NEW CLAUSE.—(Income Tax of married persons.) (Hansard, 8 July 1924)

Lieut.-Colonel LAMBERT WARD
I beg to move, "That the Clause be read a Second time."
The object of the Clause is to remedy the extraordinary inequality and injustice existing at the present time with regard to the assessment of married and unmarried people with regard to Income Tax. Of course, the same inequality and the same injustice apply to their assessment for Super-tax also, but I am not concerned with Super-tax to the same extent, because when people are in a position to pay Super-tax, minor in justices such as this do not affect them so materially as they affect other Income Tax payers. The people affected by this particular injustice, if we eliminate the Super-tax payers, are very largely, if not entirely, people of the somewhat poorer middle class, whose incomes may be sufficient to support them in comparative comfort, but when it comes to the question of bringing up a family and when they are people who take a pride in educating their family out of their own resources, the payment which they have to make under this assessment undoubtedly weighs very heavily upon them. This Clause has been before the 2074 House on several occasions, but I do not think it necessary for me to apologise on that ground, because the injustice is going on all the time.
As things stand to-day, a man may live with whom he pleases other than his wife, and if he and the other person possess separate incomes, they are assessed separately. A man may live with his father or his mother, or his brother or his sister; he may even live with another man's wife, he may live in open sin with a woman who is not his wife, and their incomes are assessed for the purpose of Income Tax and Super-tax as two separate entities. But let him commit the mistake of marrying a woman, and from that moment their incomes for the purposes of Income Tax are assessed as one. There is a still more extraordinary feature about this matter which brings home to most people the gravity of the injustice. Although for the purposes of Income Tax the incomes of married people are as one, yet for the purposes of Death Duties the incomes are regarded as two incomes. One would naturally think that if the incomes were to be assessed as one for Income. Tax, they would be assessed in like manner for Death Duties, and that on the death of one of the partners to the union the property would pass without tax to the surviving partner, but that is not the case. For the purpose of Death Duties the incomes are treated as two separate entities, and on the death of one partner to the union the Death Duties have to be paid. If I may use a colloquialism, it is a case of the State having it both ways, which is repugnant to the most elementary sense of fair play. There is not the least doubt that this form of assessment is contrary to the spirit, if not the letter, of the Married Women's Property Act, 1882. May I point this argument by reading a Clause of that Act? Every woman who marries after the commencement of this Act shall be entitled to have and to hold as her separate property all real and personal property which belonged to her at the time of her marriage or which shall be acquired by or devolve upon her on marriage. The Income Tax Act, as I say, is a direct violation of the spirit, if not the letter, of that law, and it says: The profits of a married woman living with her husband shall be deemed to be profits of her husband and shall be assessed and charged in his name and not in her name or in the name of her trustee. 2075 You will notice this Act uses the words "living with her husband." She may live with another woman's husband, and her property in such circumstances is her own and is assessed separately for taxation. Therefore, what this law comes to is that it puts a tax upon marriage and puts a premium on people living together without going through the ceremony of marriage. It may be argued that the injustice is comparatively slight and the amount involved comparatively small, but I should like to point out to what extent this injustice affects people financially. Let us take as an illustration a man and woman each with an income of£500 a year. It is a reasonable income and one which is earned by many of the middle classes to-day. The man may be a senior clerk in a bank or a manager of a West End business; the woman may be a doctor, a writer, or a designer, or she may be manageress of a West End establishment. They are unmarried, and let us examine what each individual pays in taxation. From the £500 a year, we deduct one-tenth for earned income, which leaves £450. There is then the personal abatement or allowance of £135, which leaves £315 a year taxable income. At 2s. 3d. in the £ on the first £225 the amount of tax is £25 10s., and at 4s. 6d. in the £on the remainder the amount of tax is£20 10s., or a total of £46 a year each. That is the two of them assessed separately, pay a total of £92 a year. If these people are sufficiently misguided to marry, instead of living together unmarried, they pay £36 a year more. The statement of their income as a married couple is £1,000 a year. The 10 per cent. deduction reduces it to £900 and there is £225 abatement or allowance, which leaves£675 taxable income. At 2s. 3d in the £on £225 the amount of tax is £25 10s., and at 4s. 6d. in the£on the remaining £450 the amount is £102 10s., or a total of £128 tax.
As I say, there is a tax or fine of £36 a year on these people who were foolish enough to marry. It may be said it is not a great amount. On the other hand, it would go far towards the education and upbringing of a child if they are not extravagantly-minded in their views on education and that, in these days, in my humble opinion, is a very serious thing. This is an injustice which has been felt for a very long time by the women of 2076 this country and it is one which they take seriously. It was inquired into by the Royal Commission, and I am aware that the Royal Commission in its Report advocated a continuance of the present system. Let us examine the constitution of that Commission. From first to last there were 26 Commissioners, of whom only one was a woman. That is not the sort of Commission which gives confidence in these days when women are in practically every respect the equals of men before the law. Evidence was given by 190 witnesses, of whom only four were women. There again, a Commission which carries on its inquiries in that manner is not one to give confidence to the womanhood of the country. Eleven persons gave evidence on the question of this marriage tax and eight were against it, and only three in favour of continuing the present system of assessment. Those three were all revenue officials, and one might not unfairly say they took a biassed view of the question.
I know it will be said by the Financial Secretary that this proposal would cost a lot of money. I have seen an estimate that it might cost anything from £33,000,000 downwards, but I think an estimate of that kind is absurd. It is based on the assumption that every married couple in this country, directly this new proposal became law, would divide their property equally for the purpose of avoiding taxation. I think there is not the least chance of that. The risks are too great and men are too "canny" as a general rule to give over half their property to their wives, irrespective of what may happen in the future. That amount is only reached if Super-tax is also taken into account. I have purposely excluded the Super-tax payer from this Clause, which deals only with Income Tax, and the maximum advantage that any couple can obtain from the passing of this Clause is £36 a year, while I shall be very much astonished if the entire cost of making this concession and removing this obvious injustice will be more than £100,000 a year.

