on what should be left untaxed, the incomes barely sufficient for healthful existence; and on the most favorable supposition, namely, that wages rise to compensate the laborers for the tax, it operates as a peculiar tax on profits, which is at once unjust, and detrimental to national wealth. What remain are taxes on luxuries. And these have some properties which strongly recommend them. In the first place, they can never, by any possibility, touch those whose whole income is expended on necessaries; while they do reach those by whom what is required for necessaries, is expended on indulgences. In the next place, they operate in some cases as a useful, and the only useful, kind of sumptuary law. I disclaim all asceticism, and by no means wish to see discouraged, either by law or opinion, any indulgence (consistent with the means and obligations of the person using it) which is sought from a genuine inclination for, and enjoyment of, the thing itself; but a great portion of the expense of the higher and middle classes in most countries, and the greatest in this, is not incurred for the sake of the pleasure afforded by the things on which the money is spent, but from regard to opinion, and an idea that certain expenses are expected from them, as an appendage of station; and I cannot but think that expenditure of this sort is a most desirable subject of taxation. If taxation discourages it, some good is done, and if not, no harm; for in so far as taxes are levied on things which are desired and possessed from motives of this description, nobody is the worse for them. When a thing is bought not for its use but for its costliness, cheapness is no recommendation. As Sismondi remarks, the consequence of cheapening articles of vanity, is not that less is expended on such things, but that the buyers substitute for the cheapened article some other which is more costly, or a more elaborate quality of the same thing; and as the inferior quality answered the purpose of vanity equally well when it was equally expensive, a tax on the article is really paid by nobody: it is a creation of public revenue by which nobody loses.

In order to reduce as much as possible the inconveniences, and increase the advantages, incident to taxes on commodities, the following are the practical rules which suggest themselves. Istly. To raise as large a revenue as conveniently may be, from

those classes of luxuries which have most connection with vanity, and least with positive enjoyment; such as the more costly qualities of all kinds of personal equipment and ornament. 2dly. Whenever possible, to demand the tax, not from the producer, but directly from the consumer, since when levied on the producer it raises the price always by more, and often by much more, than the mere amount of the tax. Most of the minor assessed taxes in this country are recommended by both these considerations.1 But with regard to horses and carriages, as there are many persons to whom, from health or constitution, these are not so much luxuries as necessaries, the tax paid by those who have but one riding horse, or but one carriage, especially of the cheaper descriptions, should be low; while taxation should rise very rapidly with the number of horses and carriages, and with their costliness. 3rdly. But as the only indirect taxes which yield a large revenue are those which fall on articles of universal or very general consumption, and as it is therefore necessary to have some taxes on real luxuries, that is, on things which afford pleasure in themselves, and are valued on that account rather than for their cost; these taxes should, if possible, be so adjusted as to fall with the same proportional weight on small, on moderate, and on large incomes. This is not an easy matter; since the things which are the subjects of the more productive taxes, are in proportion more largely consumed by the poorer members of the community than by the rich. Tea, coffee, sugar, tobacco, fermented drinks, can hardly be so taxed, that the poor shall not bear more than their due share of the burthen. Something might be done by making the duty on the superior qualities, which are used by the richer consumers, much higher in proportion to the value, (instead of, much lower, as is almost universally the practice under the present English system); but in some cases the difficulty of at all adjusting the duty to the value, so as to prevent evasion, is said, with what truth I know not, to be insuperable; so that it is thought necessary to levy the same fixed duty on all the qualities alike: a flagrant injustice to the poorer class of contributors, unless compensated by the existence of other taxes 1 The assessed taxes were imposed upon houses, carriages, male servants, saddle and carriage horses, and race horses, and some other articles. - Ed.

from which, as from the present income tax, they are altogether exempt. 4thly. As far as is consistent with the preceding rules, taxation should rather be concentrated on a few articles than diffused over many, in order that the expenses of collection may be smaller, and that as few employments as possible may be burthensomely and vexatiously interfered with. 5thly. Among luxuries of general consumption, taxation should by preference attach itself to stimulants, because these, though in themselves as legitimate indulgences as any others, are more liable than most others to be used in excess, so that the check to consumption, naturally arising from taxation, is on the whole better applied to them than to other things. 6thly. As far as other considerations permit, taxation should be confined to imported articles, since these can be taxed with a less degree of vexatious interference, and with fewer incidental bad effects, than when a tax is levied on the field or on the workshop. Customs duties are, cæteris paribus, much less objectionable than excise but they must be laid only on things which either cannot, or at least will not, be produced in the country itself; or else their production there must be prohibited (as in England is the case with tobacco) or subjected to an excise duty of equivalent amount. 7thly. No tax ought to be kept so high as to furnish a motive to its evasion, too strong to be counteracted by ordinary means of prevention; and especially no commodity should be taxed so highly as to raise up a class of lawless characters, smugglers, illicit distillers, and the like.

Of the excise and customs duties lately existing in this country, all which are intrinsically unfit to form part of a good system of taxation, have, since the last reforms by Mr. Gladstone, been got rid of. Among these are all duties on ordinary articles of food,1 whether for human beings or for cattle; those on timber, as falling on the materials of lodging, which is one of the necessaries of life; all duties on the metals, and on implements made of them; taxes on soap, which is a necessary of cleanliness, and on tallow, the material both of that and of some other necessaries; the tax on paper, an indispensable instrument of almost all business and of most kinds of instruction. The

1 Except the shilling per quarter duty on corn, ostensibly for registration, and scarcely felt as a burthen.

duties which now yield nearly the whole of the customs and excise revenue, those on sugar, coffee, tea, wine, beer, spirits, and tobacco, are in themselves, where a large amount of revenue is necessary, extremely proper taxes; but at present grossly unjust, from the disproportionate weight with which they press on the poorer classes; and some of them (those on spirits and tobacco) are so high as to cause a considerable amount of smuggling. It is probable that most of these taxes might bear a great reduction without any material loss of revenue.

CHAPTER XVIII

THE CUSTOMS REVENUE OF THE UNITED STATES

66. The Financial Aspects of the Customs Revenue. — Dr. R. F. Hoxie discusses the financial aspects of our customs duties, as follows: 1

A system of duties on imports for the support of the national government was established by the first Congressional revenue act under the Constitution of 1789. It seems to have been the popular desire, at that time, that customs duties alone should supply the federal revenue. But distrust, notably on the part of Hamilton, of the ability of this source to supply fully the fiscal needs of the government, led to the establishment also of a system of internal revenue duties. These two systems were on trial together for a decade. The result was definite. Though more than 88 per cent of the tax income was derived from import duties, that source continued to be regarded with favor by the people, while the internal revenue duties were steadily opposed. Nor was the opposition merely passive. In the case of the Whiskey Rebellion, it developed into armed resistance to federal authority, and, rapidly increasing in force, assumed at length the proportions of a national political issue. As such it accomplished a tax revolution. In the campaign of 1801 the maintenance of internal duties was one of the objections urged against Federalist rule. The triumph of the Republicans was immediately followed, as a political necessity, by the abolition of the internal taxes. This verdict of the people was final; it definitively established customs duties alone as the American system of national taxation. From that time until

1 The Adequacy of the Customs Revenue, Journal of Political Economy, Vol. III, pp. 43-64. Reprinted with consent of the author and the Journal of Political Economy.