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    The difficulty , if any , lies in dealing with mortgages effected before the establishment of the new system of taxation . In many such cases , no doubt , new engagements would be made , equitably settling all interests in accordance with the new state of things . In case , however , of a mortgage which for any reason could not be removed , the , obvious rule would be for tlie mortgagee to repay to tlie possessor so much of the tax as bore the same proportion to the whole tax , as the mortgage bore to the whole estimated value of the property . A rent-charge , on being fairly capitalized , falls under the same principles as a mortgage ; its share of the tax would be to the whole tax what its capitalized value would be to the estimated value of the whole property .

    2 . The Tradesman ' s Creditor . —This case differs from that of the mortgagee in that the lien is not specifically on some designated article of property , but on all the possessions of the debtor . It further differs in that it is not a specific rate of interest , but a general view to advantage , which induces the creditor to place his goods or money in the debtor ' s hands . Both parties , in considering the total effect of their proceedings , take the tax into account just as they do rent , insurance , or any other expense . The tradesman has to consider whether it is to his own advantage to hold ostensibly his creditor ' s property and pay the tax on it ; the creditor has to consider whether the tradesman is likely to

    hold his property safely and to advantage with that burden on it . If the tradesman had no tax , or a small tax to pay , he could give a greater price for the goods he retails , or a , higher interest for the money he borrows : if he lias a large tax to pay he can give only a smaller price or a lower interest . Thus , although there is no formal , there is not less a real , partition of the tax , either in exact proportion to the interest of the several parties in the property , or in that proportion affected as all other transactions are by the comparative skill , diligence , or commercial power of the parties .

    This , it is true , is only one phase of the complicated question of the ultimate incidence of taxation , and a very incomplete view of that question ; but it is sufficient for the present purpose of showing that under the proposed system the tradesman ' s creditor would not go mitaxed , and that he would bear such a share of the tax on goods held for him by others , as circumstances beyond the control of any law or government permit to reach him . 3 . The Fnndholder . —This is a case of lien such as we have already discussed , affected , however , by special circumstances . The lien is on the entire property of tlie nation , and is not the less real for being , like the tradesman ' s debt , not specifically assignable to individual objects amongst that property .

    In any other case the holder of the lien would be taxed , explicitly or implicitly , through the possessor oi the encumbered property . I 5 ut here ( ho natural operation of private- interests cannot take place ; for no voluntary arrangement can lie made , mid no ascertained share of the lax can be assigned by law as between individual parties . It is , therefore , necessary to provide by law , in this abnormal instance , for that which everywhere beside would provide for itself .

    The fundholder is himself a member of the body bound to supply the means of satisfying his claim . Tlie justice of including tlie funds in the category of taxable property becomes manifest on remembering that if all oilier taxes were repealed , and a , tax on property substituted lor Ibem , the fundholder would remain uniaxed , if bis claim were not . so included , and that tlie actual holders of his unsevered share would , in fact , ]) iiy bis share Cor him , having already paid their own . l'W , ( he liability to pay interest , to him deteriorates f licit- properly by the amount of the capital due to that interest , if not , by more ; and if be do not . pay his share of the common expenses in proportion to his lien , he just leaves them to pay it for him , lifter suffering thai deterioration .

    Reduced to its simplest form , the case is that oi an estate owned in partnership by two persons , and mortgaged to the wealthier of them . If the mortgagee , being u partner also , does not pay his share of the interest on the mortgage , by its being included in the aernitnl , of disbursementh , the other partner pays both shares . Our position , then , scarcely requires to be strengthened by the fact , that all prior taxation , applicable to them from its nut tire , has been mix In to affect the funds and tlioclfrdividciids , just as it iifl ' ecled other pro-1 H ^ tVj ^ fTitJjjKr tdfcH * 8 pi ' . V income-tax . V ^^ f jteSS M ^)?^) tax the funds , we must repeal , tWHU ^ SH ^ W * W ^ lll ( ' n < lll ^ V tllx > ' »> P OS <'< 1 "" ''¦ 1 )(( lit fo ^ tt $$ P ^¦<'' Jite ^ i ™< l Vn > iii » H "I ''«¦>• ?¦ ' •*<* Ul

