Bigger & Better

For seven months Congressional tax mechanics had been banging and bolting together the biggest piece of machinery ever designed to separate dollars from citizens. Two months were spent testing and tuning it in the Senate Finance Committee shops. Rolled out on the floor last week, the Senate spent a short five days looking it over, nodded approval 77-to-0. If joint agreement with the House moves as quickly, the tax machine will be ready for the President to press the button Nov. 1.

The new revenue bill is expected to yield $8,525,000,000 (total Treasury revenues will be boosted from $17,500,000,000 to $26,000,000,000), to increase the number of direct taxpayers from 28,000,000 to 44,000,000. So wide is the swath that only Army privates and some domestic servants and farmhands will escape being mowed down. Significant provisions:

>The "victory tax," Senatorial substitute for a sales tax, which will take 5% of all gross income over $12 a week after Jan. 1 to be collected out of pay envelopes before they are delivered. (Exception: the armed forces, farm labor, domestic servants will have to pay theirs direct.) Of the amounts collected under this complicated new addition to the income-tax system, 25%, not over $500 for single persons; 40%, not over $1,000 for married persons; 2%, not over $100 for each dependent, will be returned after the war. Those who pay insurance premiums, retire debts and make war-bond purchases get credit for them each year against their victory tax.

>Surtaxes scaled up from 13% on the first $2,000 to 82% over $5,000,000.

>Exemptions are lower: $500 for single persons; $1,200 for married persons; $300 for each dependent.

>The rules for war-contract renegotiation, which have had industry in a dither (TIME, Oct. 5), are modified to permit firm prices for fixed periods, and to limit the open period during which the Government can ask renegotiation.

>Railroads are encouraged to buy up their own securities below par, need not report the paper saving as income (see p. 90).

>Innovations: alimony becomes deductible as an expense by ex-husbands who pay it, and becomes subject to tax by ex-wives who receive it; sickness is recognized as an expense, deductible up to $2,500 if extraordinary medical costs run to more than 5% of net income; small concession: returns under oath are no longer necessary.

Said Senator Walter F. George, chairman of the Finance Committee: "The bill represents perhaps the maximum direct taxes which can be imposed during the war, but it does not go very far toward checking inflation. The Finance Committee does not claim that, and it was for that reason we provided for a joint committee to study plans for compulsory savings to make recommendation to Congress Dec. 1."

In short, Congress knows it will have to come back for a second helping.

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