Risks & Taxes

A congressional committee posed the question: What can the Government do to combat the recession? Federal Reserve Loard Chairman Thomas B. McCabe, a Pennsylvania banker and businessman before he was a Government official, this week gave them a straight-from-the-shoulder businessman's answer.

Although President Truman, who appointed McCabe, has done plenty of talking about raising taxes, the FRB chairman's remedy was just the opposite. The big trouble now, said Tom McCabe, was that there was a great shortage of risk capital, although "such risk taking has long been an American tradition." Businessmen either did not have the cash or found investment too risky in the face of high taxes. The thing to do, he said, was to ease taxes on business and businessmen. McCabe recommended that Congress study the entire tax structure, and consider such changes as:

P:Reducing income taxes, particularly in the upper brackets, to make cash available for investment.

P:Eliminating double taxation of dividends (they are now first taxed as company earnings, then as personal income).

P:Revising the tax exemption on local government securities, thus removing some of the benefits of buying municipal bonds instead of corporation stocks.

P:Liberalizing the "carry-back" and "carry-forward" tax provisions which enable businessmen to cut their business losses.

P:Allowing businessmen to speed up amortization, for tax purposes, of new plants and equipment, thus encouraging them to expand.

P:Revising, and perhaps liberalizing, the capital gains and losses regulations.

P:Liberalizing the restrictions now barring insurance companies from investing in common stocks.

If these changes were made, McCabe thought that business could step up expansion. Said he: "I am a confirmed optimist regarding the future of America. I firmly believe that the basic characteristics of our economy are expansion and growth. Economic expansion today presents a strikingly different challenge from that of a hundred years ago. Then, the frontier development was the opening up of our great Western resources. The geographic frontier is gone, but we still have a frontier of development. That frontier is technology."

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