STILL MORE TAXES?

Poverty Bay Herald, Volume LXIV, Issue 19335, 27 May 1937, Page 14

STILL MORE TAXES?

THE PEICE OF SPENDING

CHOICE FOR PUBLIC POLITICAL MEDICINE (Special to the Herald.) WELLINGTON, this day. "Some excellent political medicine was administered by the acting-Prime Minister and Minister of Education, the Hon. P Fraser, m addressing the New Zealand Educational Institute the other day, when he reminded this listeners of the simple but largely unappreciated fact that public services have to be paid for," says a statement issued by the Associated Chambers of Commerce of New Zealand. "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. Commendable Caution "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 1956-37 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 1936-37, neb 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 £7,894,0C0 to £10,621,000 —an increase of £2,727,000, or 34 per cent; expenditure oh the development of primary and secondary industries was advanced from £1,021,000 to £1,424,000 —an increase of £403,000, or 39 per 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 iiicrease 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 £1,624,742 to £3,246,782—an increase of £1,622,040, or 99 per cent. "Limit to Taxation" "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 eat 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 existing services and benefits, may 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 £4,555,234, 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 aside before the Government 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 without taxation being so excessive and burdensome as it is to-day. That £9,000,000 debt payment is on account lot' 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 as if it had never incurred a gross debt of £2B2,ooo,ooo—and 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 only three occasions in the history of New Zealand has a reduction in the gross public debt been effected during a financial year.

"There are those who advocate that additional public services and benefits could be made possible by the simple process of taxing the higher incomes more heavily. "However, examination reveals that there is no reservoir there. Distribution of Wealth "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 1925-36 tax year companies paid 65 per cent of the total yield from incometaxj " '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, therefore, should 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."