The Fight Over Taxes:
ECKARDT, W. V.
More will be heard on the Democratic proposal to boost consumer income The Fight Over Taxes By W. V. Eckardt WASHINGTON, D.C. WITH MORE vehement certitude than he ever mustered against...
...It is a matter of record that President Eisenhower himself flatly promised a tax reduction in time to cheer the voters on their way to next year's polls...
...Nobody outside their discreet profession—including, he claims, Secretary Humphrey—seems to have discovered the windfall which Section 462 of the new law opens up to Big Business until Congressman Zelenko (D.-N.Y...
...In contrast to practically all educators...
...For Keyserling and the Democrats who were guided by his economic thinking under President Truman, the magic word is not "accrual" but "consumer purchasing power...
...McGee fails to convince Congress, the electorate is supposed to believe that Ike pushed hard to relieve the desperate classroom shortage, even if the final bill looks much more like the one Lister Hill (D.-Ala...
...The way the provision is worded, this can go on from here to eternity unless someone changes the law, as a red-faced Mr...
...The President, it seems, wasn't joking when he said on signing his 929-page Tax Act last year: "Boy, there's a lot in there for lawyers...
...what they want to know is how to raise the money to build them...
...Only $66.6 million a year is to be paid out of Federal income taxes and that only to school districts which can pass a rigid test of need...
...The same fate, Democrats fear, may befall the highway bill introduced ahead of Ike's by Senator Albert Gore (D.-Tenn...
...The accountants call it "double deduction...
...More than half of a representative group of companies recently polled do not want to write off two-thirds of the cost of a new machine in half of its estimated life, even though paying more taxes now reaps greater profits later...
...And only closer reading reveals that the Federal Treasury, under this proposal, wouldn't really spend a nickel...
...The magic word which opens doors appears to be "accrual...
...State governments, of course, knew all along that there was a desperate need for improved highways...
...New investments in plant and equipment have been steadily declining, they answer...
...It means that a business can subtract from taxable income not only this year's business expenses, but next year's as well...
...Humphrey by states which can match the loan on a 50-50 basis and promise to repay with interest...
...Eisenhower's well-advertised highway program is even more impressive at first glance...
...A year later, it dropped to $27 billion...
...A "reasonable interest rate," the White House indicated, would be about 3-1/8 per cent...
...Their chief economic pundit, Leon H. Key-serling, estimates that the Administration's "penny-wise and pound-foolish" budget-balancing policy has already cost us $30 billion in needed output of goods and services...
...It is only a 2-per-cent saving for the $25,000-a-year family, but there aren't very many of them...
...The Republican tax remedy didn't stop the decline...
...A slight increase in Federal expenditures combined with increased consumer purchasing power, Democrats argue, will increase the national output and thus offers a far more painless way to balance the Federal budget...
...Again, Secretary Humphrey need have no fear of depleting his Treasury...
...told the House about it recently...
...would cost $11 billion in interest alone...
...Against Ike's $101 billion, Gore would spend a mere $1.6 billion a year for five years...
...Now his administration proudly boasts of advocating a $7-billion expenditure for school construction...
...In other words, instead of helping our school children, Uncle Sam would make money on their plight...
...Twenty dollars a person is not much, to be sure, but it happens to be 33 per cent of the tax a family of four earning $4,000 a year must now pay...
...But even more significant is the discovery that, of those companies which avail themselves of the new blessing, two-thirds make it clear that the fast write-off is not affecting their plans for capital spending...
...Only somewhat increased Federal expenditures for the things "we must afford," such as highways and schools, "can substitute for a sword hanging above our heads the great non-secret weapon of our productive genius and capacity for progress...
...In the first quarter of this year, new investment in plant and equipment, which means jobs and earnings, is officially estimated as dropping to $26 billion...
...A man with a wife and two children who earned $5,000 in dividends from corporation stock pays only $328...
...But Mr...
...Cushman McGee...
...The Democrats do their best to explain these technicalities to the public, but it is understandable that they have more faith in the public-relations value of a simple $20 tax cut...
...Sam merely beat him to the punch with his own proposal...
...Humphrey now promises to propose...
...All the remaining billions are to be raised by state school-building agencies, especially set up for the purpose of floating bonds at "reasonable rates of interest...
...Smart corporation lawyers are finding, indeed, that industry has its rewards...
...It also brought out some rather pertinent facts about last year's "enormous" Republican tax revision...
...For if stockholders see a decline in apparent profits it might scare them away...
...proposed earlier...
...As quite a few people now struggling with their income-tax returns are discovering, there is little in it for the ordinary citizen...
...Another $5 billion would be raised by taxing service stations and motels along the proposed 40,000 miles of interstate highways...
...The Administration's school-construction program, however, is painfully specific on the subject of state financing...
...At the end of 1953, the annual rate stood at about $29 billion...
...WITH MORE vehement certitude than he ever mustered against fellow-Republicans McCarthy or Knowland, President Eisenhower denounced as "the height of fiscal irresponsibility" the Democratic proposal to reduce the tax bill of every American by $20...
...He greeted the defeat of the proposal in the Senate Finance Committee by announcing that he was "highly gratified" and "naturally delighted...
...Some weeks ago, for instance, Commissioner of Education Samuel Brownell, brother of the Attorney General, didn't think there was any need for Federal assistance to the nation's schools or even to the school-lunch program...
...Sam and his party can undoubtedly be counted on to see that the President's comments find a broad audience, particularly during the 1956 election campaign...
...The House and Senate debate on the subject served to dramatize the point...
...You are supposedly getting more than $100 billion worth of highways?$101 billion, in fact...
...If Speaker Sam Rayburn, who acknowledges full responsibility for this fiscal irresponsibility, was delighted by the way the President chose to express himself, he gave no indication of it...
...Education and Welfare...
...The Treasury let it be known that it asked for the provision last year merely to facilitate book-keeping...
...Senator Hill's proposal calls for $500 million a year in Federal grants for school construction for two years, but his press conferences are rarely televised...
...To most taxpayers, a $20 saving for themselves plus another $20 each for their wives and children is nothing to be sneezed at...
...School districts which fail to peddle their bonds at the going rate and can prove they have made the effort may then avail themselves of the "reasonable rate...
...Hobby, during her testimony on the proposal...
...Twenty billion dollars of the Federal highway contribution is to be raised in bonds which, according to Senator Dennis Chavez (D.-N.M...
...A man with a wife and two children, for instance, who earned $5,000 in wages will still have to pay $420 on his income tax, come April 15...
...School-building agencies have been declared unconstitutional in at least six states and require complicated and time-consuming legislation in most others...
...The President's Education Message, in fact, is primarily a dissertation on how to float bonds...
...of the New York investment-banking outfit of Pressprich & Co., told the Senate that the Eisenhower school bill was fine and quite "workable...
...The $20 tax cut is intended to be a step in this direction...
...A proposed $1.2 billion of the advertised $7 billion may be borrowed from Mr...
...The Administration has done the same repeatedly this year when the President clamorously adopted important parts of the Democratic program...
...The states get most of their revenue from sales taxes and other means which hit low-income groups hardest...
...The price tag on Mr...
...Just when the new school buildings would go up didn't seem to interest the banking and investment experts who flanked the Secretary of Health...
...The Secretary of the Treasury also says that the loss to the Government is much less than the $5 billion which Zelenko estimates...
...Democrats have filled the Congressional Record with evidence that Secretary Humphrey's fast tax-writeoff plan is just about a flop...
...But he has the temerity to propose taking the money out of the Federal kitty instead of shoving the expense onto the states...
...And three-quarters of the money for the roads, which the President said are urgently needed to "permit speedy evacuation of target areas in case of atomic attack," is to be financed by the states...
...The current average rate on municipal bonds, according to the Dow-Jones index, is 2.42 per cent...
...It's merely un-Re-publican...
...This, he says, may well result in some 5 million unemployed by the end of this year...
...The words "in the next ten years" don't often fit the headlines...
...If Republicans counter that this is good for the economy since it will stimulate investment, the Democrats are ready with some fairly disquieting Government figures...
...they will hardly share the President's delight...
...Taxpayers might thus not have the satisfaction of seeing the Republicans balance the Federal budget, but neither would state taxes have to be increased...
...The Presidential Highway Message doesn't say...
...In tbe likely event that Mr...
...Those who do use the plan are urged by investment people to keep double books, one for the tax collector and one for the stockholders...
...But plugging loopholes in the present tax law will not remove the dangers of creeping economic stagnation, the Democrats hold...
...A modest tax saving for the little guy is by no means irresponsible, they say...
Vol. 38 • March 1955 • No. 11
