Blackwood's Edinburgh Magazine, Volume 68, No. 421, November 1850

This is a simple sketch of Free Trade, worked out from ascertained and unquestionable statistics. The reader may like it or not, according to his preconceived political or economical impressions, but "to this complexion it must inevitably come at last." What we are doing, and have been doing for the last five or six years, is to reduce the value of all kinds of British produce as much as possible, and that by admitting foreign produce, which is in fact foreign labour, duty-free; and still we expect to maintain our revenue – all derivable from British produce – at the same money value as before! Such is the besotted state of political opinion, that a Ministry holding these views, and daily plunging the country deeper into ruin, can command a majority in the House of Commons; and whenever an intelligent and clear-sighted foreigner, like the American Minister, ventures to express an opinion, however carefully and cautiously worded, in favour of agricultural protection, the whole pack of the Ministerial press assails him open-mouthed, yelling and yelping as though he had committed some atrocious and inexpiable crime.

We have thus shown, we hope clearly enough, the dependence of revenue upon produce; a very important point, but one which is apt to be lost sight of in consequence of our complicated arrangements. People used to talk magniloquently, and in high-sounding terms, about taxed corn, and we have had ditties innumerable to the same effect, more or less barbarous, from Ebenezer Elliott and his compeers; but neither orator nor poetaster ever condescended to remark that the sole reason why duties were levied on the importation of foreign grain, was the existence of other duties to an enormous extent, directly and indirectly levied by Government from the British grower. Relieve the latter of these burdens, and he does not fear the competition of the world. But so long as you tax him who is, on the one hand, your largest producer, and, on the other, the best customer for your manufactures, you cannot, in reason, wonder if he demands that an equivalent for his taxation shall be imposed upon foreign produce; so that the economical law, and not less the law of common sense, which provides that the consumer shall pay all charges, may not be defeated – in other words, that his trade may not be annihilated altogether. We have seen articles, intended to be pungent and satirical, about the farmers "whining for protection." The writers who use such language evidently intend to insinuate that the British agriculturist is a poor weak creature, unable to cope with foreign tillers of the soil – more ignorant than the Dane, more idle than the German, less active than the Polish serf, and not near so handy as the American squatter. If they do not mean this, they mean nothing. It is not worth while replying directly to such paltry and contemptible libels, but we may as well remind these gentlemen with whom the "whining" commenced. It began with the manufacturers, who have been whining for heaven knows how many years, that bread was too dear, and that they were forced to pay high wages in consequence. The papermakers are "whining" at this moment for a reduction of excise, and the nasal notes of a good many newspaper editors and conductors of cheap and trashy periodicals are adding power and pathos to the whine. No spaniel at the outside of a street-door ever whined more piteously than Mr Cardwell is doing at this hour about reduction of the tea duties. He is absolutely not safe over a cup of ordinary hyson. There are whines about hops, whines about sugar, whines about window taxes, whines about cotton, and all Ireland is and has been in a state of perpetual whine. In short, if by "whining" is meant a complaint against taxation, we apprehend it would be difficult to find a single individual who, in the present anomalous and jumbled state of finance, could not advance sufficient reasons for uttering a cry. The only way to remedy this is to reconstruct the whole system. Let this be done on principles clear and intelligible to all men, and we are perfectly convinced that for the future there would be few symptoms of complaint. It is not the amount of taxation which causes such general dissatisfaction; it is the unequal distribution of it, rendered still more glaring by the pernicious habit indulged in by Ministers of arbitrarily remitting taxes for the benefit of some exclusive class, and laying, on others – such as the Income-Tax – not on the plea of absolute State necessity, but confessedly "to make experiments." Of course, after such all announcement, everybody thinks that he, in his own person, may profit by the experimentalising. Without asking, nothing is to be had, especially from the Exchequer; and accordingly there is hardly any duty whatever which is not made the subject of petition, and against many there is a regular organised agitation. This is a most unhappy state of things, for it is inconsistent with the security of property. Values may be raised or depressed in a day at the single will of a Minister. Those who gain become clamorous for a further concession; those who lose become disgusted with what seems to them a gross partiality. In short, we devoutly trust that the days of experiment are over; and the Whigs may be informed, once for all, by the general voice of the nation, that it is now absolutely necessary for them to undertake the task of setting the financial house in order. The best method of accomplishing this desirable end, is by sternly refusing to permit the Income-Tax to be reimposed for the fourth time upon any plea or pretext, whatever.

