Evening star., 1943-08-21
Tax Plan Proposes
Credit for Increased
War Bond Buying
BY J. A. O'LEARY.

Gnelr purchase OF DOnQS mas been
worked out by prominent
member of Congress, who will
take an important part In draft
ing the new tax bill, in which the
Treasury has been aiming at a
$12 1000, 100000 goal.
Briefly. the plan is to allow tax
payers who voluntarily put up to
0l5 per cent of their income into
War bonds to deduct that amount
from their taxable income at the
end of the year, provided the money
thus exempt from taxation also is
invested in War bonds.
- If taxpayers were given this
means Of acquiring postwar re-
.serves, the sponsor of the plan said,
he would be willing to support rea-
sonable increases in the normal in
icpme tax rates, on both individuals
and corporations.
In offering this method OF induced
Isavings, as preferable to compulsory
savings, the author. who is not ready
to have his name used, agreed that
lit is bold approach" and indi-
| Gated he would not be surprised
If it incurred opposition from
tax experts.
Sees Several Benefits.
| He predicted, however, that IF we
have the nerve to do it," it would
give the Treasury the money it
| needs now. control imitation and
enable both the corporation and
the individual to build up reserves
to carry them through the postwar
| period. He anticipated that the
argument used against it would be
that Is per cent of the national
income would be escaping taxation
He said he was willing to give the
american taxpayer that advantage
II it resulted in the accumulation
Of postwar reserves.
! He declared that If the plan were
adopted, and at the same time
| economies were effected to cut Gov
! ernment spending by $4,000, ,0O0, 900
! to $4,000, 100000 year, I'VE ought to
! come pretty close to bringing into
/, the Treasury just about as much
! money as we are paying out for the
! war and for civilian government"
| In support of the idea. the law
i maker contended that with this in
. centive plan in effect, the Treasury
. no longer would have to stage cam
! paigns to sell War Bonds. He en-
! phasized, however, that under the
Misunderstanding plan, the bonds
would have to be made non-nego-
TABLE and non-transferable until
fixed date, say one year after the
war.
Would Agree to Increase.
II the administration accepted
this saving inducement plan, its
author said he would be willing to
go along on the following other
changes in the basic tax structure:
Increase the normal individual
income tax rate to 8 or 10 per cent,
with no changes in surtax rates.
Increase the normal corporation
rate from 40 to As per cent.
-. Possibly raise the excess profits
tax from 80 to 95 per cent, but keep
the present 80 per cent ceiling on
the overall tax of corporation in
cluding normal, surtax and excess
profits levies. Changes also should
be made in the law governing re-
negotiation of contracts, the law
/ maker said
If person put only 5 or 10 per
cent of his income into voluntary
bond purchases during the year, he
would be limited to that percentage
of~stax deduction for purchase of
additional bonds. but the sponsor
Of the proposal believes the oppor-
tunity to accumulate postwar re-
serves would be sufficient induce
ment to everyone who could afford
it to 60 up to the Is per cent limit
In bond purchases.
Persons Of ample means, spurred
by patriotism, could put more than
Is per cent Of their income into
bonds during the year, but this
would not enable them to deduct
more than Is per. cent from their
taxable income for further bond
i purchases, it was explained.
The man who is working on this
Misunderstanding program feels that
/ compulsory savings plan would not
be feasible at this stage of the war,
{ after the Government has gone this
far with voluntary bond-selling
: campaigns.
Even this program is not expected
to eliminate demands In both
branches Of Congress for meeting
part OF the new revenue require
ment by reduction of Government
spending. 1t would have the effect
however of simplifying the task of
tax rate-revision, by having much
Of the surplus purchasing power go
into the Treasury through the bond
buying route, and give the Treasury
greatly increased revenue now, ii
the estimates are borne out.
Renegotiation Upheld.
Meanwhile, the Navy advised Con-
eress that 1t regards as impractical
proposals for the renegotiation of
war contracts after taxes" and In
a manner to allow postwar reserves
for reconversion of plants to pro-
duction of peace time products.
In letter to Chairman Vinson of
the House Naval Affairs Committee.
K. H. Rockey, chairman of the Navy
Price Adjustment Board. also ad-
vised that in his opinion existing
tax laws were not too severe to
permit prudent management" in
many cases to accumulate adequate
postwar contingency reserves. The
letter said:
While the Price Adjustment
Board Of the Navy Department rec
ognizes that some companies will be
confronted with reconversion
problem upon the termination of the
existing emergency, the board does
not believe that the allowance OF
reconversion reserves in connection
with renegotiation offers a solution.
'The suggestion has been made
that profits after taxes, rather
than before taxes. should be the
basis of renegotiation in determin-
ing whether excessive profits have
been realized. The Price Adjust
ment Board of the Navy Depart
ment believes the proposal to be un-
S0Iin6 in y,rfprinle and as prac.