HC Deb 13 May 1862 vol 166 cc1623-58

then rose to move the Resolution of which he had given notice— That the incidence of an Income Tax should not fall upon Capital or Property; and that when applied to the annual products of invested property, it should fall only upon the net Income arising therefrom; and that the net Profits, Gains, or Salaries of persons in partnerships (not being public Companies) engaged in any trade, manufacture, profession, or salaried employment, should be subject previous to assessment to such an abatement as may equitably adjust the burden thrown upon intelligence and skill as compared with Property. The hon. Member said, it had been his intention to move a series of Amendments upon the progress of the Income Tax Bill which would be introduced; but finding that such a course would be inconvenient to Her Majesty's Government, he had relinquished it for the one he was now following. By bringing the Motion forward at this time he avoided any interruption of the progress of Government measures which were necessary for the collection of the revenue, and he thus released Members on both sides from embarrassment, and enabled them to treat the subject on its intrinsic merits. He asked the indulgence of the House while he submitted the proposal which he had now to make—which was not a mere question whether such a tax should produce so much and no more; whether it should be levied at such a rate and no more; or whether or how far it obstructed the industry of the country; but it went to the point, "Does the Legislature, as concurring with the Government, accept the full responsibility of one of their most important functions and the most important application of it?"—for if it be the duty of a Government to ensure the safety of the people from external foes and internal violence by a wise expenditure of the public revenue, much more is it their duty to take care that that revenue is collected by means which do not injure their property or impair their morality. He proposed briefly to lay before the House what he considered to he the right principle of an income tax; in the next place to show how the income tax, at present in abeyance, violated those principles; and, in the next place, to show how easily the existing legislation on the subject might be amended by the application of the true principles which he conceived should regulate a just income tax. He might be told that last year the House granted a Committee of Inquiry into the subject, and he might be asked why he did not bring forward the Report of the Committee. He was quite ready to bring it forward. He would read the judgment of the Committee on the proposition that he made— Your Committee, however, after full consideration, have arrived at the conclusion that the plan proposed by their Chairman does not form the basis for a practical and equitable re-adjust- ment of the income tax, and they feel so strongly ! the dangers and ill consequences to be apprehended from an attempt to unsettle the present basis of the tax, without a further perception of the mode; in which it is to be reconstructed, that they are not prepared to offer to your honourable House any suggestion for its amendment. This tax having now been the subject of investigation before two Committees, and no proposal for its amendment having being found satisfactory, your Committee have come to the conclusion that the objections which are urged against it are objections to the nature and essence rather than to the particular shape that has been given to it. Your Committee also feel that it would be unjust to make any alteration in the present incidence of the income tax, without at the same time taking into consideration the pressure of other taxation upon the various interests of the country, some of it imposed by recent legislation, and in one case especially, that of the succession duty, to some extent by way of compensation. He confessed he was not satisfied with that Report, and he did not think the country was satisfied with it. From that Report he deliberately expressed his most unqualified dissent. He would now proceed to the statements which he felt it his duty to offer to the House. First, with reference to the principle of an income tax, he thought he might assume from the absolute disuse of the word "property" in all recent papers and speeches on the subject that what used to be called "the property and income tax" was really income tax, and was intended to be so. That admission established the first axiom he wished to submit, which was that an income tax should be strictly a tax on income. Then the question immediately arose—What is income in the view of taxation, in the view of the Chancellor of the Exchequer, looking not upon this individual or that, but looking upon the whole country? To illustrate his meaning, he would take the case of a man who had an income of £1,200 a year from the interest of money lent to an individual or to the Government. He had no expense of collection, but could place the whole of it to his credit at his banker's, and might, if he chose, expend the whole amount. Then take the case of another man, who had an income of £1,200 arising from the rent of land; but of that £1,200 £100 had to be spent in the repairs of farm buildings and fences, and £1,100 only could be paid in to his account at his banker's. Then take the case of another man, who had an income of £1,200 arising from houses: out of that he had, perhaps, to expend £200 for repairs and insurance; so that he bad left only £1,000 out of his income of £1,200. Then take the case of a man who had au income of £1,200 from mineral property. In order to maintain the value of the investment, he must lay by £300 a year; so that he would find his spending income reduced to £900 a year. The question that he had to ask was—What was the amount of income in each of these cases with the view to taxation? Was it the £12,000, which if wholly spent, would ultimately ruin the land, the house, and the mine owner; or was it the amount of net income which in each case could be annually expended without impairing the owner's fortune? He might quote other cases of the same kind, but he had said enough to show that income, with the view to taxation, should be not the gross income, but the net income. In all these cases there was the common feature that the incomes were derived from property; the incomes were permanent in their nature, and they were all accruing spontaneously to the owner; therefore all these net sums were obviously open to an equal taxation, and they had this common character, that in every instance the tax-gatherer collected the tax from the hand, not of the owner, but of the tenant or borrower. But he had now to look at incomes arising from industrial pursuits, and in these also there was a common feature, that they were inevitably not the spontaneous growth of property, but inevitably and necessarily the results of a certain amount of labour, skill, and intelligence, applied to a greater or less amount of capital, so that the moment the labour ceased the income ceased also. These incomes depended on the life, the health, and the position of the individual, and were peculiarly precarious, and consequently were not available to the same extent for the expenditure of the owner, who ought in the exercise of prudence to lay by a much larger proportion of his earnings than was incumbent on the possessor of a permanent income. If they could by any contrivance determine the exact proportion of these industrial earnings which ought to be so laid by, they would at once have a sound basis on which to proceed in levying a just income tax. When they saw th6 immensity of the grievance attached to a remediable but unremedied evil, they must be content if they could approach with a certain amount of correctness the remedy of that evil. He would now state why he conceived that the present law was grossly at variance with true principles. The present law, in the first place, did not tax the rent of land as it ought. It taxed the whole of the tenant's rent, and without deducting the amount paid for repairs. The same observation applied with increased force to income derived from houses, for that portion of the rent applied to the maintenance of the property in repairs and insurance was taxed, though it was not available as income. Still greater injustice was inflicted upon the owners of mineral property, the whole produce of the mine being made subject to the tax. The tax was levied also on fines paid for the re newal of leases, although the full annual value of the property had been already taxed in the hands of the lessee or tenant; so that the tax was imposed twice over on same property. But the greatest injustice, perhaps of all, was that inflicted on the owners of terminable annuities. Here the capital given as the consideration for annuities terminable by lapse of years or lapse of life, was taxed in the annuity through which it was being repaid with interest; so that if a man expended £10,000 in existing terminable annuities, he would have to submit to a deduction of 9d. in the pound upon the whole sum invested. He wished the House to affirm a principle for the constitution of the income tax. He would refer briefly to the measure he laid in detail before the Committee last year, in order to show that he was not calling upon the House to make a mere abstract declaration, which could have no practical result, but one which could be carried out with perfect facility and with an unquestionably just result. He proposed that in the case of the owners of land a deduction should be made from the gross income of one-twelfth or 20d. in the pound; upon houses he proposed that the deduction should be one-sixth. He thought these proportions had been carefully fixed. With respect to house property, he might quote the evidence of Mr. Lee, a surveyor in a considerable way of business in London, who informed the Committee that in assessing houses for the poor rate he had been in the habit of deducting 15 per cent in order to compensate the owner for the outgoings for insurance and repairs; and also that that deduction had been sanctioned by the Court of Queen's Bench. He (Mr. Hubbard) would submit, that if such a rule was just as regarded the poor rate, it was equally so with regard to the income tax. The question of minerals was a much more difficult one; but after a careful consideration of all the evidence he could find on the subject, he had come to the conclusion that a deduction of one-tenth ought to be allowed on all earthly minerals, and one-fifth on all metallic. And here he must remark that the taxation of mineral property was the most crude and barbarous of any that he had become acquainted with in the course of the inquiry. So utterly without system was the present mode of assessment, that the tax-gatherer simply went to the pit mouth, counted the number of tons that were brought up, put upon it what estimated value he pleased, and then upon the gross result levied income tax, without considering what was due to the owner of the royalty, and what