How Earned Incomes Have Been Gut Down In Dominion

Auckland Star, Volume LXXVI, Issue 215, 11 September 1945, Page 4

How Earned Incomes Have Been Gut Down In Dominion

Crushing Burden on Tax,

EXTRAORDINARY consequences of *-* the taxation burden which rests on the shoulders of New Zealand taxpayers to-day are seen in the extent to which even a substantial rise in gross earned income has been converted into a net loss when the amount left in the taxpayer's pocket is compared with wnat Tie was allowed to retain in the immediate pre-war year.

From £700 a year upwards, the general tendency is for direct taxation to take at least an extra.' £100 a year from those with under three dependents, and at £1000 a year the additional amount taken becomes £150 a year. At £1500 a >year the taxation addition exceeds £250, and the rise thereafter continues on a steadily ascending scale.

Hence the man wno received £600 before the war was as well off so far as actual income was concerned as a man earning £700 to-day, and a man on £700 was better off than if he is to-day* earning £800, not to mention the loss of purchasing power caused through heavy indirect taxation and the endless ramifications of increasing costs.

In the four-figure income group, the man on £1000 a year pre-war received as much net income as one on £1200 to-day, while the £1500 a year man had as much left to spend as if he were receiving £2000 a year now. . ,

Incentive Weakened

This brings startlingly into the open the salary and income cutting effects of taxation when imposed at the peak levels to-day ruling in the Dominion, and leaves no doubt why persons in apparently highly remunerative employment are reduced to fairly narrow financial margins. The position also underlines the need for immediate taxation revision. For the Government to maintain its revenue demands at record wartime levels when everyone else is cafled upon to undertake difficult adjustments to peacetime conditions savours too much of the greedy miser who wants everything for himself however much "those under his power are forced to scrape and screw.

Just how taxation compares to-day in various grades of income with that in immediate prewar days, and how incomes have been pjuned, is apparent from the following tables: TAXPAYER WITHOUT DEPENDENTS

These figures provide, in part, the summarised statistical.. evidence in support of the argument that to-day, not to-rnorrow, this year, not in 1946, on the eve of the election, as Mr. Nash has promised, is the appropriate time for the first progressive step in the reduction of the taxation burden to vitalise New Zealand's economy in the early months of peace.

New Peak Every Year If indirect taxation is brought into the picture and we allow for the effects of exceedingly, heavy" sales tax levies and Customs, we find that in six years the taxation spread over the whole population, over every man, woman and child, has been nearly trebled. Going four years further back, we discover that the average amount taken in taxes in 1936 was only one-quarter of the figure for to-day.

Men long for the return of the days when taxes, then thought high, were just over £16 a year on the general average, or £81 for the typical family. Contrast these figures with £65 for the individual, and £325 for the family, which are the averages to-day.

Taxation in these ten years, and particularly in the last six years, has soared in New Zeaiana as never before. There was a sharp leap upwards in the first war year and

-~ By FRANCIS LYNN

another, and even greater leap, in the middle of the war, when enormous demands for the lighting forces had to be loaded on the backs of those who stood shoulder to shoulder in the factories, on the farms and wherever there was a job to do. Each peak, however, became only the basis for a further rise in the year that followed. So new record levels have been reached in the last two years as the Government has squeezed that extra ounce of effort and that last pound out of the struggling taxpayer. Above Hundred Millions When in the fifth year of war total taxation rose above the hundredmillion mark it seemed that this must be the limit of endurance, but, as if to prove that no such limit exists, and that the taxpayer is never so overburdened that he is unable to respond to additicmal pressure, there was an appreciable rise in the latest year. Is this the ceiling? Or will the still greater demands made on the people this year prove once again that they are always capable of a little more?

For a country with an estimated population at the end of March last of only 1,679,972, the figures of taxation yield contained in the following table must surely have few parallels in the world. They are equally significant whether viewed from the angle of steepness of the upward trend or from that of the dizzy height attained in the final year. Taxation in New Zealand

Closer scrutiny of the final figure of £109,014,710 reveals a number of most interesting facts. The major contributing item was income tax, to the tune_ of £34,248,067. Next was the national security tax of 1/6 in the pound, which produced £20,526,552, followed by the social security tax, which yielded £14,276,407. In fourth place was the sales tax, which has had far reaching effects in raising production costs and the cost of living, with a total of £13,602,926, and not far behind was customs and excise with £12,794,991. Estate and succession duties and stamp and death duties together brought'in £7,054,088, and taxation on motor vehicles £1,929,618, equal to considerably more than the sum of £952,622 from the land tax. The amount from beer duty was £2,074,457.

Why Taxpayers are Hard Up Ho turn from aggregates and broad general averages to the actual rates of taxation immediately before the war and to-day is to discover another interesting group of facts, which

help the taxpayer to realise, if he •has any doubts, just why he is often so hard up to-day. One does not have to ascend far in the taxation scale to reach treble figures for the man with few op no dependents. The taxation figures shown in the comparative tables must, however, be modified as the children in the family increase and deductions are made for life insurance or provident fund contributions.

This factual survey brings into impressive relief the upward graduation in the range of incomes where many tradesmen, white collar workers and professional people are caught in the net. The figures do not cover so-called unearned incomes, which are taxed at a still higher rate, and they include only direct taxes, that is social and national security charges at the rate of 2/6 in the pound, and income tax which has a basic rate of 2/6 in the pound, plus the wartime addition of 33 1-3 per cent, making 3/4. The two classes of tax together give a minimum tax rate on all incomes above minimum income tax level of 5/10 in the pound. At the upper end of the scale the total amount taken in personal taxation rises to a maximum of 18/ in the pound for incomes of £3700.

Discouraging Initiative

It can be seen at immediate glance that direct taxation throughout the whole range has been much more than doubled. What effect maintenance, of such taxation has to-day on incentive to work, initiative, thrift and enterprise for l&rge numbers of people may be easily imagined. One question which may well be asked now that the war is over and the Government has deliberately rejected the opportunity of easing the load this year to stimulate economic recovery, is whether taxation is not discouraging effort and willingness to venture among individuals who should be the leaders of the community, as well as among industrial companies.

Earned Pre-war income taxation Taxation to-day £200 £11 0 0 . £26 0 0 300 23 Iβ S 55 3 4 400 38 6 9 86 0 0 500 53 13 6 118 10 0 600 69 Iβ 9 152 13 4 700 86 Iβ 9 188 10 0 800 104 13 5 226 0 0 900 123 6 9 265 3 4 1000 143 16 9 306 0 0 1250 192 18 9 415 11 8 1600 252 16 9 535 3 4 2000 383 13 4 806 0 0 TAXPAYER, MARRIED, WITH TWO CHILDREN Earned Pre-war income taxation ' Taxation to-day £200 . £11 0 0 £26 0 0 , 300 16 0 0 38 10 0 400 24 8 0 59 6 8 500 38. 9 8 89 6 8 600 53 8 0 121 0 0 700 69 3 0 154 6 8 S00 85 14 8 189 6 8 900 103 3 0 226 0 0 1000 121 8 0 264 6 R 1250 172 5 0 367 5 0 1500 225 3 0 481 0 0 2000 349 14' 8 739 6 8

Year ended Total Taxation Marcft 31 taxation per head 1936 25,478,598 16 5 7 1937 31,181,603 19 15 0 1938 36,798,971 23 1 8 1939 37,797,904 23 9 2 1940 44,522,028 27 5 2 1941 61,360,840 37 10 3 1942 68,163,236 4119 2 1943 87,940,844 53 12 4 1944 101,131,721 61 10 5 1945 109,014,710 64 17 11