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Thursday, 27 November 1941

Senator A J McLACHLAN (SOUTH AUSTRALIA) - It goes up in smoke.

Senator JAMES McLACHLAN (SOUTH AUSTRALIA) - Yes, and so brings no return. Seeing that this money is being expended for the protection of the people as a whole, all the people should contribute, but this measure provides for sectional taxation in that it places no burden upon the bulk of the country's wealth. The Government's taxation measures have been treated generously by the Opposition. I have very little fault to find with them in existing circumstances. We must have the money, and somebody must pay. We are all willing to pay our share, but taxation should be spread over a wider field. The exemption of wage-earners and small salary-earners from direct taxation will not afford them that measure of relief which the Government would have us believe. If they are exempt from direct taxation, we must increase their burden of indirect taxation, besides resorting in a greater measure to what is known as finance by national bank credit. This must have the effect of increasing the cost of living, which falls most heavily upon people with small incomes, so that it is possible that they will be worse off now than if they were required to pay income tax. So long as this war continues expenditure will increase, yet the Government is, for the most part, tapping only the' same sources of revenue as in the past. Statistics show that the greater part of the people's income - not less than £550,000,000- is held by 70 per cent, of the population. This section did not hold anything like the same proportion before the war. The income received to-day represents, in large measure, the money taken from the wealthier classes by increased taxation and distributed in the form of wages. The Government has exempted these increased earnings from taxation, but how long can that continue? High incomes are decreasing very quickly, and low incomes are increasing at a corresponding rate. When will the Government begin to follow that money?

Senator A J McLACHLAN (SOUTH AUSTRALIA) - It will begin soon; it is only shamming.

Senator JAMES McLACHLAN (SOUTH AUSTRALIA) - I think so, too. There has been much talk about rationing spending, and this is an opportunity to do it. By levying taxation on the lower incomes the Government could curtail expenditure very considerably. It has already checked the spending of the higher incomes. Expenditure is going up by leaps and bounds, and practically nothing has been done to curtail it. Several days ago I was talking to the manager of a large departmental store in Adelaide who told me that, in the toy department alone, sales had increased by nearly 60 per cent.

Senator Amour - What a shame! Should not the kiddies have any toys?

Senator JAMES McLACHLAN (SOUTH AUSTRALIA) - I expected that interjection. The honorable member seeks to imply that I do not wish the children to have their toys. Every Christimas for years past I have given more to enable the kiddies in the slums to spend a happy Christmas than the honorable senator has given during his whole life.

Senator Large - Why not begin by removing the slums?

Senator JAMES McLACHLAN (SOUTH AUSTRALIA) - I am prepared to join with the honorable senator in doing that, also. Retail buying has increased since August, 1939, by 35 per cent, in Sydney, 45 per cent, in Melbourne and 26 per cent, in Brisbane. The value of imports of tea, coffee and cocoa have risen during the same period from £2,800,000 to £3,500,000, silk and art goods from £3,500,000 to £4,700,000, and cotton goods from £5,400,000 to £8,800,000. I realize that price increases are partly responsible for the increased figures, but the most important factor is the increased spending power of the public. The proper way to ration spending is to increase taxation so that the people will not have the money to spend. The following is an extract from the London Financial Times: -

The budget, born of party political strife, bears a very strong imprint of its origin. " Soaking the rich " is everywhere the keynote. Any budget seeking to finance a large-scale war effort by mulcting the favoured few must be inflationary. Excessive reliance on direct taxation of higher incomes caused an inflationary position in Britain, and that result is even more clearly indicated in Australia, where the number of really high incomes is extremely limited.

The lowering of State income taxes is necessary if the total taxation in some ranges is not to exceed 20s. in the £1. On the other hand, a vast number of incomes under £200 remain exempt, meaning that 300,000 wageearners make no direct contribution, while 80 per cent, of the national income escapes any additional burden.

The political situation is most tempting, to sacrifice sound finance because with a slender majority the ruling party is greatly tempted to trim its policies to increase its hold on the electors. It will be regrettable if the price of greater political stability has to be disastrous financial instability.

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