Evening star., 1943-01-26
The Political Mill
Poy-os You-Go Income Tax Program
Looms os Congress Begins Its Study

idtlOIl, Will give bIlIs pay DDS you
go program its consideration,
along with proposals for tapping
new sources of revenue such as
a Federal sales tax, whether on
retail sales or on manufacturers
sales.
The First Income Tax.
Back in the now dim days of
income taxpaying, when the first
income tax law was placed on the
statute books in 1918 a provision
was written into the law calling
for withholding" at the source
sums sufficient TO pay the nor
NAL" income tax. 1t was, in
effect, a pay-as-you-go plan.
The language of the section of
the law calling for this withhold
ing Of money to meet the tax is
long, too long to quote here in
its entirety. 1t applied, however,
to all persons, firms, co-partner-
ships, companies, corporations,
joint stock companies or associa-
tions and insurance companies
that had control of salaries,
rents, etc, to be paid another
person. Dividends on capital
stock, the net earnings of COR
porations and joint stock COM
panies or associations-subject to
a like tax-Were exempted. In
consequence, in those days, for
example, the disbursing officers of
the Senate and House withheld
sufficient sums to pay the normal
tax on the salaries of members of
Congress.
The income taxes in the early
days of this method of taxation
were comparatively simple. Un-
married persons were given an
exemption of $4,000, and married
persons, $4,000. The normal tax
was l per cent of the net income
up to $4,000. That part above
$4,000 of net income was taxed
at 2 per cent, and there were
other increases in rates for addi-
tional income up to 6 per cent on
all income beyond 100000. Gov
ernment expenditures in those
days were a mere shadow of what
they have become in the last 10
years, or were during the last
World War.
The first income tax law which
stuck" was tackled on to the
Underwood-Simmons Tariff Act
of October 8, 1918, which became
law during the Wilson admin
istration. 1t was written in the
first instance by the present
Secretary of State Cordell Hull,
who at that time was q member
of the House. The law was
amended and revised by addi-
tional laws within the next few
years, and somewhere the with
holding tax of the original docu-
ment was lost by the wayside.
Undoubtedly had the fathers of
the first income tax law been
able to look into the future, they
would have adopted firm pay
as-you-go" program. The people
would have been accustomed to
1t from the start.
Any extreme change in the
system of tax collection Is likely
to cause difficulty, at least for a
time. Administrative officers.
as well as the taxpayers them
selves-will look with disfavor,
generally speaking on such a
change. However, there seems
no doubt that today the Con-
gress and the American people
are inclined to seek some one
way out of the straight jacket in
which the payers of taxes are
likely to find themselves now.
There are many details which
1t will be necessary to work out
If a pay-as-you-go plan is to
be adopted. 1t is not a simple
proposition. Nor will it mean
that the taxpayers are to escape
taxation. 1t will mean only that
they may escape unusual hard
ships arising from lump-sum
payments, large payments for
which too many of them are not
properly prepared, and which
may have the effect of sweeping
away In large part their savings
over long period OF years.