Death and Taxes

Outside the U. S. Treasury last week, as usual, stood the time-mellowed, unsmiling bronze statue of First Treasury Secretary Alexander Hamilton. Inside, as usual, sat time-harried, unsmiling Henry Morgenthau Jr., 50th Secretary.

On Mr. Morgenthau's balding brow the cares of his office were writ large. Snappishly he told newsmen: "Every day we get that much closer to the limit, but . . . that's Congress' worry, not mine. I'm not worrying about it," said worried Mr. Morgenthau, "I'm only the paymaster."

What Mr. Morgenthau said he was not worrying about was the U. S. public debt, still climbing to alltime highs, now teetering at more than $41,168,000,000. Another thing he was presumably not worrying about was the U. S. law which flatly forbids the public debt to go over $45,000,000,000. Asked what he would do if & when the 1940 fiscal tide lapped the public debt up around King Canute Congress' shoes, he said: "I'm not going to draw checks one penny over the regular authority I've got."

U. S. newsmen, calculating roughly on their cuffs, figured that Mr. Morgenthau's services to the Government would thus terminate in about nine months--unless Congress saw fit to move its chair back to higher ground. That move is just what the next session of Congress is expected to make, with only a modicum of fuss--but the Republican fuss can be counted on to be more than a modicum.

Congressional Canutes or no, the tide of national debt was still mounting. In the fiscal year 1939 the U. S. spent $3,600,000,000 more than was collected in taxes. Session III of the 76th Congress will face a probable new Army appropriation of about $1,700,000,000, a new Navy appropriation of about $1,300,000,000, plus a $275,000,000 deficiency appropriation. To meet this bill for national defense, while continuing to spend many millions on relief, works, etc., the U. S. Treasury must raise new taxes, somehow, somewhere. And 1940 is an election year. To raise new taxes, Congress must do two politically unpalatable things: 1) broaden the income-tax structure, by lowering the tax-exemption rate to include thousands of U. S. citizens who now pay no income tax; 2) lift the tax exemptions historically enjoyed by Federal, State and municipal bonds.

The latter dodge would be no great shakes as a revenue raiser. From the former, the most optimistic guesses would add $60,000,000 to the U. S. revenues. To Treasury experts, this amount may not be piddling, but it definitely is not enough.

Last week no Democrat, high or low, New or Old Deal, cared to take his political life in his hands, suggest brutal tax increases. The shadow of 1940 lay heavy on the grey Capitol, the gleaming White House. Ancient, ham-handed "Old Muley" Bob Doughton of North Carolina, chairman of the House Ways and Means Committee, celebrated his 76th birthday, optimistically remarked that the war boom in business might obviate the need of new taxes.

This remark drew no applause whatever, for honest, optimistic "Old Muley" has unfortunately said similar things ever since 1933, has regularly followed them with a new tax bill a few months later, under White House and Treasury orders. Moreover, New Deal economists have for weeks predicted a sharp business recession in the late winter and in the early spring of 1940, on the ground that the expected war boom will not materialize, thus leaving inventories jam-packed in a sellers' market.

This split in the Administration over taxes was further wedged by the hickory-hard differences between the spend-lend pump-primers, headed by Marriner S. Eccles, chairman of the Board of Governors of the Federal Reserve System, and the cut-expenses, give-business-a-chance school, headed by Mr. Morgenthau and his Under Secretary, business-appeasing John Wesley Hanes of North Carolina. Last week slim, snappy-eyed Mr. Eccles courageously rehearsed the argument of the White House Janizariat. asked for increased income taxes (especially in the lower brackets); for increased corporation taxes; for reduction of nuisance taxes (gasoline, furs, movie tickets). He urged no reduction in relief and farm-program expenditures; in brief, argued boldly that the U. S. must tax more to spend more.

To this argument pale Mr. Morgenthau said nothing, decided to take a ten-day vacation on an Arizona ranch to get bronzed up for the Washington winter. But only three weeks ago his Mr. Hanes had told the U. S.: "No matter how heavily we tax we cannot raise three or four billion dollars [more] . . . from present sources, unless we get more on which to levy. That means more business; more employment; more national income. . . . All of us in Government and in private life must put our emphasis on adding to the national income. . . .Let us find every means we can devise to encourage honest business."

Republicans gleefully bided their time, certain they would profit, no matter what the Democratic policy turned out to be.

* National income in 1932 was $46,708,000,000; in 1938, $62,286,000,000; fortnight ago was estimated for 1939 at $59,300,000,000.

This file is automatically generated by a robot program, so reader's discretion is required.