of the property, as well as with the tenure and the age of the owner. The members of the committee, however, were not convinced by his arguments, and failed to agree. As a consequence, the evidence was transmitted to Parliament without any recommendation at all.

The failure of the committee to agree was the signal for an outpouring of periodical and pamphlet literature on both sides of the question. Hemming, in reviewing the evidence, opposed what he called Babbage's "bargain and sale theory of taxation, and declared himself in favor of a discrimination between "certain and precarious income." 1 Farr expanded his testimony in favor of capitalization, in a lengthy article.2 Willich, who declared that the evidence showed the impossibility "of arriving at any mode of levying the tax which will be theoretically just and practically possible,"3 contented himself with recommending a rate of two per cent on temporary incomes and of four per cent on permanent incomes. An anonymous writer suggested six and a half per cent on professional incomes, seven per cent on life incomes, and eight per cent on incomes from realized property. The manager of a life insurance company, Scott, advocated a somewhat analogous scheme.5 Major Court desired that the inequalities between the two chief sources of income be removed by making the distinction in the abatements rather than in the rate of tax. Hubbard, who shortly afterward became Gov

1 A Just Income Tax, how possible. Being a Review of the Evidence reported by the Income Tax Committee, and an Inquiry into the True Principle of Taxation. By G. W. Hemming. London, 1852, p. 21.

2 William Farr, "The Income and Property Tax," Journal of the Statistical Society of London, vol. xvi (1853), pp. 1-44.

3 Letters on the Income Tax; Conversion of Consols; Savings Banks and Friendly Societies. By Charles M. Willich. London, 1852, p. 5.

+ Equitable Taxation and Representation on a fixed, general and clearly defined Principle. London, 1852, p. 6.

5 The Property and Income Tax the best Tax for the Community. By E. Erskine Scott. London, 1852.

A Review of the Income Tax in its Relations to the National Debt; with Suggestions for Removal of its present Inequalities, by a more Uniform Mode of Assessment. By Major M. H. Court. London, 1853. Cf. p. 29 of the 2d. ed., 1855.

ernor of the Bank of England, took up in detail the argu. ments in favor of what he calls the "indiscriminating tax on incomes," and paid his respects to both Babbage and Warburton, while he chided Mill for advocating a progressive inheritance tax. "Mr. Mill disclaims the impolicy of a graduated tax on the property of the living, but would apply one to the property, not of the dead (for the dead have none), but of the living who gain it by an inheritance. Surely, in either case, graduation arraigns the dispositions of Providence, subverts individual rights, and shows itself to be in principle but a step towards Socialism."2 In the following year Hubbard considered more at length the objectors to the scheme, especially Maitland and Warburton, and endeavored to refute their arguments. The Liverpool Reform Association, through its president, Robertson Gladstone, issued a letter to Babbage taking exception to his views on exemption, and objecting strongly to the fact that owners of unproductive property were not liable to income tax. An enthusiastic argument in favor of a property tax was made by Gisborne who, in commenting on the excellent administration of the income tax as disclosed in the evidence before the committee, said: "We only regret that so much industry and ingenuity, and good machinery should have been applied to a tax which is so outrageous in principle, that the wisest man could not

1 How Should an Income Tax be levied? Considered in a Letter to the Right Honourable Benjamin Disraeli, Chancellor of the Exchequer. By John Gellibrand Hubbard. London, 1852, p. 26.

2 Op. cit., p. 31.

8 Reform or Reject the Income Tax. Objections to a Reform of the Income Tax considered, in two Letters to the Editor of the Times, with additional Notes. By John Gellibrand Hubbard. London, 1853, PP. 24 et seq. Hubbard's book is reviewed rather adversely in an article in the Edinburgh Review, vol. xcvii (1853), p. 240. A number of other works on the same subject are reviewed, ibid., p. 531.

A Letter to Charles Babbage, Esq., in Reply to his "Thoughts on the Principles of Taxation, with reference to a Property Tax and its Exceptions." By the Liverpool Financial Reform Association. Liverpool, 1852, p. 18. In an Appendix to this tract is printed a strong letter from Lord Jeffrey, in favor of discrimination.

say anything in its defence which any ordinary man could not refute."1 Gisborne was enamored of the system of the general property tax as he found it described as existing in the United States. In the light of our modern experience it is not a little amusing to read that "we cannot but admire the easy and simple machinery by which the tax works both in New York and Texas." 2 He closes with the naïve remark that "no one can avoid a property tax, and this I think one of its main recommendations." 3

