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Theory of Taxation, “General Summary” (1861)


Such is the ensemble of ideas resulting from my study of the question raised by the State Council of the canton of Vaud. To first free these ideas from the mass of facts, from the chaos of empiricism, and then explain them with advantage, demanded a profound critique of the fiscal institutions, a critique that I could have made much more voluminous, for no cost but the citations, but that, such as it is, appears to me sufficient for enlightened minds or administrators versed in practice.

A complete theory of taxation, of its principles, its rules, its nature, its object, its anomalies, and its function in the economic system of nations, has never, as far as I know, been given: thanks to the appeal of the honorable councilors of the State of Vaud, it will at least have been sketched, and for the first time.

What is that theory?

Here is no preconceived system, no utopian tendency, nothing that could appear foreign to even the most old-fashioned sorts, nothing that the most routine tax system could by right find paradoxical. We have taken hold of the facts and we have analyzed them; we have isolated their principle and put their spirit in relief. In a rapid review, we have outlined the history of taxation, in ancient as well as modern society; we have determined its aim and clarified its contradictions, which means its laws.

Then, with the aid of reductions, transformations, displacements, applying proportionality here and progression there; sometimes striking the question of consumption, sometimes production and circulation, and making the system pivot on land rent, we have ended—or at least such is my hope—with a rational, harmonious ensemble, all the parts of which suppose one another, like the members of an animal; we have produced an organic whole, a function of a still larger organism, which is society and the State.

Let the more experienced rework, now, the plan for reforms that we have just presented in rough form, taking the French budget for their topic; let others, applying it to the various States of Europe, subject it to all the modifications demanded by local customs and habits; let them change the proportions proposed in this report; it will matter little.

Whoever concerns themselves with taxation and seeks, for any country or society, its normal constitution, must take into account, above all, the facts and propositions that we have demonstrated, which can be considered as so many axioms. These facts and propositions are:

That taxation, according to ancient law, was first a tribute;

But that, according to modern law and economic science, it is nothing other than an exchange;

That this transformation of taxation, from ancient society to the new society, is the corollary of the transformation undergone by the State, once sovereign, but now balanced by a rival power, Liberty;

That from that fundamental notion, namely, that taxation is an exchange, its whole theory is deduced;

That thus, unlike other traders, the State owes its services at cost price;

That it does not impose them, but waits for the nation to demand them;

That as a consequence of that free demand of the citizens, the tax quota could not increase in an indefinite manner, but must on the contrary decrease endlessly, from which arises the necessity of assigning maximum to taxation;

That the centralization of government in a large country is incompatible with that unlimited reduction of the general costs of the State, and consequently with the regularity of the budget;

That, in a normal state of thing, the sum of the contributions would appear to have to be one twentieth of the total product of the country, and can be reduced to thirtieth;

That, in modern societies, all the citizens being equal before the law, the expenses of the State must be settled without distinction by all and in proportion to their abilities;

That all taxation, whatever its form and its base, is ultimately collected on the collective product;

That as a consequence all tax fees are reduced to a tax on consumption;

That, through the movement of values and the rule that presides over the formation of prices, that tax on consumption finds itself settled, in a very large part, not individually as it seems from the rates of contribution, but by the masses;

That as a result of this taxation, taken in its general case, is reduced, but for minor details, to a capitation;

That, with regard to the inequality of fortunes, that capitation constitutes a true progressive tax in inverse proportion to fortune and direct proportion to indigence;

That, under the influence of these two causes, the incessant movement of values and the inequality of fortunes, the problem of the balancing of taxation is insoluble, and that all that we can obtain in this regard is reduced to an approximation;

That in order to return to Justice in taxation, the true method, the single and unique means is thus to work toward the equalization of fortunes themselves, something that does not depend on the initiative of the State, but solely on the intelligence and will of the citizens who consent to the tax;

That every attempt made in another direction in order to arrive at the equalization of taxation, either by a progressive tax, or by a tax on capital, or by a tax on rent or income, leads to absurdity and brings about enormous perturbations for public economy;

That a single tax, invariably resulting in the concentration in one single instance of all the fiscal iniquities divided in a multitude de taxes, would be the most crushing of taxes and the worst of systems;

That the true march to follow being, in the final account, to submit to the law, or, to put it more correctly, to the egalitarian tendency, the whole difficulty consists in turning taxation in that direction and organizing it in that spirit;

That the first thing to do in order to arrive at that end is to constitute an allowance to the State;

That this allowance should be established on the rent of lands appropriated and in a good state for cultivation [exploitation];

That on top of that allowance, on which the whole system of taxation must pivot, the State should establish two categories of taxes, one on public services, directly reproductive, credit, means of transport, mines, docks, waters and forests, etc.; the other consisting of a series of facultative contributions, on all the objects of consumption and use, on transactions, etc.;

That for these various contributions, the State will apply, according to the circumstances, progression to some, proportionality to others, in such as way as to promote the egalitarian movement, the initiative, direction and acceleration of which will be up to the nation alone.

All of that, I dare say, is simple, clear, natural, logical, and, for whoever rallies to the new right, conclusive. The practice finds its explanation there, the historical movement its justification, the utopia itself its reason. The transitions can be handled as slowly as you wish.

Now, that legislation of taxation, where we see the ancient iniquity converted little by little into an instrument of Justice, is not our invention, and it is that which makes its triumph. We have deduced it from principles and facts above all arbitrariness; we have freed it, in short, from the movements of history and the contradiction of ideas; we have grasped its vestiges and indicated the organizing and liberal tendency even in the inventions of the most tyrannical tax system. So that if our democratic civilization, victorious over foolish resistances, ever manages to determine its aspirations and to constitute itself on a true basis, it would find its most decisive argument, and its consolidation, in the theory of taxation.

The progressive, indefinite reduction of the costs of the State;

Some taxes combined in such a way that they serve at once to pay for the public services, to moderate the economic movement, to discipline the market, and to promote the emancipation of the working classes;

The balance of properties;

The inviolability of inheritances;

Thee leveling of fortunes;

Society advancing with an even step in justice, liberty and wealth:

That is what we mean from now on by this word, odious and curse for so many centuries, Taxation.

[Working translation by Shawn P. Wilbur]

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