The result of a progressive income tax instituted a few years since in Vaud and other prosperous and populous Swiss cantons is reported to Lave already verified the predictions and prophecies of the European economists. The project has been often discussed in England, France, and other countries, but the tendency of economic discussion has always been generally adverse to it, on the ground that such forms of taxation would discourage the permanent investment of capital, and encourage capitalists to transfer their capital and business to other and foreign localities. Vaud, however, in particular, determined to ignore the economists and impose the tax, and the inevitable disturbance of capital is reported to have taken place. One of the chief capitalists of Lausanne, a Swiss tanner named Mercier, employing several hundred workmen, is moving his business from Lausanne to the other side of the lake (Geneva) at Evian. Evian is in French territory, and there is no progressive income tax there. "Up to this time," wrote M. Mercier, in a letter published by the Lausanne papers, "I have paid over 20,000 francs a year in state and town taxes. The new law would raise that figure to 80,000 francs or more. I owe it to my family to withdraw out of reach of what I can not consider otherwise than downright spoliation."
A recent economist, commenting on this transaction, thus curtly developed the whole subject: "The fact is that a progressive income tax will not work under modern conditions. The modern movability of capital has made all the difference. The Florentine
unfortunately, as investors knew to their cost, were almost valueless. An arrangement, however, proposed by Sir Robert Peel in 1858 gave a substantial relief to those who had precarious incomes. They made their returns on an average of the income during the three preceding years, and, if the amount fell short, a rebate was given on the difference. He urged that they might make an effort this year to induce Parliament and the Government to revert to the old system, which, it was evident, would be only fair and a great boon to all those whose income depended upon their own exertions, whether in law, medicine, or commerce." He contended that the rising and successful man was assessed on less than his income, while the man whose income was falling was made to pay on more than his income. The Chancellor of the Exchequer said in reply that "his friend had urged the desirability of returning to the system that existed prior to the passing of the act of 1865. He seemed to have overlooked the fact that the alteration effected by that act, which he now wished to overthrow, was introduced at the express instance of Mr. Hubbard, who was a strong advocate for lightening the burden of the income tax wherever practicable. Taking the average of a man's income for three years was a plan specially devised to meet the difficulty in the way of appeal that would be experienced by business and professional men. He was quite willing to allow that system to continue, as he believed that it was, on the whole, fair to both parties. The proposal of his friend, however, while adhering to the form of making a return upon the average, did not in fact carry out that principle at all, for the first year was only to be struck out where the fourth year showed a loss. Surely, therefore, if the revenue was to collect only on the small receipts, the principle of average ceased at once. For this reason he did not feel justified in accepting the amendment."
