Copyright
T. E. Cliffe (Thomas Edward Cliffe) Leslie.

Essays in political economy online

. (page 36 of 41)
Online LibraryT. E. Cliffe (Thomas Edward Cliffe) LeslieEssays in political economy → online text (page 36 of 41)
Font size
QR-code for this ebook


factures and locomotion brought about was a difference between
the wages of mechanical and agricultural laboui' (unless in the
manufacturing districts) out of all proportion to any differences
in the severity of the employment and the skill and knowledge
required. Adam Smith thought the ploughman in his time
beyond comparison superior in skill, judgment, and discretion
to the town workman or mechanic, and he certainly is not now
inferior in the proportion of his pay. In so far as he is ignorant
and ineflScient, it is the effect, not the cause, of his low wages ;
and the groundlessness of a recent suggestion that the lower
wages of the southern counties are attributable to an inferiority
of race, is proved by the fact, which might have been learned
from Mr. Caird, that a hundred years ago wages were higher in
the southern than in the northern counties, in the proportion of
7s. 6f?. to Qs. 9d. a- week. The truth is, that the sources of wages
are unequally distributed by nature, but a more equal local



382 The Movements of Agricultural Wages in Europe.

development and a more equal distribution of labour might long
ago have been brought about, had economists, in place of
assuming equality, examined the facts, and ascertained the
actual inequalities and their causes.

It remains briefly to indicate some of the conclusions to
which the foregoing review of facts, and the present conditions
of the situation, seem to point. A rise in the money wages of
agricultural labour is a general European phenomenon, showing
the operation of general causes. It is everywhere in part
merely a nominal rise, but especially so in the southern counties
of England, where a great fall in real wages, by reason of a
continuous rise in prices, preceded it. In all countries in
Europe there are great inequalities in money wages, but in most
of them, Grermany in particular, those inequalities are partially
compensated by local differences in the prices of food, so that no
such real inequalities in real wages exist there as in England ;
nor is it possible that such inequalities can continue here, now
that the economic fictions which concealed them and their
causes have been exposed. The future rate of money wages is
indeed everywhere partly a question relating to the fertility of
the gold mines and the abundance of money ; but whatever may
be the amount of money in circulation, it may be predicted that
its distribution will be such as to secure a larger share than
heretofore to the agricultural labourer in the southern counties
of England. Temporary and local causes have lately checked
the rise of agricultural wages in some countries, but all the
permanent and general conditions tend to maintain it, especially
in the lower levels. The recent decline in Germany is, in fact,
a mark of the increasing influence of manufactures and trade on
the price of agricultural labour, and of the disappearance of
customary and stationary rates of agricultural wages, and of
the excessive disproportion between them and the rates in other
employments.* Everywhere in Europe farm labourers are

* Since this Essay was written, nearly five years ago, the diminished activity
of manufactures and trade in Germany has been attended with a further decline in
agricultural wages, which are not much higher in many places now than in 1867.
Formerly the movements of trade did not affect German agricultural wages.
[January, 1879.]



I

1



The Movements of Agricultural Wages in Europe. 883

iDreaking the bonds of tradition and habit, everywhere acquiring
new powers ; in England they have, moreover, gained those
potent forces of union which have long been the monopoly of
town workmen, and farmers in the depth of the country are
beginning to feel at once the effects of the competition of distant
■employers in towns and in the New World, and of the combina-
tion of their own labourers on the spot. When one considers
the number and strength of the causes tending to the elevation
of the agricultural labourer, and the breadth of the area over
which they are operating, one can hardly err in affirming the
ultimate futility of a local effort to put a stop to a movement
which, on the one hand, has what may be called universal and
permanent forces on its side, and, on the other hand, is fortified
by special local conditions. The dark part of the prospect is,
that England, in the outcome, may lose the chief part of its
rural population, for it seems too plain that nothing will awaken
its legislature or its landowners in time to the importance of
making it the well-grounded hope of the industrious and thrifty
farm labourer to acquire a little farm of his own.



XXIY.

