represses.

possession of these resources, and the more really helpless is he by himself against that violence which an efficient Government If the life and liberty of all are equally guaranteed by the administration of law and the preservation of order, the property which each person possesses is secured in proportion to its amount, and therefore it is reasonable that property should supply the funds for defence proportionately to its amount, or, as I have said above, proportionately to the resources of its possessor. The word " resources is used advisedly.

taneous incomes, still more between industrial incomes, the necessary outgoings of which are considerable, and those, the necessary outgoings of which are unimportant; between, for instance, the charges to which persons are put whose marriage has been followed by a family, and those incurred by persons who are childless. Nothing but the most preposterous alarms about excessive population would induce any one to characterise the latter state as fortunate, or a matter for public congratulation. A man who brings up a family honourably in the practice of virtue, and in habits of industry and thrift, It is impossible to tax what cannot be saved, without destroy-is, say what one will, a more valuable person than one who ing the source of that from which all wealth arises-labour. has, either by choice or chance, no one in the world to call his They who earn must be maintained in their work; they must own. be supplied with the proper tools, implements, appliances, which are necessary towards carrying on their calling. In order to work, a man must eat, be housed, and be clothed. There are very few occupations which do not require tools. In some callings, the tools are very costly. So, again, the appliances needed for carrying on a calling vary with the calling. The usages of society allow an artisan to dress himself in a coarse and cheap kind of clothing; the same usages require that a clerk in a counting-house, whose wages, maybe, are not higher than those of an artisan, should wear a far more expensive kind of dress. In the great majority of cases, the possession of a horse and carriage is a piece of voluntary expenditure; with a country doctor they are as necessary tools as a saw and plane are to a carpenter. Instances could be multiplied to prove the position, that it is impossible to tax necessary outlay, unless to the destruction of the industry which is visited by the impost. Hence there is always a stratum of society which cannot be taxed; for, assuming that its industry is in demand, and that it earns no more by its industry than is sufficient to support life, the abstraction of a portion of these earnings must be followed by one of two things: either a certain number of those who are occupied in the calling perish or are otherwise taken away, or such an addition is made to the wages of such persons as will be sufficient to make up the deficiency caused by the tax. It has been long ago observed that when wages rise and fall with the price of food, or rise and fall with the pressure of taxation, the wages paid are only just sufficient to sustain life. In India, the only tax which the mass of the people can pay is the salt-tax, because everything else which they get by their labour is necessary for their subsistence, and this is the only article in which they can save.

But the expediency of direct taxation has been frequently alleged. It is said that it is undesirable, not to say immoral, that the greatest part of the public revenue should be derived from that kind of expenditure which is mischievous and destructive. To this it may be answered that the Legislature is not to blame for the existence of those habits which lead to such an expenditure, and that, if anything, it puts some check indirectly on their indulgence. Nor is the reasoning, that this kind of expenditure is precarious, and therefore may, on its diminution, involve a collapse of the revenue, much more to the purpose. When such a collapse arises, the deficiency can be supplied from some other source, and notably from that which would otherwise have been expended and now is saved. Again, it is alleged that the costs of collecting customs and excise duties are considerable, that the existence of a custom-house service prevents the United Kingdom from becoming a free port to the whole world, and that the interference of the excise officer with domestic industry is a hindrance and a nuisance. Much, however, of the force of this reasoning, whatever it originally had, has been taken away by the fact that the objects on which customs and excise are now levied are few and bulky, and by the general decline of the practice of smuggling.

Thirty years ago nothing was more natural than the practice of smuggling. There were hundreds of customs' duties, every imaginable article of commerce being burdened by some tax or other. Many of these duties were levied with a view of protecting some kind of home industry; in other words, the English consumer was made to pay more for what he wanted, in order that some English producer might get a better price for the articles with which he supplied the market. To smuggle, then, was to rectify this partiality-to relieve some persons from the burden which the manufacturer had, through his interest in Parliament, been able to impose on the public. But besides, while the Government declared that smuggling was highly criminal at home, it considered it patriotic and laudable abroad. It was thought the highest wisdom to increase the exports of the country; and there is this very important truth in such a view, that unless we sell, we cannot buy. Hence the British smuggler was encouraged, or at least excused, if he contrived to introduce British hardwares or cotton cloths into France and Spain. People argued over and over again that the retention of Gibraltar was necessary for the commerce of Great Britain, because this fortress was conveniently situated for smuggling British goods into Spain. But during the last thirty

The greater part of the taxation of this country is levied on consumption which people could avoid, and is therefore paid out of resources which they could save. Thus, out of the total sum raised in the United Kingdom by taxation, two-thirds are got by customs-i.e., duties paid upon articles imported from abroad and excise, i.e., duties levied on articles produced at home. Out of this vast sum, about one-fifth-i.e., the taxes levied on sugar, tea, and coffee-may be said to be imposed on articles of necessary consumption; for sugar is food, and tea and coffee, though not necessary to life, are so familiar that they could hardly be disused. But the remaining four-fifths are taxes on intoxicating liquors and tobacco-articles which people can certainly do without, and which, in the opinion of many, could be very advantageously dispensed with. Mean-years, we have arrived at the conclusion that prohibitive duties while, however, a very large part of the revenue which the legislature collects is derived from voluntary expenditure, or, as I said above, from that which might have been saved.

