WHY NOT MORE TAXES ?
"TEXT week, or very soon it is to be hoped; the Chancellor of the Exchequer will introduce a new Budget, and every one who is watching the present financial situation will earnestly hope that he will have the courage to impose heavy new taxation. Little has been said upon the subject of national revenue during the past few weeks, partly because the public was hypnotized by the success of the last War Loan, partly because we have all been more interested in the success of the war itself. But it is necessary to face the fact that the financial situation is not satisfactory. Already, indeed, in spite of the great success of his War Loan, Mr. Boner Law has started the sale of a new type of Exchequer bond which has been widely advertised, thus proving that more money has to be borrowed. By examining the figures for last year, we arc able to get a rough idea of how the nation now stands, and is -likely to stand when the war is over. The revenue has largely exceeded expectations. No less than £573,000,000 was paid in, as against an estimate of £502,000,000. But by far the greater part of this increase was due to the unexpectedly large yield of the Excess Profits Duty. The rest was due to the increased yield of the Income Tax and Super Tax. The Excess Profits Duty is by its nature a war tax which must disappear when -peace arrives. It yielded last year £140,000,000. There is also good reason to anticipate that the Income Tax and Super Tax will yield considerably less when war profits are no longer being earned. Beyond this is the important question of the Excise. Liquor control means less consumption of beer and spirits, and consequently less revenue. Last year the Excise declined by some £5,000,000 ; in the current year, owing to the step recently taken to limit the production of beer, a falling off of something like £30,000,000 may be anticipated. Similar con- siderations affect, though to a much smaller extent, the revenue from Customs.
Altogether, we may wipe out from our present revenue certainly not less than £180,000,000. Thus, on the basis of present figures, we shall be left after the war with a revenue of something under £400,000,000. As against that we have . to meet first of all our old peace expenditure, which before the war almost touched £200,000,000. That will be swollen by pension charges, and other new charges, which can hardly be put at less than £50,000,000 a year, at any rate for several years to come. In addition, there are the interest and Sinking Fund upon the Debt. Already our borrowings for the war are £3,195,000,000. Part of this we can hope to get back from the countries and Dominions to which we have lent it ; but, on the other hand, we are steadily borrowing day by day, and the end of the war is not yet in sight. At the very best we cannot hope to end the war with a 2tet National Debt of less than 13,500,000,000. Interest and Sinking Fund upon this would be £210,000,000, from which must be deducted, roughly, £23,500,000 for the cost of the old National Debt, leaving a net addition of, let us say, £185,000,000. Adding this to the figures of expenditure already given, we get approximately a peace expenditure after the war of £435,000,000. If these calculations are at all accurate, and of necessity there is a large element of specula- tion in them, when peace comes the Chancellor of the Exchequer for the time being will have to face a deficit of something like £35,000,000 a year on the present scale of taxation. Nothing would be more unpopular, and more economically injurious to the country, than the increase of taxation upon the declaration of peace. On the contrary, what we ought to aim at is to put ourselves in a position in w:tich taxation can be reduced the moment peace is declared. In order to do this sufficient revenue must be raised at once to provide a substantial immediate contribution to the cost of the war, both for the sake of reducing the amount of borrow- ing, and still more for the sake of having revenue in hand sseth which to reduce taxation when peace is declared. It is worth while in passing to note that, in spite of the large revenue we are now raising, our actual contribution to war expenditure is very small. In the year just ended, after deducting the sums paid for interest on War Debt and making a moderate allowance for the very great increases that have taken place in civilian expenditure, the balance which has been used as a direct contribution to the war expenditure of the United Kingdom, as distinct from loans to Allies and Dominions, represents only some sixteen per cent. of that expenditure. In the third year of the war this is an utterly inadequate contribution. In the Napoleonic Wars practically half the cost was borne out of revenue. The same proportion was maintained in the Crimean War. In the South African War the contribution was a quarter. We have not yet nearly reached the financial record of our ancestors.
It is, however, useless to urge increased taxation without at the same time indicating the directions in which such increases are possible. This latter task has been undertaken more than once by the Spectator, and we cannot refrain from expressing regret that the present Ministry have shown even more reluctance than their predecessors to face the problem of taxation. There is absolutely no reason why the Cabinet should so long have postponed grappling with this problem. Annual Budgets, as we have often urged, are out of date in war time. Taxes ought to be imposed whenever an opportunity offers for a new and sound source of revenue. In particular, the Government, instead of adopting the very dangerous policy of prohibiting imports, ought to have im- posedhigh taxation upon imports. The policy of prohibition is both a farce and a danger. Scarcely have these prohibitions been made before the Government set to work to authorize exemptions. These exemptions in the final resort have to be sanctioned by officials of some kind or another, and it is imposing a dangerous strain upon their loyalty to subject them to the temptations which must be offered to them when such large commercial interests arc affected. A high tax is automatic in its action. People who feel that it is imperative for them to have the taxed goods at any cost will pay the tax, and the State will get the revenue. People whose interests are less urgent will go without the goods, and tonnage will be saved and the problem of exchange simplified. This auto- matic adjustment is fair to everybody and tempts no one to dishonesty. It either brings in revenue to the State, or alter- natively it excludes goods with which the nation can dispense. In particular, there ought to be an immediate increase in the taxation of sugar, tea, tobacco, and petrol. Apart from imports, there are many other forms of expendi- ture which might legitimately be taxed, and ought indeed to have been taxed from the very beginning of the war. Among them is the often-mentioned case of dogs. The dog licence at 7s. 6d. is a quite lucrative tax, and would be much more lucra- tive if properly enforced in Ireland. It ought, however, to be at least trebled. A good deal of additional revenue would be brought in and a good many slogs would be killed, thus diminishing the consumption of food. But this moderate increment should only be on the first dog. People who choose during war to keep half-a-dozen dogs should pay progressively. Why not two guineas for the second dog, three for the third, and so on ? There ought also to he not only a further tax on petrol to replace the arbitrary restrictions now imposed, but in addition a heavy increase in the licence duty on motor-cars, especially on the smaller ones, and on motor-bicycles. Another useful and lucrative tax would bo a tax on female domestic servants. Even now in time of war one sees advertisements in the newspapers for servants in a household of two where seven servants are kept. Such adver- tisements point to the continued maintenance of large houses for purely personal gratification, and where this is done the occupier of the house clearly proves his capacity to pay a heavy tax. Of course this argument does not apply to cases (of which there are happily many in the country) where large houses have been turned into voluntary hospitals. But there is no reason why the Servant Tax should be limited to wealthy householders. Every householder who keeps even one servant proves by that fact that he is in a position to pay a moderate tax. A tax on all female domestic servants, possibly graduated according to the number of servants kept, would be a very useful source of public revenue. At the same time, the tax on male servants ought certainly to be increased. Among other taxes which would bear to be increased are the taxes on matches and on amusements.
Finally, as we have frequently urged before, the Income Tax, which now affects only a. limited number of the popula- tion, ought to be made universal, so that every citizen would be compelled to make some direct contribution to the expenses of the State that protects him.
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