38 Manual of Political Economy.
BOOK I. CH. IV.
if paid out of capital it injures the labourers.
fewer commodities, and that the labourers will thus be injured because dull trade is always prejudicial to them. But here we must once more recall the remarks we have previously made to show how little the labourer is benefited by the unproductive consumption of wealth. If the income-tax is paid from income and not out of capital, the labourers may derive a very decided advantage from an increased income-tax, because a portion of the money which is thus obtained by the Government is sure to be employed as capital, since it will be paid in wages to artisans, shipwrights, and other classes of labourers engaged by the Government. One of the advantages often attributed to a democratic suffrage is that the people have a direct interest in checking a reckless expenditure, and it is also urged that it is the interest of the rich in opposition to the poor to encourage heavy taxation. But the labourers will in every way be greatly profited by increased expenditure if the money is provided by an income-tax, which is sure to be partly supplied from increased economy, and which, in this country, it has never been proposed to levy upon the labouring population. In a country so rich as England, even a heavy income-tax would probably in the main be paid out of income, and not out of capital. Such a tax, therefore, would not seriously interfere with the production of wealth, but would most materially encroach upon the means of enjoyment of the majority of those who pay it. Even in the richest country, if an income-tax continues to be increased, it must at length cease to be chiefly paid out of income. Directly it encroaches upon the capital of the country, the tax becomes doubly burdensome and disastrous, the production of wealth will be impeded, the position of the labourers must be rapidly deteriorated, and the finances of the country will be gradually brought into a most critical state. In a poor country, such as India, an income-tax is a much more hazardous expedient, than in a wealthy country like our own.
We have now pointed out some of the effects which follow both from loans and from increased taxation, and there can be little doubt that loans ought to be avoided as far as possible. A loan, however, is perfectly justifi-