TOPICS OF THE DAY.
PRINCIPLES OF THE NEW BUDGET.
ALTHOUGH Mr. Gladstone laid down with perfect distinctness the principles which guide him in the conduct of finance as Chancellor of the Exchequer, and also certain negative conclusions to which he had arrived on the subject of taxation, he did not lay down ex- pressly any positive principle to guide him in the increase of tax- ation. In nothing, however, has Mr. Gladstone more disappointed the malicious presumptions which awaited the Member for Oxford University on his entrance to the Exchequer, than in abstaining from the obtrusion of abstract principles on commencing a course of action. The principles probably guide him, and he is prepared with them when they are required for a defensive elucidation of his conduct; but, knowing how little they really interest the -vul- gar who have them so constantly in their mouth, he begins by pro- posing substantial ants. In his present course he appears to us to be advancing from the position in which practically he finds him- self, towards the sound principle which should guide an English Minister in the extension of taxes. He has not as yet taken any permanent loan ; a sound system of finance, as we have already pointed out, so long as the effort to meet the liabilities of the time by the income of the time does not cripple the productive resources of the country. He has extended direct taxation only to a limited extent, and has commenced the extension of his burden into the vast field of indirect taxation.
Another sound principle which we infer from his acts is, that the cost of this war, undertaken for national objects, should fall upon the national resources considered as a whole, and therefore that in seeking these resources at the hands of the individuals who hold them, and who compose the nation, the impost should fall in some proportion to individual means. With our social and commercial arrangements, the two kinds of taxes, direct and in- direct, may be considered as the complement to each other in the general aim to make taxation fall upon means. Direct taxation takes the means at their source as they accrue ; indirect taxation meets them at the other end, in the form of consumption ; and one will reach a class of means which the other fails to grasp. In the extension of indirect taxes he states the negative princi- ple which guides him, in avoiding improper taxes to restore those imposts which interrupt the operations of industry ; in its com- mencement his course also coincides with a more positive law. The object of indirect taxation is, to get at the means of the tax-paying classes ; in the present instance, at the means of the whole body of the people, so far as they are not reached by direct taxes. The abstract and beau-ideal of such a form of taxation would be, to spread it equally over the entire field of consumable articles. There are substantial reasons why such an extension should be sought. If taxes to any considerable amount are imposed upon a com- paratively small number of articles, the impost necessarily has an effect of enhancing the price of those articles ; and it becomes, therefore, an element in the consideration of the consumer, who will give the preference to any alternative article of price un- enhanced. The taxed article is checked in its consumption, with the double effect of stunting a particular branch of trade and of defeating the very object of the tax. The motive of selection in the taxpayer would be disarmed, neutralized, and nullified, if he found on every other article a proportionate enhancement of price by taxation. It would be no object with him, then, to select one article more than another ; and thus while the consumer and the dealer were equally unrestrained by the tax, the Chancellor of the Exchequer would realize the full amount of the impost. There are, however, several considerations which in practice must qualify this abstract ideal of perfectly equal taxes on con- sumption. One is the profitlessness of levying taxes upon paltry commodities ; or of imposing them at some stage of manufacture, transit, or exchange, where the visitation of the collector would be either inconvenient or easily evaded. No sound Minister would attempt to tax " divi-divi," or the hundreds of small commodities of which our tariff has been relieved ; nor would he order the tax- collector to visit a railway train in transit. A selection must be made, therefore ; but the same principle holds good,—namely, that the more equally and extended the incidence of the taxation can be rendered over the whole field of consumption, the less will it inter- fere with the operations of trade, the less will it defeat the objedts of the Minister.
This principle leaves no distinction between articles of consump- tion the produce of internal industry, and those imported. Prac- tically, there is the distinction that the act of importation presents an easy stage at which to levy the tax. But it is evident, that if taxes on imports be pressed too heavily-, a large part of the national outlay will be diverted to expenditure upon internal products: trade will be so far diverted, and a proportion of the country's means will escape the taxing Minister. Mr. Gladstone is probably correct in believing that no statesman would reimpose the vexatious ex- cise restrictions which have been abolished during the ten years of financial reform ; but on a reconsideration of the great facts connected with the abuses of excise, it appears probable that those abuses are due more to excess of inequality than to anything inhe- rent in inland taxes on consumption. It is important to understand this question, as it relates to a large field of taxable wealth from which some dogmatic economists would hold the Minister to be excluded. It is the excess of an impost which begets the first desire for evasion ; the attempt at evasion which begets overstrained vigilance; and the overstrained
vigilance which begets vexatious inquisition and interference. The Post-office is a case in point : while the average rate of 61d. was levied upon all letters, society was generally engaged in a conspiracy to evade the charge and defeat the Post-office. The impost was reduced to a sum liberal in proportion to the service performed but practically very moderate ; and although eccen- tricity may occasionally indulge in some fanciful evasion, the broad fact is, that the public pays the penny stamp without re- luctance. It would be more trouble to evade the tax than to pay it. The advantage of prepayment by stamps is a secondary con- sideration, although the convenience might probably be extended to other forms. Bat the great point here is, that a very moderate inland tax, widely spread, occasions no concentrated resistance or pertinacious evasion.
Although Mr. Gladstone did not state this principle, the new taxes which he proposed in the main conform to a system of finance regulated by it. They are a commencement in extending the further taxation over the field of consumption—extending it widely, but extending it by very moderate increase. He has, in- deed, doubled a previous increase on Scotch and Irish spirits, tempted by the fact that that previous increase worked well. It is possible that this attempt, violating his own rule of " letting well alone," may teach him that a double augmentation does not yield a double return. He would have been more true to the principle which we have extracted, if he had selected for an equally moderate augmentation some other articles of large con- sumption. Malt is one such example, and he has selected it. If the principle is true, it would be more profitable in the farther increase of our taxes which will be rendered necessary by the pro- secution of the war, to impose very moderate charges of increase upon new commodities, than to select particular articles for a special pressure. To keep the amount moderate, to extend the incidence, and to render it as equal as possible consistently with convenience in the levying,—these are the practical rules for ap- plying the principle of rendering taxation coincident with con- sumption. It may be a question how far Mr. Gladstone has given an undue prominence, in point of time and proportion, to the direct class of taxes as compared with the indirect ; and this, we think, consti- tutes the more vulnerable part of his scheme. The Income-tax has usually been reserved to a later stage in any career of difficulty, since extreme necessity only reconciles the public to the pressure of the screw. The more it is extended, the more objectionable it is felt to be, for a reason which English financiers too uniformly overlook. As we descend in the scale of wealth, we arrive amongst increasing numbers, whose income and expenditure are contracted within narrower and narrower spaces of time, until, amongst the largest number of the population, the financial account begins- and ends within the week. Weekly earnings and weekly expen- diture are the rule amongst the thrifty portion of the working- classes ; and it is an invasion of fixed habits to introduce amongst. a class even above the working-people a demand for quarterly payments in the lump. The saving for such purposes—while hard. times render it difficult even to make both ends meet—requires a degree of virtue or of prudence which does not exist extensively; and it is a fault in statesmanship to presame the existence of qua- lities or feelings which do not practically prevail. This is a work- ing objection to direct taxes ; and when we observe that more than, two-thirds of Mr. Gladstone's supplemental budget consists of the most unpopular of direct taxes, we cannot overlook the fact that the proportion violates the commendable rule of our taxation at, large. The difficulty might be adjusted in the sequel, but it would require very distinct assurance of that intent, in order to reconcile the miscellaneous public to a plan which places the most disagree-, able part first.
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