Evening star., 1942-04-07


tremendous levy. ~ - -
Led by the Un- David Lawrence.
dersecretary of War. a procession of
generals and admirals recently testi-
ned before the House Ways and
Means Committee that the money
appropriated for defense would buy
less airplanes and war weapons be-
cause Of the sales taxes imposed
by the States.
Worse than the financial burden
Is the administrative task imposed
on contractors, subcontractors and
Army and Navy bureaus by the COM
plex demands Of the States and their
different types Of laws. Paper work
galore has been compelled by the
lack Of . uniform system, and men
who might be fighting the war on
other fronts are loaded down with
figuring out the taxes to be paid
TO the States.
The War and Navy Departments
have been blocked by the Treasury
Department, which looks at the
matter from its own departmental
standpoint. 1t has been planning
to raise revenue by taxing the in
come from State and municipal
bonds and naturally does not wish
to be impairing any other sources Of
State revenue. But the amount to
be cotton by the Treasury from
taxing the interest on State and
municipal bonds is estimated at
about $500 900 900 and the amount
to be saved by the Federal Govern
ment in eliminating State taxes on
War and Navy contracts exceeds
81, SOC, 100000. So the net saving
would apparently be greater II the
State taxes on war contracts were
abolished.
Eight States Get Most Orders.
1t is argued that the money Is
collected from the same public. But
this is not altogether true, because
only % States have sales and use
taxes and only IL of these States
apply their taxes to Army and Navy
contracts. Incidentally, only eight
States, because of their geographical
location or industrial resources. get
the major share of the defense ex-
penditures, and they are in a sense
able to profteer at the expense Of
the rest of the country.
These same States are enjoying
. boom because Of the indirect fac
tors involved in war expenditures
such as increased population, in
creased use of real estate and a
stimulated volume OF commercial
transactions.
The potentialities Of the situation
are numerous. II State can tax
War and Navy contracts per cent.
1t can tax or 10 per cent or any
other amount. Municipalities can
also add their layer Of taxes, too.
Counties and other taxing units can
do likewise.
The argument is made with some
plausibility that the States are los
ing other tax revenues due to the
fact that the main business Of the
hour Is defense business. But most
Of the big States are doing we'll
financially irrespective Of defense
tax revenues and the proposed legis-
lation looks rather toward q stop
ping OF the profiteering that may
result in the future than to the
subtraction Of any revenues that
already have been collected.
The Treasury Department con-
eedes that State and local revenues
are showing an Improvement but
points out that many Of them have
IN the past had prolonged deficits.
The Treasury suggests that the
States may be able to improve their
credit standing and thus be "in q
better condition to meet the stresses
of the post-defense era"
Winning War First Job.
This sort of reasoning meets with
no sympathetic reception at the
War and Navy Departments, where
the Army and Navy officers say the
important Job Of the moment is to
concentrate on winning the war and
spending the sums needed to win the
war without including subsidies for
after -the-war social or economic
conditions.
The House Rules Committee has
before it the proposed legislation to
eliminate State taxes but thus far
the Treasury has succeeded in keep
ing the bill from being passed.
Meanwhile Army and Navy officers
say they are being harassed by the
problems Of local contractors who
say there Is no end to the litigation
and disputes into which these con-
tractors and subcontractors are
being plunged and that, irrespective
Of the saving Of 81 SOC, 900, 900, there
are billions of dollars Of time being
consumed wastefully that ought to
be used In speeding production.
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