§ In the case of incomes not exceeding £500, the pressure of the tax, notwithstanding the abatements at present allowed, is sorely felt by taxpayers who have growing families to support, and although a comparatively trifling additional burthen will be imposed upon them by the increased rate, since the aggregate income of this class is to the extent of at least four-fifths exclusively earned income, I think that even upon the present basis they have a strong claim to further relief. Even from the purely fiscal point of view there is this essential difference between the position of a man with a family and that of the taxpayer who has no such responsibilities. The family man is, generally speaking, a much heavier contributor to that portion of the revenue which is derived from indirect taxation and inhabited house duty, so that in comparison with the bachelor he is taxed not so much in proportion to his income as in proportion to his outgoings.
508 There is no class of the community which has a much harder struggle or a more anxious time than that composed of the men whose earnings just bring them within the clutches of the income tax collector. On a small income they have not merely to maintain themselves, but to exhaust a large proportion of their limited resources in that most worrying and wasteful of all endeavours known as "keeping up appearances." They are often much worse off and much more to be pitied than the artisan who earns half their wages. If they have only themselves to think about they do well, but when they have a family dependent upon them the obligation to keep up the appearance of respectability of all their dependants is very trying. I am strongly of opinion that they deserve special consideration in the rearrangement of our finances. Continental countries recognise their claim, and I propose that for all incomes under £500, in addition to the existing abatements, there shall be allowed from the income in respect of which the tax is paid a special abatement of £10 for every child under the age of 16 years. Take the case of the widow with a family, which is always cited in reference to proposals to tax income or property: she will in most cases be better off with this abatement, should her family be of average numbers, even though she is rated at 1s. 2d., than she was before. The new abatement will, like the existing abatements, be allowed irrespective of the source from which the income is derived, and earned incomes, upon which no new burthen is to be imposed, as well as unearned incomes, will enjoy the advantage of the concession. The addition of 2d. to the rate upon all incomes in excess of £2,000, and upon unearned income enjoyed by persons whose total income does not exceed that amount, would yield in a full year £4,700,000, and in the year of imposition £3,760,000. But from this source I must deduct £160,000 in respect of the retention of the 1s. rate upon earned income enjoyed by persons whose total income is between £2,000 and £3,000, and £600,000 for the costs of the new abatements. This reduces the estimated net receipts from the additional 2d. in 1909–10 to £3,000,000.
§ The rate of income tax under the present law is absolutely uniform upon all incomes in excess of £2,000 a year; between that rate and £700 the allowance in respect of earned income operates to relieve the less wealthy taxpayer, and thus 509 to introduce the principle of graduation. Below £700 the system of abatements produces a regular graduation by descending stages. The introduction of a complete scheme of graduation, applicable to all incomes, besides raising questions of general principle, which it is not necessary now to discuss, would require an entire reconstruction of the administrative machinery of the tax, including in all probability the abandonment to a very large extent of the principle of collection at the source upon which the productivity of the tax so largely depends. It would create for the administrative Department a series of problems which, if not insoluble, could at any rate scarcely hope to obtain a satisfactory solution in a year where other taxation of a novel character must necessarily claim a large part of its attentions.