Posted on March 10, 2015 by Patrick Wadsted

I received a statement from HMRC today with indicated that I owed them 79p and that if I didn't pay this outstanding amount would attract interest. It must have cost more than that to produce the statement and to post it to me! This does however take me to a little story.

In 1893, the then president of the United States, Grover Cleveland proposed an income tax as the then existing revenue system put too

little burden on businessmen and members of the professions. This caused outcry. Senator John Sherman of Ohio (as in the Sherman Antitrust Act) called the proposal "socialism, communism and devilism".

In the House of Representatives a congressman from Pennsylvania was moved to say the following. "An income tax! A tax so odious that no administration ever dared to impose it except in time of war. It is so uttererably distasteful both in its moral and material aspects. It does not belong to a free country. It is class legislation. Do you desire to offer a reward to dishonesty and to encourage perjury? The imposition of the tax will corrupt the people. It will bring in its train the spy and the informer. It will necessitate a swarm of officials with inquisitorial powers. Mr Chairman, pass this bill and the Democratic party signs its death warrant."

The proposed tax was enacted into law in 1894. It was at a rate of 2% on income in excess of $4,000! Before it could be put into force, it was thrown out by the Supreme Court, on the ground that it violated the Constitutional provision forbidding "direct" taxes unless they were apportioned among the states according to population.

As is the American way eventually the Constitution was suitably amended (16th Amendment) giving Congress the power to levy taxes without apportionment. It was ratified in 1913. Personal and corporate taxes have existed ever since in the USA. We unfortunately have had them since 1799, thanks to William Pitt the Younger. The late congressman was very perceptive. Taxation does bring dishonesty. Informers are encouraged and we have a swarm of officials with inquisitorial powers.

As for the 79p, I am wondering how I can avoid it….