TAXATION: What Reduction?

Ever since the Department of the Treasury, under Secretary Andrew W. Mellon, announced that the fiscal year of 1926-27 showed a federal surplus of some $635,000,000 (TIME, July 11), those high in the ranks of the Democratic and Republican parties have quarreled over the manner in which the melon should be cut. All agree that the record surplus will result in tax reduction, but differences arise over the amount of the tax cut and over the glory of presenting it to the U. S. nation. Considering the fact that a Republican Administration governs the country, it might appear that the Republicans would have no difficulty in framing a taxation program bearing the G. O. P. stamp and in going before the public at the 1928 presidential election with lowered taxes as one of the campaign cries. But so evenly is Congress divided, and so unreliable (as party men) are several Republicans in the upper house, that Democrats can at least hamper the passage of a Republican tax bill, even if they may not be abb to pass one of their own. Political prophets look forward to a long-financial wrangle when Congress meets again.

Last week, for instance, Senator Byron Patton Harrison of Mississippi announced that taxes should be reduced by no less than $500,000,000. Democrat Harrison is a member of the Senate Finance Committee and so, in a position to make his views felt. Meanwhile Republican Senator Reed Smoot, Chairman of the Finance Committee, said that a reduction of more than $300,000,000 would be unsafe. Both Senators Harrison and Smoot agreed on one point—the desirability of calling a special session of Congress in October. Some weeks ago Senator Smoot visited President Coolidge (then in Washington) and announced that a special session would doubtless be called. Whereupon the Senator was snubbed by the announcement that the Administration was by no means committed to an extra session. Since that time Washington correspondents have had two stock stories—the President denying all intention of calling a special session and the Senator insisting that a special session would be called. Since the first announcement and denial the situation has altered considerably, inasmuch as some weeks ago the Mississippi flood was the centre of extra-session discussion whereas by last week the flood appeared to be running a bad second to tax reduction. From views expressed by both Senators Smoot and Harrison and also by Representatives John N. Garner, Texas Democrat, and William R. Green, Iowa Republican (both members of the Ways & Means Committee of which Mr. Green is chairman), it appeared likely that both parties would agree on a reduction of corporation taxes (from 13½% to possibly as low as 10%); that there might be a reduction of surtaxes on incomes of less than $500,000; that the automobile and amusement taxes would be lowered. The repeal of the estate tax and the amount of reductions on personal incomes were two questions over which pronounced argument was expected to develop.