PROPOSAL FOR A PROGRESSIVE TAX ON THE INCOMES OF THE CANTON OF NEUCHÂTEL. Zurich, Vaud, Geneva, Uri and the Grisons, in which complete systems of these taxes exist, and many others in which a partial use of the principle is made; and these systems are remarkable for the care with which they have been adapted to the circumstances of the people. The insufficiency, however, of this fiscal method in the Swiss Confederation generally is shown by the marked tendency towards increased indirect taxation, which already, in 1881, amounted to 57.9 per 1001. 1 1 A fairly full account of these taxes, whether on income or capital, real or personal estate, is given in a report by Mr. Buchanan (Foreign Office, 1892; Miscellaneous Series, No. 267). The returns of the new Prussian income tax for 1892-3, the first financial year since its introduction, do not prove much as to the efficacy of progression. There is an increase of £2,264,201, in spite of the amount levied from smaller incomes having been decreased by £350,000; but 440,218 new taxpayers have been laid under requisition, including, for the first time, joint stock companies and trading associations. The moderate graduation adopted appears to meet the sense of justice in the community, and has not had the effect of causing any withdrawal of capital from the country. An agitation, of course, exists for increasing the tax on the higher incomes. It is interesting to observe that of incomes of £4,800 and over there are 1,780, while 35 are over £45,000, 4 over £150,000, 2 over £250,000, and 1 of £350,000. The large figures are accounted for by the fact that the income of the mediatized princes have now, for the first time, been rendered amenable to taxation 1. The example of the Australian Colonies is so often quoted by democratic reformers that it is well worth while to see what, in regard to graduated taxation, that example really amounts to. The total revenue of the colony of Victoria 2 in 1887 was £7,607,598, of which nearly 60 per cent. was raised from sources other than taxation, viz.: Whatever advantages such sources of revenue may possess, they cannot be defended from the point of view of taxation as being charges on wealth. The railway revenue, for instance (36 per cent. of the whole revenue), is a tax on locomotion and on transport, not on 'realized riches.' 1 Foreign Office, 1892; Misc. Series, No. 268. 2 These figures are taken from Hayter's Victorian Year Book; and a year has been chosen before the recent check to the Colony's prosperity; since which panegyrics of Victorian State Socialism have notably diminished. There remains 40 per cent. of the revenue which is drawn from taxation (as compared with 39.99 per cent. in Switzerland and 84.25 in the United Kingdom in the same year) of this revenue 75 per cent. (or 30 per cent. of the whole) was drawn from Customs and Excise, and therefore pressed unduly on the poor. The remaining taxation, out of which alone can come any application of the principle of graduation, amounted to under 9 per cent. of the whole, and includes excise licences, stamps, succession and probate duties, property and income taxes, amounting to under £700,000. Under this head would fall the new forms of taxation directed against great estates, (1) the land tax and (2) the succession duty. The first of these is not graduated but is 'a tax with considerable exemptions, the classes of exemptions being so constructed that the tax is clearly intended to bring land into the market. The whole tax fell upon under 900 persons and brought in about £124,000 a year. The succession duty which brought in a slightly larger amount was graduated on a scale varying from 2 per cent. on small estates up to 10 per cent. on estates of over £100,000. We have said enough to show that, although the principle may be recognized and applied in most countries, the practice is certainly not to tax property in any undue proportion, if indeed sufficiently. It is not too much to say that in no stable civilized state has progressive taxation ever amounted to anything like confiscation of the larger incomes, such as is demanded by theoretic Socialism. Further, it does not appear by any means certain, from the experience of countries where it has been tried, that much is to be gained from a revenue point of view by a progressive income tax. Taken by itself as a fiscal instrument, it has even been said. that it must either amount to confiscation or it will be useless, that it must either aim at the destruction of private capital, in which case, to quote Proudhon's picturesque phrase, 'Il aurait pour effet de refouler la richesse et de faire que le travail, comme un homme attaché à un cadavre, embrasserait 1 Sir C. Dilke, Problems of Greater Britain, vol. i. p. 192. la misère dans un accouplement sans fin;' or that it will be moderate, and in this case will be little more productive than uniform or proportional taxation. The dilemma, however, is probably less conclusive than it looks. It is rash to imagine that in a matter in which the habits of a people, the distribution of their wealth and the character of their government are all important factors, the example of one country can be of very great assistance to another. The same taxes, or similar methods of levying them, will not be suitable alike to tax-dodging America, frugal Switzerland and bureaucratic Prussia. But the question whether the circumstances of any particular country make it possible or desirable to adopt or develop a progressive system of taxation is one of practical finance upon which it has been no part of my design to touch, having had chiefly in view the greater question, namely, What ideal of justice should taxation endeavour to attain? Even if the comparative inutility of all existing systems of progressive taxation were established, this question would remain for solution; and, since a system of taxation will never be in its highest degree productive which does not conform to some standard of rightfulness in the heart of the taxpayer, it cannot well be neglected. The argument from Jevons' theory, if it is economically sound, has also the advantage of harmonizing with what we may take to be the rough-and-ready sense of justice of the ordinary man. cannot, of course, be pushed too far; and if it may be held to demonstrate in a general way that, in order to equalize the burden of taxation upon individuals and classes, a higher proportion should fall upon the larger than upon the smaller incomes, it does not help us to a practical scheme of progressive rates, which has sometimes been deduced from it, and which can only be arrived at as the result of carefully guarded experiment. It Taxation indeed belongs essentially to the domain of practical administration, and a conclusion based on considerations of theory, such as those discussed in this paper, must therefore of necessity be incomplete. The judgement of the Economists appears to deprive the principle, in its practical application, of much of the importance which has been claimed for it, but it entitles us at any rate to assume that progressive taxation, in its theoretical aspect, need neither be considered in the light of a socialistic bugbear, nor ridiculed as a mere 'joujou démocratique,' and that, if it be confined within bounds, some of which have been pointed out as essential to its safe and advantageous use, and if the object of equalizing taxation be clearly kept in view and the object of equalizing incomes be as clearly repudiated, it may be found a useful adjunct to a well-balanced fiscal system. T BERNARD MALLET. |