Evening star., 1948-12-21
'|nf|ationary Revolt
From Tax Rise Feared
By u. ). Chamber
by the Asseeiotsd Press

BY the Assseiatsd Press
A tax increase now might
touch of IAN inflationary re-
volt" an official of the United
States Chamber of Commerce
declared today.
Asserting that taxes already are
too high, the chambers director of
economic research, DR.. Emerson p.
Schmidt, told Senate House Eco
norlic Subcommittee:
IF Congress imposes new taxes
along with the inevitable increase in
1949 in State and local taxes, the
American people may not sit idly by" !"
The congressional group. headed
by Senator Flanders, Republican, of
Vermont, is seeking answers to the
question: Are profits too high?"
Taxes Take $50 of Income.
The Commerce Department added
Its voice to the debate yesterday in
a report which said that while profits
are higher than ever-hitting a rate
of $21, TOO, 100000 a year after taxes
in the third quarter of 1948-they
aren't as high as they sound because
the rest of the Nations economy is
operating at a record level. too.
Interest in the controversy has
been sharpened by the possibility
that President Truman might ask
Congress for third time to restore
the excess profits tax-both to in
crease Federal revenues and to dis
courage imitation by taking much of
1.-THE profit out Of price boost.
On that point, Mr.. Schmidt said
In his prepared testimony:
Objective experience in numerous
countries in the world shows that
when once the total tax-take ap-
proaches or equals Is per cent OF
the national income, the democratic
state goes into an inflationary revolt.
This seems to be an economic law.
Federal, State and local taxes
now absorb IS per cent of our in
come-the critical level. Just why
Is per cent should be the critical
level is not clear, but evidence sup
ports It" He added:
'The notion that taxes on 'busi-
ness or corporations affect only in
vestors of stockholders is not valid
and can become a dangerous de-
lusion in terms of the peoples well
fare"
Pruned Expenditures Urged.
The greatest contribution the Gov
eminent could make toward stabiliz-
ing the Nations economy and low
ering prices, he said, would be wig
orous pruning of inflated Govern
ment expenditures"
In its official magazine, Survey
of Current Business, the Commerce
Department cited these figures to
show that the Nations entire econy.
ON, as measured by national income
and production. is at Its highest rate
In history:
National income reached an esti-
mated 1924, ,000, 900 900 for the entire
year The rate in the third quar-
ter had climbed to $227, 300 ,000, 900.
Gross national product the mar
ket value of all goods and services
produceO was around ,$253 ,000, ,0O0,-
600 for the year. This exceeds even
the peak of war production, but in
cludes price rises as well as pro-
duction gains.
Profits 20 Per Cent Higher.
Profits in the July-September
quarter were 40 per cent higher than
q year ago and 6 per cent higher
than in the preceding quarter-"far
above either the prewar period or
1929"
But, the report added, the 6 per
cent increase dwindles to 8 per cent
when allowance Is made for the fact
that inventory supplies were being
used up which would cost consider
ably more to replace because OF the
anfationary movement.
The congressional committee heard
testimony yesterday that General
Motors postwar profits have failed
to keep pace with the increased vol
ume of business, and have increased
less than wages.
M. e. Coyle, GIN executive vice
president, testified that General
Motors automobile list prices, in
cluding 1949 models. have increased
IS per cent above the 1941 level, as
compared with an average increase
of 80 per cent for the rest of the
industry.
Material Prices Doubled.
At the same time, prices of some
. the raw materials have in
creased 100 per cent, he said.
Mr.. Coyle told the committee
stockholders have received IS per
cent Of earnings since the end of
the war, as compared with IS per
cent in the period Immediately
prior TO the war, even though $685.
600 900 of new capital was secured
from outside sources.
Mr.. Coyle also told the committee
that automobiles are a better buy
today than at any time in the past
Not only can the average worker
afford to buy more car with his labor
today that formerly, Mr.. Coyle told
the committee, but more people can
buy cars than ever before.
Imitation has pushed up prices Of
postwar automobiles as it has
pushed up prices of other products" F"
Mr.. Coyle told the committee. ITO
what extent has the value the GUS
toner gets for his automobile dollar
been affected from q long-term
viewpoint?"
In answering his own question,
Mr.. Coyle produced a picture of q
1929 Buick four door sedan and q
picture Of o 1S4s Chevrolet, four
door sedan. The Buick was priced
in 1929 at 81. 800, the manufacturers
list price, and the Chevrolet Is now
.-..a.nuu.u