ned, occasions
most taxes, whether laid on capital or on income, to be paid from
income; and therefore as taxation proceeds, or as government increases
its expenditure, the annual expenditure of the people must be
diminished, unless they are enabled proportionally to increase their
capitals and income. It should be the policy of governments to encourage
a disposition to do this in the people, and never to lay such taxes as
will inevitably fall on capital; since by so doing, they impair the
funds for the maintenance of labour, and thereby diminish the future
production of the country.

In England this policy has been neglected, in taxing the probates of
wills, in the legacy duty, and in all taxes affecting the transference
of property from the dead to the living. If a legacy of 1000_l._ be
subject to a tax of 100_l._, the legatee considers his legacy as only
900_l._, and feels no particular motive to save the 100_l._ duty from
his expenditure, and thus the capital of the country is diminished; but
if he had really received 1000_l._ and had been required to pay 100_l._
as a tax on income, on wine, on horses, or on servants, he would
probably have diminished, or rather not increased his expenditure by
that sum, and the capital of the country would have been unimpaired.

"Taxes upon the transference of property from the dead to the living,"
says Adam Smith, "fall finally, as well as immediately, upon the persons
to whom the property is transferred. Taxes on the sale of land fall
altogether upon the seller. The seller is almost always under the
necessity of selling, and must therefore take such a price as he can
get. The buyer is scarce ever under the necessity of buying, and will
therefore only give such a price as he likes. He considers what the land
will cost him in tax and price together. The more he is obliged to pay
in the way of tax, the less he will be disposed to give in the way of
price. Such taxes, therefore, fall almost always upon a necessitous
person, and must therefore be very cruel and oppressive." "Stamp duties,
and duties upon the registration of bonds and contracts for borrowed
money, fall altogether upon the borrower, and in fact are always paid by
him. Duties of the same kind upon law proceedings fall upon the suitors.
They reduce to both the capital value of the subject in dispute. The
more it costs to acquire any property, the less must be the neat value
of it when acquired. All taxes upon the transfe