The Taxation Burden

Dominion, Volume 27, Issue 297, 12 September 1934, Page 11

The Taxation Burden

Sir,—ln that part of his Budget speech reported under the heading, “Taxation Burden,” iu Saturday's Issue, Mr. Dowuie Stewart evidently places more importance on a Budget surplus than on the welfare of the primary producers. The present Minister of Finance raised the exchange rate with a definite object in View—that of stopping; the export farmers from going bankrupt. Though one eannot always see eye io eye with him in his method of reaching his objective, the principal involved was the correct one for the Welfare of New Zealand. Had Mr. Stewart remained in office and refused to interfere with the exchange rate, he probably would have balanced the budget by heavy taxation, but that would be poor consolation to a country filled With insolvent export farmers. His only alternative would have been the use oi a State note issue, which he has always so roundly condemned. It would be interesjing to have Mr. Downie Stewart’s opinion as to whether it would he desirable to have the country financed bv company promoters rather .than by the people’s credit, issued by the people’s government, per medium of the Reserve Bank note 1

The Treasury bills were redeemed without any fuss of bother. To do this the Government authorised the Reserve Bank to use the people’s credit in exchange for sterling funds. Ae the exporters, who, by the sale of their produce in Britain, were responsible for the surplus credits, have been paid for their efforts in New Zealand currency, the only apparent creditor to the Reserve Bank would have been the farmers themselves had they repudiated tho New Zealand credit they received.

It is a case of mistaken identity with Mr. Stewart's “skeleton in the cupboard” for, on examination, it has the frame of quotas and embargo's, and can one wonder when one knows that New Zealand is hoarding British credit which Should be exchanged iu barter for British manufactures?

Mr, Stewart wrongs the Labour Barty when he states that it is looking with longing eyes at the Reserve Bank. To my knowledge the Labour Barty’s financial policy Is still that expressed bjits late leader in a pre-election address iu the Wellington Town Hall—to finance New Zealand with a £25,000,000 Internal loan—and though it hns also a State Bank plank, I have never known it to declare that it would finance the country with a note issue. . Under Mr. Stewart’s .financial leadership the Reserve Bank would in all probability have had the sole right of note issue for 25 years. The present Minister of Finance washed out the 25 years, and, by so doing, changed the bank into the servant'and not the master of tho Government.

I heartily agree with Mr. Stewart's remark that “looking buck over the last three years it is astonishing to. recall the magnitude of the efforts made by the people of New Zealand to weather the storm.” Looking at the handling of the situation from the people’s point of view, it has been like watching a flapper taking her first plunge into tho cool and refreshing sea on a hot summer’s day—she dallies so that one feels very tempted to upset her balance. Taxation is a necessary cycle in the circulation of credit, and it would never become a hardship on taxpayers if governments would infuse new credit into the circulation streams whenever they wished to make extraordinary demands on the same streams of credit. By this, I mean that whenever a government desires to carry out any enterprise, be it relief of unemployment, publis works, or pensions, sufficient new credit should bo added to the circulation stream to carry the commitments over one year; and then it should rely on taxation to carry on. By so doing, a government is merely taking out of the circulation stream of credit, by taxation, what it has put in. The present-day hardship through taxation is caused by the Government taxing for new Commitments from the existing supply of credit in circulation. Taxation increases the velocity of the circulating credit stream; the use, by the Government. of the note issue of the Reserve Bank would broaden the same stream, and. between the two, our surplus production would be carried along and distributed to those in need. —I nm. etc. G. 11. WILKIN. Wellington, September 9.