HC Deb 14 June 1864 vol 175 cc1731-61
MR. HUBBARD

, in rising to call attention to the operation and extent of the direct and indirect taxation as now levied, with especial reference to the Income Tax, said: Sir, What is the reason that taxes are disbursed more grudgingly than expenditure in any other form—that the tax-gatherer is universally execrated — and that taxation is a subject at once irksome and irritating? There ought, Sir, to be no ground for such a question. Taxes ought to be regarded as offerings cheerfully conceded by the various members of the community—by each according to his means—for objects essential to his welfare, and which singly he either cannot accomplish—or can accomplish only at a much greater sacrifice. In the payment of his taxes every one ought to be able to rejoice as the means by which he is best able to secure his personal safety from external foes or domestic dangers, and protection for his property and for his industry — by which, in short, he obtains the immense benefits which result from the good government, which is a main feature of advanced civilization.

But, Sir, the prevalent notion of taxation has been derived from very different considerations. With too much reason has it been complained that taxes have been levied for the gratification of the ambition and the luxury of the Sovereign; that their administration has been abused to the aggrandisement of state functionaries and their officials; and lastly, that they have been selected without wisdom and exacted without justice. In this country, Sir, whatever may have been its former condition, the two first of these complaints can be advanced no longer. We have the happiness to live under the rule of a Sovereign who, scrupulous in the exercise of her prerogative, never raises the dread ban- ner of war, except with the concurrence of her constitutional advisers—and who, so far from exacting from the people the cost of personal indulgence, is ever ready liberally to relieve the suffering out of the fund provided for the Royal maintenance; a fund, I must remark, which; measured by the wealth of this great country, and contrasted with the expenditure of other Sovereigns, is not excessive. And again, Sir, whatever may have been the state of previous generations, we may boast, and it is a boast to which of all countries we are the best entitled, that we have a public service distinguished by the integrity of its officials. Whatever be their other faults, no man can impute in our days anything like venality or corruption to our public men. No one can impute to them malversation of the national funds, and we may safely affirm that no portion of the taxes levied upon the people is diverted from the Exchequer by official peculation. But, Sir, as to the last of these complaints, we cannot honestly deny that it applies to our fiscal system, or pretend that the odium connected with taxation in this country is a mere prejudice and not the result of a want of wisdom in the selection of taxes, and in the manner in which these taxes are levied. Our taxation, as it stands, is the result of no recognized principle—it is the growth of no settled system—it is the residuum left by separate and inharmonious acts which imposed taxes when money was wanted, and removed taxes when money could be spared, with slender regard to their bearing on the national interests or to the equity of their incidence. But, Sir, my present object is the consideration, rather of the present than the past; and we may conveniently, for our purpose, divide our taxes into direct and indirect taxes; not indeed that such a division exists in the present classification, but it may with sufficient accuracy be obtained by a careful scrutiny of the Revenue returns. Customs are of course indirect taxes; Excise are chiefly indirect; but Stamps do not of themselves indicate either direct or indirect taxation, and some of the items involve both kinds of taxation. The notice of this fact we owe to the Chancellor of the Exchequer, who, in the course of the present Session, pointed it out to the House. It is true, as he stated, that the tax upon Fire Insurance presses partly upon stock in trade and partly upon property. That which is levied on stock in trade is an indirect tax in so far as it operates upon the price of commodities, and is ultimately paid by the consumer; while, on the other hand, that portion which presses upon property is a direct tax, although one most unequally

INDIRECT.
Customs and Excise.
Spirits … £12,000,000
Tobacco … 5,800,000
Wine … 1,200,000
£19,000,000
Malt … 5,800,000
Tea … 4,600,000
Coffee … 460,000
Sugar … 5,640,000
Currants and Raisins … 344,000
Pepper … 106,000
Corn … 750,000
17,400,000
Wood … 250,000
Sundries … 250,000
500,000
£36,900,000
Stamps.
Licenses and Certificates … £2,000,000
Bill Stamps and Receipts … 1,200,000
Railways and Carriages Hired … 600,000
Patents and Miscellaneous … 240,000
Marine Insurances … 360,000
Fire Insurance on Stock in Trade … 300,000
4,700,000
£41,600,000
DIRECT.
Stamps.
Probates & Letters of Administration … £1,500,000
Legacy and Succession Duties … 2,500,000
Fire Insurance on Property … 1,050,000
Deeds, Stamps. &c, … 1,450,000
Land Tax … 1,100,000
House Tax … 860,000
Assessed Taxes … 1,210,000
Newspapers and Sundries … 200,000
Excise—Game Certificates,&c. … 130,000
£10,000,000
Income Tax, 6d. in the Pound … 7,400,000
£59,000,000
Post Office, profit … £1,600,000
Crown Lands, net revenue … 300,000
Bank of England, for circulation … 130,000
Fees … 170,000
2,200,000
Total … £61,200,000

I wish to say a few words in passing upon the last four items in this list, for they are neither direct nor indirect taxes. The Post Office profits are the gains upon an industrial occupation, property undertaken by the State; but which, go far from being a tax on the community, bestows on them for each contribution that they make, a benefit far exceeding it in value. The £130,000 received from the Bank of Eng-

levied. I have ventured to classify and estimate the Revenue for 1865–6 as follows:—

