Evening star., 1939-05-14
Heavy Cloud Of More Taxation
Hangs Over the Average Citizen
Day of Reckoning for Deficit Spending Seen as
Foreshadowing Lower Exemptions
for Income Tax PAYERS.
By Arfhur "A. Ballanfine.
Former Undersecretary of Treasury.


A German tax decree raised income
taxes of single persons 1912 per cent but
contained the merciful provision thai
such persons were not to pay total of
more than SIS per cent of their income,
or married persons Of certain classes
more than As per cent The rate on the
income of corporations, which has been
steadily increased, was placed at 40 per
cent. At that, German taxes are estl-
mated to equal only about tWo-thrds OF
the national expenditures
The normal income tax in Great Brit
ain stands now at 2712 per cent, with
certain abatements in the lower brackets
OF income. For l939-40 the aggregate Of
government expenditures in Great Brit
Gin is estimated at 81 per cent of the
national income. Of this total huge ad-
d'tional expenditures for national de-
fense are in themselves equivalent to
about l4l2 per cent of the national in
come. In France. also, taxes are SHOW
Ing sharply upward.
These developments have a message
Tor every one in this country whether
he has job or is on relief How deep
Is the taXgatherer to reach into the
pocket of the average man, John Smith?
What is the effect of taxes on his living
costs and his job?
The offhand reaction of most of us is
that heavy taxes are worry to the very
prosperous or rich. The German or Brit
ish John Smith certainly would not say
tfat. And John Smith here is waking up
tc tax realities present and impending
Rich Get Soaked.
OF course, it is true that the rich are
row soaked" The Federal income ta.,
including the normal tax of per cent
and the surtaX, reaches top rate of 70
per cent-a rate some 20 per cent higher
than the top rate of Great Britain When
ar income reaches $4,000 the tax rate
applying to the next block or income be-
comes SIS per cent and at 100000, g. per
cent. This Is without including any,
thing for State income taxes, now reach
irg per cent in New York.
For the fiscal year 1887 the number of
individuals paying income taxes in trs
United States was but 3,31O2Ol The total
personal income tax paid was Sl142-
100000, but the amount paid on incomes
OF less than $4,000 was only S78 900 700
and the total amount paid on incomes of
$4,000 or less was only sl61 900 ,OOO
Nearly billion Of the total tax paid wa
paid by incomes of $4,000 or over
The present distribution of the FED
eral lncome-taX burden has a verv dis
tlnct meaning for Mr.. John Smith and
his future as a taxpayer
The top rates of income tax are now
so high that there is no chance of in
creaslng the tax yield through further
boosting of the rates-the ONLY DOS
slblllty of increase is through lowering
the top rates
Enterprise Discouraged.
The top rates are now so high that the
flow of taxable income tends to drv IN
through disbursement of enterprise
and the virtual impossibility of building
up any large savings. The recipient of
a large income has no incentive to put
his money into new ventures or the
enlargement of old ones that develop
more employment. Since such a tax
payer bears all the losses, having but
limited rights to Offset them against
income and retains but a small portion
OF any gains, his cue is to play safe. and
he does so.
The rich are soaked" again in the
estate taxes. While the Federal estate
tax on 100000 net estate is but
S4'2oo, the tax on a S500OOO estate is
soo4oo. On a million-dollar estate
S2llo0O, and the top rate reaches 70
per cent. The late Senator Couzens is
reported to have left an estate of S33-
100000. practically all in tax-exempt
securities, The Federal tax on this was
reported as s2oOOO0OO, reducing the net
to s135OO.0OO
While the yield of the Federal estate
tax rose to 1882 100000 in 1888 these
taxes will in the end be a dwindlinp
source OF income. Big estates are not
belng bullt up, and those that were big
are being steadily cut down by successive
taxes-without regard to market vicis-
STUDIES
1t should be observed, too, that the
eHect OF the extreme tax rates is to tend
10 make the owners OF large estates put
thelr property. so far as is possible. in
forms In which it can be readily
hquldated, so as to meet the tax That
means taking capital out of active en-
ployment making for jobs. It does not
do much good for the owner of a large
estate to divide it up while living for
the gilt tax is three-quarters as much
as the estate tax. So here we have
another factor operating against the
employment Of Mr.. John Smith.
u. S. John Smith Better Iff.
Getting back to the income tax stua
t1on of John Smith himself: he is
certainly well off as compared to the
German or English John Smith. If sim
gle, he pays no Federal income tax at
all on an income of $1,000 or less. If
. married he pays none unless his income
exceeds $4,000. He enjoys further ex
emption Of s400 for each child On an
income of $500, if married and having
one child, he pays but s24 and on q
$4,000 income only s168. In sharp con-
trast the German having an income of
only $500 is reported to pay S33 if single
and $24 if married. On 81 200 he pavs
Sl45 single, or sl2O married; and on
$4,000 pays $272 or s232, according to his
marital status.
The Englishman (married and with
ma chi16) with i,,cop,a M