LEVY ON CAPITAL PROPOSALS.

Manawatu Herald, Volume XLV, Issue 2537, 1 February 1923, Page 4

LEVY ON CAPITAL PROPOSALS.

HOW WOULD IT AFFECT INDUSTRY.

During the recent British elections, and in a lesser degree in New Zealand, the Socialist Labour parties declared for a levy upon capital assumedly to liquidate the nation’s war debts. We have seen a statement; by Mr J. R. Clynes, leader of the British Labour Party prior to the election, that his party did not present the proposal as part of itselection programme but merely by way of suggestion for consideration. In New Zealand Mr Holland’s Party luis mentioned the same matter but has not reduced the idea of a levy on capital to specifis form. There are a good many people in the Dominion who consider that they are heavily enough handicapped now by the State’s levies on their capital in the way of Land and Income taxes. It has been pointed out. in the Press that, the high Income Tax now ruling is a heavy burden on industrial and business enterprises and that in some instances the result has been to slmf out capital from investment within the Dominion. There can be little doubt that in view of our country’s indebtedness a very great need exists to stimulate productive enterprise and develop our local industries. Anything which will retard action in these directions cannot be of benefit to our people as a whole, but may lead to serious financial difficulties. BRITISH LABOUR’S PROPOSAL. The proposal for a levy on capital by the British Labour Party is on these lines. Fortunes up to £5,000 are to be exempt altogether. Thus £IO,OOO will only pay on £5,000/ind so on. It is intended that the plan shall be that of a percentage levy. The scale suggested is 5 per cent, on first £1,00; 10 per cent, on £2,000; 5 per cent £IO,OOO and so by a regular increase up to 55 per cent; on £1,000,000 and 60 per cent, over that. In actual money payments the scale would range somewhat thus. £SO on first £I,OOO, £250 on £2,000; £550 on £5,000 and so increasing to £502,800 on the million pounds. It is noteworthy that in the statement use is made of the words “fortune” and “payments.” It is quite clear what the latter word signifies but what, in an economic sense, does the word “fortune” mean?' Is it to be taken that there are large accretions of capital held as private fortunes which ai - e not being used at all in business or industrial undertakings. Whether this may be so or not in England we are quite sure that fortunes do not exist in such a sense in New. Zealand. The capital we possess is in actual use and has to be kept ia use to be mainfain'ed. The idea that many great fortunes stand like huge bags of money vvhich the State could draw from without affecting the general operations of our Industrial, Trading and commercial affairs is somewhat of an illusion. Wp have seen it explained that the proposal is not to levy upon business capital but bn personal fortunes. On that we can only say that no clear distinction between these two has yet been presented to us. In presenting its proposal the British Labour Party says—“ Thus, the people who possess fortunes up to £20,000 or so, will be posit ive gainers by the levy, for the Income Tax will be reduced and what they lose on the one hand will be more than made up by them on the other.” Conversely, we suppose that what the State gains in capital levy will be lost to it on the Income Tax. This plan appears to us like that of the man who proposed to lengthen liis blanket by cutting a piece off the top and sewing it on the bottom —'the advantage is more seeming than real. The Socialist idea of levying upon capital—or wealth that is supposed to be idle —seems such an easy way of meeting our National troubles that we can understand a certain class of mind seizing on the

idea as a panacea. The problem wo have to face, however, is whether the State in levying on the capital privately held will make better use of it than the private owners do. In a Bulletin of the National City Bank of New York that issue is put with reference to the business of the great Industrialist, Mi - Henry Ford —it says, “The supply of capital at his command is what makes his leadership in industry effective. What would the people of this country gain by any action at Washington for the purpose of taking Mr Ford’s profits out of his hands as fast as he makes them? Is Washington able to put them to a more advantageous use than he? We like to see the Government’s finance in a buoyant state, but better than that is it to find the sources upon which the Government depends are in a sound and healthy condition. That will not be produced by more levies upon capital but the encouragement and wise use of capital to produce greater wealth. (Contributed by the N.Z. Welfare League.)