Evening star., 1941-01-12
Tax Overhaul h1pends
But Federal State.L Relationship May Remain Middle

| HAVE often expressed my Delle1 tna1
no really satisfactory tax reform
can be achieved without readjusting the
Federal-State- local fiscal relationship. l
urge thorough investigation OF the pos
sibilities of comprehensive tax reform" !"
To this recommendation in the Presi-
dents annual budget message for the
fiscal year 1912, submitted to Congress
last Wednesday, every student Of the
tax problem will say Amen.
The tax system of the United States
has Just "growed" And it has grown
to staggering proportions. For the fiscal
year 1888, before the present and pros
| pective levies for the defense program
came into the picture, the total tax bur-
den, Federal, State and local, was around
s15,OOOO 100000, or more than fifth Of
the total national income. BY COM
parison, taxes at the beginning of the
! first World War were taking only per
cent of the national income, and 13 per
cent at the close.
! The 1888 total tax load represented
revenue of STA per capita, of which
the Federal Government took SAC, the
local governments $3.50 and the State
governments $29.70.
Revenue From Progressive" Taxes.
! Of all the revenues collected by the
several types of government, it is esti-
mated by DR.. Dewey Anderson, in a
monograph prepared for the Temporary
National Economic Committee the
! OMahoney committee, that progress
sive" taxes accounted for only 26.4 per
cent. Progressive" taxes are those lev
led in proportion to the taxpayers abil-
ity to pay; they fall predominantly on
| the relatively well-to-do. "Regresslve'
taxes are those levied wholly or largely
without regard to this ability. They
comprise property, customs, sales, pay
roll and other excise taxes and their
tendency is to restrict purchasing power.
Taxes of this kind brought in 1876 per
| cent of governmental revenues for 1888.
Thus according to DR.. Anderson, some
S4,500 100000 was collected in taxes
which may be presumed to have con-
strictive effect upon the national econ
omy, though regressive levies spent for
relief or welfare activities involve largely
transfer rather than diminution Of
mass purchasing power
The case for re-examination of the
whole haphazard tax structure, with
view to its adaptation to the changing
needs of the times, is we'll stated by DR..
Anderson:
BY, 1910 the revenue system OF the
United States and its subdivisions had
grown to include customs duties, taxes
on property, on individual and cor
porate incomes, and on inheritances
and gifts as we'll as pay rolls and sales
taxes ' . This system of revenue is
not preconceived nor scientifically I'M
posed, but is the result of political pres
sure and compromise 1t is not economi-
cally sound, either in terms Of the in
! dividual taxes imposed or their relative
importance in the entire tax system"
Start on Reform Could Be Made.
The preoccupation of the present ses-
sion of Congress with national defense
measures will be such that little can be
expected in the way of general tax
reform A start, however, could be made.
AS suggested by Senator La Toilette
long a conspicuous advocate of thor
ough overhauling of the tax system-a
special joint congressional committee to
study the problem could be set up and
the collaboration of the State govern
ments solicited.
Manifestly, the cooperation of the
States must be obtained If we are ever
to have more than a understanding
reform. The State and local tax systems.
indeed, are the principal offenders
against the ability-to-pay, or progressive,
tax principle. For, whereas the entire
system, as of 1888, obtained only about
a fourth of its yield from taxes based to
some extent on ability to pay the Fed
eral tax system obtained over half, or
526 per cent. of its yield from income,
estate and gift taxes-all these being
taxes of the progressive variety-as
against 474 per cent from customs and
excise taxes
Congress at this session will pass, in
any case, new tax bill to raise some
portion of the billions required by the
defense program That much is a GER
tainty, though it remains to be seen
what proportion of the defense costs
will be met by taxes and what propor-
ton by borrowing.
The President in his budget message
was content to lay down the principles
! that "a start should be made this year
to meet larger percentage of defense
payments from current tax receipts" and
| that the new taxes should not be re-
strictive but taxes based on ability to pay.
Il suggest" he said, "a financial policy
aimed at collecting progressive taxes out
of a higher level of national income. I
am opposed to tax policy which re-
stricts general consumption as long as
unused capacity is available and as long
as idle labor can be employed" The
President left it to Congress to fill in the
details. This will not be done till after
the March Is tax returns have shown
how the taxes now in effect are working
Sales Tax Has Little Chance Now.
The Presidents formula, of course, re-
jects that hardy perennial, the proposal
of a general manufacturers sales tax
Ievying as 1t does uniform rate, the
sales tax takes higher proportion of a
small income than of large income
and is hence thoroughly "regressive. u
| What may come eventually nobody can
tell, but it is safe to say that if the gen.
eral sales tax Is brought forward at this
session of Congress, 1t will meet the same
fate as when it was urged by the Hoover