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Juno 26, Beer Matt: In accordance with our telephone conversation, Z am enclosing a letter and a brief ae»oran&u» oa a suggestion which I think the President s&gHt wish to oonsider la oonnection with »ay public st&toaant he intends to Make on the OPA. I hop© it can be placed in his hands promptly. Sincerely yours# Mr* Matthew J. Connolly, the White House* Enclosures ET:b June 26, My dear Mr* Presidents I an -venturing to pass cm to you the attached brief suggestion, which X have also given to Joha Soyd«r, in connection with whatever ©t&temont you aay decide to nake public on tbe OPA* Respectfully yours, the President, The TShite House. Snclosure T:b the President nay wish to consider including, in whatever public statement he say make on OPA, a reoommendation that Congress restore an excess profits tax, possibly of 75 P«** cent rather than the wartime maximum of 95 per cent* Hlhen this tax was removed, it was expected or at least hoped that OPA price ceilings would continue to be effective. That hope has vanished in the delay, confusion and mutilation of the OPA extension by Congress. Some of the widespread public dismay and fear of higher prices would be offset if it were known that the Government would recapture, through this tax, excessive or exorbitant profits resulting from removal of price ceilings and that this revenue would be used to pay down the public debt* In effect, the Government would say to the public: If the wrecking of price controls does result in unreasonably higher prices for things that people need or want, the public can take some comfort from the knowledge that the extra dollars they pay will not go to fatten profiteers but will be gathered in by the tax collector if profits are excessive, and used to reduce the debt owed by all of the public* It is entirely possible that with price ceilings destroyed, corporate and business profits, before taxes, will by the end of the year exceed the wartime peak in many lines* If that should turn out to be the case, would not the Government be open to criticism if it failed to anticipate such a result and to guard against it by reimposing the excess profits tax? If prices and profits do not turn out to be excessive, then the tax would not apply. -2- Aa adequate exoes profits tax would make It less profitable for business to increase prices and would thus exert a positive anti-inflationary ^r0Mmnrmm To the extent that the tax resulted la revenue to the Treasury and a paying down of the public debt, the affect would also be anti-inflationary * Moreover, i t would be an important deterrent upon the wage-price spiral beeause i f excessive business profits were subject to this tax i t would remove a justification that would otherwise exist for labor to demand a share la those profits* Zf the President recommended and Congress refused to reenaot the tax, the responsibility would la any case be clearly fixed la the event that excessive profits do result from the wreckage of price controls # Those who previously flavored removal of th© tax could with entire consistency support i t s reanaotment aow booause of the changed situation*
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