CHAPTER 9 Plan for a Paper on Taxation in General, on Land Taxes in Particular, and on the Project of a Land Register

he subject on which M. le Contrôleur-Général¹ has consulted the Intendants is one of the most interesting which can be examined. It contains the foundations of the whole political administration of a nation.

The question is no less than the determination of the most advantageous manner, for the sovereign and for the people, of securing the revenues of the State, and of distributing the contribution which the society as a whole owes itself for the supply of all public expenditures.

M. le Contrôleur-général has contented himself with asking some questions; but I think that since each of these questions is closely related to the first principles of the matter, they cannot be resolved in a satisfactory and practical manner unless this matter is treated fully and its principles are developed in their natural order. It seems to me that this is the only way of realizing what is the best thing to do; for it is always the best with which theory should be concerned. Neglecting this procedure, on the pretext that what is best is not practical in actual circumstances, is like wishing to resolve two questions at the same time. It is like surrendering the advantage of putting questions in the simplicity which alone can render them susceptible to proof. It is like rushing into an inextricable labyrinth without any clues and like wishing to unravel all the paths at the same time, or rather, like voluntarily closing your eyes to the light by making it impossible for you to find it.

I will therefore treat the subject with all the rigor of theory by a separate study and discussion of the following two very different questions: What should be done? And what can be done?

I will not conform to the order in which the succinct questions have been put forward. The answer to each of these questions will be discovered as a matter of course through the development of the principles, and I will take care to recall them and to recapitulate them separately.

To the questions on the land register, M. le Contrôleur-général has added some questions on the establishment of corporations. This subject is so important in itself that I believe I must treat it in a separate paper in which I also intend to approach it from the two points of view of the best possible, and the most feasible.

Plan of the Various Chapters

Of the necessity of taxation, or of the contribution to public expenditure.

Examination of Rousseau’s idea that the corvées are preferable; show how much more costly this is, how much less equitably distributed, and impractical in a large society.

General principles of the distribution of taxation.

Of distributive justice.

Of the necessity of never injuring the sources of wealth.

False ideas of some people on distributive justice.

Who is liable to taxation? Proof that only the proprietor of the soil is liable [to taxation], (because he alone earns a net revenue which is ascertainable), for the maintenance of all other types of property of which the conservation and free use necessarily turn to his profit.

Refutation of the arguments used in attempts to prove that people with purely personal property have the same interest.

Different types of taxation.

There are only three possible types.

Direct taxation of landed property.

Direct personal taxation, which becomes a tax on the use of labor.

Indirect taxation or that on consumption.

Indirect taxation is divided into general taxation on consumption, like sales tax (aides) and excise duties; and into local taxation.²

The latter is subdivided into duties or impositions on consumption by virtue of their admission into the place where they are to be consumed;

Taxes on trade or on commodities passing through certain places, like tolls;

Taxes on certain transactions in the society, sales, etc., which are direct in some respects, and indirect in others;

And monopolies, like those of salt or tobacco.

All these different types of taxation ultimately fall entirely on the proprietors of the soil.

In order to demonstrate this, it is necessary:

To develop accurately the concept of the revenue, and to prove that only the proprietor has a revenue;³

Proof that industry has no revenue at all; distinction between profit and revenue.

Enumeration of different taxes. Their incidence.

Only the tax on consumption admits of difficulty. Now, it is obvious that the proprietor pays it by buying services more dearly, and selling his products at a lower price, or by the decrease either of the price or of the quantity of consumption: the decline in quantity leads also to the decline in price.

Examination of the question whether the proprietor pays the indirect tax twice.

The loss may be greater or smaller, but whatever the proportion and the manner in which the question is decided, there is no doubt that preference must be given to direct taxation.

