Taxes & Votes

Of political rather than fiscal importance was last week's tax news at the White House and the Treasury. Congress, at President Hoover's order, cut the normal income tax rate by 1% for 1929 to bolster business. Business did not respond to the cut. Federal receipts ran down hill. Last week Treasury officials compiled figures, frankly told Pressmen that they were quite helpless about a continuation of the 1% reduction for 1930 incomes. For the first 50 days of this fiscal year, U. S. revenue had fallen off $64,261,211 compared with last year, while expenditures had risen some $29,000,000. Customs receipts had been almost halved. Instead of a tax cut, a deficit loomed.

Such a forecast, on the eve of a close campaign to control Congress, seriously alarmed President Hoover. Last year's 1% cut was not large financially but it was enormous politically. Failing to continue it this year would seem like raising taxes. The President summoned Secretary of the Treasury Mellon to a White House conference, afterward declared:

"There is no ground now for the predictions that a deficit . . . would prevent the continuation of tax reductions."

Added Secretary Mellon: ". . . While no one could definitely promise that the 1% tax reduction can be maintained, I have a very real hope we may be able to make such a recommendation in December" [after the election].

President Hoover hoped for three things to maintain the lower tax rate: 1) a sudden increase in customs receipts; 2) $75,000,000 economies in his departments; 3) cash instead of security payments by foreign debtor nations to be applied to current expenditures.

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