three-quarter millions annually, it yielded over five millions. But by the time that the tax was to expire in 1845, expenditure had increased to such an extent that Peel foresaw another deficit for 1845. In his budget speech of 1845 he asked: "Will you run the risk of entailing a deficiency in future years by making no provision for the time; and seeing that in 1846 the revenue will be sufficient to meet increased expenditure, will you postpone the consideration of what will be fitting to do until that year shall have expired?" The answer he gave was that such a course would not be a prudent one. The real cause of the continuance of the tax, however, was different. So convinced had Peel now become that greater progress must be made in reducing the protective tariff and in diminishing the most burdensome of the excises, that after a frank acknowledgment of the fact that there was no absolute financial necessity for his course, he suggested a continuation of the income tax for another three years, "not for the purpose of providing the supplies for the year, but distinctly for the purpose of enabling us to make this great experiment of reducing the taxes." He, however, still declared that he did not recommend the income tax as a permanent substitute for the more onerous burdens. In his opinion it was to be only a mere temporary resource, to be utilized while the ordinary revenue was recovering itself. "I have been asked what assurance I could give that this tax should expire at the end of three years: if I could have been perfectly sure of success I would have proposed it for five years; at the same time I do think that there are good grounds for hoping that at the end of three years you may be at liberty to discontinue it." As Sir Stafford Northcote points out: "When we compare the language of Peel in 1845 with his words in 1842 it is impossible not to feel that there is a difference of tone, indicating a perhaps unconscious change of sentiment. Not that in 1845 any more than in 1842 Sir Robert Peel intended to impose the income tax as a permanent tax, or contemplated its 1 Speech of February 17, 1845.

becoming such in time of peace; but he had become a little blinder to its faults, a little kinder to its merits, and, above all, a little more alive to the magnitude of the work that might be done by its aid." Lord John Russell, the leader of the opposition, although characterizing the tax as one in which "inequality, vexation and fraud were inherent," nevertheless stated that "if the question be between a perpetual income tax and the continuous monopoly and restriction, I declare for the income tax and a diminution and final abolition of all monopoly."

"2

The country as a whole also supported the scheme, not because it loved the income tax more but because it loved the indirect taxes less. The prevalent view is rather vigorously expressed in a widely circulated pamphlet which declared that the existing system of indirect taxation was “bad in principle, mischievous in operation, interruptive in prosperity in every department of active life, disadvantageous to the rich, and oppressing and destructive to the poor.' As Buckingham pointed out in reprinting his article referred to above,3"Time, that great innovator, has wrought marvelous changes. Sir Robert Peel proposes an income tax and his followers support him. It was at first meant to be only temporary. It is now spoken of as probably to be made permanent. Lord John Russell objects to this in theory, but votes for it in practice." Even McCulloch, who published in 1845 his comprehensive treatise on taxation in which he vigorously opposed the income tax, conceded the strength of Peel's argument, and added: "It was, also, we admit, no easy matter, in the present state of the country, to point out any tax or taxes, fitted to produce four or five millions a year against which several formidable objections might not be

4

1 Twenty Years of Financial Policy, pp. 70, 71.

2 Reasons for a Tax on Property, in Substitution for Duties of Excise and Customs. London, 1846, p. 8.

3 Supra, page 121.

▲ Plan of an Improved Income Tax and Real Free Trade. With an Equitable Mode of redeeming the National Debt. By James S. Buckingham. London, 1845, p. ix.

urged." McCulloch thought, however, that even the worst of the taxes on expenditure "are less objectionable than the most carefully devised income tax." 2

Although the government proceeded rapidly with its programme of reducing and abolishing the protective duties, it did not go fast enough with the repeal of the excise taxes to suit some of the radicals. Furnivall, for instance, objected vehemently to the high excise on malt and hops, and suggested as a substitute the extension of the income tax to incomes below £150.3 The same idea was elaborated with somewhat different arguments by Smee, who proposed an addition to an income tax by "a tax per head" on all day laborers. On the other hand, Miller, who was also a heated opponent of the malt excise and who suggested in its stead an expansion of the death duties, inveighed bitterly against the income tax and went so far as to ascribe the crisis of 1847 very largely to its influence. "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." 5 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

1 A Treatise on the Principles and practical Influence of Taxation, and the Funding System. By J. R. McCulloch. London, 1845, p. 133.

