solely with the proposition to remedy the inequality resulting from the failure to collect from all of the tax-payers in 1862 and the years following. Undeniably, if there were no question except one of book-keeping between the States of the Union, as the Treasury has sometimes seemed to suppose, the process of crediting every State with an amount equal to its quota would finally close the accounts and produce equality in that sense. But the only question really open, under the circumstances, is that of producing equality among the tax-payers; and this object it appears to be impossible to secure by any process of refunding. If, of two men, one paid his tax twenty-five years ago and the other has never paid it, it is impossible to restore equality by simply returning to the former that which has been detained from him for a quarter of a century. And if a third, when assessed, suffered the collection of the tax by a forced sale of his land for a fraction of its value, he is not placed on the same footing with either of the others, by returning to him or his heirs the amount of the tax or even the proceeds of the tax sale. In short, when the tax-collector has done a part of his work by compulsory process and time has elapsed, an equitable adjustment between individuals becomes impossible. Refunding the tax may satisfy the mere formal accountant, but it does not undo the past or its consequences; and, so far as the object sought is the equalizing of burdens, such a measure is nearly nugatory.

It is, at any rate, so nearly nugatory that there may be a grave question whether, in the attempt to cure one set of inequalities by a distribution of money, a greater set does not spring out of the process of raising the money. It was contended in debate in Congress that the taxes collected in 1890, after the growth of the States has changed their relative places in population and wealth, would not rest upon them in the proportion in which the contributions of 1862-66 must be returned. Kansas, it was said

by one gentleman, will pay towards the refunding operation not less than $340,000, but will receive less than $72,000; New Hampshire, it was said in the Senate, will receive but $185,000, and will contribute at least $300,000. The incidence of our taxation is too uncertain to make these calculations important; and, in most cases of expenditure for public objects, such considerations as to the exact balance of benefits and burdens are properly disregarded. But the present is a case in which the attempt to restore such a balance with respect to a particular transaction is the main proposition; and it therefore becomes not only justifiable, but necessary, to inquire whether the proposed equality would be real or only apparent. The answer to this question is found in the census tables, where the redistribution of tax-paying power in the last quarter of a century is too manifest to require recital.

The third method of dealing with the subject would be, if we can neither complete the collection nor return the tax without producing fresh mischief, to leave the matter where it is. No doubt, this course, as well as the others, is open to objection. It is a peculiarity of the case that the United States can neither act nor refrain from acting in it without running counter to some instinct of justice. But there would be less disturbance of existing interests, and time would heal all difficulties more quickly, it is probable, if it were frankly recognized that, in such matters, the errors or misfortunes of the past are finally beyond all remedy. The funds which have been collected from the proceeds of lands leased or resold, or from the surplus of tax sales, might be returned to the parties representing the original ownership, and the account of the direct tax could then be wound up, as that of the other taxes of the war has been, without further inquiry as to the degree in which different bodies of citizens contributed to them.

It is the second of these methods, however, which has

secured the approval of Congress. The bill which was passed last winter, vetoed by the President and passed over the veto by the Senate in the closing hours of the session, was the fruit of an agitation which has been in progress in different forms for ten years, and has developed a strong appetite among the State governments for the refunding of their quotas. The bill required the Secretary of the Treasury to credit every State and Territory and the District of Columbia with a sum equal to all collections made from it or its citizens, by set-off or otherwise, and to remit all sums remaining unpaid; and appropriated the money necessary to pay all sums thus becoming due from the Treasury; it being provided, however, that sums which have been collected in any State from citizens, directly or by sale of property, should be held in trust by the State government for the benefit of the persons from whom collection was made, or their representatives. It was also provided that the owners of lands sold in the parishes of Saint Helena and Saint Luke's in South Carolina should be paid the value of their lands,- to the owners of lots in the town of Beaufort one-half of the value assessed by the direct tax commissioners, to the owners of cultivated lands five dollars per acre, and to the owners of other lands one dollar per acre, with the proper exceptions as to lands heretofore redeemed. The purchase money received on account of uncompleted sales to persons in the army and navy was to be returned to the persons paying it. For all these purposes $500,000 was to be appropriated, including in this sum moneys in the Treasury derived in any way from the enforcement of the tax. And,

As passed by the House, the bill proposed to pay the dispossessed owners according to the valuation of 1860, and appropriated $850,000 for the purpose. The rate and amount were cut down in conference, to meet the views of the Senate. On the adoption of the report of the conference committee, Mr. Sherman made this explanation:

"Upon the first sale for direct taxes, the land was bid in, I think, at some $13,000, which we credited to the State of South Carolina; and it was

finally, moneys received from the sale of lands bid in for the United States at tax sales in any State, in excess of the taxes assessed, were to be paid to the owners of the land bid in and resold, or to their representatives.

This bill was not reached by the House of Representatives after the veto, and therefore failed to become a law. There can be little doubt that it will be passed by the present Congress. It is sufficiently clear from its terms that the combination of local interests in its support is powerful, and it has every political chance in its favor. The passage of the measure, whenever it comes, will close a singular chapter in the history of taxation,— a chapter the repetition of which, we may be sure, our people will not be easily tempted to risk hereafter. The direct tax provided for by the Constitution has at last been effectually discredited as a source of revenue, and it has also been too prolific of misconception and confusion to have any interest henceforth as a practical measure of finance.

CHARLES F. DUNBAR.

subsequently resold by the United States for $455,000. So, after all, the money we are to pay back to the owners of this land in South Carolina is only about the sum that we received on the resale of the land." Cong. Record, 1888-89, p. 2139.

A NEW VIEW OF THE THEORY OF WAGES

I.

THE rate of wages, or the price of labor, can only be in equilibrium when the demand for labor and the supply of labor are equal; and if it be assumed that the supply is. for the time being, a fixed quantity, it is evident that such equality can only be brought about by causes which act upon the demand.

In a former article in this Journal I stated the condition upon which the demand for labor equals the supply, as follows: "The price of a given amount of labor is equal to the price which is paid for the use of such amount of auxiliary capital as can replace it in those operations where the two things may be indifferently employed with equal pecuniary advantage." This formula fails, however, to show what the actual price of labor is. It does not even show what is the nature of the ultimate causes which determine that price. It cannot therefore be accepted as the last word in the Wages Question.

Now, before we proceed any further, let us observe that the Wages Question really contains in itself two questions, one relating to the aggregate amount of the fund out of which the compensation of both labor and capital is paid and the other relating to the manner in which this fund is shared between them. The former is a question as to the causes which affect wages and interest alike. The latter is a question as to the causes which affect them divergently. In the first case, the interests of labor and capital being identical, neither can gain anything without the other sharing in its gain. In the second case, however, their interests are opposed, and gain for one can only be had at the cost of the other.

* Quarterly Journal of Economics, October, 1888, p. 60.