Mr Asquith's valuable Act needs to be amended by the reduction of the pensionable age to 65 and to be supplemented by a State scheme for sickness and invalidity insurance. (A minor defect which has revealed itself is the continued disqualification of a man whose wife is in receipt of relief.) The case for the amendment has been already discussed in these pages; the case for invalidity insurance is that old age is not the only determinant of dire poverty for the wage earner. The facts adduced in Chapter 10 are eloquent of the need for succour which exists in tens of thousands of cases.
[60] The Royal Commission on the Poor Laws called for a similar "year count" of paupers for 1907. It revealed that in that year of good trade 1,709,436 persons were relieved by the Guardians in England and Wales. This is 47.7 per 1,000 of the population. The later count fully confirms that of 1892.
[61] This description is their own. See "Old Age Pensions" (Macmillan & Co.) Introduction.
CHAPTER XX
ADAM SMITH'S FIRST MAXIM OF TAXATION
OUR next task shall be to examine the question of taxation in relation to the Error of Distribution.
It is over one hundred and thirty years since Adam Smith penned his famous maxims of taxation, the first and most important of which ran as follows:
"The subjects of every state ought to contribute towards the support of the government as nearly as possible in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state."
The first part of the proposition, which lays it down that contribution towards the support of government should be in proportion to ability, is interpreted by the second part to mean that contribution should be in proportion to income. The second half of the maxim is therefore subversive of the first.
Let us compare the ability to bear taxation of three persons whose respective incomes are: A £50; B £500; and C £10,000. If we accept Adam Smith's explanation of his own maxim, we should apply taxation in proportion to income. Note the effect of a tax of 10 per cent. upon the three incomes: