But we must further say a few words, bearing directly upon this tax. Odious as it may be to the community, we cannot shut our eyes to the fact that there is much danger of its being reimposed; because Ministers possess a certain majority in the present House of Commons, and are not likely to leave any means untried for effecting their object. It is to them, indeed, of paramount importance; because, if they can succeed in saddling us with this tax for a further period of three years, they may easily excuse themselves for declining to undertake the revision of our financial system. We therefore deem it our duty to look a little more narrowly into the details of the former acts than, would otherwise have been our wish or inclination.
Our readers will certainly recollect that in 1848, when the Income-Tax was reimposed for the third time, the Whigs made a strenuous effort both to extend its existence and to augment its burdens. What they modestly proposed was this, that the Income-Tax should be extended over a period of five instead of three years, and that during two of these years the assessment should be raised from sevenpence to a shilling per pound. The result—which it argues the uttermost degree of imbecility in Ministers not to have foreseen—was a roar of disapprobation from one end of the country to the other; and the scheme thus foolishly broached was as pusillanimously withdrawn. Indeed, had it not been for the peculiar circumstances of the time, which rendered it exceedingly unadvisable that the stability of any Government, however weak and incompetent, should be endangered, it is very questionable whether Ministers could have succeeded in persuading the House of Commons to submit to this tax even upon modified terms. But the contents of the budget were hardly disclosed, before the roar of revolution was heard in the streets of Paris, and the Throne of the Barricades was overthrown by the self-same hands which had reared it. That evidently was not a time for the lovers of order to persist in an opposition which, if successful, might have resulted in confusion at home; so that a new lease of the Income-Tax was granted upon the same terms as before. On occasion of the first obnoxious proposition, we expressed our opinions freely with regard to the whole constitution of the tax, pointing out both its injustice and its impolicy, in an article to which our readers may refer for the more general argument.[52] But there are one or two points with which we must separately deal.
The Act presently in force provides that farmers shall be assessed, not upon profits, but upon rental, to the extent of threepence-halfpenny per pound, on farms for which they pay £300 per annum and upwards. The gross amount of the sum so raised was in 1848 £309,890. Now, it is perfectly well known to every person that not one farmer out of ten has made a single penny of profit since the withdrawal of the duties on foreign corn in the commencement of last year. In the great majority of cases rent is at this moment paid out of capital, as the landlords will find to their cost when the leases expire, if many of them are not already perfectly cognisant of the fact. If this be the case, it becomes plain that this mode of assessment cannot be continued. To do so, would be for the State to use its power to commit an actual robbery. So long as any profit exists, the State has a right to tax it; unjustly it may be, and partially, but still the title is there. But the State has no right whatever to deprive any man of his property under false pretences. If a tax must be levied on income, so be it; but income is not a thing to be presumed under any circumstances, still less when the State, by its own deed, has made a violent change on the relation and values of property. To force the farmers, of new, to pay this tax under the old conditions, would be an act of intolerable tyranny and oppression, for which the constitution of Great Britain gives no warrant; and we hardly think that any Ministry will be insane enough to adopt such a course.
There is, however, another feature in the Income-Tax upon which far too little attention has been bestowed. In this country Repudiation has always been looked upon with just horror. Something Pharisaical there may be, no doubt, in this grand adulation of credit; for an unprejudiced bystander might be puzzled to comprehend the precise reasoning of those who are convulsed at the thought of a lessened dividend from the Funds, whilst they can look quietly on at the ravages which are made in property of another description. Still, the feeling exists, and assuredly we have no wish that it should be otherwise. But we are bound to say that, if other ideas are to be encouraged on the subject of unimpaired credit, this Income-Tax seems to us most eminently calculated to pave the way for their introduction.[53] Such was our opinion in 1848, and such is our opinion now. Once establish the principle of taxing the Funds, and there is no length to which it may not be carried. It will not do to say that the Funds are taxed in proportion with other property. That is not the case. This is an exceptional Act, creating and enforcing distinctions, and it excepts all incomes under a certain amount. It therefore virtually establishes the principle that it is lawful to tax the possessors of one kind of property (the Funds) for the benefit of the possessors of another kind of property who are excepted. In 1848 it was proposed that the assessment should be raised to one shilling in the pound. What would the fundholders say if some future unscrupulous Minister were to raise the assessment to five shillings or ten shillings per pound, and exempt every one from the operation of the act except the holder of national bonds? There can be no difficulty about a principle for doing so: it has been already admitted. Nay, more: the provisions of the Income-Tax are in direct violation of the most solemn engagements entered into by Acts of Parliament. As an instance of this, take the following:—
The act 10 Geo. IV. cap 31, which has for its object the funding of £3,000,000 of Exchequer Bills, contains the following clause: "And be it enacted, That such subscribers duly depositing or paying in the whole sum so subscribed at or before the respective times in this act limited in that behalf, and their respective executors, administrators, successors, and assigns, shall have, receive, and enjoy, and be entitled by virtue of this act to have, receive, and enjoy the said annuities by this act granted in respect of the sum so subscribed, and shall have good and sure interests and estates therein according to the several provisions in this act contained; and the said annuities shall be free from all Taxes, Charges, and Impositions whatsoever." It needs no lawyer to interpret the clause. By solemn Act of Parliament the dividends were guaranteed free from all taxes whatsoever.