Lieut.-Colonel Sir P. RICHARDSON
I should like to associate myself shortly with this Clause, and to ask the Financial Secretary to the Treasury whether he will deal with the matter on two lines, the one of justice and the other of expediency. This matter has been 2077 raised for a considerable number of years. In fact, I have looked back for some 13 years past, and I find that, if it has not been a hardy annual, at any rate it has been a matter that has called for a great deal of discussion in this House, and it has also been the subject of a great many questions. I have had the curiosity to see what answers have been given to those questions, and I find that so far it has been a matter of expediency and an estimate as to how much it would cost rather than dealing with the matter from the point of view of justice and of a marriage tax. In some countries bachelors are taxed, and I think we would all recognise, and many of us preach, that marriage is a desirable and necessary state, and one to be encouraged, but the law at present does not encourage matrimony, particularly amongst those of the middle and not altogether wealthy classes. Therefore, whereas it may be that the time is not ripe for a change, at any rate, I hope it will be made clear that, if there is any objection, it is not an objection on the grounds of justice, but of expediency only.
Looking back at the records of the Debates on this subject, I find that it was stated, I think in 1922, that to remove this tax would be to take a tax from the rich and place it on the poor. I do not think that would be the case at all, but whether or not that was so, it seems to me that one should tax people fairly and not unfairly, whether they be rich or poor. Particularly nowadays, when women are demanding equality in all things, we should recognise that women feel very strongly that their position is not a just one, that, having an income of their own, for their own enjoyment, they should, upon marriage, suffer a disadvantage. It would be quite easy to devise some scheme by which taxes upon those who are unmarried might be increased in order to obtain justice for this case, and the expressions of opinion throughout the last 13 years, so far as I have been able to ascertain them £and I have gone very carefully into the records £show that there has been an increasing demand for this particular item of legislation and that it has been resisted only on the ground of its immediate cost. I think that that cost has been very greatly exaggerated, and, as the last speaker said, it has been based largely upon the assumption, first, 2078 that everybody would be anxious to evade the law, and, secondly, that everybody would take advantage of its provisions. I do not think there would be anything of that sort whatever, and I desire to support this Clause.