to the mining adventurer. Suppose, for example, a mine was taken for fifteen years, for the first year every farthing of the capital must be advanced for the purchase and working of the mine, and during the remainder of the term every portion of the adventurer's outlay must be repaid him before it could be said that he had derived any income from the speculation at all. But the income tax Commissioners and the Board of Inland Revenue, would not allow a single farthing to be deducted from the estimated gross value of the produce derived from the mine—they assessed it to the full amount. This was an instance in which he must say the natural inequality and absence of principle of the tax had been aggravated by the unnecessary mismanagement of those who were charged with the administration of the law. With regard to money lent, to be repaid in the form of a terminable annuity, the remedy for the existing unfairness was exceedingly easy of application. If £10,000 was lent to be repaid by annual instalments, they had only to take care that they charged income tax on what was interest, and that they left un-taxed what was merely the repayment of capital. There were some who said it would be impossible to distinguish between what was capital and what was interest. In the course of the inquiry the Committee had before them a grave financial document, in which it was calmly asserted that monied Corporations lending money on security or selling annuities, were lending and borrowing, buying and selling, not capital, but interest. If such was the confusion of ideas which prevailed in financial quarters, one could not wonder that an impost like the present income tax had descended to the present day unreformed. But to come to the remedy of the grievance. That remedy, he was glad to say, he had found in an Act of the Legislature itself. In the year 1840 Parliament advanced a sum of £3,000,000 to the landowners of the country, to be repaid with interest in the course of twenty-two years. The loan thus took the shape of a terminable annuity or rent-charge, at the rate of £65 fur every £1,000 lent. The 60th section of the 5 & 6 Vict. "empowered landlords to deduct and retain the income tax out of every rent-charge or annuity for which their land was liable,' but in 1853 the Legislature provided (16 & 17 Vict., c. 34, s. 42) — Certain advances of public money to promote the improvement of lands have been made by way of loan…and the repayment thereof has been secured by a rentcharge…. by which the principal sums advanced will eventually be repaid with interest thereon, and it is just that provision should be made for deducting and allowing the duty charged by this Act in proportion to such interest on the payment of such rent-charge; it shall be lawful for any person paying any such rent-charge from time to time to deduct and retain thereout in respect of the duty chargeable under this Act one-third part of the sum which the rate of such duty computed on such rent-charge will amount to, and no more. This clause (the 34th) of the Income Tax Act of that year had been brought to his knowledge by pure accident; and he should imagine that few hon. Gentlemen in that House could be aware of its existence. By the Act of 1842 the landowner was allowed to deduct income tax on the whole of his instalment; but in this clause Parliament interfered, and said "You shall deduct the income tax on that part of the instalment which is income, but that part of it which is capital shall come back to the Exchequer untouched." This was perfectly just. Deduct the income tax on the interest if they chose, but let the capital which was lent be returned without deduction. What he complained of was that the same principle had not been generally applied, and that the Government should make one law for their creditors and another for their debtors. Nothing could be more just than to apply the same rule to the public creditor who had to receive a terminable annuity, he would venture to say to the House, "Don t make one law for your creditors and another for your debtors; don't excite the feeling, the criticisim, the ill-will, the hatred, and the contempt of the people by such grossly unjust legislation as is here exposed." Those who valued the character of the Government of this country should gladly seize any opportunity of removing so gross and glaring an anomaly. Now he came to the last question, which: he felt was by far the most important, and; the most difficult;—it extended over a far; larger sphere, and involved the interests of a far larger body of men. With regard to the other classes, the remedy he proposed was a matter of plain calculation; but this was not so much the case in the present instance—the assessment of industrial incomes. In his opinion, it was absolutely necessary that some attempt should be made to adjust the burden now thrown so unequally upon skill and intelligence as compared with property. The remedy he sought he would venture to explain by expressing a principle, and leaving the measure of its application to the House. He would say, make such a deduction upon industrial incomes as would justly represent the burdens which that class of incomes had to bear as compared with other; classes. In the first place, he should probably be met by the question, "What do you mean by an industrial income? Do you put in the same category the acting and the sleeping partners of a firm, and the shareholders in a public company? "He ventured to reply that the necessary discrimination could be applied with perfect facility and perfect justice. The principle for which he contended was that they: should not levy the same tax upon income which was the result of industry or skill, and upon income which was the mere result of capital. When they found a person carrying on a profession simply, there could be no question as to his case. A physician or a lawyer who earned his whole income by the exercise of his brain, was beyond doubt entitled to the whole of the remedy. The difficulty was when the income was earned partly by skill and partly by capital. In these cases he believed the difficulty was more fanciful than real. They could not attempt to discriminate between the two elements. In this country they could never arrive at what a man's capital really was, and they must therefore be satisfied to take the income earned as the combined result of skill and capital. When, however, they passed from individuals to companies they could easily make the desired discrimination. In those cases the labour and the skill were separately paid for; and they could, therefore, make the allowance to which those qualities were entitled, while the net result of the company's operations, the profit or dividends assumed simply the form of interest on capital. Then he might be asked how he would distinguish between companies and partnerships; or in what respect the case of a sleeping partner differed from that of a shareholder? His answer was, that the tax-gatherer knew nothing of sleeping partners at all. The firm was an industrial whole —they did not tax the individual members of the firm, but the firm itself. As to the distinction between partnerships and companies, the law had already settled that. The Companies' Act defined in clear terms what "companies" were and what "partnerships "were. So many persons formed a partnership—so many persons constituted a company. When a partnership reached that number, it assumed the quality of a company, and as a company it must be registered. Thus the matter would present to the tax-gatherer no difficulty at all. The net result of the operations constituted the interest of the capital to be fully taxed: the skill and industry producing those results would be subject to an abated assessment. He now wished to grapple with some of the objections which had been raised against what he admitted was a principal feature of his scheme. He might be told that his plan was not careful about individual cases—that it took whole classes of incomes and dealt with them in a mass—that it would, in fact, grant an unasked boon to some, while others it would leave still subject to an unfair burden. Of course, it was far easier to find a fault than to mend it. But would the House refuse to do justice in the mass because it could not deal with individual cases? No doubt some owners of house property might spend five per cent on repairs while others might spend twenty-five; no doubt some persons might save nothing out of an industrial income, while others might save nine-tenths; no doubt it might be called unjust to place all these in the same category; but he would rather do justice on the average than leave injustice on the average unrepaired, because he could not devise a remedy that would reach every particular case. He had the more confidence in the success of what he was proposing, because nearly the whole had already received legislative sanction. What he was asking for was nothing new, but was simply an extension of a system of legislation already inaugurated. Take, for example, the question of exempting savings from income tax. By a clause in the Act of the 16 Vict., the taxpayer was entitled to deduct to the extent of one-sixth of his income, provided that he could show he had expended that portion of it in the purchase of a life policy for himself or his wife. Mr. Pressly, the Chairman of the Board of Inland Revenue, was asked by that Committee whether a man who had an income of £6,000 a year, and who spent £1,000 of it in premiums on a life policy, would be allowed to pay the tax on £5,000 only? Mr. Pressly said that of course he would. "On what principle," was the next question—"on what principle do you justify that?" "Because the £1,000 so expended is not considered part of his income," was the reply. In that sentence his (Mr. Hubbard's) whole case was proved. The Legislature had determined, that if a person invested a certain portion of his income in a life policy, it should be exempted from the tax, because the portion so invested was not income at all. That was his (Mr. Hubbard's) case. Withdraw the absurd and ridiculous limitation as to the mode of investment, and increase the proportion from one-sixth to one-third, and do not limit it to money invested in life assurance, and he was satisfied. The amount of income on which the tax was now levied was about £300,000,000; and the Act of Parliament allowed a sixth of that to be exempted; but was there ever anything so preposterous as to suppose that £50,000,000 could be invested every year in life assurances? If that were done, where were the funds to come from with which to extend trade and commerce; or indeed what would the insurance offices do with the money? The Legislature had made, with a very good intention, a most valuable admission of a great principle; but it had done it in a form so absurd and extravagant, that no wonder it had proved utterly worthless for the purpose for which it had been designed. He knew he should be charged with being the advocate of a particular class, and that he should be told his object was to relieve Schedule