Evening star., 1947-09-22
Tax Cut Hopes Raised
By Treasury Approval
OF Split Salary Plan
BY Joy G. Hayden
AL a, 80.

Vo"" Amssseon Newspaper Alliance
The prospect for income-tax re-
duction applicable next January l.
either approved by President Tru-
man or passed over his veto, was
greatly enhanced when the Treasury
Department Friday declared in favor
OF permitting all husbands and wives
split salary income for tax purposes.
This Recommendation makes its
virtually certain that community
property amendment will be writ
ten into the next tax reduction bill
passed by Congress. with the effect
both OF making a veto more difficult
and adding votes to override a veto.
The purpose of the Treasury in
urging that the community property
principle be extended to all married
couples was to avert a rush of States
TO adopt this system for themselves.
State Laws Held Valid.
A few days earlier, Bureau of
Internal Revenue lawyers had de-
knowledged that community prop
erty laws passed this year by four
States - Pennsylvania, Michigan,
Nebraska and Oregon-were per-
fectly valid. The effect of that
ruling was loss of approximately
s100,000,000 in taxes otherwise pay
able on income during the last half
OF this year and double that amount
for 1948 if the discrimination is
maintained that long. In all, 13
States now have adopted the COM
munity property system.
A proposal by Senator Mcclellan,
Democrat, of Arkansas, to permit
all husbands and wives the COM
munity property privilege, failed of
inclusion in this years tax bill by
the close vote of So to 40, despite
opposition by both Democratic and
Republican leaders. Just before the
vote, Senator Millikin, in charge
OF the tax bill, promised that a
community property proposal would
be placed at the head of the list
OF tax changes to be considered
next year. And now, support by
the Treasury of this plan should
materially increase the Democratic
vote in favor of it.
Higher Salaried Group Aided.
-, But also, II the community prop
'erty amendment is adopted it,
should mean sharp revision of the
Republican tax reduction plan as
applied to the higher income brack-
cts. The plan is beneficial chiefly
to families whose income is con-
fined mainly to the husbands SAL
.ary. 1t holds simply that this
salary belongs equally to the wife
and half OF 1t may be reported by
her for tax purposes. The effect of
this Is to reduce tax liability on all
salaries Of $3,400 or more.
A circular prepared for informa-
ton OF Michigan taxpayers shows
that division of a s3,4OO salary
would reduce the tax liability only
from 1897 to $396-a saving of ST.
But division of a $4,000 salary re-
duces the tax from $2,O23.50 to ST.
596, a saving of $427.50, or about q
per cent. Division of the $4,000
salary would save s1,771.75 in tax, a
reduction of % per cent from the
comparable non-community prop
srty liability Of $6,141.75.
1t is important to point out, how
ever, that this change corrects pre-
vious glaring discrimination against
persons dependent on salary in
come. Families receiving large in
come from investments long have
been able to reduce tax liability by
various devices, accepted by the
Treasury, such as family trusts or
partnerships, gifts, etc.
Tax Increased for Some.
And for Michigan families in
which both husband and wife pre-
viously had large separate incomes,
the overall tax may be increased.
For example, a wife with $4,000 of
income from rentals, now must
claim half of her husbands $4,000
salary, pushing the wife up to the
$4,000 income bracket and more
than multiplying what the husband
saves by reporting only half of his
salary.
The logical assumption is that the
STA, ,000, 900, which the Treasury says
1t would lose annually by extending
community property to all married
couples, will be Offset in the Repub-
lican bill by reducing the 10 to 20
per cent reduction proposed for per-
sons with income in excess of So 400
q year.
And since Mr.. Truman's own Sec
reary of the Treasury now advocates
a community property tax reduction
for persons in high salary brackets,
1t would seem to be difficult to main
tain the veto excuse that Congress
was too good to big salary earners.