.

The people in the Roman provinces, says Hume,24 were so oppressed by the tax gatherers, that they threw themselves joyfully into the arms of the barbarians, happy that these coarse, plain masters offered them a domination less greedy and rapacious than the Romans.

chapter ten

A Further Drawback of Excessive Taxation

It would be yet a further mistake to suppose that the disadvantages of excessive taxation are limited to the poverty and privation of the people. A greater evil results, one which it seems to me has till now not been sufficiently remarked on.

The possession of great wealth inspires in individuals immoderate desires, whims, and fantasies which they would not have felt in more modest and restrained circumstances. It is [269] the same with governments. Excessive opulence intoxicates them, as does excessive power, because opulence is a kind of power, indeed the most real kind. From this flow your unreal public squares, your immoderate ambitions, your gigantic projects, which a government with only basic resources would never think of. Thus the people are not poor only in that they are taxed beyond their means, but poorer still from the use their government makes of their taxes. Their sacrifices turn against them. They no longer pay taxes to have peace assured by a good system of defense. They pay them to have war, because the government, proud of its huge wealth, invents a thousand pretexts for spending this in ways it calls glorious. The people pay, not so that good domestic order will be maintained, but on the contrary so that an insolent government,25 enriched with its spoils, can with impunity disturb public order with its harassments. In this way a nation which has no safeguard against the proliferation of taxes, purchases by its privations misfortune, trouble, and danger. The father pays for his son to be snatched out of his arms and sent to die far from his country. The farmer pays so that his fields will be devastated by a mob fed on the money he has contributed. In this situation the government is corrupted by its wealth and the people by its poverty.

CONSTANT’S NOTES

[1. ]In Proclamation VII of the Constitution of an XII, Article 53 we find: “The oath of the Emperor is understood as follows: ‘I swear never to levy any taxation, never any tax, save in observance of the law.’”

[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.

[6. ][Constant says propriété (property), where English would expect proprietor (propriétaire). Translator’s note]

[7. ]See Constant’s Note E at the end of Book XI.

[8. ]See Constant’s Note F at the end of Book XI.

[9. ]See Constant’s Note G at the end of Book XI.

[10. ]See Constant’s Note H at the end of Book XI.

[11. ]See Constant’s Note I at the end of Book XI.

[12. ]In Ch. 5 of this same Book XI, How Taxation Becomes Contrary to Individual Rights.

[13. ]See Constant’s Note J at the end of Book XI.

[14. ]See Constant’s Note K at the end of Book XI.

[15. ]The example and figures come from Jacques Necker, De l’administration des finances, op. cit., t. I, pp. 84–88.

[16. ]See Constant’s Note L at the end of Book XI.

[17. ]See Constant’s Note M at the end of Book XI.

[18. ]See Constant’s Note N at the end of Book XI.

[19. ]See Constant’s Note O at the end of Book XI.

[20. ]Hofmann was unable to locate the passage indicated by Constant. On the other hand, in Ch. 11 of La dîme royale (the royal tithe), Vauban does express himself analogously. “I even dare say that of all the temptations against which princes must most guard themselves, those are they which drive them to extract everything they can from their subjects, since being able to do anything to the peoples entirely subject to them, they are quite likely to ruin them without noticing.” Sébastian Le Prestre de Vauban, Ladîme royale, ed. Georges Michel, Paris, Guillaumin, s.d. [1887], p. 192.

[21. ]See Constant’s Note P at the end of Book XI.

[22. ]See Constant’s Note Q at the end of Book XI.

[23. ]See Constant’s Note R at the end of Book XI.

[24. ]See Constant’s Note S at the end of Book XI.

