I’ve been reading a fascinating book, Follow the Money, by Paul Johnson (yes, the one who is Director of the Institute of Fiscal Studies). It includes passing references to financial history, including tax and the kind of revenue-raising choices made by British governments over the centuries.
No, me neither. Or if I had, I’d forgotten.
So today’s blog is going to be about types of tax in British history, some successful, some not. And, yes, it will include income tax. (Do I hear booing from the back stalls? No surprise there.)
Taxes pay for wars. And that includes income tax
The first “income tax” in England was possibly the tithe instituted by Henry II in 1188 for the Third Crusade. It was a tenth—tithe means a tenth—of both income and movable property. And since Henry II was a tough cookie, he probably ensured it was all collected.
In the UK, income tax as we know it dates only from 1799, under William Pitt (seen above, demanding 10% from John Bull’s annual income of £200). The cartoon is very anti, but paying income tax came to be seen as a patriotic duty during the French Wars and so there was less avoidance than there might have been. Once the war was won, however, the country wanted no more of it. So it was abolished in 1816, after the end of the Napoleonic Wars. There was even a public burning of all the related records. (However, the canny Treasury kept copies—are you surprised?)
Back to the old-fashioned and long-established system of raising money for the state via other routes. Down with Income Tax!
Which prevailed for a while…
But then, in the early 1840s, the budget deficit became so worrying that, in 1842, Sir Robert Peel’s new Tory government had the bright idea of introducing income tax as a temporary measure.
Peel had opposed income tax during the previous year’s election but, as we all know, promises made during election campaigns don’t mean much, do they?
Well, income tax has been with us ever since.
Without a break.
Getting at bachelors
I chortle at the the idea of a bachelor tax. (Not for spinsters, please note.)
It all started with the Romans, apparently, who wanted men to marry and have children. Marriage alone wasn’t enough: childless married people were also taxed. The Empire needed soldiers, after all, and workers, and taxpayers…
And when England became involved in the Nine Years’ War against France, under the new monarchs, William III and Mary II, it wasn’t long before more money was needed to fund it. So various taxes were brought in, including the Marriage Duty Act in 1695. (You can see examples of parish lists via that link.) It imposed a duty on births, marriages and burials; it also taxed widowers and bachelors over 25.
St Paul said “better to marry than to burn”, didn’t he? Well this was a case of “better to marry than to pay tax”. Of course, while the man who married would avoid the continuing bachelor duty, he would have to pay the (one-off) marriage duty instead. Catch 22? 😉
The Marriage Duty Act didn’t work very well and only lasted about 10 years. The Nine Years’ War was over by then, but Britain was involved in the War of the Spanish Succession (1701-1715) instead. More taxes needed?
Poor bachelors. The later tax on servants (1785) and Pitt’s income tax both discriminated against bachelors. Tough, eh?
Property is easy to find and easy to tax. Or is it?
Houses and land are there, immovable. They can’t be hidden away. So it would seem easy to tax them. But revenue men have to allow for human ingenuity.
Take the window tax.
That was another tax introduced (in 1696) to help pay for William III’s wars (and not repealed until 1851).
It was initially levied at a flat rate of 2 shillings per house per year, plus an extra 4 shillings for 10-20 windows, and 8 shillings for 20 windows or more. Those rates were increased several times and were much higher during the Regency, especially as the threshold for extra tax had been reduced in 1766 from 10 windows to 7. (Guess how many windows new houses tended to have?)
Avoiding (or reducing) the window tax wasn’t too difficult. Either you built your new house with fewer windows, or you bricked up the ones you already had. It’s not clear which was the case for the Georgian terrace shown here.
Actually, you do. And the glass tax of 1745 (to pay for the cost of the Jacobite Rebellions?) further reduced your access to it.
Here’s The Lancet thundering against it in 1845, the year it was abolished:
In a hygienic point of view, the enormous tax on glass, amounting to more than three hundred per cent on its value, is one of the most cruel a Government could inflict on the nation …
So, in the Regency period, if you had a house with lots of large windows, or, perhaps even more expensive, a succession house for your peaches and grapes, you were telling the world that you were very wealthy indeed.
Taxmen can be innovative
Treasury men can be inventive when they’re rooting around for revenue-raising ideas. I’ve blogged before about the tax on hair powder. Another part of the trend towards immovable property was the brick tax. It was introduced in 1784 to help pay for yet more wars—in the American colonies, this time.
It must have seemed a great idea. Building houses needs bricks, so if we tax the bricks (initially at two shillings and sixpence a thousand) we’ll get lots of revenue because a house needs thousands of bricks.
Um. It depends.
On the size of the bricks.
Not surprisingly, bricks got bigger, especially after the duty was raised to 5 shillings a thousand, in 1797 (for the French wars this time).
The image here shows Wilkes’ Gobs oversize bricks in the wall of a warehouse in Measham alongside modern bricks in a bridge. Don’t you love the name “Wilkes’ Gobs”?
The Treasury men fought back by levying higher rates on larger bricks. And the tax didn’t help the quality of construction, especially as it was also levied on tiles and pipes. As a result, poorer people might not be able to afford drainage pipes for their houses.
In spite of the downsides, the brick tax was not repealed until 1850. Perhaps the revenue collectors thought they could afford the repeal since income tax was then well established? Besides, Britain wasn’t involved in a major war at the time. That would come a few years later, in the Crimea…
Wars and taxes, eh?
Till the pips squeak?
Many of these taxes, like those on windows and glass, would be paid by the rich. “Tax the rich till the pips squeak” is a misquote from Denis Healey, UK Chancellor of the Exchequer from 1974-79. He actually said he would “squeeze property speculators until the pips squeak”. But the misquote trips off the tongue better. A terrific rallying cry for those who do not see themselves as rich, possibly?
All of the above (and there are many more taxes and duties I haven’t covered) suggests that Benjamin Franklin had it right when he wrote (in 1789):
Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.
I agree, though I think wars might be in there somewhere, too.