§ Sir J. PENNEFATHER
The case for this new Clause has been so admirably put by my two hon. and gallant Friends that I do not intend to say much more than that I also desire to support it, on the ground that it is a common-sense Amendment. I was particularly struck by the argument used by the hon. and gallant Member for Chertsey (Sir P. Richardson), that this is a matter of great importance to the large number of women who are now among the electorate. Their position has very much changed since the clays when arguments were first brought against an Amendment of this nature, and in view of that change, a change, if I may say so, in the political status of women, I hope the Government will see their way to accept this Clause, and I would certainly join my hon. and gallant Friend who moved it in the Division Lobby, if necessary.

§ Mr. W. GRAHAM
The three hon. Members who have supported this Clause have quite rightly reminded the Committee that it is a familiar one in Income Tax Debates, and, as the Mover himself indicated, it was considered at very great length by the Royal Commission on Income Tax in 1919. I think I can, without detaining the Committee at too great a length, summarise the arguments which exist in favour of this proposal, and then I think I can almost immediately make what we believe to be a very strong and, indeed, an overwhelming case against it. This proposal has two sides, one of a political character relating to citizenship at large, and the other—one that must be particularly regarded by the Committee to-night £the side which has regard entirely to revenue. As regards the political side, the Committee is aware that there is already provision for the separate assessment of married people, but when we come to the actual payment of the tax, the incomes of the two people are aggregated, and the tax is imposed upon the total of the two together. As regards separate assessments, I think that we have there a concession to what may be called the political or citizenship argu- 2079 ment, if hon. Members wish to press that to-night, although that is not really the case that is before the Committee. After all, what we have to consider are, first of all, the sums required from the country as a whole, and then the kind of taxation which we are imposing upon the family or home unit. Two people who have entered into a voluntary union for life, to the exclusion of all others, do, notwithstanding far-reaching developments in citizenship, undertake duties together which no system of taxation under the sun could ignore.
One word as regards cost. I agree with hon. Members who suggest that it is no reply to such an Amendment to say that it will cost so many millions a year if, in fact, there is a substantial injustice which the new Clause is designed to prevent, but I ought to remind the Committee that there is no real injustice in this case when we get down to the facts. Before I come to that, in any event it would probably, if the change were to take place at a comparatively early date, cost the Exchequer at least£13,000,000 in a full year.

Lieut. - Colonel LAMBERT WARD
Does that include Super-tax?

§ Mr. GRAHAM
I think it refers only to Income Tax. Of course, the Committee must admit that if there were to be separate taxation, we could not logically defend the continuance of the substantial allowances already given to married people. I refer to the£250, in round figures, which is now provided by the Income Tax law as a concession to marriage as compared with the£150 allowed to single persons. The hon. and gallant Member who moved this Amendment made a great deal of the argument that this was a penalty on marriage, but may I remind the Committee of the actual facts regarding married people in this country? The Royal Commission in 1919 recommended a largely increased scale of allowances, and that was immediately adopted and incorporated in the Finance Act of 1920. I hardly think that any hon. Gentleman would raise the objection that the existing system is any penalty whatever upon marriage for the great mass of the smaller people in this country in view of the married allowances which are given. When we pass away from the smaller 2080 people to those whose incomes are larger we pass into the sphere of those who have real ability to pay, and, of course, their incomes carry a substantial part of the national burden.
This was very carefully considered in detail by the Royal Commission in 1919, and, speaking from recollection, I am, I think, correct in saying that they unanimously came to the conclusion that there was no foundation for, or any case established for, the proposal contained in this proposed new Clause. They felt that in the circumstances suggested, the married allowance must logically disappear, and if the married allowance disappeared, the burden of taxation in many homes would be substantially increased, while, no doubt, they would be diminished in others. In point of fact, taking a long view of the change, and assuming we introduced this proposal, and systematically got rid of- the married allowance, I might even go the length of saying it would probably throw more taxation upon the very people whom my hon. Friend opposite has in mind; if I had time, I think I could prove that proposition. I have, however, said sufficient to show that not only is the verdict of the Royal Commission against it, but the facts of the present situation also are against it. There is no real hardship in the present method when we get down to the facts. The present method has in mind family unity, and I think all taxation must have regard to the facts of social life, which is really the bedrock in the consideration of this proposed new Clause.