Simple Simon's Tax

Anything but simple is the great legal mind of the Rt. Hon. Sir John Allsebrook Simon, long the Empire's highest-paid lawyer. But one day last week he was suddenly congratulated by almost every London newspaper on being the author of what Britons dubbed good-humoredly "Simple Simon's Tax."

Sir John, when he recently became Chancellor of the Exchequer, found himself in charge of a new tax trap designed for Rearmament profiteers but so objectionable to many potent Britons that there was nothing to do but hastily scrap the design. Its inventor was the Rt. Hon. Arthur Neville Chamberlain, now Prime Minister, who was Chancellor of the Exchequer when he introduced it in the House of Commons as the National Defense Contribution (TIME, May 3). This bill was to help hugely in paying for Rearmament by taxing of British firms on a sliding scale proportionate to the rate at which their profits have increased this year and continue to increase during Britain's five-year Rearmament program. It was to soak the profiteers. In his first weeks as Prime Minister, Mr. Chamberlain was harassed by more high-powered letters of complaint and suggestion personally signed by top bigwigs of British trade, industry and finance than he had received during his whole long career as Chancellor of the Exchequer. The final result last week, after anxious daily conferences between Mr. Chamberlain and Sir John, was "Simple Simon's Tax."

As a face-saver for the Prime Minister, Britain's stiff new tax has the same name as the shelved tax trap: The National Defense Contribution. Irrespective of whether a firm's profits are increasing so fast as to suggest "profiteering" or not, Simple Simon's tax is to bear with equal weight on virtually all British firms with annual net profits of more than $10,000 per year. It is a supertax. Its intent is to raise the existing average 25% income tax on British firms to 29% in the case of partnerships, 30% in the case of corporations. Exempt from such super-taxing for Rearmament are to be salaried employes, doctors, lawyers, accountants and professional people generally--very few of whom in Britain earn as much as $10,000 per year.

Simon's Tax was announced to run retroactively from April 1, 1937 for five years. After taking $10,000 as its profit base, it provides generous exemptions in the brackets up to $60,000. Taxpayers with incomes up to that figure can deduct, in addition to their initial $10,000 exemption, one-fifth of the difference between their profits for the year and $60,000.

Example: Jones, Ltd. earn $20,000. One-fifth of the difference between that sum and $60,000 is $8,000. So from their $20,000 income, Jones, Ltd. deduct $10,000 plus $8,000 and pay Simple Simon's Super Tax of 5% on $2,000 of profits, over and above their normal 25% tax on $20,000.

In cynical Parliamentary circles, Prime Minister Chamberlain and his Chancellor were said to have turned tail and ducked before the storm of aroused Big Business.

Loyally the Kingdom's newsorgans rallied to make sure that no impression so unfortunate should disturb the British public mind. Although Big Business and its lobbyists had unquestionably put on the effective pressure, the London Times argued: "The new tax is in some degree a voluntary levy . . . it has been devised by the taxpayers themselves. . . . That is a fine feather in the cap of democratic institutions.'' Fortunately for the Government and editorial consciences, the original Chamberlain bill, now scrapped, had been designed to bear with extreme lightness on profits for the current year, cracking down thereafter. Thus the Simon Tax, retroactive from last April, looked much heavier than the scrapped measure would have been and thus anything but a cowardly compromise with Big Business. The Government pointed out that Simon's Tax will raise this year $125,000,000, whereas the original measure would have raised this year only $10,000,000. Despite this, British shares boomed suddenly on Change last week, whereas they had slumped heavily when the scrapped tax was announced. Beaming directors of biggest companies seemed delighted with the way everything was working out this week, and Britain's good-natured folk had in "Simple Simon's Tax" a catch phrase as pleasantly appealing as the "Belisha Beacons" of 1934 and "The Fleet is All Lit Up!" of last month (TIME, May 31). Among the few open critics of the new bill was acquisitive little Baron Beaverbrook, who lashed out in his Evening Standard that Simple Simon's Tax "will put a premium on the inactive and the timorous and a penalty on vigor and enterprise."

More typical of contented Britons was the comment of an eminent City economist, Sir Ernest Benn, publisher of a potent string of British trade journals: "The tax is a frightful burden, but the Chancellor is to be congratulated on producing proposals which are straightforward, honest and--as far as possible in any taxation--free of complications." In net effect, Simple Simon's Tax actually placed on prospering British firms as a whole a burden which the new Prime Minister had hoped to be able to inflict most heavily on Rearmament profiteers.

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