(Source Unknown)
The savages described by Montesquieu who, to get at the fruit, cut down the tree, are about as good financiers as the advocates of this sort of taxes ~ J. R. McCulloch
I place economy among the first and most important of virtues and public debt as the greatest of dangers to be feared. To preserve our independence, we must not let our rulers load us with public debt. We must make our choice between economy and liberty or profusion and servitude. If we run into such debts, we must be taxed in our meat and drink, in our necessities and comforts, in our labour and in our amusements. If we can prevent the Government from wasting the labour of the people, under the pretence of caring for them, we will be happy. ~ Thomas Jefferson
The laws made by kings and legislatures are not immutable and may be disobeyed by rebellious people. But there are laws which are in the nature of vidhi and which are immutable - like the law of conservation of energy or Newton’s laws of motion. Constitutions have invested governments with unlimited powers of taxation. But though the power is ‘unlimited’, there are limits beyond which, when taxation is levied, it becomes dangerous and even fatal. Northcote Parkinson* calls this his second ‘law’. When the Finance Minister of India mournfully confesses that additional taxes are inevitable, and proceeds to investigate the possibilities of putting heavy taxes on the very poor, by levying excise duties on commodities which they consume in one form or another, it is a clear indication that Parkinson’s second law is in operation.
Northcote Parkinson has become famous by his odd-looking but wise opinions which went contrary to orthodox error, and to which he gave cynically-shaped expression and pleased a suffering and thinking world. His latest book* is worth reading. He has written it to show that there are limits to the collection of revenue and that “evils multiply when these limits are ignored”. The positive purpose of this new book is to show that “a greatly reduced revenue would bring about an improvement, not a decline, in the public services.”
Mathematics has its unchangeable laws. People working in the concrete world, of which mathematics is the inexorable abstract, are prone to make miscalculations leading to disappointment and consequent misery. Parkinson has defined his second law - that when there is a rise in receipts, be it of individuals or of governments, it is silently absorbed, leaving the recipient barely in credit and often in fact with a deficit. Whatever the revenue may be, there will always be the pressing need to spend it. Individuals at least pause to consider what the income is. But those in charge of public finance ignore the total of their income and consider only what they would like to spend.
During times of emergency, public authorities spend lavishly without thought of limits. When the emergency ends, there is no reversion to economy. Governmental income remains at its war-time or emergency level and peacetime expenditure rises to meet it. There is no limit to departmental and technical luxuriance. The public revenue is regarded as limitless and expenditure rises eternally to meet it. The various devices which are supposed to check expenditure fail to do so, being wrongly conceived and imperfectly motivated. We must devise a new plan, says Parkinson, to achieve economy.
As a first step, says Parkinson, we must reverse the whole process of governmental finance. Ministers should not begin by ascertaining what the departments need. They should begin by asking what the country can afford to spend. What proportion of the national income should the government demand? What proportion of the individual’s income can the government safely take? There is a limit, beyond which it is dangerous and a limit beyond which it is fatal. Historical fact and economic theory, says Parkinson, both clearly indicate these limits.
Parkinson suggests a machinery for reversing the present financial practice and for the creation of an incentive for cutting down national expenditure. it is of course contrary to all present ideas. He suggests rewards, titles and exemption from taxation for citizens and officials who successfully propose deletion of any expenditure. All such saving should be utilized to reduce the National Debt and not simply go to another department for being spent by it.
Parkinson admits that the reform of national finances suggested by him will be strenuously opposed.
Freedom is founded upon ownership of property. It involves self-expression in terms of architecture and art. It cannot exist where the rulers own everything, nor even when they concede some limited right of tenure. But the modern belief is that spendable income is a concession by the State. The taxation which is intended to promote equality, the taxation which exceeds the real public need, and above all the tax which is so graduated as to prevent the accumulation of private capital, is inconsistent with freedom. Against a State which owns everything, the individual has neither the means of defence nor anything to defend. For the normal human being who is not a creative artist or scientist by profession, the means of self-expression consists largely of rooms to modify and gardens to tend, trees to plant and offspring to rear. Losing these opportunities for expression, the individual loses individuality, freedom and hope.
The reform will be faced inevitably (says Parkinson) by a closed phalanx of civil servants representing one of the strongest vested interests in the world. Their opposition, though passive, will be formidable. To all proposals for a proper system of accounts, they will reply with a pitying smile that it was tried once at the War Office, found wasteful and long ago abandoned. They will then retire behind a smoke-screen of technical mistiness muttering that public finance is a more complex matter than is generally realized.
* The Law and the Profits by Northcote Parkinson, John Murray, London 1960.
