TOPICS OF THE DAY.
THE BUDGET. THOUGH it has some good points, Mr. Lloyd George's Budget is on the whole a bad Budget. In one sense, no doubt, it was bound to be that, because it is impossible to increase the expenditure of the nation by sixteen millione a year, and especially at a time of felling revenue and declining trade, without making a bad Budget. But it is bad in other ways. It has not met in a statesmanlike and comprehensive spirit the great financial crisis caused by the imposition of old-age pensions. In our opinion, what Mr. Lloyd George should have done, in the first place, was to reimpose the taxation so recklessly taken off last year. Next, be should have adopted the plan be has adopted of a high license system. Finally, he should have put half of the remaining burden upon existing Income- tax payers, and raised the other half by establish- ing a universal Income-tax at a very low rate upon all incomes, whether paid by the year or in weekly wages. This could have been done without imposing any intolerable burden upon the working man, or, indeed, any burden harder than he will in reality be called upon to bear as it is, and would have provided a firm bulwark and defence for Free-trade. The Chancellor of the Exchequer has preferred to raise the money required in a variety of complicated and irritating ways, which are likely to add very largely to the number of people who will be anxious to adopt the nostrums of the Tariff Reformers. Mr. Lloyd George's new taxes and additions, indeed, invite the Tariff Reformers to say to the taxpayer :— " Only put us in power and we will show you how to get rid of these tiresome and vexatious burdens by substi- tuting a system of indirect taxation which you will not only not feel, but which will actually increase the wealth of the country." No doubt people will be very foolish to believe such nonsense, but men who are offered relief from new and heavy burdens are particularly prone to accept unsound economic arguments. They are sure to think experiments of the kind suggested "at any rate worth trying.
Mr. Lloyd George's first practical example Of the art of " robbing hen-roosts" is to rob the Sinking Fund. The Sinking Fund is to be permanently reduced by three millions a year. Nor is this all, for the old Sinking Fund, by which any surplus of revenue over expenditure went to reduce the Debt, is now to be added to a fund, for agri- cultural development,—a, fund which,' as far as we can see, is only too likely, for the most part, to be wasted and frittered away in expensive and useless experiments. We have protested so often against the uuwisdom of reducing the Sinking Fund that we will only say here that in our opinion the present moment is a most dangerous time to deplete our war reserve, for that, in effect, is what a Sinking Fund provides. The first new tax enumerated by Mr. Lloyd George is one on motor-cars. He begins by a revision of the present licenses, which in future are to be calculated by horse- power rather than by weight. He also proposes to put a tax of 8d. per gallon upon petrol, with abatements for commercial vehicles such as cabs and omnibuses. Mr. Lloyd George's plea that motor-cars cause very great expense to the community by the way in which they wear the roads, that be who uses most petrol wears them most, and therefore ought to pay most, is no doubt a sound one if we adopt What we may call the turnpike view of road main- tenance. We must observe, however, that it is a view which hitherto has been regarded as obsolete. In any 'case, we do not desire to challenge his motor-car-taxation proposals, especially as a proportion of the money is to be spent on improving the roads,—a reform long advocated in the Spectator, The worst aspect of the new taxes is, however, that they tend to treat the motor-car rather as a rich man's luxury, and therefore a fair subject for special taxation, than as an invention which ought to be popularised and democratised in the interests of the poorer classes.
Mr. Lloyd George's next fiscal expedient is to increase the Income-tax. In future men with earned incomes up to 42,000 a year will pay 9d. in the pound, whereas the tax will be Is. upon earned incomes between £2,000 and £3,000 a year. All other incomes now liable to the is. rate Will 'pay at a 1s. 2d. rate. To this we have no objection, nor do we object to the proposal that men with incomes not exceeding £500 shall in addition to other abatements receive an abatement of £10 a year in respect of every child under sixteen. The man who is bringing up a family certainly deserves special consideration from the State. Next comes a, proposal to levy a super-tax at the rate of 6d. in the pound on all incomes exceeding £3,000 a year. The taxpayer, however, is only to pay at the higher rate on that part of his income which exceeds 43,000 a year. Therefore a man with £3,100 would only pay the super-tax on the £100, and so on. Mr. Lloyd George expects ultimately to get £2,300,000 a year out of the super-tax, but, owing to the difficulty of collection, only halfaa-inillion in the coining year. The proposals in regard to the Death-duties ,are far more controversial. We will not weary our readers with the exact details, but must be content with pointing out that there is to be an increase of the percentages in all the categories, including a doubling of the tax on settled property. These taxes are expected to bring in two and a half millions this year, and ultimately something like five millions. We expect they will meet with a good deal of serious objection, not so much from the general public as from those economic experts who will fear the reductions that may ensue in the nation's capital. The peath-duties have proved an excellent fiscal resource, but there is, we are sure, grave danger in pushing them too bard. We must be careful not to exhaust the well by over-pumping. In addition, Mr. Lloyd George is going to increase con- siderably the Stamp-duties on the transfer and sale of property. They are to be doubled. As to the wisdom of such increases we confess to being very sceptical. It is to the interest of the nation that all transactions for buying and selling should be simple and easy. Here we find the Chancellor of the Exchequer throwing an increased dose of the grit of taxation into the machinery of exchange.
