An Inquiry into the Principles of Political Oeconomy (Vol. 2 of 2) / Being an essay on the science of domestic policy in free nations. In which are particularly considered population, agriculture, trade, industry, money, coin, interest, circulation, banks, exchange, public credit, and taxes

by Sir James Steuart

1mo, What will be the consequence of abolishing taxes, relatively to those who now receive the amount of them, viz. the creditors and servants of the public, and those to whom they give employment.

2do, What will be the consequences of abolishing taxes relatively to trade, industry, and manufactures: that is, whether these great objects are carried on to most advantage, when every individual contributes largely in providing a fund to be administred by a statesman; or when no body contributes any thing, but when every one retains the whole of his income, and the profits of his industry, and disposes of them as he thinks proper.

3tio, What will be the consequence of abolishing taxes, relatively to that part of the people who now complain that they are forced to contribute to every tax, although by their exclusion from the emoluments of lucrative employments, they bear a greater burden than others not better entitled to exemption, who thereby profit at their expence?

To determine so intricate a question, several combinations of circumstances must here be examined, and from the particulars resulting in every case, we shall, towards the end of this chapter, endeavour to point out the general conclusion. I begin by examining the consequences arising to the creditors, and to those who serve the state, from the cessation of those expences which flow from the produce of taxes, either in paying the interest of debts, or in defraying the whole actual expence of government.

As to the creditors, this question has been already discussed. We have seen that the withholding the interest due to them would have the consequence of bringing on such a convulsion in the state, by the breach of faith, and ruin of public credit, as would throw every thing into confusion. But with respect to the servants of the state, we must inquire, whether the raising taxes for defraying this article of expence be more hurtful to the people in general, than the consequences of such a revolution in circulation and employment, which would follow, if the taxes were to be suppressed, and the servants employed by the state dismissed.

When the necessity of raising taxes is out of the question, the hurt they do in general to a country is when, by the imposition, the money is taken out of those hands who would have employed it for the advancement of the prosperity of the state, in order to throw it into those who will employ it otherwise. From this let us now draw some conclusions.

1mo, That if money be taken from those who would have employed it in feeding themselves, and in continuing their industry, the cessation of such a tax is in a manner giving bread to those who are starving.

2do, If money were to be taken from those who, having more than bare necessaries, would, by its use, increase the demand for domestic industry, and were that money bestowed on a set of men who would employ it in the purchase of foreign commodities; the cessation of taxes, in such a case, would, so far, take the bread out of the mouths of foreigners, and give it to our own countrymen.

The abolition of the first species of taxes is advantageous to a state in every combination, let the money arising from it be ever so well employed. As to the second species, the abolition is not necessary; because the vice lies only in the misapplication of the amount.

Let us then suppose taxes to become unnecessary, and all those of the hurtful kind, depriving the industrious of bread, and enriching foreigners at the expence of citizens, to be taken off.