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Home -> Adam Smith -> An Inquiry Into The Nature And Causes Of The Wealth Of Nations -> Chapter 2, Part 2 continue B

An Inquiry Into The Nature And Causes Of The Wealth Of Nations - Chapter 2, Part 2 continue B

1. Introduction And Plan Of The Work

2. Book 1, Chapter 1

3. Chapter 2

4. Chapter 3

5. Chapter 4

6. Chapter 5

7. Chapter 6

8. Chapter 7

9. Chapter 8

10. Chapter 8 continue

11. Chapter 9

12. Chapter 10

13. Chapter 10 continue

14. Chapter 11

15. Chapter 11 continue

16. Chapter 11 continue.

17. Chapter 11 continue..

18. Chapter 11 continue...

19. Conclusion of the Chapter 11

20. Book 2 Introduction

21. Chapter 1

22. Chapter II

23. Chapter II continue

24. Chapter II continue

25. Chapter 3

26. Chapter 4

27. Chapter 5

28. Book 3, Chapter 1

29. Chapter 2

30. Chapter 3

31. Chapter 4

32. Book 4, Chapter 1

33. Chapter 1 continue

34. Chapter 2

35. Chapter 3, Part 1

36. Chapter 3, Part 2

37. Chapter 4

38. Chapter 5

39. Chapter 5 continue

40. Chapter 6

41. Chapter 7, Part 1

42. Chapter 7, Part 2

43. Chapter 7, Part 3

44. Chapter 7, Part 3 continue

45. Chapter 8

46. Chapter 9

47. Book 5, Chapter 1, Part 1

48. Chapter 1, Part 2

49. Chapter 1, Part 3

50. Chapter 1, Part 3 continue

51. Chapter 1, Part 3 continue B

52. Chapter 1, Part 4

53. Chapter 2, Part 1

54. Chapter 2, Part 2

55. Chapter 2, Part 2 continue

56. Chapter 2, Part 2 continue B

57. Chapter 2, Part 2 continue C

58. Chapter 2, Part 2 continue D

59. Chapter 3

60. Chapter 3 continue

APPENDIX TO ARTICLES I. AND II.--Taxes upon the Capital Value of Lands,
Houses, and Stock.

While property remains in the possession of the same person, whatever
permanent taxes may have been imposed upon it, they have never been
intended to diminish or take away any part of its capital value, but
only some part of the revenue arising from it. But when property changes
hands, when it is transmitted either from the dead to the living, or
from the living to the living, such taxes have frequently been imposed
upon it as necessarily take away some part of its capital value.

The transference of all sorts of property from the dead to the living,
and that of immoveable property of land and houses from the living to
the living, are transactions which are in their nature either public
and notorious, or such as cannot be long concealed. Such transactions,
therefore, may be taxed directly. The transference of stock or moveable
property, from the living to the living, by the lending of money, is
frequently a secret transaction, and may always be made so. It cannot
easily, therefore, be taxed directly. It has been taxed indirectly in
two different ways; first, by requiring that the deed, containing the
obligation to repay, should be written upon paper or parchment which
had paid a certain stamp duty, otherwise not to be valid; secondly,
by requiring, under the like penalty of invalidity, that it should be
recorded either in a public or secret register, and by imposing certain
duties upon such registration. Stamp duties, and duties of registration,
have frequently been imposed likewise upon the deeds transferring
property of all kinds from the dead to the living, and upon those
transferring immoveable property from the living to the living;
transactions which might easily have been taxed directly.

The vicesima hereditatum, or the twentieth penny of inheritances,
imposed by Augustus upon the ancient Romans, was a tax upon the
transference of property from the dead to the living. Dion Cassius,
{ Lib. 55. See also Burman. de Vectigalibus Pop. Rom. cap. xi. and
Bouchaud de l'impot du vingtieme sur les successions.} the author who
writes concerning it the least indistinctly, says, that it was imposed
upon all successions, legacies and donations, in case of death, except
upon those to the nearest relations, and to the poor.

Of the same kind is the Dutch tax upon successions. {See Memoires
concernant les Droits, etc. tom i, p. 225.} Collateral successions are
taxed according to the degree of relation, from five to thirty per
cent. upon the whole value of the succession. Testamentary donations,
or legacies to collaterals, are subject to the like duties. Those from
husband to wife, or from wife to husband, to the fiftieth penny.
The luctuosa hereditas, the mournful succession of ascendants to
descendants, to the twentieth penny only. Direct successions, or those
of descendants to ascendants, pay no tax. The death of a father, to such
of his children as live in the same house with him, is seldom attended
with any increase, and frequently with a considerable diminution
of revenue; by the loss of his industry, of his office, or of some
life-rent estate, of which he may have been in possession. That tax
would be cruel and oppressive, which aggravated their loss, by taking
from them any part of his succession. It may, however, sometimes be
otherwise with those children, who, in the language of the Roman
law, are said to be emancipated; in that of the Scotch law, to be
foris-familiated; that is, who have received their portion, have
got families of their own, and are supported by funds separate and
independent of those of their father. Whatever part of his succession
might come to such children, would be a real addition to their fortune,
and might, therefore, perhaps, without more inconveniency than what
attends all duties of this kind, be liable to some tax. The casualties
of the feudal law were taxes upon the transference of land, both from
the dead to the living, and from the living to the living. In ancient
times, they constituted, in every part of Europe, one of the principal
branches of the revenue of the crown.

