[Footnote 1: See _Economist_, August 4, 1917, p. 151.]

It is not possible nowadays, now that the working classes are
conscious of their strength, to apply taxation to ordinary articles
of general consumption with anything like the ruthlessness which in
former days produced such widespread misery. Indirect taxation of this
kind carries with it this inherent weakness that its burden falls most
heavily on those who are least able to bear it, consequently it is
bound to break in the hand of those who attempt to apply it with
anything like vigour to a community which is prepared to stand up for
fair treatment. A tax on bread or salt obviously hits the wage-earner
at 30s. a week infinitely harder than it hits the millionaire, and so
the country would not tolerate taxes on bread or salt. Direct taxes,
such as Income Tax and Death Duties, have this enormous advantage,
that they can really be regulated so as to press with continually
increasing severity upon those who are best able to bear them.
Unfortunately our Income Tax is still so unjustly imposed that it was
clearly impossible to make full use of it without its being first
reformed. That two men, each earning £1000 a year, should pay the same
Income Tax, in spite of one having a wife and five children, while
the other is a careless bachelor, is such a blot upon this otherwise
excellent tax that it is generally agreed that the present rate of 5s.
is as high as it can be made to go unless some reform is introduced
into its incidence. The need for its reform is made the excuse for a
sparing use of the tax, and we have been on several occasions assured
that, as soon as the war is over, this reform will be set about.

In the meantime the Government falls back on funding about 80 per
cent. of its requirements of the war on a system of borrowing. In