Chapter IV (2)

There have been few more striking circumstances connected with the transcendent changes which have taken place in this country during the past three years than the steady verification, amid every change, of those great principles of political economy which, during the past half century, have been the practical guides of European legislation. In fact, under the pressure of war we are slowly coming to realize our fellowship with the communities of the Old World in the laws of social change. Step by step the nation is now passing through all the changes in its internal and domestic condition that took place in Great Britain in the wars with Napoleon. Struck with the novelty and apparent anomalies of our condition, we have been inclined to feel that it was without parallels in history. But in that period of English history which beheld a suspension of specie payment protracted twenty years, an enormous expansion of the currency--the appreciation of gold--a rise in prices unparalleled in any country--a wild spirit of speculation--and, with all, an appearance of astonishing prosperity in the midst of a most exhausting war, we see the reflection of our own condition, and find the lessons by which we should be governed. We have now, for the first time, become a people conscious of taxation. It is clear that the burdens of the future must be still greater than anything we have yet borne in the past. The questions as to the best modes of taxation have already begun to call forth the anxious deliberation of the nation. The question is asked by some if we have not already reached that limit where taxation ceases to be a contribution from the surplus of society, and beyond which it will become a draught on the vital, productive energies of the country. It cannot be unprofitable, at such a time, to examine the history of English taxation in the great periods of similar trial through which that nation has passed.

The great rebellion marks the era of the adoption of a regular system of taxation in Great Britain. 'From a period of immemorial antiquity,' says Macaulay, 'it had been the practice of every English Government to contract debts; what the Revolution introduced was the practice of honestly paying them.'

The change is significant of the triumph of the people. It was found, on the breaking out of the rebellion, that not even an army of Puritans could be sustained without money. The plan of weekly assessments was at first adopted. It was unequal and frequently oppressive. In 1643 it was proposed, in the republican Parliament, to place a tax on the manufacture of beer and cider. The proposition was not at first favorably received. That solemn body had no objection to checking the abominations of beer drinking, but it hesitated to inaugurate a species of taxation which seemed to infringe upon some of the most cherished rights of Englishmen. After much discussion the bill was carried, though with the express declaration that it was compelled by the necessities of the state, and should not be renewed. The tax was soon found too convenient to be dispensed with. In spite of the good resolutions of Parliament, the act was again and again renewed. As the necessities of the state increased, the list of articles was enlarged, and the rate of duty gradually augmented. Thus the excise was introduced to the English people, and thus, almost before they had ceased to look upon it as an intruder, it had acquired a foothold in the budget, from which it has never since been possible to shake it. The burden of the excise at this period, however, was not oppressive. During the Commonwealth and the reign of Charles II. a tax, which has since produced to the state an annual income of $90,000,000, did not probably average more than £500,000. It gives us a singular picture of the simplicity of that period that even this small sum made up one third of the whole royal revenue for the year. The other two thirds were drawn in about equal proportions from the customs and crown lands.

We now approach one of the most important eras in the financial history of England. The nation was yet unaccustomed to taxation, and was weighed down by no national debt. In the Revolution of 1688, and the events that grew immediately out of it, we find, however, the origin of nearly every species of tax now in use in Great Britain. In the same agitated period we find also the beginning of the national debt. Louis XIV. espoused the cause of James, and England entered upon a war with France. In a conflict with the greatest monarchy of Europe, the Government soon found itself forced to adopt a scale of national expenditure which the preceding generation would not have conceived possible. At once, as in a night, a harvest of strange taxes sprang up on every hand. The list of excisable articles was increased. The tax on houses and windows, that had been so unpopular in the preceding reign, was again introduced, and a new appraisement was made of all the real estate in the kingdom. A degenerate age might take exceptions to some of the other taxes now instituted. An act was passed placing a tax upon bachelors and widowers, fixing, at the same time, 'certain rules and duties on marriages, births, and burials, for the term of five years, for the carrying on the war against France with vigor.' Men were not even permitted to enjoy the subtile luxury derived from having a title attached to the name without taxation. Persons of the present day, wishing to know the relative value of the titles, will be interested in the following law, passed at this time:

Every person bearing the title of
esquire, or reputed, or owning, or
writing himself such, shall pay £5

