Evening star., 1942-05-24
By Charles G.. Ross

A pack of 20 ordinary cigarettes brings
40 cents. of which % cents goes for
taxes. If a married man has a yearly
income of $1,000 and he and his wife
drink pint of beer each and smoke a
pack of cigarettes between them a day,
Is per cent of their income will be taken
by indirect taxation. Assuming they
run up the total of their tax bill to
"a per cent of the income. A worker with
a wife and child and earning SIP a week
escapes the income tax, but If he smokes
10 cigarettes and drinks a pint Of beer
day he will pay the government IA per
cent Of his earnings in taxation.
U. S. Heading Same Way.
We are headed in this country toward
q tax revision that will cut sharply into
the larger incomes and may broaden
the tax base to an extent not far from
the British. If the base is not materially
broadened, the alternative may be q
general sales tax. AL sorts Of proposals
are under consideration.
A desire to head of the sales tax was
reflected in the tentative decision Of the
House Ways and Means Committee. May
Il, to favor cut in the exemptions on
individual incomes to 81 900 for married
persons and $500 for single persons, from
the present figures, respectively, of 81 500
and $3.50. Adoption of the $500 proposal
would reduce the level of income tax
liability to figure not far from the
British $40. The final form of the tax
bill will not be known till late in the
summer.
Some idea of what is in store may be
gained from an estimate of new taxes
even when the present basic exemptions
are left unchanged; a lowering OF the
exemptions would of course increase
taxes all along the line.
Under these proposals. q single person
with no dependents having an income Of
$1,000 would pay $l,023 instead Of $483
as at present; on $4,000, the tax would
be increased to $2,72o. from t1,4e3; on
$25 900, to $lo.41s from $7,224: on $4,000.
$27,7l5 from $20.S82 on 100000, to $69,-
625 from $53, 3,214; on $500 900 to $429 $40
from $345.e54; on 81 900 900. to $S7961o
from $733,139.
Exemptions Cut Asked.
Since these calculations we're made, the
Treasury has recommended, as an anti
inflationary device, that the $500 and
e750 exemptions be reduced to 81 200 and
$500, and the House Ways and Means
Committee, as noted, has proposed to cut
the latter figure to $500.
1t is q safe guess that Congress will
not carry out. the Presidents recon-
mendation Of fixed top limit Of SIS, 900
on income after taxes, but will continue
to go after all taxable income in the
usual way, on the graduated tax basis
The graduation now proposed by the
produce a tax-free $25 900. Under the
present law, an income Of $4,000 is suf-
hcient to turn the trick.
The American normal corporation tax
ranges from Is per cent up to "a per
cent, the latter rate being applied to
corporations earning more than $25 900.
In addition there is a surtax on corpo-
rate income amounting to per cent on
the first $25,0 900 of net income and per
cent on the remainder The Treasury
has recommended that these surtax
rates be increased to 16 per cent on the
first $25 900 of net income and 81 per
cent on the remainder.
In Great Britain, firms and COM
panies pay the full standard income of
so per cent on profits.
U. S. Corporations Have Choice.
In computing the excess profits tax,
American corporations have the choice
OF counting as an untaxed credit 95 per
cent Of their average earnings for 1886
80, or Of using the invested capital
method, under which they take . credit
of per cent of their invested capital
up to 5000 900 and 7 per cent Of the
invested capital over that amount. The
excess is subject to a tax ranging from
IS to go per cent. The Treasury would
leave the same exemptions, but increase
the rates to q range from so to rs per
cent.
British corporations pay an excess
profits tax Of 100 per cent on the excess
of current profits over the profits earned
In . standard pre-war year. 10 guard
against failure Of incentive In the face