Full text of Economic Review (Federal Reserve Bank of Atlanta) : July 1972, Volume 57, Number 7

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In i s

issu e:

The Very C ontroversial Tax on V alue A dd ed

S m ooth Sailing for G eorgia's E conom y

District Banking N o tes

D istrict Business C ond ition s




T h e V e r y C o n tr o v e rs ia l
T a x o n V a lu e A d d e d
by Robert H. Floyd

By

n o w

on

v a lu e

th e

tax

a lm o s t

has

p r o b le m s .
a

m u ch

(o r,

o fte n

fo r

o f th e

m an y

e a r ly

h o w e ve r,

p o s s ib le

s u b s t it u te

b y state a n d

r e m a in s

th e

o f

th e U n ite d

fro m

in

to

lie u

an d

th e

by

m an y

J o in t

th e
o f

in

n a t io n s

th e

ta x

a r t ic le

n e x t d is c u s s e s

T h is

se rve s

to

illu s t r a t e

in
or

o f

th e

th e

th e

th e

to

th e

v a r io u s

u se s

fo r

s im ila r it y

o f

p o s s ib le

u se s o f V A T

in

th e

in
to

has

been

n o w

p ress,

p r o v id e

p ro p o se d

its

th e

in

ad d e d
th e

a

th e re

a

fo r

ge n e ral
it

in
th e

;

d iffe r

U n ite d

an d

v a lu e

State s are

as

h e a v ily

r e a s o n s f o r its
M ark e t

u se

th e

C o n gre ss.
th e

C o m m o n

b e tw e e n

U n ite d

in

r e c e n t ly ,

e m p lo y e d

th e

ad d e d

m a n y o t h e r a l r e a d y - e x is t in g ta x e s . F in a lly , t h e v a r i o u s p r o s a n d
o v e r th e

in c o m e

tax w o u ld

c u r r e n t e x p e r ie n c e s w it h

v a lu e

,

u n d e r stu d y b y
o f

is

s h a ll s e e t h a t th e

c la im e d

taxe s

as

c e n te re d

s p o t lig h t —

tax

a r t ic le

State s

c o r p o r a t io n

p a ym e n ts

C o m m it t e e

it. T h i s

co n ce p t

V A T

e x a m p le ,

M o re

r e c e n t ly b e e n

g iv e n

E u rop e an

th e
For

im p r o v e m e n t

p ro p e rty

ta x

e c o n o m ic

in c o m e

th e

th e

s u r r o u n d in g

fo r

th e

o f

in

ab o u t

au ra

n a t io n .

U n ite d

th a t

b a la n c e

o f

ta x h a s

Eu rop e . W e

th e

s u b s titu tio n .

E c o n o m ic

th e

m an y

p a rt o f

r e m a in e d

b u rd en

an d

in

argu e d

T he

c la im e d

c o r p o r a t io n

r e v ie w s e a r lie r a n d

a d v an tage s

T he

V A T

th e

ab o u t

fo r

been

tax e s

t h is

in

s o m e t h in g

V A T ).

p an ace a

a ls o

a t t e n t io n

ad d e d

le a s t
th e

have

o f th e

has

o f th e

th e

S t a t e s . It b r i e f l y

at

f o r a ll

fro m

V A T

m is u n d e r s t a n d in g
v a lu e

a

th e

M a n y

r e s u lt

c o n s id e r a b le

th e

be

im p r o v e m e n t

t a x in t h is c o u n t r y a n d
a d o p t io n

g iv e n

lo c a l g o v e r n m e n t s . T h e

m u ch

o v e r v ie w

to

a s a s u b s t it u te

But

re ad

n o t - s o -p o p u la r

fo r so m e

A d m in is t r a tio n

D e s p it e

th e

w o u ld

a lle g e d

q u e s t io n e d .

or

a b b r e v ia t e d ,

ad v a n ta ge s

e ffic ie n c y .

s t r o n g ly

th e

h e ard

ap p ear

t h a t its u s e

p a ym e n ts
th e

of

u se

e c o n o m ic
of

it

a t t e n t io n

ta x . It w a s a l l e g e d

b a la n c e

has

c o m m o n ly

n u m e ro u s

its p o s s i b l e

im p r o v e

as

m ad e

In d e e d ,

s u b s t it u te

aro u n d

e ve ry o n e

ad d e d

s ig n if ic a n t ly

State s.

tax
tax

o n

it.

an d

co n s

r e v ie w e d .

1
T h e V a lu e

In s i m p l e
at e a ch

110

is a t a x l e v i e d

T a x in

o n

s t a g e o f its p r o d u c t i o n . T h e V A T

Monthly Review,

V o l.

upon

th e

re q u e st

A t la n ta ,




te rm s, th e V A T

A d d e d

to

G e o r g ia

L V II,

No.

R e se arch

7.

Fre e

O t h e r N a t io n s

th e v a lu e

is n o t a n

s u b s c r ip t io n

D e p artm e n t,

Fe deral

ad d e d

A m e r ic a n

and

to

a c o m m o d ity

in v e n t io n .

a d d it io n a l

R e serve

Bank

of

c o p ie s

a v a ila b le

A t la n ta ,

30303.

M O N T H L Y REVIEW

It is n o w

in c o m m o n

u se

in

n a t io n s . F r a n c e a d o p t e d
th e ta x w a s lim it e d
w h o le s a le r s a n d

n o t a p p ly

th e o p tio n

o r a w h o le s a le

a d o p te d

Eu rop ean

o f p a y in g

s a le s ta x . In

an d

r e t a il s a le s . W i t h

th e

e it h e r th e

e x e m p te d .

V A T . T h e

D a n is h

in c lu d in g

r a t if ic a t io n

o f th e

T re a ty o f R o m e , th e

m e m b e r n a t io n s o f th e

E u rop e an

M a r k e t c o m m it t e d

C o m m o n

to a d o p t in g a V A T

a s a fir s t s t e p

to w ard

e v e n t u a lly

h a r m o n iz in g t h e ir v a r io u s ta x s t r u c tu r e s .
an d
In

G e rm a n y a d o p te d

G e rm a n y , th e V A T

V A T 's

c o m p r e h e n s iv e
B e lg iu m
C o m m o n

m em b er, have

V A T . T he

V A T 's .

In

a d d it io n

h a v e a ls o

to

p u r c h a s e ta x a n d

T h e

D e n m ark, N o rw a y

E u rop e an

V A T 's

M a rk e t m e m b e rs have
In
an

G e rm a n y , th e
in c r e a s e

ho w e ve r, so m e
s e r v ic e s , a n d

rate s. T h e

raw

ta x e d

7 .5

p e rc e n t.

p e r c e n t . R a t e s in
n e c e s s it ie s to 2 5

is 1 4 p e r c e n t .

In

th e

fu e l a n d

B e lg iu m

In

In

w as

in t r o d u c e d

to

15

N o r w a y , th e

th e sta n d a rd

rate s a re 5

e m p lo y e d .

In

D e n m ark,

a t a 1 0 - p e r c e n t rate . T h e
to 1 2 .5

p e rc e n t.

In

p e rc e n t a n d

S w e d e n , th e

r a is e d

to 1 7 .6 5

s t ill

g o o d s an d

s e r v ic e s . T h e r e

a re n o t u n ifo r m
d o c to rs' an d

a t a ll s t a g e s o f a n

in

E u rop ean

th is r e g a r d .

la w y e r s ' f e e s a r e

to

b o th

F o r e x a m p le ,

FEDERAL RESERVE BAN K OF ATLANTA




s e r v ic e s
p ro ce ss.

P r o d u c e r s , m a n u fa c t u r e r s , w h o le s a le r s , a n d
to

c o lle c t th e tax w h e r e

a p p lic a b le . T h u s , a d m in is t r a t io n
th at o f th e

ta x , w h ic h

is w i d e l y

F in a lly , t h e

as th e

e m p lo y e d

E u rop e an

o f a V A T

d iffe r s

m o r e f a m ilia r

s in g le - s t a g e s a le s ta x e s, s u c h

r e t a il s a le s

in t h e U n i t e d

S tate s.

V A T 's a p p ly to im p o r t s a s
p ro d u ce d

go o d s an d

s e r v ic e s .

It d o e s n o t , h o w e v e r , a p p l y t o e x p o r t s .
E x p o r t-d e s tin e d

g o o d s a re e it h e r e x e m p t e d
on

th e m

are

t im e o f e x p o r t a t io n . T h is fe a tu r e
th e U n ite d

S ta te s (w h ic h

tru e ) th a t th e ta x c re a te s a n
ad v an tage

fo r E u ro p e a n

re b a te d
le d

fro m

at th e

to c la im s

in

a re , a t b e s t, o n ly p a r t ly
u n f a ir c o m p e t it iv e

n a t i o n s in

It is n o w

in t e r n a t io n a l

g e n e r a lly a c c e p t e d , h o w e v e r , th a t a n y

in t e r n a t io n a l c o m p e t it iv e
o n ly te m p o r a r y .
E u rop ean
re ason

ad v a n ta ge

N o r w a s it t h e

n a tio n s a d o p t e d

fo r th e a d o p t io n

s in g le -s t a g e
c o n c e r n in g

T in b e r g e n

w a s th e

tax, b u t m a n y

s a le s ta x e s. E u r o p e a n

a s fa r b a c k

t u r n o v e r t a x e s in a c o m m o n
N e u m a rk

C o m m o n

M a r k e t s t u d ie d

and

D e n m ark,

n a t io n s

s t u d ie s
in t h e i r t a x

n a t io n s . B o t h

th e

th e p r o b le m s o f

m a r k e t s e tt in g .

In

R e p o rt to th e E u ro p e a n
th e

p r o b le m s

an

a m o n g

r a is e d

e c o n o m ic

t h e g a i n s in e f f i c i e n c y t h a t w o u l d

ta x h a r m o n iz a t io n

gro ss
r e p la c e d

as 1953, w h en

R e p o rt d o cu m e n te d

1 96 3, th e

m o st

m u ltis t a g e

p o t e n t ia l im p r o v e m e n t s

stru c tu re s b e g a n

E u rop e ,

r e p la c e e x is tin g

o r an o th e r. T h e

r e p la c e d

tu rn o v e r, o r c a s c a d e

p r im a r y

r e s o u r c e s . In

m o s t n a t io n s a d o p t e d V A T 's to
fo rm

be

th a t

th e V A T . T h e

th e e ffic ie n t u s e o f e c o n o m ic

s a le s ta x e s o f o n e

w o u ld

re aso n

o f V A T 's w a s to e n h a n c e

r e s u lt fr o m

re p o rts s o u g h t to d e te r m in e

stru c tu re s th a t w o u ld

by

u n io n

th e v a r io u s m e m b e r
tax

r e s u lt in t h e g r e a t e s t g a i n s

re co m m e n d e d

n a t io n s

e x e m p t in

go o d s an d

e c o n o m y 's p r o d u c t io n

to e c o n o m ic e ffic ie n c y , a n d

a re e x c e p tio n s , h o w e v e r .

in t h e v a r i o u s

on

p u rch aser

c a p ita l g o o d s .
a p p lie s to t a x a b le

p e rc e n t.

p r o fe s s io n a l s e r v ic e s a re n o t a lw a y s ta x e d ,

b u t th e V A T 's

tax o n

T he V A T

b o th

s u b s t it u tio n

re p o rts

o f V A T 's f o r e x is tin g

t u r n o v e r ta x e s.
T he

V A T 's a p p ly

b y th e

a g a in s t h is o t h e r ta x lia b ilit y . C o n s e q u e n t ly , t h e r e

in it ia l

r a t e is c u r r e n t l y 2 0 p e r c e n t o n

Eu rop ean

b e c r e d it e d

d iffe r e n t ta x s y s t e m s w it h in

added.

G e n e r a lly , th e

So m e

18

n o n m e m b e r n a t io n s , a

has been

1 1 .1 -p e r c e n t ra te h a s b e e n
In

6 p e rc e n t o n

N e t h e r la n d s , th e

L u x e m b o u r g , th e

S c a n d in a v ia n

la t e r r a is e d

a re ta x e d at

lu x u r ie s , w i t h

th e

t h e t a x in

c a p ita l g o o d s . T a x e s p a id

c a p ita l g o o d s m a y

p r e v a le n t fo r m

e le c tr ic ity a re

v a ry fro m

p e rc e n t o n

r a t e w a s la t e r i n c r e a s e d

v a lu e

fo o d

v a lu e

1 0 p e r c e n t , r e s p e c t iv e ly .

s in g le - r a t e V A T
th e V A T

h a s f o u r d iffe r e n t

n e c e s s i t i e s is 4 p e r c e n t , a n d

p e rc e n t an d

p r o fe s s io n a l
r a t e is o n l y

L u x u r ie s a r e t a x e d a t 3 3 .3

p e rc e n t b e in g s ta n d a r d .
rate o n

F o r fo o d stu ffs,

p e rc e n t o n

p ro d u cts an d

p e rc e n t, w h ile

a t 1 7 .6

p e rce n t, b u t

m a t e r ia ls , s o m e

F re n ch V A T

an d

C o m m o n

m u lt i r a te V A T 's .

o t h e r it e m s , t h e

g e n e r a l r a t e is 2 3

a d d e d , b u t fa rm
o n ly

a d o p te d

n o t.

tra d e .

m u ltir a t e

p e r c e n t is p l a n n e d .

a fe w

5 .5 p e r c e n t . T h e

Sw e d e n

g e n e r a l, th e

r a t e is g e n e r a l l y 1 1

to 1 2

p o p u la r .

its a d o p t i o n .

u se b o th
In

an d

c la s s o f g o o d s —

th e tax , o r ta x e s p a id

Ir e la n d , A u s t r ia , a n d

are c o n s id e r in g

s in g le -r a te stru c tu re s.

fo r

th e

are

p r o d u c t s a re g e n e r a lly n o t. T h e

w e ll a s d o m e s t ic a lly
has

th e n o n m e m b e rs

M a r k e t , t h e t a x is a l s o

a d o p t e d V A T 's .