The heir of every immediate vassal of the crown paid a certain duty,
generally a year's rent, upon receiving the investiture of the estate.
If the heir was a minor, the whole rents of the estate, during the
continuance of the minority, devolved to the superior, without any other
charge besides the maintenance of the minor, and the payment of the
widow's dower, when there happened to be a dowager upon the land. When
the minor came to de of age, another tax, called relief, was still due
to the superior, which generally amounted likewise to a year's rent. A
long minority, which, in the present times, so frequently disburdens a
great estate of all its incumbrances, and restores the family to their
ancient splendour, could in those times have no such effect. The waste,
and not the disincumbrance of the estate, was the common effect of a
long minority.

By a feudal law, the vassal could not alienate without the consent of
his superior, who generally extorted a fine or composition on granting
it. This fine, which was at first arbitrary, came, in many countries,
to be regulated at a certain portion of the price of the land. In some
countries, where the greater part of the other feudal customs have gone
into disuse, this tax upon the alienation of land still continues to
make a very considerable branch of the revenue of the sovereign. In the
canton of Berne it is so high as a sixth part of the price of all
noble fiefs, and a tenth part of that of all ignoble ones. {Memoires
concernant les Droits, etc, tom.i p.154} In the canton of Lucern, the
tax upon the sale of land is not universal, and takes place only in
certain districts. But if any person sells his land in order to remove
out of the territory, he pays ten per cent. upon the whole price of the
sale. {id. p.157.} Taxes of the same kind, upon the sale either of all
lands, or of lands held by certain tenures, take place in many other
countries, and make a more or less considerable branch of the revenue of
the sovereign.

Such transactions may be taxed indirectly, by means either of stamp
duties, or of duties upon registration; and those duties either may,
or may not, be proportioned to the value of the subject which is

In Great Britain, the stamp duties are higher or lower, not so much
according to the value of the property transferred (an eighteen-penny
or half-crown stamp being sufficient upon a bond for the largest sum
of money), as according to the nature of the deed. The highest do not
exceed six pounds upon every sheet of paper, or skin of parchment; and
these high duties fall chiefly upon grants from the crown, and upon
certain law proceedings, without any regard to the value of the subject.
There are, in Great Britain, no duties on the registration of deeds or
writings, except the fees of the officers who keep the register; and
these are seldom more than a reasonable recompence for their labour. The
crown derives no revenue from them.

In Holland {Memoires concernant les Droits, etc. tom. i. p 223, 224,
225.} there are both stamp duties and duties upon registration; which
in some cases are, and in some are not, proportioned to the value of the
property transferred. All testaments must be written upon stamped paper,
of which the price is proportioned to the property disposed of; so that
there are stamps which cost from three pence or three stivers a-sheet,
to three hundred florins, equal to about twenty-seven pounds ten
shillings of our money. If the stamp is of an inferior price to what the
testator ought to have made use of, his succession is confiscated. This
is over and above all their other taxes on succession. Except bills of
exchange, and some other mercantile bills, all other deeds, bonds, and
contracts, are subject to a stamp duty. This duty, however, does not
rise in proportion to the value of the subject. All sales of land and
of houses, and all mortgages upon either, must be registered, and, upon
registration, pay a duty to the state of two and a-half per cent. upon
the amount of the price or of the mortgage. This duty is extended to
the sale of all ships and vessels of more than two tons burden, whether
decked or undecked. These, it seems, are considered as a sort of houses
upon the water. The sale of moveables, when it is ordered by a court of
justice, is subject to the like duty of two and a-half per cent.

In France, there are both stamp duties and duties upon registration.
The former are considered as a branch of the aids of excise, and, in
the provinces where those duties take place, are levied by the excise
officers. The latter are considered as a branch of the domain of the
crown and are levied by a different set of officers.

Those modes of taxation by stamp duties and by duties upon registration,
are of very modern invention. In the course of little more than a
century, however, stamp duties have, in Europe, become almost universal,
and duties upon registration extremely common. There is no art which one
government sooner learns of another, than that of draining money from
the pockets of the people.

