Taxes for Defense

Congressman Robert L. ("Muley") Doughton of North Carolina last week had lived to see a historic phenomenon in Washington. Up before Congress, in election year, was a hefty Federal tax bill. The proposed taxes--an estimated $656,000,000 worth--were for National Defense. The press applauded, cried in effect: "Tax us more!" Congressmen bickered only over details, did not question the need for new taxes. Said Muley Doughton, explaining this miracle: "Everybody is so patriotic."

What made the taxes historic on a second count was that they represented the first real effort by the Roosevelt Administration to arrange the payment of a debt before the money was borrowed. Muley Doughton (as chairman of the House Ways & Means Committee) and Mississippi's Pat Harrison (Senate Finance Committee) sold lukewarm Franklin Roosevelt on this departure from New Deal practice, then wrote the President's ideas into "a bill to provide for the expenses of national preparedness. . . ." Sure to pass, the bill was no less sure to be a mere drop in the enormous bucket of Defense.

What the bill meant to 3,500,000 Federal income taxpayers (corporate and individual) was a 10% supertax, for five years starting next March 15, to be added to the amount normally payable. Anticipated additional revenue: $226,000,000. Rest of the $656,000,000 is to come from upped levies on distilled spirits ($91,000,000); beer ($46,000.000); gasoline (from 1-c- to 1 1/2-c- per gallon, $112,000,000); cigarets (up 1-c- per pack, $77,000,000); amusements (tickets costing 31-c- or more will be taxed; present taxable minimum is 41-c-, $25,000,000); increases in most other excise taxes ($76,000,000); a 20% increase in the tax rates on stock transfers ($3,000,000).

Secretary of the Treasury Morgenthau explained to Muley Doughton's committee why the new taxes are necessary. Even before the President upped his emergency Defense estimates by $1,000,000,000 plus (see p. 77), the expected deficit for fiscal 1941 stood at $3,703,000,000. This prospect in itself was nothing new. But, said Mr. Morgenthau, the U. S. Treasury as of last week could borrow only $1,973,000,000 more without cracking the $45,000,000,000 debt limit. In consequence the Secretary, Muley Doughton and Pat Harrison asked Congress to up the limit to $48,000,000,000, set aside the new taxes specifically to pay off the additional debt. Congress pliantly prepared to do so. But Congress well knew that provision for a mere $3,000,000,000 more debt will be just a starter, that yet to come are the full burdens and disciplines of a grave new world.

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