COMMUTATION OF TAXES.

THE DIFFICULTY OF IMPOSING NEW TAXES.

To discover new taxes, which shall be theoretically proper, is not very difficult. The difficulty lies in their practical imposition. For instance, there is abstractedly-no just reason why Steam-boats should be exempt from taxation, any more than Stage-coaches—which, besides being affected in common with the others by the taxes on iron and timber, are subjected to a peculiar pressure by the Custom-duties on corn and leather. The power of steam, in fact, seems better capable of bearing a burden than almost any other branch of trade. We need only, how- ever, call to mind the outcry that was raised on Lord ALTIIORP'S pro- posal for taxing Steam-boats, to be made sensible of the difference between theory and practice when raising the Supplies is the matter- in question. It may be suggested—tax Luxuries : but this in practice is not so easily done. There is a difficulty in defining what are really luxuries. One man may place carpets in the category ; another, superfine cloth ; another, certain articles of furniture, or furniture made of certain woods. If the definition were satisfactorily settled, the mode of levy would be vexatious and expensive. If the manufacture itself were subjected to a duty, it would extend that most mischievous class of taxes the Ex- cise, which it is the object of every one to abolish. If the use of the articles were directly taxed, it would be more inquisitorial than any im- post to which the country was ever subjected. The effects of such taxes would, moreover, be very mischievous, by the check they would give to trade and to the employment of labour. Unless multiplied ad infinitum, they would yield but little; as we may see by the duties on Servants, &c.

Let us go a step further. Music and Prints are in some sense a luxury; yet would it be worth while to subject all musical and engraved publications to a stamp, for the trifling amount they would produce— to say nothing of the effect upon industry? Musical instruments are ministrants of pleasure : statues, paintings, sculptures, 8,:c.

" Genimas, inarmor, elmr. Tyrrliena sigilla. tabellas, Argentina, tusks Greta° murice tincias,"

fall clearly under the head of luxuries ; yet to tax them, would be a tax upon civilization, refinement, and art. If it were intended rigidly to collect such a tax, a personal examination of every house must take place. If the duty were light, it would yield little' if it were very heavy, it would yield little also, for the fashion of furnishing with or collecting such articles would be exploded. Unless an ad valorem tax, it would be one of the grossest inequality; and what fiscal officer could put a value on the articles, or what people would submit to the inquisition, vexation, and trouble ? After all, it is doubtful whether luxury, dependent altogether upon fashion, be not of too fickle and volatile a nature to be taxed. A duty upon necessary commodities, upon transactions connected with the actual business of life, and direct imposts, cannot well be evaded ; but in the case under consideration, the fashion of the thing would be apt to change with the tax, and the touch of the Chancellor of the Exchequer be the stamp of vulgarity. Nor—except in war, when overwhelming necessity enforces it—can even the properest tax be imposed unless it readily chimes in with the popular feeling. If we look for all the qualities essential in a new tax, —a large revenue, a tolerably simple mode of levy, cheapness in the collection, a non-interference with industry, and a disposition in the people to submit to it,—there is but one impost (in addition to the ex- tension of the Probate and Legacy duties to Real Property) which suggests itself; and that is

A PROPERTY-TAX.

For the reasons already offered, this is one of the fairest of taxes. Its policy is unquestionable. Every improvement in production, every remission of a duty on consumption, by lowering the money value of commodities, has a tendency to add to the weight of all fixed money charges, such as the Debt. And putting every other point out of view, it is both fair and politic that the public creditor should not have the real value of his income increased by the State without being obliged proportionately to contribute to the public burdens from which..that in- come is derived. With respect to a graduated Property-tax, it remains only to consider the practical difficulties connected with its working. These are not obvious at first sight, nor was it till after long considera- tion that we fully perceived them. So far from being insuperable, a machinery already exists at the Tax-Office to conquer them. The question is, whether the public are willing to cooperate with the Executive, and to submit to the trouble the levy would entail. We must bespeak the patience of the reader whilst we endeavour to put him in full possession of the case—to describe the mode of working the graduation, and to explain in what the inconvenience Would consist.

