The Wealth of Nations · Chapter
Article II explained
This chapter examines the challenges of taxing stock (capital) compared to land, noting that stock is mobile, secret, and variable, making direct taxation difficult.
What happens
This chapter examines the challenges of taxing stock (capital) compared to land, noting that stock is mobile, secret, and variable, making direct taxation difficult. It discusses the English land-tax system, its assessment on stock, and the inequalities that arise. Examples from Hamburg, Swiss cantons, and Holland illustrate voluntary or self-assessed taxes on stock, while the French Vingtieme and poll-taxes on slaves are also analyzed. The chapter concludes that taxes on stock often fall on the interest of money and can discourage industry.
Themes in this chapter
Role of Government
Explores the practical difficulties and consequences of government taxation on stock versus land, including the need for moderation and the risk of driving capital away.
Wealth and Money
Discusses how taxes on stock affect the interest of money and the accumulation of capital, with examples from various countries.
Characters to notice
- Great Britain
Mentioned in context of the land-tax system and recent tax on men servants.
- Holland
Discussed regarding a voluntary tax on stock imposed after the prince of Orange's stadtholdership.
- The French
Referenced in relation to the Vingtieme tax and its assessment on stock.
Key passages
“The proprietor of stock is properly a citizen of the world, and is not necessarily attached to any particular country.”
Capital owners are global citizens who can easily move their wealth across borders.
Highlights the mobility of capital as a key challenge for taxation.
“A tax which tended to drive away stock from any particular country, would so far tend to dry up every source of revenue, both to the sovereign and to the society.”
A tax that drives capital away would reduce all forms of national income, including land rent and wages.
Emphasizes the interconnectedness of stock, land, and labor in generating revenue.
“In a small republic, where the people have entire confidence in their magistrates, are convinced of the necessity of the tax for the support of the state, and believe that it will be faithfully applied to that purpose, such conscientious and voluntary payment may sometimes be expected.”
In small republics with trusted governments, citizens may voluntarily pay taxes honestly.
Contrasts voluntary compliance in small states with the need for strict assessment in larger ones.