Every gentleman, or reputed gentleman,
or owning himself such,
shall pay £1

These, however, were by no means the most burdensome forms of taxation. A man would willingly pay for the distinction of writing himself an esquire, who would grumble with dissatisfaction at the duty on his salt. But to meet the increasing expense of the state, and 'carrying on the war with vigor in France and Ireland' (the propitiating clause with which nearly all the acts of taxation of the period close), the most minute articles, both of necessity and luxury, were required to bear a portion of the common burden. The nation bore its unaccustomed load with singular patience. A license duty on hackney coaches, imposed in 1693, called forth, however, opposition from an unexpected quarter. The outraged wives of the hackmen assembled, and, to express their indignation at the tax, mobbed the offending members of Parliament on their way from the House. It should be mentioned, as showing the intrepidity of that body, or, more probably, the great necessities of the state, that the tax remained unchanged. In spite of all these taxes, the greatest difficulty was experienced in procuring funds to carry on the war. A general lack of confidence in the stability of the Government prevented men from taking up readily the loans which the Government was forced to call for. Various expedients were adopted to attract the cupidity of capitalists. Among these the most successful was the custom of receiving loans upon tontines. This was a species of annuity. Twenty or thirty persons united in the purchase from Government of an annuity upon the joint lives of their whole number. At the death of each his share went to those who remained, and was distributed equally among them. The final survivor took the whole annuity. No inducements, however, were sufficient to overcome the popular distrust. The national debt had already begun to accumulate. Exchequer bills sold on the street at forty per cent. discount; while, at the same time, a wild spirit of speculation and adventure, such as is too apt to be produced by the unnatural excitements of a state of war, had seized upon the popular mind, and threatened, in its reaction, to bring the whole nation to ruin.

It was at this time of excitement and danger that the National Bank was established. It was not at first favorably received. But the effect of its steadying influence soon began to be felt in the whole financial condition of the state. It even checked for a time the frenzied spirit of stock jobbing, which was absorbing the strength of the nation, and with which a few years later, when the whole country ran wild with the South Sea Bubble, it was so nearly involved in a mortal struggle. Under the influence of the Bank, the business of the nation gradually acquired an evenness and stability which was unknown to any former age.

But while the establishment of this National Bank supplied the Government with a ready and economical method of procuring funds, it did not do away with the necessity of taxes. A new form of taxation was now furnished by the Dutch. This small and ingenious people, in the defence of their liberty, had been early forced into extraordinary expenditures, and were in advance of every other nation in the perfection of their system of taxation. The English Parliament had, in the preceding age, borrowed from them the excise. They now took from the same source the idea of stamp duties. This species of tax had been invented in a competition for a prize offered by the Dutch Government for the discovery of a new form of tax, which should press lightly on the people, and, at the same time, produce a large revenue to the state. Stamps were introduced in England in the year 1693. The nation was now in possession of the four most important methods of taxation: customs, excise, licenses, and stamps. The first had existed in the island from a period of immemorial antiquity. The second was introduced by the Great Rebellion. The third and fourth came in with the wars attendant upon the accession of William and Mary.

Of these different forms it may be said, that the second is most obnoxious to the people, and the third most unequal. We should add, perhaps, to this list the land tax, which, founded on the new assessment made by William, became from this time a regular source of revenue. In this period, we see, was laid the foundation of the whole system of taxation now in use in this country and in Great Britain. The hundred years that followed produced no new species of tax. The five forms which we have mentioned, however, were diligently cultivated. In the nine years which immediately followed the accession of William and Mary, about forty distinct acts of taxation were passed by Parliament. Still it was impossible for a nation counting less than six million inhabitants to pay the expenses of a vast and protracted war by immediate taxation. In 1697 a debt existed of about one hundred million dollars. This is the foundation of that national debt which, with trifling exceptions, has been constantly increasing for more than two centuries, and which now occupies a position of influence not second to that of the throne itself. The importance of the Bank increased with the growth of the debt, and the effects of their combined influence appeared on every hand. They were the national pledges for the stability of the Government.

