Evening star., 1945-03-04
Hard Fucts' Forbid
Much Tax Relief
Observer Says Peace Will Bring
Little Easing of Burdens
By OUen L. Scott.

By OUen L. Scott.
Individual taxpayers who must esti-
mate their 1945 income by March is.
can know that they will pay the same
rate of tax on this income in l945 as
in 1914. That is to be true, even If the
German war should end in the weeks
just ahead.
1t is probable, too, that income earned
in 1916 will be taxed at the same rate
as income earned In 1914 and 1945. This
will be the case If the Japanese war
continues beyond the first two or three
months of 1916, as it probably will.
The resulting prospect is that income
earned in 1947 is likely to be the first
to enjoy any substantial relief from the
wartime rate of taxation. Relief at
that time is to be far less than most
taxpayers imagine, except in the case of
lower income groups
There is agreement ON those points
by Treasury and congressional experts
now busy on tax plans to be presented
to Congress after war ends.
In the case of corporations, relief for
some may come a bit earlier than in
the case of individuals This is due
to the fact that the experts are agreed
that the excess profits tax, with its rate
of 95 per cent, must come off rather
quickly after the wars end If corpora
tions subject to excess profits taxation
are to be encouraged to 60 ahead with
postwar plans. Thus, If the Japanese
war should end before midyear of 1916,
it Is possible, and even probable, that
the excess profits tax would be removed
from the 1916 income. Otherwise, the
first year for corporations to expect any
substantial relief will be 1947.
Tax planners are up against some
very hard facts. One of these facts is
that even after the German war ends,
with the Japanese war going on, there
| still will be Federal Government def
cit of above 40,00o, ,ooo,0 year. This
| hardly justifies tax reduction at that
| time. Another fact is that after both
wars end and the country has settled
back to a peacetime basis, the Federal
Government budget will be at least
SIS, 900 100000 a year. If that budget
Is to be balanced, revenues must be
more than four times their prewar
| level. The result is that tax rates in
| postwar must be high by prewar stand
ards, both because the budget is so
| much larger and because the national
income out of which that budget is to
be covered is to be smaller than at Its
inflated wartime level
In the light of those facts, the spe-
| ciflc tax plans. so far as they have
| taken shape, call for the following
changes in postwar:
Individuals will be relieved, when
| cuts do come, of the normal tax of
| 3 per cent There is agreement on that
point. Personal exemptions will re-
main the same as at present, $500 for
each individual. Surtax rates will be
| lowered somewhat, with reductions In
those rates centered on net incomes of
| under $1,000 and on incomes of above
100000, where present rates now are
very high. Only small changes can be
made in the middle income group be-
cause individuals must bear much of
the burden of postwar revenue raising
and If relief is to be given to the lower
income group, somebody must bear the
burden. The present method of cur
rent payment of taxes through with
holdingsand through estimating of cur
rent income will be continued.
Some relief, too, is to be given In
come from dividends At present, cor
poratlon income is taxed first in the
hands of the corporation. Then, when
that income is distributed, 1t is taxed
again in the hands of the individual.
There is agreement that some relief
| must be given from this situation now
that tax rates for both corporations and
individuals will have to be so high. The
exact amount and method of relief,
however, is not yet agreed upon.
1t is improbable that any change
! Will be made in early postwar wears
| that will affect the present tax on
capital gains and losses. Congress will
not go along with the proposal of Mar
! rlner Eccles, chairman of the Federal
Reserve Board for a much higher tax
on capital gains as a means of dis
| couraging imitation. Neither will the
tax be lowered.
Excise tax rates probably will not be
changed before 1947, at the earliest.
High taxes probably will be retained
IN postwar on beer, liquor and tobacco.
Many Of the wartime excises on luxury
| products will be removed.
When it comes to corporations, the
probability is that the most important
postwar relief will come through re-
moyal Tof the excess profits tax. The
end of this tax will benefit many smaller
corporations that had lacked a wartime
base that would have given them some
important exemption from the very
high excess profits tax The normal
and surtax on corporation income Is
likely to continue the first postwar year
at 40 per cent for corporations with
incomes above $4,000. After that 1t
may be lowered to IS per cent, but q
reduction greater than that is not now
in sight.
Corporations, too, are to be permitted
to write of the value of new equip
ment and new construction more rapidly
than in prewar. They probably will
be permitted, in case of losses, to carry
forward those losses over five years. The
present provision of the tax law, how
ever, that permits corporations to carry
losses back, deslucting them from earn
ings in the earlier years, is likely to
be repealed after the war.
Overall. for both individuals and
corporations, there will be some tax
relief In postwar but it will be smaller