tion of its capital
unproductively, instead of employing it productively. In the form of
money this capital is productive of no profit; in the form of materials,
machinery, and food, for which it might be exchanged, it would be
productive of revenue, and would add to the wealth and the resources of
the state. Thus then I hope I have satisfactorily proved, that a
comparatively low price of the precious metals, in consequence of
taxation, or in other words, a generally high price of commodities,
would be of no disadvantage to a state, as a part of the metals would be
exported, which, by raising their value, would again lower the prices
of commodities. And further, that if they were not exported, if by
prohibitory laws they could be retained in a country, the effect on the
exchange would counterbalance the effect of high prices. If then taxes
on necessaries and on wages would not raise the prices of all
commodities on which labour was expended, they cannot be condemned on
such grounds; and moreover, even if the opinion that they would have
such an effect were well founded, they would be in no degree injurious
on that account.

It is undoubtedly true, that "taxes upon luxuries have no tendency to
raise the price of any other commodities, except that of the commodities
taxed;" but it is not true, that "taxes upon necessaries, by raising the
wages of labour, necessarily tend to raise the price of all
manufactures." It is true, that "taxes upon luxuries are finally paid by
the consumers of the commodities taxed, without any retribution. They
fall indifferently upon every species of revenue, the wages of labour,
the profits of stock, and the rent of land;" but it is not true, "that
taxes upon necessaries _so far as they affect the labouring poor_, are
finally paid partly by landlords in the diminished rent of their lands,
and partly by rich consumers, whether landlords or others, in the
advanced price of manufactured goods;" for _so far as these taxes affect
the labouring poor_, they will be almost wholly paid by the diminished
profits of stock, a small part only being paid by the labourers
themselves in the diminished demand for labour, which taxation of every
kind has a tendency to produce.

It is from Dr. Smith's erroneous view of the effect of those taxes, that
he has been led to the conclusion, that "the middling and superior ranks
of people, if they understood their own interest, ought always to oppose
all taxes upon th