Chap. I: Of the different Kinds of Taxes

Taxes have been established in all ages of the world, under different names of tribute, tithe, tally, impost, duty, gabel, custom, subsidy, excise; and many others needless to recapitulate, and foreign to my subject to examine.

Though in every species of this voluminous class, there are certain characteristic differences; yet one principle prevails in all, upon which the definition may be founded.

I understand therefore by tax, in its most general acceptation, a certain contribution of fruits, service, or money, imposed upon the individuals of a state, by the act or consent of the legislature, in order to defray the expences of government.

This definition may, I think, include, in general, all kinds of burdens which can possibly be imposed. By fruits are understood either those of the earth, of animals, or of man himself. By service, whatever man can either by labour or ingenuity produce, while he himself remains free. And under money is comprehended the equivalent given for what may be exacted in the other two ways.

I have no occasion to consider the nature of such taxes as are not in use in our days. Tributes of slaves from conquered nations are as little known in our times, as contributions of subsistence from the subjects of the state.

I divide, therefore, modern taxes into three classes. 1. Those upon alienation, which I call proportional: 2. Those upon possessions, which I call cumulative or arbitrary: and 3. Those exacted in service, which I call personal. These terms must now be fully explained, that I may use them hereafter without being misunderstood.

A proportional tax presents a simple notion.

It is paid by the buyer, who intends to consume, at the time of the consumption, while the balance of wealth is turning against him; and is consolidated with the price of the commodity.

Examples of this tax are all excises, customs, stamp-duties, postage, coinage, and the like.

By this definition, two requisites are necessary for fixing the tax upon any one: first, he must be a buyer; secondly, he must be a consumer. Let this be retained.

A cumulative or arbitrary tax, presents various ideas at first sight, and cannot well be defined until the nature of it has been illustrated by examples.

It may be known, First, By the intention of it; which is to affect the possessor in such a manner, as to make it difficult for him to augment his income, in proportion to the tax he pays.

Secondly, By the object; when instead of being laid upon any determinate piece of labour or article of consumption, it is made to affect past and not present gains.

Thirdly, by the circumstances under which it is levied; which imply no transition of property from hand to hand, nor any change in the balance of wealth between individuals.

Examples of cumulative taxes are land-taxes, poll-taxes, window-taxes, duties upon coaches and servants, that upon industrie, in France, and many others.

A personal tax is known by its affecting the person, not the purse of those who are laid under it.

Examples of it are the corvée, in France; the six days labour on the high roads, and the militia service before pay was allowed in England. (1)

Having thus explained what I mean by proportional, cumulative, and personal taxes, it is proper to observe, that however different they may prove in their effects and consequences, they all agree in this, that they ought to impair the fruits and not the fund; the expences of the person taxed, not the savings; the services, not the persons of those who do them.

This holds true in every denomination of taxes. In former days, when annual tributes of slaves were made, and even at present among the Turks, where it is customary to recruit the seraglios of great men by such contributions, I consider the young women who are sent, as part of the fruits of the people who send them. This is a fundamental principle in taxation; and therefore public contributions, which necessarily imply a diminution of any capital, cannot properly be ranged under the head of taxes. Thus when the Dutch contributed, not many years ago, the hundredth part of their property towards the service of the state, I cannot properly consider this in the light of a tax: it was indeed a most public spirited contribution, and did more honour to that people, from the fidelity with which it was made, than any thing of the kind ever boasted of by a modern society. (2)