fighting as in former times against them, and perhaps against one or two nations besides-we may expect that an eighteen-penny or twoshilling income-tax would be soon needed for the war alone, in addition to the rate of sevenpence, at which it is now levied in time of peace. But the charge in a single tax of half a crown or so in the pound on income would certainly be so heavy as to be soon intolerable; and the honour and interests of the country would be jeopardised, and perhaps partly sacrificed, through the imprudence of preserving the income-tax at any but an almost nominal rate in ordinary years.

A

We may assume it to be conceded that any substitute for the incometax should be some other direct impost; and the tax which is the most capable of adaptation for this purpose, and indeed the only one which we believe to be thus capable, is the house-duty. It is a tax which happens to have among us an unfortunate history; but it has been advocated in general words by all economists, and by many leading statesmen, and it is justified by the practice of other European nations. With certain modifications, which we propose to discuss, this duty might be satisfactorily increased to a considerable extent. Since 1851, it has been levied upon a small scale without opposition in substitution for the window-tax. proposal to double it without any modification was indeed defeated in December, 1852, as part of a large financial scheme. The resolution upon the house-duty chanced to be made the stand-point of the scheme, and the defeat of the budget as a whole was certainly not attributable solely to its defects. The house-duty was levied in the early part of the present century to a much larger extent than now. The unpopularity of the tax as then raised, led to its abolition in 1834; not however until many years after the far more odious income-tax had been withdrawn. Houses were at that time taxed according to the following graduated scale-those worth from £10 to £20 a year, were charged 18. 6d. in the pound; those of £20 to £40, 28. 3d.

in the pound; and those of £40 and upwards, 28. 10d. in the pound. The disfavour with which the houseduty was then viewed, arose firstly, from the under-assessment of many country mansions-a feature of the tax, which as we shall presently show would be almost impossible in the event of any serious increase of the duty at the present time; and, secondly, from the circumstance that shopkeepers had received no allowance during the long existence of the duty for such portions of their premises as were occupied for the purposes of trade. The exemption which Lord Althorp, as Chancellor of the Exchequer in 1833, proposed on this account, came too late to prevent the abolition of the duty in the following year, which (although deprecated by him as a financial measure) was made in deference to the cumulated force of public feeling upon the subject.

A house-tax, with proper modifications, will admit of being made larger than most taxes. A heavy duty upon any article of general consumption will often defeat itself, because people will be led to abstain as far as possible from the use of the article taxed. A heavy incometax increases the temptation to make fraudulent returns. But a housetax might be levied at a much higher rate than the present, before a man would decide to remove to a smaller class of house; and it is a tax in which there is no opportunity for evasion. And if we raise by the house-duty no larger amount than we may remit under the income-tax, competition will manifestly prevent that duty from becoming a tax upon the ownership instead of the occupation of houses.

The broad principle upon which a house-duty has been recommended by so many economists is that the lettable value of the house or houses a man occupies during the year, may be regarded as a very fair indication of his means. Exceptions of various kinds can be taken to this proposition; but its substantial truth is nevertheless so great that the exceptions will not jeopardise the rule, but only serve to indicate the respects in which the house

duty would need to be modified. But even if these exceptions were more important than they are, or were less easy of rectification, a house-duty would still compare advantageously with the income-tax such as we know it to be in practice. The correspondence between income and house-rent is likely to be much closer than the correspondence between income and self-assessments under Schedule D; for in the proportion of income which men assign to their rent, there is incontestably a far greater uniformity than is to be found amongst their consciences. And whilst a Chancellor of the Exchequer may hope to equitably adjust a house-duty, he is almost powerless against the immorality of a large portion of the income-tax

returns.

