§ MR. WHALLEYsaid, he rose pursuant to notice to call attention to the present mode of assessing the property and income tax, with a view to the more equitable assessment thereof. He would remind the House that from the establishment of this impost there had been general, wide-spread, and most deeply-felt dissatisfaction, in consequence of the mode in which it was assessed, and with reference to the principle of assessment. The subject had been repeatedly brought under the attention of the House, and in 1852 its importance had been recognized by the appointment of a Committee to consider it. It appeared that the subject was beyond the power of the Committee, because they referred it back to the House for its decision. He brought forward the question in the hope that the Government would render any further steps on the part of independent Members unnecessary, by stating what course they intended to pursue in respect to it. His object on that occasion was not to invite the House to discuss the present mode of assessment, or to inquire whether it could be improved, and if so by what means, but from the belief that, for the public interest, the Government should state at that period of the Session the course they intended to pursue in the next Session on the arrival of the time for renewing the tax. The first question was whether the present system of assessment was a just one. Now, without reviving all the arguments commonly urged upon this point, he would say that common sense revolted against persons engaged in trades and professions paying on their precarious incomes the same amount that was obtained from fixed incomes derived from real property. If the Government intended to persist in that system it was absolutely essential that they should mitigate the sense of injustice which persons employed in trades and professions must feel in contributing an equal rate, or something like an equal rate with the land, by making it clear and intelligible to the people of the country that it was essential to retain the assessment on its present footing, and that it could not be altered with any degree of consideration for the public service. In that case, unfair and unjust as it might be, those who suffered from the injustice would be ready to pay their quota with much greater readiness. Upon this point, however, the country was entirely 442 without information, although he believed that the Government had at its command ample materials for the re-adjustment of the tax, and that it could be re-adjusted without causing any of those divisions between different classes of the community, or of the jealousies between landed and trade interests, which appeared to constitute the great difficulty in approaching the question. In 1853, the right hon. Gentleman the Chancellor of the Exchequer declared that he sympathized with the feeling that the income tax bore more heavily on trade and professions, on skill and industry, than upon property; but in 1856 the right hon. Gentleman, the present Home Secretary, expressed totally different views. That right hon. Gentleman said, that in imposing a tax of this sort the State ought not to look to property but to income, and that the ability of each person to pay should be measured by the annual income he possessed. When the re-imposition of the tax was proposed, the members of trades and professions should know which of those views was approved of by the Government. In quoting the opinion of the Chancellor of the Exchequer, he omitted to say that the right hon. Gentleman expressed his full and entire conviction that the sympathy he felt could not be practically carried out, and that a reconstruction of the tax could not take place without producing evils far greater than any good that could be effected by a change in the system. Well, if that could be shown, the country might be satisfied; but in his opinion the system could be altered without difficulty and without injury. At that time the right hon. Gentleman regarded the tax as a temporary one; but looking upon it, as they must now do, as a permanent arrangement, did there not exist materials by which, without any conflict of party, and without any serious conflict between opposing interests, the system could be changed so as to put au end to the prevalent dissatisfaction? Not only was the assessment inquisitorial and unjust, but it had the most prejudicial influence on the morality of the country, in leading persons to make false returns of their incomes. If it was possible to devise a remedy, it was most essential to adopt it when the property and income tax was about to be made the permanent source of revenue. In 1840 Parliament passed an Act releasing from its liability to the poor rate visible property, as stock in trade, amounting to £16,000,000 a year, and 443 which might be said to be property of an analogous character to that which came under Schedule D of the Property Tax Act. It was true that by usage this class of property was exempt from liability to the poor rate; but in the year he had mentioned the exemption was confirmed by Act of Parliament, and the burden transferred to the land. That Act was originally passed for two or three years, he forgot which, but since then it had been continually renewed without objection on the part of the owners of real property, by whom its justice had been previously practically recognized. When the Bill of 1840 was under discussion