FISCAL: The Waiting Game

With all the haste of a man handling a hot potato, the House of Representatives passed a new tax bill last week, tossed it to the Senate to cool off. In the face of the war in Korea, the House approved a $1 billion cut in excise taxes on such items as train fares, movie admissions, luggage, jewelry and furs. And though President Truman had promised to veto any bill that did not balance these cuts with increases somewhere else, the House failed by a slim $12 million to make up the difference. To get new revenue, the House voted to:

¶Raise an additional $433 million by rejiggering corporate income-tax rates. The new schedule would put a 21% rate on the first $25,000 of income, and 41% on everything above that figure, instead of 38% above $50,000 as at present. The net result would be higher taxes for concerns making over $167,000; lower taxes for those making between $5,000 and $167,000, and no change for those earning under $5,000.

¶Impose a 10% withholding tax on dividends, to catch an estimated $150 million lost in taxes through failure of stockholders to report all their dividends.

¶ Wipe out tax exemptions on unrelated profit-making enterprises run by colleges, unions and tax-free organizations such as Royal (Textron) Little’s “charitable” foundations (TIME, Feb. 28, 1949).

¶ Impose straight corporate and individual income taxes on “collapsible corporations,” such as those formed in Hollywood which dissolve after making only one picture, thus pay only a 25% capital-gains tax rather than the higher income tax.

Whether the Senate would pass the bill without changes—or at all—was questionable. At week’s end, Georgia’s Senator Walter F. George and his Finance Committee were planning to move slowly waiting to see what happened in Korea. Said George last week: “If there is going to be another vast armaments program . . . it would not be propitious to be reducing taxes when you might have to turn right around and add new taxes to support the military program.”