Income-tax, a tax directly levied on all persons having incomes above a certain amount. We hear of a tax imposed on property and incomes by the English parliament in 1642 during the great Civil War. It became an important feature in the fiscal system during the French war in 1798. It was revived by Sir Robert Peel in 1842, and may now be regarded as permanent. Since 1898 all incomes in Britain under £160 are exempted; deductions are made from incomes between £160 and £400 of £160, between £400 and £500 of £150, between £500 and £600 of £120, and between £600 and £700 of £70. See GREAT BRITAIN, Vol. V, p. 376.
With reference to the equity and reasonableness of the income-tax opinion is divided. The tax is graduated so far; considerations of equity are satisfied by exempting from it an income sufficient for a decent and comfortable maintenance. On the other hand the tax certainly bears an inquisitorial character through the officials of government making investigation into the private affairs of the citizens. Further, as the estimate of income must to a large extent be left to the discretion of the persons taxed, it offers very considerable opportunity for concealment and falsification in the returns; while the conscientious render an account in full, the less scrupulous may pay less than they ought. Also, it is not equitable that incomes gained from hard industrial or professional labour should be taxed as heavily as incomes derived from inherited property. Such considerations have long and vigorously been urged against the income-tax, and it must be admitted that there is much force in them; but there is little prospect of argument taking effect in the abolition of the tax. An increase of income-tax is the great resort of government in times of emergency, particularly during war, or when the fear of war makes special armaments necessary. In 1890 Mr Goschen estimated that every penny added to the tax meant an addition of about £2,200,000 to the revenue (as compared with £800,000 in 1844 under Peel). It is all the more convenient and even indispensable, because taxation in Great Britain is now limited to a very few articles of daily consumption, so that the exchequer has otherwise only narrow scope for increasing the revenue. And, apart from the difficulties of levying it, it must be maintained that the principle of taxing the citizens according to their income, after deducting the minimum necessary for a comfortable living, is perfectly equitable and reasonable.
In the United States an income-tax was imposed in the years 1863-71. It was exempted at first on 600, then on 1000, and ultimately on 2000. Incomes up to 5000 paid 5 per cent., those between 5000 and 10,000, 7 per cent., and all above 10,000, 10 per cent. An income-tax of 2 per cent. on all incomes over 4000, enacted in 1894, was declared unconstitutional by the Supreme Court in 1895, as being a direct tax.
Incommensurable. See COMMENSURABLE.