the present Lord Chancellor, then a Member of the House of Commons, said it was most inquisitorial to attempt to tax stock in trade; but how much more inquisitorial must it be to tax property such as was assessed under Schedule D, and which was not even, as stock in trade was, "visible" property, but property that was invisible. He submitted that in the course taken with regard to the liability of visible personal property to the poor rate, they might find a means for the satisfactory adjustment of the income tax in respect to incomes derived from trades and professions. With the permission of the House, he would read a letter from Mr. George Coode, who had a perfect knowledge of the subject, and who stated that the materials were in the power of the Government, not only for ascertaining the bearing and operation of the tax, but for setting it free from the objections that unnecessarily aggravated its unpopularity. Mr. Coode also stated that those materials would never come before a Parliamentary Committee; and that no Government department would never work them up; but that there must be a department to make an exposition of them if they were ever to be reduced to a satisfactory condition. The difficulty of dealing with Schedule D, therefore, was purely imaginary; n deep and general dissatisfaction was felt with regard both to the principle and details of this tax, and it was the duty, therefore, of the Government either to take some means to correct its evils, or to show that it was a perfectly fair and just tax. They had ample means at their disposal for either one purpose or the other. The great question which had lately arisen between the two Houses had had its origin mainly in the opinion expressed in "another place" that they were no longer equal to the administration of those functions which were supposed 444 to attach specially to that House. As regards the property and income tax, there might be some ground for the feeling that the House had not fulfilled its duty; but, whether that be so or not, they should have an authoritative statement on the subject. Although they might not satisfy the House of Lords that they were able to discharge the duty that properly belonged to them, it was the more important, as it seemed to him, to show that they had done all they could to render themselves worthy of the high trust, in regard to taxation of the country, which that House had ever enjoyed, and which he trusted it would insist upon retaining.
§ MR. POLLARD-URQUHARTsaid, he firmly believed that the time had come when the feeling of the people on this subject could no longer be trifled with, especially as there never was a time when there was less reason for regarding the income tax as a temporary impost than that moment. At the beginning of the Session it might have been thought possible that the tax might be got rid of in a year or two, but the China war and the state of Europe, which rendered it necessary for them to spend large sums on armaments and fortifications, were sufficient to put an end to all such hopes. The Committee of 1851 and 1852 made an attempt to grapple with the tax, which proved a failure; but still he thought that their labours ought not to be altogether thrown away, and he suggested that some compromise should be come to upon the subject. He therefore hoped that Her Majesty's Government would give them some information upon it.
§ SIR FRANCIS GOLDSMIDsaid, there was a very strong impression in various parts of the country that there was unfairness in the imposition of this tax. That unfairness had been submitted to because there had been a constant hope that in two or three years the tax would be taken off. That hope had now departed, and he thought the country ought now to have an assurance that the Government, and especially the Finance Minister, would grapple with the subject.
§ MR. WESTHEADsaid, he represented a very ancient city, in which were many members of the legal and clerical professions, and they considered that this tax was most unfairly levied. It was generally hoped that this tax, after what had been shown as to its injustice, would have been brought to an end; but the prospect before them was very gloomy, and he was 445 afraid that the burden must long remain as an incubus upon the industry of the country in various forms. He had had opportunities within his own experience of perceiving how unequally the burden affected different members of the community. One was the case of a merchant who had paid the tax upon a large income for many years, but in the panic of 1857–58 the whole of his property was swept away. In the case of another merchant, he invested a short period before that panic £120,000 in land, and he retained that property now. The incomes from trade and that from land were both taxed, but it was quite unfair to tax them upon the same principle as was done in that case. A man who gave his best efforts to the support of his family, and did his best to maintain them on his income, ought not to be taxed like himself (Mr. Westhead) and others who had property which, if they died the next day, would descend to their children. The country had been content to bear these inequalities upon the assurances of various Chancellors of the Exchequer that the tax should soon come to an end. That hope was now vain; and he gave notice that in a future Session he should use all his influence to prevent its re-imposition.
