TAXES ON WAGES.
Taxes on wages will raise wages, and therefore will diminish the rate of the profits of stock. We have already seen that a tax on necessaries will raise their prices, and will be followed by a rise of wages. The only difference between a tax on necessaries, and a tax on wages is, that the former will necessarily be accompanied by a rise in the price of necessaries, but the latter will not; towards a tax on wages, consequently, neither the stockholder, the landlord, nor any other class but the employers of labour will contribute.
A tax on wages is wholly a tax on profits, a tax on necessaries is partly a tax on profits, and partly a tax on rich consumers. The ultimate effects which will result from such taxes then are precisely the same as those which result from a direct tax on profits.
"The wages of the inferior classes of workmen," says Adam Smith, "I have endeavoured to shew in the first book, are every where necessarily regulated by two different circumstances; the demand for labour, and the ordinary or average price of provisions. The demand for labour, according as it happens to be either increasing, stationary, or declining, or to require an increasing, stationary, or declining population, regulates the subsistence of the labourer, and determines in what degree it shall be either liberal, moderate, or scanty. The ordinary or average price of provisions determines the quantity of money which must be paid to the workman, in order to enable him one year with another to purchase this liberal, moderate, or scanty subsistence. While the demand for labour, and the price of provisions, therefore remain the same, a direct tax upon the wages of labour can have no other effect than to raise them somewhat higher than the tax."