THE INCIDENCE OF IMPERIAL AND LOCAL TAXATION
ON THE WORKING CLASSES.*

The working classes comprehend in this article all grades of
working people, skilled and unskilled, in both town and country,,
domestic servants, and also that numerous body of small dealers
whose earnings are derived more from their labour than from
their little stock-in-trade. It is not very important whether
foremen are included or not, but they are so here as receiving
wages. To measure the burden imposed on this vast section of
society by both imperial and local taxation is a problem of much
complexity and difficulty, admitting of no exact solution, but
the grounds for a rational judgment may be found. Two ques-
tions are involved : How much do the working classes contribute
to the revenue of the State ? and. How much do they actually
lose by the system of taxation ? The first may possibly be
answered with some approximation to accuracy ; but the second
is really the principal inquiry, and it is one as impossible to
answer in arithmetical terms, as it would have been to estimate
in precise figures the pecuniary loss inflicted on the working
classes by the corn duties. The theoretical canons commonly
applied to determine the incidence of taxes afford but moderate
assistance, and are often misleading. They furnish us amply
with inferences from ideal ' average' or * natural' rates of wages
and profit, respecting the ' tendencies' of taxes in ' the long run'
and ' in the absence of disturbing causes.' But taxes are paid
immediately under the real conditions of life, and out of the
actual wages and profits or other funds of individuals, not out
of hypotheses or abstractions in the minds of economists. The

* Fortnightly Review, February 1st, 1874.



The Incidence of Imperial and local Taxation, ^^c. 385

•working classes have had especial reason to complain of the
acceptance of such abstractions as realities, and of inferences
from them as rules of practical finance. The doctrine of the
equality of wages has done much to perpetuate the low wages of
agricultural labour in the southern counties, that of the equality
of profits has injured the labouring classes generally, alike as
recipients of wages, as consumers, and as taxpayers ; and the
doctrine of a ' natural ' rate of wages was the chief cause of the
passing of the Corn Laws, the least mischief of which to the classes
who live by labour was the rise in the price of bread. It was
inferred that the labourer's pay must rise with the price of his
food, and that taxes on wages are really taxes on profits,* and
accordingly members of Parliament, on both sides of the House,
discussed the duty on corn under the conviction that it could
not fall on the labourer.f Mr. Eicardo himself opposed the
duty in Parliament, simply on the ground that it would lower
the profits of capitalists. In place of raising wages, it really
lowered them, in a manner highly important to remember in an
inquiry into the effects of existing taxation. * Take the great
change in the Corn Laws,' said Mr. Gladstone, in a celebrated
Budget speech. ' You have created a trade in corn ; by that
trade you have created a corresponding demand for the com-
modities of which they (the working classes) are the producers,
their labour being an essential element in their production, and
it is the enhanced price their labour brings, even more than the
cheaper price of commodities, that forms the main benefit they
receive.' One of the chief causes of the impossibility of ascer-
taining with exactness the amount of the burden of existing
taxation on the classes in question, is that the effect on wages
must be taken into account. But, although I cannot pretend
to furnish an accurate estimate, I think the following investi-
gation, brief as it necessarily is, will be found to establish at
least: (1.) That the real burden imposed on the working classes
by the present system of taxation, imperial and local, is incal-



* Ricardo's Principles of Political Economy and Taxation, chap. xvi.
t See, on this point, the Speeches of Mr. Cobdeu (popular edition), p. 9.

2 C



386 The Incidence of Imperial and Local Taxation

culably greater than is generally supposed. (2.) That taxes
which admittedly fall on them seriously affect them in various
ways besides those ordinarily taken account of. (3.) That they
are contributors to a number of taxes generally believed not to
touch them at all.

