From the principle that taxes are in proportion to circulation, and not in proportion to consumption, we discover the reason why of old they were so difficult to be raised. Consumption then went on as now, in many respects, in proportion to the number of inhabitants; but circulation, that is, alienation by sale, bore no proportion to it.
The effect of every increase in circulation is to swell the amount of taxes; and when they are extensively imposed in a country of industry, the whole currency is thereby made to flow through the coffers of the public, as the blood of the human body flows through the heart, and is by that diffused through every member.
Chap. IX. I next examine the consequences of a total abolition of taxes, the better to discover the effects which such an alteration would produce, first, upon the prosperity of the whole community; and next, upon that of the principal classes of inhabitants, which compose it. These I reduce to three.
1mo, Those who administer government, and who are maintained from the amount of taxes.
An abolition of them, with respect to this numerous class, would draw consequences along with it, directly destructive to their interest; and, consequently, prejudicial to that of all the industrious classes who supply their consumption.
2do, With respect to the second class, which I suppose to be composed of the industrious part of the people, I observe, that an abolition of taxes must proportionally imply a diminution of circulation; this would produce a proportional diminution upon alienation; consequently, would interrupt the industry of many, and thereby throw them into a hurtful competition among themselves for subsistence. And as it has been proved, that the industrious classes pay no taxes, as matters stand, providing they be diligent and frugal, they consequently would gain nothing, and must lose a great deal by the abolition of them.
3tio, In the third class I comprehend those whom we have hitherto considered as the opulent and idle consumers. Of this category the proprietors of land form a considerable branch. They, we have said, draw back no part, either of the cumulative or proportional taxes, which affect them; but although they be deprived of that immediate indemnification, competent to the industrious, they reap, in another way, advantages which more than compensate all the burden laid upon them. These proceed from the consequences of that spirit of industry which is diffused over the whole people; in consequence of which, their lands are improved, the produce of them is readily disposed of, and what proves superfluous for domestic consumption meets with a ready market abroad, and thereby supports the value of all productions within the country.
It may be asked, then, where the burden of taxes falls, since every class of inhabitants seems to gain some advantage by them?
I answer, that they imply no burden when rightly imposed. The augmentation of industry, in consequence of the increase of circulation, provides a fund of well employed time, which, converted into money, is more than sufficient to pay all the taxes not immediately affecting the income of solid property; and the constant improvement of this, in consequence of the former, is more than sufficient to indemnify the land-proprietors.
Taxes, in this light, resemble the expence laid out upon new establishments for improvement; because in their consequences they augment the prosperity and ease of the whole people, not by being levied, but by being properly applied, as is farther explained in the next chapter.