h A X D AND W A T E R 
Oetobei- 2, 1915. 
Tl.Mi>.»)y rt.ichr(i .v. -IS in tlio voar 1815, alter move 
tii.'iii twenty years of ^\u\■. Ou tlaiiuary 5. 1815, 
liie total Xat'ioiial l)e!)t For the I'liited Kingdom 
tiUM <\ at £861.000.000. in\oIvi»i}.' an annual iliarL^' 
of £32,646.000. 'I'lii.s compai'i.'-un give.s .some idea 
of the enormous pace at whirl) the country is now 
;iddini( to its li;ibilit ies. Already, indeed, the 
interest eharj^e alone w hiih liie count!"y has tu fate 
exeeeds the total cxpendituro of the nation ;is 
recently as 1896. 
THE INCOME TAX. 
The steps taken by Mr. MeKennsi to meet 
these e]iormou.«i liabilities are. on the uhole, ex- 
tremely well chosen. He was bound to rai-se the 
bulk of his revenue from the income tax. That 
has long been the main supj)ort of the Exchequer, 
and must increasingly become .«o. The income tax, 
though it still contains many anomalies, is, on the 
whole, the fairest of all taxes. Some of the 
jniomalies Mr. MiKenna ))ro|K»ses to correct, la 
}>arlicular, tiie unjust exemption of farmers from 
paying income tax, even when in possession of 
substantial incomes, is to be alK)lished. with an 
estintated gain to the Exchequer of no less than 
£2,240,000. An even kilder .«<tep politically is the 
reduction of the lower limit (d' the income tax. .so 
Hs to make a larger miml)er of citizens liable to 
income tax. 
Thegreat bulk of tiie nation will, however, still wl 
escape direct tf.xation. This is a political as well 
as a financial evil. Politically, it is unsound that 
the majority of voters should never be brought 
face to face with the responsibility of contributing 
«Iirectly in hard cash to the cost of the country 
whose government is finally determined by their 
votes. Financially, this continued exemptioJi of 
the mass of the working classes from income tax 
lias this disadvantage, that it imposes upon the 
Chancellor of the Exchequer the necessity of 
rai.sing a large amount of revenue by taxes on 
articles of |)opular consumption such as tea and 
sugar. These taxes inevitably press more lieavily 
upon the poorer wage-earners than upon the 
richer wage-earners, whereas a tax on income 
is by its nature proportional to the income 
lent, .'■o far as it goes, hut it floes jjot cover the 
whole ground. It is a mistake to assume that 
it is oidy the consumption of imports that ought 
to Ih' rcfluced in the present crisis. There is 
equally .strong gidund for urging, and so far as 
is possible comj)elling. a reduction in the con- 
.sumption of home-made goods. 
The great problenj before the nation at the 
present moment is to provide enough labour and 
ca[)ital for carrying the war to a successful con- 
clusion. To that end it is our duty to economise 
men and money in every direction. So far as we 
ditninish the consumption of imports we diminish 
the necessity for employing labour to provide 
exports with which to pay for our imports; but 
it is equally true that so far as w^e diminish the 
consumption of home-made goods we set free 
labour, either to pay for our essential imports, or 
to provide irmnitions of war, or to fight in the 
trenches. For this reason it is undesirable that 
we should introduce any system of new taxation 
which might stinmlate home producers to turn 
their attention to the production of luxuries, such 
as private motor-cars, rather than the production 
f»f munitions of war. which aie r.t the moment the 
first necessity of our national life. When this 
i-onsi delation is borne in mind it will be seen 
that the new taxes upon imports, which may or 
may not be justified on their merits, ought, if 
maintained, to be su[)plemented by internal taxes 
wherever po.ssible on the corresponding home- 
made goods, so that the total volume of consump- 
tion may be reduced. 
TO REDUCE CONSUMPTION. 
This question of reducing consumption 
differentiates War Budgets from Pe?.ce Budgets. 
In peace time the main'object of a Chancellor of 
the Exchequer should be to raise revenue with 
the least possible inconvenience to the whole com- 
munity. In war time — or, at any rate, in the 
I)resent war time — he has not only to think of 
raising revenue but of leducing consumption. 
The inconvenience he inflicts upon the taxpayers 
of the kingdom, so far as it compels then'i to 
evil but a good. 
. . . ■.^' ,..-.— economise, is not an evil but a good. He is 
enjoyed. The scientific way of dealing with the therefore, justified in imposing taxes which mav 
l!!''! ,*'.'"..'!..•]■ ?■ *'•'' ,*^" ":*Ses deducted by the not be financially prolific, provided they compel 
reduction of consumption. In the ca.se of the in- 
creased postal rates, both purposes are served. A 
employer week by week as the wages are paid. 
TAXES ON IMPORTS. 
As regards taxes on commodities, Mr. 
McKcnna rai.ses his main revenue from the 
articles which long experience has proved to be 
niost prolific— namely, tea, sugar, and tobacco. 
He gets a little also out of cocoa and coffee, and 
niay in a future Budget get more. Incidentallv, 
he has broken new ground by putting taxes upon 
certain foreign manufactured commodities. The 
articles chosen are motor-cars, cinema films 
cloc-ks and watches, musical instruments, plate 
glass, and hats. As a means of raising revenue 
the only important items in this list are the motor- 
cars and cinema films, which together are esti- 
mated to yield in a full effective vear £1,450 000 
out ot a total for the whole group of £1,950,000 
-The general defence for these new taxes is basecl 
E,. p't "''T"^^ ^""^ diminishing the volume of 
K f? f""^' '^ ^' ,^" '•^''^'^■^ «^ f'"' «« possible 
the d.fi.culty in which we now find our.selves of 
paying for our imports. That defence is ^eel 
14 
net addition of £2.000.000 a .year to the revenue 
>vill be obtained, and at the same time the reduc- 
tion in the number of circulars sent through the 
post will set free labour badly needed for war 
purposes. At the same time, there rests upon the 
Government a further responsibility which h?,s not 
yet, It IS to be feared, been sufficiently faced— 
namely, the duty of reducing purely Governmental 
expenditure upon civil purposes. It is clearly un- 
just that the Government should organise tlirift 
campaigns throughout the country appealing to 
individuals to cut down their private expenditure 
that It should, in addition, impo.se taxes with the 
turther idea of securing private economy, ^^ bile at 
the same time no serious effort is made to secure 
public economy. With a little political courao^e 
many millions could be saved off our present 
national expenditure, with the double result that 
the financial burdens upon the nation as a whole 
wou d be reduced and a large amount of labour 
would be set free from Government offices for war 
work. 
1 
