Evening star., 1941-08-25
Senators Vote
Increase in Net
Income Tax
Surchoree Merged
With Levy on
Bosic Earnings
Earlier Story on Page A-1.)
BY ]. A. OLEARY.

BY J. A. OLEARY.
The Senate Finance Committee
voted today to merge the 10 per
cent defense tax into a new schedule
of surtax rates, not to raise more
money, but to simplify the task of
filling out the income tax return.
Husbands will be permitted to de-
duct alimony in figuring their in
come tax returns and the wives re-
ceiving the money will be required
to report it as income, under a new
general rule adopted by the COM
mittee. Chairman George explained
it was intended to eliminate con-
fusion now existing on this question
because of variations in the laws Of
different States.
The committee voted also not to
reopen the fight to compel husbands
and wives to file joint income tax
returns, which was defeated in the
House when it passed the $500 ,000.-
900 defense tax bill.
The committee, however. is under
stood to have adopted a special
amendment to put the eight States
having community property laws on
the same basis as the rest OF the
country in the filing of Federal tax
returns.
S50,000,0O0 Return Seen.
In some of these States, at pres
ent. husbands and wives are per-
mitted to divide equally the family
income and file separate returns.
The rule adopted by the commit
tee provides that in those States
each party will be required to file
return on the earned income he
or she brought into the family. In
the case of unearned income. 1t
would be filed by the party having
control of it.
The eight community property
States are California, Arizona.
Texas, Louisiana, New Mexico,
Idaho, Nevada and Washington.
The amendment was estimated to
raise 100000.
The committee then recessed for
the day, after having added total
1854 ,O00, 900 to the House total of
1926, 900 in the revenue bill. All
but s5l 900 600 of the increase results
from lowering personal exemptions
from $4,000 to $500 for ma -ried
persons and from $500 to $750'for
single persons.
Tax experts this afternoon gave
the following illustrations OF the
effect of the lower exemptions.
A married man with no derend-
ents and $4,000 of net income. who
now pays no tax, would pay S40.70.
New Assessments.
A single person with no depend
ents and $500 of income, no tax at
present: s275 under the new $3.50
exemption.
A married man with no depend
ents ard $1,000 of income would
have his tax of $135.30 under the
House bill raised by $3.50 to slS4.8o.
A married man with no depend
ents and $1,000 of income would
have his tax of S308 under the
House bill increased by $66 to 1914.
The Senate committees action in
combining the special 10 per cent
defense tax with the surtax schedule
will enable the taxpayer to arrive at
his total tax in two instead of three
calculations.
Under the House bill, the surtaX
was applied to every dollar of net
income by abolishing the $4,000 ex-
emption from surtax. This meant
all taxpayers would have been re-
quired to figure as follows:
First, the surtax starting at 5 per
cent on the first $4,000 of net income
and going up gradually in succeed
ing income brackets; second, the
normal tax at per cent: third. he
would then add together the surtax
and the normal tax thus computed
and increase the total of those two
taxes by 10 per cent.
Total Yield Unchanged.
The Senate committee increased
slightly the schedule of surtax rates
to absorb the 10 per cent defense
levy, and left only two computa-
tions.
The House schedule of surtaxes
ranged from per cent on the first
$4,000 to IS per cent in the top
bracket of $5,000,000 or over. The
new Senate schedule starts at per
cent and goes up to n per cent.
Since fractions were dropped in
combining the surtax and 10 per
cent defense tax, some individuals
will pay little more and others
little less, but the total yield will
be the same.