Monday, Jul. 15, 1935

Supers, Subs, Sub-Subs

Last week President Roosevelt came down from principle to practice on his social tax program. To his air-cooled White House office he called Chairman Robert L. Doughton, a potent handful of Ways & Means Committeemen and several tax experts to face with him the fact that sky-high rates on a few very rich men and a few very large estates would produce only a ridiculously small amount of additional revenue for the treasury. Upshot of the conference was a tacit agreement that the forthcoming tax bill would have to bear down harder not only upon the super-millionaires singled out by the President for special mention last month but also plain millionaires, sub-millionaires, sub-sub-millionaires and possibly on down the line to ordinary people with an income of more than $5,000 per year. Thus what President Roosevelt started as a tax program to encourage "a wide distribution of wealth" began to take shape as a full-bodied revenue bill which would affect a majority of taxpayers.

Representative Sam Hill, tax expert on the Ways & Means Committee, explained the conference consensus thus:

"If we are going to have a tax program we must have a bill which will raise substantial revenue. ... It should be at least $340,000,000, which was the estimate of the Senate Finance Committee as to the total that would be raised by the schedules made public by the chairman. But how they arrived at that estimate I have never been able to find out. The schedules proposed actually would have raised not more than $110,000,000."

Said Chairman Doughton as he emerged fiom the White House: "We will write the most equitable and scientific bill we can. . . . We can write it as we please." Then he added: "We have no constitutional right to levy taxes for any other purpose than to raise revenue."

In that last sentence Chairman Doughton expressed the feeling of a large conservative wing of Democratic Congress-men--those who do not care to be tagged with the label of "soaking the rich." To 'avoid that label many a Congressman would like to see the President's tax proposals broadened to include others than multimillionaires. Progressive Senator La Follette favors reducing personal income tax exemptions. Republican Senator Arthur Vandenberg of Michigan asserted:

"The income tax base must be broadened, because all the incomes of all 'the rich' will not suffice to pay our mounting deficit. Inevitably millions of our citizens must contribute, each in proportion to his ability to pay. Incidentally, when this happens, and citizens realize that there is no Santa Claus, the popularity of loose public spending will suffer a desirable setback."

Politically the expansion of the President's multimillionaire plan into a general tax bill did great credit to the Roosevelt acumen. He had spoken only for taxing the very rich. The rest had followed of its own accord. He pointedly told his press conference that he had not agreed with Chairman Doughton to put any taxes upon "little fellows": he had merely told Congress to write its own bill, promised that the Treasury would supply facts and figures, recommend nothing. Thus his political position was perfect: his Treasury would be replenished by new taxes, the "Share-the-Wealthers" would be silenced and Congress and the critics of his tax plan would have to bear the odium when millions of sub-millionaires protested.

When Ways & Means hearings on the tax bill began this week, not even a tentative scale of taxes was available to the public. This did not bother Chairman Doughton unduly. "There is no use drawing a bill," said he, "just to shoot it down."

First witness heard was Secretary of the Treasury Morgenthau. He contributed the information that: 1) various alternative tax schedules (not made public) might yield anywhere from $118,000,000 to $901,500,000; 2) "the only sound procedure is that the revenue derived from these new taxes shall be regarded as very definitely earmarked for reducing future borrowing and paying off the public debt."

After his testimony those who wanted to be heard still had nothing for their guidance save that the taxes proposed belonged to four general categories:

1) An amendment to the Constitution to put an end to the issuance of tax-exempt securities.

2) A graduated tax instead of the pres-ent flat rate (13 1/4%) on corporation earnings.

3) Higher income surtaxes.

4) Inheritance taxes. The Federal Government already has an estate tax which, on a graduated scale, takes a percentage of the property a man leaves upon his death. In addition a tax would be imposed upon the recipient of any part of a legacy, depending upon the size of his share. Thus, if a man should leave a $10,000,000 estate to one heir there would be one high inheritance tax. If he should leave the same amount divided equally among ten heirs, there would be ten inheritance taxes, the total of the ten taxes being less than the tax on the whole $10,000,000 left to one heir.

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