— Would there still be taxes under a Social Credit financial system?

This is a question set in the style of the present financial system. To answer it and to be understood, it is necessary to reason in the style of Social Credit, that is to say, first in terms of reality, and no directly in terms of money. Once the answer is given in terms of reality, one adapts finance to it, like in any other aspect of a Social Credit economy.

The present taxation method is corrupted like the present financial system, in contradiction with economic reality; swindling, in the service of centralization in the hands of financial empires and the State. Douglas declared on this subject, in a lecture given at Westminster in February, 1926, and reproduced in Warning Democracy, page 61 of the 1934 edition:

“Modern taxation is legalized robbery, and it is none the less robbery because it is effected through the medium of a political democracy which is made an accessory by giving it an insignificant share in the loot. But I do not think robbery is its primary object. I think policy is, much more than mere gain, its objective. I think it is most significant that every effort is made by economists of the type turned out by the London School of Economics to instill into the Labour Party that it is possible to obtain some sort of a millennium by accelerating the process of stealing.”

And in Social Credit, page 105 of the 1937 edition, Douglas wrote:

“Present-day finance and taxation is merely an ingenious system for concentrating financial power.”

And on page 150 of the same book, Social Credit:

“The main tendency of the process (of taxation) is to concentrate the control of credit in a potential form in great organizations, and notably in the hands of the great banks and insurance companies.”

Therefore, Douglas strongly condemns the present tax system.

Yet, in Warning Democracy, page 175, Douglas wrote:

“It is well understood that taxation in its present form is an unnecessary, inefficient and vexatious method of attaining the ends for which it is ostensibly designed. But while this is so, there is, of course, a sense in which, while private enterprise and public services exist side by side, taxation is inevitable. Public services require a provision both of goods and human service, and the mechanism by which these are transferred from private enterprise to the public service must in its essence be by a form of taxation.”

— Ah! does not this quotation of Douglas contradict the preceding quotations?

Not at all, if you take notice of the terms used by Douglas, as well as his supporting arguments.

What Douglas calls “legalized robbery” is the present taxation method, the one which takes money away from individuals to satisfy the demands and finalities of the financial system. Whereas the “form of taxation” which he considers inevitable is a mechanism, not to take money away from individuals, but, as he says, to transfer, from the private sector to the public sector, the things and work required to answer the public needs of the community. This is not speaking in terms of financial myth any more, but in terms of reality.

— Would you enlighten this point a little?

When the government has, let us say, a road built, or a piece of road, does this hinder or reduce in the least the production of milk, butter, vegetables, clothing, shoes or other consumer goods? Is not this production, on the contrary, activated because the wages distributed to the workers on the road stimulate the sale of these consumer goods?

Now, in the present system, the government imposes taxes on the taxpayers to pay the workers on the road. It takes away money which would buy the consumer goods, to pay for the construction of the road.

This system is not in keeping with reality. If the country is capable of producing at the same time both private and public goods, the financial system must supply the money to pay for both. There is no reason to reduce the private sector's standard of living for the public sector's standard of living, when the country's production can feed both.

Under a Social Credit financial system, money would come automatically to finance all production physically possible and requested by the population, whether it is a matter of private or public production. This is what we explained previously for the public sector while taking, as an example, the construction of a bridge.

— Is it because of the present way of financing public works that Douglas calls taxes "legalized robbery"?

It is patently obvious that it is a theft, which only madness could excuse. As it was expressed in a past issue of “Michael”:

When the country's population is able to supply both private and public goods at the same time, you have to be an idiot or a thief to take away from individuals the claims on private production under the pretext of allowing public production.

But there are other cases where taxes are an unjustifiable plundering, although legalized. Among others, the following cases:

— All purchasing power that taxes take away from individuals, while the offered production awaits buyers;

— All that the government takes in taxes to deal with functions which it ought to leave to individuals, families, intermediary bodies. And on that score, the theft is increasing, as the government's interference multiplies. The government, it is true, always gives, as a reason, the financial incapability of the individuals, families, local public administrations. Its action, then, ought to aim at correcting this financial incapability, like a Social Credit financial system would do.

 — Legalized robbery again: not only the taxes themselves, but all the expenses entailed by the collection of taxes, expenses that are paid by the public under one sector or another, without getting any service in return.

— But your last quotation of Douglas mentions a "form of taxation" to transfer goods and work from private production to public production, and you said that it is not necessarily a transfer of money. How do you see it?

First, I see it in terms of reality; as to its financial expression, it can take different forms. Let me explain:

For the bridge construction  the example given of a public plan  it is the decision taken by the government, with the approval of the people's representatives, that constitutes the transfer of a part of the country's production capacity towards the public sector. And it is the situation which results for the volume of production of consumer goods that could affect the population's standard of living.

Whether it is a matter of private or public goods, the population certainly can get nothing more than what is produced. If the citizens, through their representatives, request so many public goods from their government that the production of private goods is reduced, their standard of living will necessarily have to go down accordingly, even if their enjoyment of public goods increases. It is not a question of finance, but a question of real wealth.

