Popular Science Monthly/Volume 49/May 1896/Principles of Taxation: In Literature and History VII

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Popular Science Monthly Volume 49 May 1896  (1896) 
Principles of Taxation: In Literature and History VII
By David Ames Wells





TAXATION in France. — No chapter in history is more replete with interest and instruction than that which exhibits the system for exacting contributions for the support of the state which characterized the fiscal policy and administration of France during the seventeenth and eighteenth centuries, and which is now acknowledged to have been mainly instrumental in bringing on the memorable revolution in the closing years of the latter century.

Feudalism in France, previous to 1789, had come to find its expression almost exclusively, in the claims on the part of the various and multiplied representatives of authority — nobility and clergy — to regulate taxation, in respect to both imposition and exemption.

The kingdom was divided into departments, with an officer called an "intendant," or "farmer-general" (fermier général) at the head of each, into whose hands the whole power of the crown in respect to revenue matters was delegated. Each department was then sub-divided, and at the head of each of these subdivisions a deputy was appointed by the intendant. The rolls or lists of the various crown taxes, for polls, service, incomes, "proportions," and the like, were distributed by the intendants to their deputies, who had the power to exempt, change, add to, or diminish the list at their pleasure.

It must be obvious, that the friends of the intendant and of all his deputies, and the friends of their friends, might be favored at the expense of the helpless masses; and that great noblemen in favor at the court, to whom the intendant himself would naturally look for protection, would especially find little difficulty in transferring most or all of the burden of tribute rightfully due from them to the state, to others who had no such influence. The result was that taxation in France at the period mentioned had become in the highest degree arbitrary, and a scarcely disguised form of plunder; and the methods of assessment were so crude and defective that it is probable that the state never received fifty per cent of the amount collected, and in many cases no more than forty or thirty per cent. The expenditures of the revenues received were, moreover, characterized by so little system as to render it difficult to exercise any efficient check 30 POPULAR SCIENCE MONTHLY.

upon them, or to ascertain accurately at any one time (as was

especially the case during the latter third of the eighteenth

century) the true state of the national exchequer; all of which

fostered indefensible waste and extravagance. At the death of

Loiiis XV in 1774, the annual expenditure of the king and his

household probably amounted to one eighth of the entire revenue

I of the state,* and the total indebtedness of the state in 1789, the

I year of the commencement of the revolution, was estimated as

\ being in excess of $1,000,000,000, carrying an annual interest of

i $206,000,000 ; and it is to be remembered that these figures must

I be at least doubled to represent the corresponding sums of the

i present day. All this indebtedness, and all that was subsequently

I incurred through the issue of irredeemable "assignats" (paper

I or fiat money), was ultimately, through one means or another,

entirely repudiated.

In the collection of levies the inquisitorial, infinitesimal as- sessment and dooming penalty system, the like of which still finds favor in Massachusetts, was carried out to perfection ; and the only rule of practice which in different districts could prefer any claim to uniformity, was the rule of inequality of assessment, and harshness and cruelty in collection. Arthur Young, an Eng- lish gentleman of culture and keen powers of observation, who traveled in France in 1787-'89, states, in recording the above experiences, that " he shuddered at the oppression of which he became cognizant."

One of the chief sources of revenue to the state was from an exaction known as the taille,\ which was mainly in the nature of a direct tax on land, though in some provinces it was a levy on both polls and land. The history of this exaction has been carefully investigated and is not a little interesting. It origi- nated in the early feudal period, and was imposed on persons originally bondsmen, or on persons who held in " farTn," or lease, or resided on the lands of a noble or suzerain, and from which the proprietors or suzerains of the land were exempt. And as no vassal could at will divest himself of servitude or allegiance to his lord or suzerain, so the obligation to x)ay tribute (taxes ?) always remained upon him as a personal servitude, wherever he might be In other words, the condition of the masses in France during the middle ages was not unlike the condition of the slaves in the United States previous to emancipation. These had property in

  • There were seventy-five officers connected with the king's chapel alone ; forty-eight

physicians, surgeons, and apothecaries attached to his person ; and three hundred and eighty-three men and one hundred and thirty-three boys employed for his table.

f The ta'dle was the equivalent of the English " tallage." But the discretionary power of levying the impost was taken away from the English crown and nobility by the pro- visions of Magna Charta.


their possession, and spoke of themselves as owners of property, but in reality their property followed the condition of the servi- tude of their jDersons, and both persons and property belonged equally to the masters. The taille, furthermore, as a badge of servitude, was supposed to dishonor whoever was subject to it, and degrade him not only below the rank of a gentleman, but of that of a " burgher," or inhabitant of a borough or town ; " and no gentleman, or even any burgher," writes Adam Smith in 1775, " will submit to this degradation."

(Repulsive and barbarous as was the taille, it is curious to note that the principle involved in it still survives and finds recognition and practice in States claiming a high civilization ; as, for example, in Massachusetts and Connecticut, where personal property is held to owe a servitude to the State and to be subject to taxation by it in virtue of the citizenship or personal domicile of its owner, although the property itself may be located beyond the territory and jurisdiction of the taxing power.)

