After having duly considered the operation of a sinking fund, derived from annual taxes, we come now to the consideration of the best mode of pro viding for our annual expenditure, both in war and peace; and, further, to examine whether a country can have any security, that a fund raised for the purpose of paying debt will not be misapplied by ministers, and be really made the instrument for creating new debt, so as never to afford a rational hope that any progress whatever will permanently be made in the reduction of debt.
Suppose a country to be free from debt, and a war to take place, which should involve it in an an nual additional expenditure of twenty millions, there are three modes by which this expenditure may be provided ; first, taxes may be raised to the amount of twenty millions per annum, from which the coun try would be totally freed on the return of peace ; or, secondly, the money might be annually borrow ed and funded; in which case, if the interest agreed upon was 5 per cent., a perpetual charge of one mil lion per annum taxes would be incurred for the first years expence, from which there would be no relief during peace, or in any future war ; of an additional million for the second year's expence, and so on for every year that the war might last. At the end of twenty years, if the war lasted so long, the country would be perpetually encumbered with taxes of twen ty millions per annum, and would have to repeat the same course on the recurrence of any new war. The third mode of providing for the expenses of the war would be to borrow annually the twenty millions re quired as before, but to provide, by taxes, a fund, in addition to the interest, which, accumulating at compound interest, should finally be equal to the debt. In the case supposed, if money was raised at 5 per cent., and a sum of L.200,000 per annum, in addition to the million for interest, were provided, it would accumulate to twenty millions in 45 years ; and, by consenting to raise L.1,200,000 per annum by taxes, for every loan of twenty millions, each loan would be paid off in 45 years from the time of its creation; and in 45 years from the termination of the war, if no new debt were created, the whole would be redeemed, and the whole of the taxes would be repealed.
Of these three modes, we are decidedly of opinion that the preference should be given to the first. The
hurthens of the war are undoubtedly great during its continuance, but at its termination they cease al together. When the pressure of the war is felt at once, without mitigation, we shall be less disposed wantonly to engage in an expensive contest, and if engaged in it, we shall be sooner disposed to get out of it, unless it be a contest for some great na tional interest. In point of economy, there is no real difference in either of the modes; for twenty millions in one payment, one million per annum for ever, or L. 1,200,000 for 45 years, are precisely of the same value ; but the people who pay the taxes never so estimate them, and therefore do not ma nage their private affairs accordingly. We are too apt to think, that the war is burdensome only in pro portion to what we are at the moment called to pay for it in taxes, without reflecting on the probable duration of such taxes.. It would be difficult to con vince a man possessed of L. 20,000, or any other sum, that a perpetual payment of L. 50 per annum was equally burdensome with a single tax of L.1000. He would have some vague notion that the L.50 per annum would be paid by posterity, and would not be paid by him ; but if he leaves his fortune to his son, and leaves it charged with this perpetual tax, where is the difference whether he leaves him L.20,000, with the tax, or L.19,000 without it ? This argument of charging posterity with the inte rest of our debt, or of relieving them from a portion of such interest, is often used by otherwise well in formed people, but we confess we see no weight in it. It may, indeed, be said, that the wealth of the country may increase ; and as a portion of the in creased wealth will have to contribute to the taxes, the proportion falling on the present amount of wealth will be less, and thus posterity will contribute to our present expenditure. That this may be so is true ; but it may also be otherwise—the wealth of the country may diminish— individuals may withdraw from a country heavily taxed; and therefore the pro perty retained in the country may pay more than the just equivalent, which would at the present time be received from it. That an annual tax of L. 50 is not deemed the same in amount as L. 1000 ready money, must have been observed by every body. if an individual were called upon to pay L. 1000 to the income-tax, he would probably endeavour to save the whole of it from his income ; he would do no more if, in lieu of this war-tax, a loan had been raised, for the interest of which he would have been called upon to pay only L.50 income-tax. The war taxes, then, are more economical; for when they are paid, an effort is made to save to the amount of the whole expenditure of the war, leaving the national capital undiminished. In the other case, an effort is only made to save to the amount of the interest of such expenditure, and therefore the national ca• pita] is diminished in amount. The usual objection made to the payment of the larger tax is, that it could not be conveniently paid by manufacturers and land holders, for they have not large sums of money at their command. We think that great efforts would be made to save the tax out of their income, in which case they could obtain the money from this source ; but suppose they could not, what should hinder them from selling a part of their property for money, or of borrowing it at interest ? That there are persons disposed to lend, is evident from the facility with which government raises its loans. Withdraw this great borrower from the market, and private bor rowers would be readily accommodated. By wise regulations, and good laws, the greatest facilities and security might be afforded to individuals in such transactions. In the case of a loan, A advances the money, and B pays the interest, and every thing else remains as before. In the case of wat-taxes, A would still advance the money, and B pay the inte rest, only with this difference, he would pay it di rectly to A ; now he pays it to government, and go vernment pays it to A.