believe our neighbors are seldom any the wiser; but if they were, I hold that so long as in every centre of population there exist such masses of abject misery, no minister of a great country would be justified in regarding such an argument as any more than dust in the balance." 1

§ 2. The Growing Permanence of the Tax, 1874-1894 Notwithstanding the diminution of the opposition, however, a final effort was made by Gladstone in 1874 to abolish the tax. After five years of office he was in possession of a large surplus and he now suddenly dissolved parliament, going to the country on January 24 with an appeal in which he promised, if returned to power, to abrogate the income tax once and for all. The tax, he thought, had been borne with "exemplary patience," but this was because of its temporary character, "the country cherishing, together with the desire, the expectation, the hope of its extinction." And its extinction Gladstone now declared to be possible: "According to the older financial tradition, the income tax was a war tax. For such a purpose it is invaluable: . . . At a sacrifice for the financial year of something less than four and one half million pounds, the country may enjoy the advantage and relief of its total repeal. I do not hesitate to affirm that an effort should now be made to attain this advantage, nor to declare that according to my judgment it is in the present circumstances practicable."

The election, however, turned only partly on fiscal questions. Moreover, it must not be forgotten that the Tories also held out some prospect of repealing the tax. In Disraeli's election address he referred to "the diminution of local taxation, and the abolition of the income tax measures which the Conservative party have always favored, and which the Prime Minister and his friends have always opposed." In fact, the general expectation was now widespread that no matter how the election might turn out, the end of the income tax had come. The Times, in its issue of January 26,

1874, stated: "It is now evident that whoever is Chancellor of the Exchequer when the budget is produced, the income tax will be abolished."

The Liberals were overwhelmingly defeated, and Gladstone regarded the defeat as the definitive end of the movement to repeal the tax. Many years later he sought to explain his action at this time, and to defend himself against the charge of political bribery which had been preferred against him by Lecky.1 "Those who gave the promise (in 1853)," wrote Gladstone, "believed the thing they promised to be politic and right. . . . They bound themselves to get rid of the principal direct tax, and none but the nation could absolve them from the attempt to fulfil their effort. Public exigencies postponed for fourteen years the practical acknowledgment of the obligation, but it has never been forgotten. The way had been carefully prepared by the ministry of 1868-1874, through successive reductions of the tax from 8d. to 3d. In 1874, for the first time since 1845, the opportunity arrived. The nation had its opportunity to take its choice; it may have been wise or unwise, but it was made by competent authority. The result is told in our present expenditure of ninety millions. What, in Mr. Lecky's mind, is a basis of unequalled political profligacy was, in prospect, and is in retrospection, according to my conviction, the payment of a debt of honour and the fulfilment of a solemn duty."2 Lecky replied that he did not impugn Mr. Gladstone's motives, but that bribery, nevertheless, was the nature of the act. "He must excuse me," Lecky went on to say, "if I add my opinion that the decisive and somewhat indignant rejection of his offer by the constituencies was an encouraging sign of the sound political morality of the nation."3

1 Lecky, History of England, vol. 6, p. 300, had said: "No modern statesman would attempt to bribe individuals or purchase boroughs, like Walpole or like North, but we have ourselves seen a minister going to the country on the promise that, if he was returned to office, he would abolish the principal direct tax paid by the class which was then predominant in the constituencies."

2 The Nineteenth Century, xxi (1887), p. 935.

8 Lecky, "Mr. Gladstone and the Income Tax," ibid., vol. xxii, p. 54.

The new Chancellor of the Exchequer under the Tory ministry, Sir Stafford Northcote, in introducing his budget, proposed that the income tax be continued at the nominal rate of 2d. "Such a mighty structure," said he, "as that of the income tax was not to be allowed to be thrown down at six weeks' notice." He did, indeed, intimate that the tax would expire entirely as the surplus continued, although he stated that it ought to be kept "ready only for some great emergency, and not to be called upon for trivial occasions." As a matter of fact, however, the surpluses were soon dissipated, and not only was there no thought of abrogating the tax, but the government and the country virtually abandoned the idea of retaining it at a simply nominal rate. The consequence was that the income tax was now utilized from year to year as the exigencies of the budget demanded, and became an acknowledged part of the permanent fiscal system.

