How Much Tax?

"There is a time and a season for everything," intoned Treasury Secretary Henry Fowler, echoing Ecclesiastes. "Now is the time and the season for this tax increase." Members of the House Ways and Means Committee did not exactly greet Fowler's message as Holy Writ. Their refractory mood was shared by most of their congressional co'leagues. With constituents' mail all but unanimously opposed to President Johnson's proposed 10% surcharge on corporate and personal income taxes, Capitol Hill was loudly unconvinced of the Administration's economic and political sagacity in seeking a tax boost this fall.

Marching before the Ways and Means Committee with a squadron of aides and a stupefaction of statistics were the President's fiscal troika: Henry Fowler, Budget Director Charles L. Schultze and Council of Economic Advisers Chairman Gardner Ackley. At the outset, Ways and Means Chairman Wilbur Mills, whose opposition spells finis for any tax package on the Hill, noted ominously: "I regret exceedingly the circumstances that bring you here."

Arithmetical Abracadabra. For two days, the Administration trio painstakingly elaborated the President's case for increased revenue. The cost of the war, along with domestic spending, is running as much as $8 billion higher than anticipated last January. The surcharge would bring in $6.3 billion in the current fiscal year, and, along with other tax adjustments, would reduce a horrendous national budget deficit of $29 billion to between $14 billion and $18 billion. Thus, they argued, the surcharge is vital therapy for an economy whose current expansion (see U.S. BUSINESS) threatens, if unchecked, to result in a new spiral of inflation, tight money and rocketing interest rates.

In support of their forecast, the Administration advocates invoked statistics --conveniently issued by the Commerce Department last week--showing a $9 billion (to $627.1 billion) increase in Americans' personal income during June and July. The tax boost, they argued, would cost three out of four families between $2.50 and $9.25 a month, while the fourth, earning more than $10,000 a year, would pay more.

Nevertheless, many Congressmen doubted that the economy had built up sufficient impetus to resist the recessional impact of higher taxes. A more prudent course, they reasoned, would be to reduce domestic spending--though few Congressmen could agree on the programs to be cut. Some citizens felt that the President's experts were practicing arithmetical abracadabra to justify the surcharge. "Now you see it, now you don't," siehed Wisconsin's John Byrnes after Schultze projected a $2 billion saving on the sale of "participation certificates," which, committee members thought, amounted to an elaborate form of federal borrowing.

Mills's committee will continue its hearings until the Labor Day recess, then withdraw into executive session to decide whether, politically as well as economically, the time and the season are right for a tax boost. The bill that emerges will probably call for an increase of at most 6%, far less than the President now deems necessary but the very amount that he prescribed in his budget message last January.

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