STILL MORE TAXES?

Taranaki Central Press, Volume IV, Issue 443, 26 May 1937, Page 2

STILL MORE TAXES?

THE PRICE OF SPENDING Choice For Public Some excellent political medicine wag. administered by the ActingPrime Minister and Minister of Education (Hon. P. Fraser) in addressing the New Zealand Educational Infcj itute the other day, when he reminded his listeners of the simple but largely unappreciated fact tih'a.t public services have to be paid for (says a statement by the Associated Chambers of Commerce of Zealand). The Minister said it was useless to ask for the best education system in the world, or for other socilal betterment, unless the people—including those who did the asking—-were prepared ito pay fer it, and did not, in Uhe same breath, deplore the heavy taxation. Commendable Caution, In view of the fact that -the Government increased taxation. very heavily llasii year on top of greatly improved revenues from old taxes, it is highly gratifying to see that it Is now .tempering witQi 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 1936-37 an expenditure (excluding Unemployment Fund expenditure, and expenditure of Ipan money on public works) of £5,164,000 more tha was spent in the previous year, and it necessarily arranged that taxation should bring in an additional £4,460,000 over the prevous". year so as Ko meet the expenditure—>the balance being made up by increased interest and 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, oyer the previous year; expenditure on all social services wlas 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* per t 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 land order was advanced from £711,000 to £779,000—an increase of £68,000, or 9 per cent.; expenditure

on all Government departments and general admini's'tration (excludiing debt service and other permanent charges) wa§ advanced from £1,624,742 to £3,246,782 —an increase of £1,622,040, or 99 per ,cent. These fare in the main heavy in- ! creases, and it is very timely that I the Ac 1 ing-Prime Minister should i start reminding the people that as regards taxation and expenditure, they cannot eUt the cake and have it, itoo. There ig a limit to the amount of the Rational income which can safely be taken by taxation and applied to social benefits. All sorts of new public services, and expansions of existing services and benefits, may i be desirable, but can the .country afford ’hem? in 1936-37 £9,228,92'6 had to go toward service of the public debt, while other permanent charges took lanother £4,55,234, making a total of £13,784,000 —or 52 per cent, of /the whole of the estimated revenue from ordinary taxation) — j 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, tnc.n the present social services land general administration costs could be carried without taxation being s o ex- 1 qessive and burdensome as it is to- ) day. But that £9,000,000 debt payment is on account of the benefits l i the country has given itself in the past out of borrowed money, and ; what it lilas had it must pay for. Not- | withstanding, the country is still try- ! ing to go on living and spending as I if it had never occurred a gross debt jof £2B2,oo,ooo—and lived up to a ’ I past standard which was a false one I because Lt wag largely based on borj rowed money, not income. It is an eloquent fact Khat 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 th/it additional public services and benefits ■ould be made possible by rhe simple process l of taxing the higher incomes | more heavily. However, examination /reveals, that there is no reservoir I lere - The report of the 1924 Royal (Commission on Land and Income Taxation says: “Of -the total individual assessable income of New Zealand, le-ss than 11 p er ceni 1 . is held in incomes of over £2.O(W a year, and less than lj p er cent, in incomes of over £lO,OOO a year. Any system of income-tax will have to obtain the bulk of its return where the assessable income is—thht is, from ihe in. comes under £2OOO la year.” By comparison, Government statistics show that, for the 'tax year 1935-36, only 'I S per cent, of individual assessable

inicome is now held in incomes of £2OOO and over, and only .08 per cent, in incomes of £9,000 and over. The trul h is? that wealth is distributed in New Zealand l to a degree of evenness which is extraordinary. As for companies, the rate of tax on comany incomes was increased last year to the very heavy mlaximum of 7/6 in the £1 —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 in-come-tax upon individual incomes cannot be pushed without reducing i ( ‘s productiveness l 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 remlarks, is l most important, and it is essential in I he interests of the future stabilty and prosperity of the Dominion that ihe weight of taxation should’ be reduced as rapidly as possible.