770 POPULAR SCIENCE MONTHLY. 



metrical ratio." 2. Taxation should be levied on the commodity ; 

 never on persons. 3. Taxes should never impede the liberty of 

 labor. 4. Every tax ought to be levied as cheaply as possible. 

 5. There should be but one sole and single tax namely, on fixed 

 capital* 



The True Measure op the Burden of Taxation on Pro- 

 duction. In addition to the maxims, or canons, proposed by 

 Adam Smith, another one, first pointed out by Mr. Edward At- 

 kinson, of Massachusetts, is worthy of being added, and may even 

 be regarded in the light of a fundamental principle ; and that is, 

 that the hurden or injurious effect of a tax on j^roduction or ex- 

 change is not to be measured by the ratio ivhich the tax may bear 

 to the gross value of the subject of taxation, but 7'ather by the pro- 

 portion which the tax bears to the profit which might normally or 

 naturally result from undertaking a certain line of industry or 

 product. To practically illustrate this, let us take an example. 

 Let us suppose two men, A and B, to start shops for the manu- 

 facture of machinery, each with a capital of $20,000, and that each 

 in his operations expends $20,000 for coal and iron, $40,000 in 

 wages, and $4,000 for transportation of the raw materials to the 

 shops for manufacture. The total cost of the annual product of 

 each shop will then be $64,000, or a little more than three times 

 the capital ; and a sale of their respective products, at the net 

 price of $66,000, would yield the owners $2,000, or ten per cent 

 profit. Now, suppose further that under such conditions A has a 

 tax imposed on him of three and an eighth per cent upon the value 

 of his product ; it may be a customs or excise tax, or an increased 

 rate of railroad freight. This amounts to $2,000 on the $64,000 of 

 product no excessive burden, it may be said, and only requiring 

 A to sell his $66,000 for $2,000 additional. But suppose A can not 

 get this $2,000 additional ; and he certainly can not if the other 

 man, B, is exempt from this three-and-an-eighth-per-cent tax, or 

 contrives to evade it, and competes with A in the open market. 

 Then, in such a case, this three-and-an-eighth-per-cent tax upon 

 product manifests itself as ten per cent upon the entire investment 

 and absorbs the entire profits which otherwise might have been 

 realized ; so that the business of A first drags, then stagnates, and 



* M. Menier defines fixed capital as every utility of which the product does not change 

 the identity, as useful machines, instruments of trade, profitable buildings, improvements 

 of land, and the liiie. Circulating capital, on the other hand, produces utility only by be- 

 ing transformed. It is represented by three elements materials, goods, money. " Facts 

 prove that the suppression of circulation is a cause of ruin for the land as for every other 

 source of production. Look at Spain since the expulsion of the Moors, who had carried to 

 so great a height the theory and. practice of agriculture. The land, having become the 

 property of a few great families or the clergy, was consolidated. Its circulation ceased 

 completely, and production ceased with it." 



