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Chapter XVII: OF TAXES AND THE NATIONAL DEBT. - William Stanley Jevons, The Coal Question; An Inquiry concerning the Progress of the Nation, and the Probable Exhaustion of our Coal-mines 
The Coal Question; An Inquiry concerning the Progress of the Nation, and the Probable Exhaustion of our Coal-mines (London: Macmillan and Co., 1866). 2nd edition, revised.
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OF TAXES AND THE NATIONAL DEBT.
A FEW pages may be given to considering the policy of imposing duties and restrictions with a view to limit the consumption of our fuel.
The prohibition of the export of coal is the first step which naturally suggests itself, and it has often been advocated. Dr. Buckland, when asked, before the Committee on the Coal Trade of 1830, his opinion of the policy of allowing exportation, answered: "It is permitting foreigners to consume the vitals of our own prosperity. I consider coals the stamina upon which the manufacturing prosperity of the country primarily depends; and I think it our duty not to spare one ounce of coals to any person but ourselves."
The imposition of a more or less heavy duty on the export of coal is certainly the way we should commence a prohibitory system. Such a duty might be imposed for any of the following purposes:—
It is plain that the first purpose is more or less inconsistent with the other two.
I can see no general reasons against levying revenue by an export duty. Sir R. Peel adopted as a principle of English finance, "that with respect to exports there shall be no duty leviable. I am unwilling to make any exception to this principle."85 And to the present day the rule has, I believe, been upheld without exception. Yet there are no principles of economic science, so far as I know, bearing against export duties that do not equally bear against import duties. There are only the general arguments against any restrictions on commercial intercourse. In fact, Sir R. Peel had himself previously said, when proposing the coal-tax of 1842: "I must say I cannot conceive any more legitimate object of duty than coal exported to foreign countries. I speak of a reasonable and just duty, and I say that a tax levied on an article produced in this country—an element of manufactures—necessary to manufactures—contributing by its export to increase the competition with our own manufactures—I think that a tax on such an article is a perfectly legitimate source of revenue."86
Lord Overstone, too, asserted in his speech on the Commercial Treaty with France—a speech distinguished by his usual clearness and soundness of thought—that an export duty on a commodity of peculiar value and limited supply, like coal, may be an advantageous and legitimate source of revenue.
Instances of export duties of a similar kind are not wanting, but they are rather unfortunate instances. The Spaniards taxed Peruvian gold; the Sicilian Government, sulphur; Russia, its products of tallow, hemp, and flax. In India we raise a large revenue of the kind on opium, and the Slave States propose an impost on cotton. Too high a duty, indeed, is apt to draw out foreign competition, and ruin at once the trade and revenue, as the sulphur trade of Italy was for a time ruined. But we do not fear competition with Newcastle coal; we rather desire to avoid the foreign competition to buy it, and there seems accordingly to be no abstract objections to a duty on coal exported.
But I think that Lord Overstone in advocating such a duty, as a source of revenue, must have overlooked that peculiar relation of coal to our shipping interest which I have endeavoured to explain in chapter xiii. The fact is, that such a tax would be paid by ourselves as entirely as the tax on dogs or men-servants, with the further disadvantage that we should pay it through and to the discouragement of our navigation. It would be equivalent to a duty on outward tonnage.
For as our coals, in nearly every part of the world, meet and compete with inferior native coals or other fuel, the freight and price have to be lowered until the competition is successful. Witness the rate to Callao, which is no more than that to Spain. If a 4s. coal duty were imposed, our shipowners would receive about 4s. less freight to most places, which consumers would ultimately pay in the shape of increased inward freights and prices of foreign articles. At the same time it must be allowed that the reduction of outward freights would stimulate the exportation of any other heavy commodities like bricks, cement, earthenware, slates, flag-stones, paving-stones, salt, pig-iron, &c, which could be found profitably to take the place of coal as ballast. On the whole it may be said that there are even more reasons against a tax on coal as a source of revenue than might be urged concerning most taxes. It would be paid out of our pockets as much as the income-tax, and would act besides as a restriction on commerce and a burden on navigation.
To impose a duty on coals to injure continental manufactures on the sea-board towns, is a purpose that no English statesman in the present day would avow. It was on the contrary argued by Mr. Gladstone and others, in carrying the Commercial Treaty through the House of Commons, that a large manufacturing interest on the French coasts dependent on English coal, would be an excellent guarantee for the peace and extended intercourse we so ardently desire with that country.
There only remains the question of a partially or completely prohibitory duty on the simple and legitimate ground of self-defence, to save our posterity, if possible, from the misery and danger that a failure of our coal mines would bring upon them. If, indeed, we are again to resort to restrictions on trade, it is not apparent why we repealed the Corn Laws, which might have been far more efficient in preventing the exhaustion of our coal mines than any measures we are now likely to adopt. Nor is it quite apparent why we should stop the export of coal and not that of pig-iron, every ton of which represents the consumption of two or three tons of coal. The question of a prohibitory tax is but a part of the general question whether we do wisely in allowing a suicidal development of trade, and this question will be again referred to in my concluding remarks.
