Evening star., 1947-07-18
Text of Second Tax Cut Veto

| ext OF OeCOn(
I return herewith, without my ap-
proval, H. r. 1850, entitled "An Act
to reduce individual income tax
payments"
The provisions of this bill are
identical with those of H. r. ex-
cept that this bill would not become
effective until January /, 194S,
whereas H r. + would have become
effective on July /, 1947.
returned H. r. to the House OF
Representatives on June 16, 1947.
without my approval. stating that
it represented the wrong kind OF
tax reduction at the wrong time.
This is still the wrong kind of tax
reduction and this is still the wrong
time to provide for tax reduction.
The present bill is not consistent
with sound fiscal policy. AS I have
stated to the Congress on previous
occasions, while business, employ
ment, and national income continue
high, we should maintain tax reve-
nues at levels that will meet current
expenditures and also leave sur
plus for retirement of the public
debt. No other course is consistent
with realistic and conservative man.
agement of the fiscal affairs of the
Government.
Debt Cut Now or Never.
Since H. r. / was disapproved,
there has been no lessening of the
need to make substantial payments
on the public debt. Maintaining
the integrity of this debt is one of
the primary obligations of the Gov
ernment. repeat that, if we do not
reduce the public debt by substantial
amounts during a prosperous period
such as the present, there is little
prospect of material reduction at
any time.
I also pointed out in my message
on H. A l that necessary Govern
ment expenditures are still high.
We are meeting tremendous obliga-
tions growing out of the war. The
national defense establishment still
requires large sums. Our RESPONSE
bilities for international rehabilita-
ton have an important bearing on
our efforts to secure lasting peace.
The recent refusal Of certain ma
tions to join in common endeavors
to establish conditions of world sta
bility increases the difficulty of our
task and exposes us to greater risk
Until we are better able to estimate
the cost of our investment in world
peace and collective security, it is
unwise to make so large a cut in our
Governments future income that
our ability to meet our needs would
be impaired.
AS far as can be determined at
present. it Is not likely that expend-
itures In the fiscal year 1948 will
be substantially less than I esti-
mated in the January budget mes
sage. A careful appraisal of the out
look for both receipts and expendi-
lures indicates that it is not possible,
under present conditions, to make a
major tax reduction and an ade-
quate payment on the public debt
at the same time.
Imitation Contributed To.
Not only does this bill represent
an unsound fiscal policy, but it
would also contribute to infiationary
pressures which we have made pro-
gress in combating but, have by no
means overcome AS I stated in the
message on H. r. /, there Is no justi-
fication for tax reduction so long as
price stability at sound levels has
not been secured and business, en-
ployment, and national income con-
tinue at peak levels.
Since the veto of H. R. /, income
payments to individuals have con-
tinued to rise, and the general level
of business activity is establishing
new high records. The total num-
ber of civilians gainfully employed
has also continued to rise. Total
employment in June increased by
/ ,725 900 over May, and the total
number now employed is over co.
900 ,000-the highest in our history.
There is still no convincing evi-
dence that a recession Is imminent.
Tax reduction now would delay
the readjustments of prices and
wages necessary to maintain this
high prosperity. 1t would lead to
an even higher level of prices for
consumer goods. 1t would increase
| the DANGER of recession
For all these reasons, which are
more compelling now than they were
one month ago. regard the present
bill as unsound and unsafe.
| I also regard it as unfair.
Low Income Groups Sighted.
In my message of disapproval of
June Is, J. pointed out that H. r. /
was inequitable in that it would
reduce taxes in the high income
brackets to grossly dispropor-
tionate extent as compared with the
reduction in the low-income brack-
cts. I stated that a good tax re-
duction bill should give greater
proportion of relief to low-income
groups.
Since the present bill is identical
except as to its effective date, 1t is,
of course, subject to the same criti-
CiSm.
It is important to remember
that, during the war, Federal in
come taxes were extended. to mil
lions of 1ow-income families who
had never before paid them. and
taxes on moderate incomes were
increased by a far greater proper
ton than those on higher incomes
The amount by which present in
come taxes exceed those payable
under the Revenue Act of 1910 rep
resents a special wartime tax
burden.
When the time comes to lessen
this wartime tax burden, 1t Is cnly
J.