ART. III-A Treatise on the Principles and Practical Influence of Taxation and the Funding System. By J. R. M'CULLOCH, Esq. 8vo. London. 1845.

THIS HIS work embraces one of the most extensive, and preeminently the most practical department of the all-important science to which it belongs; and it comes to us recommended by the authorship of one of the most distinguished cultivators of that science. He has here, in addition to his other great services, presented the Public with what is, strictly speaking, new in economical science; namely, a systematic and comprehensive survey of the whole field of Taxation, viewed under three main heads; the first treating of Direct, the second of Indirect Taxes, and the third of Funding. To the whole is superadded an Appendix of Reports and Statistical Tables, highly useful for

reference.

It need hardly be said that a writer, at once so deeply versed in scientific deductions, and so thoroughly conversant with statistical details, is peculiarly qualified to treat such a subject as Taxation; in which conclusions drawn from abstract premises and general principles continually demand the correction of practical knowledge. And the reader of the work before us, if he meets with no great amount of absolute novelty—if he is somewhat disappointed in finding that so much deep study and careful observation have suggested to so able and experienced a writer but little in the way of practical amendment will nevertheless derive great advantage from having the confused notions apt to be entertained of the incidence of taxation, that is, the relative pressure of public burdens on different portions of the community, rectified and elucidated. He will be able to deduce from these pages a view, more than ordinarily clear and satisfactory, of the daily working of the great economical machine of society; and thus, and thus only, will be enabled to judge of the disturbances introduced by Taxation, and to ascertain in what manner, and by what parties, these disturbances are felt.

Of a work of this description, it would be in vain to attempt to exhibit any thing like a complete survey. The general reader would not thank us for such an attempt, however carefully executed; and they who are disposed to study the subject in all its extent, will themselves have recourse to the author's reasonings and deductions. Perhaps the best course that we can take, is to endeavour to condense Mr M'Culloch's views on that which will be the most interesting portion of the subject to most of

our readers—the manner in which taxation affects the labouring classes that is, the great majority of the nation. The views which this part of the enquiry will disclose, will be a sufficient inducement to the real students of the science to examine the rest for themselves.

The condition of these classes has more and more attracted the attention of all serious observers, until it has become the great question of the day. This is a fact for which we have abundant evidence, even in the quackery and false sentiment daily expended on the subject; but well may it become a matter of deep concern to those who are far above the temptation to all vulgar displays, if Mr M'Culloch's belief be well founded, that their situation is growing gradually worse. "Though there has,' says he, 'been a vast increase of production, and of wealth and comforts, among the upper classes engaged in business during the last twenty or thirty years, and a considerable diminution of taxation, the condition of the workpeople during that period has certainly not been in any degree improved, but has rather, we incline to think, been sensibly ' deteriorated.' This opinion of our author we believe to be new, and it is connected with some prophecies of evil which he has lately promulgated, with reference to the extension of the manufacturing system. Perhaps, indeed, it would not be easy altogether to reconcile in Mr M'Culloch the theorist with the statistician. In some of his previous statistical enquiries, he seems, if we recollect rightly, to have proved, that, during a period in which the population of England has doubled, its agricultural produce, chiefly for the use of man, has quadrupled; and this although, in the interval, England has become an importing instead of an exporting country; from which it follows, that an Englishman at this day eats twice as much as his ancestor eighty years ago,—a fact difficult to digest in itself; more difficult still, when we are informed that for thirty years the condition of the great bulk of the people has been falling off. We confess, however, to much distrust of all such proofs; and certainly there are not wanting serious reasons for the more gloomy inference. One is noticed by Mr M'Culloch-namely, that the habit of early marriage was in great measure introduced by the extraordinarily sudden extension of the demand for manufacturing labour, after the discoveries of Watt and Arkwright; and, like most habits, has remained in force after the cause which produced it had lost much of its efficacy, and the demand for labour become less pressing. The children called into existence by Watt and Arkwright are now grown up, and ask for employment; and though the demand for

their services is still great, it is not so strong as that which was originally occasioned. Another cause, perhaps, of an overrapid increase of population, is, that the comparative uncertainty of manufacturing labour has a tendency to produce on wages the well-known effect which great gains and great hazard have on profits. There is a disposition on the part of the labourer to bid too low, from an exaggerated expectation of the permanence of the employment. But whether these speculations be true or false, it is not the less the most important office of an English statesman to watch over the welfare of this vast and helpless body; and he who utterly disbelieves in any power possessed by the higher classes, or by individuals, to alter and improve, by human effort, the economical arrangements of society, may nevertheless allow that the state has a minor but still serviceable function to perform; by shifting the burdens which it imposes, so as to make them rest with greater weight on the shoulders of those who, it is conceded on all hands, have made much greater advances of late years in material prosperity than the great mass of the people.