Taxes upon the transference of property from the dead to the living,
fall finally, as well as immediately, upon the persons to whom the
property is transferred. Taxes upon the sale of land fall altogether
upon the seller. The seller is almost always under the necessity of
selling, and must, therefore, take such a price as he can get. The buyer
is scarce ever under the necessity of buying, and will, therefore, only
give such a price as he likes. He considers what the land will cost him,
in tax and price together. The more he is obliged to pay in the way
of tax, the less he will be disposed to give in the way of price. Such
taxes, therefore, fall almost always upon a necessitous person, and
must, therefore, be frequently very cruel and oppressive. Taxes upon the
sale of new-built houses, where the building is sold without the ground,
fall generally upon the buyer, because the builder must generally have
his profit; otherwise he must give up the trade. If he advances the tax,
therefore, the buyer must generally repay it to him. Taxes upon the sale
of old houses, for the same reason as those upon the sale of land, fall
generally upon the seller; whom, in most cases, either conveniency
or necessity obliges to sell. The number of new-built houses that are
annually brought to market, is more or less regulated by the demand.
Unless the demand is such as to afford the builder his profit, after
paying all expenses, he will build no more houses. The number of old
houses which happen at any time to come to market, is regulated by
accidents, of which the greater part have no relation to the demand. Two
or three great bankruptcies in a mercantile town, will bring many houses
to sale, which must be sold for what can be got for them. Taxes upon
the sale of ground-rents fall altogether upon the seller, for the same
reason as those upon the sale of lands. Stamp duties, and duties
upon the registration of bonds and contracts for borrowed money, fall
altogether upon the borrower, and, in fact, are always paid by him.
Duties of the same kind upon law proceedings fall upon the suitors. They
reduce to both the capital value of the subject in dispute. The more
it costs to acquire any property, the less must be the neat value of it
when acquired.

All taxes upon the transference of property of every kind, so far as
they diminish the capital value of that property, tend to diminish the
funds destined for the maintenance of productive labour. They are all
more or less unthrifty taxes that increase the revenue of the sovereign,
which seldom maintains any but unproductive labourers, at the expense of
the capital of the people, which maintains none but productive.

Such taxes, even when they are proportioned to the value of the property
transferred, are still unequal; the frequency of transference not being
always equal in property of equal value. When they are not proportioned
to this value, which is the case with the greater part of the stamp
duties and duties of registration, they are still more so. They are in
no respect arbitrary, but are, or may be, in all cases, perfectly clear
and certain. Though they sometimes fall upon the person who is not
very able to pay, the time of payment is, in most cases, sufficiently
convenient for him. When the payment becomes due, he must, in most
cases, have the more to pay. They are levied at very little expense, and
in general subject the contributors to no other inconveniency, besides
always the unavoidable one of paying the tax. In France, the stamp
duties are not much complained of. Those of registration, which they
call the Controle, are. They give occasion, it is pretended, to much
extortion in the officers of the farmers-general who collect the tax,
which is in a great measure arbitrary and uncertain. In the greater
part of the libels which have been written against the present system of
finances in France, the abuses of the controle make a principal article.
Uncertainty, however, does not seem to be necessarily inherent in the
nature of such taxes. If the popular complaints are well founded, the
abuse must arise, not so much from the nature of the tax as from the
want of precision and distinctness in the words of the edicts or laws
which impose it.

The registration of mortgages, and in general of all rights upon
immoveable property, as it gives great security both to creditors and
purchasers, is extremely advantageous to the public. That of the greater
part of deeds of other kinds, is frequently inconvenient and even
dangerous to individuals, without any advantage to the public. All
registers which, it is acknowledged, ought to be kept secret, ought
certainly never to exist. The credit of individuals ought certainly
never to depend upon so very slender a security, as the probity and
religion of the inferior officers of revenue. But where the fees of
registration have been made a source of revenue to the sovereign,
register-offices have commonly been multiplied without end, both for the
deeds which ought to be registered, and for those which ought not.
In France there are several different sorts of secret registers. This
abuse, though not perhaps a necessary, it must be acknowledged, is a
very natural effect of such taxes.

Such stamp duties as those in England upon cards and dice, upon
newspapers and periodical pamphlets, etc. are properly taxes upon
consumption; the final payment falls upon the persons who use or consume
such commodities. Such stamp duties as those upon licences to retail
ale, wine, and spiritous liquors, though intended, perhaps, to fall upon
the profits of the retailers, are likewise finally paid by the consumers
of those liquors. Such taxes, though called by the same name, and levied
by the same officers, and in the same manner with the stamp duties above
mentioned upon the transference of property, are, however, of a quite
different nature, and fall upon quite different funds.

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