Evening star., 1938-02-22


actual purchasing ~
power. When the "''"'''
economic system gets a shock like
that, depression or recession is an
inevitable result.
There are plenty of boards and
commissions and bureaus hereabouts,
but none charged with the study of
the economic effects of taxation. 1t
is subject on which the public gets
knowledge only after the injury has
been done.
Some idea of what it means to take
81 900. 100000 out of the pay rolls in
taxes might be gained by noting that
all the taxes collected by the Federal
Government from corporations here
tofore have rarely ever reached a
billion dollars in a single year. Now
there has been virtually 100 per cent
increase in taxes from that source,
and all of it within a single 12-month
period without any opportunity for
business and industry to work up
gradually to this extraordinary levy.
But even the collection of billion
dollars year from corporations out
OF net income is different in its
economic effect from tax on every
ones pay roll. America has had little
experience with tax on workers
pay envelopes, yet the drop in purchas-
Ing power today reflects some of the
dangerous results. This is not the
view merely of persons who have fault
70 flnd with the general lack of tax
sense of the Roosevelt administration.
out 1t also is the considered opinion
OF critics Of the social security law
itself.
Distributing Poverty.
Thus, Abraham Epstein, executive
secretary Of the American Association
Tor Social Security, whose organization
mas been the leader in the crusade for
social security legislation, declares
IN a public address that the paw roll
tax is device for distributing poverty
among the poor
Instead" he says, "of following
the modern principles of social in
surance so successfully carried out
IN Great Britain, Of increasing the
purchasing power by distributing the
cost OF social insurance among all
elements of society, our program
places the cost entirely upon the
workers both directly as wage earn
ers and indirectly as consumers.
The idea underlying our system is
TO build reserves by setting the con-
trioutlons higher than necessary and
by keeping the payments on a low
level. But since this boarded money
comes only from direct taxes on wages
and pay rolls, which reduces purchas-
Ing power, the consumptive power of
the masses is doubly reduced.
Moreover, since no funds at all
are provided by the we'll to do, the
reduced purchasing power must in
evitably result in decreasing con-
sumption, curtailing production, d.
ninishing profits and intensifying un-
employment"
Changes in Law Studied.
A special committee of experts or
advisory council is studying, with the
co-opera ton of the Social Security
Board itself, certain changes in the
legislation which are to be proposed
some time this year or next, but this
is not touching the economic factor
the capacity of business to absorb,
from the point of view of ownership
and of the consumer, the price
changes that result from such
suddenly imposed tax burden. Mr..
I,o
to come down and certain others not
to rise, but if he will have some bu-
reau investigate the relationship of
pay roll taxes to prices last year he
will find that along about last March,
when businesses began to realize they
had to pass on social security costs
to the consumer, the beginning Of
buyers strike set in, whereupon the
present recession ensued, because the
bottom dropped out of demand, re-
sulting in a widespread cancellation
of orders from one end to the other
OF the whole economic system.
The interdependence of such fac
tors in the business world may not
be generally realized. Let aae trace
one stream of influences az All sx-
ample. The auto industry raises
prices because labor costs ana pay~
roll taxes In its own plans, plus labor
costs and payroll taxes among the
suppliers of raw materials, cause
precipitate increase which cannot be
met any other way. Consumers balk
at prices and halt their buying new
cars. This causes the auto company
to lay off men and to cancel orders
with steel companies. One steel con-
Germ ordered transported about 5000
carloads of coal year ago last Janu-
ary over the Norfolk & Western Rail-
road. This year in the same months
this railroad, one of the most pros
porous and efficient systems In the
country, carried only 1000 cars of
coal for the same steel company.
Earnings dropped from 100000 in
January, 1887, to 100000 in January,
1888, for the Norfolk e. Western. It
can well be imagined what the cor
responding decline was on weaker
railroads
When there is little coal to be
moved workmen are laid OF on the
railroads, or else they are cut to q
four-day or even three-day week.
Then purchasing power continues to
drop. The income groups of work.
men ordinarily buy many Of the used
autos. They stop buying. This slows
up the market for new cars, and we
are back to recession in the automo-
bile industry again, which normally
Is the leading production business in
the world.
Does anybody in Washington care
about the withdrawal of anywhere
from $4,000, 100000 to $4,000, 1000, 900
from the stream of purchasing power
by means of the payroll tax? Does
anybody offer to shift the burden and
give us social security plan from
general taxation and BY bigger cop-