If a Property-tax were imposed which should fall equally upon all incomes, whatever might be their amount, its collection would be very simple, and neither vexatious nor inquisitorial. Assuming that 5 per cent. were the rate of duty imposed, the Bank of England would de- duct that proportion from all the Dividends. Every tenant, after making a return of his rent, would pay Is. in the pound to the present collectors of the Land and Assessed Taxes, and tender their receipt to his landlord as so much cash. Five per cent. would be deducted by the respective offices from the dividends on shares in canag, docks, rail- roads, and other investments. Where a man occupied his own house j

or land, it would be valued. In cases of joint tenancies, mortgages, or other incumbrances, the respective proportions of the tax would be settled by the party who paid the individuals their respective profits; so that the State would only deal with one party, and that the party in possession. If a Property-tax were imposed, graduated not in propor- tion to a man's whole income, but to the income derived from any single fund, a little more trouble might be given in the levy, but no practical difficulty would be created. Art individual with 100/. a year in the Funds, paying 2 per cent. would have 21. deducted from his an- nual dividend ; another, with 1,0001. a year, and subjected to 5 per cent. would have 501. per annum stopped. The tenant of a house or farm of .50/. a year, would, at 2 per cent., pay 1/. annually to the King and 49/. to the landlord; a tenant of 100/., 2001., or SOU a year, would de- duct 21., 51, 91., or any other sums, according to the graduation. Joint- stock companies would proceed in a similar manner. This plan, how- ever, would be grossly unequal. A man with 2001. a year (which might be his all), derived from an investment in the Funds, would be sub- jected to a heavier graduation than a man with 5001. or 1,000/., or even several thousands a year, derived from a variety of sources, each of which in itself fell below the line which determined the rate of the first-instanced annuitant. The impolicy of such a tax, though not quite so palpable, is as clear as its injustice. In its practical operation, it would prevent men from investing their property in any one fund; it would induce landlords to subdivide their lettings as much as possible, and set people upon practising various devices to evade the tax. Such a mode of graduation would also materially diminish the produce of the tax. To render this effect clearer, we subjoin a few examples of what the higher incomes would pay, under a graduation according to the whole income, and according to a graduation upon the receipt from any particular fund. The rates must be understood as illustrative, not suggestive.

15.000 740 3,000 at 0r0eent.

2,000

these two classes. We come to what is popularly

A GRADUATED PROPERTY-TAX ; •

That is, a gradation according to a man's income derived from invested or realized capital. As the whole difficulty resolves itself into ascer- taining what this income really is, and working the machinery by which the knowledge is acquired and tested, we shall first describe the man- ner of working, and secondly offer some observations upon the pros and cons of the question. The leading machinery both to acquire and test the facts, already exists. The present Collectors of the Assessed Taxes would leave a return at every house. This would be filled up by each resident ; who would state the amount of his income derived from property, specify- ing, in such a manner as to render their identity easy, the sources from which it was produced. To check this, every tenant would fill up a return, containing the name and address of his landlord, and the amount of the rent actually paid. Joint-stock companies would make out a list of their shareholders, and of the dividend to which each was en- titled ; the Bank of England would do the same by the Fundholders. All these returns would be forwarded to the Tax-Office, and there ar- ranged. This arrangement would not be accomplished "by a wet finger." It would involve much clerkly labour, and some expense. The task would not, however, be so Herculean as it might seem.to

u

many who areunacquainted with the results which are accomplished by an extensive division of labour. The real difficulties arise from time working the collection, from the tendency of the tax to' check the trans- fer of property, and the vexation that every transfer would-create to the buyer, the seller, and the Government. The importance of the subject

will excuse our evolving these points at some little length. •

There are two modes of collecting the tax,—one direct, the other se- condary. In the first case, a book, which would be a counterpart of the verified returns, would be sent to each Collector, who would de- mand the payment of his assessment directly from every individual. This is much the simplest mode : the only objection is, the probable in- . convenience and the certain indignation that the payment at once of i.: Annual Amount of Income.

