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

Essays in political economy online

. (page 37 of 41)
Online LibraryT. E. Cliffe (Thomas Edward Cliffe) LeslieEssays in political economy → online text (page 37 of 41)
Font size
QR-code for this ebook

of raising it occasions.

Bearing these considerations in mind, let us glance at an
arithmetical estimate by one of our most distinguished econo-

* Exclusive of the Post Office, Telegraph Service, Crown Lands, and Miscel-
laneous Receipts. See Statistical Abstract, 1873.

On the WorJcing Classes.


mists, of the relative contributions of ditfereut classes to both
imperial and local taxation : one which seems to estimate as
«,ecurately as is possible the chief taxes on expenditure, save
that it adds to the burden on the wealthier class the duties on
the consumption of their servants, the objection to which has
been stated already. Summing up the results of an investigation
into the taxes falling on three typical families — the first, a
common labourer's, with an income of £40 a-year ; the second,
an artisan's, with £85 a-year ; and the third, a middle class
family, with £500 a-year — Mr. Jevons arrives at the following

Description of Tax.

Percentage of Income paid in Taxes, by
Families expending in the Year, re-
pectively : —

£40 £85 £500

On Necessaries, ....
On Stimulants, ....
Direct Taxes, ....
Legacj' and Probate Duties, .
Rates and Tolls, ....

Total Taxation, .








lO-l 8-2


It will be seen that, according to this estimate, the weight
of taxation decreases as the income increases, being lO'l per
cent, on the common labourer's income, and only 8*0 per cent,
on an income of £500 a-year ; and it seems clear that if the
estimate had been carried up to the higher incomes, the burden
would be seen to bear an inverse proportion to the ability to
bear it. Yet the estimate omits a number of items which, as
we have seen, must be included in the real pressure, direct and
indirect, of taxation on the working classes. To Mr. Jevons'

* The Match Tax. By W. Stanley Jevons, p. 64. As the estimate occurs
only incidentally in the able essay referred to, it could nut well be exhaustive,
but it furnishes a good basis for calculation.

394 The Incidence of Imperial and Local Taxation

estimate ought to be added the incidence, direct or indirect, or
both, of the income-tax, the house-tax, the probate, legacy,
succession, and other stamp duties, trade licences, taxes on
shops, and on public carriages, railways, horses, and dogs, and
sundry taxes paid by a number of small dealers. Above all, I
submit, with unfeigned respect to Mr. Jevons, that a large
addition ought to be made for the losses in wages arising from
the system of indirect taxation.

Another estimate, by Mr. Leone Levi, reckons the taxes
paid by the working classes out of their total taxable income,
at twelve-and-a-half per cent., and the taxation of the upper
and middle classes at twelve per cent. This estimate includes
some of the taxes on labour omitted by Mr. Jevons, but omits
a number of others which it has been shown ought to be
included. And so far is Mr. Levi's estimate from taking any
account of the loss of wages, or even allowing for the additional
cost of taxation occasioned by the advance of duties by dealers
(which Mr. Jevons puts at twenty per cent.) that he strangely
assumes that the advance causes an addition to wages.* Never-
theless he concludes that the whole burden of taxation on the
upper and middle classes is ' rather less than that which falls
on the income of the working classes.'

Both the estimates just referred to include the important
element of local taxation. The question now follows, whether
local taxation redresses or aggravates the very unequal burden
which, it has been shown, imperial taxation casts on the working
classes ?

Some recent writers on local taxation set out with the as-
sumption that local rates in England are always levied on the
occupier, but the proposition does not hold good in the case of
the occupiers of premises of small rateable value ; f the greatest
diversity of practice exists in different towns and parishes with
respect to the levy of rates on owners and small occupiers.

* Estimate, S;c. By Leone Levi, p. 10.

t See with respect to the levy of poor-rates, in the case of small occupiers, the
Foor Mate Assessment and Collection Act, 1869. The levy of other rates is affected
hy a number of Acts, and the powers given to authorities.