The hardship and injustice of the practical working of the taille may be thus illustrated : In all cases the nobility and the clergy were exempt from its payment, as were also the holders of a multitude of minor Government offices, which, however, did not carry with them any patent of nobility. These exempt classes, which in the time of Louis XVI are believed to have numbered some 300,000 out of a total estimated population of 25,000,000 in the kingdom, owned about one half of the whole soil of France ; so that the burden of the taille, amounting in 1789 to 110,000,000 livres (francs), fell exclusively on the rural classes ; especially upon the agricultural interests, which it would have been sound policy on the part of the State to favor.

" But the mode in which the taille was levied still further illus- trates its iniquity. The Comptroller-General of the Finances, in the first instance, decreed that a certain aggregate sum was to be raised, and then two subordinate officials and the local landlords in each province and parish were left to decide among themselves how the prescribed amount was to be exacted from the taxpayers. The combined forces of jobbery and absolute authority rendered its incidence grossly unfair, the poorer localities generally paying the larger share, while the richer ones escaped lightly. Thus there was brought about a condition of things in which the most miserable sections of the community were made to feel their inferiority in every relation of life. They were humbled in all their feelings, and they could not but loathe those whom birth or favoritism had placed above them." *

Besides the taille, two other forms of direct exaction were in-

  • The Financial Causes of the French Revolution. By Ferdinand Rothschild.


eluded in the fiscal policy of France at the. period under consid- eration — namely, a so-called capitation tax, whicli was a kind of graduated tax on capital, and from the incidence of which there was theoretically no exemption ; and the vingtieme (one twen- tieth), instituted by Colbert, which was an income tax, and sup- posed to be levied on every class. Owing, however, to inefficient administration, and to the circumstance that the clergy occasion- ally bought exemption for themselves for a term of years by the payment of a lump sum, the revenue derived from these sources was always much less than it ought to have been, the privileged class to a large extent evading assessments.

The almost complete exemption of the clergy of France dur- ing the ante-revolutionary period from taxation, whereby those who were supposed to preach and practice charity were so intent upon securing worldly vantage as to have thrown nearly all their duties and responsibilities to the state upon the poor, constitutes one of those striking contradictions which so often confront us in history.

The indirect taxes were very numerous ; comprising the cus- toms, the octroi, the excise, and special taxes on wines, cards, tobacco, salt, and on a great variety of manufactured products ; and in their collection the arbitrary, inquisitorial, infinitesimal, and penalty system was carried out to perfection. It was this class of taxes which undoubtedly pressed most heavily on the French poor, and from the direct incidence of which the Church and nobility managed in a great degree to escape. Very curi- ously, also, they constituted an inducement to the peasantry to seem poorer than perhaps they actually were, and to live in low, thatched cottages, without floors or glass in the windows, inas- much as any improvement of their dwellings meant an increase of their taxes. Custom duties were levied, not only at frontiers of the kingdom, but between every province of France. The taille was exacted with military severity. " Carriages and carts were stopped on the highway and searched by the tax collectors ; no private house was safe from them by day or by night ; and on the slightest suspicion they used the power of arrest that was vested in them. Prosecutions for unpaid taxes were carried on with the utmost rigor. The clothes of the poor were seized, and even their last measure of flour, and the latches on their doors. Collectors, accompanied by locksmiths, forced open doors and carried away and sold furniture for one quarter of its value, the expenses exceeding the amount of the tax." — Taine.

The most vexatious, arbitrary, and extraordinary tax of this period was that imposed on salt, and known as the " gahelle " ; and to one who now acquaints himself with its history and details it must seem almost inconceivable that any country claiming to


be civilized ever could liave had such an experience. In order to | effectually secure at the outset the payment of this tax, the right to produce and sell salt was vested exclusively in the state. By an ordinance in 1780, every person over seven years of age was required to purchase, not at convenience, but on one stated day of each year, seven pounds of salt, which in a peasant's family of four, according to Taine, entailed an expense equal to the average wage receipts of nineteen days' work. It was forbidden also to divert a single ounce of the seven obligatory pounds to any use but the "pot and the salt cellar." If any one failed in these observances he was fined ; and he was also fined if he purchased a smaller quantity than the law prescribed. To supplement the use of salt with water from the ocean, or from saline springs, or to water cattle in marshes or other places containing salt, was for- bidden under severe penalties. In certain departments of France it was also made incumbent on officials periodically to destroy, often by defilement, all deposits of salt which were formed natu- rally. No retail dealing in salt was permitted, but Government warehouses were established, often at places at considerable dis- tances from towns and villages, where their inhabitants were compelled to make their purchases. According to a report made by the comptroller-general in 1787, the salt tax at that time annually occasioned " four thousand domiciliary seizures, three thousand four hundred imprisonments, and five hundred sen-^l tences to flogging, exile, and the galleys."

