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MINISTRY OF INFORMATION
Home Intelligence Special Report No. 17

9th May, 1942

WORKERS' REACTIONS TO THE NEW INCOME TAX PROPOSALS

1. Reaction to the budget as a whole

The budget was very well received, on the whole, particular satisfaction being caused by the fact that direct taxation had not been increased. The new income tax proposals seem to have attracted considerably less attention than the proposals relating to beer and tobacco, which have been received by the majority with dismay.

As yet, misunderstandings about income tax do not appear to be widespread, but it is thought that “the significance of the new proposals would not become apparent until they had actually been applied”.

2. The workers' attitude to income tax

From four Regions opposition to the idea of paying tax is reported in one form or another. The strongest expression of this dislike comes from the Scottish Regional Report, which says that “to sum up, income tax is still considered by most workers to be a system of legalised highway robbery. Where reliefs are given, they are considered as putting part of this wrong to rights”. In the South Western Region, where income tax is described as being “on the whole, accepted as an inevitable part of the war effort”, the strongest individual dislike is said to be on the part of (a) “the older, thriftier type of worker who has always laid out his money to good advantage, and (b) the young worker earning good wages for the first time, who says he's ‘not going to work like that’ only to be taxed so highly”.

3. Tax deduction from current wages

Keen and widespread disappointment is reported from nine Regions that no method of tax deduction from current wages has yet been devised. The objections to a weekly deduction of tax do not seem to be generally understood, and it is suggested that further explanation of these objections would be helpful. Even if the new concessions (i.e., the division of the financial year into periods of seven and five months, and the raising of the weekly minimum) do promise some alleviation, it appears that they will not remove one of the main objections, which is the “feeling which the worker has of being saddled with a debt which he is trying to reduce each week”. It is said that “the men would prefer to pay more than they need as they go along, and get a credit at the end of the financial year”.

Another of the main objections to the present method of basing deductions on past earnings is that the workers are “suspicious of the method by which it is calculated and, having kept no records of their earnings, they cannot check up on it”.

4. Seasonal fluctuations in earnings

The proposed division of the year into periods of seven and five months to meet fluctuations in seasonal earnings is said not to be widely known or understood, but it appears to have been regarded as a half-measure and as “only a short step in the right direction”. It is thought that additional explanation will be needed, and in this connection one report suggests that the “valuable White Paper, ‘The Taxation of Weekly Wage Earners’ (C.M.D. 6348) is little known” and might be brought to the notice of Union officials with advantage.

5. The raising of the minimum wage at which deductions are not required

The principle of the minimum wage packet is approved and there is some gratitude that the minimum is to be raised. The feeling is, however, reported from one Region that even the new exemption limits are too low and should be raised so that for single men there should be a limit of at least £3 - and for married men £4 - free of tax.

In connection with this weekly minimum, two queries are reported:-

There seems to be some uncertainty as to the whole question of the applicability of the minimum weekly wage packet to women.

6. Concessions to married women

The increased personal allowance for married women workers has been warmly appreciated by those to whom it applies. The desire for a separate assessment for husband and wife, however, is still expressed. There appears to be some feeling that “Sir Kingsley Wood missed the point when he said that allowances for a married couple who were working were already more favourable than for two single workers, as one of the main drawbacks to married women working is that they have to reckon on added expenses, such as payment for the care of their children, fares, meals out, laundry and other household tasks, which they would otherwise perform themselves”.

Resentment at the concessions to married women workers was expressed by the following:-

(a) Married housewives , particularly those with children to look after, or with workers billeted on them. Some of these housewives refer to the new concessions for married women workers as “bribes”.

It is thought that serious discontent may be caused when people compare the position of a childless married couple, both of whom are on munitions and will benefit from the new comcession, and that of a soldier's wife with children who receives no concession.

