The Wilmington morning star., 1943-10-09
TREASURY'S TAX
PLAN NOT SURE
Continued From Page One)

Pearl Harbor.
So there is something missing in
Mr.. Morgenthau's explanation. He
is telling us that he is out to "con-
bat initiation" But he offers us a
program which Congress thinks too
severe. and yet his program is,
statistically, as compared with the
supposedly inflationary deficits of
the pre-war New Deal much more
inflationary.
So the citizen who reads h e
Treasury statement will ask him
self whether this program does
really do the job it is supposed to
do. Yet the citizen will be still
more perplexed when he realizes
that ENTHUSIASTICALLY - we
have his enormous initiation, yet,
in fact, the country does not suf-
fer the pernicious consequences of
initiation in the form of rising
prices.
An adequate explanation of why
this dangerous money is not now
acting dangerously would give us,
/ think. the main clue to the prob
lem of war finances. The explana-
ton is, evidently, that the Amer
lean people are not spending all
the money they are receiving. 1t
is this fact that they are not spend
ing it on which we must fix our
attention. For the central problem
of war finance is to find ways and
means of persuading the people
to continue not to spend their ex-
cess income until it is once again
economically safe for t h m to
spend it.
What are the means by which
non-spending is being induced?
First, many things cannot be
bought at all, and many others
only in limited rationed quaint
ties: in other words, we are not
spending because we cannot buy
the things we should like to spend
money on. This leads to saving
either in the form of war bonds OF
of life insurance Or unused bank
accounts. Second, we have become
conscious Of rising taxes, and the
fact that they are rising and will
continue to rise during the war
acts as powerful reminder
against loose, extravagant spend
ing, as powerful stimulant to
saving
The combined effect of CONTROL
ed and rationed goods, with con-
tinually rising taxes, has brought
home to us what theoretically we
ought to know anyway, that in
war time we must not spend free
ly. For this reason the control OF
the effects Of the initiation during
the war and for the immediate
postwar period demands that we
continue to control and t i n
goods on the one hand, and that
on the other we remain conscious
of the fact that next year taxes
will be larger than this years.
The Congressman who wish to
remove the controls of goods and
also to stabilize the tax rates will,
if they have their way, make an
economic chaos.
On the financial side it is al
most certain that our secret Weap-
on against the effects of initiation
has been that our taxes have riser
so rapidly during the war. 1t is
the rapidity of the rise, rather thar
the absolute amount of the taxes,
which has had the most far-reach
ing beneficial effect. That is the
reason why another tax bill, jack
ing up the rates still higher, is sc
very necessary and so very de
sirable.
A few figures may indicate the
real value of our by no means IN
successful war finance Take {
married man with two dependents
and net income of $4,000. In 1914
he paid S58; in the United King
dom he paid $409. But in 1943 the
American pays 1926, not counting
the postwar refund, and the Brit
on pays S755. The direct British
taxes on the same income are still
more than twice as high. But the
Americans taxes in the two years
of war have been multiplied five
and one-half times, whereas the
Briton's have been multiplied less
than twice.
The British collect more money
from a man with this income. Bu1
we have been changing his tax
paying habits much faster. This
rapid change of their taxpayins
habits has proved to be a rather
effective way of convincing people
to hold on TO their money.
The inner purpose OF the next
fiscal measure must be, therefore
to continue this pressure agains
free spending. The means fol
doing this are higher tax rates
that are visible TO the spender
plus compulsory saving in some
form or other, always backed ur
by the knowledge that as the wal
continues to draw upon our re
sources taxes will continue to rise
For in the last analysis we cannot
drain off the whole of the infla
tionary money. What we can dc
is to impound it, to freeze it, tc
make people not want to spend it
until civilian goods can again be
produced to match the money.
Finally, it should be said that
even after the armistice we cannot
for some time return to normal,
It will take long time-some