But in addition to the so-called national system, which im- posed a great variety of taxes upon all persons and property in France which could not through favor procure exemption, which exemption embraced practically all the nobility, clergy, and gentry, there were a great number of taxes peculiar to separate estates or seigniories, but at the same time more or less general. Thus, all the various operations involved in production and consumption were made, as far as possible, the occasion for tax assessments. The tenants, or vassals, were bound to grind their corn at the mill of the seigneur only ; to bake their bread exclusively at his ovens ; to press their grapes and apples exclu- sively at his presses ; and for every such industrial conversion a toll or tithe was collected. One of the memoirs touching the condition of the Tiers Etat, as the common people were called, published about the time of the meeting of the National Con- vention, expresses a hope that posterity may be ignorant that feudal tyranny in Brittany, armed with judicial power, did not blush at breaking hand mills and selling annually to the mis- erable people the privilege of bruising between two stones a measure of buckwheat or barley.

Movements of persons or property from one town or parish to


another always involved taxation. If a farmer or laborer moved from one parish to another, it was held that he could not separate himself from a residence once adopted, but remained there for taxation, although he might actually and permanently have left it and be paying taxes in another place. All movements of property and persons were discouraged ; and it not infrequently happened that there was grievous famine in some departments of France, and a surplus of food at the same time in others, not very far distant, because of the inability of producers in the lat- ter to dispose of an abundant harvest for lack of any remuner- ative market or demand. Every sale or transfer of property also carried in it a payment to the seignior, or lord of the manor, to the extent of one eighth and sometimes one sixth of the en- tire equivalent received in consideration. And it is interesting here to note that this exaction was recognized and enforced in French Canada until the abolition of seignioral tenure, forty years ago. Arthur Young states that at the time he traveled in France, 1787-'89, the very terms used to designate the taxes im- posed on the peasantry were in many instances untranslatable into English ; and from a long list of such terms as he recorded, very few can be found and defined in any ordinary French lexicon.* In order, however, in some degree to satisfy curiosity as to the nature of these abominations, it may be mentioned that one of the local taxes in Brittany, which remained in force down to 1789, and was known as the " silence des grenouilles," was a money payment in lieu of an ancient feudal obligation incum- bent on the residents of marshy districts to keep the frogs still, by beating the waters, that the lady of the seigneur might not be disturbed " when she lies in " ; while another exaction, still more outrageous, which was not repealed until the French revo- lutionary convention in 1790 swept it from the statute book, was a tax known as cuissage, or " droit du seigneur," which was paid to the seignior as a substitute for his ancient and formerly undis- puted right to the possession before marriage of the person of every female, the daughter of any of his serfs or more dependent vassals, f

��* Of such terms Mr. Young mentions the following as expressive of the tortures of the peasantry in Bretagne (Brittany) without attempting to define their exact meaning : " Che- vauches, quin/amcs, sonic, saut de poisson, haiser de mariccs, chansons, transport dceuf un charrcite, silence des grenoiiillcs, corvee d muericordes, milods, Icide, couponage, cartilage, borage, fouage, mdrechaussee, ban vin, ban d^aout, irousscs, gclinage, civerage, taillabilite, vingtain, sterlage, bordclage, minage, ban de vendanges, droit d^accapitc,^ etc.

\ This exaction, the reality of which has been called in question, would seem to be a necessary incidence or outcome of slavery or serfdom, inasmuch as the condition of slavery implies no rights on the part of a slave that the master is boimd to respect. Mr. Thorold Rogers is authority for the fact that this droit du seigneur was recognized under


Another relic of old feudalism whicli prevailed in France down to the period of the Revolution, and which, indirectly a tax, was most oppressive and impoverishing to the French rural population, was an obligation termed the corvee, imposed upon them to keep the main roads of the kingdom in repair without "being remunerated for their labor or for the services of their animals. They were thus frequently forced away with their teams from their fields, at the demand of any traveling noble or important personage in either church or state, and often at a time of sowing or harvesting, when they could be least spared ; and were occasionally required to travel long distances in order to reach their allotted work. While they were thus compelled to keep the main roads of the kingdom in repair, which were gener- ally of little use to them, the local or parish roads, on which they were dependent for their communication with adjacent towns or villages, were allowed by the Government to remain neglected.* For many years previous to the Revolution, the institution of the corvee undoubtedly meant to the French peasantry a period every year of from twelve to fifteen days of forced labor for the con- struction and repair of roads, for which the nobility, clergy, and town merchants contributed not a sou, or an hour of work.

And now comes an exceedingly interesting but little-known chapter in French history. There were men of large hearts and great intelligence in France during the reign of Louis XIV — 1643-1715 — who were not only keenly appreciative of the oppres- sions and sufferings of the French people by reason of their hor- rible system of taxation, but also of the certain destructive influ- ence of this system on the industry, society, and government of the kingdom, f Among these was the celebrated Marshal Vauban, who, although a soldier by profession, and holding one of the highest offices among the privileged nobility, had made a study of the misery of his countrymen, and had discerned in a great degree its cause, and was seeking for its remedy. The knowledge that his office as marshal of France gave him of the necessity for great expenditures — the country being almost always at war — and the little hope he had that the king would retrench in matters of splendor and amusement, left him no other alternative but to try

various names, as jambage, mercheta, and mantagium,, in France in the thirteenth and fifteenth centuries, and that fines in recognition and in lieu of this ancient manorial right were probably paid in England almost as late as the administration of Cromwell.

