#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
The best way to tell if something is a necessary commodity is whether increasing its price increases the wages of labor or just changes consumption patterns. (V.ii.k.3–4) #WealthOfTweets #SmithTweets
Because taxes on necessary commodities will raise the wages of labor to ensure workers have what they need in a given economy, taxing them has the same effect as taxing the wages of labor.

That's bad. (V.ii.k.5) #WealthOfTweets #SmithTweets
By "luxuries", Smith doesn't mean goods only the rich can afford. He means commodities that aren't necessaries. Goods universally consumed by the poor can still count as luxuries. Some examples include tobacco, sugar, and—hold up. Tea‽ (V.ii.k.6) #WealthOfTweets #SmithTweets
We really weren't ready for that.

A quick break while we brew a recovery pot. (V.ii.k.6) #WealthOfTweets #SmithTweets
[We, the SmithTweeters, assure you that if the price of TEA goes up, our per-tweet rate will go up right along with it!] (V.ii.k.6) #WealthOfTweets #SmithTweets

We look askance on Smith's claim that increasing the price of luxuries will make the poor better off by making them more frugal. (V.ii.k.7) #WealthOfTweets #SmithTweets
We straight-up SIDE EYE the suggestion that disorderly families who can't moderate their consumption and let their children starve instead wouldn't add "useful" people to the population anyway. (V.ii.k.7) #WealthOfTweets #SmithTweets
It's a reminder of the high stakes of increasing wealth in the 18thC, but it's 𝙧𝙖𝙩𝙝𝙚𝙧 𝙖𝙩 𝙤𝙙𝙙𝙨 with Smith's laudable idea from way back in Book I that we're born with equal potential. (V.ii.k.7) #WealthOfTweets #SmithTweets
Even middle- and high-income people should oppose taxes on necessities, says Smith. They're better able to weather the increase in the cost of living, but taxes on necessities, like takes on wages, make everyone poorer. (V.ii.k.9) #WealthOfTweets #SmithTweets
Taxing luxuries, though—by definition—doesn't raise the overall cost of living. They just make the luxuries taxed more expensive. (V.ii.k.9) #WealthOfTweets #SmithTweets
Britain may not have taxed wages, but it did tax necessities. Specifically:
- Salt (need it to live)
- Leather (need it for shoes)
- Soap (need it to wash linen shirts)
- Candles (need it to work at night, esp in UK winters) (V.ii.k.10–11) #WealthOfTweets #SmithTweets
Smith thinks fuel might also qualify in the winter, and suggests that if a bounty could ever be reasonable, a bounty to get coal to places would qualify.
Britain, meanwhile, taxed that kind of thing. (V.ii.k.12) #WealthOfTweets #SmithTweets
Smith thinks all these taxes on necessities are obviously harmful, but that that's not enough to say you shouldn't do them. If a government needs the revenue and can't get it another way, it might make sense to continue taxing these goods. (V.ii.k.13) #WealthOfTweets #SmithTweets
#SmithSnark drive-by: This potential defence of taxing necessities is 𝗻𝗼𝘁 available to duties imposed to support the mercantile system, which have all the bad effects of taxes and none of the good ones. (V.ii.k.13) #WealthOfTweets #SmithTweets
Britain could be worse. (V.ii.k.14–15) #WealthOfTweets #SmithTweets
There are two ways to tax consumable commodities: an annual fee for using them paid directly by the consumer, or a tax on the merchants selling them paid by the consumer as the goods are purchased for use. (V.ii.k.16–17) #WealthOfTweets #SmithTweets
Annual consumption licenses might make sense for coaches and things like coaches, especially when compared to an up-front tax when purchasing the coach. But generally, consumption licenses are worse than pay-as-you-go taxes. (V.ii.k.17–18) #WealthOfTweets #SmithTweets
Consumption licenses are:
1) Less equal (not based on consumption)
2) Less convenient (you need a lot of money all at once)
3) Do less to discourage bad consumption
4) Likely onerous for low-income consumers. (V.ii.k.18) #WealthOfTweets #SmithTweets
Smithsters, there's a lot still to come on consumption taxes. We're going to leave it here for today. See you tomorrow for more! (V.ii.k) #WealthOfTweets #SmithTweets

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More from @adamsmithworks

3 Mar
#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
Read 24 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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