D at the expense of the rest. That, however, was by no means the case. By a clause in the original Act of 1842 (clause 133), it was provided that the assessment should be upon a triennial average of income derived from precarious sources; but it was added that in case that average triennial income was more than the actual income of the year in question, the difference should be returned. The object of that proviso was very plain. When the tax was imposed for a single year, it was felt to be harsh, whatever the antecedents of a man's income might have been, to require him to pay on a larger sum than he was actually receiving; but when they made the tax a perpetual one, the rule became perfectly absurd. He (Mr. Hubbard) had obtained some information of its working in the case of a firm in the City, The aggregate income for ten years of the house in question, reckoning each year's returns on a triennial average, was £78,640; but the aggregate sum on which the tax was actually paid was only £40,083, or very little more than one-half of the real amount. The result of this was to charge the full amount where an income was steady, but to excuse nearly half the tax where the amount of the income fluctuated; from year to year. These circumstances could only arise in the cases of persons trading upon a very large scale—of large manufacturers losing in adverse times, and recovering themselves in more prosperous times; and it was therefore an act of special favour to those by whom the favour was least required, and was an abatement which was in no degree shared: in by those who made small and regular profits as traders, by professional men with regular salaries, or by that large and meritorious class the salaried officer: of the State and of private individuals This was one feature in the tax which he should be glad to see disappear. He did not want to see, under Schedule D, one class enjoying so important a boon; while others, and perhaps in many respects those who ought to be more considered, were in no degree benefited. There was another evil attached to the operation of the tax, and especially with regard to smaller incomes, to which he wished to draw attention. A person whose income amounted to £99 19s. paid nothing to the income-tax; but if he were assessed at one shilling more, he had to pay at the rate of 6d. in the pound, or £2 10s. upon his income The operation of this sudden rise from no taxation to a payment of £2 10s. gave rise to enormous misrepresentation and fraud, and, no doubt, it offered a very great temptation to a man of small means to return his income at less than the actual amount, and thus an encouragement was held out to defraud the revenue, and great trouble was given to the officers who had charge of the assessment and collection of the tax. Again, in the case of incomes of £149 19s. the rate of 6d. was paid, while an income of £150 paid the full rate of 9d.; and this difference of rate had the same effect as the exemption of incomes under £100 in stimulating fraudulent returns. Both of these difficulties could be easily got rid of by the proposition he ventured to submit; and fixing £180 as the lowest amount to be entitled to an abatement of one-third, £60 would remain as the settled deduction from all incomes under that amount; so that a man having an income of £100 a year would be assessed, not upon £100, as now, but upon £40, and would pay 30s. instead of 50s., at the 6d. rate, or 20s. at 6d. in the pound. He thought a tax of 20s. would not be very dangerous to the morality of those who had to pay, and he had no doubt, from all the evidence he had been able to obtain, that in this particular the change he proposed would not only largely conduce to more accurate returns from the taxpayers, but would largely diminish the labour and difficulties of those who had the administration of the tax. He was aware that the idea of making people honest by granting a boon had been not only ignored but ridiculed; but it was not simply to the amount of the abatement that he looked for that result. If the Government were to show themselves acquainted with the grievances complained of, and, without proposing to reach each individual ease of injustice, were to endeavour as near as possible to meet the complaints, he believed that that declaration would arouse a feeling in the country which would operate in returns largely to the advantage of the Exchequer, and would probably make the people regard the tax with less displeasure. He believed, that if they wanted to make men rogues and liars, there was no readier way than to treat them as if they were so; and that if, on the other hand, they treated them with confidence and as honest men, and with that justice which should distinguish the legislation of England, the effect would go far to make them honest and truthful. He knew that there were persons who disbelieved in the feeling of responsive confidence, but he had a better opinion of the English people. It was true that Mr. Coleman, an official, accountant in the City, who gave very valuable information to the Committee, said in his evidence that he did not think the returns would be very much more correct even if the measure of adjustment proposed by the Chairman (Mr. Hubbard) were adopted, he gave Mr. Coleman's view because he did not wish to leave any class of opinion unrepresented. But Mr. Coleman, from the nature of his occupation, had been specially concerned with persona not of the highest but of the lowest commercial standing, with insolvent and bankrupt firms; and they knew how very apt misfortunes and embarrassments were to make people less scrupulous in their dealings than they would otherwise be. He could not therefore allow that Mr. Coleman's contrary evidence carried any authority with reference to this not unimportant point. He conceived that infinitely above the mere fact of pecuniary compensation to those who were sufferers under the present clause was the immense gain of removing from them the temptation to fraud and dishonesty which arose from the conviction that they were unjustly treated by the State. This tax had been so long pressing inequitably upon the country that many persons who would he was sure under ordinary circumstances have shrunk from anything that was untruthful and dishonourable, had come to the belief that the case was settled between them and the State—that the State robbed them, and they were justified, therefore, in robbing the State; and by the action of this principle all idea of honesty with respect to the income tax had been obliterated. In his evidence before Mr. Hume's Committee in 1851, Mr. Warburton, the eminent political economist, expressed himself very much in favour of keeping things as they were, untouched; and when asked how he would treat professional and mercantile incomes, said— I would treat professional and mercantile incomes in the light of short annuities, and levy upon them the same rate; and with regard to incomes of this description I should act very much as the State has acted, not making it very inquisitorial, because if you did, there would be a rebellion against the tax, and it would be no longer paid. I believe the tax has been levied with great moderation by the State; that was the practice when I was a merchant, from 1808 to the repeal of the 10 per cent tax. For years I made the same return annually, and was never surcharged. Supposing A, employed as a merchant, returns his £1,000 profit for the year, do you consider that he ought to be taxed three per cent upon that £1,000, or is there any modification by which you would alter the amount on which he should pay the tax? —I would treat that precisely like any other annuity. The merchant makes his own return. The greatest indulgence is in that respect shown him by the State. In the case of other properties the parties may possibly have reason to complain. A man who has an income derived from land or houses, gets no allowance for repairs, and various other heavy deductions which are made upon the nominal rent; but the mercantile and professional men make their own returns at their own discretion; and whatever the return may be, it is hardly possible by investigation to find out whether the return is true or not. As the returns are made by the parties themselves, without any possibility of really testing their accuracy, I should, generally speaking, say that those two descriptions of persons were more leniently treated than those who have the tax levied upon visible and tangible property, where it is levied not only to the last shilling, but considerably beyond it in the case of land and houses. What was the whole meaning of this evidence? An eminent merchant and Member of that House acknowledged that for years he made the same return, and was never surcharged, and the leniency of the Administration in omitting to enforce its rightful claims is cited as a merit in the law. He (Mr. Hubbard) thought it most deplorable that a person of Mr. Warburton's position and standing should bring forward as an argument in favour of leaving the income tax unaltered, that as it was levied it was left entirely to the discretion of the taxpayer to return the amount upon which he ought to be assessed; that he made his own returns, and that the State never interfered to see whether they were right or wrong. He had been told that at such places as Manchester the misrepresentations with regard to assessments were notorious—that they were well known to the authorities, who were, however, powerless to correct them. With regard to the effect of the readjustment he proposed under Schedules D and E, without rating the amount too high, he felt confident that the disparity between the amount of the abatement, and that which would be ultimately realized, would be short of one-half of what would be the apparent concessions by the abatement of a third of the amounts liable to assessment. In considering the effect of the change which he proposed in Schedule D, it was necessary to consider also how the other schedules would fare upon a general readjustment of the tax, supposing that they were to realize the same amount as at present. The only fair way to test his proposal was to treat the tax: as one that required readjustment. He might be told that he was raising class against class, that he was wanting to introduce a measure which was to favour Schedule D at the expense of other classes, and he had heard the language used that the landed gentleman would have to pay for relieving opulent traders in London and in the manufacturing districts. An appeal had been made to the landed aristocracy of England to oppose their own personal interest to the Consideration of a measure which had for its object the removal of an injustice. But to what extent were the agricultural interests engaged in this matter? In his most comprehensive speech the other evening, to which he (Mr. Hub bard) had had the pleasure of listening, the right hon. Gentleman the Member for Buckinghamshire, speaking of the taxation of the country, and turning to the benches behind him, said to the country Members, "It