No. 165.
Mr. Sargent to Mr. Frelinghuysen.
Berlin, November 20, 1882. (Received December 8.)
Sir: I have the honor to state that the Prussian Parliament was opened on the 14th instant, by the Emperor in person, in the throneroom of the old palace in this city. It was satisfactory to observe that the health of the aged Emperor was excellent. The spacious room was crowded with deputies and dignitaries, who received the sovereign with [Page 314] hearty applause. His Majesty read the opening speech, which contained some remarkable passages. I inclose a copy and translation.
After a graceful greeting of the lately chosen representatives of the popular will, and thanks for the loyalty towards the Hohenzollern house displayed on the occasion of the birth of his great-grandson, he passed to business considerations. He ascribed the increased activity of industries to the trade legislation of the imperial Government, which increased duties on certain imports, and to the general favorable result of harvests, and thought the hope warranted that there would be a continued development of the welfare of all classes of the people.
He next adverted to the disproportion between the means and the needs of the Government, which had caused a deficit which must be met by a loan, and by the adoption of remedial measures insuring larger revenue. He ascribed the failure to the repeated rejection of the financial measures of the Government by the Reichstag, and said it was so considerable that it cannot be covered unless new sources of revenue are opened up; and that recourse must be had to the public credit. Alluding to the delay in meeting the views of the Government in financial matters, he declared that in one respect this time-wasting course could not be followed—the relief of the poorer classes of the population from the burden of the class tax must, in his opinion, be accomplished without delay. It was his wish to see a speedy stop put to the harsh and oppressive distraints connected with the levying of this impost. A bill for the complete abolition of the four lowest grades of the class tax should therefore be at once presented to the Parliament, and the gap thus occasioned would also have to be otherwise filled up.
He alluded to the railway system inaugurated by the Kingdom, and expressed confidence and hope for its future, while recommending the construction of further important lines, for which a bill would be laid before them. He also stated that a bill would be submitted providing for cutting the first section of a canal designed to unite the large rivers in the western part of the Kingdom, also one remedying certain defects of administration.
It is unusual to allude to foreign affairs in the Prussian Diet, but the Emperor took the occasion to express his satisfaction that the relations of the Empire with all powers warrants the belief that the blessings of peace are assured. The restoration of diplomatic relations with the Roman Curia he referred to as follows:
The re-establishment of diplomatic intercourse with the Roman Curia, has, I am glad to say, helped to fortify my friendly relations with the supreme head of the Catholic Church, and I cherish the hope that the conciliatory disposition which my Government will never cease to manifest, will also exercise favorable influence on our ecclesiastico-political relations. Meanwhile, on the strength of existing laws, and the discretionary powers conferred upon it, my Government continues to extend to the ecclesiastical demands of my Catholic subjects such indulgent considerations as is consistent with the general interest of the state and the nation.
After expressing the hope that the legislation of the session would be for the public good, he uncovered his head and withdrew, being saluted with cheers as he departed. The speech was listened to with attention, and there was some applause as he recommended the abolition of the four lowest grades of the class tax, which have hitherto brought about 15,000,000 marks. His statement of the foreign relations of the Empire was also applauded.
There are several topics of interest covered by this suggestive speech. The proposition to reduce taxation in the face of a deficit necessitating other taxations and a national loan is remarkable. But the humanity [Page 315] of the particular reduction cannot well be contested. It is only a question whether it can be permanently made.
There is a Prussian state income tax on all incomes from 420 marks upwards. The tax upon incomes of 3,000 marks and upwards is called simply “income tax.” The tax upon all incomes under 3,000 marks is called “classified income tax,” or, shortly, “class tax.” The former (the income tax) is 3 per cent. The latter (the class tax) is a fixed amount for each twelve grades of income under 3,000 marks. The twelve grades are as follows:
| Grades. | Incomes. | Tax. |
| Marks. | Marks. | |
| 1 | 420 to 660 | 3 |
| 2 | 660 to 900 | 6 |
| 3 | 900 to 1,050 | 12 |
| 4 | 1,050 to 1,200 | 15 |
| 5 | 1,200 to 1,350 | 18 |
| 6 | 1,350 to 1,500 | 24 |
| 7 | 1,500 to 1,600 | 30 |
| 8 | 1,600 to 1,800 | 36 |
| 9 | 1,800 to 2,100 | 42 |
| 10 | 2,100 to 2,400 | 48 |
| 11 | 2,400 to 2,700 | 60 |
| 12 | 2,700 to 3,000 | 72 |
The first four classes, viz., incomes from 420 to 1,200 marks (say of from $100 to $300) are proposed to be stricken off.
To the first class belong 2,709,972 tax-payers; second class, 1,031,007 tax-payers; third class, 342,191 tax-payers 5 fourth class, 279,347 taxpayers.
The aggregate product of all four classes is 19,916,280 marks. Under an existing dispensation of the Government, one quarter in amount of these taxes is now remitted, so that the state treasury will lose by their total abolition the annual sum of 14,937,210 marks.
The minister of finance, in submitting the new budget to the Prussian House of Deputies, referred to this measure of relieving the first four classes of the classified income tax, and intimated that it is contemplated to make good the resulting loss in revenue by taxing the sale of liquors and tobacco. The bills for this end were not submitted, somewhat to the disappointment of the deputies, and the budget speech was therefore somewhat deprived of interest.