S w it z e r la n d

I t a l y is

to s u b s t it u te a V A T

th e

s e le c t iv e e m p lo y m e n t tax. A m o n g
o f th e C o m m o n

n e w e st

in J a n u a r y 1 9 7 3 . B r i t a i n

its i n t e n t i o n

p r e s e n t ta x e s—

It a ly o f t h e

B r it a in , t h e

n o t yet a d o p te d

F a rm

s u b s t a n t ia lly f r o m

N e t h e r la n d s a n d

fe e s

t h e tax. B a r b e r s '

b u t n o t in S w e d e n . R e n t s a r e g e n e r a l ly

r e t a ile r s a r e r e q u ir e d

e x is tin g tu rn o v e r ,

s u i t in 1 9 6 9 . O n l y

to c h a n g e

an n o u n ce d

an

t h e e a r lie r , le s s

M a r k e t n a t io n s a n d

s c h e d u le d

tw o

F re n ch

f o llo w e d

in J a n u a r y 1 9 6 8 .

r e p la c e d

o r g r o s s s a le s tax , a s h a d

F ran ce

v e t e r in a r ia n s '

m o s t i m p o r t a n t e x e m p t i o n , h o w e v e r , is a p a r t i c u l a r

is n o

t h e m s e lv e s

an d

h a ir d r e s s e r s ' fe e s a r e e x e m p t f r o m

D e n m ark,

1967, D e n m ark

t h e fir s t c o m p r e h e n s i v e

a r c h it e c ts '

M e d ic in e s a re u s u a lly s u b je c t to

r e t a ile r s .

a t a ll t o

ta x in c l u d e s a ll s t a g e s o f p r o d u c t io n ,
t h e fin a l

but

in 1 9 5 4 , b u t

to m a n u fa c tu re rs a n d

d id

W h o le s a le r s h a d
V A T

m an y

th e fir s t V A T

w ill b e

tu r n o v e r ta x fo r m e r ly
sh o w n

c o n s id e r a b ly

m o re

c le a r ly

d iffe r e n t fr o m

th e t u r n o v e r ta x a p p lie d
p r o d u c t io n
r e s u lt, t h e
n o t o n ly

to

u se d

in

E u rop e—

th e V A T .

gross s a l e s

sta ge , w h e re a s th e V A T

o f th e

In

is

e ffe c t,

at each

d o e s n o t. A s a

t u rn o v e r tax a t th e s e c o n d

to th e v a lu e

as

la t e r in t h e a r t ic le —

stage

a p p lie d

p r o d u c t cre a te d

in

111

th e s e c o n d

sta g e b u t a ls o

t h e fir s t s t a g e a n d

to th e v a lu e

t h e ta x le v ie d

on

sta g e . T h is m e a n t th a t fir m s a n d
h ig h

d e gre e

rate th a n

fir m s a n d

le s s v e r t ic a l in t e g r a t i o n , e v e n
tax rate w a s th e s a m e
e ffe c t iv e

ta x ra te v a r ie d

p ro d u cts, a n d
ta x a t io n
o f an

on

can

a m o n g

in

p a id

e v a s io n

t h e fir s t

in d u s t r ie s w it h

o f v e r t ic a l in t e g r a t io n

effective t a x

c re a te d

it in

a

th e

le g a l

a m o n g fir m s , a m o n g
d iffe r e n tia l

re so u rce s. T h u s, th e

o r to a d o p t s o m e

fo rm

o f a n a t io n a l in c o m e
th a t c o n tin u e d

a n a t io n a l s a le s ta x w a s p r e fe r a b le , b o t h

in t h e s e

M a r k e t n a t io n s a n d
o f th e

m o re

ta x e s w e r e

n a t io n s a n d

m ig h t h a v e

been

in

th e

fa m ilia r a n d

A n

w o u ld

m o re

in

p r o b a b ly

have

m o re

to

h a r m o n iz e

ta x e s. T h e V A T

ta x e v a s io n

p a tte rn s, s u c h

n a t io n s .

is a l m o s t a
B u s in e s s

w a s c o n s id e r e d

ap p e a re d

to

be

to

d iffic u lt a n d

le a s t lik e ly t o

to

t h is c o u n t r y . T h e

b y a co rp o rate
n a r r o w ly

r e s u lt

an d

o f th e

p o lit ic a l. T h e

s im ila r ta x w a s

tax w e r e

in c r e a s e d ,

o r

w ith

th e

th e

c o m p r o m is e , th e

th e

n u m e r o u s e x e m p t io n s fr o m

T h u s, th e V A T w a s n o t e x p e c te d
w it h

p r o b a b ly a re

th e

th e

to b e

u se s o f e c o n o m ic

in f lu e n c e d

e x e m p t io n s a n d

w o u ld
fo rm

n a t io n s

fa c e d w ith
t h is
a

tax w a s

a s w e ll. T h e

tax .

t r u ly n e u tr a l

be even

n a t io n s w it h

tax

o f s a l e s t a x a t i o n , it d o e s n o t d i s c r i m i n a t e
u n in t e n d e d

an d

c a p r ic io u s

in e c o n o m i c
th e V A T

e ffic ie n c y . T h e

to a s in g le -s t a g e

th a t fo r in c o m e
fir m s to
c o u ld

be

p r o b a b ly d id

ta x e s. T h e

m in im iz e
u se d

in

in c r e a s e d .

re ason

g a in

fo r p r e fe r r in g

s a le s ta x w a s s im ila r to
re co rd s

r e q u ir e d

th e ir in d iv id u a l V A T

b y th e g o v e r n m e n ts to

fo r

b u rd e n s
p reve n t

112

to

u p

to th e

n o n co rp o rate

b u s in e s s e s

p r o d u c t iv e

in a b o u t $ 2 3 . 4
In

M ic h ig a n .

b y co rp o rate

m illio n

revenu e

d u r i n g its

its f is c a l y e a r , it r a is e d

m i ll i o n . T h u s , in 1 4 y e a r s t h e t a x y i e ld
th a n

in c r e a s e d

f iv e f o ld .

D u r in g

t h is t im e ,

b u t b y o n ly t w o fo ld .

ta x b a s e

had

been

e ro d e d

a d d e d . C le a r ly , th e ta x w a s a n

gro w th
T he

r a is e r a n d
in

w as

r e s p o n s iv e

In
as

a d d it io n a l e x e m p t io n s , d e d u c tio n s , a n d

lo o p h o le s

e ffe c t iv e

to e c o n o m ic

th e State .

tax h a d

so m e

le a s t p a r t ly le d

to

u n d e s ir a b le

its d e m i s e .

a s p e c ts , w h ic h

at

F o r e x a m p le , u t ilit ie s

w e r e t a x e d a t a lo w e r rate . M o r e o v e r , c a p it a l
e x p e n d it u r e s a n d

d e p r e c ia t io n

w e re

in a d e q u a t e ly

t re a te d . T h e t r e a t m e n t o f in t e r e s t a n d

e q u ity




a

m o re

e a r n in g s

'Vertical integration refers to the amount of involvement of a
single com pany in the entire production process of a commodity.
For example, a company that manufactures, wholesales, and
retails shoes w ould be more vertically integrated than a company
that merely manufactures shoes.

A s

in c r e a s e d

reven u e

w as

r e s u l t in s o m e

tax

fr a n c h is e

o ver $128

w e re

m a n n e r o f th e

t u r n o v e r tax . T h u s , t h e s h if t t o t h e V A T
e x p e c te d to a n d

a p p lie d

ta x w a s a h ig h ly

a d d it io n , th e

le s s n e u t r a l. N e v e r t h e le s s , a s a

in c o m e

co rp o rate

r e a s o n a b l y s u c c e s s f u l in

r a is e r , b r i n g i n g

rate s h a d

ra te d iffe r e n tia ls , th e V A T

p o lit ic a l

B u s in e s s A c tiv itie s T a x w a s

fir s t y e a r o f e x is t e n c e .

re so u rce s

b y t h e ta x . In

a

co rp o rate

S t a t e 's

s a le s

in a d e q u a t e

need,

e n acte d .

r e t a il le v e l a n d

r e s p e c t t o e c o n o m i c a c t iv it y , a n d ,

c o n s e q u e n t ly , th e

b o th

in

la t e r .

to M ic h i g a n 's

m a n u fa c tu r e rs , b u t th e tax e x te n d e d

n o t ge n eral even

t a x r a te , if f o r n o o t h e r r e a s o n

re ason s

p r im a r ily fis c a l a n d

been

w h e th e r

ad o p te d ,

t h is ta x

o f th e

14 ye ars

th a t th e V A T

is p r o b a b l y

le g is la t u r e

B u s in e s s A c tiv itie s T a x

r e a s o n s le a d in g

o ve r

o n ly

r e p la c e d

so m e

f o r its r e p e a l

C o n fro n te d

be

an d

tax . A

r e v ie w

state h a d

en su e d

s h o u ld

to

o f th e

ad d e d

tax , h o w e v e r , la s t e d

b y th e W e s t V ir g in ia

im m e d ia t e

a d o p t io n

v a lu e

o th e r sta te s h a v e e m p lo y e d

M ic h ig a n
T h e

a tax
its

is n o t e n t i r e l y

r e p e a le d

n e t in c o m e

re je c te d

It is i n s t r u c t i v e

T he

w as

it w a s

fo r th e a d o p t io n

ta x

b e th e

tax w a s e s s e n t ia lly a ta x o n

M ic h ig a n . T h u s , th e V A T

u n t il 1 9 6 7 , w h e n

b a t t le

le g is la t u r e a d o p t e d

M o s t o f th e to ta l ta x b ill w a s p a id

th a n

th e b e st

in M ic h i g a n

a d m i n i s t r a t i v e l y e n f o r c e a b le . Y e t , it w a s r e c o g n i z e d

a u n ifo r m

m o re

B u s in e s s A c t iv it ie s T a x . D e s p it e

n a m e , th e

re ve n u e s.

a s th e p r e v a le n c e o f

in d i s t o r t i o n s t o t h e e c o n o m y a n d

th e

w it h in

r a is e r .

r e la t iv e ly e a s y .

w it h

be d o n e

m u ch

ta x e s b y a d o p t in g e n tir e ly

In 1 9 5 3 , t h e M ic h i g a n
c a lle d

in

had

O f th e v a r io u s f o r m s o f s a le s t a x a t io n , a g e n e r a l
V A T

n e w

fo rm .

o f

have been

s m a ll s h o p k e e p e r s , m a d e c o lle c t io n
e v a s io n

fo rm

fo r a v o id in g h ig h e r in c o m e

m an y E u rop e an

o r g a n iz a tio n

tax stru c tu re s a n d

c o n c e iv a b ly

o t h e r t a x e s , it w a s p r o b a b l y

in 1 9 6 7 ; n o

th e m

p o t e n t ia l a s a r e v e n u e

w a s th a t in c o m e

tr a d itio n

e x t e n s iv e ly

f u r t h e r in c r e a s e s in

a d d it io n a l re a s o n

ta x a t io n

M a r k e t n a t io n s ,

h a r m o n iz e

t h is c o u ld

m ad e

a v a ila b le .

n e w

th e

n o n m e m b e r

u se d

d e tr im e n t a l. S o m e

a ls o

in

tax .
u se o f

im p o r ta n t re a s o n s w a s

a lr e a d y

n a t io n a l s a le s tax, h o w e v e r , w o u l d

c o n s id e r a b ly

to

a s in g le -s t a g e

th e V A T .

th e C o m m o n

T h e V A T

w a s w h e th e r to c o n tin u e

Se ve ral re aso n s su g g e ste d

n a t io n s . O n e

F in a lly , w it h in

an

u s e o f a n a t i o n a l s a l e s ta x , b u t in a d i f f e r e n t f o r m ,

th a t in c o m e

reco rd s

t o s u b s t i t u t e a b e t t e r t a x f o r it.

T h e s e c o n d a r y q u e s t io n

C o m m o n

w ith

d iff ic u lt w it h

t h e r e w a s a d e s ir e

w ith

p o s s ib le
r e q u ir e d

E u rop ean

n a t io n s ' in itia l c o n c e r n w a s t o e lim in a t e
in e ffic ie n t ta x a n d

m o re

fe a s ib le

g r e a tly d is t o r t th e e ffic ie n t a llo c a t io n

e c o n o m y 's

s im p ly , th e

rate s. A lt h o u g h

b o t h . 1 A s a r e s u lt, t h e

in d u s t r ie s . S u c h

e v a s io n

a lo w e r

in d u s t r ie s w it h

th o u gh

th a t m ig h t b e

tax . Q u i t e

te n d e d

fin a n c in g . T h e se , h o w e v e r , w e r e

p r im a r y

re a so n s fo r th e

A c t iv it ie s T ax . O n e
r a is e d

d iv id e n d

to fa v o r d e b t fin a n c in g o v e r

a g a in s t th e

p r o f i t , it s h o u l d

o f th e

p r in c ip a l a r g u m e n ts

t a x w a s t h a t if a f ir m

pay n o

n o t th e

r e p e a l o f th e B u s in e s s

m akes no

t a x in o r d e r t o a v o i d

M O N T H L Y REVIEW

a d d it io n a l h a r d s h ip
fir m
sam e

to

"a d d

t im e .

t o t h e f i r m . It is p o s s i b l e f o r a

v a lu e " a n d

If th is h a p p e n s , t h e fir m

w o u ld

a ta x lia b ilit y . S u p p o r t e r s o f t h e V A T
even

a m o n e y - lo s in g fir m

g o v e r n m e n t s e r v ic e s a n d

V a lu e

in c u r

r e p lie d

Added

in

s h o u ld
n o

a r g u m e n t w a s v e r y i n f lu e n t ia l in
fin a l

b e tax e d

p r o f it - n o
th e

to p a y

ta x

re p e a l o f th e

re ason

f o r its

a

S a le s of Output

P ro ce ss

M a n u - W hole­ Retail
er
facturer sa le r

Cum u­
lative

$1000

$2400

$100

P u rch a se s of
M ate rial In p u ts
VALU E ADDED

P ro d u c tio n

F o u r-S ta g e

Raw
M a te ria ls
Producer

th at

r e c e iv e s b e n e f it s fr o m

fo r t h e m . N e v e r t h e le s s , th e

B u s in e s s A c tiv itie s T ax . A

TABLE 1

to s u ffe r a lo s s a t th e

$500

$800

—

100

500

800

1400

100

400

300

200

1000

re p e a l w a s to e a s e th e s t in g o f in t r o d u c in g a

W a ge s

60

275

200

100

635

state

in c o m e

Rent

10

25

40

50

125

been

s u ffic ie n t to b r in g th e d o w n f a ll o f th e U n ite d

Interest

10

50

25

25

110

Profit

20

50

35

25

130

tax . T h e s e f a c t o r s s e e m e d

S t a t e s ' o n ly e x p e r im e n t w it h

W h a t

E x p e r ie n c e w it h
p o p u la r a n d
u se d as an

Is a

V a lu e

th e V A T

a d d it io n

a v a lu e

ad d e d

A d d e d

Tax?

has p ro ve d

e ffe c t iv e fo r m

to

have

tax .

it t o b e

a

o f t a x a t io n . It c o u l d

to o r as an

it s e lf. In
be

a lt e r n a t iv e to

s e v e r a l e x i s t i n g t a x e s in t h is c o u n t r y .

L e t u s lo o k ,

t h e r e f o r e , in s o m e w h a t g r e a t e r d e t a il a t t h e t a x

p a r t ic u la r , t h is s e c t io n

a d m in is t r a tio n

an d

c o n c e rn s th e

th e b a se o f th e

t a x . T h a t is , w e

lo o k a t th e im p o r t a n t p r a c t ic a l a s p e c t s o f h o w
t a x is a p p l i e d

an d

th e

o f w h a t is t a x e d . W e
d iffe r e n c e b e t w e e n
lie s in

s h a ll f in d
th e V A T

its a d m i n i s t r a t i o n .

h o w e v e r , it is c l o s e l y k i n

th a t th e p r im a r y

an d

In

e x is tin g ta x e s

its c o n c e p t a n d

FEDERAL RESERVE BAN K O F ATLANTA

a r e t h a t it

a p p lie s a t a ll ( o r m o s t ) s t a g e s o f p r o d u c t io n , r a t h e r
th a n o n ly

o n e sta ge , a n d

ra th e r th a n
each

p a rt,

only t o t h e
added a t e a c h p r o d u c t i o n
value added i s t h e d i f f e r e n c e

s t a g e . T h a t is , t h e t a x a p p l i e s

value o f

p r o d u c t s t h a t is

s ta g e . F o r a fir m ,
b e tw e e n
an d

it a p p l i e s t o o n l y

a ll, o f t h e v a l u e o f t r a n s a c t i o n s a t

t h e v a lu e o f t h a t f i r m 's o u t p u t w h e n

th e v a lu e

pu rch ased

o f th e m a t e r ia ls a n d

fro m

T h is s a m e d iffe r e n c e

in p r o d u c i n g

is a t w o - s i d e d

in v a l u e

s o ld

s u p p lie s

o th e r fir m s fo r u se

th e o u tp u t. B u t v a lu e a d d e d

c o in .

is a l s o e q u a l t o

th e

c o s t o f n o n m a t e r i a l in p u t s in t h e p r o d u c t i o n
p r o c e s s . T h a t is , it w i l l e q u a l t h e s u m
w age,

re n t, a n d

o f t h e f i r m 's

in te r e s t p a y m e n t s , a n d

its

r e s id u a l p r o fit .

T h e A d m in is t r a tio n

T h e re are tw o
V A T

b a s ic

g e n e r a lly

deduction method a n d
th e d e d u c tio n

o f th e V A T

m e t h o d s o f d e te r m in in g th e

lia b ilit y . T h e s e a r e

re fe rre d

to

as th e

addition method.

th e

U n d e r

m e th o d , h o w e v e r, th e re a re tw o

d if f e r e n t w a y s to c o m p u t e

subtraction method

an d

th e ta x lia b ilit y —

th e

th e

credit method.