is to your class I am now coming, when I speak of additional taxation. The landed interest of England is the milch cow visited when more money is wanted;" and the right hon. Gentleman added, "the landed interest must bear a vast portion of the additional taxation required for the expenditure of the country." He admired the simile of the right hon. Gentleman, if it referred to the fertile pastures of that portion of the country which he represented; but if the whole of the rest of the agricultural interest were taken into consideration, it would be found that the land of England and Wales was assessed in the aggregate at £1,863,000, while the total amount assessed under the income tax was £10,424,000; so that the land stood under those figures at less than one-fifth of the whole amount assessed. But if to the land they added farms, which might be fairly thrown into the same category, they would have £2,436,000 as the amount at which land was assessed in the person of the owner or occupier, as compared with £10,424,000, the amount upon which in come tax was paid throughout the whole country:—showing that the landed gentry and their tenants did not bear one-fourth of the whole amount of direct taxation But if it were taken that they ought to bear a larger proportion, and that in the readjustment of the tax they were subjected to additional burden, who was the person responsible for raising the idea of class interest upon such a subject? Surely it should not rest with one who endeavoured to remedy what was acknowledged to be an injustice; the charge more fairly lay at the doors of those who endeavoured by raising such a cry as this to prejudice the attempt at readjustment. And if even it were true that the landed in-rest would be sufferers by the readjustment of an unjust and oppressive tax, he hoped the landed gentry would not oppose their personal and class interest to a measure which would benefit the community at large. He felt there was no necessity for addressing any admonitory words to the landed gentry, to whom such prejudicial appeals had been made. For who were the landed interest? The descendants of those knightly and honourable men who inherited their estates from ancestors who had well served their country—composed also of men who had risen by their own skill and intelligence, and who would scout the idea of allowing personal and party interests to influence their votes on a question like this. The people felt that under the income tax they were not truthfully treated—that the law as it stood was a falsehood, which said one thing and did another. Such ought not to be the characteristic of English legislation. Injury done to one class ought not to he balanced against injury done to another, and certainly that was not the mode by which this measure ought to be disposed of. He had read with much interest the report which had recently been published on the subject of the Turkish finances. From that report he found that a. part of the revenue of Turkey consisted of tithes; but he did not find that the Government of the Sultan even took the cow when they tithed the calves, or the ewe when they tithed the lambs. That was what our income tax did. It took not only the results of property, but the property itself. He would like to know whether those interesting visitors who were here, the Japanese, had considered the subject of the financial system of England. If they had done so, and they should make a report on the subject, how would they describe the income tax? They would say—" We find in this country an income tax, but we also find that it not only takes the interest but the capital which produces that interest. Again, we find that this tax robs the public creditor. We find, indeed, that savings are exempted from taxation; but that boon is coupled with a condition so remarkable that it becomes totally illusory, and not one in ten thousand is benefited by it. Again, we find that it permits very powerful traders, merchants, and manufacturers to escape, by virtue of a special provision, which they say is clause 133 of an Act, one half the taxation, while the more modest trader, professional and salaried man, has to pay the whole income tax. We find these anomalies in the law provoke such an amount of dislike, contempt, and evasion that the Government themselves are incapable of enforcing the provisions of the Act. Such is the law by which is raised a large portion of the taxation of a country which is sup- posed to be not only one of the greatest, but one of the wisest in the world." Such might be the picture which our Japanese visitors might draw of the income tax when they returned to their own homes. In the course of the inquiries which he had been enabled to give to this subject one only principle had been enunciated to justify this tax, and that was that it was one of practical convenience. He ventured to disbelieve the practical convenience, of any system which openly violated justice and truth, and he asked the House to affirm that the tax, if re-enacted, should be based upon a principle of truth. Truth in it was all he wanted. If there must be an income tax, let it be levied as an income tax: that was the substance of his Resolution. The hon. Member concluded by moving— That, in the opinion of this House, the incidence of an Income Tax should not fall upon Capital or Property; and that when applied to the annual products of invested property, it should fall only upon the net Income arising therefrom; and that the net Profits, Gains, or Salaries of persons and partnerships (not being public Companies) engaged in any trade, farm, manufacture, profession, or salaried employment should be subject, previous to assessment, to such an abatement as may equitably adjust the burthen thrown upon Intelligence and Skill as compared with Property.


begged to second the Motion of his hon. Friend, and in doing so joined in asking the House to affirm the principle for which he contended. It was because he saw little prospect of being able to dispense with the income tax altogether, although it had been first imposed for a purely temporary object, that he assumed the responsibility of taking part in this discussion; and he was perfectly satisfied that he echoed the sentiments of the important constituency he had the honour to represent, and of all the other large constituencies in the country. Ever since the first institution of the tax, and especially in the years 1848 and 1851, great dissatisfaction had been expressed at the working of the income tax, which had culminated in the appointment of Mr. Hume's Committee. He had hitherto always indulged in the hope that we should be able to part with the income tax; but he was no longer able to see that prospect before them. The country appeared to be of a different mind altogether, and in the present large expenditure of the country, a speedy termination of which could not be expected, he could indulge in the hope no longer. The petitions recently presented embodied a fair expression of the popular feeling on the subject of the income tax. He wished to draw the particular attention of the House to one which he had himself presented from the barristers and solicitors practising in the metropolis, in which they stated that the mode of charging the same amount of tax on income from trades and professions as on realized property was most unjust, and it had been only reluctantly submitted to under the idea that the tax was imposed for a temporary purpose. That purpose could no longer be considered temporary, and it was the duty of the House to see whether the tax could not be readjusted. He did not intend to pursue all the train of arguments his hon. Friend had placed so perspicuously before the House. He concurred with him to a great extent in the plan he proposed to the Committee on the subject, and he concurred with him entirely in what he had stated that evening. But he would recall to the recollection of the House some of the opinions expressed in both Houses of Parliament in former debates on this question. In the House of Lords on the 17th March, 1842, Lord Brougham moved the following Resolutions:— 5. That with the same view it is expedient to make a distinction between income arising from capital of every description, and income arising from labour merely, levying a smaller proportion of the latter income than the former. 6. That with the same view it is expedient to make a distinction between income possessed by persons who have only an interest in the same for their lives or for some lesser term, and income possessed by persons who have an interest in the capital from whence the income arises, levying a larger proportion of the latter income than of the former.—[3 Hansard, lxi. 508.] These propositions were not disputed by the Government, who met the Resolutions by moving the Previous Question. On the 18th March, 1842, the right hon. Baronet the Member for Portsmouth (Sir F. Baring) commented in this House on the injustice of the tax in language which was in complete accord with the views now put forward by the hon. Member for Buckingham. He said— The tax now proposed, however, was one to which he could not consent. Was it a just tax? Was it an equal tax? Those were questions for the country to determine. Was it fair for those who were in the permanent occupation of property —that those whose property descended from father to son, and who might dispose of it as they pleased—should pay in the same proportion as those who obtained their annual incomes by their own exertions; incomes which would be immediately cut off by some of those casual accidents to which humanity was liable, leaving the families dependent on them wholly unprovided for. For his own part he could conceive nothing more unfair than such a mode of taxation.—[3 Hansard, lxi. 857.] Lord Howick (now Earl Grey) on the same occasion denounced the tax in those words— Again, we are told that taxation ought to be equal. Can anything be more monstrously unequal than the tax recommended to us?"—3 Hansard, lxi. 893.] And the right hon. Gentleman the Member for Ashton-under-Lyme (Mr. Milner Gibson), on the 4th April in the same year, said— The right hon. Baronet had professed that he wished to take from all persons according to their means; but he failed to realize his professions, because he exacted from persons in trade and from persons who lived by their learning and faculties as much as from individuals of real property. He appealed to every man. Conservative or Liberal, whether this was just; and, moreover, whether they would sanction injustice with their eyes open? Did not such flagrant injustice invite every species of evasion?"