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the property escheat to the State. The arguments by which he defends these proposals have, we confess, failed to satisfy us altogether of their wisdom, but they are well worthy of consideration. They are to be found in the first chapter of his second book.

In comparing the respective merits of direct and indirect taxation-taxes on income and property, and taxes on commodities—much stress is laid by the advocates of the former on its superior economy,-on its taking less than its rival out of the pocket of the people, in proportion to the sum it puts into the coffers of the State. We have already considered this point so far as mere cost of collection is concerned; and we have shewn that the alleged cheapness of direct taxation in this particular, is rather delusive than genuine-rather accidental and fluctuating than permanent and essential. But another expense attaches to taxes on articles of consumption, which it is important to estimate at its real magnitude. Duties on commodities (it is said) being usually paid by the producers or importers before the commodities are sold to the consumers, increase prices, not only by the amount of the duty, but also by the amount of the profits on that portion of the producer's or importer's capital which was expended in advancing the duty. That is, if the usual and fair profits on capital employed in trade are ten per cent., the article in question reaches the consumer charged not only with the duty, but with the addition of ten per cent. on the amount of that duty; nay more, with an additional ten per cent. laid on by every tradesman through whose hands the article passes. Sismondi goes so far as to say that a tax of 4000 francs, paid originally by the manufacturer or importer, whose profits were ten per cent., would, if the article passed only through the hands of five different persons before reaching the consumer, cost the latter 6734 francs. If this statement were true, or even approached the truth, it would amount to an indictment against indirect taxation, which scarcely any or all of its acknowledged recommendations would suffice to countervail. But it is obvious that this blundering calculation proceeds upon the assumption that the tax accumulates by compound interest, not at the rate of ten per cent. per annum, but at the rate of ten per cent. at each step of its progress. If each one of the transmitters retained. the article a year in his possession, and it was, therefore, five years in reaching the consumer, Sismondi's reasoning would be correct; but if only one year elapsed-and the actual time is seldom so long-then an addition to the original duty of 400 francs instead of 2734, would give a rate of ten per cent. per annum to all parties through whose hands the commodity had passed, whether they were five or fifty.

But even when we have thus reduced this objection from the

gigantic magnitude to which Mr. Sismondi's oversight had swelled it, a farther and most material deduction must be made. We will assume that a year elapses between the payment of duty by the importer or manufacturer, and its repayment to him by the consumer; the consumer will then pay it with the addition of ten per cent. But he pays it a year later than he would otherwise have done: the State required the money at the time it levied it from the importer; if, in place of an indirect, it had been levied by a direct tax on the consumer, he must have paid it in January instead of in December. The money, therefore, has been left in his hand for a whole year, during which period it has yielded him, we may presume, five per cent. The real addition to the consumer is, therefore, not ten per cent. but five; since whether he pays the tax plus five per cent. in January, or plus ten per cent. in December, the actual sum taken out of his pocket is the same. The State wants £100 from the tax-payer, whose money is invested at five per cent. interest; and, taking this by indirect taxation, it takes from him £110, but it does this a year later than it would have done by direct taxation; and whether it takes £105 from him now, or £110 twelve months hence, must be a matter of complete indifference.

But is there any reason to believe that a year, or any time approaching to it, elapses in ordinary cases between the payment of the duty by the importing merchant, and its recovery from the ultimate consumer? In former days it might have been so; but since the system of bonded warehouses was introduced, the case is altogether changed. Now the merchant can leave his goods under the Queen's key, and does not pay the duty till he takes them out for delivery, not indeed to the consumer, but to the dealer who supplies the consumer. The additional capital required, and on which he has to charge his supposed profit of ten per cent., is only needed for the few days or weeks which elapse between his payment to the revenue officer, and the shopkeeper's repayment to him: the shopkeeper, again, has only to charge profit on the same capital for the few days and weeks which elapse between his payment to the merchant, and his customer's payment to him. If all parties paid ready money, the whole additional cost to the consumer would be confined to ten per cent. profit on the duty, for the time during which the goods lay unsold in the dealer's shop,-which time he would of course render as short as possible, by holding small stocks and applying to the merchant only a very short time before his previous supply was exhausted. If either vendor give credit to either vendee, then the additional price which this credit obliges him to charge for the commodity, is a simple remuneration to him for consenting to remain so long out of possession of his capital. It is interest on money lent to his customer; and

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it is mere misrepresentation to speak of it as an addition to the duty advanced by the importer.

The indirect expense of indirect taxation, then, which loomed so large in the distance, turns out, when closely analyzed, to be very insignificant ;-not, as Sismondi conceived, 70 per cent.,not, as Ricardo seemed to admit, 10 per cent.,-not even, as for the sake of argument we assumed, 5 per cent., but probably not above 14 per cent., or three months' interest on the amount of the original duty. The enormous cost to the country of many taxes on imported commodities, (conjectured to have been in the case of sugar five millions, and in the case of corn twenty millions, annually,) arising from their effect in forcing production into unnatural and injudicious channels, and compelling us to buy from one country what we could have procured far more cheaply from another-need not be spoken of here. They are discredited, condemned, and almost swept away. Duties strictly and fairly imposed for the sake of revenue, have nothing in common with duties which are either purposely or incidentally protective; and the ill repute justly attaching to the latter can by no legitimate process be made to recoil upon the former. Neither need we combat the objections derived from the evil of excessive or ill-selected duties which, like that on tea, curtail consumption, tempt adulteration, lessen by so doing their own productiveness, and diminish the production of those labour-employing articles of export which are used to purchase the commodity so injuriously over-taxed. All arguments drawn from such cases are of weight, not against the principle of indirect taxation, but against its injudicious and clumsy application. They merely shew that the financier who lays himself open to such charges, does not understand his business. They are what logicians call fallacia accidentis. They are specimens of the sophism, à dicto secundum quid ad dictum simpliciter, which argues from what is true under particular circumstances, as if it were true nakedly and altogether. They are directed solely against the separable accidents, not against the inherent essentials of the system.

