Evening star., 1943-10-17
New Treasury Policy
of uxution
By ODen L. Scott.


the dollar cost of this war promises to
lead to the end of an era for the people
OF the United States. In this past era
every American could aspire to modest
fortune as the result of toll and thrift.
Now it is proposed to end all OF this
for the wars duration. The plan is to
tax heavily enough to place virtual
ceiling on income at $25 900 year. That
is wartime plan to assure that no in
dividual can get rich out of the war and
to help pay the colossal dollar cost of
the war. Yet, in peacetime there will be
continuing reasons for taxes almost as
high.
One Of these reasons will be provided
by the need for balancing budget that
Is expected to amount to more than
$4,000, 600, 900 year. The second Is to
prevent what the economists say is a
tendency toward over-saving in relation
to opportunities for investment Both
have a very real meaning for the aver
age American family.
Right now the Treasury is offering
Congress what can become a permanent
new philosophy in taxation. The Treas
ury philosophy, implied in its new tax
plan, is the one that follows:
First, impose no more than a nominal
tax on the income of any family with
family income of $4,000 or less. Next,
tax all family income above s2,50O at
stiff and sharply graduated rate so that,
in effect, no family may have a tax-free
income Of above $25 900 year Under
tax rates proposed by the Treasury, a
married man with two dependents in his
family would have to earn $255 900 in
order to retain s25 900. A very few in
dividuals earning up to 81 900 900 a year
could retain little more than $500 a
year, but to all intents and purposes a
$4,000 ceiling would be established.
At the same time it is proposed to cut
very deeply into incomes of persons
earning more than $1,000 year. For
example, the man who is earning $4,000,
If married and with two dependents,
could retain only s6,445. 1t would re-
quire 1000 salary to permit as much
as $ll 900 to be retained. To complete
the process, the Treasury wants sharp
increases in estate taxes, so that fortunes
now accumulated would be broken down
effectively.
1t is true that Congress will refuse to
go along with the Treasurys tax plans.
Yet Congress must search for revenue
sources and will in the end 60 part way
toward the Treasury goal, Furthermore,
there is every prospect that the high
wartime taxes on individual incomes will
undergo only modest downward adjust
ment after the war
The resulting outlook is this:
For the rich there is the promise of an
adjustment comparable to that which
has taken place in England during re-
cent years. 1t is to be difficult in the
future to maintain large estates, or
yachts, or numerous homes unless that
is done by eating into capital. The
prospect is far less bright that income
tax rates will be adjusted to give wealthy
persons break after this war than there
was after the last war. The idea of a
ceiling on incomes seems definitely to
have taken hold.
For the well-to-do, for the man earn
ing $4,000 to s25,o00 year there is far
less prospect than in the past that
enough can be saved to assure a modest
fortune on which to retire in comfort
and security. 1t was not uncommon in
the past for a family with $4,000 of in
come to live on 5000 and to save 5000
against rainy day. Back in 1929 the
tax on this amount of income for
family Of four was only $40 AS late as
1929 it was under $3.50. Now it is $4,000
and it is proposed that it shall be $500.
leaving barely $500 for living expenses
and savings. The opportunity to build
large reserves out of that amount of re-
tanned income is not great.
For the person of modest income, for
the man earning $4,000 year, the story
is somewhat the same. In the past this
man could hope by frugality to accumu-
late competence for his family He
paid only SO Of tax back in 1929 and
barely $50 of tax in 193e Now he pays
$3.50 and it is proposed that he shall pay
nearly $1,000 of tax, leaving him $1,000
on which to live. The amount that he
once saved now goes to the Government.
Something Of revolution in the out
look for the average American is writ
ten into the problem of war finance.
Not only is the prospect for saving
much reduced so far as the individual
family is concerned-as contrasted with
the mass saving for the whole popula-
tion-but the return on savings is much
smaller than in years past. Where a
family with 100000 of savings could ex-
pect return of $4,000 on safe invest
ment in the old days, it now is lucky to
be assured of $4,000 OF income.
Results of this developing situation are
many. Fewer individuals can accumu-
late capital out of which to 60 into busi-
ness for themselves. Fewer can at
tain independence through saving. More
are forced to look to Government,
through social security, for protection in
old age. Government tends to move in
to take risks and to direct investments
that once were a province of the indi-
vidual enterpriser.
1t is in this field of income distribu-
ton that the great change Is being
wrought by the war. War costs are so
high that there appears to be little that
can be done about it. People are left to
adjust themselves to a different sort of
world.
A. E.. .G kA:~sx: