"Soak-the-Rich"

Most anxiously awaited day in Britain's Parliamentary year is the one on which the Chancellor of the Exchequer "opens" his Budget in the House of Commons, because ever since 1917 Britons, great and small, though ruled for the most part by Conservatives, have paid out staggering income taxes. Outstanding British taxpayers like Lord Leverhulme (soap), Lord Wakefield (oil), Joseph Rank (flour & shipping) and Lord Nuffield (motors) are relieved of as much as 66% of their incomes by the Government, and it was these who faced the 1937 Budget with most fear and trembling.

Last week on Budget Day even those indolent M.P.s who rarely put in an appearance rolled up in full force, jam-packed the House so thickly that Laborite M.P. Richard Gibson had to take refuge in one of the galleries with a host of peers, foreign diplomats and other bigwigs, including the famed economist Sir Josiah Stamp and Bank of England's eccentric Governor Montagu Norman. So staggering was the Budget speech which all were keyed up to hear that Montagu Norman was reported next day to have "looked bewildered as if he could not follow or believe what he heard."

For the sixth time in his political career, rake-thin, hook-nosed Chancellor of the Exchequer Neville Chamberlain, slated to succeed Stanley Baldwin as Prime Minister, stepped sedately up to the red dispatch box in the centre of the floor, fished a sheaf of papers from the Chancellor of the Exchequer's historic leather brief case, began to talk in his precise dry rasp.

From long practice Mr. Chamberlain knows, the advantage of cracking an early jest to distract his victims from the impending thumbscrew of his Budget revelations. Last year he said: "Perhaps I may liken this budget to the uncertain glories of an April Day." This year if he had drawn on the calendar for his opening banter he would have had to choose the month of November, so he changed his tack, orated: "It has been suggested that I tax bachelors, bicycles, cats, dogs, debutantes, fiction, loudspeakers and other things. . . . None of these things is of any use to me." His audience tittered nervously, and shrewd Neville Chamberlain followed up with the handsome announcement that he proposed to abolish the "trousers tax" of 15 shillings a year, which every Briton who employs a manservant has hitherto had to pay. After this he got down to brass tacks and his pop-eyed listeners learned how the British Government proposes to pay for its five-year $7,500,000,000 rearmament program.

Casually announcing that the Government will spend a total of $4,315,500,000 in 1937, $324,755,000 more than last year--most of it on warplanes,ships and guns--Mr. Chamberlain let fly two hammer blows: 1) Britons' basic tax on net incomes will be raised to live shillings in the pound (25%). A Briton with a wife and child who earns $5,000 a year would pay, after benefiting from various exemptions, $585 to the Exchequer, more than seven times as much as a U. S. citizen in the same position pays to Washington. 2) An excess profits tax, hated by Tories the world over and first levied in Britain in 1915 by the Asquith Government and continued until 1921 by David Lloyd George to hit war-profiteers, will be reintroduced under the euphemistic head of "the national defense contributions." This will be raised "during Britain's rearming years on the growth of profits from "all persons and firms engaged in industry, trade, or business of any kind" making an annual profit in excess of $10,000. This new tax, it is estimated, will bring in only $10,000,000 in the current year but nearer $125,000,000 next year.

A company will have the privilege of choosing by which of two methods it wishes to have its excess-profits tax computed. It may pay taxes on that portion of its profits in excess of the average profits made in the years 1933 to 1935; or it may choose to be taxed on profits exceeding 6% of the ordinary capital in the case of public companies. 8% of ordinary capital in the case of individuals or private concerns. Thus if a public company chooses the second standard it will pay the Government one-fifth of profits, ranging from 6% to 10% of capital; up to one-quarter of profits ranging from 10% to 15%; one-third of profits over 15%. It was estimated by London financiers last week that Imperial Chemical Industries, for example, would pay $850,000 by choosing the capital basis, $1,420,000 by choosing the profits basis.

As the House recoiled from this nose punch, Mr. Chamberlain tried to strike a more cheerful note by declaring that he would show no mercy to tax-avoiders, who deprive the Exchequer of millions of dollars each year. This raised a cheer but the House soon relapsed into gloom.

As soon as the speech was over Laborite Clement Attlee, leader of His Majesty's Most Loyal Opposition, leaped to his feet and thundered: "This is the first of a new series of war budgets whereunder we are marching straight into another conflagration."

Financial London was shocked. The market slumped badly. London financial papers described the excess profits tax as "crazy," as paving the way for "a Socialist Government to ruin the profitability of British Industry." Writing in the London Times, Economist John Maynard Keynes said: "It is like a tax on twins whose names are in the first half of the telephone book and happen to be born in 1900."

Dyed-in-the-wool Conservatives who approve wholeheartedly of Britain's gigantic rearmament scheme accepted the new tax as a necessary evil, other Conservatives feared it would cause dangerous discontent, would sap industrial vitality. Declared Sir Robert Stevenson Home. Conservative Chancellor of the Exchequer from 1921 to 1922: "I have talked with many people and there are great perturbations. Unless these are abated in some way I fear some check upon the enterprise of the country." British Radicals, though strongly opposed to rearmament, were delighted that the 1937 Budget hits those with most money, tagged it the "Soak-the-Rich Budget."

This week Mr. Chamberlain announced that the Government would shortly issue -L-100,000,000 ($500,000,000) in 2 1/2% National Defense Bonds, priced at 99 1/2, all to be redeemed at par by 1948.

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