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CHAPTER VII

ANOTHER of the cliches to which the official Labour organisations have committed themselves is that which goes by the name of the Capital Levy" in its various forms. It is so superficially familiar to everyone interested in these matters that no extended description of it is necessary; with variations it may be described as a graduated and ostensibly non-recurring tax on the money-value of individual property, real and personal, such value being estimated, not by its earning power, but on some basis such as market price or expert estimation.

At first sight such a levy is an attractive expedient to a party concerned with the flagrant disparity in worldly circumstances to which" Capitalism" has at the moment brought us. If we can believe that there is a fixed amount of wealth in the world, and we see, as we do, that some have the good things of life while many have hardly the necessaries, it would appear an easy path to greater "justice" to take some of the "wealth" off the fortunate ones, even thongh you do not directly give it to the remainder. Let us examine the project more closely, therefore.

The law recognises two main classes of capital: "real"-'i.e., land, houses, etc.; and "personal "-i.e., stocks and shares, cash, etc., 'which latter are ultimately claims to some sort of "real" property. That is to say, ultimately all property of any kind or description is a claim on realty.

Now, imagine all money values above, say, £5,000 held by individuals to be subjected to a capital levy. 'What actually happens '? The levy, remember, is on individuals by the "State." The State has no concrete use for realty; it does not, broadly speaking, administer productive undertakings; consequently what it requires is a transfer of credit which' it can apply say, to tho reduction of the National Debt, which in itself is an agency for distributing purchasing- power.

Now, however steeply you graduate a tax it must leave some men "richer" than others. Remembering this, consider the course of events when the tax is collected. The owner of land has to sell to "raise" the money for the tax. Who buys that land? Similarly, the owner of stocks and money parts with these. Who gets them ~ There are two answers.

If the titles to the land or shares are thrown on the market together there will be a slump in "values" which will affect not only those who are taxed but those who are not taxed, in so far as they have any possessions other than money. At first sight this seems a desirable result, but on further consideration it will be seen that as the National Debt. is a money-debt, not a "realty" debt, such a slump in values increases the real Weight of the debt, because it requires a larger transfer of property at the lower price to liquidate a unit quantity of it. Since, as we have agreed, this transfer of actual property cannot be to the State in propria persona, it must be from persons with less money to persons with more money; and the greater the fall in yalues, the greater would be this transfer of real wealth from the less rich to the more rich. That is one possible answer. But there is a modification of this process possible. In order to avoid the fall in values that the liquidation of large blocks of securities would entail, the banks would be besieged for overdrafts withwhich to meet the cans of the levy. Which class of applicants would receive preference in this scramble for credit-issue ~ Undoubtedly those whose prospect of repayment seemed to rest on the surest foundation; and, unless the previous arguments have failed of their purpose, it will be plain that whatever costs may be incurred by a produccr (who controls a market can be recoupcd by him in prices from the consumer. Consequently, the banks would extend credit most readily to those whose power of price-making gave assurance of their ability to collect the levy, in so far as it affected them, from the public, together with the bank's interest on the loan. Such persons would not only not have to part with any property, but would probably be found in a position of commanding advantage from which to acquire the property thrown on the market by their less fortunate· neighbours-a result which, though differing slightly in method results in the same conclusion as in the previous case: that instead of such a levy being a transfer from the rich to the poor it ,becomes a transfer from the consume; to the price-maker and the credit-issuer.

This is another way of stating the theorem on which stress has previously been laid in these pages. Under the existing economic arrangements, industry cannot be carried on unless the price of an article includes all the costs - ie dispensations of purchasing-power-which have been incurred during its production. If a cost is not included in the price, then the pricemaker becomes poorer, and eventually goes out of business. You cannot tax a capitalist-producer effectively because his existence as a producer depends on his ability to pass on any expense incurred to the consnmer. And it will be admitted by any unprejudiccd observer that no excessive reluctance to avail himself of this privilege is: noticeable in the behaviour of the a average entrepreneur.

It is, however, possible to attack the Capital Levy on more general grounds also, if it be realised that the situation with which we are faced is only accentuated by and not fundamentally due to the destruction of war. If the economic system under which we are working is a sound system, then it is a flagrant "injustice" that such persons as do well out of it should be penalised; and if it is unsound, as it is, then the Labour Party, which clear;y regards itself as the sole political concessionnire of justice, should be too highminded to believe that an unjust system is improved by ,working it unjustly.

The cnpitalist system is tottering to its fall, but, like the Bolshevik Government, which (according to official communiques) began to totter at its birth, and has continued to totter until it has infected half the world with its congenital instability, it may carryon for a long while, if its opponents obligingly dcmonstrate at short intervals their inability to supplant it by something better."

(Credit-Power and Democracy Pge. 69-76)

Take care,

Jim

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