So thought Sir Robert Peel in 1831. When in that year a proposal was made to levy a small tax from the transfer of stock in the public Funds, he denounced the measure in the strongest terms, as a violation of the contracts made with the public creditor, and as a proceeding which must necessarily "tarnish the fair fame of the country." "He (Sir Robert Peel) dreaded that an inference would be drawn from the proposed violation of law and good faith, that a further violation was not improper. If in these times of productive industry and steady progressive improvement—if, in such times, in a period of general peace, when there was no pressure on the energies and industry of the country—the Government contemplated the violation of an Act of Parliament, and express contract entered into with the public creditor, what security could the public creditor have if the times of 1797 or 1798 returned?" Contrast this language with the propositions of the same eminent statesman in 1842, when he introduced the Income-Tax for the first time. "I propose that, for a time to be limited, the income of this country should bear a charge not exceeding sevenpence in the pound.... I propose, for I see no ground for exemption, that all funded property, held by natives in this country or foreigners, should be subject to the same charge as unfunded property."
No ground for exemption! Mark that, gentlemen who are interested in the Funds. On no mean authority was it then announced that an Act of Parliament, however solemn and stringent in its terms, is no fence at all against the inroads of a Chancellor of the Exchequer. True, people may have lent their money on the strength of that positive assurance; true, it may have been made the basis of the most important family arrangements: but all that matters nothing. Money is wanted to make "experiments," for the purpose of stimulating manufactures; and what is the maintenance of public faith and honour, compared with an object so important? So, in order to stimulate manufactures, the principle of repudiation was recognised.
After all, perhaps, British subjects might be content to submit themselves to the loss, and be thankful that it was no worse. But what shall we say to the forced taxation of property belonging to foreigners, and invested in the British Funds? What interest or concern had they in experiments upon British manufactures? Just let any of our readers suppose that he has invested the whole of his property in Dutch bonds, and that, after receiving two or three dividends, he is informed that, for the future, one half of his annuity will be retained by the Dutch Government, because, in order to "stimulate" the internal industry of Holland, it has been thought advisable to drain the Zuyder Zee! Would Lord Palmerston, if such a case were brought under his notice, sustain the plea of the Dutchman? We trow not—at least we hope not; for such a claim for redress would certainly proceed upon far better grounds than any which were urged by Don Pacifico. The two cases are precisely similar. The Dutch Government would have as much right to appropriate the dividends belonging to British subjects for the purposes of stimulating the internal industry of Holland, as the British Government has to retain any part of the dividends belonging to foreigners, for the declared object of stimulating British manufactures. If this free-and-easy mode of "conveyance" is to become general, there is an end of public credit. Henceforward it will be but decent for us to use a moderate tone while speaking of Pennsylvanian defalcations. American swiftness may have outstripped us in the repudiatory race; nevertheless, we have gone far enough to recognise the principle, and to appropriate sevenpence in the pound.
We need not dwell on other evident objections which may be raised to the continuance of the Income-Tax. These suggest themselves to the minds of every one, and have been often pointed out and dwelt on by public writers. The danger of maintaining a war tax in time of peace—the eminently inquisitorial nature of the impost—and the injustice of assessing professional men, authors, artists, &c., whose incomes depend solely on their health, at the same rate as the possessors of accumulated property, are reasons sufficient to condemn it. But the most monstrous injustice, to the already severely burdened people of Great Britain, is the exemption of Ireland from its operation. It is impossible to assign any valid reason for the policy which dictated this odious partiality. Sir Robert Peel in 1842 could not find any better excuse than the following: "When I am proposing a tax, limited in duration, in the first instance, to a period of three years, and when the amount of that tax does not exceed three per cent, I must of course consider, with reference to public interests, whether it be desirable to apply that tax to Ireland. I must bear in mind, that it is a tax to which Ireland was not subject during the period of the war; that it is a tax for the levy of which no machinery exists in Ireland—Ireland has no assessed taxes—the machinery there is wanting, and I should have to devise new machinery for a country to which the tax has never been applied."
Most rare and convincing logic! Because Ireland on a former occasion was not taxed, she is not to be taxed now; because she pays no assessed taxes, her income also is to be exempted from contribution! Why, these were, of all others the very strongest arguments for laying it on; and most contemptible indeed was the pusillanimity of the representatives of English and Scottish constituencies, who did not on that occasion peremptorily demand the enforcement of equal burdens. What a premium to agitation is here held out! The Irishman with a yearly revenue of £150 a-year, pays no assessed taxes—is cleared from some excise duties—and enjoys an immunity from Income-Tax. The people of England and Scotland are kind enough to save him all these charges, in grateful recognition, doubtless, of his exceeding docility, and proverbial attachment to the Constitution. As to the allegation of want of ready-made machinery, the answer was plain—Make it. Nine years have gone by, and yet it is not made, and there is no proposal for making it; and it remains to be seen whether the fourth attempt at imposition will be as grossly partial is the others. If this tax is again renewed, there can be henceforth no escape from it. It matters not whether the term of the new lease be seven, or five, or three years—the tax itself will be immortal, and surely we shall not be insulted this time with a plea of deficient machinery.