According to The Mode in Hats and Headdress by R. Turner Wilcox, prior to the French Revolution many people use flour or starch as wig powder. Price of food rose dramatically at that time and was one of the grievance the general public have against the monarchy. Wasting flour when many people could not afford bread incited public outrage. Wigs along with other extravagant Rococo fashion were quickly abandoned during the Reign of Terror to avoid being targeted as pro-monarchy.
In Britain, the Prime Minister William Pitt introduced a tax on hair powder in 1795. Charles James Fox (who was still powdering his hair) attacked the tax due to his concern for people working in the fashion industry. He thought the tax would cause uncertainty. A pro-war MP, Robert Buxton, thought the tax did not go far enough in eradicating the practice, which wasted huge amounts of wheat.
After Pitt made some exemptions, such as clergymen with an income of less than £100 per annum, there was not a great deal of opposition to the tax. The tax mainly hit wealthy people and both the Foreign Secretary and the Lord Chancellor said they could not imagine a more popular tax. Many MPs noted the vast amount of corn used up for powder at a time when the poor had seen the cost of their food rise.
The Foxite MP James Martin said he abandoned the use of hair powder because it took bread from the mouths of the poor during an economic downturn and also in protest against paying a tax that funded an unjust and unnecessary war with France. The Duchess of Northumberland banned her family (apart from herself) from using hair powder. The Adjutant-General ordered on behalf of the Duke of York that soldiers should not use hair powder. The radical Duke of Bedford cropped his (unpowdered) hair and this hair style became a symbol of radical sympathies. This style was followed by many gentry in Bedford in imitation of the Duke.
Fashion historians have claimed that powdering hair declined almost overnight after the tax was introduced. However John Barrell claims that, according to evidence from government statistics, the fashion declined over a period of a quarter of a century from 1795 and that although hair powder licences continued to be purchased, anecdotal evidence suggests that the fashion of powdering one's hair was reserved for formal occasions rather than everyday use as previously.
Source: John Barrell, The Spirit of Despotism: Invasions of Privacy in the 1790s (Oxford University Press, 2006).