HC Deb 29 April 1909 vol 4 cc506-7

Now what do I propose? When it is remembered that the total yield of income tax on its present basis amounts to little more than five years' normal growth of the aggregate income upon which income tax is payable (which increased from £607,500,000 in 1901–2 to £640,000,000 in 1906–7), it will be seen that our present reserve of taxable capacity is as great at the present moment with the existing rate of the tax as it would have been five years ago if there had been no tax at all. If the tax were doubled in the present year income tax payers would, in the aggregate, after payment of the double rate, be in the enjoyment of almost exactly the same net income as five years ago. A careful consideration of these figures ought to convince the most sceptical that the maximum rate of the tax may be retained at 1s., or even increased, without seriously encroaching upon our available reserves for national emergencies. The time, however, has gone by when a simple addition of pence to the poundage of the tax, attractive as the simplicity of that expedient is, can be regarded as a satisfactory solution of a financial difficulty.

As the Prime Minister so well pointed out two years ago, inequalities which might be tolerated in a tax designed for the purpose of meeting a temporary emergency are intolerable in a permanent part of our fiscal machinery. The income tax, imposed originally as a temporary expedient, is now in reality the centre and sheet anchor of our financial system. The principles of graduation and differentiation, the apportionment of the burden as between different classes of taxpayers, according, on the one hand, to the extent, and, on the other hand, to the nature of their resources, are in the lower stages of the income tax scale already recognised by abatements and allowances. It remains to complete the system by extending the application of these principles, and in regard to differentiation by taking account to some extent, at any rate, not only of the source from which income is derived, but also of the liabilities which the taxpayer has contracted in the discharge of his duties as a citizen, and of the other burdens of taxation borne by him by virtue of those responsibilities.

Notwithstanding the relief given by the Finance Act of 1907, the burden of the income tax upon earnings is still disproportionately heavy. While, therefore, I propose to raise the general rate at which the tax is calculated, I propose that the rates upon earned income in the case of persons whose total income does not exceed £3,000 should remain as at present, namely, 9d. in the pound up to £2,000, and 1s. in the pound between £2,000 and £3,000. In respect of all other incomes now liable to the 1s. rate I propose to raise the rate from 1s. to 1s. 2d.