Altered and Passed

After mulling over the Tax Reduction Bill for several weeks, the Senate passed it. As in the House, the question was not whether a tax bill should pass, but what its provisions should be. The differences in the bill between the House and Senate versions are accounted for by the different conditions at the time of passage.

In the House, the bill was passed after the regular Republicans had compromised with their own left wing. In order to do this it was necessary to raise surtaxes to a maximum of 37 1/2%, but the bill as it passed was essentially a Republican bill.

In the Senate, the bill was passed by a combination of Democrats and left wing Republicans. Therefore, it was essentially a Democratic bill with an insurgent Republican bias.

The final vote in the Senate was 69 to 15, a few of the regular Republicans voting adversely. Either the House must agree to the Senate provisions, or a compromise be evolved in joint conference.

Major provisions (of House and Senate bills) :

1) A 25% reduction in taxes payable this year (both Houses).

2) Normal taxes, 2% from $1,000 to $4,000 (both Houses) ; 4% from $4,000 to $8,000 (Senate) or 5% (House) ; 6% above $8,000 (both Houses).

3) Surtaxes, beginning with 1% on $10,000 and advancing to 40% at $500,000 (Senate), or beginning with 1 1/2 on $10,000 and advancing to 37 1/2% at $200,000 (House). On the settlement of this difference, slight though it is, will largely depend the question of whether the bill will bear a Democratic or Republican label.

4) For earned income, a reduction of 25% in the tax (both Houses) with earned income limited to $10,000 (Senate) or $20,000 (House).

5) Personal exemptions, for single persons $1,000 (both Houses) ; for married persons $2,500 (Senate), or $2,500 if net income is less than $5,000 and $2,000 if net income is more than $5,000 (House).

6) Inheritance and estate taxes, beginning at 1% on amounts (received by each beneficiary) not in excess of $25,000 and advancing to ft maximum of 36% at $5,000,000 (Senate), or beginning with 1% (on entire estates) in excess of $50,000 and advancing to 40% on $10,000,000 and more (House).

7) Gift taxes, each House enacted a gift tax identical with its estate or inheritance tax proposal.

8) Corporation taxes, 9% on corporate earnings and 1/4% on undistributed profits above 10% increasing to a maximum of 40% on undistributed profits over 60% (Senate), or flat tax of 12 1/2% on corporate earnings (House).

9) Excise taxes abolished (both Houses) :

Telegraph and telephone.

Candy.

Knives, dirks, daggers.

Liveries.

Hunting and riding garments.

Yacht and motorboat sales.

Carpets, rugs.

Floor tax on theatres, circuses.

Admissions under 50-c-.

Drafts and promissory notes.

As riders on the bill, the Senate provided for complete publicity of tax returns and appeals and for a reduction of the postal zone rates for newspapers to the 1919 level.

Senator Smoot estimated that the bill, as passed by the Senate, would produce a deficit of $162,150,000 not allowing for the enactment of the bonus or other extra drains on the Treasury. Nevertheless he voted for the bill finally, in hope that it would be improved in joint conference.

Senator Moses, who voted against the bill, exclaimed: "The nondescript minority has put everything in it except the kitchen sink. The final touch might well be a provision for a Federal Corporation with a capitalization of $1,000,000,000 for the purpose of paying all Federal taxes."