Take, first, imperial taxation. Of the grievous inequality of
the contribution levied from the working classes by the customs
and excise duties, which produced nearly forty-seven millions of
the sixty-five and a-half millions raised by imperial taxation in
the last financial year (exclusive of the revenue from the post-
office, telegraphs, crown lands, and miscellaneous receipts), there
can be no question. The duty, for instance, on all qualities of
tea is the same ; the duty on a pound of the finest cigars is little
heavier than on a pound of common unmanufactured tobacco ;
the duties on beer, spirits, and wine, make no distinction be-
tween rich and poor. It is, indeed, sometimes asserted that the
wealthier classes pay, in addition to their own, their servants'
taxes on tea, sugar,* and beer ; but the very language in which
one well-known waiter defends this assumption, affords proof
of its error : ' A gamekeeper,' says Mr. Dudley Baxter, ' is
employed by a country gentleman at weekly wages, but lives in
his own cottage, and pays his own taxes on beer and sugar. If
the taxes are taken off, he reaps the benefit, and is therefore the
true taxpayer. But a house-servant, if his provisions are paid
for him, would not receive any benefit, so that his master is the
taxpayer.'! Were the taxes referred to removed, the result
would be that outdoor servants would have more money to spend,
while indoor servants in the very same establishments would
have no more than before, unless their wages were raised, as
they could be, in proportion to the reduced cost of their board,
without any loss to their masters. It is, indeed, a mere fiction
that competition equalizes wages in all occupations and all over
the kingdom ; but such an inequality as the foregoing obviously
could not continue. It is not, however, by the cost to them as



* The duly on sugar has heen abolished since the first publication of this Essay.
t The Tazation of the United Kitiffdotn, p. 48.



Ill



0)1 the Working Classes. 387

consumers, even adding the charges for the advance of the duties
by the producers and dealers, that the sums of whicTi customs
and excise duties deprive the working classes can be measured.
Not to mention that the forty to fifty millions advanced would
otherwise be productively employed, yielding wages as well
as profit on each turn of the capital, the system by which
they are raised is a network of obstructions and restrictions to
trade, production, and the employment of labour. For evidence
in detail of the mass of impediments which customs and excise
regulations oppose to the growth of commerce, manufactures,
agriculture, capital, and wages, I must refer to a former Essay.*
But I may instance one fact not particularized there. Conser-
vatives and Liberals are now agreed that protective and dis-
criminative duties impede the development of our resources, and
diminish the demand for labour. Yet we still maintain four
protective and discriminative duties — on sugar, spirits, wines, and
tobacco. The sugar duties are framed for the protection of
the British refiners, and the protection afforded appears to be
disastrous, even to many of them.f The duty on foreign spirits
protects the British against the German distiller, iu ordinary
years. The wine duties place all wine-producing countries
other than France, and oui' trade with them, under a heavy
disadvantage. The licensed British cigar-maker pays little more
than the importer of raw tobacco, and the duty becomes virtually
protective. These four duties, accordingly, by obstructing the
natural course of commerce and industry, diminish the earnings
of the working classes, besides taxing them on their expenditure.
Just as the duty on foreign corn was a tax not only on the

* Financial Reform. C'obden Club Essays, 2nd Series, 1871-2.

t ' Since 1840 they had had no less than twenty-seven changes in the sugar
duties, and since 1863 they had had four or five conventions with Foreign Powers
for the purpose of protecting the refining trade, and also the revenue. The re-
sult had been this, that Avhile there were twenty-three sugar refiners existing
in London in 1862, only three or four were left in existence now. He had the
curiosity to ascertain what proportion of foreign sugar and English sugar was
sold in this town (Bradford). He went to one of the leading grocers and asked
him the question, and was astonished to hear that he did not sell a single ounce
■of English made sugar, and that he found it more profitable to buy it from
France.' — Speech of Mr. Jacob Behrens at Bradford, November 26.

2C2



388 The Incidence of Imperial and Local Taxation

tread, but also on the wages of working classes, so the sugar
duties mulct them, not only as buyers of sugar, but also as sellers
of labour ; and the duties on wine, spirits, and tobacco are taxes
on the wages of men and women who never drink a glass of
strong liquor, or smoke a pipe in the year. It may, on account
of the difficulty of levying the imperial revenue by direct taxa-
tion, be absolutely necessary ; it may, for moral and sanitary
reasons, be desirable to tax the consumption of stimulants ; but
in estimating the actual incidence and pressure of our system
of taxation, we are bound to take account of the fact that the
duties levied on commodities are not only taxes, and most
unequal ones, on the working classes as consumers, but also
taxes on their earnings as producers.

