THE RIGHT BASIS OF TAXATION.
MR. DILLON'S proposed clause providing for the reduction of the Tobacco-duty in Great Britain and Ireland was brought forward primarily for the pur- pose of securing a debate on the alleged inequalities of English and Irish taxation. But incidentally it opened up the general question of indirect and direct taxation in connection with the theory as to the relative burdens to be borne by rich and poor. We say "rich and poor," for the phrase is so generally used that one slips into it quite naturally, but social reformers are apt to forget that the terms are relative, and that there is a large class in this as in most civilised countries which cannot be included in either category. It is precisely on this class of middle folk on whom fiscal burdens in England are apt to fall with undue weight. At least, if we are to critici. existing fiscal arrangements, this is the class whose interests might well be considered. We do not, however, propose to criticise our fiscal system from the middle-class point of view, for, on the whole, we think British taxation is almost as near to a rough justice as any in the world. We intend, rather, to consider the general question of taxation in its relation to social wellbeing.
In the days of the Unauthorised Programme of twelve years ago, we were told that " equality of sacrifice " was the ideal to be aimed at. This sounds well, but it is difficult, when one comes to examine it, to say exactly what equality of sacrifice means. That is to say, it is difficult to get at any quantitative translation of the term, and it is obviously such a translation which is called for. You cannot, in reference to taxation, dwell on moral generalities, you must come down to arithmetic, and when you do so, the fine phrase seems somewhat to elude your grasp. If we are to have equality of sacrifice, then from two men of identical income the same sum should, it would appear, be taken. But to one of these the sacrifice involved might be far greater than to the other. You could not divide men into taxable classes on the bare principle of total income, for the manner in which that income was earned, and the way in which it had to be spent, must be considered if " equality of sacrifice," in a genuine quantitative sense of the word, is to be strictly carried out. Here is, on the one hand, a hard-worked business or professional man, toiling for longer hours and more intensely than many of the working men properly so-called; here, on the other hand, is a lucky speculator who has invested his earnings in such a way as to cause him no anxiety whatever. Obviously the mere taking of the same increment from either man, because both have the same income, is not any real enforcement of "equality of sacrifice." Evidently there can only be a rough approximation at best to such an equality, and that is all the present system aspires to. But it does, in a very high degree, secure that, and there- fore it is that the fiscal reforms of Peel, Huskisson, Gladstone, and Cobden have brought about a condition of rough justice which is as far superior to the systems of Germany, France, and Italy, as these are superior to Oriental ways, where arbitrary seizure is the recognised method.
But the doctrine of " equality of sacrifice " is supposed to be favourable to a bleeding, of the rich classes in order to carry on the rapidly extending functions of the modern State. It seems easy to take the rich man with his £50,000 a year, and to say to him, ' Your income is some two hundred and fifty times that of your average poor or lower middle-class neighbours all round you, therefore the sacred principle of equality of sacrifice compels us to take from you for public purposes two hundred and fifty times as much as these neighbours of you pay.' This seems easy, though of course we all know i4 would be fought with such tenacity by the owners of realised wealth that no such proposal could be carried in any ordinary times. It seems all right from the moral point of view to those who speak of equality of sacrifice as an actual quantitative fact. But the morality of the State, it cannot be too often said, is not and never will be identical with the private morality of the individual. The State does things which the individual may not do, and it refrains from doing things which are incumbent on the individual. If we were all living on an island on whOse-shores we had been cast by a tempest, " share and share alike " would be, doubtless, the principle of action which would be approved by us all. But we are not living under such conditions. We are the heirs of a vast' and -complex civilisation which we are bound to transmit, not only un- impaired, but improved, to our posterity. The State is the agent through which this is done, and the State has to see (or its leading representatives have to see) that the general organic life is preserved in full vitality. That is the chief end for which the State exists ; and while the State is by no means the one great end of life, the leviathan which is to swallow up our petty individualities, yet within certain defined limits it is all-powerful. Taxa- tion is the first means which the State uses to preserve and perpetuate its life, to give it the material basis on which to carry on its multifarious operations.
Now the power and beneficence of those operations are largely in proportion to the rich and varied life of the citizens. Therefore, to secure that rich and varied life must be one of the first aims of the State. One means by which in all ages such a life has been secured is to leave men as free as is consistent with social union, to exert themselves in carrying on the world's work. Some men in so doing care little about material reward. Like Agassiz, they " have no time to make money." But these are exceptions, and the State cannot safely assume that this spirit will be general. Most men are so constituted that a material reward is a powerful stimulus to that exertion on which the progress of the race depends. The State must not only recognise the fact, it must not, it can- not penalise the wealth-seeker as such by telling him that, just as soon as he has attained his aim, the collective body will step in and confiscate half or three-fourths of his earnings. He would decline to exert himself for so bare and stern a prospect. This may not be altruistic, it may not be heroic, it may not be the attitude of a growing number in the future, but it is the attitude of the average man now, and especially at a time of adventure and pioneer work in new or distant regions of the globe as at present. Doubtless many of these pioneers are not among the most desirable of mankind, but the question is : Are they useful in any way to the general progress ? Can we do without the American railway magnate, the great con- tractor, the proprietor of huge " stores," the adventurous banker, the concessionnaire, the Australian gold-hunter ? If we can, well and good ; there is no question that society has the power to render his occupation extremely difficult and precarious, if not to abolish him altogether. But society does not, and is not likely to, exert this power, because society knows that it would suffer in the operation. Therefore it is that, in the rich and varied and differentiated life of the modern world, the modern rich man who runs, and is willing to run, great risks, the man of nerve and social efficiency, is allowed to reap unmolested a rich reward for doing what the majority of mankind are not able to do. The State may, as in our country, deter- mine that it is wise and right, on his death, to take from him for public purposes a portion of his accumulations, because the prospect of this is not at all likely to hinder him in the general work he is at. But if the idea of " equality of sacrifice " were carried out in its entirety, and with any approach to literalness, this kind of man would not organise our supply of food, or our railway systems, or our oceanic transit. He does a great and difficult work, and, in the existing condition of mental and moral development among men, he expects an unusual material reward.
Taxation will, on rational lines, be undoubtedly arranged so as to extract more from such a man than from the recipient of daily wages: But the statesman will consider the close relation existing between the two, and will see that if the first is to be penalised for being rich, the second will probably suffer also. Therefore the principle to be adopted will be, so far as possible, to secure the second man in continued employment by enabling capital to pay from the sum allotted to wages the highest amount possible. This will enable the wage-earner to share in those fundamental or reasonable luxuries in which all should indulge. As regards the first, a rational fiscal system will take what can be secured in a fair proportion, stopping short of the penalising of adventure due to an instinct lying deep in mankind. La carriers ouverte aux talents by all means. Let everybody have the freest opportunity to enter on the highest career, and let education be directed towards the higher selection of individuals from the mass. But when the selection has, been made, the State can scarcely assume to itself the task of imposing a new and artificial barrier against the energies thus fostered. But precisely this is what some crude theories of " equality of sacrifice " propose to do. Reasonable luxuries and free incentive to all, and as reasonable and free enjoyment of the rewards of unusual endeavour,—this is the right basis of taxation.
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