Section VI. A Tax on Profits

A direct tax on profits of stock offers no question of any difficulty. It would fall entirely upon the owners of capital, and could not be shifted upon any other portion of the community.

As all capitalists would be affected equally, there would be no motive to the man engaged in any one species of production, to remove his capital to any other. If he paid a certain portion of his profits, derived from the business in which he was already engaged, he would pay an equal portion, derived from any other business to which he could resort. There would not, therefore, in consequence of such a tax, be any shifting of capital from one species of employment to another. The same quantity of every species of goods would be produced, if there was the same demand for them. That there would, on the whole, be the same aggregate of demand, is also immediately apparent. The same capital is supposed to be employed in the business of production; and if part of what accrued to the capitalist was taken from him, lessening to that extent his means of purchasing, it would be transferred to the government, whose power of purchasing would be thence to the same degree increased.

There would, therefore, be the same demand, and the same supply: there would also be the same quantity of money, and the same rapidity of circulation; and therefore the value of money would remain the same as before.