TAXATION.

I

Taxation. By WILLIAM POLLARD URQUHART, M.P.

FEEL that I owe some apology to the Association for proposing to read a paper on a subject which was fully discussed at the meetings of 1862 and 1863. But on these occasions the matter was treated by all parties as if it were entirely a question of antagonistic class interest; some were endeavouring to show that the owners of property were not paying their proper share of, and others were seeking to prove that they already contributed at least their full quota to the necessary burdens of the country, Now, all the attention that I have paid to the subject has convinced me that a remarkable opinion, broached by the late Prince Consort-to the effect that the more the knowledge of social science was extended, the more certain did it appear that the true interests of the different orders of society were not antagonistic, and that whatever was most conducive to the good of the whole community was also the most profitable to each of the various sections of which the community is composed,-is as applicable to the theory of taxation as it is to any other branch of national economy.

In beginning this subject, I gladly avail myself of a simile made use of about two years ago, by one who has always been regarded as a champion of the landed interest. On the occasion referred to, Mr. Disraeli said, that whatever increase was made to the burdens of the country would be sure to be placed on the land, and he proceeded to compare the land itself to a milch cow that was about to be drained of its milk to the very last drop. Now, it is a wellknown fact, that the cows of a dairy farmer who lives by sending to the market all that he can extract from them in the shape of milk and butter, are in much better condition than those of one that makes his money by selling the produce that would otherwise be given to them as food; and I cannot but think that the animals, if they could reason and think for themselves, would deprecate the interference of any indiscreet protector of their interests, who remonstrated with their master for drawing all his profits directly from them, rather than from the sale of his crops. It may, then, be well worthy of the serious consideration of the landowners, whether any greater practical wisdom is evinced by their friends who advocate the imposition of taxes rather upon articles of commerce and consumption (which, there is good reason to believe, if left perfectly free, are as sure to augment the value of their estates, as the hay and turnips are sure to improve the condition of the milch cows) than upon the surplus profits arising from the occupation of land. which constitute rent.

I need hardly state that this is no new idea, either of mine or of the gentlemen who have attended here on behalf of the Liverpool Association. It is now not very far from two centuries since Mr. Locke, in his essay concerning lowering the interest and raising the value of money, wrote as follows:

"Taxes, however contrived, and out of whose hand soever immediately taken, do, in a country where their great fund is land, for the most part terminate upon land. Perhaps it will be found that those taxes which seem least to affect land will most surely of all others fall the rents. This would deserve to be well considered in the raising of taxes, lest the neglect of it bring upon the country gentleman an evil that he is sure to feel, but not to be able very quickly to remedy; for rents once fallen are not very easily raised again. A tax raised on the land seems hard to the landowner, because it is so much money going visibly out of his pocket, and therefore, as an ease to himself, the landowner is always forward to lay it on commodities. But, if he will thoroughly consider it and examine the effects, he will find he buys this seeming ease at a very dear rate; and though he pays not this tax immediately out of his own purse, yet his purse will find it by a greater want of money there than that comes to, with the lessening of his rents to boot, which is a settled and lasting evil that will stick upon him beyond the present payment. It is vain in a country whose great fund is land to hope to lay the charge upon anything else. The merchant, do what you can, will not bear it; the labourer cannot, and therefore, the landowner must; and whether he had best do it by laying it directly where it will last settle, or, by letting it come to him by the sinking of his rents, which, when they are once fallen, every one knows are not easily raised again, let him consider."

The same opinions are to be found in many of those tracts on commerce and finance by writers chiefly of the last century, recently collected by Lord Overstone and Mr. M'Culloch. They are also maintained by the French economists of the last century, from Quesnay to Dupont de Nemours, and, to a certain extent, have received the sanction of Dugald Stewart. The substance of the arguments of the French economists is thus stated by Mr. Turgot:

"The smallest trifle so paid, i.e., a tax on exchanges or transactions of society, is a subtraction from actual property. Taxes ought to be paid for the preservation of property, not to prevent its formation. The reflections of those who have mastered the subject, confirmed by experience, show them clearly that the whole burden of taxation, in whatever form it is raised, when traced through all its ramifications, falls eventually upon the owners of the soil. It sometimes falls upon them directly, by the application of part of their revenue to the necessities of the State, sometimes indirectly by the diminution of their income and the augmentation of their expenditure."

