Adam Smith on public expenditure and taxation

This paper presents Adam Smith s view on taxation and public expenditure, by means of an almost literal reading of the Wealth of Nations famous passages on the "duties of the sovereign" and on the "maxims of taxation". Contrarily to the commonest usage of these passages, we will show that their core is the preoccupation with the public expenditure soaring and the defence of decentralisation. Furthermore and also contrarily to the existing interpretations we defend the non-existence of any contradiction between Smith s income and price theory (and the incidence hypothesis), provided due attention is paid to the guiding role of the "maxims".