Indirect taxes may be on (1.) Long or (2.) Short investments of capital.
Indirect taxes on Long investments are always unadvisable, in view of Canon IV.
Indirect taxes on Short investments are subject to the laws of indirect taxation. 1. Tax vanities rather than positive enjoyments (e.g., liveries rather than servants). 2. The consumer and not the producer should pay the tax collector (Canon IV). That is, collect the tax as near the actual consumer as possible. 3. Taxes on real enjoyments to be kept as equal as possible for large and small means. 4. Tax as few articles as possible. England taxes only a very small number of imports. The United States taxes nearly everything imported. 5. Tax stimulants freely. The United States collect $91,000,000 from spirits and liquors, and $42,000,000 from tobacco (1883). 6. Tax imports of commodities not made at home, or whose home production is under an excise (internal revenue) duty equal to the customs tax. 7. Keep the rate of tax low, in order to get most revenue.
Chapter V. Of A National Debt.
§ 1. Is it desirable to defray extraordinary public expenses by loans?
The question must now be considered, how far it is right or expedient to raise money for the purposes of government, not by laying on taxes to the amount required, but by taking a portion of the capital of the country in the form of a loan, and charging the public revenue with only the interest.
This question has already been touched upon in the First Book.[355] We remarked, that if the capital taken in loans is abstracted from funds either engaged in production, or destined to be employed in it, their diversion from that purpose is equivalent to taking the amount from the wages of the laboring-classes. Borrowing, in this case, is not a substitute for raising the supplies within the year. A government which borrows does actually take the amount within the year, and that too by a tax exclusively on the laboring-classes, than which it could have done nothing worse, if it had supplied its wants by avowed taxation; and in that case the transaction, and its evils, would have ended with the emergency; while, by the circuitous mode adopted, the value exacted from the laborers is gained, not by the state, but by the employers of labor, the state remaining charged with the debt besides, and with its interest in perpetuity. The system of public loans, in such circumstances, may be pronounced the very worst which, in the present state of civilization, [pg 597] is still included in the catalogue of financial expedients.