Evening star., 1935-08-06
ROBERT H. JACKSON,

BY general consent, our income
tax laws, under all administrations,
have provided exemptions, in amounts
considered necessary to reasonable
subsistence, so as to avoid depreSS-
ing the standard Of living within the
lower income groups. The significant
result is that when the groups that
are considered to need all of their
income for necessities, are left out.
We have only relatively small num-
Der left Applying the standard thus
set by Congress as necessary to
reasonable way of life, We find the
largest number who ever rose above
that standard, as evidenced by the
number of returns indicating taxable
incomes, to be 5,5l8,3l0. This was
in 1920, when exemptions allowed
were at their lowest. In 1888 the
returns filed. which showed taxable
incomes numbered 1,747,740.
The conclusion indicated by Treas
ury statistics is that the base for
our income tax is now seriously mar
row. and results in part from the fact
that the number of people having in
comes above a generally accepted
subsistence level is seriously small.
I'VE have just studied the incomes
of So taxpayers who. in 1882, re-
ported total taxable and non-taxable
incomes exceeding $l,000,000. OF the
So such taxpayers. 38, or over 70 per
ship in IA families. This indicates
that statisctics may fail to reveal the
true extent of concentration of op-
portunity and control, and hence of
the benefit of organized government
and Of both ability and duty to pay
taxes.
Fortunes Dissipated.
at is often asserted that large
wealth is dissipated in three genera
tions, and 1t has become a proverb
that it is three generations from
shirt sleeves to shirt sleeves 1t was
doubtless once true that all a grand
father saved from the fruits of his
labor could be spent by a grandson.
1t is probably true today of very mod
crate fortunes 1t is not true of large
invested fortunes under present condi-
tons. They not only perpetuate them
selves-they grow.
This is because they are now so
large. A riotously living heir to one of
our larger fortunes would exhaust
himself before he could exhaust the
income alone of the estate. Further
more, such estates are largely perpetu-
ated IN trusts, and every legal and
economic obstacle to their dissipation
is employed. They are invested In
the enterprises of the country where
the income and management are not
dependent upon the judgment of in
dustry OF the heir or are invested in
tax-free Government securities.
Most Of the large estates as at
present managed, we find, not only
perpetuate themselves, but are larger
as they pass from generation to gen.
Grafton. With large incomes from
inherited property remaining intact
or actually increasing, there results
a diversion of a large proportion
Of the community's productive re-
sources to the satisfaction of the
wants of few individuals, and a
fastening Of control in few hands.
Determined by Collections.
"The tax burden Is not mere mat
ter Of rates written into the law.
Actual collections determine the bur-
den carried, and administrative pro-
visions and procedures have resulted
in the income tax law In the higher
brackets being considerably less ef-
fective In application than income tax
in the lower brackets.
"The Treasury is deeply concerned
over the problems of enforcement,
some defects of which 1t calls to your
attention, both for whatever consid-
Grafton you feel it should have in
shaping the policy of the law and
rates of tax, and also because we find
fair and equal enforcement to be it
self a problem which the Congress
must soon deal with.
Congress lays a surtaX rate of 4
per cent on an income between $4,000
ana $6,UOU. In actual operation tnat
means that the average taxpayer
within that range of income really
pays to the Federal Government a
surtax of per cent on that $4,000.
On the other hand, Congress lays a
surtax rate of 50 per cent on net in
comes in excess of 81 ,000, 900, but that
does not, by any means, indicate that
each taxpayer In that range Of In
come pays a surtax of SO per cent on
all such excess. The latter taxpayer
has available many devices for reduc-
ing his tax liability which are not
available to the small taxpayer. An
illustrative, but by no means all
inclusive, list of means ny which in
actual experience the large tax rates
are made less effective, follows:
Investment in tax-exempt securi-