On the Working Classes. 395

But the real incidence of rates does not depend on their levy
from owner or occupier, and the subject is one of great com-
plexity, though some economists find a simple key to its solu-
tion in the doctrine of an equality of the profits of different
occupations and investments. Neither farmers, house builders,
nor people in trade, they argue, will take less or can get more
than ' average,' ' ordinary,' or ' natural' profits ; none of them,
therefore, will bear special taxation, and the rates in the case of
farmers will fall on land-rent ; in the case of houses (unless in
special situations, where the ground owner is affected), on the
occupiers ; in the case of the premises of traders, on consumers.
Respecting the profits of farmers, I will only say, so far are
they from being determined by a knowledge of the profits of
other occupations, that a farmer seldom knows the profits of
any other business in the nearest market town, and never knows
the profits of farming itself in the different parts of the kingdom.
Farming is a speculative business, depending very much on
the seasons and other local conditions, and its profit varies
in different localities, under different landlords, w^ith different
farmers, at different periods. We can only make sure that
farmers in general will shift the burden of rates from their own
to other shoulders if they can. And the question follows, Are
there no shoulders but the landlord's to which they may shift
it ? Are there not two other possible sources besides rent, from
which they may recoup themselves for special local taxation,
namely, wages and prices ? As regards prices, foreign com-
petition has hitherto presented no insurmountable obstacle to
a rise in the price of a great part of farming produce, such as
fresh meat, milk, butter, eggs, and sundry vegetables; the price
of corn itself depends a good deal on the domestic supply. Then
as to wages, the truth is, that while economists have been
assuming, contrary to Adam Smith, a free competition and an
equal rate of wages throughout the kingdom, farmers have had
all along the price of labour very much under their own control
in a number of places. ' The wages of labour on Salisbury
Plain,' Mr. Caird wrote, in his famous 'Letters on English
Agriculture in 1851,' in which he showed that agricultural

^96 The Incidence of Imjperial and Local Taxation

wages varied from six to sixteen shillings a- week, * are lower
than in Dorsetshire. An explanation of this may partly be
found in the fact that the command of wages is altogether
under the control of the large farmers, some of whom employ
the whole labour of a parish. Six shillings a-week was the
amount given for ordinary labourers by the most extensive
farmer in South Wilts, who holds nearly five thousand acres of
land, great part of which is his own property. Seven shillings,
however, is the more common rate ; out of that the labourer has
to pay one shilling a-week for the rent of his cottage.' Twenty
years later, wages in Dorsetshire were generally from seven to
eight shillings a-week ; * and if we look to the low wages of
labour in many parts of the country on the one hand, and the
high price of farm produce on the other, it is impossible not
to see that farmers in many places have been able to put the
burden of rates on labourers as well as consumers, and have
exercised the power ; so that, in fact, labourers have been
mulcted in both wages and prices. We find here the explanation
of a difficulty which seems to have puzzled both members of the
committee of the House of Commons on Local Taxation (1870)
and witnesses. It was argued, on the one hand, that the great
increase of rates must have come out of the pocket of the farmer,
since rents had not fallen ; and, on the other hand, that it must
have come out of the landlord's pocket, since agricultural profits
had not fallen. It seems not to have occurred to either land-
lord or farmer that a rise in the price of farm produce, without
a corresponding rise in farm wages, reconciles the two state-
ments respecting profits and rent, and proves at the same time
the incidence of the rates on consumers and labourers : —

' 2373. Are you an owner of land in Somersetshire ? — I am.

* 2374. Do you farm your own land ? — I do.

*2375. Have you given attention to the subject of rating ?
— I have.

* On the different rates of wages of agricultural labour in England and their
causes, see the present writer's Land Systems of Ireland, England, and the Continent,
pp. 353-4, 357-79.

On the Working Classes. 397

* 2432. Is this a fair way to state your opinion, that the
owner does not reduce the rent in consequence of the rise in the
rates?— Certainly he does not; I believe that during the last
thirty years, when the rate has nearly doubled, nearly the whole
of the increase has been paid by the occupier,

' 2433. Because there has been no readjustment of the rent?
— Exactly; rents are not readjusted very often. Farming is
one of those fluctuating businesses that an owner does not read-
just his rent very often, perhaps not even for one or more lives.

