A financial experimeut will servo 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 addition of 5 per cent. was made to all the duties of customs and excise, and a proportionate increase of revenue was anticipated, but not realised. The net pro duce of the customs and excise in the year ending January 5th, 1S40, amounted to 37,911,506/. The estimated produce for the year ending January 5th, 1842, was 39,807.0311., 1,895,575/. being expected from the additional 5 per cent. The actual increase, however, was only 206,7151., or little more than 4 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 augmentation of existing taxes, without reference to their present amount, character, and circumstances, is very unwise.
We have raid 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. It must be presumed that existing rates have been fixed in order to secure these results, and that they are justified by experience. To add to them, therefore, not because they are in sufficient for their immediate object, but because a general addition 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 hest century it was a common financial course to add a general per centage of increase upon all the customs' duties whenever the revenue was found to be insufficient for immediate purposes. To this unwise policy must be attributed many of the strange anomalies which formerly existed in the British tariff. Any recurrence to so clumsy a mode of taxation should bo avoided. The tax upon each article ought to be adjusted by itself upon sound principles, and then should not be changed merely to save the trouble or to avoid the un popularity of selecting particular articles for increased taxation or of inventing new burdens.
Protectire, Discriminating, and Prohibitory Dutics.—The legitimate object of taxation is that of obtaining a revenue in the least injurious manner for the benefit of the community ; but this object has con stantly been overlooked for the sake of ends not fairly to be accom plished by taxation. Legislature should endeavour to encourage agriculture, trade, and maunfactures; and it would bo culpable to neglect any proper means of encouragement, which are not only beneficial 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 instru ment of protection and encouragement ; and, using it as such, have injured the great mass of their own countrymen, and ultimately have failed in promoting the very interests they had intended 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 experience unite in teaching the impolicy of protective taxes; and, in our own country, this itnpolicy was acknowledged by the acts of 1846, which regulate the trade in grain, meal, and flour, and other articles.
The object of a protective duty is to raise artificially the price of the produce or manufactures of one country as compared with the produce or manufactures of another. A heavy tax easily effects this object, and thus prevents competition on the part of that country whose commodities are taxed, and establishes a monopoly in the supply of those commodities in favour of the parties for whose benefit the tax will imposed. The revenue, 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 1 Not the consumer ; for the more abundant the supply, the better and cheaper will he find the market ; but the seller, who is enabled to obtain a high price for his wares because Ire 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; aud, secondly, by being obliged to pay other taxes which would not have been required it the very articles which would have made their purchases cheaper had been charged with a moderate impost. Even the sellers, for whom all these sacrifices are tints's), do not derive the benefit which might be expected. In the goods which they sell themselves, indeed, they are gainers ; but in purchasing of other monopelista 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 re duced, by the competition of others selling the same articles, to the general level of profits throughout the country. When this is the ease, all parties, without exception, are losers—the state, the cominu city, and the monopolists.