100,000 50,000

30,000 20,800

Enough of meant by

Produce of the Produce

whole Income, If derived from separate funds, neither of niSeit

taxed nt exceeded, per annum,

151. per cent. 2,0001. of 6 per ct. IMO/. at S per at. 2001.nt 2 per et.

£ £ £ £

6,000 5,000 2,000 3,000 2,500

1,000

0 1,800 1, 600 1,200 1,000 0 200

Urge amounts would 'cause. Were the secondary method adopted, the returns from the tenants, the Bank of England, &c. would be made the basis ;_ and the amounts to be respectively deducted would be calcu- lated from the whole income of the individual. This would be the least grating and most convenient mode of collection, for the party ac- tually paying the tax would scarcely seem to pay it. It would, how- ever, be troublesome. A tenant would scarcely like to pay a high per- centage without applying to his landlord ; en error at any stage of the accounts would involve considerable trouble to every party; where pro- perty was encumbered, or held by two or more persons, several distinct rates 'of graduation would have to be applied to one payment, however small. It would also have a tendency. to expose the incumbrances to which property was subjected (though it is by no means clear that this would be a real evil). In short, it appears that the trouble attending its secondary levy would be so great, that if a graduated Property-tax be imposed, it would be better to collect it in the direct way—that is,

in a lump from each individual possessor of the income. •

Yet even this method would not be unattended with trouble. Pro- perty, more especially property in the Funds, is constantly changing hands. Every mutation, whether by sale or death, would involve a change in the gradation of the respective individuals' scale. If the al- teration took place between the yearly Or half-yearly period of making the returns, the purchase or bequest would involve double notices to the Tax- Office, double changes in its books, and changes in the books of two or more different Collectors,—all which, though seemingly nothings in description, would be found vexatious hi-practice, especially coming newly upon the public. This change, indeed, is an additional reason why the tax should be levied directly ; for many would be unwilling to have the amount of their property known to their tenants, and tenants would be somewhat puzzled by the changes in the amounts they would have to pay when a change took place in their landlord. All these working difficulties combined, would have a tendency to check the transfer of property, and so far to diminish its value beyond the amount of the tax.

In making these observations, we wish not to be understood as deny- ing the practicability of the tax. Its difficulties are not insuperable ; they are merely troublesome and vexatious. The payment of large amounts took place in the case of the Income-tax, when the income was derived from profit and exertions. The most troublesome part of the working arises from the tranfer of property. But this is in itself an event in a man's life ; it is always attended with a troublesome kind of routine ; it requires professional assistance, and the Government notice would soon he got through as easily as the forms attending a sale by auction. The trouble of the officials would be greater, but " they are paid for it." After all, the practical difficulties only apply to a graduated tax. A uniform percentage might be levied without any difficulty, and perhaps without hardship. The remission of certain taxes on consumption, and a general modification of our fiscal system, would relieve the lower incomes by more than the amount of the tax if it were only 4 or 5 per cent. And even this rate upon the higher class of incomes would not be inconsiderable. If a very low amount of income were deemed fit to be subjected to a lower rate of duty, or exempted altogether, fix a minimum, and give a right of appeal.

It is held by many, that the higher class of incomes derived from profits, and from professional exertions, should also be taxed. An in- dividual with 2,0001. of invested property is to be charged with a duty;

a merchant worth a plumb escapes. What, it may be said, is more un- just? We can only answer one query by another. Will the public

bear the revival of the old Income-tax with all its inquisitorial vexa- tion ?—for though it be confined to the higher incomes, we can never tell a man's income till we investigate his affirirs. An income-tax is, moreover, practically unequal. Unsuccessful speculations or bad debts may render the gains of a merchant in reality nothing during a year; yet he must pay a tax out of his capital, proportioned to his style of living, or submit to have his affairs exposed. It would also have a ten- dency to drive productive capital from the country; and in this sense, there is some force in the assertion that an income-tax is a war-tax, for during a war capital cannot advantageously be removed. There is something too to be said on the score of justice. A landlord, an an- nuitant, may escape indirect taxes by residing abroad. A merchant, a

Total Great Britain £90,317,000' IrtsLaten.

