The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
'I^'1 io iN-crt-rttt; sUv.U Ig* ' Statement of Randolph Paul, General Counsel of the Treasury Department, before the Senate Finance Committee in Executive Session in support of the recommendations of the Secretary of the Treasury for an additional war-time revenue program In his statement Secretary Morgenthau emphasized the need for additional taxes to increase Treasury receipts out of current income by an amount far in excess of his previous recommendations and to exercise a strong restraining influence on consumer spending in order to furnish an effective weapon for combatting inflationary increases in prices. The Secretary has indicated the broad outlines of the Treasury's recommendations* It is my purpose to discuss these recommendations in detail. The proposed spendings tax is in two parts — a flat rate tax to be refunded after the war, and a progressive surtax. The Refundable Part of the Spendings Tax The refundable part of the spendings tax would be imposed at a flat rate of 10 percent on the total spendings of individuals for consumer goods and services. In general, it would apply to all individuals who had income subject to the individual income tax, and also to individuals subject to the spendings surtax whether or not they had income subject to the income tax. It is suggested that single persons be entirely outside the scope of the tax only if their income is less than $500, and married couples only if their income is less than $1,000* The exclusion \*ould be increased by an additional $250 for each dependent* The test for determining liability to file a refundable spendings tax return would therefore be stated in terms of income, even though the tax itself would be assessed on the basis of spendings* The reason for using the income test is to facilitate the administration of the refundable spendings tax by collecting it in conjunction with the individual income tax* Tax base The tax would be levied on total spendings of persons filing returns and reporting total spendings in excess of $500 for a single person, $1,000 for a married couple, and an additional $250 for each dependent* The tax would be imposed on the taxpayer's total spendings, not merely on that part of his spendings above these amounts* ~ 2 - The amount of spendings would be computed indirectly. From the total amount of funds at the disposal of the taxpayer, derived either from current income or "by-drawing on capital, there would be subtracted the amount of savings. ^Savings" would be defined to include, chiefly, repayment of debt, premiums paid on life insurance, expenditures for the purchase of bonds or other capital assets, gifts and contributions, payment of taxes and increases in bank balances. The items needed to determine the tax base are shown in the attached schedule (Exhibit l). Method of collection The refundable part of the spendings tax would be collected in the same manner and at the same time as the individual income tax. A tentative tax would be collected at source on wages, salaries, and dividends in the same manner as it is proposed to collect part of the regular income tax. A spendings tax return would be made part of the annual income tax return. The amount of spendings and the tax thereon would, also be computed on the sane return. The total of the income tax and the spendings tax payable would be ascertained by deducting the income tax and the spendings tax already collected at source. If the amount collected at source exceeded the combined tax liability, the excess would be promptly repaid to the taxpayer. Short income and spendings tax form The great majority of taxpayers would be eligible to file a simplified refundable spendings tax return which would be a supplementary part of their simplified income tax return. Tax rate and amount of tax The refundable part of the spendings tax would be levied at a rate of 10 percent on the taxpayer's total spendings. An individual with an income of $5,000, for example, who spent $3,200, would pay a tax of $320. If he increased his savings and spent only $2,U00, the tax liability would be reduced to $2^0. - 3 Special provision would