regarded as landlord's profit. This argument, however, is not needed for the condemnation of such a tax. A peculiar tax on the income of any class, not balanced by taxes on other classes, is a violation of justice, and amounts to a partial confiscation. I have already shown grounds for excepting from this censure a tax which, sparing existing rents, should content itself with appropriating a portion of any future increase arising from the mere action of natural causes. But even this could not be justly done, without offering as an alternative the market price of the land. In the case of a tax on rent which is not peculiar, but accompanied by an equivalent tax on other incomes, the objection grounded on its reaching the profit arising from improvements, does not apply; since, profits being taxed as well as rent, the profit which assumes the form of rent merely pays its just share.

§ 3. A tax on profits, like a tax on rent, must, at least in its immediate operation, fall wholly on the payer. All profits being alike affected, no relief can be obtained by a change of employment. If a tax were laid on the profits of any one branch of productive employment, the tax would be virtually an increase of the cost of production, and the value and price of the article would rise accordingly; by which the tax would be thrown upon the consumers of the commodity, and would not affect profits. But a general and equal tax on all profits would not affect general prices, and would fall, at least in the first instance, on capitalists alone.

There is, however, an ulterior effect, which, in a rich and prosperous country, requires to be taken into account. When the capital accumulated is so great, and the rate of annual accumulation so rapid, that the country is only kept from attaining the stationary state by the emigration of capital, or by continual improvements in production; any

circumstance which virtually lowers the rate of profit, cannot be without a decided influence on these phenomena. It may operate in different ways. The curtailment of profit, and the consequent increased difficulty of making a fortune or obtaining a subsistence by the employment of capital, may act as a stimulus to inventions, and to the use of them when made. If improvements in production are much accelerated, and if these improvements cheapen, directly or indirectly, any of the things habitually consumed by the laborer, profits may rise, and rise sufficiently to make up for all that is taken from them by the tax. In that case the tax will have been realized without loss to any one, the produce of the country being increased by an equal, or what would in that case be a far greater amount. The tax, however, must even in this case be considered as paid from profits, because the receivers of profits are those who would be benefited if it were taken off.

But although the artificial abstraction of a portion of profits would have a real tendency to accelerate improvements in production, no considerable improvements might actually result, or only of such a kind as not to raise general profits at all, or not to raise them so much as the tax had diminished them. If so, the rate of profit would be brought closer to that practical minimum, to which it is constantly approaching; and this diminished return to capital would either give a decided check to further accumulation, or would cause a greater proportion than before of the annual increase to be sent abroad, or wasted in unprofitable speculations. At its first imposition, the tax falls wholly on profits; but the amount of increase of capital, which the tax prevents, would, if it had been allowed to continue, have tended to reduce profits to the same level; and at every period of ten or twenty years there will be found less difference between profits as they are, and profits as they would in that case have been; until at last there is no

difference, and the tax is thrown either upon the laborer or upon the landlord. The real effect of a tax on profits is to make the country possess, at any given period, a smaller capital and a smaller aggregate production, and to make the stationary state be attained earlier, and with a smaller sum of national wealth. It is possible that a tax on profits might even diminish the existing capital of the country. If the rate of profit is already at the practical minimum, that is, at the point at which all that portion of the annual increment which would tend to reduce profits is carried off either by exportation or by speculations; then if a tax is imposed which reduces profits still lower, the same causes which previously carried off the increase would probably carry off a portion of the existing capital. A tax on profits is thus, in a state of capital and accumulation like that in England, extremely detrimental to the national wealth. And this effect is not confined to the case of a peculiar, and, therefore, intrinsically unjust, tax on profits. The mere fact that profits have to bear their share of a heavy general taxation, tends, in the same manner as a peculiar tax, to drive capital abroad, to stimulate imprudent speculations by diminishing safe gains, to discourage further accumulation, and to accelerate the attainment of the stationary state. This is thought to have been the principal cause of the decline of Holland, or rather of her having ceased to make progress.

Even in countries which do not accumulate so fast as to be always within a short interval of the stationary state, it seems impossible that, if capital is accumulating at all, its accumulation should not be in some degree retarded by the abstraction of a portion of its profit; and unless the effect in stimulating improvements be a full counterbalance, it is inevitable that a part of the burden will be thrown off the capitalist, upon the laborer or the landlord. One or other of these is always the loser by a diminished rate of accu

mulation. If population continues to increase as before, the laborer suffers; if not, cultivation is checked in its advance, and the landlords lose the accession of rent which would have accrued to them. The only countries in which a tax on profits seems likely to be permanently a burden on capitalists exclusively, are those in which capital is stationary, because there is no new accumulation. In such countries the tax might not prevent the old capital from being kept up, through habit, or from unwillingness to submit to impoverishment, and so the capitalist might continue to bear the whole of the tax. It is seen from these considerations that the effects of a tax on profits are much more complex, more various, and in some points more uncertain than writers on the subject have commonly supposed.

§ 4. We turn now to Taxes on Wages. The incidence of these is very different, according as the wages taxed are those of ordinary unskilled labor, or are the remuneration of such skilled or privileged employments, whether manual or intellectual, as are taken out of the sphere of competition by a natural or a conferred monopoly.

I have already remarked, that in the present low state of popular education, all the higher grades of mental or educated labor are at a monopoly price; exceeding the wages of common workmen in a degree very far beyond that which is due to the expense, trouble, and loss of time required in qualifying for the employment. Any tax levied on these gains, which still leaves them above (or not below) their just proportion, falls on those who pay it; they have no means of relieving themselves at the expense of any other class. The same thing is true of ordinary wages, in cases like that of the United States or of a new colony, where, capital increasing as rapidly as population can increase, wages are kept up by the increase of capital, and not by the adherence of the laborers to a fixed standard of

comforts. In such a case, some deterioration of their condition, whether by a tax or otherwise, might possibly take place without checking the increase of population. The tax would in that case fall on the laborers themselves, and would reduce them, prematurely to that lower state to which, on the same supposition with regard to their habits, they would in any case have been reduced ultimately, by the inevitable diminution in the rate of increase of capital, through the occupation of all the fertile land.

Some will object that, even in this case, a tax on wages cannot be detrimental to the laborers, since the money raised by it, being expended in the country, comes back to the laborers again through the demand for labor. The fallacy, however, of this doctrine has been so completely exhibited in the First Book,* that I need do little more than refer to that exposition. It was there shown that funds expended unproductively have no tendency to raise or keep up wages, unless when expended in the direct purchase of labor. If the government took a tax of a shilling a week from every laborer, and laid it all out in hiring laborers for military service, public works, or the like, it would, no doubt, indemnify the laborers as a class for all that the tax took from them. That would really be "spending the money among the people." But if it expended the whole in buying goods, or in adding to the salaries of employés who bought goods with it, this would not increase the demand for labor, or tend to raise wages. Without reverting to the proofs formerly given, we may rely on an obvious reductio ad absurdum. If to take money from the laborers and spend it in commodities, is giving it back to the laborers, then, to take money from other classes, and spend it in the same manner, must be giving it to the laborers; consequently, the more a govern