TOPICS OF THE DAY.
THE RATES.
WE cannot express any great satisfaction with the debate in regard to the rates which was raised by Mr. Hayes Fisher's amendment to the Address on Tuesday evening. There was no real attempt to grapple with the essentials of the question, and the discussion tended to degenerate into a scuffle between urban and rural rate- payers, or, again, between the supposed interests of the rich and the poor. What is wanted is a reform in our system of local taxation which will go down to the roots and base that taxation not on haphazard, but upon an equitable system. The present plan is not merely inequit- able; it is injurious in a high degree. If one did not know that it was rather the child of accident than of purpose, one might imagine that it had been actually designed to hamstring the greatest of industries, the industry of agriculture. No wonder then that our local taxation causes a profound sense of dissatisfaction and injustice in every quarter of the land. Of one thing we are assured. The political party which first takes up the question will achieve what all political parties naturally try to achieve. It will win the support and gratitude of the majority of the voters. As Unionists we naturally desire that the party which should take up the question of the rates and settle it shall be the Unionist Party. They have here and ready to their hands a tremendous oppor- tunity. If they are wise they will take it. They desire a constructive policy rather than a merely negative one, and here is a constructive policy on the biggest scale waiting for them. It also is a constructive policy which is especially appropriate to a Unionist and Conservative and Anti-Socialist Party, for it is based on justice and commonsense, and offers no tempta- tion to the Unionists to commit that supreme folly —the borrowing of their opponents' weapons, which can only make them appear clumsy and ridiculous. The country will never take Socialism, diluted or undiluted, from the Unionist Party. When it is in a Socialist mood it will go to " the old firm " and prefer the article they supply and not a colourable imitation. To reform our rating system, however, though it would be the greatest of popular boons, is not Socialism, but a policy founded upon what must be the basis of all anti-Socialist legislation, the policy of free exchange.
We will try to make good what we mean by sketch- ing shortly the practical steps which we hold the Unionist Party would be wise to take. Before we set forth our scheme, however, we may make a few preliminary observations on the principles of taxation. The Chancellor of the Exchequer in Tuesday's debate declared that the ratepayer could only be relieved by increasing another person's burden. That is an abstract proposition which we are delighted to hear coming from the Chancellor of the Exchequer, for he has so often acted on the contrary principle, namely, that taxation is a natural good which descends from heaven and is twice blessed, which blesses those who receive the taxes and those who pay them. Or again, he has always tended to treat taxes as if they were a kind of crop which springs out of the ground when struck by the wand of the harlequin Chancellor of the Exchequer. But though the Chancellor of the Exchequer is quite right in saying that you cannot take taxes off one person without putting them upon another, he is forgetting that you can make taxes very much fairer by taxing people in proportion to their real wealth instead of taxing them in proportion to their possession of a particular kind of property. Here, indeed, is the touchstone of all taxation, and here is our quarrel with the Chancellor of the Exchequer. He, for example, assumes that people are necessarily rich because they own that particular form of property which is called wayleaves or mining royalties, or because they hold suburban land. Our system of rating is unfortunately largely based upon this ridiculous principle, especially as regards agricultural land. Now what we want the Unionist Party to do is to adopt and follow honestly to its logical conclusion the principle that in the matter of local taxation people must pay because they are rich and therefore able to pay, and not because they own or occupy a particular form of property or are engaged in a particular industry. If they will adopt the principle we advocate, the principle that if " A " is ten times as rich as "B " he ought to contribute ten times as much to local taxation as " B," they will find they have got the master-key of the situation in their hands. They will have the power to put down such iniquities as those under which the Highland counties groan. In Inverness and Sutherlandshire the rates on the occupiers of land may amount to something like a twenty- five per cent. income tax.
Let us once more give an example of the folly and injustice of rural rating—an example which we have often set forth in these columns in various forms.
" A " is a yeoman farmer owning his own farm of two hundred acres, the rateable value of which is assessed at £1 an acre. His house is assessed at £40 a year and his farm buildings at £60. " B," on the other hand, is a. private individual with an income of £4,000 a year, who lives in a superior villa or country house and grounds rated at £100 a year. One may safely assume that the man farming his own two hundred acres has not a net income of more than £330 a year, if that. Therefore the villa man " B " has twelve times the yeoman's income. Now let us see how under our present system of rates the rate col- lector treats these two men. When he calls upon the man of £4,000 a year, living in the house and grounds rated at £100 a year, be tells him that the rates, county and district, amount to 5s. in the £, and that he must there- fore pay £25 in rates in all. After they are collected he is finished with the £4,000 a year man. He goes next to the yeoman and asks him, on his house and farm build- ings which are rated in all at £100 a year, for £25. But, unfortunately for the yeoman farmer, the rate-collector does not stop there. He proceeds to say that the yeoman must pay also on his agricultural land, that is, on £200 a year. Here, however, only a half rate has to be paid, i.e., a rate of 2s. 6d. in the pound. But 2s. 6d. on £200 is £25. The yeoman's cheque, therefore, in all will be £50, while the villa man's total rate is £25. And yet, as we know, the net income of the farmer is £330 a year, or one-twelfth of that of the villa man ! Instead, that is, of the villa man paying twelve times as much to local taxation as the yeoman because his income is twelve times as large, the villa man pays only half as much towards local taxation as the yeoman with one-twelfth of his capacity to pay. Yet people will tell you that, roughly speaking, under our system everybody contributes according to his ability. If such a system were newly imposed in a community it would cause an insurrection owing to its inequity. It is only because we are accustomed to it, and because before the Imperial Government paid half the rates on agricul- tural land it was infinitely worse, that we endure it. Here we may note that the old suggestion that the yeoman ought to pay more because he makes more use of the things provided out of the rates will not hold water for a moment. The £4,000 a year man with his carriages and his motor car uses rate-provided facilities not merely as much as but probably more than the yeoman, while, as his stake in the country is bigger, he certainly must be held to get more out of the charges for police, sanitation, poor law, and education. The " services " theory is a mere piece of special pleading, one of those ingenious attempts which men will always make to account for an injustice in being.
