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<!-- you can have any number of categories here --> [[Category:Adam Smith]] [[Category:Progressive Taxes]] <!-- 1 URL must be followed by >= 0 Other URL and Old URL and 1 End URL.--> {{URL | url = http://www.staff.ncl.ac.uk/j.veit-wilson/documents/adamsmithontaxesandnecessities.pdf}} <!-- {{Other URL | url = }} --> <!-- {{Old URL | url = }} --> {{End URL}} {{DES | des = [[Adam Smith]]’s ideas about the justification for progressive rather than merely proportionate taxation. | show=}} <!-- DPL has problems with categories that have a single quote in them. Use these explicit workarounds. --> <!-- normally, we would use {{Links}} and {{Quotes}} --> {{Quotations|Adam Smith's views in 1776 on the progressive burden of taxation|quotes=true}} {{Text | Adam Smith [1776], An Enquiry into the ature and Causes of the Wealth of ations, [Book 5, chapter 2]. The following passage is commonly quoted to show Adam Smith’s views of social necessities. Below it I have added quotations [with added emphasis] from the original source to show the context of argument about the burdens of taxation in which this passage is located, and Smith’s ideas about the justification for progressive rather than merely proportionate taxation. “By necessaries I understand, not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. ...But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt ... Custom, in the same manner, has rendered leather shoes a necessary of life in England. The poorest creditable person of either sex would be ashamed to appear in public without them. ... Under necessaries, therefore, I comprehend, not only those things which nature, but those things which the established rules of decency have rendered necessary to the lowest rank of people.” [Ibid, part 2 article 4.] CHAPTER II Of the Sources of the General or Public Revenue of the Society PART 2. Of Taxes THE private revenue of individuals, it has been shown in the first book of this Inquiry, arises ultimately from three different sources: Rent, Profit, and Wages. Every tax must finally be paid from some one or other of those three different sorts of revenue, or from all of them indifferently. I shall endeavour to give the best account I can, first, of those taxes which, it is intended, should fall upon rent; secondly, of those which, it is intended, should fall upon profit; thirdly, of those which, it is intended, should fall upon wages; and, fourthly, of those which, it is intended, should fall indifferently upon all those three different sources of private revenue. The particular consideration of each of these four different sorts of taxes will divide the second part of the present chapter into four articles, three of which will require several other subdivisions. Many of those taxes, it will appear from the following review, are not finally paid from the fund, or source of revenue, upon which it was intended they should fall. Before I enter upon the examination of particular taxes, it is necessary to premise the four following maxims with regard to taxes in general. I. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. The expense of government to the individuals of a great nation is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation. Every tax, it must be observed once for all, which falls finally upon one only of the three sorts of revenue above mentioned, is necessarily unequal in so far as it does not affect the other two. In the following examination of different taxes I shall seldom take much further notice of this sort of inequality, but shall, in most cases, confine my observations to that inequality which is occasioned by a particular tax falling unequally even upon that particular sort of private revenue which is affected by it. ARTICLE I. Taxes upon Rent. Taxes upon the Rent of Land. Taxes upon the Rent of House. The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion. ARTICLE IV. Taxes which, it is intended, should fall indifferently upon every different Species of Revenue Taxes upon Consumable Commodities. The impossibility of taxing the people, in proportion to their revenue, by any capitation, seems to have given occasion to the invention of taxes upon consumable commodities. The state, not knowing how to tax, directly and proportionably, the revenue of its subjects, endeavours to tax it indirectly by taxing their expense, which, it is supposed, will in most cases be nearly in proportion to their revenue. Their expense is taxed by taxing the consumable commodities upon which it is laid out. Consumable commodities are either necessaries or luxuries. By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct. Custom, in the same manner, has rendered leather shoes a necessary of life in England. The poorest creditable person of either sex would be ashamed to appear in public without them. In Scotland, custom has rendered them a necessary of life to the lowest order of men; but not to the same order of women, who may, without any discredit, walk about barefooted. In France they are necessaries neither to men nor to women, the lowest rank of both sexes appearing there publicly, without any discredit, sometimes in wooden shoes, and sometimes barefooted. Under necessaries, therefore, I comprehend not only those things which nature, but those things which the established rules of decency have rendered necessary to the lowest rank of people. All other things I call luxuries, without meaning by this appellation to throw the smallest degree of reproach upon the temperate use of them. Beer and ale, for example, in Great Britain, and wine, even in the wine countries, I call luxuries. A man of any rank may, without any reproach, abstain totally from tasting such liquors. Nature does not render them necessary for the support of life, and custom nowhere renders it indecent to live without them. }}
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