—[3 Hansard lxi. 267.] In the same year, in the House of Lords, the Marquess of Lansdowne said— But let their Lordships go a step further; let them go to trades and professions. There again the inequality was more gross than ever. But he would not advert to this part of the subject further, because his noble and learned Friend (Lord Brougham) had, on a former occasion, most eloquently dwelt upon the peculiar circum stances of those who in a state of bad health and of declining age, and finding their professional earnings were escaping from their reach, were nevertheless by the rigid rule laid down—and he admitted necessarily laid down—obliged to pay the fullest amount on their earliest returns, with out having the poor consolation of enabling them to explain their case, because that very explanation would be injurious to them, and deprive them of the benefit which their former reputation had obtained for them."—[3 Hansard, Ixiv. 29)] He (Mr. Crawford) could nut understand how it was now possible for these noble Lords and right hon. Gentlemen to profess different opinions from what they professed then, inasmuch us the principles remained the same. If they now came down to a period ten years subsequent, they would find that on the 18th April, 1853, the right hon. Gentleman who was now Chancellor of the Exchequer making the following profession— I am not one of those who make light of these charges [against the income tax]. In my own individual opinion it is perfectly plain, from the mode in which the income tax was put an end to at the end of the war, that it is not well adapted for a permanent portion of your ordinary financial system. Whether it is so or not, on which there is a great difference of opinion, yet I think this is on all hands agreed, that it is not a permanent portion of your fiscal system, unless you can by reconstruction remove its inequalities.…. Self-assessment leads to grievous frauds upon the revenue, and renders the real inequality of the tax far greater than any of those among its inequalities which immediately strike the eye and feelings…..I do not at all deny that the case of professional men appeals to our sympathies. In my opinion, it is one of the reasons which indicate that the tax ought to be a temporary tax."—[3 Hansard, lxxv. 1364.] And a few days subsequent, on the 12th May, the same right hon. Gentleman said— I did state that the burden which the income tax casts upon property is unequal as compared with the burden which it puts upon intelligence and skill. I did not contest the opinion commonly entertained that intelligence and skill were too hardly pressed upon as compared with property."—[3 Hansard, Ixxvii. 260.] Lord Granville, in May, 1854, said— Now, if there was at that time (1853) any feeling in or out of Parliament which was stronger than another, it was, that it was absolutely necessary that the Government should either abolish the income tax, or should modify it to moot certain inequalities and injustices, which were apparent in its operation."—3 Hansard, exxxii. 1043.] Again, on the 22nd June, 1852, the right hon. Gentleman the Member for North Wilts (Mr. Sotheron Estcourt) proposed a Resolution in the Select Committee, in which were these words— It is repugnant to public feeling to impose the same rate of tax upon incomes derived from permanent realized property, enjoyed without exertion or risk, and incomes derived from trades, professions, and salaries, which are subject to both. And in his evidence before the Committee Mr. John Stuart Mill, being asked to define the principles upon which he would recommend the construction of a tax of the nature of an income tax, answered — I should say that the first rule is the general rule of taxation—namely, equality; that is to say, taxation in proportion to means. But this does not, I think, imply taxation in proportion to the whole of a man's receipts, because the whole of his receipts may greatly exceed what he can with propriety expend upon himself. It seems to me, I therefore, that two kinds of allowances are necessary, an allowance for small incomes and for those that are of temporary duration or precarious. And I think that the present income tax tails of justice under both those heads, though I do not go nearly so far as many people in my estimate of the amount of that injustice. By the adoption of the principle of not taxing savings all the claims of justice towards individuals would be included and covered. He might have multiplied these quotations by further search among the records of Parliament; but he hoped he had called witnesses enough in support of the views expressed by his hon. Friend. But there was one other witness, whose opinion was eminently entitled to consideration by the House. It was an opinion of the late Mr. James Wilson, of The Economist, who, in a Minute dated "Treasury Chambers, March 12, 1853," which had since been republished in the form of a pamphlet, commenced with these words— It will be admitted that the time has arrived when a reconsideration of the income tax, with a view to some discrimination between the various sources from which income is derived, is imperatively forced upon the Government. Notwithstanding the ability with which a uniform rate of charge was sustained, it is impossible not to admit that the conviction on the part of the public of its injustice has assumed a more substantive and practical shape than at any former time, and that a very large majority in Parliament is prepared to act according to that conviction. It was because the tax had become a permanent source of revenue that the House ought no longer to delay expressing its opinion upon it. It was not creditable to go on year after year raising a large portion of the revenue on a principle that excited throughout the country a feeling of universal dissatisfaction. He seconded the Resolution.

Motion made, and Question proposed.


My hon. Friend who seconded this Motion has combined together in his speech a reference to two matters which are in themselves perfectly distinct, though I admit they are associated in his mind. I mean the question whether the income tax should be reconstructed, or rather, whether the subject of its reconstruction should be agitated; and the question whether the income tax is to be a permanent part of our financial resources. With regard to the permanence of the income tax, with regard to its security or insecurity, its desirableness or otherwise, as a permanent portion of our finance, I have nothing to say on this occasion; because it was my duty, now nine years ago, to explain myself fully, on the part of the Government to which I then belonged, with regard to that subject; and I believe I might say that to every word of what I then uttered I now deliberately adhere. I did not then think that an income tax of 7d. in the pound was a satisfactory portion of our permanent finance; still less do I now think that an income tax of 9d. in the pound can be so considered. I am not surprised, therefore, to hear my hon. Friend, who looks at this question as a practical man, and whom I understand to say that he is not so much governed by abstract considerations as by the pressure of the tax itself upon his constituents, together with his own view of the likelihood of its becoming permanent, that upon this account he now appears to second the Motion of his hon. Friend the hon. Member for Buckingham. Though I can express no sympathy with Motions of this kind, and though I do not concur in the grounds upon which it is introduced, yet I believe the feelings from which the Motion springs do extensively prevail. And though I do not think those feelings are founded in strict reason, yet, being founded on views and opinions which we must expect to see arise from time to time—though I for one cannot concur in them—I am willing to regard them with every indulgence, deference, and even respect. But while showing deference and respect to those feelings, I am bound to say on the part of the Government that we must, in the most decided manner, ask the House not to consider superficial appearances in a case of this kind—not to be led away either by apparent authorities or by powerful appeals, but to regard the substantial interests that are involved—the interests, in the first place, not of the State or of the Treasury, but the interests of justice as between the respective classes of the community, and the interests of that social harmony which I am convinced the adoption of such a Motion as this would fatally disturb. With regard to the notice that appears upon the books given by my hon. Friend the Member for Stamford (Sir S. Northcote), I wish to say on the part of the Government that we oppose that Motion of my hon. Friend. My hon. Friend the Member for Stamford has given that notice not in any manner in concert with us. It appeared upon the paper without our knowledge. We have not even the means of knowing—I am not in possession of any knowledge upon the subject—whether it is the absolute intention of my hon. Friend to persevere with the Motion, though I presume it is. But I wish to state to the House that, in the execution of our duty, we shall be prepared, if my hon. Friend should not make that Motion, to give a negative to the Resolution that has been moved by the hon. Member for Buckingham; although, if my hon. Friend of his own will and authority thinks proper to make that Motion, we shall vote with him, as the only natural mode which would be open to us of meeting and setting aside the proposal of the hon. Member for Buckingham. I must say that I congratulate my hon. Friend the Member for Buckingham upon the possession of the great courage and inflexible will which he has displayed in dealing with this question. Last year my hon. Friend moved for a Committee of Inquiry on this subject. He admitted the difficulties of the case; but he said that before a Committee those difficulties would be investigated, and that the results would lead to the pouring of great light upon the subject. We thought —I am now speaking of my colleagues and myself—that there were more dangers than advantages in such a Committee, and therefore we took the sense of the House; upon the Motion. But my hon. Friend obtained a Committee by a majority, and thus he succeeded in the appointment of a tribunal to which he determined to refer his case. That Committee was fairly-constituted. I believe, that if that Committee had had only, upon the first day of its meeting, to vote upon the Resolution that is now proposed, or upon some similar Resolution involving the principle of reconstruction, it is quite as likely as not that the majority of the Committee, as then in formed, would have voted for the principle of reconstruction. I believe it was a fairly constituted Committee, and that the reasons of my hon. Friend in favour of reconstruction were represented by a moiety, if not more, of the Committee. The Committee did not fail in patience or diligence. It applied itself with great assiduity and care to the investigation of the subject. And what was the result? Why, at the close of the Committee, the proposal of my hon. Friend was put aside by a majority of seven to two. The Motion by which that was effected was upon the adoption of this paragraph in the draft report— Guided by these considerations, your committee have arrived at the conclusion that the plan proposed by their Chairman (the plan now before the House in the form of this Resolution) does not afford the basis of a practicable and equitable readjustment of