The new property and income tax act," as it was now called, which was especially limited to the April following a definitive treaty of peace,1 contained three important classes of modifications, most of which have remained to the present day. The first was the extension of the stoppage-at-source idea originally applied in Addington's act of 1803. It will be remembered that in Schedule C, while the Bank of England was required to make certain returns as to the dividends from the public funds, the tax itself was assessed on the owner or his agent.2 Henceforth, however, the Bank of England itself was required to make the assessment and to deduct the tax. Foreigners not resident in the British dominions were exempt upon proof of their claims. Thus was Schedule Cassimilated to Schedules A, B, and E. Moreover, Schedule C was now enlarged by taking over from the third case of Schedule D the duty on all securities issued at any governmental office.

The second class of alterations involved the abatements and: deductions. In the first place, the right of total exemption was declared inapplicable to incomes derived from property, such as real estate, securities, and moneyed capital in general, with a few minor exceptions.3 The total exemption, hence, was restricted substantially to incomes from trades, professions, and personal exertions.1

Secondly, the limit of total exemption, in the cases where it still remained, was reduced from £60 to £50. The reasons for this change are well put in the official Guide Book. "So

1 46 George III, c. 65. "An Act for granting to his Majesty during the present war, and until the sixth day of April next after the ratification of a definitive treaty of peace, further additional rates and duties in Great Britain on the rates and duties on profits arising from property and professions, trades and offices."

2 The last provision as to agents had been repealed by 44 George III, c. 37. 3 These were cottages not exceeding forty shillings a year, occupied by the owners; property not exceeding the annual value of £5, belonging to laborers whose wages did not exceed thirty shillings a week; ecclesiastical profits; profits of mines and quarries, and annuities under £50 a year.

Dowell, History of Taxation, 2d ed., iii, p. 103, is characteristically inaccurate in stating that it applied only to wage-earners. Buxton, Finance and Politics, i, p. 309, who evidently copied from Dowell, makes the same mistake.

baneful is indulgence on weak minds that this regulation, intended to have a strict and limited operation, has been introductive of the greatest fraud on the public," many people in easy circumstances having returned their income as just under £60.1 In the third place, the system of abatements was so changed that with every pound of income below £150, I shilling tax was deducted; thus, at The abatement was 100s. The abatement was 998. The abatement was 98s. and so on, until at The abatement was The abatement was

50 the charge was 100s. £51 the charge was 1025. £52 the charge was 1045.

The tax was OS.
The tax was
The tax was

35.

65.

IS.
OS.

The tax was 297s.
The tax was 300s.

£149 the charge was 298s. £150 the charge was 300s. Fourthly, as the deduction for children under the old law had led to an astounding official increase of large families, this was now discontinued. Fifthly, the allowance for repairs to houses in Schedule A was abandoned, for the reason, as stated in the Guide Book, that it had been found "so inadequate and to operate so inequally, and to be demanded in many cases where repairs were done by tenants." Finally, the allowance for life-insurance premiums was restricted to persons with an income under £150.

2

Several changes were also made in the details of the different schedules. In Schedule A, where the ordinary rule was the assessment on the profits for the year, tithes in kind were assessed on an average of three years, manors and other royalties on an average of seven years, and mines on an average of five years. In Schedule B, warehouses and other business premises were exempted from taxation. In Schedule D, in the third case applying to profits of "an uncertain annual value" a new provision was inserted applicable to dealers in cattle and sellers of milk. Where the lands occupied by such dealers were not sufficient for the sustenance of the cattle, so that the rent of the lands did not afford a just estimate of the profits of the dealer, the commissioners were authorized to increase the charge.

1 Guide to the Property Tax Act, 1856, p. 13.

2

Op. cit., p. 14.

The important changes in administrative procedure were as follows: In the first place, the whole system of referees, as provided in the law of 1803, which had not worked well, was now dropped. The system of Additional Commissioners was, on the contrary, retained. In the next place, provision was made for a new set of commissioners known as commissioners for the "special purposes of this Act," or, for short, Special Commissioners. These were invested with the function of granting allowances in Schedule A, of supervising the exemptions in Schedule C, and of taking charge of the assessment of foreign dividends. These Special Commissioners were not selected by the General Commissioners, as were the Additional Commissioners, but were appointed by the Commissioners for the Affairs of Taxes, representing the central government.

