Shearman: The Distribution of Wealth, Part II (1887)

THE DISTRIBUTION OF WEALTH
BY THOMAS G. SHEARMAN.

II.

An Irish landlord, writing to the London Times, called particular attention to the fact that, in case all the landlords should be expelled, the whole of Ireland, outside of the large towns, would be left without a single person whose annual income would exceed $1,500. To the wealthy landlord who owns the Times, this appalling fact seems to afford such conclusive proof of the desolation and misery which would follow home rule that he deems it superfluous to add a word of comment. He considers it quite enough to say that no such state of things exists in any civilised country. That it should be eventually brought about in Ireland, he evidently believes, must be considered by every sane man as one of the most frightful disasters which could befall the human race.

I am writing in Germany, the country from which have proceeded the most important additions to the intellectual wealth of the world during the last fifty years. The man who knows nothing of the contributions made to history, to theology, to science, whether abstract or applied, by German students, knows practically nothing at all. What have been the income of the men who have thus enriched the world! Rarely so much as $1,500; generally not half that amount. Some of the world-famous German scholars accomplished their great achievements on an income of less than $600 a year.

New England developed a marvelous degree of intellectual activity in the colonial period of our history, though confined within a narrow circle. But that was a period of small incomes and very little accumulated wealth; nor did the few wealthy men contribute anything of importance to the intellectual or moral development of the people. What have the wealthy Irish landlords done for the development of the Irish people in religion, morality or intellect? What contribution has any wealthy Irish landlord ever made to literature, science, art or high thought of any kind? What benefit have these men of wealth conferred upon any part of the world in any direction? They have just held a solemn meeting to answer these questions, and their own testimony affords the best evidence against them. They claim to have advised their tenants to improve their stock, to introduce better methods of cultivation and to qualify themselves generally to pay higher rents, while they themselves have set excellent examples to their inferiors by taking good care of themselves.

Many years ago a practical joker inserted an advertisement in a daily paper to the following effect: "Wanted, by a young gentleman of good birth and breeding, board in a respectable family, where his Christian example would be considered sufficient compensation for his board." The Irish landlords do not advertise, but they get precisely that for which the young man advertised in vain. Their Christian example, however, has been chiefly directed toward hunting, horse racing and hard drinking. Certainly, down to a period less than fifty years ago, all accounts of Ireland agreed in this; and except that the drinking is conducted with more moderation, there seems no reason to believe that there has been any change.

But are the landlords of Ireland constituted of worse materials than landlords elsewhere? Are landlords anywhere naturally worse than other men? Would their tenants, if transferred to the position of the landlords, be any better than they? Is not human nature much the same, whether men are landlords or not? These questions answer themselves. The march of human progress does not depend upon the leadership of wealthy men, and their contributions to human welfare have always been and always will be infinitesimal when compared with their ability.

No harm, therefore, would ensue to any society in which wealth should be distributed with comparative evenness. We may safely assume that such a state of society is most desirable. The important questions are:

    1. In which direction is society now tending?

    2. What causes are at work to produce an unequal distribution of wealth?

    3. What can be done to effect a more equal distribution without diminishing the production of wealth?

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Is modern society tending toward a more equal or a more unequal distribution of wealth?

This is a question which has only in recent years excited any active interest sufficient to induce the compilation of statistics casting any light upon its solution. The means of comparison with the past are therefore very imperfect; and for this reason all answers must be somewhat uncertain and largely colored by personal bias. Mr. Atkinson in America and Mr. Giffen in England have undertaken to show, by various statistics, that the tendency of the last forty years has been toward securing a larger share of the annual product, for the masses of the people, and that there has been a general progress from poverty among the vast majority who labor with their hands for their daily bread. We shall, therefore, certainly be upon the safe and conservative side if we accept the statistics of these gentlemen as a basis for further argument.  Let us do so, and thus avoid disputes as to these questions, which, as will soon appear, are matters of minor importance; since enough is admitted on all sides to make imperative and just the demand for a better state of things than that which now exists.