land is a part of the larger revenue which the Crown might derive from its prerogative of coining paper into money. Fees and Crown lands require no explanation. Deducting these items we have £59,000,000, as the direct and indirect taxation of 1865–6, supposing the Income Tax of 6d in the pound to be then still in force. But, Sir, the Income Tax expires again in April next. Can we do without it? The list of items which I have read exhibit a total of £41,600,000 of indirect, against £10,000,000 of direct taxes, excluding the Income Tax. But what do we mean by direct and indirect taxes? I am not aware of any great authority to whom I can refer upon this subject; but I venture to suggest the definitions which these lists bring before my mind. I would say then, that indirect taxes, are such as are levied upon commodities either at their importation or production, or upon their transfer, and which being so levied merge into the constituents of price, and are ultimately paid by the consumer; and that direct taxes are, as such, levied either upon property in its corpus, or on the products of property and industry as they accrue or are created. If we come to examine still further what are the peculiar advantages of each, we must necessarily take a retrospective view. The House is of course aware that, up to 1842, indirect, taxation was the means of raising by far the largest portion of our revenue. Indirect taxation has considerable advantages. Indirect taxation being comprised in the price of commodities, is paid almost unconsciously, and therefore paid not unwillingly. It falls in a great measure upon luxuries, and is levied upon people according to their income, as expressed in their expenditure. It raises no difficulty as between the State and the tax-payer, and it creates no jealousies between different classes of the community. There are, therefore, many very evident advantages connected with indirect taxation. But, on the other hand, we cannot refrain from seeing that there are some imperfections in indirect taxation standing by itself. Through indirect taxation you can tax people according to their means as exhibited in their expenditure. But we know that expenditure is not always an exact test of means. It is so if you take the whole community at large; but it is not so with regard to individuals. Persons who are in a position that obliges them to press closely upon their income are, by indirect taxation, exposed to an aggravation of that pressure; while those who may be called economical, and who lay up a very large portion of their income, escape with a comparatively small pressure upon their means. But there is another and wider disadvantage in indirect taxation. Indirect taxation, as it presses upon the price of articles of general consumption, has the effect of elevating the prices of labour by elevating the cost of sustaining labour. And when we consider the immense foreign commerce of this country, when we consider how dependent this country is upon foreign trade, upon the export of its manufactures, for the maintenance of its commercial supremacy, we must also see that nothing could be more opposed to the progress of its commercial prosperity than the exclusive adoption of indirect taxation. It is, no doubt, true that the great measure of Sir Robert Peel for the removal of the tax upon corn and other articles of food was a first and most important step towards the liberation of our foreign trade from the prejudicial effects of indirect taxation. His eminent successor, the present Chancellor of the Exchequer, has gone a great length in the path of commercial reform upon which Sir Robert Peel entered. But there are still unrepealed a large number of indirect taxes which might be advantageously removed. Let us pass in review our present indirect taxes. With regard to the taxes on spirits, tobacco, and wine, which will produce £19,000,000, I believe the Chancellor of the Exchequer is quite satisfied to leave their efficiency unimpaired. But next we have the Malt duty. Malt is an article which is highly interesting to Gentlemen on both sides of the House, and only recently we have had a discussion upon the propriety of reducing or abolishing the duty upon malt. Amongst the agricultural classes also, from one end of the country to the other, a most active agitation has been initiated for the abolition of the malt duty. I now come to the duty on Tea. I cannot think that a duty of 100 per cent is a satisfactory duty upon an article which enters so largely into the comforts, not only of men, but of all the women and children throughout the country. Again, the duty of 40 per cent on Coffee considerably restricts the consumption of that wholesome beverage. Sugar, also, is an article which, although it is now subject to a duty of only 33 per cent, is more heavily taxed than any article should be which constitutes so important a feature in the sustenance of the people. Then, coming to Currants and Raisins, we all know that English plum pudding is a standing dish for many families on Sunday, and for every family on Christmas day, and that our plum pudding is made of currants and raisins [a laugh], and they pay a 30 per cent duty. I now come to an article which I am quite sure nobody is so anxious to liberate from taxation as my right hon. Friend. In the course of one of those eloquent and jubilant orations in which the Chancellor of the Exchequer imparted to the discussion of a financial measure the interest of a romance, he took occasion to refer to the state of taxation some forty years ago, and quoted expressions of Sidney Smith, the witty canon of St. Paul's, who, in his peculiar style, described everything in the earth and under the earth as taxed in this country; and amongst the things he mentioned Spices. My right hon. Friend said, "the poor man's salt had been taxed, that salt was now free; the rich man's spice had been taxed, the rich man's spice was free." Well, but did my right hon. Friend forget that pepper is the poor man's spice, and that pepper pays a duty of 133 per cent? Then we come to Corn. Corn is now taxed at an amount which some persons may regard as a mere registration tax. Very rigid votaries of free trade look upon it as a tax equal to 2½ per cent, and therefore as one which is not compatible with the carrying out to their full extent the principles of free trade and the abolition of protection. ["Hear!"] I will not go so far as that, but I must say that I should gladly concur in the reduction to 1d. per cwt. of the present duty of 3d. a cwt. on corn. I now turn to the questionable items of direct taxation; and there I find the duty upon Fire Insurance on property. The ingenuity of my right hon. Friend was never exercised so perversely as when he diminished the duty paid upon the insurance of stock-in-trade, and left undiminished the duty upon the insurance of house property: that very property which is insured when it belongs not to the rich but to the poor, and is therefore peculiarly ill-suited to bear the burden of this arbitrary impost. The utter failure of the professional advocate enlisted by the Government to justify this tax and the unequivocal decision of the House will, I cannot doubt, ensure its diminution in future Budgets.