be required to avoid large differences "between the tax on persons just "below and just above the exclusion limits — that is, the limits at which the tax becomes applicable* For a single person without dependents, for instance, the exclusion ajnount is $500. Those with spendings in excess of $500 would be liable to a tax of 10 percent on all their spendings. In some cases, in the absence of a special provision, the tax would be greater than the excess of their spendings over the exclusion limits. An individual spending $510, for example, would be subject to a tax of $51» whereas if he spent only $500, he would not be subject to tax. To provide for a gradual transition between nontaxable and taxable individuals, it is proposed that the tax on persons just above the exclusion limits shall not exceed the excess of their spendings over the exclusion limits. In the illustration cited, the tax on the single individual spending $510 would be $10. Refunding of spendings tax It is suggested that this flat-rate spendings tax be made refundable without interest after the war. The amount collected in the first year of operation of the tax might be refunded in the first year following the close of the war; the amount collected in the second year might be refunded in the second year following the close of the war; and so on. It might also be desirable to provide for earlier refunding after the close of the war at the discretion of the Secretary of the Treasury* Provision should in any event be made for the earlier refunding of the tax even prior to the close of the war in cases of proven distress. The Treasury proposes that the entire amount of the flat-rate tax be refunded. However, if the Committee should desire to do so, it is technically feasible to refund the entire tax only to the lower income groups. - il The Individual Spendings Surtax I turn now to a discussion of the second part of the spendings tax, the spending surtax. This tax would be imposed at progressive rates on expenditures in excess of an exemption of $1,000 for a single person, $2,000 for a married couple, and an additional $500 for each dependent. In contrast to the exclusions under the flat rate tax, these exemptions provide a minimum of spendings that is free from surtax for everyone, regardless of the total amount spent. The spendings would be calculated in the same manner as in the case of the refundable spendings tax — that is, they would not include such items as debt repayment, insurance premiums and bond purchases — except that you may want to consider allowing some extraordinary expenditures also to be deducted. Method of collection The tax would be collected currently by requiring individuals to report the approximate amount of spending at short intervals, say quarterly, with a final adjustment after the close of the year. The quarterly report might contain no more than a single item — the approximate amount of spending during the preceding quarter* Tax rates The tax rates would be progressive. schedule is suggested: Spendings : (Brackets) : $ 0 - $ 1,000 1,000 2,000 2*000 - 3,000 3,ooo 5,ooo 5,000 - 10,000 Over $10,000 The following surtax rate Tax rate (Brackets) 10% 20 30 HO 50 75 This schedule would apply to a single person in the usual manner. However, direct application of this progressive spendings tax schedule to a family as a unit would be unduly harsh on large families and would favor single persons* This follows from the fact that the larger the ~ 5 - family, the greater is the necessary amount of spendings and the higher the rate at which the spendings would "be taxed. This difficulty can "be overcome "by putting the family's tax on a per capita basis. The family's total spendings would be divided by the number of persons in the family. The progressive rate schedule would then be applied to the resulting per capita spendings. The per capita tax computed in this way would be multiplied by the number of persons in the family to get the total family tax. For this purpose, a dependent child would be counted as equivalent to one-half a person. For example, a married couple with one dependent would comprise 2.5 taxable persons. If this family spent $5$000, spendings in excess of the exemption of $2,500 wo\ild be $2,500 or $1,000 per taxable person* According to the above rate schedule, the surtax would be $100 per person, or $250 for the family (2.5 times $100). Married couples would be permitted to file either joint returns or separate returns, since discrimination would be avoided by the method of computing spendings per taxable person. The amounts and effective rates of tax under the above rate schedules are shown in Exhibits 2, 2a, 2b and 2c. Effective date of surtax The spendings surtax should be made effective as of September 1, 19U2. It is essential that this be done in order to prevent large scale buying and hoarding of consumers1 goods in anticipation of the enactment of the spendings tax# In addition, unless the spendings tax is made effective as of the date on which it is announced, individuals would be given an opportunity to convert their bank deposits into currency, hoping thereby to set aside spendable funds upon which an adequate check could not be made. These and similar dangers can be prevented only by making the spendings surtax effective as of September 1, 19U2, The corresponding difficulties are not of great importance with respect to the refundable part of the spendings tax and this could go into effect January 1, 19^3* Reduction of exemptions for the regular income tax In addition to the spendings tax, the Treasury recommends a reduction in the personal exemptions under the individual income tax. The exclusions of $500, $1,000, and $250 for the refundable spendings tax are believed to be desirable in order that a very large volume of consumer spendings may be brought into the tax base, For purposes of simplicity the income tax exemptions and the refundable spendings tax exclusions should be the same amounts of income. Accordingly, it is suggested that the personal income tax exemptions be lowered to $500 for single persons, $1,000 for married couples, and $250 for each dependent. This step will need to be taken in any event as the impact of the war increases. It represents a $200 reduction in a married couple's exemption and a $50 reduction in the amount of the dependent credit, from the exemptions tentatively adopted by your Committee. The proposal would increase the number of taxpayers to some five million above the estimated number under the exemptions tentatively adopted by your Committee. Under the rates of H. R. 7378, the lowering of exemptions would increase the tax liability of a married person without dependents having an income of $2,000 from $lHo to $178; for one with an income of $10,000 from $2,152 to $2,220. A married person with two dependents having an income of $2,000 would pay a tax of $S3» whereas with the exemptions under H. R. 7378, he would pay no tax. For a $10,000 income, the tax liability would be increased from $1,880 to $2,050. The amounts of tax and the effective rates for taxpayers with selected net incomes under present law, under the rates of H. R. 7378, with the proposed lowered exemptions, are shown in Tables 3, 3ai and 3c. The proposed reductions in personal exemptions and credit for dependents will increase substantially the tax load of those in the lowest taxable income groups and you may want to consider revising the surtax rate schedule to reduce the impact on these groups. We should be glad to submit such schedules for your consideration. Effect of the Treasury program The total yield of the proposed program at 19^2 levels of income is estimated to be $6.5 billion. Of this amount, $U.5 billion would be refundable to taxpayers after the war. - 7 Examples illustrating the combined effects of the refundable part of the spendings tax, the spendings surtax and the reduced individual income tax exemptions for individuals with selected amounts of income are shown in Exhibits H through 1+d. For example, a married couple with two dependents having an income of $5f000 would have an income tax liability of $680. If their spendings amount to $3f800 the spendings surtax would be $80 and the refundable spendings tax* $380. If their spendings were only $3*100 the spendings surtax would be reduced to $10 and the refundable spendings