The figures given by Mr. Atkinson, from a select number of American mills and workshops, indicate an advance in wages of 50% in 40 years.  The census of 1880, including that part of it which was taken under Mr. Atkinson's personal direction, does not indicate anything like this advance; and no statistics of farm wages have ever been given which justify the belief that they have advanced even 20% in the last 30 years.  And farm laborers outnumber manufacturing workmen by more than one-half of their whole number.  No matter: let us assume that all wages have risen 50%.  Still, we are furnished with no statistics justifying the assertion that a larger share of the national accumulation of wealth has gone to the workmen, except the one circumstance that the profits of capital invested in manufactures and in loans have diminished.  May not the amount of capital, however, be very much greater than it was 30 years ago?  May it not have increased more rapidly than wages have advanced?  We have conclusive answers to these inquiries in the census returns, which show that the increase in invested capital, in every direction, has gone on at a far more rapid rate than the utmost advance ever claimed for wages. We need not ignore the fact that these returns of capital are very inaccurate. The inaccuracy consists solely in a great understatement; and therefore a correct return would only intensify the contrast between the growth of capital and the increase of wages. There is nothing, therefore, in the figures furnished by Mr. Atkinson which even tends to show that the working classes of the present day hold a larger share of the accumulated wealth of the country than the same classes held 30 or 40 years ago. And it is certain that they pay three times the amount of taxes now which the same classes paid 30 years ago.

Mr. Giffen is able to make a better showing for England. He proves — at least as clearly as Mr. Atkinson does for America — that wages have risen over 50% in England during the last 30 years. He proves conclusively that the price of everything which the laborer buys has been reduced in a far greater proportion in England than in America. Taxation in England has been shifted very largely from the shoulders of the poor to those of the well to do. The workman, who used to pay the most, now pays the least, especially if he does not use liquors or tobacco. The hours of labor in large factories have been reduced much more than in America. The general improvement in the condition of the mechanical and manufacturing workmen of Great Britain and Ireland has actually been far greater, within the last 40 years, than among similar classes in America. Moreover, Mr. Giffen is able to show, as Mr. Atkinson is not, a decided increase in the proportion of the national wealth which is held by small owners, so far as personal property is concerned. If mere progress is a conclusive test, England must be the paradise of workingmen. But, no: there is still a brighter paradise! Wages have risen more rapidly in Ireland than in any part of England or America. Ireland must, therefore, be the true land of milk and honey!

We have now reached the true climax of absurdity. We see that progress may go on for long periods at a rapid rate without bringing the people into a condition with which they can be or ought to be  contented, and without even giving them a materially larger share of the general wealth. We may well begin to doubt whether some important point has not been overlooked in these glowing pictures of prosperity.

As usual, we find that something has been overlooked, and that there remains an exceedingly important element, concerning which neither Mr Atkinson nor Mr. Giffen furnishes any statistics. And, as usual, we find that it is our old friend, rent. Mr. Giffen, it is true, has some advantage over Mr. Atkinson, on this as on almost every other point. The rent of farm lands has declined of late years in Great Britain, and has been cut down by statute in Ireland. But the population of England is crowding more and more into the towns. and rent in towns shows no sign of falling, either in England or in America. That profits are falling is proved easily enough, without statistics, by the manifest fall in interest of money. That wages are, upon the whole, rising, may be admitted. But if rent rises faster than wages, the condition of the wage earner may be no more satisfactory than it was before.

Whether this omitted factor in the problem changes its solution or not, one thing is far too clear to be denied by men of common sense. Whether the condition of the great mass of people is improving rapidly or not, it is certain that the accumulation of large fortunes in the hands of a few persons has gone on in America at an unprecedented rate during the last 25 years. Mr. Atkinson estimates the average earnings of nine-tenths of the American people at less than $450 for each family. He arrives at this by dividing the total product of the nation among all its workers in equal shares, except as to the first million or so, to whom he allows $1,000 each. Here is no deduction for interest on capital or for the numerous incomes which are well known to exceed $10,000, and the considerable number which range between $100,000 and $1,000,000 a year. No allowance is made either for the difference between the earnings of skilled workmen and common laborers, or between the incomes of farmers and their laborers. Making a very moderate allowance for these items, the annual income of four-fifths of American workers, including small farmers, would not exceed $350 each. If the calculations heretofore given are at all correct, even this is an overstatement of the case.