T h u s,

t h e r e a re a c t u a lly th r e e m e t h o d s to d e t e r m in e
th e V A T

lia b ilit y , t w o

an d

u n d e r th e a d d it io n

o n e

T h e c r e d it m e t h o d

u n d e r th e d e d u c tio n

is g r a n t e d
T he

f o r ta x e s p a id

s u b t r a c t io n

m e th o d

d ir e c t ly b y s u b t r a c t in g
s a le s a n d

to

to ta l s a le s a n d
o n

m e th o d

m e th o d .

a c q u i r e s its n a m e

t h e t a x r a t e is a p p l i e d

b e cau se
a c r e d it

m a t e r ia l p u r c h a s e s .

c o m p u t e s v a lu e

ad d e d

m a t e r ia l p u r c h a s e s fr o m

a p p lie s th e ta x ra te to t h e d iffe r e n c e .

F in a lly , u n d e r t h e a d d i t i o n
is c o m p u t e d




its b a s e ,

to se v e r a l e x is t in g ta x e s.

T h e d is t in g u is h in g fe a tu r e s o f a V A T

An example may clarify the concept of value
added. Table 1 depicts a production process inI
volving four stages—raw materials production,
manufacturing, wholesaling, and retailing. It is
assumed for simplicity that the raw materials pro|
ducer buys no material inputs for his own use
other than his capital investment. He sells raw
I
materials to the manufacturer for $100. The differ­
ence between his sales and purchased inputs is
$100, which is his value added. From this amount,
he must pay wage, rent, and interest expenses
|
totaling $80, thus leaving a profit of $20. The
manufacturer converts the raw materials into prod­
ucts that he sells to a wholesaler for $500. The dif­
ference between this amount and his $100 worth
of purchased materials leaves his value at $400,
which again must equal the sum of wages, rent,
interest, and profit. Similar columns summarize the
activities of the wholesaler and the retailer.
Some general characteristics should be noted
from Table 1. First, at any particular stage in the
process, value added is equal to either (1) the
j
difference between sales and material purchases or
(2)
the sum of factor payments including profits
(wages, rents, interest, and profits). Second, the
|
sales value at any one stage equals the sum of
value added at that stage and all previous stages.
Thus, the $1,000 sales value at the final or retail
|
stage equals the sum of value added at all four
\ production stages (as shown in the cumulative col­
umn), and, hence, the sum of factor payments at
I
all stages. It also equals the difference between
the cumulative totals of sales and purchased maj
terial inputs.

th e

im p o r ta n t c o n c e p tu a l a s p e c t

m e t h o d , v a lu e a d d e d

b y a d d i n g t o g e t h e r a ll f a c t o r

113

TABLE 2

Table 2 depicts how the VAT would be com\ puted under the credit method in a highly simpli­
fied economy. The table retains the same four- j
stage production process shown in Table 1. For
simplicity, it is assumed that there is no capital in- 1
vestment and no depreciation. Suppose that the ;
VAT is levied at a 10-percent rate. Under the credit j
method, the selling firm determines its t a x liability i
by applying the 10-percent tax rate to its total sales, j
It then deducts from this gross amount the amount
j
of any VAT paid on its purchases of material in­
puts. The difference is its net tax liability of the
firm. In Table 2, for example, the raw materials
producer applies the 10-percent tax rate to its sales
of $100. Since it has no purchased material inputs,
its gross and net tax liabilities are both $10. The
total cost of the sale t o t h e manufacturer is $110,
j
of which $10 is paid to the government and $100
to the raw materials producer. The manufacturer
then converts the raw material into a finished prod­
uct, thereby adding $400 in value. In order to deter­
mine his tax liability, the manufacturer follows a
similar procedure. He sells his output for $500 and
applies the 10-percent tax rate to this sale. His
gross tax liability is thus $50, making the total cost
to the wholesaler $550. The manufacturer, how\ ever, deducts from the $50 gross tax liability the j
5 7 0 tax he paid on his purchases from the raw
materials producer, leaving his net tax of $40—or
10 percent of his value added of $400. Similar pro­
cedures are followed by the wholesaler and the •.
retailer until the final sale for consumption ends
the production process.
The second deduction method, the subtraction
method, is much simpler. In this case, the firm
computes its value added by subtracting its pur­
chases of material inputs from its sales of output \
and applies the VAT rate directly to this amount. I
The method is shown in Table 3. The addition
method, however, takes a fundamentally different !
approach. As shown in Table 1, the sum of factor
payments and profits equals value added. Thus,
under the addition method, the VAT liability is
computed by adding factor payments and profits
and applying the tax rate to the sum. The process \
is illustrated in Table 4.

VAT

is a p p l i e d

in c lu d in g

T h e a d d it io n
se em

p r o f it s —

an d

th e tax

rate

(S e e th e e x a m p le

th a n

in t h e

b o x .)

H o w e v e r, th e

u se d

in t h e

th e V A T

r e c o r d s a re a u t o m a t ic a lly g e n e r a t e d
d is c o u r a g e

114

ta x e v a s io n .

$500.00

$800.00

$1000.00

100.00

500.00

800.00

A dded

100.00

400.00

300.00

200.00

Tax on Total S a le s

10.00

50.00

80.00

100.00

10.00

50.00

80.00

10.00

40.00

30.00

20.00

110.00

550.00

880.00

1100.00

V alue

Credit for Taxes
Paid on
Pu rch a se s
V A T Lia b ility to
G overnm ent
Total C o st of
O utput to
Buyer

JThe total cost figu re s in the table involve several h ighly
sim p lifie d a ssu m p tio n s. In general, they a s su m e that taxes
are fu lly reflected in h ighe r sa le s prices. For broad ly based
taxes a p p ly in g to all or nearly all g o o d s and se rvice s in
the eco n o m y (su ch a s a VAT), th is is a h igh ly s u sp ic io u s
a ssu m p tio n . The respon se of s a le s price s to taxe s in su ch
c a se s w ould depend not o n ly on the tax but a lso on n u m er­
o u s other e q u ally im p o rtant factors, su ch a s m onetary
p olicy actions.

TABLE 3

VAT

C o m p u t a t io n

under

th e

S u b t r a c t io n

Raw
M anu­
M a te ria ls
Produ ce r facturer
Sa le s of Output

$100.00

P u rch a se s of
M ate rial In p u ts
Value

Added

M e th o d

W ho le ­
sa le r

R e ta il­
er

$500.00

$800.00

$1000.00

__

100.00

500.00

800.00

100.00

400.00

300.00

200.00

10.00

40.00

30.00

20.00

VA T

TABLE 4

VAT

C o m p u t a t io n

u n d e r th e

A d d it io n

Raw
M a te ria ls
Produ ce r

M anufactu re r

M e th o d

W holesa le r

Retailer

$ 60.00

$275.00

$200.00

Rent

10.00

25.00

40.00

$100.00
50.00

Interest

10.00

50.00

25.00

25.00

20.00

50.00

35.00

25.00

100.00

400.00

300.00

200.00

10.00

40.00

30.00

20.00

VAT

c r e d it

th e

lia b ilit y ,
th at te n d

r e c e iv e
V A T

to

F o r e x a m p l e , in o r d e r t o




$100.00

Eu rop ean

n a t i o n s in o r d e r t o c o m b a t t a x e v a s i o n . W i t h
o f c o m p u t in g

R e ta il­
er

th e c r e d it m e t h o d .

is t h e a p p r o a c h

c r e d it m e t h o d

W ho le ­
s a le r

—

Profit

m e t h o d s m ig h t

M e th o d 1

M anu­
facturer

S a le s of Output

Valu e A dded

s u b tr a c tio n

le s s c o m p l i c a t e d

m e th o d

an d

to th e su m .

C r e d it

Raw
M a te ria ls
Produ ce r

C o st of In p u ts

W a ge s

p a ym e n ts—

u n d e r th e

h is ta x c r e d it a n d , t h e r e fo r e , r e d u c e

lia b ilit y , t h e

pu rch ase
p a id

tax p a ye r m u st b e

r e c e ip t s t h a t it e m iz e

b y h im

on

a b le

th e V A T

to

h is

p r o v id e

a c t u a lly

h is p u r c h a s e s . T h is s a m e

r e c e ip t

M O N T H L Y REVIEW

p r o v id e s th e ta x c o lle c t o r w it h

a reco rd

o f th e

s e ll e r 's s a le s . T h u s , t h e s e ll e r h a s d i f f i c u lt y
u n d e r s t a t in g h is s a le s (a n d , h e n c e , u n d e r s t a t in g
h is t a x lia b ilit y ) . T h e
t o h e lp

r e c e ip t , w h ic h

th e b u y e r m in im iz e

p r o v id e s a re c o r d

to th e

is n e c e s s a r y

h is V A T

lia b ilit y , a ls o

go v e rn m e n t—

d is c o u r a g e s th e s e lle r f r o m
lia b ilit y .

In

E u ro p e , th e se

v a lu a b le

in

c h e c k in g

w h ic h

c h e a t in g o n

h is V A T

r e c e ip t s h a v e

in c o m e

a ls o

p ro ve d

ta x re tu rn s.

T h r e e T y p e s o f V A T 's

T he

d is c u s s io n

b e tw e e n

t h u s fa r h a s n o t d is t in g u is h e d

p u r c h a s e s o f c a p ita l a n d

g o o d s . T h is d is t in c t io n

an d

th e

c o n s u m p t io n

m e th o d

c a p ita l g o o d s fo r ta x c o m p u t a t io n
d e te r m in a n t s o f th e ta x b a s e a n d
b e t w e e n V A T 's
g o o d s

t h a t a fir m

tra n sfo rm e d
o n e

an d

are

p u rc h a se s are

o f th e

t h a t is o n l y

n e w sp ap e r o r even

u se d

p r in tin g
up

o v e r a lo n g p e r io d
T w o

r e la t io n s h ip s

im m e d ia t e ly
F o r e x a m p le ,

p r i n t i n g p r e s s is n o t e n t i r e l y u s e d

a n e w sp ap e r. T h e

h a n d lin g

o t h e r t y p e s o f t a x e s . N o t a ll

in t o a d if f e r e n t p r o d u c t .

p r o d u c in g o n e

o f

im p o r ta n t

in

u p

in

o n e e d it io n

th e p r o d u c t io n

p ro ce ss

o f t im e .

p r im a r y t y p e s o f V A T 's e v o lv e f r o m

in w h i c h

o f

p r e s s is a c a p i t a l g o o d

c a p ita l g o o d s a re tre a te d .

a re fu lly d e d u c t ib le

a t t h e t im e

th e w a y

If c a p it a l g o o d s

th e y are p u rc h a se d ,

j u s t a s a r e p u r c h a s e s o f o t h e r m a t e r ia l in p u t s , th e n
th e y a re e x c lu d e d

fro m

th e re fo re , o n ly to

th o se g o o d s p ro d u c e d

th e tax b a se . T h e

c o n s u m p t io n . T h is ty p e o f V A T

consumption type VAT.
o n ly th e d e p r e c ia t io n
fro m

s a le s , t h e n

th e

O n

on

in c o m e
ad d e d

typ e V A T

c a p i t a l g o o d s is d e d u c t i b l e
is v e r y s i m i l a r t o w h a t
an d

income type VAT.

th e
T h e

b a s e e s s e n t ia lly c o n s is t s o f v a lu e

fo r c o n s u m p t io n

u se

p lu s v a lu e a d d e d

n e t a d d i t i o n s t o t h e c o u n t r y 's s t o c k
In

to as a

t h e o t h e r h a n d , if

ta x b a s e

to as an

f o r fin a l

is r e f e r r e d

e c o n o m is t s c a ll n e t n a t io n a l in c o m e
t a x is r e f e r r e d

ta x a p p lie s ,

E u ro p e , th e c o n s u m p t io n

fo r

o f c a p ita l g o o d s .

typ e V A T

is

e m p lo y e d . 2

V A T

C o m p a re d

U s i n g t h e e x a m p l e s in
co m p are
cascade
so m e
V A T

th e V A T

w it h

O th e r Taxes

th e b o x e s p e r m it s
th e

in t e r p r e t a t io n ,
w it h

w e

a c o m b in a t io n

as th e V A T

in

u s to

r e t a il s a le s ta x a n d

t a x p r e v i o u s l y p o p u l a r in

C o n s id e r a c a s c a d e

S in c e

W it h

m ay

a ls o

co m p are

o f ta x e s o n

ta x le v ie d

th e

E u ro p e . W it h
th e

in c o m e s .

at th e sa m e

t h e e x a m p l e s , t h a t is , a t 1 0

rate
p e rc e n t.

t h e t a x a p p li e s f u lly t o a ll s a le s w i t h o u t

c r e d it f o r p r e v io u s ta x e s p a id , a n d
c u m u la t iv e

s a le s a re $ 2 ,4 0 0

The differences between the computations of
value added under these two types and the result­
ing taxes may be described with tabular examples.
Table 5 shows the computation of the tax bases
for an income type and a consumption type VAT.
Purchases and sales are broken down in the table
according to whether the goods sold are used by
the buyer as an intermediate or capital good in
the production process or as a final consumer
good. Value added under the consumption base
is simply the difference between total sales and
total purchases of inputs, whether used as inter­
mediate or capital goods by the buyer. Value
added under the income base is the difference
between total sales and the sum of purchases of
intermediate goods and depreciation of capital
goods. Thus, value added under the income base
for the raw materials producer is only $90, since
his capital stock is assumed to have depreciated
by $10. Even though he did not actually purchase
any capital goods, he is still allowed a deduction
for depreciation. The manufacturer computes his
value added by deducting the costs of his inter­
mediate input purchases ($425) and the deprecia­
tion on his capital stock ($35) from his total sales
($800). Similar computations are made by the
wholesaler and the retailer. The total t a x base
under the income concept is higher than under
the consumption concept by the amount of net
investment. The income type VAT base is $1,040,
but the consumption base is only $1,000.
Table 6 shows how the tax liability would be
computed under the two concepts by using the
credit method. Computation under the consump­
tion base is the same as was shown in Table 2.
For the income base, the taxpayer also computes
the tax due on his total sales. In this base, how­
ever, he is allowed credit for the tax paid on his
purchases of intermediate inputs plus his deprecia­
tion. Thus, his credit for a 10-percent tax rate, as
shown in the Table 6, is 10 percent of his pur­
chases of intermediate inputs plus 10 percent of
his depreciation. As seen in the table, the distribu­
tion of the tax burden is changed when the tax
base is changed. For example, the manufacturer's
tax bill is reduced by $3.50 when a credit is al­
lowed for depreciation in the tax base. The whole­
saler's tax liability, however, rises by $5 because
some of his purchases are for capital investment
and these purchases exceed his depreciation
claimed. In the aggregate, the tax bill is greater by
$4 under the income base— o r 10 percent times
the amount of net investment.

a s s u m in g th a t

( T a b le 1 ), t h e t o t a l

ta x b ill w o u l d

be

$ 2 4 0 . In

o r d e r to a c h ie v e a y ie ld

e q u a l to th e V A T , th e c a s c a d e
to b e o n ly s lig h t ly

m o re

th a n

h o w e v e r , o v e r s im p lifie s o n e
d is a d v a n t a g e s o f th e c a s c a d e

ta x ra te w o u ld

need

4 p e r c e n t . T h is ,
o f th e

p r in c ip a l

tax . S in c e

th e re

is n o

c r e d i t f o r p r e v i o u s t a x e s , t h e a c t u a l r e s u lt in a
m u ltis t a g e

2A third variation of the VAT, know n as the product type VAT, is
generally considered to be inferior to the consum ption and
income variations and is consequently not discussed in this article.

