the tax at a low level, this was considered a justification, while the minimum 2d. in 1875 warranted raising the exemption to £150.

Following the precedents of the past, therefore, it might have been expected that the smaller incomes would have been again subjected to the tax, while on the restoration of peace, and peace expenditure, the tax should have been at once fixed at a normal peace level.

Unhappily, prior to the war expenditure had been increasing, and though this increase was obscured by the war, it is now quite clear that it has grown enormously, and there seems no assurance of a considerable reduction. This being the aspect of what we must call normal peace expenditure, it is the obvious duty of the Chancellor of the Exchequer in particular, and of the Ministry in general, to address themselves to readjusting national finance to the new needs. This duty they have shirked, and hide themselves behind a new shibboleth about direct taxation. It is submitted that this is totally unjustifiable, and that the line they have adopted is fraught with grave national risk, in that they are using for peace what is a legitimate reserve for war, upon which they cannot fall to an unlimited

extent.

It is for responsible Ministers to devise new taxation, and to take the odium of so doing, if they are unable to reduce expenditure. If direct taxation is to be their policy, it must be applied to the whole taxable community, and not to a class only. In order to do this, the whole system of income tax must be recast, abolishing the ridiculous scheme of abatements, and marking everything in plain figures, so to say. A graduated scale is wanted, to commence, it is suggested, at fifty pounds a year, and to be assessed on all earnings at that rate, whether described as salary, wages, or earnings. The rate, of course, would be low, say a penny in the pound, or even a halfpenny, which could readily be collected by means of stamps affixed to pay-sheets, for which employers would be responsible. The rate would somewhat rapidly ascend, through, perhaps, eighty pounds to a hundred, and then by fifties to five hundred, by hundreds to a thousand, by two hundred and fifty to two thousand, and so on by thousands.

Here in this country the proposal may be thought impossible, or outrageous, but it is an accomplished fact in Germany, where in one of the States for instance (for the revenue is differently raised in different States), a tax of one mark (shilling) is assessed on incomes of 401-500 marks (£20-25) ascending by one mark per 100 to 800 marks, and then by larger advances till 10,000 maiks (£500), which pays, in the English equivalent, £14 2s., while £1000 pays £28 10s. We need follow it no further, because it is only the principle that is wanted.

Such, then, as regards direct taxation, must be the form of any

remodelling of our system of finance, and in it alone will lie the safeguarding of the interests of all, which must be the object of responsible government. Were we to adopt a graduated tax of this description, fixing the minimum so low as to bring within it the great bulk of the electors, though subjecting the poorest to an almost nominal tax, the risk would be avoided of leaving it in the power of the majority to tax the minority, since any increase of this tax would fall proportionately on all.

This risk is, now, not entirely imaginary, for even a Conservative Government, sorely in need of money, has evinced a great unwillingness to tax the poorer classes, while it is, we hope, not unjust to say that a section, at all events, of the Liberal party appears to be quite out of sympathy with the present direct tax payer.

So far as either party is actuated by genuine consideration for the working classes-and it is not doubted that both alike are so actuated their motives deserve every commendation.

But motives are often complex, and political motives form no exception. The majority of electors do not now pay income tax, and it is no reflection upon that majority to say that it is more agreeable to them to see other people taxed than to be taxed themselves. That is a proposition to which we should all agree, and is of universal application.

A revised income tax, it is submitted, should be divided into two parts: a tax on earnings, and a tax on the produce of investments. To deal first with the latter it would conduce to simplicity, and as a general principle would be just, to impose a uniform tax on all income derived from invested capital, without regard to whether or not it accrued to any one who also derived income from earnings. The two sources are totally distinct, and involve absolutely different principles and considerations, as has been stated is recognised in our own Australasian Colonies, but as we have no knowledge of the details it is not possible to enlarge upon it, though it offers a useful field for inquiry by the Chancellor of the Exchequer. Obviously, capital represented by investments is quite another thing from earnings, however ample, since the latter cease with life, or o'd age, or may be diminished or even cease also through sickness or chronic ill-health, while capital remains for dependants and others. A uniform tax on capital might fail to meet particular cases of hardship, but it is necessary to legislate on general principles, and having regard to this fixed nature of capital the principle seems eminently just.

A direct tax upon earnings, thoughtfully graduated, and normally kept at a low level, provided it is made to apply generally, in order to prevent class taxation, and to bring home to all in whom power is vested through the franchise an equal sense of responsibility, seems altogether unobjectionable. Not only so, but since revenue

has to be raised somehow, it is positively desirable that this fact should not be too much obscured by indirect taxation. In a democracy, using the term in its widest sense to connote the whole people, without distinction of class, it is politic so to order finance as to compel the interest of all, so that in sanctioning any act of State the individual man, whether expressing himself in the vague sense recognised as public opinion, or by a direct vote, may consider the effect of his action as regards himself and the State, in a precisely similar manner to that in which he regulates his own private affairs.

It is agreed, therefore, that direct and indirect taxation should be co-related, since, as regards that which is direct, we fail to see why it should not be applied to wages, low and high. Apart from the general argument in its favour, it is to be remembered that the mode of life, the standard of living, and the sense of responsibility for others is so different in the wage-earning, as distinguished generally from the salaried and profit-earning classes, that it seems as equitable to impose some burden on the former, since it would entail no greater hardship upon them than is now imposed upon the lower grades, at least, of the latter class. Wages, it is believed, are not now in any case assessed to income tax, though one has heard of a skilled artisan, in permanent employment, whose wages vary from £5 to £8 a week. If we are to have an income tax, why should not this, at all events, come within it?

