PRINCIPLES OF TAXATION. 495 



imparting power to machinery, or conducted through conduits to 

 centers of population which otherwise could not obtain it, it becomes 

 extremely valuable, and capable of being sold in large or small quan- 

 tities. Another similar illustration is to be found in the case of 

 atmospheric air, which in its natural and ordinary state has no mar- 

 ketable value, but when compressed by labor embodied in the form 

 of machinery and made capable of transmitting force, it at once be- 

 comes endowed with value and can be sold at a high price. 



An opinion entertained and strongly advocated by not a few 

 economic writers and teachers of repute (more especially in Europe, 

 but not in the United States) * is, that taxes on land do not diffuse 

 themselves, but fall wholly on the landowner, and that there is no 

 way in which he can throw it off and cause any considerable part of 

 them to be paid by anybody else. The concrete argument in support 

 of this opinion has been thus stated : " When land is taxed, the owner 

 can not, as a general rule, escape the tax, for the reason that, to get 

 rid of the tax, the price of the land or of the rent must be raised the 

 full amount of the tax, and the only way in which this can be done is 

 by reducing the supply or quantity offered in market, or else by in- 

 creasing the demand. The supply of land can not be reduced, and 

 the demand being created by capital and population, both of which 

 are beyond the control of the landowner, he can do nothing to raise 

 the price of land, and hence can not get rid of the tax. It may be 

 stated, then, as a general rule, that a tax on land, or on any com- 

 modity the supply of which is limited absolutely, must be paid by 

 the owner. It is possible to suggest cases in which, through com- 

 bination of owners and the necessities of consumers, a demand mav 

 be created strong enough to raise the price to the full amount of such 

 tax, but it is doubted if such cases ever really occur." f 



The source of the contention on this important economic and 

 social question, and the difficulty in the way of the attainment of 

 harmonious conclusions, is due to a nonrecognition of the fact that 

 land is taxed under two conditions, and can not be taxed otherwise. 

 Thus, if a person holds land for his exclusive use or enjoyment, and 

 consumes all of its product, a tax on such land, which has been char- 

 acterized by some economists as, its " pure rent," will not diffuse 



* " In America, where there has been but little serious study of taxation, the few writers 

 of prominence are, remarkable to relate, almost all abject followers of Thiers," the French 

 economist and statesman, who claimed to have invented the term " diffusion " of taxes. 



f " Our conclusion is, that under actual conditions in America to-day the landowner may 

 virtually be declared to pay in the last instance the taxes that are imposed on his land, and 

 that at all events it is absolutely erroneous to assume any general shifting to the consumer- 

 In so far as our land tax is a part of a general property tax, it can not possibly be shifted ; 

 in so far as it is more or less an exclusive tax, it is even then apt to remain where it is first 

 put — on the landowner." — Seligman : Incidence of Taxation, p. 99. 