FEDERAL RESERVE BAN K O F ATLANTA




p r o d u c t io n

ta x p a y e rs w o u ld
had

been

p a id

in

p r o c e s s is t h a t la t e r s t a g e

p r o b a b ly
p r e v io u s

p a y a ta x o n

tax e s th a t

p r o d u c t io n

sta ge s an d

115

C o n s id e r

TABLE 5
T a x B a s e s o f C o n s u m p t io n T y p e a n d
In c o m e

Type

S in c e

Raw
M a te ria ls M a n u P roducer facturer

P u rch a se s of In p u ts
Interm ediate G oods
Capital G oo d s

W holesa le r

R e ta il
er

$100
100
—
—
__
—
—

$500
425
75
—

$800
750
50
—

$1000
—
—
1000

100
100
—

500
425
75

800
750
50

100
90

400
365

300
350

200
235

10
55
10
10
15

35
255
25
50
35

25
185
40
25
25

15
90
50
25
20

Depreciation
W ages
R ent
Interest
Profits

1 0 -P e rc e n t

sam e

1 ), t h e t a x y i e ld

w o u ld

as th e c o n s u m p t io n

c o n s u m e r w o u ld
c o n s u m p t io n
th a t th e se

be

typ e V A T .

tw o

th e

TABLE 6

w o u ld

n ot be

be

h o w

th e y are

N o w

VAT

M a te ria ls M a n u P rodu cer facturer

in t e n d e d

Retailer

cu rren t

$100

$500

$800

$1000

___

100
100
—

500
425
75

800
750
50

10

35

25

15

10

50

80

100

10

50

80

—

Depreciation
Tax on S a le s (1 0 % )

—

U.

S.

s in c e

Tax Credit on P u rch a se s
C o n su m p tio n B a se
—

tax e d , a n d
th e

1
10
9

be

13.50

45

76.50

40

30

20

36.50

35

23.50

a d o p t io n

t im e

o f

in c lu d e d

s a le

or

in t h e

tu rn o v e r.

p r o d u c t 's v a lu e
For

e x a m p le ,

m a n u f a c t u r e r m ig h t p a y $ 1 1 0 f o r h is in p u t s
fo r m a t e r ia ls a n d
in v a l u e , a n d

th e $ 1 0 c a s c a d e

The

ta x ), a d d

s e ll h is o u t p u t f o r $ 5 1 0

w h o le s a le r , th e r e fo r e , w o u ld
$ 5 1 0 fo r th e

in p u t s a n d

G o ve rn m e n t has b e gu n
th e

ta x o n

th e $ 1 0 ta x p a id

th e d is t o r t io n s b e t w e e n

o f tax o n

th e

b ase

fir m s a n d

b ase

o f a

in c o m e

tax .

in t a x b a s e s , it

is n o t r e a l ly a n e w

tax .

fo rm

o f

in itia l, b u t lin g e r in g ,

o v e r th e
U n ite d

to

a n e w

p o s s ib le

State s

fo c u s o n

Fe d eral

t h is a s p e c t

Tax.

th e

U n ite d

S ta te s E m p lo y

V a lu e A d d e d

Tax?

u s in g

in

th e
($ 1 0 0

The

$400

or

a 10

u se

in d u s t r ie s w it h
not

th e V A T .3

as

a

s u b s t it u te d
u se d

fo r

V A T
at

th e

U n ite d

in it ia lly

le a s t

a

t a x . T h a t is , t h e

in c o r p o r a t e

r e p la c e d

V A T . O th e rs

V A T

A m e r ic a n

in c o m e

a r e d u c t io n
be

a

S tate s

th e c o n te x t o f a ta x s u b s t it u tio n .

s u b s t it u te

c o r p o r a t io n

w o u ld

ta x le a d s to

o f

p u t in

P ro p o n e n ts o f an
its

fro m

b y th e

th at d o

p o s s ib ilit y

is u s u a l l y

p l u s tax . T h e

d if f e r e n t d e g r e e s o f v e r t ic a l in t e g r a t io n

a s th e su m

p r o f it s , t h e V A T

to

p lu g g e d ,

b e v e r y s im ila r

t a x . T h a t is , s i n c e v a l u e

b y th e

A

th e 1 0 p e r c e n t ta x o f $ 5 1 .

m a n u fa c tu r e r . T h is p ilin g o n

a p p e a r w ith

w o u ld

is t h e s a m e

th e d is c u s s io n

at

p a y a to ta l o f $561

r e s u l t is t h a t t h e w h o l e s a l e r h a s p a i d

p e r c e n t o r $1

case

th a t th e V A T

o f a V A T

to

tax e d

ra te a s o th e r in c o m e ,

a p p r o p r ia t e ly c o n s id e r e d

c o n fu s io n ,

n ot

m u n ic ip a l

ta x w e r e a p p lie d

B e c a u s e o f t h e s e s im ila r it ie s

S h o u ld
th e

in c o m e

q u it e c lo s e

se e m

is

m u n ic ip a l b o n d s w e r e

typ e V A T

in t h e s i m p l e

ta x

th a t c a p ita l g a in s w e r e

c o m p r e h e n s iv e ly d e fin e d

o f

been

in c o m e

so

r a is in g ta x r e v e n u e . A ft e r s o m e

IN C O M E V AT

th at h a d

in t e r e s t o n

if m a n y o t h e r l o o p h o l e s w e r e

in c o m e

It is m o r e

C O N S U M P T IO N V A T

in c o m e

in c o m e

a t lo w e r ra te s o r n o t ta x e d

o f fa c to r p a y m e n ts a n d
w o u ld

go o d s.

p e rso n al

fro m

to a p r o p o r t io n a l

w o u ld

Tax Credit on
Interm ediate
P u rch a se s and
Depreciation
Inco m e Base

in c o m e

th e ta x

m a n y s o u r c e s o f in c o m e ,

If, h o w e v e r , t h e

ad d e d

m a j o r p r o b le m

c o n s u m p t io n

a s c a p ita l g a in s a n d

if t h e

th e n

is

fo r u s e a s p r o d u c t iv e

as th e y a c c ru e at th e sa m e

W holesa le r

th a t th e V A T

t o c o ll e c t a r e t a il s a le s

e x e m p t r e t a il s a le s f r o m

a ll f o r m s o f in c o m e

L ia b ilit ie s

th e ir
ta x b a s e s a re

c o n s id e r a tru ly c o m p r e h e n s iv e

T he

a t a ll.

o f C o n s u m p t io n T y p e a n d

s a id

c o st to th e

a s th e

it is u s u a l l y a r g u e d

th e rate s a n d

p e rfe c t. O n e

to

c a p ita l r a th e r t h a n

an d

S a le s of Output

$ 1 ,0 0 0
e x a c t ly t h e

th e sa m e

In d e e d ,

b o n d s , a r e e it h e r ta x e d

P u rch a se s of In p u ts
Interm ediate G oods
C ap ital G oo d s

Tax

p r a c t ic e , o f c o u r s e , t h e e q u iv a le n c e w o u l d

p r o b a b ly

su ch

Type

be

typ e V A T . T h e

s a m e . T h u s , it is o f t e n

c o m p r e h e n s iv e

In c o m e

to

S a le s

$100—

t a x e s a r e e q u i v a le n t in

m e r e ly a n o t h e r m e t h o d

w h e n

be

$ 1 ,1 0 0 —

e c o n o m ic e ffe c ts w h e n

ta x .

C o m p u t a t io n

R e ta il

f in a l r e t a il s a le s a r e a s s u m e d

ta x . In

VALUE ADDED
C o n su m p tio n B a se
In co m e Ba se

a

V A T ’s
(T a b le

Total Sa le s
Interm ediate G oo d s
C ap ital G ood s
C o n su m e r G oods

N o w

w it h

h a v e a ls o

p a rt

o f

th e

revenu e

lo s t

in c o m e

revenu e

p ro p o se d

fa v o re d

tax rate s

r a is e d

fro m

th a t a V A T

a n ew
be

f o r p a r t , o r a ll, o f p a y r o l l t a x e s c u r r e n t ly

f o r f in a n c in g t h e S o c ia l S e c u r it y s y s te m . M o r e

r e c e n t ly , h o w e v e r , a t t e n t io n
p o s s ib le

u se o f a V A T

to

has fo c u se d

r e p la c e

u p o n

th e

a t le a s t p a r t o f

e x is t in g p r o p e r t y ta x e s.
P ro p o n e n ts

^Taking the p iling on effect into account, and assum ing that
taxes are fully reflected in higher sales prices, cumulative sales
w ould be $2,618, and the total tax bill w ould be $261.80.

116




o f

a

U n ite d

g e n e r a lly e m p h a s iz e d
o f a d o p t in g th e

tax .

State s

V A T

have

s e v e r a l a r g u m e n t s in

If t h e V A T

w e re

fa v o r

s u b s t it u te d ,

M O N T H L Y REVIEW

in

p a rt, fo r th e c o r p o r a t io n

tax stru c tu re w o u ld
re sp e cts.
w o u ld

be

L a b o r -in te n s iv e

n o t b e fa v o re d

m e th o d s.

in c o m e

n o t b e tax e d

i n e f f i c i e n t yu n p r o f i t a b l e

m o re

is , it is t r u e o n l y

is in

h e a v ily th a n

fir m s . A n d

f in a lly , t h e ta x

n o t fa v o r n o n c o rp o ra te

w e r e s u b s t it u te d

in t e n s iv e in d u s t r ie s w o u ld
th e

c it y p r o p e r t y w o u l d

be

If

be

re d u ce d .

o n

if c o r p o r a t i o n s a v o i d

r e d u c e d , t h u s lo w e r in g th e

is w r o n g .

v a lid

o n ly

in

u n d e r c e r t a in

n e v e r t h e le s s f o r m

r e s u lt in

V A T

lo w e r p r ic e s . T h is c o n t e n t io n

th e u se o f ta x e x e m p t io n s a n d
n o w

u s e d w it h

th e

su p p o rt

is s a i d

to

m in im iz e

o f a V A T

w o u ld

o f le v y in g p r o p e r t y

r e s u lt s in s h a r p l y d i f f e r e n t i a t e d
p ro p e rty se p a ra te d

ta x e s o fte n

rate s o n

b y o n ly a fe w

is t h e

p r o d u c t iv e

revenu e

t a x in t h e E u r o p e a n

u se d

le s s a n d

in

a r g u m e n t a g a i n s t it . E v e n

in

V A T

a d m it th a t th e tax w o u ld

d is t o r t in g

th a n

th e c o r p o r a t io n

p o in t o u t, h o w e v e r, s o m e

th e s u b s t it u tio n .

fo rm . T h is w o u ld
a ll g o o d s a n d

in

n o t in v o lv e

th e

o f th e p u b lic s e c to r o f th e

I n a d d i t i o n , it w o u l d

im p ly th a t th e

o t h e r a lt e r n a t iv e

V A T

r a is e d

q u e s t io n a b le

in s u p p o r t o f a U n i t e d
a lle g e d

c o r p o r a t io n

s in c e

n o

a r g u m e n t o fte n

S tate s V A T .

th a t s u b s t it u tio n

p r o f it s ta x w o u l d

U . S. b a la n c e

re ve n u e

te n d

to

o f p a ym e n ts. U n d e r an

fo r th e

im p r o v e

th e

m ay be

tax . C r it ic s a ls o

in c o m e

tax w e re

argu e

rem ove d

a w in d f a ll g a in

it w o u l d

th e

r is k
n ot

t h e o t h e r h a n d , it

n o

to

th e

o f a V A T

c o r p o r a t io n

m o re

n e u tra l

is t h e c o r p o r a t i o n

t h a t if t h e c o r p o r a t i o n

o r re d u c e d , th e re

co rp o rate

o r n o t it is s h i f t e d ) . T h i s w o u l d

m ig h t

p r o f it s ( w h e t h e r
m ean

th at

is e s s e n t i a l l y t h e o p p o s i t e
tax—

it w o u l d

fa v o r h ig h

p r o f it fir m s b y a llo w in g

th e m

to m a k e

an d

r e t a in

la r g e r p r o f it s .
s ig n ific a n t e q u ity a r g u m e n ts

a g a in s t th e s u b s t it u tio n
If a w i n d f a l l g a i n

o f a V A T

acc ru e d

f o r a p r o f it s tax.

t o t h e c o r p o r a t io n 's

th e a d d it io n a l e a r n in g s w e r e

d is t r ib u t e d

o n

c o r p o r a t io n

w o u ld

c a p ita l g a in

f o r t h e c o r p o r a t io n 's s t o c k h o ld e r s .

su rch a rg e o n

T rad e , a c o u n try

it c h a r g e s o n

s im ila r p r o d u c t s p r o d u c e d
m ay

p r ic e o f a n y e x p o r t e d

(o r n o t c h a rg e )

g o o d

i n d i r e c t t a x e s it n o r m a l l y
it is c o n s u m e d

re b a te s m a y
tax e s, s u c h

th e

a s V A T 's o r v a r io u s

a t h o m e . S im ila r ly , a n a t io n

w h e n

a

its i m p o r t s e q u a l t o o r le s s t h a n

a m o u n t o f in d ir e c t ta x e s (s u c h
s a le s ta x e s)

m ay ch a rg e

re b a te fro m

le v ie s o n

th e

th e

an y

p ro d u ct

d o m e s t ic a lly . S u r c h a r g e s a n d

n o t b e a p p lie d , h o w e v e r , fo r d ir e c t

as p e rso n al an d

co rp o rate

FEDERAL RESERVE BAN K O F ATLANTA




in c o m e

ta x e s.

a s d iv id e n d s , th e v a lu e o f s t o c k

not

in t e r n a t io n a l a g r e e m e n t , t h e G e n e r a l A g r e e m e n t
T a r iffs a n d

o f

in c o m e

e a r n in g s a n d

e x is tin g

re sp e c t to

p r o f it a b ilit y th a n

T h e r e a re a ls o

It is

o f th e V A T

re sp e c t to

s u b s titu tio n

by

is c o n s i d e r e d .

F in a lly , t h e r e is o n e

o fte n

t o r a is e t h e

be

w it h

ta x c r e d it s f o r lo s s e s a n d ,

in c o m e

be

r e la t iv e t o t h e

b e s t w a y t o a c h ie v e t h is in c r e a s e w o u l d
im p o s in g a n e w

s h o u ld

rate b e e q u a l fo r

th e re fo re , s o m e w h a t o ffs e t th e p e n a lty a g a in s t

o t h e r p a r t i c u l a r t a x , is e s s e n t i a l l y a n

p r iv a te s e c to r .

its e lf w o u l d

th e a s p e c ts o f th e c o r p o r a t io n

in c o m e ta x th a t a llo w

replace s o m

in c r e a s e d

le s s

m ig h t im p r o v e

su c c e ssfu l v e n tu re s. O n

su c c e ss. T h u s, th e V A T

be

V A T

b u s in e s s v e n tu re s, s in c e

p e n a liz e

w it h

e c o n o m y s h o u ld

be

tax . T h e y

d is a d v a n t a g e s to

r e q u ir e t h a t th e

s e r v ic e s . A

by an

e

in c o m e

F o r e x a m p le , th e V A T

a c c o m p a n ie d

a rg u m e n t th at th e V A T

o f a

m o s t c r itic s o f a n

A m e r ic a n

w o u ld

r a is in g

to b e a h ig h ly

n a t io n s a n d

has

le s s in s u p p o r t o f t h e V A T .

