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[rea^t
H X
10
,f f)3 p y
v, s'*
U iS
(Press,
He leases
»*
n" a* lr “ wwar u w v
^^ R A R Y
P ™ M 5030
JUN 1 4 1972
TREASURY DEPARTMENT
*'
P-
PRESS RELEASES
39-51
39-99
Nov. 16, 1943
Dec. 17, 1943
stability of our postwar economy.
Unfortunately, it becomes even
i
more apparent that existing taxes are, in fact, not playing any such
role.
Instead of building bulwarks against postwar inflation and
unemployment, our inadequate taxes provide aid and comfort to these
disruptive forces.
Instead of distributing the bulk of war's costs
once and for all, our inadequate taxes will saddle the postwar tax
system —
and incidentally our fighting men —
with a heavier
burden of debt service.
Postwar considerations heavily underscore the need for a
courageous program of additional taxes.
Failure to meet that need
will expose our postwar economy to the ravages of inflation and
unemployment.
In this setting, the Treasury*s proposal for $10.5
billion of additional taxes stands out even more clearly than
before as truly a minimum program.
to recapture, corporations unable to reconvert rapidly will find
their competitive position impaired.
Small and medium-sized
concerns would be most likely to suffer in the postwar scramble
for the financial and material wherewithal of reconversion.
Thus,
forces which hinder reconversion will not only bring on a postwar
economic crisis, but also encourage the growth of monopolies.
Insofar as corporate tax policy in wartime removes postwar stumbling
blocks, it contributes tellingly to the reestablishment of a
strong peacetime economy*
VII. Conclusi on
I
have said comparatively little this evening about specific
provisions of current tax proposals*
review some of the principles —
principles” —
It seemed more urgent to
perhaps I should say "neglected
that should govern wartime tax decisions.
It becomes apparent in the course of review that wartime
taxes
play a major role in providing for the health and
stability of
The Treasury has recognized, however, that the carry-hacks
will not serve their maximum purpose unless the promise of refunds
is quickly converted into the fact of cash payments*
Immediate
access to cash will be the vital need in the demobilination period.
The Treasury has therefore recommended a number of measures to
accelerate refunds of war taxes under the carry-back provisions.
If these measures are adopted, a substantial sector of the war
economy will be guaranteed the lubricant of cash for the process
of postwar reconversion.
Nearly 50 percent of American industry is currently engaged
in the production of war goods.
Delay in reconverting it to
peacetime production might mean inflation, or unemployment, or both.
It might also spell loss of markets for the firms caught in the
bottleneck.
Since lost markets will be difficult or even impossible
to recapture,
evidence the credits do not mature immediately upon the cessation
of hostilities, they become negotiable at that time*
sold or used as the basis for loans.
They may be
The excess-profltsjjtax credit
will thus supply many corporations with badly needed funds for the
process of reconversion*
Our existing tax law provides further assistance to many
corporations by allowing the so-called carry-back of losses and
unused excess-profits|tax credits*
Under the loss carry-back provision,
the corporation may offset its currentjyear losses against profits
in the preceding two years and obtain a corresponding tax refund#
Unused credits under the excess-profits tax may be similarly
carried back#
These provisions-recognise the arbitrariness of the
annual accounting period*
They will grant corporations whose
wartime profits are converted into postwar losses a refund of at least
part of their wartime taxes*
These refunds are a potential source
of funds for the difficult transition period*
The Treasury
reserve figures indicate that wartime taxes have performed this
function generously.
The average total annual profits after taxes
for 1941* 1942, and 1943 will equal the peak profits of 1929 and
will more than double the profits for 1937,
Even after taxes and
dividends, corporations will have accumulated over $15 billion of
undistributed corporate profits during 1942, 1943, and 1944,
These
figures do not, of course, imply that every corporation will have
a sound financial position at the end of the war.
But they do
indicate that wartime taxes have not, generally speaking, prevented
the attainment of such a position*
With respect to the postwar liquidity of corporate assets,
tax policy can serve a positive function,
One source of reconversion
funds with roots in tax policy is the postwar credit under the excess
profits tax.
