Suppose a tax laid upon wheel carriages, and that every person in the state were liable to pay a certain sum in proportion to the number of carriages he has for his convenience. The tax-gatherer comes at the end of the year and demands the sum. The person complains that he is not at liberty to have a coach or a chaise without paying duty for it; and that while he has occasion for one carriage only, and has but one pair of horses, he is obliged to pay for several sets of wheels.
Now, suppose this cumulative tax were turned into a proportional one, and that wheels were to pay a stamp-duty, or the like, in the hands of the wheelwright. The price would immediately rise; but this rise would soon become familiar to the man who has the carriage; and he would then be no more hurt by this additional expence, than if it had proceeded from some new and expensive fashion of wheels: in short, wheels would generally begin to bear an advanced price, and very soon no body would inquire how it came about, nor once complain of the tax.
To set this in another light, the difference between the two impositions resembles that between long and short accounts, which to poor people is very great. When the expence of living is insensibly and universally augmented, by the effect of proportional taxes, then the industrious man, who enjoys neither superfluity or idleness, may and can augment the price of his work in proportion. This augmentation forms then a part of what has been called his (A), which he draws fully back when he comes to market. But if the same, or even a less sum be raised upon him by a cumulative tax, it comes upon him at the end of the year, or at the end of the quarter, and let him be ever so provident, he cannot draw it back, or raise the price of his work, because of the unequal competition of other people of his own class, who, from a variety of circumstances, cannot all be so equally loaded by the cumulative as by the proportional taxes. Besides, they may not be so provident as himself, and may work for subsistence, without making any allowance for what they are to pay the state at the end of the year. Thus a double inconvenience ensues. The industrious poor are oppressed by the tax-gatherers, and the tax is ill levied. In the other case, the first never see a tax-gatherer, and the money is paid. Besides these advantages in favour of proportional taxes, there is still another, that if this tax be improperly laid on, the defect will manifest itself by checking consumption only; whereas in the other case, it will be known by the distress of individuals.
If the liberty not to consume be taken away, as in the gabelle in some provinces in France, then the imposition changes its nature and becomes a cumulative tax, as may be easily perceived[[44]].
[44]. The gabelle, or salt-tax in France, is not levied in every province; because of certain privileges of exemption, which some have all along enjoyed.
This opens a door to the greatest abuse, by smuggling salt from places where it is free, into places where the tax is imposed, at many 100 per cent. above the value; and obliges the King to use great severity upon those who are loaded with this duty.
The consumption of every family is fixed to a certain quantity; and if it be found that they have not bought, from the King’s granaries, to the full extent of what is reckoned necessary for them, it is supposed that the deficiency has been made up from contraband salt, and the deficiency is exacted.
It has been said, that so far as the three inconveniences of the cumulative taxes can be prevented, they cease to be oppressive. From which we see the reason why excises are so easily paid when those who manufacture the commodities charged with them, are contented to compound for them. This changes the tax into one of the cumulative kind; but gives it every requisite to make it easy. Let me take an example.
A brewer who pays excise for all he brews, is exposed to the daily visit of the excise-man, to whom he pays the duty. Here the brewer’s imposition participates of several of the inconveniences attending cumulative taxes. But let me suppose that after a certain time he finds that 100l. is the annual amount of his excise. If he makes a composition for it at that rate, he comes under a regular cumulative composition, with every advantage. He thinks no more of frauds; he no more grudges what he pays; and becomes in a manner collector of that imperceptible duty paid by all his customers.
The easy method of transforming those taxes into one another, shews their resemblance sufficiently, and the differences which we have pointed out, shew the principles which regulate the proper manner of imposing them.