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The tax b i l l now before the Ways and Means Coiraittea contains
provision for a 10 per cent increase In Income and estate t&xes, & simil a r increase in manufacturer 1 s excise taxes, and &uch sharper increases
In other Indirect taxes levied by the Federal Government*
The tax on
gasoline i s increased by 90 per cent, on liquor 53 per cent, on beer
50 per cent* and on cigarettes 17 per cent.
In judging the economic
e f f e c t s of the tax Increases the following considerations are of Importance;
(1) I t I s estimated t h a t the proposed tax Increases would
provide 1656,000,000 of revenue In a f u l l year, of which about
1250,000,000 would be obtained frora increased in cone end estate
taxes, and the remainder, roughly $400,000,000, from indirect
taxes bearing heavily on consumption.
{£) The increase in income and estate ta*es would not begin
to provide additional revenue u n t i l March 15, 1941, while the
remaining tax increases wauld go into e f f e c t almost at once*
Thus the portion of the tnx increases which weighs h«mvily on
consumption would become almost Immediately e f f e c t i v e , while
the portion raided from the unspent Incomes of the well-to-do
will not be collected f o r soae time.
(S) Ylerring the proposed tax inore see as a whole, i t I s
estimated that about half of the additional revenue would produce a direct or indirect dr&in on the Income of families and
other consuming unite having incomes below §3,000 a year* and
t h a t only one-third of the lnc oeeed tax revenue would f a l l on
those with incomes of #10,000 a year o r above*
(4) The Increase in the cost to con miners of tobacco, gaso l i n e , beer, l i q u o r , and a r t i c l e s on which manufacturers* excise
taxes ere levied w i l l not only impair t h e i r a b i l i t y to consume
these specific a r t i c l e s , but w i l l also tend to reduce the purchasing power available f b r expenditure on food, t e x t i l e s , and
other essentials*
(5) The notion, t h a t the expansion of our national defense
program requires l*rge s a c r i f i c e s a t once from the Baas of $on<*
sutlers i s based o&Bp complete f a i l u r e t o take i n t o account our
t o t a l economic situation* which i e chiefly characterised by a
huge volume of unused productive power* In those circumstciaces
*hat we need I s not increased aimestent production irnd curtailment
fclwetofcere, but increased ornament production and expansion elsewhere. We won f t get the expansion i f we finance the defense program in wfeys which drain away the buying power of consumers* I e
will get, Instead, needless end wasteful ategnotion outside war
industiifte*
(6) In the l i g h t of the P r e s i d e n t s promise that there eh a l l
be no war millionaires, i t i s essential that much more <*han onethird of the revenuesderived from inc eased taxation should f a l l
on those with incomes^rflO.OOO a year* Taxation of the well*
to-do i s aleo compatible with the rer.uiregents of general economic
expansion> imile taxation which bears on the m*es of consumers
produces stagnation in our peace-tis;e industries.
@FedFRASER