Evening star., 1947-06-16
The tert of President Truman's

| lHS LSLL VI TISSt0SJS ~"s$Ve
tar bill peto toIlo1Ds::
To the House of Representatives
I return herewith, without my ap-
proval, H. r. /, entitled: "An act te
reduce individual income tax pay.
ments."
The right kind of tax reduction
at the right time, is an objective to
which I am deeply committed. But
I have reached the conclusion that
this bill represents the wrong kind
of tax reduction, at the wrong time
1t offers dubious, i'll apportioned and
risky benefits at the expense OF a
sound tax policy and is, from the
standpoint of Government finances
unsafe. Proposals for tax reduction
must be examined in the light OF
sound and carefully related fiscal
and economic policies. Unless they
are consistent with the demands OF
such policies, they should not be
approved.
In my budget message of January
10, 1947, I said:
"As long as business, employment
and national income continue high
we should maintain tax revenues at
levels that will not only meet cur
rent expenditures, but also leave a
surplus for retirement of the public
debt. There is no justification now
for tax reduction
Developments since January dc
not warrant a change in that con-
clusion. Total employment in May
increased by a million and hall
over that in April, and the tota
number now employed is ovel
I58,000,000. The number OF unem'
ployed is now less than 1900 900
practically a peacetime minimum
Income payments to Individuals are
estimated to be at the record annua.
rate of s176, 900, 10000 Department
store sales in May were up 6 pei
cent over April, and equaled the
all-time high in dollar volume. The
number of houses begun by private
enterprise in May was the largest in
any month since VI day. Despite
many gloomy predictions, there Is
no convincing evidence that a reces-
sion is imminent.
Infiationary Pressures Continue.
Ample evidence points to the con-
tinuation of inf1ationary pressures
Tax reduction now would increase
them. If these pressures are long
continued, and if essential readjust-
ments within the price structure are
long deferred, we are likely to in
duce the very recession we seek to
avoid.
| Reductions in income tax rates are
not required now to permit neces-
sary investment and business ex-
pansion. There is no shortage OF
funds for this purpose in any wide
sector of our economy. AS matter
Of fact, the amount of liquid funds
in the hands of corporations and
individuals at the present time is
nearly 100000 100000. Under these
circumstances, tax reduction is not
now needed to provide additional
funds for business expansion.
The argument is made that the
! funds added to consumer purchas-
ing power through this tax reduc-
ton are needed to maintain employ
ment and production at maximum
levels.
1t is true, as have pointed out
many times, that the purchasing
power of large groups of our people
has been seriously reduced. We
must take every step possible to
remedy the disparity between prices
and the incomes of the rank and
file of our people, so as not to put
brakes on our continued prosperity
and lead us toward a recession. Tax
reduction as proposed in H. r. ] is
not the proper way to remedy the
current price situation and its
effect upon consumers and upon
prospective employment. Necessary
adjustments in incomes, production
and prices should be made by wise
policies and improved practices of
business and labor, not by hastily
invoking the fiscal powers of Gov
ernment on broad scale.
Realistic Fiscal Policy Needed.
The time for tax reduction will
come when general infiationary
pressures have ceased and the
structure of prices is on more
stable basis than now prevails. How
long it will take for this point to be
reached is impossible to predict
Clearly, it has not been reached
as yet. Tax reduction now would
add to-. rather than correct, NAL
adjustments in the economic
structure.
Sound fiscal policy also requires
that existing tax rates be main
tained for the present. I have always
been keenly aware of the necessity
for the utmost economy in Govern
ment and of the need for a progress
sive reduction in Government ex-
penditures to the greatest extent
possible consistent with our ma
tional interests. However, necessary