EARNED AND UNEARNED INCOME TAXATION.

Evening Star, Issue 18046, 14 August 1922, Page 4

EARNED AND UNEARNED INCOME TAXATION.

One of the recommendations made by the Taxation Committee was that the distinction between earned and unearned! income in the assessment of income tax should cease. This distinction was first made by Parliament in 1920. It not amount to ft great deal, for the rebate is only 10 per cent, on earned incom.cs, the definition of which includes only salaries, wages, or allowances in respect to employment or service, and excludes profits or gains derived from a business. This rebate ceases also to bo operative above £2,000 a year. But it is certain that, with the income tax and super tax so high a« they are, the withdrawal of this concession would be strongly opposed by those in receipt of it. Tho -reason given by the committee for putting the taxation of earned and unearned incomes on the same level is tho difficulty of classing them—of saying which is which. According to the evidence heard by tho committee, those who have invested the savings of a life of hard work should be allowed to hare the annuity derived from them classed as earned income. The committee appeared to incline to this point of view also, but without making a definite pronouncement on the point. Neither did tho committee attempt to decide the “extremely difficult” point as to whether military and' civil pensions should be regarded as earned or unearned income. Strong representations were made to the committee by pensioners against the injustice of taxing their pensions on the higher scale, and it appears to us that tho pensioners have a distinct grievance. They have earned their pensions in the eye of the Jaw or they would pot bo in receipt of them. The British Parliament takes a broader view of the matter than does the New Zealand Parliament, for tho phrase “earned income” in the British legislation expressly covers “ income received as a pension or a superannuation allowance.” And if tho pensioner is entitled to easier treatment, then surely tho main retired from private business or employment who has exercised the foresight and self-denial to create and conserve his own pension fund should not be treated any more harshly. It seems really to be begging the question for the Taxation Committee to advocate no distinction being made between earned and unearned income simply because a somewhat grasping Administration excludes from participation in a small concession those for whose participation there is the best of reasons and) the best of precedents. In Britain the distinction between “ earned ’’ and “investment” income is very pronounced. Low down on tho scale the latter is taxable where the former is exempt altogether. The percentage concession on earned incomes in Britain fluctuates'curiously, amounting, in the case of single persons, to 30 per cent, on £2OO incomes, IS per cent, cn £3OO, -26 per cent, on £4OO, 19 per cent, on £SOO, 17 per cent, "on £6OO, and 15 per cent, on £7OO. On, none of Uiese-averago incomes

does tho percentage fall to Hew Zealand’s unvarying 10 per cent. *lf tho taxation payable by married couples without cL;I-_ dren is considered', the concession is much greater, and greater still for those with three children, who do not pay income tax at all below £350, the taxation on £360 of earned income totalling only £1 7s, as against £6 15s if it is “investment" income.