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APPENDIX 
the seller nor the purchaser. It is an instance of the effects of a tax 
being injurious to those who do not pay it, rather than to those who 
pay. In so far as the parties to the transaction are concerned, the 
result of the decrease of sales of real estate, for instance, is to lower 
the selling value of the land. For any impediment to the free trans- 
fer of a commodity is bound to diminish its relative desirability or 
value. The purchaser indeed pays the tax but he will recoup himself 
by paying so much less for the land. Were there no tax he would 
be willing to pay a larger price. The result hence is that the tax is 
capitalized or amortized into a lower selling price of the land and 
it is only the original owner who possesses the land before the tax 
is imposed or increased, who suffers. After the tax has been in 
existence long enough for the original owner to part with his land, 
the new owner as a consequence of the absorption of the tax will not 
suffer, 
“This kind of capitalization or amortization, however, differs from 
the ordinary phenomenon discussed above. For ordinarily capitaliza- 
tion depends on the regular recurrence of a tax and can be ascertained 
by the simple arithmetical process of capitalizing the difference be- 
tween the present and the future income. In the case, however, of 
taxes or the transfer of real estate, while the tax indeed recurs, the 
recurrence is at irregular intervals and the depreciation consists in 
the capitalization of an unknown quantity. This very uncertainty 
contributes to render real estate values unstable and in itself would 
suffice to explain the absence in France of such an important class of 
operators as the “real estate interests” in large American cities. 
“The same considerations which have just been mentioned apply, 
with some modifications, to the taxes on stock- and produce-exchange 
transactions. The process, however, is even more subtle and com- 
plicated. 
“The ordinary view of such taxes is that they are borne by the 
respective parties in interest—the buyers and sellers of securities or 
the speculators on the bull or the bear side in produce so that the 
tax may really be considered as a tax on speculation or on the un- 
earned or fortuitous profit of the speculator. A tax on stock- and 
produce-exchange transactions would thus be a tax on speculative 
profits. 
“In reality, however, it is nothing of the kind. The results are 
quite different. 
“The real function of speculation, as has been abundantly shown 
by modern economists, and as has recently been explained in detail 
in the admirable report of the special commission on the exchanges