But, perhaps, by no writer has the pith of what has been said in their favour been better expressed than by Sir John Stewart, who, though not altogether a disciple of their school, has written :"Taxes ought to affect the fruits only, not the fund."

To return, however, to the great English philosopher, Locke. In the extract I have just read from his Essay he says:-"If the landowner will thoroughly consider it, and examine the effects, he will find he buys this seeming ease [from taxation] at a very dear rate." Perhaps there is no method by which we can [to use Locke's words again] "thoroughly examine it, and consider the effects"

more efficiently, than by supposing it applied to the area of taxation with which the landowner is familiar-a parish, a poor law union, a hundred, or a county. For rates are frequently levied for local purposes over these districts, and they, from the smallness of their size compared with the country from which the imperial revenue is raised, afford the best opportunity of what logicians call "verifying a theory by observation and experiment."

Local rates, I need hardly observe, are levied off the occupiers in proportion to the value of their holdings. They, it is well known, form a deduction from rent as certainly as if they were paid in the first instance by the owners of the soil; for every man about to take land or premises ascertains the amount of taxes chargeable thereon, and frames his bargain with his landlord accordingly. Nor would there be any difference in their ultimate incidence, if they were raised in any other way. Suppose, for instance, that instead of being levied according to the valuation or rack rent of the premises, they were apportioned according to the probable or supposed profits of the occupier. An incoming tenant would still take an account of them in framing his bargain about rent as surely as he does of the rates as now exacted. If, for instance, poor rates were levied in the same manner as the income tax, the farms of a highly-rated parish would still let for less in proportion than those of a low-rated parish. The effects would still be the same if, under the delusive expectation of making every inhabitant of a district contribute to sundry necessary objects in proportion to what he was supposed to have to spare, a tax were imposed on his real or presumed consumption of the most necessary articles of subsistence. The possible amount of such tax would still be taken into consideration by every incoming tenant, before he made his stipulation about rent. The variation of such tax in the divers districts, parishes, or counties, would produce a corresponding variation in the letting value of property.

In short, turn and twist about these rates as you will, they cannot but enter into the calculations of every man about to take land or premises. Stock will fly from a district where rent and taxes will not allow it to realise ordinary profits. Stock can adjust itself

to taxation; land cannot. As Adam Smith says:- "Land is an

"The pro

article which cannot be removed, whereas stock may." prietor of land is naturally a citizen of the particular country in which his estate lies, the proprietor of stock is not attached to any particular country." These observations, if for the word "country," we substitute "county," "" district," or parish," express all that I

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contend for in this part of my argument. Nor would the landlords of any such district fare any better, if, with the view of keeping them ignorant of what they did pay, and preventing them framing their bargains about rent accordingly, they attempted to levy a tax on each article of consumption before it reaches the consumer on their estates. For all people, whether initiated or not initiated in the mysteries of government and taxa

tion, would migrate from, or hesitate to settle in, a district where they found the cost of living artifically dear. Thus would be diminished that competition among tenants and capitalists which is one of the causes of high rents; and it is easy to see that such competition would continue to diminish, till rents had fallen so much beneath those paid in other districts as to offer a full equivalent for the enhanced cost of living. So the primary effects of such indirect taxation would be to lower the rents in the district in which it was tried to an amount equal to that which the landlords would have to pay, if it were levied directly off themselves.

