CHAPTER II.

Of the Sources of the General or Public Revenue of the Society.

THE revenue which must defray all the expenses of the government may be drawn either: (1) from some fund which belongs to the sovereign or commonwealth; or (2) from the revenue of the people, p. 404.

PART I.

Of the Funds or Sources of Revenue which may peculiarly belong to the Sovereign or Commonwealth.

These funds must consist either in stock, or in land. The sovereign, like any other owner of stock, may derive a revenue from it either by employing it himself or by lending it. His revenue is, in the one case, profit, in the other, interest. It is only in the rudest state of civil government that profit has made the principal part of the public revenue of a monarchical state. Small republics have sometimes derived a considerable revenue from the profit of mercantile projects. Hamburg is said to do so by a wine cellar and an apothecary's shop. The profit of a public bank has been a source of revenue to more considerable states, such as Venice and Amsterdam. The post office is properly a mercantile project, and is, perhaps, the only one which has been successfully managed by every sort of government. Princes, however, have frequently engaged in

This is to a great extent due to the fact that the government (which in almost every other mercantile project is likely to suffer much from the negligence of its agents) has in the case of the post office an army of unpaid spies, in the shape of all writers and receivers of letters who are sure to keep a sharp eye on the officials. The post office is a particular case of a widely diffused principle, viz. that the same exertions which are necessary to produce a given result are often capable of

many mercantile projects, but seldom with success. The profusion with which their affairs are managed renders it almost impossible that they should. No two characters seem more inconsistent than those of trader and sovereign, a truth amply illustrated by the history of the English East India Company (pp. 404-7).

A state may derive some part of its public revenue from the interest of money. The canton of Berne derives a considerable revenue by lending part of its treasure to foreign states. The security of this revenue must depend: (1) upon the security of the funds in which it is placed; and (2) upon the probability of the continuance of peace with the debtor nation. The city of Hamburg has established a sort of public pawnshop, which lends money to the subjects of the state at 6 per cent., by which it is pretended that the state gains 33,750l. sterling a year. Pennsylvania invented a method of lending, not money, but the equivalent of money, to its subjects, in the form of legal tender notes redeemable fifteen years after date. The success of the experiment arose from three concurrent circumstances. 1. Demand for some other instrument of commerce than gold and silver money. 2. The good credit of the Government. 3. That the whole (nominal) value of the paper should never exceed that of the gold and silver money which it displaced. The perishable nature of stock and credit render them unfit to be trusted to, as the principal funds of that revenue which can give security to government, pp. 407-8.

Land is a fund of a more stable and permanent nature, and has been the principal source of public revenue of many a great nation; e.g. the ancient republics of Greece and Italy. The rent of the crown lands constituted, for a long time, the greater part of

producing many similar results, e.g. police, army, &c. See Senior, Political Economy, 75–6, and M'Leod's Dictionary of Political Economy, article Chadwick.'

the revenue of the ancient sovereigns of Europe. War, and the preparation for war, occasion the greater part of the necessary expense of all great states. In ancient

Greece and Italy every citizen was a soldier at his own expense, and in the ancient monarchies of Europe the body of the people took the field at the expense of their lords without bringing any new charge upon the sovereign. The other expenses of government were moderate, which the rent of a great landed estate might defray. In the present state of Europe the rent of all the lands in the country, managed as they probably would be if they all belonged to one proprietor, would scarce amount to the ordinary revenue laid upon the people even in peaceable times. The ordinary revenue of Great Britain amounts to upwards of ten millions a year. But the land-tax at four shillings in the pound falls short of two millions, pp. 408-11.

The revenue which the great body of the people derives from land is in proportion, not to the rent, but to the produce of the land. The whole produce, except what is reserved for seed, is either annually consumed by the people, or exchanged for something that is consumed by them. Whatever keeps down the produce of the land below what it would otherwise rise to, keeps down the revenue of the great body of the people still more than it does that of the proprietors of land, since the rent of land is (in Great Britain) seldom more than the third part of the produce, pp. 411, 412.

Though there is no civilised state in Europe which derives the greater part of its public revenue from the rent of lands which are the property of the state, yet in all the great monarchies there are still large tracts of land which belong to the crown. These are, in general, mere waste and loss of country, the sale of which would, however, produce a large sum of money, which

The revenue for 1876-77 amounted to 81,945,5351., of which the land-tax yielded 2,532,000%

might be applied to the payment of the public debts.

The crown might immediately enjoy the revenue which this price woul redeem from mortgage. In a few years it would enjoy another revenue, arising from the cultivation of these lands. It would, in all cases, be for the interest of the society to replace the revenue which the crown enjoys from its lands by some other revenue, and to divide those lands, by public sale, among the people. Parks, pleasure grounds, and public walks seem to be the only lands which, in a civilised monarchy, ought to belong to the crown, pp. 412, 413.

ᏢᎪᎡᎢ 11.

Of Taxes.

It has been shown in the First Book of this inquiry that the private revenue of individuals arises ultimately from three different sources, rent, profit, and wages. Every tax must be finally paid from the private revenue of individuals, which arises ultimately from rent, profit, and wages. It is necessary to premise the four following maxims: (1) The subjects of every state ought to contribute to the support of government, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.2 (2) The tax which each individual is bound to pay ought to be certain, and not arbitrary. (3) Every tax ought to be levied at the time, or in the manner, most convenient for the contributor to pay it. (4) Every tax ought to be so contrived as both to take out, and to keep out, of the pockets of the people, as

F. 519. M. v. 2. 2. Rogers's Political Economy, 273 seq. 2 Taxation can be levied only on which a man can save. Whether he would actually save to that amount if untaxed is a different question. (See Rogers's note on this passage.) Of course the practical difficulty is to determine what each person has from which he can contribute.

little as possible, over and above what it brings in to the public treasury of the state. A tax may either take out or keep out of the pockets of the people a great deal more than it brings into the public treasury, and in four ways: 1, by the number of officers who levy it; 2, by obstructing the industry of the people; 3, by penalties incurred in attempting to evade the tax; 4, by subjecting the people to the frequent visits and examinations of tax-gatherers. The evident justice and utility of the foregoing maxims have recommended them more or less to the attention of all nations,' pp. 413-17.

ARTICLE I. Taxes upon Rent. Taxes upon the Rent of Land.

A tax upon the rent of land may either be imposed according to a certain canon not to be altered; or it may be imposed so as to vary with every variation in the real rent of land. A land-tax which, like that of Great Britain, is assessed upon each district according to a certain invariable canon, though equal at the time of establishment, becomes unequal in process of time, according to the unequal degrees of improvement in the different parts of the country. In England the landtax was unequal at its first establishment. It offends, therefore, against the first maxim. It is agreeable to the other three, pp. 417, 418.

The advantage which the landlord has derived from the invariable constancy by which the lands are rated to the land-tax has been principally owing to circumstances extraneous to the tax. It has been owing in part to the prosperity of almost every part of the country, the rents everywhere continually rising. The landlords, therefore, have gained the difference between the tax

F. 520. M. v. 2. 2-4.