Evening star., 1955-03-01
Tax Cut Urged by KeyserIing
To Stimulate Buying Power
As Senators Prepare to Vote
Committee Held
Likely to Reject Any
Kind of Reduction
By jones Y. Newton

Senate Democrats today made
o last-ditch effort to save the
provision for a $40 per person
income tax cut. plan which
seems headed for defeat in the
Senate Finance Committee.
The Democrats produced a
witness. Leon H. Keyserling. chief
economic adviser to former Pres
ident Truman. who went all out
for an income tax cut as a
means of stimulating consumer
buying power.
Mr.. Keyserling, called before
the committee to anSweI strong
assault on the tax cut by Treas
ury Secretary Humphrey. said
income tax reduction would help
give the Nations economy a
needed boost and hence lead in
the end to larger revenue yield
to the Government.
Rejection Appears Certain.
Despite Mr.. Keyserling's plea,
1t seemed certain the committee
later today would strike from
the bill passed by the House the
provision for the $40 cut to be
effective next January. 1t seemed
likely also the group would reject
compromise proposals.
It was also considered certain
that committee rejection would
be followed by an attempt to re-
vive the income tax cut plan
when the bill reaches the Senate
floor later this week.
Senate Republican Leader
Knowland. told reporters st the
White House, meanwhile, that he
would not be surprised" if Sec
retary Humphrey recommends Il
presidential veto of the tax bill
if the Senate should approve the
$40 reduction.
Rules Out Compromise.
After he and other Republican
congressional leaders conferred
with President Eisenhower, Sem
ator Knowland said he saw no
room for a compromise on tax
reduction.
The $40 provision is attached
to measures requested by the ad-
ministration extending present
high rates of corporation and
certain excise taxes for a year
beyond April /, when the rates
otherwise would drop. There is
no dispute in the Finance Com
mittee over the need for extend
ing those tax rates.
Mr.. Keyserling said admins
tration fiscal policies were still
designed to combat imitation, the
real threat of which died in 1851.
He argued that the real danger
now is deflation. This. he added,
was represented by a current $50
billion deficit in national output
of goods and services and by ris-
ing unemployment. which he
said, might reach 5 million by
the end of the year. He placed
cur ent unemployment at 4
million, allowing for persons en-
ployed part-time.
Wrong Approach, George Says.
Senator George, Democrat, of
Georgia said he agreed with Mr..
Keyserling'S basic philosophy
that the economy needs boost"
But he said. the $20-per-person
tax cut made so far in advance
of the effective date. was the
wrong approach.
Il will not support the
House BILL" Senator George said,
because I can't see how it
would do any good and 1 fear it
might have an unfavorable
psychological effect"
THE tax policy which best
promotes economic stability and
growth will also be best from
the viewpoint of revenue YIELD"
Mr.. Keyserling argued, because
the bigger the pie of our total
national output, the bigger will
be the revenue yield represented
by a tax slice of any given per-
centage size, and the better will
the economy be able to stand a
tax slice of that size"
The witness admitted that
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