'2435. Then you have this curious result, that though a
farmer's profits must be enormously affected by a rise in the
rates, which you have described as 100 per cent., nevertheless
it has had no influence on the rent ? — Yery little indeed.

' 2445. Have the farmers' profits diminished generally in
your neighbourhood ? — No ; I think not.'

But more general incidences of the rates, both in country
and town, have to be considered. In the first place, on whom
do the rates on the houses occupied by working people, both in
country and town, fall ? Secondly, what is the effect of the
poor- rata on wages ? It would save a world of trouble to follow,
in respect to the first question, the formula that the builders of
houses and investors in house property must get the average
rate of profit, and therefore the rates must fall on the occupiers,
whether working people or not. It gives, too, an air of com-
plete command over the subject, and of rigorous logic, to argue
strictly from assumptions such as the equality of profits. But
there are really no such short cuts to the end of economic
inquiries. In one of the excellent articles on finance which M.
Leroy-Beaulieu, an economist of very high reputation, and editor
of the Economiste Frangais has recently contributed to that
useful journal, it is shown that there are no external character-
istics by which the State can measure, for the purpose of an
income-tax, the profits of business. ' The system is in its very
nature defective. One of its principal faults is, that it can
throw no light on the individual profits of each trader : it has, in
fact, for its base the supposed average profit which each class
of traders may reasonably obtain. In this system, therefore.

398 The Incidence of Imperial and Local Taxation

individual injustices must alway sbe numerous.' — {Economiste
Frangais, December 20, 1873.) Nevertheless, the State has a
thousand times better means of ascertaining the actual profits
of every business than any private person in business can have,
inasmuch as it can make it the business of a large staff to collect
information on the subject in every locality, while each man in
business must mind his own business, instead of the business of
other people all over the country. What would be thought of
a project to assess the taxpayers under Schedule D to the income-
tax, on an assimaption that every man actually makes the same
percentage of profit on his capital ? Such, verily, is the assump-
tion on which the common theory of the incidence, alike of local
rates, of customs, and excise duties, is based : a theory which
suits large and successful capitalists, no doubt ; it justifies both
low wages and high prices ; and it serves as a screen for enor-
mous profits from the competition of ' low men ' — to borrow the
language of a high authority in such matters — who would 'cut
in ' if they knew the real state of affairs. A flagrant ignomtio
elenchi in economics has arisen from this readiness to *cut in' ;
it is put forward as proving that profits are, by consequence,
equalized. The fact that capital deserts losing businesses for
others in which extraordinary profits are made, proves only that
profits are actually very unequal. The new capital, moreover,
often comes in only for a loss at the turn of the tide, after the
earlier men in the trade have doubled their capitals, and a fresh
inequality is the real consequence. Take the common case of
building-ground to be let for ninety-nine years, and consider for
one moment the nature of the assumption that the profit on houses
is determined by the knowledge which capitalists have of the
profits of all investments, and the consequent equalization of
building with other profits. The profits of each occupation vary,
as we have seen, with different individuals, from immense gain to
utter ruin, and vary at different times in the case of the same
individual. We are told by Mr. Brassey's biographer that there
were times when he would have died a poor man ; and he might
have died a poor man had the economic assumption been well
founded, and had other people known the real state of his

On the Working Classes. 399

l}usiness. The same capitalist, in several cases known to
myself, is making profits on different investments under his
own management, varying from upwards of 100 per cent,
to a balance on the v^^rong side. Adam Smith, writing at a
time when the number of employments for capital was com-
paratively insignificant, when the modes of carrying on business
were almost stationary, when speculation was a much less active
element than now, and when all the conditions of an estimate
of tlie profits of different businesses were comparatively simple,
said : — ' It is not easy to ascertain what are the average wages
of labour even in a particular place, and at a particular time.
We can, even in this case, seldom determine more than what
are the most usual wages ; but even this can seldom be done
with regard to the profits of stock. Profit is so fluctuating that
the person who carries on a particular trade cannot always tell
you himself what is the average of his annual profit. It is
affected not only by every variation of price in the commodities
he deals in, but by the good or bad fortune both of his rivals
and of his customers, and by a thousand other accidents to which
goods, when carried either by sea or land, or even when stored
in a warehouse, are liable. It varies, therefore, not only from
3'ear to year, but from day to day, and even from hour to hour.
To ascertain what is the average profit of all the different trades
carried on in a great kingdom must be much more difficult ; and
to judge of what it may have been formerly, or in remote periods
of time, must be altogether impossible.'

