Evening star., 1942-09-03
uxes
Continued From First Page J

dDle part Oh lIle SptIlulIlS IdA WOulQ
be imposed at a fat rate of 10 per
cent of the total spending of indi-
viduals for consumer goods and
services.
He said that. in general, it would
apply to all individuals who had
become subject to the individual
income tax.
In order to compute the tax, he
said that the total amount Of funds
at the disposal of the taxpayer, de-
rived either from current income or
by drawing on capital, would be
calculated and the amount of the
individuals savings subtracted.
He said savings would be defined
to include. chiefly, repayment of
debt, premiums paid on life insur-
ance, expenditures for the purchase
of bonds or other capital assets,
gifts, contributions, payment of
taxes and increases in bank bal
ances.
Collection At Source.
He said that a tentative tax would
be collected at the source on wages,
salaries and dividends in the same
manner that the bill now contem-
plates collection of the 5 per cent
Withholding levy.
MIR. Paul added that the spending
tax return would be made q part of
the regular income tax return, the
amount Of spendings and the tax
being computed on the same return.
The total Of the income tax and
the spending tax payable would be
ascertained by deducting the income
tax and the spendings tax already
collected at the source" he said. If
the amount collected at the source
exceeded the combined tax liability,
the excess would be promptly repaid
to the taxpayer"
He explained that great majority
of taxpayers" would be eligible to
file simplifled refundable spending
tax rethrn. which would be a sup
Elementary part of their simplif1ed
income tax return.
THE refundable part of the spend
ings tax would be levied at a rate of
10 per cent on the taxpayers total
spendings," he said. An individual
with an income of 5000, for ex-
ample, who spent 5000, would pay
a tax of $500. If he increased his
savings and spent only $2,400, the
tax liability would be reduced to
$40.
Spending Surtax Urged.
Supplementing the fiat 10 per cent
tax in the lower brackets of spend
ing, the Treasury proposed a spend
ing surtax with rates graduated up
to rs per cent in the higher brackets.
For a single person, spending up
to $1,000 would be taxed 10 per cent.
from 81 900 to $4,000 at 20 per cent.
from $4,000 to $1,000 at 80 per cent,
from $4,000 to $1,000 at 40 per cent
from 5000 to $4,000 at so per cent
and all over $4,000 at rs per cent.
A family, however, would be put
on per capita basis, giving a mar
ried couple with one dependent an
exemption from this surtax of $2,50O.
II this family spent q total o1
$1,000, or $2,500 in excess of its ex-
emption, its surtax would be $3.50
for the family.
Immediate Application Asked.
The Treasury recommended max
ing the spending surtax effective as
OF September !, 1912. Mr.. Paul said
1t was essential this be done tc
prevent large-scale buying and
boarding of consumers goods in an
ticipation of the enactment Of the
spending tax.
He said the refundable part of tn,
spendings tax, the 10 per cent fla
levy could go into effect on January
/, 1943.
Mr.. Paul said the proposal tt
lower income tax exemptions to $500
for single persons, 81 900 for married
couples and give only $3.50 credit fol
dependents would bring an addition
al 5000, 600 persons into the Fedora
income -tax-paying field, over ant
above the number previously in.
cluded by Senate committee changes
in the House bill.
Examples Are Cited.
He cited these examples of poten
tial increases in individual incom,
taxes:
The tax of married person with.
out dependents having an incom,
of $4,000 would be increased from
$40 to s178, while married person
with two dependents and the SAM
income would pay tax OF s83
whereas he would pay none undel
the pending bill.
illustrating the effect of tn.
spending tax, combined with th'
income tax, he cited this example
"A married couple with two de-
pendents having an income OF IS ,00t
would have an income tax liability
of $3.50. If their spendings amour
to $500. the spendings surtax woult
be so and the refundabls spend