COST OF SERVICE

Evening Post, Volume CXXIII, Issue 122, 25 May 1937, Page 10

COST OF SERVICE

STILL MORE, TAXES?

CHOICE FOR PUBLIC

THE PRICE OF SPENDING

Some excellent political medicine was administered by the Acting Prime Minister and Mipister of Education (the. Hon. P. Fraser) in addressing the New Zealand Educational Institute the other day, when he repinded his listeners of the simple but largely unappreciated fact that public services have to be paid for (says a statement 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. X 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. : GROWTH OF EXPENDITURE. In a nutshell, the Government undertook for 1936-37 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 an,d other receipts. For 1936-37 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; the 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.; the 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 per cent.; the expenditure on defence was advanced from £1,014,000 to £1,283,000^-an increase of £269,000, or ■26 per cent.; the expenditure on law and order was advanced from £711,000 to £779,000—an increase of £68,000, or 9 per cent; and the expenditure ori 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. 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 tlje cake and have it too. There is a limit to • the. amount of' national Income1 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 towards service of the Public Debt, while other permanent charges took another £4,555,234, making a total of £ 13,785,000—0r 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, the present social services and general administration costs could be carried 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 gn living and spending as if it had never incurred a gross debt of £282,000,000—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. The report of the 1921 Royal Commission on Land and Income Taxation says: "Of the total individual assessable income of New Zealand, less than 11 per cent, is held in incomes of over £2000 a year, and less than li per cent, in incomes of over £10 000 5 year. 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 £2000 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 of £2000 and over and only .08 per cent, in incomes of £9000 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 £-and Jot the 1935-36 tax year companies paia 65 per cent, of the total yield from income tax. rr_ vn "There is a point," says the Taxation Commission, "beyond which income tax upon individual incomes cannot be pushed without reducing its productiveness through ipital leaving the country. A rate inducing an inflow of capital would produce a ferger 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 po=sible. _______———