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the absorption of the tallage by the State will not affect prices. The products or services of the exclusive monopolies have prices so fixed as to yield maximum gains, hence these prices cannot be raised, to cover the tax, without decreasing the gains. These direct fiscal taxes, however, must be levied upon the gross receipts of exclusive monopolies rather than upon the gross product. If every product be taxed, the exclusive monopoly may find that the point of maximum gains is to be reached by raising prices and decreasing sales. The tax on gross product in that case would not be purely fiscal, but partly social. A direct tax of this kind may be imposed upon tallage without diminishing production. The output of exclusive monopolies will not be lessened nor the investment of capital in them be checked before the tax absorbs all the tallage. As long as the exclusive monopolies receive gains equal to those which they command as possessors of optional and differential monopoly forces, they will prosecute and develop their business activities.
Fiscal taxes may also be indirect. This can be shown to be possible by a line of reasoning analogous to that employed to prove that permanent burdens imposed upon production must be borne by the slowest increasing factors. Fiscal taxes were defined to be those which take a portion of the free producer's surplus without affecting the amount of the fixed surplus or producing any change in the consumer's surplus. An indirect tax being shifted by the first objects upon which it is imposed, cannot be fiscal, unless the tax is shifted from the fixed to the free surplus without lessening the former and without increasing or decreasing the consumer's surplus through changes in consumption. If, however, a moderate tax be levied on a factor of production in which competition obtains, i. e., on a differential or an optional monopoly, and if the factor be one whose articles of production are those for which there is a strong and stable demand, the tax can be shifted without producing social effects. The prices of the articles produced by such a factor can rise
sufficiently to cover a moderate imposition, without sensibly affecting the consumption of staple and strongly demanded articles. This rise in the prices of the taxed articles will cause a readjustment of objective values. General objective value cannot rise, hence the value of some articles must fall. The articles whose price will permanently fall will be those produced by the exclusive monopolies. They are the slowest increasing factors, and, according to the law of distribution, must bear permanent burdens. The shifted tax will thus reach the tallage and be borne by it. Production, however, will not be affected, as was shown above, unless the entire tallage be taken.
It will be seen by the above that the number of indirect taxes which are purely fiscal cannot be very large; the number of articles whose price can be increased without sensibly affecting their consumption being relatively small. There are, however, many staple articles whose price may be moderately increased without exerting more than a slight influence upon consumption. Indirect taxes imposed upon them would have but small social effects and would be chiefly fiscal in character. The legislator, therefore, who is desirous of imposing indirect taxes for the purpose of securing a revenue without thereby modifying social relations to any noticeable extent, has ample opportunity for realizing his aims.
In the imposition of an indirect fiscal tax there is no ethical question involved. Such a tax is a purely economic phenomenon. The tax having been shifted, by changes in prices, from the fixed to the free portion of the surplus, and this having taken place without sensibly modifying the consumer's surplus, the ultimate effect of the tax is simply to take a part of the free surplus. Society simply prevents a part of the free surplus from becoming private property. Without the tax, the entire free surplus would go as tallage to the owners of exclusive monopolies; with the tax imposed, they receive a sum decreased by the amount appropriated by the public. Society has the first claim on the results of social
progress; and, in the case of indirect fiscal taxes, the State supplies its needs by a law as purely economic as that governing the rate of interest. Should the owners of exclusive monopolies find that the State had enacted a law which diminished by a certain common percentage the tallage they respectively received they would have no grounds for complaint. The tax law would change the conditions under which they must produce, but all would produce under the same conditions. A change in the current rate of interest would produce a like effect. Questions of equity and justice would arise in neither case.