A great deal has been said and written on the comparative merits of direct and indirect taxation. By the former is meant an impost levied on property or income; by the latter, a tax put upon voluntary consumption. But all which can be written or said on this subject resolves itself into two questions-Which is the most equitable form of taxation? Which is the most expedient? Now it is plain that if indirect taxation is levied on those articles only which are of voluntary use, no kind of taxation can be more equitable; because, both in quantity and form, it takes from that which may be saved, and it takes it with the full knowledge, and practically with the full concurrence, of the person who pays it. The condition of using such and such articles is that the use shall be burdened with a contribution to the exigencies of Government, and the use is discretionary. Now it is impossible that an income-tax should be equitable, because it is impossible, or at least it is said to be impossible, to make any difference between industrial and spon

and protectionist regulations are no use to the persons in whose favour they are enacted, and are a great loss to the country which endures them; and thus there is no political sympathy with the smuggler, who has at last fallen into his proper posi tion-that, namely, of a rogue who cheats the tax-payer, and would put, were his operations generally successful, an unfair burden on the honest dealer.

A great deal of the taxation of this country does not come into the imperial exchequer, but is levied and expended by local authority. Such, for example, are the poor-rate, highway and paving rates, rates levied for police and light, and county-rate. It is the practice to value the property which the ratepayer occupies, and to tax him according to this valuation. It is supposed that though the occupier pays the tax immediately, the person who ultimately pays it is the owner, who, it is imagined, would be so much the better off in his rent if the tax were not levied at all. But this position, though a question too abstruse to be discussed in these elementary lessons, is not by any means so clear as those who support it avow.

A large proportion of this local taxation is levied for what

are called beneficial or reproductive purposes. In some cases this is perfectly plain. A good road is necessary in order to bring agricultural produce to market, just as a wagon and team are. To call the outlay which is necessary for making a road and keeping it in repair a tax, is a mere abuse of words. This charge is met by a contribution levied on all those who would or could use the road, because it is thus only that the cost is equitably distributed. To leave its construction and repair to purely voluntary effort would be to present the selfish and stingy with the labour of the public-spirited and generous.

capital which has been borrowed. Nor, again, can any one object, assuming that other resources fail, that the State, in time of great danger, and when every exertion must be made in order to save the community from ruin, raises any funds which it can to meet the emergency. When everything is in peril, a necessity arises which is importunate; and all that a wise administration can do is to make the necessary charge as little burdensome as possible.

raise it by way of loan is to cripple the State with a double payment, the first when the loan is contracted, the second when the interest is paid upon it.

There have been certain economists-as, for example, Dr. Chalmers who have argued that a Government ought always The poor-rate is a little less manifestly a beneficial tax. It is to raise what it needs for the public service, however great the so, however, to the employers of labour. Wages must include, emergency, by a tax or contribution. And the reason they for reasons now familiar to my readers, enough to maintain the allege is, that as the loan must-provided it be raised at home labourer, to supply him with a reserve-fund against sickness-be taken out of the existing resources of the community, to and old age, and enough also to bring up his children so as to fill his place when his work is over. Now there is very little doubt that, even with their existing wages, many of those who obtain poor-law relief could make provision for sickness and even against old age; for benefit-clubs having the first of these objects are common among the agricultural poor. But it is doubtful whether they could maintain their families without this assistance; and it is certain that agricultural labourers accept and are content with lower rates of wages than they would submit to, if no provision were made on their behalf against the emergencies referred to. But higher wages, with no increase in the effectiveness of labour, mean a greater cost of production; and a greater cost of production means less profit to the employer or less rent to the landlord. It does not follow, therefore, that the tax levied under the name of a poor-rate is a loss to employers. It may be an indirect means of paying wages; and there are persons who have argued that ultimately a poor-rate is virtually paid by those who receive it, because they have, by its operation, to put up with lower rates of wages.

