New Taxes for Old

To tax or not to tax was a loudly debated question in Washington last week. The Treasury was heading into Deficit No. 2, estimated at $1,500,000,000 (TIME, Sept. 14). Its efforts to finance the Government through the Depression by borrowing took a turn for the worse.* Secretary Mellon had already declared for a broader tax base than the levy on incomes. While President Hoover continued to keep his mind open, two of the most important Republican fiscal leaders of Congress came forward with plans for the Treasury to tax its way out of trouble at the next session.

Senator David Aiken Reed of Pennsylvania is a member of the Senate Finance Committee. He is considered Secretary Mellon's mouthpiece on Capitol Hill. Senator Reed contended that the income tax is outmoded, that a general tax of 1/2 of 1% should be applied to all retail sales.

All states have a sales tax on gasoline, no State has a sales tax on every article of trade. During the War and after, the U. S. taxed a variety of luxury commodities from automobiles and candy to cigar holders and Mah-Jongg sets. The Reed plan would tax everything. The sale of a $6 pair of shoes would net the Treasury 3-c-. Senator Reed estimated such a tax, bitterly opposed by retailers, would net the U. S. $2,000,000,000 per year or about half of its operating costs.

President Hoover quickly let Republican party leaders know that he was wholly opposed to the sales-tax idea.

Generally considered the '"brains" of the House Ways & Means Committee where all tax legislation originates, Representative Isaac ("Ike") Bacharach of New Jersey simultaneously suggested an increase in the surtax rate (now 20%) on incomes above $100,000, heavier inheritance taxes, a sales tax on "luxuries and non-essentials." Said he:

"Some individuals are fully able to pay higher taxes. . . . There is considerable support for the statement that the 'rich are getting richer and the poor are getting poorer.' . . . The number of taxpayers has steadily decreased, indicating the unsatisfactory distribution of profits among individuals. The only class which reaped substantial profits from 1925 to 1929 consisted of 14,700 individuals with net incomes above $100,000. ... It seems obvious that these individuals should bear the bulk of any increased tax burden."

Such talk from two regular and conservative Republicans sounded almost like heresy to their G. O. P. colleagues. Had Messrs. Reed & Bacharach forgotten that a Presidential election was coming, that any tax increase would handicap President Hoover in that race and make campaign cash collections doubly difficult? To offset their words, Senate Leader James Eli Watson trundled down to the White House, talked long and earnestly with President Hoover about taxation. He emerged to use the White House lobby as a sounding board for his fiscal ideas:

"I don't think we need to worry about the Treasury as long as Uncle Andy is at the helm. He knows his business and knows it well. Until after we've passed the Presidential election and other disturbing factors we should steer clear of tax legislation."

*Only $940,000,000 was bid for a treasury bond issue of $800,000,000. A similar offering last June was oversubscribed eight times.

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