Now, suppose that the same class of persons did earn only $233 30 years ago; will any one pretend that the difference between their condition and that of the average rich man of today is less than that which existed between the average laborer and rich man of 30 years ago? Is the social chasm any the less a chasm, simply because both sides have moved in one direction, while one has moved a hundred feet further than the other? Suppose that the rich man does only gain 10% on his income of $10,000 in the same space of time in which the poor man gains 20% on his income of $300, how many periods of 20 years each will be required to bridge over the chasm?  Let us put it in figures:

Table No. 1.
	Laborer's earnings	Rich man's income	Difference
1880	$300	$10,000	$9,700
1900	360	11,000
1920	482	12,100
1940	518	13,300
1960	622	14,630
1980	746	16,093
2000	896	$17,702	$16,806

Now one of the most striking facts of our time is that this very table will raise a smile on many lips at the very idea of calling any man "rich" whose income is only $30,000 a year. Already we have long passed that point; and it is a common saying that no one can "afford to live in New York" on an income of $10,000.

When it is said, as it was said twenty years ago by David A. Wells, that the rich are growing richer, and the poor are growing poorer, every man of sense knows that what is meant by the speaker and understood by the hearers is that the relative share of the poor, and not their actual quantity of wealth, is diminishing. That this is true of the poor in America, even more than of the poor in England, is hardly disputable. That it is true of the poor in both countries is not disputable at all.

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What causes are at work to produce an unequal distribution of wealth?

Many, of course, which are in the nature of men and things. Superior industry, skill, judgment, foresight, adaptability, inventive genius, economy, self-control, patience, perseverance, punctuality, promptness, diligence, honesty, truthfulness and other virtues, as well as superior bodily strength and powers of endurance, must all tend to give to their possessors great advantages over those who are inferior in any of these respects. It would be an unfortunate thing for the world if this were not so. In the future, even more than in the past, the services of great inventors and men of rare genius will be indispensable to human progress. If the vast mass of the poor are ever to be made rich and comfortable it must be by means of new developments of the power of man over nature, attainable only by means of incessant studies and experiments, growing every year more laborious and costly. The inventor can no longer work successfully without the aid of the capitalist; and the one must be repaid for his toil and the other for his risk. Both will inevitably make a much larger profit than any individual workman could possibly obtain, for if they could not do so they would not incur the labor nor the risk.

All that Mr. Atkinson says about the value of capital to labor is substantially true. Each is necessary to the other; and there is no more conflict between them than there is between every buyer and seller. And the competition between capitalists for the services of laborers tends to increase more rapidly than the competition of laborers for employment — other things being equal.

Let us, for the present, waive the burning question of rent. Mr. Atkinson says that we can get land, free of rent, anywhere that we want it, to build a new mill or factory. We should like to see him do it, especially in a convenient part of Manhattan island; but no matter. There is another perennial source of inequality in the distribution of wealth, as to which Mr. Atkinson (though saying little about it in public) agrees with us, as indeed every one who has considered the subject at all, must do. This is taxation.

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Very few ideas in these days are really original; and it is of little importance whether they are or not. The writer has worked out many problems in economic science himself, only to find, long afterward, that they had been better done by others long before. But there some advantages in this process, among which it sometimes happens that a new extension of the main idea may be found. Among the questions thus worked out, without aid from books, or a suggestion from any source, was the great discrepancy between the burdens imposed by indirect taxation upon the rich and the poor respectively, in proportion to their incomes. That point had been noticed many years before, although it had never received the attention which it well deserved. The independent study of this, however, led the writer to observe another point which, so far as he is aware, had never before received attention; namely, that, in consequence of the impossibility of taxes being paid out of anything but savings, the burden of taxation should be estimated according to what each taxpayer is able to save, and not according to what he earns. The principle involved being practically recognized in the imposition of every income tax, it may be that it has been discussed in some of the debates which preceded the laying of that tax in England; but, if so, the writer is still quite unaware of any such debate or of any allusion to the subject, in any form, prior to his own public statement of it in January, 1882. Since that time it has gradually been recognized in many discussions of taxation, and it is fully conceded by Mr. Atkinson.

It may be as well to reproduce here, in a corrected form, the calculations by which it was shown, in 1882, that indirect taxation lays a burden upon the poor at least ten times as heavy, in proportion to their ability to pay, as it does upon the moderately rich, and a hundred times as heavy as that imposed upon the extremely rich. The fact is undisputed; it is not only conceded, but is insisted upon by the most strenuous supporters of the system of indirect taxation.

