CHAPTER I

THE WAR INCOME TAX, 1798-1816

§1. The Origin of the Triple Assessment

THE British income tax was a direct outcome of the gigantic struggle against France.1 The reason of its introduction can be grasped only when we understand the fiscal situation of the day. Like that of most other countries, the English revenue system of the eighteenth century had come to consist almost exclusively of customs and excises. The medieval system of taxes on property and produce had shrunk to very small dimensions, and the old general property tax had long become

1 There is no good history of the British Income Tax. The account in Stephen Dowell, A History of Taxation and Taxes in England from the Earliest Times to the Year 1885, London, 4 vols., 1885, 2d ed., 1888, is neither full nor accurate. Sydney Buxton, Finance and Politics; a historical Study, 1783–1885, 2 vols., London, 1888, gives the general setting of the subject. Brief surveys of the legis lation may be found in the First Report from the Select Committee on the Income and Property Tax, 1852, pp. 1-25; in the Report from the Select Committee on Income and Property Tax, 1861, pp. 1-10; in the Thirteenth Report of the Commissioners of Inland Revenue on the Duties under their Management for the years 1856-1869 inclusive, with some retrospective History and Complete Tables of Accounts of the Duties from their first Imposition, London, 1870, i, pp. 120-131, and ii, pp. 184-207; in the Twenty-eighth Report of the Commissioners of Her Majesty's Inland Revenue on the Duties under their Management for the Year ending 31st March, 1885, with some retrospective History, and complete Tables of Accounts of the Duties from 1869–70 to 1884–5 inclusive. London, 1885, pp. 73-85; in the Forty-third Report of the Commissioners of Inland Revenue. London, 1900.

Incidentally, references may also be found in the Reports of 1905 and 1906 mentioned infra, pp. 186 and 197, notes. An excellent Russian work is Oseroff, The Income Tax in England. The Economic and Social Conditions of its Existence in the System of Taxation. Moscow, 1898. [In the Russian language.] Cf. also the monograph by Manes, Die Einkommensteuer in der englischen Finanzpolitik," in the Festgaben für Wilhelm Lexis, 1907.

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virtually nothing but a land tax. This land tax, however, still plays so important a rôle in the administrative machinery of the present income tax that it deserves a few words of special mention.

In the preceding chapter we have called attention to the process by which the general property tax of the Middle Ages changed, by the end of the seventeenth century, into the socalled land tax, and how what was originally a percentage tax on property had become an apportioned tax, designed to yield a definite amount of revenue.1 According to the principle of apportionment fixed in 1697, one shilling in the pound of land tax produced about half a million sterling,2 and in that year three shillings in the pound were granted. Throughout the eighteenth century the rate varied annually from one to four shillings in the pound. The unsuccessful attempt of Grenville in 1767 to compel Townshend to accept a four-shilling rate, left the latter no alternative but to attempt to raise the necessary sums by a tax on the colonies, and thus precipitated the Revolutionary War. After the war broke out, however, four shillings became the normal rate. It proved to be impossible to increase the revenue from this source, as the landowners were in control of Parliament, and finally, in 1798, the “annual land tax," as it had now come to be called, was made a redeemable rent charge. In the course of a few decades, about one-half of the landowners in Great Britain accordingly bought themselves free of tax, and the yield of the tax is at present quite insignificant.

The machinery of the land tax has, however, been kept up from that day to this. The various land-tax acts, beginning in the seventeenth century, provided that certain individuals, especially designated, should be commissioners for executing the act in the different localities. From this fact these acts have been called "Name" acts, and have usually been enacted at the first session of each parliament, being discontinued only at the beginning of the present century. There was from the very outset a property qualification for the Supra, p. 48. Exactly £494,671.

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2

position of Land Tax Commissioner, fixed at the end of the eighteenth century at the possession of an estate with an annual value of not less than £200. Justices of the Peace were ex-officio Land Tax Commissioners. The commissioners for the general purposes of the land tax or, as they came to be known, the General Commissioners, were empowered to divide themselves into smaller groups for the local divisions of every county or town, and in each case to select a clerk. These divisional commissioners were to appoint in every district or subdivision local commissioners, who were to nominate the assessors and collectors. The assessors and collectors were not to receive fixed salaries, but were to get a certain percentage or poundage on the amount raised. The commissioners were entirely unsalaried and, as they were chosen from the local gentry, their position was considered one of considerable dignity. With the diminution in the yield of the land tax, the duties of the commissioners became so light that by the end of the eighteenth century the tax was administered by only a few members, while the real work was done in each case by a clerk. In the majority of cases the position had thus become simply a title of honor. Yet, as we shall see later, it is these very land tax commissioners, with their clerks and assessors, who are indirectly in charge of the assessment of the present income tax.