We have now before us a direct tax of £1,050,000, and indirect taxes amounting to £17,400,000, of which the abolition or mitigation is urgently demanded by sound policy, or advocated by important sections of the community ably represented in this House. And it is obvious that if any of those permanent taxes are to be abolished of sensibly diminished, while the public expenditure remains unchanged, you most provide a permanent substitute. You cannot increase the taxation of luxuries. Spirits and tobacco are taxed as highly as they can be without provoking smuggling and illicit distillation, and wine we could not charge with heavier duties consistently with our engagements by treaty. Can we increase direct taxation through any of the existing channels? Probates and letters of administration, legacy and succession duties are very proper methods of taxation, but it is perfectly obvious that you cannot carry either of those taxes to a much greater length without danger of evasion. I heard of a gentleman the other day who distributed half a million sterling before his death among his children, and by doing so he saved £5,000. If you were to increase this tax largely, a much greater tendency to personal disposition would be provoked, and you would take from the tax a portion of its productiveness. Deeds, stamps, and other charges of that kind, are already high enough; they press very sensibly upon the transfer and leasing of real property. The land tax you cannot touch, for from the peculiar position in which it stands, having been partially redeemed, you can neither add to it nor diminish it; all that can be done is, at a favourable moment, to give an opportunity for its entire redemption. The house tax is, I think, one of the least objectionable in principle, because the expenditure in house rent, taking the community from end to end, represents the same proportion of every man's means. Whether we look to the labourer with 15s. a week, or to the man of £15,000 a year, we may roughly estimate at one-tenth of his expenditure the sum spent in rent. Houses then are a very fair test of meant, and therefore a fair medium of taxation, but even with houses yon soon reach the ultimate point. The tax is now 9d. in the pound; but if you exceed 2s. or 10 per cent, the tax becomes oppressive, and men will try to escape its pressure. To my view, therefore, we are in this position, We have a number of taxes which more or less demand remission, but we have no taxes either direct or indirect which we can venture sensibly to increase. How then are we to dispense with the tax which last yew produced £10,000,000 sterling, and which at 6d. in the pound is calculated in 1865:to produce £7,400,000. It appears to me that the Income Tax stands in a position from which you are utterly unable to dislodge it. Yon cannot do without it, because no one will sacrifice in that tax his hope of the possible remission of other taxes to which he is personally opposed. In taking into view the pressure of direct and indirect taxation we must recollect that there are some persons who can be reached only by direct taxation. There are many persons who from their penurious habits, or the magnitude of their wealth, go on accumulating, but pay comparatively little to the State. I believe a miser to be a more useful citizen than a spendthrift, but the miser ought not to escape his fair share of the national hardens. There are, however, others who also escape. There are a large number of our fellow countrymen who live beyond these shores who possess incomes to the amount of £5,000, £10,000 and £15,000 a year, and who spend them in foreign parts. In the absence of direct taxation these persons escape altogether, and the only way you can reach them is by taking a portion of their revenue in the country in which it has accrued. The conclusion, therefore, to which I come is, that it is our duty to maintain in due proportions both direct and indirect taxation. It appears to me that our direct taxation cannot be diminished if you intend to maintain a proper equilibrium, or if you desire to introduce those reductions in our fiscal tariff which so many hon. Members are anxious to effect. For those reductions would leave a vacuum. By what tax are we to fill it? The tax which now supplies all deficiencies is the Property and Income Tax; and in some shape or other an Income Tax you must pay. Upon what principles must it be levied? I believe that no serious difficulty would arise if you only deal with the subject truthfully. What yon want is to provide for the annual expenditure of the country, and that expenditure can only be defrayed from subsidies raised from the community at large. If you take it from annual income you take it at once from the appropriate source; and, if you act upon the principle of levying the tax on the net products of property, you leave, so far as they are concerned, no room whatever for dissatisfaction. We have to look, however, not only to realized property, but to the earnings of industry and skill, and here we arrive at another and more complicated portion of the subject. It is a theory of many who have studied the science of taxation closely, that taxation ought never to infringe on the earnings of skill and industry, but should await the result of those earnings in their future investment. But that is a theory which can hardly be maintained. Take the case of a person engaged in law or medicne, who, by his great skill, makes his £15,000 or £20,000 a year, but being of rather Epicurean habits saves nothing. Supposing you were to rely upon the direct taxation of the products of property, the earnings of his skill and industry would escape altogether. And yet that man is protected by the State in his person, and in the enjoyment of everything that constitutes his happiness. I do maintain that he is bound to make some contribution towards the general fund out of his industrial gains. Critically speaking, industrial incomes of the higher classes are not derived from labour alone The learning of the barrister and the science of the physician are acquirements resulting from a large previous expenditure, and constitute their capital; and the more we press this subject to a precise conclusion, the more, as it appears to me, we shall be brought to confess, that there is required in the production of industrial incomes a concurrence of capital with industry. The question then arises, in what proportion is capital combined with industry to be taxed? We cannot here, as in the United States, call for a return of the capital invested; but we can take the combined results and tax them in an estimated average proportion. It has been suggested that a tax of two-thirds upon those combined earnings of industry and capital would meet the requirements of the case; and I will show how closely the present law has sanctioned that proportion. In dealing with this question I am most reluctant to introduce any reference to what may concern me personally. I say this with perfect frankness, because in this matter I have no vanity to gratify and no ambition to promote. I shall probably be told that my plan has been tried and condemned, but I venture to say that any condemnation which has been passed upon it has been pronounced by those who have not made themselves thoroughly masters of the subject, and now I will prove it. I am sure my right hon. Friend the Chancellor of the Exchequer must be considered not inferior in ability or power to any of my opponents. In what light does my right hon. Friend look upon that plan? Really if I did not feel that it was necessary for the elucidation of the question, I would not care to reproduce a series of unfounded censures; but I think it essential to investigate the principles which underlie the taxation of this country. The Chancellor of the Exchequer designated my plan as "One which would favour those who were wealthiest, and whose wealth increased most rapidly, and which would lay heavier burdens upon property;" as a plan "which would introduce principles arbitrary and capricious, and which, so far from diminishing existing evils, would only increase them; which would introduce discord between class and class; a plan more dangerous and less plausible than the principle of graduated taxation.," —[See 3 Hansard, clxix. p, 1845–46.] And the Chancellor of the Exchequer has himself introduced the principle of graduated taxation, because he thinks that with all its vices it is better than the plan which I placed before him. But what I have to observe is this, that not one of those allegations has been brought to a definite trial. There was strong language and strong condemnation, but there was no evidence. In one instance only has the right hon. Gentleman given me the opportunity of testing the force of his objections, and in that instance he signally failed to prove his charge. The substance of it was, this, that by the process which I proposed the assessment upon real property would be raised to 1s. 1½d., while the payment of the great merchants would be reduced to 8d.—a difference of something like 70 per cent in favour of the latter. It is only fey means of a Parliamentary paper (No. 248), which came out last summer, that I have had an opportunity of bringing to a definite conclusion the substance of that charge; and the result is this, that if you take the sums which were levied on lands and houses, fines, and farms—the four items which constitute real property— in 1862 at 9d. in the pound, and compare them with the sums which those items would have contributed under my plan, the result would be, that whereas in the first instance they were taxed to the amount of £4,830,000, in the second they would appear to be taxed at £5,023,000, a difference of £193,000, resolving in a rate of 9d. 36–100 per cent. The percentage of; difference between the merchant and the landed proprietor is something under 32 per cent instead of 70, and the rate which lands and houses would be subject to, according to my right hon. Friend's own calculation of 11½d. in the pound, would be brought down to 10d. I am sure my right hon. Friend would never have made a charge without supposing it to he accurate; but if in the only instance in which he has given a definite expression to his charge he is not justified, I ask the House to suspend its judgment as to my right hon. Friend's remarks upon other more important matters which I have submitted for consideration. There is only one other instance upon which I shall comment, and that is a very important one, because it raises the question of graduated taxation. My right hon. Friend said in March, 1863, In my opinion more is to be said in favour of graduated taxation than for his (Mr. Hubbard's) plan. A graduated taxation recognizes poverty in one class and overgrown wealth in another, and justice demands that one should pay less and the other more. There is something rather plausible in that principle, more so than in my hon. Friend's plan…He takes a widow, with £200 a year from the Funds, with six children to educate, to train, and to start in the world, and he takes the case of a great merchant—I will not say brewer or banker, as there seems to be some objection to specifying those flourishing classes—but to a great merchant, with £20,000 a year, he grants a relief to the extent of one-third, and in order to do that he adds 25 per cent to the burden of the poor widow."—[3 Hansard, clxix. 1846.] If I were disposed to create a momentary impression in my favour, and to gain a vote, I could cite extreme cases and deceptive illustrations which would tend the other way. I could have said the subject at issue is this—"Will you tax an industrious hard-working clerk who has his 200 guineas a year, a wife and six children to maintain, who is obliged to lay by one-third of his income (which will procure a certainty of only £100 a year for his surviving family instead of the 200 guineas which he gets now), will you tax him at the rate of 9d, in the pound, while you put the same tax upon the capitalist whose money brings him in an income of £20,000 per annum?" The Chancellor of the Exchequer put extreme cases, but I did not. I thought it better to rest the discussion upon principles which would bear examination, and not to appeal to a morbid and spurious sympathy. But as for "the poor widow" with her £200 a year, is she the widow of a Cabinet Minister, or of a poor clerk? If the former, she is poor indeed; if the latter she is passing rich; and I must say that this illustration of my right hon. Friend brought vividly to my mind an exhibition which I saw some years ago in the suburbs of London. A parochial election was going on. A great parish office was vacant, that of sexton, and there were two candidates, the one the assistant of the late sexton, and the other the late sexton's widow. The assistant was satisfied to base his claim upon his reputation in the parish, and his placard bore simply "Dunkley for Sexton." But the widows, more wise, had a placard which ran thus— "Vote for the widow Scroggins, and the five fatherless children," and, no doubt, that appeal found an echo in the breasts of many. And so it is that my right hon. Friend brings forward illustrations which have no proper hearing on the argument, but serve the purpose of raising a prejudice. If you do make comparisons, compare poverty with poverty, and riches with riches, but not poverty with riches, and then how does it turn out? I will take the widow Scroggins with her five fatherless children, and if she has 200 guineas a year in the funds, I say she is much better off than the poor clerk with his salary of 200 guineas, his wife and six children.

