Raising the Bill

How to boost the House's $3,200,000,000 tax bill to over $4,000,000,000 was the subject witnesses discussed last week before the Senate Finance Committee. Chief proposals:

Withholding Tax. Senator Walter F. George, chairman of the Finance Committee, proposed a 3% tax, collected at the source, on all kinds of income: salaries, wages, dividends, commissions, rents, fees. Such a withholding tax, said Senator George, might yield as much as $2,500,000,000 a year. The Treasury has been studying the idea. The U.S. Chamber of Commerce approved it, besides asking for another $2,500,000,000 increase in ordinary income tax, corporate and miscellaneous taxes and a $2,000,000,000 cut in non-defense spending--to provide, in all. close to $7,000,000,550 a year more for wartime expenses.

Social-Security Taxes. Secretary of the Treasury Henry Morgenthau would like to get more money from Social-Security taxes. One way would be to bring farmers and household servants into the Social-Security fold, which Mr. Morgenthau hopes to do anyway. Another would be to collect an additional tax on salaries and wages, payable as a "dismissal fee" when defense jobs end--a U.S. version of Britain's compulsory-savings plan. But the best way, said Mr. Morgenthau, would be to raise the rate on old-age-benefit taxes (now 2% of wages, the employer paying half) without increasing the benefits for the time being. Under the original Social-Security Act, the combined rate would have jumped to 3% in 1940, reached a peak of 6% in 1949. But Congress decided instead to put off upping the rate until 1943, then make it 4%. Doubling the rate now would take out of circulation another $750,000,000 cash a year, which would reduce by that amount the chances of inflation.

Sales Taxes. Most of the schemes suggested to the committee were for sales taxes of one kind or another. Harcourt Amory of the Investment Bankers Association of America had an idea for a 5% and 10% "purchase tax" (plainspoken Senators insisted on calling it a sales tax) on such consumer luxuries as furs, jewelry, cosmetics.

Senator Prentiss M. Brown of Michigan suggested "an intelligent sales tax" on luxury items such as expensive cars and clothing. His Michigan colleague, Senator Arthur Vandenberg, proposed a general manufacturers' excise tax (equivalent to a sales tax) of 5% on all consumer goods except food, clothes and medicine. Such a tax, said Senator Vandenberg, would add another $1,250,000,000 to the $3,366,000,000 in consumption taxes already loaded on consumers in the $12,436,000,000 tax bill passed by the House. Nobody expected a sales tax to be put in this year's tax bill, but as Majority Leader Alben W. Barkley said, "We should save at least one source for the tax bill we are going to have next year."

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