150% than on any others whatever. The second condition is, that incomes above the limit should be taxed only in proportion to the surplus by which they exceed the limit. Thirdly, that life incomes should be less heavily taxed than inheritable incomes, in a degree as nearly as possible equivalent to the increased need of economy arising from their terminable character. Fourthly, that incomes which are jointly the result of capital and of personal exertion, should be taxed intermediately between the rate for inheritable and that for life incomes.

An income-tax, fairly assessed on these principles, would be, in point of justice, the least exceptionable of all taxes. The objection to it, which, with much regret, I cannot help regarding as insuperable, is the impossibility of ascertaining the real incomes of the contributors. The supposed hardship of compelling people to disclose the amount of their incomes, ought not, in my opinion, to count for much. One of the social evils of this country is the practice, amounting to a custom, of maintaining, or attempting to maintain, the appearance to the world of a larger income than is possessed; and it would be far better for the interests of those who yield to this weakness, if the extent of their means were universally and exactly known, and the temptation removed to expending more than they can afford, or stinting real wants in order to make a false show externally. At the same time, the reason of the case, even on this point, is not so exclusively on one side of the argument as is sometimes supposed. So long as the vulgar of any country are in the debased state of mind which this national habit presupposes-so long as their respect (if such a word can be applied to it) is proportioned to what they suppose to be each person's pecuniary means-it may be doubted whether anything which would remove all doubt as to that point, would not considerably increase the presumption and arrogance of the vulgar rich, and their insolence towards those above them in mind and character, but below them in circumstances.

Notwithstanding, too, what is called the inquisitorial nature of the tax, no amount of inquisitorial power which would be tolerated by a people the most disposed to submit to it, could enable the revenue officers to assess the tax from actual knowledge of the circumstances of contributors. Rents, salaries, annuities, and all fixed incomes, can be exactly ascertained. But the variable gains of professions, and still more the profits of business, which the person interested cannot always himself exactly ascertain, can still less be estimated with any approach to fairness by a tax-collector. The main reliance must be placed, and always has been placed, on the returns made by the person himself. No production of accounts is of much avail, except against the more flagrant cases of falsehood; and even against these the check is very imperfect, for if fraud is intended, false accounts can generally be framed which it will baffle any means of inquiry possessed by the revenue officers to detect: the easy resource of omitting entries on the credit side, being often sufficient without the aid of fictitious debts or disbursements. The tax, therefore, on whatever principles of equality it may be imposed, is in practice unequal in one of the worst ways, falling heaviest on the most conscientious. The unscrupulous succeed in evading a great proportion of what they should pay; even persons of integrity in their ordinary transactions. are tempted to palter with their consciences, at least to the extent of deciding in their own favour all points on which the smallest doubt or discussion could arise: while the strictly veracious are often made to pay more than the state intended, by the powers of arbitrary assessment necessarily intrusted to the Commissioners as a last defence against the tax-payer's power of concealment.

It is to be feared, therefore, that the fairness which belongs to the principle of an income-tax, can never be made to attach to it in practice; and that this tax, while apparently the most just of all modes of raising a revenue, is in effect more unjust than many others which are primâ facie more

objectionable. This consideration would lead us to concur in the opinion which, until of late, has usually prevailed— that direct taxes on income should be reserved as an extraordinary resource for great national emergencies, in which the necessity of a large additional revenue overrules all minor objections.

The difficulties of a fair income-tax have lately elicited a proposition for a direct tax of so much per cent, not on income but on expenditure; the aggregate amount of each person's expenditure being ascertained, as the amount of income now is, from statements furnished by the contributors themselves. The author of this suggestion, Mr. Revans, in a clever pamphlet on the subject, contends that the returns which persons would furnish of their expenditure would be more trustworthy than those which they now make of their income, inasmuch as expenditure is in its own nature more public than income, and false representations of it more easily detected. He cannot, I think, have sufficiently considered, how few of the items in the annual expenditure of most families can be judged of with any approximation to correctness from the external signs. The only security would still be the veracity of individuals, and there is no reason for supposing that their statements would be more trustworthy on the subject of their expenses than on that of their revenues; especially as, the expenditure of most persons being composed of many more items than their income, there would be more scope for concealment and suppression in the detail of expenses than even of receipts.

The taxes on expenditure at present in force, either in this or in other countries, fall only on particular kinds of expenditure, and differ no otherwise from taxes on commodities than in being paid directly by the person who consumes or uses the article, instead of being advanced by the producer

* "A Percentage Tax on Domestic Expenditure to supply the whole of the Public Revenue.” By John Revans. Published by Hatchard, in 1847.

or seller, and reimbursed in the price. The taxes on horses and carriages, on dogs, on servants, are of this nature. They evidently fall on the persons from whom they are leviedthose who use the commodity taxed. A tax of a similar description, and more important, is a house tax: which must be considered at somewhat greater length.

§ 6. The rent of a house consists of two parts, the ground-rent, and what Adam Smith calls the building-rent. The first is determined by the ordinary principles of rent. It is the remuneration given for the use of the portion of land occupied by the house and its appurtenances; and varies from a mere equivalent for the rent which the ground would afford in agriculture, to the monopoly rents paid for advantageous situations in populous thoroughfares. The rent of the house itself, as distinguished from the ground, is the equivalent given for the labour and capital expended on the building. The fact of its being received in quarterly or halfyearly payments, makes no difference in the principles by which it is regulated. It comprises the ordinary profit on the builder's capital, and an annuity, sufficient at the current rate of interest, after paying for all repairs chargeable on the proprietor, to replace the original capital by the time the house is worn out, or by the expiration of the usual term of a building lease.

A tax of so much per cent on the gross rent, falls on both these portions alike. The more highly a house is rented, the more it pays to the tax, whether the quality of the situation or that of the house itself is the cause. The incidence, however, of these two portions of the tax must be considered separately.

As much of it as is a tax on building-rent, must ultimately fall on the consumer, in other words the occupier. For as the profits of building are already not above the ordinary rate, they would, if the tax fell on the owner and not on the occupier, become lower than the profits of untaxed employments,

and houses would not be built. It is probable however that for some time after the tax was first imposed, a great part of it would fall, not on the renter, but on the owner of the house. A large proportion of the consumers either could not afford, or would not choose, to pay their former rent with the tax in addition, but would content themselves with a lower scale of accommodation. Houses therefore would be for a time in excess of the demand. The consequence of such excess, in the case of most other articles, would be an almost immediate diminution of the supply: but so durable a commodity as houses does not rapidly diminish in amount. New buildings indeed (at least of the more expensive class) would cease to be erected, except for special reasons; but in the meantime the temporary superfluity would lower rents, and the consumers would obtain, perhaps, nearly the same accommodation as formerly, for the same aggregate payment, rent and tax together. By degrees, however, as the existing houses wore out, or as increase of population demanded a greater supply, rents would again rise; until it became profitable to recommence building, which would not be until the tax was wholly thrown upon the occupier. In the end, therefore, the occupier bears that portion of a tax on rent, which falls on the payment made for the house itself, exclusively of the ground it stands on.

At first sight one would be inclined to suppose the case to be different with the portion which is a tax on groundrent. As taxes on rent, properly so called, fall on the landlord, a tax on ground-rent, one would suppose, must fall on the ground landlord, at least after the expiration of the building lease. And such would really be the case, if with the tax on ground-rent there were combined an equivalent tax on agricultural rent; but not otherwise. The lowest rent of land let for building is very little above the rent which the same ground would yield in agriculture: since it is reasonable to suppose that land, unless in case of exceptional circumstances, is let or sold for building, as soon as it is decidedly