Corporations are entitled to a rebate of 10 percent
of their @xcess*profitsitax payments.
Although the bonds Issued to
evidence the
to exceed reasonable bounds, it mould be difficult to justify denials
of wage and price increases*
If the defense line against such increase
crumbles, costs will rise sharply*
But on the other hand, unduly high
corporate taxes may weaken the resistance of management to pressures
for higher costs*
Once costs have pushed upward, it is very
difficult to put them back into their former place*
Since a high
cost level tends to hobble production, wartime taxes on corporations
/■
must walk a perilous tight rope*
They must be high enough not to
give labor and farmers & cause for action on the wage and price
fronts, yet, they must not be so high as to remove the profit
brake on costs*
Effect on Financial Position,
The postwar health of corporations
depends also on the amount and liquidity of corporate accumulations.
■]f
V :
' '
V'-?
'!■//' ' R 9 H B
With respect to their amount, taxes have a negative function,
namely, to avoid impeding their normal growth,
Corporate profit and
reserve figures
From this cursory resume, it becomes clear that the taxes we
levy in wartime powerfully affect postwar distributions of costs
among income groups*
If war finance leaves a legacy of huge war debts
and regressive taxes, we shall be ill-equipped to follow the
traditional precepts of equity in government finance*
To guard
against this outcome, war finance should rely heavily on taxes,
especially personal income taxes, and should^direct a large part of
its bond-selling efforts to the lower Income groups*
VI.
Corporate Tax Policy
In appraising the postwar effects of wartime taxes it is also
important to examine the postwar impact vOf corporate tax policy*
This
impact revolves around the effect of corporation taxes on both cost
structures and financial positions*
Effect on Cost Structures. 'Corporate taxes must be high enough
to prevent disproportionate war profits.
If profits were allowed
to exceed
difficult to uproot xt after the war#
The burden of postwar
taxes would press snore heavily on the low income groups in that
case than if the same revenue were raised through the income tax.
By the same token, increased wartime reliance on personal income
taxes will have long-run advantages in distributing war costs.
From this cursory
♦ 37 *
Large wartime accumulations of paper
money are also generally thought to represent savings from low and
moderate incomes.
In addition* many people whose incomes and
savings have risen sharply during the war will slide hack into
moderate or low income brackets after the war.
These factors
reduce the likelihood that Government bonds will be as heavily
concentrated in the hands of the higher income groups as they have
been in previous wars.
In terms of an undesirable postwar
redistribution of burdens* then* the social cost of inadequate
war taxes* though high, may be lower in this than in previous wars.
Not only the magnitude but also the type of wartime taxes we
levy will affect the postwar distribution of burdens.
If* for
example, we adopted a sales tax during the war, we might find it
difficult to
** Sll »
I n ■the pro-eeni waa^the larger part of the public debt is being
absorbed by savers in the higher income brackets
sums ofL at least $3f5, are very widely bought out of tjm current
savings of people with low or moderate incomes, Uflt we find that
in the year endin^peptember 30, 1943, the jgflesl of Series 1 Bonds
jw
/jf/
mjm
of less than $500 face \^.lue amounte<M^fonly $$}7 billion.
the same period, sales of
In
Series 1 Bdhds were $2,9
billion, while sales of tjpfr serielNfco tailed $fjL7 billion*
Out of
jF
\
1
total sales of $16.6 Jfi 11 ion to individuals r a p t he year, nearly
I
$10 billion reiupsent| bonds which do not gener
investo^^pr lower income groups
savers in the
lower income brackets are accounting for a substantial share of
total savings,^
the other to share pro rata in the burden of servicing the bonds
held by civilians who were prospering at home.
let* by setting
wartime taxes too low, we^w^EL be causing precisely this injustice.
Distribution Among Income Groups,
Our decisions on war finance
will affect the distribution of war costs not only between soldiers
and civilians but also among different income groups after the war*
5
the level of wartime taxes, through its effect on borrowing!, governs
the amount of taxes we shall have to levy after the war to service
the public debt.
