does not apply to indirect taxes, and the person upon whom the incidence of such taxation primarily falls may be regarded as advancing rather than paying the tax, which is ultimately paid by a consumer, not as a tax, but as a part of the market price of a commodity.
In other words, the general effect if not the avowed object of an indirect tax is to place its burden in a roundabout way on the person who ultimately bears it. Taxes on imports, or customs dues; most internal revenue taxes; "octroi" taxes, or taxes levied by municipalities on commodities—mainly articles of food—brought within their limits from without stamps and fees for registering or verifying documents, are typical examples of indirect taxation.
The objections to this form of taxation are so great as to warrant their characterization as evils. In the first place, they prevent the taxpayer from knowing what he pays, by mixing up the price of an article with the tax, as has been already noticed. Secondly, they enhance the cost of a commodity to the consumer to a degree (often largely) in excess of the original burden of the tax. Thus, if an importer of sugar, salt, wool, coal, or metals pays taxes on these commodities when they enter the territory of another country (as, for example, that of the United States), he adds them to the first or invoice cost of the importation. On this aggregate he calculates and adds interest and profits when he sells to a wholesale dealer; and this process is repeated by every smaller dealer or retailer through whose hands the commodities pass on their way to final consumption; and as the number of such intermediaries is greatest in the case of articles sold by small retailers, the final burden of the tax is greatest on the very poor, whose necessities compel them to buy in very small quantities.[1] There is thus a very real and close connection between indirect taxation and pauperism.
In dealing with the relative influence of direct and indirect taxation, Mr. Gladstone, when Chancellor of the Exchequer, took the position in a parliamentary discussion in 1859 that "the distinction between them involves the question between rich and
- ↑ Some years since, at the instance of the writer, the late Charles L. Brace instituted an examination to determine the difference in price to individual consumers of coal bought in comparatively large and small quantities. He reported that as a rule, when coal could be delivered at private residences in the city of New York (at the time when the investigation was made) for four dollars and a half per ton, its cost to the people whose poverty compelled its purchase by the "bucketful" was at least twelve dollars per ton. And yet when subsequently a philanthropic capitalist proposed to remedy this grievance of the poor by selling coal bought in small quantities at greatly reduced rates, his attempt did not meet with the full approval of the people whom he desired to serve, by reason of an inference by them that the project must in some way be a scheme for the promotion of private gain rather than public good.
