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 approxi 
mately 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 de 
mand, 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 mod 
ern 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