The Waterbury Democrat., 1942-01-06
BY FRED A. ELDEAN Executive Director, The Tax
 Foundation


 New York, Jan. 6.-(SpeciaD federal tax bill more than double that of any previous year; state tax collections topping all previous highs Rs 8 result of booming industry and trade; local tax revenues approach ing the peak year of 1880; and swelling demand for reduction of nonessential, non-defense expendi- lures were major developments in the field of taxation during 1941.
 On September 20 President Roose- welt signed one of the most exten- sive revenue measures ever adopted by Congress, a tax bill designed to raise between $3 and $4 billion in additional revenue. Most significant change was the lowering of personal exemptions III the income tax, bring ing into the federal tax fold millions of persons never before subject to direct taxation by the national gov- ernfnent. Despite this broadening of the tax base, however, imposts were increased all along the line with surtaxes lifted and extended, cor poration and excess profits rates raised sharply, and a hose of new eXcises and so-called nuisance taxes levied.
 Even so, because of the tremen- douS sums necessary for national defense, lend-lease, and the conduct of the war, federal revenue con- tinued to fall far short of expendi- turea. The year l941 saw the federal debt pass $50 billions, well within statutory limit of $65 billions. While federal tax collections for the fiscal year ending June 1942 are expected to exceed $12.6 billions, expenditures for the same period will approach $25 billions, of which approximately SIS billions will be allocated for war purposes. The near future will doubt less bring budget expenditures of between $37 and $50 billions an- nually, for during 1941 alone ap- proXimately $67 billions were appro- priately or authorized for war and defense expenditures, much of this for lend-lease purposes.
 Further sharp increases in federal taxes seem inevitable for 1942, both to raise revenue and to discourage purchases of articles that compete for materials with war production. Possibilities include new withhold ing tax on pay rolls and stiffer prof its taxes to bring ill the additional $4 to $5 billoills the Treasury is reported to be seeking.
 Of major significance for 1942 will be the efforts of taxpayers and legis- iators to eliminate nonessential, non- defense expenditures. Considerable progress was mace in this direction during 1941 with the organization of the Citizens Emergency Committee on Nondefense Expenditures headed by Dr. Henry M. Wriston, President of Brown University and the ap- pointment of the Joint Congressional Committee on NondefenSe Expendi- lures of which Senator Harry F. Byrd is chairman. Budget Director Harold Smith has indicated where savings of as much as $2 billions can be made on nonessential federal government costs, and there promises to be strong taxpayer sentiment for the elimination of any and all spending not necessary to the war effort or the maintenance of needed services.
 This same sentiment is likely to extend to the state and local fields where taxpayers are expected to seek tax reductions to compensate partially for necessary but increas- ingly onerous federal taxes. Perhaps :~. 1c ri f,,a tio,, to ta tax legislation curing 1941 was mill der than for many preceding years. Few new taxes were imposed and there was strong trend, inspired largely by taxpayer associations, toward the restriction both of new expenditures and of state budgets in general. Principal legislative changes in the state tax picture revolved around increases in gasoline taxes and djustments-some in- creases and some decreases-in sales taxes.
 During the year state tax collec- tions reached the highest level yet recorded. Total collections were per cent higher than in l940, with income taxes up IT per cent, sales taxes III, 0 per cent, and nuemploy- ment taxes up per cent, The total collected was in excess of $4.4 billions, Tax Foundation research experts estimate.
 Due in great part to the work of the state taxpayer organizations, several states made noteworthy pro- gress toward more efficient, more economical administration, New York had the lowest budget in five years. the governor introducing budget $9,0O0000 below is40's and an additional sl 100000. Taxpayers saved $20,000,000 through the repeal of the emergency personal income