TAXES AND THE INDIVIDUAL

Press, Volume LXXXIX, Issue 27191, 7 November 1953, Page 3

TAXES AND THE INDIVIDUAL

Taxation and Incentive. By Lady Rhys-Williams, DJB.E. William Hodge. 186 pp.

<Tt.T he J ge P eral , reader with some background knowledge of economics as well as the trained economist will find this important book of considerable interest. Proposals for the reform of the income tax system in England have been supplied to the Royal Commission on the Taxation of Profits and Income by the author, who is honorary secretary of the Economic Research Council and the United Europe Movement. She is also a Governor of the British Broadcasting 4? r Jt oratlon - ■ Her book is a statement of the general background to these proposals, which imply the necessity of large-scale changes not only in taxation, but in the whole conduct of industry and government. Although the book has been written according to Lady Rhys-Williams’s confession, “in considerable haste,’’ it is a masterly statement of the grave and difficult problems that confront modern governments and of the philosophy that lies behind the Wel-fare-State. Lady Rhys-Williams regards it as necessary to accept the determination to abolish poverty, “the great feature of this century,’’ as the essential condition for any proposals for reform. But she emphasises the unsatisfactory nature of the methods which have been so far adopted in pursuance of this aim:

The fact should be faced that the chief methods hitherto adopted for putting an end to poverty, through the redistribution of wealth by steeply-graded progressive taxation and by inflation of the currency, are not the right ones for continuous use. It is beginning to appear that there may be an actual conflict between the aim of a steadily increasing prosperity for the whole country and indeed of the whole world, which is the professed and inevitable objective of every government alike, and the actual effects of the policy of redistributive taxation' and inflation which has been accepted and enforced in recent years. The desire to work hard and the will to save have gravely deteriorated m England, Lady Rhys-Williams says, and this tendency threatens to undermine the progress already made. Many and serious injustices have arisen, particularly to the small saver. Traditional concepts, such as those of selfhelp and the rights of the individual to legitimate capital formation, have been abandoned;

The principle of progressive taxation involves the complete abandonment of the clear and comprehensible concept of justice to the individual which is embodied in the Common Law, and the acceptance in its place of the still insufficiently defined and certainly not adequately comprehended criterion of justice to the community as a whole.

So far the good administration and good sense of the Inspectors of Tax and the continuing habits of thrift and honesty of the older generation have saved the confusion of thought on these subjects from becoming confusion of practice. But the sense of responsibility and respect for the law where taxes are concerned are fast becoming affected, and the confusion must be resolved in the public mind and the concept of community defined. Against _ this background, Lady Rhys-Williams • analyses the present state of opinion as to what are the fundamental human motives for labour, and outlines methods by which modern man’s incentives, based not upon fear but upon hope of gain and improvement, can be restored to him within, the framework of the Welfare State. She surveys the balance of trade, the social services, the attitude of the trade unions to increased output, the effect of fluctuations in world commodity f prices, and of the high tariff policy of the United States upon the financial stability of the rest of the world, and the use of taxation as an instrument of international as well as national policy. (She recommends “inter alia” the expansion of trade in non-dollar areas.)

The second part of the book indicates how the ideas expounded in the first part can be put into effect through the tax structure, providing detailed studies of the income tax and insurance systems. The increases in net incomes of all classes of earner, as shown in the tables appended, are not sensational but probably sufficient to restore incentive. Lady RhysWilliams’s system of taxation calls for the merging of the taxation and social security systems. It involves a rationalisation of the whole arrangement antf the substitution of the present system with an income tax of 4s in the £, with universal flat-rate allowances of 7s 6d per head, by which the whole of social welfare will be financed, leaving only government expenditure of a strictly national kind, such as defence, to be borne by progressive or indirect taxation. The idea is bold and expounded with brilliant clarity; her figures are agreed by the Inland Revenue Department of the United Kingdom.