13: Taxes on Gold
The problems inherent to taxation of commodities have been considered in some detail: chiefly, that taxation discourages production, and people at liberty to choose their professions and the ways in which they invest their capital will do so to avoid pursuits made less profitable than other, which is the net effect of taxation.
A tax upon gold has been proposed - as it is the basis for money and a quantity in universal demand, and as it has few uses aside of serving as a token of exchange, it is reckoned that this would escape the negative consequences of taxation on any other specific commodity.
Especially if the tax were assessed prior to its introduction to the market - e.g., taxed when it is removed from the mine or brought into the country - then it should have little impact on the market, as it does not diminish the amount of money in circulation if it is intercepted in this manner.
Another factor that is unique to money is that it is not demanded in any specific or definite quantity. If less food is produced than is required, people shall starve. If less money is produced than is required, prices of all goods will rise to reflect the scarcity of money, but the people will not suffer neglect of any needful thing. Prices and wages will fluctuate, adjusting to one another, but the same amount of goods will be produced and traded.
However, this argument would apply only in states of society when physical gold is used as currency, paper-based credit money has not been established, and there is no use for gold other than as a token of exchange.
Precious metals, like other commodities, have value in the market that is ultimately determined by its supply and demand, and demand is derived of practical use as well as its employment as a token of exchange. Even such a situation, there is no certainty of a reliable stream of tax revenues: if a tax is placed on gold, and there is no practical use for it, there is no reason individuals would refrain from finding another medium for use as currency.
Given the stranglehold of Spain on the gold-producing colonies in the territories they control in America, the King of Span could well place upon gold a considerable tax to increase its value. Ricardo explains how this would disadvantage Span and its colonies but do no damage to the economies of other European nations. (EN: I'm skipping much detail as it's largely a footnote to history books, of interest in the author's time but moot in the present day.)
There is some mention of the taxation of gold in circulation rather than the gold in production. This generally corresponds to a tax on wealth rather than on production, the consequences of which have also been considered earlier in the present book.