The data for forming a judgment upon the animal value of Property in Ire- land is much less complete than for that of England. The amount of the rentals, including glebes, have been estimated by Mr. MARSHALL. at 14,000,0001. He also lixed the Tithes. &c. at 9,000,0001. The statements of Lord Aurnotte seem to overthrow this latter calculation; but it must be remembered, that within this year or two, the collections for clerical purposes have fallen short; and it is trot to he supposed that the Clergy would pitch upon the highest year in making their returns. lf, however, we take the whole income derived from Irish Property of every kind at

15,000,0001. it will not certainly be deemed too cinch 15,000,000- £105,317,00 0

manufacturer, a lawyer, a physician, is compelled to reside at home and pay them. If these classes accumulate and invest their savings, they become PROFERTY, and are subject to the tax. If they spend, they stimulate consumption and production, and either directly or indirectly employ labour, and add to the general wealth of the community. A point suggests itself as to incomes derived from Government. Whenever these are, or are held to be, not susceptible of -reduction, they should be subject to the tax. When a salary for actual service appears proper to be assessed to the duty, it is a shrewd sign of its, being too high, and forms one of the strongest of all arguments for a reduction in its amount.

A general argument against every Property tax has been put for- ward—its tendency to check accumulation. This view is somewhat transcendental. The effect of a Property-tax is to diminish the value- of all existing property by the amount of the percentage. The 1001- a year of to-day would be worth only 951. to-morrow. In the Funds,. and in loans to individuals, the new accumulations of one man set free- the old investments of another. Improvements of property or new speculations are not likely to be stopped by the action of the tax. If 1001. were invested in a project which succeeded and paid 4 per cent., the duty at 5 per cent. would be only four shillings; the investment (of 1,000/. would subject the successful speculator to a tax of 21. per an- num, and no more.

There remains another point—the probable produce of the tax. If rents, public dividends, the shareholders of joint-stock companies, and certain ecclesiastical and official incomes, were subject to the impost, the gross amount of income would be about 105,000,000/. At a uni- form rate of 5 per cent. or at a scale of from 2 to 10 or 12 per cent.— which would average full 5 per cent.—the produce would be, in round numbers, five millions, after allowances for exemptions. The data upon which these calculations are founded will be seen in the following

TABLE OF THE INCOME ARISING FROM PROPERTY.

GREAT BRIT1ihe.

The total annual value of the Real Property, as assessed in April 1815, to the Property-tax. was 5-if millions. Since that time, rents have fallen; but the number of houses, canals, docks. Re. has very considerably in- creased. Railroads have sprung into existence. If we set the value of the new property against the depreciation of the old, the rentals, Re. of Great Britain would not be far short of GO millions. There is another test—the Poor-rates. The average itoudelage varies in different years. The last authentic accounts we have seen fixed it at :is. 6d. Since that time, the rates have increased. On the other hand. the actual rent is never or vel v rarely taken as the basis of assessment. It is frequently not more than two thirds. The amount levied for the use of the Poor in England and Wales, in the year ending 5th March 1831. was 8,279,217/. I If we take this at 4s. in the pound, it would give an assessed rental of 41,393,085t.; adding one fifth for the rackrent, the total amount would lie upwards of 50 millions, being within three quarters of a mil- lion of the amount assessed in 1815. We shall not therefore be accused of exaggeration if we set down the annual value of the Real Property of

Great Britain at Dividends from the Public Funds, exclusive of Russian Dutch Loan The incomes of Annuitants, Dividends of Insurance Offices, Re. have been

formerly rated in the Spectator as high as 6,000,11001. This was perhaps too high; and as a great proportion of the amount is indirectly de- rived front routs or the Funds, let us set it down at A salary Ihr actual service should be reduced, nut taxed. Pensions and other Deadweight charges, possessing the certainty of real property, should clearly be subject to the duty. The Nowellicient public expendi- ture amounts to nearly six millions and a half; of which perhaps two millions and a half consist of Mantles too small to admit of reduction. This item gives us therefore £4,000,000 Church and Legal Incomes from fees and other miscellaneous

sources 1,000,000

5.000,000

55,000,000 28,067,000

°,9-50,000