the income tax; and they feel so keenly the dangers and ill consequences to he apprehended from an attempt to unsettle the present basis of the tax, without a clear perception of the mode in which it is to be reconstructed, that they are not prepared to offer to your honourable House any suggestions for its amendment. This was the Resolution at which the Committee, after full investigation, arrived. I am not telling any secrets when I mention that in the majority which voted that Resolution were contained the names of some Gentlemen, Members of this House—aye, experienced and distinguished Members—who had entered that Committee with minds as favourable to a reconstruction of the income tax as my hon. Friend himself. But those Gentlemen, the choice and selection of my hon. Friend himself, heard his case, he did his best before them, he exhibited all his ingenuity before the Committee, he opened and unfolded his case, it was amply tested and criticised in a manner that it would be absurd to attempt in any speeches in this House, and the result was that his plan was rejected by seven to two. That is not an unimportant fact, as bearing upon the present Motion. Presumption and authority are matters of some consequence in matters of this kind; and we cannot run blindfold into the adoption of an abstract Resolution such as this, without sonic attention to these matters. When I stopped my hon. Friend the Member for London (Mr. Crawford) by asking what was the date of the opinion he was quoting from the mouth of the President of the Board of Trade, it was because I had heard, long ago, from my right hon. Friend the present President of the Board of Trade, that having begun, as many honest and benevolent men have begun, with strong convictions in favour of reconstructing the tax, he had abandoned them, and come to the conclusion that any such attempt would be not only impracticable but highly dangerous. My hon. Friend the Member for Buckingham, having induced the House to appoint the tribunal which he requested; having had the fullest opportunity of producing his case before that tribunal; having found the members of that tribunal—not exactly those who were opposed to him at the out-pet, but, on the contrary, some of those who were favourable to him and sharing his views at the outset—having found them determining by a large majority, in the terms I have read, that his proposal was one that could not be recommended—my hon. Friend now, leading a forlorn hope, as I may call it, brings forward the proposition which his own Committee rejected, and asks the House, upon the slight examination that the case may possibly, and only possibly, undergo in the course of two or three hours' discussion, to affirm the principle which his own chosen Committee, after full investigation, determined to be inadmissible. My hon. Friend must, whatever confidence he may have in the force of what he considers to be truth and justice, but which I consider to be the opposite to truth and justice, permit me to say that he is taking rather a sanguine view under these circumstances if he thinks he can persuade the House to adopt his proposition.

I wish now to look to the financial effect of the proposition. I will not discuss some of the points which my hon. Friend has introduced into his statement for reasons that are obvious. My hon. Friend dwells upon the moral effects of a reconstruction of the income tax, and thinks that many sinners will be converted from fraud to integrity, and from mischief to honesty, by the simple proposal which he would embody in an act of Parliament. We have discussed this matter before. I doubt whether my hon. Friend is likely to come over to our opinion, but we do not think that any marvelous moral change is likely to arise from my hon. Friend's proposal. Changes and revolutions in matters of this kind are no trifles to accomplish. It is not easy to change the minds and habits of men, especially in matters in which the purse is concerned; and it is wholly visionary to speak of the conversion of large masses of fraudulent persons in consequence of the adoption of a plan which will shift the burdens of one man to the shoulders of another. Neither is it at all necessary to discuss the question which my hon. Friend has embodied in his plan, whether the tax should apply to incomes under £180, or £150, or any limit you will. But I will make this admission to my hon. Friend. I think that the case of the lowest incomes now assessed to the tax is a case requiring the earliest consideration of the House. Those incomes were dealt with in the first instance by Sir Robert Peel, when he had a bonâ fide expectation of the early cessation of the tax, and therefore he took simplicity for his rule. In the same manner in 1853, when these incomes were dealt with again, they were again dealt with under the expectation that the tax would, at the then rate of expenditure, be extinguished at an early date; and then a plan somewhat less simple was adopted. I agree therefore with my hon. Friend, that if we were in a condition financially to do it, it would be a very proper subject to take into consider- ation some adjustment or modification with regard to the lowest class of incomes, although keeping within the safe rule of ancient precedent as to the amount to which indulgence should be extended. I will not, however, at this moment further discuss this point. The proposal of my hon. Friend would have the practical effect of taking away one-fourth of the revenue at present derived from the income tax, which now amounts to £10,000,000. I must take the liberty of saying that I proceed in this discussion upon the vulgar calculations that proceed from the Board of Inland Revenue, and that I do not proceed upon imaginary calculations of the magical results that are to follow from the improved morality of a considerable portion of the people. We must really look to facts, to the old methods of computation, and I must say to my hon. Friend that upon his showing he gives us a loss upon Schedule A—assuming he makes a remission of one penny in the pound—of £520,000. On Schedules B, D, and E, he makes a loss of £1,450,000, and by the concessions to the smaller incomes a loss of between £600,000 and £700,000; so that the total loss would be £2,600,000. This is the defalcation which my hon. Friend proposes to make. And observe that my hon. Friend makes this proposal at a period when it is not only an abstract but a practical question. This House has not yet finally disposed of the income tax for the year. The Bill has certainly passed through Committee, but there still remains the stages of the Report and the 'third reading, and it has then to be sent to the upper House. If, therefore, the House considers it necessary to adopt the proposition of my hon. Friend, it follows that that Bill must be reconsidered, and provision made in some way or other for filling up the void of £2,600,000. My hon. Friend is rather taciturn and reticent on this portion of the subject —namely, the filling-up of that void. If there were no other defect in his speech but that one, this remains; and that particular gap I must endeavour to supply. The gap of £2,600,000 in the income tax, caused by the reduction of one-third upon three of the Schedules, would require the imposition of 2½d. or 3d. in the pound additional to the current rate. So that the proposal of my hon. Friend is this, in point of fact, that instead of passing a 9d. income tax for the year, as you have already passed it through several stages, you should raise the rate, for the service of the year one-fourth, that is to 1s. in the pound, and with that combine a reduction to 8d. in the cases of Schedules D and E. That is the proposal which my hon. Friend appeals to the landed interest to support. Now, I am well known to be an enemy to the landed interest—I have been told so often; I certainly have never made any proposition affecting that interest which can compare with that of my hon. Friend; but being so reputed, I shall not be suspected if in what I have to say I show an independent bias in their favour. I must say, then, that the proposition of my hon. Friend is clearly and grossly unjust; and I shall state the grounds upon which I hold that opinion. The first effect of the plan would be this. It is all very pretty indeed; my hon. Friend has boons for everything, and he scatters them right and left. He begins by reducing Schedule A from 9d. to 8d., and Schedule B he would reduce to 6d. As to Schedule C, I am sorry to say it has always been held, by Mr. Pitt, by Sir Robert Feel, and by even great authority who has spoken upon the subject, that it would amount to nothing less than a positive breach of the national faith to lay any special tax upon the funds, This opinion has not been delivered by these authorities merely as an abstract opinion; it has always been delivered by those authorities in conjunction with the questions of the income tax, and as an argument against the reconstruction that my hon. Friend recommends. We must therefore look these facts in the face, and in the reconstruction which he recommends upon the ground of justice, we must lay a special tax upon Schedule C—that is, a higher tax than would be paid by any other class of the community. My hon. Friend may think this untrue, but there are those who think it true. Even if he thinks it untrue, what does he think of the weight that is due to a doctrine of that kind after it has been promulgated from such sources and by such authorities, by men responsible for the conduct of the State, and after it has governed the policy of England during the greater part of the period in which the national debt has been created? Then my hon. Friend comes to Schedules D, C, and E, and they are the special objects of his favour. They are to be reduced from 9d. to 6d. This produces a defalcation of more than £2,500,000. Now comes the question of filling up the gap. How does my hon. Friend propose to supply these two millions and a half? One penny in the pound of income tax now produces £1,100,000, but after reducing one-third by the reductions on the three Schedules, it would only produce £900,000. It would therefore require 3d. in the pound to fill up this gap; and the plan would then go forth to the country that Schedules B, D, and E, should pay 1s. Thus, only one class of the community would enjoy the high honour and distinction, under the paternal government of my hon. Friend, of paying the demands of the Chancellor of the Exchequer in full, and that class would be the public creditor. Whatever less anybody else had to pay, he at least would pay 1s. The landowner would be eased by little more than 1d. Primâ facie, he would pay nearly 11d. in the pound; while the tenants' profits, the banker, the merchant, the brewer, and traders of all descriptions, professional men, and salaried officers, would pay 8d. The proposal of my hon. Friend, as it is now before US, would greatly raise the income tax upon certain classes of the community in order to give a great relief to others. My hon. Friend disclaims the idea of