Evening star., 1939-05-14

accurately measured, yet can be realized
when it is perceived that the total tax
bill in the United States for 1898 reached
nearly $4,000 00O000 equivalent to about
% per cent of the estimated national
income.
John Smith must bear in mind that
of the total income of the Federal Gov
ernment only a little over tWo-fifths
comes from income taxes, the balance
from wide variety of miscellaneous
taxes or eXactionS
Estimates made, as indicated above. in
some cases carry the tax burden to over
II per cent of every dollar spent out of
modest incomes. equivalent to 1928 go a
year out of an income of $3.50 a month.
The probability of this is that these
estimates are conservative.
Bends" May Follow.
While the present hidden-taX burden
on John Smith is considerable. he is per-
haps adjusted to it. When you tell him
about it he may feel no worse than he
would II you were to tell him that he
lives under a weight of atmosphere of
l6 pounds to the square inch. But that
isn't all; suppose you were to tell him
that this pressure is likely to run up to
80 pounds, or more. He could then see
that this pressure might give him the
bends"
The sad truth is that the present taxes
90 not come anywhere near paying the
bills Of the Federal Government The
deficiency in Federal revenue, officially
, estimated for this fiscal year, is around
! S3600 900 ,000-more than it used to cost
back in 1928 and 1929 to run the whole
Government and also make heavy pay
ments to the sinking fund for the re-
duction Of the Government debt And
this huge deficit follows others for the
past eight years, bringing the total up
to some q billions, met of course by
borrowing and piling up the Government
debt. What does that mean to John
Smith? Must he pay more and have his
/ job further endangered?
Some in high positions. and some hav-
( ing academic standing now say that the
Government deficits can 60 on in
definitely. These are prophets of a new
era in Government finance, a happy era
in which debt begets prosperity, and
/ never has to be paid or reckoned with.
/ The history of nations affords little SUD-
! port for this alluring idea.
Debt Alibis" Change.
AT first the piling up of Government
debt was excused as a necessity of the
emergency. Then it was justified as a
temporary step toward recovery and re-
lief. Now comes the theory that piling
up the debt is a necessary permanent
device, always building up the national
income
The new justification lies in the idea
OF treating certain Federal expenditures
as producing assets" to be capitalized
in properly constructed Federal balance
sheet. and hence not to be considered as
creating deficit
There is basic difficulty with this
idea. The Government always has to pay
out real money for all that it spends.
Unless the assets" to be capitalized will
actually turn into cash or produce net
revenue, they do not help solve the
Governments financial problem. The
Government must just go on borrowing
and taxing to meet the expenditures
Counting on the assets simply postpones
the day of reckoning
Necessary as expenditures for these
purposes are, we cannot be blind to their
financial effect And now. to make mat
tiers more difficult, we have also the
greatly enlarged expenditures for ma
tional defense
In the end the only safe, practicable
course will be for the Federal Govern
ment to make its revenues and expendi-
lures balance. Government bonds are
the ultimate support of banks, insurance
companies and security funds. How can
they continue indefinitely to be good
II the Government cannot succeed in
making both ends meet?
What does this mean for John Smith? ?
Balancing Only Course.
Undoubtedly Federal expenditures will
have to be cut. No one has shown
how to balance Federal expenditures of
between eight and nine billions a year
the present rate. Certainly these eX-
penditures will have to be held down,
and that in the face of imperious new
demands. Some of these are most ap-
pealing, like the public health program
to cost ultimately nearly a billion a
year. Yet if additional expenditures
are taken on too soon they are likely
to wreck the whole financial structure
Some stand must be made against heavy
State and local expenditures
The most probable tax development
in the off1ng is real broadening of
the base of the income tax This would
take the form of lowering the exemp-
tions so as to reach incomes below 81 900
in the case of single persons, and per-
haps as low as sl50O in the case of the
married, with a sharp stiffening of
the rates up to the high brackets We
might not be taking as much as 10 per
cent on the very small incomes, as in
England and Germany, with sharply
increasing percentages beyond that, but
We may approximate such rates.
Such increases in the present income
tax will hurt John Smith. They will
also reduce his immediate purchasing
| power and tend to check industry and
still further restrict the creation and
utilization of capital for new enterprises.
Yet they may be inevitable, so greatly
have Federal expenditures increased.
IL Is small wonder that taxpayers