The other suggestion involves more difficulties, and is of a more far-reaching character.  Would it not be possible to replace to some extent the excess profits duty, which cannot be permanent, by a duty on “excess dividends,” that is, on the amounts paid out of the profits of a business for the use of capital above a certain percentage?  The excess profits duty, in spite of all its anomalies and the difficulties of assessment, has saved the financial situation during the War; a tax on excess dividends might “save the situation” afterwards.  When a business is successful, paying, as many businesses have recently done, dividends of 30 to 50 per cent., and sometimes even more, the return made to those who have invested money in them is clearly excessive.  From such profitable businesses those who have the responsible management no doubt may generally get better remuneration, possibly the workmen may get a small bonus or share in such profits, but those who by a mere stroke of good luck have embarked their money in these businesses, shareholders who very likely know nothing whatever about the conduct of them, benefit enormously.  Such a tax would not discourage thrift or prevent a person from getting a reasonable return on his savings.  Take the case, say, of two professional men.  Both, by hard work and using up their lives in the effort, manage to make a fair income and bring up their families.  One of them, to make provision for the future, invests L2,000 in safe securities with fixed rate of interest, and L2,000 in some company whose business is of a more or less speculative character, but by good fortune becomes able to pay a dividend of 30 per cent.  The other invests a like sum in firm securities, and L2,000 in another company which turns out a failure.  Neither of them has anything to do with the conduct of the business of the company in which he invests, but one has got a tip from some friend or other who thinks he knows of a good thing.  The work of the two men is exactly the same; it is a mere fluke that one gets a huge return and the other puts his money into a company which, without any fault on his part, brings in nothing.

The tax suggested would be levied on the excessive profits distributed in respect of the capital embarked in businesses of every kind.  It was pointed out long ago that a tax thus levied on all alike would be paid wholly by the capitalist and “would neither affect the prices of the commodities produced nor the distribution of capital.”  The duty might be graded according to the percentage to be received on the capital of each investor.  It might be reasonable for the first 10 per cent. to pay only the ordinary rate of income tax.  Money in fixed permanent securities may now produce 5 per cent. or 6 per cent., and the additional 4 per cent. free from the excess duty would be a fair return for risk and an inducement to enterprise.  The rate of excess duty might be increased according to the excess of profits above 10 per cent. until when the profits