The Analysis of Taxation in Classical Economics

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The Analysis of Taxation in Classical Economics “Every tax, however, is to the person who pays it a badge, not of slavery, but of liberty. It denotes that he is subject to government, indeed, but that, as he has some property, he cannot himself be the property of a master” 1 The school of classical economics is regarded as the first modern school of economic thought. Its’ starting point is generally considered to be in 1776 when Adam Smiths’ “An Inquiry into the Nature and Causes of the Wealth of Nations” was first published and it continued until the mid 19th century. The main economists associated with classical economics are: Adam Smith; David Ricardo; Jean-Baptiste Say; Thomas Malthus and John Stuart Mill. Classical economics was developed when Britain was progressing from a feudal society to a capitalist society over the background of the Industrial Revolution, a time of great economic, technical and social change. Significant improvements were made in mining, transport, agriculture and manufacturing which impacted on all aspects of life. Classical economics endeavoured to explain and solve the problems of a society based on a system with members all seeking individual gains. The theories focused on economic growth with emphasis on economic freedoms, free competition and laissez-faire ideals. The views of Adam smith being that an “invisible hand” governs over unregulated markets leading them to a natural equilibrium without the government needing to impose regulations and the tendencies of individual gains to correspond to collective gains. Throughout this time in British history continuous wars with France impinged on the import of goods leading to excise taxes, smuggling and the need to raise revenue for the state. Mercantilism was the English policy and revenue was needed to support the military presence necessary for overseas colonies and expansion.
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