Moreover, it determines in large part what income
(j groups become government creditors.
A war financed mainly by
/ rwadS^IW^/borrowing, especially if accompanied by inflation, builds
up heavy credits in the hands of high-income groups against the
rest of the population.
Depending on the postwar distribution of
tax burdens, such debt financing may lead to a postwar redistribution
of burdens bearing heavily on the lower income groups.
In the present
Despite tax and price increases and a huge war effort, they are
maintaining consumption comfortably above subsistence levels*
At the
same time, they are saving as never before, and with these savings
will exercise a claim on postwar goods and services.
In large part,
these savings reflect our failure to tax more heavily in wartime*
As one would expect, they take the form primarily of direct or
indirect ownership of public debt*
The combination of insufficient
taxes in wartime and the handmaiden of a huge public debt means
heavier taxes in the postwar period than would otherwise be necessary.
These taxes will fall partly on the fortunate owners of
wartime savings, but also in part on people who have not shared in the
savings boom because they were in military service.
j||§
It seems &
curious way of distributing war burdens to ask our fighting men on
one hand to bear the dangers and forego the profits of war, and on
the other to share
33 -
and thus leave the future with a better equipped economic system.
On the other hand, borrowing may have a psychological advantage
over taxation because the fallacy of postponement persists.
People
m y feel that they are postponing costs and therefore accept more
willingly the direct sacrifices of war.
Distribution of Costs Between Civilians and Servicemen.
What
\
is really postponed through borrowing is not the cost of war but
the distribution of its cost.
War finance can do a great deal to
shift burdens among the people who will be members of the community
after the war.
As I hinted previously, the patterns of war finance
into which we are drifting involve a discrimination against men
now serving in the armed forces.
Civilians at home are, with few
exceptions, better paid than they ever have been in their lives.
Despite tax and
|
- 32 -
V. Distribution of Tax Burdens
Costs of War#
The fallacy still persists that the cost of
the war in economic terms can be postponed
after the war*
It
persists in spite of the fact that exploding this particular fallacy
is one of the favorite "indoor sports" of economists*
They are
fond of pointing out that no method of war finance can shift real
burdens from the war to the postwar period.
Methods of finance
cannot give people more food, housing, and clothing during the
war at the expense of less after the war,
can any financial
legerdemain levy on the future to put weapons into the hands
of our fighting forces in Italy and the Solomons*
Whether we
borrow or whether we tax will have only a minor effect on our total
burden.
Generally speaking, heavy taxes tend to minimize the wear
and tear on the plant and equipment of our civilian economy and
and thus leave
X
31 «
BooiaX Security, Another wartime fiscal measure which does
yeoman service for the postwar period is the Social Security
program*
Expansion of unemployment insurance, and schemes providing
for dismissal or separation pay on an insurance basis, offer an
attractive hedge against our combination of inflation and
unemployment dangers.
They withdraw spending power steadily during
periods of strong employment, both during and after the war.
During periods of weak employment, they offer life blood to
a faltering economic system.
If unemployment is widespread, a
strong Social Security program will support markets.
If unemployment
is spotty, which is more likely, Social Security will protect the
Individuals whose luck is bad.
On all counts, the strengthening
of Social Security deserves high rank as a war measure which
provides insurance against postwar instability.
V* Distribution of Tax Burdens
Cur pent payment has another important advantage in this
connection.
It permit® speedy legislative adjustment of tax
collections to the fluctuating requirements of our economy.
It permits tax adjus touts to be paired with Government
spending policy in smoothing out the extreme fluctuations of
the business cycle.
m
Under our present withholding system, we have not yet
achieved the maximum exactness in current collection of
liabilities.
Year-end adjustments are necessary, and some of
these will be fairly substantial.
The Treasury has, therefore,
recommended that the withholding system be adjusted to match
the amount withheld more closely with the amount of taxes owed.
This would be accomplished by graduating the withholding rates
and by narrowing wage brackets in withholding tables.
This
adjustment is urged with an eye to avoiding a tax overhang in
the demobilization period.
