Germany before the war

by baron Beyens

In the debate on the first reading the Finance Minister’s scheme was coldly received by the Liberal elements. It soon became clear that the vote for financial cover, which the Chancellor wished to obtain by the beginning of July at the latest, would not be passed unless he resigned himself to accepting drastic amendments. Herr von Bethmann-Hollweg, anxious to push the matter through as quickly as possible, acknowledged that the Government proposals might be modified.

The Budget Committee went to work with a vengeance. For the Wehrbeitrag, it raised the minimum of taxable property to £2,500 with an income of over £100, and, making the tax progressive, it taxed incomes of over £250, provided they exceeded by £50 a sum representing five per cent. of the taxpayer’s capital. For the valuation of real estate it adhered to the principle of fictitious capitalization, multiplying the incomes by 25 instead of 20, a co-efficient proposed by the Government and considered too favourable to the landed proprietors. The Princes were subjected to the extraordinary tax in the same way as private citizens; the assurance given by princely families, that they would contribute of their own free will, was not regarded as sufficient. On the other hand, against the advice of the Liberals, estates held in mortmain were exempted. The tax was to be collected in three instalments: the first, one month after the preliminary assessment, i.e. on December 31, 1913, the second in 1915, and the third on February 15, 1916.

A large number of the taxpayers were called upon to contribute to this “Defence Levy,” within two years, a third or more of their income. For manufacturers, bankers, commercial companies, and others who had capital in reserve, this sacrifice was not very hard to make. A landed proprietor, however, who lived on the income derived from his estate, would be compelled either to cut down expenses or to raise money on a mortgage. In the same way, a person who depended on the modest proceeds of his investments would have to sell or mortgage a portion of his holdings.

For permanent expenditure, the Committee rejected the increase in matricular assessments proposed by the Government, on the pretext that the Empire ought not to beg for alms from the federated States. On the other hand, it accepted, with some modifications of detail, the principle of taxing increments of wealth and capital. It exempted princely families, but not limited companies.

At the second and third readings, the Reichstag adopted the resolutions of its committee. On 30th June, the date recommended by the Government, the bill for financial cover was passed, as I have said above, by a notable majority, composed of the Liberal and Socialist groups, with which the Centre had combined, the Conservatives forming the bulk of the opposition.

It was a great victory for the more advanced elements, Progressive and Socialist. The Centre and the National Liberals rallied to their standard, being convinced that it was impossible to revive the Bassermann-Erzberger proposal. In point of fact, the bill passed by the Reichstag proceeded, to a great extent, upon the same lines as the measure proposed by these two deputies. A series of direct taxes, on an enormous scale, now swelled the resources of the Empire, while their yield, in accordance with the Bismarckian policy, was almost entirely reserved for the individual States. The Socialists would have liked to go further and throw the whole weight of this burden upon the shoulders of the privileged classes.

After all, the Reichstag vote was, in a way, a breach of the federal compact, and an invasion by the Imperial Parliament of the rights of individual States. It marked a stage in the journey towards complete unification of the Empire by means of fiscal processes. This encroachment by the central power was not accepted without a murmur by Saxony and the southern States. Their deputies in the Reichstag were forced to bow to the higher necessities pleaded by the Government, and to ratify a measure which claimed to be in the interests of the nation as a whole. It may be said that from this time onward the fiscal independence of the federated States ceased to exist.

The anger of the Conservatives found vent in the columns of their newspapers and the speeches of their leaders. Their representatives in the Reichstag, clinging to the Government scheme, had voted in sheer desperation against the new tax on increments of wealth and capital, nominally because it infringed the autonomy of the individual States, really because, in striking at increments in wealth due either to a rise in site-values or to inheritance in direct line, it assailed their position, privileged till then, as landed proprietors.

IX.

It was not to be expected that the Conservatives would accept this defeat without any thought of seeking revenge. The aristocracy who direct the party had supported all the costly proposals for augmenting the military forces, in order to ensure Germany’s triumph in the next war. Their sins now recoiled upon their own heads. From this time forth, the landowners would suffer the common lot of taxpayers, and in the grim struggle that they wage with such amazing vigour against an ungenerous soil, would no longer be able to devote the entire surplus of their income to the improvement of their farms. Their rout was due to the growth of the Socialist vote, to the place won in the Reichstag by Social Democracy, whose magnetic force was attracting both the Christian Democrats of the Centre and the more advanced Liberals. The problem now before them was this: should they submit to the domination of the Left, or should they counteract it, and endeavour to build a dam, once for all, against those Socialist floods that threatened to sap the very foundations of the monarchy?