tion, which it rarely fails to occasion. And it is clear that no scheme of finance can be bottomed on sound principles, which disguises these necessary consequences of war, and deceives the public with regard to their real situation. This, however, is notoriously the case with the Funding System. It is truly said to require no individual to make any extraordinary sacrifice at any particular period; and, in this respect, it bears a close resemblance to those most dangerous diseases which steal slowly and imperceptibly on the constitution, and do not discover their malignant symptoms until they have fastened on the vitals and vitiated the whole animal economy.

"The Funding System has been almost universally adopted, and it has uniformly been abused, and, how serviceable soever at first, has become, in the course of time, generally injurious. It was carried to a great extent in Holland; and we have already seen that it is to it, or rather to the excessive taxation in time of peace which it occasioned, that the low rate of profit in that republic, and the decline of her fisheries, manufactures, and commerce, are to be ascribed. 'Nous avons remarqué, que l'accroissement successif des impôts, et la nécessité de faire des emprunts, ont concouru, plus que toute autre cause, à faire décroître le commerce de la Hollande. C'est là une suite inévitable surtout des emprunts, parce qu'une paix ne mortifie pas les dettes de l'état. Tous les avantages d'une guerre heureuse ne bonifient les désavantages que l'état en souffre. Les peuples sont moins heureux, et l'état s'est affoibli."

An avoidance of the Funding System is not only the true republican doctrine; we have a right to call it also the established American policy. The United States, hitherto, have always paid off their war debt within the lifetime of the generation that contracted it. The Revolutionary Debt was, in fact, fully discharged at least as early as 1817; for the National Debt still existing in that year ought to be considered as resulting from the purchase of Louisiana in 1803, and from the war of 1812. This last Debt was still more rapidly extinguished, for no portion of it remained unpaid in 1835. The country was then entirely free from debt, and even found itself encumbered with a surplus income. Thus far, also, we have been paying off the enormous debt contracted during the Great Rebellion at a rate which, if continued, would insure its extinction in about one generation. In July, 1865, it exceeded

2,783 millions; in February, 1870, it was less than 2,445 millions, thus showing an average annual diminution of about 74 millions. At this rate, even if taxation were cut down as rapidly as the annual charge for interest is diminished, the Debt would be extinguished in thirty-three years from 1870.

The value absorbed in loans raised at home is so much withdrawn from the capital employed in aiding productive industry within the country. This is an argument, which is strongly urged by Dr. Chalmers and Mr. J. S. Mill, in favor of raising within the year the whole of the supplies needed for war purposes, instead of obtaining them by an increase of the National Debt. Whatever is spent unproductively, they say, cannot but be drawn from capital or yearly income. "The whole and every part of the wealth existing in the country forms, or helps to form, the yearly income of somebody. The privation which it is supposed must result from taking the amount in the shape of taxes is not avoided by taking it in a loan. The suffering is not averted, but only thrown upon the laboring classes, the least able, and who least ought, to bear it; while all the inconveniences, physical, moral, and political, produced by maintaining taxes for the perpetual payment of the interest, are incurred in pure loss. Whenever capital is withdrawn from production, or from the fund destined for production, to be lent to the state and expended unproductively, that whole sum is withheld from the laboring classes; the loan, therefore, is in truth paid off the same year by these classes; the whole of the sacrifice necessary for paying it off is actually made; only it is paid to the wrong persons, and therefore does not extinguish the claim; and paid by the very worst of taxes, a tax exclusively on the laboring class. And after having, in this most painful and unjust of ways, gone through the whole effort necessary for extinguishing the Debt, the country remains charged with it, and with the payment of its interest in perpetuity."

CHAPTER XVIII.

TAXATION.

TAXATION is the equivalent rendered by a people to their gov ernment for preserving peace, enforcing justice, and aiding in various other ways the production of wealth. To the extent of the services thus performed, the government is a co-worker with the rest of the community, and therefore equitably claims its share of the products of each year's industry. The aggregate task is most economically performed through a Division of Labor, whereby one class of men devote themselves exclusively to making laws and administering them, thus enabling every other class to do its special allotted work without interruption, fear, or hindrance. In the case of the Post-Office, it is easy to see that the government renders a very important service for small compensation. If the work done by the tribunals of justice is not always so highly appreciated as it deserves, the reason is, that the feeling of security which they create is so widely diffused, and so seldom interrupted, that men are not aware how much it contributes to their happiness and well-being. Those who never have suits at law are quite as much indebted to the courts as those who frequent them, and therefore a tax upon the whole community rightly furnishes the means for their support. Arbitration is better than litigation, it is true; but litigation is still better than open strife and violence. Most of the other departments of government may fairly be considered as aids of the judiciary, or means of enforcing its decisions.