dealing with individuals. He says that the shareholders in joint stock companies have nothing to do with the labour and skill expended in the management, and he would therefore tax these companies to their full income. But my hon. Friend has surely heard of sleeping partners in great private firms, who are surely much more secure and comfortable than the shareholders in joint stock companies, and yet he does not propose to treat them in the same way. The hon. Gentleman says he would deal only with classes. Now, the fact is, that one interest is so involved with another—so blended—that they can scarcely be distinguished even by the finest financial microscope. If, indeed, we were dealing with Indian finance, we might tax the Brahmin in one way, the Rajpoot in another, and the Pariah in a third. I do not say that such a mode of taxation would be either expedient or equitable; but, at all events, in that case we should be dealing with distinct and sharply-separated classes. No such distinctions exist in this country, and it is therefore impossible to legislate in the manner proposed by my hon. Friend. The banker, for instance, has a business which is worked under fixed rules, by well-selected officers:—he is allowed to deduct the salaries of all his clerks and servants before he pays income tax; and he enjoys a business, with respect to which it is well known, that although it is not so solid, permanent, and substantial as a landed estate, yet it is the next in these respects to it. I have spoken of the banker; but if the hon. Member is not satisfied with the instance of a banker, I can give fifty other instances. I will take some of the first mercantile and commercial firms. There is no difficulty in the selection of instances to suit the most fastidious taste. My hon. Friend is so horrified at the doctrine that the high mercantile class of this country should pay the same rate as the landed interest, that he would propose to introduce a severance between the two, and say to one, "You shall pay 11d.," and to the other, "You shall pay 8d." My hon. Friend sees an enormous difference between the wealthy London banker and the landed proprietor; but now let us look at some one else in Schedule D. I will take the case of a lawyer, making a large professional income, every shilling of which depends upon his health. The business of a banker may be worth five-and-twenty years' purchase, but the lawyer's business is not worth one shilling. He cannot hand down his business to his son, nor can he make it the medium of placing his younger children in good positions. He runs the race of sheer competition, and every farthing he gets is through his own merits and exertions, and depends upon the continuance of his health. Here, therefore, are professional men as a body who have their income without one shilling of prospective value, and yet my hon. Friend, in his plan of re-construction—with the determination to have justice and equality—deals with those two persons precisely alike, although the difference between them is ten times as great as the difference between the high-class merchant or banker and the proprietor of land. I want to point out another thing to my hon. Friend before I sit down. If my hon. Friend should prevail on the House to adopt his plan, in my opinion it will be very materially improved upon in future years. When once you begin to raise a cry of class against class, and give to that cry the countenance of authority, it does not depend on my hon. Friend to come down, and, with his plan discredited and rejected by a Committee, to say: "I have considered the matter—I have let out the tide, it is quite true; but now I have shut the floodgates, and I say, Thus far shalt thou go, and no further." But I have no doubt it would be greatly improved upon. I believe the certain tendency of the plan of my hon. Friend would be to lay more and more burden upon property, more and more to exempt income, and more and more to favour a large part of those who are both the wealthiest persons in the country and the persons most rapidly increasing in their wealth. With regard to the case of the owners of houses and land, under schedule A, the fact is not as it appears in the figures of my hon. Friend. It appears that 8d. would be paid by the favoured class on whose behalf be appears, and nearly 11d. would be paid by the taxpayer under Schedule A. The real payment, however, under Schedule A would be much greater. I must be guilty of the vanity of egotism in referring to rather a minute computation which it was my duty to submit to the House in 1853, of the real amount of income tax paid by the owners of lands and houses under Schedule A as compared with the nominal amount. From the computation then made it Appeared that in consequence of the various outgoings on that description of property, and of a large part of it being burdened by mortgages and settlements, the whole of which were paid net without any deduction whatever, the tax of 7d. really amounted to 9d. on the residue. Upon the same rule landed and household property taxed at 9d. will really pay more than ll½d., and that taxed at 12d. will pay 15½d. The result, therefore, of the proposition of my hon. Friend, if adopted, would be, that those paying the tax under Schedule A would be elevated to the honour of paying about 13½d. in the pound, while the tax on the class of wealthy bankers and merchants would be reduced to 8d. There would be a difference of something like 70 per cent against the owners of lands and houses, compared with the wealthy, mercantile, and manufacturing class of this country. Would that be a fair state of things, or is that a proposition which ought to be recommended to us to-night, in the name of justice, and with a solemn invocation to the landed interest of this country to take care what they are about, and to consider that honesty is the best policy? I think honesty is the best policy, and I can assure my hon. Friend, that if he comes to lecture Gentlemen in this House upon that subject, it is a game at which two people can play, and I am ready to throw back upon him the doctrine that "honesty is the hest policy" in condemnation of the plan which he proposes. There is an impression abroad that all persons with fixed salaries are; wallowing in wealth and luxury. For instance, all single ladies brought up in luxury —perhaps at the head of their fathers' establishments, but at all events who have enjoyed all its comforts and embellishments up to the death of their fathers, and then passed the remainder of their life upon some fixed income of £200 or £300, or at the outside £400 or £500 a year. These are the persons for whom my hon. Friend has no bowels of compassion whatever. Bowels of compassion ! on the contrary, he has bowels of anything but compassion. These are the people who are to share with the landlord the honour of having their tax raised for the service of the present year from 9d. to 12d., in order that the wealthy merchant, banker, and manufacturer may have his tax reduced to 8d. I hope it will not be supposed that because I argue against the speech and the Motion; of my hon. Friend with something of the same zeal he has shown himself, it indicates the slightest change in my views with regard to the proper course of legislation in this House; but I must tell him that I believe he is treading upon far more dangerous ground than he is aware of—he is coming near to questions that cut deep into the foundations of social order, and the result of the adoption of the Motion; would be far indeed from what he himself dreams of or desires. There is no greater folly than to suppose that persons with fixed incomes are wallowing in luxury and wealth, and there is nothing more plausible than the whole argument in favour of graduated taxation. I can easily imagine that many a benevolent, clever, and honest man, whose business it has not been to consider practically the subject of taxation, might say, "Let the rich pay; let those who can bear the burdens of society bear them." And why has legislation taken another course? Because there has been wisdom enough in legislative bodies to detect mere plausibility, and to perceive that the true interest of society lies in securing to every man the fruit of his accumulations, and consequently doing the fullest justice to the possessors of property and fixed incomes, though the Legislature may know perfectly well that they are thereby subjecting themselves to a good deal of distrust and misconception. It would be the greatest folly to suppose that all holders of fixed incomes stand in the same position. Take the case of a man holding a large estate under a settlement, with an income little adequate to his station, and with no son, but a number of daughters. Supposing he succeeded to the property when sixty or seventy years old; he can only enjoy it a very few years, and at his death it may pass away to some one he neither knows nor cares about. He has to provide for his daughters out of the income he has to receive from that estate for a very limited number of years; and under these circumstances my hon. Friend comes down upon him and says, "So strong is my sense of justice and of the gross inequalities existing under the present income tax, that in order to repair them I must reduce the tax on the wealthy sleeping partner in a banking or brewery firm to 8d., and to do that I must raise your tax to 1s. or something more." I know the feelings which prevail in the country on this subject, and I am inclined to treat them with respect; but having been often called upon, in the exercise of official duty, to consider this question, and look at it round and round and on every side, with the strongest political interest in arriving at the same conclusion as my hon. Friend, I have never been able to arrive at any other conclusion except that this was a plan full of mischief and danger. I do not say it is utterly impossible to make an improvement in the structure of the present income tax. I am very sensible of its inequalities, and I do not at all wonder that these inequalities should be sharply felt. I do not complain of those who describe them in strong terms. But I do say it is our positive and bounden duty to take care that no practical measure is passed which tends to weaken the foundation of that tax, so long as the tax itself is a necessary arm of our finance, and so long as we cannot really see our way to a plan which will in the main get rid of these inequalities. I trust that when plans like that of my hon. Friend are introduced—arbitrary, capricious, and inapplicable in principle, and without any practical recommendation, merely upsetting the principles of taxation as they now exist, and getting rid of one set of anomalies and evils which at all events are more tolerable by being more known and traditional, in order to bring in novel inequalities and novel abuses, and with them that source of all evils, discord between class and class—I trust that whenever a proposition of that kind is made, the House of Commons will have virtue and manliness enough to reject it.


