Sunday, January 9, 2011

Pitt's Income Tax

Rampant Scotland indicates that the income tax was introduced in Great Britain this day, January 9, in the year 1799.  William Pitt's (the younger) tax of 10% on earnings (above £60) was imposed to fund a defense against Napoleon.  The tax was abolished three years later, when Pitt's replacement as Prime Minister, Henry Addington, imposed a tax on property, creating five Schedules for taxation (property and income sources).   Income taxation was repealed soon after Napoleon was defeated (1816 for the income tax, 1815 for Napoleon), not being reintroduced until 1842 (under Robert Peel).

Sir Walter Scott was subject to the income tax, and Addington's new tax scheme.  In 1813, Scott was troubled by the imposition of tax on literary labor.  The following is reported in John Gibson Lockhart's "Memoirs of the Life of Sir Walter Scott":

'....The poet's allusion to " taxing men" may require another word of explanation. To add to his troubles during this autumn of 1813, a demand was made on him by the commissioners of the income tax, to return in one of their schedules an account of the profits of his literary exertions during the last three years. He demurred to this, and took the opinion of high authorities in Scotland, who confirmed him in his impression that the claim was beyond the statute. The grounds of his resistance are thus briefly stated tn one or his letters to his legal friend in London.

To John Richardson, Esq. Fluyder Street, Westminster.

" My dear Richardson,

" I have owed you a letter this long time, but perhaps my debt might not yet be discharged, had I not a little matter of business to trouble you with. 1 wish you to lay before either the King's counsel, or Sir Samuel Romilly, and any other you may approve, the point whether a copyright, being Bold for the term during which Queen Anne's act warranted the property to the author, the price is liable in payment of the property tax. I contend it is not so liable, for the following reasons:—1st, it is a patent right, expected to produce an annual, or at least an incidental profit, during the currency of many years and surely It was never contended that if a man sold a theatrical patent, or a patent for machinery, property tax should be levied in the first place on the full price as paid to the seller, and then on the profile as purchased by the buyer. I am not very expert at figures, but I think it clear that a double taxation takes place. 2d, It should be considered that a book may be the work not of one year, but of a man's whole life; and as it has been found, In a late case of the Duke of Gordon, that a fall of timber was not subject to property tax because it comprehended the produce of thirty years, it seems at least equally fair that mental exertions should not be subjected to a harder principle of measurement. 3d, the demand is, so far as I can learn, totally now and unheard of. 4th, supposing that I died and left my manuscripts to be sold publicly along with the rest of my library, is there any ground for taxing what might be received for the written book, any more than any rare printed book which a speculative bookseller might purchase with a view to republication?  You will know whether any of these things ought to be suggested in the brief. David Hume, and every lawyer here whom I have spoken to, consider the demand as illegal. Believe me truly yours,

Walter Scott."
Mr. Richardson having prepared a case, obtained upon it the opinions of Mr. Alexander, (afterwards Sir William Alexander and Chief Baron of the Exchequer,) and of the late Sir Samuel Romilly. These eminent lawyers agreed in the view of their Scotch brethren; and after a tedious correspondence, the Lords of the Treasury at last decided that the Income-Tax Commissioners should abandon their claim upon the produce of literary labour. 1 have thought it worthwhile to preserve some record of this decision, and of the authorities on which it rested,
in case such a demand should ever be renewed hereafter.'

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