SPECTATOR'S LIBRARY.

Pommel. EMMOscr, A Treatise on the Principles and Practical Influence of Taxation and. the Funding System. By J. R.: IPCnn‘vh, Esq., Member of the Institute of France. .Losiginan teed Co. 'VOYAGES AND TRAVELS, -Narrative of the kinked States Exploring Expedition, during the years 1838, 1839, . late, last, sod 1842. By Cbmits 11hee, •U.SsIf.. CoMMander of the Expedition, Member of the American Philosophical Society, &c. &c. In five volumes, with an alias. Volumes IL and III. /V094ind Putnam. Honor, -The Eccentric Lover; a Novel. By Boyle John. In three 'volumes —.Binary-

ISOCTILLOCH'S PRINCIPLES AND PRACTICAL INFLUENCE OF TAXATION AND THE FUNDING STSTRIL

Tam object of this work is to "furnish the public with a pretty full exposition of the principles and practical influence of Taxation and the Funding System"; and, by testing our existing taxes according to these principles, to "assist in facilitating the adoption of various salutary -reforms, at the same time that they may perhaps help to thwart,some dangerous projects." With this purpose, the laws of taxation are first considered, in their direct operation upon rent, profits, wages, and in- come, (or put formally, " taxes on property and income ") ; the prin- ciples of indirect taxation are next discussed in their various phases, and an elaborate examination instituted into our principal imposts ; some in- cidental or subordinate points connected with the general subject are then exhibited ; and the work concludes with the pros and cons of the Funding System, an elaborate sketeh of the history of our National Debt, and an -exposition of what the author considers the fatal errors of our system.

Mr. MTulloch states in his preface, that he has ." availed' himself, in a -few parts of the work, of statements in articles contributed several years ago to the Edinburgh Review : these have been, however, for the most part rewritten." Unless we are labouring under some hallucination, the ac- knowledgment might be extended. Those who have thegood fortune to be familiar with Mr. M'Culloch's writings will, it seems to us, find little here that is new in principle; and if they have read what has been written and spoken upon particular taxes, not a great deal of novelty in the details. This, however, is no objection in itself. To collect into a single volume the views and information scattered over many volumes, is a useful un- =dertaking : but if it be done in a ready or compendious way, two faults, one literary, one scientific, are apt to creep in. The style is very likely to retain its original tone, with its original diffuseness :.a fault visible throughout the volume before us; whose composition more resembles a slashing " article " than a scientific treatise. That inconsistency of view which arises from handling different branches of a subject at different times, under different circumstances, with different objects, is very likely -to pervade the compilation. The peculiar feature of Mr. 34`Culloeh's -mind, which induces him to take up a side of * ,question as if lie were "taking its part," may indeed be a further cause of this inconsistency. However that may be, of inconsistencies the volume is full. When the author opposes a tax on income, he is hot upon its inequality : when he cannot -shut his eyes to the unequal operation of taxes upon consumption, Mich are evaded by the penurious, he says, (page I56,) " Two genera- tions of misers do not often follow in succession • so that the probability is, that the more liberal expenditure of those ttilio are to come will fully compensate for the parsimony of their forefathers,"—certainly a new way to pay old debts. He resists a tax upon the rent of land, because he says it willoheek agricultural improvements : yet he strenuously urges the re- imposition of the House-tax, which, supposing it to operate at all, must have precisely the like effect on the improvement of old and a greater on the erection of new buildings ; and, so far as any part of it falls upon the tenant, the House-tax is the more unfair of the two. Many are com- pelled by their business or their position to live in a house more expensive dual their own wants ; whereas a farmer has no appearance to study, but derives from his farm a profit proportionate to his rent. The House-tax was also vicious by being charged upon the occupier and not upon the rent; upon which, practically, it was rarely assessed except to lead to all kinds of hardship and injustice. When Mr. M'Culloch is op- posing or rather abusing the plan of borrowing money on annuities for one hundred years instead of in perpetuity, he says, and truly, that though the mathematical value is only the difference of some -quarter of a year's purchase between the two, men do not make investments on mathematical principles ; and that "even the sub- scribers to a new loan, who generally mean to sell their subscription as soon as possible, invariably prefer a perpetual annuity redeemable by Parliament, to an irredeemable annuity for a long term of years " : yet, when arguing upon the advantage of funding at the par of 1001., and paying 5, 6, or 7 per cent interest in order to reduce it on the termi- nation of the war, (which upon the moral argument is quite as mis- chievous as an annuity for a hundred years, if not more so,) be asserts, " the great majority of those who subscribe to loans never think of such remote contingencies, [as reduction of interest or repayment,] but look only to the circumstances of the moment." The book is crowded with analogous inconsistencies.