And how will this real situation be expressed financially? By a reduction of purchasing power, because one cannot buy what does not exist. And this reduction of purchasing power, under a Social Credit financial system, would mathematically fit into the adjusted- and compensated-price mechanism. This would be a "form of taxation" corresponding to the transfer, from the private sector to the public sector, of a certain part of the country's pro­ductive capacity.

Any price increase coming from this adjustment would be perfectly justifiable. It would neither be speculation nor exploitation, since the whole would be adjusted according to the ratio of consumption to production. The increase would mean a reduction of the production volume for private goods. The public would always be aware of it; if it thought the load too heavy, it would request its government to curb its public-sector activities.

The “form of taxation" expounded here above does not claim to be the only conceivable one. The main thing is for the financial aspect to be the exact reflection of reality. As for the choice of methods, it is a question of practicability, taking into account circumstances and experimentation, as long as the principles are respected.

— Does all this mean that with a Social Credit financial system, we would have nothing to pay any more neither to governments, municipalities, nor to school boards and other public administrations, and that new money would come for all their needs?

There are distinctions to make. We said that new production must be financed by new credits, but we added that one must pay as one consumes. For example, if a school built with new credits is estimated to last at least twenty years, the population which uses it must pay for it one-twentieth of its price each year. We explained it for the bridge.

This is no more a robbing tax; it is the payment of what we consume. It is as normal as the payment for a suit to a tailor or for bread to a baker.

Similarly for public services, instituted to provide services to the individuals or families which would be more costly if the individuals or families had to provide them individually.

Let us take, for example, the waterworks or garbage services. If each family had to go and get water at a lake or a river, or pay to have some brought over, this would cost time, tiredness, or money. Similarly to take or have one's garbage taken to a dumping ground.

And education: a mother does not often have the time, even if she has the competence, of becoming a teacher for her children. One can hardly expect each family to be able to find and hire a private tutor to do it. But if 20, 30, 100 families decide together to hire a competent personnel to teach all of their children, that, for an equivalent service, will certainly cost less to each family.

Must we call what each family will have to pay, taxes? Perhaps, because the term is common; but in reality, it is no more a tax than the money paid to a doctor who treated a family member, or the shoemaker's bill for a shoe repair.

— Then what is the difference, as far as taxes are concerned, between what exists today and what we can expect under a Social Credit financial system?

A huge difference. First, as we have said, the country's developments would be financed by new credits, and not by taxes. We would only pay financially for their consumption, their wear and tear, not their production. We would not drag public debts, that are mathematically unrepayable, and that are serviced every year by a great slice of the tax revenues.

We would not have to pay taxes either to support government employees who deal with functions which ought to be a matter for the individuals and families themselves. And today's individuals and families would no more be in a financial incapacity which invites governments to do things in their stead.

We would not have to feed by taxes the funds that are always more demanding from the government organisms of social security, since all citizens, as co-inheritors and co-owners of a common capital, would find their unconditional economic security in the social dividend combined with the adjustment of prices.

Then, as all the physical possibilities would be, by this very fact, financial pos­sibilities, the public would be able, collectively, to pay for anything that the country can provide, in public and in private production as well. Therefore, the payment of public services would not be, like today, a burden and a hindrance in getting private goods.

Under a Social Credit financial system, all citizens are treated as shareholders, entitled to a dividend on national production. They would also, as shareholders, be kept informed periodically on the national accounts, which would be infinitely simpler, clearer, than the complexities of the present system. Therefore, they would be able, as we have said above, to give orders to their elected representatives, in the case where they would prefer seeing the country's production giving more of its activities to the satisfaction of private needs.

Moreover, the guaranteed income to each person, at least for a start, up to the level of the biological minimum, then soon to the level of a minimum of civilization, would be the means for all to give their own orders to the production capacity.

For the perspective of a Social Credit world, it is necessary to look at everything in a perspective of reality. The standard of living would no more depend on the financial system but on the realized or realizable production upon orders. Finance would only intervene to oil the production mechanism on the producer's side, and to allow freedom of choice on the consumer's side.

— How would the population pay for public services?

These are methods to be determined according to the services, depending on whether they benefit the whole population or only certain geographical areas, according to what proves to be more practical once tried out. But we must avoid what, under pretext of effectiveness, causes wrongs to persons that no financial objective can justify.

Certain public services can very well continue to be, like today, paid only by those who use them. Such is the case for the postal service: those who want to use it pay for it by buying stamps. Such is the case again for certain fast communication routes, like the expressways — although, under a Social Credit system, many tolls could disappear or last less longer, seeing the new means of financing public works.

Other public services are used by all citizens, no matter what part of the country they live in. It is the case for ordinary roads. It is also the case for the national security, by which is meant the country's protection against any possible aggression, requiring the keeping of a sufficient army and, in case of attacks, military operations. It is the case again of the country's administration for maintaining the established social order. Everybody benefits equally by it. The most simple way of paying it would be, it seems to us, by using the national credit, recovered from the public by the adjusted-price mechanism.