But let us pass from the poor widow, the one extreme selected by the Chancellor of the Exchequer to his other extreme, the rich merchant who makes his£20,000 a year. The present law says to him, "You shall never pay in any one year on more than you make in that year. You make a return upon an average of three years, but you need never pay on more, than you make in any particular year." And what is the consequence of that 133rd clause? Why, we had Mr. Pressly before us in the inquiry of 1861, and he gave us a probable scale under which a trader making fluctuating profits would pay three-eighths less than the sum in which he would be otherwise charged. In the ordinary course of trade, a merchant, brewer, or manufacturer might, upon the principle of the fluctuating scale of profits, easily escape by paying half the tax which other persons making equal profits pay into the Exchequer. Therefore, when my right hon. Friend attacks me for taking the part of the rich merchant, I, on the contrary, say, that it is the privilege of the rich merchant which I am anxious to relinquish. And now, Sir, let us consider what is the principle upon which an equitable Income Tax must be constructed. Beginning with the products of real property, are we to tax alike the rack rent of £ 1,200 a year from lands and of £1,200 from houses. If we are, we are adopting a principle wholly contradictory to the principle laid down by this House, acted upon in several instances, and now being carried out throughout the country in the parochial assessment. The principle of the parochial assessment is to tax the net produce of real property, and you are doing; a grievous injustice to real property if you attempt to proceed upon any other principle than that which the parochial assessment system involves. But the measure of injustice with regard both to houses and lands is not limited by the mere taxation upon the outgoings. We are indebted to the Chancellor of the Exchequer for having brought clearly into view the injustice done to the owners of encumbered property, for they have alone to pay the tax upon the outgoings of the property. I mentioned last year the case of a man with an estate of £2,000 a year, but burdened to the extent of £1,600, who had to pay the tax upon £400, although the outgoings of £200 left him a net residue of only £200. The Chancellor of the Exchequer, thought that case impossible, but so far was it from being impossible that I myself am trustee to a property in a position precisely similar, and the unhappy landowner does pay 18d. in the pound when the capitalist mortgagee pays but 9d. on his interest. Can that be satisfactory in a tax which is, perhaps, to take a permanent place in our fiscal system? Now, with regard to the other question, namely, the allowance upon the taxation of industrial earnings. In the year 1853 the Chancellor of the Exchequer frankly admitted the grievance imposed upon industrial earnings, he repeated it in his Budget speech of that year several times, and everybody expected that he was prepared, not only to acknowledge the grievance, but also to apply a remedy. But the Chancellor of the Exchequer said that the land was already overcharged to the extent of 16 per cent, or one-sixth, which so far balanced the overcharge on trade; but he would give a still further remission. Savings are generally considered a fair subject for remission, and accordingly the Chancellor of the Exchequer said, "We will give a further remission of taxation upon all savings to the extent of one-sixth, provided that those savings be invested in a life policy." There was a boon, but it was destroyed by the condition attached to it. But the one-sixth overcharged on land and the one-sixth upon savings make exactly the one-third which I have asked as an abatement upon industrial incomes, concurrently with an allowance for out-goings on land and houses. And now a word as to the way in which the tax acts upon the morals, not only of those who hare to pay it, but of those who have to administer it. We have had over and over again instances of the most grievous fraud; instances in which the fraud was so gross that the authorities did not dare to expose or punish it. The fact is, the law is so unjust that you dare not enforce it and punish those who are guilty of its violation. It is a law which demoralizes not only its victims but its administrators, I will communicate to the House a most remarkable paper which lately came into my possession. In the year 1846 the Government made a loan to the landed gentry of the country, and it was principally taken up by the Scotch proprietors. It was made repayable in the shape of a twenty-two years annuity; and the document which I hold in my band is a circular issued by the Stamps and Taxes Office in Edinburgh to the assessors and collectors throughout the country. It is as follows: DRAINAGE ACT—CIRCULAR TO COLLECTORS. Stamps and Taxes, Edinburgh, 1st March, 1849. SIR—It is proper that I apprise you, for your information and guidance, that the Board are of opinion that parties to whom advances have been made under the Drainage Act, 9 and 10 Vict. cap. 101, are entitled to claim deduction of the property tax on the rent charges payable by them. The Board, however, do not consider it necessary to offer such deduction to parties paying those rent charges, but that it will be sufficient to allow it when claimed. I have also to inform you that such parties as claim the deduction due at 16th of October last, but which they omitted to do at that time, may be allowed to claim it at the 5th April next, along with the deduction due at the latter date, but always in the event only of the parties making the claim. When you transmit to me the half-yearly return of the drainage rent charges, you will accompany it with a list of the names of the parties who claimed and received deduction of the property tax, stating the amount of deduction claimed and allowed to each for said half-year, and you will be allowed credit for the amount at this office. I am, Sir, your obedient servant, (Signed) "ANGUS FLETCHER. Well, Sir, this circular may have been issued by the Edinburgh Comptroller only in obedience to instructions from his superiors in office; but I must say that it is a document which I blush to read, because it is nothing more nor less than an instruction to collectors that, whereas certain persons indebted to the State have a right to deduct from their payments the amount of their Income Tax, yet if these persons, in their unsuspecting ignorance, failed to demand that concession, it was not to be offered or to be hinted at. The money is to be taken and no questions asked, unless a specific demand is made for a deduction. This is equivalent to what other Governments have done when they have received their dues in sterling coin and have paid their debts in a base currency. They have received on the one hand that which was their due, and have given on the other something of less value. The transactions to which this document referred were the occasion of a special enactment in 1853, under circumstances to which I must also allude. In the Income Tax Act of 1853, the Government introduced a clause providing with especial reference to the Drainage Annuities of 1846, that those who paid them should be allowed Income Tax only on the interest and not on the principal repaid. This clause was in the words of the enactment a "just provision," and yet at the same time the Government refused the same justice to their own creditors, under precisely analogous circumstances. Before I leave the question of trade incomes, I wish to direct the attention of the House to the 133rd clause of the Act of 5 & 6 Vict. I do not believe that the House is aware of the extent to which the existing law favours those who make large but fluctuating profits. We have heard that in the course of the great speculation in cotton, which has taken place of late years, enormous sums—such as £200,000 and £300,000 — have been made by individuals in the course of a year. Would the House imagine that it is perfectly possible for persons making £300,000 in one year as traders, to escape the taxation of that sum altogether under the operation of the 133rd section. The process is this: A man making £3,000 a year in ordinary trade, returns £3,000 as the average of 1861, 1862, and 1863, for assessment in 1864; but in 1864 he realizes £300,000 by his speculations. What happens then? Although he realizes that sum of £300,000, making altogether £303,000, he only pays on the previous returns of £3,000. The next year that large sum comes into his average, and he returns for assessment £103,000, but if in 1865 he makes only £3,000 be only pays on £3,000. In 1866, he would also return £103,000 as the average, but if again he made only £3,000 in that year he would pay upon that amount only. Again, in 1867, he would return £103,000 for assessment, but would pay on £3,000. The next year the £300,000 will pass altogether out of his calculations, and upon that enormous sum he will not have paid one farthing. That is a remarkable but true illustration of the way in which this 133rd section operates in favouring persons making large profits by speculation. Then again if a man takes stock every year; and Values his profits every year, he would pay on all he makes, but if he takes stock every other year he would only pay half the tax. If he took stock every third year then he would only pay one-third of the tax. If he only took stock every fourth year, by this clause he would escape the tax altogether. I think my right hon. Friend could not have been aware of the way in which this clause operates when he ventured to stand up for the integrity of the present Income Tax. I should have felt that it was somewhat presumptuous to bring the question of taxation again before the House this year, had it not been for what has happened in the course of the present Session. In his Budget speech, the right hon. Gentleman said There is another question that it is my duty to bring under the view of the House; it is the question of the Income Tax," — [3 Hansard, clxxiv. 583.]

