small profit of the merchant renders the commodity cheaper, causes a greater consumption, quickens the labour of the common people, and helps to spread arts and industry throughout the whole society."

"

There is reason to believe that Mr. Hume came, in the progress of his speculations, to be aware of this inconsistency; as Mr. Pinto assures us, that when he saw Mr. Hume at Paris, the latter expressed "great satisfaction with the Essay on Public Credit;" and he adds, "I flatter myself he will one day correct some of his ideas on this subject." One thing is certain, that in the last edition of Mr. Hume's Discourse, he has suppressed entirely the passage already quoted about the obscurity of the word circulation as it respects public credit.

Of the general question which has divided the opinion of these authors, a question so difficult in itself, and which comes home so directly to the most momentous interests of this country, it never was my intention to treat in a course of academical lectures. But I could have wished to have had it in my power to give a general outline of the speculations of our most eminent practical politicians on a subject less delicate, and at the same time more immediately useful; the means of raising those supplies (which are rendered indispensable by our actual circumstances) in a way the least unjust to individuals, and the least calculated to obstruct the national opulence and improvement. Even in considering this article, it was not my design to deviate from the common track of speculation, but to confine myself to a statement of those principles which have had the chief influence of late on the policy of Great Britain. In a field where the most splendid talents have been so often employed, some important conclusions could not fail to reward a diligent survey; and at any rate an acquaintance with prevalent ideas forms a necessary branch of information, whatever judgment we may find reason to pronounce on their solidity. The whole of this subject, however, I must omit at present, as I am anxious to proceed at our next meeting to that article of Political Economy which relates to the poor. What remains * [Ibid.]

of this lecture, I shall employ in some remarks on taxes which affect the rent of land; a branch of the general speculation which I select in preference to others, not only as it occupies the first place in Mr. Smith's arrangement, but as it will furnish me with an opportunity of mentioning a few particulars concerning the origin of that project of a territorial tax, which is commonly ascribed to the French Economists.

In entering on the subject of Taxation, Mr. Smith states four maxims as general and fundamental principles by which the comparative advantages and disadvantages of particular taxes may be estimated. Their evidence appear to him to be such, as to supersede the necessity of any illustration.

"1. The subjects of every state ought to contribute towards the support of the Government as nearly as possible, in proportion to their respective abilities. . In the observation or neglect of this maxim consists what is called the equality or inequality of taxation.

"2. The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-gatherer, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror of such aggravation, some present or perquisite to himself.

"3. Every tax ought to be levied at the time, or in the manner in which it is most likely to be convenient for the contributor to pay it. . . .

"4. Every tax ought to be so contrived as to take out of the pockets of the people as little as possible over and above what goes into the treasury of the state."*

Of these maxims, the last three are expressed with sufficient precision, and may be safely assumed as self-evident truths. The first (which relates to what Mr. Smith calls the equality of taxation) is stated in terms so vague and ambiguous, that * [Wealth of Nations, Book V. chap. ii.; Vol. III. pp. 255-257, tenth edition.]

it is hardly possible to make any use of it as a principle of reasoning. This is the more remarkable, that it is to be found. in almost every writer who has treated of Political Economy. If, indeed, by the equality of taxation, it is meant merely that taxes ought to be imposed in as equitable a manner as possible, for the whole community, without partiality or prejudice to particular individuals, or to particular classes of men, it may well be regarded as a principle whose evidence sufficiently recommends it, without the aid of any comment; and it is in this sense alone that I would be understood to employ the phrase, if at any time it should occur in the course of our future reasonings. It is curious, however, that while all writers. agree in stating the maxim as a self-evident truth, hardly any two agree in giving the same interpretation to the word ability; and the greater part ascribe to it meanings that involve very problematical propositions. Mr. Smith, for example, after stating the maxim, adds the following explanation :"That is, the subjects of every state ought to contribute towards the support of the Government, as nearly as possible in proportion to the revenue which they respectively enjoy under the protection of the state."* Mr. Young, on the other hand, in commenting on the very same maxim, remarks, that "by ability must not be understood either capital or income, but that superlucration, as Davenant called it, which melts in consumption. Suppose, (for example,) a manufacturer makes a profit of £2000 a year, living upon £500, and annually investing £1500 in his business, it is sufficiently obvious, upon just principles, that the state cannot lay the £1500 under contribution by taxes. The £500 is the only income exposed. But when the manufacturer dies, and his son turns gentleman, the whole income is made to contribute. . . In like manner, if a landlord farm his own estate, and expend the income in improvements, living on but a small portion of the profit, it is sufficiently clear that taxes ought not to affect one shilling of his expenditure on his land; they can reach with propriety the expenses of his living only; if they touch any other part of his * [Ibid. p. 255.]