But the admission of this fact involves the admission of another, which has nevertheless been ignored by the supporters of the present system. The enormous disproportion between the shares of taxation borne by the rich and the poor respectively results in the inevitable concentration of wealth in the hands of the rich. The most extravagant estimates of the savings of the American people do not put them higher than 15% of the total income. Mr. Atkinson puts them at less than 10%. Actual statistics show that prudent, average laborers do not save more than 5% of their earnings, after payment of taxes. Obviously, men with large incomes can and generally do save a far greater proportion of their incomes. The table given below is based upon what is believed to be a reasonable estimate of the savings of the different classes in view of all known statistics. In preparing this table an allowance of an increase of prices, by reason of the tariff, on domestic articles protected thereby, is made only to the extent of twice the tariff duties, or $500,000,000 per annum. As the domestic articles outnumber the imported ones by about ten to one, this allowance is very moderate. Duties are not added to the prices of the domestic articles in quite the same proportion as to the imports; but only about one-fifth of that increase is assumed to attach to the home product. This estimate is absurdly low, and it therefore does not make the table as strong on the side here taken as the facts would justify. Fifteen percent is added to the whole increase of price to represent the mercantile retail profit, which has to be added to the costs to the consumer, in order to compensate the three or more sets of merchants for advancing the duties and the corresponding increase of prices on domestic goods. All this is an unavoidable burden imposed upon the final purchaser by indirect taxation.

The amount to be added to indirect taxes, other than the tariff, is not so easily computed. Experience has proved that internal revenue taxes, as on liquors and tobacco, promote monopolies, and thus add a burden upon the consumer, far in excess of the nominal tax. The repeal of the tax of one cent per box of matches resulted in an ultimate reduction of price by two cents. But we will not undertake to estimate anything on this point. The mercantile profit, or rather the compensation for loss of interest and risk of loss, is, of course, the same upon excise duties as upon customs duties. It is not probably half so large upon the nominally direct taxes levied by the several states and towns, which are mainly indirect, because charged on building and personalty. We will allow only 5% upon these as profit.

The entire taxation of the country for the census year, 1880, was, in round numbers, $250,000,000 taxes upon imports, $150,000,000 internal revenue taxes and $300,000,000 in state and local taxes — $700,000,000 in all. The total burden arising from this taxation, by the time that it reached the mass of consumers was about as follows:

Table No. 2.—The Present Burdens of Taxation.
Duties upon imports	$250,000,000
Increased prices of protected articles — not imported	500,000,000
Internal revenue	150,000,000
		$900,000,000
Interest and profits 15%		135,000,000
		1,035,000,000
Local taxes	300,000,000
Interest and profits 5%	15,000,000	315,000,000
Grand total		$1,350,000,000

Accepting the extravagant estimate of the gross earnings of the American people, for the same year, at $10,000,000,000, which Mr. Atkinson thinks rather too high, and Mr. Nimmo rather too low, and dividing this income according to the best light which is thrown upon it by all the statistics heretofore referred to, we arrive at the following result:

Table No. 3—Estimated Incomes of American People.
Class 1—	100	persons averaging $1,000,000	$100,000,000
Class 2—	2,000	persons averaging $100,000	$200,000,000
Class 3—	5,000	persons averaging $50,000	$250,000,000
Class 4—	100,000	persons averaging $10,000	$1,000,000,000
Class 5—	1,000,000	persons averaging $1,000	$1,000,000,000
Class 6—	2,500,000	persons averaging $500	$1,250,000,000
Class 7—	13,800,000	persons averaging $350	$4,880,000,000
Depreciation of capital, coming out of income, but not reckoned by any one as part of net income; 4% on $35,000,000,000			1,400,000,000
	17,407,100	persons, income	10,030,000,000

The item of depreciation is precisely that which, from investigation of accounts for a long series of years, Mr. Atkinson finds to be the proper allowance in a cotton mill. Of course, this depreciation must be made good out of the annual income before that can be divided at all.

Next, let us consider what portion of these earnings each class could save by the exercise of such care and economy as may fairly be expected from each. The whole amount actually added to the national wealth, after deducting taxes, which are so much loss, was certainly not more than $750,000,000 in 1880. Add the taxes, which were not saved, and there would appear to be about $1,450,000,000, which might have been saved but for taxes.

But, in addition to these actual taxes are to be considered the profits accruing to capitalists out of the system of indirect taxation, already mentioned as amounting to $650,000,000 per annum. A vast proportion of these profits (probably two-thirds) are lost by the wasteful processes through which they are made; but that does not lessen the burden upon the poor, who have to pay them. The rich pay their pro rata share of these; but how small that is will soon appear.

