Evening star., 1942-07-23
Taft Sees Threat
Of Initiation in
u. 5. Borrowing
Morgenthou Urges
Senators to Boost
Tax Bill ~ Billion
BY ]. A. O'LEARY.

A new danger of imitation from
the sale of too many Government
bonds to commercial banks was
seen today by Senator Taft, Re
publican, of Ohio as Secretary of
the Treasury Morgenthau asked
the Senate Finance Committee to
raise the House tax bill from
$6,30O,OO0,000 to $8,7O0,OOO 900.
The Secretary called the Treas
urys request for its original tax bill
total of $8,7OO,0O0,OO0 a minimum
program. In the light of the coun-
trys dire need for war funds, he
suggested the following steps:
Abolishing tax exemption for in
terest on $4,000. 900 900 of State and
municipal bonds.
Making Joint returns by husband
and wife mandatory, a proposal
which failed in last years tax bill
Coupling the 80 per cent excess
profits tax with 9 per cent credit
to be returned to corporations after
the war, to help meet the problems
OF postwar readjustment.
New Excise Taxes Urged.
Imposition of new excise taxes
on soft drinks. candy and chewing
gum and increased rates on beer.
wine, cigarettes, gasoline, oil and
transportation. He opposed a new
tax of S per cent OH freight and ex-
press voted by the House.
Mr.. Morgenthau testified that the
Government expects to spend ST.
600 100000 in his fiscal year to win
the war, and that The Treasury
will have to borrow $50, 900 900 900 of
that sum. Senator Taft ard Senator
Vandenberg, Republican. of Michi-
gan sought to find out how this
borrowing would be distributed.
They brought out that the goal OF
the voluntary War stamp and bond
sale program is only $4,000 900 900,
and has not quite been reached.
That leaves Sal 200 100000 to
come from somewhere else said
Senator Vandenberg, adding, How
much of 1t will you have to force into
the banks?"
Banks Show Proper Spirit"
Mr.. Morgenthau objected to the
word force" contending the banks
have shown proper spirit" toward
the Governments financing require
ments. The Secretary then sought
to show that before turning to the
commercial banks the Treasury
would endeavor to borrow as much
as possible from insurance COM
panies, savings banks. individual in
vestors, trust funds and fiduciaries
Senator Vandenberg estimated
there would still be about $39, ,O0O,-
100000 the banks would have to
take, and Senator Taft contended
1t would be more than $50 900 900 900
Undersecretary Of the Treasury
Daniel Bell took issue with these
estimates. He said he did not be-
lieve the conclusion could be drawn
from Mr.. Morgenthau's testimony
that such an amount would remain
for sale to the banks. insisting there
would be many other investment
sources.
Senator Taft observed that cor.
porations would not have much lef,
for Government bond investment
after paying the new taxes.
Infiationary Danger Recognized.
After Mr. Bell mad given the pres
ent holdings Of the banks in Gov
ernment bonds as s24,87O, 900 900
Senator Taft suggested this year,
financing program may double those
bank holdings, and inquired:
Doesn't that create s24.87O. 900.
600 OF purchasing power in a market
OF decreasing materials and sup.
plies?"
Mr.. Bell saiG the Treasury realized
the inf7ationary danger of going tc
the banks. and that the Treasury
aim would b. to seek as many other
investment aources as possible.
Senator Taft summed up hi.
cross-examination by asserting thai
sale Of as rruch as 100000 900 900 o.
bonds to .he commercial banks "de.
stroys anv hope of curbing infla
tion," despite anything Price Ad
ministra.or Henderson may do tt
keep a ce' Ing on prices. If tina
becomes necessary, the Senator said
the responsibility for imitation ma,
'See TAXES, Page A-6D