Evening star., 1941-09-27

of the Treasury Department must
have known this in advance, the
speculation hereabouts turns on
what the motive back of the pro-
posaI may have been.
The feeling is beginning to de-
velop that the Treasury was merely
preparing the corporate interests of
the country for the shock of another
heavy tax bill. When the next in
crease in rates is proposed, it may
well be that the 6 per cent limi-
tation will be set aside and the
feeling of relief over its elimination
may make the new tax bill more
palatable.
Mr.. Morgenthau has put himself
on record as against initiation. He
wants to see farm prices included
In any legislative control that may
be exercised. This makes it all
the more necessary that he record
himself as in favor of holding profits
down to the minimum during the
defense era.
Psychological Move.
The Secretary of the Treasury
has been known as a man with con-
servative tendencies and hence 1t
is quite possible that his champion
ing of the per cent proposal is
more in line with the views of the
President than it is with his own.
In these days of trading with Cap
itol Hill, however, the Treasury is
endeavoring to present united
front and to place the responsibility
for rejecting tax plans on the mem
bers of Congress. In the new tax
law the Treasury was reversed by
the Congress in a number of in
stances and this only tends to stimu-
late a desire to obtain in the next
tax measure what was omitted from
the last.
There is serious question
whether the Treasury has adopted
a fundamental tax philosophy. Ma
turally 1t is harassed by many con-
siderations. AS the seller of Govern
ment bonds, it wishes, Of course,
TO strike away at any nflationary
evidence.
1t is quite possible that the 6 per
cent proposal was launched wholly
on psychological considerations and
1t may be that the Treasury is pre-
pairing its own record for the day
when it may advocate what would
be thought of as very drastic today,
namely enforced savings of wages as
an ti-infation move. In Britain,
the workingman gets part OF his
wages through a forced saving plan
whereby a certain amount OF the
paw roll is withheld at the source
and invested by the Government.
The trouble with the plan Is that
1t would be worked out in America
doubtless on a basis where the en-
ployes' unions would soon be asking
for a pay increase to offset the de-
duction of income taken for the
savings plan. Most all schemes
herea bouts wind up the same way,
as a levy on the income of corpora
tons.
What the sponsors of the 6 per-
cent plan have overlooked is that II
Ii ever went through it might lead
to imitation through course which
they have apparently forgotten
sbout. The employer who would
not be able TO earn more than 6
per cent on capital invested would
tend toward extravaganza OF ex-
penditure and this in turn would
merely increase purchasing power
to the point where with the exist
ing shortages it would be even more
difficult to hold prices down.
Joker in the Situation.
There Is another joker in the sit
uation. The New Deal is building
I'D a big disbursement of public
funds for its own projects and for
defense and is expecting to pay at
least two-thirds of the annual bill
In taxes. If the administration, on
the other hand, cuts down profits or
chokes the incentive for the making
of profits, what is going to happen
TO the tax collections? And If the
bottom drops out of that side Of the
picture, will not the public become
frightened at the prospect of an in
evitable reputation of the public
debt and will not this in turn pro-
duce a distinctly inf1ationary trend?
Some day the administration will
have to make up its mind what 1t
wishes to do on tax policy. To date
II has had several policies. Some
times these have been punitive and
have been based on Socialistic re-
forms. At other times it has been
shown that the administration Is
willing to broaden the tax base.
Again it has been evident that the
would like to get rid
of all tax exempt securities. But at
no time has the tax policy of the
Government under the present ad-
recognized the simple
fact that the goose that lays the
golden egg has to be fattened or at
least kept alive so that there may
be bigger and better eggs out Of
which tax receipts can be collected.
The administration is as much as
. 10 to 30 per cent partner in many
businesses but hasn't yet discovered
that the duty of partner is to
help make profits and not sabotage
the other partner by taking away his
initiative and his creative energies.
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