Evening star., 1937-10-28

Committee of the ,,,.
House and the
Finance Committee of the Senate get
together next month and begin con-
sideration of Treasury proposals. But
the important fact is that the full
drive of the administration will be
behind the effort to achieve tax
revision.
Heretofore tax revision" has usually
meant indiscriminate increases in rates
and the public has come to look upon
every change as more burdensome than
its predecessor But the time now has
come for realistic understanding that
1t is not a revision of rates but
revision of tax methods which is
bound to bring sustenance and support
to a business recovery.
Americas tax system has been
developed with typical political in
consistency as a sort of crazy quilt.
Rates have been compromised between
extremes in Congress that never have
represented any well-considered tax
theory as whole, but simply the
individual efforts of certain Congress
men to win political prestige by soak
ing this or that class in the COM
munity.
Business Recession Factor.
Today the complicated tax system
OF America is one of the major factors
in the current business recession.
Considerable study has been given
by Roswell Magill, Undersecretary of
the Treasury, and some of his asso-
ciates to the British system of ad-
ministering taxes and it may be that
some of the methods that have worked
well in Great Britain will be found
among the Treasury's forthcoming
recommendations.
A good example of the clumsy and
destructive way that tax laws have
evolved may be seen in the way the
undistributed profits tax was intro
duced President Roosevelt proposed
In 1885 to abandon the corporate
income tax, the excess profits tax and
the capital stock tax and to substitute
the undistributed profits tax for all
OF them. Apprehension over possible
loss of revenue and the usual hit-or-
miss methods in drafting tax legisla-
ton prevailed so that finally all these
taxes were retained as well as the So
called substitute. Also instead OF
doing away with the graduated income
tax for corporations, the principle first
injected in the 1885 law was modified
somewhat to provide . lower starting
point, but the top bracket was kept
unchanged at IS per cent.
In other words, there has not been in
the making of our tax laws any we'll
defined plan, but q sort of makeshift
that has suited the political condi-
tions of the moment. So far as tax
theory itself is concerned, very little
popular education on it has been de-
veoped. Many business men talk
frequently Of wanting to see broad
ening of the base," by which they mean
q lower exemption. and while there is
undoubtedly much merit in reducing
the exemptions somewhat, the latest
studies of the Twentieth Century Fund
research staff show that hidden taxes
are proportionately more burdensome
to the persons of small incomes than
any other group.
The Basic Need.
Basically. what is needed is q general
recognition of the important prin-
ciples that should guide the Congress
in making tax laws.
First and foremost is acceptance of |
the principle that capacity to pay"
Is a desirable ysrdstick, but that de-
struction of incentive has ill effects
upon the normal expansion of business
activity.
Secondly, it will be conceded uni |
versally that the primary purpose of
taxation should be to get the revenues
necessary to balance prudently built
budget, but here again as between two
methods both of which are likely to
attain the goal, the decision might
well be in favor of the tax that bur-
dens least the exchange of goods or
the price structure.
Thirdly, the imposition of a tax
purely to accomplish social reform is
detrimental to the growth or expan-
sion of business. This principle per-
haps could better be stated thus: Tax
alton to get revenue is desirable but
regulation in the guise of taxation is
undesirable.
Fourthly, the revision of taxArstes,
some of which may actually reduce
revenues but encourage business activ-
tty, should be balanced against the
imposition OF taxes that increase reve-
nues without discouraging business
volume.
Tfp-Heavy Tax Structures.
What Is little realized perhaps is
that most of the States Of the Union
have been building top-hesvy tax
structures and that with 48 diff
ferent taxing systems in the
States, to say nothing of the
municipal tax experiments, busi-
ness volume finds itself hampered
at every turn in sn effort to plan ex-
penses as much as year in advance.
For . long time there has been agi-
tstion in favor Of q conference be-
tween Federal and State authorities
to eliminate duplication and specifi-
cally to prevent competition in certain
tar fields as between Federal and
local taxing bodies. Impetus for the
holding of such a conference can come
: only from the President of the United
States. 1t would be q constructive
move if start in this direction could
soon be made. President Roosevelt
however, is well aware of the impor-
tance of !. general tax revision and
rumor hath it, as an example OF his
D.. attitude, that he already has agreed
to substantial change in the undis-
tributed surplus tax and revision, II
not repeal, of the capital gains tax,
both of which moves would be consid-