But there are public services which are offered only to fractions of the community, such as the waterworks and sewerage services and others, which people of the countryside do not enjoy like those living in the cities. Then it would be unjust to have these services paid for through an adjustment of prices of which all the buyers, those of the countryside and those of the cities as well, would bear the costs. In these cases, it is up to the municipalities supplying these services to have them paid for by their own population.

In general, we can say that it is for those favoured by these services to bear the costs. As for the best method, Douglas wrote in Warning Democracy (1934 edition, page 176):

“Now, just as there are two methods in theory by which the unearned increment of association, which we call public credit, can be distributed, these two methods being either a grant of ‘money’ or a general reduction of prices, and the choice between these two methods is one of practicability and not of principles, so there are two methods by which this transfer of goods and services from private to public use can be obtained, the direct and the indirect method, and it is curious that we have such a tendency to insist on the direct method, with its crudities, complications, and iniquities. It would be both simple and practical to abolish every tax in Great Britain, substituting therefore a simple sales tax on every description of article, and, apart from other considerations, such a policy would result in an economy of administration far in excess of anything conceivable within the limits of the existing financial system.”

Direct taxes are the amounts levied directly from individuals, like the income tax, the poll taxes where they exist, the taxes on successions, property taxes, etc.

Douglas thus gives preference to a sales tax which would affect prices. In a Social Credit system, this would combine with the adjustment of prices to be paid by the consumer. A perfectly suitable method, at least for the payment of public services offered to all the community, as we have pointed out above.

— But is not this way of having everybody pay for public services unjust since it includes lower-income people and large families which, because of their numerous children, are forced to buy more?

This objection forgets that, even in the present system, prices are the same for everybody, for the poor and for the rich as well.

It is, above all, to forget that, under a Social Credit financial system, each person is ensured an income, at whatever age one may be, through the social dividend linked to the individual and not to employment; in such a way that there are as many dividends coming as there are people in the family. Then, this dividend must be large enough, even with the inclusion of the prices of the public services into the prices of the consumer goods, to allow each individual to get at least the necessities of life in a country that can supply more than the necessities of life to all. The hierarchy of needs requires, in fact, the country's production capacity to be first used for the satisfaction of the necessities of life to all.

Besides, the rich generally buy, if not always, more than the poor; with the proposed indirect method, they would therefore be financing the costs of the public services more than the poor, It is only fair that the one who benefits most from the national wealth pays more for its cost.

If one looks at it closely, the taxes included in the prices have also a less dictatorial character than the income tax or the property tax. It is a point that the master, Douglas, emphasized. If one wants to pay less taxes through prices, one always has the choice of buying less, of contenting oneself with a lower standard of living. Whereas the income tax or the property tax hits you under a strict obligation, even if you do not draw any particular benefits from your income or your property.

The most iniquitous of all taxes

Here is the opportunity to say a word on the property tax, especially when it is levied on the family dwelling. It is at the source of a multitude of evils.

The family dwelling is a home, not a money fountain: why ask the family for money which does not come out of the walls or the roof of its hous<%18>e<%0>?

It is to discourage the status of proprietorship, which goes very well in the direction of Communism.

Often it is to put the family in anguish, while perhaps waiting to throw it onto the street, following its incapacity of coming up with the money it does not have, even after bearing hardships for months and months without succeeding in finding the amount exacted by the Revenue Department.

It is obvious that if this form of taxes has been generalized in preference to others, it is because it allows the taxing authority to punish those who do not pay, by putting up their properties for sale. This is to give more importance to the collection of money than to human beings.

The property tax is, in our opinion, the most iniquitous tax, and the first to get rid of.

To conclude on the subject of taxes, let us repeat that, under a Social Credit financial system, there is not, so to speak, any taxes. There is payment for services received, public and private services as well. And in any case, the country's population would be provided with the means of payment to pay the prices of all that is offered answering public and private needs as well.

Conclusion

We will now end this study on a sound and effective financial system. Not because we exhausted the subject, but we believe that we have enabled the reader — or better yet, the student — to tackle, in the light of Social Credit, just about all the economic problems which can come up, often with considerable social incidences.

To tackle them in the light of Social Credit means to make a clean sweep of all the purely financial limitations.

There are no purely financial problems with Social Credit. Neither to implement the country's productive possibilities. Nor to distribute adequately the fruits of production, while forgetting no one.

And this, without the need to nationalize any enterprise; without looking for an utopian way to equalize the standards of living; without revolutionizing the established methods of production and marketing; without suppressing the reward to those who, by their activities of entrepreneurs, producers or retailers, implement the means of producing and offering the wealth to the population.

We can add that a financial system reflecting reality, like Social Credit, would allow a country of immense production to give some of its plenty to the countries suffering from hunger.

The abolition of the purely financial hindrances gives way to prospects of enriching developments for all, enrichments of a cultural as well as a material nature, but incompatible with the defects of the present financial system