We have now got to the point when we shall be told that it is not enough to prove an injustice in taxation. The essential question is how to get rid of it. The plan we have to propose is, we admit, not absolutely perfect, but it is an immense improvement, and it would at any rate lay a foundation upon which a system very nearly approaching complete justice could be built. We would." begin by abolishing in toto the rates, both in town and country, upon land and business premises. Such rates are, in our opinion, injurious taxes upon industry rather than upon ability to pay. The tax upon agriculture is infinitely the worst of them, but the taxes upon urban businesses, though more easily borne, are per se unjust and injurious. They can be nothing else unless you assume that because a business requires a large amount of ground and a great number of buildings it must necessarily be a lucrative business. The rates then would become—instead of what they are so often now, a burdensome tax on industry—nothing but a local inhabited-house duty. But a local inhabited-house duty is a rough form of income tax, because, at any rate in the case of houses assessed at £150 to £200 a year, men may be said to pay rent in proportion to their income. But, it will be said, what is the use of doing this ? If the rates are taken off land and business premises they will have to be very nearly doubled upon houses, and that would be an intolerable burden. We agree. But we do not propose that the amount taken off land and premises should be placed upon the rates in the form of an increased local inhabited- house duty. We propose that the amounts taken off agricultural and other industries shall in the first place be paid to the local authority by the Imperial Exchequer, except in the case of the rates on railways, which, in our opinion, should be commuted in the form of a fixed local railway tax. The railways would groan, no doubt, but at any rate they would have this advantage : the tax would become fixed at the existing sum and would not be liable to those increases which now seem so menacing to the industry. But how is the rest of the money to be raised ? We would raise it by what is after all the most equitable form of taxation in the world, that is, by an increase of the income tax. The imposition of a universal income tax would of course be the fairest method, but at the moment that is not possible, though we may come..to it in the end. Again, a very good plan is the French plan of adding a centime or several centimes to a national tax for local purposes.
If, as we trust will some day be the case, every- body is obliged to declare his total income, there would be no difficulty, when the Government collected the Imperial income tax, in adding a penny for a local income tax and handing it over to the local authority for the district where the individual was domiciled. And here we may remark that, what with supertax, deductions for small incomes, and professional incomes, we have almost reached the point where everybody has to make a declaration of his total income. It would involve no very great extra harrying of the income-tax payer to oblige every man, however small his income, to make the declara- tion that the supertax income-tax payers have to make. That, however, is a question for the future. Till such declarations have become universal we suggest that a new and special form of income tax might be raised from which there should be no exemptions. We would deduct a penny in the pound as a dividend tax off every dividend paid in the United Kingdom, no matter what the income of the recipient, and we would put an equivalent income tax on all professional and business incomes, again without deduction. If this penny income tax on dividends was not enough, then such a sum as was necessary to make up the amount must be levied.
Let us say at once that we are not such fools as to think that such a system of taxation is going to enrich anybody or can be classed as a panacea. All taxes, of course, are evil things per se, and deprive men of the enjoyment of the fruits of their toil or of their property. But unfortunately taxes must be raised, and on behalf of the system we sug- gest, we say without fear of contradiction that it is infinitely more equitable than the present system, and that it is based on the principle that the amount of taxes which a man pays should be measured by his wealth—his ability to pay—and not by his possession of a particular form of property. We commend our scheme for the total abolition of rates of all kinds and the substitution of a local inhabited-house duty, plus temporary Government subven- tions to make good the loss, to the Unionist leaders. We admit, of course, that there are many and great objec- tions to Government subventions. When, therefore, such a proposal as ours had been carried out and things had settled down, we should supplement it by a scheme for taking the national services, such as education and the main roads, off the rates and making them what they ought to be, national charges. Till this could be done there would have to be subventions which, though bad in themselves, would be infinitely less bad than the present iniquities. Will not the Unionist leaders consider our proposal? If they do we recommend to them the motto which Danton stole from Bacon: "Boldness, Boldness, and again Boldness."
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