Firstly, because, as I have said already, only the proprietor is liable [to taxation];

Secondly, because direct taxation is less expensive to levy, and thus the proprietor gains the whole amount of the costs and the gain of the chief collectors, tax farmers or agents;

Thirdly, because the indirect taxation imposes a multitude of constraints on commerce; because it entails lawsuits, frauds, penalties, the loss of a large number of people, a war between the government and its subjects, a lack of proportion between crime and punishment, and a continual and almost irresistible temptation to fraud, which is yet subject to cruel punishment;

Fourthly, because indirect taxation attacks liberty in a thousand ways;

Fifthly, because it is greatly prejudicial to consumption, and by this destroys itself;

Sixthly, because the expenses of the State are increased by it, since the State pays it on its own expenditure and on that of all its agents;

Seventhly, because it gives a competitive advantage in trade to foreign merchants;

Eighthly and finally, because its results cannot be calculated precisely, while a proprietor is always able to determine what proportion of his revenue he pays.

In the case of direct taxation, the State knows what it is inflicting; it also clearly knows what it is able to inflict. Everything desirable in administration is present in it, that is, simplicity, surety, and rapidity.

Direct Taxation

On persons or on the land.

That on persons, by its very nature offends reason; only laziness, and undue haste can have suggested it.

It cannot possibly be uniform.

Firstly, because there are people who own nothing;

Secondly, because, if the whole idea is to tax the individual, who is but a mass of wants, it would at any rate be necessary to tax at the rate appropriate to the lowest class of society; and at such a low rate, taxation would not yield a great deal.

It is therefore necessary to come back to classifying people more or less according to their means. Then this is no more than taxation of wealth, imposed arbitrarily and without rules.

If all so-called means are included in this, such as industry, commerce, their wages, the profits necessary for the exercise (of their business), etc., this poll-tax is in this respect an indirect tax.

The part proportioned to the means originating from landed property is direct taxation; but it has all the disadvantages of arbitrariness.

It is still possible to distinguish between personal and real taxation, even in the case where the personal taxation would be proportioned to landed property only, for the taxation resting on landed property may be payable by the person, as in the taille personnelle, or by the capital, as in the taille réelle. This is the difference from real taxation with regard to the assessment and with regard to the collection.

If all direct taxation were left in existence in amended form, a great deal of the taxation would still remain and fall directly on the soil, and it would still have to be imposed in the most equitable way possible, and even then the indirect taxes would still hit landed property on the rebound.

It is therefore of some use to discuss the question in general terms, and to run through the particular disadvantages of the various types of indirect taxation.

Indirect Taxation

Impositions on general consumption; their disadvantages. They cause the payment of the same tax on products of the same type, some of which are costly, and others not. Poor consumers are taxed excessively. And similarly, the same tax is paid on output of which a part, originating from fertile soil, has cost little, while the rest, from barren ground, has cost a great deal which it barely repays. These taxes therefore bear no relation to the revenue, and cause the abandonment of cultivation of mediocre soil, the output of which would only cover costs.

The import duties of towns. They have the same disadvantages and, moreover, this difficulty, that their rates could not be made to follow the relative value of commodities; because, for commodities with a high value, smuggling would increase in line with the duties.

The less necessary commodities are, the more duties will diminish their consumption.

A sure yield can therefore be counted on only to the extent that the taxes are imposed on commodities which the people use, which they cannot do without, and which are at the same time sufficiently bulky to prohibit fraud; but then the poor pay, or, at least advance, the whole of the tax, which causes them great hardship. The wealthy, who repay this advance, at first pay almost nothing, and even in the end pay only tardily.

It is a common belief that through these duties the towns are made to pay; but in reality, it is a charge on the country side which produces the taxed commodities. For the inhabitants of towns have limited revenues, and can pay the tax only by offering a lower price to the producers and the initial sellers of the commodity, or by curtailing their consumption. And we have already seen that these two transactions which naturally occur together, have the same results.

The ridiculous tariffs which the inhabitants of the towns have been allowed to establish, have almost completely the objective of placing the whole burden of the tax on what they call foreigners.

Foreign merchandise must therefore be sold at a higher price than local goods. This gives the local merchants a monopoly which is prejudicial to the ordinary inhabitants of the towns.

In the case of most of these duties, it is felt that everything must be taxed. Because of this, an inextricable labyrinth of valuations, disputes, etc. has been created.

Moreover, taxation of commerce tends to reduce its volume.