S ta te o f M ic h ig a n . T h is a r g u m e n t , h o w e v e r , u n le s s

a r g u m e n t th a t t h e s iz e

tax . A s
m o re o b v io u s

in t h i s c o u n t r y , t h e r e is u s u a l l y a c o u n t e r ­

t a k in g

m ile s .

p o t e n t ia l o f t h e ta x . It h a s p r o v e d

in c o m e

r e s u lt b e c a m e

n e u tr a lity o f th e ta x s y s te m

s im ila r

P e r h a p s t h e m o s t s ig n if ic a n t a r g u m e n t r a is e d
fa v o r o f a d o p t in g a V A T

fo r th e c o rp o ra te

s t ill i n v o l v e d i s t o r t i o n s , e x c e p t in its m o s t i d e a l

u s e o f d if f e r e n t ia l ta x ra te s. F o r e x a m p le ,

th e c u rre n t m e th o d

V A T

a ls o

d e d u c tio n s fr o m

o u r v a r io u s fo r m s o f in c o m e

t a x a t io n . S im ila r ly , s u b s t it u t io n
red u ce

in

w as o n e o f

F o r e v e r y a r g u m e n t in f a v o r o f a d o p t i o n

a d o p t io n .

if

h ig h e r p r o d u c t p r ic e s ,

a d d it io n a l s tu d y , h o w e v e r , th e c o n t e n t io n

been

is t h a t t h e t a x is

a d m in is t r a t iv e ly s im p le . T h e V A T

th o se

w ith

a s s u m p tio n s , th e y

a stro n g c a se fo r V A T

A n o t h e r a r g u m e n t fr e q u e n t ly g iv e n
o f a n A m e r ic a n

fa v o r o f

s o m e o f th e se a rg u m e n ts are

n o t a ffe c t p r ic e s

a d d it io n , e v e n

t h e e a r lie r a r g u m e n t s in f a v o r o f t h e s u b s t i t u t i o n

u n c e r t a in t y a b o u t th e

o f th e n e u tr a lity a r g u m e n t s g iv e n

In

th e p r ic e s

it is c e r t a i n l y n o t c l e a r t h a t r e m o v i n g t h e t a x w o u l d

o f th e V A T

a V A T . A lth o u g h

ta x o n

r e a s o n i n g is

th e p r o f it s ta x w o u l d

th e c o n t e n t io n

c o n c e r n in g

in d u s t r ia l lo c a t io n . T h e s e a r e o n ly a

r a is in g th e

e c o n o m ic s p r o fe s s io n

in c o m e

t h e p r o f i t s t a x d o e s r e s u l t in

c e n tra l

b e a r in g th e

tax b y

If t r a d it io n a l e c o n o m ic

t e n d e n c y f o r p r o p e r t y ta x e s to d is t o r t d e c is io n s

fe w

in c o m e

th e b a la n c e

a s s u m p tio n . T h a t

a se v e re sta te o f d is a g r e e m e n t a b o u t th e

co rre ct, th e n

In a d d it io n ,

fo r a

im p r o v e

u n c e r t a in

im p a c t o f th e c o r p o r a t io n

an d

a g a in s t c a p it a l-

r e la t iv e ly h e a v y p r o p e r t y ta x b u r d e n

an

o f th e c o rp o ra te

o f go o d s.

in d u s t r ia l

f o r a ll o r p a r t o f t h e

p r o p e r t y tax, d is c r im in a t io n

ta x w o u ld

p r ic e s o f th e ir p r o d u c t s . T h e

p r o f it a b le

o r g a n iz a t io n s o v e r c o r p o r a t e o r g a n iz a tio n s .
th e V A T

b u rd e n

n o t b e fa v o re d

E ffic ie n t a n d

th a t s u b s t it u tin g a V A T

in c o m e

o f p a y m e n t s re sts o n

o v e r c a p it a l- in t e n s iv e

o v e r e q u ity fin a n c in g .

la w s w o u l d

c o r p o r a t io n

in s e v e r a l

m e t h o d s o f p r o d u c t io n

D e b t fin a n c in g w o u ld

fir m s w o u ld

T h e c o n t e n t io n

tax, t h e n e w

le s s d i s t o r t in g

p r o b a b ly

r is e a n d

T h u s , c r itic s o f th e s u b s t it u t io n
c a p ita l g a in s ta x a t io n
ra te s o n

o r d in a r y e a rn e d

s u b s t it u t io n
A n

w e re

even

a d o p t io n

w o u ld
m o re

th a t u n le s s

r a is e d t o e q u a l t h e ta x

in c o m e , th e n

th e

b e n e f it o w n e r s o f c a p ita l.

im p o r t a n t e q u ity a r g u m e n t a g a in s t

o r s u b s titu tio n

o f a V A T

i t s e l f is e q u i v a l e n t t o a t a x o n
th e re fo re ,

argu e

in t h e

c re a te a

is t h a t t h e V A T

c o n s u m p t io n

r e g r e s s iv e . A t b e s t, a n

in c o m e

an d

is ,

typ e V A T

117

w o u ld

be

w h ic h

w o u ld

r ic h

e q u iv a le n t to

s h o u ld

p o or.

In

v io la t e

a p r o p o r t io n a l in c o m e

th e c o m m o n

p a y p r o p o r t io n a t e ly

o rd e r to o ffse t th e

V A T , c r itic s a r g u e

m o re

be

th e se e x e m p t io n s w o u ld

ta k e th e fo rm
in c o m e

an d

r e g r e s s iv it y .
in c o m e
V A T
o f

w o u ld

C r itic s

be

d is p u t e

be

c o u p le d

lo w -in c o m e

th e V A T

r e lie f

its e lf. E v e n

th a t

s in c e

not

a th o ro u gh

n e c e s s a r ily

o f th e

r e s t r ic t e d

to

a t f a ir ly

by
lo w

r ic h

an d

rate s.

p u rch ase d

m ean

be

g iv e n

o f th e

at

n e u tr a lity

P e rh a p s th e

t h e t a x in o r d e r t o

a c h ie v e

g re a te r

ta x e q u ity .

th e

C o n c lu s io n s

w o u ld

T h e re

an d

its p o s s i b l e

its e f f e c t i v e n e s s in t h e

h a v e a lr e a d y a d o p t e d
have

a d o p t io n

n o t a ll b e e n

th e

in t h e

E u rop e an

fe w

re m arks m a y b e d raw n , h o w e ve r.




th e
State s

n a t io n s th a t

tax . A t t h is t im e , t h e y

r e s o lv e d . A

118

U n ite d

In

th a n

to

w it h

tax e v a s io n

have

f o r t h is

e ffic ie n c y a n d
m u ch

fo r e ffic ie n c y ?

is a n s w e r e d

q u e s t io n

or

ta x e s.

in t h e a f f i r m a t i v e ,

b e c o m e s : W h ic h
b e e m p lo y e d ?

fo rm
In

t h is

fo r y e a r s e m p lo y e d

e c o n o m is ts

f e e l t h a t it

h a v e a F e d e r a l r e t a il s a le s ta x

a Fe d eral V A T . T h e
are

Eu rop ean

n o t i m p o r t a n t in

th e a d m in is t r a tiv e

m e c h a n is m

to s h o w

p r o b le m s

th is c o u n t r y ,

f o r r e t a il s a le s

t a x e s a lr e a d y e x is ts . S u p p o r t e r s o f t h e V A T
c h a lle n g e d

State s

o th e r w o rd s, h o w

b e s a c r ific e d

w ill b e

its s u p e r i o r i t y o v e r t h e

m o re

r e t a il s a le s tax .

T h e a n sw e rs to th e se

are m a n y o th e r a r g u m e n ts c o n c e r n in g

and

ta x sy s te m .

b e b e tte r to

a fte r

F ir s t ,

U n ite d

in c o m e -ty p e

tra d e o ff b e tw e e n

se co n d

upon , an d

V A T

o f a V A T

b e d e c id e d

o f w h e th e r th e

o f n a t io n a l s a le s ta x s h o u ld

fa m ilia r
Su m m ary an d

a d o p t io n

m o s t im p o r t a n t c o n s id e r a t io n

is t h e

e q u ity o f th e

an d

u p . D is t o r t io n s w o u ld

d a n g e r o u s ly

o f n a t io n a l s a le s t a x a t io n

r e t a il s a le s t a x e s. M a n y

r ic h

is a p p l i e d

co m e

n a t io n , m o s t o f o u r s ta te s h a v e

L u x u r ie s th a t
th e

have

p o s s ib le

it f o r e x i s t i n g

th e n

p o o r a lik e

b y o n ly

th a t th e V A T

rate s. T h u s , s o m e

a d v a n ta g e s w o u ld

a d o p t a fo rm

o f th e

ta x e d a t h ig h e r rate s. T h is a p p r o a c h ,

b u ilt in t o

be

so m e

c o u ld

d iffe r e n tia l

is t h e q u e s t i o n

ta x e q u ity s h o u ld

lik e ly to

be

o v e r th e

s e ld o m

are m o re

h o w e v e r, w o u ld

th e re

q u e s t io n

p ro gra m

th e

p a n a c e a th a t s o m e

fu n d a m e n ta l q u e s t io n s a re a n s w e r e d .

s u b s t it u te

lo w -

m ig h t b e o ffse t. N e c e s s itie s

p u rch ase d

b e ta x e d

b y w h ic h

is n o t t h e

if n o t

u se d . O n

S ta te s w ill p r o b a b ly

If th e fir s t q u e s t io n

is a n o t h e r m e t h o d

th at m u st b e

U n ite d

s h o u ld

n e c e ssa ry , a d o p t io n
w it h

d e b a te

in t h e
tw o

lo w -

p r o p o n e n t s o f th e V A T

r e g r e s s iv it y o f th e V A T

be

to

th e e q u iv a le n t o f a

argu e

r e a s o n a b ly ,

it h a s b e e n

to c la im in g .

T h e

have

th is p o in t .

T h e re

c o u ld

c lo s e

s o m e w h a t o ffse t th e

o fte n

r e lie f w o u l d

s h o u ld

be

has w o rk e d

p e r fe c t ly , w e ll w h e r e

o f its s t r o n g e r s u p p o r t e r s

p e rso n s.

p r o b a b ly

th a t th e V A T

o th e r h a n d , th e V A T

th e

n e c e s s a ry to

o f G o v e r n m e n t p a y m e n t s to

p e r s o n s . T h is w o u ld

ta x r e fu n d

th an

r e g r e s s iv e n e s s o f th e

t h a t it w o u l d

e m p lo y e x e m p t io n s fo r lo w - in c o m e
A c t u a lly

tax,

fe e lin g th a t th e

th e y m a y

have

be

n o t yet been

so m e

t im e

agre ed

in a r r iv in g .

I n d e e d , it is n o t l i k e l y t h a t t h e y w i l l e v e r b e
c o n c lu s iv e ly
atte m p te d

to

s e t t le d . T h is a r t ic le

h a s c e r t a in ly

a n s w e r th e se q u e s tio n s .

h o w e ve r, a tte m p te d

c o n c lu d in g

p e r s p e c t iv e

in t o

F ir s t , it is c l e a r

ju d g m e n ts m ay

to

g iv e

th e se
be

m o re

th e

is s u e s

so

not

It h a s ,

read er so m e
th at

h is

o w n

e a s ily f o r m e d . ■

M O N T H L Y REVIEW

S m o o t h S a ilin g fo r
G e o r g i a 's E c o n o m y
by Em erson A tkinson

G e o r g ia 's e c o n o m y
an d

a p p e a rs to

p ic t u r e
ro u gh

has re sp o n d e d

be h e ad e d

o f re ce n t ye ars, w h e n
g o in g

e c o n o m ic

th e

a n d , th e n , b e g a n

s lo w d o w n

to th e fo rc e s o f s tro n g e c o n o m ic w in d s

fo r sm o o th

s a ilin g . T h is c o n t r a s t s w it h

Peach

to s h o w

th a t a ffe c te d

S t a t e 's e c o n o m y

th e e c o n o m ic

fir s t e x p e r ie n c e d

s ig n s o f r e c o v e r in g fr o m

th e

m o s t p a r ts o f t h e n a t io n .

S i g n i f i c a n t I m p r o v e m e n t in t h e E m p l o y m e n t
S it u a t io n

h a s P r o v id e d

In c r e a s e d

B o th

n o n m a n u fa c t u r in g a n d

gro w th

fo r th e se

e m p lo y e d

a ffe c te d

m o re
m o re
in

th a n

go v e rn m e n t,

s lo w d o w n s .

fo r th a t m atte r, so

tw o

d id

jo b s are c e n te re d

s lo w d o w n

h it t h e

th at th e

"o u t

A t la n t a

o f ir o n s " a n d

t r im m e d

c o n tin u e d

t e x t ile

in d u s try

m o v in g a g a in

e x p e c te d

to

its e m p l o y m e n t

re d u ce
to

fa ll

to

its w o r k
1 0 ,0 0 0

FEDERAL RESERVE BAN K OF ATLANTA

in

tra d e —

n o n m a n u fa c t u r in g

areas

not

th e

up

in n o n m a n u f a c t u r i n g . )

h a rd , a n d

w o rke rs

u n t il la t e 1 9 7 1 ,

p e rfo rm a n c e . T h e
it w a s

e m p lo y e d

not

u n t il

b e gan

th e

to

t h ir d

p ic k

up.

e q u ip m e n t in d u s try , a p p e a r e d

m o re . A n

A t

au to

m id -1 9 7 1 , a n d

its

th e ir w o r k

a s s e m b ly
Lockh e ed

p l a n t in
G e o r g ia

o f 1 9 7 2 , L o c k h e e d 's e m p lo y m e n t

peak

p r o d u c t io n

3 2 ,0 0 0 w o rk e rs. A u t o

o th e r h a n d , h a ve e x p a n d e d

h e ld

e m p lo y m e n t , s in c e o v e r

B y th e e n d

p e rso n s.

s e v e r e ly

e m p lo y m e n t h a s a ls o

b y e a rly 1 9 7 1 , b u t a s th e y e a r w e n t

o n ce

r o l l s in

fo rc e .

g ia n t a ir c r a ft p r o d u c e r e m p lo y e d




1 9 7 2 , n o n m a n u fa c t u r in g

f o r t h is la g g in g

n u m b e r o f t e x t ile

b y , e m p lo y m e n t p r o b le m s e m e r g e d

on

an d

to tal n o n fa rm

A n o t h e r b ig e m p lo y e r , th e t r a n s p o r t a t io n

is

an d

m a n u f a c t u r i n g . T h i s is n o t

(C o n s tr u c t io n

m a j o r in d u s t r ie s a c c o u n t in g

q u a rte r o f 1971

be

in

th e o th e r h a n d , m a n u fa c tu r in g e m p lo y m e n t w a s s lu g g is h

e c o n o m ic

to

In 1 9 7 1

d id jo b s

m o re

ra te o f e m p lo y m e n t e x p a n s io n

50 p e rc e n t o f th e w o rk e rs

s e r v ic e s ,

7 0 p e r c e n t o f a ll n o n f a r m

w it h

th e sam e .

r a p id ly th a n

b y e c o n o m ic

w e ll. A n d

O n

in 1 9 7 1 . B u t t h e

se c to rs h a s n o t b e e n

s u r p r is in g s in c e
are

m a n u fa c tu r in g e m p lo y m e n t h a v e s h o w n

t h u s f a r in 1 9 7 2 t h a n

j o b s in c r e a s e d

F a ir W i n d s f o r

E c o n o m ic A c tiv ity

fo rc e

p e r io d ,

a s s e m b ly

th e

p la n t s ,

s in c e e a r ly 1 9 7 2 .