Every fresh rumor of preparation on the part of the exiled Stuarts to enter England, filled the people with alarm for the safety of the Bank. And when, in 1745, Charles Edward landed in Scotland, and made his romantic advance into the kingdom, an enormous run was begun on the Bank. It was prevented from doing harm only by the patriotism of the London merchants. In this brief rebellion the people realized the important financial interest which each citizen had acquired in the permanency of the existing Government and the stability of the reigning house.

At first Parliament had proceeded in the imposition of its taxes on the principle that a tax, to be equitable and easy, should be distributed over a great variety of articles. It was argued that a man would pay a small duty on a large number of things with less inconvenience and consciousness of burden than if the same tax was levied upon a few prominent articles. The pettiness of the tax would keep him in a kind of deception as to the total amount he was paying, which not even the frequency with which he was called upon to pay it would entirely remove. This theory, together with a condition of state in which the wants of Government were constantly increasing, produced, in the time of William and Mary, a constant multiplication of petty taxes. In the early part of the following reign many of these were consolidated in separate funds, which were designated to pay specific parts of the national debt.

But the number of articles subject to taxation was not reduced. The restlessness of the people under the numerous exactions of the excise soon, however, suggested the necessity of a change. Government now passed to one of those extremes which were only too common in an age when political economy had not yet risen into a science, and legislation was only an art of shifts and expedients. In 1736 a tax of five dollars upon the gallon was imposed on all English-made spirits, with a corresponding protective tariff on those of foreign manufacture. The result of this extraordinary tax proved the folly of its originators. It failed as a source of revenue, and, so far from removing these articles beyond the reach of the poor, which had been one of the designs of the bill, it was estimated that the business of smuggling was so stimulated by the enormous bounty offered upon its labors, that the amount of spirits consumed in the kingdom during the existence of this tax was not sensibly diminished. After a short trial the tax was removed.

The work of reducing the list of excisable articles was nevertheless begun, and from this time it went slowly, and, except as interrupted by extraordinary demands upon the state, steadily forward. Stamps, however, were governed by a different law. Its inoffensiveness, the economy of its mode of collection, together with its ready availability, caused this species of tax to be brought into more and more extensive use. In fact, a constant increase of taxation in some form had become necessary in order to meet the increasing expenses of the state. After the close of the war in 1697, strong efforts were made to pay off the national debt, the rising greatness of which filled all classes with alarm. No corresponding efforts since have been rewarded with similar results. In the brief period of peace that followed, the national debt was reduced one fifth. Four expensive wars, following each other in rapid succession, overwhelmed the petty labors of the sinking fund, put an end to the work of diminution, and left the nation, at the beginning of the war with her colonies in this country, oppressed with a debt of $600,000,000. It came out from this struggle with $500,000,000 added to the burden of the state. This point of time may be fixed as the close of the second epoch. A new class of changes now begin, which have had, if possible, a greater influence on the financial condition of England, as it exists at the present, than those we have already described.

In 1793, notwithstanding its enormous debt, the country boldly entered upon its great conflict with France. It is impossible to look without admiration upon the obstinate energy displayed by the English nation during this conflict, which lasted, with slight intermissions, for more than twenty years, and by which the annual tax was quadrupled, and the national debt increased beyond a chance of final extinction. In the astonishing revolution which it wrought in the financial condition of the state, as well as in much of the social phenomena with which it was accompanied, this conflict strongly resembles that in which the States of the North are engaged against the South. The first effects of the war appeared in the tax system.

Great changes had taken place in Great Britain since the time of the introduction of a regular system of taxation in 1688. Land was no longer the most important source of income to the citizen. Profits from other sources had sprung up. Commerce had discovered the riches of the Eastern trade, and manufactures, stimulated by new inventions, had begun to assume an importance and exert an influence which already threatened to revolutionize the whole condition of society. Unconsciously to itself, the nation had reached a point where any large increase in the demands of the state must produce a new species of taxation. The war with France supplied the impulse required. In 1797, Government attempted to meet the extraordinary expenses of the year by tripling the tax on houses and windows, etc. The experiment failed. It was found that these taxes, which had been the 'towers of strength' of a preceding generation, could no longer be relied on in the changed circumstances that had been brought about by time.