It is hardly necessary to discuss a duty on all coal raised from the pit's mouth. Such a duty of 2s. per ton was proposed by Pitt in 1784, at the beginning of his great financial career. But it was on the express ground that sea-borne coal was already burdened with duties of long standing, and that equalization of burdens was desirable. He intended, too, to exempt manufacturers from the impost as far as possible. But only a week after proposing the tax Mr. Pitt said, with the candour that distinguished his greatness, "From the information he had been able to collect upon the subject, he found men's minds so adverse to the tax, and that it would be necessary to make such a variety of exceptions and regulations in order to prevent it from having an injurious effect on one or other of our manufactures, that he thought it more expedient to abandon the tax."87
The character of a general tax on coal was truly stated by Robert Bald. "It would unnerve the very sinews of our trade, and be a death-blow to our flourishing manufactories. Were our determined enemy set in council, to deliberate upon a plan to wound us in a vital point as a nation, the advising the imposing of this tax would be the most successful he could possibly suggest." And again he says truly, "A small tax on the ton of coal would be a heavy tax on the ton of iron. The whole of our mining concerns depend as to their prosperity upon the abundance and cheapness of fuel, and if the price be increased by means of taxes, the utility of the steam-engine will be greatly abridged."88
Lord Kames, Sir J. Sinclair, and Adam Smith were the most distinguished of the many writers who deplored the mischief wrought by the old taxes on sea-borne coal, in retarding the progress of towns and country places, where cheap coal might otherwise have been enjoyed. But it is impossible to describe adequately the all-pervading bane that a general tax on coal would be. A rise in price of coal, whether from taxation or scarcity, must levy open and insidious contributions upon us in a manner with which no other tax whatever can compare. Sydney Smith described how a man in former days was taxed at every step from the cradle to the coffin. But through coals we shall be taxed in everything and at every moment. Our food will be taxed as it crosses the ocean, as it is landed by steam upon the wharf, as it is drawn away by the locomotive, as the corn is ground and the bread mixed and kneaded and baked by steam, and the meat is boiled and roasted by the kitchen fire. The bricks and mortar, the iron joists, the timber that is carried and sawn and planed by steam, will be taxed. The water that is pumped into our houses, and the sewage that is pumped away, and the gas that lights us in and out, will be taxed. Not an article of furniture or ornament, not a thread of our clothes, not a carriage we drive in, nor a pair of shoes we walk in, but is partly made by coal and will be taxed with it.
And most things will be taxed over and over again at each stage of manufacture. Materials will be burthened in the cost of steam-carriage, and the want of outward coal-freight—in their steam conveyance here—in the machinery that is to manufacture them—the engine to drive the machinery. At every step some tool, some substance, some operation will suffer in cost from the use of taxed coal.
A general coal-tax, too, would be subject to practical difficulties. Coals differ so much in kind and quality and size, that a uniform tax would be prohibitory of the use of small or inferior coals, and great quantities would be lost and burnt upon the waste heaps. An ad valorem duty, or one graduated to the size of the coal, would entail endless trouble and fraud.
On coals for domestic use a tax would in theory be very desirable; but it would entail a change of national habits among a people who look upon a cheerful fireside as one of the most pleasant things in life. It was really a tax on domestic consumption that Pitt proposed, for he intended to exempt all factories largely consuming coal. But to discriminate the coal used for different purposes would be a difficult or impossible task for the Inland Revenue department.
A tax on coal-gas in domestic consumption might be most readily collected from the inspection of the Gas Companies' books, and would be a beneficial tax in some ways.
Little need be said of other possible modes of legislating with a view to saving coal. To oblige manufacturers to discard old wasteful engines and furnaces would be a wholly unjustifiable interference. It would destroy much property that is now profitable, and render necessary the investment of other capital now profitably engaged elsewhere. And in the building of new engines and furnaces individuals can alone judge properly what forms are most suitable for their purposes, and they are sure not to forget the profit to be derived from a reduced consumption of fuel.
We could hardly prohibit the burning of duff and slack coal on the colliery heaps, seeing that if not lighted they will take fire by spontaneous combustion of the pyrites. To prohibit the screening of coal, again, would deprive many manufacturers of the cheap small coal which is essential to their business. And to attempt to enforce economical modes of mining and working coal, would be to interfere by legislation in the most uncertain of enterprises, where no rules can be laid down, but the individual circumstances of each pit determine its mode of working.
