CUTS AND TAXES

Evening Post, Volume CXI, Issue 69, 23 March 1931, Page 8

CUTS AND TAXES

In support of the claim that the lower grades in the Public Service should be exempt from salary reductions two arguments have been advanced: (1) That the higher-paid office^ after he has lost £100 through the 10 per cent, cut and, say, £50 in income tax, will still have £850 left, while the £250~ man, losing £25, will have only £225 left; (2) that: the income tax to which the higher-paid officer is subject has been eased since the War. The first argument, that we should consider not what is paid but what is left, is fundamentally unsound when the taxation of salaries is being considered. If • this argument were carried to its logical conclusion there could be.no reward for efficiency and ability in service. All workers would be on a dead level. This may appeal to a political party which has leanings towards the dictatorship of the proletariat, but it is not a principle which can be'applied in a society which endeavours to adjust its rewards to the value of the services rendered. The £1000 officer receives £1000 because he is judged to,be wojrth it. If he is not worth it, then it should not be paid; but his greater, industry and capacity should not be ignored when dealing with his salary. The salary should not'be regarded as a gift without adequate consideration" from the Stated ".'".". The second plea, that the income tax which the highly-placed officer pays has been eased, is not correct when the whole question is viewed in proper perspective. The professional and salaried classes of New Zealand have, as a rule, suffered nior^ severely than others in meeting war and post-war costs. They have not received anything approaching a 60 per cent, addition to their income, though they have had to meet higher living costs. Their relative position in society is lower than it was before the War. The State's demand upon them is much heavier than it was. Recently a critic of the Government's proposals, submitting arguments for a surtax on incomes.in. place of salary reductions, stated that income tax had been" reduced steadily since 1920. This is correct. In 1920 the percentages of taxation receipts in the principal classes to the whole were: Customs and excise, 31.91; land tax, 9.59; income tax, 39.19; 'as compared with the following in 1930: Customs and excise, 48.88; land tax, 7.74; income tax, 18.15. But in considering these figures one must not overlook the pre-war percentages, which were for 1912: Customs and excise, 64.16; land tax, 12.21; income tax, 8.48. Income tax rose subsequently so high as to supply 45.54 per cent, of the national tax revenue; but it was realised -that such a drain on the financial resources of, the individual, while it might be justifiable in years when values were high, was crippling and unjust in normal periods. It had to be eased if enterprise were not %6 be handicapped to the detriment of the whole country. Yet if, after some relief has been given, the present taxation scales be compared with those operating in 1912 we do not think it can be submitted that the salaried man is escaping lightly. In 1912, companies were subject to an income tax rising from Is to Is 2d in the pound, and. individuals to a- tax rising from 6d in the pound on the first £400 ot taxable income to Is 2d in the pound where the income exceeded £2000. But the individual had a straight-out exemption of £300. That exemption is now withdrawn in part where income exceeds £450 and vanishes completely at £900. The only small compensation is a greater allowance for dependant children or parents and for insurance or superannuation. The man in receipt of £750 in 1912 paid tax on £450. To-day he is taxed on £600, as half of his exemption has been withdrawn. His tax in 1912 would have been.£l3 2s 6d; to-day it is £25. Has he really been let off lightly with an increase of almost 100 per cent., and is he 'really due for the further 250 per cent, income tax increase that the Labour Party proposes?