Evening star., 1941-08-15
Economist Advocates
2-BiIIion-DoIIar Cut in
Non-Defense Items
New Tax Bill Contoins
Obvious Injustice
Senate Group Told
BY J. A. O'LEARY.

A tWo-bllllon dollar cut In non
defense spending was urged today by
Fred A. Fairchild, Yale University
economist, testifying before the Sem
ate Finance Committee on the So
236, 100000 new tax bill.
Prof. Fairchild, appearing for the
Federal Finance Committee of the
United States Chamber of Com
merce, said Secretary of the Treas
ury Morgenthau did not 90 far
enough in recommending one-bil-
lion saving in non-defense appro-
priations.
while we advocate a reduction of
non-defense expenditures to the
minimum consistent with efficient
performance of essential activities,
we admit the necessity of bearing
the cost Of whatever may be re-
quired for national defense" he
testified.
Prof. Fairchild said the tax bill
contained obvious injustice" be-
cause, he said, it would place the
major burden of new taxation on
some 100000 persons who already
contribute the bulk of Federal taxes.
He suggested enactment of levy to
be deducted from wages by en-
ployerS and to be applied to per-
sons whose incomes are insufficient
to subject them to income taxes.
Discourages Enterprise.
Prof. Fairchild said that two
thirds of the presently estimated
revenue yield from the bill would
come from income taxes.
Having in mind" he told the
committee, "the great heights to
which the Federal taxes upon in
comes, corporate and individual,
have already attained, there is
grave danger to the Government
and to the economy of the Nation
in any such reliance upon income
taxation.
"Taxation of incomes as heavy
as this has profound effect in re-
ducing the supply of capital avail
able for production. checking saw
ings and discouraging investment
and business enterprise
Prof. Fairchild said that "very
large portion of increased national
income anticipated from the defense
program would go to some IS per
cent of the population which does
not bear the burden of income and
similar taxes.
Mr.. Morgenthau, in earlier testi-
mony. had directed attention to
farm benefits, c. C. c., N. Y. A. and
public works for consideration in
trying to save s1,0O0.OOO, 900 along
with the raising of new revenue.
We support the Secretary's pro-
poSaI,' said Prof. Fairchild, but do
not believe it goes far enough. Scru-
tiny OF the expenditures he men
TONED and Of other non-defense
Items, would. it is believed. reveal
that reductions amounting to about
two billion dollars could be made ''
Other Witnesses Heard.
Other witnesses heard this morn
ing were Charles w. Briggs of St
Paul, Mimi, representing personal
holding companies, and A. w. Clapp,
spokesman for some West Coast
lumber companies, who discussed
detailed changes in the House bill.
The suggested defense savings
could be made in the next budget,
II not in current expenditures, Prof
Fairchild said.
he also warned Congress there is
no certainty that excise taxes de-
signed to check consumption of GER
tain commodities and hold prices
down, will not result in checking the
demand for entirely different COM
modltles, because the consumer has
the choice of the particular expendi-
ture he will curtail in order to meet
the new tax. To the extent thai
excise taxes raise prices, they are in
flatlonary, he said.
Cites Inf1atiOnary Policies.
Continuing, Prof. Fairchild testi-
fed.
1T is futile to place our trust ir
dubious use of taxation to prevent
imitation in the face of the various
lnf1ationary policies which are being
followed by the Government itself
For example. the wage policy. some
forms of Government spending. the
measures taken to increase agricul-
tural prices. the credit and none
tary policies, including the con-
tinued purchase and monetizatior
OF silver, some of the fiscal prac-
tlces which contribute to the crea-
ton of enormous excess bank re-
serves, the powers to devalue the
dollar and print greenbacks and
other aspects which might be men
toned. If the Congress desires to
prevent imitation, it is in the modi-
flcation of such policies that it car
find opportunities for really effec-
tive action