Thus reductions of existing duties are proved by these examples to increase the revenue ; hut whether the effect of them be immediate or deferred must depend upon a variety of circumstances. If the reduction puts an end to extensive smug gling, the revenue will derive immediate benefit, as both the demand and the sup ply of the article already exist ; and the reduced tax, without affecting produc tion or consumption, acts as a police re gulation, and at once protects the revenue from fraud. But where there is little or no smuggling, and the revenue can only be increased by means of additional con sumption, the effect of reduced duties may be deferred and even remote. The article may have to be produced ; capital, skill, labour, and time may be required to provide it in sufficient quantities to meet the growing demands of the con sumer; and even should the supply be come abundant, the habits and tastes of a people cannot be changed on a sudden. The high price of an article may have plaeed it out of their reach, and in the meanwhile they may have become attached to a favourite substi tute„ or may be slow to spend their money upon a commodity which they have learned to do without. These and other causes may defer for a consider able time such an increase of con sumption as would make up for the reduced rate of tax, especially when the reduction has been so great as to require an extraordinary addition to the previous amount of consumption, before the sacri fice made in the revenue can be redeemed. But where the article on which it is pro posed to reduce a tax is already in uni versal request, and the supply immediate and abundant, and where the tax is so heavy as to restrain consumption, no present loss need be apprehended from a remission of part of the tax, and a very speedy increase of revenue may be ex pected. Sugar is an article of this de scription. It has become a necessary of life as well as a favourite luxury. There are scarcely any limits to the supply that could be raised, and the present duties add materially to the price and check consumption. As a proof of the sudden ness with which the consumption of foreign sugar might be expected to in crease if the excessive duty were re duced, we may refer to the effects of equalizing the duties on East and West India sugars in 1836. In that year the duty on East India sugar was reduced from 32s. the cwt. to 24s. In 1835 the quantity imported had been 147,976 cwts. ; and in 1837, one year only after the change, the import had increased to 302,945 cwts.; in 1838, to 474,100 cwts. ; and in 1839, to 587,142 cwts. As the tax was diminished only by one-fourth, and the consumption was immediately more than doubled, the revenue at once gained considerably by the reduction of duty.
A recent financial experiment will serve to show how little an increased revenue can be depended upon as the result of an augmentation of taxes upon articles of consumption. In 1840 an ad dition of 5 per cent. was made to all the duties of customs and excise, and a pro portionate increase of revenue was an ticipated, hut not realized. The net pro duce of the customs and excise in the year eliding January 5th, 1840, amounted to 37,911,5061. The estimated produce for the year ending January 5th, 184.z.
was 39,807,0811., 1,895,5751. being ex pected from the additional 5 per cent. The actual increase, however, was only 206,7151., or little more than one-half per cent., instead of the 5 per cent. which had been expected. This result was undoubtedly in part caused by a general stagnation of trade, and by the consequent distress which prevailed in that year, but we notice it because the principle of an indiscriminate augmen tation of existing taxes, without refer ence to their present amount, character, and circumstances, is very unwise. We have said that experience alone can show the precise rate of a particular tax which will not affect consumption and will at the same time discourage smuggling. ft must be presumed that existing rates have been fixed in order to secure these results, and that they are justified by ex perience. To add to them therefore, not because they are insufficient for their im mediate object, but because a general ad dition to the revenue is needed, is to neglect experience and to disturb the proper relations between the amount of tax and the value of particular articles.
During the last century it was a common financial course to add a general per • entage of increase upon all the customs' c uties whenever the revenue was found ..• be insufficient for immediate purposes. To this unwise policy must be attributed many of the strange anomalies which have existed in the British tariff. Auy recurrence to so clumsy a mode of taxa tion should he avoided. The tax upon each article ought to be adjusted by it self upon sound principles, and then should not be changed merely to save the trouble or to avoid the unpopula rity of selecting particular articles for increased taxation or of inventing new burthens.
Protective, Discriminating, and 'Pro hibitory Duties.—The legitimate object of taxation is that of obtaining a revenue in the least injurious manner for the be nefit of the community ; but this object has constantly been overlooked for the sake of ends not fairly to be accom plished by taxation. Legislapre should endeavour to encourage agriculture, trade, and manufactures; and it would be cul pable to neglect any proper means of en couragement, which are not only bene ficial to particular interests, but add to the general prosperity. Unfortunately, however, the zeal of most legislatures upon this point has been misdirected. They have seized upon taxation as the instrument of protection and encourage. went; and, using it as such, have in jured the great mass of their own coun trymen, and ultimately have failed in promoting the very interests they had in tended to serve. When the system of protection has existed, severe injuries and even injustice are inflicted whenever an attempt is made to undo the mischief which has been done. Reason and ex perience unite in teaching the impolicy of protective taxes ; and, in our own country, it is now acknowledged by the acts of the present year (1846) which regulate the trade in grain, meal, and flour, and other articles. [TARIFF.] The object of a protective duty is to raise artificially the price of the produce of manufactures of one country as com pared with the produce or manufactures of another. A heavy tax easily effects this object, and thus prevents compe tition on the part of that country whose commodities are taxed, and establishes a monopoly in the supply of those commo dities in favour of the parties for whose benefit the tax was Unproved. The re venue, the avowed object of a tax, so far from being improved, is here actually sacrificed by the exclusion of merchan dise, which at moderate duties would fill the coffers of the state. The state clearly is a loser ; the foreigner, whose goods are denied a market, is a loser. Who then gains by these losses? Not the con sumer; for the more abundant the sup ply, the better and cheaper will he find the market ; but the seller, who is en abled to obtain a high price for his wares because he has a monopoly in the sale of them, is the only party who gains. The community at large suffer doubly : first, by having to buy dear instead of cheap goods, or by being denied the use of them altogether ; and, secondly, by being obliged to pay other taxes which would not have been required if the very ar ticles which would have made their pur chases cheaper had been charged with a moderate impost, Even the sellers, for whom all these sacrifices are made, do not derive the benefit which might be expected. In the goods which they sell themselves, indeed, they are gainers; hut in purchasing of other monopolists they lose by an artificially high price, like the rest of the community. It constantly happens too, that although the prices at which they sell are high, their profits are reduced, by the competition of others selling the same articles, to the general level of profits throughout the country. When this is the case. all parties, with out exception, are losers—the state, the community, and the monopolists. The general injury done to trade by the pro tective system is too extensive a question to enter upon, but it is well illustrated in the Report of the Committee of the House of Commons upon Import Duties' in 1840 ; and the best refutation of the fallacies on which it is rested is in the debates in Parliament within the last few years, and especially during the pre sent year, 1846, which has been rendered memorable by the acts above referred to.