he readier we shall be to play a leading part in
the great time of reconstruction.

V

A LEVY ON CAPITAL

_January_, 1918

The Objects of the Levy--Its Origin and History--How it would work in
Practice--The Attitude of the Chancellor--The Effects of the Scheme
in discouraging Thrift--Its Fallacies and Injustices--The Insuperable
Obstacles to its Application--Its Influence on Production--One of the
Tests of a Tax--Judged by this Test the Proposed Levy is doomed.

By some curious mental process the idea of a levy on capital has come
into rapidly increasing prominence in the last few months, and seems
to be gaining popularity in quarters where one would least expect it.
On the other hand, it is naturally arousing intense opposition, both
among those who would be most closely affected by its imposition, and
also among those who view with grave concern the possible and probable
economic effects of such a system of dealing with the national debt. I
say "dealing with the national debt" because, as will be clear, as
a system of raising money for the war the suggestion of the levy on
capital has little or nothing to recommend it. But, as will also be
made clear, the proposal has been put forward as a thing to be done
immediately in order to increase the funds in the hands of the
Chancellor of the Exchequer to be spent on war purposes.

A levy on capital is, of course, merely a variation of the tax on
property, which has long existed in the United States, and had been
resorted to before now by Governments, of which the German Government
is a leading example, in order to provide funds for a special
emergency. This it can very easily do as long as the levy is not too
high. If, for example, you tax a man to the extent of 1-1/2 per cent.
to 2 per cent. of the value of his property, on which he may be
earning an average of 5 to 6 per cent. in interest, then the levy on
capital becomes merely a form of income tax, assessed not according to
the income of the taxpayer but according to the alleged value of his
property. It is thus, again, a variation of the system long adopted
in this country of a special rate of income tax on what is called
"unearned" income, i.e. income from invested property. But it is
only when one begins to adopt the broadminded views lately fashionable
of the possibilities of a levy on capital and to talk of taking, say,
20 per cent. of the value of a man's property from him in the course
of a year,