#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

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More from @adamsmithworks

4 Mar
#AdamSmith! #WealthOfNations! #Taxes! He's still going!
Today, at long last, we come to
consumption taxes!

We, the SmithTweeters, realize we've really built this up. (V.ii.k) #WealthOfTweets #SmithTweets
But! There's a lot of good stuff in here! So once more into the breach, dear Smithketeers...

Smith divides consumable commodities into necessaries and luxuries. (V.ii.k.2) #WealthOfTweets #SmithTweets
Smith includes in necessaries not just what's needed for physical survival, but what's required by common decency in a given society at a given time. He uses the examples of linen shirts and leather shoes for British working class men. (V.ii.k.3–4) #WealthOfTweets #SmithTweets
Read 22 tweets
2 Mar
Having said what he had to say about taxes on rent and profits, #AdamSmith pauses, now, for an appendix to handle the taxation of the land and stock that generate rent and profit. (V.ii.h) #WealthOfTweets #SmithTweets
Dear readers, we hope you are tax nerds. (We still and forever ❤ you, nerds.) @TurboTax @IRSnews @HRBlock (V.ii.h) #WealthOfTweets #SmithTweets
Taxing the revenue generated by land or stock doesn't diminish the ability of that land or stock to generate revenue. But taxing away a portion of the revenue-generating property does. (V.ii.h.1) #WealthOfTweets #SmithTweets
Read 22 tweets
1 Mar
#AdamSmith's thoughts on taxation: They are numerous, and outlined in detail in #WealthOfNations. Today we'll be looking at taxes on profit! (V.ii.f–g) #WealthOfTweets #SmithTweets
Smith starts out by reminding us that profits are divided into the part that pays the interest and the part over and above that which pays the interest.

You can't tax the over-and-above part directly. (V.ii.f.1–2) #WealthOfTweets #SmithTweets
Over-and-above paying the interest might sound like it's extra money, but it's not! It compensates the owner of stock for things like risk and trouble. If you tax away this profit, the owner of the stock won't employ it productively. (V.ii.f.2) #WealthOfTweets #SmithTweets
Read 28 tweets
28 Feb
Ready for more of #AdamSmith's thoughts on taxes from #WealthOfNations? Sure you are! (V.ii.e–h) #WealthOfTweets #SmithTweets
Taxes upon rent can also fall upon the rent of houses! House rent isn't like regular land-rent, though. It's split into two parts: the building-rent and the ground-rent. (V.ii.e.1) #WealthOfTweets #SmithTweets
Building-rent is really just the profit of the person who builds the building. Like all profit it's regulated by supply, demand, and the interest of money. (V.ii.e.2) #WealthOfTweets #SmithTweets"
Read 22 tweets
27 Feb
It's here! It's finally here! The (first) day #AdamSmith talks about taxes in #WealthOfNations!

We're assuming there's a group for whom this is exciting. We, the SmithTweeters, may not count ourselves among them. But let's go anyway! (V.ii.b) #WealthOfTweets #SmithTweets
Remember how Smith divided private revenue into rent, profit, and wages in the first book? Now he's gonna divide up taxes. Smith loves a good subdivision. Taxes can fall on:
1) Rent
2) Profits
3) Wages
4) All three indifferently. (V.ii.b.1) #WealthOfTweets #SmithTweets
He'll be dividing up three of these into further subdivisions, obvs. (V.ii.b.1) #WealthOfTweets #SmithTweets
Read 27 tweets
26 Feb
Now you know all the things #AdamSmith has to say about what the government should spend money on. But that money's gotta come from somewhere. What does #WealthOfNations say about how governments should get money to spend? (V.ii.) #WealthOfTweets #SmithTweets
I know the tax nerds have been waiting for this chapter (we ❤ you, nerds), but first Smith wants to talk about other sources of revenue "which may peculiarly belong to the Sovereign or Commonwealth". (V.ii.a) #WealthOfTweets #SmithTweets
IOW, before we get to taxes we've gotta cover businesses run by the sovereign (like the post office), public banks, public lending, and revenue from public lands.

But don't worry, we can do that pretty quickly...ish. (V.ii.a) #WealthOfTweets #SmithTweets
Read 17 tweets

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