POLITICAL ECONOMY. 



411 



arc called beneficial or reproductive purpose*. In some eases 



this i.- ;>luiit. A good rood i> nocwwary in ordor to 



bring agricu .uco to market, just as a wagon and team 



are. To <-.t!l th. outlay which in necessary for making a road 



- it ia repsiir a tax, ia a mere abase of wordn. This 



charge ia mot by a contribution levied on all those who would 



1 usti the road, because it ia thus only that the cost 



.il.lv ili-tributod. To leave its construction and repair 

 ly voluntary effort would bo to present the selfish and 

 ii the labour of the public-spirited and generous. 



poor-rate is a little less manifestly a beneficial tax. It in 

 so, however, to the employers of labour. Wages must include, 

 for reasons now familiar to my readers, enough to maintain tbo 



r, to supply him with a reserve-fund against sickness 



: uu'''. ;iii'l enough also to bring up his children so as to 

 fill his place when his work is over. Now there ia very little 

 doubt that, even with their existing wages, many of those who 

 obtain poor-law relief could make provision for sickness and 

 even against old ago ; for benefit-clubs having the first of these 

 objects are common among the agricultural poor. But it is 

 doubtful whether they could maintain their families without 

 this assistance ; and it is certain that agricultural labourers 

 accept and are content with lower rates of wages than they 

 would submit to, if no provision wore made on their behalf 

 against the emergencies referred to. But higher wages, with 

 no increase in the effectiveness of labour, mean a greater 

 cost of production ; and a greater cost of production means 

 less profit to the employer or less rent to the landlord. It does 

 not follow, therefore, that the tax levied under the name of 

 a poor-rate is a loss to employers. It may be an indirect means 

 of paying wages ; and there are persons who have argued that 

 ultimately a poor-rate is virtually paid by those who receive it, 

 because they have, by its operation, to put up with lower rates 

 of wages. 



The amount of annual income raised by local taxation is 

 about one-fourth of all the contributions which are paid for 

 public purposes, i.e., out of every .100 raised and spent, 75 

 goes into the exchequer, .25 is collected and spent locally. 

 And furthermore, it will be seen from what I have already said, 

 that when any person attempts to calculate what is the real 

 burden of taxation, he must not contemplate only what people 

 earn, but he must reckon what they can save. For instance, 

 suppose we reckon 500 as the amount annually earned, and 

 .100 as the amount which the Government claims either 

 through the imperial or local tax-gatherer, we must not argue 

 as though the pressure of taxation was merely 20 per cent, on 

 labour, for, as I have said before, we must deduct the necessary 

 maintenance of the people from the amount of their annual 

 earnings. Make this deduction, and it will be found that the 

 burden is much more heavy ; that it may absorb or divert 70, 

 80, or even more per cent, of the possible savings of the 

 people ; that it may even absorb every penny of that which 

 some persons might otherwise save. At the same time it cer- 

 tainly does not absorb nearly the whole, for the nation annually 

 accumulates a large amount of wealth, and invests it. 



As a matter of fact, taxation is distributed with a fair 

 amount of equity, when we take into account the general 

 resources of those who are made liable to it. It has been 

 shown with sufficient clearness that the aggregate earnings or 

 income of those who get more than .100 a year is pretty equal 

 to that of those who get less, and that the contribution of each 

 of these moieties to the public revenue is also nearly the same 

 in amount. There is no doubt that those who have the higher 

 rate of income are on the whole better able to pay taxes than 

 > those whose earnings are less, because, in the former case, the 

 margin of possible saving over necessary expenditure is greater. 

 When the claims of the State are exceptionally great, it has 

 been the custom for Governments to raise part of its means by 

 way of loan, thus pledging the resources of the future on behalf 

 of the needs of the present. Of course there can be no defence 

 for loans contracted in order to meet ordinary expenditure, for 

 such a practice is sheer recklessness and waste a wilful impo- 

 sition of burdens on posterity. But, on the other hand, there is 

 no need to defend the raising of a loan for productive purposes 

 as, for example, a road, a railway, a canal, or similarly advan- 

 tageous public works when the use of any of these is so con- 

 siderable that the toll, or rent paid for the convenience which 

 they supply, is sufficient to meet the annual interest on the 



capital which has been borrowod. Nor, affsin, can any one 

 object, ammming that other resources fsil, that the State, in 

 time of great danger, and when every exertion most be made in 

 order to save the community from ruin, raises any roads which 

 it can to meet the emergency. When everything is in peril, a 

 necessity arises which in importunate; and all that s> wise 

 a. 1m migration can do is to make the necessary charge as little 

 burdensome as possible. 