The reform Mr. M'Culloch proposes in our system is not of a large or striking character ; and, from his suggestions being scattered up and down, it may perhaps look of less importance than if it had been more artistically presented. Nor in the lesser improvements is there much that is new. Persons not deeply read in politics or political economy are acquainted with the partial operation of the Stamp-duties; and even listeners to the League are aware of the iniquitous favour shown to the landed interest by the exemption of freehold property from 'the Probate and Legacy duties. A similar remark may be ventured on proposals to cheek smuggling by lowering the duties on Brandy and Hollands ; Sugar ha been handled by many, but by none equal to Mr. Macgregor Laird ; and the world is pretty well agreed as to the advautage of getting rid of

-taxes on raw materials,—though Mr. ferCetlloch on the Timber-dudes is very Whiggish. .'A moderate fixed ditty on Corn with the bait of a draw-

back is-at least as old as the Whig Budget; and .n change in the duty Cif Insurances has been recommended- before, 'though this would hardly be

supposed from Mr. Weulloch's manner of 'inning it. The two largest

suggestions; apparently intended to supersede the Income-tax, are of that kind which in a certain elms of rife elicits the- phrase -" I wish you may

get it." They are-1. To extend the old House-tax, still as a charge upon the occupant, not upon the landlord, except in the case of houses under 101. a year, new to be included. 2. To overturn the Penny Post-

age ; which is denounced as a "quackery " the principle and its author being assailed with a- not very happy ridicule, and this improvement pro- pounded— " Indeed, we see no good reason why the present rates of postage-should not, and very many why they should, be doubled, Or inavased to 2d. for a letter weigh- ing half an ounce, 4d for one weighing one ounce, And so en. We are well cot- vmoed that, were this done, and the troublesome practice of forcing the prepay- ment of letters abandoned, revenue would be nearly doubled, with little or no inconvenience to the public. " The increase of the Post-office revenue, while this system is maintained, will redound nothing to its credit; this being a neoessaryresult of the increasing popu lation, wealth, commerce, and education of the country. The revenue would .-m- crease quite as fast under any reasonably well-contrwed system: all taxes pn articles in general use are sure, provided they be not excessive, to increase with every increase of population and wealth."

In so large a volume, dealing with subjects that have been practically examined for generations and whose leading principles have been elabo- rately discussed by men like Smith and Ricardo, there must of necessity

be much that is unquestionable—the settled truths and commonplaces of the science. The newest facts connected with our taxation, and a large

mass of curious statistics in relation to the 14ational Debt, are also

brought together; shrewd remarks or suggestions; respecting the -de- tails of our system are often thrown out; and the subject is illustrated

by a reference to the taxation of other countries, especially of France.

The subject is also .completely presented both in its principles and prac- tice. Beyond these merits—and they are great—we do not attach

much importance to the publication. Its smaller suggestions have no

particular novelty or striking practicability. . Its largest propoeal is so very peculiar that the author is likely to keep it to himself: From tJe

principles of taxation promulgated by Mr. MICulloch we must confessgene-

ral dissent ; and we doubt whether the views of thelate ,Sir Henry Parnell and himself respecting the true mode of funding are available. It was

the opinion of Bicardo and others, that what' would be gained. by the more rapid reduction of the interest on a Five per Cent Stock at the re- turn of peace, would be counterbalanced by the higher rate that •must,he

-paid for the prospective advantage during the war; and though Mr. ill'Culloch roundly-denies it, such is possibly the case. Still, we agree with Parnell in thinking that the full interest •upon the- sum actually ;lent is the proper course, if it can be accomplished without greater loss ,there is Aim questiou. Even in pease sad in .a glutted money- market, people require-a Immo, of some kind from ,the State to.ohange a

stock. In --war, with some hoarding gold, industry artificially otimulated

by the demands of Government, specadatioris site to employ capital at high interest, °arid the mincjs of men emits(' by fear .and plueney, eve

question whether inverters would not require a much higher interest than Mr. WCulloch assumes, if they had not the bonus of the capital given them in a Three per Cent Stock ; or, which would -come to the same thing, they would require .a fixed -time before which the interest should not be alterable. A difficulty might-also arise in dealing with large amounts of

one stock. As soon as the money-market permitted, there has been no .difficulty in seducing Five, or Four, or Three,and-s-lisp' per Ceuta, with the Three per Cents below them as a -test. This operation might not be so rapid or so easy with an enormous amount of one kind of stankr—as we may learn, perhaps, with our Three per Cents; facility of resbnition ..operating upon the value of stock as well as the state of the money- market. Put the high war-interest, some years' additional high interest _after the close of the war, and the,boauses that mould certainly be required