[25. ][Constant uses the word cour, which suggests that he typically has royal government in mind for this fault. Translator’s note]

[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

[E. (Refers to page 213.)]Smith, Livre IV, Ch. 2.29

[F. (Refers to page 214.)]Smith, Livre V, Ch. 2. Ganilh, Tome II, p. 449.30

[G. (Refers to page 214.)]On the operation of capital and its indispensable part in all forms of production, see Sismondi, De la richesse commerciale, Livre I, Ch. 1, and Ganilh, Du revenu public, Volume II, pp. 281–306. The nature of my work does not permit me to enter into further detail.31

[[271] H. (Refers to page 214.)]I assume for the sake of argument that he cannot employ his capital or effort elsewhere. If he can, the comparison will be based on the first use he puts his capital and effort to.

[I. (Refers to page 216.)]The public revenue in England was in 1799 close to £27,000,000 and the land tax only £2,000,000.32

[J. (Refers to page 216.)]Théorie pratique du commerce d’Espagne.33

[K. (Refers to page 216.)]See de Ulloa.34

[L. (Refers to page 218.)]Tome II, p. 289.

[M. (Refers to page 218.)]Capital.

[[272] N. (Refers to page 219.)]

Smith, Book V, for the application of this general truth to each tax in particular.35

[O. (Refers to page 219.)]

Say, Livre V, Ch. 8.36

[P. (Refers to page 219.)]

Contrat social III, Ch. 8.37

[Q. (Refers to page 220.)]

Say, V, Ch. 11.38

[R. (Refers to page 220.)]

Administration des finances, Livre I, Ch. 2.39

[S. (Refers to page 221.)]

Essai politique, 8.40

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

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

[E. (Refers to page 213.)]Smith, Livre IV, Ch. 2.29

[F. (Refers to page 214.)]Smith, Livre V, Ch. 2. Ganilh, Tome II, p. 449.30

[I. (Refers to page 216.)]The public revenue in England was in 1799 close to £27,000,000 and the land tax only £2,000,000.32

[J. (Refers to page 216.)]Théorie pratique du commerce d’Espagne.33

[K. (Refers to page 216.)]See de Ulloa.34

[[272] N. (Refers to page 219.)]

Smith, Book V, for the application of this general truth to each tax in particular.35

[O. (Refers to page 219.)]

Say, Livre V, Ch. 8.36

[P. (Refers to page 219.)]

Contrat social III, Ch. 8.37

[Q. (Refers to page 220.)]

Say, V, Ch. 11.38

[R. (Refers to page 220.)]

Administration des finances, Livre I, Ch. 2.39

[S. (Refers to page 221.)]

Essai politique, 8.40

[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.

[29]Adam Smith, op.cit., t. III, p. 81.

[30]Adam Smith, op. cit., t. IV, pp. 450–451. Smith here asserts that it is never advantageous to subcontract taxation. Charles Ganilh, op. cit., t. II, p. 449: “It seems to me that if one wished to harmonize the interests of public revenue with the security of taxpayers, then only the lower tax officials should be concerned with the volume of revenue, while the superiors should be accorded only salaries sufficient to purchase talent and even satisfy ambitions.”

[31]Jean-Charles-Léonard Sismondi, De la richesse commerciale ou principes d’économie politique appliqués à la législation de commerce, Geneva, J.-J. Paschoud, an XI (1803), t. I, pp. 19–38. This first chapter, to which Constant refers, is entitled The Origin of National Wealth. In the pages indicated the author shows how any contribution must be based on income.

[32]These figures and this example come from Ganilh, op. cit., t. II, pp. 350–351, himself drawing on George Rose, A brief examination . . . , op. cit.

[33]Don Geronimo de Ustariz, Théorie et practique de commerce et de la marine, Paris, Vve Estienne et Fils, 1753, Seconde Partie, Ch. XCVI and XCVII; especially p. 107: “I do not doubt for a moment that such is the cause of the destruction of our manufactures.” This example of the Alcavala and the reference to Ustariz are taken from Charles Ganilh, op. cit., t. II, pp. 306–307. Adam Smith speaks of it too, op. cit., t. IV, pp. 444–445.

[34]Antonio de Ulloa, Voyage historique de l’Amérique méridionale fait par ordre du roi . . . , Paris, C.-A. Jombert, 1752, 2 vol. This reference too comes from Adam Smith, op. cit., t. I, p. 34.