tax to $310* Their combined tax would be in the first case and $1,000 in the second case. Of these amounts, however, $380 or $310, respectively, would be refunded after the war. Effect of the Treasury proposals on the anti~inflation program The spendings tax will raise very substantial amounts of revenue and will accordingly be valuable in financing the war. More important, it will be particularly helpful as an anti^inflation measure in two ways• (l) by withdrawing consumer purchasing power and thus reducing the demand for goods, and (2) by creating an obstacle to spending, thus checking spending and encouraging saving. Because it will apply only to individual spendings and not to business spendings, it will not interfere with price ceilings. On the contrary, it will greatly facilitate the exercise of direct price controls, rationing, and other methods of combating inflation. The refundable part of the spendings tax and the spendings surtax differ in the emphasis placed on these two methods of reducing spending. The refundable tax, applying to the bulk of total individual spending at a 10 percent rate, will be effective primarily by withdrawing purchasing power. The spendings surtax, on the other hand, is intended primarily to discourage spending directly, rather than to absorb large amounts of purchasing power. Tor this reason it is imposed only on spending above a fairly adequate living level, but at increasingly heavy rates. Insofar as spendings are not checked, the tax will bring substantial payments into the Treasury; insofar as they are checked, inflationary pressure on the price level will be reduced. For these reasons, these taxes should provide a powerful instrument for combating inflation, Moreover, they provide an adjustable instrument which, once put in operation, can be increased or decreased as the current economic situation requires. - s Like any new tax, and perhaps more than some taxes, a spendings tax necessarily involves administrative and compliance problems. These problems are reduced by the fact that a spendings tax can be administered in conjunction with the individual income tax. As a consequence, the refundable tax will require no additional returns, and the collection of the refundable tax at source will impose no additional burden on either withholding agents or the Bureau of Internal Revenue. Nevertheless, the spendings tax will create an administrative problem in checking on information not now required on income tax returns, in familiarizing the public with a new type of tax, and in helping the public to fill out the forms that they will be required to submit. Compared with other measures of like importance in meeting the inflation and revenue problems, the administrative difficulties should not prove disproportionately large. In time of war, administrative difficulties cannot be allowed to stand in the way of measures vital to the Nation's welfare* E x h i b i t 1a The Individual Spendings Tax Schedule (To "be used "by persons subject to the spendings surtax and by -persons not eligible to use simplified income tax return. A simplified spendings tax schedule will be available to all other persons subject to the spendings tax.) Funds at the disposal of the individual 1. Salaries, wages, and other compensation for personal services... $ 2. Dividends and interest received, including government interest.. 3. Rents, royalties, annuities, pensions 4. Withdrawals from business, professions, partnerships, trusts.... 5. Cash receipts from gifts, bequests, and insurance. 6. Receipts from sale of capital assets 7. Receipts from repayment of loans made to others . 8. Receipts from borrowing, including debts incurred on installment purchases. ......... 9. Cash nnd bank balances at beginning of year .. 10. Other receipts..... 11. Total disposable funds —I I ., (items 1 to 10) .... , , - - ' : — i — ! . m. — H ,,,•„.. Deductions: Fon-taxable use of funds 12. Cash and bank balances at end of year...... $ 13. Cash gifts and contributions..... 14. Interest and taxes paid, except on owner-occupied homes 15. Expenditures on the purchase of capital assets. 16. Life insurance premiums, annuity, and pension payment........... 