Confiscation and Class Hatred; H. Hazlitt

Confiscation HENRY HAZLITT LONDON-When politicians in pow er in any country have wrong, fixed ideas, not even the worst crisis will lead them to abandon those ideas. They will only admin ister still greater doses of the same quack remedies that brought on the disease'. The budget measures recently announced by Roy Jenkins, the British chancellor of the excheq uer, are a perfect illustration. They have been praised both there and abroad for their harshness and brutality. It is true that they im pose further sacrifices on the Brit ish taxpayers, but most of these are unnecessary and irrelevant. In the long run the new measures can only discourage effort, saving, investment, and production. To restore confidence in the pound the budget should be bal anced, of course; but it should be balanced by reducing grossly infiated welfare spending. Instead, the new budget actually increases total spending to $27.6 billion in fiscal 1969 compared with $26.1 billion in the preceding fiscal year.

The surplus is to be achieved by even more onerous taxation. Rev enue for fiscal 1969 is estimated at $30.9 billion, up from $26.8 bil lion. This would leave a nominal surplus of $3.3 billion, compared with a surplus of only $718 mil lion in fiscal 1968, which ended March 31. Even before the announcement of the new levies, Britons paid Draconian taxes. The standard in come tax rate is 411;4 per cent. On top of this are imposed surtaxes which bring marginal rates as high as 911;4 per cent on income and 80 per cent on estate duties. The Jenkins proposals, impos ing stiff increases on "purchase taxes" (up to rates of 50 per cent A1F\ 416 THE FREEMAN July on items like phonograph records and cameras) were praised be cause they did not increase ordi nary personal income, corporation, or capital-gains taxes. But to make up for this, the new budget im poses a savage additional tax (os tensibly to run only for one year) on investment income over $7,200 a year. The rate progresses from 10 pe'r cent on that amount to 45 per cent on amounts over $19,200.

Because this special impost comes on top of the regular income tax and surtax, it actually makes the total tax on investment income in the higher brackets more than 100 per cent. In fact, a man with investment income of. more than $19,200 could pay a total tax of 136 per cent on amounts over that figure. An added grim feature of this confiscatory tax is that the recipi ent of investment income is not al lowed to escape it even by giving that income away. There are various other follies in the new Labor Party measures. The stupid "selective employment tax" has been increased by 50 per cent. Wage and dividend increases are to be limited to 31/2 p.er cent a year. The government is to be allowed to roll back individual prices that it considers too high. All of these measures will restrict, dis courage, and distort production. Yet the most ominous measure is still the expropriation of invest ment income, in a country once considered to be the most respon sibly governed in the world.

Even the London Economist, to day far from a conservative jour nal, gagged at this. "The spectacle of people purposelessly enjoying the despoiling of somebody else is very nasty; and as a great roar of delighted shadenfreude greeted the levy, the Labor backbenches sud denly looked extraordinarily nasty and loutish." The act of confiscation is totally irrelevant to restoring confidence in the pound. It can only under mine that confidence. Even on the government's own calculations it will bring in less than 1 per cent of its total revenues. It penalizes precisely saving and investment, the most essential element for the increase of production, real wages, and economic growth. It was im posed solely to satisfy a blind envy and class hatred. + Copyright 1968, Los Angeles Times. Reprint by permission.