    Ai ^ gT « % ft ;^ n | V- ^ ljtt ^) rf ' ly name ^^^ m m ^ Mv . - , ^ 'hfl ^ . ^ v »^ 4 ?^ ? Nr s h 1 iow llliat Uu * ' on >| tf " li . ' / wjGr ^ $$ Mir Ty » 0 ki » yVviHt as liable , to taxation ji . h t lie flrfbiHh Wd ^ fctri ^ lf . ' , Ilin uiiHcverod property , S

    or , in other words , the property on which the foreigner is secured , is here , entitled to and enjoying all the protection afforded by our laws and national stability , and it is for him to pay his proportionate share of the expense of its protection , just as he would pay if his property were invested here in some specific and definable objects . ' We might thus seein to be conducted to the conclusion that property in the funds should be taxed like all other property ; or , what is the same thing , that its nominal capital should be added to the estimated value of the visible and tangible property , and then one rate made to run over the whole . But here another fact

    obstructs us , and mere good faith in fulfilling existing engagements , may be said to require an artificial character to be put on what would otherwise be a simple and natural arrangement . The engagements with the national creditor have been founded , whether wisely or not , on the principle that the nation engages to pay so much income , the principal being irredeemable , except at the option of the Government ; the whole transaction is based on income . In other affairs , and naturally ,

    the subject-matter of sale is the capital ; here , by artificial arrangement , it is the income . In those other affairs , and naturally , the estimate of money value , variable from circumstances , is based on the invariable matters forming the capital in kind ; here and artificially , it is based on the invariable income in money . This is the essence of the funding system . The national creditor may say that he ought not to be taxed by the decree of his debtor , on property , while his transaction with that debtor related to income .

    Not , then , from the nature of the case , but from the manner in which it has been dealt with , it may be urged that we have here in good faith to consider , contrary to general principles , how the income of the fundholder should be taxed , as income , so as it put its owners in the same position as they would have been had they been proprietors of visible and tangible property , and had been taxed accordingly . Let us see to what this view will lead us . Obviously , such an adjustment can be made only in the way of an average . Different fundholders might have employed their property in different ways , with various results , but only one rule of estimate for all can be carried into effect . What that rule should be ,

    or rather within what limits it will probably be found , when justly determined on examination of all the facts , may appear as follows : In our article of October 23 rd , we showed that , as far as it is yet known , the taxation of the United Kingdom may be fairly estimated at one-sixth of the income . But this income is partly the earnings of skill , industry , and even of severe labour , while that of the fundholder is purely the interest of capital , received without any-expenditure of time or effort ; that is , without any admixture of earnings . If , then , the entire income of the country could be separated into two parts , one the produce of property , the other of skill and labour , it is

    clear that the taxation which would fall to the share oi pure property—such as the funds are—would be more than one-sixth . The trite tax of the fimdholder , on this principle , considered as one on property commuted from necessity of circumstances to one on income , will not , be less than one-sixth of his dividend . If the data on which this proportion is founded should hereafter be corrected by better knowledge , a corresponding correction will be required in the application of the argument , but none in the argument itself . Meanwhile , we take the ; lowest limit of the fundholder's taxation at one-sixth of his dividend .

    The highest limit , may be found by considering that land in general may bo taken as worth from twenty - live to thirty years' purchase ; that is , that it yields from I ? . , to 4 per cent , per annum , as an investment , and Unit , consequently , a rate of about ono per cent ., such as the proposed system would at present require , must amount , to about one-fourth of the rent . The landowner , however , has generally mi advantage over tlie fundholder , in the improvable character of his properly ;

    he may derive from it ii larger absolute income , although be pny unequal proportion of his gross income in tax . The landholder ' s property is fixed and unimprovable . In endeavouring to place the fundholder in the same situation as to tax , as he would have been in had he held visible and tangible property , this difference may justify bis being rated not quite so highly on bis income as Ihe landlord . It seems , then , that the tax on tho fundholder would lie between one-sixth and one-fourth of bis dividend ; probably one-llfth , twenty per cent , would bo a failaverage . For this be would be free of all other j > nrliamaitarti taxes ichatcvrr . lint this conclusion , however true at present , is founded , in purl , on n supposition , which , under a change of circumstances , would involve an error , — viz ., that the , ire lie nil taxation is one-sixth of tlio trenernl

