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APPENDIX 
as before. The real burden here falls, not on the parties to the trans- 
actions, but on certain outsiders. 
“Who are these outsiders? In the first place, they are apt to be 
the smaller capitalists who have borrowed on securities and who are 
less able to endure the losses resulting from excessive declines in 
value than are their larger brethren. In the second place, since the 
tax increases pro tanto the expense of transferring securities and thus 
diminishes the mobility of capital, it is likely to increase, even though 
slightly, the rate of interest. If, however, the rate of interest rises the 
capital value of the securities will decline. We would thus have a 
kind of capitalization of taxation somewhat comparable, although not 
in degree, to the capitalization brought about by a tax on the securities 
themselves. If, however, instead of dealing with a new or suddenly 
increased tax on stock-exchange transfers we have to do with a long 
and well established tax, the net results will obviously be that when 
the securities are initially listed on the exchange they will fetch a 
price somewhat lower than would be the case were there no tax on 
the stock-exchange transaction. The real losers, therefore, will be 
the bankers who float the securities; or, still more likely, the corpora- 
tion or enterprise which has arranged with the promoters to under- 
write the issue. The ultimate result will be a slight falling off in the 
profits of the stockholders in the industrial and other enterprises 
whose securities are listed on the exchanges; and to the extent that 
the issues consist of government bonds, a slight increase in the 
public expenditures, which is, of course, far more than compensated 
by the proceeds of the tax, when the same government that issues 
the securities also imposes the tax. Thus here again we see that the 
consequences of a tax are frequently quite different from those that 
are expected or intended.” 
Again, in “The Effect of Taxation,” in the Political Science 
Quarterly for March, 1923 (p. 23), Professor Seligman stated: 
“The indirect consequence of a tax may be far greater than the 
direct effects. An excessive tax on business enterprises may not only 
cut down business profits but lead to such a reduction of employment 
and wages that it will be borne by classes of the community far 
removed from the direct taxpayers. A tax on stock exchange securi- 
ties by hindering the free speculative movement may cause a widening 
of the upper and lower limits of stock quotations so that when the 
new securities are initially listed they will fetch a smaller price. 
This will obviously cause the bankers who underwrite and float the 
securities to make a bargain more unfavorable to the corporation or 
enterprise in question. When we are dealing with private issues