In the first instance we must ascertain what are the possible savings of each class at present, allowing the ordinary living expenses of that class. Many individuals of every class, except the great capitalists, spend all their income; but the great majority do not, for if they did, the nation would accumulate no wealth. The following estimates are based upon Mr. Atkinson's theory that the national savings of 1880 amounted to not more than $750,000,000. If Mr. Blaine's theory, that we had saved $30,000,000,000 in 20 years, could be accepted, it would imply a national saving of at least $2,000,000,000 in 1880. That would, if true, lay the foundation for a terrific statement as to the concentration of wealth in few hands, since the working classes certainly have not saved a quarter of that sum; but, as no intelligent person can honestly believe such a statement, it would be wrong to take advantage of it for the sake of an argument.

We divide the community, as before, into seven classes:

Table No. 4.—Incomes, Expenses and Savings.
	Income	Family Expenses	Present Savings
Class 1	$1,000,000	$100,000	$900,000
Class 2	100,000	45,000	55,000
Class 3	50,000	30,000	20,000
Class 4	10,000	8,500	1,500
Class 5	1,000	900	100
Class 6	590	475	25
Class 7	850	340	10

Table No. 5-- Savings of Each Class, as a Class, for the Year 1880
	Number of Persons	Present Savings of Class
Class 1	100	$90,000,000
Class 2	2,000	110,000,000
Class 3	5,000	100,000,000
Class 4	100,000	150,000,000
Class 5	1,000,000	100,000,000
Class 6	2,500,000	62,500,000
Class 7	13,800,000	135,000,000
Total	17,407,000	$750,500,000

This computation, it will be seen, harmonizes with the previous estimate of national savings. The estimate of savings of the three great classes, including all earning $1,000 or less, is based upon statistics furnished to labor commissioners by men of that class. Men earning $500 to $600 a year do not claim to have saved more than 5% of their earnings. It is obvious that a still smaller proportion only can be saved by those who have to support an average of three persons on $250 or less. What pinching must be suffered, even to do so much, none can know but those who have tried it.(1)

(l)It is to be borne in mind that furniture and clothing are included in expenses, even though partially saved up, as they are taxed in the same manner as other expenses, and are not available capital.

Now, upon those figures, how is it possible that the distribution of wealth should not become more and more unequal, as time rolls along? Put the whole of the three poorer classes together, including. as they do, not only all laborers and skilled mechanics, but also the vast majority of foremen, clerks, teachers, preachers, traders, shopkeepers, farmers and planters, with a decided majority of lawyers and doctors, inasmuch as class 5 includes all those whose income is less than $2,000, they falling into the average of $1,000. Yet, with all these included, the annual savings of these 17,400,000 workers cannot exceed $300,000,000; while the annual savings of 107,000 persons, having the larger incomes, amount to $450,000,000. At the end of thirty years, which is the usual estimate of a generation, the 17,000,000 will have accumulated $9,000,000,000, or $530 each, while the 107,000 will have accumulated $13,500,000,000, or $126,168 each, without allowing anything for interest on their savings, which, even at the lowest conceivable rate of interest, would increase their gains to over $175,000 each.

Now there is no use in fighting with facts or with natural laws. If this state of things really is the natural result of natural laws it is useless to struggle against it or complain of it. But, before assuming that it is, let us see what share taxation, which is a necessity, it is true, but not necessarily to be levied in any one way, has to do with this result.

The present system of taxation, as already shown, imposes a total burden of $13,500,000,000, which is substantially all borne by consumers, in proportion to their expenses, and not according to either their property or their income. This is equal to about 17.25% of the total expenditures of all classes. Let us call it only 17%. The following table shows the annual expenses of each class, the amount of tax levied on each, at 17%, and the amount which each class would save, if it were possible to dispense with taxation altogether without losing the benefits of civilized life:

Table No. 6 — Expenses, Tax Burden and Possible Savings, by Classes.
	Annual Expenses	Tax Burden at 17%	Possible Savings if not taxed
Class 1	$15,000,000	$2,250,000	92,500,000
Class 2	90,000,000	15,300,000	125,300,000
Class 3	150,000,000	25,300,000	125,500,000
Class 4	850,000,000	144,500,000	294,500,000
Class 5	900,000,000	153,000,000	233,000,000
Class 6	1,187,500,000	199,750,000	262,230,000
Class 7	4,692,000,000	797,640,000	935,640,000
Total	$7,784,000,000	1,338,240,000	$2,088,740,000