  • This practice or institution of the corvee w as undoubtedly of ancient Eastern origin,

and until recently existed in Egypt ; a very considerable part of the labor employed in con- structing the Suez Canal having been performed, in accordance with the orders of the then ruling Khedive, under its conditions.

f During the eighteenth century famine periodically decimated the rural population of France, and forty million acres went out of cultivation.


to find some method by wliicli the burden of the multitudinous taxes imposed for defraying these expenditures might not be enormously and unnecessarily augmented by their method of taking. He accordingly proposed what was in effect a single tax — namely, that the king should annually take by one act or pay- ment a royal tithe or tenth — dixnie royale — of all the property of each community, or of each person in the kingdom ; and that this simple and sole tax, which would suffice for all, and which would pass directly into the coffers of the king, should be the means by which every other form of tax or exaction from the people, with all its complicated, inquisitorial machinery for collection, should be abolished. About the same time a lieutenant-general of France — one Boisguilbert, of Rouen — took up the investigation of the same subject, and published a really learned and profound book ; in which he also proposed a new system of taxation, which he claimed would at once relieve the people of many taxes, and the state of the necessity of great expenditure, by providing that the proceeds of every tax should go at once into the treasury of the king, instead of enriching first the farmers-general, the finance ministers, and their deputies.

The system of Boisguilbert was analogous to that proposed by Vauban, with the exception that the former advocated the con- tinuance of some taxes on foreign commerce and upon foods, and the latter desired especially to abolish all such forms of taxation.

Admirable in many respects as were these proposed reforms ; clearly based as they undoubtedly were upon what are now recog- nized as sound economic principles, they had one great defect. They prescribed a course which if followed would have taken away the means of livelihood of a very large number of officials. It would have compelled them to live at their own expense, in- stead of at the expense of the public. This was enough to insure their failure. All the people whose interests, fortunes, and emol- uments were threatened arrayed themselves in opposition ; for they reasoned truly that place, power, wealth, and social position would fly from their grasp if the counsels of Vauban were to be followed. It is not to be wondered, then, that the king listened to the advice of the multitude who were privileged to talk with him, rather than to his one clear-headed, unselfish, faithful servitor ; or that when Marshal Vauban presented him with a book embodying and explaining his fiscal views and system, he received it with a very ill grace. His ministers also, even if they were contrary dis- posed, which is not probable, could not do otherwise than follow the views of the king, and from that moment the splendid ser- vices of the marshal, his military genius, his virtues, the former affection the king had had for him — all were forgotten. He stood in the position of one courting the favor of the people, and con-


temning and weakening lawful autliority. The circulation of his book was forbidden, and all the copies which the state could reach were destroyed ; while the unhappy marshal, unable to survive the loss of the king's favor, or stand up against the enmi- ties he had created, soon died of a broken heart.

His friend Boisguilbert, whom these events ought to have made prudent, could not restrain himself, but published a book vindicating Vauban, and answering one of the principal objections to his system — namely, the impracticability of making any radical changes during a great war — by asking if it was necessary to wait for peace before abolishing great abuses. This was a more offensive contemning of authority than Vauban had committed ; and Boisguilbert was stripped of his functions, severely repri- manded, and sent into exile. For this he was in a degree recom- pensed by the acclamations and approbation of the people wher- ever he went.

The system and abuses which Vauban and Boisguilbert en- deavored to reform accordingly continued ; but as years went on, and the misfortunes of France accumulated and culminated in the total defeat of her armies by Marlborough, the necessity of larger revenues to meet larger expenditures became most urgent ; but how to provide them was a problem which brought no little embarrassment to Louis XIV's ministers. At last Desmarets, who was Comptroller- General of the Finances, proposed to the Council of State, as a way out of their difficulties, that they should, in addition to all existing numerous and abominable taxes, establish or take on the system of a royal tenth, which had been proposed by Vauban and Boisguilbert as a substitute for all other taxes ; with all the new machinery, officials, and valuations which such a system entailed. The proposition, after a brief consideration, was approved by the Council, and Desmarets was authorized to present it to the king ; who, although long accustomed to various and extravagant exactions, is related at first to have been greatly terrified, and to have exhibited for some eight or ten days a pro- found melancholy. At the expiration of this period he regained his usual calmness, and gave the following explanation of the cause of his trouble : He said that he had been much tormented that the extremity of his affairs required him to take so much of the wealth of his subjects ; and that at last he unbosomed himself to the Pere Tellier (his confessor) ; who after a few days returned and reported that he had laid the matter before the most eminent doctors (theologians) of the Sorbonne, by whom it was decided, that all the wealth of his subjects ivas the king's, and that when he took of it he only took what belonged to him. The king added that this decision had taken away all his scruples, and had re- stored to him all the calm and cheerfulness that he had lost. After


the king had heen thus satisfied by his confessor, no time was lost in establishing the tax. The effect upon the masses was one of great sadness, but there was no revolt. Many of the property holders in the kingdom endeavored to convince the state officials that under the former condition of affairs they did not enjoy a tenth part of their income, and representatives of the province of Languedoc offered to give up its entire wealth to the crown, if they might be allowed to enjoy, free of every tax, the tenth part of it. All these remonstrances and propositions were not only not listened to, but their presentation was regarded in the light of insubordination.