It is a common opinion, that, under the system of indirect taxation which prevails amongst ourselves, the poorer classes contribute in reality much more to the revenue, in proportion to their means, than the richer. The taxes on tea, soap, and sugar alone-articles of which any ordinary labourer consumes, or ought to consume, nearly as much as the wealthiest inhabitant of the country-amount to nearly a fifth of its whole public income. To these must be added the enormously productive duties on beer, spirits, and tobacco-the luxuries, whatever moralists may urge respecting them, of the poor. It is necessary, further, to take into consideration the effect of the corn and sugar duties, in raising the price of these articles to the extent of a large additional tax paid to the producers, and to which labouring men contribute per head nearly as much as the capitalist and the landlord; also the duty on sea-borne coal, and possibly other items which do not figure in the annual Budget of the State. We are not aware that any Statistician has endeavoured to show how large a proportion of the earnings of a labouring family, say at twenty shillings per week, goes in the shape of duties on commodities; but we should imagine that it very far exceeds the proportion contributed by the possessor of L.1000 per annum in landed or funded property.

Such is the first appearance which the facts present; yet Dr Adam Smith was of opinion, that in reality the labouring classes ⚫ contribute nothing of consequence to the public revenue;' and

this opinion has been pretty extensively shared by Political Economists. The principles on which it is maintained are, in themselves, perfectly true; but probably it would be found, were the subject worth analysing, that the problem, whether the labouring classes do or do not contribute towards the revenue, is little more than a question of words. The really important points of enquiry are, how those classes would be affected by the imposition of additional indirect taxes, or by the remission of those which exist; and if it appear that they must lose by the one operation and gain by the other, it is of little consequence whether a tax on the necessaries and comforts of labourers be denominated with strict correctness a tax on wages or not.

Let us, however, guard against exaggeration. Suppose an additional duty laid on necessaries consumed by the labouring class; it is plain, in the first place, that its effect on that large division of the class which consists of persons boarded by their masters or employers, would be very different from that on ordinary labourers. It is evident, for instance, that taxes on the articles consumed by domestic servants do not fall on them, but on their masters; probably, indeed, such taxes, when carried beyond their proper limits, may make fewer servants be employ ed; but, except in so far as they operate in this way, the duties on sugar, tea, beer, soap, and other articles used by household servants, are wholly paid by those with whom they live.' Mr M'Culloch might, perhaps, have added, that the tax would be injurious to this class in another way: Thus, if it directly affected the comforts and deteriorated the condition of other labourers, it would increase the competition for the situations of domestic servants, and lower their wages; but this, of course, would be an indirect result only.

In the next place and this is a more important considerationthe effect of such a tax (say ten per cent on wages) must depend on the mode in which it is expended. If the produce of the tax be laid out in hiring additional troops or sailors, it is easy to see that it can be productive of no immediate injury to the labourer; for were such the case, the agents of government would enter the market for labour with means of purchasing, derived, not from the employers, but from the labourers themselves; and, in consequence of the greater competition, wages would be raised in exact proportion to the additional means in 'the hands of government, or, in other words, to the amount of the tax.' Perhaps Mr M'Culloch has here understated the case: a tax of considerable magnitude, thus expended, might probably have the effect of raising wages. When so many

hands were abstracted from the market for labour, capitalists would bid against each other in that market, as far as they possibly could do so by economizing out of their profits; and labourmight thus become dearer than it was before by more than the amount of the tax. And in this way it seems evident, that taxes on wages or necessaries, when imposed for the purpose of carrying on a war, can be but slightly felt as burdens by the labouring classes.

The case is different if the tax be laid out, not in hiring additional troops, but in increasing the pay of those already embodied, or of the other functionaries employed by government; or, we would add, in payments to the public creditor. Under these circumstances there would be no additional demand for

• labour. The individuals receiving the tax would, indeed, have a greater demand for the produce of labour; but their 'greater demand, being merely equivalent to the diminished ⚫ demand of the labourers by whom the tax had been paid, would 'make no real addition to the total demand of the country.' It seems therefore undeniable, that the burden of the tax would be borne in the first instance, wholly or chiefly, by the great labouring class.

But would it be ultimately borne by that class? Some Economists support the doctrine of a necessary' rate of wages; that is, a rate of wages fixed by the circumstances and habits of a country, on less than which the labourers will not, in the language of the school, subsist and keep up their numbers.' Now, the theory of those who regard the labourers as contributing in no degree to the public revenue, seems to rest on the assumption that this very useful supposition represents a fact -that there is an actually subsisting rate of wages below which labourers will not be reduced. Therefore, they argue, the imposition of a tax on wages can only have the effect of diminishing their numbers; and then, again, wages will rise to the former level. But it is scarcely necessary to say, with Mr McCulloch, that there is no such absolute standard of natural wages;' that the rate of remuneration which suffices for the great body of labourers in any country, is not of invariable amount; that if a portion of his earnings be taken from the workman, there is nothing absurd or inconsistent in the supposition, that, after struggling for a while against his destiny, he may resign himself to the inferiority of his new position, and live on, and propagate his species, in a lower condition than that enjoyed by his forefathers. And therefore, when we come to look closer into the matter, several possible results of such a tax present themselves to the mind.