    income . If the taxation should diminish , or the incom increase , ( both probable events , ) so that the proportion of one-sixth no longer obtained , the fundholder would be entitled to a revision of his quota . If it be imagined that any necessity of treating thi special case as income , if established , would impugn th soundness of our general principle , that propert y is th true subject-matter of taxation , we need only repeat that this case is made special by the irreversible acts of

    the parties themselves , one of whom is the very power which imposes and regulates taxation , These acts if admitted to affect the case , change conventionally the character of this particular relation , but they change nothing beyond it ; and , to argue from a case so disturbed by artificial considerations , to those depending on the great natural relations of Government , society and individuals , would be an error most calamitous , in the end , for all parties .

    But more;—if a bargain so obviously changing the ordinary obligations of the borrower to the lender , establish here a necessity of dealing , as to taxation , with income , not with property , it is an easy inference that beyond that bargain , property and not income is the true matter to be taxed . To tax , however , the fundholder on the nominal value of his stock , would come so nearly to the same thing , as to leave little doubt that the position , in respect of taxation , assigned to him above , is the true one .

    For a tax of one per cent , on the nominal capital would commonly be not quite one-third of the income , —a proportion which , under any equitable system , would probably fall on other incomes equally secure , and equally exempt from the necessity of labour , to realize them The difference between this result and that of one-fifth , arrived at above , is somewhat more than one-eighth ;—a difference which , the coarse operations of taxation , has often been thought inconsiderable , and which does not here prevent the mutual confirmation of the two conclusions .

    4 . The JReversioner . —We here use the word reversion in the widest sense , without regarding distinctions between the different kinds of deferred interests . All property is reversionary , the only difference being that , in some cases , the reversioner is already designated , or may be designated , independently of the will of the present owner , while , in others , the present owner has the power of designating his successor . Inasmuch as a reversion has a saleable value , it is argued that it is a fit subject of taxation . But whatever is the value of the reversion , is just so much subtracted from the entire value of the property to its present owner ; and as to taxation , it is , on our principles , an incumbrance , taxable , if at all , only through the actual possessor .

    A reversion differs from other incumbrances in being realizable only after a given event : the reversioner has no present right or enjoyment . The mere fact of the deferred right being saleable , proves nothing as to the taxableness of reversions ; for such u sale is a mere transfer of a deferred right , to a person who is willing to exchange for it a right in present , activity . The suitableness of a property goes no further , in matters of taxation , than to ascertain the share of tax which a given object ought to bear , if it be taxable at all . In the sale of a reversion , there is no measure , as in other sales , of one active right by means of another active right , both admitted to he taxable alike ; there in only an interchange in the situation of two persons , and we are left to discover whether or not a reversion is

    taxable , by the aid of other principles . There is no difficulty as to reversions to be created subsequently to the establishment of the system proposed . Whoever enrlcH one , then , nuiy do so on his own terms , tax being taken into account when 1 "' iixes them . The . Slate can have nothing to do with existing ieversioiiH except , in cases where the present and iuturo owners do not agree ; and then its only question can 1 >« of the repartition between ' them of the entire tax <>« the property , whether any , or , if any , in what proportion .

    Other incumbrancers having present virtual possession of their property may justly be called on by (•>•' taxed possessors to contribute their quo * a . to the expense ; but ( . he reversioner possesses nothing hh yet for the state to protect . Is not luxation this- year ' s contribution to this year ' s expenses ? and will it not l ><> finio for the revorsionor to pay bis slime when ho conies into possession V ' ,

    It is said , however , that , because the Slate protect the property for the future * benefit of Uui rcvcr . sioiie . , UN well as for the present , . tdvuntiign of the present possessor , the reversioner ought to pny bin share of th" < (| K of the presimt protection . A sudlcient answer to _ ¦» would bo that Mm State cannot look ho Inr , nor mterlcnwith liabilities ho extremely uncertain in their inwclci" mid extent ,, h thoao Uiuh mid to attach |« rov « . r « i <> " » m

    Untitled Article

    1068 THE LEADER . [ Saturday ,

• Citation
  • Leader (1850-1860), Nov. 6, 1852, page 1068, in the Nineteenth-Century Serials Edition (2008; 2018) ncse-os.kdl.kcl.ac.uk/periodicals/l/issues/vm2-ncseproduct1959/page/16/