MR. SPEAKER

The hon. Gentleman is out of order in making any reference to a speech delivered in this House in the course of the present Session.

MR. HUBBARD

All I will say is that the House has gathered from what has fallen from the right hon. Gentleman on other occasions that the Income Tax was a subject upon the future of which the Parliament had yet to decide, and I therefore imagined that I was really assisting the object which the right hon. Gentleman has in view in bringing before the House some of the features connected with the tax as it now stands. It is quite true that in previous Sessions the right hon. Gentleman has remarked that with the peculiar views which I entertain with regard to the oppressive and unjust character of the tax he does not agree. I am sorry for that, because, if he himself were sensible of these defects and inequalities, he would not only acknowledge them, but would probably attempt to apply a remedy. And now, Sir, I would notice one further argument which may be urged to arrest the disposition of the House to reform this tax. The Chancellor of the Exchequer has brought this question before the House: Is public economy compatible with the maintenance of the Income Tax? He has stated that his great experience in the office he holds has raised in himself serious doubts whether His possible to retain the Income Tax as an habitual means of raising our national revenue compatibly with the exercise—he does not say of a rigid economy—but of reasonable thrift. Well, Sir, I think that not only is an Income Tax compatible with due economy, but that it is highly eligible, upon the very premises suggested by the argument of my right hon. Friend; for let me observe this that to arrive at any other conclusion would be to admit that a tax may be devised, the most just and the most equable, and one to which the whole country will cheerfully contribute; but if the tax is supposed to provide the Government of the country with a revenue more easily than would a less popular tax, it should be rejected. That appears to me to be an extraordinary doctrine, for it rests upon the assumption that the Finance Minister himself is either weak or incapable, or that he has to deal with a profligate House of Commons, ready to back him in any unwarrantable expenditure of the public funds. Now, I cannot admit that the right hon. Gentleman is weak or incapable; nor can I venture to believe that any of his successors, whoever they may be, are likely to be either weak or incapable. Neither can I apprehend that the present, or any succeeding, House of Commons will be so profligate as to connive with the Government of the day in wasting the public resources. The House, I feel sure, will join me in altogether disregarding that argument. I have little more to say upon the subject. I conceive that as taxation in itself is a proof of civilization, so I am satisfied that an Income Tax equitably devised, and, therefore, readily accepted by the country, would be a mark not only of high civilization but of high morality; and I do believe that this country does possess that amount of high morality which can enable it more than any country to support an Income Tax. I will here advert to one incident which falls under the eye of every Gentleman in this House—I mean the constant recurrence in the public prints of notices from the Chancellor of the Exchequer in acknowledgment of the receipt of such and such sums from A., B., C., or D., as Income Tax due to the State. These remittances vary from large sums to very small ones, and they amount to as much as from £5,000 to £10,000 a year. I was touched by observing a notice not long since of the receipt of 20s. from a curate. Incidents such as these prove how scrupulous many of our countrymen are to give to the State every- thing which they believe to be its due; and I say that while that high tone of feeling does survive, we ought to be aware of discouraging it by either careless or wilful disregard of justice in our legislation. But I do believe that be long as the present tax lasts you will diverge further and farther from that state of public mind and feeling which alone can make an Income Tax tolerable. My right hon. Friend in some of his speeches illustrated the difficulty of fiscal legislation as a "dealing with flesh and blood." No doubt there is a natural aversion on the part of any man to pay that which is extracted from him at the cost of personal sacrifices. But, in looking at this question, I think there is more than flesh and blood concerned in our legislation—these taxpayers have souls and intellects, and they ought to have consciences; but their souls have been degraded and their consciences dulled, while their intellects have been striving to baffle injustice and oppression by fraud and evasion.

An hon. MEMBER moved that the House be counted, but the Speaker having counted and found that a House was present—

MR. HUBBARD

resumed: The Chancellor of the Exchequer has spoken of this tax as one of which the defects were known, so that the back had adapted itself to the burden; but I believe that his proverb should be read the other way, and that the back on which the burden rested becoming impatient had thrown off just as much of it as seemed convenient. The evil is, that in that process there is an essential and inevitable degradation of the whole man, and that is a far more important consideration ["Hear, hear!"] than the mere money grievance. I make this Motion at a period when the Budget has been disposed of, and in such a way that its affirmation can cause no inconvenience to the Government. I have stated that the change I desire is one to be adopted not now but hereafter. I therefore do appeal to the House and to those who are connected with the Government, to put away from them the idea that in voting for my Motion they will cause any embarrassment to the Government. And I venture to entreat the House, with all the earnestness I possess, to join me in deprecating the re-imposition in its present form of a tax inevitable, but which as now administered is rife with pecuniary wrong and moral deterioration to our fellow countrymen. The hon. Member concluded by moving his Resolution:—

SIR JOHN HAY

seconded the Motion.

Motion made, and Question proposed, That the inequalities and injustice attending the operation of the existing Property and Income Tax, disqualify it for being continuously reimposed in its present form, as one of the means of levying the National Revenue.

