histofthought1

The celebrated Adam Smith 469shows no particular desire to cut tariffs or restrictions. In contrast, his dominantemotion seems to have been pride at cracking down on smugglers andthereby increasing government revenue. In December 1785, he writes to afellow customs official thatit may, perhaps, give the Gentleman pleasure to be informed that the net revenuearising from the Customs in Scotland is at least four times greater than it wasseven or eight years ago. It has been increasing rapidly these four or five yearspast; and the revenue of this year has overleaped by at least one half the revenueof the greatest former year. I flatter myself it is likely to increase still further. 36Well, happy day! This from an alleged champion of laissez-faire!?16.9 On taxationOver the centuries, economists have contributed little of interest or value onthe subject of taxation. In addition to describing forms of taxation, they havegenerally approached the subject from the point of view of the state as akindly or not so kindly despot, seeking to maximize its revenue while doingminimum harm to the economy. There are variations among the differentschools, but the general thrust is the same. Thus, the cameralists (see Chapter17) were frankly interested solely in maximizing state revenue, as were theFrench absolutists; the more liberal economists admonished the governmentto keep tax rates lower than had been customary.The more liberal economists have tried to strictly demarcate functionswhich government should and should not perform. By ruling out variouskinds of government intervention, the thrust, other things being equal, is toreduce total government taxation and spending. But they have offered us veryfew guidelines beyond that. If, for example, as in the case of Smith, thegovernment is supposed to supply public works, how many should it provideand how much should be spent? There have been almost no preferred criteria,then, for total spending or for overall levels of taxation.There has been more discussion of the distribution of taxation. That is,gi ven, from some arbitrary external dictate, that the total level of taxationshould be a certain amount, T, there has been considerable discussion of howT should be distributed. In short, the two main problems of taxation are: howmuch should be levied, and who should pay? and there has been considerablymore thought devoted to the latter question.But none of this has been very satisfactory. Again, the basic point of viewseems to be that of a highwayman or slavemaster, interested in extracting themaximum from his charges while keeping their complaints as minimal aspossible. In the discussion in eighteenth century France, there were twofavourite tax proposals: proportional income or property taxation, or, as inthe case of Marshall Vauban and later the physiocrats, a single tax on land,