adjective p t o ran n quy th ! e " b O ri h gu C t ro w ff a u li t s , with the original imposition of the
tax. Even Home-rule could you find no other has not prevented the action of this law of rebirth. The air of the cottage hung with luxury more and *more,' on "the is full of talk as to a graduated Income-tax ; and only last • Tuesday Mr. Bartley stood up in his place in the House of Commons and asked the Government to differentiate the incidence of the tax in accordance with the sources of in- come, and to make the man whose wealth is derived from Consols pay at a higher rate than the man who has to depend upon his own industry and to provide out of the fruits of that industry for accidents, illness, old age, and the support of his family in the case of his death. Mr. Bartley, no doubt, believed he was making a demand which, if not actually new in theory, was at least put forth for the first time in sober and practical earnest. The speech must have sounded to Mr. Gladstone, how- ever, like an echo of far fiercer and more ingenious demands of a similar nature, which forty years ago were hurled against the Chancellor of the Exchequer, only to break up in foam and sound. But though Mr. Bartley's plea for differentiation is nothing but a reincarnation of a very old idea, it is quite worth discussing. It is in the nature of polities that every few years the old arguments have to be revived and re-employed. Public life is like a battle-field cumbered with dead bodies. For many years the slain lie still and silent. Then suddenly, and as if by enchantment, the combatants start to their feet, the batteries are reopened, the banners wave, the troopers charge, and the soldiers are once again locked in deadly struggle. The men who are fighting, however, seldom know that they have fought before, and join battle with all the energy and eagerness of those who face each other for the first time. The struggle, in other words, is quite as real and quite as important when it is being fought out for the fiftieth time, as it was when it was fought out first. It is not, then, necessary to offer any apology for joining in the fray which has just begun again in regard to the Income-tax.
There are two ways of looking at taxation. We may affirm that each individual taxpayer is buying protection and other conveniences of Government at the pike of his taxes, and that therefore no thought ought to be given to the sources of income. The taxpayers, it is alleged, are like men met in a room to subscribe in order to carry out some scheme which they all agree in thinking necessary. They agree at once that each man shall subscribe a certain percentage of his income. This done, however, they do not ask whence particular men derive their incomes. It is enough to know that in the particular year A or B " touches " so many pounds. Hence, it is argued, the surrender by each man of the same per- centage of his annual wealth is the proper principle upon which to raise the Income-tax. That is the maxim of one set of fiscal theorists. Their opponents propose another. They declare that the principle we have just given is in practice unfair, and that it is necessary to substitute for it the principle of "equality of sacrifice." They argue that, as far as possible, the sacrifice made by the taxpayers to the needs of the State should be equal. But how can it be said that A, with 41,000 from Consols, when he pays his 425 a year, makes as great a sacrifice as B, who earns 41,000 a year ? Both men are fifty. But this means that B's income is not worth, at the very most, more than eight years' purchase ; or, in other words, for the purposes of making provision for his family, A, with his Consols, is nearly five times as rich as B, with his professional income. For immediate spending purposes A is, therefore, far richer than B. B, to put himself in the position of A as regards -making provision for his family at death, would have to save, say .2500 a year. No doubt, he seldom attempts to do that ; but considering the insecurity of his income, and the necessity that there exists for saving, it is by no means going too far to say that A, the Consol-holder, is far richer than B, the professional. If, then, equality of sacrifice is taken as the principle, it must be admitted that there is a good deal to be said. for the proposal to make incomes from non-realised sources pay only on a portion, say, two-thirds of the total. The plea for gradua- tion is not so strong, but there is also something to be s id for that, granted always that we accept the maxim of equality of sacrifice. The rich man—the man with 45,000 a year and over—has a superfluity, out of which he can well afford to help the State. It is unfair on the poorer man to tax him at the same rate. This argument, based on " superfluity," assumes, of course, a standard of living and a scale of expenditure beyond which either a surplus exists or can be created by economies which would not be felt. This is, we suppose, a very large assump- tion. Still, looking at the matter broadly, and putting aside the idea of justice, we presume it will not be denied that the man with 410,000 a ;mar can bear a shilling Income-tax better than a man with 41,000. As a matter of fact, the 410,000 a year man feels having to get along on 49,500 a year less than the 41,000 a year man feels having only 4950 to spend. Let us assume, for the purposes of argument, that the men who demand differentiation and graduation of the Income-tax have abstract reason on their side.
Ought we, in that case, to differentiate and graduate? We believe that only one answer can be given to this question, and that is "No." Even if it were right in theory to differentiate and graduate the Income-tax, it would be most unwise to attempt to do so in practice. The practical difficulties in the way, if not absolutely insuperable, are of the most serious kind. Take graduation. If you graduate, you must make every one return his total income as if it were earned. If not, you will be unable to graduate. At present, the bulk of the Income-tax is collected on dividends before they are paid,—cut off automatically and handed to the Govern- ment. If we had a graduated Income-tax, this could not be done, as will be seen on a moment's reflection. In the books of a railway Company, A is put down as owning stock which pays him 41,000 a year. How is it to be decided at what rate the deduction is to be made ? It may be that A has no other money. Again, it is possible that he is a millionaire. In the same way, the Income-tax could not, as now, in the case of landed property and house- property, be levied on the tenant, be being allowed to deduct from the rent. The tenant would not know his landlord's income, and so would be quite unable to tell at what rate to make the deduction. Graduation, in a word, would destroy the efficiency of the tax. It is the same with differentiation. The difficulties and intricacies of the subject, when looked at closely, are so great—there are many cases in which it is quite impossible to say whether the source of income is realised money or professional skill—that any fair scheme would be too cumbrous to work. To put the matter plainly-, if the Income-tax is made absolutely fair and equal, it will hardly be worth collection. That is the great argument against meddling with it. Here is a tax which, as at present organised, is a source of revenue such as can be found nowhere else in the world. At 6d. it yields some 415,000,000 a year, and by a stroke of the pen, and without any additional cost of collection, another 412,000,000 might probably be obtained from it. The sub- stitution of is. for 6d. in the Parliamentary vote would be all that would be required. No sane person will care to knock the bottom out of this unexampled source of national strength,—a source of strength as great as that provided by any army or navy in the world. We get in the Income-tax as it is, an impost which fills the Treasury ; let us not, in our desire for theoretical fairness, drop the substance for the shadow. On this point, we cannot help referring to a speech made by Mr. Gladstone in 1853. After reminding the House of Commons what the Income-tax had done for the country, and "what, if you do not destroy it, it may do for you again," he pro- ceeded to show how differentiation must destroy it. Into the details of the speech we cannot follow Mr. Gladstone. We will, however, quote one paragraph, which may fitly stand at the end of this article. Let us trust that the warning it contains will not be lost on the new House of Commons :—" Whatever you do in regard to the Income.
tax, you must be bold, you must be intelligible, you must be decisive. You must not palter with it. If you do, I have striven at least to point out, as well as my feeble powers will permit, the almost desecration, I would say, of your high office, certainly the gross breach of duty to your country, of which you will be guilty, in thus putting to hazard perhaps the most potent and effective among all its material resources. I believe it to be of vital importance, whether you keep this tax or whether you part with it, that you either should keep it or should leave it, in a state in which it will be fit for service on an emergency ; and this it will be impossible to do, if you break up the basis of your Income-tax." Indeed, we believe that Mr. Gladstone did once make a serious effort to dif- ferentiate the tax ; and became convinced, on elaborate inviry, that the tax so differentiated would be more unjust than it is.
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