The more the provisions of Sir John Simon's Budget are examined the sounder does the general scheme of raising money with which to fight this war appears. The increased income tax serves efficiently to ensure that the middle incomes, ranging from £250 to £1,500, shall bear their proper share of the burden, while the various indirect taxes, including the proposed sales tax makes it quite certain that wage earners receiving sums below the above minimum will, in their turn, make adequate contribution. It is true that the income tax payers will be equally affected by the indirect taxes, but as it is the most painless way of extracting money, it will probably not be felt too heavily. On the other hand these increased indirect taxes are designed for another purpose beside the raising of money, and that is to effect a reduction. of expenditure on the part of the public so that greater sums shall become available for governmental borrowing. Much has been said in favour of a general sales tax on everything purchased in a shop. Sir John Simon has adopted a modified plan which subjects only certain goods to such taxation not on the sale in the shop, but on the transaction between the wholesaler and the retailer, Mr. Geoffrey Crowther, editor of the "Economist" points out in a recent article that if this tax were levied at the stiff rate of five per cent., it might, as a pure guess, bring in from £100,- 000,000 to £120,000,000 under war-time conditions. Exactly what Sir John Simon contemplates in this respect has not been made clear in his Budget speech, but the exempt tions from the proposed sales tax, which he proposes, should have the effect of materially reducing the expected returns. Sales taxes are fairly common throughout the world, and the proposed scheme should make collection in this particular instance comparatively inexpensive and easy, and as it is obviously levelled against luxury purchases, this form of control of public consumption should have the effect of enforcing greater saving, and, consequently, greater borrowing resources for the Government.
Much has been said in recent weeks about the advisability of the Government introducing legislation empowering it to seize all income over £2,000 a year. Few people, however, realize how little income the rich have after they have paid their taxes. Mr. Crowther is again quoted as stating that "in 1936-7, the last year for which we have figures—there were 95,750 persons with incomes over £2,000 per annum. Their incomes added up to £483,700,000. On these incomes surtax (on the rates prevailing prior to the introduction of the present Budget) would amount to about £65,000,000 and income tax to about £165,000,000. This leaves about £250,000,000, which is all that is left of the incomes of the rich. If the States decided to take every penny over £2,000 a- year, so that nobody should have a income higher than that figure, the benefit to the Exchequer, over and above existing taxes could not be more than £60,000,000. Clearly there is not much more to be got from the incomes of the rich." Such a proposal may nevertheless be justified on the ground of imperative need, and in the knowledge that every little helps, but it is quite clear that as a means of raising substantial sums the proposal has not the merits which its advocates appear to believe. There is on the face of it, however, something attractive in the suggestion that, in a democracy under war conditions, nobody should be in receipt of an income of more than £2,000 per annum, though it needs to be pointed out that the general effect of such a provision would operate against big estates even more severely than does present taxation, and possibly lead to the extension of unemployment attendant upon their disappearance. Nevertheless such a step may eventually have to be taken, though at present there is nothing in the financial position of Great Britain, to make it immediately necessary. Obviously there are other resources which will have to be tapped and exploited to the utmost before this suggested raid is put into effect, for to resort to such a scheme unless it becomes absolutely necessary might prove to be highly imprudent.
It is interesting, however, to note how much leeway there still remains for further increases in the income tax, and tq point out how misleading it is, with regard to middle incomes, to speak about the income tax being levied at the rate of 7s. 6d. in the pound. No one in the middle income class pays as much as that. A bachelor in receipt of an income of £2,000 per annum unearned pays not more that 6s. 9d. in the pound in addition, of course, to the surtax on '£500 because of the change announced in the present "Budget. Similarly, with a like proviso, a married man drawing a similar earned income, and two children, pays no more than 5s. 3d. in the pound, while a married man in receipt of no more than £1,000 and having two children in fact pays as little as 3s. 7d. in the pound. The standard rate of 7s. 6d. is, therefore, a purely comparative one, and when there is talk of increasing the rate to 10s. it does not necessarily mean that the burden placed on the recipients of middle incomes would be as great as the difference in standard rates would at first suggest.. It is believed that if the income tax rates were increased by the equivalent of a rise in the standard rate to 10s. an additional £175,000,000 would be obtained of which approximately two-thirds would come from the middle incomes. The burden would not be so heavy as would appear at first glance, and the figures indicate that the possibilities of the income tax have not yet been exhausted. There is consequently every justification for claiming, as the British press has done, that this year's Budget, almost revolutionary as it must seem to many, is not only a sound piece of government financing, but demonstrates in the clearest manner possible the financial strength of the country. It may be that it will be called upon to make even greater sacrifices than Sir John Simon has already demanded, but the capability is there. Not only that there is the determination to see this war, which has been forced upon the Allies, through to the bitter end, and the knowledge that whereas Germany has nearly reached the limit of the sacrifice of which she is capable, the British Empire is only just commencing.
Text read from the printed page and cleaned; old type leaves the occasional error.