The natural result of all these urban taxes would be to change the location of towns, or to extend them beyond the genuine convenience of the inhabitants by building in the suburbs in order to evade the duties. The only reason which prevents this effect is another evil, which is even worse: It is the sad condition of the inhabitants of the countryside and the manifold vexations which pursue them, while the city dwellers, by reason of their wealth and their proximity to the government, their better education and greater prestige, and because, through closeness, they form a much more imposing body than those living in the country, even though the latter are twice as numerous, have been able to avoid much of the wrongs and the bad treatment which the cultivators have had, and still have, to endure.

If the countryside were subjected to territorial taxation only, the majority of the town dwellers would soon settle there, and this would not be a bad thing, for then consumption would come closer to the place of production; there would be fewer wasteful expenses of transportation and the cultivator, enjoying the whole of the consumer’s expenditure, would be able to extend his activities profitably to less fertile lands of which the additional produce would enable citizens to live whose existence is at present impossible, because if they were born, they would have no sustenance.

Taxation by way of monopoly is much worse still. By the extreme disproportion in price, it becomes a cruel lure to smuggling. The king is made to play the same role as those people who scatter corn for the birds in order to trap them.

With all indirect taxation, the maladministration of the customs officers is impossible to avoid. In order to ascertain frauds, it is necessary to give customs officers the privilege of being believed on the basis of their reports, and this may become a source of vexations which cannot be curbed.

The intricacy of the tariffs and the laws which regulate their collection and which seek to prevent their violation, make it a physical impossibility for the people to hold out against these vexations, for in the midst of so many obscurities, what individual would dare to hazard the expenses of a lawsuit against the agents of the authorities?

The taxation on transfers of property and commercial deeds, is a type of taxation no less odious.

It seems that Public Finance, like a greedy monster, has been lying in wait for the entire wealth of the people, and all this through a gross misunderstanding. For why so many tricks when all real wealth is out in the open, as the saying goes?

The hundredth penny (centième) takes a portion from property itself. However, when people agreed to pay taxes to preserve the society of which they are members, they did this only to preserve their property, and not to lose it.

There are undoubtedly cases in which people would consent to sacrifice part of their property in order to save the remainder, but this would not be the normal case. They want an assured and constant tenure of property, and they also want their sacrifice to be constant. Taxation must therefore be levied on the revenue and not on the capitals.

Moreover, the State has the greatest possible interest in preserving the stock of capitals. It is this stock which provides the advances of all agricultural and commercial enterprises, as well as the acquisition of real property. These capitals are formed by the slow process of thrift. To cause payment, as revenue of the State, of part of these capitals, which are accumulated for the advances necessary for work, is to destroy in part the source of these same revenues.

Having decided that direct taxation of landed property is the only form of taxation conforming to our principles, it is necessary to establish: firstly, on what part of the product of landed property it should be levied, and then how it can be distributed and collected.

I have already said that only the owner of real property is liable to contribute to taxation; a first ground for this is that he alone has a stake in the preservation of an abiding social order. What does it matter to a working man what becomes of the government? He would always own the same resources in the form of his arms; he is perfectly indifferent as to whether it is Jack or Peter who furnishes the work. A second ground, and the more peremptory, is that only the owner of landed property has a true revenue.

Discussion of the Revenue

M. Quesnay was the first to establish the correct notion of the revenue, when he learnt to distinguish the gross product from the net product, and not to include the profits of the cultivator in the net product. These products are the bait, the sufficient and necessary motive for cultivation; why would the cultivator work if he could not count on his legitimate profit? And will he not work with all the more eagerness and success as he is assured that he will not labor in vain?

An estate may produce commodities in quite large quantities and not yield any net product; for this result it is sufficient to assume that it costs more to till than the sale of its fruits can yield.

It is well known that soil, manured and ploughed to the point where it is as light as that of an ants nest, yields a prodigious harvest; but if in order to work the soil in this manner, spades and many days’ labor are required, this output may become expensive. If the quantity of output is such that it is not matched by consumption, and has no exchange value, the revenue will be zero in spite of the abundance of the harvest. When the philosophers’ stone is discovered, its inventor would not be any richer from it if he could only make gold to the value of a hundred louis by spending the value of a hundred louis on charcoal, and if it were to cost him a hundred and one louis he would certainly leave the trade.

This truth is well known; but what has not been so well realized is that it is just as necessary to subtract similarly from the gross product the recovery of the expenses of the cultivator in order to ascertain the net product.

