Death and Taxes

Northland Age, Volume IX, Issue 17, 1 December 1939, Page 4

Death and Taxes

This is the American “Nation’s” view of the first British War Budget: During the last war the British inI come tax reached a peak of 30 per > cent; last week it jumped to 37i per cent, while a sharp upward revision of j surtaxes leaves taxpayers in the higher brackets with no more than 15 per cent of their net incomes. At the same time an excess-profits’ tax ranging up to 60 per cent and applicable to all industries has been promulgated, and imposts on articles of common consumption, including sugar, I tobacco and liquor, have been sharply increased. Even so, it is certain that unless the war ends far sooner than | seems possible, British taxpayers will 1 be required to make heavier sacrifices. | In the current financial year ending ! March 31 next, a total expenditure of | at least two thousand million pounds is forecast, barely half of which will be covered by taxation. The new taxes will produce an additional yield next year, but judging by the experience of the last war, expenditure will rise even more rapidly. In 1918 Britain spent on the wai approximately half the national income. There is no reason to thin! that in the present conflict the proportion will be less, and indeed wit! the far greater exigencies of air defence it may indeed be more. Th( problem of the Chancellor of the Ex chequer, therefore, is how to force oi persuade British citizens to mak( available to him goods and service: representing half of the national in come. The latter is now roughly fiv< thousand million pounds, and b; I lengthening hours and recruiting thi labour of women and others not usu ally employed it might be raised t< - six thousand millions. Normally four fifths of the national income is spen on goods for current consumption an: the remainder “saved.” Thcreior r assuming that all private inver.tmen ■ ceases and the whole of this fourteei . hundred millions is at the disposa : of the National Treasury, an addi

tional sixteen hundred millions must still be squeezed out of civilian consumption if the war-time needs of Che State are to be met. In the last war the main instrument of pressure employed to attain this w'as inflation. The State issued new purchasing power which it used to compete for goods and services in a more or less open market. Consequently prices rose and, as existing incomes shrank in terms of goods, consumption was forcibly curtailed. But this was a slow process as well as an unfair one, for inflation actually added to certain kinds of income, enabling their possessors to consume as much as before. Thus the whole burden fell either on those with fixed incomes or those with wages and salaries which failed to keep pace with the cost of living. Moreover, after it reached a certain point this kind of inflation is difficult to halt, and even when curbs are successful the effects on the whole economic system can be devastating. An alternative method of forcing a reduction in consumption is the one the Government is apparently adopting. In order to meet the demands oi , the tax-collector every British family will be forced to reduce its standard of living. In addition, certain direct methods are being employed, such as a prohibition of many luxury imports i and restrictions on motoring and entertainments. The “pay-as-you-go” policy adoptee j by Britain may seem to add to ths grimness of war for those not in the | front line, but among its many ad | vantages is its correspondence tc reality. It does make clear the fact which inflation finance tends to ob scure, that, leaving aside accumulatec reserves, the shells, planes, guns, ant

innumerable other articles used in warfare must be provided out of current production. Future generations may seem to pay part of the bills, but it is the present generation which must tighten its belt so that the goods may be delivered.