Thread by @adamsmithworks

#AdamSmith, #WealthOfNations, and #Taxes. There's a lot here. Will it ever end? The only way to find out is to keep reading!
Today: taxes on wages and head taxes. (V.ii.i–j) #WealthOfTweets #SmithTweets

Spoiler alert: #AdamSmith did not like "absurd and destructive" taxes on wages.
[We, the SmithTweeters, are taxed not on our wages, but per tweet. Still waiting for Smith to get to tweet taxes.] (V.ii.i) #WealthOfTweets #SmithTweets

Wages are set by the demand for labor and the cost of living. Taxes can therefore only raise what laborers must charge hourly. They can't go without necessities. They're necessities. (V.ii.i.1) #WealthOfTweets #SmithTweets

It's worse than that, though. The cost of living depends on the cost of labor. So when the cost of labor increases to cover the tax, it also increases the cost of living. So the cost of labor has to go up *more* than the tax. (V.ii.i.1) #WealthOfTweets #SmithTweets

It gets worse again. Laborers are paid by stock of their employers. So employers need to earn a profit on the amount the tax adds to the cost of labor, or they'll use that stock on something else. (V.ii.i.2) #WealthOfTweets #SmithTweets

It gets worse again. If employers are manufacturers, the final tax is paid by consumers.
If employers are farmers, the final tax is paid by landlords, who are less likely to improve their land.
Both of these make everyone poorer. (V.ii.i.2) #WealthOfTweets #SmithTweets

We, the SmithTweeters, have got to admit that that sounds pretty bad—oh gosh we just kept reading and it gets worse again. (V.ii.i.3) #WealthOfTweets #SmithTweets

Sometimes taxes fail to increase the wages of labor sufficiently to cover the tax because what happens instead is the demand for labor falls➡industry declines➡the wealth of the country declines. (V.ii.i.3) gph.is/1pqmw5q
#WealthOfTweets #SmithTweets

"The demand for labor falls" doesn't sound so bad today. But at the time Smith's writing, the labor supply "adjusts" when the working poor are unable to feed their children, who die instead of growing up to become laborers.

THAT'S BAD. (V.ii.i.3) #WealthOfTweets #SmithTweets

So, like we were saying. "Absurd and destructive" are taxes on the wages of labor.

But they were (and are!) also common. For instance, the French taille, which Smith has been (justifably) dunking on through this chapter, is such a tax. (V.ii.i.5) #WealthOfTweets #SmithTweets

There are two types of taxes on income upon which #AdamSmith does not glower so: taxes on "recompence of ingenious artists and men of the liberal professions" and upon emoluments of offices. (V.ii.i.6–7) #WealthOfTweets #SmithTweets

Taxes on the income of people in the liberal professions will either raise their income so that they can pay the tax, or some of them will have to leave their profession until wages increase enough for those who remain to pay the tax. (V.ii.i.6) #WealthOfTweets #SmithTweets

Taxes on income of people in public office are not only not harmful (the number of people in office and what they're paid have nothing to do with supply&demand) but popular. Even England taxed the salaries of offices (but no other wages). (V.ii.i.7) #WealthOfTweets #SmithTweets

We, the SmithTweeters, may have misled you when we said we'd get to taxes on consumption today. We are sorry. But let's tackle discussion of capitation taxes. We're here anyway. (V.ii.j) #WealthOfTweets #SmithTweets

Capitations taxes are one of two sorts of taxes that fall equally upon all forms of revenue. (The other is consumption taxes. We are, again, sorry.) (V.ii.j.1) #WealthOfTweets #SmithTweets

Capitation taxes are a head tax. (There's probably a decapitation tax joke here, but we can't find it.) They can be a set amount, based on rank, or based on wealth. (V.ii.j.2–4) #WealthOfTweets #SmithTweets

#AdamSmith: Not a fan of wealth taxes. A tax based on fortune or revenue will be "altogether arbitrary". Fortunes change constantly! (V.ii.j.2) #WealthOfTweets #SmithTweets

At the end of the day the assessment of a fortune will depend more on the "good or bad humour of his assessors" than on his wealth. (V.ii.j.2) #WealthOfTweets #SmithTweets

A head tax could also be set based on the rank of each contributor. This is certainly unequal (not every, we don't know, earl or something, has the same wealth or income), but at least it's certain. (V.ii.j.3) #WealthOfTweets #SmithTweets

^This would also apply to head tax of a single amount for everyone in socieites where rank isn't a thing. (V.ii.j.3) #WealthOfTweets #SmithTweets

Try to make a head tax equal➡it becomes arbitrary.
Try to make a head tax certain➡it must be unequal.
So maybe at least make it a light tax? It will still be unpopular, but at least not unbearable. (V.ii.j.4) #WealthOfTweets #SmithTweets

England has had poll taxes. But can you guess who not only had poll taxes but has a poll tax and it's especially oppressive to the poor masses?
It's France. Again. Are you keeping score? We, the SmithTweeters, feel like we should be. (V.ii.j.5–7) #WealthOfTweets #SmithTweets

Capitation taxes charged to the working poor are just taxes on the wages of labor, so they're ᴛᴇʀʀɪʙʟᴇ. But they're cheap to administer and raise money so they're popular with governments that don't care much for the poor. (V.ii.j.8–9) #WealthOfTweets #SmithTweets

So that's our quick and dirty overview of #AdamSmith on capitation taxes. Tomorrow is consumption taxes. WE PROMISE. It's literally the next paragraph. See you then! (V.ii.k) #WealthOfTweets #SmithTweets