M. Quesnay has developed the mechanism of agriculture which is based entirely on very large original advances and requires in addition annual advances which are equally necessary. It is therefore necessary to deduct from the sale of the produce: firstly, all the expenses or annual advances; secondly, the interest on the original advances; thirdly, their maintenance and the replacement of their inevitable decay, at least equal to the interest; fourthly, the subsistence and reasonable profit of the entrepreneur farmer and his agents, the wages of their labor and of their industry.

The cultivator has made these calculations when he leases a piece of land. It is the surplus which he gives to the proprietor that makes up the revenue, and it is only on this revenue that taxes can be levied. When the proprietor cultivates the land himself, he has no greater disposable revenue, but he combines in one person his revenue as a proprietor and his profits as a cultivator, a profit which is not disposable at all.

M. Quesnay has, moreover, demonstrated that, if the exchange value is diminished, the revenue would diminish gradually to the point where finally the soil would produce nothing beyond the reproduction of advances and the profit of the cultivator; that from then on, there would be no more letting out of land; that the proprietor, it is true, would still be able to farm it for his own subsistence, by making the advances himself, but that this slender revenue would no longer be disposable. And it would be possible that, in a nation where the estates would be reduced to this sort of cultivation, there would be absolutely no revenue, no means of sustaining the State, other than by gradually consuming the capitals; this situation would be self-destructive and of necessity transitory.

To appreciate this, it is sufficient to consider that the proprietors must have their livelihood. Let a family need a hundred écus in order to subsist, and let the land be so distributed that each proprietor, by farming it himself, earns only one hundred écus, and he will not be able to pay the tax without taking from his subsistence.

This so-called revenue would only be the wages of his labor. The true revenue is the portion of the proprietor over and above that of the cultivator, that which the cultivator gives to the proprietor in order to acquire the right to work his field. All other notions of the revenue are illusions. When landed property is purchased, it is this revenue alone which is purchased.

Now it is obvious that it is this revenue alone in which the tax can share, since it could not encroach upon the share of the cultivator without removing his interest in cultivation, without forcing him to consume his advances and consequently to reduce his activities and his productive expenditure. As the output of successive years becomes less, the encroachment of the tax would become more and more destructive, and the output and the sources of the State’s revenues would be exhausted together with the revenue of the proprietors.

There is no further need to return to indirect taxation, which would destroy the capitals even more quickly, for the very reason that its blows would at first be less perceptible and would give less warning of the danger.

In this context the question is solely one of territorial taxation; and since it has already been shown that taxation should respect the portion of the cultivator, it follows directly that it must be paid by the proprietor. For if it were demanded from the farmer, the latter would be intelligent enough to withhold it from the proprietor in the price of his lease. Thus, the taxing of the cultivator as such would never have been considered, but for the impediments placed in the way of true principles by the privileges of the Nobility and the Church which the lawmaker desires to dodge. The disadvantages of this method will be discussed below. For the time being, we will deal with the question considered by itself, and, in a nation where no obstacle is placed in the way of pursuing correct principles, there is no doubt but the proprietors would be approached directly.

However, this proposition is contrary to the opinion held by those who originally conceived of the device of the royal tithe (dîme royale),⁴ or those who have praised it. This method may in fact dazzle one by its simplicity, by the ease with which it is collected, by the appearance of distributive justice, and at least, because each knows what he must pay. The ecclesiastical tithe is a fascinating example among the poor and non-trading people. This form of taxation may be established more easily than any other. It is certain that the taxpayer always has the wherewithal to pay; he pays immediately and without expense. This mode of taxation is established in China. Yet, it has a number of disadvantages.

First disadvantage of the tithe: its lack of proportion. No regard whatsoever to the expenses of cultivation. It is possible that the gross tithe is greater than the net product. If by expending the value of nine setiers of corn, one managed to produce ten setiers per arpent, the net product would be only one setier. This would yet be a very sufficient revenue for engaging in agriculture: well, the tithe would take it all; it would therefore destroy the whole revenue; and if the cultivation had been more expensive, the tithe would destroy itself; it would destroy the motive for cultivation, and put an end to it.

