"straitened, narrow and sordid. Through the revenue alone. "the body politic can act in its true genius and character, and "therefore it will display just as much of its collective virtue, "as it is possessed of a just revenue."*

We cannot pretend to do full justice, to a topic of such vast importance, in the short space to which we are obliged to confine our remarks. We shall be under the necessity of treating It in a very concise, and, as it were, aphoristic manner; and of contenting ourselves frequently with merely advancing certain positions, particularly if their correctness is obvious, or receives corroboration from the results themselves to which they lead. We shall not even dwell, any longer than is requisite in order to be understood, on such points of financial doctrine as we shall venture to maintain, in deviation from those laid down by some distinguished writers on this science. Our principal, if not our sole object, is to be useful; and, for this reason, we shall aim at popular perspicuity, more than at academical elegance.

The end and object of the social compact can be no other than the happiness of the people. The happiness of the people -politically-depends on multiplicity and security of enjoyments. Multiplicity of enjoyments on wealth; and national wealth consists in the abundance of good things.

This wealth must originate with the revenue of individuals; and individual revenue can only be derived from land, from Fabour, and from capital.

Without land, there could be no supply of food and raw materials. Without labour this supply would be scanty, in amount; indifferent, in quality; inconvenient for consumption, in form; precarious, as to its very existence. Without capital, the beneficial results of labour would be, comparatively, trifling.

There are two species of capital. The one, which we shall exclusively call so, is nothing else but labour consolidated; and identified with the objects on which it was bestowed. Such are all kinds of buildings, hedges, fences, dikes, bridges, roads, canals, ships, improvements of every description, books, tools, mills, utensils, machinery, &c. &c. The more of this accumulated labour, this real capital, a nation possesses, the more must the further exertions of its physical and mental powers prove productive.

The other species of capital, which we shall in preference

* Burke. Reflections on the Revolution in France.

call the circulating medium, is a tool of civilized society, invented for the purpose of transferring, and circulating the former. If metallic, and consequently possessed of intrinsic value, it constitutes at the same time a part, and an unproductive part of the real capital, which may be considered as by so much diminished. If paper, it constitutes no part of it, being, in itself, almost destitute of value, and merely exhibiting the form of a contrivance to circulate substantial values, or what is called property, by means of credit.

From these primary, and leading considerations, it follows that every system of taxation, which bears heavily on land, on labour, or on capital, by preventing, or impeding the accumu lation of wealth, defeats the purpose of the social compact, is inconsistent with it, and should be rejected.

When people find that, without security, they are unable to exert themselves to advantage, and to acquire wealth; when they institute a government to procure them this security; when government must have a revenue to render it competent to afford it; and when taxes are laid to create the revenuesurely, the taxes themselves ought not to become destructive of that wealth, the acquisition and preservation of which the whole fabric is intended to facilitate. For, what difference could it make to the people, whether their substance were devoured by the beasts of the forest, or by invading hordes of savages, or by the fisc?

Taxes, though they cannot well bear directly on land, because merely as such it cannot be removed or destroyed, will bear on labour, when they become so heavy as to cause people to be badly fed, badly lodged, and badly clothed-for this situation cannot fail to put them out of heart. They will bear on capital, when they cannot be satisfied without an alienation of property, always more or less attended with destruction and waste. They will bear on capital, also, when their amount is so great as to cause all the produce of land, labour and capital-that is, the whole revenue of an individual to be absorbed by expenses of subsistence and taxes; because it is the nature of capital to wear and diminish, if not constantly recruited.

Hence then results the fundamental principle of taxation, which is, that the amount of taxes, levied on each individual, should never exceed that proportion of his revenue, which he may be able to spare, without encroaching on the means of his subsistence; and that there will be the less danger of their proving prejudicial to the increase of wealth, the more revenue they leave applicable to the purposes of recruiting, and accu mulating capital.

A public revenue, insufficient to enable government, fully and energetically to compass the important purposes of its institution, is not conducive to general prosperity. Wealth may be acquired, but its tenure will be precarious. More will be lost by the innumerable evils, which never fail to spring from a feeble, languid, and financially embarrassed administration* -evils often terminating in confusion and ruin-than is saved by the lightness of the taxes. Besides, many of the expenditures of a good government, such, for instance, as arise from facili tating intercourse, by means of canals and similar improvements, are themselves converted into a most productive national capital; whilst others, such as are, or ought to be, incurred for the regulation, extension, and protection of commerce, for the promotion of education and science, for the creation and preservation of a national spirit, &c. will have a powerful influence in rendering industry more enlightened and more productive.

A public revenue, on the other hand, larger than is necessary for the complete attainment of the national purposes, for which it was established, must obviously tend to retard the general prosperity, and this tendency will be the greater, the more injudiciously the excess is applied.