The product of this new tax was not nearly so much as had been expected ; and its most marked result was, that it enabled the king to augment all his infantry to the extent of five men per company.

In this record of tax experience, which, commencing at least as far back as 1667, under Louis XIV, continued with increasing popular oppression and misery until 1789, we find the origin and the horrors of the French Revolution which began in the latter year. During its continuance six thousand persons, mostly of the ranks of the nobility, clergy, and gentry, are said to have perished under the hands of public executioners and upon '■ the scaffold. But when one calls to mind the multitudes that, for many successive generations, were starved and tortured out of . existence by a system of exactions under the name of taxation, ! and for which system the king, the nobility, the clergy, and the 1 influential classes of France were responsible, the wonder is, that the masses of a brutalized and infuriated people should have / shown so much clemency and restraint in the hour of their ven- geance and of triumph.*

��* On this point, Arthur Young, whose observations on the condition of the French people were made before the great revolution had culminated, or in 1789, writes: "It is impossible to justify the excesses of the people or their taking of arms. They were clearly guilty of great ciuelties. But is it really the people to whom we are to impute the whole, or to their oppressors, who had kept them so long in a state of bondage ? He who chooses to be served by slaves, and by ill-treated slaves, must know that he holds both his property and life by a tenure far different from those who prefer the service of well-treated freemen ; and he who dines to the music of groaning sufferers, must not, in the moment of insurrec- tion, complain that his daughters are ravished and then destroyed, and that his sons' throats are cut. When such evils happen they surely are more imputable to the tyranny of the master than to the cruelty of the servant. The analogy holds with the French peasants. The murder of a seigneur, or a chateau in flames, is recorded in every newspaper. The rank of the person who suffers attracts notice. But where do we find the register of that seigneur's oppressions of his peasantry, and his exactions of feudal service from those whose children,were dying around them for want of bread ? Where do we find the minutes that assigned these starving wretches to be fleeced by impositions, and a mockery in the seigneural court ? Who gives us the award of the iuteudant and his sub-dclegues, who


It is interesting also to note in this connection tLat against no one class, when the revolutionary element became ascendant in France, was popular hatred more intense than to the farmers- general, to whom the collection of taxes in the different provinces of the kingdom was farmed out or contracted. The extravagant expenditure which, as a rule, characterized their living, was re- ; garded by the masses as all-sufficient evidence of the enormous { profits unjustly accruing to them from these contracts ; and the ' power continually exercised by their agents to make domiciliary visits, seize goods, inflict fines, and take other measures of an arbi- l trary, obnoxious character to enforce compliance with extortions, all contributed to make them objects of execration by nearly the entire people. And this animosity under the revolutionary gov- ernment speedily manifested itself, by sending thirty-two out of the whole number — sixty — of these high officials to the guillotine ; among whom were undoubtedly some honest and conscientious financiers and otherwise distinguished men, such as Lavoisier, the father of modern chemistry.

One of the great results of the French Revolution, which ought to be duly weighed in reckoning up the good and evil of that mighty popular convulsion, is that it swept away the feudal land laws of old France and made landowners of several millions of men who were formerly serfs. Fully one half of the land of France at the present time is owned by small farmers or peasants ; and in their j / hands has been demonstrated afresh what Arthur Young called ' ^ the magic power of property to turn sand to gold. Regions which he visited in 1788, and found barren and deserted, a hun- | dred years later were clothed with vines and gardens under the j tillage of peasant proprietors.

From the foregoing consideration of France in the last cen- tury, experiencing through the abuse of taxation the most awful revolution in history, let us turn to a country of our own time and continent, and observe methods of taxation yet surviving the vigor and barbarism of the mediseval period.

Taxation in Mexico. — Until recently, and to a great extent at present, the system of taxation operative in Mexico, the ori- gin or evolution of which may in no small part be attributed to a sparseness of population, lack of accumulated wealth or capi- tal, limited wants, and low civilization of the masses, is especiallj worthy of notice, and most instructive from the circumstance that nothing like it exists in any other country.

took off the taxes from the man of fashion, and laid them with accumulated weight on the poor who were so unfortunate as to be his neighbors ? Who has dwelt sufficiently on ex- plaining all the ramifications of despotism, regal, aristocratical, and ecclesiastical, pervading the whole mass of the people, reaching like a circulating fluid the most distant capillary tubes of poverty and wretchedness?" — Young^s Travels in France.