Let us now descend from the roughly just principle that rent is proportionate to income, and consider the cases in which this proportion fails to obtain, and also what further modifications may be required in the house-duty when proposed as a substitute for the income-tax. We may indeed observe at the outset, that a duty based upon house-rent must be regarded more correctly as being proportionate to total expenditure than proportionate to income, which is the theory of the income-tax. Now, we have no hesitation in agreeing with the economists who hold that expenditure, and not income, is the proper basis of taxation. For, what a man saves is not enjoyed by him; and yet through this abstinence from expenditure he becomes charged under the income-tax with the payment of twice the tax which he would have been otherwise required to pay. It will be readily seen by persons conversant with the values of annuities, that whether a man's saving is invested in the purchase of a permanent property, or is sunk in the purchase of an annuity for life or other determinate period, the produce of either investment becomes chargeable with income-tax, which is in present value equal (assuming a uniform rate), to the sum which he has already paid upon his saving when he received it as

income, and might have spent it instead of converting it into capital. We may deem a saving man a prosperous man (though this is not a necessary consequence), and may be thus led to consider it allowable to impose upon his savings this double tax; to tax him in two shapescapital and income-for what he can only enjoy in one; but it is a severe measure which commends itself more successfully to our sympathies than to our sense of justice. Whatever penalty we are inclined to impose upon success or prudence, may be much more appropriately required from the person who inherits their products; and we have already such a tax in the legacy and succession duties. After all, too, it is in theory alone that the incometax is a tax proportionate to income; in its practical development it is most eccentric. The principle is only carried out under Schedule E. It is notorious that there are numerous and important inequalities in the assessment of property of various kinds under Schedule A. Under Schedule C, the terminable annuitant maintaining his capital, is taxed as though he were exhausting it. The payers under Schedule D are the worst treated as a class, but the conscientious among them have a still worse case against the cheats under this schedule, than against the Chancellor of the Exchequer. The income-tax as professing to be a tax upon income, is an elaborate imposture, and therefore in accepting in its place a house-duty proportionate to a man's expenditure, we are not giving up a tax that is proportionate to income even if that could be shown to be essentially just; and the clenching argument in favour of a tax which shall not fall upon a man's savings, is that we shall thereby remove the grievance to which the industrial classes as a whole are subjected under the income-tax. This grievance, as pointed out by Mr. Wilson and Mr. J. S. Mill, is just the circumstance that savings (which are now doubly taxed, as we have before stated), are made in the largest proportion by these classes in consequence of the precarious nature of their incomes.

an approach to equity as can well be. Now, if this deduction of £60 were allowed to every income above £100, such anomalies as exist in the present taxation of £199 and £200 respectively, would be avoided; and the only sound reason that can be offered for the existing limitation of the abatement, is the peculiar mode in which it has been found necessary to collect the income-tax. If each person were to pay his tax (as was done in the year 1800, for instance), in one sum based upon a return made by him of his entire income, it would be easy to allow the deduction of £60 in the assessment itself; but as it constantly happens that a man is charged under more than one schedule, the mode of making the allowance in question, is to require the parties legally entitled to it to present claims for repayment of the overcharge. Already these claims amount to an enormous number, and involve very great cost to the State; and, although right in principle, it is certainly not feasible to allow a claim to repayment to be made by every income-tax payer. But though so intolerably difficult under this tax, an equivalent for the uniform exemption of £60 of income could we think be given with great fairness under the house-duty, in the following simple and inexpensive manner. A deduction of uniform amount might be made from the lettable value of every house in assessing it to the house-duty; and the advantage of this would of course be greatest in the case of small houses, where persons with small incomes are found. Regarded as a substitute for a tax which is levied upon incomes as small as £100 a year, the house-duty should be extended to houses of a lower rent than the present limit, £20. We may here say that, along with an intended extension of the income-tax to certain incomes below £150, Mr. Disraeli had proposed as part of his budget of December, 1852, to lower the house-duty to houses of £10 a year rent; and Mr. Gladstone also had given indications in the previous year of his agreeing to the propriety of extending its incidence. In replacing a portion

VOL LXIX. NO. CCCCXII.

of the present income-tax by an increased house-duty, it would be only a moderate extension of the latter, if its lowest point were to be altered from houses worth £20 to those worth £16 a year; and as regards the exemption from incometax of £60 of income, which should, as we have said, be strictly larger, and be a universal allowance, this would, we think, be fairly represented by the uniform exemption from house-duty of £8 of the annual value of every house.

Although such amount of incometax as might be supplanted by an adjusted house-duty would thereafter be paid directly by only householders, it might be reasonably expected that in a very short time (for which an allowance should be made in the introduction of the duty), the rents of apartments would by the action of competition become so altered as to effect a very equitable distribution of the tax between householders and lodgers. *And there is throughout all kinds of houses a sufficiently general correspondence of station between the householder and the lodger to allow of this distribution being made with far greater fairness by such means than by any scheme which could be devised for direct Government action. The man who can afford to occupy a house worth £16 per annum-the commencing point of the proposed duty-may certainly be considered to have an income that renders him liable to the income-tax; and it will be presently seen that we propose he should be charged with house-duty upon only one-fourth of that rent. But if such a house is not wholly occupied by the tenant, but part of it is let off by him to lodgers, the burden of this small tax would be shared between them all; and in houses where the lodgers are the most numerous, the ground-floor is ordinarily a shop, and therefore the duty would be charged only at the reduced rate which it is proper to levy upon such houses as distinguished from those which are private dweilings. We may however mention, as bearing directly on this part of our subject, that according

LL

more

to the recently-published General Report upon the census of England and Wales in 1861, the number of houses containing not more than two families (counting as a distinct family any two or persons occupying the same rooms), is as large as 43,736 out of the 45,894 inhabited houses in fourteen sub-districts of England and Wales * which have been there selected and combined to illustrate our town population. In the case of a boarding-house, the house-duty would be large when considered with reference to the income of the master; but it would (in consequence of the market principles to which we have just referred), be eventually shared. by a number of persons-the inmates of the house-who will be more or less numerous in proportion to its size. And similarly with reference to schools, as the number of scholars varies from two or three to as many hundred, any uniform allowance would be inexpedient; but the numerous items of a schoolbill, and the comparative ease with which extras are introduced into it, will afford to the masters abundant facilities for duly relieving themselves of the excessive pressure of a house-duty in their case.

We have thus endeavoured to show why the exemptions and abatements of the income-tax require that a substituted house-duty should be extended to houses of the lettable value of £16 and upwards, and should be levied upon each house only in proportion to the excess of its value beyond £8 per annum; but we reserved the question of the disproportion of houserent to the total expenditure of persons having large and small incomes respectively, and we must therefore make some further allowance in this respect in order to complete the correspondence which shall render a house-duty a fitting substitute for income-tax. Our own examination of the subject, whether as regards town or country, has indeed led us very closely to the

conclusion of Mr. J. S. Mill, that what a person spends in house-rent is generally a fair criterion of what he can afford to spend altogether. It must be remembered that the rich, or those by whom the largest houses are ordinarily occupied, inhabit both town houses and country seats, and reside at wateringplaces during some portion of the year. They would therefore become liable to the charge, directly and indirectly, of house-duty in respect of several houses. But besides the forgetting of this circumstance, the case against many large mansions is liable to natural exaggeration on account of the very large sums evidently expended in their erection. This immense outlay, however, is often attributable to the more ample means, or to the vanity and reckless extravagance of some ancestor of the present owner; yet a nobleman cannot abandon a family seat with the indifference with which persons of the middle class of life change their residences. He will submit to great sacrifices rather than involve himself in the discredit of such a course; and the costly maintenance of these large old mansions is thus in' not a few cases a cause of poverty rather than an indication of wealth. On the other hand, we may point out that the assessment of country houses to the house-duty should include the whole of the flower-gardens, pleasure-grounds, and parks (minus the grazing value), for they are comprehended in the occupancy of the mansions. And in the case of such a residence being let by the owner, as is sometimes done when he is ' out at elbows,' the rent should not be necessarily adopted for the house-duty assessment, any more than rent is the sole criterion for the property-tax. A mansion let under such circumstances fetches ordinarily only a small rent, because a tenant can only be found among persons of a somewhat lower grade than the owner, and to whom the cost of maintaining the house is