The income tax applies to net income from employment, and net profits from business. There is an absolute exemption of $1,500, except in the case of absentees, and companies whether absentees or not, and a further additional exemption up to $250 a year for life insurance premiums, if the citizen wishes to spend his money that way. All income derived from land or from mortgages, so far as they represent realty, is outside this tax, which affects only income from employment or business. The farmer, who derives all his income from land, pays no income tax. The same may be said of a lawyer, doctor, teacher, artisan, or any other person who makes no more than $1,500 a year. The total number of income-tax payers is only about 5,600.
United States Consul Connolly, reporting to our Government in 1894 and 1897, has considerable to say regarding taxation in New Zealand. He says that country excels in the matter of taxation. That in a very short time the system of taxation had been revolutionized and the incidence almost entirely changed, not only without disturbing to any appreciable extent existing interests, but with the most beneficial results. He says the income tax was most fiercely denounced as inquisitorial, destructive of the first principles of frugality and thrift—in fact all the forms of evil lurked in the shadows of the words “income tax,” and a united effort was made to resist this “iniquitous tax,” but all to no purpose. And that in 1897, after six years of experience, the more liberal and fair-minded of those who opposed the income tax frankly admitted that it is a fair and unembarrassing tax. “In New Zealand the land and income tax is now popular; it is accepted in lieu of the property tax; it is a success.”
In the United States the Government is paternalistic toward banks, railroads and manufacturing interests. It loans its credit to the national bankers at most advantageous terms, but has persistently refused to favor other classes in a similar way. In New Zealand, however, in 1894, there was established a Government loan office which lends public funds to farmers, laborers, business men, etc. at low interest, and on easy terms. The security taken is on freehold, or leasehold, interest clear of incumbrances and free of any breach of conditions. The loans are on first mortgage of land and improvements. No loan is to be less than $125, or more than $15,000, and the sum of the advances to any one person must not exceed $15,000. There are two kinds of advances, fixed loans and installment loans. The first may be for any period not exceeding ten years, and the principal is due at the end of that term. The second is for 36½ years, and part of the principal is to be paid each half year. Interest in both cases is at 4½%, if paid within fourteen days of the time it is due (5% if payment is not prompt); and in the case of an instalment loan, 1% more is to be paid for the reduction of the principal.
Passing over the chapters devoted to the labor department, the state farm, the factory laws, the shop acts, the 8-hour day, industrial arbitration and co-operation, all of which are of intense interest, but of such a nature as to preclude brief statement, we come to the Government ownership and operation of the railways. The year 1894 Prof. Parsons calls “the glory year of land resumption. Government loans to farmers, nationalization of credit, labor legislation and judicialization of strikes and lock-outs.” It was in this year that another important move was made through a vital change in the national railway policy. In 1887 a commission system was inaugurated, under which the roads were put in the hands of commissioners appointed by the Governor, with the assent of Parliament. This did not prove satisfactory to New Zealand. The commissioners managed the roads with a view to making a good financial report. They were looking for profit. In the Parliamentary debates it was charged that rates were so high that firewood went to waste in the forest, and potatoes rotted in the fields, while the people in the cities were cold and hungry in the years of depression; that goods were frequently hauled more cheaply by wagon than by rail; that while rates were reduced somewhat now and then, it was done by reducing wages; that the pay of the men was cut while the salaries of high-priced officials were increased, and so on. This is a striking parallel to conditions in the United States today.
Prof. Parsons admits that the commissioners were honest, but they were simply railroad men, running the roads to make money for the treasury. Finally public indignation became intense. The air was full of complaints, and in 1893 the abolition of the commission was made an issue in the campaign, and the people, by an overwhelming majority, elected representatives pledged to put the roads under direct control of the Minister of Railways and the Parliament, and to bring the railroads within speaking distance of the people.
The result of this change is that the roads are no longer run primarily for profit, but for service; and the men are treated with the consideration due to partners in the business. It is announced that the definite policy of the Government shall be that all profits above the 3% needed for interest on the railway debt shall be returned to the people in lower rates and better accommodations. This is in striking contrast to the facts brought out in the letter of Engineer William D. Marks to Hon. Wharton Barker, recently printed as a public document at the instance of Senator Tillman of South Carolina, in which it is shown that the people of the United States are today paying interest on a fictitious railway capitalization of something like $7,000,000,000.
In 1899 the Minister of Railways announced a reduction of 20% on ordinary farm products and 40% on butter and cheese, etc. These concessions, Prof. Parsons declares, amount to one seventh of the receipts—equivalent to a reduction of $150,000,000 on the yearly freight rates in the United States. That alone would be a yearly saving of almost $2 a head for the people of the United States. In 1900 Mr. Ward, the new Minister of Railways, announced a general lowering of passenger fares as the first fruits of his administration. “The announcement was received with cheers by the audience—stockholders in the road.” Care is taken in New Zealand that small men shall not be put at a disadvantage. The State roads carry 400 pounds at the same rate as the ton rate, or the train-load rate, and one bale of wool goes the same rate as a thousand. No such thing is known in New Zealand as the lowering of rates to a shipper because of the great size of his shipments. All the rates are made by the management openly. There are no secret modifications of the tariff. There may be a variation on scheduled rates to equalize a long haul, or enable a distant mine or factory to reach the market in condition to compete with nearer rivals, but the total charge is never lower than the rate that is given to others for the same service.
The State roads are used to advance the cause of education. Children in the primary grades are carried free to school. Other children pay $2.50 to $5, according to age, for a three-months season ticket up to sixty miles. This gives them a possible 120 miles a day for 3 to 6 cents in round numbers, or 20 to 40 miles for a cent. A child who goes in and out six miles each day rides 12 miles for 3 cents.
It is impossible in the limits of this article to more than touch upon many of the other advances made in New Zealand. The Referendum is now used to a considerable extent in local affairs, and its use is being extended. Old age pensions are in force, being a much better method than maintaining poor houses. Immigration is carefully guarded. The State is now opening coal mines and engaging in the business of furnishing fuel to the people. Many other innovations of this character are being considered and put in operation from time to time.
Prof. Parsons summarizes his study of New Zealand in some sharp contrasts and conclusions, from which we quote in part: