Take, for instance, protectionism. What support it has, beyond the
mere selfish desire of sellers to compel buyers to pay them more than their
goods
are worth, springs from such superficial ideas as that production,
not consumption, is the end of effort; that money is more valuable than money’s-worth,
and to sell more profitable than to buy; and above all from a desire to limit
competition, springing from an unanalyzing recognition of the phenomena that
necessarily follow when men who have the need to labor are deprived by monopoly
of access to the natural and indispensable element of all labor. Its methods
involve the idea that governments can more wisely direct the expenditure
of labor and the investment of capital than can laborers and capitalists,
and that the men who control governments will use this power for the general
good and not in their own interests. They tend to multiply officials, restrict
liberty, invent crimes. They promote perjury, fraud and corruption. And they
would, were the theory carried to its logical conclusion, destroy civilization
and reduce mankind to savagery. ... read the whole letter
8. A tax upon shoes, paid in the first instance by shoe manufacturers, enters
into manufacturers' prices, and, together with the usual rate of profit upon
that amount of investment, is recovered from wholesalers. The tax and the
manufacturers' profit upon it then constitute part of the wholesale price
and are collected from retailers. The retailers in turn collect the tax with
all intermediate profits upon it, together with their :usual rate of profit
upon the whole, from final purchasers -- the consumers of shoes. Thus what
appears on the surface to be a tax upon shoe manufacturers proves upon examination
to be an indirect tax upon shoe consumers, who pay in an accumulation of
profits upon the tax considerably more than the government receives.
The effect would be the same if a tax upon their leather output were imposed
upon tanners. Tanners would add to the price of leather the amount of the
tax, plus their usual rate of profit upon a like investment, and collect
the whole, together with the cost of hides, of transportation, of tanning
and of selling, from shoe manufacturers, who would collect with their profit
from retailers, who would collect with their profit from shoe consumers.
The principle applies also when taxes are levied upon the stock or the sales
of merchants, or the money or credits of bankers; merchants add the tax with
the usual profit to the prices of their goods, and bankers add it to their
interest and discounts.
For example; a tax of $100,000 upon the output of manufacturers
or importers would, at 10 per cent as the manufacturing profit, cost wholesalers
$110,000;
at a profit of 10 per cent to wholesalers it would cost retailers $121,000,
and at 20 percent profit to retailers it would finally impose a tax burden
of $145,200 — being 45 per cent more than the government would get.
Upon most commodities the number of profits exceeds three, so that indirect
taxes may frequently cost as much as 100 per cent, even when imposed only
upon what are commercially known as finished goods; when imposed upon materials
also, the cost of collection might well run far above 200 percent in addition
to the first cost of maintaining the machinery of taxation.
It must not be supposed, however, that the recovery of indirect
taxes from the ultimate consumers of taxed goods is arbitrary. When shoe
manufacturers,
or tanners, or merchants add taxes to prices, or bankers add them to interest,
it is not because they might do otherwise but choose to do this; it is because
the exigencies of trade compel them. Manufacturers, merchants, and other
tradesmen who carry on competitive businesses must on the average sell their
goods at cost plus the ordinary rate of profit, or go out of business. It
follows that any increase in cost of production tends to increase the price
of products. Now, a tax upon the output of business men, which they must
pay as a condition of doing their business, is as truly part of the cost
of their output as is the price of the materials they buy or the wages of
the men they hire. Therefore, such a tax upon business men tends to increase
the price of their products. And this tendency is more or less marked as
the tax is more or less great and competition more or less keen. ...
4. CONFORMITY TO GENERAL PRINCIPLES OF TAXATION
The single tax conforms most closely to the essential principles of Adam
Smith's four classical maxims, which are stated best by Henry George 19 as
follows:
The best tax by which public revenues can be raised is evidently that which
will closest conform to the following conditions:
- That it bear as lightly as possible upon production — so as least
to check the increase of the general fund from which taxes must be paid
and the community maintained. 20
- That it be easily and cheaply collected, and fall as directly as may
be upon the ultimate payers — so as to take from the people
as little as possible in addition to what it yields the government. 21
- That it be certain — so as to give the least opportunity for tyranny
or corruption on the part of officials, and the least temptation to law-breaking
and evasion on the part of the tax-payers. 22
- That it bear equally — so as to give no citizen an advantage
or put any at a disadvantage, as compared with others. 23 ...
b. Cheapness of Collection
Indirect taxes are passed along from first payers to final consumers
through many exchanges, accumulating compound profits as they go, until
they take
enormous sums from the people in addition to what the government receives.26
But the single tax takes nothing from the people in excess of the tax. It
therefore conforms more closely than indirect taxation to the second maxim
quoted above.
26. "All taxes upon things of unfixed quantity increase prices, and
in the course of exchange are shifted from seller to buyer, increasing as
they go. If we impose a tax on money loaned, as has been often attempted,
the lender will charge the tax to the borrower, and the borrower must pay
it or not obtain the loan. If the borrower uses it in his business, he in
his turn must get back the tax from his customers, or his business becomes
unprofitable. If we impose a tax upon buildings, the users of buildings must
finally pay it, for the erection of buildings will cease until building rents
become high enough to pay the regular profit and the tax besides. If we impose
a tax upon manufactures or imported goods, the manufacturer or importer will
charge it in a higher price to the jobber, the jobber to the retailer. and
the retailer to the consumer. Now, the consumer, on whom the tax thus ultimately
falls, must not only pay the amount of the tax, but also a profit on this
amount to everyone who has thus advanced it — for profit on the capital
he has advanced in paying taxes is as much required by each dealer as profit
on the capital he has advanced in paying for goods." — Progress
and Poverty, book viii, ch. iii, subd. 2.
... read the book