The midland journal. (Rising Sun, Md.) 1885-1947, 1942-03-20
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LOWERED EXEMPTIONS BRING
NEW ARMY OF WAGE EARN
ERs INTO AZ INCOME
TAX FOLD
BY John III. Hougardy, Executive
Director Maryland Public Ex-
penditure Council

into first place as sourse of rev.
enue for the Federal Government, a
place that it has held ever since.
World War II seems destined to
establish the levy as the greatest
revenue producer in world history.
The Sixteenth Amendment to the
constitution, allowing Congress to
impose an income tax without dis
tributing the funds received proper
tionately to the states, was adopted
just in time to permit the tax to be
major factor in bearing the costs
of the first World War. Income tax
collections rose precipitately from
around $3.50 million in 1915 to
nearly SO billion in 1918, dropped
slightly in 1919, and set a high of
nearly "a billion in 1920 that will
be eclipsed for the first time this
March Is. Only once, at the nadir of
the depression in 1888, has the in
come tax failed to add at least
billion dollars each year to the fed
eral treasury, and usually revenue
from the tax has been in excess of
50 billion.
At first erich mans tax" bear
ing almost entirely on wealthy in
dividuals and prosperous corpora
atoms, the income tax has been
broadened in its twenty-eight years
existence until, with personal
exemptions lowered to $3.50 for
single persons and $1,000 for mar
ried, almost every wage Garner ex-
cept those in the minimum income
brackets will be affected by it this
year.
Since its institution, the income
tax has far outstripped the three
previous major sources of federal
revenues--customs, and tobacco and
alcohol taxes--and though it has the
bad habit of returning the least
revenue in times of depression when
tax funds are most needed, it is still
the pride and joy of the bureau of
internal revenue and, incidentally,
of the pork barrelers.
Just as in 1917, income levies
will be the major factor in paying
the tremendous costs of the mechan-
lied warfare of 1912. Other taxes
may aggregate greater sum, but
of the total Of approximately SIS
billion in taxes to be nearly Sc
billion. Again like World War 1, vic
tory will probably bring lowered in
come tax rates, but it is doubtful
If the liberal exemptions which pre-
vailed before 1910 will return for at
least several years after we finally
lick Hitler and Hirohito, in the
opinion of Tax Foundation experts.
Those currently enlisted in the army
of taxpayers will probably serve long
past the duration.
It's a matter Of simple arithmetic
Despite the fact that tax revenues
will be three times those of 1920
which marked the peak of World
War I collections, we are spending
at least four times as much as will
be collected. The Presidents budget
message for instance, called for
the expenditure of $50 billion dur
ing the 1943 fiscal year, and Con.
gress has already appropriated more
than that sum. The government
must go in debt for the remainder
In consequence, the national debt
may exceed $3.50 billion at the wars
end and interest payments alone will
add well over billion dollars each
year to the cost of government, the
experts point out. Additional in
terest charges alone will amount to
an increase Of 16 per cent in the
normal cost of government. Costs of
postwar adjustment, of whiting
down the enormous debt, of veter-
ans care and pensions, leave little
hope for return to income tax rates
prevailing before the war, they say.
One benefit the tax experts ex-
pect to come out of the great
broadening of the income tax base
| is a heightened interest in govern
ment on the part Of the average citi-
zen who hitherto has been tolerant
of, and frequently has abetted,
waste and ineficiency in government
because he felt that it was ''the
other fellow" who paid. In conse-
qnence of the wave of tax con-
seriousness which they predict will
sweep the nation when John @. Citi-
zen files his first income tax return
sense of personal responsibility
for the conduct Of government is ex-
pected to develop with bone-deep
pairing of non-essential, nonwar ex-
pendftures as its first fruit.