"1

The belief in the temporary character of the tax, however, died hard. In 1874, after the election, Professor Levi stated: "Its unpopularity, its uncertainty, and its injustice are a sufficient barrier to the general acceptance of the tax as a permanent branch of the revenue, and it is wise to accept the irrevocable judgment formed of the tax long ago on this subject, by the public at large, and the dicta more recently pronounced against it by the Rt. Hon. W. E. Gladstone. Three years later an anonymous author, who was now becoming somewhat fearful of the outlook, placed all the responsibility on Gladstone. "No one more than he had committed himself to the extinction of the tax. No one had done so much to prevent that extinction."2 Quoting the petition of the Hull and East Riding Anti-Income-Tax Association, that "the income tax ought to be entirely excluded from the ordinary revenue, and kept as the fiscal reserve for which it was designed," he closed his appeal by

1 Leone Levi, "On the Reconstruction of the Income and Property Tax," in Journal of the Statistical Society, vol. xxxvii (1874), p. 169.

2 Shall the Tax be Permanent? By the author of Our Deficient Revenue and the Income Tax. London, n. d. [1877], p. 9.

saying: "to prolong the policy of the last dozen years is little less than political lunacy; it is trifling with loyalty and an abuse of patience." 1

In 1880 Gladstone returned to power, but the question of the abolition of the income tax was touched upon by him only once. In a speech of April 25, 1884, he alluded to the action of the country ten years before. "The matter was referred to the country at a general election. They declined the offer of abolishing the tax that was given them, and I can promise that a sufficient number of years will pass over the heads of Englishmen before they will have another opportunity of abolishing it." Hubbard, however, gave a more adequate explanation: "Mr. Gladstone has not explained why he did not abrogate the income tax when he resumed office in 1880. The reason is obvious: neither in 1874, nor in 1880, nor in any later year, could an income tax be dispensed with, for it is now, as a substitute for indirect taxation, the only means of taxing classes of persons who would otherwise escape scot free, or nearly so."2 Thus we can thoroughly agree with the opinion of his biographer that "in all these divers ways, then, while Mr. Gladstone's dream was to repeal the income tax, his fiscal reforms and his financial work have tended to make it permanent.'

While Gladstone, however, found it impossible to repeal the tax, his influence sufficed to prevent any important change in its constitution. Hubbard, despite his failure in 1861, had never abandoned his cherished hope of accomplishing its differentiation. In 1875 he attempted to bring the matter up again in parliament, but found no opportunity to deliver his speech, which was thereupon printed separately. In this

2 Gladstone on the Income Tax. Discussion of the Income Tax in the House of Commons on 25th April, 1884. With Preface and Historical Sketch, including a Proposed Bill. By the Rt. Hon. J. G. Hubbard. London, 1885, p. 14.

3 Mr. Gladstone, etc. By Sydney Buxton. London, 1901, p. 135.

* Local and Imperial Taxation. A speech of the Right Hon. John Gellibrand Hubbard, M.P., the Delivery of which on Tuesday the 20th of July, was precluded by the Counting out of the House at 9 P.M. London, 1875.

speech Hubbard stated that the official returns “furnish a distressing series of details of fraudulent returns." After citing these in extenso, he lamented that "the records of the Inland Revenue exhibit so frightful a picture of habitual untruthfulness and fraud." He ascribed this situation, as usual, almost entirely to the lack of differentiation. Others agreed with him. In 1883 Haywood, of the Council of the Liverpool Financial Reform Association, read a paper at the Social Science Congress at Huddersfield, reverting to the old idea that the tax should be levied on property alone. Shortly afterwards, the former Financial Secretary of the Treasury, Laing, enunciated "the broad, simple principle of observing a distinction between earned and unearned income, and making the latter pay at a higher rate." 3 Finally, in 1884, Hubbard returned to the fray. In February he published an article reviewing the entire history of the subject. "Peel's property and income tax," he tells us, "survives the lapse of forty-two years. Detested, denounced, and doomed again and again to extinction, it has crept on by stages of three years, of seven years, but mostly by yearly renewals, and its continuance now stands more firmly rooted than ever as a permanent instrument of revenue." In April he found an opportunity in the House to repeat in substance his motion of over twenty years before. But Gladstone replied: 5 "The Right Honourable Gentleman has devoted himself to this matter with a chivalrous loyalty. He began upon it shortly after his entrance into Parliament, now more than twenty years ago; and I believe that he will pursue it to the death. It reminds me of the Crusades. They began somewhere about the year 1100, and they continued, at intervals, for

1 Op. cit., pp. 13-17, 24.

2 Direct Taxation, and how it may be applied. By G. R. Haywood. Liverpool, 1883. See esp. p. 11.

8 Taxation and Finance. By S. Laing, Chairman of the London and South Coast Railway Company. London, n. d. [1883], p. 14.

* J. G. Hubbard, "Forty Years of Income Tax," National Review, February,

5 Hansard, vol. cclxxxvii, p. 677.