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Form F. R. 131 BOARD OF GOVERNORS or THE FEDERAL RESERVE SYSTEM O f f i c e Tn C o r r e s p o n d e n c e Date Subject; Chairman Eccles From Mr. Despres A P m as, i 9 k i Comparison of Proposed Surtax Rate Schedules The following table shows taxes on incomes of various sizes that would result from the application of the present tax laws, the Treasury's proposals, the proposals suggested by Mr. Stam, head of the Technical Staff of the Joint Committee on Internal Revenue, and the rate schedule we have developed in accordance with your suggestions. Married Taxpayer, No Dependents Income $ Taxes Pre sent Treasury Stam Eccles 0 # 2,000 $ 0 1 0 $ 32 11 2,500 70 72 lib 108 3,000 152 97 31 528 1,628 10,000 1,060 1,361+ lJ+,128 19,5^0 50,000 20,791+ 17,1+89 100,000 k3.kl6 5k, 12k 1+7,321+ 52,1+71+ 1,000,000 717,58U 738,086 739,598 700,614+ Effective Rates Present Treasury Stam Eccles mmmm 0.1+ 1.0 5.3 28.3 1+3.5 71.8 2.9 5.1 16.3 39.0 52.5 73.8 1.6 2.8 1.8 3.6 3.2 13.6 10.6 ill. 6 35.0 51+. 1 U7.3 71+.0 70.1 mmmm "• "r ' J V Note: Under present law, a maximum amount of $lij.,000 may be counted as earned income for purposes of the 10 per cent earned income credit in connection with the normal tax. In the above table, all income is assumed to be earned for incomes of $10,000 or less and fli^OOO is assumed to be earned for larger incomes. The Treasury proposes to leave personal and other exemptions unchanged. Stam proposes reducing the earned income credit from ten per cent to four per cent of earned income but to make that credit allowable for surtax purposes, instead of only for normal tax purposes, as at present. He also proposes substituting absolute amount tax credits for the present system of allowing personal exemptions and credit for dependents as credits against income. In effect, this amounts to disallowing personal exemption and credit for dependents for surtax purposes (a proposal we advanced last summer). Under your proposal personal exemption would be lowered to $1,500 for married persons and the other exemptions and credits would be left unchanged.
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