Another incidence of a number of taxes on the working
classes as producers has been concealed by the doctrine that
taxes on particular commodities and particular employments
fall on consumers only, not on producers. The theory of
taxation abounds in examples of the danger of the abstract and
hypothetical method of reasoning in economics. The economist
sets out with an assumption surrounded with conditions and
qualifications, and perhaps itself open to question, such as that
in the long run, and on the average, the profits of different
occupations tend to equality, and presently forgetting all his
qualifications and conditions, concludes that the profits of indi-
viduals must be equal ; and therefore all special taxes advanced
by producers must come back to them with equal or average
profit. Individual profits really, in almost every business, vary
from enormous gain to absolute loss. Profit depends, as Mr.
Mill says, not only on the skill of the capitalist himself, and
the conduct and honesty of those he deals with, but also ' on
the accidents of personal connexion, and even on chance. That
equal capitals give equal profits, as a general maxim of trade,
would be as false as that equal age and size give equal bodily
strength.'* Nevertheless, it is taken for granted that every
special tax on a business is recovered ' with average profit,'

* Principles of Political Economy, Book ii., chap. xv.



On the Working Classes. 380

though the net result of all a trader's advances is not unfre-
quently ruin, though all such taxes give an advantage to the
larger capitalists, and though our customs and excise duties
have been steadily driving small producers and dealers from
one business after another. There is a numerous working class
(as, from the small proportion of their capital to their work,
they are properly considered) who are frequently losers by the
taxes they advance. A petty retailer, to give real examples,
takes out licences to sell spirits, beer, and tobacco ; he advances
the customs and excise duties on tea, sugar, and the rest of his
stock ; he pays perhaps sixpence in the pound on his shop ; and
after all these duties have been advanced, his shop is burned to
the ground, or he falls sick and loses his business, or he is
defrauded and becomes bankrupt ; or a large dealer, to whom
the taxes are * a fleabite,' takes away his customers ; or from
one of twenty other causes the return to all his outgoings is
ruin. Take another actual case. A cab driver saves a little
money, and sets up a cab for himself ; soon afterwards his cab is
smashed in a street collision, and his horse is so seriously
injured that it has to be shot. A large cab proprietor would
feel the loss of one horse almost as little as the cost of his licence,
but to the poor cabman I speak of his licence itself was a con-
siderable outlay, and he will never recover it. There are
thousands of poor men who every year embark their little
savings or borrowed money in losing ventures of this sort on
which they pay taxes ; and not unfrequently one cause of their
failure is the advantage which wealthier rivals find in those
very taxes. Thus, excise and customs duties on commodities,
trade licences, licences to keep horses and public carriages, &c.
— though treated not only by theorists but even by chancellors
of the exchequer as taxes on consumers alone — are often heavy
direct taxes on a working class of producers, over and above the
general diminution of wages which the whole system of so-called
indirect taxation occasions.

Again, it is commonly assumed in estimates of the incidence
of taxation, that the working classes are entirely unaffected by
•a number of imperial taxes which really fall on them. Thus



390 The Incidence of Imperial Taxation

probate and legacy duties, and stamp duties in general, the
income-tax, the house-tax, the wine duties, the railway duty,
and the duty on dogs, are usually supposed never to fall on
working men or women, directly or indirectly. Now, in fact,
the succession duty, in the first place, really falls upon many of
them. Numbers of working mea and women in towns and
manufacturing districts have become owners of houses — ori-
ginally in most cases through building societies — and succession
duty is often paid on them. At Bradford, for instance, a
high local authority answers as follows the questions given : —
' Do any of the working classes own the houses they occupy ? *
* A large number.' ' Do cases occur in which they pay probate
and legacy, or succession duties ? ' ' Yes, frequently, as large
numbers own house property.' Another good authority states
with respect to the same town : ' Very many workmen own the
cottages they live in. A smaller but still fair number own two,
and some even four cottages. The cottages are worth from £100
to £150 each.' A London workman's house is sometimes worth
from £400 to £500, and, if a leasehold, pays the higher suc-
cession duty on personalty. It does not so often happen that
working men leave to their families other property of sufficient
value to become liable to probate and legacy duty ; yet it does
sometimes happen, in the case alike of workmen, servants, and
small dealers belonging to the working class. Servants, too,
sometimes receive legacies, subject to duty from their masters,
and working people of all classes sometimes succeed to per-
sonalty, or receive legacies from relatives who have made money
as emigrants or otherwise. The house-tax, again, sometimes
falls on the highest class of skilled workmen, and sometimes on
workmen of a poorer class, either as lodgers or letters of lodg-
ings. The income-tax, though directly incident on but a small
number of the highest paid workmen or foremen, has an
incidence on the working classes which one of the current
canons of taxation conceals. It is laid down that taxes on the
profits of all employments fall on capitalists only, and cannot
be shifted on any other class. But there is in reality a per-
petual migration along the borders between capital and labour^