If, however, the State does not in this general manner divert into its own possession that part of the free surplus, which the public finances may require, before the same has become private property, but allows the entire free surplus to be distributed as tallage to the exclusive monopolies, then the levy of taxes may involve problems of equity. Indirect fiscal taxes affect all individuals alike, in that they modify the conditions of production equally for all. This cannot be true of direct fiscal taxes. They must be levied on the tallage of particular exclusive monopolies, and must necessarily change the relation which these monopolies bear to each other, and alter the respective positions which they hold as industrial factors. There are different classes of producers enjoying exclusive monopoly privileges and a direct fiscal tax must change the apportionment of the free surplus among these classes. These classes are of various degrees of importance to the economic and moral progress of society. As long as the State does not take by direct taxes all the tallage obtained by these different exclusive monopolies, they may rightly insist that the State distribute its impositions among them with equity. The only true basis of an ethically just apportionment of the surplus among these several classes is the services which they respectively render society. Hence, in levying direct fiscal taxes upon the slowest increasing factors of production, i. e., upon the tallage of the
exclusive monopolies, the State ought so to distribute its impositions among the several kinds of exclusive monopolies as to favor the respective classes according to the economic use they make of the free surplus received. This should be done in order that the larger amounts may be left in the possession of those who do most to promote social welfare and progress.
It will, of course, be obvious to many that the facts of distribution, as outlined in this paper, and especially the theory of monopolies here presented, have important bearings on other questions than taxation. Probably nobody regards the present distribution of wealth as an ideal one. That it is far from being such is attested by our desire to see it made better. It is being improved at present by the steadily growing strength of the forces which give larger shares to the lower ranks of producers. As these forces are made stronger, will distribution become less unequal. The existence of dependent social classes having no firm standard of life, and little power or desire to raise that which they do possess, is cause as well as evidence of the present glaring inequalities in distribution. A larger sharing in the results of social progress is to be secured the less fortunate classes by improving the objective and subjective conditions which operate to raise the standard of life. In this way will the monopoly force be strengthened that gives them command over a portion of the surplus. Taxation is one, but only one, of the forces that may be employed to further that end. Fiscal and industrial taxes will yield a revenue by means of which the objective conditions of life may be made better. Social taxes will do this also, and may, at the same time, be employed to effect desirable social changes. At any given time the surplus of production is distributed by definite monopoly forces. The operation of these forces can be modified by fiscal, social and industrial taxes, the nature and operation of which this paper has attempted partially to set forth. EMORY R. JOHNSON.
University of Pennsylvania.
THE FARMERS' MOVEMENT.
The widespread movement among the farmers to-day is their effort to adapt themselves and their occupation to the ever-changing environment, so that they shall be once more masters of the situation, receiving their due share of the product of American industry and exerting their due influence in the formation and development of national character. As a result of his industry the farmer has made food and the raw material of our factories produced from the soil more and more plenty, of better quality and cheaper. Here we find an efficient cause of his pecuniary embarrassment; the supply of agricultural products has been increased beyond the demand, with the consequent fall of price. If the surplus of agricultural products was matched by a corresponding surplus of gold, of personal services, of means of transportation, and of the comforts, conveniences and luxuries of life, such universal plenty would enrich all, beggaring none. But with over-production in agriculture, and monopolies of coal, of telephones, of electric railroads and of other essentials of modern civilization, the farmer finds himself at a great disadvantage.
Farmers have been content in the past to confine their labors to the production of wealth, leaving to others the control of those conditions which determine the distribution of this wealth. At last, however, they have awakened to the fact that the problems of distribution have not been successfully solved. They believe that they get too little for the product of their labor and others too much, that they must bear heavy burdens of society while they are at the same time practically debarred from the enjoyment of the advantages of the progressive culture of modern life. When in this discussion we speak of the farmer, it must be born in mind that we refer to the average farmer, who tills on his own account his own or another's farm. We do not refer to those who derive a large share of their income from other sources than their farms, nor do we mean the farmer of exceptional ability or those whose opportunities have been remarkably fortunate. An investigation, carried on for a number of years, upon different lines, based upon statistics official and unofficial, as well as upon other reliable sources of information, shows that the average farmer, east and west, north and south,