It's from the definition of Democracy in the chapter entitled The Jazz Webster. It's only the second half of the definition. The first part is:
The theory that two thieves will steal less than one, and that three will steal less than two, and that four will steal less than three, and so on, ad infinitum
It's even more appropriate for our new Socialist Overlords than the second part....
Just so.
And thank you for pointing me to the source, which can be found in its entirety here:
A Book of Burlesques (New York 1919) (pdf
For those viewing the page scroll to the end...a long overdue book!