'Nay' on the Surtax

...From the window of our pressurized coach we see hundreds of derricks built to extract the shelf's rich reserves of oil and gas In the distance, a continuous belt carries freight cars to and from Europe Now the farms are coming into view Each one is fenced in by a light nylon grid and stretches for miles and miles, like the Iowa cornfields But the harvest is a fish called hake More nutritious and cheaper than corn, it is ground up, bones and all, to provide the entire population of the earth with a protein-inch meal mixture costing a penny per person per day...

...Nevertheless, it is only fair to concede that this tax program is probably as nearly equitable as this particular Congress is at all likely to enact In sum, when the constraints of Congressional mood, Vietnam policy, and Federal Reserve conservatism are noted, the President's case for his tax program is strong on technical economic grounds, though somewhat short of overwhelming...

...The year is 2067 We are leaving on the Lisbon Express, the fish-shaped tram that skims along an underwater monorail 100 feet above the condimental shelf, then drops as much as 10,000 feet to the ocean floor...

...Second question Is the new tax program as neutral in its impact upon rich and poor, business and individual taxpayers, as the wit of the Treasury can devise7 At a quick glance it seems to be Corporate and individual taxpayers would simply add 10 per cent to their tax payments As between businessmen and consumers, rich man and poor man, what could be fairer7 Indeed, on the face of it the only discrimination is against corporations, which are asked to pay the surcharge retroactively to July 1 and to adjust the schedule of the quarterly payments in such a manner that would slightly increase their tax liabilities Naturally, this was the very issue raised by the National Association of Manufacturers m the course of testimony generally favorable to a tax increase But as ever the appearances deceive The fact is that for several years corporate profits have been swollen out of the proceeds of a war boom In the midst of a national pretense of business as usual, the argument for an excess profits tax has lost by default Yet at the least equity demands that the corporations pay a good deal more than the same 10 per cent asked of individuals This is a pot that was not made (but should have been) by George Meany in his testimony in favor of tax increases directed more substantially to the affluent...

...A final consideration In 1968 the President will run for re-election either as a war leader or as a Man of Peace who has succeeded at last in de-escalating, if not ending, the Asian war Recent events make the first posture by far the more probable And passing a war tax encourages an increasingly hawkish President Failure to do so offers a chance, however slight, that he will think again Politics are more important than economics and peace is a larger issue than inflation It is little short of idiotic to place technical considerations ahead of possibly catastrophic political consequences If I were a Congressional dove, I should vote against this war tax...

...All the same, I shall not add my name to the economists' pro-tax document My reasons for abstention are to be found in the wildly unnatural political effects of Congressional passage of the tax program In the sort of Congress which Robert Sandoz so eloquently denounced in these pages ("Sharing In the No rewards," NL, August 28), higher taxes amount to an additional pretext for slaughter of the pitiful remains of Great Society programs It goes without saying that in a sensible legislature, higher taxes would permit more leeway for the support of domestic action In this Congress attempts to curtail the tax increase will move in parallel with slashes in social spending...

...THINKING ALOUD 'Nay' on the Surtax By Robert Lekachman Nearly \ decade ago, when I was certainly younger and possibly more naive about the connections between taxes and politics, I wrote an article which pleaded the case tor fiscal policy as merely a neutral, technical tool of the hydraulic family When inflationary pressure manifested itself, I argued, money should be withdrawn from the economy either by raising taxes or reducing Federal spending When the economy was sluggish (as in those Eisenhower years it always seemed to be) then a prudent President and a responsible Congress pumped money into eager hands by cutting corporate and personal income taxes, raising public expenditures, or both A beautiful symmetry could characterize public policy, I alleged, if only...

...The foolishness of my youthful aspirations is extremely easy to illustrate out of the events of the 1960s Thus the investment tax credit, the Kennedy Administration's initial tax initiative of any consequence, was designed to stimulate business investment and, via its multiplier effects, national income, consumer expenditure, and total employment But it did so by increasing the size of corporate profits, expanding dividends, and consequently altering the distribution of income in favor of the prosperous...

...The Wharton econometric model at the University of Pennsylvania is predicting a sharp spurt in expansion Such respectable economists as Walter Heller and Joseph Pitchman (of the Brookings Institution) are circulating a pro-tax increase petition among university economists And the case for a tax increase is reinforced by a possible deficit in its absence of $30 billion Such a deficit will impose the pressure of large government borrowing upon money markets, tighten credit, raise interest rates and risk a repetition of the 1966 money squeeze Of course, the Federal Reserve could pump additional funds into the economy, but no one expects William Machesney Martin and his merry men actually to do so...