Nothing is more easy than to suggest that the Legislature should interfere to check the waste of coal so much wanted by posterity. But when we examine the several possible modes of interference it will be found that they all break the principles of industrial freedom, to the recognition of which, since the time of Adam Smith, we attribute so much of our success. Equal objections can be urged against interference with internal industry, or external commerce. To tax home industry would strike more at the root of our wealth; a coal export duty would be less burdensome, but it would lay us open to the imputation of perfidy. The greater part of the world would regard any approach to a new restrictive system as the appropriate sequel to that cunning and successful course of commercial manœuvre, which they consider we have pursued since the time of Cromwell. It would seem that we have placed ourselves in a painful dilemma; we must either retract the professions we have made to the world and the principles we have so recently adopted, or else we must submit to see our material resources exhausted in a shorter period than could have been thought possible.
The only suggestion I can make towards compensating posterity for our present lavish use of cheap coal is one that it requires some boldness to make. I mean the reduction or paying off of the National Debt. It has long indeed become a fashion to talk of this as a chimerical notion. And on various pretexts, but really from "the ignorant impatience of taxation," we go on enduring this vast gap in the capital of the country.
An annual appropriation towards the reduction of the debt would serve the three purposes of adding to the productive capital of the country, of slightly checking our present too rapid progress, and of lessening the future difficulties of the country.
If commenced without delay, and continued with perseverance, the vast debt, now nearly eight hundred millions sterling, might be easily reduced to inconsiderable dimensions within that period now before us, which we must believe to comprise England's climax of prosperity.
A most suitable and unobjectionable mode of effecting the payment presents itself. It is well known that the legacy and succession duties are of a very improvident nature, because they yearly convert a portion of the property of the country into income, and expend it, instead of expending the annual interest only.89 The country, to the extent of about one-twentieth of its revenue, acts the part of a spendthrift in spending what it ought to invest, and trade upon, and transmit to its descendants for their similar use.
Now this investment would be duly made by transferring the whole proceeds of the duty to the Commissioners for the Reduction of the National Debt, not allowing it to enter into the annual balance sheet of the Chancellor of the Exchequer. Of course it would be useless to do this unless the remaining revenue were maintained at least equal to the expenditure. It would be absurd to pay debts on one hand and contract them on the other, in the manner of the old sinking fund. But such is the growing condition of our revenue, that the appropriation could easily be made, had we the patience to refrain for a very few years from those constant demands for the remission of taxes which are now become an unreasonable habit. After a very brief period remission of taxes might again go on, gradually accelerated by the reduction of the annual charge of the debt.
At the present time we enjoy the rising tide of prosperity due to the unprecedented commercial reforms of the last twenty years. Are we wise in pushing our present enjoyment to the extreme by remitting every penny of taxes we can possibly spare? And would not the present appropriation of the legacy duty to a special purpose ensure us future remissions at a time when they will be grateful and useful in contributing to uphold for a little longer a rate of progress which is now, if anything, too rapid?
It cannot be doubted that before long, if at all, an effort must be made to relieve the country of this burden. Writers of the last century entertained most gloomy anticipations concerning the growing debt, and they were only wrong in undervaluing the industrial revolution which was then proceeding. But now we run the risk of being too confident, and losing the grand opportunities we enjoy. It is growing wealth that makes a happy and prosperous country, and, no matter what be the absolute wealth of the country at a future time, it is idle to suppose that a popular government with a stationary revenue would ever impose new taxes to pay off an old debt. It is when a surplus revenue grows of its own accord, as at present, that we can alone expect a successful effort to be made.
As a common pretext against any attempt to repay the National Debt it is said that we had better remit taxes instead, and "leave the money to fructify in the hands of the people." But this is wholly erroneous. Taxes are, partly at least, paid out of income which would otherwise be unproductively expended; part only is subtracted from the fund of productive capital. But in investing the proceeds of a tax in Consols towards the reduction of the great debt, almost the whole money will be added to the productive capital of the country, and will be placed most certainly in the hands which will make it fructify in trade and industrial enterprises.90
The present Chancellor of the Exchequer has already devoted a good many millions of surplus revenue to the reduction of the debt, and has converted several millions more into terminable annuities. What is still better, he has often spoken of the debt in a manner which shows he would like to do more. Could a minister be found strong and bold enough to carry out a permanent and large measure towards the same end, he would have an almost unprecedented claim to gratitude and fame. And were the work once taken in hand, the notions that the payment of the debt is impossible, or Utopian, or undesirable, would quickly be dispersed. They are mere fallacies of habit.
In regard to our present subject we find, in the above proposed measure, a legitimate and practicable mode of giving some compensation to our posterity, who will undoubtedly suffer from an increased price of coal, the worst of taxes.
[85.] Hansard's Debates, third series, vol. lxxvii. p. 478.
[86.] Hansard's Debates, third series, vol. lxi. p. 448.
[87.] Hansard's Parliamentary History, vol. xxiv. p. 1215.
[88.] On the Scotch Coal Trade, p. 197.
[89.] J. S. Mill, Principles of Political Economy, 3d Ed. vol. ii. p. 455.
[90.] J. S. Mill, Principles of Political Economy, Book v. chap. vii. § 3.