The minister gave the deficit at about 32,000,000 marks, which must be covered by a loan, and alluding to the flush days of the French indemnity milliards, somewhat facetiously said the era of milliards had returned, since the budget exceeds the sum of a milliard, and reaches 1,089,583,205 marks. He considered it a favorable circumstance that now, for the first time, Prussia receives 3,800,000 marks as her portion of the surplus imperial revenue, and has no longer to contribute to the treasury of the Empire. The interest payable on the national debt would have to be increased by 18,000,000 marks, so that April 1, 1883, the debt of the nation would be 2,640,000,000 marks. To this must be added a fourth sum of 1,860,000,000 marks, to be issued in treasury bonds in consequence of the nationalization of railways. The total debt of the nation would come up to 4,682,000,000 marks. He looked to the Empire to help the various states to gradually improve their finances.
The financial showing of the minister would seem to be sufficiently grave, in view of the failure of the Government to carry through the tobacco monopoly measure at the last session of the Reichstag, and of the indisposition of that body to enhance the tariff duties.
[Page 316]The paragraph in the Emperor’s speech in relation to railways under Government management is remarkable in view of the fact that the returns therefrom have not met general expectation. It is true the warlike Emperor has the military significance of these great engines in view, and is animated by the spirit that inspires the written constitution of the Kingdom, which enjoins upon the Government the duty of creating and fostering the system. His Majesty probably views with especial favor the grand facilities which so enhance the defensive or offensive forces of the Empire, and therefore desires their extension where still incomplete. I understand the passage in the speech to point to the construction of new lines towards Russia, the use of which, in case of war with that country, need not be pointed out. Nevertheless there is reason for disappointment at the low estimate of the surplus from the state railways. The surplus was expected to reach 21,000,000 marks, against which stands an increased expenditure of 18,000,000 marks as interest on the state debt, arising from the acquisition of railways, as I have remarked above. The petty resulting surplus will be used undoubtedly by the opposition as an argument against state acquisitions of railways, in that such meager results have been obtained in the recent prosperous times, and under excellent conditions for railroad success, that large deficits may be expected with duller times, and with the burden of less favorably situated roads contemplated as part of the system.
In this connection it may be added that the Government claims to be actuated by a desire to further the general interests of the people and the public comfort rather than gain a revenue from the roads. In the latter respect it has indeed accomplished much. Whatever criticism may assail the policy of the Government in the acquisition and management of railways, I have not the least doubt it will be persevered in.
I infer from the speech from the throne, and the budget speech, that the Government has not relinquished its financial measures, so strongly pressed and signally defeated at the last session of the Reichstag, and that attempts will be made, also, by an increase of indirect taxation and heavier import duties, to fill up the chasm between the income and outgo of the public treasury. One argument of the opponents of the financial projects of the chancellor was that they were unnecessary. Such a position is untenable in the face of the actual status. Hence the force of the intimation officially made that the reasons which demanded the tobacco monopoly have not disappeared. These reasons are obvious enough, whatever may be thought of the remedy.
The economical condition of Prussia is hardly matter of congratulation after eleven years of peace. Retrenchment, rather than further taxation, would seem to be required, for taxation is now extreme. There is a land tax, house tax, a trade tax, an income tax, and class tax, various stamp taxes, besides the indirect taxes. Considering the leading position of Prussia in the Empire, and of Germany in Europe, there would seem to be some anomaly in so powerful, industrious, and enlightened a nation falling annually behind in its finances, when the finger of taxation so searchingly points out objects of revenue.
The ship-canal mentioned favorably by the Emperor is designed to connect the Baltic with the North Sea, say from Lübeck to Hamburg, so that commerce may be spared the five hundred miles’ trip around the peninsula of Denmark. This will be a stupendous work, costing many millions, but of great commercial importance. It will have a serious influence on existing cities, like Hamburg, which now have what might be called vested interests in present currents of trade, and [Page 317] which might be helped or hurt by changes; and it leaves Denmark on one side, reducing its weight in the commercial world, if not impoverishing it utterly.
The speech from the throne has caused some criticism, and dissent or approval in the press as special interests are affected by its propositions. Thus the Freihandels-Correspondenz of the 16th, a free-trade paper, dissents from the idea that the trade legislation had conduced to prosperous times. It points out that at the close of 1879 there was an increased activity in many industries, the reason for which was increased demand from abroad, and especially America, while the new tariff only went into force January 1, 1880, and could not have caused the prosperity. It traces the revival of business to other causes and denies that protection is of any advantage in Germany or elsewhere.
The Provincial-Correspondenz, a semi-official paper, speaks of the new taxes proposed in the confident tone suggestive of the old adage that “he who puts on his armor should not boast like him who puts it off.” According to this sheet there is to be a new trade tax upon the wholesale trade in liquor and tobacco. “In this manner,” it says, “a provisional help will be obtained that will cover all deficits in the state treasuries.”
The unusual proceeding of stating the condition of the foreign relations of the Empire to the Prussian Parliament excited comment also. The influence of the fact that the Emperor is also the King of Prussia may, perhaps, be traced in the whole speech. It may also account for the growing preponderance of Prussia in the confederacy. * * *
The National-Zeitung is a Liberal organ. In its issue following the Emperor’s speech it adverts to this unprecedented light shed on foreign affairs, and says:
It is difficult to suppress the belief that the introduction of a reference to foreign policy into the throne speech, from which it has been so long methodically excluded, is to be regarded as a change in the relative position of Prussia to the rest of the Empire. The assertion of the imperial chancellor that the customs unions had struck deep root into Germany, and that this and Prussia’s control in military affairs are principally to be relied on under certain circumstances, is not to be forgotten. We have already been led to refer to the peculiar position assumed by Prussia towards the Empire. The increased importance which the throne speech receives through the reference to the foreign policy would be, in all circumstances, at the expense of the Empire. We therefore express the sincere hope that the foreign policy will be left, except in cases of extreme emergency, where it belongs, to the organs of the Empire.
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Apologizing for the length of this dispatch on the ground that the interest of the topics suggested by His Majesty’s speech might excuse some amplification,
I have, &c.,