-on the original loan All when the induction gear. effeetad, and -it might turn out in the result that Sir Henry Parneles view, though joet -in theory, is not so practicable as it looks. Nations cannot any more than individuals escape the law of necessity--drat those who we compelled to borrow money must borrow it on the lender's terms.

The deadly pressure upon the resources of a country which the funding system creates, coupled with other artificial evils, renders it important to impress upon the public the absolute necessity of restricting the pratioe as much as possible. A "horror of debt" is as important to nations.as to individuals. Agreeing with Mr. M`Culloch as to the expedieney of the

occasional use' of borrowing in war, we incline to leave it in much leas

general terms than he has left it, and to lay down as .a maxim-that a loan is only justifiable-1. to setthe war in motion • 2. to raise money before

tlle war-taxes can be collected, which is almost included.in the first; 3- 40 meet ealtraordinary expenses. It is probable that A nation can always really bear taxes pretty much in -proportion to the loans it can rake ; for

a loan argues national wealth in proportion to its amount, and proves superfluous capital. The question is, will the nation-bear the taxes ?.and can the taxes be suddenly imposed without derangement and oonsequent injury ? The answer to this depends partly Rpm the nationaliniod, partly upon the existing system of taxation. The people will oertainly prefer Nat- posing the evil day, unless the fatal consequeueesof increasing debt be felt by the natioualmind, and the startling fact beconiiimally present to them, that the " total expenditure ,of the country from 1793 to 181:6 was only 151,000,0001. greater than the revenue actually derived from taxes during -that period "; the-deficieney of the inoome chiefly occurring during the first ten years of the war. In other words, during the last thirteen years of the

war the nation bad to raise taxes, to pay the interest of the previous loans, of nearly thesame amoantas would have prevented the eontractiug of-any debt to speak of had they been imposed ten years earlier : the nation lso

been burdened with twenty millions a year for ever to save taxation to the amount of 150,000,0001. spread over nearly quarter of a century. The solution of the second question will mainly depend upon the nature of the

taxation. If many new taxes have to be imposed, the country may not only resist them, but it will be impossible to avoid deranging industry, if they be placed upon articles of Consumption; and if levied directly upon articles-of show, luxury, or even of use, such as our Assessed Taxes, the object of the tax will often-be defeated by persons discontinuing the article. And this leads us to the conclusion that we should cling to an improved Income:tax, as to our financial sheet-anchor ; and that no tax yielding a large amount of revenue shOuld he totally repealed, but for some very cogent reasons peculiar to the tax itself. We would give up no source of necessary revenue merely for a pro tanto relief, but for soma..evil in the tax beyond its mere amount. What Sir Robert Peel may determine upon doing, we cannot tell at "this present time of writing" ; but if we take a rapid -survey of our taxation, we shall find that the vast repeals effected since-the war have reduced our duties on consumable articles, as well as on Postage, .Stamps, and what are called the Assessed Taxes, to a lower point than is consistent with our expenditure. In other words, were the Income- tax abolished, we should have a deficient revenue. The same repeals have got rid of some of the most mischievous and unpupular duties in the Customs and Excise. The writings of economists and the "articles" of the periodical press have diffused pretty full information as to the nature of our particular taxes, and more judicious views as to the principles of taxation. An able Finance Minister will of course do more with the means at his disposal than an inferior person ; but were Van- sittart himself to be raised from the dead and reinstated, he would not be permitted to do much mischief. Everybody will agree upon the principle of only drawing our Customs-duties from articles yielding a .considerable amount of revenue. Perhaps few would object to the repeal of the six hundred and odd items in the Tariff whose total produce does not reach to 80,0001., unless in the case, of special circumstances peculiar to the individual tax. Many would go further, and abolish the 109 articles yielding little more than 300,0001. _Few, whose opinion on finance is worth, regarding, but would abolish duties on raw materials ; the most 'important if not the most injurious of which are those on Timber and Cotton-wool. The question is one of preference, and practicability as re- gards means. In the Excise,

Bricks, yielding in round numbers about £350,000 per annum, Glass, 550,000 Pater, 600,000 .