We pass over with a mere enumeration several minor advantages of indirect taxation, as our limits warn us to draw to a close. Such as the convenience of the time at which the tax is paid by the consumer, which consideration Adam Smith places so high in his list of requisites. Such as its self-adjusting qualities, enabling a man to do for himself what it is one great, but uniformly unattained object, of the Science of Finance to do for him, namely, to proportion his fiscal burdens to his capacity of bearing them. Such as its light and evanescent pressure on the poor man, so soon as he becomes poor enough to be obliged to dispense with luxuries. Such, finally, as its liability to be

thrown, in part at least, on foreigners, the possibility of which, and the modus operandi of effecting it, involves so subtle and intricate a train of reasoning that we shall not attempt to enter upon it here, but shall content ourselves with referring to the argument of Mr. J. S. Mill, as confirmation of its practicability.* The most weighty objection brought against Customs and Excise duties is their alleged demoralizing tendency. They encourage smuggling, and tempt to fraudulent adulteration. It is impossible to deny the accusation. But two pleas may be urged in mitigation, which will go far to prevent sentence of condemnation from being passed. In the first place, the charge is valid against excessive, not against moderate duties. If the duties are so high as to leave the profits of the smuggler-all risks included-decidedly greater than those of the fair trader, such duties are not only demoralizing, but suicidal. But these immoderate duties have long been condemned, and in the majority of cases abandoned. Our experience in the case of the excise on spirits and the duty on silks, as in many other instances, proved the effect of the lowering of the duty in discouraging and knocking up the smuggling trade, and thus clearly shewed that this argument, like others we have just disposed of, bore not against indirect taxation, but against enormous and abortive taxation, not against import and excise duties per se, but against such injudicious and ineffective duties as no financier who was master of his profession would dream of imposing. To impose a duty which rendered smuggling and adulteration overpoweringly attractive-which gave higher inducements to the smuggler than the tradesman's native preference for honesty and the vigilance of the coast-guard were competent to countervailwould be to impose a duty which failed of its purpose, and the imposition of which, therefore, would be a proof of the incapacity of the statesman who laid it on. It is true that we have not yet fully carried out the maxins of fiscal wisdom which our experience has taught us; and that in the case of tea and of tobacco we still retain duties which offer irresistible temptations to the smuggler and adulterator; but their operation is now well understood, and their death-warrant is already signed—as far, that is, as refers to their self-defeating and illegitimate excess. In the second place, temptations to evasion are inherent in the nature of every tax, in proportion to its disagreeableness and the severity of its pressure. We know the subterfuges often

resorted to in the case of the assessed taxes; we have seen something of the enormous stimulus to fraud arising from the Incometax; the revenue is defrauded in the several departments of the

*Principles of Political Economy, vol. ii. p. 405. Essays on some unsettled Questions of Political Economy.

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Legacy Duty, the Stamp Duties, and the Post-Office ;-and, while fully admitting the validity of the objection in question, when urged against Excise and Customs Duties, we hold that it is one of those objections which, as we have seen, inevitably attach to things so intrinsically evil in their nature as all taxes are; and that, where the duties are moderate in amount and judiciously selected, they are as little open to it as almost any direct tax that can be named, except a house-tax,-and far less open than many that might be specified, such as an income-tax.

We now come to the final consideration,-on which we are at issue with, and diametrically opposed to the popular declaimers against indirect taxation, viz., the comparative ease with which it is levied, the comparative unreluctance-approaching to unconsciousness with which it is paid. This the Liverpool financiers regard as its decisive demerit: this we regard as its crowning recommendation. Horace says of poems:

"Non satis est pulchra esse poemata, dulcia sunto."

We hold this to apply in the case of taxes also. They should be, as far as possible, not only theoretically beautiful, but practically sweet. If an impost must be levied, let it be done with as little irritation and annoyance as the thing will admit of. When a painful operation has to be performed, it is surely desirable to effect it while the patient is under the influence of chloroform. If the life-blood must be extracted from a man, it is unquestionable mercy to throw him first into a deep sleep. "Not so, (say the financial reformers :) this would remove the most efficient check on the extravagance of Government. If taxes are made pleasant, or even endurable, there is no limit to the amount that may be extracted from the people-if, by the perfection of art, they are reduced to a kind of insensible perspiration, the patient may be bled to death before he is aware. The best security we can have for the economical expenditure of the public money, is to make taxation so disgusting and burdensome that the people will grudge every farthing they are called upon to pay." Surely this argument is very childish and very shallow. Englishmen are scarcely such infants as to require to be treated in this way. If the taxation be not needed for the due furtherance of public objects, it is wrong to levy it, and weak to pay it; if it be needed, it is silly to grudge it, and would be double silliness to raise it in any but the least objectionable way. But let the matter be argued on its own grounds: let us tie our Government down in the strictest mode we can devise to expend the public money for none but the most just, important, and valuable purposes; let us, by the closest vigilance, compel them so to manage as to obtain these purposes as cheaply as they can; but let us not adopt so blind, clumsy, emVOL. XVI. NO. XXXI.

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