In order to give further effect to the principle of graduating the Income Tax, Mr Lloyd George at the same time imposed a Supplementary Income Tax, or Super-Tax, upon persons whose incomes exceeded £5,000 a year.

The Super-Tax is nominally 6d. in the £, but in practice it is always less. For the Super-Tax of 6d. is payable only upon that part of the income which exceeds £3,000 a year. That, reflection will show, creates a graduated Super-Tax, thus:

THE LLOYD GEORGE SUPER-TAX
AS IT REALLY IS

It will be seen that it is a great gain under this system to have £5,000 a year rather than £5,001. The extra £1 of income costs the tax-payer £50, 0s. 6d. Thus a premium is placed by the State upon false declarations, for if a Government is so unfair as to tax £1 of income £50, 0s. 6d, who can blame a tax-payer who retorts in kind?

It will be seen that it is impossible for the alleged 6d. Super-Tax to reach 6d. It can at the highest reach 5.9 pence.

But while the Super-Tax is so unfortunate in method it is excellent in principle, and largely carries into effect the suggestions made in "Riches and Poverty," edition 1905. It effects a rough graduation in the taxation of incomes over £5,000 a year, and extends the gamut of the Income Tax scale from zero at £160 a year to 19.8 pence in the £ at £100,000 a year.

I am now able to show the total effect of all the obscure provisions which it has been my misfortune to attempt to describe in plain language. The table on page 307 gives a faithful picture of the Income Tax, as graduated and differentiated by all the reforms made down to 1910. The table is the expression of the following provisions, existing in 1910, which I recapitulate for its better elucidation.

Incomes not exceeding £160 a year pay no tax. Small and moderate incomes are relieved from taxation by being only taxed in part, i.e. "abatements" are allowed according to the size of the income. Over £700 a year there are no abatements. Unearned incomes are taxed at the nominal rate of fourteen pence in the pound. Earned incomes not exceeding £2,000 a year are taxed ninepence in the pound. Earned incomes over £2,000 a year, but not over £3,000 a year, are taxed one shilling in the pound. Finally comes what is called the "Super-Tax." Incomes, whether earned or unearned, over £5,000 a year are taxed an extra sixpence in the pound on such part of the income as exceeds £3,000.

The table on p. 307 shows, as the mere relation of the complicated provisions does not show, both the virtues and the faults of Mr Lloyd George's Income Tax. There is graduation, but it is effected so clumsily that it positively bristles with anomalies. Consider, for example, the gross anomaly of making a man with £3,000 a year pay only £150, while a man with £3,100 a year must pay £180. Or, again, of asking from the £5,000 man a £291 tax, and demanding £350 from the £5,100 man. Perhaps the worst feature in the scale, however, is the fact that unearned incomes from £701 to £5,000 pay the same rate.