Evening star., 1947-01-19

taxes would mot only produce larg-
er revenues, but at the same time
establish industry and trade on a
healthier basis throughout the coun-
try" The question that cannot be
positively answered is whether
business would have expanded had
the higher rates been maintained.
Present-day tax reducers, how
ever, are ahead of Secretary Mellon.
When he advocated the original
Mellon plan in November, 1928, he
was able to say that fiscal years 1922
and 1928 had each ended with a sur
plus Of about s3lo,0Oo,0oo over ma
tional expenditures of about $780,
100000, which included a fixed
charge of more than $500, ,o00, 900
into a statutory sinking fund.
Truman Predicted Deficit.
In contrast with this favorable
financial situation, President Tru-
man, in his recent budget message
predicted a deficit of $2,293, 900 900
for the current fiscal year and sur
plus of only $202, ,0O0, 900 for the year
beginning July l If wartime excise
taxes are not retained and the
postal deficiency not made up by
higher postal rates. The actual
deficit for the year ending last June
80 was $40, ,676, ,O00,0 900.
None of'these present-day figures
includes statutory debt retirement
from sinking fund. President
Roosevelt ignored the sinking fund
when his relief and other expendi-
lures made debt retirement impos-
sible. To get comparable figure to-
day to the $500,000, 900 sinking fund
requirement in the '20s, when the
national debt was around $22,000,-
100000, the law would have to re-
quire an annual retirement of at
least 5000 900 900, now that the
debt is around $260,O00, 100000. II
the older practice were followed,
payments into this fund would
come from current revenue and the
yearly total would not be regarded
as surplus of receipts over expen-
ditures.
There were really several Mellon
tax plans" The most comprehensive
was in 1924, which emerged from
Congress as a compromise between
different plans offered by
the Treasury Secretary and Repre-
sentative Garner Of Texas and the
elder Senator La Toilette of Wis
consin. This raised exemptions in
the lower brackets, reduced the nor
NAL rate of taxation, gave Is per
cent relief on earned income" retro
active to 1928 and slightly reduced
the surtaxes in the higher brackets.
1t also provided for publicity of in
come taxes paid. The 1926 act gave
further reductions in the normal tax
and surtaxes and the estate tax.
This policy was continued in the
acts of 1928 and 1929.
Mellon Plan Favored Rich.
The same fight over rates is shap-
ing up now as went on between
Democrats and Republicans in the
1920s. In mis- budget message oppos-
ing tax reductions this year or next,
President Truman said:
Under the wartime tax system,
millions Of taxpayers with small in
comes are called upon to pay high
taxes. When the time comes for
taxes to be reduced, these taxpay-
ers will have high priority among
the claimants for tax relief"
The original Mellon plan would
have given reductions of Is per
cent to persons with taxable in
comes of less than $4,000 and up
to 80 per cent to those with such
incomes of 100000 and over. The
Garner plan would have given a
go per cent reduction to those with
taxable incomes under $4,000 and
only II per cent to those with in
comes up to 100000. The Garner
plan was adopted substantially by
the House and rewritten in the
Senate, where the Republican pro-
gressives under the leadership of
the elder La Toilette held the bal
ance of power.
President Coolidge and Secretary
Mellon were dissatisfied with the
new law. In summary the act re-
tanned the 121a per cent corpora
tion tax of the 1921 law; normal
tax on individual income, which
had been 8 per cent a per cent
on the first $4,000 was cut to- 6
per cent q per cent on the first
$4,000, 4 per cent on the next
$4,000; surtaXes began at $4,000
instead of $1,000. rising to 40 per
cent on increments of more than
$500,000 The 1921 maximum sur
tax had been so per cent on amounts