| A | £50 | less 10 per cent. | = | £45 |
| B | 500 | " | = | 450 |
| C | 10,000 | " | = | 9,000 |
Most clearly we see that to A, with £1 a week, the loss of 10 per cent., or five week's income, is a most serious matter—a crushing burden. With £500 per annum, however, B, after the loss of 10 per cent. of his income, is still left with a revenue ten times as great as that of A. The taxation in B's case is serious but not overwhelming. C, after the loss by taxation of one-tenth of his income, is left with the handsome income of £9,000 a year, a sum which is more than sufficient to sustain him in luxury. The loss in the third case is clearly a shadowy one; a rich man has been rendered not quite so rich.
Thus, by taxing in proportion to income, we impose upon the poor man a crushing burden; upon the small income a serious burden; upon the large income a burden scarcely to be felt.
Obviously, then, the second part of Adam Smith's maxim is not a true illustration of the doctrine of equality of sacrifice which is involved in the use of the term "ability."
This has been partially recognized in our present system of taxation. Those with incomes exceeding £160 per annum are made to pay a tax which is not imposed upon those with less than that income. Further, the income tax is roughly graduated. A graduated death duty is also imposed in order to obtain a larger contribution from the rich than from the poor.
I now urge that the doctrine of equality of sacrifice, which has already been partially recognized, should be considered in relation to all the facts treated in Book I.
We have seen that the great mass of the people, who do the greater part of the work of the nation, who produce the material commodities without which life could not be supported, receive so small a share of the total product that while 39,000,000 persons enjoy an income of £911,000,000, about 5,500,000 persons receive an income of £930,000,000. If then, we had to raise £200,000,000 per annum by taxation and were to raise the whole from the second class, the result would be:
| 5,500,000 would have £930,000,000, | £730,000,000 or |
| less £200,000,000 | £133 per head. |
| 39,000,000 would have | £911,000,000 or |
| 23 per head. |
The Error of Distribution is so great that, were the whole taxation levied upon those above the line of £160 per annum, the comfortable and rich classes would still be left about six times as rich as those below that line.
An unanswerable case is thus made out for the repeal of the whole of the customs duties on tea, coffee, cocoa, dried fruits and sugar, which bear almost entirely upon the poorer classes. A heavy tax on tea or sugar is a matter of indifference to the rich; to the poor it means a considerable privation. Our indirect food taxes are a denial of the doctrine of ability.