The provision as to the liability to the tax after six months' residence was altered so as to make the residence cumulative; that is, if a person resided in England for a short time, then departed, and again returned, he was liable, if during the year he had resided altogether for a period of six months.1 The provisions with reference to assessors, notices, lists, etc., which had previously been confined to Schedule D, were now made applicable to all schedules. The abatement in Schedule D which was permitted to taxpayers when they could prove that their actual profits were less than the amount assessed upon them and which, under the law of 1803, had been allowed only where the taxpayer was not assessed on the average system, was now extended to all cases, irrespective of whether the taxpayer had been assessed on his year's profits, or on the three years' average system. In all other respects, however, the administrative provisions of the earlier laws were continued.

The improvements effected in the operation of the law through the extension of the stoppage-at-source principle, and through the alterations mentioned above, were at once reflected in the yield. The rate, as we have seen, was raised

from six and one-fourth to ten per cent; yet the produce of the tax jumped from £6,429,599 in 1805 to £12,822,056 in 1806. In other words, roughly speaking, an increase in the rate of the tax by only one-half doubled the yield; a fifty per cent augmentation resulted in one hundred per cent increase in the produce. This, again, affords a striking illustration of the significance to be attached to administrative methods.

During the continuance of the war, that is, for just a decade, the tax remained in force at the same rate of ten per cent. Owing in part to the growth of population and industry, but in still larger measure to the increasing efficiency of the administrative methods, the yield of the tax gradually rose, until toward the end of the period its produce amounted to almost £16,000,000— well-nigh eighty million dollars - a prodigious sum for those days. As a fiscal device, there could be no doubt as to its success.

The fame of the income tax spread to the Continent.1 The literary critics were gradually silenced, and were limited either to well-meaning and somewhat crack-brained enthusiasts, like Coad, who included well-nigh all existing taxes in his denunciations, or to writers like Grey, who demanded a reduction of the burdens on particular classes, as, for instance, the military and naval officers. Several efforts were made by the

1 Cf. Das Britische Besteuerungs-System, insbesondere die Einkommensteuer, dargestellt mit Hinsicht auf die in der Preussischen Monarchie zu treffenden Einrichtungen. Von Friedrich von Raumer. Berlin, 1810. Raumer, however, is much opposed to the whole scheme. See esp. p. 233.

2 Coad speaks of the income tax as being "in its nature the most perplexing, in its effects the most ruinous, and in its opperations (sic) the most partial.". A New Plan of Taxation. This Plan will render the Custom and Excise Duties useless, abolish the Income Tax, take off all the Assessed Taxes, and reduce Provisions more than Seventy per cent, etc. By Joseph Coad. London, 1807, p. 10. He uses almost equally violent language, however, as to all other taxes, except the land tax and the poll tax, which constitute his "new plan of finance.”

3 Grey grows very eloquent in his metaphors. "The tax has no passover; the destroying angel visits every door, allows of the validity of no mark of blood on the lintel and side-posts, to induce him to pause in his destructive course; for the destroyer comes, with ferocious swoop, into our houses, to smite us and our firstborn; no door is exempt from his dire visitations." - A Letter Addressed by Col.

opposition, but to no avail, in 1806, 1808 and 1809, to abolish the exemption for foreign holders of government stock.1 The Scotch farmers also complained, in 1808 and 1810, of the method of assessing profits on the basis of rentals, holding that farmers' profits were often as fluctuating as those of business men.2 In 1811, Turton protested against the lack of what would now be called both differentiation and graduation, but the Chancellor of the Exchequer objected to both schemes, stating as to the latter that "as for laying a higher income tax upon the richer classes, it would be a complete subversion of all the principles of justice, by which the property of all men should be equally protected by the law." 3 In the main, however, all discussion of the tax was silenced in the face of the gigantic struggle against Napoleon.

§ 8. The Repeal of the Income Tax

As the war drew to a close, however, a movement was set on foot to compel the government to redeem its pledge and to drop the tax. The City of London, as usual, led in the agitation, and drew up a petition in December, 1814. Other towns followed during the next few months. When parliament opened, in February, 1815, Vansittart, Chancellor of the Exchequer, declared that he did not intend to renew the tax. He stated that it ought to be held "as a great and powerful resource which, in times of public emergency, might and ought to be resorted to," but he thought that the great fluctuations in prices then going on would "render it peculiarly vexatious and disagreeable to large classes." 4 So great was the joy occasioned by the announcement that Tierney made a celebrated speech with a peroration in which "he begged

John Grey to a Member of the House of Commons on the Subject of the Liability of the Pay of the Officers of the Navy and Army to the Tax upon Property. London, 1810, pp. 28, 29.

1 See Hansard, vol. vii, p. 407; vol. xi, p. 898; vol. xiv, p. 1018.

2 See the Farmer's Magazine for 1808, passim, and for 1810, p. 519. 3 Hansard, vol. xx, p. 747.

4 Hansard, vol. xxix, p. 853.