The doctrine by which eminent economists of our own day
affect to determine the incidence of rates assumes mucli more
than the knowledge of which Adam Smith demonstrated the
impossibility. It assumes that caj)italists not only know the
past and present profits of all occupations and investments, but
foreknow them at remote periods — to the end of a long building-
lease, for example. Yet it is clearly impossible for persons
contemplating the building or buying of new houses to foretell,
even for twenty years, the profits that single investment will
yield. The movements of business and population, the demand
for houses and other buildings, the increase of wealth and

400 The Incidence of Imperial and Local Taxation

money, and the general range of incomes and prices, the supply
of new houses on the spot, the means of locomotion bringing
other districts within reach, all defy calculation. The under-
ground railway defeated the expectations of many house-owners
in London. There are indeed house-agents who will affect to
tell you the rate of profit on houses, just as there are actuaries
who profess to be able to capitalize and assess to the income-tax
the profits of every man in every business, though of two men
assessed at the same rate, one will be bankrupt within the year,
and the other will make money for half a century, and die
richer than Mr. Brassey. The truth is that the profits of house
property, the rents that can be exacted from occupiers, and
the incidence of rates, depend on no such fiction as ' the average
rate of profit,' but on the demand for and the supply of houses,
and these conditions vary from time to time, and from place to
place. The house-builder, having cast in his lot with house
and ground, and covenanted to pay a ground-rent, determined,
not by any knowledge of the profits of all occupations, but
simply by the local demand for and supply of building-ground,
afterwards makes such terms as he can with his tenants. And
the constant increase of population, the narrow limits of distance
from their business within which it is convenient to most people
to live, and the cost and trouble to existing occupiers of removal,
give the owner, in most cases, the stronger position, and enable
him to throw any increase in the rates on the occupier. But, on
the other hand, if rates were abolished, house-owners in most
places might exact some addition to their rent, and to that
extent they may be said to pay a part of the present rates in
reduced rents ; their power of raising the rent on the abolition
of rates being limited, not by any ' average rate of profit,' but
by the supply and demand for houses, and the encouragement
to building which the prospect of higher rents might occasion.
No universal or strict rule, therefore, can be laid down on the
subject ; but, generally speaking, the occupier is the weaker
party, and the chief burden of the rates can be laid upon him.

In the case of occupiers of the working class, the inquiries
I have been able to make lead to the conclusion that, generally

On the Working Classes. 401

speaking, the bulk of the rates falls either directly, or indirectly
in rent, upon them ; but as rent usually could and would be
somewhat raised, were rates to be done away with, a part may
be said to fall on the houseowner. It would be unfair, at the
same time, to take no account of the fact that on some large
estates, owing to the liberality of the landlords, the payment of
the rates on the cottages of labourers falls altogether on the
former. So differently, indeed, are labourers circumstanced in
respect of both house-rents and rates, as well as of wages, in
different places, that in one parish I know of, belonging to a
large proprietor, the labourer pays only £2 12s. for a decent
cottage and garden, and nothing for rates ; while in neighbouring
parishes, in which the rate of wages is the same, he pays £6 for
a worse house without garden, and the rates in addition. The
estate of the great landlord is, to speak fairlj^, in most cases,
the best estate for the labourer to live on. Where great
landlords and great estates injure the working classes, are as
buttresses of a system which keeps land out of the market,
obstructs agriculture, manufactures, and trade, and causes the
very notion of little farms to appear a chimera to the untravelled

