LETTERS TO THE EDITOR.
THE PENALTY ON THRIFT.
[To asp EDITOR 01 T217 .93111C1A100.1
Sur,—I desire to bring to notice some points in connexion with the Income Tax, which involves much injustice in its operation in many quarters, but in no case does it act more harshly than in that of the so-called "unearned" income. The differentiation between "earned" and "unearned" incomes I hold to be grossly unfair as applied to a very numerous and deserving class, and the whole question of this distinction needs reconsideration. I wish more particularly to dinw attention to what appears to be a most flagrant injustice, and one that I think is not generally realized. I refer to the differentiation between "earned" and " unearned" incomes as
applied to Government pensions, and what I might call self- made pensions—that is, incomes of professional or business men after retirement from their life's work owing to old age or ill-health. The Civil servant, both whilst he is earning and after he ceases to do so, is taxed at the rate of Pd. The professional or business man is taxed at the rate of 9d. whilst he is earning, but at la. 2d. (now ls. 4d.) when he ceases to do so, on a much reduced income. If they are taxed on the same basis before retirement, why are they taxed on a different basis after retirement ? These incomes after retirement are either both "earned" or both "unearned"; they cannot be different. Retiring incomes, whether in the form of pensions, annuities bought with savings, or dividends from saved capital, are all " unearned " within the meaning of the Act, though all morally earned and all serving the same purpose— that is, providing for old age or ill-health. They should, therefore, all be taxed on the same basis. Why should incomes derived from voluntary thrift be taxed over fifty per cent. in excess of those derived from compulsory thrift as represented by Government pensions P This, I maintain, is a gross injustice and a direct tax on thrift. It penalizes the one and favours the other. The Government explain this anomaly by treating pensions as " deferred pay." It is an ingeniously invented phrase, whereby they recognize the injustice of super-taxing small incomes after retirement, and so secure themselves and their staff against the " unearned" rate. But one would suppose that• income after retirement is as much " unearned " or " earned " in the one case as in the other, and that both should therefore be similarly treated. Pay deferred over a life's work is savings, just as much as deferred expenditure, where the pay has been received. It amounts, therefore, to this : If you are in Government service, they save your money for you, dole it out to you on retirement, calling it " deferred pay," and tax it at 9d. If you are not, and save it yourself, making your own arrangements for your income, they call it " unearned," and tax it at ls. 2d. (now la. 4d.), or over 50 per cent. in excess as a penalty on your thrift. It is an obvious injustice, affecting a very numerous and deserving class with small incomes, and one that should be righted. This subtle and illusory distinction of incomes operates most harshly on widows and spinsters not in a position to earn an income themselves, but dependent on that which has been earned for them. In this matter women have a very strong case, and if those who devote their energies to agitating for• the vote, by encouraging the burning of innocent and unoffend- ing people's houses and other senseless outrages, would turn their attention to such matters as this, they might do some real good to their sex. I hope some of your readers who have earned a retiring income, and are now being super-taxed for making provision for their old age, will give expression to their• views on this matter.—I am, Sir, &c.,
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