The Tacoma times. [volume] (Tacoma, Wash.) 1903-1949, 1942-10-30
. capital
Comment
The Case of
Jim Smith
Shows How Victory
Tax Works
Helps Out on 1914
Income Tax
Income Take
BY PETER EDISON


The easiest way to understand
this new five per cent Victory tax
and what it may do to you is to
take a typical case and try to
spell 1t out to show what happens
to the five per cent the boss win
start taking out of your pay
envelope after Jan. 1, 1913.
So take the case Of one James
tJim) Smith, married, two chill
dren, earning $50 week all
through 1913. buying his home
and paying for 1t at the rate of
$50 a month, half of il being
interest and the other half pay
ment on the pincipal.
In the first place. the Victory
tax does not apply on the first
S12 Of every workers weekly
wages. People who earn less than
s12 a week don't have to pay
Victory tax. But when Jim's boss
makes up the payroll each week,
he will have to subtract S12 from
$50. which is Jim's weekly pay
rate. That leaves S4s. The Vic
tory tax is five per cent of this
s4s, or $40 a week. taken direct
ly from Jim's pay envelope before
he gets a look at it.
For the year 1943, Jim's Victory
tax of S2.40 a week for So weeks
will amount to S124.s0. Jim HIM
self will account for this money
when he makes his first Victory
tax return before March is, 1914,
making his calculations somewhat
as follows:
Having contributed this Victory
tax, Jim is theoretically entitled
to certain postwar refunds. If
Jim were single. he would be en-
titled to rs per cent refund. Be-
ing married, he gets more. On
July 1, 1913, therefore, Jim should
be reminded to count his family,
for the computation Of his refund
is to be determined by his marital
status on that date.
But to get back to Jim. Count
ing his family on July 1, he learns
that he has one wife. That entities
him to 40 per cent refund. They
have two children. He gets a two
per cent refund on each. or a total
of A per cent refund on the
S124.s0. This is the sum which
Jim's boss had already taken from
his pay envelope during 1913.
Multiplying it out, A per cent of
$124.s0 comes to S54.91, the
amount Of the so-called postwar
fund.
Does Jim get this refund and IL
so, when and how? II Jim had no
insurance, no debts, and was buy
ing no war bonds, he could not
get this refund till after the war
is over.
But Jim may be dead by then,
so the thing for him to do is
take this refund as credit
against his income tax. To get
this credit, Jim must show that
he has made payments on insur-
ance, paid off debts, and bought
war bonds to an amount greater
than $54.91. In Jim's case, his
500 insurance payment is enough
to entitle him to this credit, but
he has in addition payments on
the principal of his mortgage
amounting to SIS a month or
$3.50 a year, and he has been buy
ing war bonds at the rate of So
a week for 81 weeks or 1912. The
total is 1892, but as far as saving
him money on his tax bill it is
mostly window dressing, for all 1t
permits him to do is get credit
for his refund of S54.e1 now, in
stead of having to wait till after
the war is over to collect.
The way Jim gets immediate
credit for his s54.sl is this: Jim's
boss took S124.s0 out of Jim's
wages as Victory tax. Jim is en-
titled to a refund Of s54.e1. Sub
tract the latter from the former
and you get s69.se, which is the
real amount of Jim's Victory tax.
Jim can realize on this S54.91 re-
fund on March Is, 1914. by enter
ing this sum as credit claimed
in advance on the payment Of his
regular income tax on his 1s43
earnings.
At Jim's salary of $50 per week,
gross, his regular income tax
would be around S160 a year-say
S164.s1 to make it easy. But since
he is already credited with hav-
ing paid S54.e1 too much Victory
tax. Jim can deduct this $54.s1
from the s164.e1 and he can get
by with an income tax payment
Of only S11o; neat.
What the Victory tax amounts
TO. therefore, is part payment OF
income tax in advance. II hghtens
the income tax you pay year
after-next' by making you pay
little more the year before. Maybe
that's one reason for calling il
Victory tax. It's victory for the
tax collector, only he's going TO
have his troubles when he tries to
exrIair Al Ahsn .rIin.4a and