But we must further say a few words, bearing directly upon this tax. Odious as it may be to the community, we cannot shut our eyes to the fact that there is much danger of its being reimposed; because Ministers possess a certain majority in the present House of Commons, and are not likely to leave any means untried for effecting their object. It is to them, indeed, of paramount importance; because, if they can succeed in saddling us with this tax for a further period of three years, they may easily excuse themselves for declining to undertake the revision of our financial system. We therefore deem it our duty to look a little more narrowly into the details of the former acts than, would otherwise have been our wish or inclination.

Our readers will certainly recollect that in 1848, when the Income-Tax was reimposed for the third time, the Whigs made a strenuous effort both to extend its existence and to augment its burdens. What they modestly proposed was this, that the Income-Tax should be extended over a period of five instead of three years, and that during two of these years the assessment should be raised from sevenpence to a shilling per pound. The result – which it argues the uttermost degree of imbecility in Ministers not to have foreseen – was a roar of disapprobation from one end of the country to the other; and the scheme thus foolishly broached was as pusillanimously withdrawn. Indeed, had it not been for the peculiar circumstances of the time, which rendered it exceedingly unadvisable that the stability of any Government, however weak and incompetent, should be endangered, it is very questionable whether Ministers could have succeeded in persuading the House of Commons to submit to this tax even upon modified terms. But the contents of the budget were hardly disclosed, before the roar of revolution was heard in the streets of Paris, and the Throne of the Barricades was overthrown by the self-same hands which had reared it. That evidently was not a time for the lovers of order to persist in an opposition which, if successful, might have resulted in confusion at home; so that a new lease of the Income-Tax was granted upon the same terms as before. On occasion of the first obnoxious proposition, we expressed our opinions freely with regard to the whole constitution of the tax, pointing out both its injustice and its impolicy, in an article to which our readers may refer for the more general argument.⁵² But there are one or two points with which we must separately deal.

The Act presently in force provides that farmers shall be assessed, not upon profits, but upon rental, to the extent of threepence-halfpenny per pound, on farms for which they pay £300 per annum and upwards. The gross amount of the sum so raised was in 1848 £309,890. Now, it is perfectly well known to every person that not one farmer out of ten has made a single penny of profit since the withdrawal of the duties on foreign corn in the commencement of last year. In the great majority of cases rent is at this moment paid out of capital, as the landlords will find to their cost when the leases expire, if many of them are not already perfectly cognisant of the fact. If this be the case, it becomes plain that this mode of assessment cannot be continued. To do so, would be for the State to use its power to commit an actual robbery. So long as any profit exists, the State has a right to tax it; unjustly it may be, and partially, but still the title is there. But the State has no right whatever to deprive any man of his property under false pretences. If a tax must be levied on income, so be it; but income is not a thing to be presumed under any circumstances, still less when the State, by its own deed, has made a violent change on the relation and values of property. To force the farmers, of new, to pay this tax under the old conditions, would be an act of intolerable tyranny and oppression, for which the constitution of Great Britain gives no warrant; and we hardly think that any Ministry will be insane enough to adopt such a course.

There is, however, another feature in the Income-Tax upon which far too little attention has been bestowed. In this country Repudiation has always been looked upon with just horror. Something Pharisaical there may be, no doubt, in this grand adulation of credit; for an unprejudiced bystander might be puzzled to comprehend the precise reasoning of those who are convulsed at the thought of a lessened dividend from the Funds, whilst they can look quietly on at the ravages which are made in property of another description. Still, the feeling exists, and assuredly we have no wish that it should be otherwise. But we are bound to say that, if other ideas are to be encouraged on the subject of unimpaired credit, this Income-Tax seems to us most eminently calculated to pave the way for their introduction.⁵³ Such was our opinion in 1848, and such is our opinion now. Once establish the principle of taxing the Funds, and there is no length to which it may not be carried. It will not do to say that the Funds are taxed in proportion with other property. That is not the case. This is an exceptional Act, creating and enforcing distinctions, and it excepts all incomes under a certain amount. It therefore virtually establishes the principle that it is lawful to tax the possessors of one kind of property (the Funds) for the benefit of the possessors of another kind of property who are excepted. In 1848 it was proposed that the assessment should be raised to one shilling in the pound. What would the fundholders say if some future unscrupulous Minister were to raise the assessment to five shillings or ten shillings per pound, and exempt every one from the operation of the act except the holder of national bonds? There can be no difficulty about a principle for doing so: it has been already admitted. Nay, more: the provisions of the Income-Tax are in direct violation of the most solemn engagements entered into by Acts of Parliament. As an instance of this, take the following: —

The act 10 Geo. IV. cap 31, which has for its object the funding of £3,000,000 of Exchequer Bills, contains the following clause: "And be it enacted, That such subscribers duly depositing or paying in the whole sum so subscribed at or before the respective times in this act limited in that behalf, and their respective executors, administrators, successors, and assigns, shall have, receive, and enjoy, and be entitled by virtue of this act to have, receive, and enjoy the said annuities by this act granted in respect of the sum so subscribed, and shall have good and sure interests and estates therein according to the several provisions in this act contained; and the said annuities shall be free from all Taxes, Charges, and Impositions whatsoever." It needs no lawyer to interpret the clause. By solemn Act of Parliament the dividends were guaranteed free from all taxes whatsoever.

So thought Sir Robert Peel in 1831. When in that year a proposal was made to levy a small tax from the transfer of stock in the public Funds, he denounced the measure in the strongest terms, as a violation of the contracts made with the public creditor, and as a proceeding which must necessarily "tarnish the fair fame of the country." "He (Sir Robert Peel) dreaded that an inference would be drawn from the proposed violation of law and good faith, that a further violation was not improper. If in these times of productive industry and steady progressive improvement – if, in such times, in a period of general peace, when there was no pressure on the energies and industry of the country —the Government contemplated the violation of an Act of Parliament, and express contract entered into with the public creditor, what security could the public creditor have if the times of 1797 or 1798 returned?" Contrast this language with the propositions of the same eminent statesman in 1842, when he introduced the Income-Tax for the first time. "I propose that, for a time to be limited, the income of this country should bear a charge not exceeding sevenpence in the pound… I propose, for I see no ground for exemption, that all funded property, held by natives in this country or foreigners, should be subject to the same charge as unfunded property."

No ground for exemption! Mark that, gentlemen who are interested in the Funds. On no mean authority was it then announced that an Act of Parliament, however solemn and stringent in its terms, is no fence at all against the inroads of a Chancellor of the Exchequer. True, people may have lent their money on the strength of that positive assurance; true, it may have been made the basis of the most important family arrangements: but all that matters nothing. Money is wanted to make "experiments," for the purpose of stimulating manufactures; and what is the maintenance of public faith and honour, compared with an object so important? So, in order to stimulate manufactures, the principle of repudiation was recognised.

After all, perhaps, British subjects might be content to submit themselves to the loss, and be thankful that it was no worse. But what shall we say to the forced taxation of property belonging to foreigners, and invested in the British Funds? What interest or concern had they in experiments upon British manufactures? Just let any of our readers suppose that he has invested the whole of his property in Dutch bonds, and that, after receiving two or three dividends, he is informed that, for the future, one half of his annuity will be retained by the Dutch Government, because, in order to "stimulate" the internal industry of Holland, it has been thought advisable to drain the Zuyder Zee! Would Lord Palmerston, if such a case were brought under his notice, sustain the plea of the Dutchman? We trow not – at least we hope not; for such a claim for redress would certainly proceed upon far better grounds than any which were urged by Don Pacifico. The two cases are precisely similar. The Dutch Government would have as much right to appropriate the dividends belonging to British subjects for the purposes of stimulating the internal industry of Holland, as the British Government has to retain any part of the dividends belonging to foreigners, for the declared object of stimulating British manufactures. If this free-and-easy mode of "conveyance" is to become general, there is an end of public credit. Henceforward it will be but decent for us to use a moderate tone while speaking of Pennsylvanian defalcations. American swiftness may have outstripped us in the repudiatory race; nevertheless, we have gone far enough to recognise the principle, and to appropriate sevenpence in the pound.

We need not dwell on other evident objections which may be raised to the continuance of the Income-Tax. These suggest themselves to the minds of every one, and have been often pointed out and dwelt on by public writers. The danger of maintaining a war tax in time of peace – the eminently inquisitorial nature of the impost – and the injustice of assessing professional men, authors, artists, &c., whose incomes depend solely on their health, at the same rate as the possessors of accumulated property, are reasons sufficient to condemn it. But the most monstrous injustice, to the already severely burdened people of Great Britain, is the exemption of Ireland from its operation. It is impossible to assign any valid reason for the policy which dictated this odious partiality. Sir Robert Peel in 1842 could not find any better excuse than the following: "When I am proposing a tax, limited in duration, in the first instance, to a period of three years, and when the amount of that tax does not exceed three per cent, I must of course consider, with reference to public interests, whether it be desirable to apply that tax to Ireland. I must bear in mind, that it is a tax to which Ireland was not subject during the period of the war; that it is a tax for the levy of which no machinery exists in Ireland —Ireland has no assessed taxes– the machinery there is wanting, and I should have to devise new machinery for a country to which the tax has never been applied."

