The Simplified Wealth of Nations of Adam Smith, Book 5, Chapter 2, Article 3: Wage Taxes

Chapter 2j, Article 3: Wage Taxes

Article 3: Taxes on wages
131 Book 1 showed that the wages of lower class workers are regulated by two circumstances:
  1. The demand for labour
    1. This demand requires an increasing, stationary, or declining population.
    2. It regulates the worker's subsistence, whether liberal, moderate, or scanty.
  2. The ordinary or average price of goods
    1. This determines the amount of money which must be paid to the worker for his subsistence.
  132 A direct tax on wages can be advanced by his employer, at least if the demand for labour and the average price of provisions remained the same, before and after the tax. In different cases, the final payment would fall on different persons.   133If direct taxes on wages have not always created a proportional rise in those wages, it is because they have created a big fall in the demand for labour.   134A tax on the wages of country labour does not raise the price of the rude produce of land in proportion to the tax, for the same reason that a tax on the farmer's profit does not raise that price in that proportion.   135 Such absurd and destructive taxes are in place in many countries.   136 I have shown in Book 1 that the recompense of ingenious artists and men of liberal professions is proportional to the emoluments of inferior trades.   137 The emoluments of offices are not regulated by free competition.

Next: Chapter 2k: General Taxes: Capitation Taxes