Adam Smith
Consumption taxes superior...no uncertainty re: when must be paid, how, and where. Most convenient and agreeable. Cost of administration means less of tax goes to final objectives, and more goes to collectors and tax system infrastructure. Customs levies most expensive re: collection expenses. If import tax encourages one part of business, it discourages ALL OTHER parts of it. Smuggling moral hazard i.e makes criminals of people who would otherwise NEVER becomes criminals i.e makes it a crime what nature never intended to be a crime i.e free trade. Smuggler ends up in prison, and involved in further criminality in order to carry out smuggling. Either way burden to society when otherwise would not have become. Officers carrying out their duty disliked by public, and contract hard character as result. Intrusive into privacy. Unnatural intrusion i.e required to enter homes, audit books etc.
Wars oblige nations to contract great debts...wars would be unpopular / unacceptable, if rulers forced current generation to pay for them, immediately...but as have access to easy credit, engage in more wars than would otherwise...finance=more war...
First capital exits, then the owners of that capital follow it...ruining the nations productive capacity...
In past all excess could only be consumed i.e shared by host as benefactor to guests and dependents...but as soon as could convert surplus into cash, and other goods / luxuries / ostentation, lead to rich and great reducing their generosity to their people, and indulging in excess luxuries...liberal hospitality never ruined anyone, Vs ostentation and luxury ruined many... i.e rustic landholder hospitality Vs modern excess luxury...in past had little opportunity to trade surplus for luxuries ... could only hoard any money saved...trade disgraceful, and usury prohibited by law, and even more disgraceful...hoard could be taken if driven from own home to place of safety i.e violence of times ... treasure trove i.e no owner known for treasure found...was once important revenue of sovereign...today would be insignificant...little commerce / manufacture lead to parsimony required for security, and need to save up for wars i.e pay in advance...expense of standing army was not necessary, so could share hospitality with dependents, his people...
So in past kings had treasure, today they have debts...abuse tenants Vs generous...merchants and traders i.e businesspeople soon gained greater wealth than kings...only King of Prussia has any considerable treasure i.e parsimony leading to accumulation rare...most republics and nations in debt...public expenditure as great ins supposedly sober democracy as any lavish king...debts entered into to 'defend' state, as state always outspends self i.e revenue for war is 4 times greater than peacetime...but takes long time to collect taxes...at least a year...but military expenditures begin immediately...even if only defence...immediate and great expense in moment of immediate danger Vs slow returns of new taxes...so govt. must borrow...MHR so if Jews can encourage another nation to pose threat, can force peaceful nation into debts...
Merchants and manufacturers spend entire capital 4 times in a year i.e it circulates, they spend, get back i.e money flow greater than for any other sector of society...can lend money to goverment without limiting this flow...government security transferable...can demand high rates...and general public willing to buy again from them...literally a favor to allow to share in first subscription of a loan...as the merchants ensured profit from this...allows govt. to avoid having to save...can simply borrow at time of 'need'...Vs past where sovereign realised that at time of need could not simply borrow / increase expenditure...unfunded debt of great britain consists of debt supposedly with no interest i.e similar to private debt to merchant i.e invoice not paid at time, but to be paid i.e arrears...unpaid debts, unpaid wages...some bills bear interest from particular time, sold at discount or received at par, and paying interest only, so circulate continually...promise to rebuy at some future date at full nomimal value...or guarantee that interest will be paid, so can easily sell the debt on, and it continues to circulate without the capital ever being repaid to anyone...principal not funded...only interest / annuity...state could buy back at any time by paying principle to owner...so most debts not actually 'funded' i.e e.g by a future tax income ... so all income spent before comes in...all assets / future revenues already mortgaged...pays interest for use of its own money...perpetual funding...in past new taxes limited in time to repay a debt...loans in anticipation of payment of those taxes...if income less than promised, term prolonged...
Bank of england and east india company advanced money to govt. ... these debts lead to the only taxes imposed for perpetuity ... early 1700s...bank annuities serviced by various later funds, the duties supplying them becoming perpetual...common 'general funds' for payment of annuities, lead to even more perpetual taxes, which before had been limited in duration...for paying only interest...the capital never being repaid...at this time could have repaid entire capital in a few years...but encouraged to 'anticipate' income before receiving it, and when it fell short, having to increase the fund / taxation / make taxes perpetual, in order merely to finance that shortfall, and merely pay the interest on past capital, while increasing the size of that capital debt, ensuring perpetual debt that would perpetually increase... this began early 1700s...MHR who was behind this? 'merchants'? of venice???
Perpetual annuity equal to the interest...ruinous practise of perpetual debt...too easy to raise money in this way to pay for wars etc...posterity left to pay off debt...temporary taxes rendered perpetual, and distributed into the general funds...5% interest paid on these debts...taxes accumulated into these funds...laying foundations for the 'sinking fund'...then reduced to 4% in 1750s, then to 3%, augmenting the 'sinking fund'...but facilitates contracting of new debts i.e as mortgage for more 'risky' borrowings ... anticipations and perpetual funding...
can borrow on annuities for terms of years, or lives...i.e guaranteed payout over duration of annuity...14% for 16 years ... then later for 'lives', but undersubscribed, so 7 years annuities offered ... could be exchanged for life annuities by paying difference at excessive terms but even that could not attract buyers...1719 32 years annuities converted into south seas stocks in lieu of payments...