MR. WHALLEY

said, it was unnecessary to follow the subject further than the hon. Gentleman had done in order to show the inequality and injustice of the tax, and he hoped the enlightened pertinacity of the hon. Member would induce the Chancellor of the Exchequer to consider the effect of the tax on those who had to pay it. He would, however, venture to remind the Chancellor of the Exchequer that when some years ago he (Mr. Whalley) ventured to call attention to the injustice and immorality of the tax, the answer of the right hon. Gentleman was, not to deny the statements put forward, but to ask how they were to find a substitute. The Income Tax was, to all intents and purposes, not a direct tax, but an indirect tax, the most injurious and oppressive that could possibly be devised, so far as it was levied upon persons in respect of trade or occupation. A grocer or a draper regarded it as a necessary outgoing, and one which he must recompense himself by charging more for his goods. It was against the science of political economy to tax trade in that manner. Under the statute of Elizabeth for raising rates for the relief of the poor, vestries might levy the rate not on lands and houses merely, but on stock in trade and other personal property, but they knew that to do so would be unwise, as the result would be that the tradesman would have to charge more for his goods, and in that way the public would suffer. And he did not know what distinction there was between the imperial tax and the local tax. But the great question was, did the income tax tend to demoralize the traders of this country—and in his opinion it did. He did not agree with the hon. Gentleman the Member for Buckingham that the tax should be continued, and be modified. He thought the Property Tax should be separated entirely from the Income Tax, that the Income Tax should be done away with and the Property Tax maintained.

THE CHANCELLOR OF THE EXCHEQUER

Sir, I freely admit that it would be most unfair to charge my hon. Friend who brought forward this Motion either with seeking to embarrass the Government, or with, a desire to place the prosecution of his own purposes in the way of the necessary financial legislation which devolves upon this House from year to year. On the contrary, I thank my hon. Friend for having upon, all occasions been ready and desirous to distinguish between this annual Motion, as I think I may call it—for, though the form has changed, the substance remains the same—and the prosecution of these financial measures. But I still think that my hon. Friend, having watched the course of affairs in this House during the last two hours, must be of opinion with me that it is not the desire or the sentiment of the House that this Motion should be adopted, or even that it should, be discussed in that infinite variety of detail which is necessary for its adequate discussion. My hon. Friend, having' explained his views with his usual ability, has been supported by my hon. Friend the Member for Peterborough, and by no one else, although the last moment was given for any one else to interpose, and I only rose to speak as the question was about, to be put from the Chair. But the champions of the Motion, who are only two, are themselves wide as the poles asunder. My hon. Friend opposite recommends a modification of the schedules, adhering to the principle of: the taxation of income, but giving, as he thinks, to that principle a more just and accurate application. But his only supporter in this House entirely repudiates the taxation of income—proposes to abolish and erase it altogether from the statute-book, and to substitute simply the taxation of property. The hon. Member for Peterborough has stated the principle of his proposal, but he has refrained from drawing aside the veil of general declaration, so as to enable the House to comprehend what was really meant. Let me attempt to fill the void which he has left, and state what I understand to be the practical effect of his proposal. The Income Tax is at present levied upon an annual income which may be stated roughly at £300,000,000. It is something more than that amount, but that Sum will do for the purposes of argument. Of that amount £100,000,000 consists of income derived from visible property, or that which is popularly known by the name of "Schedule A" This may be taken as about one-third, of the income which bears the tax, and the proposal of my hon. Friend (Mr. Whalley) is to abolish the tax upon income so far as regards Schedules B, C, D and E, leaving Schedule A the undivided honour and responsibility of furnishing whatever proceeds we may require from the tax. In other words, at the comparatively moderate figure at which the tax now stands he would propose to relieve all other classes of income except those in Schedule, A, to reduce the tax from 6d. to zero upon these classes of income, and in order to fill up the gap he would raise the tax in Schedule A from 6d. to 1s. 6d. in the pound; or if we are to suppose the return of periods of crisis and of exigency, such as the nation has seen—the occurrence of a great war threatening our national existence—the farmers in Schedule B, the fundholders in Schedule C, the traders in, Schedule D, and the salaried officials in Schedule E—who, under the old method of imposing the tax, might pay 2s. in the pound—would pay nothing, while those assessed in Schedule A would pay at the moderate rate of only 6s. in the pound. That is the proposal of the only supporter of my hon. Friend, and, considering that the supporters of the Motion are but two, and that their views are so widely apart, I recommend a serious and prolonged conference between them respecting the principles upon which they are to prosecute this great cause in the House of Commons, so that when next it is brought forward we may somewhat narrow the field of discussion. My hon. Friend opposite has replied to speeches made by me on former occasions in this House; but, considering what has since taken place in respect to this tax, I am sure he will not require from me that I should follow him through these details. If it were the will of the House that we should seriously address ourselves to this question with a view to a present and a regular issue, I should be at once prepared to obey and take point by point the topics urged by my hon. Friend. But, reading the intentions of the House in a different sense from my hon. Friend, I mean to deal very briefly with the subject. I shall, therefore, only refer to one or two points casually mentioned, by my hon. Friend, and then state what I propose with regard to his Motion. He complains that I have illustrated his scheme unfairly by selecting extreme cases, and he says it would be, easy to take extreme cases in illustrating the working of the present law. But I do not think my hon. Friend gives due weight to the enormous difference in our respective positions as regards the argument upon this subject. My hon. Friend proposes a plan which he has matured in his ingenious mind, but which has never yet obtained the acceptance either of Parliament or even of a Minister responsible for the conduct of the finances of the country. For more than forty years an Income Tax has been in operation in this country, but the plan of my hon. Friend has never been in operation, and consequently remains a matter of rhetoric or of speculation. The anomalies and inequalities, the existence of which in the Income Tax I do not deny, do not stand upon the same footing with the anomalies and the inequalities which he would seek to introduce. My hon. Friend does not propose to get rid of anomalies; he merely proposes to displace a system to which the nation is habituated in order to substitute a scheme full of anomalies not less gross than those of the present tax, with the additional disadvantage that they are perfectly novel. Why are we to undertake the labour, and undergo the risks and the responsibilities attending the replacing of a scheme that is imperfect and full of solecisms by another scheme which is also imperfect and also full of solecisms? Passing from this point, let me say that I only heard with regret one portion of my hon. Friend's speech — in which he impeached the morality of the officers of the revenue department, and, quoting a circular issued in 1849 from this department in Scotland, said that the consciences of the officers there, if not of the officers in the three kingdoms, were tainted and rendered impure, and their integrity deteriorated by being called upon to administer the Income Tax. If my hon. Friend takes so extreme a view of the operation of the tax I think he ought to have given us the opportunity of consulting some of those gentlemen, and of knowing what was to be said in their defence against so grievous and, as I think, so needless and gratuitous an imputation. My hon. Friend says I have dealt in general imputations against his scheme and have produced no evidence. In answer to this I request the House to reflect what has taken place in regard to the Income Tax since my hon. Friend took the championship of this particular view of the subject into his hands. When my hon. Friend began in 1860 the crusade, he did not find the House at all indisposed to go with him. My hon. Friend invited in- quiry by a Committee. The Government, disbelieving in any useful result in the sense described by the hon. Gentleman, did their best to oppose it, but they were overruled by a majority of the House. I mention that to show that my hon, Friend addressed an audience favourably predisposed to his view. The Committee sat, and if it took no evidence, I know that some of the ablest men acquainted with this subject were examined, and if their testimony is not to be called evidence, I do not know what deserves that name. Those gentlemen, the ablest that could be found to support my hon. Friend's views, were examined, and cross-examined by a Committee composed of some of the best men in this House, and so most competent to deal with this subject. [Mr. HUBBARD: That evidence was all in favour of the plan.] Was it? I do not think my hon. Friend gained much advantage by it. What was the effect of, all the evidence which, we are told was entirely in favour of his plan? It was this — that not only those who had been previously opposed to his plan remained unconverted, but that divers gentlemen, who when they entered that Committee had been more or less favourably disposed towards the views of my hon. Friend, ultimately concurred in a Report which repudiated and rejected his proposal. My hon. Friend made his own Motion, found the House willing to adopt it against the view of the Government, obtained his own tribunal, produced the best witnesses he could find, before the best men the House could select, and the result was a decision adverse to his views. What degree of respect has he shown for the conclusion of his own Committee? Did he allow even a decent interval to elapse? Did he allow this question to lie fallow for even one year? Having failed in that Committee, he came down to the House with unbated breath and with unalterable resolution to protest against the decision of his own Committee, and with determined purpose, and what my hon. Friend behind me calls "enlightened pertinacity," he has made up his mind that the House shall accede to his plan, whether it will or not. He has, indeed, this year varied the terms of his Motion. He has not called upon the House directly to adopt his plan, although a great portion of his argument was addressed in support of that plan. He has now called upon the House to adopt a Resolution which recites "that the inequalities and injustice attending the operation of the existing Property and Income Tax disqualify it for being continuously reimposed in its present form as one of the means of levying the national revenue." I do not think the House of Commons will be disposed to adopt a Resolution of an abstract nature, especially upon such a subject. The experience we have had of abstract Resolutions upon questions of revenue has not been so inviting as to induce us to repeat the experiment now. Unsound in principle, they have been found inconvenient in practice. They are objectionable, because they involve the proceedings of this House in ambiguity, because they raise expectations which are afterwards disappointed, because they multiply and even embitter the causes of divided opinion and party conflict, always of necessity sufficiently numerous in a popular assembly. In my opinion, the arguments against these Resolutions were quite strong enough before the Resolution upon the Paper Duty, and the experiences which followed the adoption of that Resolution has afforded an additional lesson of warning against the repetition of the practice. Let the House deal as it can with taxes which affect the country, but let it promise nothing with respect to a tax except that which it is able and willing to perform. But my hon. Friend in proposing this abstract Resolution at the same time condemned it. The first half hour of his speech my hon. Friend employed in analyzing the present state of our taxation, and in showing that at least twenty millions in value of our indirect taxation ought to be greatly reduced or entirely abolished; that the tea duty should be largely reduced; that the sugar duties should be considerably reduced; that the coffee duty should be got rid of; that the pepper duty should be got rid of; and that the malt duty should be altogether abolished. Having had a ground for sweeping away a great portion of twenty millions of taxation we had a right to expect that the man who wrought such a work of ruin and desolation among the resources of the Exchequer would have devoted the rest of his speech to an endeavour to rebuild the edifice which he had cast down. It was with astonishment that I heard my hon. Friend not recommending any reduction of expenditure— and I never see my bon. Friend taking any part in a vote for reducing expenditure—but, not recommending any reduc- tion of expenditure, he devoted the last moiety of his speech to urging upon the House to adopt a Resolution that eight millions more should be cut off from the Exchequer. I do not think that is a proper way of dealing with a matter of taxation. No doubt there are inequalities and evils attaching to the existing system of Income Tax, but let us not part with that tax until we know how to supply its place. Do not let us adopt a Resolution which holds out an expectation of parting with that tax until we have something in the nature of a practical scheme laid down and matured, by which we may be able to attain that much-desired consummation. I promised the House not to enter into the question at length, but I trust that although I have been brief in my observations I have said enough to induce the House not to assent to the Resolution preferred by the hon. Gentleman.