119

In

a d d it io n , th e

c o n tin u e d
1 9 7 2 , th e
d e c lin e

to

u n e m p lo y m e n t s it u a t io n

im p r o v e

rate s t o o d

fro m

s in c e

s a la r ie s . G o v e r n m e n t w a g e s

has

m a jo r so u rc e

m id - 1 9 7 1 . In A p r i l

s a la r ie s , a n o t h e r
at a

7 .4 -p e r c e n t a n n u a l rate . T h e s e c o m p o n e n t s w e r e

a t 3 .7 p e r c e n t , a s iz a b le

t h e 4 . 2 - p e r c e n t le v e l r e a c h e d

an d

o f p e r s o n a l in c o m e , in c r e a s e d

f o llo w e d

in

b y tra d e a n d

s a la r ie s , w h ic h

J u ly 1 9 7 1 .

gre w

m a n u fa c tu r in g w a g e s

8 .4 p e r c e n t a n d

an d

4 .1

p e r c e n t , r e s p e c t iv e ly .
R o b u s t P e r s o n a l In c o m e
a V it a l R o le
to

M a k e

The

G a in s P la y e d

in E n a b lin g t h e E c o n o m y

1971

S u b s t a n t ia l

w as

H e ad w ay

Peach

in 1 9 7 0 , b u t it w a s a

o f th e
T h e

rate o f e x p a n s io n

in p e r s o n a l i n c o m e w a s

g r e a t e r in 1 9 7 1

th a n

q u a rte r o f 1971

w a s th e o n ly o n e

in c o m e

d id

gro w th

th e e x c e p tio n

in 1 9 7 0 .

n o t exceed

co m p o n e n ts

h ig h e s t ra te s o f in c r e a s e . O n e

in w h i c h

th e 1 9 7 0

o f la s t y e a r 's t h ir d

p e rs o n a l in c o m e

p e rso n al

q u a rte r, th e

a ls o

d is p la y e d

la r g e r

o f th e fa ste st g r o w in g

a ls o

in c r e a s e d

c o n d itio n s

a t a fa ste r rate th a n

in c o m e

in d ic a t io n s

h a s c o n tin u e d

to a d v a n c e

a t a f a s t p a c e t h u s f a r in 1 9 7 2 .
G e o r g i a 's p e r c a p it a

p e r s o n a l in c o m e
w it h

$ 4 ,1 3 9 . T h e r e fo r e , p e r c a p it a
Peach

im p r o v e .

th e

.

8 5 .7 p e rc e n t, u p

ro se to

U . S. fig u r e o f

p e r s o n a l in c o m e

State as a p e rc e n ta g e o f th e

has reach ed

r a t e o f 9 .7 p e r c e n t in w a g e s a n d

in
it

p o in t a h e a d

in o t h e r p a r t s o f t h e n a t io n . A n d

are th at p e rs o n a l

th e

an

E m p lo y m e n t

p e rc e n tage

$ 3 , 5 4 7 in 1 9 7 1 , c o m p a r e d

th e

gro w th

h ig h e r th a n

U . S. ra te . G e o r g i a 's m a j o r s o u r c e s o f

p e rs o n a l in c o m e
th o se

rate . W it h

s e c t o r s o f t h e e c o n o m y , s e r v ic e s , r e c o r d e d
an n u al gro w th

m u ch

In fa c t , t h e t h ir d

S t a t e 's p e r s o n a l i n c o m e

(7 .8 p e r c e n t ) w a s n o t o n l y

fro m

in

U . S. fig u r e

8 5 . 0 p e r c e n t in

.
1967 = 100

The

u n e m p lo y m e n t

s it u a t io n

g e ts

b e tte r.

.

.

D e p a rtm e n t

sto re

s a le s

gath e r

speed

Percent of work force

-

-

/ \

A

M acon
_

A tla nta
-

\

v
V .
/

VSk/

\

f

\

a

\ r - s /

\»>

//
/jr,

A u g u sta
V

~

y
Savannah
.....................
i

1971

120



19 7 2

m o nth ly

r e v ie w

1970, an d

c o n s id e r a b ly a b o v e

r e g is t e r e d

in 1 9 6 6 !

th e 8 0 .9 p e r c e n t

ave rage d

n e a r ly o n e - t h ir d

c o n tra c t a w a rd s—
D e p a r t m e n t S to r e S a le s P r o v id e d

A u x ilia r y P o w e r

n o n b u ild in g

m o n th ly
la r g e S t a n d a r d

A r e a s ( S M S A 's )

M e t r o p o lit a n

h a v e e x p e r ie n c e d

d e p a r t m e n t s t o r e s a le s .

In

an

w h ic h

r is e , w h ic h , o n

u p l i f t in

F a rm

C ash

s a le s t r e n d e d

u p w ard

gro w th

fir s t q u a r t e r . C r o p

gro w th

in 1 9 7 1 , a l t h o u g h

in A t l a n t a h a s b e e n

in t h e s a m e

p e r io d

in d ic a t o r o f th e u p w a r d

o u tp a c in g th a t o f th e

u s e ta x c o lle c t io n s fo r th e

fir s t q u a r t e r o f 1 9 7 2 w e r e
th an

th is

it s e lf t h is y e a r . R e c e n t ly , s a le s

o t h e r S M S A 's . S a le s a n d

b u ild in g a n d

o n

th e

ave rage ,

up

1 9 7 1 's

a v e r a g e , w a s u p o n e -th ir d .

R e c e ip ts H e a d e d

In t h e fir s t q u a r t e r o f t h is y e a r , f a r m
w e re

s t e a d ily d e c lin e d

w e re ,

S t a t is tic a l

d u r i n g n e a r ly a ll o f 1 9 7 1 . B u t M a c o n 's y e a r - t o - y e a r

h as re ve rse d

in 1 9 7 0 .

A lo ft

A t la n t a , A u g u s t a , a n d

S a v a n n a h , d e p a rtm e n t sto re

tre n d

in c lu d e

c o n tra c ts—

o n e - f if t h . T h is , h o w e v e r , fa lls b e lo w

A ft e r R u n n in g a t A b o u t H a lf S p e e d

M o s t o f th e

h ig h e r th a n

F o r t h e fir s t f o u r m o n t h s o f t h is y e a r , a ll o t h e r

s u b s t a n t ia lly h ig h e r

o n e

m o m e n tu m

in

o f g r a in

r e c e ip t s fe ll 1 2 p e r c e n t b e lo w

s e t t le d

b a c k to m o re

b e in g a b n o r m a lly

h ig h

in

n o r m a l le v e ls a ft e r

b e c a u s e o f a g r a in

p r ic e s o f e g g s a n d

in c r e a s e

r e t a il

r e c e ip t s

t h e fir s t q u a r t e r o f 1 9 7 1 , m a in ly b e c a u s e t h e p r ic e

Lo w

y e a r a g o , a fu rth e r

cash

r u n n i n g o n l y s l i g h t l y a h e a d o f la s t y e a r 's

sh o rta g e .

b r o ile r s h e ld d o w n

liv e s t o c k c a s h

r e c e ip t s , w h ic h

th e

c lim b e d

o n ly 6 p e rc e n t.

a c t iv it y .

D u r in g 1 9 7 1 , to ta l fa rm

cash

r e c e ip t s w e r e

$ 1 ,2 1 0 ,3 0 0 , a 6 -p e r c e n t in c r e a s e o v e r 1 9 7 0 . C a s h
F in a n c ia l D e v e lo p m e n t s " P o in t e d

U p "

r e c e ip t s f r o m

crop s sh o w e d

t h e g r e a t e s t in c r e a s e ,

ju m p in g 25 p e rc e n t a b o v e th e y e a r-a g o
S u b s t a n t ia l t im e d e p o s it in f lo w s t o
s a v in g s a n d
even

lo a n

th o u gh

b e co m e

b an ks an d

a s s o c ia t io n s c o n tin u e d

s o m e s lo w d o w n

e v id e n t r e c e n t ly .

in t h e

P e a n u ts, th e

in t o 1 9 7 2 ,

rate h a s

In 1 9 7 1 , t im e

an d

s a v in g s

16

p e rc e n t, w ith

in f lo w s o f la r g e

f o r n e a r ly o n e - f o u r t h
g a in e d
lo a n

14

o f th e

p e rc e n t. F ro m

C D 's

in c r e a s e d

a c c o u n t in g

in c r e a s e . T o t a l d e p o s it s

th e le n d in g

o f co rn
sta te s

c o m m e r c ia l b a n k s

crop

le v e l.

in t h e s t a t e ,

a h e fty 4 4 - p e r c e n t g a in . C o r n

r e c e ip t s

n e a r ly t r ip le d , p r im a r ily b e c a u s e o f t h e

d e p o s it s o f in d iv id u a ls , p a r t n e r s h ip s , a n d
c o r p o r a t io n s a t G e o r g ia

r e g is t e r e d

la r g e s t c a s h

s id e , s t r o n g e r

ye ar,

le a f b lig h t , w h ic h

h a rd .
as

B u t to b a c c o

r e c e ip t s

fro m

16 p e rc e n t. T h e n , to o ,
h e ld

d o w n

p e rce n t

in

1970

fa rm e rs

h it

ab se n ce

m o st S o u th e rn

had

a

bad

to b a c c o

p lu n g e d

liv e s t o c k

r e c e ip t s w e r e

b y s a g g in g p o u lt r y p r ic e s , f a llin g 6

b e lo w

th e

1970

le v e l.

d e m a n d , p a r t ic u la r ly f o r b u s in e s s lo a n s ,

c a r r ie d

in t o 1 9 7 2 .

D u r in g th e p a st ye a r, re al e sta te

lo a n s a t c o m m e r c ia l b a n k s a d v a n c e d
w h ile c o m m e r c ia l a n d

to

ju d g in g b y th e P e rfo rm a n c e o f th e G e o r g ia

p e rc e n t,

in d u s t r ia l lo a n s j u m p e d

p e rc e n t. C o n s u m e r s c o n tin u e d
fu n d s to

13

r e ly o n

E co n o m y S o

19

b y th e

1 8 - p e r c e n t r is e in c o n s u m e r l o a n s in 1 9 7 1 .

A

c a p s u le v ie w

A c tiv ity G o t O f f t o a F a st S ta rt

has

been

r e la t iv e ly

1 9 7 2 , c o n tin u in g th e m o m e n t u m

b r is k

ge n e ra te d

in

in 1 9 7 1 .

in d ic a t e th a t th e e m p lo y m e n t

h a s im p r o v e d , c o n s t r u c t io n

h u m m in g , b a n k s ' lo a n a b le
s u p p ly , a n d

a c t iv it y

lo a n

d e m a n d

has been

s t r o n g . M o r e o v e r , r e t a il t r a d e
stage , a n d

G e o r g i a 's e c o n o m y a p p e a r s w e ll o n

o v e r th e sa m e

p e r io d

c o n tra c ts a w a rd e d

th an 4 0

o n e year ago.

In

p e rc e n t

1971,

fo r r e s id e n tia l c o n s t r u c t io n

FEDERAL RESERVE BAN K O F ATLANTA




s t r o n g e r fin is h
tw o

r e la t iv e ly

in d ic a t io n s a re th a t fa r m e r s w ill h a v e a

c o n tra c ts a w a rd e d

m o re

is

is o u t o f t h e s l u g g i s h

b e t t e r y e a r in 1 9 7 2 t h a n

u p

a c t iv it y

f u n d s a r e in a d e q u a t e

F o r t h e fir s t f o u r m o n t h s o f 1 9 7 2 , r e s id e n t ia l
w e re

a Stro n g

o f G e o r g i a 's 1 9 7 2 e c o n o m ic

p e rfo rm a n c e w o u ld
s it u a t io n

C o n s t r u c tio n

S h o w

b o rro w e d

fin a n c e t h e ir n e e d s , a s e v id e n c e d

C o n s t r u c tio n

F a r , it S h o u l d

F in is h b y t h e E n d o f 1 9 7 2

in 1 9 7 1 . In

in 1 9 7 2 t h a n

esse n ce ,
its w a y f o r a

in t h e p r e v i o u s

ye ars. ■

121

B A N K IN G S T A T IS T IC S
B illio n $

—*30

_

D E P O S IT S

-1 2

-2 8
Sis

-1 7
—16
Sts

- 7
-6
-5
-4
- 3
i i i i i I i i i i i i <i i i i I i i i i i i i
J
D J
J
D J
J
1970
1971
1972

1971

1970

1972

LATEST M O N T H P LO TTED : M A Y
Note: All figures are seasonally adjusted and cover all Sixth District member banks.
*D a ily average figures
‘ ‘ Figures are for the last W ednesday of each month.

S IX T H D IS T R IC T
B

A

N

K

I

N

G

N

O

T

E

S

Billion $

—

1.4

-

1.2

-

1.0

-

0 .8

L a rg e C D V o lu m e at 23 L a rg e Dist. B a n k s

r\s

0.6

Percent

XI
I

-I

9 0 - D a y T reas. B ill
A

s _____

*** 8

Reg. Q C e ilin g 9 0 -1 7 9 D a y s
A vg. C D R a te 9 0 -1 7 9 D a y s

-

6

4

1969

122



1970

1971

1972

M O N T H L Y REVIEW

N E G O T IA B L E

L a r g e - d e n o m in a t io n ,
p o s it

( C D 's )

fu n d s

fo r

n e g o t ia b le

c o n tin u e

to

be

C D 'S

R E A C H

c e r t ific a t e s

an

im p o r ta n t

R E C O R D

o f

LEVEL A T

D IS T R IC T

d e ­

so u rce

of
LA RG E

m an y

S lig h t ly

m o re

in

t im e

to tal

12

t h is

w as

to

a

th e

le v e l

la s t

12

c it ie s

d e p o s its ,

$ 1 .4

m o n th s
in

not

e x p la in s

th o u gh

a s re al e sta te

been

ban ks
s io n

in

s in c e

m o n e y

is s u in g

o f

t ie s o f 3 0 d a y s t o
a g a in s t

o th e r

m a t u r it ie s ,
ra te

le v e l.
on

w it h

C D 's

th e

Q

m arke t
of

th e

b e lo w

in

y ie ld s

U . S. T r e a s u r y

o n

ave rage d

179

days

b e lo w

to

th at

days
Q

have

c e ilin g s .
on

C D 's

p e rce n t,

w h ereas

a 9 0 -d a y

m a t u r it y

th e

th e

been

th e

average

n e g o t ia b le
m o n th s
w it h

a

average

at

m a t u r it y

C D 's
th e

M e a n w h ile ,
b an ks

in

c o n tin u e d

b e g in n in g

1971

to

552

in

N e w

C D

in

Jan u ary

s t ill

acco u n t
v o lu m e .

A t la n t a ,

an d

FEDERAL RESERVE BANK OF ATLANTA




1972,

o f

3 .3

o f

C D 's
w h en

D is t r ic t

m a t u r it y

n u m b e r

D is t r ic t

1970

m o n th s.

June

(fro m

d o lla r

O r le a n s ,

o f

m a t u r it y

gro w

b an ks

h o w e ve r,

D is t r ic t 's

th e

4 .6

D is t r ic t

A p r il

average

to ta l

to

o f

s in c e

w as
an

average
th e

C D 's

b an ks,

had

b e g in n in g

n a t io n a l

m e r c ia l

m a t u r it y

t r e n d in g d o w n w a r d

o f

3 .1

co m p are d

75

p e rce n t

a d d it io n ,
la r g e

in s u r e d

c o m ­

is s u e

n e g o t ia b le

512

b an ks

in

1 9 7 2 ).
th e

La rge

A

fe w

b u lk

ban ks

N a s h v ille

Jan u ary

b an k s,
to

b an k s)
th e

th a t

Ga.

- 200
- 100

L a .* - T e n n *
M is s . *

so m e

s in c e
u n le s s

hand,

m a t u r it y

D is t r ic t

$1

b illio n

an

am o u n t

acco u n t

fo r

C D 's

in

fo r

C D 's
be

to

o ve r

C D 's

be

C D

is

C D 's ,
is

le s s

b e lie v e

in c r e a s e d

im p o r t a n t ly ,

by

o th e rs

n o n n e g o t ia ­
a u t o m a t ic a lly

r e d e m p t io n .
m u st

an

O n

n o n n e g o t ia b le
eq ual

t o t a l.

F lo r id a

be

O n

p a id

th e

o ff

at

so u rc e

of

r e is s u e d .

are

b an k s.