The duties levied on imports into Mexico are so excessive that the average rate of the Mexican tariff is probably greater than that adopted by any other country claiming to be civilized, with the possible exception of Russia. The favorite modern idea of making the tariff subserve two purposes — namely, the raising of revenue and the regulation of trade — does not appear as yet to have greatly interested either the people or Government of Mexico, as revenue, through the necessities of the state, is the supreme consideration ; and for securing this no other rule seems to have been recognized and followed in imposing duties on imports than that the higher the duty (or tax) the greater will be the accruing revenue.

But with this general characterization of the Mexican tariff there comes in the following other most anomalous feature : Thus, in all commercial countries, save those which permit the levy by certain municipalities of the so-called octroi taxes, when for- eign articles or merchandise have once satisfied all customs re- quirements at a port, or place of entry, and have been permitted to pass the frontier, they are exempted from any further taxation as imports so long as they retain such a distinctive character. In the United States, for example, it is held that the right to im- port carries with it a right to sell (i. e., in the original packages) without further restrictions. And the Supreme Court of the United States has decided that a license tax imposed by a State of the Federal Union, as a prerequisite to the right to sell an im- ported article, is equivalent to a duty on imports, and in violation of the provision of the Federal Constitution which prohibits the States from imposing import duties ; and this decision has been carefully recognized by the authorities of the several States in dealing with imported liquors under local license, or other re- strictive laws.

But, in Mexico, each State of the republic has had practically its own custom-house system, and levies taxes on all goods — do- mestic and foreign — passing into its territory for the purpose of use or consumption ; and then, in turn, the several towns of the States again assess all goods entering their respective precincts. The rate of State taxation, being determined by the several State legis- latures, varies, and varies continually, with each State. In the Federal District — i. e., the city of Mexico — the rate was recently two per cent of the national tariff ; but in the adjoining State of Hidalgo it was ten per cent, and in others it has been as high as sixteen per cent. The rate levied by the towns is said to be about nine per cent of what the State has exacted ; but in this there is no common rule. Nor is this all. For the transit of every terri- torial boundary necessitates inspection, assessment, the prepara- tion of bills of charges, and permits for entry ; and all these trans-

�� � actions and papers involve the payment of fees, or the purchase and affixing of stamps. Thus, by section 377 of the tariff law of December, 1884, it is ordained that "the custom house shall give to every individual who makes any importation, upon the payment of duties, a certificate of the sum paid, which certificate, on being presented to the administrator of the stamp office in the place of importation, shall be changed for an equal amount in custom-house stamps. For this operation the interested party shall pay, to the administrator of whom he received the stamps, two per cent in money (coin) of the total value of the stamps." All imports into Mexico are liable, therefore, to these multiple assessments; and the extent to which they act as a prohibition on trade may be best illustrated by a practical example.

In 1885, an American gentleman, residing in the city of Mexico as the representative of certain New England business interests, with a view of increasing his personal comfort, induced the landlady of the hotel where he resided (who, although by birth a Mexican, was of Scotch parentage) to order from St. Louis an American cooking-stove, with its customary adjuncts of pipes, kettles, pans, etc. In due time the stove arrived; and the following is an exact transcript of the bills contingent, which were rendered and paid upon its delivery:

Original Invoice:
1 stove weight 282 pounds.
1 box pipe " 69 "
1 box stove-furniture " 86 "
 Total 437 pounds, or 199.3 kilos.
Cost in St. Louis, United States currency $26 50
Exchange at 20 per cent 5 30
Total $31 80
Freight from St. Louis to city of Mexico (rail), at 3.15 per 100 pounds. $15 75
Mexican consular fee at E1 Paso 4 85
Stamps at El Paso 45
Cartage and labor on boxes examined by custom-house at El Paso 50
Forwarding commission, E1 Paso 2 00
Exchange 162/3 per cent on $7.64 freight advanced by Mexican Central Railroad 1 25 $56 60
Import Duties:
1 box, 128 kilos (stove), iron, without brass or copper ornaments, at 19 cents per kilo $24 42
1 box, 31.3 kilos, iron pipe, at 24 cents per kilo. 7 51
1 box iron pots, with brass handles, at 24 cents per kilo 9 48
$41 41
Add 4 per cent as per tariff. 1 65
$43 06
Package duty, 50 cents per 100 kilos 1 00
$44 06
Add 5 per cent as per tariff $2 20
$46 26
Add 2 per cent municipal duty 93
$47 19
Add 5 per cent consumption duty 2 36
$49 55
Dispatch of goods at Buena Vista station, city of Mexico 38
Stamps for permit 50
$50 43
$107 03
Cartage in city of Mexico 75
 Total $107 78
Original cost of stove, with exchange $31 80
Freight, consular fees, and forwarding 24 80
Import duties 50 43
Cartage 75
 Total $107 78

Under such a system articles of the most common use in the United States are from their increase of price necessarily made articles of luxury.

Again, the Mexican tariff provides that the effects of immigrants shall be admitted free. "But this is rendered practically a dead letter, from the fact that the interior duties are levied on everything the immigrant has before he gets settled; and these are so heavy that immigration has been greatly discouraged. A carpenter, or other mechanic, who desires to get employment in Mexico, has such heavy duties levied on his tools on passing the national or State frontiers that few are willing or able to pay them. Hence, few American mechanics find their way into the country, unless in accordance with special contract."

