INCOME TAX

Evening Post, Volume XCV, Issue 45, 21 February 1918, Page 11

INCOME TAX

SYSTEM OF TAXATION

TO THI EDITOR

Sir, —In devising an equitable system of taxation the first consideration should be that it be determined and adjusted on rational and. intelligible principles. Well, in> the first place, practically all taxation, for revenue to meet the requirements of the State, should be on land and income. It should be. ■" direct," not "indirect," so far as any of the necessaries of life is concerned. The only "indirect" taxation that can be justified is that on luxuries. If this, as a general principle, is conceded, then in devising an equitable system of taxation of income it is essential that the conditions under which the income is acquired be carefully determined and considered. The "source" of income is "the question." r (1) Is the income derived from inheritod.property or investments—that ,is : is it (in the language of economics) " unearned " ? (2) Is the income derived from property or investments, etc., the deferred recompense of thrift, "saving," and personal effort and energy on the part of the taxpayer; or is it, largely, the result of unearned'increment!from acquiring an undue interest in'; community-created* values and wealth? •■> (3) Is the income salary—the reward of services personally rendered—is it (in the language of economics) wholly "earned"? I venture to .submit-that an equitable system of direct taxation must take full account of all these " considerations." Now, our New Zealand taxation for income tax purposes takes no account whatever of these' " considerations "! The whole existing system, appears a .deliberate effort to mystify its for most part uncritical and unsuspecting victims! It is unsound, unjust, undemocratic, and unscientific! '" Let our financial exports—or " wizard's of finance " —set themselves seriously and conscientiously to devise an equitable sys- 1 tern of taxation. Let them, in the first place, abolish everything in the shape of duties on the necessaries of life—let there be- free trade, at least within the Empire, in all necessaries of life. . Then, in the matter of income tax, let the income derived from inherited wealth (that is, from permanent wealth wholly unearned) be taxed a,t (say) three or more times the rate (p.c.) for temporary and earned income (that is, for salaries). Again, let the rate for income from permanent wealth (accumulated during the taxpayer's life tinie a-nd the result of Ms personal efforts) be taxed at (say) two or more times the rate p.c. for tennin-" able wealth (i;e., for salaries). Some such discrimination or differentiation is surely eminently reasonable and desirable. -I do not claim that the rate or ratio suggested would make adequate discrimination. I-am concerned merely with the justness of the principle (of eomo such discrimination). It is surely astounding that in .a democratic community like ours permanent income and terminable income: should be subject to the same amount of taxation! Now, it would, T urge, be both just and expedient that practically all taxation should be on land and income. It would be but fair and reasonable that every voter on the electoral rolls of the Dominion should pay something toward the revenue of the country. Therefore, I would suggest that every elector (male and female) be required to enrol annually, and pay an enrolment tax (or fee) nf (say) 5s for males and of (say) 2s 6d for females ; and, be required also to furnish a return of income for the" preceding -year. Then I would suggest a. graduated income tax for men and women on the supposition that they were to remain "single" (unmarried), and I would make liberal concessions to^married • men for wife and "every child (until such child's education was completed, and it was able to 1 earn its own living) ; and I would make equally liberal concession to all "single" men or women'who had to maintain, or contribute to, the maintenance of aged, infirm, and mentally or physically "defective" relatives. ' ' 'For earned income (that is, income acquired as salary or as remuneration for services rendered) I would begin with incomes of £100 (for the unmarried with. no dependents), and a,t £200 for married couples with no family; and for the unmarried with a, parent, brother, or sister wholly dependent on them. I would begin at £300 with married couples with ono child, and' the unmarried with two relatives wholly dependent; at £400 with married couples with two children, and the unmarried with three relatives wholly dependent on them; and so on, beginning, £100 higher for every additional dependent. For the unmarried (with no dependents) I would , suggest some such "graduation" as the following :— On £100, 2 p.c „\ £2 On £200, 5 p.c £10 On £300, 8 p.c £24 On £400, 11 p.c.' ! £44 On £500, 14 p.c. £70 That is to say, I would increase the percentage by "3" for every additional £100 —up to'some reasonable limit. For married couples with no family and tho unmarried with.one dependent I would begin (as already, suggested) at £200 a-nd adopt some such "graduation" as the following.:— On £200, 1 p.c. ■. : £2 On £300, 3 p.c. \ '£9 On £400, 5 p.c. £20 On £500, 7 p.c £35 That is to say I would raise the percentage (of taxation) by 2 per cent, on every additional hundred. For the married coaples with one child (or dependent) and for the unmarried with two dependents I would beghi o t £300 and adopt some such "graduation" a^the following : — , . On £300, 1 p.c. ..................... '£3 On £400, 2 p.c. ...'..... ...:......... £8 On £500, 3 p.c '£15 That is to say, I, would increase the percentage by 1 per cent, for every additional £100. '. At the same time to ell taxpayers vith dependents and in receipt- of inccmea of, say, less than £500 a. year, I would concede the amounts pffid on-rent, domestic help, medical fees, and incidental expenses in nnrsinu and in medicine, and also the amounts paid for supcraniuiation and life insurance. 1 do not suggest that the foregoing '''suggestions" regurdini; n graduated system of taxation would, if given effect to, prove satisfactory or unexceptionable. I merely suggesl that experts (with the help of experienced actuaries) ought to bo able to devise or elaborate! :iii equitable system of taxation that v.onld mako chip claim upon wealth and relieve the fiimily and family-raisers of tlu- Dominion of the iit-presenl' grossly ■inequitable incidence- of indirect and direct taxation. —I am, etc., HUGH MACKENZIE.