Second and more direct reason, but which is partly contained in the first. The tithe, being a portion of the crop, may encroach upon the share of the cultivator, and may therefore take more than it should. The whole crop belongs at first to the cultivator; it is up to him to make his calculations in order to know what he ought to give up to the proprietor, and it is only on this portion, surrendered to the proprietor, that taxation may and should be levied.

Proposing to set up a cadaster for the tithe in order to remedy these shortcomings, and to ask less from land that produces less relative to the expenses, would mean rushing into a difficulty greater than that of evaluating the revenues in terms of money, because, for the latter operation, the leases and contracts of sale can be used at least, while there is nothing like this for evaluating the expenses of cultivation, which can only be ascertained through an analysis of cultivation. This is impossible for anyone but the cultivator, who knows how to calculate them accurately. The farmers calculate them approximately, and come closer by trial and error.

The tithe would be an excessive tax in some provinces; but it would be far from adequate for the public needs, unless it was extremely outrageous, which would make it more unequal, and even more destructive of cultivation, and consequently of itself, on land of inferior quality.

If it is assumed that the clergy have no other revenue than the tithe (setting off its other wealth against the enfeoffed tithes, and other tithes it does not own), the whole of the tithe, levied, it is true, at a multitude of different rates, would not go much beyond sixty million, and I do not believe the clergy to be a great deal more wealthy.

Let us thus turn back to approaching the proprietor directly, and asking from him in coin that part of his revenue which the State needs.

What would be asked of him? How would it be asked from him?

Two different systems.

Ask from each a part of the revenue, a constant proportion. This is the method of the dixième, of the vingtième, this is what has been put forward in the Théorie de l’impôt, in the Philosophie Rurale, it is the method used in the English land tax.

On the other hand, a fixed sum may be exacted from the nation, from each province, from each municipality; this sum being distributed among all the proprietors in proportion to their prosperity.

This second system, embodied in the arbitrary taille, has also been adopted in the provinces with land surveys or with taille réelle (property tax). In fact, it is only to this system that the land survey is truly appropriate. For what purpose would an unchangeable land survey serve in the case where a proportional part of a variable revenue is demanded? However, when a tax distribution is made, a fixed table is required. In all, there are only four possible methods of distributing the land tax.

Firstly, that of a portion proportional to the crop. This is the method of the tithe, of which I have already spoken and whose advantages and disadvantages I have sufficiently discussed.

Secondly, that of a portion proportional to the revenue. This is the method of the vingtième.

Thirdly, that of a fixed sum distributed each year among the taxpayers according to their mutual knowledge of the produce. This is more or less the method of the arbitrary taille, confined to landed property.

Fourthly, that of a fixed sum, distributed according to an invariable valuation of the property. This is the method of the land survey or the taille réelle.

The method based on the tax proportional to the revenue would have considerable advantages.

An unchangeable law could forever put an end to all the disputes between the government and the people, especially if it fixed one proportion for war and one for peace. People would compound at this rate in purchases and sales, and the part of the net product belonging to taxation would not be bought any more than that belonging to the priest is bought. After some time, in truth, no one would be paying taxes. But the king would be proprietor of a proportional part of the revenue of all the estates.

This revenue would increase with the wealth of the nation, and if the increase in wealth should augment the needs, it would be equally sufficient in that case. The wealth of the king would be the measure of the wealth of the people, and the administration, always affected by the repercussions of its mistakes, would learn once and for all, that is, by the simple calculation of the yield of the tax.

These advantages are considerable, especially in a monarchy; for in a republic or a limited monarchy like England, the people might not be so pleased if the prince would never have to reckon with them. With a law like this, the English Parliament would lose its greatest influence, and the king would soon be as absolute a monarch as in France, since it would no longer be to any one’s advantage to oppose him.

If, therefore, it were possible to succeed in establishing a tax like this, proportional to the revenue, there could be no hesitation in preferring this manner of levying the public revenue to any other.