17. Outlays for repayment of debt, including installment debt....... 18. Loans made to others* 19. Other nontaxable disbursements. 20. Total deductions (items 12 to 19). 21. Expenditures subject to tax .........•...••*• $ (item 11 minus item 20)............ $ Exhibit 2. Individual Spendings Surtax: Rates and amount of surtax Expenditure per taxable person (Bracket). : : : : Surtax rate (Bracket) 0 - $1,000 $ 1,000 - 2,000 2,000 - 3,000 20 30 3,000 - 5,000 5,000 - 10,000 Over 10,000 40 50 75 : : Cumulative surtax per taxable person at upxier limit of "bracket $ 100 300 600 1,400 3,900 Exhibit 2a Refundable spendings tax and spendings surtax: Mount of tax and tax as per cent of spendings Single person - Ho dependents Exclusion for refundable tax 500 Exemption for surtax - 1,000 Total spendings: Amount of tax :Surtax as : Total tax before : Refundable: Surtax: Total :percent of : as percent of exemption : tax : : tax sspendings : spendings 500 800 1,000 1,200 1,500 2,000 2,500 3,000 3,500 4,000 5,000 6,000 8,000 10,000 15,000 20,000 25,000 50,000 $ 0 80 100 120 150 200 250 300 350 400 500 600 800 1,000 1,500 2,000 2,500 5,000 $ 0 0 0 20 50 100 200 300 450 600 1,000 1,400 2,400 3,400 6,900 10,650 14,400 33,150 $ 0 80 100 140 200 300 450 600 800 1,000 1,500 2,000 3,200 4,400 8,400 12,650 16,900 38,150 0 0 1.7 3.3 5.0 8.0 10.0 12.9 15.0 20.0 23.3 30.0 34.0 46.0 53.3 57.6 66.3 0& 10.0 10.0 11.7 13.3 15.0 18.0 20.0 22.9 25.0 30.0 33.3 40.0 44.0 56.0 63.3 67.6 76.3 Exhibit 2b Refundable spendings tax and spendings surtax: Amount of tax and tax as per cent of spendings Married person - No dependents Exclusion for refundable tax - $1,000 Exemption for surtax - 2,000 . :Surtax as : Total tax Total :percent of: as percent tax :spendings :of spendings Total spendings •Amount of tax before Surtax Refundable exemption tax 1,000 1,500 2,000 2,500 3,000 3,500 4,000 5,000 6,000 8,000 10,000 15,000 $ 0 150 200 250 300 350 400 500 600 800 1,000 1,500 20,000 2,000 25,000 50,000 2,500 5,000 $ 0 0 0 50 ICO 150 200 400 600 1,200 2,000 4,300 6,800 10,050 28,800 $ 0 150 200 0 0 300 400 500 600 900 3.3 4.3 5.0 1,200 2,000 3,000 5,800 8,800 12,550 33,800 2.0 8.0 10.0 15.0 20.0 28.7 34.0 40.2 57.6 10.0 10.0 12.0 13.3 14.3 15.0 18.0 20.0 35.0 30.0 38.7 44.0 50.2 67.6 Exhibit 2b Refundable spendings tax and standings surtax: Amount of tax and tax as percent of spendings Married person - Two de-pendents Exclusion for refundable tax - $1,500 Exemption for surtax - 3,000 Total spendings: Amount of tax before : Refundable: Surtax : Total exemption : tax : i tax: i 1,500 2,000 2,500 3,000 3,500 4,000 5,000 6,000 8,000 10,000 15,000 20,000 25,000 50,000 $ 0 200 250 300 350 400 500 600 800 1,000 1,500 2,000 2,500 5,000 $ 0 0 0 0 50 100 200 300 700 1,200 3,000 5,200 7,700 24,450 $ 0 200 250 300 400 500 700 900 1,500 2,200 4,500 7,200 10,200 29,450 Surtax as : Total tax : percent of : as percent : spendings : of spendings 0 i 0 0 0 1.4 2.5 4.0 5*0 8.8 12.0 20.0 26.0 30.8 48.9 0 i 10.0 10.0 10.0 11.4 12.5 14.0 15.0 18.8 22.0 30.0 36.0 40.8 58.9 Exhibit 2b Comparison of individual surtax rate schedule under present law and H. R« 7378 Surtax net income (000) 2 4 6 8 10 12 14 16 18 20 22 26 32 38 44 50 60 70 80 90 100 150 200 250 300 400 500 750 1,000 2,000 5,000 and 2 4 6 8 10 12 14 16 18 20 22 26 32 38 44 50 60 70 80 90 100 150 200 250 300 400 500 750 1,000 2,000 5,000 over Bracket rate Present law H.R. 7373 6 9 13 17 21 25 29 32 35 38 41 44 47 50 53 55 57 59 61 63 64 65 66 67 69 71 72 73 74 75 76 77 13 16 20 24 28 32 36 40 43 46 49 52 55 58 61 63 66 69 72 75 77 79 81 82 82 82 82 82 82 82 82 82 Total surtax cumulative Present law K.R. 7373 120 300 560 900 1,320 1,820 2,400 3,040 3,740 4,500 5,320 7,080 9,900 12,900 16,080 19,380 25,080 30,980 37,080 43,380 49,780 82,280 115,280 148,780 183,280 254,280 326,280 508,780 693,780 1,443,780 3,723,780 - 260 580 •980 1,460 2,020 2,660 3,380 4,180 5,040 5,960 6,940 9,020 12,320 15,800 19,460 23,240 29,840 36,740 43,940 51,440 59,140 98,640 139,140 180,140 221,140 303,140 385,140 590,140 795,140 1,615,140 4,075,140 - Exhibit 3a. Amount of individual income tax and effective rates under present law^ H. R. 7378, and