Social Security.
Another wartiml
consumer markets and reinforce the downtrend*
The situation
during the rising phase of the cycle is analogous.
If taxes
In the current year are based on the smaller income of the
preceding year, people will be in a fictitiously easy financial
position.
Upward pressures may be unduly reinforced*
In connection with the effects of taxation on the business
cycle, the Current Tax Payment &ct, passed earlier this year,
Is an extremely important safeguard.
For the most part, and
especially in the lower brackets, current payment avoids the
lag which tends to accentuate fluctuation®.
current payment has a countercycle effect*
income drops, and rise when income rises.
Or, put positively,
Taxes drop when
The drain on
purchasing power is minimized when incomes are on the downgrade,
and maximized when Incomes are on the upgrade.
Current payment has
some pressure toward higher prices may actually be tenefici&l,
since it will activate production and employment.
But until
we have cleared the decks for action, we are only too likely to
burn up our wartime savings accumulations in a post-armistice
spending spree that will express itself not in more goods, but
only in higher prices.
The Impact of Current Tax Payment.
Given the prospect of
unemployment and cyclical fluctuation after the war, it becomes
important to correlate tax payments closely with the receipt of
income.
During an economic downturn and a period of developing
unemployment, a mass of accruing but unpaid taxes can have
a seriously depressing effect*
If taxes payable out of a
declining income in the current year are based on a higher
income in the preceding year, the effect will be to dampen
consumer markets and
27 *
metaphor, it is even possible that we will have to wrestle with
both at the same time!
Nature of the Problem* The inflation d m g e r and the
unemployment danger unfortunately do not cancel out*
It is true,
of course, that the same pressure of spending power which
threatens inflation creates a strong market for many key products.
It does not follow, however, that it automatically creates
employment*
The danger of unemployment during demobilization
results not from any lag in consumer demand but from a lack of
y
the equipment and materials needed to employ labor in
satisfying that demand*
The initial problem of post**annistice
unemployment is thus likely to be a bottleneck problem,
^fter
the bottlenecks are broken, the danger of unemployment becomes
largely one of inadequate purchasing power,
in this situation,
some pressure
from the cumulative effects of increases in money and bank
deposits during the war.
Heavy wartime taxes and maintenance
of such taxes until it is d e a r that postwar inflationary
pressure is under control are the best weapons against these
dangerous inflationary forces.
The inflation thunderheads on
the postwar horizon should have a sobering effect on any optimism
about wartime taxation.
They afford little aid and comfort to
the enemies of a vigorous additional tax program.
IV.
Postwar Unemployment Dangers
Our economic system in the postwar period faces not only
the menace of inflation, but also the rigors of unemployment.
Inflation and unemployment are the Seylla and Charybdis of
demobilization periods.
If we escape one, we are reasonably
sure to have trouble with the other.
V*e may, in fact, run
athwart both in the same stormy voyage; and contrary to the
metaphor, it is ©von
"X
* 25 -
ending September 30, 1943, will be a further inflationary threat
after the war*
Business will quite naturally want to draw these
funds out end put them into circulation.
With business, as well
as with consumers, any signs of a runaway market will be the
signal for & rush to spend accumulated funds before their value
melts away*
A flash flood of business spending will eventually
pour into the same stream as consumer spending*
In the postwar
period, the two forces will oe reinforcing and not offsetting,
ana will tend to make a Joint attack on price stability*
Records of past wars make it clear that post-armistice
inflations are commonly more drastic than actual wartime
inflations*
This is no mere coincidence.
It results from
a relaxation of wartime controls, from impatience with
restrictions, from the unleashing of speculative motives, and
from the cumulative
24
\
During the war, business is steadily piling up cash
balances*
It is selling inventories it cannot replace*
wearing out machinery It cannot fully maintain.
It is
And, because
credit restrictions m l shortages of aid table goods severely
limit new sales on m installment basis, it is reducing
outstanding installment debts.
