ABSTRACT
§ 1 . EVERY modern State finds itself in need of a continually increasing income for the performance of new non-remunerative work, and for the enlargement and improvement of existing public services. Comparatively little of this new or enlarged work is directly and specifically productive of wealth upon which the cost of the State service can be charged. Though public health, education, defence and industrial regulations may be considered conducive to the improved economic productivity of the nation, this economic gain is not the sole or even the main object of the State, nor is it so certain, immediate and measurable as to furnish a specific revenue for the performance of the public service, as in the case of the Post Office Services. The cost of most of these services must therefore be defrayed out of the general income of the State. That income must be obtained either from the profitable exploitation of State properties and monopolies, or by general taxation. Where, as in some countries, State ownership of lands, forests, mines, railways, banks and other lucrative resources, enables the public revenue to be enriched by receiving rents and profits which elsewhere are left in private hands, subsidies from these sources may be applied to help to bear the cost of non-remunerative services. But even in these cases it appears that the rents and profits thus taken by the State are in effect taxes upon the income of citizens, in the shape of surcharges on their purchase of the goods or services delivered to them by the State. For, when the State administers a productive and remunerative service of which it has a monopoly, it can either supply the goods or service at cost price to the community, or it can levy an arbitrary toll, working its public monopoly on business lines as would a private owner. If, in order to defray the cost of other specific services, or to improve the general revenue, the State pursues the latter policy, its action ought clearly to be recognized as a method of taxation. The determination of State policy is not, however, as a rule, guided by mere or immediate considerations of finance. Low railway rates may be given in order to promote health and amenities by helping to relieve the congestion of population in cities; a drink or tobacco monopoly may impose high prices and earn a high profit primarily for public order and hygiene or in order to check excessive consumption of luxuries. A welladministered State will certainly use its economic monopolies to achieve other serviceable objects than the provision of revenue. The desirability of providing cheap food, fuel, travel, carriage, insurance or credit, will, in many cases, disable the State from reaping a large direct revenue out of the economic services it owns or controls. To encourage or discourage certain habits of consumption may be deemed more ‘truly profitable for a State, in relation both to its higher purposes and to the future economic productivity of the nation, than to exploit these monopolies for present purpose of maximum public revenue. Upon the whole, the tendency of a modern progressive State will be to use its increasing economic control to supply sound goods and services at cost price in all cases except where health, public order, or some other clearly defined advantage accrues from restricting or regulating the supply of the goods or services controlled. We cannot, therefore, hold it likely that our post-war State, however greatly it extends its ownership or control of specific industries or services, will utilize the power of monopoly thus obtained to any large extent as a source of public revenue. In other words, the great bulk of the increasing revenue the modern State demands must come out of ordinary taxation.
