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If I am not wearying the Committee, as this is very important, let me very briefly review the history of the tax. The income-tax was introduced by Mr. Pitt in 1798, in almost the darkest hour in our great struggle with France. It was avowedly a temporary tax put on for the purposes of war. Our ancestors, when they did these things, did not do them by halves, and the tax was 2s. in the £. Incomes of £60 and under were exempt, and up to £200 there was a differential rate proceeding by steps. That tax was reintroduced, after a year of peace, in 1802–1803, by Mr. Adding-ton, at the lower rate of 1s. In 1806, war still continuing, it was raised by Lord Henry Petty, the Whig Chancellor of the Exchequer, to 2s.; and he for the first time introduced a distinction, since dropped, between earned and unearned incomes by providing—and this was the state of things that prevailed from 1806 to 1816—that, as regards abatements,
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only earned incomes should be entitled to them. In 1816 the tax came to an end, and, although Lord Liverpool's Government attempted to continue it, they were, by a large majority of this House, defeated in their attempt; and I think it was Mr. Brougham who moved that all the records of the tax should be burnt or destroyed, in order that posterity should never know that such a tax had existed. That was the early history of the tax. It was revived in 1842 by Sir Robert Peel, not as a war tax, but again as a temporary expedient, only for a period of three years, to enable him to effect a reconstruction of the tariff. Mr. Gladstone never liked the income-tax; as a member of Sir Robert Peel's Government he opposed its introduction; during the whole of his life he was anxious to see its gradual extinction; and on a celebrated historic occasion he invited the country to agree with him in abolishing it altogether. In his picturesque language, speaking of Sir Robert Peel's revival of the tax in 1842, he spoke of calling forth from its repose this giant, which had once shielded us in war, to come to assist our industrious; toils in peace. The industrious toils were assisted to this extent, the tax was imposed by Sir Robert Peel at the comparatively moderate rate of 7d. in the pound; but he raised the limit of total exemption to £150, and above that everybody was taxed exactly alike. Sir Robert Peel defended it mainly on the ground that the tax was a temporary one. It was taken in hand again by Mr. Gladstone in 1853, who proposed that it should continue seven years at a diminishing rate, and extended it to Ireland, not altogether without consideration. ["Oh."] He reduced the limit of exemption to £100, but between £100 and £150 gave abatements at a lower rate of tax. I should like to quote two sentences from Mr. Gladstone's speech on that occasion. In refusing to make any differentiation between earned and unearned incomes, he said—
I do not at all deny that the case of the professional man appeals to my sympathy; in my opinion, that is one of the reasons which indicate that the tax eight to be a temporary tax.
And again he said—
It is not adapted to be a permanent portion of your fiscal system unless you can by reconstruction remove its anomalies.
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I found myself on that opinion. We now recognise the tax to be a permanent part of our system; and following Mr. Gladstone, I think that we must do something to remove the anomaly and to arrive at some scheme, without destroying the essential features or the productive character of the tax, which differentiates incomes, not only as to amount, but also as to the source whence they are derived and the conditions under which they are enjoyed I need not weary the Committee by giving the history of the different steps by which the present scale of abatement has been reached. We all know that in incomes up to £700 there is a substantial abatement; but it may be interesting to point out that at the present rate of 1s. in the pound an income of £200 pays 2½d.; an income of £300, 5½d.; £400, 7¼d.; £500, 8½d.; £600, 9½d.; and £700, 10¾d., so that the Committee will observe that the principle of differentiation prevails now to that extent. What is the result? The income-tax is not only Is. in the pound, but of the million of taxpayers, 800,000 to 850,000, or four-fifths of the whole, showing an income of £275,000,000, are under £700. This extension of the scale of abatement has much simplified the question. Mr. Gladstone used to say—
Take the poor widow with £300 a year derived from investments, and bringing up a family; is she to he placed in a worse position and to be taxed at a higher rate than the small business or professional man making 1300 a year from his business?
There is great force in the argument, but it should be remembered that nobody pays the whole rate unless his or her income is over £700 a year.