Jumps & Junket

Political heads were roughly scratched last week in Washington and from the scratchings emerged a major agreement: Federal taxes must be jumped up. The 1932 deficit was pointing inevitably toward two billion dollars (last year's: $900,000,000). Into such a colossal hole the Treasury could no longer keep pouring bond issue after bond issue. More revenue was imperative to save the Government's good credit.

Before the 1930 elections, and up to three or four months ago, most regular Republicans in Congress loudly decried increased taxation, predicted a quick return to better times, publicly put their faith in Secretary Mellon and large borrowings to pull the Treasury through. Today these same Senators and Congressmen were concurring in the immediate necessity for tax-upping. They talked with President Hoover and left the White House convinced that he would recommend ways & means of raising more revenue. They heard that Secretary Mellon had reached what he felt was the end of his rope in putting out deficit bonds and now wanted authoritative instructions from Congress as to the next move. They were well aware of the political riskiness of lifting tax rates just before an election but they could figure out no escape.

"We've got to do it," dolefully declared Senator Smoot, chairman of the Finance Committee. "Everyone knows we must raise more money." Senator Watson, Republican leader, was almost tearful when he announced: "Much as I am personally sorry for it, it seems that some form of tax legislation will be necessary." Senator Fess, G. O. P. chairman,* declared: "The budget must be balanced even if we are compelled to take drastic measures such as was done in England." Only die-hard dissenter among important Republicans was ultra-conservative Congressman Hawley, chairman of the last House Ways & Means Committee. Moaned he: "I'm up in the air about taxes. I'd hoped we wouldn't have to increase them."

Old Taxes, All week long the air about the Capitol buzzed with plans, suggestions, proposals and advice for taxing more money out of the country. Needs were estimated at from $500,000,000 to $1,250,000,000. The income tax was immediately turned to as the first and easiest source of additional revenue. Conservative Republicans favored an increased normal tax (now 1 1/2, 3% and 5%), reduced exemptions (now $1,500 for single persons. $3,500 for married folk) and a general jumping of surtax rates. Senator Smoot favored an increase in the maximum surtax from 20% to 40%. "Progressive" Senators, probably holding the balance of power, clamored for stiffer surtax rates on incomes above $20,000 per year, opposed any move against small taxpayers. Also discussed were new levies on automobiles, radios, amusement admissions, estates, gifts. Only two items seemed sure of escaping tax upping: 1) corporations, already tottering under their 12% burden; 2) tobacco, which already pays an ad valorem rate of 100% to 150%.

New Tax, Revived by the new need for cash was the old question of a general or selective sales tax. On such a levy Congressional opinion breached widely. Most conservatives favored it on the ground that it: 1) taxed all alike; 2) was easy to collect; 3) provided a large and steady revenue regardless of profit fluctuations; 4) was comparatively painless for the consuming public; 5) made all citizens tax-conscious and therefore economy-conscious. Most liberals, progressives and insurgents opposed it on the ground that it: 1) overburdened the poor man who must buy necessities; 2) underburdened the rich man who would not feel it in proportion to his wealth; 3) restrained consumption and therefore production. Champion of the sales tax exempting only food and cheap clothing was Pennsylvania's Senator Reed who proposed a 1/2 of 1% levy (TIME, Sept. 21). Opponents of the sales tax included such Senate figures as Idaho's Borah, North Dakota's Nye, Oregon's McNary, Iowa's Brookhart.

Mr, Hearst's Party. One of the most ardent sales taxers outside Congress is that man of great wealth. Publisher William Randolph Hearst. Largest neighboring sales tax area is Canada where a 4% rate is levied on most manufactures. Last week Mr. Hearst made one of the spectacular gestures for which he is famed. He underwrote a Congressional junket to Canada to study the sales tax in operation. Meanwhile his press harped on its virtues in editorial, cartoon and newsstory. Credited with the courage of his convictions, Mr. Hearst also laid himself open to the suspicion of agitating a tax form which might save his own large income payments to the Treasury from becoming larger. Sixty-four members of Congress accepted the Hearst invitation "to provide an educational opportunity." Among them were Senators King of Utah, Austin of Vermont, Thomas and Gore of Oklahoma; Representatives Norton of New Jersey (only woman junketeer), O'Connor of New York, Estep of Pennsylvania, Arentz of Nevada, Douglass of Massachusetts. Howard of Nebraska. Mr. Hearst paid every expense (except liquor) from the time his guests boarded a special train of compartment Pullmans in Washington until they returned six days later. Estimated cost: $17,500.

The Hearst junketeers went to Montreal, Ottawa and Quebec. They questioned revenue officials, manufacturers, consumers. Sir Henry Thornton, potent president of Canadian National Ry. gave them a banquet in Montreal. At Ottawa they were received by the Governor General; U. S. Minister Hanford MacNider had them all in to tea. Many a U. S. investigator was no less interested in the Canadian liquor system-and liquor-than he was in the sales tax. But only two or three became so incapacitated they could not appear in public. At a banquet blind Senator Gore convulsed merry Senator Austin by declaiming:

Four and twenty blackbirds Got a little dry

Came up to Montreal To drink a little rye.

When the rye was opened They began to sing

To hell with Mr. Volstead And God save the King!

* Slated to succeed Senator Fess as chairman is Postmaster-General Walter Folger Brown.

This file is automatically generated by a robot program, so reader's discretion is required.