Penal Tax On Unearned Income Removed By Amendment Bill

Wanganui Chronicle, 2 September 1950, Page 6

Penal Tax On Unearned Income Removed By Amendment Bill

Measure Passes House After Being Opposed By The Opposition

PARLIAMENT BUILDINGS, Last Night (PJL)—The House of Representatives today passed the Land and Income Tax Amendment Bill, which gives effect to the Budget proposals increasing the exemption on linemen inhered land valued at less than 112500 from £5OO to £lOOO, and the lifting of the 33 1-33 per cent, penal lax on unearned income.

The Opposition divided the House three limos, once on the second reading and twice during the committee stages. Government speakers said that lifting the penal tax on unearned income would encourage people to save for their old age. The Opposition contended that the Bill was a gesture to the wealthy.

The associate Minister of Finance (Mr. Bowden), moving the second reading of the BUI, said that in regard to land tax, the Bill would absolve 25,000 taxpayers from making returns. The administrative work of the department would be lessened considerably. The loss of revenue would amount to about £20,000. In the latter case there would now be no form of intome classed as unearned. A total of 33,300 taxpayers and “something under £500.000 would be involved. Mr. Bowden said that the total returned as unearned income was £9.8 i million, and of that sum £6.8 million was returned by taxpayers in the under £lOOO income group. The total number of taxpayers who paid unearned incometax was 19,600. There were many people who had unearned income in quite small amounts which went on top of their earned income. UNJUST, SAYS MR. NASH. Mr. Nash (Opp., Hutt), former Minister of Finance, said that the principle differentiated between sums taken out of the pool of wealth without exertion and those as the result of production or services. It was helping those who had plenty at the expense of others. The Labour Government exempted people with small unearned incomes. The present proposal was designed to win votes, and those jwith high incomes today would have them extended by a lower rate of tax on £9 8 million, which was unfair and unjust. Mr. Nash said it was unfair that a man might enjoy from his investments higher income than, say, the Prime Minister. Government voices: Raise the Prime Minister’s salary. Mr. Nash said the suggestion to raise the Prime Minister’s salary, because another man might receive more in unearned income, was absurd. Mr. Nash said he knew of one man who received £26,000 last year free of income tax. Mr. Sutherland (Govt., Hauraki): Was he selling import licences? Mr. Nash: No: It came from race winnings. The Minister of Education (Mr. Algie) said Mr. Nash had made sweeping exaggerated statements. The Bill would right an illogicaol wrong which amounted to an injustice. It was not. night to tax at penal rates those who had saved for their old age. Let. them I pay tax- on a graduated scale, but no': | at. differential rates. Income from '.savings was earned in the truest moral sense. Mr. Algie said it had alI ways heen his ambition *o nay income (tax. He was sorry he did not pay | more. ! Mr. Holland: Can I help you? Mr. McCombs said that Mr. Aleie ‘had been horn 190 years too late. His arguments i n favour of the workless wealthy belonged to 19th century conservatism. The principle of a differential tax on income from investments was introduced by Mr Massev |in 1922, and the differential tax wai i trebled by Mr. Downie Stewart in 1931. Mr. Gillespie (Opp.. Hurunui) said he hoped the day would come when land tax. as a tax. could be removed. It was, in his opinion, quite a wrong

system. He considered that the lifting of the penal tax on unearned income would do much for those who had saved. They could .iow Invest that money. ; Mr. Kearins (Opp., Waimarino) said Budget proposals did not give a fair distribution of relief to all people. The ■ Government had rightly been charged i with reducing taxation for tnoss who did not need that assistance. I Mr Kearins said there was a very real reason why land tax should be continued —to force the cutting up of land. He hoped the day would come when a graduated land tax system would be imposed in the interests of thousands of returned servicemen who were still waiting to be settled on the land. The Government, he said, had a responsibility to take land away from those who held a surplus. The Government’s prime duty was to look after those on lower income groups—those with an income of £SOO downward, but the whole of this Government’s legislation so far had been heavily weighted against the lower income groups. The Bill was class legislation, intended specfically to reward those who provided the sinews of war for the National Party. He hoped the Prime Minister would not yield to the known pressure on him to do still more for those who already had all they needed. The Minister of Internal Affairs (Mr. Bodkin) said the penal tax of unearned income for years had made ordinary securities unattractive, and was unjust to widows and many others who had modest investments for their later years. He claimed that many artisans, earning about £5OO a year, made regular savings for investment purposes. Eighty per cent, of taxation came from the lower income groups. Taxation from the so-called rich would i not pay the costs of the Government' for one month. Mr. Combs (Opp., Onslow) said it I was not the degree of relief that mat- i tered but the principle. Those who 1 did no work and contributed nothing to the pool of wealth were receiving aj benefit. He urged the Prime Minister not to go on with the Bill, but reconsider its provisions during the week-end. Mr. Bowden, replying to the debate, said thousands of small investors would benefit from the Bill. The 01*position had sung a hymn of hate against any man with a substantial income, but investors were thrifty people who had worked and saved. Mr. Bowden, answering Opposition criticisms that the Bill would benelit those on higher incomes, said: “We are not goving them more; we are just not taking so much away from them. “Abolition of the penal tax would gneourage more diversified investment. The test would be the ability to pay, not the source of income. Was a person drawing £lOOO from an investment better able to pay tax than a person earning £lOOO from a salary? The Bill was not the last of the Governments taxation legislation, but merely a first instalment. Mr. Mathison (Opp., Avon): Another instalment of freedom. A division was called for on the second reading, which was given by 34 votes to 21. The House divided twice during the committee stages of the Bill, but on each occasion the clauses contested—those increasing exemption from land tax and abolishing 331-3 tax on unearned income—were retained by 33 votes to 22. Ihe Land and Income Tax Amendment Bill, and the Land and Income Tax (annual) Bill, which fixes the rates of land and income-tax payable were passed. The House adjourned at 6.48 p.m. until 2.30 g.m. on Tuesday.