Its opportunities and temptations
to spend these balances are severely restricted by wartime
regulations*
Thus, liquid funds of business are fairly
non-inflammable as regards wartime inflation.
return of peace, business will naturally strive
co repxenxsn xus inventories, renovate its equipment, and again
push instalment selling*
accumulated funds of business will
tend to go into circulation at least as repdily as those held
by consumers*
Some
116 billion
of reserve funds which
corporations have put into Government bonds during the year
ending September 20, 1943,
to rely heavily on self-restraint and very likely also on an
extension of direct oontrols into the immediate postwar era.
The total increase in the money supply in recent years is
enormous*
Combined business and individual accumulations of
currency and checking deposits rose $26.5 billion, or 59 percent,
in the two years ended last June.
Of this growth, $19 billion
occurred in the second of the two years.
Although we lack
figures showing who holds the added currency, Federal Reserve
figures are available on checking deposits,
§»
lear tha1
Lded checking deposits belong to business
rather than to consumers,
by this fact.
From these it is
Some people are very much comforted
This sense of comfort is legitimate in wartime,
when liquid business funds are largely tied down by priorities
and other restrictions.
However, in the postwar period, these
business accumulations will be a real source of concern.
During the war,
aocountsj $21 billion are in the form of redeemable or
marketable bonds*
,jj| our direct and Indirect controls, on one bandy and our
jjj&pacity to revert to peacetime production, on the other, prove
sufficient to cope with postwar inflation, these accumulations
may settle down into permanent savings.
But if people make up
their minds that prices are rising and are likely to keep on
rising, the process of spontaneous combustion may kindle the
fires of inflation.
People will want to spend their funds
before price rises sap their purchasing power and devaluate their
savings.
To keep these combustible funds within manageable
limits is one of the chief assignments of wartime taxes.
I must
ionfess that the taxes we have and seem likely to get may not
keep liquid savings within manageable limits,
We shall have
to rely heavily
•
21
*
rather as one of our best guarantees, though a negative one, of
of the free democratic system we are fighting to retain.
However, if the impatience of the American people with
wartime control bursts its bounds too soon after the war, we may
be faced with economic disaster,
A great fund of accumulated
war savings will overhang our postwar market,
Desirable as it
is to hajpr a large volume of savings out of current income to
lessen current inflationary pressure, such savings art not an
unmixed blessing.
In fact, the greater the contribution they
make to the present fight against inflation, the greater the
threat they offer to future price stability.
In the three and one-half years ending June 30, 1943, the
American people added the staggering total of $55 billion to
their accumulated savings.
Of this total increase in individual
savings, $24 billion are in the form of currency and checking
accounts; $21 billion
20
It is especially in the post-armistice period that inflation may
disrupt our economic processes*
||
$
aB" ^ >
Inflation forces*
The end of active hostilities will unleash
political and economic forces that m y irresistibly drive us to
|||
post-armistice inflation.
There will be an inevitable dilution
of patriotism and of the willingness to accept controls that
smack of regimentation*
Patriotic appeals to saving will no
longer have their present effectiveness.
The red tape of price
control and rationing, which is accepted as a necessary nuisance
in wartime, will become a galling and intolerable restriction
when victory has been won.
Enforcement of controls will become
much more difficult when civilians regain their mobility by
renewed access to gasoline and rubber.
I do not decry the
unwillingness of the American people to retain restrictive
wartime controls for a long period after the waiv I regard it
rather as one of
-In speaking of inflation and its dangers,
whether in time of war or in the postwar period,
I am not talking about sh the German type of inflation
P
l
’
^r |* ,
* || | I|
after the last war when German money became valueless.
We are in virtually no danger of such a catastrophe*
Rather I have in mind the kind of inflation we had
after the last war when the cost of living m a went to
211 percent of its prewar level and wholesale prices
WHQc went to 240 percent of their prewar level, That
kind of inflation, even if no worse than it was after
the last war, would be disastrous enough to warrant
very great effort and sacrifice to avoid it.
HI*
Postwar Inflation Dangers
Every day the press is full of nows about measures to hold
the line against inflation*
I cannot refrain from adding
parenthetically that such news rarely assigns taxes their
rightful place in the fight to hold the line.
