(4.v.12) Only a few lines before, in the same passage, he recognizes such a distinctionbetween rent and profits, as in my opinion is fatal to his argument. "The circumstance," he says, "of rentunavoidably rising in the progress of society, inclines us to think that it would be good policy forthe governments of countries, such as the United States, which are possessed of large tracts offertile and unappropriated land, to retain the property of this land in their own hands:" that is, inother words, to reserve the rent for the service of the state. The case of profits is not onlydifferent, but the reverse. Instead of rising, in the progress of society, they decrease. Land existsby the gift of nature; capital is the product of human industry. Land is originally not the propertyof any man; capital always is. The profits of stock must be secured to the owner to afford amotive for its preservation and augmentation. For the preservation of the land, or theaugmentation of its produce, it is not of the least importance to whom the rent is consigned.
Profits are, in reality, the fund, out of which rent is always taken; and every increase of rent, inthe progress of society, is a deduction from profits, in other words, may be regarded as a taxupon profits, not for the benefit of the state, but that of the landlords.
Section VI. A Tax on Profits (4.vi.1) A Direct tax on profits of stock offers no question of any difficulty. It would fallentirely upon the owners of capital, and could not be shifted upon any other portion of the community.
(4.vi.2) As all capitalists would be affected equally, there would be no motive to the manengaged in any one species of production, to remove his capital to any other. If he paid a certainportion of his profits, derived from the business in which he was already engaged, he would payan equal portion, derived from any other business to which he could resort. There would not,therefore, in consequence of such a tax, be any shifting of capital from one species ofemployment to another. The same quantity of every species of goods would be produced, if therewas the same demand for them. That there would, on the whole, be the same aggregate ofdemand, is also immediately apparent. The same capital is supposed to be employed in thebusiness of production; and if part of what accrued to the capitalist was taken from him,lessening to that extent his means of purchasing, it would be transferred to the government,whose power of purchasing would be thence to the same degree increased.
(4.vi.3) There would, therefore, be the same demand, and the same supply: there would alsobe the same quantity of money, and the same rapidity of circulation; and therefore the value ofmoney would remain the same as before.
Section VII. A Tax on Wages (4.vii.1) If wages are already at the lowest point, to which they can be reduced; that is, justsufficient to keep up the number of labourers, and no more; the state of wages which seems tohave been contemplated, by Mr. Ricardo, throughout his disquisitions on political economy, andwhich the tendency of population to increase faster than capital, undoubtedly leads us to regardas the natural state; no tax can fall upon the labourer; and if any tax is imposed upon wages, it iseasy to trace in what way it must produce a corresponding rise of wages. If wages are as low asis consistent with the preservation of the number of labourers, take any thing away from thosewages, and the number of labourers must be reduced. The reduction of the number of labourersmust be followed by a rise of wages, and this process must continue till wages rise sufficientlyhigh to be consistent with the preservation of the number of labourers; in other words, just ashigh as they were before the tax was imposed.
(4.vii.2) If wages are not at this lowest rate; if they are sufficiently high to afford thelabourers something more than what is necessary to keep up their numbers, something which may beretrenched without a diminution of their numbers, they may, to this extent, be made subject totaxation.
(4.vii.3) Wages, like the price of any other commodity, rise or fall, in proportion as thedemand for labour rises or falls, compared with the supply.
(4.vii.4) When wages are so low as barely to keep tip the number of labourers, wages mustrise to the amount of any tax imposed upon them, because there is a continued diminution of thesupply of labourers till this rise is effected.
(4.vii.5) In the case of wages above this level, there is no necessary reduction of the numberof labourers in consequence of a tax imposed upon wages. There is no alteration, therefore, in thestate of supply. From this it follows, that if there is not an increase of demand for labourers, inconsequence of such a tax, there can be no rise of wages; and if there be no rise of wages, the taxmust fall upon the labourers. The solution, therefore, of the question, whether a tax upon wagesfalls upon the labourer, depends upon the inquiry, whether there is, or is not, such increase ofdemand.
(4.vii.6) An increase of demand for labour can arise from two causes only; either from anincrease of capital, the fund destined for the employment of labour; or a difference in theproportions between the demand for the produce of fixed capital and that of immediate labour.
(4.vii.7) The first of these causes needs no illustration. The operation of the second weproceed to trace. As the demand of a nation consists of a great number of demands of a great number ofindividuals, the case of one individual will exemplify the whole.
(4.vii.8) Suppose a man with a certain income; to determine our ideas, let us call it 1000 l. per annum; this is his demand. Let us suppose it divided into two portions, the one of whichconstitutes his demand for the produce of fixed capital; the other his demand for that ofimmediate labour: and let us suppose that these proportions are different at two different times.
We have to examine what are the consequences.