H. R. 7373 -with lowered exemptions. Single person - No dependents Personal exemption: Present law - $750 H. R. 7378 - 500 Treasury proposal- 500 Net income before personal exemption l/ Effective rates Amount oi tax « • Present law :H. • R. 7378 • • • :il. R. 7378 :with lowered ; « exemptions • Present : :H.R.7378 law sH. R.7372:with low : :ered ex: : eruptions Percent Percent 500 600 700 800 900 1,000 1,200 1,500 2,000 2,500 3,000 4,000 5,000 6,000 8,000 10,000 15,000 20,000 25,000 50,000 100,000 500,000 1,000,000 5,000,000 - ~ 1 *1't - $ 3 11 21 40 69 117 165 221 347 483 649 1,031 1,493 2,994 4,929 7,224 20,882 53,214 345,654 733,139 3,923,124 — 15 £> 15 34 34 52 52 71 71 89 89 126 126 181 181 273 273 365 365 472 472 686 686 920 920 1,174 1,174 1,742 1,742 2,390 2,390 4,366 4,366 6,816 6,816 9,626 9,626 25,811 25,811 64,'41 64,641 414,616 414,616 854,616 854,616 4,374,616 4,374,616 - .4 1.2 2.1 3.3 4.6 5.9 6.6 7.4 8.7 9.7 10.8 12.9 14.9 20.0 24.6 28.9 41.8 53.2 69.1 73.3 78.5 Percent - - 2.5 4.9 6.5 7.8 8.9 10.5 12.1 13.7 14.6 15.7 17.2 18.4 19.6 21.8 23.9 29.1 34.1 38.5 51.6 64.6 82.9 85.5 87.5 2.5 4.9 6.5 7.8 8.9 10.5 12.1 13.7 14.6 15.7 17.2 18.4 19.6 21.8 23.9 29.1 34.1 38.5 51.6 64.6 82.9 85.5 87.5 lormal tax rate (percent) 4 \j Maximum earned income assumed. 6 6 4 6 6 Exhibit 3a Amount of individual income tax and effective rates under present law, H. R. 7378, and H. R. 7378 with lowered exemptions Married person - No dependents Personal exemption: Present law -$1,500 H. R. 7378 - It200 Treasury proposal- 1,000 Net income : before :Present personal : law exemption 1 / : $ 1,000 1,100 1,200 1,300 1,400 1,500 1,600 1,800 2,000 2,500 3,000 4,000 5,000 6,000 S.000 10,000 15,000 20,000 25,000 50,000 100,000 500,000 1,000,000 5,000,000 Amount of tax : : H. R. : H. R. 7378:Present : 7378 i with lowered: law : : exemptions : Percent - - - - - $ 6 23 42 90 13s 249 375 521 873 1,305 2,739 4,6i4 6,s64 20,1+39 52,704 345,084 732,554 3,922,524 $ 13 30 48 66 103 1140 232 324 532 71+6 992 1,532 2,152 4,052 6,1+52 9,220 25,32s 61+,060 1+14,000 854,000 4,374,000 - $ 13 31 49 6S s6 104 l4l 17s 270 362 576 790 1,044 1,592 2,220 4,136 6,556 9,336 25,466 64,226 414,176 854,176 4,374,176 Effective rate : H. R. s H. R. 7378 : 7378 :with lowered : : exemptions Percent Percent - - - - - 0.4 1.3 2.1 3.6 4.6 6.2 7.5 s.7 10.9 13.1 is.3 23.1 27.5 40.9 52.7 69.0 73.3 7S.5 1.0 2.1 3.2 4.1 5-7 7.0 9.3 10. S 13.3 14.9 16.5 19.2 21.5 27.0 32.3 36.9 50.7 64.1 32. S 85.4 87.5 1.2 2.6 3.8 4.9 5.7 6.5 7.8 0.9 10.8 12.1 14.4 15.8 17.4 19.9 22.2 27.6 32.8 37.3 50.9 64.2 82.8 85.4 87-5 U 6 6 - - - Normal tax rate (percent) k 6 1/ Maximum earned income assumed. 6 Exhibit 3c» Amount of individual income tax and effective rates under present law, H. R# 7378, and H* H # 7378 with lowered exemptions Married person - two dependents - $1,500 Personal exemption: Present law - 1,200 H. R. 7378 Treasury proposal - 1,000 Dependent credits Net income "before personal exemption! ]J - $ 400 Present law H. R. 7378 400 250 Treasury proposal Effective rate Amount of tax Present H.R. 7378:H.R. 7378 JPresent H.R* 7378:H.R, 7378 :with lowlaw :with low- : law :ered exemp:ered exemp tions :tions MB • • Percent Percent i - 1,500 1,600 13 $ 1,700 28 1,800 46 1,900 65 — 2,000 83 13 2,100 101. $ 2,200 120 26 2,300 43 138 2,400 $ 6 157 62 2,500 12 80 175 3,000 58 267 172 4,000 154 356 466 5,000 271 570 680 397 784 914 6,000 8,000 717 1,442 1,292 1,117 2 ,050 10,000 880 1, 15,000 2,475 3 716 ,926 3, 20,000 4,287 036 6 ,296 6, 9 25,000 6,480 756 ,046 8, 50,000 19,967 24,776 25,121 100,000 63,811 52,160 63,396 500,000 413,296 413 ,736 344,476 1,000,000 853,296 853,736 731,930 5,000,000 3,,921,884 4,373,296 4,373,736 Percent - - - - - - - - - - - - <M 0.3 0.5 1.9 3.9 5.4 6.6 9.0 11.2 16.5 21.4 25.9 39.9 52.2 68.9 73.2 78.4 0.6 1.2 1.9 2.6 3.2 5.7 8.9 11.4 13.1 16.2 3,8.8 24.8 30.2 35.0 49.6 63.4 82.7 85.3 87.5 0.8 1.6 2.6 3.4 4.2 4.8 5.5 6.0 6.5 7.0 8.9 11.7 13.6 15.2 18.0 20.5 26.2 31.5 36.2 50.2 63.8 82.7 85.4 87.5 Normal tax rate (percent) 4 6 l/ Maximum earned income assumed» 6 4 6 6 Exhibit 4. Illustration of the combined effect of the income tax, spendings surtax, and refundable spendings