Evening star., 1948-02-03
Republicans in Senate
Must Win Democrats
To Insure Tax Slash
Trumon Held Blocking
Will of Nation, But Party
Conservatives Have Key
Rv David Laurence

By David Laurence
Five times within the last several
months, the House of Representa-
tives has demanded tax reduction.
Every time there has been a sub
stantial majority. On the last three
occasions, the vote has been In ex-
cess of two thirds.
In other countries with q parlia-
mentsry system of government this
would have meant the fulfillment
of the will of the people as expressed
by the national legislative body.
: In America, however, the Chief
j. Executive has a veto stronger than
in any other democracy. 1t Is
stronger than q two-thirds vote Of
the House of Representatives and
stronger than a majority in the
Senate even though the majority
: falls short Of two-thirds by only
one vote.
Obviously tax revision for 1s4S
depends on what the Senate will
do. The House bill win not COM
mand a two-thirds vote over the
expected veto, so the Republican
leaders who are sponsoring tax re-
vision must write a bill that is palat-
able to enough Democrats to make
the necessary two-thirds.
Chief Bone of Contention.
The chief bone of contention is
the possible loss of revenue due
to tax reduction. On this there
are no accurate figures. Indeed, the
experience after World War I
showed that when taxes were re-
duced revenues did not fall off but
actually increased as the economic
situation improved.
1t is,apparent that such reductions
as have been made since World War
II ended have not been accompanied
by loss in revenue to the Treasury.
Corporation taxes, for instance, are
providing larger receipts than dur
Ing the war years when the excess
profits taxes were in e1ect. Repeal
of those taxes has not resulted in
o loss of revenue.
Those who argue that there will
be substantial losses are either as
Stunning q business recession or are
taking it for granted that, even with
economic conditions unchanged, q
lower tax rate means lower revenue
receipts when the exact opposite Is
true.
To the extent that high taxes are
q restraint and burden on the VOL
ume Of individual transactions in
the country, every piece of tax re-
lief tends to increase business
activity and thus to augment
revenues.
The lower the tax rate, the higher
the receipts, and the higher the tax
rate, the lower the receipts-this
principle as to tax collections Is
Just as true as 1t is with respect to
prices in normal times. High prices
often bring fewer sales while re-
duction in prices often bring an in
creased number Of sales.
Tax reduction operates as an in
centive to business, and in the year
194s could conceivably prevent the
much talked of recession altogether.
The effect of tax reduction on the
economic system cannot be measured
by the superficial yardsticks used by
the demagogues who take one look
at the rates or percentages and see
benefts;to the higher income ebrack-
cts and totally ignore the overall
effects of changes in tax rates.
Will Avoid Wsse Increases.
This time the biggest single effect
will be to avoid q wave Of wage in
creases. Many q person in the lower
income brackets will receive more
benefit through tax, reduction than
through any increase in the pay
envelope. One reason for this Is
that the tax reduction is uniform
and affects everybody whereas wage
changes do not affect all workers.
Indeed, in respect to Federal, State,
and municipal employees, school,
teachers and white collar workers,
as we'll as unionized workers whose
pay contracts are not likely to be
reopened or cannot be reopened dur
ing 1913, the tax reduction Will be
a distinct money bonus far In ex-
cess of the $40 apiece offered by
President Truman.
Another important effect OF the
tax reduction is to assure con-
tinuance of employment for many
millions of workers employed In
small businesses or marginal busi-
nesses which find 1t hard TO get
capital. The investor class has been
practically stopped from investing
funds because the high wartime tax
rates have eaten up all surplus Or
dinsrily used for investment.
The Socialists and Communists,
aided and abetted by the radical
Democrats in Congress, want this
situation to continue so that state
capitalism will be introduced, with
the Government furnishing the capi-
tai and, of course, controlling the
businesses by selecting executives
and management politically friendly
to the existing administration.
If America wants to avoid state
socialism and state capitalism, some
incentive must be provided for the
investor class which saves its money
and buys stocks in companies with
successful earnings records. Many OF
the Democrats who are voting for
q revival of the excess profits tax
do not really believe in 1t and know
it will not be adopted, because such
q tax imposed now-as supported
by the American Communist Party
lin its Platforms only q means OF
sabotaging our economic system and
forcing a chaotic change to state
capitalism.
The House has q two-thirdS vote
ready to override veto but the Re-