Taxation in the abstract, therefore, is eminently just and expedient. The only difficulty is, how to apportion it equitably among the various classes of the people, so that each may bear its rightful portion of the burden with the utmost possible ease and acquiescence. Adam Smith's four rules for the assessment and collection of taxes have been often quoted; but it must be confessed that they are vague and incomplete, and afford but little practical guidance for legislation. This was not his fault. As taxation needs to be applied under a great variety of circumstances, and the modes which have been contrived for applying it are numerous, And me of them complex and intricate, few rules can be laid

down which will not be found to admit many exceptions and limitations.

Adam Smith's first canon is, "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. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation."

Secondly, "The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought to be clear and plain to the contributor and to every other person. Where it is otherwise, every person subject to the tax is put, more or less, in the power of the tax-gatherer." A still worse evil is, that the tax-payers cannot then make those nice calculations respecting future demands upon their resources, or the causes which will affect the prices of commodities and the future state of the markets, upon which success in any commercial or manufacturing enterprise largely depends. Adam Smith declares it to be proved from the experience of all nations, "that a very considerable degree of inequality is not near so great an evil as a very small degree of uncertainty."

Thirdly, "Every tax ought to be levied at the time, and in the manner, in which it is most likely to be convenient for the contributor to pay it. Taxes upon such consumable goods as are articles of luxury are all finally paid by the consumer, and generally in a manner that is very convenient for him. He pays them by little and little, as he has occasion to buy, the goods, and as he is at liberty, too, either to buy or not to buy, as he pleases, it must be his own fault if he ever suffers any considerable inconveniency from such taxes."

Fourthly, "Every tax ought to be so contrived as both to take out, and to keep out, of the pockets of the people as little as possible, over and above what it brings into the public treasury of the state."

The first of these rules, as here stated without qualification, is far from being well founded. Taxation strictly proportioned to revenue or income would press with undue severity on the indigent

and the industrious classes; for the rich contribute out of their abundance, but the poor out of their living. Hence it is now admitted, on all hands, that the bare necessaries of life should not be taxed at all, while the articles which are properly regarded as comforts or decencies should contribute moderately, and luxuries should bear the heaviest imposts. Internal taxes are properly denominated excises, (excisa,) as they are the portion cut off from the value of commodities, or from the income of individuals, for the support of government. Now, the state has no moral right to cut off a portion of the poor man's loaf, but is fully justified in taking away some of the enjoyments of those who will yet have enough, and to spare. For this reason, a minimum of income is always declared exempt from taxation; what constitutes a minimum, must be determined by reference to the customs of the people and other circumstances of the case. Moreover, to lay equal burdens on the idle and the industrious, even if it were just, would be highly inexpedient, as it would discourage labor, and tend to dry up the resources of the state. Those who have nothing to lose have comparatively little need of protection; while wealth could not exist at all, except under the safeguard of the laws and those who administer them. In modern days, and in civilized communities, the machinery of government exists far more for the protection of property than of persons, and therefore property should bear nearly all the expense of maintaining that machinery. On the other hand, the indigent classes, by filling the army aud navy, form the chief dependence of the nation in the case of war. Capitation or poll taxes are now seldom levied, and only at very low rates.

"Equality of taxation, as a maxim of politics," says Mr. Mill, means equality of sacrifice. It means apportioning the contribution of each person towards the expenses of government, so that he shall feel neither more nor less inconvenience from his share of the payment, than every other person experiences from his.” Now it is evident that a 5 per cent income tax imposes the necessity of far heavier sacrifices on a person having an income of only $1,000, than on another whose income is $10,000. In this country, it would cut off from the former most of the comforts, and, especially if he had a large family, some even of the necessaries, of life; while the latter would be restricted only in his