Paying One-Third the Bill

In an almost unearthly quiet, the 81st Congress, which was going to reduce taxes $1 billion, was in the process last week of boosting them almost $5 billion.

Senator Walter George's Finance Committee had the bill ready. Closely following Treasury Department recommendations, the bill reached into three areas:

Consumer Goods. The bill not only wiped out reductions in excise taxes on furs, jewelry, leather goods, cosmetics, refrigerators, etc., which the House had approved June 29 in a slaphappy, early-Korea mood, but added new excise taxes on television sets and home-freeze units and closed old tax loopholes, to bring in an estimated $500 million in new revenue.

Corporations. The bill boosted corporation taxes from 21% to 25% for small companies and for big outfits from 38% to 45%. The increases would be retroactive to July i, 1950. Estimated additional yield: $1.5 billion a year.

Incomes. The bill wiped out almost all the tax reductions granted by Congress since the end of World War II. Its effect was to lift the present tax rate in the lowest bracket (single person, $800 a year) from 4.2% up to 5%; increase the present tax rate of 77% for the highest bracket to 88.4%, with graduated changes in between. Under the present law a man with a $3,000 net income before exemptions, and a wife and two children, pays about $100; under the new law he would pay $120--one-fifth more. The man with an income of $1,000,000 now pays about $770,000; under the new law he would pay $857,000 --a little less than one-eighth more. The new schedule would hit the lowest income groups hardest, a practice that usually makes politicians' flesh creep.

Treasury Secretary John Snyder, one of the more conservative members of Harry Truman's Fair Deal Cabinet, explained why it had to be: the under-$5,000 group accounts for 91% of all taxpayers in the U.S. and 69% of all taxable personal income before exemptions. "A relatively small increase in the rate in the lowest brackets," said Secretary Snyder, "contributes more revenue than a larger increase at the higher levels."

The income-tax boost would go into effect Oct. 1. Wage earners will give up 18% instead of 15% of their taxable incomes out of their pay envelopes. Estimated yield: $2.7 billion.

The only audible major objections were two: the bill did not include an excess-profits tax, a complicated tax law to write; the levy was less than one-third as big as it should be. While taxes were going up $5 billion, the government was going to appropriate (although not necessarily spend this year) an additional $15 billion.

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