STILL MORE TAXES?

Otago Daily Times, Issue 23201, 27 May 1937, Page 7

STILL MORE TAXES?

THE PRICE OF SPENDING CHOICE FOR PUBLIC (Communicated by the Associated Chambers of Commerce.) Some excellent political medicine was administered by the Acting Prime Minister and Minister of Education in addressing the New Zealand Educational Institute the other day, when he reminded his listeners of the simple but largely unappreciated fact that public services have to be paid for. The Minister said it was useless to ask for the best education system in the world, or for other social betterment, unless the people—including those who did the asking—were prepared to pay for it, and did not, in the same breath, deplore the heavy taxation. _ In view of the fact that the Government increased taxation very heavily last year on top of greatly improved' revenues from old taxes, it is highly gratifying to see that it is now tempering with caution its expressions with regard to any additional expenditure commitments, and is seeking to explain taxation in the only way in which it can be explained—namely, by pointing to Government expenditure. In a nut-shell, the Government undertook for 193 G-37 an expenditure (excluding Unemployment Fund expenditure, and expenditure of loan money on public works) of £5.164,000 more than was spent in the previous year, and it necessarily arranged that taxation should bring in an additional £4,460,000 over the previous year so as to meet that expenditure—the balance being made up,by increased interest and other receipts, For 193637 net expenditure on education was advanced from £2,891.000 to £3,553,000 —an increase of £662,000, or 22 per cent., over the previous year; expenditure on all social services was advanced from £7,894,000 to £10,621,000 an increase of £2,727.000, or 34 per cent.; expenditure on the development of primary and secondary industries was' advanced from £ 1.021,000_.-. to £ 1;424,000—an increase of £403,000, or 39 ner cent.; expenditure on defence was. advanced from £1,014,000. to £1,283,000—an increase of £269,000, or 26 per cent.; expenditure on law and order was advanced from £711.000 to £779,000—an increase of £68,000, or 9 per cent.; expenditure on all other Government departments and general administration (excluding debt service and other permanent charges) was advanced from £1.024.742 to £3,246,782 —an increase of £1,622,040. or 99 per cent. These are in the main heavy increases, and it is very timely that the Acting Prime Minister should start reminding the people that as regards taxation and expenditure they cannot oat the cake and have it too. There is a limit to the amount of the national income which can safely be taken by taxation and applied to social benefits. All sorts of new public services and extensions of exisling services and benefit* mav be desirable, but can the country afford them? In 1936-37 £9.228.926 had to go toward service of the public debt, while other permanent charges took another £4.55a.234, making a total of £ 13,784,000-or 52 per cent, of the whole of the estimated revenue from ordinary taxation—which had to be put a?ide before the Goyernment could provide for domestic administration or start distributing benefits. TAXING HIGHER INCOMES If the Dominion did not have such very large overseas commitments, then the present social services and general administration costs could be carried out without taxation being so excessive and burdensome as it is today. But that £9,000,000 debt payment is on account of the benefits the country has given itself in the past out of borrowed money, and what it has had it must pay for. Notwithstanding, the country is still trying to go on living and spending ns if it had never incurred a gross debt of £282.000.000and living up to a past standard which was a false one because it was largely based on borrowed money, not income. It is an eloquent fact that on onlv three occasions in the history of New Zealand has a reduction in the gross nublic debt been effected during a financial vear. There are those who advocate that additional public services and benefits could be made nossible by the simple process of taxing the higher incomes more heavily. Examination reveals, however, that there is no reservoir Ihere. The reDort of the 1924 Roval Commission on Land an Income Taxation says: " Of the total individual assessable income' of New Zealand, less than 11 ner cent, is held in incomes, of over £2OOO a year, and less than U ner cent in incomes of over £IO.OOO a vear. Any system of income tax will have to obtain the

bulk of its return where the assessable income is—that is, from the incomes under £2OOO a year." By comparison, Government statistics show that, for the tax year 1935-36 only 4.8 per cent, of individual assessable income is now held in incomes ot £2OOO and over, and only .08 per cent, in incomes of £9OOO and over. The truth is that wealth is distributed in New Zealand to a degree of evenness which is extraordinary. As for companies, the rate of tax on company incomes was increased last year to the very heavy maximum of 7s 6d in the £l. and for the 1935-36 tax year companies paid 65 per cent, of the total yield from income tax. , "There is a point," says the Taxation Commission, "beyond which income tax upon individual incomes cannot be pushed without reducing its productiveness through capital leaving the country. A rate inducing an inflow of capital, would produce a larger revenue to the State than otherwise would be obtained." Ways should, therefore, be sought for reducing taxation, not increasing it. The weight, of taxation, as the Taxation Commission itself remarks, is most important, and it is essential in the interests of the future stability and prosperity of the Dominion that the weight of taxation should be reduced as rapidly as possible.