§ THE CHANCELLOR OF THE EXCHEQUERSir, I think this subject is one so important, and involves so many public interests, that it would not be respectful to my hon. Friend who raised the discussion if I were to allow you, Sir, to leave the chair without saying one word with regard to what has fallen from him. Now, Sir, there is one consideration that ought always to be borne in mind in a discussion as to the mode of assessing the income tax. It is not always so vividly present to the minds of those who enter into that discussion as it might be. I am far from mentioning it as a consideration decisive of the question, but it certainly is one very material to the question, and it is this— that when we are considering the re-adjustment of the income tax, with the idea of affording great relief to particular persons on whom we may think it presses too heavily, we do not always remember that the relief of one is, in point of fact, an additional burden on another. I have, indeed, known the case of a Member of Parliament who was assailed, I think, in the same town which he had canvassed, with complaints of the burdens of the income tax on those who come under Schedule D, on which he said that nothing could be 446 clearer than the claims of those who were assessed under Schedule D to relief. He afterwards became a county Member, and when he canvassed that county he was assailed with complaints of the unjust and unequal pressure of the income tax on those who come under Schedule A. He replied in like manner, and yielding to the same impulse of benevolence, said that nothing in his judgment was clearer than that relief ought to be given to those assessed under Schedule A. He was afterwards pressed with the case of the fundholder— he considered the case of persons receiving salaries from the Government who are assessed under Schedule C to belong to D; and thus he disposed of three Schedules: he was pressed, as I have said, with regard to the only remaining Schedule, which was the case of the fundholders, and he said nothing could be more invidious than to make them exceptions to the enjoyment of that relief which had been extended to Schedule C. That is, no doubt, a most agreeable method of handling a thorny question. It was most consolatory to the feelings of those classes who were addressed in turn in honied accents by the Gentleman who had that happy knack of dealing with an unpleasant subject. But the end of that method is, that if all get relief from the existing standard, then the standard of the whole tax must be raised in order to replace the Exchequer in the same position that it occupied before. With regard to the fault of the income tax, its inequality, there are certain parts of the inequalities of it common to it as to most other taxes levied in this country, although they may be more prominent in the case of the income tax. There are other inequalities—other disadvantages—which I myself have always strongly felt—and perhaps with regard to some of them, at least, I feel more strongly than most Members of this House—many inequalities and faults peculiar to this tax. There is a peculiar sense—a belief of the inequality attaching to the imposition of this tax. Now, I gather from what has been said by the hon. Gentleman who raised this discussion that he has no intention at the present moment of moving for a Parliamentary Inquiry into the subject. I confess I think that in so doing he exercises a wise discretion. I am very far from saying that it is the duty of the Government to oppose a further prosecution of the Inquiry into the assessment of the income tax, if at any time it should be the general desire of the House to in- 447 stitute that Inquiry, and not only to institute that Inquiry, but to prosecute it with earnestness, and energy proportionate to the extreme difficulty of the subject. I do not feel authorized to shut the door against a general desire of the House, but I must confess as an individual, and I believe on the part of my Colleagues, that in saying this we have done all in our power. The hon. Baronet (Sir Francis Goldsmid) who appeals to me in the office I hold, said he hoped the question would receive at the hands of the Government, and especially the Finance Minister, before he proposes another Budget, an attentive and careful examination. Now, it does happen that at a former period it became my duty, in my own behalf, in the same office I have now the honour to fill, and likewise on behalf, to a considerable degree, of the same Colleagues, to examine this question. Nor was I alone in the examination, because several Members of the Cabinet of the Earl of Aberdeen, including all those who had paid the greatest attention to the subject of finance, were good enough to associate themselves with me for the purpose of testing and sifting it to the best of our ability. At that period nothing was more obvious than that it was to the interest of the Government to come to some arrangement if possible for the adjustment of this tax. A strong disposition had been shown by those who then formed, as now, the Opposition party, to give their countenance to the reconstruction of the tax. I do not mention that now as a matter of praise or blame, but simply as an important historical fact. While that was the case with regard to the Conservative party, undoubtedly a large portion of the Liberal party were, in the abstract, favourable to the same opinion. Therefore there was the clearest interest on the part of the Government to have proposed a plan for the purpose, if we had found ourselves able to arrive at the means of constructing such a plan consistently with justice. It is very difficult to assert, with confidence, a negative on most subjects, and particularly on the subject of politics, and most of all on the subject of taxation. We did come to the conclusion, however, that it was not practicable to form any system of readjustment of the income tax with reference to the distinction between permanent and terminable income, without inflicting a greater amount of injustice than that which