Income Tax a pocket history

There are some people, in fact, pretty much everybody hates taxation. Particularly Income Tax. Governments are so used to it that they increase it like layers in a cake. “Tax” is the whole cake but hidden underneath are the icing, the sponge, the sugar, the cream, another sponge layer, more cream, topping, walnuts, cherries a whole gamut of ingredients and then the cream, custard or ice cream you eat it with. Now you are thinking about a cake and not taxation. That is how Governments the world over like a magician make hundreds of little taxes in everyday life appear as an acceptable single item. “Tax.” First a little history.

Income tax was always considered and intrusion of personal affairs even as far back as the 17th Century. Before that taxation was all about taxing other countries using export tax or wine taxes etc not the people. In fact in 1628 Parliament passed the Petition of Right so a Monarch could not impose a tax on the people without consent. Things changed in the late C18th.

William Pitt the Younger (PM) raised a tax in 1783 to pay for the war against Napoleon. True they were in a sorry state needed equipment, uniforms, food but it was accepted. It started at 10% on incomes above £60. It was repealed in 1802 by Henry Addington the PM after Pitt. In 1803 it was renewed again by Addington after Napoleon got out of prison and he needed cash for weapons and equipment but only at the rate of 5%. Addington increased the scope for the tax bringing more people into the bracket but Pitt opposed these measures vociferously.

Unsurprisingly when Pitt took back No10 in 1806 he kept Addington’s changes and put the level back to his original 10%. It was finally repealed in 1816 – Remember Waterloo was 1815 and old “Boney” was enjoying life smelling the wallpaper* on St Helena. The Chancellor Vansittart was against the repeal but the public mood and the opposition were for it so it went through with a thundering round of applause.

In 1841 Sir Robert Peel took the election and taxation as a norm began. To be fair in the beginning it worked as it should, the less wealthy benefited, and trade revived as a consequence. Peel’s income tax was 7d in the pound (about 3%). It was imposed for three years, with the possibility of a two-year extension. A funding crisis in the railways and increasing national expenditure ensured that it was maintained. Remind you of anything? Governments needing a crisis to impose unpopular legislation?

During his 1853 Budget speech Gladstone spoke for 5 hours outing his 7 year plan to phase out income tax, thwarted by the Crimean War and introduced tax deductions for expenses ‘wholly, exclusively and necessarily’ incurred in the performance of an office – including keeping and maintaining a horse for work purposes. 1858 Disraeli came in as Chancellor following his comments about income tax as being ‘unjust, unequal and inquisitorial’ and ‘to continue for a limited time on the distinct understanding that it should ultimately be repealed’ alas by 1859 they were out and Gladstone was back as Chancellor. He set 1860 as the year to repeal income tax. Ill health shortened his speech this time to 4 hours but he had to tell the House it must be renewed.

Income tax was now factored into Government Spending which means to this day no Government will ever be liable again to ‘manage’ a budget like ordinary citizens have to.

But apparently Gladstone was still determined to end income tax. However a Select Committee was set up to figure ways of reforming it instead Gladstone packed the committee with his side to try and stop improvements but they lost the election and Disraeli took power in 1866 he introduced the Reform Bill of 1867 become and it became law. This gave the vote to all householders and to those paying more than £10 in rent in towns – and so enfranchising many of the working class for the first time. This should mean Disraeli would get an increased majority with an increased electorate but the election of 1868 when Disraeli was PM again let in Gladstone and income tax stayed during his first term of office. In public both he (Conservatives) and the Whigs wanted to end income tax and even The Times agreed in their 1874 election coverage saying ‘It is now evident that whoever is Chancellor when the Budget is produced, the income tax will be abolished’. It was Disraeli’s turn but his Chancellor Northcote kept the tax. At just 1% it wasn’t a priority with most of the population exempt. With worsening trade and a decline agriculture due to poor crops there was never another opportunity to discuss it again.

*One of the theories behind Napoleons rapid decline into death was the wallpaper in his prison (Longwood House) was made using arsenic giving it a green colour. Not murder but accidental.