64
NATIONAL DEBT REDEMPTION LEVIES
ALTHOUGH the taxation of capital is nonsensical, it does not follow that every proposal presented to you in that form must necessarily be impracticable. It is true that the Government, if it wants ready money, can obtain it only by confiscating income; but this does not rule out operations for which no ready money is required, nor does it prevent the Government from taking not only the income of a proprietor, but the source of his income: that is, his property, as well. To take a possibility that is quite likely to become a fact in your experience, suppose the Government were driven to the conclusion that the National Debt, or some part of it, must be wiped out, either because the taxation needed to pay the interest of it is hampering capitalist enterprise, which would be a Conservative Government’s reason, or for the sake of redistributing income more equally, which would be a Socialist Government’s reason! To pay off what we have borrowed from America, or from foreigners of any nationality, would need ready money; and therefore the simple wiping out of this part of the national debt would be impossible except by flat repudiation, which would destroy our credit abroad and probably involve us in a war of distraint. But that part of the debt which we owe to ourselves could be wiped out without a farthing of ready money by a tax presented and assessed as a tax on capital, or rather a levy on capital (to indicate that it was not to be an annual tax but only a once-in-a-way tax). Take the war debt as an illustration of the possibility of a total wipe-out. Let us suppose for the sake of simplicity that as much of the National Debt as the Government owes to its own subjects is £100, all lent to it by one woman (call her Mary Anne) for the war, and, of course, long since spent and blown to bits, leaving nothing behind but the obligation of the Government to pay Mary Anne £5 a year out of the taxes. Imagine also that there is only one other capitalist in the country (say Sarah Jane), whose property consists of £100 from stocks and land yielding an income of £5 a year. That is, Sarah Jane owns the entire industrial plant of the country; and Mary Anne is the sole domestic (as distinguished from foreign) national creditor. The Chancellor of the Exchequer brings in a tax of 100 per cent on capital, and demands £100 from Sarah Jane and £100 from Mary Anne. Neither of them can pay £100 ready money out of their £5; but Sarah Jane can hand over all her share certificates to the Government; and the Government can transfer Mary Anne’s War Loan of £100 to itself. Mary and Sarah, left destitute, will have to work for their livings; and all the industrial plant of the country will have passed into the hands of the Government; that is, been nationalized.
In this transaction there is no physical impossibility, no selling of worthless shares for non-existent ready money, no rocketing of the Bank Rate, nothing but simple expropriation. The fact that the £200 at stake are really thousands of millions, and that there are many Marys and many Sarahs, each with her complement of Toms and Dicks, alters the size of the transaction, but not its balance. The thing could be done. Further, if the disturbance created by a sudden and total expropriation would be too great, it could be done in instalments of any desired magnitude. The 100 per cent tax on capital could be 50 per cent or 5 per cent or 2½ per cent every ten years or what you please. If 100 per cent meant a catastrophe (as it would) and 10 per cent only a squeeze, then the Government could content itself with the squeeze.
By such a levy the Government could take off the taxation it had formerly imposed to pay the home War Loan interest, and use the dividends of the confiscated shares to pay the interest on our war debt to America, taking off also the taxation that now pays that interest. If it were a Conservative Government it would take it off in the form of a reduction of income tax, supertax, excess profits tax (if any), death duties, and other taxes on property and big business. A Labor Government would leave these taxes untouched, and take taxes off food, or increase its contributions to the unemployed fund, its grants-in-aid to the municipalities for public work, or anything else that would benefit the proletariat and make for equality of income. Thus the levy could be manipulated to make the rich richer as easily as to raise the general level of well-being; and this is why it is just as likely to be done by a Capitalist as by a Labor Government until the domestic war debt is—shall we say liquidated, as repudiated sounds so badly?
The special objection to such practicable levies is that they are raids on private property rather than orderly and gradual conversions of it into public property. The objection to raids is that they destroy the sense of security which induces the possessors of spare money to invest it instead of spreeing it. Insecurity discourages saving among those who can afford to save, and encourages reckless expenditure. If you have a thousand pounds to spare, and have not the slightest doubt that by investing it you can secure a future income of £50 a year, subject only to income tax, you will invest it. If you are led to think it just as likely as not that if you invest it the Government will presently take it or some considerable part of it from you under pretext of a Debt Redemption Levy, you will probably conclude that you may as well spend it while you are sure of it. It would be much better for the country and for yourself if you could feel sure that if the Government took your property it would buy it from you at full market price, or, if that were for any reason impracticable, compensate you fully for it. It is true that, as we found when we went into the question of compensation, this apparently conservative way of doing it is really as expropriative as the direct levy, because the Government raises the purchase money or compensation by taxing property; so that the proprietors buy each other out and are not as a body compensated at all; but the sense of insecurity created by the raiding method is demoralizing, as you will understand if you read the description by Thucydides of the plague at Athens, which applies to all plagues, pathological or financial. Plagues destroy the sense of security of life: people come to feel that they will probably be dead by the end of the week, and throw their characters away for a day’s pleasure just as capitalists throw their money away when it is no longer safe. A raid on property, as distinguished from a regular annual income tax, is like a plague in this respect. Also it forms a bad precedent and sets up a raiding habit. Thus domestic debt redemption levies, though physically practicable, are highly injudicious.