Most rare and convincing logic! Because Ireland on a former occasion was not taxed, she is not to be taxed now; because she pays no assessed taxes, her income also is to be exempted from contribution! Why, these were, of all others the very strongest arguments for laying it on; and most contemptible indeed was the pusillanimity of the representatives of English and Scottish constituencies, who did not on that occasion peremptorily demand the enforcement of equal burdens. What a premium to agitation is here held out! The Irishman with a yearly revenue of £150 a-year, pays no assessed taxes – is cleared from some excise duties – and enjoys an immunity from Income-Tax. The people of England and Scotland are kind enough to save him all these charges, in grateful recognition, doubtless, of his exceeding docility, and proverbial attachment to the Constitution. As to the allegation of want of ready-made machinery, the answer was plain – Make it. Nine years have gone by, and yet it is not made, and there is no proposal for making it; and it remains to be seen whether the fourth attempt at imposition will be as grossly partial is the others. If this tax is again renewed, there can be henceforth no escape from it. It matters not whether the term of the new lease be seven, or five, or three years – the tax itself will be immortal, and surely we shall not be insulted this time with a plea of deficient machinery.

For all these reasons, then, we counsel a determined opposition to any attempt which may be made to renew the Income-Tax, even for the shortest period. Ministers have no right to claim it as part of the ordinary revenue. It was levied originally for a specific purpose, on a distinct assurance that it was not to be permanent: that purpose, it matters not whether the results have been satisfactory or the reverse, has been accomplished, and we now demand the fulfilment of the other part of the agreement. Moreover, if the Income-Tax is renewed, we must relinquish for the present, and it may be for a long time, all hopes of that most desirable object, a complete revision of the national taxation. It is desirable for all of us, whatever may be our political or economical bias: because we take it for granted that no man can wish to impose upon his neighbour any portion of a burden which it is his own duty to bear; or to exalt the class to which he belongs by the undue depression of another. The present complicated and entangled mode of taxation prevents us from seeing clearly who is liable and who is not. It is like a great net, twisted at one place, torn at a second, and clumsily patched at a third; and it is no wonder, therefore, if large fishes sometimes escape, while the fry is swept to destruction.

What we wish to see is the recognition of a plain principle. There is a school of political economists existing in this country, who confound two distinct and separate things – principle and method. They profess themselves to be the advocates of direct, in opposition to indirect taxation; and they think that, in propounding this, they are enunciating some great principle. This is a most absurd delusion. In reality, it matters nothing in what way taxes are levied, provided they are levied justly – whether they are drawn from produce before it leaves the hands of the producer, as in the case of the excise, or charged on foreign goods at the ports from the merchant – or directly taken from the consumer in the altered form of assessed taxes. All that has reference merely to the method and machinery of taxation. Undoubtedly there are most important questions involved in the choice of a proper machinery. Hitherto the leaning of statesmen has been in favour of indirect taxation, as by far the least costly method, and as the only practicable one with regard to many branches of the revenue. In that opinion we entirely concur, never having yet seen any scheme for the merging of indirect into direct taxation which had even the merit of plausibility; nor do we suppose that, by any stretch of ingenuity, a method to this effect could be devised, not open to the gravest political objections in this or in any other old community. But these considerations do not affect the principle at all. Men cannot be taxed simply as men by poll-tax, for their means are notoriously unequal; property cannot be taxed solely as property, because that would cause all immediate transference of capital to other countries; incomes cannot be made the sole subject of taxation, partly from the same reason, and partly on account of the injustice of such an arrangement. The only true principle, and that which we wish to see recognised, is this – that the annual produce of the country alone must bear the weight of taxation. If that principle could be steadily kept in view, much of the haze and mist which modern political economy has spread, would be dispelled. Men would perceive that there is not, and cannot possibly be, in this great country, any such thing as the rival interests of classes; but that what we have hitherto termed rival interests, is neither more nor less than the desire of certain parties to thrive and accumulate wealth at the expense of the rest of the community. They would also see that this selfish and nefarious intention must in the end defeat its own aim, for it is as impossible for a tradesman to thrive by the poverty of his customers, as it is for any class whatever to extract permanent prosperity from the depression and downfall of another. They would clearly understand that cheapness, when effected by the introduction of the products of foreign untaxed labour into this country, must be and is obtained at the cost of the British workman; that it consequently is no blessing to the country, but the reverse; and that each such introduction, either by displacing industry, or by beating down its wages, or by lowering the value of home products, augments the burden of taxation, and reduces all incomes, except, indeed, those which are derived directly from taxation – as, for instance, fixed salaries, government annuities, and the incomes of Ministers, officials, and the like. A dim perception of the truth of this seems to have dawned upon the minds of some of our legislators, and to have led to the appointment of that committee which deliberated last session on the subject of official salaries. The question has often been asked, why, since almost every article which money can command is cheapened, the servants of the public should still receive the same allowances as before? There are good grounds for putting that question; and some still more formidable ones, we anticipate, will be asked ere long, if we choose to persevere in our present commercial policy.

