TOPICS OF THE DAY.
THE WORSHIP OF TAXATION.
pERHAPS the strangest thing about the very strange condition of British politics at the present moment is the devotion to taxation in the abstract expressed by so many of our politicians. Men of the old school were wont to regard taxation as essentially an evil, though no doubt a necessary evil. The modern fashion is to regard it as a positive benefit, and as a veritable source of national prosperity. The great goddess of taxation is invoked alike by the Tariff Reformers and by the extreme Radicals and Socialists as an all-powerful deity who, if only worshipped in the proper spirit and with appropriate rites, will prove the strongest and most helpful of political patrons. Again, in old days men found certain important objects for expenditure, and in view of the imperative character of those objects excused the grim necessity of laying fresh burdens upon the taxpayer. Now we begin at the other end. We suggest schemes of taxa- tion in vacuo, and quite apart from the objects upon which the money when raised is to be spent. Indeed, we may now witness the amazing spectacle of politicians looking round for objects on which to spend taxes, which are to be raised in any case, and on their own merits. For example, the ordinary Tariff Reform speech bristles with suggestions of the many wonderful things that might be done with the money which will be got from a general tariff. The Radicals and Socialists are quite as bad in this respect. Their schemes for a highly graduated Income-tax, for still more graduated Death-duties, for intercepting the so-called unearned increment, and for the taxation of land values and ground sites all start with the notion that taxa- tion, or at any rate taxation of the well-to-do, is per se a good, and can produce a political millennium. The enthusiasm of the votaries of taxation inclines us, indeed, to recommend to their attention Henry Kirke White's " Ode to Disappointment." With the, alteration of a word or two, the opening passage might be used as an invocation to their deity :— " Come, sweet Taxation, come!
Not in thy terrors clad ; Thy chastening rod but terrifies The wanton and the bad.
But we recline beneath thy shrine," &c., &c.
Though we fear we shall lay ourselves open to the taunt of being not only hopelessly behind the times, but poor- spirited, and also thoroughly unscientific, truth obliges us to confess that we take no pleasure in the new worship. We are old-fashioned enough to regard taxation per se with aversion. Save for the needs of law, order, and public justice, of national defence, of national health, and other essential public needs, we greatly prefer to let money fructify in the pockets of the individual rather than be sterilised in the Exchequer. Taxation there must be in a modern State, and heavy taxation; but let it be restricted as much as possible, and let us never forget that it is an evil, even when a necessary evil. In a word, we believe that what Peel laughingly called "the ignorant impatience of taxation " is in itself a very sound and healthy sign. We will go further, and say that there is no way in which a statesman can do more for the people of the country which he is called upon to govern than by reducing taxation, provided that such reduction does not sacrifice the true interests of the country by starving some essential public service, by underpaying the men who are called upon to serve the State, by imperilling the national existence, or by neglecting Imperial responsibilities. We claim that those who desire to reduce rather than increase taxation, and who with- stand proposals for placing vast new burdens on the tax- payer in the name of social reform, ,are often far truer friends of the people than those who imagine that you cannot spend too much and tax too much provided only you have got a philanthropic object and a beneficent intention.
By raising unnecessarily large sums by taxation the State tends not to develop but to prevent the natural processes under which money distributes -itself more equally. By high duties on such commodities of universal use as sugar, tea, coffee, cocoa, and tobacco we raise the prices of those commodities. But to raise the prices of commodities which all poor men use is in effect to reduce wages. Under a system of high taxes wages go less far than they would otherwise go. Sovereigns and shillings are, after all, only tickets for tea, tobacco, sugar, and so forth, and therefore to raise prices by taxation is to dock those tickets of a part of their value,—i.e., of a part of their purchasing power. A similar effect is pro- duced by undue direct taxation. It is all very well to -talk about taxing the millionaire and the rich man, and of so graduating your direct taxation that it shall fall only on the well-to-do. In truth, when you are apparently only hitting the well-to-do hard, you are really bitting the poor man still harder. The greater part of the money which you take from the rich man in Income-tax would, did you not take it,.be spent in the employment of labour or in the accumulation of capital which would also go in the employment of labour. The capitalist employers whose incomes are reduced by high taxation are by so much the less able to compete against each other for the hiring of labour. Therefore in the most practical way high direct taxation of the rich tends to injure the poor. No doubt all taxation, high and low, is open to these objections ; but that is not a reason for ignoring the fact, but for using taxation as sparingly as possible.
Money raised on commodities, as we have said, reduces the purchasing power of wages, and thereby reduces wages, while high direct taxation limits that competition of the wage-payers which is the wage-earners' opportunity. All taxation hits the poor in the end. No doubt we shall be told that there is a fallacy in our argument, and that money raised for social reform, if taken from the rich in direct taxation, or from the poor in the taxation of commodi- ties, is returned to them by feeding their children, by giving them old-age pensions, or by such social reform schemes as the endowment of motherhood and the giving of a living wage to all unemployed persons. To that we reply that, even granted this return, there is an enormous amount of pure waste—i.e., unproductive labour—involved in the process, and also that the return is constantly made to the wrong people. In other words, there is a class —the lower middle class—who are not in the possession of so-called superfluous wealth, and yet to whom no return is made. Under a system of high State expendi- ture and huge taxation the very poor and the very rich may for a time, and till the sources of wealth are finally dried up, manage to do well enough,—one through their doles, the other through cheap labour and the lowering of wages which is always the result of such systems. But upon the intermediate class, including of course the skilled artisans, an intolerable burden is laid. For them there is no give, but only plenty of take. In the Roman Empire this intermediate class was taxed out of existence ; and when it was destroyed the whole fabric of the State collapsed. If our worshippers of the beneficent goddess of taxation have their will, we may see similar results produced in an Empire which in so many ways resembles that of Rome. Therefore, if we may advise the middle classes, they will listen to no one, be his plea never so specious, who asks them to believe that what the nation needs is new taxes, and plenty of them,—plain English for " broadening the basis of taxation."
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