Nightmare Round the Corner

Many a U. S. taxpayer put his tax return in the mail last week, then rushed to the nearest bar to get a jolt of what P. G. Wodehouse has called "the stuff that restores the tissues." Taxes were steep; some citizens were paying the highest taxes in U. S. history, and to most of them it felt like it. But their morning newspapers assured them, in Washington dispatches that read as if they had been written by men who had also suffered deeply, that this was only the beginning.

Simplest way to demonstrate the future was to table relative British and U. S. income taxes; next year the U. S. table would look much more like the British table. Relative 1940 levies on married couples with two children:

Income British Tax U. S. Tax

$1,500 $43 none

2,500 311 none

5,000 1,196 $75

10,000 3,451 440

20,000 9,426 2,143

50,000 32,401 13,741

100,000 76,276 42,948

The budget estimated 1941-42 (fiscal year) expenditures at $17,485,000,000. This estimate is already out of date. Additional appropriations will raise the total to at least $20,000,000,000. The first aid-to-Britain appropriation was for $7,000,000,000. Therefore the next fiscal year's outlay will be at least $27,000,000,000. The Treasury is now hoping for tax receipts of $9,000,000,000--which would leave a mere $18,000,000,000 to be found somewhere. Treasury Secretary Henry Morgenthau Jr. has announced that he hopes to raise two-thirds of the required money by taxation and only one-third by borrowing (see p. 74). To raise two-thirds of the needed amount by taxation, tax collections would have to be exactly doubled. Mr. Morgenthau, who used to suffer from sick headaches, last week had the best excuse in years.

At the very least, said Washington observers, the 4% normal income tax would be upped to 6%--some even said 8%; surtax bases would be lowered from $5,000 to $4,000; middle-bracket surtax rates would be raised; personal exemptions might be lowered again; corporation taxes would be increased from 24 to 30%; excess-profits taxes tightened; nuisance taxes might be raised on liquor, tobacco, theatres, cabarets, gasoline, automobiles, radios, etc.

In the far, dim background loomed the shape of the one form of taxation that gets there fastest with the mostest dollars --and is also the most distasteful to the Treasury, the President, and to many economists: straight sales taxes. Off the record, Washington admitted that sales taxes must come, sooner or later. Many a citizen, pondering the situation, felt a renewed urge to rush around to the nearest bar and restore his tissues.

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