expenditure, they deprive him of those tools that are working the business of the state. The proposition, therefore, that a man should pay according to his ability, must be understood in a restrained sense.' "1

Sir James Steuart lays it down as a general principle, that according to equity and justice, all impositions whatsoever ought to fall equally and proportionally on every one according to his superfluity;"* that is, (as he explains himself afterwards,) according to the income that remains to him after the necessary expense of subsistence. "Whatever a people consumes," he observes, "beyond the necessary, I consider as a superfluity which may be laid under taxation."† And in another passage, "nothing can be the object of taxation, except what is over and above the physical necessary of every one."‡

I have mentioned these different interpretations of Mr. Smith's first maxim, not with a view of deciding in favour of any one of them in preference to the others, but to express my dissent from all of them, when stated in the form of self-evident propositions. The maxim, indeed, as first announced by Mr. Smith, has the appearance of an axiom; and in the very general sense in which I have explained it, nobody can dispute its claim to this appellation; but, according to the meanings annexed to it both by this writer and the others just now quoted, it is made a pretext for prejudging, without any examination, one of the nicest questions which are connected with the theory of taxation. It is very rarely indeed, that in morals or in politics, we can follow with safety the mathematical mode of reasoning synthetically from general principles. Few maxims are to be found which are perfectly indisputable when proposed in an abstract form; and even when such occur, there is a danger (as in the present instance) of their being differently understood by different individuals, according to their pre-conceived theories, so as to give a false shew of demonstrative evidence to reasonings which lead to widely different conclusions.

[Political Arithmetic ?] pp. 521, 522. * [Political Economy, Book V. chap. xii.; Works, Vol. IV. p. 298.]

+ [Ibid. p. 317.]

[Ibid. p. 314.]

To these maxims of Mr. Smith, the following one may be added as a principle equally general in its application,—

5. No tax should be imposed in such a manner as to drain the source from which it is derived ; or, (as Sir James Steuart expresses it,) "Taxes ought to affect the fruits and not the fund."* Impositions, which necessarily imply a diminution of any capital, cannot properly be ranged under the head of taxes, inasmuch as every payment diminishes necessarily the productiveness of the tax in future. In fact, every such contribution realizes the fable of the boy who killed the goose with the golden eggs. "Thus," says the last mentioned writer, "when the Dutch contributed, not many years ago, the hundredth part of their property to the service of the state, I cannot properly consider that 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 anything of the kind ever boasted of by a modern society."†

In the examination of particular taxes, Mr. Smith arranges his observations under four heads, suggested to him by the Analysis given in another part of his work, of the sources of private revenue. As the revenue of individuals arises ultimately from three different sources, rent, profit, and wages, every tax must finally be paid from some one or other of these, or from all of them indifferently. Accordingly, he treats (1.) Of those taxes which it is intended should fall upon rent; (2.) Of those which it is intended should fall upon profit; (3.) Of those which it is intended should fall upon wages; and (4.) Of those which it is intended should fall indifferently upon all those three different sources of private revenue. In the further prosecution of the subject, I shall follow the same arrangement, beginning (according to Mr. Smith's order) with the consideration of taxes upon rent.§