therefore these funds were devoted to
the maintenance of foreign, and not of English labourers, such as
soldiers, sailors, &c. &c.; then, indeed, there would be a diminished
demand for labour, and wages might not increase although they were
taxed; but the same thing would happen if the tax had been laid on
consumable commodities, on the profits of stock, or if in any other
manner the same sum had been raised to supply this subsidy: less labour
could be employed at home. In one case wages are prevented from rising,
in the other they must absolutely fall. But suppose the amount of a tax
on wages were, after being raised on the labourers, paid gratuitously to
their employers, it would increase their money fund for the maintenance
of labour, but it would not increase either commodities or labour. It
would consequently increase the competition amongst the employers of
labour, and the tax would be ultimately attended with no loss either to
master or labourer. The master would pay an increased price for labour;
the addition which the labourer received would be paid as a tax to
Government, and would be again returned to the masters. It must however
not be forgotten that the produce of taxes is often wastefully expended,
and that by diminishing capital they tend to diminish the real fund
destined for the maintenance of labour; and therefore to diminish the
real demand for it. Taxes then, generally, as far as they impair the
real capital of the country, diminish the demand for labour, and
therefore it is a probable, but not a necessary, nor a peculiar
consequence of a tax on wages, that though wages would rise, they would
not rise by a sum precisely equal to the tax.

Adam Smith, as we have seen, has fully allowed that the effect of a tax
on wages would be to raise wages by a sum at least equal to the tax, and
would be finally, if not immediately, paid by the employer of labour.
Thus far we fully agree; but we essentially differ in our views of the
subsequent operation of such a tax.

"A direct tax upon the wages of labour, therefore," says Adam Smith,
"though the labourer might perhaps pay it out of his hand, could not
properly be said to be even advanced by him; at least if the demand for
labour and the average price of provisions remained the same after the
tax as before it. In all such cases, not only the tax, but something
more than the tax, would in reality be advanced by the person who
immediately employed him. The final