§ 5. A Résumé of the general principles of taxation.

After the manner of our classification and résumé of the subject of value and money, it may be convenient to here insert a recapitulation of the various principles under the treatment of taxation.354

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Comparison Between Direct And Indirect Taxation.

Adam Smith's “Canons of Taxation.”—A tax should be: I. Equal (in amount of sacrifice entailed). II. Certain. III. Timely. IV. All for the state.

A Tax is either:
Direct.
Indirect (on commodities.)

Direct taxes are:
On Income.
On Expenditure.

Taxes on Income are:
General.
Special.

General income taxes. The best of taxes, if people were all honest. As it is, it falls most heavily on the conscientious. Should be reserved for emergency. All savings and a fixed amount in all incomes should be exempt.

Special taxes are on:
Rent.
Wages.
Profits.

Taxes on Rent. Agricultural rent is meant. It falls entirely on the landlord, and, if not balanced by taxes on other classes, is unjust. May be blended with a tax on profits, if on rent due to landlord's improvements.

Taxes on Wages are:
On Skilled.
On Unskilled.

Skilled wages are at a monopoly price, and taxes on them are paid by the laborers, so long as wages are not reduced below their just proportion.

Unskilled wages. (1) Population diminished by it. Paid by profits. (2) Population left stationary. Shared between profits and wages. (3) Population increasing in spite of it. Falls entirely on wages.

Taxes on Profits. May possible stimulate production, and is then a good all round, contributing to the state, and leaving no one any poorer. If not, if profits are really diminished by the tax, capital may be diminished also. This (a) may, or (b) may not diminish population. If (a), then the margin of cultivation ceases to be extended, and part of the tax, pro tanto, falls on the landlords. If (b), then wages fall, and part of the tax falls on the laborer. Total result is a nearer approach to the stationary state.

Taxes on Expenditure are open to the same objections as the general income-tax. They may be:
Assessed taxes.
House-tax.

Assessed taxes, such as on servants, dogs, etc. These are rigidly direct.

House-taxes are:
On building-rent.
On ground-rent.

House-taxes on building-rent are paid by occupier. This tax is indirect.

House-taxes on ground-rent are (1.) with, or (2.) without an equivalent tax on agricultural rent. (1.) Are paid by ground landlord wholly, and therefore direct. (2.) Are part by occupier, and therefore indirect.

Indirect taxes are: Excise,
Customs, or
Tolls.

Indirect taxes may be on (1.) Long or (2.) Short investments of capital.

Indirect taxes on Long investments are always unadvisable, in view of Canon IV.

Indirect taxes on Short investments are subject to the laws of indirect taxation. 1. Tax vanities rather than positive enjoyments (e.g., liveries rather than servants). 2. The consumer and not the producer should pay the tax collector (Canon IV). That is, collect the tax as near the actual consumer as possible. 3. Taxes on real enjoyments to be kept as equal as possible for large and small means. 4. Tax as few articles as possible. England taxes only a very small number of imports. The United States taxes nearly everything imported. 5. Tax stimulants freely. The United States collect $91,000,000 from spirits and liquors, and $42,000,000 from tobacco (1883). 6. Tax imports of commodities not made at home, or whose home production is under an excise (internal revenue) duty equal to the customs tax. 7. Keep the rate of tax low, in order to get most revenue.

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