Evening star., 1938-05-29
Principle of Ability to Pay
Disregarded in Tax Fixing
Sacrificed to Give Prior Consideration to Revenue
Needs, Punitive Theories or
Other Motivatons.

form fiat rate can scarcely be con-
sidered highly adaptable to the personal
status Of the individual"
Probably the closest approach to tax Jus
tice occurs in the individual income tax,
although existence of broad loopholes in
applicability Of this levy still leaves 1t
short of perfection.
The income tax structure has been re.
fined for instance, in the consideration
given for the status Of the potential tax
payer-whether married, how many de.
pendents, credit for earned income allow
ance for certain types of business expenses.
etc. These various adjustments go far
toward making the income tax burden on
individuals an equitable one from the
standpoint of ability to pay.
At the same time the existence Of such
exemptions as are now granted for income
from public securities and from public
positions tends to throw the structure out
of balance by levying an income tax only
on one Of two persons who may be IN
identical economic circumstances Further.
the elimination of tax liability for the
exempt classes has the effect Of increas-
ing the share of the total burden which
must be borne by those receiving taxable
income.
Aside from bringing in a substantial
amount of desirable revenue, therefore, the
pending proposals of President Roosevelt
for making public salaries and bond inter-
est taxable would be in the direction Of
tax justice and furtherance of the ability
to pay principle
Despite the approach to equitable taxa
ton already found in the income tax, this
very issue of ability to pay has been
the most effective outward obstacle to pro-
posals for broadening the income-tax base
and placing increased revenue reliance on
this system.
For instance, Senator Borah, Idaho Re-
publican and most outspoken foe of a
broader income-tax base, prefacing his
argument on the difficulties which low
income families already have in maintain.
ing a decent standard Of living, has as
serted that lowered individual exemptions
clearly violates the fundamental and just
rule that taxes should be levied in &C
cordance with ability to pay"
They Already Pay Indirectly.
The Idaho Senator does not give equal
weight, however to the fact that persons
of small income already are paying indi-
rectly, and usually without being aware
of it, tax bill greater than they would
normally be required to pay If larger
share of Government revenues were coll
lected through the medium of the income
tax. Levied at the same rate on rich and
poor alike such indirect taxes fall propor-
tionately heavier on the person of small
taxpaying capacity, especially since the
bulk of his income must be spent on articles
or services whose cost is affected by such
taxes.
At the same time most of those advocat-
ing broader income-tax base. including
Senator La Toilette, Wisconsin Progressive.
have urged a compensating repeal Of as
many indirect levies as possible.
In this direction the Committee on Taxa
ton of the Twentieth Century Fund rec
commended specially that Federal revenue
gains from the lowering of exemptions be
Offset by a reduction in other taxes that
now fall heavily on persons of low in
come, such as the tariff duties, possibly
the social security pay roll taxes, and the
indirect internal revenue taxes (for ex-
ample the cigarette taxi"
Before any too critical conclusions are
drawn. however from the citing Of In
stances of disregard for the principle Of
ability to pay, it should be recognized that
some inequities balance others and that the
real issue is how the composite tax structure
bears upon the people rather than how
isolated parts of the structure may operate.
And existing as major complication is
the difficult problem of determining actual
distribution of the tax burden with ma
tority Of the levies passed on, sometimes
through several classifications of taxpayers