Evening star., 1941-01-12
Bv Charles g. Ross.

too, that future Federal bond issues
should be made subject to taxation,
along with the obligations of State gov
ernments. He believes that the first step
in heavier taxes for defense should be 10
increase the normal personal income
levy from per cent to 10 per cent.
With the sales tax out, it seems clear
that Congress must turn to increases in
existing rates for the great bulk of the
new revenue to be derived from taxa
ton. The most probable change is STEP
ping-up of the surtax rates in the brack-
cts up to $50000. and perhaps somewhat
higher. 1t is generally agreed that in
the highest brackets, where the SurtaX
rates range up to peak of 10 to rs per
cent on increments of income above
S5OO,000 Gin addition to the normal per
cent tax that runs through the whole
scale), the rates have reached the point
of diminishing returns and should not
be increased According to the T. N. E.
C. monograph already quoted, the pres
ent tax especially favors net incomes
ranging from $4,000 to $4,000, favors
those from $50, 900 to 100000, and does
not extract excessive taxes from even
those above that amount. If the rec
ommendation implicit in this diagnosis
should be accepted, Congress would look
for new revenue first to the brackets
from 5000 to $4,000, and then to those
from $5O,0O0 to 100000.
Personal Exemptions Lower Now.
This, in general, is the line of thought
of Senator La Toilette, who had the sat-
isfaction last year of seeing Congress
accept his often repeated proposal that
the income tax base should be broadened.
Congress in the First Revenue Act of
1910 lowered the personal exemption for
a married person from S250O to $4,000,
and for a single person from $1,000 to
$500, thereby increasing the effective tax
rate for all present taxpayers and bring
ing some 2,290,000 new taxpayers within
the fold. Senator La Toilette believes
that the exemptions are now low enough.
He would however, in the next revision,
start the surtax rates at $4,000 instead
of $4,000 as at present, and graduate
more steeply the surtax rates from the
point of departure up to $5O,0O0-and
perhaps even higher. He agrees that the
upper bracket rates probably could not
be raised to advantage.
Senator La Follette-among others
would seek more revenue from the gift
and estate tax by reducing the present
$4,000 exemption, and undoubtedly
there will be a strong effort in this dl-
rection when the tax debate gets under
way.
Likewise, there will be an effort to
close what many believe are yawning
holes in the excess profits tax enacted
last year Senator La Toilette has an
nounced that he will carry on his fight,
begun last session, for a real" excess
profits tax instead of the "hydra-headed
and Intellectual measure" we now have.
Administration pressure to strengthen
the excess profits law is foreshadowed in
the Presidents statement in his budget
message that because it Is the fixed
policy of the Government that no citizen
should make any abnormal net profit out
of national defense, I am not satisfied
that existing laws are in this respect
adequate"
It seems that Congress, in response to
a desire of the administration, will pro-
vide for the taxation of income from
future issues of Federal securities, thus
beginning the demolition of the Cyclone
cellar" against which long line of Sec
retaries of the Treasury, including An
drew Mellon, have protested. But
whether Congress will go further at this
session and enact the short and simple"
statute recommended by the President,
providing for the reciprocal taxation of
income from Federal, State and NUM-
cipal bonds, is questionable.
100000 900 Eventual Revenue Seen.
In a debate in the Senate last session
it was estimated that the initial Federal
revenue from the proposed reciprocal
taxation of securities would amount to
only between $4,000 900 and 500, 100000,
but might rise eventually, after the re-
tirement of the present tax-exempts, to
around s4OO,0O0,o0O.
AS the Presidents message suggests,
the administration is counting heavily
and seemingly with good reason - on
prospective increases in the national in
come. Tax rates need always to be sur
yeyed in relation to the national income
on which they are levied. The following
Department of Commerce estimates OF