In

The chief opponent of differentiation was Maitland. an anonymous pamphlet he stated that the tax had now undoubtedly become permanent. "I cannot help concluding that the tax will, with or without modification, be a permanent national burden."4 This, in itself, he thought, robbed the argument for "discrimination" of much of its weight. Even apart from this, however, he opposed discrimination on the ground of the diffusion theory of taxation, holding that, in the long run, matters would right themselves. He maintained, further, that "although graduation and discrimination are different things, yet I believe it will be found that they are closely related. Both depend upon the feeling that any deduction from a small or precarious income will press more heavily than a large deduction from a large and secure income." Accordingly, while he applauded Mill for opposing graduation, he declared him illogical in at the same time upholding discrimination. In a production published in the following year, Maitland returned to the charge and sought to show that the arguments of his opponents defeated each other.7

1 Thoughts on an Income Tax and on a Property Tax; principally founded on the Evidence taken by the House of Commons Committee in the session 1851. By Thomas Gisborne. London, 1852, p. 14.

2 Op. cit., p. 41.

3 Op. cit., p. 61.

4 Property and Income Tax, Schedule A and Schedule D. [By J. G. Maitland.]

London, 1852, p. 2.

5 Op. cit., pp. 3-11.

6

Op. cit., pp. 56, 57.

Property and Income Tax. The Present State of the Question. By J. G.

Maitland. London, 1853. See esp. p. 38.

Disraeli, however, was won over by the arguments of the discriminationists. When he became Chancellor of the Exchequer in the new cabinet of Lord Derby, he had time, in making his financial statement in April, 1852, only to propose the continuance of the income tax for another year. In December, however, when he presented his budget for the following year, he proposed to renew the income tax for three years, and to reduce the rate of Schedules D and E from 7d. to 5d. He also suggested that farmers should be assessed hereafter on one-third instead of one-half of their rent, and that the limit of exemptions be reduced to £50 for industrial incomes and £100 for property incomes. As he combined with these suggestions the scheme of a great increase in the house tax, this practically meant a decided relief to the agricultural community at the expense of the towns. Disraeli's proposals, however, led to vehement opposition. They were denounced by Duncombe as "preposterous," by Osborne as "based upon tyranny and injustice," and by Gladstone as "most regardless of those general rules of prudence which it is most absolutely necessary we should preserve."1 The government was defeated on the house tax proposition, and Disraeli was replaced by Gladstone as Chancellor of the Exchequer.

§ 6. Gladstone's Budget of 1853

Gladstone's financial statement of April 18, 1853, is rightly considered one of his masterpieces.2 He began by asking whether an effort should be made to part with the income

1 Cf. the discussion in Fiscal Legislation, 1842–1865. A Review of the Financial Changes of that period, and their effects upon Revenue, Trade, Manufactures and Employments. By John Noble. London, 1867, p. 53.

2 Nicholson, Principles of Political Economy, iii, 1901, p. 339, declares it to be "probably the finest oration on finance ever delivered, and certainly the strongest in argument." In addition to the passage in Hansard, it is found in full in The Financial Statements of 1853, 1860-1863. To which are added a Speech on Tax-Bills, 1861, and on Charities, 1863. By the Rt. Hon. W. E. Gladstone. London, 1863. It is discussed in Northcote, Twenty Years of Financial Policy, pp. 185-199.

tax at once.

"I do not say that such an alternative is impossible," he replied; but he did not recommend it, because in his opinion the new taxes which it would be necessary to impose "would, upon the whole, be far more unequal, and would cause greater dissatisfaction than the income tax," and furthermore, because "it would arrest other beneficial reforms of taxation." He went on to emphasize the fact that the House "should fully appreciate the power of this colossal engine of finance," and, referring to the imposition of the income tax by Pitt in 1799, he maintained that "if there had been resolution enough to submit to the income tax at an earlier period, our debt need not at this moment have existed."

Referring to Peel," who called forth from repose this giant, who had once shielded us in war, to come and assist our industrious toils in peace," he said: "The second income tax has been the instrument by which you have introduced, and by which I hope ere long you may perfect, the effective reform of your commercial and fiscal system." This he thought would finally spread to other countries as well; "If we rightly use the income tax, we shall be entitled, when we part with it, to look back upon it with some satisfaction, and to console ourselves for the annoyance it may have entailed by the recollection that it has been the means of achieving a great good immediately to England, and ultimately to mankind." He did not, however, for a moment conceal his opinion that the tax "is not well adapted for a permanent portion of your fiscal system, unless you can by a reconstruction remove what are called its inequalities. Even, however, if you could remove its inequalities," he added, "there would still remain, in my mind at least, objections to it of the gravest character."

With some of the objections he did not agree. The matter of discrimination, for instance, he declared was virtually a question of the distinction between land and trade. As to this, after a careful analysis of the facts he concluded that land and houses actually paid a higher rate than trade. He held, therefore, that so far as these are concerned, there was no sufficient ground to attempt a reconstruction of the income