commodity suffers some loss or inconvenience from the tax, although he thereby does not contribute any thing to the revenue. The inconvenience and loss which the producer and the non-consumer suffer, are to the advantage of those whose wealth enables them to consume the accustomed quantity, and who appear to contribute a large sum to the revenue, a part of which is, however, in fact paid at the expense of others. As an example, let us suppose that foreign sugar is excluded, and the country for its supply of sugar is dependent upon our West India Islands, which send us a considerable supply free of duty at four pence a pound. Let a duty of three pence a pound be now imposed, which will occasion a considerable diminution of consumption. But as the cultivators of sugar cannot readily apply their land and labour with equal profit to the production of other goods, they will reduce the price of sugar, in order to avoid the loss which they would sustain by either having their stock unsold, or turning their land and labour to other purposes. They will produce less, and what they do produce they will sell at a cheaper price than they formerly procured. They will produce no more than they can afford to produce for three pence, and than the country can afford to purchase at six pence per pound. The man who consumes one pound of sugar, appears to pay a tax of three pence to the state, although in reality he only loses two pence, as the remaining penny falls on the producer. From the inconvenience which the poor man suffers by being compelled to forego the use of sugar, the state derives no income. That inconvenience is merely the process by which the tax is in part shifted from the consumer to the producer. If all men were governed by the dictates of prudence in all their habits, this interference of taxation with the natural course of individual expenditure, would be a greater evil than it actually is. In the present state of mankind, a tax may sometimes have a useful operation as a sumptuary law, and a restraint upon vice and folly. In particular, a tax upon ardent spirits operates in this manner. When a poor man sees the inviting sign of a publichouse, it may not occur to him, that if he goes in to take a glass he will pro bably be tempted to take more; that every glass he takes is one step towards the formation of the most destructive of all bad habits, which will assuredly destroy his morals, health, fortune, and character, and that even a single glass of whiskey exercises a pernicious effect on all these. Such reflections may not occur to him at the proper moment, or if they occur, they may be disregarded. He is much less likely to forget, or to disregard, the circumstance that a glass of whiskey will cost two pence, and that he has only one penny in his pocket. The mere cost of purchasing ardent spirits is the slightest inconvenience attending their use, but it is the most immediate, and is therefore frequently the most operative restraint. It may be considered an admitted principle in finance, that the difficulty of preventing smuggling is the only circumstance which ought to place a limit to the tax upon ardent spirits. This limit has been attained, and experience has sufficiently proved that in the present state of Ireland, any increase of the tax on whiskey would immediately lead to illicit distillation. It is not, however, to be hastily concluded, that what we have said of the tax on whiskey is equally true of the duty on wine, or on any of the more expensive liquors. There is a most important distinction between the cases. It may be said, that of those who habitually drink wine, not one in a hundred ever commit any excess, and very few feel that the price is a restraint upon the quantity which they consume. We do not feel it necessary to enter into the medical question, whether the use of wine in any quantity is pernicious to the health, although we do not coincide in that opinion, but believe that, with the exception of a few peculiar idiosyncrasies, a man may take one glass of sherry and three of claret every day, without injury to his constitution. Our meaning is, that most men drink wine with deliberation, and without repentance, and are limited in the quantity which they consume by other motives than the consideration of its expense. We admit that an increase of duty diminishes the consumption of wine; but this effect is not attended by improved habits of sobriety; on the contrary, those who would otherwise consume wine, are induced to take some form of ardent spirits in its place, and it is generally admitted that the use of spirits is more apt to create a craving desire for a recurrence to them, and thereby to lead to habits of intoxication, than the use of wine. In general, it may be said that a tax upon any species of ardent spirits, except the cheaper kind, cannot operate usefully as a sumptuary law it will merely lead to a consumption of the cheaper in place of the better and more wholesome liquor. At present the tax on wine is too high. It is five shillings and six pence a gallon on French, Spanish, and Portuguese wines indifferently, independent of the five per cent. duty, which is about three pence more. This is about eleven pence a bottle, or eleven shil-, lings a dozen. But the principal quantity of the wine consumed in England can be shipped at five shillings and six pence a gallon wholesale price, the duty on which, therefore, operates as an ad valorem duty of cent. per cent. We doubt if, after a short time, the revenue would suffer much by reducing the duty on wine to two shillings and six pence a gallon-that is, to five pence a bottle-a duty which would lead to an immense increase of consumption, by enabling the public to procure a pure port, sherry, or