The amount of taxation to which this country is subject, and from which it cannot free itself without the sacrifice of the national honour, has the necessary effect of enhancing the cost of every commodity which is produced in it. England is, and must remain, a dearer country than any of the Continental states, because her burdens are heavier, and these must be necessarily paid from produce. The professed object of the late "experiments" was to counteract this; a scheme quite as feasible as that of making water run up-hill. But the depth of public credulity is not easily fathomed. People may be duped in a hundred ways besides being taken in by railway boards of direction. So, for the benefit of the rich, taxes were repealed or lowered on wine, silks, velvets, mahogany, stained papers, and fancy glass, and an Income-Tax substituted instead. The Colonies were broken down, and an impetus was given to the slave trade in order to procure cheap sugar. The labourers got a cheaper loaf, and were desired to consider that as an equivalent for lower wages. And now we find ourselves in this position, that, but for the Income-Tax, there would be an annual deficit in the revenue of from four to five millions; the farmers are absolutely ruined; and the manufacturers, by their own confession, making little or no profit.

The reason of this is quite obvious. We are striving to accomplish what is, in fact, an absolute impossibility. We wish to reconcile cheapness of commodities with a high rate of taxation, and at the same time to promote the general prosperity of the nation. But cheapness and high taxation cannot possibly co-exist within the same limits, nor can any exertion of industry or skill make them compatible with each other. On this point we believe there was little difference of opinion. But it occurred to certain interested parties, whose trade lay without the limits of Britain, that there might be a way of solving the difficulty, or, at all events, of persuading the public that they had solved it. So they devised that system which we erroneously denominate Free Trade, opening the ports for the introduction not only of cotton-wool duty-free, but of a great many articles which were either grown or manufactured in Britain, by far the most important of which were corn and agricultural produce. And this had, undoubtedly, the effect of producing cheapness, and may have for some time to come. But that cheapness is not natural. It has been brought about by converting a profitable into a losing trade, and by depressing all kinds of wages and incomes throughout the country. The introduction of foreign untaxed commodities has lowered prices in our market, not because they were too high before in relation to the amount of taxation, but because they could not stand against the weight of so heavy a competition. Hence arises in the country agricultural distress, which no palliatives whatever can remove – a distress which, commencing with the agriculturists, is spreading through all who are dependent on them for custom and livelihood, and finally must reach, if it has not already reached, the principal seats of manufacture. Hence the suffering, complaint, and wretchedness among the artisans of the towns, who find themselves undersold on all hands by the venders of foreign wares, and who are now cursing competition, without a distinct understanding of its cause. The Free-traders attempt to cajole them by pointing to the cheap loaf; but they do not add, as in candour they ought to do, that they have not removed, or attempted to remove, one jot of the taxes which weigh heaviest upon the industry of the working classes. The poor man, though he may escape direct taxation, nevertheless contributes as heavily, or even more heavily, to the national revenue than the rich, in proportion to his means. Bread and water he may have untaxed, but not beer nor tobacco, sugar nor spirits, tea nor coffee, spices nor soap. Free trade does not touch those things. They do not come within its cognisance; and yet, as we have said already, more than one-half of the national revenue is derived from duties levied on such articles.

There could be no difficulty whatever in raising an adequate revenue, if Ministers had the courage to adopt a sound constitutional policy. They ought, in the first place, to reimpose the taxes upon all articles of luxury consumed exclusively by the rich, and on all articles of foreign manufacture which are brought into this country to compete with the productions of our own artisans. In no other way is it possible to keep the balance even between taxation and produce. The working men have a right to expect this, and doubtless they will demand it ere long. Nor ought the Legislature to permit the importation to this country of any commodity whatever, raw or manufactured, which is a staple of our own produce, without imposing upon it a tax, equal in amount to all the taxes, direct or indirect, which are charged on the growers or manufacturers of the said commodity in Britain, and which do actually enter into the cost of its production. The strict justice of these propositions cannot be doubted; and it is only because our statesmen have accustomed themselves, for a long time, to deal with taxation as if it were capable of regulation on no sort of principle, that the false views and impracticable theories of the Free-trade party have unfortunately been allowed to prevail.