The amount of annual income raised by local taxation is about one-fourth of all the contributions which are paid for public purposes, i.e., out of every £100 raised and spent, £75 goes into the exchequer, £25 is collected and spent locally. And furthermore, it will be seen from what I have already said, that when any person attempts to calculate what is the real burden of taxation, he must not contemplate only what people earn, but he must reckon what they can save. For instance, suppose we reckon £500 as the amount annually earned, and £100 as the amount which the Government claims either through the imperial or local tax-gatherer, we must not argue as though the pressure of taxation was merely 20 per cent. on labour, for, as I have said before, we must deduct the necessary maintenance of the people from the amount of their annual earnings. Make this deduction, and it will be found that the burden is much more heavy; that it may absorb or divert 70, 80, or even more per cent. of the possible savings of the people; that it may even absorb every penny of that which some persons might otherwise save. At the same time it certainly does not absorb nearly the whole, for the nation annually accumulates a large amount of wealth, and invests it.

As a matter of fact, taxation is distributed with a fair amount of equity, when we take into account the general resources of those who are made liable to it. It has been shown with sufficient clearness that the aggregate earnings or income of those who get more than £100 a year is pretty equal to that of those who get less, and that the contribution of each of these moieties to the public revenue is also nearly the same in amount. There is no doubt that those who have the higher rate of income are on the whole better able to pay taxes than those whose earnings are less, because, in the former case, the margin of possible saving over necessary expenditure is greater. When the claims of the State are exceptionally great, it has been the custom for Governments to raise part of its means by way of loan, thus pledging the resources of the future on behalf of the needs of the present. Of course there can be no defence for loans contracted in order to meet ordinary expenditure, for such a practice is sheer recklessness and waste--a wilful impo- | sition of burdens on posterity. But, on the other hand, there is no need to defend the raising of a loan for productive purposesas, for example, a road, a railway, a canal, or similarly advantageous public works-when the use of any of these is so considerable that the toll, or rent paid for the convenience which they supply, is sufficient to meet the annual interest on the

But if my reader will bear in mind what has been said above, and what I affirm is the fundamental canon in taxation-that all taxes are paid out of what can be saved-he will see the answer to this opinion of Dr. Chalmers. Let us suppose that the urgency of the crisis in which the community is placed is such as to double the necessary expenditure of the State. At the present time (1870) it is stated, and perhaps with truth, that the daily cost of the war to the French nation is six times the charge of the ordinary machinery of Government in times of peace. Now it is certain that there are persons in a community who could have their taxation increased sixfold and yet exist, because these persons find, or are supposed to be likely to find, the huge sums needed for military purposes. But it is quite as certain that there are hosts of people who contribute regularly to the public revenue, to whom even a double taxation might be ruin or starvation, who could not increase their quota in any notable degree to the revenue of the State. An attempt, then, to raise an extraordinary war expenditure by taxation would be to introduce a graduated property or income tax, under which an increasing quantity would be taken from those whose means are sufficient to supply a considerable margin over their absolute necessities and those of their families.

There are two ways in which a loan can be contracted. Either a borrowing Government may vary the rate of interest which it is willing to pay for a fixed sum, according to the state of the market, or it may vary the amount of principal which it will acknowledge as its debt, while it fixes the rate of interest. For instance, it may borrow £100 at 5 per cent.; or it may give 3 per cent., and, receiving £60 from its subscribers, credit them with a debt to the extent of £100 stock. In the beginning of our debt we adopted the former course. But during the long administration of Walpole, a number of these debts were consolidated into one fund, the rate of interest at that time being so low, that the minister was able to offer the public creditor the option either of being paid off, or of accepting the lower rate of interest. After this time the latter custom was adopted; and it is said that of the whole public debt, not more than two-thirds has been actually received in cash, i.e., that every £100 of our public obligations represents no more than £66 13s. 4d. paid to the exchequer.

There is one manifest inconvenience in this practice. It is almost impossible to lower the rate of interest. But it is argued, and with great reason, that this very impossibility enables the Government to borrow on the best terms. They who lend to a Government generally lend for a permanent investment. Now, if they foresee that this Government, whenever an opportunity offers itself, will set about lowering their rate of interest by offering them the option of re-payment-as the Government, in the interest of the public, is bound to dothey will demand higher terms in order to cover this risk. As it is, they are unlike other mortgagees, for the State reserves its right of paying its debtors off, but does not give them the right of demanding their money at pleasure. And it has been calculated that, notwithstanding the fact that Government has given up the power of lowering its rate of interest, it has on the whole made a better bargain for the public, than it would have made by adopting the other alternative, by raising all its stock at a fixed rate of interest, and so precluding itself from any subsequent operation, except that of creating a surplus revenue in order to purchase and extinguish portions of its debt.

TO OUR READERS.

CASSELL, PETTER, AND GALPIN, BELLE SAUVAGE WORKS, LONDON, E.C.