It was in many respects one of the darkest periods in English history. The Austrian armies, exhausted by repeated defeats, hoped only to be able to defend themselves if attacked. Spain and the Netherlands had joined themselves to France. Against the power of Napoleon England stood up alone. At this critical juncture, a mutiny broke out in the English navy. The whole fleet in the channel refused to do duty. The fleet at the Nore, catching the spirit of revolt, also raised the red flag. The doctrines of the French Revolution were sedulously scattered throughout the kingdom, and in several counties of Ireland actual uprisings had taken place. Added to these were financial difficulties. The enormous outlays demanded for the prosecution of the war were very naturally weakening the public confidence in the final ability of the Government to pay the extravagant sums it was obliged to borrow. Under the influence of the distrust thus engendered stocks fell. Three per cents., which had sold at 98, went down to 53. Many of the loans effected by the Government at this time and during the war were made with a discount of forty per cent. on the nominal value of the stock. Gold was scarce, and rapidly rising. The pressure on the Bank for redemption was greater than it had been since the rebellion of 1745, and threatened, unless corrective measures were at once adopted, to bring that institution to actual bankruptcy.

The undaunted courage and resolution of the Government, in the midst of this accumulation of difficulties, saved the country. The writ of habeas corpus was suspended. By an admirable mingling of firmness and conciliation the mutiny was quelled in the navy without serious consequences resulting to the state. To meet the financial difficulties, an act was passed by Parliament permitting the Bank to suspend specie payment--thus delivering the country, for a period of more than twenty years, over to a wholly inconvertible paper currency. From these strong measures the enemies of the country anticipated the most disastrous results. They were, however, doomed to disappointment. Even Napoleon at length grew weary of prophesying the bankruptcy of a nation which every year, from this time, gave more and more effective proofs of the stability of its finances. It was the singular fortune of Great Britain to have at the head of its finances, at this juncture, a man, who in a different sphere, exhibited a spirit scarcely less bold, indomitable, and comprehensive than that of the First Consul himself. This man was Mr. Pitt. The finances of Great Britain, even at the present day, bear witness to the extraordinary changes instituted by this statesman. The tax on houses, windows, etc., had failed. In 1798, Mr. Pitt, with a characteristic fertility of invention, brought forward a bill laying a tax on incomes. By this bill, which is the foundation of all those that have since followed, no tax was imposed on incomes that were less than $300; on incomes above this sum a small tax was laid, which gradually increased until it became one tenth of all incomes over $1,000. The income tax was designed by Mr. Pitt to be simply a war tax. According to his plan the interest upon the national debt, which he kept funded as far as possible, was to be provided for solely from the indirect taxes, leaving the direct tax to meet the extraordinary expenses of the war. The most original feature of the financial system instituted by this statesman, however, was the sinking fund. To prevent the rapid accumulation of the national debt, Mr. Pitt, even before the breaking out of the war with France, had obtained from Parliament permission to set aside six million dollars, with an addition, afterward made, of one per cent. of all the loans made by Government, as a fund to be expended in the purchase of Government stock. The rapid growth of this fund from the constant compounding of interest would, he declared, be sufficient, ultimately, to consume the entire debt of the state. The result seemed to justify his prediction. Constantly in the market, the sinking fund saved the state, by its timely purchases many times during the war, from the disastrous depreciation to which the public stock was liable at every unfavorable turn of the conflict. In 1815, so enormous had been the financial transactions of the state that this fund amounted to about $75,000,000.

In 1802 the income tax was discontinued; and, in the following year, was renewed under the name of the property tax. The expenses of the state continued to rise, and it became necessary that this tax should be largely increased. During the last ten years of the war the property tax required ten per cent. of all the incomes of the kingdom--with a few exceptions--to be paid into the national treasury every year. Never before had such a burden been laid on Englishmen. All classes groaned under the exactions of a tax every penny of which they were made conscious of by direct collection. In comparison with the property tax all other burdens seemed easy. It is now clear, however, that the nation could never have passed successfully through the great struggle in which it was engaged without the assistance of the tax upon incomes. It stood next in order of productiveness to the excise. In the year 1815 the property tax produced seventy-five millions of dollars. Still the people remembered with pleasure that the word of Parliament had been given that it should not continue longer than the return of peace. The time was eagerly looked forward to when that promise should be redeemed. Early in 1816 the question of the continuance of the tax came up before Parliament. A strong party, impressed with the importance of diminishing the national debt, advocated its continuance. Every night, for two months, the subject was anxiously discussed. The motion for its abolition was at last carried. The vast crowd which had assembled without the Parliament House to await the result, caught the sound of cheering in the chamber, and, receiving it as a signal of success, rent the air with shouts of joy. The enthusiasm spread with the news. Bells were rung as for a great victory, and bonfires in all parts of the kingdom proclaimed the joy of the nation at its release from what was regarded the moat oppressive burden of the war. Twenty-five years later the income tax was again revived.