However that Is
probably quite natural, since taxes are a background force,
operating to relieve pressure on the front-line forces of price
control and rationing.
Most students of the question have been
agreeably surprised at the degree of success achieved by our
inflation controls to date, wherever they have not been breached
by direct political pressure.
inflation will not stay put.
But it must be recognized that
It will crop up at the first, and,
indeed, at every opportunity where the aggregate of spending
power exceeds the available supply of consumer goods and services.
It is especially
demanding that they stop learning from experience and giving the
nation the benefit.
True, our war outlays are so huge that
a saving of only a small fraction justifies diligent effort in
rooting out inefficiency.
But we must not overestimate the amount
of genuine economy that can result from our efforts.
Incidentally, even where we find serious inefficiency, it
does not follow that aggregate government outlays should be cut.
Where inefficiency is exposed and corrected, it means that
somebody has discovered a way of getting the same supplies with
less work and less expense. But it also means that, if we do as
much work as before by && more efficient methods, we can get
more supplies for the same money. Where heightened efficiency
opens this sort of opportunity, we should seize it for the same
reason that we should reject suggestions to expand consumption
goods output by skimping our fighting men.
III.
Postwar Inflation Dangers
Every day the
always easy to find fifty glaring examples of situations which
in fact are very rare.
By such “examples* you can readily make
out a case that Americans stand over six feet six in their
stocking feet or that they are under five feet tall —
just as
you can make out a case for astounding efficiency or outrageous
inefficiency in war production.
Secondly, there is a tendency to identify inefficiency with
higher costs.
A good deal of what looks like “inefficiency,1* is
simply the cost of adapting to changes in war conditions.
To
start producing anti-submarine craft, for instance, and then
shift suddenly to other types of production raises costs.
But
it i»n*t necessarily inefficient, any more than it is inefficient
to pay money for fire insurance on a factory and then not have
a fire.
To demand that our procurement agencies should cut costs
by blocking costly shifts in war production would amount to
demanding that they
- 16 *
production to civilian production would be perverted economy.
It would be extravagant squandering of the time needed for victory
and, more important, of the lives of countless fighting men.
Few of the advocates of economy, of course, are so extreme
as to advocate reducing war production in such a short-sighted
effort to benefit civilian consumers.
Most of them center their
attention on eliminating inefficiency in war production —
is, on getting value for our money*
that
Getting value for money spent
Is genuine economy, and the Treasury is deeply concerned about
such economy#
But opportunities for cutting government
expenditures through the elimination of waste and inefficiency
are smaller than many people suppose.
In the first place, the prevalence of "inefficiency1* is
exaggerated.
The vivid examples often mentioned are
unrepresentative.
In a country of 130,000,000 people, it is
always easy to
15 The Possibility of Effecting Economy. As I implied
a moment ago, it is far from clear that we can in fact cut war
expenditures at all sharply without impairing the war effort*
Economy at the expense of war output is unthinkable.
To my
mind, economy means to buy only what is needed and to make sure
that full value is received for the money outlay*
In a global
war, there is practically no limit to what is needed.
of war are insatiable.
The gods
Expenditures could, of course, be cut
and inflationary pressure eased by cutting war production.
But
the fact is that while we civilians have enough, and even more
than enough, to take care of our minimum needs, our own armed
forces and those of our fighting allies still have unfilled war
needs.
Moreover, the rapidly changing technology of modern war
constantly turns up new and pressing needs.
To sacrifice war
production to
* 14
fraction of any cut in expenditures*
Ifce designers of the Treasury's
$10.5 billion revenue program were conscious that it was uncomfortable
close to the wartime economic minimum,
But it was difficult to
go
beyond this goal in the face of the limited taxable capacity of
taxpayers in
lower and middle brackets, who have not shared in
wartime increases in income or who are bound by pre-war commitments
There is little likelihood that a wartime economy program will
affect the taxable capacities of this group.