claret, for eighteen shillings a dozen, or one shilling and six pence a bottle. The high price of wine presses with great severity upon many of the poorer and middling classes who are directed to use it for medicine, and they are strongly tempted to take ardent spirits in its place, although there are very few cases indeed in which the use of the latter can be of any service to the health. Even when they do get what they mistake for wine, it is abominable stuff. They na. turally resort to those who supply them with other commodities of the like nature, but who, having among their customers none who know what wine really is, keep for an occasional demand nothing that is deserving of the name. This evil would disappear under a more general consumption of cheap wine by the lower classes. Very few people know that good, unadulterated wine can be procured at a very low price, and a comparatively small number could discern the difference between a pure and cheap wine, and that of a higher quality which commands double the price. We shall VOL. XXVI.-No. 151. mention a few statistical facts to show how great an increase may take place in the consumption of wine without injury to the morals or temperance of the population. In the year 1843, the quantity of wine imported into the United Kingdom for consumption was 6,000,000 gallons, on which the duty was £1,700,000. It does not appear that the importation in any year came up to 7,000,000 of gallons. But in the same year there were 7,700,000 gallons of gin and whiskey consumed in England alone,in Scotland 5,600,000, and in Ireland 5,500,000; making altogether 18,800,000 gallons of ardent spirits consumed in the United Kingdom. Before the spread of temperance, the consumption in Ireland alone exceeded 10,000,000 gallons of whiskey. The intoxicating strength of the spirituous liquors consumed in the United Kingdom is equal to that of 60,000,000 gallons of wine, which is ten times the quantity of wine now consumed. There is no reason to doubt that a reduction in the price of wine would lead to a considerable increase in its consumption, and that this increase would be chiefly derived from those who at present consume ardent spirits, and that ultimately the revenue and the health and habits of the people would profit by the change. The duty on foreign spirits is also much too high, being twenty-two shillings and ten pence the gallon. This must afford an irresistible temptation to the smuggler, as the article on which this high duty is placed can be procured within a few hours' sail of our coasts for about four shillings the gallon. The duty therefore is five hundred or six hundred per cent.-so high as to make one successful venture com pensate for many failures. We fully agree with Mr. M'Culloch, that the duty ought to be reduced to ten shillings the gallon. At present the consumption of foreign spirits on which the duty is paid is about 1,100,000 gallons, and probably at least as much more is smuggled into the country, and an equal quantity of counterfeit is sold as genuine brandy. A duty of ten shillings would in a short time lead to a consumption of 6,000,000, and a revenue of £3,000,000, being an increase of £1,700,000 on the present revenue. This increased consumption would be drawn partly from the stoppage of the C sale of smuggled or counterfeit brandy, and partly from those who at present consume spirits of an inferior nature, subject to a lower rate of tax. It would also lead to a great increase of our trade with the continent of Europe. A duty of four hundred per cent., acting chiefly as a prohibition, is contrary to every principle of sound commercial policy. Nor let us be deceived by the name of a tax upon spirits, as if it acted as some check habits of drunkenupon ness, as we have already shown that no tax, except that upon the cheapest kind of spirits, can have that effect. A tax upon the dearer and better kinds, merely leads to the consumption of an inferior or adulterated spirit in their place. Mr. M'Culloch is of opinion that the duty on tea is still too high, although it is less than one-half of what it was one hundred years ago, when money was more scarce and valuable than it is now. In 1745, the duty was four shillings the pound, together with an ad valorem duty of fourteen per cent. The present duty is two shillings and one penny a pound on all kinds of tea alike. The produce of this tax is about £4,500,000. "Taking the average price of bohea in bond in London at ten pence or one shilling per pound, a duty of the same amount would, of course, be equal to the ad valorem duty of one hundred per cent. under the Company's regime, which is certainly high for a duty on a necessary consumed by the poor. But even with a duty of this amount, bohea might be retailed at two shillings and six pence per pound; and at this price there can be no doubt the consumption would amount to eight or ten millions of pounds. The reduction of the duty on congou to one shilling per pound, would also be of the greatest importance to the lower and middle classes; and the powerful stimulus it would give to consumption, and consequently also to the demand for sugar, which is indispensable to the use of tea, makes it all but certain that in no very lengthened period, the revenue would, instead of losing, gain by the change. "But supposing the revenue were to lose at the outset some £500,000 or £600,000 a year by the proposed reduction, is the getting rid of the injustice of the present tax, and the effectual encouragement of the trade with China, not worth even a greater sacrifice? Taking the price of bohea and low con gou in bond in London at one shilling per pound, (and it is frequently less,) the duty of two shillings and one penny with which