There have been certain economist* as, for example, Dr. 

 Chalmers who have argued that a Government ought always 

 to raise what it needs for the public service, however great the 

 emergency, by a tax or contribution. And the reason they 

 allege is, that as the loan must provided it be raised at home 

 bo taken out of the existing resources of the community, to 

 raise it by way of loan is to cripple the State with a double 

 payment, the first when the loan is contracted, the second when 

 the interest is paid upon it. 



But if my reader will bear in mind what has been said 

 above, and what I affirm is the fundamental canon in taxa- 

 tion that all taxes are paid out of what can be saved he 

 will see the answer to this opinion of Dr. Chalmers. Let 

 us suppose that the urgency of the crisis in which the com- 

 munity is placed is such as to double the necessary expenditure 

 of the State. In the year 1870 it was stated, and perhaps with 

 truth, that the daily cost of the war to the French nation was 

 six times the charge of the ordinary machinery of Government 

 in times of peace. Now it is certain that there are persons in 

 a community who could have their taxation increased sixfold 

 and yet exist, because these persons find, or are supposed to be 

 likely to find, the huge sums needed for military purposes. 

 But it is quite as certain that there are hosts of people who con- 

 tribute regularly to the public revenue, to whom even a double 

 taxation might be ruin or starvation, who could not increase 

 their quota in any notable degree to the revenue of the State. 

 An attempt, then, to raise an extraordinary war expenditure by 

 taxation would be to introduce a graduated property or income 

 tax, under which an increasing quantity would be taken from 

 those whose means are sufficient to supply a considerable 

 margin over their absolute necessities and those of their families. 



There are two ways in which a loan can be contracted. 

 Either a borrowing Government may vary the rate of interest 

 which it is willing to pay for a fixed sum, according to the 

 state of the market, or it may vary the amount of principal 

 which it will acknowledge as its debt, while it fixes the rate of 

 interest. For instance, it may borrow .100 at 5 per cent. ; or 

 it may give 3 per cent., and, receiving ^60 from its subscribers, 

 credit them with a debt to the extent of .100 stock. In the 

 beginning of our debt we adopted the former course. But 

 during the long administration of Walpole, a number of these 

 debts were consolidated into one fund, the rate of interest at 

 that time being so low, that the minister was able to offer the 

 public creditor the option either of being paid off, or of accept- 

 ing the lower rate of interest. After this time the hitter 

 custom was adopted ; and it is said that of the whole public 

 debt, not more than two-thirds has been actually received in 

 cash, i.e., that every .100 of our public obligations represents 

 no more than 66 13s. 4d. paid to the exchequer. 



There is one manifest inconvenience in this practice. It is 

 almost impossible to lower the rate of interest. But it is 

 argued, and with great reason, that this very impossibility 

 enables the Government to borrow on the best terms. They 

 who lend to a Government generally lend for a permanent 

 investment. Now, if they foresee that this Government, when- 

 ever an opportunity offers itself, will set about lowering their 

 rate of interest by offering them the option of re-payment as 

 tho Government, in the interest of the public, is bound to do 

 they will demand higher terms in order to cover this risk. As 

 it is, they are unlike other mortgagees, for the State reserves its 

 right of paying its debtors off, but does not give them the right 

 of demanding their money at pleasure. And it has been calcu- 

 lated that, notwithstanding the fact that Government has given 

 up the power of lowering its rate of interest, it has on the 

 whole made a better bargain for the public, than it would 

 have made by adopting the other alternative, by raising all 

 its stock at a fixed rate of interest, and so precluding itself 

 from any subsequent operation, except that of creating a 

 surplus revenue in order to purchase and extinguish portions of 

 its debt. 



