Milford chronicle., 1948-02-27
THE COMMITTEE for Economic Devel-

THE COMMITTEE for Economic Devel-
Opment, non-partisan and nOn-proft or
ganization which engages recognized econO-
mists to study and report on problems of top
national Importance, has proposed tax pro-
gram for "nineteen-fifty-X" which is based
on the proposition that more than tax re-
dnctiOn is needed-We must also have tax
reform. The general Objectiyes of the pro-
gram are four in number. First, it must
yield the required revenue, a consideration
which caused the economists to foregO many
recommendations that would have been ap-
prOpriate had revenue requirements been
lower. Second, the program should avoid
seriously repressive effects on incentives to
effort and investment. Third, there should
be fair and reasonable degree of progress
sion In the tax burden. Fourth, the program
should be equitable in its treatment of per-
sons in similar economic circumstances.
At present, the three principal sources Of
Federal revenue are the. individual income
tax, the corporate profits tax and excise
taxes. of these, the first is by far the most
important, both from the point of view Of
revenue produced and influence on the indi-
vidual. The rate now ranges from 19 per
cent on the first $4,000 of taxable income to
nearly 81 per cent on incomes in excess of
100000. The SO per cent point is reached
at little more than $4,000. But, as the
Committee observes, these averages are mis-
leading, for incentives to productive effort
and risk-taking are affected largely by the
marginal rates of income tax rather than the
average rates of taxes" To give a simple
Illustration a person with a $4,000 income
pays at a tax rate of 4S per cent But if he
earns another $1,000 he will have to pay
tax of S684 on (which makes his marginal
rate Of tax nearly 70 per cent. And this mar
sc rfc
The influence of taxation on incentive is
obvious. It involves a balancing of the adj
vantages of more income on the one side
against the advantages of greater safely or
less effort on the other. When tax rates be-
come so high that it doesn't seem worth while
to work, the effect upon the economy is felt
everywhere.
No one knows just at what point tax rates
have serious adverse effect on Individual
incentive. The Committee believes there is
"a psychological breaking point of so per
cent the point where the Individual real
ICES that the government is getting more out
OF his efforts than he can keep for himself.
1T therefore advocates that rates be reduced
so that bracket rate of so per cent will be
reached at the 100000 level of taxable in
come. The rate would continue to progress
to q top OF 77.5 per cent at 81, 100000
The benefits to low and middle bracket
taxpayers would be very substantial. A mar
Tled couple with two dependents and $4,000
Of net income now pays S589-the Commit
tee proposal would cut it to 1915. The same
couple with $4,000 now pays S1,862-and
That would be reduced to 81, ,16O. The Com
mlttee further recommends that married
people in all states should be allowed to di-
vide their income for tax purposes, lust As
they can now do in states which have a COM
munity property law.
The Committees findings on the complex
subject OF corporation taxes pretty well par
allel It's income tax recommendations. High
corporation taxes-Which it should be re-
membered, are paid in part BY consumer IN
the form of higher prices, as well as directly
oy stockholders-can be serious deterrent
20 industrial expansion and, thus to sustain
ed hlgn employment The present standard