CREDIT AND TAXES.

Wellington Independent, Volume XXVI, Issue XXVI, 2 August 1871, Page 3

CREDIT AND TAXES.

.Q. (From the Nkw Zealand Mail.) As error is the great obstacle to human progress, so enlightened self-interest would prove its most efficient auxiliary. Men desire their own good, but they seldom know what is good for them. It is not so much the end, as the means of attaining it, in which they are mistaken. A present sacrifice, however small, is thought more of than a distant advantage, however great. When this is the case either with an industrial or a state future affluence and prosperity are out of the question. There are some erroneous notions prevalent regarding both credit and taxes which if not removed may obstruct the progress of the colony These relate to the basis on which public credit rests, and to the benefits which public taxes, rightly expended, are capable of conferring. First ns regards credit. This is supposed, and the word I seems to denote, that it has something jto do with character. A person of good character could get credit where a person of bad character could not ; as one man's word is as good as another man's bond. But in large monetary transactions, character is not, merely as such, of much account ; nor is it in any case of so much account as it has been represented. For example ; it has been frequently stated that " there is nothing so sensitive as the money market ; there is nobody so particular as regards character as the member of the Stock Exchange*" By dint of constant repetition these assertions have come to be con sidered in the light of axioms which have been established bejond dispute. Yet it may be doubted whether the money market is really any mere sensitive than any other market. The reason why its sensations have been more noticed is not so much on account of its greater susceptibility, as on account of the magnitude of its operations. The trembling of a mountain would be more felt than that of an aspen leaf, though the latter might be the more violent of the two. As regards character that is doubtless a most important matter; but the member of the Stock Exchange, and the ordinary money lender, do not enquire into (he character of the oorrower, but into the nature of his security. Two advertisements shall appear in one column of the same newspaper ; one notifying that Messrs So and So want a clerk, the other that certain sums of money are to be lent at tho current rate of interest. Good character ia said to be indispensable in the one case ; but there is nothing said about character in the other. It is not the character of the borrower, but the character of his security which the money lender cares about. The question he asks is not whether he will be willing to pay, but whether he can enforce payment. Everybody has read Dr. Franklin's homely illustrations of the nature of credit, which he represents as equivalent to money. He shows that the sound of the blacksmith's hammer, heard regularly at the forge at 5 o'clock in the morning, will establish his credit, when the sound of his voice heurd as regularly at the alehouse would ruin it. But the iron merchant, storekeeper, or : money lender does not give him credit because he thinks ho is willing, but because he knows that, with such habits?, he will be able to pay his debts The alehouse brawler could obtain more credit, and on better terms, than the sober blacksmith, if he could give better security. The opulent knave is a preferable debtor to the honest bankrupt. If is the same with an opulent nation, and also with a flourishing colony, which has vast natural resources that only require the application of capital for their development. Can the colony now or hereafter pay the interest and sinking funds? If the money lender is satisfied on this point, whether it will bo willing or not to do so does not disturb him, as he is well aware that a colony could no more repudiate its liabilities than a mortgagor his mortgage. ]t does not pay a great nation to refuse payment of its debts ; and a small ono, which exhibits any disposition in that direction., is quickly brought up to the scratch, either by the force of a fleet of

of public opinion, as in the case of Mexico and icnnsylvania. The amount of the inituoi depends on the extent of the risk, and il.ai depends on the nature and extent of the security and the facilities which exist lor its realisation. The " Hawke's Bay Herald" and its Taranaki namesake have both been niiiking merry at the expense of this province. They both laugh at Mr Fitzherbert's statement relative to the Provincial assets and liabilities. The latter talks about the price the Waitotara land fetched eta forced auction, and at a time when the district was full of rebels, and intimates that worse land, under the most favorable circumstances, and when opened by railways and settled by small farmers, would not be likely to realise so much money as was obtained in that exceptional inslance ; while the former, with equal wisdom, observes : — " Unless he means to put the roads and bridges up to auction it is not easy to understand on what principle they are introduced into the calculation." Mr Fitzherbert did not include roads, but tolls, in his estimate of Provincial assets, though had he done so he would have been perfectly justified. They constitute part of the public wealth of the province, and afford a good collateral security for a public works loan. The real assets of the province, instead of being magnified arc much more valuable than they appear in the Superintendent's statement When Sydney Smith endeavored to show how easy it was for Pennsylvania to pay its public debt of forty million dollars, he did not enquire what was the value of its waste lands and bridges, but what the total income of the state, from all sources, amounted to; and what proportion the total debt bore to the net income. As we pointed out in our last issue, the " Times" is of opinion that property which will yield no revenue, and which can be neither alienated nor mortgaged, yet constitutes a portion of the public wealth ; and that a country which was rich in roads aud public works possessed in reality a public fortune. The value of our public roads, therefore, ought to have been included in the inventory of our possessions. These papers speak of our future revenue as if it would remain stationary after immigration had set in, railroads had been made, and flourishing settlements founded. They might as well represent the revenue of a cultivated farm would only equal that of an uncultivated farm ; or assert that there were no means of raising a revenue than those which are employed at present. The consideration of this latter point constitutes the second branch of our subject. In treating of tuxes, we shall have to confine our remarks, on the present ocsion, to those which may be imposed by the legislature to cover the interest and sinking fund of loans expended on such reproductive works ns roads, bridges, and railways. We cannot help remarking, however, that more than one half of the taxes paid into the Colonial Treasury are self-imposed, while the whole of them together do not constitute more than a trifling portion of those which are paid under other names, and to other parties, by the people. Anything which adds to the price of a commodity, before it reaches the consumer, beyond the cost of its production and manufac ture, is a (ax paid by the purchaser. It is just as much a tax when this increased price is charged for transportation, and collected by the carrier or storekeeper, as when charged for revenue, and received by the Collector at the Custom House. A tax, therefore, as we on a former occasion remarked, which is levied for the purpose of paying the interest on a loan expended in such a .manner as would greatly diminish the cost of the transport of commodities, might, instead of increasing, largely decrease the amount which the consumer had to pay for his goods beyond that which he would pay for them at Wellington. It matters not whether he paid that sum directly to the carrier, or indirectly through the retail dealer; in either case it would be much larger than the sum he would have to pay to the Government in the shape of taxes ; while this would be only one of the advantages he would reap from the expenditure of a public works loan in his neighboihood. He would participate, in spite of himself, in the general prosperity which would be the national aud necessary result. If a tenant farmer, he would secure a better and more accessablc market for his produce ; if he owned the land he cultivated, his increased taxes would be a mere bagatelle compared with the benefits he would derive from the construction of a railroad. It has been ascertained that every mile of railroad constructed in America has added five times its cost to the aggregate value of the property of the country. The danger is not that we shall increase our debts by constructing public works more rapidly than we shall increase our wealth, but that railways may be made where they are not required, and be left unconstructed where they arc most wanted. IVe observe that in Canterbury the bankruptcy of tli3 runholder and the agriculturist is ascribed to taxation, but the taxes which have ruined them were the taxes they had to pay to the money lender. These amounted, with commission, to 15 per cent on the money borrowed, which would ruin any farmers in the world, if they hud no Government taxes to pay. Their ca&e shows, however, that money can be borrowed at too high a rate of interest, and that even in the matter of a railway we may, if we arc not careful, '• pay too dearly for our whistle."