they are at present charged, is equivalent to an ad valorem one of more than two hundred per cent.: whereas, taking the price of the hyson aud other superior teas consumed by the rich, at from three shillings to four shillings per pound, the duty on them does not exceed from fifty to sixty-six per cent. ad valorem; that is, it does not amount to more than from one-fourth to one-third part of the duties laid on the teas consumed by the poor. Surely, however, this is neither an age nor a country in which an anomaly of this sort can be safely maintained. The public necessities require that the tea, sugar, and other necessaries of the poor, should be taxed; but the obvious principles of justice require that the duties on them should be, if not lower, at all events no higher than those laid on the necessaries or luxuries of the rich. The existing duties on tea contradict this plain principle, and are at once unjust and exorbitant. The duty on bohea and the lower cougous should not, in fact, exceed four pence or six pence per pound; and we trust that at no distant period means may be found of reducing it to that amount."-p. 239. We agree with Mr. M'Culloch in thinking that the duty is too high, but we do not recommend so considerable a reduction, nor one of the same nature, as that proposed by him. A revenue of £4,500,000 is not to be trifled with. The consumption of tea has something peculiar in its nature, and of those who at present consume it, a great proportion now consume as much as they desire. Still we have no doubt that a reduction of the duty to one shilling and six pence per pound would be attended with beneficial results. But it would not, we think, be expedient to reduce the duties on the lower sorts more than on the rest. Such reduction would encourage the Chinese to cultivate the inferior qualities, for which the differential duties would excite an artificial demand. We would prefer to place good tea within the reach of the poor. It is impossible to levy ad valorem duties on articles to be judged of by the uncertain sense of taste. The attempt would open an inexhaustible field for fraud. In those cases, the tax must be the same upon all goods of the same name and species. There is as great a difference between brandies and wines of the same name, and from the same port, as there is between different qualities of tea; but to levy an ad valorem duty on them is out of the question. In all those cases, those who consume the higher qualities, that is to say, generally speaking, the rich, inevitably enjoy this advantage that a smaller proportion of the price of what they purchase consists of the tax; but this inequality cannot be cured by an impracticable mode of assessing those particular taxes. It is, however, fully compensated by the income tax, which falls exclusively upon the richer classes, and by our general system of taxation, according to which the poor man contributes nothing to the revenue for the greater part of his expenditure. Mr. McCulloch's general opinion of an ad valorem duty is not very favourable, and we apprehend that he does not correctly understand what its effects would be. If all "It had been, we believe, uniformly supposed, down to the edition of The Wealth of Nations' by the author of this work, that an equal ad valorem duty on all commodities, by affecting them to the same extent, would not in any degree modify or change the relation or proportion which they previously bore to each other. But it must be observed, that though an equal ad valorem duty would affect commodities in the same proportion, it would not affect the profits of their producers in the same, but in a very different proportion; and it is by the degree in which the latter are affected, that the relation of commodities to each other is determined. classes of producers employed the same proportions of fixed and circulating capital, an equal ad valorem duty would affect them all equally, and the value of their commodities, as compared with each other, would not be affected by its imposition. But this is not the actual state of things; different sorts of commodities are produced by the agency of very different proportions of fixed and circulating capital; and hence were an equal ad valorem duty laid on them all, it would not affect profits equally, and would consequently cause a transfer of capital from one business to another, and a variation in the value of commodities, raising some and sinking others. To illustrate this, assuming that profits are ten per cent., let it be supposed, in the first place, that A advances one thousand pounds in wages at the commencement of the year, and that he receives the produce, which must, by the supposition, be worth one thousand one hundred pounds, at the end of the year; in the second place, let it be supposed that B has a capital of eleven thousand pounds vested in a highly durable machine, which is capable of performing its work without any, or with but very little manual labour-the annual produce of this machine being, it is obvious, under the circumstances supposed, wholly made up of profits, and necessarily selling for eleven hundred pounds; and last, let it be supposed that an equal ad valorem duty of ten per cent. is laid on commodities. Now it is plain that in this case A and B will each bring, at the end of the year, commodities worth eleven hundred pounds to market, and will therefore be respectively taxed one hundred and ten pounds. But one hundred pounds only of the value of A's goods consists of profits, the rest consisting of the capital expended in paying the wages of those by whom they were produced; whereas the whole value of B's goods consists of profits: hence it is clear that, while the duty would swallow up the whole of