D is t r ic t

ban ks

r u n o ff w it h

p re se n te d

C D 's

n ot

M o re

o f

m ay

th e

n o n n e g o t ia b le

w o u ld

C D 's .

se ve ra l

la r g e

So m e

In

to

n a t io n a l

n e g o t ia b le

typ e

th e n

N o n n e g o t ia b le
fo r

la r g e

D is t r ic t

t h is

by

( p a r t ic u la r ly

n e g o t ia b le

an d

is s u e d

p e rc e n t o f th e

is le s s c h a n c e o f a

C D 's ,

th e

lo c a t e d

o f

o u ts t a n d in g .

im p o r t a n t

o th e r w is e .

n e g o t ia b le

ren e w e d

5

is s u e
o f

be

s a le s

C D 's

are

ban ks

to

m ig h t

fe e l th e re

fu n d s

D i s t r ic t 's
C D 's

to ta l v o lu m e

v o lu m e

t h e ir

is s u in g

b le

th e

p re fe r

to tal
it

th e

le s s t h a n

B ecau se

la r g e
o f

o f

a lth o u g h

am o u n ts

o th e r

m o n th s.

th at

fo r

Fla.

*District portion

th a n

O v e r a ll,

300

o f 1971,

o f 1972.

has

-

s im ila r

co m p e te

c e ilin g

s in c e

400

in t e r e s t

b e g in n in g

w it h

-

co m p e te

m arket

R e g u la t io n

p e rc e n t

500

m a t u r i­

o f

90

Ala.

a id e d

su sp e n ­

w it h

ban ks

Q

c a te ­
lo a n s ,

have

C D 's

is 6 . 7 5

B ills

4

o th e r

o f 1971.

th a n

R e g u la t io n

m a t u r in g

have

9 0 -to

m o re

fu n d s

co n su m e r

in s tru m e n ts

in

s u b s t a n t ia lly

e x a m p le ,

th e

ii

t im e

stre n gth e n e d

ye ar,

m o n e y

-

th e

d e m an d s.

in s t r u m e n t s

th e

m arke t

m a t u r in g

of

m a jo r

o f

in J u n e 1 9 7 0 , t h e
on

o f

th e se

c o n d itio n s

d a y s e n a b le d

r e g a r d le s s

of

d u r in g

th e

lo a n

o n ly

t h is

c e ilin g s

89

C D 's ,

b e g in n in g

m arke t

m o n e y

m o n e y

r e m a in e d
For

o f

in

in f lo w s

s a t is fy

F u r th e rm o r e , s in c e

rate s

p o r tio n

b an ks

lo a n s a n d

C D 's . A n d

R e g u la t io n

la r g e

have

F e b ru ary

stro n g

F a v o r a b le

to

lo a n s

g o r ie s , s u c h
have

a

n e g o t ia b le

s u ffic ie n t

b u s in e s s

1972

have

m o n th s

d e m a n d

f a v o r a b le

s in c e

30,

la s t

o u ts t a n d in g

lo a n

W h ile

a p p r e c ia b ly

th e

is s u e s

fiv e

A P R IL

in c r e a s e

ban ks

C D 's

C D ’s O U T S T A N D I N G

b illio n .

C D 's .

in c lu d in g

fir s t
o f

a stro n g

e x p e r ie n c e d

w e re

Even

o f

th e

la r g e

N E G O T IA B L E

ban ks.

d u r in g

in c r e a s e d

th e se

v o lu m e

s a t is fy

gro w th

have

a lo n e

to

ban ks

by

d u r in g
th e

m e m b e r

$ 8 0 0 -m illio n

at th e se

M o re o ve r,

m illio n

d e s ir e

cu rre n t

h a lf o f t h e

b r in g in g

re co rd

T he

D is t r ic t

p r o v id e d

C D 's .

$180

ye ar,

th a n

d e p o s it s

m o n th s

n e g o t ia b le
ad d e d

m a jo r

B A N K S

9

im p o r ta n t

Jan u ary
C D 's

31,

w e re

p e rc e n t

o f

1972,

o ver

o u ts t a n d in g ,
th e

n a t io n a l

to ta l.
JO SE P H

E. R O S S M A N , JR.

123

C H A N G E IN P A R S T A T U S
Effective July 1, 1972, all checks drawn on banks located in Ala­
bama may be cleared through the Federal Reserve System at par.
This is the result of recent legislation in Alabama.

June

12, 1972

C IT Y

N A T IO N A L

B A N K

O F

H A L L A N D A L E

Hallandale, Florida
C o n v e rte d

Bank
A n n o u n c e m e n ts

June

a

n a t io n a l

bank.

12, 1972

ST A T E
O F

to

B A N K

G O L D E N

A N D

T R U S T

C O M P A N Y

M E A D O W

Golden Meadow, Louisiana
Began
June

to

r e m it a t

p a r.

1, 1 9 7 2

B A N K

O F

Z A C H A R Y

June

Zachary, Louisiana

15,

C E D A R

1972
B LU FF

B A N K

Cedar Bluff, Alabama
Began

to

r e m it a t

p a r.
Began

June

to

r e m it

at

p a r.

1, 1 9 7 2

C IT R O N E L L E

ST A T E

B A N K

June

Citronelle, Alabama

15,

1972

C H E R O K E E

C O U N T Y

B A N K

Centre, Alabama
Began

to

r e m it a t

p a r.
Began

June

to

r e m it a t

p a r.

1, 1 97 2

L A M A R

ST A T E

B A N K

June

Barnesville, Georgia

15,

F IR S T

1972

ST A T E

B A N K

Carrollton, Alabama
O pened
L.

E.

v ic e

fo r

b u s in e s s

H e w le t t,

Jr.,

as

a

n o n m e m b e r.

p r e s id e n t ;

and

Jo se p h

O ffic e r s :
E d w a rd s,

p r e s id e n t . C a p it a l, $ 2 5 0 ,0 0 0 ; s u r p lu s a n d

c a p ita l

fu n d s,

Began

to

r e m it a t

$ 2 5 0 ,0 0 0 .

June

19,

1972

T E N N E SSE E
June

N A T IO N A L

B A N K

A T

O pened

O pened

f o r b u s in e s s . O f f ic e r s : A r t h u r H . C o u r s h o n ,
S.

G o ld b e r g ,

C a r te r , e x e c u t iv e v ic e

p r e s id e n t ;

and

sk y,

B a rto n

$ 4 0 0 ,0 0 0 ;

s u r p lu s

c a s h ie r .

c a p ita l

fu n d s,

B A N K

K E N D A L L

Miami, Florida

c h a ir m a n ;

ST A T E

GatUnburg, Tennessee

7, 1 9 7 2

JE F FE R SO N

p a r.

o th e r

C a p ita l,

$ 6 0 0 ,0 0 0 .

1 24




p r e s id e n t ;
Je ro m e
and

J.

W .

B e lin ­

June

fo r

b u s in e s s

as

a

n o n m e m b e r.

24, 1972

P E O P LE S

B A N K

Red Level, Alabama

o th e r
Began

to

r e m it

at

p a r.

M O N T H L Y REVIEW

R e c e n t P u b lic a tio n s

The Discount Rate: Problems and Remedies
W illia m

N .

C o x,

III,

June

1972,

pp.

9 4 -9 8

District Banking: Ten Years of Growth and Change
John

M .

G o d fr e y , A p r il 1 9 7 2 ,

pp.

The 1971 Forecasts Revisited and
F r e d e r ic k

R.

Stro b e l

an d

5 4 -6 1

Look at 1972

a

W illia m

D .

T o a l,

M a rch

1972,

pp.

3 8 -4 1

Liability Management Banking: Its Practice in the Sixth District
A r n o ld

D ill,

D e ce m b e r

1971,

pp.

2 2 -3 1

People and Places: A Decade of Southern Change
W illia m

D .

T o a l,

N o v e m b e r

1971,

pp.

1 9 8 -2 0 4

The Treasury Debt: Someone Else's Assets
W illia m

N.

C ox,

III, O c t o b e r

1971,

p p . 1 8 2 -1 8 5

The Spread of International Banking: A Regional View
John

E.

L e im o n e ,

A u g u st

1971,

pp.

1 4 2 -1 5 0

Mobile Home Manufacturing: Infant Industry Grows Up
W illia m

D .

T o a l,

J u ly 1 9 7 1 ,

pp.

1 2 9 -1 3 5

1970 Bank Holding Company Amendments: What Is "Closely Related to Banking"?
C h a r le s

T h e se
th e

D .

S a lle y ,

p u b lic a t io n s

R e se arch

A t la n ta ,

are

1971,

now

D e p artm e n t,

A t la n ta ,

G e o r g ia

FEDERAL RESERVE BAN K O F ATLANTA




June

pp.

9 8 -1 0 6

a v a ila b le
Fe d eral

upon
R e se rve

re q u e st
Bank

to
of

30303.

125

S i x t h D i s t r i c t S ta tis tic s
S e a s o n a lly A d ju ste d

(A ll d a t a a r e in d e x e s , u n l e s s in d i c a t e d o t h e r w is e . )
Latest Month
1972

One
Month
Ago

Two
Months
Ago

One
Year
Ago

S XTH DISTRICT

Unemployment Rate
(Percent of Work F o r c e ) ............. May
Avg. Weekly Hrs. in Mfg. (Hrs.) . . . May

IN CO M E AND SP E N D IN G

Livestock
................
Instalment Credit at Banks*

Latest Month
1972

May
Apr.
Apr.
Apr.

148
133
140
139

148
146
193
143

146
144
160
149

133
119
117
123

. May
. May

453
405

450
380

434
377

368
338

116
108
108
103
105
103
110
115
105
107
102
111
106
118
123
101
119
111
116
118
125
123
100
125
90

116
108
108
104
104
106
109
114
104
107
102
112
106
118
122
102
119
113
116
125
124
123
100
125
89

116
108
109
104
104
107
109
115
103
107
101
112
106
117
121
104
119
113
115
118
124
123
101
124
93

112
106
107
102
103
106
110
113
105
104
98
107
105
114
117
105
114
108
112
115
121
119
100
118
90

4.3

4.3

4.4

4.8

2.3
41.1
238
259
217
176
84
124
269
233
186
266
290
214
164
299
311
193
183
184
200
267
397
651
413

2.3
41.3
224
282
167
170
91
112
268
231
184
264
287
211
164
294
314
190
179
187
202
266
396
652
425

2.5
41.2
193
222
165
168
89
119
263
227
180
260
279
209
162
292
307
191
178
186
200
261
385
654
403

2.9
40.6
158
181
135
167
90
124
252
217
176
239
276
201
166
260
294
173
176
167
207
240
378
624
387

178
165

173
159

175
161

154
143

167
149
184

161
143

160
143
183

144
132
160

.
.
.
.

One
Month
Ago

Two
Months
Ago

One
Year
Ago

5.7
40.9

5.4
41.2

5.4
40.9

173
162
166

172
157
169

168
154
167

148
140
145

144
131

144
175

144
141

101

May
May
May
May
May

126
110
129
131
96

125
110
128
135
97

125
113
128
130
102

121
107
121
130
100

May
May

3.7
41.4

3.9
41.6

3.9
41.6

4.4
40.9

May
May
May

195
186
210

190
177
208

191
179
210

170
162
178

May
Apr.

144
128

145
136

142
138

133
129

May
May
May
May
May

115
105
120
108
87

115
105
120
109
86

115
105
120
111
92

113
104
117
107
90

May
May

3.8
41.1

3.7
41.2

3.8
41.0

4.0
40.4

Bank Debits*

May
May
May

174
151
197

166
146
193

169
143
191

146
128
168

Farm Cash R e c e ip t s .............

May
Apr.

139
120

137
122

134
138

128
128

May
May
May
May
May

107
102
109
90
85

108
102
109
93
82

108
102
109
93
83

104
100
105
85
76

May
May

5.8
42.0

5.7
42.5

6.6
42.7

6.5
41.9

May
May
May

155
154
151

154
150
149

152
149
151

137
136
137

May
Apr.

162
169

164
162

160
179

141
140

May
May
May
May
May

114
119
112
95
91

114
119
112
96
88

114
119
112
98
96

111
113
110
96
97

FIN AN CE AN D B AN KIN G
Member Bank L o a n s ...................... May
Member Bank D e p o s i t s .................May
Bank D e b i t s * * .............................. May
FLORIDA

E M PLO YM EN T AN D PRODUCTION
. May
. May
. May
. May
. May
. May
. May
Printing and Publishing
• May
• May
• May
• • May
Stone, Clay, and Glass
• May
• May
• May
• May
Transportation Equipment
. May
. May
• May
. May
• May
Fin., ins., and real est. . . . . May
S e r v i c e s .......................... . May
Federal Government . . . . . May
State and Local Government . May
Farm E m p lo y m e n t...................... . May
Unemployment Rate
(Percent of Work Force) . . . .
. May
Insured Unemployment
(Percent of Cov. E m p . ) ............. . May
Avg. Weekly Hrs. in Mfg. (Hrs.) . . . May
Construction C o n t r a c t s * ............. . May
. May
. May
Electric Power Production*
- Feb.
Cotton Consumption** . .
. Apr.
** June
. Apr.
. Apr.
. Apr.
. Apr.
. Apr.
. Apr.
Printing and Publishing
. Apr.
. Apr.
. Apr.
. Apr.
Furniture and Fixtures . .
. Apr.
Stone, Clay, and Glass . .
. Apr.
Primary M e t a l s .............
. Apr.
. Apr.
Fabricated Metals . . . .
Nonelectrical Machinery
. Apr.
Electrical Machinery . . .
. Apr.
Transportation Equipment
. Apr.
FIN AN CE AND BANKING
Loans*
All Member B a n k s ...................... May
Large B a n k s ..............................May
Deposits*
All Member B a n k s ....................May
Large B a n k s .............................. May
Bank D e b i t s * / * * .......................... May

EMPLO YM ENT
Nonfarm E m p lo y m e n t ....................May
Manufacturing
.......................... May
Nonmanufacturing .......................May
C o n s t r u c tio n ....................... May
Farm E m p lo y m e n t..........................May

126




134

EMPLO YM ENT

Unemployment Rate
(Percent of Work Force)
Avg. Weekly Hrs. in Mfg. (Hrs.)
FIN AN CE AN D B AN KIN G
Member Bank L o a n s ............
Member Bank Deposits . . .
Bank D e b i t s * * ....................

INCOM E
Manufacturing Payroll:
Farm Cash Receipts
EMPLOYM ENT

182

ALABAMA
IN COM E
Manufacturing P a y r o lls ................... May
Farm Cash R e c e ip t s ....................... Apr.

Manufacturing P a y r o l l s .................May
Farm Cash R e c e ip t s ...................... Apr.

Nonfarm Employment
Manufacturing
. .
Nonmanufacturing .
Construction . .
Farm Employment . .
Unemployment Rate
Avg. Weekly Hrs. in Mfg. (Hrs.)
FINANCE AND BANKING

EMPLOYM ENT
Nonfarm Employment . . . .
Manufacturing
................
N o n m a n u fa ctu rin g ............
C o n s t r u c t io n .................
Farm E m p lo y m e n t................
Unemployment Rate
(Percent of Work Force) . .
Avg. Weekly Hrs. in Mfg. (Hrs.)
FINANCE AND BANKING
Member Bank Loans* . . . .
Member Bank Deposits* . . .
Bank D e b i t s * / * * ................
M IS S IS S IP P I

151
165

151
171

109
107
119

108
106
119
113

132
136

IN COM E
Manufacturing Payrolls
. . .
Farm Cash R e c e ip t s ............
EMPLO YM ENT

111

109
108
119
113

107
107
108

Construction
Farm Employment

MO NTHLY

r e v ie w

One
Month
Ago

Two
Months
Ago

One
Year
Ago

4.2
40.8

4.2
41.0

4.0
40.8

5.1
40.3

180
166
184

175
160
173

184
158
171

160
149
161

Latest Month
1972

One
Month
Ago

Two
Months
Ago

One
Year
Ago

EMPLO YM ENT

Unemployment Rate
(Percent of Work Force) . . . . . May
Avg. Weekly Hrs. in Mfg. (Hrs.)
. May
FIN AN CE AND BAN KIN G
Member Bank L o a n s * .............
Member Bank Deposits* . . . .
Bank D e b i t s * / * * ....................