MR. BOVILL

said, he thought the House must be surprised at the charge made by the right hon. Gentleman against his hon. Friend, of raising expectations that could not be fulfilled, for if ever anyone had raised expectations upon the subject it was the right hon. Gentleman, when he declared that the Income Tax should not be permanent. Neither was it fair to say that, because the tax had been borne for twenty-two years, therefore the public had become habituated to it. The public had always deeply felt the inequalities and the injustice of the system; but they had tolerated them because they believed that the tax was not to be permanent. With respect to the Committee which had been appointed upon the Motion of his hon. Friend, he thought that there never was a Report which presented such unsatisfactory results. It admitted the inequalities, referred to evidence of which it gave no abstract, drew no conclusions, but printed the evidence at length. There was not a single gentleman of eminence examined who did not find fault with the mode in which the Income Tax was levied. The Report of the Committee was simply against the proposal of his hon. Friend, but the proposal now made by him was not of any particular plan, but was one which merely expressed the results of experience, and the opinions of most eminent statesmen. The tax had been tolerated in its present shape, because it was looked upon as a temporary tax, and therefore his hon. Friend was justified in proposing a Resolution — not an abstract Resolution, but one which would have practical operation—in order that if it should be intended to reimpose the tax and to make it permanent, some attempt should be made to remedy its admitted inequalities and injustice. He contended that it was not impossible to rectify the present unfair treatment of different classes of property. No one could justify the taxing of flesh and blood, brains and intellect, on the same principle as realized property. Every one must admit the injustice of taxing income dependent on age, health, mental and bodily infirmity, and all those circumstances which rendered income precarious, on the same principle as what was called spontaneous income. The Chancellor of the Exchequer admitted the inequalities of the tax, but would make no attempt whatever to remedy its injustice and unfairness. The proposal of his hon. Friend was this— if they allowed these inequalities to continue, then the tax was not fit in its present state to be imposed as a permanent source of revenue. Did the Chancellor of the Exchequer say that no means could be adopted to remedy the inequalities of the tax as regarded income? Thousands of professional men felt the injustice of taxing their incomes, not only as compared with incomes derived from property alone, but also as compared with incomes from capital and trade. He knew by painful experience in the course of his profession, that the returns by traders of their income were not accurate. He had seen it particularly in cases in which they came forward to claim compensation for the loss of trade. A person by the present system might realize £160,000 in one year, and escape payment of the tax on that amount. What was the true principle on which taxation should proceed? The advocates of the Income Tax said that it taxed men according to their means; and, if that were so, they would have a principle of equality. But the tax sinned against the first principle of equality. It taxed not only the professional man's income, but his savings. The Committee reported not that there were no inequalities, injustice, and unfairness in the tax, but, all these being admitted, that the former plan of his hon. Friend was insufficient to remedy them. The Chancellor of the Exchequer was good enough to tell them that if this plan were adopted there would still be anomalies; but did he mean to say that the grievances which existed could not be remedied? The right hon. Gentleman the Member for Stroud a few years ago, with considerable approval, drew a distinction between spontaneous income and that arising from the exercise of genius and intellect. He divided income into three classes—income derived from the possession of property, income derived from the possession of intellect, and income derived from combined property and intelligence—of which the merchant was an instance. Was there no practicability in that plan? Some scheme of that kind might easily be adopted. Suppose a tax of 6d. in the pound on income derived from realized property, there might be a scale of 2d. in the pound on income derived from professions, and an intermediate rate of 4d. on that derived from intellect and capital combined. But the Chancellor of the Exchequer, admitting all the inequalities of the tax, did not propose to adopt any remedy for them, and contented himself by rejecting as insufficient the present proposition, which, he said, was the same as that negatived by the Committee, but which only declared that with such recognized defects the tax was not fit to be imposed, contrary to the right hon. Gentleman's own promise, as a permanent source of revenue. He should support the Motion.

