intelligence of the poorer classes, aided so far as necessary by the guidance and coöperation of the state, shall obviate, as it might so well do, the major part of the disabilities attendant on poverty, the inequalities of fortune arising from people's own earnings could not justly give umbrage. With respect to the large fortunes acquired by gift or inheritance, the power of bequeathing is as much a part of the right of property as the power of using; that is not in the fullest sense a person's own, which he is not free to bestow on others. But this is one of those privileges of property which are fit subjects for regulation on grounds of general expediency; and I have already suggested,* as the most eligible mode of restraining the accumulation of large fortunes in the hands of those who have not earned them by exertion, a limitation of the amount which any one person should be permitted to acquire by gift, bequest, or inheritApart from this, and from the proposal of Bentham (also discussed in a former chapter) that collateral inheritance ab intestato should cease, and the property escheat to the state, I conceive that inheritances and legacies, exceeding a certain amount, are highly proper subjects for taxation; and that the revenue from them should be as great as it can be made without giving rise to evasions, by donation inter vivos or concealment of property, such as it would be impossible adequately to check. The principle of graduation, (as it is called,) that is, of levying a larger per centage on a larger sum, though its application to general taxation would be a violation of first principles, is quite unobjectionable as applied to legacy and inheritance duties.

ance.

The objection to a graduated property tax applies in an aggravated degree to the proposition of an exclusive tax on what is called "realized property," that is, property not forming a part of any capital engaged in business, or (it

* Supra, book ii. ch. 1.

should rather be said) in business on the owner's account; as land, the public funds, money lent on mortgage, and shares (I presume) in joint-stock companies. Except the proposal of applying a sponge to the national debt, no such palpable violation of common honesty has found sufficient support in this country during the present generation, to be regarded as within the domain of discussion. It has not the palliation of a graduated property tax, that of laying the burden on those best able to bear it; for "realized property" includes almost every provision made for those who are unable to work, and consists, in great part, of extremely small fractions. I can hardly conceive a more shameless pretension, than that the major part of the property of the country, that of merchants, manufacturers, farmers, and shopkeepers, should be exempted from its share of taxation; that these classes should only begin to pay their proportion after retiring from business, and if they never retire should be excused from it altogether. But even this does not give an adequate idea of the injustice of the proposition. The burden thus exclusively thrown on the owners of the smaller portion of the wealth of the community, would not even be a burden on that class of persons in perpetual succession, but would fall exclusively on those who happened to compose it when the tax was laid on. As land and those particular securities would yield a smaller net income, relatively to the general interest of capital and to the profits of trade; the balance would rectify itself by a permanent depreciation of those kinds of property. Future buyers would acquire land and securities at a reduction of price, equivalent to the peculiar tax, which tax they would, therefore, escape from paying, while the original possessors would remain burdened with it even after parting with the property, since they would have sold their land or securities at a loss of value equivalent to the fee-simple of the tax. Its imposition would thus be tanta

mount to the confiscation for public uses of a per centage of their property, equal to the per centage laid on their income by the tax. That such a proposition should find any favor, is a striking instance of the want of conscience in matters of taxation, resulting from the absence of any fixed principles in the public mind, and of any indication of a sense of justice on the subject in the general conduct of governments. Should the scheme ever enlist a large party in its support, the fact would indicate a laxity of pecuniary integrity in national affairs, scarcely inferior to American repudiation.

$ 4. Whether the profits of trade may not rightfully be taxed at a somewhat lower rate than incomes derived from interest or rent, is part of the more comprehensive question, so often mooted on the occasion of the present income tax, whether life incomes should be subjected to the same rate of taxation as perpetual incomes; whether salaries, for example, or annuities, or the gains of professions, should pay the same per centage as the income from inheritable property.

The existing tax treats all kinds of incomes exactly alike, taking seven pence in the pound as well from the person whose income dies with him, as from the landowner, stockholder, or mortgagee, who can transmit his fortune undiminished to his descendants. This is a visible injustice; yet it does not arithmetically violate the rule that taxation ought to be in proportion to means. When it is said that a temporary income ought to be taxed less than a permanent one, the reply is irresistible, that it is taxed less; for the income which lasts only ten years pays the tax only ten years, while that which lasts forever pays forever. But almost every one feels that this answer does not touch the real grievance; for in spite of the nominal equality of income, A, an annuitant of £1000 a year, can

not so well afford to pay £100 out of it, as B who derives the same annual sum from heritable property; A having usually a demand on his income which B has not, namely, to provide by saving for children or others; to which in the case of salaries or professional gains, must generally be added a provision for his own later years; while B may expend his whole income without injury to his old age, and still have it all to bestow on others after his death. If A, in order to meet these exigencies, must lay by £300 of his income, to take £100 from him as income tax is taking £100 from £700, since it must be retrenched from that part only of his means which he can afford to spend on his own consumption. Were he to throw it ratably on what he spends and on what he saves, abating £70 from his consumption and £30 from his annual saving, then, indeed, his immediate sacrifice would be proportionally the same as B's; but then his children or his old age would be worse provided for in consequence of the tax; and the plea ordinarily urged in vindication of its justice, that when the income ceases the tax ceases, would no longer be maintainable.

The principle, therefore, of equality of taxation, interpreted in its only just sense, equality of sacrifice, requires that a person who has no means of providing for old age, or for those in whom he is interested, except by saving from his income, should have the tax remitted on all that part of his income which is really and bona fide applied to that purpose. I say really applied, because (as before remarked in the case of an income not more than sufficient for subsistence,) an exemption grounded on an assumed necessity, ought not to be claimable by any one who practically emancipates himself from the necessity. One expedient might be, that the Income-Tax Commissioners should allow, as a deduction from income, all bona fide payments for insurance on life. This, however, would not provide 31

VOL. II.

for the case which most of all deserves consideration, that of persons whose lives are not insurable; nor would it include the case of savings made as a provision for age. The latter case might, perhaps, be met by allowing as a deduction from income all payments made in the purchase of deferred annuities; and the former by remitting income tax on sums actually settled, and on sums paid into the hands of a public officer, to be invested in securities, and repaid only to the executor or administrator; the tax so remitted, with interest from the date of deposit, being retained (for the prevention of fraud) as a first debt chargeable on the deposit itself, before other debts could be paid out of it; but not demanded if satisfactory proof were given that all debts had been paid from other resources. I throw out these suggestions for the consideration of those whose experience renders them adequate judges of practical difficulties. It is highly probable that there may be better modes of attaining the object. If no plan be found practicable by which the exemption can be confined to the portion of income actually saved, there still remains the rough expedient of two different rates of assessment. There would be great difficulty in taking into account differences of duration between one terminable income and another; and in the most frequent case, that of incomes dependent on life, differences of age and health would constitute such extreme diversity as it would be impossible to take proper cognizance of. It would probably be necessary to be content with one uniform rate for all incomes of inheritance, and another uniform rate for all those which necessarily terminate with the life of the individual. In fixing the proportion between the two rates, there must inevitably be something arbitrary; perhaps a deduction of one fourth in favor of life-incomes would be as little objectionable as any which could be made, it being thus assumed that one fourth of a life-income is, on the average of all ages and states of