(b) Unmarried women , who feel that many of the women workers do not deserve their concession, “since they married to avoid being called up”. Among unmarried women and men also, regret is expressed that the Treasury had to resort to this means of “enticing married women into industry”. Single women in jobs, many of them with dependants and with homes to run, “feel the contrast with fellow workers who are married”. It is thought that an especially unfair advantage will be enjoyed by women workers who have recently married men in the Services, who have no home of their own, and continue therefore to live with their parents, but who - in addition to the Army allowance - will have the £80 concession on their income tax.

(c) A minority , who are said to be very concerned about the effect on the birth rate. It is thought that the new concession will “tend to attract married women to work rather than to have children, since a married man with one child has allowances of £140 plus £50, whereas a married man whose wife also earns is allowed £140 plus £80. There is minority criticism of “the small size of children's allowances” and the encouragement to married women to leave home and go into industry (by what is regarded as a monetary inducement) appears a “retrograde and inequitable step” to those who consider family allowances to be one of the postwar necessities.

7. Postwar credits

The proposal to issue certificates showing the postwar credits due to tax payers has met with some approval as “the best means of countering the fear” - which still exists - “that postwar credits may never come to anything”. Some people think that “our financial position will be so bad after the war that the Government will then claim that it is unable to allow these credits”.

8. Travelling allowance extension

The new proposal to “extend to employees assessed yearly” the allowance for additional travel, at present allowed only to manual workers assessed half yearly, is regarded as “but a small step in the right direction”, and has resulted in a number of enquiries from people who do not know whether it applies to them. There appears to be a “tendency to suspend judgment until the concession is explained”.

9. Simplification of assessment forms

No particular reaction is reported with reference to the Chancellor's statement that a newer and simpler form of income tax return was to be introduced. The demand for a simpler method of assessment, however, as well as for a simplified form, continues. It is pointed out how greatly the filling of forms is disliked, cases being mentioned “where wage-earners have been deeply disturbed at the prospect, and employers have found it most difficult to get their hands to comply.” One of the arguments for the deduction of a fixed percentage from weekly wages is based on the contention that it would make it easier for a man to understand how the assessment has been arrived at, thus “reducing the suspicion born of ignorance”.

10. Tax on overtime

Although there is no indication that any concessions were expected with regard to tax on overtime and Sunday work, disappointment is strongly and fairly widely expressed that overtime work, which is regarded both as a “contribution to the National effort” as well as a “tax on stamina and health”, should be “penalised”. There is reported to be a persistent belief that, in working overtime, “nearly all the extra pay will go in tax”, with resultant “opposition to overtime working and especially Sunday working”.

11. Farmers

The reluctance of farmers to undertake book-keeping is stressed in the Scottish report: this is said to be due less to inability to do so than to “reluctance to reveal much that they would prefer to remain concealed”. The chief point on which farmers are said to be in need of education is the question of “what an income really is”. It is said that in many cases what a farmer thinks of as “income” is really “profit”, and as a result farmers are incredulous when they are told that produce off their own land, consumed by them and their families, must be regarded as income. The report from Scotland concludes by observing that “the general, though grudging, acceptance by the farming community, of the new burdens of income tax, may be succeeded by something like an uproar when full realisation dawns. It would be well if this could be forestalled by a really vigorous campaign (i) to tell the farmers how to keep books, and (ii) to inform them precisely what an income is, and how other sections of the community are taxed”.

12. Minority points , mentioned by only one Regional report, include:-

13. Income tax publicity

It is suggested that a new edition of the “Income Tax Quiz” would be useful, in view of the popularity of the present edition. Some people suggest a free distribution, through the Trades Unions. The necessity of providing managements of factories with accurate information is stressed, as it is considered essential that they should be in a position to pass this on when requested to do so by workers.

The view is expressed from one Region that the Income Tax Poster and Quiz are “too governmental”, and that what is wanted is “more sympathetic publicity, from the workers' point of view”. It is suggested that the starting point for publicity should be “what the worker is going to receive” rather than what is going to be taken from him.