Tax Revision and Reconversion

...But if so, why not carry through these revisions at once, increasing in this way the workers take-home by 6-10 percent and bringing him, without burden to the employer, nearer to the goal: "40 for 62...

...Hut if to, where it the justification for a program of tax re-ducticn...

...In the meantime, we have realized that these criteria of a tax program are not adequate...

...One, if not Ihr important cause of the ?··¦ufusii.n in the debate, ia the dense fog which lie* over our immediate economic future...

...The adjustment of wage rates to the 40-hour week would be substantially eased, if the basie income tax rate were reduced at the same time...

...of equal, if not greater importance than social justice, is the other criterion: how far does a tax program hamper or promote full employment...

...This meant in aartieulai: no excise taxes •n necessities of wife, and "graduated" income taxes (with adequate family exemptions), ao that the rieh had to pay a higher percentage of their income (i.e., more cents per dollar) than the poor, and the poorest, with just enough to live, >v...

...Ker several year* kie held the neat or ihief Economist af the Research In.,.·.>» »f tha Osace ef Price Adminlatratrea...

...Let us hope thai, nevertheless, the grave frictione of the reconversion period will be overcome and our apprenticeship in lax polic ? will be extended far enough to launch an era of high prosperity for the United Stairs...

...We decide now also what taxes will be raised in the second half of 1946, and in this period (which ia the first half of the fiscal year 1947), the-Government deficit may easily have shrunk to prewar dimensions and prosperity might be threatened by a deficit in demand...

...indeed, an increase in the Social Security contributions is objectionable on two counts: it represent* a flat pereentual deduction from wage* and salaries without regard to the ability to pay, and (in order to strengthen tha reserve fund of social security) it "freezes" and stores away current purchasing power in times in which deflationary tendencies will become stronger and stronger...

...Neither th* reduction of the corporation surtax, nor the abolition of the excise taxes of 1943 (which are exclusively taxes on luxury Items) can be justified from these viewpoints...

...This country has not get learned lo use the instrument of tax policy for reaching the goal of full employment...

...At prasent, however, wt deal with a preliminary program designed for a relatively ahort tramitional period...

...Because that would, for a short while, increase the Federal deficit by a few billions of dollars...

...profits over the profits earned in some past period (1936-1939) in normal times would be arbitrary and might dangerously reduce private investment activities, the reaaona why it waa introduced in wartime still hold: that during time* of huge Government spending all additional profits earned are the riskie** by-produc* of thia Government spend ing, and no special "risk premium" in form of higher profits is necessary to elicit a higher volume of productive activities...

...we do not deny, of course, that in times of incipient inflation, as during a war, private consumption has to be curtailed, but not the consumption of the underfed and under clothed...

...for the actual amount the public will spend in 1946 can be estimated only with a margin of many billion dollars...

...This information may not be relished by those who hope to see the trade union movement weakened or destroyed in Ihe postwar period," Fenton said...

...Frees 1»S8 te 1943 be aervad aa Prefeaaer ef Economic Theory at the llaiversity ef Peonaylraaia...

...Excess profits earned in the fiscal year 1946 will still be the result of Government spending and should be secured for the Treasury by appropriate taxation (which, of course, would not exclude certain qualifications of the present tax in order to snake current investment sufficiently attractive...

...We face, indeed, a curious situation: on the one hand, it is almost impossible that the many millions of workers laid off in the wartime industries will find, at once, jobs in peace industries, even if the civilian demand for consumer's durables and dwelling space should expand rapidly...

...It is only this necessity which gives asemblance of justification ,o Vinson's proposal to abolish the tax on excess profits of corporations...

...That is just wishful thinking...

...In addition to the white-collar field, Fenton pointed mil that the AFL plans to welcome back to its ranks a million and a half AFL members who have been in the armed services...

...But, as contribution to the all-important task of maintaining social peace, this is tar too little...

...Anti-labor propagandists argue that since union membership dropped sharply after the last war, it should enter a tailspin now...

...it is not possible to judge any tax program without having answered that vital question...

...There are two main reasons: first, there is one tax on the Federal books which never should have been imposed at all, because it flagrantly violates the most elementary commands of Social Justice, viz., the so-called "normal" income tax of -'i percent which allows no family exemption and falls heavily on the low income earners with inadequate income to maintain a family...

