Evening star., 1942-09-04
New Tax Scheme

It Is not surprising that the So
called tax program which the Treas
ury Department has dropped in the
lap of the Senate Finance Committee
has met with chilly reception. Why
this should have been the case can be
readily demonstrated by summar-
izing what seem to be it's principal
objectives, some of it's obvious def
ciencies and the motives which
apparently underlie it.
To begin with, the spending tax is
designed to miss those persons who
would not be required to file income
tax returns. In other words, 1t is a
sales tax, refundable in part, but
applicable only to those persons who
also are subject to the income tax
Those in the lowest income brackets,
although their aggregate earnings
are said to approximate half the
national income, would pay neither
an income tax nor a spending tax.
The great burden would fall on the
middle class, and, in the case OF those
whose spending exceeds the refund
able level, this proposal amounts to
nothing more than an additional in
come tax
The Treasury estimates that the
spending tax, coupled with lowered
income tax exemptions, would raise
about $500, 100000 from individuals
in addition to the $6,271 ,O00,O 900 which
the House approved income tax rates
are expected to produce. This means
that the total taxes for a full year
would be about $30,5O0 900, 900, with
$4,000, 900, 900 due to be refunded after
the war.
There are many inequities in the
plan. For example, married couple
with an income of $1,000 would pay
no income tax and no spending tax.
But the couple next door, with only
slightly greater income, would pay
some income tax and, in addition,
10 per cent tax on all of their spend
ing, exclusive of certain exemptions.
Furthermore, since the latter tax is
proposed primarily to discourage
0pending, 1t seems unfair to refund
only part of the tax. The refund
should apply either to the entire
spending tax or to none of it. If the
principle of the tax is sound, and If
the people can pay it in the first
instance, it might we'll be preferable
to treat the entire levy as an out
right tax. It may be thought that
the prospect of a refund makes the
scheme more palatable from politi-
cal standpoint, but it Is certainly not
in the best interests of financing the
war or the period Of postwar ad-
justment
1t is also worthy of note that the
spending tax plan, if adopted, would
enormously complicate the prepara-
tion of tax returns and the payment
Of taxes. In order to prepare his re-
turn and plan his payments, the
individual would have to acquire the
skill of tax expert, and even this
would avail him little it, for ex-
ample, he should be obliged in a
particular year to incur heavy medi-
cal expenses, which, presumably,
would be taxable as spending.
Furthermore, since the tentative
spending tax would be collected at
the source of income, employers
would find themselves confronted
with an additional and probably in
tolerable bookkeeping burden.
If all of this confusion and COM
plexity were necessary, it might at
least be said that the end of curbing
spending is sufficiently important to
justify the means. But the case for
necessity cannot be made out. The
same objective could be attained
more easily and with less confusion
and fewer inequities if the Treasury
would screw up its political courage
and come out fatty for a sales tax.
But this, apparently is not to be.
Rather than call a spade a spade, or
a sales tax a sales tax, the Treasury
prefers to enmesh itself and the tax
payers IN cumbersome new proposal
With fancy name. In these circum-
stances 1t Is gratifying that the
Senate committee has insisted on the
submission by the Treasury of retail
sales tax plan, and that the latter,
however reluctantly, has complied.
AS between the sensible sales tax out
lined, but not sponsored, by the
Treasury and its own spending tax
brainchild, there can be little doubt
as to which is better calculated to
serve the dual purpose OF raising war
time revenue and checking imitation.
1t is to be hoped that the committee