Income Tax
SIR,—The interesting letter about income tax, written in 1853 and re- printed in last week's Spectator, could ,hardly have appeared at a more opportune moment, The fantastic level to which this tax has now risen is well exemplified by the fact that, in order to increase Judges' salaries by £1,000 a year net, it would be necessary, in the case of the Lord Chancellor—, who now gets 410.000,. to .raise his salary to.£40,000, In present, circumstances income tax is a most harmful form of taxation. It is of vital importance today to produce more, especially _for export, and to consume less. Greater production means harder work; but wage-earners have little incentive to work harder when the extra money thus earned is almost halved by income tax. And for those earning higher incomes the present level of income tax makes saving or investment difficult if not impossible while having compara- tively little effect in reducing their consumption. In fact, paradoxically, the futility of trying to make substantial savings tends to stimulate extravagance. A tax which restricts production and disencourages saving and investment just does not. make sense.
Were income tax to be replaced by a sales tax on all kinds of consumer goods, other than real essentials, the change in the source of taxation would result in harder work, increased Savings and invest- ments and lower consumption. As 'a country we might then find it easier to earn our living and save for investments overseas. A sales tax on non-essential consumer goods would not fall on the poorer classes since, presumably, the poorer the individual the less he or she is likely to spend on non-essentials.
According .to Whitaker 1953, income tax, surtax and taxes on profits total £2,113,749,000. Customs and Excise total £1,751,782,000. If the yield of the latter were to be raised by 120 per cent., this would serve to cancel the loss of the former. Between 1939 and 1944 the yield from income tax was raised by just about this amount.--Yours faithfully, H. R. PELLY. 5 Smith Terrace, S.W.3.
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