Evening star., 1945-05-20
Tox Relief Moy Come
Reasonably Soon
But Observer Believes Rates Still
Will Be at High Levels.
By Owen L. Scott.


Will Be at High Levels.
By OUen L. Scott.
Both individuals and corporations are
likely to be given some relief from war
time taxes on income earned in 1916.
The White House is understood to be in
agreement with leaders in Congress on
that point.
How much tax relief will be possible is
to depend upon the course Of the jap
anese war. If that war should end early
In 1916, the amount of relief will be very
considerable If war should run through
the year, there may be very little tax
adjustment.
Several factors contribute to the pros
pect Of tax relief on 1946 incomes. One
is the fact that next year is an election
year and Congress will be in mood to
| please voting taxpayers. A second Is the
| fact that overtime with its premium pay
| will be ending for very large numbers Of
workers, with the result that there will
be demand to reduce the rate Of with
| holding of taxes on remaining income.
A third factor is to be the desire to en-
courage civilian industry in a period
when unemployment will be reappearing.
The prospect is that the Withholding
tax rate will be reduced at some time in
1916 from the present level of 20 per cent.
| probably to Is per cent. That is to be
true unless the Japanese war runs
throughout the year. If that war should
end early in 1916, then surtax rates on
! i,,Ii IirriI itnaN yr,sn hn raIt,Nnl
somewhat all along the line 1t is prob
able, too, in that event, that present
exemption of $500 for single persons and
| $1,000 for man and wife will be raised.
Lower income individuals will be ia
vored in tax adjustments. They are the
ones who will lose most when war jobs
end. They also have more votes than
any other group and are tax conscious
to an unusual degree because of the pres
ent high rate of withholding tax.
Corporation tax relief is to center
largely in the field of excess profits tax
alton Congress will grant measure of
tax relief to corporations on 1945 income
by permitting corporations to take an
excess profits tax postwar credit cur
rently and by permitting corporations to
cash excess profits cash refund bonds
next January /. The result will be to
give corporations that have been paying
excess profits taxes access to a large
amount of cash. To help smaller cor
porations, there will be an increase In
the specific exemption from excess
profits tax from the present $4,000 to
s25 900 effective on income earned in
1916.
Those changes are planned regardless
Of what happens in the war. In addi-
ton, even if the Japanese war does run
we'll along into 1946, it Is planned to
reduce the rate of excess profits tax
from the present 95 per cent probably
to IS per cent, effective on 1916 income
The corporation normal and surtax is
unlikely to be reduced from its present
10 per cent until 1947.
A limit on the amount of tax reduc-
ton that can occur after present wars
is limited, Of course, by the level of
Government expenditures. Even after
Government spending Is fully adjusted
to a one-war basis as it should be by
mid-1946, assuming the war runs that
long, the Federal Government budget
will be about $45,oO0 ,0oo, 900 a year. It
now is above 10000, 100000. Taxes yield
under s5o00O, 600, 900 at their existing
high level and with national income at
its present very high level.
If the Governments budget is to be
brought into balance while one war is
going on, taxes cannot be reduced. 1t
Is doubtful, however, If an effort will
be made to balance a wartime budget.
In postwar the budget will be around
s25 90 100000 compared with around
50 600, 100000 before the war. If the
postwar budget is to be balanced, income
taxes will have to remain high, although
they can be brought down somewhat
from present levels.
President Truman, much more so than
former President Roosevelt, is a believer
in what might be called conservative
policies in taxation. He does not favor
use of taxes as means of redistributing
income or of working other types Of
reform. He is on record in favor of
tax policies that will be acceptable to
businessmen as fair
| &A*
The trouble, however, Is that the
latest wars have added greatly to the
permanent cost Of Government by in
Producing more fixed expenses In the
form of high interest charges, big
veterans benefits, large expenditures for
permanent military establishment
Somebody has to pay those costs If there
ever Is to be sound structure in ma
tional finances. To pay the cost of
postwar government, even if there is no
reduction in principal of the national
debt will require tax rates on both
corporations and individuals that are
far above any that would have been
considered bearable before the war.
As a consequence, taxpayers, while
looking forward to tax relief from war
time levels, cannot look for any return
to the good old days of low taxes. Taxes
of New Deal days will seem very mod
crate compared with taxes of postwar
years.
Bone Crafts
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