Evening star., 1945-10-02
Tax Cut Seen Giving
Pay Hike to All in '46
Employers to Welcome Easing OF
Pressure, Says Observer
By David Laurence

Pressure, Says Observer
By David Laurence
wage increase Is in the cards for
everybody for the year 1946-only 1t
will come about through the action Of
the Congress and not the employers.
Many employers, however, will breathe
sigh of relief, for the pressure on
them to make up what Uncle Sam has
been taking out of the pay envelope has
been steady these last three years.
The proposed reduction in taxes which
Secretary of Vinson has advocated and
which Congress Is certain to pass is,
in effect, a method by which "take-
home" pay will be substantially in
creased for 100000 persons of low
incomes and, If the Republicans have
their way. all individuals will benefit
by the change in income-tax rates to
the extent of 20 per cent.
Corporations will have their excess
profits tax repealed but individual re-
cipients of dividends will continue to
pay tax on the bulk of their earnings
from corporations to the Federal Gov
ernment.
The normal tax on corporations will
remain This probably will be fixed at
about 40 per cent. So Uncle Sam will
still be 40-per-cent partner in every
American corporate enterprise regard
less of size. And as for the remaining
go per cent the Treasury will continue
|. to get large slice of that segment. too.
when it is paid out in dividends to
individuals
Business Stimulant
The purpose of the reduction Of tax
rates so far as corporations are con-
cerned is to stimulate business. increase
purchasing power and investment power
so that jobs will be created as a Ma
tion turns from war manufacturing to
making of peacetime goods.
| Already House Republican Leader
| Joseph Martin is saying the tax reduce
tions are not adequate and will not
prove sufficiently stimulating to expand
| business. The question really turns on
how much the Nations annual in
| come as whole Will be. 1t is being
/ predicted by administration folks that
a $500 000, 5000 national income is
feasible. If SO, the proposed collection
| Of s27 900, 100000 in taxes each year is
not out of line, for 1t is between 13 and
! IA per cent. Taxes have at various times
in the last decade taken far bigger
| slice out of the national income
To collect $4,000, 900 900 in Federal
taxes in peacetime is an unprecedented
feat. In no peacetime year in the past
have the tax collections from all sources
gone beyond $4,000 ,oo0, 600. During
the war the peak in collections was
s46, 500 000,0 ,00o
Nobody knows definitely what Amer
ica's national income is going to be in
1946, and most of the guesses range all
the way from 3o,000 100000 to $780,
600, 900, 900. When it is realized that the
national income reached an all-time
peacetime high of So, 400 ,0oo,0 900 in
1929 and that there really never has
been normal year since, it can be un-
derstood why the calculation can hard
ly be anything more than an estimate
based on so many variable factors that
it could as readily go to $500 600, 900 900
as it could drop to $3.50, 900 900 ,o0e with
out occasioning surprise
Capital and Savings
Certainly the Nation has acquired a
considerable amount of capital and saw
ings since the war years began. Most
of the cash which'the Federal Govern
ment paid out during the war stayed in
the United States, though purchases
abroad will account also for many bill
lions American war plants, however.
paid to American workers, for the FULL
time production, vast sums of money
borrowed by the Government from the
American people. The accumulations of
capital or savings now are available for
use in larger peacetime production
than ever before.
The fly in the ointment. of course,
is the presence of the s275 900 900 900
national debt, which is just about 10
times what it was at the close of World
War T. How can that debt be reduced
and how rapidly? A nations solvency
and its future productivity depend on
the soundneSS of its financial struc-
ture, Eventually rise in prices would
appear to be inevitable in many cate
gories. This means lower and lower
purchasing power for the dollars accu-
mulated. 1t also means considerable
hardship for persons whose incomes are
fixed or which are revised upward
slowly.
Tax collections can reach $4,000 ,0o0,-
900 but the national income will be
made up of more transactions and
higher prices than ever before and it
may be several years before the full
impact of the war on our economic
system will really be felt or severe
readjustment compelled.
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