Tontines (inventor) granted on group of lives i.e only survivor of entire lot of 20 to 30 people receives an annuity...sells for more than worth, in terms of 'separate life' annuities...
In England merchants prime lenders i.e advance money to govt....only subscribe in order to resell and profit from debts...annuities more risky i.e no profit guaranteed...London was more of a mercantile / trading city than France, so different basis of public debts...more confirmed bachelors in France i.e no children, so no need to leave anything to posterity...
People would soon become disgusted with war if forced to pay for it now...in lump sum...but if gradually increase, people don't notice...i.e spread costs of war now over future decades...public find amusement in war / entertainment...willing to pay the small extra taxes...war exciting / sexy ... unaware of real long term cost will pay for this entertainment / excitement... new taxes only repaid interest of loans made for war...sinking funds, leading to perpetural taxes, will continue this...even in peacetime some extraordinary expenses, and taxing unpopular...so financing it avoids 'murmur or complaint'...public debts accumulate and the higher they climb, the higher the tax would need to be raised to pay it, so the more likely govt. will use 'sinking funds'...'national vengeance' or 'national security' only way people will accept new taxes...in reality peacetime does not lead to repayment of capital borrowed to fund wars...so accumulates...Adam Smith cites actual statistics from before 1700, showing relationship of public debts to wars...new wars added to debts from old wars...so keeping world at war proved very lucrative to 'merchants' and 'bank of England'...ensured increasing revenues for banks / lenders ... bank paid for renewal of its charter !!! ... lead to land taxes...civil list debts...new wars...ensure never will discharge public debt through savings from ordinary revenues...each new war more expensive than previous...barely start repaying interest from last war before engaged in new expensive wars...capital advanced to govt. turned away from productive labor to unproductive labor i.e soldiers, weapons...so didn't increase productive capacity...interest ensures actually decreases productive capacity to what would have been without incurring those debts i.e if had not borrowed a cent...but if had borrowed and invested, could have had huge impact (MHR)
Forced to maintain new species of unproductive labor...though taxes probably would have gone to alternative 'unproductive' labor i.e govt. costs...perversion of annual produce towards unproductive labor...destroys old capital...but leaves private capital to increase...under normal conditions...war would be more speedily continued, and less likely undertaken, people would grow weary...would only be carried on as long as absolutely necessary...war would not be so popular i.e if had to pay for it up front...so could expect fewer wars, of shorter duration...MHR probably the limit of 5 years we've seen in WWI and WWII...payment of interest of public debt is 'right hand paying the left'...revenue of one set of inhabitants transferred to another is the sophistic response of mercantilists / merchants i.e claim nothing lost by process...but this also assumes all debt local, when in fact many foreign lenders involved...so capital does leave nation...
Landlord maintains and improves land...but land taxes diminish revenue, and increased costs, lead to unable to keep up this improvement / maintenance...distressed landlords lead to agricultural productivity declines...leads to inflation...disposes those who can leave, to leave nation...employers of great capital exposed to increased taxes, inclines to leave, and motivates this to occur...manufactures and merchants leave...so entire economy / nation suffers...land management suffers right up to manufactures...reduces revenue base of govt...leads to land being neglected and capital stock drying up / leaving nation ... creditor of public has no vested interest in the good management of any particular business, farm, etc...i.e no motive / concern about its ruin...
every state which has adopted this system has become 'enfeebled' by it...i.e debts ruinous to entire nation...taxes then oppress people...debts ruin nation...Smith shows 'weakness and desolation' in every nation it has been employed...so crazy to expect it NOT to have same impact on Great Britain, which relative newcomer to the practises...can expect same as Holland or Spain before 1700s to occur in Britain...waste and extravagence of govt. hard to 'repair'...
Once debts reach certain limit, never repaid...only via 'pretended' repayment i.e to hide public bankruptcy i.e royal proclamation / law changing 'value' of currency i.e amount of silver in a unit...i.e inflationary, fraud, deception...everyone would suffer proportional loss...creditors the greatest losers, unless they are themselves in debt i.e borrowed the money... but actual creditors receiving pretended payment would damage them, and ruin governments creditworthyness...enriches debtor at expense of creditor...re-distribution from productive to non-productive ... better to declare open bankruptcy...rather than use juggling tricks...no-one fooled...does more damage to pretend then admit...Romans at end of first Punic war reduced value from 12 to 2 ounces copper i.e common currency...Republic repaid debts with sixth part of what actually owed...but didn't occasion any clamour...law was actually popular, as poor people in debt ... debtor thus benefitted by inflation...poor thus calling for abolition of debts / new tables i.e proportional repayment...so this law reduced their debts to one sixth of original...so very popular among masses...debt abolitions and new table quite common in Rome...2nd Punic war 2 ounces to 1, then later 1 to O.5... so debts reduced to almost nothing ... but massive inflation e.g imports ...
Adulteration of coin...mix greater quantity of alloy to silver...French 'augmentation' is direct raising of coin denomination is more open / transparent i.e change denomination of original coin...e.g 5c now 10c. 'Injustice of open violence Vs treacherous fraud'...could never be concealed for long...indignation...fury...English coin both augmented and adlterated...
'Projector' is businessman? Entrepreneur?
Americans don't pay tithes...so could afford considerable land tax...
