GENERAL RESULTS WORKING THROUGH CONSUMPTION. Tax payments form an item of expense to the citizen, and the only way in which they can touch general in dustries is through curtailment of demand or encouragement of supply of those services or commodities furnished by pri vate enterprise. Should the payment be a constant amount from year to year, or a constant proportion of social income, industries would adjust themselves to established fiscal con ditions and would continue without any conscious apprecia tion of the government's demand for money. Whether or not this would be an advantage depends upon the peculiar needs of the people at the period under consideration. It is only when some radical reform is made in the tax policy, either in changing the amount demanded by old taxes or in levying taxes in some new form, that the influence of tax payments upon industries becomes apparent.
The nature of this influence has already been referred to in tracing the incidence of taxes, and is familiar to the student of economy. It may be illustrated by reference to an ordinary commercial transaction. Should rents for dwelling-houses rise or fall from an assumed standard, incomes meanwhile re maining stationary, the fact that a higher per cent of ordinary expenditure takes the form of rental payments would quickly be reflected in general industrial organization. Forms of con sumption previously indulged in would be curtailed, and the consequent reduction in demand would necessitate reorgani zation in the order of industry. Now, a tax is like rent in this particular, that it is a fixed charge upon a given standard of comfort. What is spent in the support of the State cannot be spent in the support of private enterprises, and inasmuch as the State fixes the amount of its expenditure in an arbi trary manner, it follows that the general industries of the country must content themselves with a development that can be supported by what is left of the income of the people after public demands have been satisfied.
In all this there is nothing peculiar. The industrial effect of any radical modification in the taxing system would be similar to that sure to follow should a change in fashion, or the development of a new taste, disturb the established rela tion of demand and supply, especially if this change were of such a sort as to shift demand from one class of producers to another. The appearance of the bicycle presents an il
lustration which will make clear the analogy. This machine provides a new pleasure to a very considerable class in the community, and has disturbed accustomed expenditures. Piano-makers, tobacco manufacturers, theatre companies, and the producers of other analogous pleasures complain that their business is curtailed on account of the expansion of the bicycle trade. The industrial disturbance resulting therefrom is very considerable and must be followed by a readjustment of investments and occupations. In the same way a modi fication of the tax policy by which the income of one class is relieved at the expense of another class will be followed by important industrial consequences. Capital will be dis charged from the service of those upon whom are imposed the new demands and pass to the service of those who are relieved of payment. The transfer of capital implies the trans fer of labour, and thus a certain number of employers and employes will be dbliged to learn a new business as a result of the changed tax. This leads to a most important con clusion. The burden of a new tax, or of a modification of an old one, cannot be measured by tracing the payments which they occasion; the true burden is borne by those who must readjust their business to conform to the new commercial conditions resulting from the tax. It is similar in kind to the burden resulting from a new invention, though unfortu nately it cannot be subjected to the severe commercial ordeal by which the desirability of a labour-saving machine, as com pared with old methods, may be determined.
The practical lesson to be learned from the above is that a taxing system to which the industries of the country have adjusted themselves has logically the right to urge the argu ment of presumption. Under ordinary circumstances the fact that it is in possession of the field should be final against inno vation. Nothing can be worse than continuous meddling with tax laws. The time comes in the life of every nation when reforms are necessary, but in judging of those reforms no statesman will fail to weigh the industrial burden imposed by the necessity of industrial readjustments.