Latest Month
1972

. . May
. . May
May

Nonfarm E m p lo y m e n t .............
M a n u f a c t u r i n g ....................
N o n m a n u fa ctu rin g................
C o n s t r u c t io n ....................
Farm E m p lo y m e n t...................
Unemployment Rate
(Percent of Work Force) . . .
Avg. Weekly Hrs. in Mfg. (Hrs.) .

.
.
.
.
.

.
.
.
.
.

May
May
May
May
May

115
108
119
119
91

116
108
119
124
92

115
108
119
128
89

111
105
112
108
86

. . May
. . May

3.7
40.7

3.6
40.9

3.7
40.7

4.7
40.1

• . May
. . May

174
161
154

169
156
155

173
155
161

151
138
140

TENNESSEE

FIN AN CE A N D B AN KIN G
INCOM E
Manufacturing P a y r o lls ............
Farm Cash R e c e i p t s ................

151
134

. . May
Apr.

147
137

153
147

*For Sixth District area only; other totals for entire six states

Member Bank L o a n s * .............
Member Bank Deposits* . . . .
Bank D e b it s * / * * ......................

136
128
“ Daily average basis

tPreliminary data

r-Revised

N.A. Not available

Note: Indexes for bank d eb its, construction co n tracts, cotton consum ption, em ploym ent, farm cash receipts, loans, deposits,
petroleum production, and payrolls: 1967= 100. All o th er indexes: 1957-59=100.
Nonfarm employment data for all District states have been adjusted to new bench marks and to new seasonal factors.
Sources: Manufacturing production estimated by this Bank; nonfarm, mfg. and nonmfg. emp., mfg. payrolls and hours, and unemp., U.S. Dept, of Labor and cooperating
state agencies; cotton consumption, U.S. Bureau of Census; construction contracts, F. W. Dodge Div., McGraw-Hill Information Systems Co.; petrol, prod., U.S. Bureau of
Mines; industrial use of elec. power, Fed. Power Comm.; farm cash receipts and farm emp., U.S.D.A. Other indexes based on data collected by this Bank. All indexes
calculated by this Bank.

D e b it s t o D e m a n d D e p o s it A c c o u n ts
In s u re d C o m m e r c ia l B a n k s in th e S ix th D is tric t

(In T h o u s a n d s o f D o lla r s )
Percent Change

May
1972

Apr.
1972

May
1971

STANDARD METROPOLITAN
STATISTICAL AREAS
Birmingham
. . . 2,833,438
Gadsden . . . .
84,430
Huntsville . . .
272,913
M o b i l e ............
864,611
Montgomery
. .
519,443
Tuscaloosa . . .
166,270

2,686,666
80,392
240,627r
834,661
460,303
149,194

2,255,817
78,021
239,560
763,780
486,641
139,736

+ 5
+ 5
+ 13
+ 5
+ 13
+ 11

+
+
+
+
+
+

26
8
14
13
7
19

+ 28
+ 3
+ 8
+ 19
+ 10
+ 9

Ft. Lauderdale—
Hollywood . . . 1,582,039
Jacksonville
. . . 3,071,254
M i a m i ............
5,044,354
Orlando . . . .
1,230,821
Pensacola
. . .
379,386
Tallahassee . . .
653,238
Tampa— St. Pete . 3,064,748
W. Palm Beach .
890,782

1,515,806
2,705,866
4,996,580
1,235,180
354,551
584,763
2,995,096
896,686

1,213,395
2,146,791
4,484,125r
904,510
329,304
323,228
2,345,434r
716,234

+ 4
+ 14
+ 1
- 0
+ 7
+ 12
+ 2
- 1

+
+
+
+
+
+
+
+

30
43
12
36
15
102
31
24

+ 20
+ 31
+ 14
+ 26
+ 14
+ 115
+ 22
+ 14

A l b a n y ............
Atlanta
. . . .
Augusta . . . .
Columbus
. . .
M a c o n ............
Savannah . . . .

162,675
11,061,322
423,352
369,367
425,540
439,209

148,930
9,874,733
398,412
342,346
397,715
418,260

131,512
8,575,888
350,262
346,847
362,624
356,385

+
+
+
+
+
+

9
12
6
8
7
5

+
+
+
+
+
+

24
29
21
6
17
23

+
+
+
+
+
+

16
18
15
12
14
12

. .
206,353
. . . 1,123,759
. .
230,598
212,938
. .
. . . 3,470,721

181,871
985,664
194,711
182,416
3,154,009

169,388
904,435
186,181
184,020
3,096,040r

+ 13
+ 14
+ 18
+ 17
+ 10

+ 22

+

9

+
+
+
+

24
24
16
12

+ 14
+ 10
+ 5

Biloxi-Gulfport
Jackson . . . .

219,213
1,219,777

183,441
984,978

190,450
1,009,371

+20
+24

+ 15
+ 21

+ 13
+ 11

Chattanooga . .
Knoxville . . . .
Nashville . . . .

948,851
731,012
2,647,139

882,787
718,600
2,520,684

933,972
627,369
2,136,220

+ 7
+ 2
+ 5

+ 2
+ 17
24

+ 3
+ 11
+ 19

96,214
134,417
63,307

87,234
113,469
54,849

86,346
107,620
51,985

47,121
144,136
265,811
144,337

42,094
150,537
247,431
144,111

35,174
110,728
201,123
108,704

189,758

172,253

178,946

+ 11
+ 25
+ 22
+ 12 + 34
- 4 + 30
+ 7 + 32
+ 0 + 33
+ 10 + 5

+ 11
+ 16
+ 13
14
+ 25
+
+ 2712
+
+ 9

Alexandria .
Baton Rouge
Lafayette . .
Lake Charles
New Orleans

THER C EN TERS
Anniston . . . .
D o t h a n ............
S e l m a ............
Bartow
. . . .
Bradenton . . .
Brevard County .
Daytona Beach
Ft. Myers—
N. Ft. Myers

Percent Change

Year
to
May
date
1972
mos.
From
1972
May I from
Apr.
19711 1971
1972

+ 10
+ 18
+ 15

+

+ 12

1972
May
Gainesville . .
Lakeland . . .
Monroe County
Ocala . . . .
St. Augustine .
St. Petersburg
Sarasota . . .
Tampa . . . .
Winter Haven .

FEDERAL RESERVE BAN K OF ATLANTA

+
+
+
+
+
-

+
+
+
+
+
+
+
+
+

138,282
82,093
158,848
24,025
104,667
58,353
31,078
43,770
119,340
80,481

131,299
73,593
148,285
18,818
101,222
54,413
31,068
37,505
113,652
78,666

172,153
61,101
117,097
15,709
94,186
50,009
51,637
34,876
95,641
72,007

+ 5
+ 12
+ 7
+28
+ 3
+ 7
+ 0
+ 17
+ 5
+ 2

_ 20

_ 19

34
36
53
11
17
— 40
+ 26
+ 25
+ 12

+ 21
+ 20
+ 20
+ 5
7
+
— 5
+ 28
+ 17
+ 17

15,130
9,179
60,319
53,942
16,317
34,189

15,479
7,965
57,533
47,803
14,403
29,414

12,681
7,770
49,978
54,178
14,263
32,162

- 2
+ 15
+ 5
+ 13
+ 13
+ 16

+
+
+
+
+
+

19
18
21
19
14
6

+ 10
+ 6
+ 11
+ 7
+ 9
+ 4

.

105,931
62,771
101,847
47,957

98,994
60,209
95,303
44,655

87,191
53,929
79,076
46,617

+
+
+
+

7
4
7
7

+ 21
+ 16
+ 29
+ 3

+ 17
+ 11
+ 18
+ 5

.
.
.

139,364
58,720
38,858

116,030
56,114
39,238

102,107
49,064
36,050

+20
+ 5
- 1

+ 36
+ 20
+ 8

+ 26
+ 4
+ 8

123,084
140,369
225,651

115,233
134,552
209,470

116,191
115,533
186,380

+ 7
+ 4
+ 8

+ 6
+ 21
+ 21

+ 8
+ 21
+ 13

. . . . 58,264,973

54,148,078r 47,465,154r + 8

+ 23

+ 17

.
•
.
.

6,341,802r 5,689,969 + 8
19,120,949 15,699,523r + 4
14,472,675 12,683,960 + 10
5,670,674
5,465,528r + 12
2,264,309
2,180,043 + 16
6,277,669
5,746,131 + 5

+ 20
+ 26
+ 26
16
21
+ 15

+ 21
+ 20
17
8
13
+ 11

.

.
.
.
.

Hattiesburg . .
Laurel . . . .
Natchez . .
Pascagoula—
Moss Point
Vicksburg
.
Yazoo City .

Bristol . . . .
Johnson City .
Kingsport
. .

Alabama}
Florida! •
Georgia* .
Louisiana*
M ississippi*
Tennessee*

May
1971

166,660
217,198
59,285
137,244
29,492
715,793
251,322
1,431,011
129,586

Abbeville . .
Bunkie . . . .
Hammond .
New Iberia .
Plaquemine
Thibodaux .

istrict Total

Apr.
1972

175,380
237,661
58,614
140,249
29,081
725,713
242,001
1,488,399
125,054

Athens . . . .
Brunswick . .
Dalton . . . .
Elberton . . .
Gainesville . .
Griffin . . . .
LaGrange
. .
Newnan . . .
Rome . . . .
Valdosta . . .

-Inclu de s o n ly banks in the Sixth District portion of the state; partially estim ated.




Apr.
1972

Year
to
date
5 mos.
1972
May from
1971 1971

May
1972
From

.
•
.
.
.
. .

.
•
.
.
.

. 6,839,805
19,846,933
15,972,472
. 6,360,722
. 2,627,258
. 6,617,783

^Partially estim ated.

134,861
179,035
48,754
114,407
24,066
602,827
184,153
l,191,788r
101,814

5
9
1
2
1
1
4
4
3

30
33
20
23
21
20
31
25
23

+
+
+
+
+

+
+

+
+
+
+
+
+
+
+
+

21
20
17
25
18
17
24
16
22

+
+
+

N A - N o t available.

127

D i s t r i c t B u s in e s s C o n d i t i o n s

E c o n o m ic
m o b ile

a c t iv it y

s a le s

in

th e

reach ed

S o u th e a st

e x t r e m e ly

d e m a n d

sh o w e d

g r o w in g

o u tlo o k

fo r

fa rm

m o n th s,

so fte n e d

B an ks
as

m an y

h o ld in g s

o f

b an ks

U .

ste p p e d

an d

m ad e

W h ile
ly ,

S.

up

d e m a n d

at

a

m u ch

h o w e ve r,
fu n d s
June,
fro m

fro m

4 .3

A la b a m a

lo s s e s

o f

w e re

Note:

s in c e
fe ll

c lin e d ,

o f

in

th e

an d

R e s id e n t ia l

c o n tin u e d

to

c o n s t r u c t io n

m ake

s m a ll b a n k s. G o o d

c o n d itio n s ,

th an

a p p a r e n t ly

th e

in

an d

h e avy

r a in s a n d

s t ill

an d

u se

o f

r is in g

d ig e s tin g

D e s p it e

fro m

A p r il

m e m b e r

fro m

w h ic h

1971,
an d

to

expan d

o f

cate

d o m e s t ic

b an k

p r ic e s

ste ad y

a u to ­

c r e d it .

Loan

im p r o v e d

g a in s

o f

th e

e a r lie r

to

M a y ,

m o n th s;
C D
la t e

le n d in g

rate

u n ch an ge d

C o n su m e r
e x p an d e d
s u b s t a n t ia l
p r e v io u s

at

th re e

a u t o m o t iv e
In

r e g a in e d

t h e ir

r e s id e n tia l a n d

N o n m a n u f a c t u r in g

jo b

o ff.

P r e lim in a r y

in

rose
p r ic e s

d a ta

c o n tin u e d

in d i­

to

r is e

at

c o m m e r c ia l

H o w e ve r,

s m a lle r

th a n

b an k s

th o u gh

th o se

in

fo r

au to s

Loan s

g o o d s

g a in s

each

r e m a in e d

s t ill

o f

an d

th e

n o n ­

p a r t ic u la r ly

s a le s o f d o m e s t ic a lly

p ro d u ce d

au to s

v ig o r ,

b r ie fly

in

A p r il.

u p w ard

tre n d ,

C o n s t r u c tio n

ste a d y

s ig ­

an d

tra d e .

a d v a n c in g

A ve ra ge

m a n u fa c tu r in g

e a ste rn

p ro d u cts

in c r e a s e s

c a t t le

c r e d it

M a y .

co n su m e r

s h o w in g

been

fa rm

la r g e

an d

m o n th s.

M ay,

e s p e c ia lly

had

in

w e re

and

s e r v ic e s ,

o f

b r o ile r s .

in s t a lm e n t

a g a in

F lo r id a

S tate s

in e s t im a b le

a fte r

s lip p in g

N o n fa rm

r e g is t e r in g
1972.

by

h o gs

an

June.

stro n g.

e a r ly

le d

w e re

d r o u g h t -s t r ic k e n

P r ic e s

an d

p r ic e s o f

A g n e s

th e

D is t r ic t .

h o gs,

th a t

in

sh a rp ­

In

fo rc e .

th e

c it r u s ,

in

in c r e a s e d

a ttra c te d

p r im e

fa c to ry

p a y r o lls

g a in s .

D ata on w h ic h sta te m e n ts are b a se d

128

ban ks
ban ks

w in d o w .

p r e v io u s

w o rk

le v e le d

e a r lie r 1 9 7 2




o th e r

H u r r ic a n e

fa rm e rs

s e c u r it ie s .

d e p o s it s

a fte r

fro m

to
o f

go v e rn m e n ts.

D is t r ic t

g a in s .

R a in s
b o o n
area

b an ks

c o n s tr u c tio n ,

jo b s,
la t e

o ff,

o n ly

d e ­

red u ced

in

t h e ir

M a y ,

p e rc e n t.

c iv ilia n

1971

in
lo a n

d is c o u n t

s a v in g s

lo c a l

1 /4

th e

s lig h t ly ,

h a lt in g

stre n gth e n .

t h e ir

c o n tin u e d

r a is e d
5

re se rve s

M ay,

la r g e r

an d

e m p lo y m e n t

M a n u fa c t u r in g
s m a r t ly

th e

le v e le d

o ccu rre d

h o u rs

e a r ly

pace

ban ks

th ro u g h o u t

n ific a n t

m arket

u n e m p lo y m e n t ra te r e m a in e d

p e rc e n t

g a in s

an d

June

e m p lo y m e n t

to

C o n su m e rs

la r g e

stro n ge r

b o r r o w in g s

d e p o s it s

p e rc e n t to

M a y 's

fo r
A

r e s u lte d

s in c e

u se

t im e

state

m a jo r
5

has

th e ir

s lo w e r
in

p re sse d

G o ve rn m e n t

g re a te r

co n su m e r

at b o th

Labor

stre n gth e n e d .

s t r o n g d e p o s it g a in s
a ls o

in c o m e s .

m o re

d e m a n d
at

stre n gth

le v e ls .

s lig h t ly .

b e cam e

lo a n

m an d

h ig h

c o n tin u e d

h ig h

d e ­

ly

b e lo w

in

aw ard s

in g

la s t

c r e d it
s a v in g s

c o n tin u e d
In

M a y ,

its

th e

v a lu e

o f

b o th

to ta l c o n tr a c t a w a r d s w a s o n ly s lig h t ­

re co rd

id e n t ia l
th e

a c t iv it y

F lo r id a .

h ig h s ,
m o ve d

t w e lv e

c o n tin u e d
in f lo w s

w h ile
up

m o n th s.

to

be

at

t h r if t

th e

a fte r

v a lu e
lit t le

o f

R e s id e n t ia l

r e a d ily

d u r­

m o rtga ge

a v a ila b le ,

in s t it u t io n s

n o n re s­

ch a n ge

a lth o u g h

d im in is h e d

so m e w h a t.

h a ve bee n

ad ju ste d w h e n e v e r p o s s ib le

to

e lim in a te

se a so n a l

in flu e n c e s.

M O N T H L Y R E V IE W
July 1972