Detroit evening times. (Detroit, Mich) 1921-1958, 1941-03-24
Tax-Price
Issue Starts
Hot Debate
Confiscatory Levy Offers
No Lasting Solution
1.-THE opinions expressed by
General Johnson are not neces-
sariIy those of The Detroit
Times.)
BY HUGH S. JOHNSON

BY HUGH S. JOHNSON
DEBATE among our planners
- of economic war policy wages
warm over the twin subjects of
taxes and prices. Both are
hot potatoes because both touch
every pocketbook in America
and pockethookS- are the prize
political squawk boxes.
One prescription is:
"Pay as you go. The best
way to prevent initiation or high
war prices Is high taxes"
The contrary argument is that
high taxes help TO make. not to
prevent, high prices. that taxes
too high dry up their own
sources and that, at time when
political unity and public mo-
rale are all-important, confisca-
tory taxes are the worst possible
medicine-especially where the
time has come when high taxes
must be paid by everybody
and not the rich alone.
This latter conclusion seems
to be. admitted by everybody.
According TO the Brookings In
stitution's study of incomes, all
family incomes above 100000
a year are only about IL per
cent of the total income of the
nation probably not exceeding
$4,000, 100000. We expect soon
to be at a rate of spending of
over $4,000. 900. 900 a year.
IF WE taxed away all that lush
Il take. II would be a long way
from paying as we go. Further
more, as invariable experience
has shown, when you tax away
the whole. or even very large
part of any source OF revenue,
that source disappears
People don't work or invest
for return of zero. II we con-
fiScated ait income in excess OF
$1,000 a year the revenue. sup
posing that the source did not
dry up (as it surely would,
the result would not be two
thirds of the anticipated rate
of spending.
There have been at least five
studies of the bearing of hidden
and open taxes on the lower in
come classes including the very
lowest and those on relief. Al
though each approached the
problem from a different angle.
the result was remarkably sim
ilar-a showing that taxes al
ready take about 81 per cent in
these lowest brackets.
Considering the astronomical
figures of proposed spending. il
is very apparent that sources of
additional revenue are skinny
and hard to find
Considering that half the total
income of the country is earned
by families with less than 81 600
year and 40 per cent of it by
families with less than than
$1,000. it is very apparent that.
if there is TO be any increase in
the rate OF revenue, even to
fraction of the increase in the
rate of spending. the little fell
low" who has hardly heretofore
felt the pinch of federal income
taxes is in for cleaning.
OF COURSE the worst that
" could probably happen by in
creased taxes would be nothing
to the catastrophe of any such
runaway inflationary rise in
prices as happened in the World
War when the purchasing power
of the wage-earners' dollar de-
clined 80 per cent. That is a so
per cent tax on income that pro-
duceS no revenue and no useful
result whatever-no result ex-
cept to double the burden of debt
and halve the consuming power
of the public.
what Is the answer? / don't
know but have never been able
to understand how high taxes
can produce lower prices. Tax is
an element of the cost of things
and cost is an element of the.
price of things. The higher the
tax, the higher the cost and also
the higher the price-or so it
has always seemed to me.
If that is so and the prudent
sources of greatly increased
revenue are as thin as they seem
TO be, we should be giving a lot
. more study TO methods of keep
Ing prices down than to WAYS of
getting taxes up.
Until the last war. efforts by
o law to stop price increases were
not successful but much was
accomplished then in that direc-
ton and more seems to be
working now-not only in Ger
many and German dominated
territory, but in England. The
quicker we put flexible statu-
tory ceiling over prices the
better chance we shall have of
surviving this war.
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