AGRICULTURAL RATES.* ALL who are interested in the problems connected

with agricultural rating owe a debt of gratitude to Professor Nicholson for the extremely able and impartial way in which be has dealt with those problems. Professor Nicholson is neither a landowner nor a politician, and he approaches his subject solely from the point of view of justice and truth. He examines the question before him, not with a desire to find support for any particular theory, but in order to ascertain whether agriculture is fairly treated in the matter of local taxation. As our readers are doubtless aware, we have repeatedly pointed out in these columns that, so far from the relief given to agriculture by the State paying one-half of the rates being inequitable, it is but a bare act of justice. The whole history of local taxation shows that those who established the Poor-rate in the time of Queen Elizabeth— the Poor-rate is the basis of our system of local taxation— intended that all the inhabitants of the parish, or taxable unit, should contribute according to their ability. In other words, they desired to create a local Income-tax, for the essential of an Income-tax is that those who pay it con- tribute according to their income,—that is, according to their ability. In the time of Queen Elizabeth, however, men's ability to contribute to taxation was shown chiefly by two things: either by the amount of land which they occupied or owned, or by the amount of personal property or stock-in-trade which they possessed. Accordingly such occupation or possession was held to be the measure of their ability to contribute to the rates. But as time went on it proved far easier to test a man's ability by the size and value of the house he occupied or the land he tilled than by the personal property or stock-in-trade which be possessed. Thus personal property gradually slipped its neck out of the collar and left realty—i.e., land and houses—to drag the coach of local taxation. Almost the only indication that the rates were once a local Income-tax that now remains is the fact that rates are collected on the tithe—that is, on the income.— of the parson. But though our present system of rating does not touch personal property, Parliament by a law which is annually renewed solemnly records the fact that personal property was meant to pay, used to pay, and ought to pay. Every year it enacts that for the coming year all forms of personal property shall be relieved from rates, and that rates during the year shall only be levied on houses, lands, tithes, coal-mines, and underwoods. The origin of this public annual declaration that personal property once paid rates is to be found in the fact that in 1840 the Court of Queen's Bench decided that the rate-collectors bad no right to exempt personal property, as they were in the habit of doing in almost every case, and that in future they must rate stocks in-trade as well as realty. The decision caused consternation, and an Act was hurried through Parliament exempting personal property from rates for one year, it being hoped

* Rates and Taxes as Affecting Agriculture. By J, S. Nicholson, ILL, DSO. London : Swan Sonnenschein and Co. [2s. e4.]

that within that year Parliament would be able to devise some equitable adjustment of rates. Since that date personal property has every year been solemnly relieved of what, if it were realty, would be called its "hereditary burden" by a fresh Act of Parliament. Yet such is the irony of fate that the greater part of the nation believes that land is unfairly privileged in the matter of taxation, and that its owners are somehow relieved from a burden which they ought to bear, and which the less fortunate possessors of personal property are made to endure. Professor Nicholson in his new book tells this strange story with wonderful clearness as well as impartiality. He holds, as we have noted above, no brief for the landlords ; but as a student of economic science he refuses to misread history in order that he may adopt a popular or conventional conclusion.

In a book so full of good things it is difficult to know what to single out for special mention. Perhaps the most illuminating chapter is that in which Professor Nicholson insists that all taxes fall on persons and not on things. If the public could once be got to realise that it is "a hungering, thirsting man" who in every case pays a tax, and not a thing, we should have much less nonsense talked and much more justice done in the matter of taxes. Unfortunately, however, the loose rhetoric of the politicians and the lawyers has clouded the issue. People, and quite as often people of education as "the man in the street," talk about taxes springing from the land as if the rates rose from the farrows like the larks. Yet it only requires a little reflection to show that it is solely out of a human being's pocket that a tax can spring, and that all the tax-collectors can do is to say that the amount which shall come out of that pocket shall be measured according to the amount which the human being in question possesses of this or that material object. Windows or watches cannot grow taxes themselves any more than acres; but you can, of course, tax a man according to the number of windows he hires, or watches he owns, or acres he tills :—

"This throws us back on what is after all the fundamental principle that must be applied throughout : the principle, namely, that a// taxes fall on persons and not on things. By this time, this principle ought to be a commonplace, so often has it been insisted on in the present controversy; but as a matter of fact, it is constantly forgotten. The very reference to the Royal Commission is open to the criticism that it suggests that taxes fall not on persons but on things ; they were to report whether all kinds of real and personal property contribute equitably to taxation raised for local pur- poses. In this ease, the Commissioners themselves pointed out the importance of the principle of personal burden, but they did not always follow it to the logical conclusion; and in popular controversy, the point most discussed is still literally whether different classes of property are equitably taxed. The fallacy involved in this point of view may be illustrated by reference to a case that will call for repeated consideration in different forms. It is a grievance of the agricultural ratepayers that poor- rates, and similar rates, are levied on the net rental of the cultivated land, and they contend that land is as much the raw material of the farmer as wool or cotton is of the manufacturer. It is alleged that one form of property is taxed whilst other forms used in a similar way escape. Thus the farmers—the manu- facturers of food—seem to have a special grievance against the manufacturers of clothes and other things. In the same way, it is urged that the shopkeeper is not rated on his stock-in-trade, whilst the farmer is in effect so rated because his rent is payment, not merely for land at its prairie value, but as inextricably combined with various forms of capital. Suppose, however, that in fact the farmers, as a body, are able to transfer this part of their rates to the landlords, then this special grievance dis- appears, so far as they are concerned, and is transferred to the owners of land. The real difficulty is not that land is taxed, but who really pays the tax—landlord or occupier. The principle that taxes fall on persons and not on things is in effect the basis of the distinction between primary (or nominal) and ultimate (or real) incidence."

