TAXATION: Ante Up

The tax experts, the theorists, the ax grinders finished their pleading before the Senate Finance Committee. The shouting died away. Behind closed doors, the committee began drafting their idea of the 1942 tax bill to raise $3,500,000,000. Indications were they would adopt almost none of the new proposals, would stick close to the bill the House had already voted.

Only major change: a lowering of exemptions from $800 to $750 for single persons, from $2,000 to $1,500 for married, to add an estimated $305,000,000 or more revenue. This might even be a popular tax, for misery loves company and the middle-class income group might think it meant getting more taxes out of people previously untaxed. Actually it would make some 5,000,000 more citizens file returns, and over 95% of the revenue it added would come from present taxpayers paying taxes on more of their income or shoved up into higher surtax brackets.

Joint returns were dead as far as the committee is concerned. Also dead was the Treasury plan to abandon the average-earnings base in computing excess profits. The committee might shave surtaxes for the $5,000 to $20,000 group, will probably add some new excise taxes if only to have them on hand as bargaining points in wrangling with the House over broadening the income base. By merging last year’s special defense tax with the surtax rate, the committee proposed to increase the lowest surtax rate from 5% to 6%, readjust upward the rate for higher brackets. What will happen to the committee’s bill when it reaches the Senate floor, no one could foretell.

The Senate committee’s public hearings cost the Government about $3,000,000 in excise taxes for each day they delayed enactment, and the country will continue to lose that much until the bill is finally passed. Perhaps it was worth it to hear so many people cheerfully urge so many whopping taxes (including a 10% “withholding” tax, collected at the source of all income, which would drain an estimated $7,000,000,000 into the Treasury). It must have made the committee feel better about the next tax increase, expected early in 1942.