Fiscal Babel

Early last week Premier Paul Painleve submitted to the Finance Committee of the Chamber a definite plan for the fiscal rehabilitation of France. There ensued seven days of picturesque wrangling and wirepulling, which the French press characterized almost unanimously as "scandalous." As the week closed, the Painleve bill emerged momentarily to public view in a revised and amended form. Only Le Bon Dieu was aware what further and possibly indefinite modifications it might undergo before passing from the Committee into the Chamber itself.

The Original Bill may be succinctly described as a tax on everything and everybody. The proceeds would be used to feed a sinking fund for the retirement of the French domestic debt. Specific provisions: 1) A head tax of 20 francs (80c) a year on everyone in France. 2) A tax on all "real property" amounting in general to one and a half times the income derived from it in 1925, and payable either in a lump sum or in installments over 14 years. 3) A tax on all business, amounting to one-half the average yearly profits for the past three years, and payable in 14 yearly installments. 4) A tax upon all securities* and investments, providing that for 14 years 15% of their yield shall be paid to the Government. 5) A heavy increase in the income tax, especially in the higher brackets, with severe fines for tax dodgers. 6) A tax of 8% on household goods and personal property valued in excess of 50,000 francs ($2,000) payable in a lump sum or in installments over 14 years./- A detailed and extensive sketch envisioned the proposed Sinking Fund as functioning separately from the regular fiscal machinery of the Government; and a clause was inserted to the effect that its administrators or the Finance Minister should be permitted to resort to a limited inflation of the French currency in case of emergency.

The seven days were spent by M. Painleve in endeavoring to parry the efforts of M. Leon Blum and the Socialists to force a definite expression of the "capital levy" (TIME, Nov. 16 et ante) into the bill. Nominally the Painleve Government is "supported" by the Radical-Socialists, the so-called cartel des Gauches, nominally headed by M. Herriot. Actually M. Blum split off with his Socialists a fortnight ago and had the Government at his mercy, because without his votes Premier Painleve could not command a majority in the Chamber.

In these circumstances, M. Blum flatly demanded a direct levy on capital instead of a 14-year tax on "income." M. Painleve dared not yield, because it was considered certain that the conservative Senate would kill any such measure even if it passed the Chamber. Still M. Blum insisted. He wanted a "capital levy" inserted "on principle," though the Senate should tear it up.

M. Painleve, backed by President Doumergue, then defied the Socialists and vowed that he would throw his measure into the Chamber as it stood. Said he, "I will not yield. I will fall on the field of battle." Thereupon he went to bed.

At 2 p. m. he was awakened and told that Le Cartel had reunited itself and now thought that it knew what it wanted as a unit. Apparently M. Herriot had worked fast and got the Socialists back into line. It remained to be seen at what cost. Unfortunately it shortly became apparent that the cost meant inserting the "capital levy" in the bill under the guise of a "mortgage-secured tax." For 24 consecutive hours M. Painleve occupied himself with redrafting his measure, largely to suit M. Blum. Said the harassed Premier, "I yield. But only to Le Cartel."

The Revised Bill, while embodying a multitude of changes in detail, differed from the original chiefly as follows: 1) The head tax was stricken off as "not worth bothering with." 2) Subject to individual modifications, the sums originally collectable over 14 years as taxes were now to be secured by a mortgage held by the Government on the property of the taxed individual or firm. This arrangement is, of course, the "capital levy" in all but name. 3) Instead of resorting to inflation in case of need, the Government would declare a moratorium on certain of its short term obligations, notably those which will fall due, on Dec. 8 next.

The Significance. The proposal in either form was unfavorably regarded by a large majority of the electorate, which sympathized with a Paris shopkeeper who suicided "because life would be unbearable under this tax." Great indignation was expressed over the proviso that the 3 million francs' worth of short term bonds which will be presented by their owners on Dec. 8, would be exchanged for other securities maturing later instead of being paid off. Cried many, "Is France thus to default for the first time since the Revolution?"

It was expected that the Senate would kill the bill if it ever passed the Chamber. Le Temps called the present fiscal situation "a Tower of Babel."

M. Joseph Caillaux, recently ousted French Finance Minister, fulminated against M. Painleve's new bill; but caused some surprise by asserting that he would not lead the expected attack upon it in the Senate. Said he: "The Government's new capital levy scheme will work hardship to France for much longer than 14 years. Be warned! Enough illusions have been disseminated in this country already. . . . However, thanks to my methods as Finance Minister, the condition of the state debt and the Treasury is grave but not alarming."

*Except certain classes of exempt state bonds.

/-A notable "joker" clause was inserted to the effect that the "value" of an object should never be considered as less than the sum for which it had been insured.