REAPING IN THE FIELD TWICE

Evening Post, Volume CXXVIII, Issue 15, 18 July 1939, Page 8

REAPING IN THE FIELD TWICE

The -statement made by Dr. McMillan, M.P., that the Government intended to increase taxation on higher incomes and greatly increase death duties may reassure people who think that heavy taxation is good if it does not fall directly upon them. But the idea underlying this satisfaction—that there is a wide, unreaped field of big money awaiting the Government harvester—is quite fallacious. Tlie field is not extensive. Big incomes in New Zealand are not numerous and, -what there are, are heavily taxed -already. Aggregate private income for 1936-37 was about £150,000,000, but'the tax returns for 1937-38 show that only £91,000.000 of this was assessable. That means that £59,000,000 was income received by people who were not assessed for tax. Of the total assessable income £18,499,000 from companies was taxed £5,377,000. Obviously not much more can be taken here without embarrassing the companies, hindering the expansion of enterprise, and adversely affecting employment. Individual income aggregated £73,000,000, and was Taxed £3,699,000. But here again the small incomes came in. Almost £21,000.000 of the £73,000,000 paid no tax and almost another £12,000,000 (returned by 45,391 taxpayers) -paid under £5 per taxpayer. The individual incomes from £1000 to £1999 yielded £841,884 of tax, from £2000 to £4999 yielded £920,000, and those over £5000, £596,000. In the moderate to large income class almost two-thirds of the individual income tax was collected. To collect, say, a million more tax, the taxation on these incomes would have to be raised by almost fifty per cent. Such an increase would be disastrously heavy, disturbing employment and production at many points. Evidently, therefore, a great amount more cannot be obtained from income tax, already heavy on higher incomes, without a heavy increase on the moderate aud non-taxed classes. With death duties, the problem is no simpler. They yield from £1,500,000 to £2,000,000 annually. To obtain another million the tax would have to be raised more than 50 per cent. This would very seriously disorganise industry, for in few estates is there a substantial cash balance from which duties can be paid. The bulk of most estates is invested in businesses—farms, factories, plant, shops, and so on. If death duties are greatly increased the persons left to carry on the farm or business will have to strip it of necessary cash resources and encumber it with mortgages or overdrafts. This must be bad for enterprise aiid employment. Also it must be bad for future income tax. There is the alternative of insuring against death duties, but this involves deprivins* the business or farm of capital which should often be put back into it. This, too, must be remembered: states greatly diminished by death duties can never again viVld * heaw nro\) of income tax. Possibly th* Covemment in -cronos^ne taxation "f b'Vher incomes and estates hai* ♦wn "Vficts: tn trot wonev and tn re-' w»»T»h. But in so far a? *t achieves the second oKSect. the attainment of the fir?r When it has levelled everybody down to the lower income classes, it is left with no higher incomes or big estates to tax. Then it must tax the smaller incomes heavily. We are ranidly reaching that stage. .