As regards earnings generally, it is claimed that they are not so well able to bear taxation as capital, on account of their more temporary and transient nature. Earnings are called upon to provide for the future in various forms of insurance suited to the conditions of various classes, while capital is not so called upon, at least to the same extent and with the same urgency. Surplus earings, it is to be remembered, would be taxed as income from investments, while a moment's consideration will show the immense gulf between the man who has capital, however small, to leave behind him, and whatever his station, and he who has none.

Widening the basis of direct taxation, to include wages and the smaller incomes, would, it may be pointed out, greatly increase the yield and decrease the burden of its incidence by reason of distributing it over a larger area.

Having considered the advantage and fairness of a general direct tax, we may turn to indirect taxes, which may be treated shortly, as the subject is less debatable. The justification for taxing articles of general consumption, such as tea, is that thus large numbers of persons are laid under contribution who would ctherwise not be reached at all. Subject to this, the least burdensome principle is to impose as large taxes as possible upon articles of luxury and of voluntary consumption, that is, which are not strictly necessary or

beneficial. Under this principle it is possible for persons in whose circumstances, such as a large family, the incidence of direct taxation is severely felt, so to regulate their economies as to adjust their expenditure to their means far more nicely than is possible under any scheme of involuntary taxation, as for this purpose it may be called, meaning that which is inevitable, unavoidable.

An income tax raised to one shilling in time of peace, on the narrowest basis ever known, supported by specious and spurious maxims of finance, calls urgently for consideration. It is thought that modern Ministers will not concede this consideration, except under pressure, and the most effective means of exercising this pressure is by a combination of the class affected. For this reason an Income tax Payers' Defence League has been suggested, and it is hoped that it may assume a definite form, the object being to secure, by organisation, by pressure brought to bear on members of Parliament, and candidates therefor, a substantial reduction of this tax-as at present assessed, sixpence should should be the peace

maximum.

Such revision of national finance as this may necessitate is the affair of Ministers, and it is not necessary for income tax payers, as a class, to make any suggestions, or to adopt any which are made. The Conservative party, who pile them on, are probably not unwiling to lessen their burdens, but are impotent. A section of the Liberal party is certainly unsympathetic, and to them it may perhaps be permitted to say that, since the party must stand or fall as a whole. -and its fall would, we think, be a national misfortune-it is not desirable for them to alienate the income tax payer. Let them remember that Mr. Gladstone was his best friend, and he wished to abolish it altogether. Equal justice for all is the true principle of Liberalism, and prudence may suggest that, if and when the income tax payer decides to adopt common action in defence of his legitimate interests, in the same way that other classes and interests have done and now do, his numbers would be sufficient to turn mcst elections, and his wealth represents the collective wealth of the country. It would surely be better policy for Liberals to proclaim themselves and their policy his friends, and to concentrate upon financial reform.

The Land Tax, with its insignificant yield of £725,000 in 1902-03, offers a legitimate field for inquiry, and the fact that the amount of land and house property assessed in 1892-93 was £170,000,000, while in 1901-92 it had shrunk to £156,000,000, seems to call for some explanation, especially having regard to the immense increase, during this period, in the value of such of this property as is urban. Other forms of wealth showed marked increase during this same period.

Another aspect of national revenue and expenditure remains to

be considered as bearing upon the question. We mean the Imperial aspect. The United Kingdom has to bear the whole burden of the Empire. The 25 per cent. of the population of the self-governing Colonies are freed from Imperial taxation at the expense of the remaining 75 per cent., who represent the United Kingdom.

It is in no "Little England" spirit that attention is directed to this. Mr. Chamberlain himself, addressing the Colonial Premiers at the Conference in 1902, used the most forcible language. In his argument he said:

"At the present moment the estimates for the present year for naval and mitary expenditure in the United Kingdom-not including the extraorinary war expenses, but the normal estimates-involve an expenditure per head of the population of the United Kingdom of 298. 3d.-29s. 3d. per head per annum. In Canada the same items involve an expenditure of only 2s. per head of the population, about one-fifteenth of that incurred by the United Kingdom. In New South Wales-I have not the figures for the Commonwealth as a whole, but I am giving these as illustrations, and I find that in New South Wales the expenditure is 38. 5d.; in Victoria, 38. 3d.; in New Zealand, 3s. 4d.; and in the Cape and Natal, I think, it is between 28. and 38.

"Now no one, I think, will pretend that this is a fair distribution of the burdens of Empire. No one will believe that the United Kingdom can, for all time, make this inordinate sacrifice."

In the same connection the First Lord of the Admiralty issued a Memorandum embodying the result of informal discussions between him and the Premiers. In it he showed that, allowing for the increased Colonial contributions to naval defence, the naval contribution per head per annum in the United Kingdom was 15s. 2d., while in Australia it was 1s. 03d.; in Cape Colony, 1s. 104d.; in Natal, 10s. 91d.; and in Canada, nil.

Speaking in the House of Commons upon the Army E-timates on March 17 this year, in reply to Sir R. Reid, who had called attention to our Imperial expenditure and the question of Colonial contributions, the Secretary of State for War said:

"I think the hon. and learned member is right, and that the feeling of this country is growing, and will grow, in the direction he indicates. I believe that unless there is some greater willingness on the part of the Colonies to share these great burdens, there will be a closer and closer examination by the people of this country of the wisdom of the policy which compels them always to bear the lion's share. I do not think it is the case that any action this House or the Government may take is likely to change the situation materially. I believe it can only be by the slow growth of public opinion in the Colonies, which may, perhaps, tend in the direction of showing that they have dangers, and that those who have dangers must take their share in guarding against them. Or it may beI shall not be surprised if we have to recognise it-the growth of public

1 For this and subsequent quotations I am indebted to the publications of the Imperial Federation (Defence) Committee, and to the courtesy of Mr. Howard d'Egville, its hon. sec.