On the Working Classes. 391

as there is also an intermediate class who individually may be
regarded either as capitalists or workmen, according as capital
or labour forms the main element in their earnings. To
instance actual examples of the migration referred to : I have
known the same man successively a butler, a grocer, and a
court-crier ; the same man an upper servant, a small trader,
and a railway-platform inspector ; the same man a groom, a
cab proprietor, and the conductor of an omnibus ; the same
man a waiter, a tavern-keeper, and a waiter again ; the same
man a private servant, a servant in a hotel, and the proprietor
of the hotel ; the same woman a housekeeper, a shopkeeper, and
the matron of a workhouse. It is quite a common thing for
servants to set up shops with their savings ; and the induce-
ments to do so, as also their success in doing so, depend a good
deal on the taxes on profits. Few, indeed, of the working
classes are sufficiently versed in the real incidence of taxation to
estimate the pressure of indirect imposts ; but they are quite
alive to the pressure of such a tax as the income-tax, and to the
vexatious and often oppressive manner in which it has latterly,
with grievous impolicy, been levied. So long as the exemptions
of small incomes are not carried considerably further, Schedule
D must fall indirectly on servants and other working classes,
by diminishing the migration from their ranks to those of
employers, and so lowering wages. Other commonly over-
looked taxes on working people, as above said, are stamps on
receipts, bills, &c. ; the railway duty, the duty on dogs, and
the wine duties. Small retailers and other dealers, carpenters,
smiths, and other workmen, have often occasion to use stamps,
besides which, stamp duties reach the labouring classes gene-
rally as consumers. The railway duty falls on them both as
regular passengers and as excursionists ; and the duty on dogs,
though sometimes regarded by country gentlemen, in relation
to the working classes, as a duty on poaching, is really often a
duty on the sentinel who guards the poor man's or poor
woman's cottage from tramps and peculating neiglibours.
Even the wine duties fall sometimes on working people in sick-
ness, ' for the poor are sometimes sick,' as Mr. Gladstone once



»392 The Incidence of Imperial and Local Taxation

said on the subject; and the heaviest duties are imposed on the
kinds of wine they use. The wine duties in such cases have,
too, like several other taxes, another incidence on the poor, in
the shape of privation. Law taxes have been said to fall
heaviest on a class who, at first sight, seem not to be subject to
them at all, namely, those who are too poor to go to law on
account of its cost, and thereby forfeit their rights. Stamp
duties on deeds are of this character ; they constitute also part
of the system which makes land — the common and favourite in-
vestment for the savings of working men on the Continent — an
impossible investment for them in England.

Thus the pressure of imperial taxation in the mass on the
working classes is enormous, though it cannot be accurately
measured, and is not distributed equally over the entire body.
In the financial year ending March 31. 1873, its different
branches* yielded: —



Customs.


Excise,
Licences, &c.


Stamps (in-
clufUng Probate,
Legacy, and Suc-
cession Duties).


Land Tax

and

House Duty.


Property

and

Income Tax.


£ £
21,033,000 25,785,000


£
9,947,000


£
2,337,000


£

7,500,000



To the two first of these branches, which yielded more than
two-thirds of the whole, the working classes contributed out of
all proportion to their incomes; and the other branches, in
place of compensating for that inequality, added heavily to the
burden sustained by many working people. But this statement
affords no adequate measure of the relative pressure of taxation,
since it omits the incalculable losses in wages which the system



Online LibraryT. E. Cliffe (Thomas Edward Cliffe) LeslieEssays in political economy → online text (page 36 of 41)