But I confess that this seems completely impossible to me: under this system, the king or the government stands alone against all, and every one is interested in hiding the value of his wealth. In the provinces where the grande culture exists, the value of the leases serves as a valuation; but firstly, not all land is leased; and secondly, I think it impossible to guard against the disadvantage of defeasances. I know it is said that an administration which inspires confidence, as that of the States could be, would persuade people to declare accurately; but I believe this to be a lack of understanding of human nature. Fraud would be very common, and straightaway would no longer be deemed dishonorable. Even in the case of the distribution method, where all frauds are regarded as odious in that they affect all the taxpayers, people scarcely scruple to commit fraud. The principles of honesty and patriotism have far from taken root in the provinces; only in the course of time and by the slow means of education could they be established.

It is proposed to make defeasances null and void, but this would encourage false testimony. The proper remedy for fraud is to take away all advantage in it.

Moreover, there still remains the objection relating to the provinces where lease holding is not practiced, that is, more than two thirds of the kingdom. Would declarations be demanded from the proprietors? What has been their use for the vingtième? But, it is said in the Théorie de l’impôt, the old forms of taxation can be left in existence in the provinces where there is no lease holding, until cultivation has made sufficient progress there for this to be introduced. This is all right in the case of an entire province, but in connection with parishes for the distribution among the proprietors of each estate, it would entail returning to estimates.

And then, it would be rather a long wait until lease holding is established everywhere. I will show below, when I will be concerned with developing the progress of la grande culture, that this will not be as speedy as M. de Mirabeau images it will be.

The restoration of agriculture must start with the proprietors. The stock of capitals required for the establishment of rural enterprises will take a long time to eventuate.

It is therefore necessary to rest content with the distribution of a fixed sum, except that its increase could be regulated according to a certain proportion with the revenues of the nation; I will show below that this is possible, and how it may be done.

This distribution cannot be made arbitrarily without incorporating many of the disadvantages with which the taille has been reproached. I say a part, not all, for it must be understood that part of the disadvantages of the current taxation arises from the fact that it is not levied directly on the proprietor but on the cultivators, and on the unfortunate inhabitants of the countryside. Yet many of the disadvantages would remain.

One can be sure that in this annual distribution the poor proprietors would always be overburdened, and that the large proprietors, whose voice would always be preponderant….⁵

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Written 1763.

¹ The Contrôleur-général to whom this paper was directed was presumably Bertin (1719— 1792), who held this post from 1759 to 1763. He was keenly interested in agricultural reform, and took charge of a new secretariat d’Etat which included agriculture, in 1763.

² The aide and accise were taxes on consumption goods.

³ I have heard a man calculating the revenue of a province by saying: There are so many men; each man, in order to live, spends so many sous per day, therefore the province has so much revenue. Tax a similar revenue proportionately, and these people must die of hunger, or at least from misery. I believe that it all comes back to the great question of the soup of the Franciscans; it is in them when they have eaten it. It is the same with the so-called revenue from industry. When a man has eaten the reward proportioned to his talent or to the usefulness of his service, he has nothing left, and taxation cannot be levied on nothing. (Note by Turgot.)

⁴ The system of the dîme royale, or royal tithe, had been suggested by Sébastien Le Prestre de Vauban in the book Dîme Royale, which appeared in 1707. The dîme royale consisted of a tax levied proportionately on everything bearing a revenue, and was to be modeled on the dîme ecclésiastique which was then in existence in France. Vauban’s scheme was severely criticised at the time by Boisguilbert, in a mémoire to Chamillart, then Contrôleur-Général. (Note by Turgot.)

⁵ This paper was not finished, and the manuscript has not been found.

Extracts from
“Paper on Lending at Interest”

The next selection shows Turgot’s strong opposition to laws that limit or prohibit interest on loans. Anti-usury laws show no awareness of the importance of risk. In order to have economic progress, enterprises requiring large amounts of capital are necessary. Many of these enterprises are risky; if lenders are not allowed to derive a profit, they have no incentive to lend. The very fact that usury laws are always evaded shows their necessity. An activity that invariably takes place cannot reasonably be said to be wrong. Further, since lenders own the money they lend, they have the right to come to whatever terms they are able to secure. In the course of arguing against usury, Turgot defends an unusual interpretation of the then-common view that an exchange involves an equality of value. He takes this “equality” to be the fact that each person in an exchange values what he gains more than what he gives up. Although he retains the term “equality,” he in fact abandons its usual interpretation.