Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-05-24

over q long per1OQ ana WlLn view W
its ultimate effect on the country as
whole.
The situation in which we ind our
selves at present, with a serious deflcit
facing us at the end of the year, raises
the question as to whether We have yet
developed a sufficiently well balanced
system to provide the revenues on which
the Government must be able to count
| from year to year.
We depend today largely on two
sources of revenue-frst, internal reve-
nue. taxes, including individual and cor
poration income taXss and such other
taxes as those on tobacco and estate
taxes, and, second. customs duties.
Customs duties are fairly stable and, in
spite of all We hear to the contrary
may be relied on to produce an even
flow of revenue, except in the most alb
normal years. Taxes on tobacco are
also a very dependable and important
source OF Government revenue. The
! individual income tax, however. has
| become so restricted in Its application
that it has become class rather than
a general tax, with its incidence limited
to a comparatively small number Of
taxpayers. Out of a total population
Of 40 900, there are only 2,500,000
individuals and about q quarter of q
million corporations who pay an income
tax. Furthermore, some 100000 indi-
viduals pay about 81 per cent Of the
total amount received from individual
income taxes. Yet We depend on this
limited number of taxpayers for so large
a part Of the revenue needed for the
support Of the Government.
Treasury Aware Of Defects.
In times like the present, when In
comes have fallen on, such system IN
evitably results in q severe shrinkage
in the Governments revenues, and this
fiuctuation in the revenues Is further
increased by our treatment Of capital
gains and losses, which tend to increase
abnormally current income in times of
rising prices and business expansion
and to depress it in periods of falling
prices and business contraction. The
SURPRISES which have arisen in the past
and the deficit which We face today
are due In large measure to the fact
that we rely for two-thirds of our tax
revenue on the income tax, which Is
subject to sweeping variations and de-
ponds on variety of circumstances
but principally on the upward and
downward swings of business.
The Treasury has for some time been
aware Of the defects In our tax struc-
ture, and while, in my opinion, we could
not possibly have anticipated the ex-
tent to which revenues have fallen of,
the Treasury has not failed to call to
the attention of Congress and the coun-
try the advisability OF providing safe
guards against the very conditions
which have overtaken us.
Three years ago when Congress was
being urged by organizations of bust
ness men Ind other individuals to grant
greater reduction Of taxes than seemed
warranted, the Treasury pointed out
the danger Of eliminating certain excise
taxes and depending for so large q part
oil our revenues on comparatively
small number Of taxpayers. In this
connection the Treasury said:
In prosperous years this revenue
tfrom income taxi Is stable enough, and
In an era Of mounting prosperity we
may expect an increase in the taxable
income OF this limited number Of tax
payers, who form the base Of the Fed
eral tax structure But If the situa-
ton should be reversed and prosperity
should begin to recede, 1t might result
IN such q shrtnkage In incomes that
the Governments revenue would be
seriously affected. Obviously, we should
retain some other taxes which can be
relied on IN times when a slowing up
OF prosperity may cause falling OF in
incomes and a consequent drop in
taxes from This source.
have referred to these views at this
time, first because they seem to be per-
tinent now when the tax system must
come under careful scrutiny, and. seq
ond. because do not wish the country
to think that the Treasury views with
complacence the present situation in
which We md ourselves. either as re-
CARDS the lack OF balance In our tax
structure or the INADEQUATE amount of
revenue which 1t produces under adj
verse conditions.
Any Government deficit is q matter
OF grave concern. The present deficit
may be met. as 1t is being met through
borrowing, but such q source Is only a
temporary expedient. The handling of
the problem OF Government revenues
for the future must depend upon judy
ment at the proper time. in the light OF
all possible information which can be
developed. Is to how long the adverse
conditions which have brought about
the deficit will continue The strong
credit position of our Government
makes it possible to take care Of a
temporary decrease in the revenues.
But the continuing policy, addressed to
conditions as they may be expected to
prevail over a considerable period Of
time. can only be the maintenance of
the sound principle Of closing each fiscal
year with a balanced budget.
The existence OF a deficit has added
materially TO the problem OF current
financing Fortunately. money condi-
tons have been unusually favorable. so
that the sums needed have been OBJ
tanned without difficulty and at low
cost TO the Government.
Public Building Program.
Now I would like to turn for a mo-
ment TO another and happier problem
Of the Treasury. having TO do with a
subject Of general interest throughout
the country. In many places public
buildings are being erected. or soon will
| be. and even If one has no direct con-
Germ with these projects. all of us feel
deep and proprietary interest in what
Is being done at Washington to make
the Nations Capital more beautiful
! One OF the subdivisions OF the Treas
ury Is the ONCE OF the supervising archf-
tect, and 1t Is in this ONCE, in collabora-
ton also with the Post once Depart
ment, that the plans are being made for
| carrying through the extensive public
building program authorized by Con-
gress. Outside architects are being en-
| pioyed on many Of these projects and
contracts are being let as rapidly as pos
| sible In order TO provide employment
and stimulate activity at the present
| time In many lines which are affected
/ directly or indirectly by the building
| Industry. Furthermore. by building
now, when contracts can be made on a
basis materially lower than a few wears
ago, the Government will save money in
erecting needed and permanent improve
ments. It must be borne in mind that
the building program is not in any sense
an unnecessary OF extrayagant use of
/ the public funds merely for the purpose
OF meeting an emergency situation. On
the contrary, the buildings contemplated
or now being erected in Washington and
throughout the country are needed to
house the Governments varied activi-
ties, and will make 1t possible TO avoid