Evening star., 1942-10-28
Pay Increase
Restrictions
Now in Force
Net Earnings
Are Limited to
$4,000 a Year
Byrnes Tert, Page A-1s.

Government restrictions on al
salary increases were in effeo4
today. And these regulations in,
effect will prevent any American
from earning a purchasing
power" Of more than $25,0OO .
year after January /. j
The regulations, making effec-
tive the qualified $25OOO salary
limit long advocated by President
Roosevelt, were issued by James F.
Byrnes, Director of Economic
Sterilization, late yesterday with
the authority of new presidential
executive order.
Mr.. Roosevelt, whose own salary
OF SITS 900 year is fixed by statute
and therefore exempt from the reg
ulations, directed the Treasury De-
partment to make his pay conform
to the limitation nevertheless.
The only salary increases that
may be given by employers from now
on without specific approval are in
the cases of individual promotions.
individual merit increases within
established salary rate ranges, for
length OF service, increased pro-
ductivity under incentive plans, or
operation of trainee system.
Even such raises as these, the reg
ulations stipulate, must be made lin
accordance with terms of salary
agreements or salary rate sched-
ules."
Even these raises will not be
permitted, however, if they re-
suit in ANY substantial increase in
the level of COSTS" or furnish the
basis either to increase price CELL
ings or to resist otherwise justi-'
fable price ceiling reductions.
The captains Of industry and the
lowliest wage earners thus both be-
come subject to pay control-and
even salary increases or wage de-
creases must be justified in certain
cases.
In cases where salaries were less
than $4,000 year on October 3, no
decrease may be made by the en-
ployer below the highest salary paid
between January /, 1912, and Sep
tember IS, 1912, unless to correct
gross inequities or to aid in the
effective prosecution of the war"
except with Government approval
In cases where salaries exceeded
$4,000 a year on October 3 any cut
must be justified to the Government
If it reduces the level below $4,000.
The Treasury and War Labo,
Board will enforce the rules.
Deductions Allowed.
| The regulatlonss provide that no
person shall receive salary of more
than $25,0O0, after deductions for
Federal income taxes on the whole
salary" for customary" charitable
contributions, and for payments on
life insurance policies and other
fixed obligations which we're in
force on October 3, and for past
income taxes.
Wealthy persons with income
other than salary would not be per-
mitted to benefit from these deduc-
tions, however. The allowances for
life insurance payments and fixed
obligations are permitted only where
"the recipient of the salary has no
other source of income" which can
be used for these payments or can
show that he is unable to meet them
without disposing OF assets at q
substantial loss, involving undue
hardship"
Although the $4,000 salary limi-
tation does not take effect until
January l, increases at this level
are forbidden in the meantime.
Mr.. Byrnes explained that there
was no exception for such persons
as movie stars who might contend
that their high-earning capacity
was limited to few years.
Purpose of the $25 900 salary limit
is to discourage wartime imitation
and at the same time increase Fed
eral tax revenues by causing cor.
porations to retain amounts for
merly paid out in high salaries. The
corporations thus would be required
to pay taxes levied at higher rate
than those on individual earned
income.
Mr.. Byrnes explained that tho
limitation applies only to salaries
because that is the extent of our
power" under the act passed by Con-
gress. Control of income from other
sources, he pointed out, could be
effected only by taxation" which
would require further action by
Congress. He did not indicate
whether he would urge such action.
Penalties Provided.
Any violations of the new salary
regulations may be punished under
the Price Control Act by imprison-
ment for a year and a $1,000 fine.
In addition, corporations will not
be allowed credit for salaries paid
in violation of the regulations as
expenses in figuring income taxes,
price ceilings or costs on Govern
ment contracts.
Administration of the salary regu.
(See SALARIES, page A-7)