Online Library of Liberty: Economics, vol. 2: Modern Economic Problems

power, information of a proposed change, makes speculation possible and political corruption profitable.

The fact that a change in taxation is a disturbing element in price is not to be deemed insignificant merely because “all comes out right in the end.” Every change in taxation is an element of uncertainty in business and increases the fortunes of some men at the expense of others. Hence no considerable change should be made without good reasons in its favor. The older taxes have the virtue of stability, but in many cases they have grown out of harmony with the industrial conditions. While, therefore, from time to time there is a real need of a reform in the tax system, it should not be undertaken without recognizing the many and complex interests involved.

§ 16. Taxation and socialism. Because of its effect on costs, the taxing power gives to the government a means of encouraging some and of discouraging other persons and industries. “The power to tax is the power to destroy,” is the notable dictum of the Supreme Court. At the same time it is the power to favor and to enrich the favored. So it is but to be expected that, under the guise of taxation, greedy men, mistaken reformers, sentimentalists, and true philanthropists should constantly attempt to upbuild or to destroy the chosen objects of their favor or of their antagonism. Taxation has been used, for example, to make impossible the issue of bank-notes by state banks, to discourage the use of whiskey and tobacco, to prohibit child labor, to decrease the use of oleomargarine, and to upbuild chosen industries. The purpose in such legislation is sometimes subtle, at other times frankly recognized. Rarely is it admitted, however, by those who use taxation as a means of interference with the ordinary course of business, that this is socialism in the correct sense of the term.6 Many active business men who generally oppose any interference with private business, and strongly denounce as socialism the use of legislation intended to favor the weaker industrial classes, nevertheless support a “protective” tariff. But a protective tariff is intended to make selected industries more profitable than they would be if left to the usual rule of supply and demand, and it compels men in other industries to cease exporting goods, and forces many others to pay higher prices than they otherwise would. That such use of the taxing power, either with selfish or unselfish purposes, will cease, is not to be expected; but it is well to recognize the truth nature of the case, and to watch carefully the results.

References.

Bullock, C. J., Selected readings in public finance. Bost. Ginn. 1920. Daniels, W. M., The elements of public finance. N. Y. Holt. Pt. II, chs. I-V. 1904.

Library of Congress. List of References on Municipal Finance and taxation. Washington. 1920.

Plehn, C. C., Public finance. 4th ed. N. Y. Macmillan. 1920. Seligman, E. R. A., Essays in taxation. 8th ed. N. Y. Macmillan 1913. United States Census, 1910. Volume on wealth, debt, and taxation.

Willoughby, W. F., The movement for budgetary reform in the States. P. 254. New York. Appleton. 1918.

Willoughby, W. F., The problem of a national budget. N. Y. Appleton. 1918.