the tax would, for 1000 l. , have as great a quantity of goods as he before had for 910 l. ; in the second, he would have only as much as he before had for 900 l. This proceeds from the difference in the amount of the tax; in the first case it is only an eleventh of his income, in the second it is a tenth; money in the two cases being of a different value.
But although, if money be not taxed, and do not alter in value, all commodities will rise in price, they will not rise in the same proportion; they will not after the tax bear the same relative value to each other which they did before the tax. In a former part of this work, we discussed the effects of the division of capital into fixed and circulating, or rather into durable and perishable capital, on the prices of commodities. We shewed that two manufacturers might employ precisely the same amount of capital, and might derive from it precisely the same amount of profits, but that they would sell their commodities for very different sums of money, according as the capitals they employed were rapidly, or slowly, consumed and reproduced. The one might sell his goods for 4000 l. , the other for 10,000 l. , and they might both employ 10,000 l. of capital, and obtain 20 per cent. profit, or 2000 l. The capital of one might consist for example of 2000 l. circulating capital, to be reproduced, and 8000 l. fixed, in buildings and machinery; the capital of the other on the contrary might consist of 8000 l. of circulating, and of only 2000 l. fixed capital in machinery and buildings. Now if each of these persons were to be taxed 10 per cent. on his income, or 200 l. , the one, to make his business yield him the general rate of profit, must raise his goods from 10,000 l. to 10,200 l. ; the other would also be obliged to raise the price of his goods from 4000 l. to 4200 l. Before the tax, the goods sold by one of these manufacturers were 2½ times more valuable than the goods of the other; after the tax they will be 2.42 times more valuable: the one kind will have risen 2 per cent.; the other 5 per cent.: consequently a tax upon income, whilst money continued unaltered in value, would alter the relative prices and value of commodities. This is true, if the tax instead of being laid on the profits were laid on the commodities themselves: provided