TAXATION: Those Poor British

The average U.S. citizen now pays more tax, dollar for dollar, than the average Briton. That was the shocking claim made by the U.S. Chamber of Commerce last week to U.S. taxpayers, who feel that, although they have suffered much, British taxpayers have suffered far more. If the Chamber of Commerce is right (and not all tax experts are prepared to admit that it is), in fiscal 1942 the average U.S. citizen will pay $168 in taxes; the average Briton will pay $165.

Even under the stiff new tax law, U.S. Federal income taxes are still far behind Britain’s. For a single person, the U.S. tax starts next year at 10% on net income over $750, runs to a peak of 81% on net income over $5,000,000. The British tax begins at 6% on earned income over $480, rises sharply, virtually confiscates all income over $20,000 (97½%). A U.S. married couple without dependents, earning $4,000 a year, will pay only $249 Federal income tax. In Britain they would pay $1,404.

But Federal income tax is only a small part (about 15%) of the U.S. tax iceberg. In Britain, the Government is the only important taxing authority—it imposes some 90% of all taxes. The U.S. citizen also pays State income taxes, State and Federal excise taxes, State and local property taxes, sales taxes, numerous other imposts to a host of tax authorities.

For the last four years, British and U.S. taxes have run neck & neck: between 20% and 22% of each country’s national income. (Germany’s present taxes: 30% of national income.) In three of those years (1938-40), the U.S. actually paid more of its income in taxes than did Britain.

The total tax bill which the U.S. will foot through fiscal 1942 is estimated at $22,500,000,000 (Britain’s: $7,900,000,000). If the U.S. national income reaches $90,000,000,000 during the current year, taxes will take 25% of the nation’s earnings. British wartime taxes will take about 22% of the $36,000,000,000 Britons will earn this year.

Undaunted by these startling figures, last week Treasury Secretary Henry Morgenthau Jr. (see p. 77) journeyed to Chicago, told a meeting of the American Bankers Association that the new tax law is only “a good start,” that next year’s tax bill “will have to be a genuinely all-out bill, a … levy upon all in accordance with their ability to pay.”

Amid the encircling gloom, one little note of hope was heard. Maryland’s Governor Herbert Romulus O’Conor announced that his State had closed its fiscal year with a fat treasury surplus of $925,000. He promptly cut Maryland’s real and personal-property tax rate from 22¢ to 14¢ on each $100, saving property owners about $2,000,000 a year. Next year, said Governor O’Conor, if all goes well, he may ask the Legislature to reduce Maryland’s income taxes.