The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1932-01-30
A BETTER Tax Plan


Two of the worst features of the Hoover-MelIon
TAX program have been eliminated by the house ways
and means committee which controls such legislation
Democrats and Republicans on the committee have
agreed to throw out the retroactive parts Of the ad
ministration plan, which would have applied to in
comes earned in the calendar year 1881.
They further have agreed to eliminate the admin
sraton proviso that the tax increase run only two
years.
Retroactive taxation at any time is unjust But it
would be especially unfair at time of national de-
preston, when individuals and corporations alike
must account for every penny. The Hoover-Mellon
plan would have meant double taxation for 1884, the
original tax plus the new tax
Apart from the theoretic injustice involved, there
the serious practical difficulty Of collecting money
already spent Few corporations or individuals in
these hard times pay tax unless it is budgeted
and set aside in advance.
In the case of poorer classes OF taxpayers, they
would not have the money to meet this unforeseen
charge In the case of weather., but embarrassed,
corporations and individuals they would have to un-
load securities the market at sacrifice prices
That would pinch not only those who Sold but
further would depreSS market which can not stand
many blows without catastrophe results to busi
ness generally.
An equally bad feature in the Hoover-Nelon plan
was the limitation of the proposed increase to two
years 1t is precisely because of that same Mellon
shortSighted policy of cutting the corners of federal
finance that the government operating deficit is so
overwhelming today.
If the last tax increase had been allowed to stand
creating rainyday surplus the country today would
not have such deficit and would not have to assume
an additional tax load when the country least able
to bear it.
This obvious policy of precaution, favored at the
time by the liberal press and by senate progressves
was swept aside by Mellon who was more intent on
upon assuring the governments future financial
security.
While still suffering from the dire results of that
error, Mellon might have been expected to avoid re-
pesting it Immediately. Nevertheless the Mellon plan
to limit the tax increase to two years is repe-
ttion of the earlier blunder because it assumes that
the proposed tax rates will balance the budget in two
years, when five ten years may be necessary-no-
body knows or know,
The answer depends on when and at what level
prosperity returns, and how many billions of dol
lars the government will go into debt lighting the
depression That answer has not been revealed-not
even to the President and the secretary of the treasury
The fact is that income tax collection during de-
preston is pretty much of flop In any case. The
incomes taxed are fewer and smaller The income tax
really is effective only during prosperity when in
comes are high.
Therefore, the Mellon system Of cutting the income
tax during prosperity and raising it only for two
years during the depth of the depression is joke
and very sour If the proposed income tax in
crease pays the governments way out Of this deficit
mre, it will be because that tax increase continues in
force after the depression when there are large in
comes to tax
Fortunately, the Democratic and Republican lead
ers of the house appear to be safer nsncers in this
emergency than Hoover and Mellon