Evening star., 1941-08-22
Flat 1917 Tax Urged
On All Individual
Income al Hearind
Senators Told Levy
Would Boost Revenue
To 7-BilIion TotoI
BY J. A. OLEARY.

A fiat 10 per cent tax on all indi-
vldual income, without deductions
and withheld at the source was rec
commended to the Senate Finance
Committee today by Prof Harley
l.. Lutz of Princeton University, as
"streamlined" substitute for the
House revenue bill.
He said it would raise returns of
all types to $1,000 900 900 instead of
1926, 100000, as contemplated in
the House bill, and begin to produce
funds needed for defense at once.
At the same time the committee
was warned by Henry F. Long, Ma
tional Association of Tax Admins
traitors, of the growing necessity of
co-ordinating Federal and State tax
systems, since both are now tapping
so many of the same revenue
sources.
A third witness today was Rep
resentative Dewey, Republican, of
Illinois, who predicted the heavy
proposed Federal estate taxes will
put out of business many small in
duStrieS when the Individuals who
built them up die. AS means of
avoiding the liquidation of such
businesses to meet estate taxes, the
House member suggested plan un-
der which the owners could make
prepaymentS on estate taxes over a
1O-year period by purchasing Treas
ury anticipation certificates, which
would be good for payment of the
tax at death.
Insurance Intellectual.
When businessmen try to accom-
plish this by taking out life insur-
ance, he said, the insurance merely
adds that much wealth to the estate
and increases the tax proportion
ately.
Prof. Lutz proposed that his with
holding tax be applied to wages,
salaries, interest and dividends, net
rents and royalties "and entrepre-
neurial Withdrawals. The tax would
not apply to the gross income of
business as such.
The Princeton educator said his
plan would be more effective in con-
trolling imitation than price-control
legislation, with its RECOMMENDATION.
IN presenting the problem that
confronts State governments, be-
cause both the States and the Fed
eral Treasury are now taxing the
same sources, Mr.. Long opposed an
increase in Federal estate taxes at
this time, and said provision should
be made for the creation of taX-free
reserves with which to meet Federal
death duties.
Urges Tax Conferences.
He also recommended that large
increases in income taxes, especially
those applicable to individuals,
should not be made retroactive,
and said there should be provision
for prior consultation by Treasury
representatives with State authori-
ties before Treasury recommended
tionS as to types and amounts of
new taxes are made.
He urged that attention be given
to commodities on which ''dupli-
eating or conflicting eXcises are be-
ing imposed"
The international Allied Printing
Trades Association late yesterday
filed brief asking the Senate to
double the House excise tax on time
sold by radio stations. Earlier in
the hearings, however, this proposed
tax on radio advertising was op-
posed by other labor groups-the
International Brotherhood of Elec-
trical Workers and the Chicago
Federation of Labor.
Meanwhile, reiterating his predic-
ton that the Senate Finance Com
mittee would cut present income tax
exemptions from $4,000 to $1,500 for
married persons and from $500 to
$3.50 for single individuals, Chair
man George released estimates to-
day showing that such action would
increase Federal revenue at least
s3O0,O00,000 annually.
S300,00O,000 Increase Seen.
Senator George said the Treasury
estimated the increase at 100000, 900
If the House-approved tax rates were
retained, whereas congressional rev.
enue experts put the figure at S348,-
100000. The Senate Finance Com
mittee is seeking to add approx
mately $500, 100000 to the pending
1926, 100000 tax bill in an effort to
raise the total to the original goal of
s3,500,000000.
Only small percentage of any
revenue increase resulting from low
cred exemptions, Senator George
declared, would come from the eSti-
mated 100000 additional persons
who would be brought under the in
come tax structure. The bulk of
the increase, he added, would come
from those already paying income
taxes-especislly from those who
would be pushed into the next high
er surtaX brackets by reduction of
the exemptions.
The Treasury originally recon-
mended a cut in present exemptions
to $500 for married persons and |
$3.50 for single persons, but the |
House rejected the IDEA. If the Sem
ate should approve it, the question
would have to be threShed out by
conference committee of the two
houses.
AS the Senate Finance Committee
approached the end of public hear
ings on the revenue measure, Sen
ator Brown, Democrat, of Michigan
said craftsmen were putting in shape
his proposal for a "selective sales
tax under which levies would be
imposed on a number of designated
luXuries.
Senator Brown said the tax would
expand the existing system of So
called nuisance taxes and might
operate thus: Sale of $100 suit
would be taxed $40; sale of $50
suit, S5; sale of S35 suit, $3.50;
sale of a $40 suit, nothing.
Senators Brown, George and Taft,
Republican, of Ohio agreed that
some of the HouSe-approved nui-
sance levies might be eliminated or
modified in the Senate. Senator
Brown expressed opposition to a
projected levy on radio time sales,
asserting: IF you tax radio ad-
yprticiY,u tbic year Snrnehodv will saw