2 Ibid., p. 134.

8 Taxation Revised and National Progress. By Thomas Furnivall. London, 1847, P. 5.

4 The Income Tax; Its Extension at the present Rate proposed to all Classes; abolishing the Malt Tax, Window Tax, and other Taxes, with some Observations on the Tea Duties. By William Ray Smee. London, n. d. [1846], 2d ed., p. 9.

5 Suggestions for a General Equalization of the Land Tax and the Abolition of the Income and Real Property Taxes, and the Malt Duty. By Samuel Miller. London, 1848, pp. 5, 6.

have been devised."1 Extreme statements of this kind were counterbalanced by almost equally extravagant panegyrics, of which that of Cobham may serve as a type. Cobham confessed that "perfection cannot be attained in anything," but added, "Let those who disapprove of the income tax only try to propose a better system; they will then discover the difficulty the impossibility, indeed, of doing so."2 He went so far as to demand the abolition of all other taxes, and their replacement by a single income tax.

When the three years expired, in 1848, Great Britain was in the throes of the distress caused by the railway crisis of 1847-1848. John Stuart Mill, in his great work published in that year, had lent the weight of his authority to the opponents of the tax. Although he conceded its theoretic justice, he found the real objection to be "in the present low state of. public morality, the impossibility of ascertaining the real incomes." 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 is 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 1 A Familiar Treatise on Taxation, Free Trade, etc. Comprising Facts usually unnoticed or unconsidered in Theories of those Subjects. With Notes on Subjects arising incidentally. [By Alexander Gibbon.] London, 1846, p. 223. A somewhat reduced version of this work was published a few years later under the title, Taxation: its Nature and Properties, with Remarks on the Incidence and the Expediency of the Repeal of the Income Tax. By Alexander Gibbon, London, 1851. The passage quoted above is found here on p. 74. Gibbon now adds: "The tax is more offensive in its collection than any other tax, being an inquisitorial infringement of the liberty of the subject - violating the sacred reserve and modesty of private life-lowering the dignity of honourable poverty by exposure of it causing disgust and mortification, and exciting evil passions, at the subjection of the most private affairs to the scrutiny (often the vexatious or malicious scrutiny) of equals or inferiors, by an enforced disclosure to them of such affairs." -- Ibid., p. 76.

2 Direct Taxation. The Income Tax, the Property Tax, and Free Trade. Peace, Retrenchment, and Captain Warner's awful Engines of War. By Samuel Cobham. 1848, p. 19.

pay; even persons 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. This consideration would lead us to concur in the opinion which, until of late, has usually prevailed - that direct taxes on income should be reserved as extraordinary resources for great national emergencies." i With a large deficit staring him in the face, however, Lord John Russell had no thought of abandoning the income tax; on the contrary, in introducing the budget on November 18, he went so far as to recommend its renewal for five years, at the rate of five per cent, i.e., one shilling in the pound.

This proposition aroused so great an uproar that on February 28 Sir Charles Wood, the Chancellor of the Exchequer, dropped the suggestion and asked only for a continuance of the tax at the old rate, and for another three years. "I do not think it would be wise," he said, "to attempt to force upon an unwilling House an addition to an unpopular tax." With this modification the government proposition was accepted. On the other hand, Hume's motion to limit the tax to one year, as well as Horsman's motion to introduce the principle of discrimination, were both defeated by overwhelming majorities. As has been well said, "the income tax, instead of being a temporary staff which might be thrown aside when it had served its turn, had become a permanent and necessary support upon which it was evident that we should have still to lean, and to lean more strongly than ever. . . . A triennial

1 Principles of Political Economy, with some of their Applications to Social Philosophy. By John Stuart Mill. London, 1848, ii, pp. 376, 377. Book v, ch. iii, § 5.