...Without doubt, when we once have revised the whole Federal tax ¦yatem for normal time*, also the surtax en corporation income, lik« the eurtaa en individual incomes, will be subject to revision...

...It is for this reason that th* present writer does not seriously fear ? general deficit in demand for quite a time to come...

...T() compensate the corporations for the partial maintenance of the excess profits tax, the House proposed to reduce the corporation surtax by 4f per dollar earned...

...on the other hand, the revised Government deficit for the fiscal year, 1946, amounts still to $30,000,000,000, more than eight times as much as at any time in peace, exceeding the amount people would normally aav* from their income even in prosperous times...

...Haas Ncisaar ia well-knewa as an aatherity em eco-neaaiea...

...At present he ia a aaeatker ef the faealty ef the New Scheel of Serial Research...

...Fortunately, both Vinson's original proposal and the compromise plan accepted in the House and in the Senate Committee remove this blemish from the American tax roll: the first by eliminating the normal tax altogether, the other by allowing the family exemptions, valid for the remainder of the income tax (the so-called "surtax"), also for the normal tax...

...Vinson himself, in a statement before the Ways and Means Committee, formulated these t wo tenia tor a program of changes in taxation: "They shculd contribute to a vital and vigorous peacetime economy...

...on* asked: are the requirement* of Social Justice satisfied...

...Indeed, who haa ever heard of deflation with a $30,000,000,000 deficit...

...There it no reason to accept as the gospel truth Secretary Vinson's assertion that any tax reduction beyond $.5,000,000,000 would spell dangerous inflation...

...This is the goal stated by AFL Director of Organization Frank Fenton in a nationwide broadcast of the American Federal ionist of the Air...

...The AFL, Fenton added, extends a hearty welcome to veterans who have not before belonged to unions to join its ranks...

...Fro** I»27 Is 1»S> ».· wa* lectarer at the University ef Kiel and editor af Probien, ef World rv.iw.mi...

...Nobody would favor anyway rhe maintenance of a basic rate of 19 in normal times, which would be kept under the House proposal (10 percent would be the maximum) ; and even a moderate increase in the family exemption can he predicted for the end of the coming year...

...For though a tax on the cxette of...

...They should be fair in themselves and should, in ao far as possible, remedy present inequities," The present writer, however, is much more^doubtful than Vinson that tiie Treasury's proposals actually satisfy both tests...

...1h a similar way one can justify the further deferment of an increaae of Social Security contributions from the necessity of supporting the demand for consumables in times with a much lower Federal deficit, possibly already in the second half of 1946...

...We welcome, therefore, the decision of the House to maintain for another year the tax (the rate reduction from 96 percent to 60 percent'of excess profit* means less than usually thought, because of the overall limit of 80 percent for total corporation taxes), and regret that th* Senate Committee has not been willing to accept this decision...

...The second reason for revising taxes downward at present lies in the traditional aversion to changing the income taxation in the middle of a calendar year...

...AFL Goal Ten Million Members in Five Years Washington o.pa).—The afl an ticipates an increase in membership to 10,000,000 by 1950...

...Oa tw* continents Dr...

...But if the state of a wage truce, as we experienced it during the war, is allowed to lapse into a state of unmitigated social warfare, the costs both to the Government and the people would by far exceed a few billion dollars...

...Among his books are numbered: "The Exchange Value of Money" and "Seme Intcr-¦atianai Aspects af Ihe Husinesa Cycle...

...Only one thing is quite clear: neither our leading economists nor the Washington Administration have been able to make up their minds to answer the one vital question: whether we are threatened in the coming months with ml Int mu or deflation f And yet, since it is the hiain function of taxes to prevent inflation by rutting private spending (at the right place...

...It u certainly true, however, that, in view of the huge Federal deficit, an immediate tax reduction is-justifiable only if either required by social justice or contributing substantially to the easing of the grave friction which threatens the transition from wartime to peacetime and might discourage both, Investment and spending...

...the House took a step in the right direction only by proposing to reduce the individual income tax by 4f per dollar earned, instead of 3< in Vinson's proposals...

...uld not pay an income tax.at all...