A's profits, and ten pounds of his capital, it would only take ten per cent. of B's profits. We have purposely chosen a case that sets the unequal operation of the tax in a striking point of view; but whenever there was any considerable difference in the proportion of fixed and circulating capital employed in producing different commodities, an equal ad valorem duty would operate in the way now pointed out. Such a duty would therefore be among the most unequal and injurious that could be imposed. It would cause an immediate derangement in all the channels of industry, and in the value of most descriptions of property. Capital would be driven from employments principally carried on by hand, to those principally carried on by machinery; and while the value of commodities produced by the former would rise, the value of those produced by the latter would fall, until they had been adjusted so as to yield the same rate of profit to the producers."-p. 170. As this is a purely theoretical question, we do not think it proper to enter into all the details necessary to point out the consequences which might be "It is, of course, taken for granted that the fixed capitals are of the same degree of durability, and that the circulating capitals are returnable in the same periods." expected from an equal ad valorem tax upon every species of property. For our present purpose it is sufficient for us to express our dissent from Mr. McCulloch's doctrine, to expose the fallacy of his reasoning, and to state what we conceive to be the true doc trine applicable to the case. Our author's mistake lies in his not taking into his consideration the effect of the ad valorem tax upon his machine, and on the price or wages of labour. An equal ad valorem tax would fall chiefly on the wages of labour. His employer advances to him a commodity which has already paid a duty, and procures by his work a commodity on which a duty is to be paid. His power to produce for his employer, and therefore to purchase such goods for himself, is diminished by the tax. He must work for less wages, precisely in the same manner as if his productive powers were reduced in the proportion of ten to nine; and as the commodities produced by machinery would be subject to a double tax-i. e. that on the machine, which is in effect paid by the labourer, and that on the commodities themselves when produced-it seems to follow that a general ad valorem tax would rather have an effect contrary to that attributed to it by Mr. M'Culloch, and tend to drive capital from trades in which a great quantity of fixed capital is employed, to those which are principally carried on by means of circulating capital. In conclusion, we must express our conviction, that the taxation of the United Kingdom is now placed upon a sounder and juster foundation than the financial system of any country has ever exhibited, and that notwithstanding the enormous increase of the national debt, taxation presses less upon the subject now than it did one hundred years ago. Still there is room for some improvement. A reduction may be beneficially made in the duty upon wine, and upon all cominodities on which the duty now exceeds or approaches one hundred per cert.: these are, principally, foreign spirits, tea, and tobacco. The duty on insurance against fire is also much too high, and is regulated on a wrong principle, being proportional to the sum insured, not to the premium paid. It does appear monstrous, that in all the common cases of insurance the sum paid to the state as duty should be double the sum paid for insurance to the company who undertakes the risk. A tax of two hundred per cent. is thus imposed upon that prudence and foresight which it ought to be the object of the state to encourage. The produce of this tax is less than one million; but if it were reduced to one shilling per hundred pounds, in every case in which the insurance office did not charge a higher rate of premium, the public would gain much in comfort and security, and the revenue would lose little or nothing. Insurance offices would reduce the premium to that rate in all ordinary cases, and the increase of insurances would more than compensate them for the change. It may be said, that if the risk requires a premium of one shilling and six pence, (the present rate,) it must be a losing concern to insure for one shilling, and therefore to increase the business of an office at that rate of premium would only increase the loss; and so it would, if every fire always burned the entire of the property insured. But this is far from being the case, and therefore the greater the sum insured on any given property, the less will be the risk incurred by the insurance company in proportion to the premium. The custom of insuring all property to its full value against fire, would therefore enable the company to insure at a cheaper rate. Let the experiment be tried, and we have little doubt that it will succeed, and lead to a multiplication of the property insured against fire. Another improvement may be made in our system of taxation, which we scarcely venture to mention, although we have the authority of Mr. M'Culloch on our side: the rate of postage ought to be increased. It was formerly too high, and was felt to be so; it is now absurdly low, and could be raised with great advantage to two pence and four pence for different distances. Considering the trouble of writing a letter, and the object which the writer had in view, there can be no reason to suppose that a two-penny or four-penny rate would prevent any letter from being sent by post, except those which are not worth the trouble of writing, or even of reading them. But the public mind is not yet ripe on this subject It would be the same with the reduc |