Evening star., 1949-08-09
Toxotion and Investment

can people, while earning a national In
come of a bit less than 1925 billion paid
out in q record breaking total of $54la
billions in taxes. Almost three-fourths Of
this sum, according to the Census Bureau,
went to the Federal Government, the bal
ance being collected by the States and
localities
Last years taxation, in other words, ate
up approximately rs per cent Of our in
come. Translating this into more graphic
terms, Senator Byrd has estimated that
for every $40 earned, the average Ameri-
can in 1948 had to hand over 81 to the
Federal, State and local governments. Mr..
Byrd has made the further point that II
President Truman's current spending pro-
posals are put into effect, the tax bill
ought to be 81 for every $3.50 earned.
Conceivably, $541z billion in taxation
representing an average levy Of $372 on
every man, woman and child in the coun-
try-may be quite in keeping with the idea
of an expanding national economy. But
Thomas B. McCabe, chairman of the Fed
eral Reserve Board, seems to think other
WISE At any rate, speaking for himself
rather than for the board, he has made
clear that he suspects our present tax
structure of being largely responsible for
the fact that Americans are not investing
as vigorously as they should In the private
enterprise system.
Thus, in letter addressed to the Joint
Congressional Economic Committee and to
a subcommittee of the Senate Banking and
Currency Committee, Mr.. McCabe has de-
clared that there Is reason to be concerned
over the persistent reluctance of present.
day Americans to make the kind of risk
taking investments which in the past have
resulted in the rapid development of our
resources, expanding production and a
steadily rising standard of living" The
concern is warranted, for unless there are
such investments, unless business is able
to raise money by selling common stocks
to individuals, our economy will be hard
put to expand.
In Mr.. McCabe's opinion, there is no
single and simple explanation for the cur
rent investing apathy. It is attributable
in part to the failure of business itself to
acquaint potential small investors-many
of whom know nothing about the subject
with the advantages of stock ownership
In part, too, it is attributable to such fac
tors as the tendency among numerous
companies to be too niggardly in paying
dividends. But one of the most important
reasons of all, according to Mr.. McCabe,
is that people xeem.to have lost their taste
for risk-taking, preferring to put their
money In such things rs Government
bonds, bank deposits and life insurance.
Why has this happened? As Mr.. McCabe
sees the situation, individual savings today
are tremendous, but Americans in general
do not want to risk their capital when
they see no prospect OF sizable return.
Accordingly, since taxation has much to DO
with this, he has proposed thorough
congressional study to consider changes
in the tax laws for the purpose of creating
investment incentives. He has suggested
for example, that 1t might be good thing
to lower Federal taxes in the upper income
brackets and modify the practice of taxing
both corporation earnings and the divi-
dends paid out of those earnings.
In view of the. administrators fiscal
policy and widespread public support for
Federal spending programs, Mr.. McCabe's
ideas may be coolly received. 1t can hardly
be doubted, however, that he is right In
declaring that high tax rates initiate
against investment incentives. Certainly,
when the average American Is obliged to
pay 81 In taxation out OF every $40 earned,
he is not likely to be enthusiastic about
engaging in the type of risk-taking that
has been indispensable to the growth of
our free-enterprise economy.