Adam Smith writes in The Wealth of Nations:
To prohibit a great people, however, from making all that they can of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind.
This quote reminds me of what John Adams wrote in 1787 in his A Defence of the Constitutions of Government of the United States of America:
The moment the idea is admitted into society that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence. If “Thou shalt not covet” and “Thou shalt not steal” were not commandments of Heaven, they must be made inviolable precepts in every society before it can be civilized or made free.
From The Wealth of Nations:
High taxes, sometimes by diminishing the consumption of the taxed commodities, and sometimes by encouraging smuggling, frequently afford a smaller revenue to government than what might be drawn from more moderate taxes. [page 954]
Back in the 1700s, income taxes were rare, yet more countries were adopting such revenue generating schemes. Adam Smith minced no words in attacking such “absurd and destructive” taxes. In a section of The Wealth of Nations titled “Taxes upon the Wages of Labour,” Adam Smith wonders why countries institute such income taxes:
Absurd and destructive as such taxes are, however, they take place in many countries.
Just a decade later, the Founding Fathers recognized that limits needed to be placed on government. One such limit would be to make it more difficult for government to raise our taxes. In Federalist #21, Alexander Hamilton argued that a consumption tax would effectively limit the size of government:
It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, “in political arithmetic, two and two do not always make four.” If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.
We have seen how the income tax has accomplished the growth of government that duties were unable to do previously. I return to this chart of the size of government excluding defense dating back to 1910. Remember, the income tax amendment to the Constitution was ratified in 1913.
Click on image to zoom in:
Seeing the growth of government since the income tax appeared a century ago, Smith and Hamilton were correct in their assessments. Based on the above quotes and their other writings, Adam Smith and Alexander Hamilton would support a switch to a consumption tax, more commonly called a sales tax today or the proposed Fair Tax.
Posted in Books, Economics, Government spending, History, Quotes, Taxes
Tagged adam smith, alexander hamilton, Consumption tax, Fair tax, federalist papers, Federalist Party, Government, income tax, Sales Tax, Tax, taxes, Wealth of Nations
Plato: “When there is an income tax, the just man will pay more and the unjust less on the same amount of income.”
Adam Smith in the section “Taxes upon the Wages of Labour” of The Wealth of Nations: “Absurd and destructive as such taxes are, however, they take place in many countries.”
Albert Einstein: “The hardest thing in the world to understand is the income tax.”
Will Rogers: “Income tax has made more liars out of the American people than golf.”
Please post more quotes in the comments.
Posted in Economics, Taxes
Tagged adam smith, Albert Einstein, Economic, income, income tax, Politics, taxation, taxes, United States, Wealth of Nations