The only conclusion we can come to with respect to the
incidence of rates, as between owner and occupier, is that
generally the working man, as occupier of a house in country or
town, pays (sometimes to a man as poor as himself) all the
rent that can be screwed out of him. A little more could be
screwed out of him were there no rates, and to that extent the
rates may be said to fall on the owner, the remainder being
borne by the workman. Even where the local authorities
exempt the occupier from the payment of rates on the score of
poverty, the rent is often raised in proportion. But it must
not be forgotten that, whatever may be the incidence of the
rates, as between owner and occupier, working men are now,
in a considerable number of cases, the owners of the houses they
occupy, and bear the whole burden of the rates, even where
their houses are mortgaged. In not a few cases, moreover, the
owners of the cottage^s occupied by workmen are themselves

2 u

402 The Incidence of Imperial and Local Taxation

working men; and here, too, whatever the incidence of the
rates, as between owner and occupier, working men pay the
entire amount. It is estimated that there are 2000 building
societies in England, and although the English building societies
do not build, they advance money to working people both to
build and to buy houses, and the number of houses consequently
owned by men and women of those classes in some places is truly
prodigious.* ' We have,' says a witness connected with some
of the chief building societies in Birmingham, in evidence be-
fore the Friendly and Building Societies' Commission, ' 13,000
houses in Birmingham belonging to our working men. We
have streets more than a mile long, in which absolutely every
house belongs to the working classes.' The value of a working-
man's house, and the amount of the rates on it, are sometimes
considerable. ' To-morrow,' says another witness before the
Commission, ' I have to settle an advance to a workman on the
Metropolitan Railway ; we are to lend him £360 ; he has bought
a house for £420.' The amount of local taxation on a town
workman's house is, in short, sometimes actually not far below
the amount paid by a millionaire, who keeps only an office in
town, and lives in a parish where rates are low. But it is not
town workmen only who pay rates as owners of houses. The
famous Mr. Joseph Arch, for example, has long been a village
ratepayer, as owner of a house left to him by his mother.

Two other classes of working people ought not to be left
unnoticed, who are neither owners nor occupiers of whole
houses, but letters of lodgings and lodgers. The vestry clerk
of St. Leonard's, Shoreditch, gave the following evidence before
the Poor-rates Assessment Committee of 1868, with respect to
inhabitants of houses of £10 a-year rateable value in that
parish : —

' 2543. Do you know in what way those people are employed

* A useful Essay on English Building Societies has been published by Mr.
Ernst von Plener (lately First Secretary to the Austrian Embassy in London,
now a Member of the Austrian Parliament), the author of a History of English
Factory Legislation, of which an English translation was procured by Mr.

On the Working Classes. 403

who live in those houses ?— A great many of them have stalls
in the street, and they go out with hearthstones, aud there are
a great many birdcatchers and brickmakers.

' 2544. Are there many bricklayers and masons' labourers
in your parish ? — Yes, there are a good many bricklayers, and
a good many cabinet-makers.

' 2546. Do those people chiefly take in lodgers in their
houses ? — A great many of them take a house — for instance,
widows, and those sort of people — and let it out to lodgers.'

The vestry clerk of Bethnal Grreen also gave evidence : —

* 2707. Are the people who occupy a £10 house, even
though they pay a weekly rent, unable to pay their rates ? —
In many instances they take in lodgers, and with that they are
scarcely able to get along.'

It may be assumed, for the reasons given above respecting
occupiers, that in such cases the letter of the lodging in tlie
first instance generally pays at least the greater part of the
rates in rent, but the question follows — Is it finally paid by the
lodging-letter or by the lodgers ? The stoutest advocate of
* the average rate of profit/ as the key to the incidence of
taxation, will hardly contend that costermongers, sellers of
hearthstones, birdcatchers, bricklayers, and poor widows in
Shoreditch are accurately informed respecting the rates of
profit to be made in every trade and investment. The case,
indeed, falls within one of the exceptions which Adam Smith
emphatically made to the doctrine of a tendency of the gains of
different occupations, in the same neighbourhood to equality —
exceptions which deprive the doctrine of all application to the
profits of English trade at the present day. There is no general

Online LibraryT. E. Cliffe (Thomas Edward Cliffe) LeslieEssays in political economy → online text (page 37 of 41)