50
THE A B C OF TAXATION
of 5 per cent prevailing to-day in both cases? Is it not
supply and demand? When there is a surplus of capital,
rates are depressed; when a scarcity of capital, rates
are advanced. The question is, What and how has
taxation to do with this 5 per cent rate of interest?
Again; Let it be assumed that a way has been found
to exact from all bonds a tax of $25 per thousand, or
one-half the income. Inviting investment, there would
then be, land paying 5 per cent, bonds paying 2\ per
cent, and what would happen? If the interest rate is
5 per cent owners of bonds will continue to hold them
for an income of 2 J per cent or they will sell at approximately
half price, but as loans are renewed borrowers
will have to pay the market rate of interest, what
capital is worth for use, plus the tax. The rate of
interest will still be fixed, as now, by supply and demand,
and not by taxation. What has taxation to
do with the general interest rate more than with the
gross ground rent of land? The idea that if a uniform
rate of tax were imposed and collected from all incomes
it would lower the rate of interest is admitted to be
highly speculative and seems to find contradiction in
every money market. As to the statement that modern
taxes upon land are not virtually exclusive and
unequal, how can this possibly be true when the
alleged bane of the present system is that more than
three-quarters of personal property escapes taxation?
Cb) The proposed plan of “some of the present-day
followers of Henry George” is set forth in the same text
book in the main correctly, and admirably, as above,
except that their specific recommendation is limited
to absorbing only enough economic rent to meet all
public expenses, an object which might be accom
