The Lyttelton Times. MONDAY, JUNE 22, 1891.

Lyttelton Times, Volume LXXV, Issue 9446, 22 June 1891, Page 4

The Lyttelton Times. MONDAY, JUNE 22, 1891.

The proposal of paramount interest in the Financial Statement is the change from the Property tax to a Land and Income tax. In 1878, when Mr Ballance was Treasurer in Sir George Grey’s Ministry, the Land tax was adopted. The following year the Conservatives were victorious, and the Property tax, as we have known it for the last eleven years, was substituted. But its days are numbered. The experience gained since 1879 has steadily created a public opinion adverse to what the Treasurer correctly describes as an “obnoxious form of taxation,” and at the elections in December an overwhelming majoritv of the voters declared that some more equitable form of taxation must be substituted. True to bis conviction that land is the proper object of direct taxation, Mr Ballance, in 1891, has taken up the work which lie left ia 1878. Returned to power, and combining i the offices of Premier and Treasurer, unhampered by a coalition such as restricted the policy of the Stout - Vogel Government, Mr Ballance can now give effect to bis Liberal principles. The Si out-Vogel Ministry moved, it is true, in the dice lion of graduated taxation iu the Budget of 1887, but Sir Julius Vogel professed his inability to see how the revenue required could be obtained except by the Properly tax. He therefore proposed a g-adua'ioa of the Property tax. Mr Ballance refuses to helievo that a tax which, to quotehis words, is" grossly unjust in its operation, ia imposing without discrimination burdens on capital whether productive or'unproductive, and discouraging industry,’' is the only direct tax that is possible to this Colony. He has set to work iu earnest to reform the taxation by changing the incidence, and by giving effect to the principle of “ equality of sacrifice” which Adam Smith laid down as the coiner stone on which any equitable system of taxation must rest. In brief, therefore, Mr Ballance is loading the Colony back to the starting-point of 1878, when, in the full recognition of Liberal principles, the Land tax was accepted as the best and fairest form of direct taxation. His present proposals, however, have this important difference: he has removed the blot in the Act of 1878, which allowed the mortgagee to escape his share of the burden. Had that inequality been removed at the time, and the Land tax continued, wo believe, with Mr Ballance, that, we should now have had the fairest system of taxation of any country under the British Crown, As it is, we must caution sly feel our way, and retrace our steps as rapidly as experience will permit, bearing in mind that the essentials of the position are twofold —First, that a certain amount of revenue must be obtained from direct taxation ; and second, that it is desirable this revenue should be obtained in such a manner as to encourage industry and thrift, and detract as little as possible from the attractions tbo Colony holds out us a field for the investment of capital.

The Premier’s proposals appear to be admirably framed to achieve both these ends/At first sight it may seem that lie is less anxious about the revenue to he secured tliau ho is to ease the general body of taxpayers. Still, he takes the country so fully into his confidence in setting out the data on which his estimates are based, that it is apparent be has carefully calcinated toe probable income from the new taxes. Be states, however, that the new system will not come into force until next March. This will enable the estimates to be revised in the light of the property assessment returns of the triennial vaim,turn about to lumade, and a more accurate forecast will then be possible. In making his

proposals, Mr Ballance had two things to consider. He had to provide a form of taxation which was certain to produce the revenue required; and he had also to hear in mind that it was a substitution for the Property tax. The worst feature of the Property tax was that it did not discriminate. It taxed all capital, whether productive or unproductive ; and if fortune smiled on, a man’s investments in real property, and increased their value by the aggregation of population round a centre, it taxed him only the same as the man who saved a similar amount as the result of incessant wear and tear and mental and physical strain in an arduous profession. Mr Ballance proposes to alter all this. As already indicated, he assumes that land is the proper object of direct taxation. The Property tax is therefore to be swept away, and a tax on land and incomes is to be substituted. It is to be literally a Land tax, as an exemption up to -£3OOO for improvements will be allowed to each owner. There will also be an exemption on the land value up to .£SOO. Thus no man will pay Land tax who has not at least over £SOO worth of land (without considering improvements) free of mortgage. The mortgagee will he regarded as an owner to the extend of his charge over the land, and will pay land tax on his interest. Persons or Companies who possess over £ISOO worth of land will not he entitled to the £SOO exemption. They will pay the tax in full on their whole estates (less the £3OOO of improvements.) The principle of graduation takes effect when a limit of £SOOO worth of land (less £3OOO of improvements) is reached. That is the point at which the Government considers it is “ equality of sacrifice” to call on a person or Company to pay an increased proportion, and the scale graduates at the rate of one-eighth of a penny. Mr Ballance estimates that the deduction for improvements will mean a loss of £60,000 to the revenue, and this amount he proposes to make up by the adjustment of the graduation. As the £61,000 the graduated taxation is estimated to return will come from about 3000 owners, there will be little to complain of. It means an average of only about £2O each. The other form of taxation the Treasurer proposes is that on incomes. Here the principle of graduation also applies. Mr Ballance justly discriminates between incomes derived from ( a ) trade and commerce and those derived from (h) professions, salaries, and those occupations in which a profit is not made from capital. From the former there will be an exemption of £l5O, and a deduction of a similar amount from incomes which do not exceed £6OO. This means that persona who have an income of £6OO will pay only on £3OO ; whilst those having over £6OO will pay on the full amount of their income, less £l5O exemption. Incomes derived from professions, salaries, and from occupations in which a profit is not made from capital will be taxed differently from those derived from 'trade and commerce. From the tax on these incomes there will be an exemption up to £3OO. There is also a graduation of the amount of the tax on incomes of this class, namely, threepence in the £ on the first over the exemption, and sixpence in the £h ey end th at sum. Taking the whole scope of the proposals, they must be pronounced just and statesmanlike. They are just because they will place the burden of direct taxation on those who are best able to bear it. They are statesmanlike because they will tend to remove from the Statute Book a form of taxation which has been for the last eleven years a menace to capital and a clog upon the wheels of industry.