in reply said, that he was surprised that only one Member of the House should have risen to speak to his Motion, the more so as a notice of Amendment by the hon. Member for Stamford (Sir S. Northcote) had been on the paper for a considerable time. The Chancellor of the Exchequer had, however, made a formidable attack upon the proposition he had ventured to submit to the House, and he wished to say a few words in reply to some of his observations. In the first place, the right hon. Gentleman had complimented him on his strength of will in reproducing in the House the proposition which had been rejected by the Committee. Now, so far as the rejection of his draft Report by the Committee went, it was only rejected by a majority of one, after which he took no further part in the proceedings of the Committee. It was not thought advisable to ask the concurrence of the House in regard to the Report, it being then so near the end of the Session; and for that reason the simple course was proposed of reporting the evidence alone. He denied altogether that a Committee of the House, or even the House itself, constituted an infallible guide, and he would beg to remind them that the House once voted that a £1 note was worth 20s., when it would only fetch 16s. in the market. Notwithstanding, however, the attack the right hon. Gentleman had made upon his proposition, he (Mr. Hubbard) did not yet despair of having his assistance in reconstructing the income tax. The right hon. Gentleman had once been a zealous Protectionist, and was now a zealous Freetrader, and he did not doubt that the time would come when the House would find him arguing against those defects of the income tax which he now upheld. He did not think injustice was altered by the mere rate of the tax, for injustice in point of principle was the same whether the rate was high or low. Having been taunted by the Chancellor of the Exchequer with having omitted to state how the gap in the revenue which the adoption of his proposal would create could be filled up, he would now supply the omission; but he would use his own figures, which he believed to be strictly accurate, not those of the right hon. Gentleman, whether he obtained them from Somerset House or elsewhere. The amount which was now levied in the shape of income tax was £10,424,000; the abatements he proposed to make would amount to £1,469,000; but he assumed that one-half of the abatements in Schedule D would be recovered. If so, there would be required an additional tax, not of 2d. or 3d. in the pound, but of 1½d. in the pound over the whole surface of the tax; so that a tax of 10½d. would then produce the same amount as was now produced by one of 9d. Land, including landlords' and tenants' payments, now paid £2,438,000; under the new system there would be a difference of only £100,000, and this small loss of the landlord would be the gain of the tenant. He did not think that that was a result calculated to alarm the landed aristocracy of England, or to induce them to think that his proposition was of so dangerous a tendency that it must entail other measures of a revolutionary and destructive character. The right hon. Gentleman said that the proposed plan would infringe on the faith due to the fundholder, but how did the right hon. Gentleman reconcile his present earnest appeal in favour of the fundholder with his own defence of the robbery so clearly inflicted upon him by the present law? If a man had £100,000 in the funds, the law taxed the income of £3,000; but if the fundholder should lend his £100,000 to the Government on terminable annuities, then the right hon. Gentleman took the tax on the whole of the. £100,000. The right hon. Gentleman was a man of great earnestness and command of language, and it was not surprising to find that he managed, in answer to a calm business-like statement, to throw the House into a fever of excitement; but the right hon. Gentleman's statement had nothing to do with the real merits of the question. The right hon. Gentleman had referred to the case of sleeping partners in banks and breweries; but while the sleeping partner in a bank would derive no sensible advantage under his plan, the sleeping partner in a brewery got all the benefit which he could obtain under the 133rd section of the existing Act. The principle which he (Mr. Hubbard) had chiefly in view throughout was to redress the injustice perpetrated under Schedule D, which related to the men who constituted the intellect, and the skill, and the active labour of the country, by whose efforts the country had gained her present eminence, and by whom, if it continued at all, it would be retained. As to setting class against class, that question was not one of his raising; but if, in doing justice, the incidence of the tax was altered, all that was proved would be that the incidence was unjust before; and he contended against the argument that because an act of injustice was in existence it was therefore to he stereotyped, and hallowed, and sanctioned. To the assertion that Sir Robert Peel could not mend the income tax, he replied that Sir Robert Peel never tried to do it. He had not time. Had that statesman died a few months earlier, he might have been quoted as the advocate of Protection. Although he was aware, that as he had never given a party vote, he had not entitled himself to assistance from either side of the House, yet he had hundreds of thousands of supporters out of doors, and he could promise that as long as he had health and strength the readjustment of this tax should never want an advocate.


said, he had the misfortune of being accidentally absent during the speech of the Chancellor of the Exchequer; but he agreed generally with what he had heard the right hon. Gentleman say on the subject on previous occasions. The hon. Gentleman, in proposing his Motion, seemed to have proceeded on what was known in America as the "logrolling" principle; and seemed to have altogether forgotten that the landlord paid land tax, poor rate, highway rate, police rate, and county rate. And independently of all this, and independently of the succession duties, it was now proposed to saddle him by an addition to his income tax. Sir Robert Walpole said, that the agriculturists might be sheared as easily as their own sheep, but that it was a very difficult thing to squeeze money out of the commercial classes. He contended that, owing to wet seasons and bad harvests, the income from landed property was fluctuating and uncertain, as well as that from commercial pursuits. The simplicity of the present system, at all events, was a recommendation; for a man paid upon his income as long as he received one; and if he received no income, he paid no tax. They could not diminish the Estimates to any considerable extent without imperilling the safety of the country; and if a portion of the revenue was to be cut off, how was the deficiency to be met? There was only one answer to that—by laying excessive, exclusive, and exceptional burdens on annuitants, mortgagees, and fund- holders, and so far as the latter were concerned, to do so would be a breach of faith. With respect to the proposition of the hon. Gentleman (Mr. Hubbard) for drawing a distinction between different kinds of income, he begged to remind him that Mr. Pitt, in introducing his Income Tax Bill, distinctly laid down that no distinction ought to be made as to the source from which incomes arose, and he (Mr. Knightley) was inclined to pay great deference to such an authority.

Motion made, and Question put, That, in the opinion of this House, the incidence of an Income Tax should not fall upon Capital or Property; and that when applied to the annual products of invested property, it should fall only upon the net Income arising therefrom; and that the net Profits, Gains, or Salaries of persons and partnerships (not being public Companies) engaged in any trade, farm, manufacture, profession, or salaried employment, should be subject, previous to assessment, to such an abatement as may equitably adjust the burthen thrown upon Intelligence and Skill as compared with Property.

The House divided:—Ayes 62; Noes 99: Majority.57.