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

The great advantages of proportional taxes over the cumulative, may be reduced to three.

1mo, The proportion between the tax and the object taxed is determinate.

2do, The proportion may be known to every body.

3tio, The time of paying the tax is regular and gradual; because in paying for the commodity you pay for the tax, and your liberty in buying such commodities is unrestrained; consequently, the expence is supposed to be in proportion to what your income can afford. Whereas in the cumulative taxes, it is, first, hardly possible to preserve the proportion between the tax and the ease of a person’s circumstances. In the second place, it is impossible for the state to ascertain exactly that proportion. And in the last place, the demand for the tax is made at a time when people are often unprepared.

Chap. V. The principal inconveniences alleged against proportional taxes, are, 1. That they raise prices: 2. Discourage consumption: and 3. That they are oppressive and expensive in the collection. These inconveniences are more apparent than real, as will appear from what follows.

1mo, A proportional tax, rightly imposed, and properly levied, will undoubtedly raise the price of the objects taxed; but it will only consequentially raise the price of the labour of the industrious man who pays it; because he will draw it back in proportion only to his diligence and frugality.

The price of labour is regulated by demand, and is influenced only by proportional taxes.

2do, As to discouraging consumption, if taxes raise prices, this circumstance proves the increase of consumption; because if consumption were to diminish, taxes would not be paid, and prices would fall of course, even to the detriment of the industrious. These are always the consequences of proportional taxes, when wrong imposed.

3tio, As to the expence and oppression in levying them, these inconveniences are, in a great measure, in proportion to the disposition of the people to defraud the public: for when they are fairly paid, and honestly collected, proportional taxes are little more expensive, and infinitely less oppressive than any other. I conclude my chapter by some observations drawn from the practice of different countries, which point out a method of avoiding both the oppression and the expence of levying proportional taxes.

Chap. VI. All taxes are paid out of the circulating money of a country; consequently, they cannot exceed a certain proportion of that sum. It is not, therefore, from the value of the property, or the quantity of consumption, that any one can form a guess of the probable amount of taxes, so much as from the easy and expeditious circulation, which facilitates alienation and sale.