The national debt at the close of the war with France amounted to a little more than $424,000,000,000. Of this, $300,000,000,000 had been added by the war. During the last years of the contest the annual expenditures of the state were $585,000,000. The population of the island was at this time 13,400,000, from which $360,000,000 was annually collected in taxes. It is important to notice the condition of the people during this epoch. For nearly twenty years the country had been under the uncontrolled influence of a paper currency. It had been a period of remarkable prosperity, coupled with unparalleled changes. And here we find many points of resemblance with the present condition of our own country. The rapidly expanding currency, the enormous demands of the war, and the spirit of speculation engendered by the sharp alternations of hope and fear, and the extraordinary fluctuations of the markets had stimulated in every branch of business a preternatural activity. Manufactures, which the beginning of the war had found just rising into prominence, rapidly developed in an age of financial profusion. No such progress had ever been made in a corresponding period. Exports were doubled. The shipping rose from one to two and a half million tons. The whole nation exhibited the singular spectacle of a country constantly advancing in wealth and prosperity in the midst of one of the most exhaustive wars that the world has ever seen.

To this, however, there was apparently, at least, one exception. Prices rose steadily from the beginning of the war. This was true not merely of unimportant articles, or those which, by the exercise of a more severe economy, could be in part dispensed with. The cost of the necessaries of life doubled. Wheat rose from forty-nine shillings per quarter in 1797 to one hundred and forty shillings in 1813; while the beef which was sold in Smithfield market, at the beginning of the war, at three shillings per stone, constantly advanced in price, until the same quantity in 1814 could only be bought for six shillings. Malt, coal, wages--everything rose proportionately. Few questions have been the subject of more discussion than the cause of this remarkable rise of prices. Two diverse explanations have been given, each put forth by men whose habits of thought and opportunities for observation qualify them to speak on the subject with authority. One large party attribute the rise of prices that took place at this period, entirely to the influence of the suspension of specie payment by the Bank, which, as they say, flooded the country with an inflated and depreciated paper currency, and thus necessitated a corresponding rise in the price of the articles given in exchange for it. So strongly does this reasoning commend itself to the minds of those familiar with the first principles of political economy, that it has been very generally accepted. And it is worthy of notice that these are almost the only arguments which can be heard in explanation of the similar rise of prices now going on in this country. A more subtile but very important class of influences were brought to notice by another party, under the able leadership of Mr. Tooke. By these the rise of prices is, to a large degree, attributed to the excited spirit of speculation produced by the war, which, as they show, twice during this period brought the country to the brink of ruin. In favor of this explanation it may be further said that the fall of prices began immediately on the close of the war, and at no time was greater than in 1817, two years before the resumption of specie payment by the Bank. In 1819 the Bank of England resumed the payment of specie. Gold, which had been at one time at a premium of twenty-five per cent., now fell rapidly, and in 1821 was again at par.

It is difficult to say which has exerted the largest influence on the finances of Great Britain--the Revolution of 1688, or the wars with France in the beginning of this century. The first gave to England its system of taxation, but the last developed the capabilities of that system, and adapted it to the wants of a growing and commercial people.