The object, consequently, to be kept in view, is to provide a revenue, amply sufficient for the exigencies of the state, and yet, as far as possible removed from being oppressive to those, on whom it is levied. To devise the mode, best adapted to the accomplishment of this object, is by no means easy. "It is, therefore, not without reason," says Burke, "that the science of speculative and practical finance, which "must take to its aid so many auxiliary branches of know"ledge, stands high in the estimation, not only of the ordinary sort, but of the wisest and best men; and as this "science has grown with the progress of its object, the prosperity and improvement of nations has generally increased "with the increase of their revenues; and they will both “continue to grow and flourish, as long as the balance between "what is left to strengthen the efforts of individuals, and what "is collected for the common efforts of the state, bear to each "other a due réciprocal proportion, and are kept in a close cor"respondence and communication."

But in what does this balance consist? When is it that a tax encroaches on the means of subsistence?-Whenever it does not leave free, say the learned, a sufficient portion of individual

*"Nothing turns out to be so oppressive and unjust as a feeble govern"ment." Burke. Reflections, &c.

Burke-same work.

revenue to defray necessary individual expenditures.-And what expenditures are necessary?-Those required for food, for shelter, for clothing. But, what food?-Meat? potatoes? grain? and, if grain, manufactured into flour, or bruised? What shelter?-A stone house, a log house, a mud house, a hollow tree? What clothing?-A cloth coat? a blanket? a sheepskin?

The inevitable want of precision in the verbal import of the principle, vanishes on adverting to its origin and intention. We generally find that people are apt to encroach upon their capital, when their revenue is not sufficient to defray the ex penses, caused by the acquisition of those necessaries, conve niences, or comforts of life, to which, from education and habit, they have become accustomed. Whenever these cannot be had-they suffer. They must submit to painful privations-which is want-or spend their property. In either case the tax, causing this state of things, is injurious.

The question next occurs, how is the principle to be applied?

As taxes are to be defrayed out of individual revenue, or income, much stress has been laid, by those, who have taken most pains to investigate this subject, on the distinction between taxes which bear on capital, and taxes which bear on income. Montesquieu, Stewart, Smith, the Economists, Ganilh, Say, &c. bestow many pages on this point. All agree in condemning the former description of taxes, and approve only of the latter.

But, however fully we are convinced of the correctness of the principle, that taxes prove injurious whenever they affect capital, instead of income, we cannot, on that account, attach much importance to the distinction just mentioned. The ob ject on which a tax is laid, is one thing: the fund, from which it is discharged, is another. A tax on ploughshares, on seedcorn, on tools and machines of every sort, on bank stock, &c. would not cause those things to be sold, in order to pay the tax. The amount would be taken from income, whenever conveniently within its compass. Even a tax on successions to real estate, say to the amount of one fourth of its value, would not cause the new proprietor to dispose of the fourth part. He would raise the sum required, on the security of the whole, and discharge the loan by degrees out of his revenue. On the other hand, a tax on the annual produce itself of an estate, if it took away too large a proportion of it, to allow the proprietor to live, in his usual way, on the remainder, would, probably, induce him to run in debt, that is, to encroach on capital.

his

This distinction, therefore, however much dwelt upon, is of no practical value, and does not advance us a single step in the solution of the problem under examination. The consideration of it only affords additional strength to the maxim, That all taxes, of whatever denomination and form, must prove prejudicial to general prosperity, when they trench too far on individual revenue. Still more when the amount demanded permanently exceeds it.

Some writers have also pretended, that the wages of labour should remain exempt from taxation,* because taxes must not encroach on the means of subsistence.

But, are in our times any of those, who derive their living from the wages of labour, reduced to what may be termed the mere physical necessary? Is not, particularly in this country, the faculty of earning wages equal to a productive estate? Are not those, whose labour procures them a comfortable existence, indebted to the state for security and protection, and for the enjoyment of the advantages, which spring from a well regulated government, and from civilization?

All, who enjoy an individual revenue, however derived, ought to contribute to the public revenue; but no one more than his share. The greatest attainable justice, in the distri bution of the public burthen, is the most essential feature in a good system of taxation. It is so essential, that in a system, whereof it forms the prominent character, all other considerations may be said to be of a subordinate, or merely theoretical, importance: Because, there is very little danger, that the exigencies of the public, thus distributed, will ever encroach on the means of subsistence and on capital, if government understand their business, and do their duty.

Another feature of a good system is, that the taxes laid be of an easy, cheap and convenient collection;-because they will then be attended with the least vexation to those, who have to pay them, and with the least loss to the public.

Another that they be amply, and uniformly productive;because the less they are so, the more it will be requisite to multiply, the oftener to change them; and the greater their number, the greater the difficulty of a just distribution; the greater, and the more justifiable their unpopularity, the more expensive and vexatious their collection."

Another that the amount of the tax, levied on each contributor, be precise and definite,-not subject to the arbitrary decision of taxgatherers or assessors;-because the justice of

P. 313.

Stewart-Political Economy, vol. i. Ganilh-Essai Politique, &c. vol. i. † Adam Smith. Wealth of Nations. Book V. ch. ii. p. 2.