articles of which the consumption is not likely to be restricted to any great extent by the tax; since all such restrictions tend to cause loss of utility to the public over and above the gain to the treasury. But some restriction is inevitable: hence the special advantage of taxing commodities like alcoholic liquors and tobacco, which tend to be largely consumed in excess of what is salutary. It is to be observed, however, that such commodities usually occupy an increasing portion of non-necessary consumption, as we descend in the scale of wealth: therefore, in order to proportion the taxation of different classes as nearly as we can to their superfluous incomes, we shall require further taxation of the middle and upper classes—either directly, by an income-tax in the narrower sense, or by taxation of the special luxuries of such classes. This leads me to notice another difficulty in equalising burdens. It is urged that direct taxation, being inevitable, is a greater burden than an equal amount of taxation voluntarily incurred by purchasing commodities. And I think that this cannot be denied; on the other hand, the amount of the extra burden cannot be definitely calculated. Perhaps we may take this inequality as roughly balanced by the loss that the voluntary tax-payer generally incurs beyond what he pays to the treasury, through the inevitable interference with the process of supplying the commodities taxed. So far I have assumed that the burden of taxes-whether direct or indirect-will be borne by the persons on whom Government designs to impose it; and, speaking broadly, I think this will be the case with the taxes so far suggested. I do not conceive that any considerable part of the taxation proportioned to non-necessary expenditure has any important tendency to be transferred from the persons on whom it is intended to be imposed to other classes in the community, whether it takes the form of an income-tax in the narrower sense, or that of taxes on commodities:-so far as these latter are practically paid by the consumer, which may be taken to be in the main the case with taxes imposed for revenue only, when they have been some time estab lished.1 A new tax on any article of luxury is doubtless liable to fall to some extent on those who supply the article; which is a reason on the ground of equity for avoiding frequent changes in this department. The clearest case of transfer of burden is that of a special tax laid on land (or any other species of durable wealth). It would be clearly contrary to equity to impose such a tax, in a modern community-except as payment for special utilities furnished by Government to landowners, etc.; but, supposing such a tax to have been imposed some time ago, then to whatever extent land has been sold since it was imposed, the injustice would not be repaired by taking it off now; since, so far as the tax is taken into account by the purchaser, it practically remains a burden on the original owner even after the sale, and not on the purchaser.2 Hence such a tax, when of old standing, should be regarded as a portion of rent reserved by the community, and not taken into account in distributing the burden of taxation. It seems also right to treat taxes on inheritance as quite sui generis; since neither the economic nor the equitable considerations that ought ordinarily to be decisive in distributing taxation are applicable to this case—at least in the ordinary manner and degree. In the first place, Government, by taking a portion of what would otherwise have come to a man by inheritance, in no way diminishes the motives that prompt him to produce and accumulate wealth -if anything, it tends to increase these motives; nor does it necessarily cause even any disappointment of expectations, except when the tax is first imposed. A heavy tax on in 1 A certain share of the burden of such taxes will be borne by the owners of land or other natural agents employed in the production of the commodities taxed and this should receive consideration in any fresh taxation of the kind. But this share will not generally be large or definitely ascertainable in the case of taxes of old standing imposed for revenue only and it need the less be taken into account in the case of such taxes for the reason given in the next paragraph. : I do not take account of transfers by inheritance; since, where children have inherited, it may reasonably be supposed that they would have got more if there had been no tax : so that they may fairly be regarded as still paying it. heritances may indeed diminish the inducements of prospective testators to industry and thrift: but its bad effect in this way is not likely to be considerable, so long as such taxation is kept within the limits which the danger of evasion by gifts from the living to the living practically imposes on the financier and this latter danger will generally be much less where there are no children or other direct descendants to inherit. Hence it seems expedient, in the case of these taxes, to give up the ordinary aim at equality of incidence, so far as to tax more heavily wealth inherited by others than direct descendants. But if so, we can hardly include these taxes in our general distribution of the burden of taxation on the equitable principles above laid down and, on the whole, it seems best to treat them as a special burden on the propertied classes-inheritances below a certain value being exempted. Such an arrangement has the advantage of conceding something to the equitable claim for a graduated income-tax, without incurring any serious danger of checking accumulation. : N CHAPTER XII GOVERNMENTAL ENCROACHMENTS AND COMPENSATION $ 1. WE have now completed the survey, commenced in Chap. III., of the internal operations of government, and the principles on which these operations ought to be conducted. We have adopted the assumption, generally accepted in modern political thought, and realised in modern systems of law, that what the adult members of any state require from their government is mainly security from mutual mischief and interference, including breach of engagements freely contracted; security which is mainly to be given by maintaining laws that prohibit all such mischief, and inflicting punishment or exacting damages for the violation of such laws. We have, however, seen the need of further governmental interference with industry, and generally with the action of private individuals, on various grounds; sometimes on grounds that I have called "indirectly individualistic,” to carry out more effectively the principle of protecting individuals from mischief caused by others; sometimes, though rarely, in the interest of the individuals interfered with; sometimes, again, to secure for the community—either by regulating or by undertaking industrial operations—certain utilities which private competition does not tend to provide satisfactorily; sometimes to enable the poorer members of the community to apply their labour more productively, thus compensating for the encroachment on equality of opportunity which the appropriation of natural agents necessarily involves; sometimes, finally, to save those defeated in the struggle for existence from the worst consequences of their defeat. The need of some kind of interference under all these heads is generally recognised in the practice of modern communities; but our discussion will have made it evident that very wide divergences are possible as to the proper limits of such interference, even in well-ordered communities of civilised men, of which the governments are aiming in an intelligent and reasonable manner at the wellbeing of the community. -as These divergences are most manifest in the classes of governmental interference distinguished as "indirectly individualistic," "paternal," and "socialistic;" but they would still exist even if the operations of government were strictly confined to the "individualistic minimum." Thus, in trying to define the content of the right of property, from the point of view of the strictest individualism, we have had to recognise a considerable margin of doubt,-for instance, in the important cases of property in land, and property in the results of intellectual labour; and we have noted a similar doubtful margin, in considering the limits of contractual obligation. In the same way many doubtful points of importance occur as the last chapter has shown-in determining the distribution of the burden of providing government with the resources necessary for the performance of its functions. Considering these actual doubts and disagreements, and taking further into account the continual changes in human relations and circumstances which may be expected to accompany the development of industry and of civilisation generally, we must expect that important changes will occur from time to time in the legislative operations of government even in the most peaceful and well-ordered communities; and that such changes may materially affect the interests of individuals and frustrate expectations founded on the existing law. And even without any general alteration, the most effective attainment of the ends of government in some particular case may require-or appear to requirean encroachment on private rights. But by such encroachments on the legitimate expectations of individuals |