a profit generally assured to the state, but that profit is by no means certain, and can not make good the demoralization introduced among the people. State lotteries are still a part of the revenue system in Italy and Austria (proper), where the receipts are important, but show a decided tendency to diminish; Hungary and Denmark, where they are of little moment; and in Spain, where they are retained because of the general incapacity of the administration to reach other and more profitable sources of revenue. The experience of the State of Louisiana in connection with a State lottery is too recent to require examination. It is not probable that once abandoned such an instrument for obtaining money from the people will be revived, save as a last resort.
The state monopoly in the manufacture and sale of an article for fiscal purposes holds a place in European countries of high importance, and is met elsewhere under conditions not so favorable to its maintenance. As an example of the latter may be cited the colonial policy of the Dutch in their possessions in the East. After the termination of the trading companies, the Government undertook the entire control of the colonies, and sought to make them a source of revenue. The natives were to be taxed, but, having little of their own to be taxed, and practicing no occupation that could of its own volition become a profitable source of revenue, the state undertook to organize industry, and, by creating an opportunity for employing the labor of the natives, to receive the profits of production for its own uses. The native chiefs were made "masters of industry" and collectors of the revenue; and a certain part of the labor of the natives, one day in every five, was decreed to the state. In order to derive a profit, this labor must be bestowed in cultivating some product as find a market in international trade. Hence arose the importance of the sugar, coffee, tobacco, and spice crops of these Dutch islands, and for many years a handsome profit to the treasury was obtained from the management and sales of product. With the great fall in prices of sugar and coffee throughout the world, and the narrowing of the market for cane sugar, the Government obtained a less income each year, and has found it of advantage to relax the conditions surrounding cultivation, and to throw the management of the plantations more and more into private hands. To such an extent has this transition been effected that the state can no longer be considered as controlling a monopoly in product or sales, and is content with a revenue from other sources, one that does not even cover the expenses incurred in the colonial system. This experiment differs widely from those industries undertaken with the aid or encouragement of the state to be found in India. It was not with a fiscal object that they were established, and not infrequently the state sacrifices revenue by releasing them from tax burdens they would ordinarily endure. As one of the few remaining instances of the direct participation of a state in the production of products intended for foreign markets, yet undertaken and maintained for fiscal reasons, the history of the Dutch colonies in the East is instructive.
In Prussia the working of certain mines is in the hands of the state, and was originally looked upon as an important contribution to the income of the state. As in the Dutch experience, the changes in production throughout the world have greatly reduced the returns and made the income variable; yet there is little disposition to dispose of these possessions. "The danger of mineral supplies being worked in a reckless and extravagant manner without regard to the welfare of future generations, and the dread of combinations by the producers of such commodities as tin, copper, and salt, with the aim of raising prices, have both tended to hinder the alienation of state mines."7
The more common form of state monopoly is that which occupies a middle position, established for reasons of public safety or utility as well as of revenue. The salt monopoly enforced in Prussia was only abolished in 1867, and is still maintained in every canton of Switzerland. The strongest plea in its defense has been the guarantee by the state of the purity of the article sold, and this phase of the question has superseded the revenue aspect. Few articles of prime necessity, like salt, are subject to monopolies imposed by the state, and by a process of elimination it is only articles of luxury or voluntary consumption that are regarded as fit objects of monopoly for the benefit of the state.
A tax imposed upon an article at a certain stage of its production or manufacture may enforce the expediency or necessity of a state monopoly. Where the supervision of the state agents must be so close as to interfere with the conduct of the industry, the state intervenes and itself controls the manufacture and sale. Tobacco has long been subject to this fiscal régime, and, proving so productive of revenue, there is little to be said against a monopoly by the state of its manufacture and sale.
In Italy the tobacco monopoly is conceded to a company, but its return of net revenue to the state is nearly as large as the revenue derived from the taxes on real property (about thirty-eight million dollars a year). Prussia imposes a charge on the home-grown tobacco by a tax on the land devoted to its culture, but the return is very small, and Bismarck wished to introduce a true tobacco monopoly, modeled on that of France. But the conditions were opposed to his scheme, for the use of tobacco is general throughout the empire, and a proposition to increase its price by taxation or modify its free manufacture and distribution excited a widespread opposition. France maintains a full monopoly, and finds it too profitable to be lightly set aside unless some equally profitable source of revenue is discovered to make good the loss its abolition would involve.
While historical support is given to the maintenance of a monopoly as in France, it is not probable that the system will find imitators in other states, however tempting the returns obtained might seem. Great Britain has by her insular position solved the problem in another way. By interdicting the domestic cultivation of tobacco, all that is consumed must be imported, and a customs duty offers a ready instrument for making the plant, in whatever form it enters, contribute its dues to the exchequer. In Russia, as in the United States, where tobacco is a domestic product, the tax is imposed upon its manufacture, and this method requires supervision but no monopoly of the state.
The tobacco régime is defended almost entirely on fiscal grounds, and as a monopoly, an extreme measure, has proved its value as an instrument of taxation. Other reasons, of a moral character, are urged to induce the state to monopolize the manufacture and sale of distilled spirits. Both France and Germany have considered this question, and, in spite of confident predictions of a large profit, have decided not to undertake it. Russia, on the other hand, has taken it up quite as much on social as on revenue grounds, and is gradually securing a monopoly of the trade in spirits. The initial cost of the undertaking is large, and, as the system has not yet been perfected, it is too early to give a judgment on its availability as a financial instrument.
The transit dues, once commonly used by different countries, have been generally abandoned, and in China must they be sought for in their original forms of vexatious and unprofitable force. They arose from a desire to derive some benefit from a commerce permitted grudgingly, and rarely attaining any high results. The same end was sought by duties on exports, much employed when the country was supposed to be drained of its wealth by what was sent out of it. The conditions necessary for a successful duty on exports are not often found, and only in a few countries are they now existent. In Italy, South America, and Asia, exports of certain natural products are taxed, and, as in the case of Brazil, yield a notable revenue. In view of the rapid advancement of production in new countries and of inventions in the old, whereby many natural monopolies have been destroyed and competition made more general, such duties prove to be more obstructive to trade than productive of revenue, and are rapidly being abandoned. In spite of a formal prohibition of export duties in the Constitution of the United States, they are sometimes suggested in all seriousness.
In thus clearing the path of what may be called dead or dying methods of recent tax systems, the advantages enjoyed by the United States in their freedom from such survivals become more evident. The practice of farming taxes never gained a foothold in any part of the country. Lotteries have been occasional, and with two exceptions have been conducted on a limited scale – that of Louisiana is well known; an earlier instance is less known. During the Revolution one of the means resorted to by the Continental Congress for income was a lottery, but the attempt proved disastrous to all concerned, and was finally abandoned even more thoroughly than was the continental currency. State monopolies of production and sale
Bastable. Public Finance, p. 181.
