Evening star., 1942-05-23
Withholding Tax

: With tax bill which is by far the
most drastic in this country'S expert
ence certain to be enacted this year,
1t is highly desirable that Congress
also should adopt the Treasury's pro-
posal for a 10 per cent withholding
tax designed to collect at the source
at least a part of the Federal income
tax during the year that the income
Is earned.
In other days, when the tax was
small and the number of taxpayers
relatively few, the present system of
collecting the tax was adequate. But
those days ere gone.
Under the provisions of the tax
bill as approved by the Ways and
Means Committee, the Treasury esti-
mates that approximately 100000
persons will pay tax on their 1912
incomes. Exemptions for married
persons have been lowered from
1,500 to $780, and for single per-
sons from $3.50 to $500. The normal
tax rate has been increased from 4
to per cent, and the surtax,
applicable to the first dollar of tax
able income, has been boosted from
6 to II per cent on the first $4,000,
and it rises sharply thereafter.
This is a tax program which is
going to call for real sacrifices in the
majority of American households,
and in some cases it is going to in
volve very definite hardshipS. These
sacrifices, under existing conditions,
are necessary, and the sum total OF
hardships will be less than would
have been the case if the Treasury
or Congress had failed to deal coura-
geously in the tax bill with the highly
dangerous economic factors at work
throughout the country. But neither
of these considerations is any reason
why the tax burden should not be
eased by adoption of the withholding
tax
Unless this is done the vast major
ity of taxpayers will go into 1943 IN
debt to the Government for the tax
on their 1912 incomes, and many OF
them. because of changes in our
national economy, will earn less in
1913 than they did in 1912. To guard
against the development OF any such
unhealthy condition, fixed and peri
odic tax allocations should be made
during the year when the taxable
income is being earned. This could
be done voluntarily, of course, but
experience indicates that most people
would not follow such a course. The
only effective plan is to make the
deductions by law at the source
before the taxpayer has an oppor-
tunity to spend the money.
Adoption of the withholding plan
also would materially increase the
effectiveness of the tax bill as
safeguard against imitation. II the
present pattern were followed, with
no tax money being withdrawn from
circulation before next March Is, we
might find, so far as the tax bill can
play a part in the counter-lnt1atlon-
ary program, that we had locked the
stable door after the horse was gone.
On the contrary, prompt adoption OF
the plan would help to close the gap
this wear between the diminishing
supply of consumer goods and the
mounting consumer buying power.
Finally, the withholding plan would
facilitate the collection of taxes from
certain groups of taxpayers-those
who, from inexperience or other
reasons, might neglect to file returns
or fail to make provision for payment.
If Congress will approve this plan
now, there can be but small doubt
that it will be welcomed by the great
majority of taxpayers. And when
the original adjustments to it have
been made. the chances are that all
persons affected will want to con-
tinue it in effect through the hard
tax years that lie In the future.