If taxation could be entirely dispensed with, these figures show that the classes living by their daily labor, and averaging together less than $500 a year, would be able, with no greater economy than they exercise now, to save $1,450,000,000 per annum; while the wealthier classes, retaining all the advantage which has been given to them by centuries of unequal and oppressive taxation, would still be unable to save more than $1,737,000,000. At the end of thirty years, therefore, the "poorer" classes would have saved $43,530,000,000, while the "richer" classes could have saved only $10,100,000,000. The rich would be richer than they can be now, but the poor would gain upon them so rapidly, and would, as a class, have such a decided control over the properiy of the country as to remove all occasion for jealousy. While under the present system of taxation it is inevitable that two-thirds of all the wealth of the country should soon pass into the hands of about 100,000 persons, the abolition of taxation would make it impossible that they should ever control as much as one-third, and would reduce their share continually as time passed on.

Thus it is made clear that taxation lies at the root of poverty and infallibly fosters enormous inequalities in the distribution of wealth.

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"Ah! but we cannot do without taxation! How is the government to be carried on and social order maintained?" Very good; but why must taxation be so levied as inevitably to crush the poor? As Mr. Atkinson says: "The man upon whom the burden of taxation falls heaviest is he who possesses no property whatever. It finds him poor, it keeps him poor, and it may even reduce him to pauperism." Must this be so?

Before answering this question, let us see what would be the result of a system of taxation which is universally conceded by the strongest opponents of both the land tax and the income tax to be perfectly fair, and which certainly is abundantly liberal toward the rich. What would be the result of a direct tax upon all kinds of property, if it could be so levied that it could not be shifted over from the taxpayer to the consumer? No fairer or more accurate method for ascertaining this could be suggested than a tax proportioned exactly to the amount which each taxpayer could naturally save out of his income, because this is the only source from which accumulated property can be derived.

We have seen that the present system of taxation, under which taxes are first paid by a few and then collected, with a profit, from the many, is attended with burdens which nearly double the weight of the taxes. It is notorious, also, that the national government has for many years collected a vast amount of taxes which it has not needed; and the "surplus" — of which so many stupid people are ignorantly proud — is even now hanging about our necks and threatening the country with the worst financial panic which it has over known. Under direct taxation all this would be at an end, and the tax would be instantly reduced to $630,000,000, if not less. Let us take that figure, however, as to which there can be no dispute.

In place of the present burden of 60% on the savings of people, a tax of one half that amount would be more than ample to meet all the expenses of government, both national and local. Under a perfectly impartial system of taxation, assessing rich and poor alike upon what they have, and not upon what they have spent, the following would be the result of a direct tax of 30% on the savings of all classes alike, instead of the present levy of 10% on the very rich and 80% on the very poor.

Table No.7—Savings and Taxes, under Strictly Equal Taxation.
	Income Each Person	Savings of Class, if untaxed	Tax on Savings, Equally	Savings After Taxes Paid
Class 1	$1,000,000	$92,550,000	$27,765,000	$64,785,000
Class 2	100,000	125,509,000	37,500,000	87,710,000
Class 3	50,000	125,500,000	37,650,000	87,850,000
Class 4	10,000	294,500,000	88,350,000	206,150,000
Class 5	1,000	253,000,000	75,900,000	177,100,000
Class 6	500	262,250,000	78,675,000	183,575,000
Class 7	350	905,610,000	280,692,000	654,248,000
Total		$2,088,740,000	$676,622,000	$1,162,113,000

Even under an equalized taxation, it will be seen, the three poorer classes would accumulate wealth at the rate of $1,015,023,000 per annum, or $30,468,690,000 in 30 years, while the richer classes would accumulate only at the rate of $446,495,000 per annum, or $13,394,850,000  in 30 years! Thus the 17,000,000 persons who now begin life without capital and depend solely upon their labor for support, would, in the course of an ordinary working life, become the owners of more than twice as much property as all the capitalists and more favored classes put together.

