THE BUDGET AND THE INCOME-TAX, 1'r0 28Z EDITOR Or TM/
"SPICOTAT08.1
San,—The moat serious result of the falling off in the national revenue last year, and of the heavy increase of taxation proposed in this year's Budget, is the impression produced on the general public, which is, I see, shared by the Prime Minister, that the system of finance which has obtained in this country for the last fifty years has broken down, and must be assisted or replaced either by the plan of the present chancellor of the Exchequer of heavy tares on capital value, or by the Tariff Reform plan of duties on a large number of imported articles.
May I ask, the courtesy of your columns, which have been Bp consistent in their defence of careful finance, to point out that the difficulty is purely fictitious, and is due entirely to the graduation of the Income-tax P
Our present principles of finance were established by Sir Robert Peel and Mr. Gladstone half-a-century ago, and their main point is the concentration, of the indirect taxes on a small number of articles of very general and large consumption, the character of which is such as to enable equal. Excise and Custom Duties to be levied on them no as to ensure the whole semi paid by the consumers being received by the Exchequer. This results in the least possible disturbance of trade, internal and external, and the maximum contribution to the revenue. These taxes do not provide a complete system of finance for two reasons. First, they are largely per capita, while the services rendered by Government are partly per capita and partly in proportion to income. Secondly, their produce is rather more dependent on the immediate condition of the country than on the necessities of the Government. A contribution is due in proportion to income, and a reserve is required for contingencies. These two objects Sir Robert Peel met by the Income-tax—a general tar on all incomes large enough to pay the cost of collection—and if the prin- ciples which he established, and Mr. Gladstone followed, had been maintained no difficulty would have arisen.
Since Mr. Gladstone's last Chancellorship, one Chancellor after another (I make no distinction of party, for all have been equally to blame) has been gradually injuring what was truly called the great "engine of finance" by the introduction of the principle of graduation, the speciousness of which is obvious, the honesty doubtful, and the mischief undoubted.
The Income-tax last year, if no graduation had existed, would have stood below 8d. in the pound instead of at is.,— to be exact, at 7.83d. This year one of the most serious depressions of trade of modern times has diminished the revenues of all countries, our own included. We are further faced with heavy expenses for old-age pensions, largely increased by the discovery of the abnormal longevity of the Irish people ; with a bitter competition with neighbouring nations as to our relative power of building expensive battle- ships ; with a change in the habit of the people causing a falling off of the yield of the Excise; and with a Government and House of Commons which select this period of strain as a suitable time for road improvements and speculative planting, and various costly experiments of that Lind. With all these disadvantages, eo wonderful is the growth of wealth in this country, so great was the engine of finance we possessed in our Income-tax, that if Sir Robert Peel's and Mr. Gladstone's arrangements had not been tampered with, le. in the pound, with no super-taxes or• additions, would have paid all expenses, provided for all deficiencies on other sources of revenue; paid off ten millions of Debt, and given a handsome surplus to the Exchequer without any increase of taxation on spirits, or beer, or tobacco, or land, or licenses. On the moral effect abroad of the ease with which we should have been shown to bear the extra burden thrown on us by the folly of other nations in attempting to compete with us in naval construction I need not enlarge. The effect on credit and enterprise in this country of a simple, straightforward, honest system of finance would go far to end our present depression. The Free-trade finance that the great Chaficellers of the last reign established has not broken down ; it is the encroachments on it that have caused all the difficulty, and the sooner we return to the simple system of taxation that they established the better it will be for the credit, the prestige, and the prosperity of this country.—I am, Sir, &c.,
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