In addition to the land tax, there had existed all through the Middle Ages a system of customs duties, at first primarily on exports and then, after the growth of the mercantilist system, on imports. Beginning in the seventeenth century, a system of excises was introduced, supplemented by a few stamp duties. After the outbreak of the American war, when larger revenues became imperative, North, following in part the suggestions of Adam Smith, turned to Holland as a model, and imposed new taxes. Among them were a tax on inhabited houses, according to rental value; the beginning of a succession duty; and a series of so-called taxes on establishments, such as men-servants, horses, and the like, designed to reach the luxury of the rich. In 1785 Pitt

grouped these taxes on houses and establishments together into what afterwards became known as the assessed taxes, and put them under the management of the so-called "Commissioners for the Affairs of Taxes." The chief increase in the revenue, however, came from other sources. In 1792, just before the outbreak of the French war, out of a total tax revenue of about seventeen and a quarter millions sterling, the land tax yielded only two millions, and houses and establishments only one and one-quarter millions. Almost the entire remainder came from customs and excises. Taxes on articles of food and drink were responsible for nine millions.1 Taxes on manufactured articles - primarily, soap, candles, leather, printed goods, glass, and drugs-yielded about one and three-quarter millions, and stamp duties yielded about one million. It will be seen, therefore, that what we have come to regard in modern times as direct taxes played a very slight rôle, and that, so far as there were any direct taxes at all, they were not personal, but real, taxes, i.e., taxes not on the individual as such, but on product.

After the declaration of war in 1793, new laws were enacted, and additional taxes were laid from year to year. The old customs, excises, and stamp duties were raised from time to time, and new duties were imposed successively on tea, on stone, on salt, and on collateral successions. On the other hand, the assessed taxes, which had been increased by ten per cent in 1790, were increased by further additions of ten per cent in 1796, and again in 1797, while the system was extended from carriages, servants, and horses so to include taxes on hairpowder, dogs, watches and clocks.

All these changes, however, proved to be utterly inadequate for the great struggle, and British credit fell as the French victories increased. The country could not disguise its alarm, and by 1796 various fiscal schemes were propounded. Notwithstanding the increase in the assessed taxes, the over

1 Beer, three and a half millions; wine and spirits, two and a quarter millions; sugar, one and a quarter millions; tobacco and tea, about half a million; and salt a little less.

whelming mass of revenue, as we have seen, was still derived from expenditure rather than possessions. It is therefore not to be wondered at that the scheme of some direct assessment on the wealth of the individual should be advanced. One writer, who sought to inspire confidence by contrasting English and French methods,1 suggested a "general and voluntary contribution."2 Although in one place Bowles calls it a "Public Contribution to be furnished by the general mass of proprietors," he made it plain that he expected the yield to come primarily from the rich. In the following year he returned to the scheme, lamenting the "inflexible obstinacy and the increased malignity of the Opposition," but stating that had it been adopted, "we should not now see the funds at their present low ebb." Another writer even went so far as to advocate a progressive property tax. "Taxes," he tells us "should affect individuals in a progressive ratio, proportionate to their properties, for they who have the greatest interest at stake should bear the greatest charge." 6 The author was, however, willing to supplement his proposed impost by

"5

1 Two Letters addressed to a British Merchant a short Time before the Meeting of the new Parliament in 1796. By John Bowles. 4th ed., London, 1796, p. 36. A scheme of a general tax on all property had been advanced as early as 1779 in a series of letters collected in the following year under the title of Occasional Letters upon Taxation; upon the Means of raising Supplies within the Year to answer the Expences of a necessary War; and upon such Measures as would probably tend to secure Great Britain and its natural Dependencies the Blessings of Peace upon a durable System. By an Independent Man. London, 1780. See esp. pp. 3, 45, 72.

2 Bowles, op. cit., p. 31.

3 Op. cit., p. 63.

"It should not be forgotten that the measure of Voluntary Contribution, though calculated to be general, is proposed to derive its chief effect from the wealthy and affluent."— Op. cit., p. 76.

5 A Third Letter to a British Merchant, containing some General Remarks on the late Negociation with France, considered in Relation to Ancient and Established Principles; together with Reflections on the state of Domestic Politics, and particularly on the Mischievous Tendency of the Conduct pursued by the Opposition. By John Bowles. London, 1797, p. 93.

A General Address to the Representatives of Great Britain on important National Subjects, agitating at the present Period. By an Elector, M. A. London, 1797, p. 48.