Evening star., 1941-10-02
Social Security Tax
Proposal Resembles
Canadian Levy
Presidents PIun Also
Similar to British
Forced Saving
BY JAY g. HAYDEN.

pay roll taxes and making some d.
100000 additional wage earnerS and
their employers liable to this levy
has points of resemblance to both
the Canadian Withholding tax and
the British scheme of forced saw
ing"
For the frankly stated purpose OF
providing war revenue and guarding
against initiation by curtailln9 con-
sumer purchasing power, the Ca
madam government has imposed a
tax on salaries and wages, withheld
from pay envelopes by the employer.
For single men the rate is per cent
on annual pay between $500 and
81 200 a year, and per cent on
earnings above $1,000. For married
persons the tax applies to all earn
ing $1,000 or more year at a rate
of 5 per cent. Small additional eX-
emptions are allowed for dependent
children.
The British recently reduced in
come tax exemptions to the point
where single persons earning as little
as S4OO a year and married couples
receiving S640 are required to pay.
AS palliative for this stern eXac-
ton and to cushion expected post
war unemployment 1t is provided
that a portion Of the collections
shall be returned to taXayerS IN m
stallments after peace has been de-
clared.
A British married couple without
other dependents, whose income IS
$500 a year, pay tax OF 1924 and
are credited with an after-war REM
hursement of SIP The largest re-
endorsement anyone can receive IS
$3.50, reached on a married couple
with income of $4,000. The current
annual tax of this couple is S2,O40.
Curb on Initiation.
A person with a $4,000 income Is
allowed the same $500 reimburse
ment. but this as against a present
annual tax payment OF S27,329.
The Roosevelt proposal is like the
Canadian withholding tax" in that
It contemplates a pay roll tax which
would be used initially to defray
RAPIDLY rising war costs. That 1t is
designed also to restrict consumer
buying power is indicated in the
Presidents statement that 1t would
aid in preventing initiation.
The plan smackS of the British
forced saving" in that it would
provide for paying back the pay roll
money to employees some time in fu-
ture. in the form of old-age pensions.
This feature also is emphasized IN
Mr.. Roosevelt's assertion that the
plan would simplify the economic
problem occasioned by the shift of
American production from war 10
peace time goods when the war is
over.
The weakness of the British
promise to pay back taxes after the
war obviously lies in the question
as to how money for these repay
ments is to be derived otherwise
than from more taxes. and the same
INQUIRY is likely to be raised when
the Roosevelt proposal IS presented
to Congress. In fact, a major criti-
cism of the contributory old-age
pension system, even as it stands,
has been that social security tax
revenue is being spent as fast as
IL comes in and mostly for purposes
other than pensions: that when the
real pension load arrives there will
be no money in the till with which
to meet it.
Bonds Make Up Reserve.
Paw roll tax collections for old
age pensions in the 1941 fiscal year
totaled $3.50, ,0000 900, Of which only
s70,00O,000 was disbursed in contrib
utory pensions.
Ostensibly the old-age pension tax
money, when received, is paid over
to the Social Security Board. But
1t Is promptly paid back into the
Treasury general fund and used to
meet Government expenses, the
same as any other tax money. For
a supposed reserve for payment of
future pensions-now totaling 81
582,231 900 the Social Security
Board has nothing TO show but
Government bonds. And like all
other Government bonds these can
only be paid off, when they fall
due. by collecting more taxes.
Now, as it appears, Mr.. Roosevelt
proposes to accelerate this pro-
cedure on huge scale. The pres
ent old age pension tax collection is
2 per cent on pay rolls, divided
equally between employer and en-
ploye. Congressional sources report
that Secretary of the Treasury Nor
genthau has proposed that this tax
rate be jumped Immediately to the
6 per cent, which would not become
effective under present law until
l949.
Might Yield Three Billion.
Calculated on the present 10000
900 social security taxpayers, this
pay roll tax increase would produce
S1,376, 100000 of added annual rev.
enue. And even that is not all that
the Presidents plan contemplates.
He proposed that all wage earners
. not now in the system be brought
llbO II. L liz EOOIldl tCCNhIllN DOdA u
lists these prospective entrants as
100000 present eligibles, registered
but not yet taxed; 2500,000 domes-
tic servants. 4,5O00O0 farm laborers
100000 self-employed persons, g.
100000 casual laborers, 1000, 900 pub
lie employees, 100000 employees OF
non-profit organizations and T.
100000 tenant farmers.
If the earnings of all of these are
drawn on at s per cent the Gov
ernment's annual receipts from old
age pension taxes probably Will
reach three billion dollars. And
sometime. somehow. all of this is
to be paid back to the contributing
wage earnerS in the form OF old age
pensions. More than that, the Pres
ident proposes that the plan be bait
ed for presentation to Congress by
an immediate increase in Fedora
dole to the States for non-contrlb-
utory old age pensions-somethine
that members hailing from the poor.
er States long have been demanding
The burning issue thus presented