The existence in a state of the New World of a system of taxation so antagonistic to all modern ideas, and so destructive of all commercial freedom, is certainly very curious, and prompts to the following reflections: First, how great were the wisdom and foresight of the framers of the Constitution of the United States in providing, at the very commencement of the Federal Union, that no power to tax in this manner, and for their own use or benefit, should ever be permitted to the States that might compose it (Article I, section 10). Second, how did such a system come to be ingrafted on Mexico, for it is not a modern contrivance? All are agreed that it is an old-time practice and a legacy of Spanish domination. But, further than this, may it not be another of those numerous relics of European mediævalism which, having utterly disappeared in the countries of their origin, seem to have become embalmed, as it were, in what were the old Spanish PRINCIPLES OF TAXATION. 43

provinces of America — a system filtered down through Spanish traditions from the times when the imposition of taxes and the regulation of local trade were regarded by cities and communities in the light of an afiirmation of their right to self-government, and as a barrier against feudal interference and tyranny; and when the idea of protecting industry through like devices was not limited as now to international commerce, but was made ap- plicable to the commercial intercourse of cities and communities of the same country, and even to separate trades or " guilds " of the same city ? Whether such speculations have any warrant in fact or not, it is at least certain that we have in the Mexico of to- day a perfect example of what was common in Europe in the middle ages ; namely, of protection to separate interests (through taxation) carried out to its fullest and logical extent, and also of its commercial and industrial consequences.

So much for the tariff system of Mexico and its adjuncts. The " excise " or " internal revenue " system of the country is no less extraordinary. It is essentially a tax on sales, collected in great part through the agency of stamps, and is a repetition of the old " alcalvdla " tax of Spain, even to the extent of retaining its name slightly modified from alca vala to " alca bala " ; and which Adam Smith, in his Wealth of Nations, describes as one of the worst forms of taxation that could be inflicted upon a country, and as largely responsible for the decay of Spanish manufactures and agriculture. Thus a Federal statute of Mexico, enacted in 1885, imposed a tax of " one half of one per cent upon the value in ex- cess of twenty dollars of transactions of buying or selling of every kind of merchandise, whether at wholesale or retail, in whatever place throughout the whole republic." Also, one half of one per cent " on all sales and resales of country or city property ; upon all exchanges of movable or immovable property ; on mortgages, transfers, or gifts, collateral or bequeathed inheritances ; on bonds, rents of farms, when the rent exceeds two thousand dollars an- nually ; and on all contracts with the Federal, State, or inunicipal governments." Every inhabitant of the republic who sells goods to the value of over twenty dollars must give to the buyer " an invoice, note, or other document accrediting the purchase," and affix to the same, and cancel, a stamp corresponding to the value of the sale. Sales at retail are exempt from this tax ; and retail sales are defined to be " sales made with a single buyer, whose value does not exceed twenty dollars. The reunion, in a single invoice, of various parcels, one of which does not amount to twenty dollars, but which in the aggregate exceed that quan- tity," remains subject to the tax. Retail sales in the public mar- kets, or by ambulatory sellers, or licensed establishments whose capital does not exceed three hundred dollars, are also exempt.


Tickets of all descriptions — railroad, theater, etc. — must have a stamp, as must each page of the reports of meetings, each leaf of a merchant's ledger, day or cash book, and every cigar sold singly, which must be delivered to the buyer in a stamped wrapper. Sales of imported spirits pay eight per cent on the duties levied on their importation, and a half of one per cent in addition when retailed. Domestic spirits pay three per cent when sold by pro- ducers or dealers at wholesale, and a half of one per cent additional when sold at retail. Gross receipts of city railroads pay four per cent ; public amusements, two per cent upon the amount paid for entrance ; playing cards, fifty per cent — paid in stamps — on the retail price; and manufactured tobacco a variety of taxes, pro- portioned to quality and value. Mercantile drafts are taxed at a dollar on every hundred.

Farms, haciendas, and town estates are required to be taxed at the rate of three dollars per each thousand dollars of the val- uation, but such is the influence of the landowners that the valuation is almost nominal. In Vera Cruz the rate is reported at about two mills on the dollar for the most productive portions of country estates ; while in the Pacific State of Colima the rate is said to be one and a half per cent. Land and buildings not actually producing income are exempt from taxation, notwith- standing they may be continually enhancing in value. This sys- tem of exempting unoccupied realty from taxation also prevails in Portugal ; and the Mexican usage was probably derived from that country, where the theory in justification of the practice is, that the use of a thing defines its measure of value, and that to tax unused property is confiscation.