But, I think also that a little further consideration will show that not only would the landlords not shift thus the burden off their own shoulders, but they would further depress the value of their estates to an extent of which it might be difficult to calculate. For in the first place, if an attempt were made to tax sundry articles before they were consumed in any particular district, it would be necessary to maintain a staff of men invested with proper authority, to prevent their free importation or production. This alone would be equivalent to maintaining an extra police force at the expense of the district. I have often heard proprietors complain of the addition made to the poor rates by the workhouse establishment charges, yet the maintenance in each district of the cordon of officers that would be required to make such a scheme of taxation practicable would be far more onerous.

But the additional expense of such a preventive staff, though by no means inconsiderable in itself, would constitute, in my opinion, but a small part of the damage inflicted on property by any attempt to levy the district rates by a tax on consumption. For I think it very difficult to conceive that any tax levied on any article will not, to a certain extent, restrict its use. Such restriction would entail diminished importation and production, and consequently diminished trade and diminished rents. Let us for one instant suppose the landlords of any particular district combining to stop the grumbling of their tenants about heavy rates by compounding with them for a duty on every article of general consumption imported or produced therein. Any prudent man of business would foretell that the retail trade of the district would be annihilated; every shopkeeper or dealer of any sort would emigrate, the farmers would lose their best markets, and many would be compelled to throw up their farms if they did not get a large immediate reduction of rent.

Now if the validity of these arguments, as applied to the smaller areas that are usually assessed simultaneously for local rates, be admitted, it is difficult to assign any reason why they should not hold equally good as regards the whole extent of the country that is taxed for what is called imperial purposes. As Mr. M'Culloch justly observes, "The same principle that would prevent the employment of capital in Yorkshire, if the return to it were less than in Kent or Surrey, regulates its distribution through the different markets of the world." It is true that trade and industry take a

much longer time to change their countries than their counties. But the same causes will produce the same effects, more slowly it may be, but no less surely in the former than in the latter. To quote Mr. M'Culloch again, "The vicious nature of the taxes to which Spain was subjected was one of the most potent causes of the decline of her industry." In a memorial addressed by the merchants of Amsterdam to the Stadtholder, William IV. in the year 1741, they complain that the high prices caused by the heavy duties on every article in consumption rendered it impossible for them to compete with foreigners in the neutral markets of the world, and caused a great deal of capital to be iuvested elsewhere. And if religious intolerance caused many industrious citizens to pass over the sea into England from the Low Countries, and from France, in the slow sailing days of the sixteenth and seventeenth centuries, it will hardly be denied that fiscal oppression will make men undertake corresponding migrations in the present era of rapid locomotion.

It would be almost superfluous in the existing state of economical science to advert to the effect which such increase or decrease of trade produces upon rent. We have numerous examples of it. Concerning one of the countries in which it has already been mentioned that a decline of commercial prosperity was produced by high taxes on consumption, Locke gives us to understand that the value of land in Guelderland was declining, while its landowners were attempting to shift the burdens from their own shoulders to the trade of Amsterdam. In 1741, at the time that the above mentioned memorial was presented to the Stadtholder, we read of sundry measures devised for the protection of agriculture, which strongly remind us of those tried in England during the period when it was the fashion to cry out about agricultural distress. To what else but increased commercial prosperity are we to ascribe the great rise in the value of land that has taken place since the imposition of the land tax in the reign of William III.—a rise so great, that a tax originally settled at 4s. in the pound, is now in many places less than d., and in no place we believe more than 1s. in the pound of the present rent? But, perhaps, the most remarkable change in the circumstances of the land is that which has taken place within the memory of men now living. Not long after the peace of Paris, when Government attempted to bolster up the price of wheat to 80s. a quarter, and no direct tax was levied off land for imperial purposes, cries of agricultural distress were rife from John o' Groat's house to Land's End.

If anyone had ventured to assure the complainants that the true remedy for their distress would be to desist from any attempt to bolster up the price of their produce, and to submit to an impost on their properties sufficient to enable the Government to dispense with some of the taxes that pressed most heavily on the consumption and the industry of the country, he would have seemed unto them as one that mocked. Yet land has never neither let or sold for so much as it has since both of these things have been done.