Essays: Moral, Political, and Literary

ESSAY VIII

Essay_301-350.indd 342 12/27/11 9:05 PM ESSAY VIII OF TAXES T HERE is a prevailing maxim,•among some reasoners, that every new tax creates a new ability in thesubjectto bearit, and that each encrease ofpublic burdens encreases proportionably the industry ofthepeople. This maxim is of such a nature as is most likely to be abused; and is so much the more dangerous, as its truth cannot be altogether denied: but it must be owned, when kept within certain bounds, to have some foundation in reason and experience. 1 1[The "maxim" that H ume considers here was commonly held by the mercantilist writers and by others between 1660 and 1750. See Edwin R. A. Seligman, The Shifting and Incidence of Taxation, 5th ed. , rev. (New York, Columbia University Press, 1927), pp. 25-30,46-62. Hume finds it to be partly correct, in that workers can be expected to absorb moderate Essay_301-350.indd 343 12/27/11 9:05 PM 343 OF TAXES When a tax is laid upon commodities, which are consumed by the common people, the necessary consequence may seem to be, either that the poor must retrench something from their way of living, or raise their wages, so as to make the burden of the tax fall entirely upon the rich. But there is a third consequence , which often follows upon taxes, namely, that the poor encrease their industry, perform more work, and live as well as before, without demanding more for their labour. Where taxes are moderate, are laid on gradually, and affect not the necessaries of life, this consequence naturally follows; and it is certain, that such difficulties often serve to excite the industry of a people, and render them more opulent and laborious , than others, who enjoy the greatest advantages. For we may observe, as a parallel instance, that the most commercial nations have not always possessed the greatest extent of fertile land; but, on the contrary, that they have laboured under many natural disadvantages. TYRE, ATHENS, CARTHAGE, RHODES, GENOA, VENICE, HOLLAND, are strong examples to this purpose. And in all history, we find only three instances of large and fertile countries, which have possessed much taxes on commodities by increasing their industry rather than by retrenching consumption or by increasing wages. Since people are often more industrious and opulent where there are "natural disadvantages" of soil and climate ro overcome, we may expect rhar "artificial burdens," such as judicious taxes, will likewise be favorable ro industry. Yet Hume qualifies the argument by refusing ro apply ir ro taxes on "the necessaries of life" and by warning rhar a people can be ruined by exorbitant or inappropriate taxes (see paragraph 2 in note b of rhe variant readings for this essay). Later in the essay, Hume opposes rhe view rhar all taxes are ultimarely shifted roland. john Locke had taken this view, and he may be the "celebrated writer" rhar Hume refers ro in earlier versions of this essay (see the passage in note d of the variant readings). Locke's theory of the shifting of all taxes ro land was revived in the eighteenth century by the school of French economists known as rhe "Physiocrars" (see Seligman, pp. 125 - 142). Hume debated the issue with one of the leading Physiocrars , Anne-Robert jacques Turgor, in correspondence during 1766 and 1767. For the significance of Hume's views on taxation, see Rorwein, David Hume: Writings on Economics, pp. lxxxi-lxxxiii.] Essay_301-350.indd 344 12/27/11 9:05 PM 344 ESSAY VIII trade; the NETHERLANDS, ENGLAND, and FRANCE. The two former seem to have been allured by the advantages of their maritime situation, and the necessity they lay under of frequenting foreign ports, in order to procure what their own climate refused them. And as to FRANCE, trade has come late into that kingdom, and seems to have been the effect of reflection and observation in an ingenious and enterprizing people, who remarked the riches acquired by such of the neighbouring nations as cultivated navigation and commerce. The places mentioned by CICERO,2 as possessed of the greatest commerce in his time, are ALEXANDRIA, COLCHUS, TYRE, SIDON, ANDROS, CYPRUS, PAMPHYLIA, LYCIA, RHODES, CHIOS, BYZANTIUM, LESBOS, SMYRNA, MILETUM , Coos. All these, except ALEXANDRIA, were either small islands, or narrow territories. And that city owed its trade entirely to the happiness of its situation. Since therefore some natural...