it would cure. I am bound to take notice—I am bound to remind those who have taken part 448 in this debate, because it is a material part of the case, that even in the commencement of the examination of it, we find ourselves confronted by this fact—that whereas, on the whole, those who are assessed under Schedule D pay on less than their real income—I do not speak now of the cases of fraud, though I fear they are not unfrequent, but I speak of the liberal arrangements made by the law, which, I think, legitimately have on the whole that effect —while those assessed under Schedule D pay on less than their real income, in almost every case—I believe I may say every case without exception—those who pay under Schedule A pay on more than the real amount of their income. Therefore, I think that if at this moment we institute a severe critical analysis of the tax, and pursue that to its farthest stage, we shall find that the tax presses more heavily on those assessed under Schedule A than any other. That is clear with reference to all property assessed under Schedule A, but one description of property—I think I may say all property; but I am not quite sure how the case stands with regard to the returns of mines. But speaking of the great branches under Schedule A, there is no doubt of the truth of the statement I have made. With respect to one large branch of that property—namely, house property, I may say with regard to certain classes of it at least, that if there he a special claim to be singled out from all the rest for relief, the strongest is the claim which may be urged by the owner of a certain species of house property. I only mention that as a material, but not as a decisive consideration, to be borne in mind by those who take an interest in this subject. It was my fate, in 1853, for a space of two mortal hours, to occupy the time of this House,— whether fruitfully or fruitlessly, I do not know,—in stating in great detail, and in giving a full development to the reasons that had actuated the Government in the conclusions at which they had arrived. There was then a strong sense, and there is still a considerable sense of the inequality of the pressure of the tax, as well as of its general severity, yet I am bound to say, on the whole, since that time the public have been more impressed with a sense of the difficulty of any practical reconstruction of it than they were at an earlier period. That result I entirely attribute to the labours of the Select Committee, and to the fact that that Committee, having been appointed with the notion 449 that a reconstruction of the tax, as practicable, and probably easy, might be accomplished, were—such was the general effect which the evidence brought before them left on their minds—led to the conviction that if such a reconstruction was not hopeless, it was, at all events, a work of extreme difficulty. Nay more, there were one or two highly intelligent Members of this House, who entered upon the inquiry in that Committee, in the firm belief of the practicability of the reconstruction of the tax, who concluded their labours in the full persuasion that its reconstruction was impossible. I think the hon. Gentleman who brought forward this question, will, therefore, see that it would be paltering with the House and the country, if I were to pretend, on the part either of myself, or, I believe I may say, any one of my colleagues, that we see our way to any plan for the readjustment of the income tax. It cannot, of course, be denied that there are many questions of a more limited character than the complete reconstruction of the tax, which, nevertheless, are of great importance, which may, perhaps, form the subject of useful inquiry; and with respect to which I am by no means disposed to say that improvements might not be effected. But what I am desirous of impressing upon my hon. Friend behind me (Mr. Whalley) now is, that while I am aware there are very sanguine ideas entertained out of doors on this subject, I cannot give to those who entertain them any encouragement; and that, while I feel myself perfectly unable to give to those ideas practical effect, I should be unwilling to stand in the way of men, who, bringing a greater amount of ability to bear upon the question, may deem themselves capable of devising a scheme to accomplish this object. With that explanation, frankly owning to my hon. Friend that he exercises a sound judgment in not asking the House to go into an inquiry on this subject, I beg to conclude the brief remarks I have offered to the House.
§ MR. WHALLEY, in explanation, stated that he had neither proposed nor suggested a revision of Schedule D merely, but such an inquiry into the whole of the schedules as would satisfy the just requirements of the country.
§ SIR HENRY WILLOUGHBYsaid, that as it was clear that the income tax must be permanent, he hoped that means would be devised to make it bear as light as possible. It might be extremely difficult to readjust the tax, yet there were 450 some of its more aggravated inequalities which might be easily redressed. In the course of last year, for instance, the right hon. Gentleman had greatly aggravated the inequality of the income tax by throwing the annual payment on the half-year. The class of long annuitants in this way were compelled to pay the whole year's tax on the half-year's income in October. The consequence was that they paid on a quarter's income that they had never received. That was a remarkable instance of the injustice of that House. The quarter he referred to was from the 10th of January to the 5th of April. He had been applied to by some of these long annuitants to appeal to the Chancellor of the Exchequer for restitution, and he had told them to appeal to him themselves; but he was afraid they would not succeed, as he never knew a Chancellor of the Exchequer to make restitution of anything. He (Sir Henry Willoughby) had done all he could. He had last year divided the House on the subject, but only thirty-seven Gentlemen followed him.
§ Main Question put, and agreed to.