Evening star., 1945-10-22
Tax Revenue Involved
In Price-Woge Formula
Observer Sees Unwise Decision
Hating Flow of Debt Funds
By David Laurence

By Dapid Laurence
The war has been won but the peace
has yet to be won. The average man
thinks this is something that has to do
with other nations. He scarcely realizes
that the peace has to be won inside
the United States and the major task
falls ON the average man. For the pay
ment of $275. 600 900 900 national debt
is the responsibility of the average man
in America.
To pay of that debt means that
funds must be raised to pay OF the
billions Of War Bands which the Amer.
ican people have bought. This can be
done only by collecting taxes, and taxes
cannot be raised unless businesses and
individuals make the money on which
to pay the taxes.
The whole theory Of taxation in
America Is that there must be profits.
Uncle Sam today is in many instances
an 80 per cent partner in private busi-
nesses. That is the maximum tax but
it is not unusual to see 10 per cent
tax rate applied.
U. 8. Loses by Strikes.
= This means that when there are
strikes or work stoppages, for instance,
the biggest loser Is the United States
Treasury. If a company where strike
occurs loses 81 100000 in profits, Uncle
Sam bears 100000 Of the loss and the
company 100000. II the payroll
amounts to 100000 a week, the
Treasury loses 100000 there in with
holding taxes. So it is quite conceivable
that the Treasury could lose total of
5000. 900 where the employer lost $780,
600. Union treasurers are not taxed. so
the loss in union expenses isn't relevant.
But the work stoppages account for
only small fraction of Uncle Sans
loss. Take the automobile industry, for
instance. 1t is reconverting from war
time to peacetime wage scales. The
Government is supposed to fix the price
to the purchaser. II that price Is too
high, sales will be curtailed The Gov
ernment, however, will wish to fix the
price at figure that will cover all costs,
including labor, as well as a profit. II
the Government price-fixing agency
assumes that autos can be sold on q
narrow margin of profit, it means the
Treasury must give up large slice Of
tax collections. If it assumes that nor
NAL profits shall be maintained then
the question is whether the manufac-
turer can reduce his costs.
In some industries raw materials are
the costliest items and in others it is
the labor payroll. Arbitrarily to state
that all businesses can pay a 30 per
cent increase in prewar wages without
raising prices is to express a fallacy
and one that will not give the tax COL
lector his share because the profit will
be wiped out in many instances.
Solution Suggested.
| Industry on the whole recognizes that
take home" pay should not be reduced
if it is at all possible to avoid such a
step. But an increase In the wage
cost often requires increase in the price.
If the Government disapproves such q
| price increase, a stalemate is reached
where profits are cut, tax collections are
| reduced, and no new jobs are created
for the unemployed.
One way out of the dilemma has been
presented to President Truman as q
possible solution. 1t Is that the work
ers who, through their unions, now
suggest that the work week be 40 hours
but that the same pay be given as for
| So hours Of work meet the manage
| ment argument half way by increasing
the work week to As hours. Presumably
| this would mean 50 hours pay for As
hours work. The worker would retain
the same pay but would work seven
hours less than before.
Industry would be given fve hours
more per week Of work than in prewar
days. This would, satisfy an age-old
economic principle, which is that wage
increases cannot be piled up indefinitely
especially on an article of necessity like
auto transportation, without some in.
crease in productive efficiency or output
If both wage increases and price in
creases are granted, the inf1ationary
spiral starts toward runaway prices
and panic. II output Is increased NOR,
autos can be produced for the new
wages. Management gets something
The workers get something. And aboy,
all the Treasury's tax collector get
something toward reduction of tha
huge public debt.
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