The fact that it is persons, not things, who pay taxes may seem at first sight of no very great importance. Yet a whole fabric of error has been built up on the contrary aesamp-

tion,—i.e., that it is the lands or houses that are taxed, and not men in respect of them. For example, the theory of hereditary burdens, which is responsible for so much wild talking and thinking, and therefore for so much injustice in our system of taxation, is derived directly from the non-under- standing of this principle. Professor Nicholson shows how even such able men as Sir Edward Hamilton and Sir George Murray in their Special Report attached to the Report of the Royal Commission on Rating fall into this very fallacy :—

apparently a fair evidence of income. But this exemption of other property (including, I suppose, land used for agriculture) is objected to principally because it would exempt from rating a very large amount of property all over the country which has for centuries contributed to local expenditure, and has passed from hand to hand, subject to that liability ; and though we feel that the present system is open to serious criticism, from an equitable point of view, yet it seems that the entire exemption from local taxation of any property at present brought into charge would be inadmissible.' This seems to be the hereditary burden theory in its simplest form. And yet the authors of this Memorandum have shown most clearly that it is not things but persons that are taxed. In the concrete, if you impose taxes on agricultural land, you tax the persons engaged in agriculture, and the tax comes out of their profits. If they did not work the land, it would give no tax."

Here we see that while the authors of the Special Report escaped the original fallacy, they floundered into the error which is the offspring of that fallacy.

We wish we could find space to quote Professor Nicholson's excellent handling of the hereditary-burden theory as a whole, but may note the perfectly admirable way in which he deals with the legal fiction that the land belongs to the State,—a fiction which, as he notes, though it may conceivably have a

meaning in law, has none in economics or politics. Another very remarkable chapter is that which deals with the incidence

of rates and taxes. The problems involved are some of the most difficult and obscure in economic science, but Professor Nicholson has treated them with a clearness and discretion that cannot be too highly commended. We may say, indeed, that we have never read anything more convincing on the subject. All we can do, however, is to call attention to the three pages of general conclusions with which Professor Nicholson winds up his book. After restating the fallacy

at the bottom of the hereditary-burden theory, he continues as follows :— "it is sometimes said that the relief of the poor is a first charge on land; it would be equally true to say that it is a first charge on all property. It was never intended that land should bear special differential charges for onerous purposes whilst other property escaped. Rates on houses and other forms of property that came to be rated were in their origin of the nature of local income taxes. During the last half century, there has been a continuous and progressive increase of local burdens for national charges. In particular, burdens on the agricultural interest have increased without any corresponding special benefit to agriculture. At the same time, especially of recent years, agriculture has become less able to bear taxation. The popular idea that there is in land-values a large unearned increment available is, as applied to agricultural land, the reverse of the truth. On the whole, the rental of land is kept up because a large part of it is expended on the land. A tax, even if it falls on rent, tends to depress agriculture. With regard to remedies, what is required is a complete reorganisation of the whole system of local finance; and in this reform agriculture should receive equitable treatment, having regard to actual conditions, and not to fictions, whether legal, historical, or economic."

Before we leave Professor Nicholson's little book, which we recommend to the attention, not only of politicians, but of all thinking men who wish to act justly and fairly in the matter of landed property, and who do not desire merely to imbibe and repeat conventional "clap-trap," we may point out that his work is by no means a piece of pure economic science, but is full of sound political sense. Especially good is the way in which he explains how the system of doles has led to local extravagance. In a passage of no little humour he shows how "most people seem to think that truth, like everything else, is subject to senile decay," and there- fore have taken to neglecting that "musty piece of practical wisdom" which teaches us "that the most effective way of

securing economy in the expenditure of money is to see that people spend what is really their own money." That may be an inconvenient as well as an old truth, but if we neglect it as we have been doing for the last twenty years we are certain to reap our reward in waste and muddle. The fad is, our whole system of local taxation must be remodelled, and re- modelled by men who have cleared their minds of cant in regard to the alleged privileged position of land. Land must be treated like every other form of wealth, no better and no worse. Until that essential piece of equity is done,

and we get rid of the special burden which we now impose on agriculture, we shall find our schemes for getting the people back to the land liable to be checkmated, and shall always be subject to a recrudescence of the demand for Protection,—a demand which, from the agriculturist's point of view, is often a blind cry for some set-off against the injustice of our present system of rural rating.