The Principles of Taxation

Dominion, Volume 29, Issue 200, 21 May 1936, Page 6

The Principles of Taxation

Sir,- —Historically, the income tax dates from 1799 when the Pitt Government had recourse to tit for the purposes of the long war against France. When peace came after Waterloo in 1815, it was dropped, nor was it heard of again until 1841, when it was imposed by the second Government of Sir Robert Peel for three years only, at 7d. in the £. With the abolitiion of the Corn Laws in 1545 and the adoption of comparative Free Trade, the income tax commenced to wear the appearance of permanency, and, in fact, it has lasted in England ever since, though for many years it was never regarded as more than a temporary expedient. It was opposed by Gladstone, the greatest of Parliamentarians, as “the most demoralising of all taxes,” and as we shall see presently, its extinction was one of the cardinal features of his policy. The story is well told in Morley’s “Life of Gladstone” (vols. i and ii), and is worth study by all who realise the importance of taxation and finance and its intimate bearing on the social question. Unquestionably’ one of the greatest of Gladstone’s triumphs was the Budget which, as Chancellor of the Exchequer in the Government of Lord Aberdeen, he delivered in 1853. Its outstanding features were simplicity, boldness and extended outlook. The simplification of the tariff commenced by Peel eleven years before was carried forward. Nearly 140 duties were abolished, a great number reduced, and the income tax was renewed for seven yearn, two years at 7d., -two years at Gd., three years at sd„ and thereafter it was to disappear altogether. On the other hand, Gladstone proposed that the legacy duty, theretofore levied on personal property only, should be ex-

tended to real property. Mr. Morley describes this as “the first breach in the territorial system, unless indeed we count as first the abolition of the Corn Law." He adds that it (secured for Gladstone “the lasting resentment of a powerful class,” referring of course io the “landed interest.” Naturally, the Budget aroused fierce opposition, but as will ever happen when the cause is just, opposition stirred the nation into enthusiastic support, and the popularity' of the first of Gladstone's 13 Budgets bore down even the opposition of the House of Lords with whom he came into conflict for the first time. Striking as the success of the Budget wan, however, the hopes of its great author were not realised. He had visualised seven years of peace with economy, but soon after caijie the Crimean War, and the guns had scarcely ceased to roar in the Crimea, when there followed the Indian Mutiny and the outbreak in China. These calamities prevented the realisation of Gladstone’s plans, but be continued nevertheless to cherish them with splendid tenacity, and so, “when the rush of war was passed,” he came to his second great Budget, of 1860. Gladstone was now Chancellor of the Exchequer in Lord Palmerston’s Government, Cobden had just negotiated his memorable commercial treaty with Erance, and the Chancellor relinqufelted u million pounds in customs duties for the sake of that treaty; a second million went in releasing 371 commodities from duty, and yet a third .million was relinquished an the abolition of the excise duty on paper. In 1842 there had been 1052 duitable articles, but the number was now reduced to 48, the income tax was raised from Od. to 10d., but again Mr. Gladstone indicated his hopes for its ultimate extinction. Again the nation rallied to the support of Gladstone, and again it brought its author auto conflict with the Lords. Even in those far-off days .it had become settled practice that the Lords could not amend a Money Bill, but they might reject it, and that they ventured to do with the Bill abolishing the paper duties. In the following year, however, Gladstone made the bold innovation of including the whole of his financial proposals in a single Bill, and thus he compelled the hereditary Chamber to “eat the leek,” and the paper duties were extinguished. But again the fates were against Gladstone. The outbreak of the American Civil War and the consequent excitement made wreck of his plans of economy. 'l'lio year 1868 saw the first Gladstone Government, and great were its achievements—the Disestablishment of the Irish Church; the Education Act, 1870; the Irish Land Act, 1870; the 'Trade Unions Act, 1871; the Ballot Act, 1872, by' which secret voting was introduced for the first time; the settlement of the Alabama Claims by arbitration. Nevertheless, Mr. Gladstone did not face the electors of 1874 on the record of his first great Ministry. In his election manifesto he reiterated his jplan to abolish the income tax, and it is very significant that, while in his own appeal, Disraeli launched an unscrupulous attack on the Government, he tacitly accepted the cardinal feature of its policy. This time, however, the nation did not respond, or more correctly, Gladstone lost the election as the result of a dishonest electoral system, for though the Conservatives gained a majority of nearly 60 in the House of Commons, the number of votes cast for the new Government was 1,222,000. while Gladstone secured 1,436,000 !

For six years thereafter Disraeli became dictator of England, and the nation became Embroiled in so many extra-terri-torial quarrels that economy was no longer possible, and all further suggestion of repealing the income tax was abandoned, though Harcourt, Chancellor of the Exchequer in 1894, succeeded inequalising the death duties as between real and personal property. To the end Gladstone’s convictions remained unaltered, however, and he ended his great career dissatisfied because he had failed to extinguish the income tax and to confer Home Rule on Ireland. Gladstone appears great when we consider his actual achievements, but lie looms greater still when we bear in ihind what he had the will to do, lint failed to accomplish.—l am, etc., I>. J. O’REGAN. Wellington, May 20.

(Oilier Letters on Page 11.)