The nation came out of its long conflict with taxes pressing upon nearly every important branch of industry. In the sixteen years that followed the war with France, taxes to the amount of nearly $200,000,000, were taken off from the country. These changes gave opportunities for many important reforms. While the national debt was slowly reduced, the tax system underwent great changes. Many taxes which had checked the growth of important branches of business were entirely removed. Efforts were made to reduce the excise, which was always an unpopular form of taxation. In carrying forward these changes, it was found that one really productive tax might be made to take the place of a large number of small duties which pressed with peculiar severity upon the people. Government now turned longingly to that 'splendid source of revenue,' as it was aptly called, which it had so reluctantly relinquished in 1816. In 1842, Sir Robert Peel suddenly brought forward a plan for a new tax upon incomes. It was at once adopted. This income tax differed, however, in many important particulars, from the one which the Government had been compelled to make use of in the wars with France. By it incomes under $750 were exempt. A discrimination of very great importance was also made, which has been the occasion since for much refined discussion, and is founded in sound reason, but which has hitherto been wholly overlooked in the legislation in this country. A discrimination was made between salaries and the incomes divided from realized capital. Taxable incomes, partaking of the nature of a salary, and upon which a tax would have the character of a duty on capital, were required by the provisions of this new act to pay only one half as much as those incomes which arose from, and would be therefore added to, wealth already acquired.

The income, or property tax, as it is now called, completes the system of taxation which is now relied upon to supply the varying but always enormous wants of Great Britain. Through these various sources during the past year the English Government has collected an income of three hundred and fifty million dollars--about the same it obtained through the same channels from a population of thirteen million inhabitants in the closing years of the war with Napoleon. With the same system of taxation, our own Government has, during the past year, obtained an income of one hundred and eleven million dollars. If we examine particularly the sources of the English revenue at these two epochs, and compare them with the corresponding branches of taxation with us, we find that in the year closing in 1815, the receipts from customs amounted to about fifty-six million dollars--a sum, it will be noticed, considerably less than that drawn from the same source in this country for the past year, but only about half the amount derived from customs in Great Britain in the year ending September, 1863. From the property tax was obtained about seventy-five million dollars--the modified form of this tax now in use in Great Britain produces about fifty million dollars per annum. Either of these sums is probably much larger than it would be advisable to attempt to produce by a direct tax in this country. Stamps, in 1815, yielded an income of thirty million dollars. During the past year this simple and productive source of revenue produced in Great Britain forty-five million dollars. It seems probable that this species of tax might be extended in this country much farther than it now is, without oppression to the people, and with a handsome increase of the revenue.

But the excise has ever been the most productive fountain of revenue in Great Britain. The income from this tax in that country, during the year ending September, 1863, was eighty-four million dollars. In the year 1815, when, on account of the smaller population, the other sources of revenue were less productive than at the present day, the excise yielded an income of not less than a hundred and thirty-five million dollars. It is worthy of notice that, of this income, the tax upon the various forms of spirituous liquors supplied a large element. English spirits, which, in the experiment of 1736, it had been found could not carry a tax of five dollars per gallon, it was now found easily bore the more moderate but still large tax of ten shillings sixpence sterling. Aside from this tax was the duty on beer, cider, and malt, the last of which alone yielded an income of thirteen million dollars annually.

* * * * *

We have lingered on these details, which to many will be dry and uninteresting, because they supply a kind of guide to the changes which must ultimately take place in the tax laws of this country, and because, further, they furnish an answer to all those objections which periodically disturb the minds of the timid and doubtfully patriotic in our midst. But these lessons we must leave the reader to extract for himself. We close simply with saying that, while excessive and undiscriminating taxation is always a curse, yet taxation, properly imposed, although severe and long continued, may be far from disadvantageous. We have seen the English people slowly arising, through two centuries, from a nation comparatively free from taxation and without a national debt, to one bearing an annual tax of three hundred and fifty million dollars, and holding absorbed in its midst a national debt of nearly four thousand million dollars. We have seen it during this period constantly advancing in prosperity and greatness--the national debt adding stability to the Government, and taxation giving caution and stability to the transactions of private life.

APHORISMS.

NO. I.

One of the most sublime of all facts beneath that of the Divine Being, appears in the existence of an immortal soul. There it stands--once for all, once forever. The earth might be wasted away, at the rate of a single grain in a century, without passing the very infancy of our spirit's life. How insignificant, in the comparison, a world like our own, in all its temporal aspects. What the future duration of the earth may be, we have no means of knowing; but if less than endless, it is of little moment in the presence of the least capacious human soul.

THE LOVE LUCIFER.