Evening star., 1941-08-09
Alternative Tax Plan

In specifically urging broadened
tax base to offset some of the revenue
loss which will result from the re-
fusal of the House to accept the
joint income tax return plan, Secre-
tary of the Treasury Morgenthau is
asking Congress to take a step which
is politically difficult but econom-
ically sound.
There are two principal reasons
why the income tax base should be
broadened First, it would raise
more revenue; not only from new
taxpayers but alSo-and this is a
point which has not been stressed
from every one already paying an
income tax Second, it would tend
to make more people "tax conscious"
by giving them a direct and personal
interest in the Governments tax
program and in its expenditures.
The Importance of these conSidera-
tions, of course, would be determined
by the extent to which exemptions
are lowered, but in view of the fact
that only about one-siXth of the
people pay income taxes at this time
it would seem that a substantial
broadening is in order
Mr.. Morgenthau also asked the
Senate to revive modified form OF
the mandatory Joint returns pro-
vision which was rejected in its en-
tirety by the House. Under the Sec
retaryS proposal an appropriate
credit would be allowed in cases
where husband and wife both earn
their incomes, but those which are
not earned would be subjected to
the higher tax payable on joint
return. In this connection it is in
teresting to note Mr.. Morgenthau's
assertion that since 1882 about
S7,500000,000 of property has been
transferred from one spouse to an
other-most of it undoubtedly for
the purpose of lowering income tax
payments.
1t has been estimated that the
House, in eliminating the joint re-
turns, reduced prospective income by
about $323,000,000. Mr.. Morgenthau
said that his modified version would
raise about S258,00O,000, thus indi-
eating that the bulk of the revenue
originally anticipated would have
come from unearned income.
Despite these considerations, how
ever, it is unlikely that the joint re-
turns provision, which was opposed
in the House on constitutional
grounds as well as by the combined
strength of the members from the
eight community property States,
will be revived in any form. Nor is
it probable that his proposal for
adoption of the invested capital
formula of computing the excess
profits tax-as against the more
equitable alternative method ap-
proved by the Ways and Means Com
mittee and the House-will prove
acceptable.
That being the case, Congress must
turn to the broadened tax base if it
is to make up any substantial por-
ton of the 10 per cent of revenue
which has been wiped out by the
ban on joint returns. This deficit
should be made up, and Congress, by
broadening the tax base to do so,
would lend force to Mr.. Morgen-
thau's renewed appeal for a maxi
mum reduction of non defense
spending. The Secretary's words in
this respect, when appraised against
the deplorable record of defense
spending, have a hollow ring, but the
case might be different if a body of
millions of new direct taxpayers
were created to police the activities
of those who seem willing and anx-
ious to spend the public funds with
out any thought of the reckoning
that tomorrow must bring.