A recent Mexican statute for the taxation of land contains forty-seven different sections, each providing the ways and means of enforcing the tax and prescribing penalties for its in- fraction. In the towns and cities of Mexico this system of infini- tesimal taxation is indefinitely repeated, the towns acting as col- lectors of revenue for the Federal and State governments, as well as for their own municipal requirements. All industries pay a monthly fee : As tanneries, fifty cents ; soap factories, one dollar. So also all shops for the sale of goods pay according to their class, from a few dollars down to a few cents per month. Each beef animal, on leaving a town, pays fifty cents ; each fat pig, twenty- five cents ; each sheep, twelve cents ; each load of corn, fruit, vegetables, or charcoal, six cents (as a supposed road tax), and so on ; and, on entering another town, all these exactions are re- peated. A miller, in Mexico, it is said, is obliged to pay thirty- two separate taxes on his wheat before he can get it from the field and offer it, in the form of flour, on the market for consump- tion. As a matter of necessity, furthermore, every center of popu-


lation — small and big, city, town, or hamlet — swarms with petty- officials, who are paid to see that not an item of agricultural prod- uce, of manufactured goods, or an operation of trade or commerce or even a social event, like & fandango, a christening, a marriage, or a funeral, escapes the payment of tribute.

In fact, trade has been so hampered by this system of taxa- tion that one can readily understand and accept the assertion that has been made, that people with capital in Mexico really dread to enter into business, and prefer to hoard their wealth, or restrict their investments to land (which, as before pointed out, is practically exempt from taxation), rather than subject themselves to the never-ending inquisitions and annoyances which are attend- ant upon almost every active employment of persons and capi- tal, even were all other conditions favorable. Mexico, from the influence of this system of taxation alone, must, therefore, remain poor and undeveloped ; and no argument to the contrary can in any degree weaken this assertion. Doubtless there are many intelli- gent people in Mexico who recognize the gravity of the situation, and are most anxious that something should be done in the way of reform. But what can be done ? If autocratic powers were to be given to a trained financier, thoroughly versed in all the prin- ciples of taxation and of economic sciences, and conversant with the results of actual experience, the problem of making things speedily and radically better in this department of the Mexican state is so difficult that he might well shrink from grappling with it.

In the first place, the great mass of the Mexican people have little or no visible tangible property which is capable of direct assessment.

Again, in any permanent system of taxation, taxes in every country or community, in common with all the elements of the cost of production and subsistence — wages, profits, interest, de- preciation, and materials — must be substantially drawn from each year's product. Now, the annual product of Mexico is compara- tively very small. Thus, for example, the annual product of one of the least developed States of the Federal Union — South Caro- lina — was in 1888 absolutely two and a half times — or, propor- tionally to area, twenty-five times — as valuable as the then an- nual product of the entire northern half of Mexico ; and the Argentine Republic of South America, with only one third the population of Mexico, has a revenue twenty per cent greater, and double the amount of foreign commerce. Product being small, consumption must of necessity be also small. " The average cost of living (food and drink) to a laboring man in the city of Mexico is about twenty-five cents per day ; in the country, from twelve and a half to eighteen cents. The average annual cost of a man's


dress is probably not over five dollars ; that of a woman, double that sum, with an undetermined margin for gewgaws and cheap jewelry." Mr. Lambert, United States consul at San Bias, re- ported under date of May, 1884 : " The average laborer and me- chanic of this country may be fortunate enough, if luck be not too uncharitable toward him, to get a suit of tanned goatskin, costing him about six dollars, which will last him as many years." Of household goods, the mass of the Mexican people are almost desti- tute. A few untanned hides are used for beds, and dressed goat or sheep skins serve for mattress and covering.

The food of the masses consists mainly of agricultural prod- ucts — corn {tortillas), beans (frijoles), and fruits — which are for the most part the direct results of the labor of the consumer, and not obtained through any mechanism of purchase or exchange.

Persons conversant with the foreign commerce of Mexico are also of the opinion that not more than five per cent of its popula- tion buy at the present time any imported article whatever, and that for all purposes of trade in American or European manufac- tures, the consuming population is not much in excess of half a million. Revenue in Mexico from any tariff on imports must therefore be limited, and this limitation is rendered much greater than it need be by absurdly high duties, which (as notably is the case of cheap cotton fabrics) enrich the smuggler and a few mill proprietors to the great detriment of the national exchequer.

It is clear, therefore, that the basis available to the Government for obtaining revenue through the taxation of articles of domestic consumption, either in the processes of production or through the machinery of distribution, is of necessity very narrow ; and that if the state is to get anything, either directly or indirectly, from this source, there would really seem to be hardly any method open to it other than that of an infinitesimal, inquisitorial sys- tem of assessment and obstruction akin to what is already in existence.

But the greatest obstacle in the way of tax reform in Mexico is to be found in the fact that a comparatively few people — not six thousand out of a possible ten million — own all the land and constitute in the main the governing class of the country, and the influence of this class has thus far been sufficiently potent practi- cally to exempt land from taxation. So long as this condition of things prevails it is difiicult to see how there is ever going to be a middle class (as there is none now worthy of mention) occupying a position intermediate between the rich and a vast ignorant lower class that take no interest in public affairs, and is only kept from turbulence through military restraint. Such a class in every truly civilized and progressive country is numerically the largest, and comprising the great body of producers, consumers.

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