With Mr. Lloyd George's plan for an increase in the licenses for the sale of liquors we are in sympathy. Roughly, it is that which has often been advocated in these columns and elsewhere. He is going to tax the big public-houses in the matter of licenses on the same scale on which the village inn is now taxed. Mr. Lloyd George intends to make a now valuation in the case of public-houses, but, as this will take time, be proposes till it is completed to levy a uniform rate upon the valuation on which the present duties are chargeable. Beerhouses will be taxed on the same principles, but the rate will be two-thirds of the amount payable for the full public-house license. Exceptions will be made in favour of bond-fide hotels. Further, the whole system of Excise liquor licenses will be revised. The scale of duties on liquor manufacturers will be graduated according to the kind of liquor made. Clubs will have to pay 3d. in the pound on all receipts from liquor, and the rates for grocers' licenses will be readjusted. These changes in the License-duties should raise the revenue by the handsome sum of £2,600,000.
Mr. Lloyd George's scheme for taxing what he calls the unearned increment of land must next be dealt with. He proposes to impose a tax of 20 per cent. on the future unearned increment of laud based on a valuation to be taken at once. This tax is, however, only to be collected when the land is sold or transferred at death. Further, there is to be a tax of a Ipd. in the pound on the capital value of undeveloped laud and " ungotten " minerals. Next, a id. in the pound is to be placed on mining royalties, while a 10 per cent. Reversion-duty is to be applied to the benefit accruing to a landowner at the termination of a lease. The Chancellor of the Exchequer believes that the yield of the new Land-taxes will be some £400,000 to begin with, but will greatly increase in later years. Finally, Mr. Lloyd George proposes to increase the Customs and Excise on all spirits by 3s. 9d. per gallon. This will give him an extra £1,600,000 in the current year. In the case of. tobacco, there is to be an additional charge of 8d. a pound on unmanufactured tobacco, with an equivalent addition on cigars, cigarettes, and manufactured tobacco. This, it is hoped, will bring in nearly two millions a year.
It will be seen from this necessarily rough and imperfect sketch of Mr. Lloyd George's complicated Budget that he has been pretty catholic in his inroads. Almost every interest will be made to pay bomething additional, We have already expressed our general view of the Budget, but we must say here that, in our opinion, by far the worst proposals are those connected with the taxation of land values. Such taxes on a special kind of property necessarily violate the true principle of taxation. That principle is that a man should be taxed in proportion to his wealth and in accordance with his ability to pay. The man with £10,000 a year should pay ten times as much as the man with £1,000 a year. If, however, a particular kind of property is singled out and specially taxed, unfairness must be the result, unless we are to assume that the posses- sion of that particular kind of property offers a trustworthy indication and measure of a man's wealth. But it is notorious that this is not so in the case under discussion. Men who are comparatively poor often possess pieces of valuable undeveloped building land. On what principle of justice are they to be made to pay more than a rich man who does not happen to possess "undeveloped land " ? Our point will easily be seen by taking a concrete example. Lord A possesses £30,000 a year, chiefly derived from railway stocks and 'various home and foreign investments. Mr. B is a retired tradesman with an income all told of £800 a year. But part of his fortune has been invested by him in land in the immediate vicinity of a big town. After Mr. Lloyd George's Bill has passed he will have to pay a special and heavy tax to the State beyond what is paid by Lord A just because his money happens to be invested in a particular form of property. It is no consolation to him to tell him that he will be able to pay the tax because the wail° of his land has risen since he bought it. In all probability the value of a great many of Lord A's stocks has also risen, and in any case Lord A would be much better able to bear the additional burden. The truth is that this form of taxation is grossly unjust, because it is based upon the utterly fallacious view that the possession of a particular kind of property is a proof of wealth. If the object of taxation is to make men pay in proportion to their ability to pay, as it certainly should be, taxation must be based, not upon what we can only describe as a special prejudice against a particular form of property, but upon men's total wealth. That is why the Income-tax is, in truth, the fairest of all taxes. What we have said in regard to the tax on undeveloped land is equally true of the taxation of mining royalties and the reversion of leases. There is no sort of reason why these particular forms of property should be singled out for a special attack by the State.
• The Budget, as Mr. Austen Chamberlain pointed out, besides being a Budget, is a vague programme of social reform, which includes such difficult subjects as the extension of old-age pensions and insurance against unem- ployment. These matters cannot be dealt with here, but must be held over for future discussion. They cannot be profitably discussed at the fag end of a fiscal article.
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