Soap, 850,000

are mischievous for their interference with the process of mannfac- - tare ; and all afe in some sense unequal, as subjecting a puticular trade to a burden and control. ' On political grounds to be presently

stated, we might retain the whole - though every means be. adopted to render the Excise-regulations as innoxious as possible. -But on mere financial or popular rounds, any One of all of themlit, advantageously he repealed. The most misehievous of the Amps :is the tax on Insurances, which' should certainly be modified. The other Stamp-duties, though unfair in their graduation if not in their principle, (as falling on necessity, or at all events partially,) may press upon an individual, but scarcely interfere with industry or interchange, -except the stamps on the conveyances of small property. - Any modifi- cation could be made at little cost ; ' and a thorough revision and reform might add largely to the revenue, by including freehold property in the Probate and Legacy duties. On social grounds the yfindow-tax is objectionable ; but it is levied without uncertainty, and with fairness to the tenant, whilst its ultimate incidence is upon the landlord. On po- litical grounds we would retain it ; but its abolition would certainly be

Popular.

Improvements like these, however, depend upon the retention of the In- come-tax : give it up, and you begin to get into debt. It is equally ne- cessary for a tentative part of our taxation, where skill and care come into play, to relieve the pressure of taxation with little if any permanent loss to the revenue ; the remission of duties on articles of consumption—as sugar, foreign spirits, and tea, that most unfair and oppressivesluty upon the poor consumer. This experiment cannot, however, be tried without an ample surplus ; because the assumed increase of consumption may not take place for some time.

It is, however, chiefly with a view to the large future that the Income- tax should be upheld : for without it we not only are powerless for war, without running the ruinous course of the funding system over again, but we look so. At this moment, by trebling the Income-tax, (even then less than nine per cent,) we should, with our present surplus, have at once a fund of nearly fourteen millions applicable to a war. A re- imposition of the Beer-duty would raise almost three millions7-perhaps enough to carry on the war without recourse to loans or any addition to the Debt beyond the occasional issue of Exchequer Bills fot4extraor- .dinary objects. This the world—at least the belligerent part of it, France -and America—well know ; and knowing, are probably bound over to keep the peace,' since they themselves could not raise a war-fund either by borrowing or taxing, and the latter attempt in America might faibe a civil 'commotion.

With a view to permanence, two reforms in the principle of levying the -tax would be indispensable. 1. To avoid what is even now, we fear, a bard pressure upon incomes about 150/. a year, by adopting Sir Harry Inglis's plan of charging only the excess of income, but beginning with 100/. a year, to avoid loss. 2. To act upon the distinction, which the instinc- tive feeling of mankind will ever draw, between a fixed income from property and an uncertain income from profit or industry. Even mathe- matically an uncertain income is entitled to such a reduction as would enable a man to insure his life for a sum equal to the value of the income in funds or acres. This, it is true, is impracticable ; but an approach to the principle might be made by a difference of sole two per cent in favour of Schedule D: and we still think, as we urged three years ago, that this distinction should now be arawn.

In short, we believe the permanent retention of the Income-tax essen- tial to a complete financial reform, and to enable the country to take a " high position " in the world ; whilst we think it equally essential to the maintenance of a sound principle in our finance. Whether it. will be so retained, is another matter. When the act of 1845 expires, in the spring of 1847, the expiration of Parliament will probably follow in the autumn ; and the repeal of the Income-tax will be a tempting election claptrap. It may be doubted whether the Minister will have the courage to propose its renewal on the eve 'of a" dissolution; it is pretty certain that the Members will not of themselves have the honesty and courage to vote for it : but we . think that _if the question could be put -fairly to the country, a majority would be found in favour of its continuance, and possibly among those who have to pay it. A strong confirmation of this belief is the present quietude of the country, almOst approaching. to forget- fuhiess. The agriculturists have-been petitioning in behalf of Malt ; dele- gates of Metropolitan parishes ti,ve been making-flying marches, to eon- centrate their forces before St. Valentine's Day in order to assault the Window-tax ; meetings have been held and speeches made upon the Soap- duty ; there is a stir about Tea and Sugar ; and some smaller interests have been moving vigorously in their own orbits : but all are quiet about the "odious Income-tax," save Whig scribes at their wits-end 'for a grievance.