SIR STAFFORD NORTHCOTE

said, he had not intended to take any part in the discussion, but he could not allow the remarks of the hon. and learned Gentleman to pass without some notice. The hon. and learned Gentleman found fault with the Chancellor of the Exchequer because, on the strength of the evidence before him, that the plan formerly proposed by the hon. Member for Buckingham to his Select Committee would not answer, he proposed now to reject this new Resolution, which did not bind the House to that particular plan, but only to something which was perfectly vague and indefinite. The hon. and learned Gentleman said the Chancellor of the Exchequer was quite in the wrong if he called on the House to make the Income Tax a permanent part of our taxation without rectifying its inequalities. Now, in the first place, the Chancellor of the Exchequer was not at present asking the House to make the Income Tax permanent. If the right hon. Gentleman were proposing a Bill for that purpose, or if they were discussing the details of an Income Tax measure, it would have been open to the hon. Member for Buckingham, and to the hon. and learned Member for Guildford, to have proposed Amendments in order to have a discussion of a practical plan; and this would have brought the question to something like an issue. But how stood the case now? The Income Tax had existed some twenty-two or twenty-three years, and had been renewed sixteen or eighteen times. On the occasion of each of those renewals there had been an opportunity for revising the details of the tax. Nor were these the only opportunities which had offered. Various discussions had been raised at different times. On one occasion the right hon. Member for Stroud (Mr. Horsman) — on another the hon. Member for Sheffield (Mr. Roebuck) had brought forward plans for its amendment. The late Mr. Hume had done so too. So had his hon. Friend the Member for Buckingham himself. But none of the proposals which had been made had found acceptance in the House. The House had always found it impossible to make such alterations in the structure of the tax as would get rid of the present inequalities without introducing considerably greater evils. No one could deny that the Committee which was moved for by his hon. Friend the Member for Buckingham (Mr. Hubbard) had taken evidence which hit some of the blots of the present system, but the plan proposed by the hon. Gentleman was rejected by the Committee as unsuitable. The Committee did rather more than merely reject; for if his recollection served him right, they reported that the inequalities complained of were of the essence of the tax, and that it was hopeless to expect to be able to put the tax on a footing which would altogether get rid of inequalities. His hon. and learned Friend now proposed a scheme of his own —6d. per pound on realized property, 2d. per pound on professional incomes, and 4d. per pound on mixed incomes; but where was the line to be drawn? The whole question turned on the possibility of drawing a line between the higher rate and the lower rate, which should not occasion manifest injustice. Were all mixed incomes to be taxed alike? What was to be done if the income was derived chiefly from realized property, and but slightly from labour? What if from both in equal proportions? Who was to decide on the proportion? How were you to deal with sleeping partners? Those were some of the practical difficulties with which it was necessary to deal, and his hon. Friend the Member for Buckingham had grappled with them with great skill; but when his witnesses before the Committee had been pressed in the matter, and asked how they would deal with this case and that case, they escaped the difficulty, and his hon. Friend escaped the difficulty by saying, "Oh, those are border cases. I want you to admit my general principle." He recollected a somewhat startling case which would serve as an illustration of the difficulties which had to be met. His hon. Friend laid down a principle to the following effect, that annuities were to be taxed on a different principle from interests arising out of land, and the case was put of a gentleman who in making provision for his two daughters, settled upon each of them an income of £1,000 a year for life at his death, the income of the one being by way of annuity purchased at an Insurance Office, and that of the other being derived from landed estate. That being so, the conclusion at which his hon. Friend had arrived in the maintenance of his theory was that of those two sisters possessing exactly the same income, the one was to be taxed at the rate of £37 a year, while the other would have to pay only £19. They were obliged, therefore, to say that the scheme proposed would bring about as many difficulties as existed under that sought to be got rid of. Joint stock companies were also to be treated on a different footing from private traders; and it came to this, that if two or three persons were carrying on a brewery, they were to be taxed according to one rate, and if they sold the concern to a joint stock company, the tax was to be different, and higher by one-third than the tax on the private firm. How could such distinctions between persons or firms engaged in active competition fail to operate unjustly and to cause heartburnings? He did not say that it was not a question into which the House might not be persuaded to look; but there were points in reference to it which ought to be fairly brought before them. If the hon. Member thought he had a better settlement of the Income Tax to propose, let him take a proper opportunity of doing so, but do not let the House condemn a tax which furnished a very important amount of revenue by passing a general Resolution, the effect of which would be simply to throw a vagueness and uncertainty over our financial system, without doing any good whatever. He thought that if the House looked at the matte upon the ground upon which the Chancellor of the Exchequer placed it, when he appealed to them not to pass an abstract Resolution upon a question of this importance, they would see that nothing could be more inconvenient than to adopt a Resolution of this kind.

MR. HUBBARD

I have very few words to add to the discussion. The deserted condition of the House is less to be ascribed to a want of interest in the subject of taxation, as supposed by my right hon. Friend, than to the fact that dinner is a subject of still higher interest. I have no other point to notice in the speech of the Chancellor of the Exchequer. In answer to the hon. Member for Stamford, I must remind him that the apparent anomaly to which he refers as an objection to my plan has been thoroughly explained, and the principle of the supposed case affirmed in the memoranda appended to the Report of 1861. That principle has been approved, and the provisions necessary to give it effect have been framed by one of the most acute and logical lawyers of our day; and it will remain superior to all impeachment, until the impeachment is supported by argument and demonstration. I entertain unfailing confidence in the ultimate triumph of right principles of taxation, although I may have to regret that the Vote of the House to-night will postpone the result which I desire.

Question put, That the inequalities and injustice attending the operation of the existing Property and Income Tax disqualify it for being continuously re-imposed in its present form as one of the means of levying the National Revenue,

The House divided:—Ayes 28; Noes 67: Majority 39.