Porridge at Any Price

Once upon a time there were three bears--a papa bear, a mama bear and a baby bear. Papa bear liked his porridge very, very hot. Mama bear liked her porridge "just hot." Baby bear liked his porridge only warm. But it was quite impossible for cook to make three kinds of porridge every morning. So cook made up a batch of porridge that was the same temperature as if she had made some veryvery hot porridge, some just-hot porridge, some only-warm porridge, and mixed them together. Papa bear grumbled that it wasn't right. Mama bear growled that she wouldn't have it. Baby bear squeaked that it wasn't fair to all the little children. Then cook said if they didn't like the porridge, she wouldn't make any more for them. Then all three bears let out a great roar. Papa bear and mama bear and baby bear all shouted together: "We want the porridge!"

So it was with the tax reduction bill in the House of Representatives. The regular Republicans wanted 25% maximum surtaxes, the Democrats wanted 44% surtaxes and the radicals wanted 50% surtaxes. So Representative Longworth mixed a compromise with 37 1/2% surtaxes. Nobody wanted surtaxes like that, but they had to agree if there was to be porridge. So on the final vote, everybody shouted "Yes" and the bill was passed, 408 to 8.

The final compromise with which the bill was passed by the House had the following chief features:

Normal taxes: 2% on net income up to $4,000; 5% on net income from $4,000 to $8,000; 6% on net income over $8,000 (present rates, 4% up to $4,000 and 8% above that).

Surtaxes: Beginning with 1 1/2% from $10,000 to $12,000 and graduated upward (each rate being just 75% of the corresponding surtax at present) to 37 1/2% at $200,000 and more.

Personal exemptions: $1,000 for single persons; $2,000 for heads of families with incomes over $5,000; $2,500 for heads of families with incomes less than $5,000 (the same as the present law).

Inheritance taxes: 1% on estates above $50,000, graduated up to 40% on estates of more than $10,000,000 (present rates, 1% above $50,000 and 25% above $10,000,000).

Gift taxes: On exactly the same scale as inheritance taxes. (At present there is no gift tax.)

Taxes taken off: Candy, theatre and other admission tickets up to 50-c-, telephone and telegraph messages, promissory notes.

A reduction of 25% of the income tax on "earned" income.

A flat reduction of 25% on all income taxes for 1923, payable during the present calendar year.

Summary of changes: 43 1/2% is the maximum rate; addition of a gift tax; reduction of normal income rates below the Mellon plan; increase in inheritance rates; changes, not expected by the Treasury, in the excise taxes.

The Treasury Department gave out figures estimating that the bill as passed would create a deficit next year of $116,000,000. The arithmetic:

Net loss of revenue from the bill $446,000,000 Estimated Surplus 330,000,000 Deficit $116,000,0000

The passage of the bill followed a last-minute compromise between the regular Republicans and their insurgent namesakes who previously had voted against the Mellon bill. With Longworth's offer of 37 1/2% surtaxes and a cut of the nominal tax to 2% on incomes up to $4,000, the 17 irregulars returned to the fold. Then all but eight members joined in the final chorus of approval. The eight dissenters were: seven Republicans who stuck by the Mellon plan to the end, one Democrat (Howard, of Nebraska, onetime private secretary to W. J. Bryan) who stuck by the Garner plan.