The Simplified Wealth of Nations of Adam Smith, Book 5, Chapter 2l, Article 4: General Taxes -- Sales Taxes

Chapter 2l, Article 4: General taxes -- Sales taxes

147 The impossibility of taxing people according to their revenue by any capitation led to the invention of taxes on consumable commodities.   148 Necessities are commodities needed to support life. Under necessities, I mean both those things which nature and the established rules of decency have rendered necessary to the lowest rank of people.   149Whatever raises the price of necessities must raise wages, so that the labourer may still be able to buy those necessary goods.   150 A tax on necessities operates exactly in the same way as a direct tax on wages.   151 It is otherwise with taxes on luxuries, even on the luxuries of the poor.   152The high price of luxuries does not reduce the ability of the poor to bring up families.153 Any rise in the average price of necessities must reduce the ability of the poor to bring up big families and supply useful labour, unless such price is compensated by a rise in wages. 154 Taxes on luxuries do not raise the price of other commodities.

Sir Matthew Decker

  155 In Great Britain, the principal taxes on necessities are those on salt, leather, soap, and candles.   156 "Salt is a very ancient and a very universal subject of taxation." 157 In a country where the winters are so cold as in Great Britain, fuel is a necessity. A bounty might be reasonable on the transportation of coals from where they abound to those where they are wanted. 158 Such taxes raise the price of subsistence and wages. 159 Taxes on necessities are much higher in other countries than in Great Britain. 160 Taxes on meat are more common than those on bread. 161 Consumable commodities may be taxed in two ways. 162 A coach may last 10 or 12 years with good management.   163 Sir Matthew Decker proposed that all commodities should be taxed this way.  
  1. The tax would be more unequal.
  1. Paying for an annual, half-yearly, or quarterly licence to consume certain goods would very much reduce the convenience of taxes on goods of speedy consumption the piecemeal payment.
  1. Such taxes would operate less as sumptuary laws.
  1. If a workman paid all at once, by yearly, half-yearly, or quarterly payments, a tax equal to what he at present pays on all the porter he drinks, the sum might distress him very much.
  164 The excise duties are imposed briefly on local goods for home consumption.
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Next: Chapter 2m: Customs Duties