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The statistics and estimates here given are, of course, open to question and correction. Those who believe that the average American laborer is able to save more than $10 a year out of $350; and to lay it by as untaxed capital, can construct tables which would show a somewhat different result. But the figures here given have been taken, as far as possible, from those which are furnished by the defenders of the existing system. Ex-Governor Gear of Iowa, when running for congress, declared that every American workman paid a tax of 17% on his wages for the privilege of living in America; and he glorified the system which imposed this tax as the bulwark of American freedom. The Iowa farmers and laborers were simple-minded enough to believe him, and elected him to continue that system by his vote. The figure given in table No. 6 agrees with this estimate, although it was reached by an independent calculation. The estimates of present savings are based upon the official publications of that devoted adherent of the same system, the state of New Jersey. But let any number of corrections be made in these figures, and it will be found that the results will be substantially unchanged. Congressman Milliken of Maine, three years ago, and Congressman Seymour of New York, forty years ago, urged the necessity of a protective tariff on the very ground that the effect of any indirect tax system was just what it is here stated to be, and that American workmen must be insured higher wages in order to compensate them for the injustice of such a system. Table No. 6 shows that the amount of taxation imposed upon the farmers and laborers of this country by this system is $1,000,000,000 every year. The census shows that the whole amount of wages in all kinds of manufacturing in 1880 was much less than this sum. But not more than one-fourth of these wages was paid to laborers who could, by any possibility, be engaged in protected industries. The other laborers could afford to pay, not merely the difference in the wages paid to their fellow workmen in protected factories and mines, but absolutely all their wages, for the sake of getting rid of indirect taxation; and they would gain enormously by the trade. If it is necessary that heavy taxes should be raised to increase the wages of American workmen, let them be raised by direct taxation and paid directly to the workmen, not to their employers.

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The ordinary reader has long since become weary of these figures, and has skipped to this point. It is not necessary for him to look backward. It was necessary to give the figures, in order to prevent the cavils of critics, who would otherwise have said that the conclusions now to be stated were supported by no proofs. These figures completely demonstrate the truth of the following conclusions, which are all that the ordinary reader need trouble himself with.

1. The present system of indirect taxation is so grossly unjust and unfair that it takes from the 16,000,000 hand workers of this country every year five-sixths of all their possible savings; while it takes from about 100,000 comparatively wealthy persons much less than two-sixths of theirs, and, from the immensely rich, only one part in thirty-six. In other words, out of every dollar which he has left, after supporting his family, the laborer pays 83 cents, the rich man on the average 30 cents, and the railway kings, steel rail makers and other twenty-millionaires 3 cents.

2. Under this system an enormous bounty is paid continually by laborers to their employers, for the privilege of having work, while their employers have to pay almost the whole of this bounty to other persons, for the privilege of having access to the materials for work.

3. The inevitable result of this system is to keep 17,000,000 farmers and wage earners so poor that, while 100,000 persons can and do easily accumulate $450,000,000 every year, the 17,000,000 can only, by the closest economy, accumulate $300,000,000 in the same time. In other words, for every dollar which it is possible for all the small farmers and mechanics to save, it is an easy matter for a class, not a hundredth part as numerous, to save a dollar and a half.

4. It is also a necessary result of this method of taxation that the wealth of the country is rapidly concentrating into a few hands, and that, unless it is absolutely squandered by its owner, by far the larger part of that wealth must become the property of about 100,000 persons in less than two generations, while more than one-third of the whole will belong to less than 10,000 persons.

5. No cause of inequality in the distribution of wealth has ever been named, other than such as is inherent in natural laws, working freely in a land of liberty (always excepting rent, which we have purposely excluded from the discussion), which has or can have anything like the influence in promoting inequality of wealth that the present system of taxation has.

6. This system of taxation takes from the poor two-thirds of the benefits which modern inventions and improvements and all the other favorable influences enumerated by Mr. Atkinson have conferred upon them. In his own truthful words, "it finds them poor, keeps them poor," and constantly tends to "reduce them to pauperism."

7. No matter how many eight hour laws, arbitration laws, factory inspection laws, apprentice laws, high tariff laws, immigration laws, railroad legislation laws or any other laws upon any conceivable subject may be enacted, and no matter how much good, or harm, such laws may do, one thing is absolutely certain: not all the laws which could be devised by human ingenuity in those directions, or in any of the directions indicated in old fashioned party platforms, could ever change the current which carries wealth steadily away from the poor to swell the purses of the rich, so long as the present system of taxation is maintained.

 

Continued at http://lvtfan.typepad.com/lvtfans_blog/2013/01/shearman-the-distribution-of-wealth-part-iii-1887.html