EFFECTS OF THE WAR ON CREDIT, CURRENCY, AND FINANCE. 273 
Mr. Hirst replies : ‘It would not be easy to set a limit. If the Govern- 
ment could spend its money as profitably and productively as individuals, 
I should say, in that case, the revenue might safely exceed half the total 
aggregate incomes of the people.’ 
Dr. Cannan writes : ‘ Nohow, because it is relative to the system of taxation, 
disposition of the taxpayer, &c., and you can never tell whether you have the 
best possible conditions in this respect for raising taxation.’ Mr. Lavington 
suggests that ‘taxable limits are set by political and by economic considerations. 
On economic grounds alone it may be said that the taxable limit is reached 
when further taxation would inflict an injury on the community greater than 
(1) that inflicted by alternative methods of raising that revenue, or (2) that 
resulting from the abandonment of the purpose for which the revenue was 
required.’ Mr. Ellinger finds the limit, ‘when so much is taken out of the 
taxpayers’ pockets that their incentive to produce is reduced, and when 
' insufficient remains to provide the necessary capital to make up for wastage 
and to set to work new workers in an increasing population.’ He does not 
think it has been reached here, especially after the abolition of the E.P.D. 
Dr. Dalton draws a distinction between (a) the proceeds of taxation spent 
within the country, and (6) those spent in making payments outside. In the 
case of (a) he does not believe that the taxable capacity, ‘ as measured by a mere 
sum of money, or even by a percentage of the national income, can be ascer- 
tained at all.’ It depends upon what particular taxes and what particular 
forms of public expenditure it is proposed to increase (or reduce). Dr. Dalton 
wishes to draw a further distinction between taxation devoted to repayment of 
internal debt and taxation devoted to paying for the destructive operations 
of war, or between a tax on spirits and a tax on the necessities of life 
or on savings. In the case of making payments outside the country ‘ the 
problem may be regarded as that of determining what is the maximum 
amount, or percentage, of the national income which can be taken away and be 
handed over to foreigners, without reducing the future national income.’ 
Mr. Sykes thinks we must face ‘the possibility or probability of a democratic 
_ Government ‘being compelled to bow to popular opposition to an increase of 
_ taxation above an uncertain limit.’ Again, we have to remember that the 
results of excessive taxation may only be felt in a gradual economic deteriora- 
tion, which may not be recognised for years. Mr. Sykes sees a need ‘ for more 
_ definite information in regard to the incidence of modern forms of taxation.’ 
He cannot agree with Mr. McKenna’s statement that the necessity for borrowing 
_ to pay taxes is an indication that the limits of taxation have been reached or 
exceeded. 
Mr. Hilton Young answers: ‘ Directly, by a census of production only ; 
indirectly, according to the fancy of the payer, as to what he likes to call a 
fair measure of it.’ 
Mr. Pethick Lawrence thinks ‘that no definite basis can be laid down.’ 
Mr. Mason answers: ‘ When it affects production unduly.’ Mr. A. Hoare 
thinks that ‘taxable capacity can only be ascertained by experimenting with 
taxes; Mr. McKenna was wrong.’ 
Mr. Gibson thinks that the limit depends mainly on the distribution of 
taxation, but also on the level of prices and the general willingness to work 
harder. He does not think that it has been reached yet, ‘provided there be 
a ae 2 ee eee 
_ Increased production.’ But taxation should be directed against those who made 
fortunes out of the War, with a corresponding remission for people with 
“fixed ’ incomes. 
__ Sir J. C. Stamp replies: ‘ (a) By reference to the total surplus of produc- 
_ tion over the minimum of consumption that is functional or necessitated by 
_ the volume of that production. (b) This surplus must be considered in relation 
_to the number of inhabitants, and the proportion in which it is distributed. 
_(e) It depends also upon the manner in which the taxes are raised. (d) There 
can be no absolute answer, because it depends upon the reasons for, or subjects 
upon, which the money is to be spent. (e) There is a much larger capacity 
if the money is to be applied to the payment of interest, and a very much 
larger capacity if it is to be applied to the payment of internal debt. 
“It has not been reached and passed for this country, as suggested by Mr. 
‘ McKenna, if these facts are borne in mind. He has treated interest and debt 
just as they would be treated if the same money was spent on armaments.’ 
