Cuffing Again

Cutting Again

Once more the great public diversion and private pleasure, tax cutting, came to the front; for the Ways and Means Committee of the House assembled in Washington to draft a new tax reduction law for the Congress that meets in December. The lines of the fight were well laid down in advance of the hearing. Everyone--Administration and opposition--is for it. The question is, what and how much?

How Much? The Administration thinks that, the tax reduction should be gauged by the expected Treasury surplus. What this is expected to amount to is $250,000,000 or $300,000,000. The Democrats eager to be ahead of the Administration began to talk of a tax cut of $600,000,000. How is it to be done? By the simple process of paying off the national debt less rapidly than at present. Every year a large sum is set aside for amortizing the public debt--enough so that the War debt will be paid off in about 25 years. The Democrats propose to pay the debt off in 62 years--over the same period as our debt funding agreements with our foreign debtors.

The Administration plan is the plan of the conservative business man--to put the business quickly on a strong financial footing. The opposition plan is a demand for more dividends at once. The Democratic plan will yield a larger tax reduction this year. The Administration plan will make possible larger tax reductions in years to come.

What Taxes. The chief provisions of the Administration plan call for reduction of surtaxes to a minimum of 20%, abolition sooner or later of the Federal inheritance tax, reductions in the normal taxes to benefit small tax payers.

The Democrats propose abolition of many special taxes, retention of the Federal inheritance tax at lower rates, reduction of the surtax, an indefinite amount and increase of personal exemption, perhaps to $5,000. Different Democrats, of course, present slightly different plans; they have not got together yet.

Inheritance Taxes. For some time the Administration has been paving the way for abolition of inheritance taxes or at least to cut down the Federal tax by the amount collected as state inheritance taxes for each estate. A feature of the hearings before the Ways and Means Committee was to be the appearance of a great number of governors of states favoring this movement. No less than 29 governors were reported to be in favor of doing away with the Federal inheritance tax.

Exemptions. Among the first to advocate increased exemptions was Senator Couzens, the Republican Progressive of Michigan. He suggested that the taxes collected on incomes under $5,000 were only a few dollars each, yet returns in this class made up about six millions of the seven million returns made last year. He said the revenue from these returns was disproportionately small to the cost of making the collections. This proposal was taken up by numbers of Democrats and a few Republicans. Last week Secretary Mellon replied to this argument in a letter to Senator Edge, Republican, of New Jersey, who had suggested it to him.

He said that the cost of increasing exemptions to $5,000 would be $167,000.000 in lost revenue, that practically all the small returns were audited in the field by the local collectors and that the total cost of all the field offices is about $14,000.000 a year, only a portion of which could be charged to auditing small returns. He argued that the amounts were small for the tax payers but not small for the Government, and he believed it was well for the six million small tax payers to "have a stake in the Government."