The Sun.
London, England, 1861-02-05 00:00:00

7 CIE INCOME AND PROPERTY TAX.

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TO THE EDITOR OF THE SUN.

SIR,--In the article upon this subject in the
current number of the Quarterly Review, great
stress is laid upon the dishonesty which is assumed
to characterise the returns made under Schedule
D of trading and professional incomes; and the
writer points to the large amounts of " conscience
money" received by Government from "repentant
letters of the alphabet." Some of these amounts
are, however, specified to be for other taxes than
the one in question ; and it would not be fair to
assume that all the sums which are paid in respect
of Income Tax are referable to Schedule D, and
had been fraudulently withheld. Some cases may
have been inadvertent omissions, and on the
9th ult. the Board of Inland Revenue acknow-
ledged the receipt of the enormous sum of
£542 10s. 4d. from one person for " unclaimed
Income Tax," and a sum of £4O was mentioned in
similar terms on the following day. That inade-
quate returns are often made is only too probable,
but is this surprising when men holding high
official positions, and combating the claims of
persons charged under Schedule D, have alluded
more or less distinctly to self-assessment as being
an advantage ?
If a financier feels himself obliged to excuse the
severe taxation of an honest man by the circum-
stance that a cheat relieves himself, he should
certainly prefer proposing to abolish the tax for
ever, and should find a substitute for it free at
least from a duplication of vice. But by the
removal of the grievance which industry suffers
under the present tax, the temptation to fraud
would be considerably lessened ; and therefore the
greater the dishonesty which may now exist, the
less would be the decrease in the aggregate amount
of tax received at the present time under Schedule
D, but the interests of the honest man would not
be prejudiced as now.
When Mr. Disraeli proposed to give to industry
a measure of relief by reducing the tax under
Schedules B, D, and E to three-fourths of the rate
charged upon incomes from land and house pro-
perty, or from the Funds, Mr. Gladstone, on the
6th December, 1852, opposed the reduction, not
upon the ground that it was in itself unreasonable
to make a distinction, but that it so happened this
distinction would constitute a breach of faith with
the public creditor. He alleged that the engage-
ments in the loan acts that the dividends should
be paid free from all taxes and charges whatsoever
were not intended to preclude the fundholders being
subject, in common with every other person in the
land, to a tax for the general service of the State,
but that they were intended to prevent their being
subject to taxes which looked to the quality of the
income, and the source from which it was derived.
In support of this interpretation he quoted parts of
Mr. Pitt's speech on 3d Dec., 1798, in introducing
the Income-tax. If your readers will turn to this
speech, they will find that Mr. Pitt's observations
were made for the purpose of refuting any preten-
sions on the part of the fundholder to be free from
the tax, If he spoke, as Mr. Gladstone said, of
"the quality of the income and the source from
which it was derived," he was merely arguing
against those men who would ask for an exemption
from the tax on the ground that the source of their
income was the public funds; and whilst avowing
that it would be a breach of faith to charge them
with a tax "distinctly levelled at them as annui-
tants of the public," charged "separately and dis-
tinctly" upon them only, " peculiar to them. and
belonging (not ' looking') to the quality of their
income," he asserted that in the case of a general
tax they were not entitled to any more considera-
tion than if they had invested their capital in any
other manner. Hence these very words of Mr.
Pitt might be cited to show that if it is right
to make a distinction in the Income Tax between
earnings and incomes from land, the distinc-
tion is equally necessary between earnings and
dividends from the Funds. It is true that he
was not prepared to allow any distinction in
favour of labour, but this question was not raised
when he made his speech and his reason for
opposing it appears, from a subsequent debate, to
have been one wholly independent of Schedule
C, viz., the circumstance that the charge of the
same nercentag. ni-mn nil deserintinns of inenmps
left them of the same relative magnitude as be-
fore. The sufficiency of this reason has yet to
be discussed, but the above objection to a dis-
tinction between labour and property was attri-
buted to expressions used by,Mr. Pitt with a very
different meaning, and without any allusion what-
ever to the point in dispute.

The claim to a reduction of the tax upon in-
dustrial incomes may be made, not as a matter of
grace and favour to the quality of those incomes,
but as a question of common arithmetic.

Mr. John Stuart Mill stated to the Income-tax
Committee in 1852, with reference to terminable
incomes derived from either property or labour,
" I do not conceive that the tax should be in pro-
portion to the means only, but that it should take
into consideration the means and also the wants.
I would, therefore, tax temporary or precarious in-
comes at a lower scale than permanent or certain
incomes, not because of their having a less selling
value, but because the possessors of those incomes
have one want which those who possess permanent
incomes have not ; they are liable to be called upon
in most cases to save something out of that in-
come to provide for their own future years, or to
provide for others who are dependent upon them ;
while those who possess permanent incomes can
spend the whole, and still leave the property to
their descendants or others. It is for this reason
that I would tax a temporary income at a loweir
rate than a permanent income."
All that is saved out of such incomes to meet
the liabilities specially attaching to them is taxed
twice. It would be easy to show that when such a
saving is invested in the purchase of either a free-
hold property or a life annuity, its annual produce
bacomes liable to the same amount of Income Tax
in present value that is paid in respect of a
. . _

patrimonial estate, whilst it (the former) has been
taxed to just this extent already—i.e., when received
in the first instance as income, and before any
benefit was derived from it. Now, as a temporary
income from property is commonly sought as a life
provision, and no reserve is therefore made in such
case of any portion of the income, no second tax is
levied. And the man who sinks money in the pur-
chase of tt temporary income for any other purpose,
will, when calculating the price at which he intends
to make the investment, take in to account the second
tax which will be levied upon his reserves ; and if
he cannot effect the purchase upon satisfactory
terms he can choose some other investment. Very
different, however, is the case when these prin-
ciples are examined in connexion with incomes
which are earned. There is no option here, and
reserves are required to be made for loss of trade
or employment, for occasional illness, for possible
disablement, for death certain and perhaps early,
for a widow, for orphan daughters. These are
liabilities which cannot, therefore, be overlooked in

, the consideration of an industrial income, particu-
larly if we subscribe to the righteous principle
enunciated by Mr. Mill, that taxation should
require an " equal sacrifice from all." Premiums
upon life assurance are indeed exempted from
Income Tax, but the reserves which are made to
meet the terrible liabilities of industrial incomes
are invested in a hundred other ways, and upon
these the second tax is levied. Yet a trader may
end by losing all in bankruptcy, and if a professional
man's income is not attended with such risk,
still it entails an expense peculiar to itself,
fcr society compels him generally to keep
up an appearance beyond his desires, or he
loses its patronage and his income fails.
Further, the precariousness of an industrial income
was alleged by Mr. Mill as a ground for a reduc-
tion of the tax upon it, beyond the reduction re-
quired by the circumstance of the reserves which
should be made out of it—precarious, dependent
upon the pleasure a other men, and the run of
events, and therefore fluctuating in amount. Let
it be granted that the protection of the State is
equally, nccessa7 to property and to labour, and
even that the float of the brow is to be regarded
with no mariOf our than the operation of interest;
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