"Hold Your Horses"

Less than two years ago the Treasury was calling for tax reduction, including reduction of surtaxes, and Congressmen were holding back warily. As the time for the convening of another Congress draws near, the situation is very nearly reversed. Congressmen are calling for a tax cut--a cut of as much as half a billion dollars, reduction of surtaxes to as low as 10%, and the Treasury is holding back, fearing that if it gives Congressmen their way it may not be able to balance its books next year. It is crying to overeager Congressmen (in everything but slang) : "Hold your horses."

What the Treasury really believes and hopes may be done by way of tax reduction has been more or less conjectural, but last week Under Secretary Garrard B. Winston laid out in brief a plan of which he vouchsafed to say: "I think I can state the Treasury position as follows :

"1) The Treasury believes that the Federal Estate Tax should be abolished.

"2) It should be possible from a revenue standpoint to have a maximum normal and surtax combined of 25%. The Treasury thinks, therefore, that 20% is the highest surtax rate which should be now in the law.

"3) An income tax on corporations graduated on the amount of income has no logical basis. The theory of a graduated income tax is that it is related to the capacity of the taxpayer to pay. A man with $100,000 can spare a larger proportion of his income than a man with $10,000. This reasoning has no relation whatsoever to corporations.

"A large corporation having a large income may be owned by a great number of small stockholders who can not afford to have their dividends cut down, whereas another corporation having a moderate income may be owned by one man who can well afford to pay a larger proportion of his income to the Government. If we have two corporations each earning $1,000,000, they would be taxed at one rate; if they are consolidated into one corporation they would be taxed at a different rate, a purely arbitrary discrimination.

"The tendency of a graduated income tax would be to split up large corporations into a great number of small corporations, the economic effect of which would be undesirable." Various recent suggestions for tax reduction include those of:

Senator Curtis of Kansas: Possible $500,000,000.

Senator Copeland of New York: $500,000,000 and a maximum surtax of 10%.

Congressman Martin B. Madden of Illinois: $350,000,000 and a maximum surtax of 15%.

Congressman Henry W. Watson of Pennsylvania: A maximum surtax of 15%.