...My own answer is on the whole affirmative While factory output rates are still below optimum percentages of capacity and retail prices (despite a July jump explicable largely on seasonal grounds) have not been moving upward at dangerous rates, there are many portents of trouble to come Alter five months of stability, wholesale prices have started to move The techno in corporate profits has been arrested Once again, military spending is exceeding earlier estimates, though presumably by a smaller number of billions than last year's $all-billion underestimate of Vietnam costs...

...Although the errors of the past cannot be corrected, they occasionally improve present courses of action Is Lyndon Johnson, a sadder and wiser man, now meekly accepting the technical recommendations of advisers whom he so recently overruled...

...As we glide off the condimental shelf and descend to the ocean floor the water becomes much greener and colder, the heat m the coach must be turned up even on this warm summer day Since the shelf...

...The $10-bilhon tax cut of 1964, a major monument to the conversion of the politicians to the New Economics, was also worth more to some than to others For one thing, it reduced personal income tax rates from 20-91 per cent to 14-70 per cent For another, it reduced corporate profits tax rates For a third, it opened more loopholes for the affluent than it closed Again an overriding public goal, faster economic growth, involved larger benefits for the rich than for the poor...

...that its sons and brothers engaged in the conflict there shall never lack all the help, all the arms, and all the equipment essential for their mission and for their very lives " The President has defined the rules Anyone who supports the war in Vietnam should vote for higher taxes It is a game which the President has played before with defense appropriation measures Here he plays it much more disingenuously, since there is no real issue of denying necessary arms and equipment to the Armed Forces Congress has appropriated generous funds If taxes fall short, then further borrowing will fill the gap...

...Right then and there I should have scrapped the article, for the several "if ones" were quite enough to reveal the implausibility of a neutral tax policy "If only" taxpayers came to think of taxes as national policy, not as additions to then incomes (when the rates fell) or subtractions from their pleasures (when rates rose) then politicians could make their recommendations free of the fear that what they did might imperil their prospects of re-election "If only" tax changes had no equity effects, then various classes of taxpayers would refrain from looking suspiciously at each other (and tax proposals), out of apprehension that some were being treated better than themselves And just for good measure, "if only" the citizen, informed or otherwise, could separate tax policy from his estimate to taxation's impact upon the fortunes of an Administration he either favored to opposed, then Americans could leave it all in the hands of the economists and live happily ever after...

...Or take a somewhat different case—the tax that never was In January 1966, most economists who expressed themselves on the topic (myself included) were urging the President to raise taxes Certainly the inflationary signs were at least as plain as they are now, and far more visible than they were in January 1967 when the President first posed the issue of new taxes during the current year The President did not heed the economists and, what may be more astonishing, the economists turned out to have been right Price increases did accelerate The Federal Reserve was given the chance to exercise its favorite policy of hiking interest rates and tightening credit That the renter??s share in the national income rose was possibly a minor issue More serious was the collapse of the home building industry, the rejection by voters of school bond issues inflated by their interest costs, and the difficulties small businessmen encountered in securing credit on bearable terms...

...Aaron L Danzig is Chairman of the UN Charter Committee of the World Peace Through Law Center...

...This is sufficiently appalling But there is much worse For the President the tax increase is justified by Vietnam His message to Congress contained the news of escalation "I have concluded that I should authorize an increase of at least [my italics] 45,000 in the number of men to be sent to Vietnam this fiscal year " The Treasury or the Council of Economic Advisers are hardly the source to Johnson's rhetoric "This Nation has taken a solemn pledge...

...What explained Presidential inaction7 Possibly the President believed that in 1966, an election year, more taxes must remind the voters of the burden of a dreary, interminable, morally-suspect war Moreover, only economists could believe that raising taxes was in the least symmetrical with lowering them The great truth is that politicians will always delay raising taxes Often they will hasten to lower them So Johnson must have hoped that something would turn up the Viet-conga??s collapse, trade union cooperation in holding down wage increases, corporate restraint in price behavior, or a less feverish rate to economic activity It was a suitable judgment upon the President that despite all his political calculations, his party lost 47 Congressional seats and effective control of the House of Representatives...