A tax upon the gross rent of land would fall upon the landlord, and would be in fact a tax upou his annual income, and as such would fall with undue severity upon him, unless other classes of the community should be liable to a proportionate deduction from their respective incomes for the benefit of the state. This brings us to consider the expediency of a general tax upon all incomes.
In whatever form the tax may be levied, the contribution should be paid from income, and not from capital ; and, accordingly, the simplest and most equitable mode of taxation would appear to be that which, after assessing the annual income of each person arising from all sources, should take from him, directly, a certain proportion of his income as his share of the general contribution. Such a tax, equitably levied, would appear to agree in theory with all the four maxims of Adam Smith ; but, practically, every tax upon income must abound in inequalities, in uncertainty, and in great personal hardships and inconvenience.
The strongest of the objections to an income-tax is, however, the inquisitorial nature of the investigation into the affairs of all men, which is necessary to secure a statement of their incomes. This objec tion, indeed, is treated lightly by some ; but by the mass of the con tributors it is considered the most inconvenient and unseasonable quality of an income-tax. Even if the exposure of a man's affairs could do him no possible injury, yet as an offence to his feelings, or even caprice, it is a hardship which is not involved in the payment of other taxes. But apart from matters of feeling, injury of a real character is also inflicted upon individuals by an exposure of their means and sources of income. Mercantile men, from the dread of competition, take pains to conceal from others, especially if in the same business, the application of their capital, the rate of profit realised, their connections, and their credit, all of which must be dis closed, perhaps to their serious injury, when there is an investigation of their profits.
For these reasons the mode of collecting the income-tax certainly cannot be approved of as being " most likely to be convenient to the contributor." Its general unpopularity when in operation is the best proof of its hardship and inconvenience. Upon the whole, a tax upon iucome is so difficult to adjust equitably to the means of individuals, and the mode of collection is necessarily liable to euch strong objec tion, that, if resorted to at all, it should be reserved for extraordinary occasions of state necessity or danger, when ordinary sources of revenue cannot safely be relied on.
The English Assessed taxes have as few objections in principle as most modes of direct taxation. With an equitable assessment, and special exemptions in certain cases, they are capable of being made to bear a tolerably just proportion to the incomes of the individuals paying them. They share, however, in the general unpopularity of all direct taxes, and it cannot be denied that they often press unequally upon particular persous. The wiodow-tax was indeed in many respects
most objectionable, but it has happily been removed. The direct taxes upon horses, carriages, hair-powder, armorial bearings, &c., being paid voluntarily by the rich to gratify their own taste for luxury or display, are not likely to meet with many objectors. The use of such articles generally indicates the scale of income enjoyed by the contributor, and the tax is too light to discourage expenditure or to make any sensible deduction from his means.
Indirect Taxes.—In preferring one tax to another, a statesman may be influenced by political considerations as well as by strict views of financial expediency, and nothing is more likely to determine his choice than the probability of a cheerful acquiescence on the part of the people. All taxes are disliked, and the more directly and distinctly they are required to be paid, the more hateful they become. On this, as well as on other grounds, " indirect taxes," or taxes upon the consumption of various articles of merchandise, have been in favour with most governments. " Taxes upon merchandise," says 3lontesquieu, "are felt the least by the people, because no formal demand is made upon them. They can be so wisely contrived that the people shall scarcely know that they pay them. For this end it is of great consequence that the seller shall pay the tax. He knows well that he does not pay it for himself ; and the buyer, who pays it in the end, confounds it with the price." (' Esprit des Lois,' Eyre xiii. chap. 7.) This effect of indirect taxes is opt to be undervalued by writers on political economy ; but it is undoubtedly a great merit in any system of taxation (which is but a part of general government) that it should be popular, and not give rise to discontent. A tax that is positively injurious to the very parties who pay it without thought, is certainly not to be defended merely on the ground that no complaints are made of it; but It may be safely admitted as a principle, that of two taxes equally good in other respects, that is the best which is most acceptable to the people. The very facility, however, with which indirect taxes may be levied, makes it necessary to consider the incidents and effects of them with peculiar caution. The statesman has no warning, as in the cases of direct taxes, that evils are caused by an impost which is productive and which every one seems willing to pay. When any branch of indus try is visibly declining, and its failure can be traced to no other cause than the discouraging pressure of a tax, the necessity of relief Is felt at once ; but if trade and manufactures are flourishing, and the country advancing In prosperity, it is difficult to detect the latent influence of taxes in restraining that progress, which but for them would have been greater ; and still more difficult to imagine the nevesources of wealth which might have been laid open if such taxes had not existed, or had been lees heavy, or had been collected at different times or in different ways.