TAXATION: Twenty Minutes

When Vice President Garner, in his capacity as President of the Senate, is in a mood for quick action, his methods are direct. Last week, as the clerk read each section of the Senate Finance Committee’s 371-page, $5,000,000,000 1938 Tax Bill, Mr. Garner glanced down at Committee Chairman Pat Harrison, whacked his gavel on the desk, grunted: “Without objection, amendments agreed to. . . .” Five hours after the bill came up for debate Mr. Garner turned the chair over to Indiana’s Minton, with a cheery comment: “We’ve passed 224 pages in 20 minutes—not bad.” Two days later the bill that Congressional tax experts have been working on since last autumn catapulted through the Senate without a record vote.

Main feature of the House Tax Bill passed last month was eliminating the undistributed profits tax in all but principle. Main features of the Senate Bill were:

1) killing undistributed profits tax entirely, substituting a flat 18% levy on all corporate income, with exemptions for corporations earning less than $25,000; 2) killing the House’s complex capital gains tax, substituting a flat 15% on capital gains arising from the sale of assets held over 18 months, reducing taxes on short term capital gains and capital gains by taxpayers in low income brackets; 3) an amendment introduced by Idaho’s Borah removing exemption provisions from all future issues of Government securities.

As remarkable as the wide differences in the two bills was a fundamental similarity of purpose: to lift some of the tax pressure from the point at which wealth is ventured. To many an economist this seemed the surest possible way of offering capital the fullest inducement to get busy and help itself out of the current depression. That the tax reforms crossed the Administration’s three-year policy was a matter which did not seem greatly to concern Congress.

Last week, as the two bills went to conference, likeliest trade seemed to be one whereby the House would give in to the Senate on capital gains, the Senate give in to the House on what is left of undistributed profits.