tax Income $2,500 : Single person:Married couple:Married couple : Uo dependents:Mo dependents :Two dependents Assumed spending on consumer goods and services $1,700 $1,300 $1,900 $1,500 $2,100 $1,700 270 - 175 - 175 - Income tax (H. E. 7378 with lowered exemptions) 1/ Spendings surtax 365 70 365 30 Income tax and spendings surtax: Amount As a percent of income 435 17.4$ 395 270 15.8$ 10.8$ 270 10.8$ 175 7.0$ 175 7.0$ Eefundable tax 170 130 150 210 170 '420 lb.8$ 385 15.4$ 3^5 13.8$ Total, income tax, spendings surtax and refundable tax: Amount 605 As a percent of income 24.2$ 1/ Exemptions: 2J0 - 190 525 460 21*0$ 18.4$ Single person, $500; Married couple, $1,000; each dependent, $250. Exhibit ij-a. Illustration of the combined effect of the income tax, spendings surtax, and refundable spendings tax Income $5,000 : : Assumed spending on consumer goods and services Income tax (H.B, 7378 with lowered exemptions 1/) Spendings surtax Income tax and spendings surtax: Amount As a percent of income Refundable tax Total, income tax, spendings surtax, and refundable tax: Amount As a percent of income Single person : Married couple : Married couple Ho dependents : No dependents : Two dependents $3,200 $2,500 $3»500 $2,S00 $3,800 $3,100 920 360 920 200 790 150 790 80 680 80 680 10 9*K> 1 IS. 8^ 0 S70 17.1$ 760 15.2 $ 690 13.8$ 350 280 380 310 1,1^0 22. 8$ 1,000 20.0$ 1,280 1,120 22.4$ 25-656 320 250 1,600 1.370 21M 32.0^ 1,290 1,150 6 23.0^ 25. 8? 1/ Exemptions; Single person $500, married couple $1,000, each dependent $250* Exhibit 4b. Illustration of the combined effect of the income tax, spendings surtax and refundable spendings tax Income $10,000 Single person No dependents Assumed spending on consumer goods and services Income tax (H. R. 7378 with lowered exemptions 1/) Spendings surtax Income tax and spendings surtax: Amount $ 5,500 $ 4,000 Married couple No dependents $ 6,000 $ 4,500 2,220 2,390 1.200 2, 390 600 2,220 3,590 35.9$ 2,990 29.9$ 550 Married couple Two dependents $> 6,500 $ 5,000 300 2,050 400 2,050 200 2,820 28.2$ 2,520 25.2$ 2,450 24.5$ 2,250 22.5$ 400 600 450 650 500 3,390 33.9$ 3,420 34.2$ 3,100 31.0$ 2,750 27.5$ 600 As a percent of income Refundable tax Total, income tax, spendings surtax, and refundable tax: Amount As a percent of income 1/ Exemptions: 4,140 41.43 2,970 29.1% Single person, #500; Married couple, $1,000; each dependent, $250. Exhibit 4c. Illustration of the combined effect of the income tax, spendings surtax and refundable spendings tax 'Income #25,000 : : Assumed spending on consumer goods and services Single person No dependents $10,000 f 6,000 Income tax (H.R. 7378 with lowered exemptions l/) 9,626 9,626 Spendings surtax 3,400 Income tax and spendings surtax: Amount As a percent of income Refundable tax Total, income tax, spendings surtax, and refundable tax: Amount As a percent of income 1/ Exemptions: Married 'couple No dependents Married couple Two dependents $ 7,000 $L2,000 $ 8,000 9, 336 9, 336 9,046 9,046 1,400 2,400 1,200 1,800 700 13,026 52.1$ 11,026 44.1$ 11,736 46.9$ 10,536 42.1$ 10,846 43.4$ 9,746 39.0$ 1,000 600 1,100 700 1,200 800 14,026 56.1$ 11,626 46.5$ 12,836 51.3$ 11,236 44.9$ 12,046 48.2$ 10,546 42.2$ $L1,000 Single person $500, married couple $1,000, each dependent $250 Exhibit 4d. Illustration of the combined effect of the income tax, spendings surtax and refundable spendings tax Income $L00,000 ; Single person j No dependents : Married couple : No de-pendents : Married couple : Two dependents Assumed spending on consumer goods and services #16,000 $11,000 $18,000 $13,000 #20,000 $15,000 Income Tax (H.R. 7378 with lowered exemptions!/) Spendings surtax 64,641 7,650 64,641 5,900 64,226 5,800 64,226 3,300 63,811 5,200 63,811 3,000 Income Tax and Spendings Surtax: Amount As a percent of Income 72,291 68,541 72.3$ 68.5$ 70,026 70.0$ 67,526 67.5$ 69,011 69.0$ 66,811 66.8$ 1,800 1,300 2,000 1,500 71,826 71.8$ 68,826 68.8$ 71,011 71.0$ 68,311 68.3$ Refundable Tax 1,600 Total, income tax, spendings surtax, and refundable tax: Amount As a percent of Income 1/ Exemptions: 1,100 73,891 69,641 73.9$ 69.6$ Single person, $500; Married couple, $3L,000j Each dependent, $250.
@FedFRASER