INCOME TAXATION

Te Awamutu Courier, Volume 64, Issue 4563, 22 April 1942, Page 8

INCOME TAXATION

PEEL’S MODEST BEGINNING PROPHETS OF DISASTER

(By

H.W.M.)

When Sir Robert Peel was responsible for the re-enactment of the income tax in March, 1842, the people of England certainly did not like it any more than we do to-day. It was only 100 years ago, on March 11, since Sir Robert Peel made proposals in his famous budget speech of 1842, to re-enact the Income Tax upon a basis approximating to that in vogue to-day. His scheme, which caused many bitter debates, and which did not actually become law until the last day of the following May, stands out as the first genuine attempt in England to impose taxation which would ensure an equality of sacrifice according to income. According to Seligman, in “The Income Tax,” France was the only European country in the eighteenth century to develop an Income Tax, because it was the only country in which industry and commerce had attained any considerable importance, but during the eighteenth century France was being slowly overtaken by England, and by the close of the century it was England that was ready for a new attempt. Taxation, prior to 1842, had been levied very unevenly upon the community, many favoured ones escaping it altogether. Whenever a Chancellor of the Exchequer wanted extra money he generally resorted to the imposition of higher duties, as well as new duties, upon imports and upon commodities in daily use. It was the utter inadequacy of the amount of revenue raised from duties on various articles of merchandise to meet the needs of the nation that rendered a more scientific method imperative. As an illustration of revenue raising in England in 1792, it is sufficient to record that, out of a total of about 174 millions, taxes on articles of food and drink were responsible for 9 millions. VIOLENT OPPOSITION Suggestion of reforms of a sweeping nature usually provoke economists and politicians, who see dire disaster facing the nation if such proposals ever reach the statute books. Have we not had countless instances of this fact in our own country? If the prognostications of these jeremiahs had been realised, Victoria would have sunk into a financial morass when Protection became law; one man one vote would have brought about social and political chaos; votes for women would have robbed our womanhood of every estimable charm and virtue, while the early closing laws and the Saturday half holiday would have involved every business in financial ruin. Though tjone of these prophecies was fulfilled, the ranks of the foretellers of disruption never seem to diminish. In view of the general acceptance of the heavy imposts levied on us all in these days, as well as the recognised ferret-like qualities of income tax officials the world over, the opinions of many of the leaders in opposition to Peel’s proposals of 1842 make interesting reading. Thus, Hilditch, a well-known writer of the day: “Nothing enlarged or greatminded—nothing, in fact, beyond the most rickety accommodation and joinery of discrepant interests and parties was to be expected from Sir Robert Peel.” He concluded by saying “no other tax is so objectionable as the income tax.” Buchanan, the author of a large work on taxation, bitterly complained of “these inquisitorial proceedings, arbitrary as they are —a practical inroad on the rights of freeman, to which there is no parallel, even under the most absolute Governments of Europe, and truly an anomaly in a country long famous for its love of liberty.” GIBBON’S DENUNCIATION Another well-known economist, named Miller, went so far as to ascribe the crisis of 1847 as very largely due to the influence of income taxation. “In any other free country besides Great Britain,” he added, “the imposition of a perpetual income tax, with all its inquisitorial accompaniments, would be the germ of a revolution.” The climax, however, was reached by Gibbon, who, after recounting every possible objection, stated: — “If human ingenuity had been racked to invent a tax, the imposition of which should be the greatest possible departure from, and the greatest violation of, the principle of making every member of society contributory to it, in due proportion to . . . his means ... a tax more effective of that purpose than the tax upon income could not perhaps have been devised.” John Stuart Mill lent the weight of his authority to the opponents of the tax, but his reasoning strikes one as somewhat involved. This is what he said:—“ln the present low state of public morality the impossibility of ascertaining the real income is the main objection.” The supposed hardship of compelling people to disclose the amount of their incomes ought not, Mill held, to count for much. But as flagrant fraud was unavoidable, “the tax, on whatever principles of equality it may be imposed, is in practice unequal in one of the worst ways, falling heaviest on the most conscientious. . . . The unscrupulous succeed in evading a great proportion of what they should, pay; even persohs of integrity in their ordinary transactions are tempted to palter with their consciences, while the strictly veracious may be made to pay more than the State intended, by the powers of arbitrary assessment necessarily entrusted to the commissioners. It is to be feared, therefore, that the fairness which belongs to the principle of an income tax cannot be made to attach to it in practice, and that this tax, while apparently the most just of all modes of raising a revenue, is in effect more unjust than many others which are prima facie more objectionable.” Even Peel himself, in his speech on 18th March, 1842, referred to “ the great objection to the income tax—that which arose from its necessarily inquisitorial character.” A LIGHT IMPOST The receipts from the early income taxes of England were only pocket money in comparison with the giganI tic amounts handled by Governments | to-day. When Peel introduced his famous bill, he proposed a tax of 7d

in the £; equal to £2 18s 4d per cent., but the rate was eventually fixed at 31d for England and 21 for Scotland. Peel desired his act to operate for five years, but in the face of opposition he had to be content with a three years’ term. He estimated he would r eceive £3,750,000 per annum, but the amount collected exceeded £5,000,000. How taxpayers of to-day must sigh for a return to “ the good old days ” ! But if they sigh all day and all night, those days have gone, never to return.

The first Commonwealth income tax was levied during the year 1915-1916, while the Victorian income tax was first imposed in 1895. Like so many other financial measures, these enactments were at first intended to be temporary, but with amendments and alterations, they, like the British acts, have never been removed from the statute books. A FAMOUS LAMENT The incidence of taxation prior to Peel’s act was wittily summed up by Sydney Smith, in the “Edinburgh Review.” “We can inform Brother Jonathan what is the inevitable consequence of being too fond of glory. Taxes on every article which enters the mouth or covers the back or is placed under the foot. Taxes upon everything which it is pleasant to see, hear, feel, smell or taste. Taxes upon warmth, light and locomotion. Taxes on everything on earth and under the earth, on everything that comes from abroad or is grown at home. Taxes on the raw material, taxes on every fresh value that is added to it by the industry of man. Taxes on the sauces which pamper man’s appetite, and the drug which restores him to health; on the ermine which decorates the judge and the rope which hangs the criminal; on the poor man’s salt and the rich man’s spice; on the brass nails of the coffin and the ribbons of the bride; at bed or board, couchant or levant, we must pay. The schoolboy whips his taxed top; the beardless youth manages his taxed horse with a taxed bridle, on a taxed road, and the dying

Englishman, pouring his medicine, which has paid 7 per cent., into a spoon which has paid 15 per cent., flings himself back upon a chintz bed, which has paid 22 per cent., and expires in the arms of an apothecary who has paid a license of £lOO for the privilege of putting him to death. His whole property is then immediately taxed from two to ten per cent., besides the probate judge’s fees demanded for burying him in the chancel; his virtues are handed down to posterity on taxed marble, and he will then be gathered to his fathers to be taxed no more.”