Consequently, the
$10.5 billion program continues to be the smallest we can
conscientiously recommend.
The most we can expect from any
feasible out in expenditures is a narrow and much-needed margin
of taxes above the economic minimum demanded by war*
The Possibility of Effecting
As I implied
too anxious to have more manpower and materials to tool up for
postwar production and to provide more housing, transportation,
equipment, and so forth#
Accordingly, any drop in the income of
war workers as a result of reductions in government expenditures
would probably be offset in large part by increases in the
employment and income of workers in civilian industry.
If a net
decrease in the income paid to consumers did occur, moreover,
it would be more likely to cut into their savings than into their
attempted spendings.
Some lessening of inflationary pressure
would, of course, be achieved to the extent that supplies of
goods were expanded.
i
4m
^gf faJ& j /udtd*
The upshot is that the wartime economic minimum of revenue
I|j •- .
.I‘
|1'•jf ‘-I •,
needed for inflation control could be reduced only by a small
fraction of any
-
12
-
would.be/imdwas6- If economy materially lessened inflationary
71
pressure.
Actually, the reduction in this pressure would be only
a fraction of the cut in expenditures.
In the first place,
insofar as the cut resulted from/n w n g sttnM w .v t m w n wit t e w * ^
jy -urt-uML
1^
ffpM'O'
-ow
&0
tit:
uacLa**
U u ._ Ho real easing of the/^ituation
results from taking what was going to be excess-profits tax
revenue and re christening it "reduction of expenditures," «***►
In the second place, even where the cut in expenditures is
real and not nominal, it Is unlikelyto result in
reduction in inflationary pressure.
Civilian industry is only
too anxious to have
*
11
*
expenditures can in large part be substituted for additional taxes.
It is a matter of record that the Treasury has strongly and
repeatedly urged the adoption of rigid economy measures in
§1
government.
But such eeonoay must be consistent with the demands
of an unstinting war effort. I cannot visualise a cut in expenditures
during total war that would give us license to set our revenue sights
below the Treasury's $10.5 billion program.
The Effect of EcoHony on Tax Heeds.
However, to forestall
the charge that I am evading the issue, let me entertain for
a moment the unrealistic assumption that we can do justice to
the
a
j tion's war needs and yet pare expenditures far below
estimates.
How would such economy affect our tax goals?
case for higher taxes
10
-
economic maximum, the more we can restrict the growth of the public
debt and the piling up of potentially explosive holdings of currency,
bank deposits, and redeemable or negotiable bonds*
The closer we
can get to the wartime economic maximum, the stronger will be our
postwar tax weapons against the forces of postwar inflation#
The danger of spontaneous combustion of our vast savings backlog
will be greatly reduced if we go into the immediate postwar period
with a strong and even severe tax structure#
Finally, the closer
we can get to the wartime maximum, the less we shall be in the
position of discriminating against our fighting men.
It would be
discrimination of the rankest sort to levy on the postwar earnings
% A jl
civilians, that is* #
jU x
ourselves
% Yhe Panacea of Substituting Economy for jtoftg
It is argued in some quarters that economy in government
expenditures can
When we refer to "revenue needs#" we are really
referring to the need to avoid borrowing# and thus to hold down
the debt with v&ich we shall have to deal in the postwar period.
$&&&*'vjm M&skm m zJ, we will,#
finance the war.
need.
The
get the money needed to
The crucial question is how we get the money we
ore taxes we have now, the less the chance that our
wartime borrowing will put our postwar taxes into a strait jacket
of debt service.
Postwar Considerations. We begin to see that between the
maximum and minimum tax limits set by the wartime situation the
optimum level will be determined by postwar considerations.
And those considerations point toward the economic maximum rather
than the economic minimum.
The closer we can get to the wartime
economic
maximum# the more
8 *
ia much blacker*
There are ominous signs that during 1943 the
two limits may have crossed, bringing the political maximum below
the economic minimum.
Applying the measuring rods I have just
discussed to the $10.5 billion tax program advocated by the
Treasury, I am forced to conclude that it is the minimum needed
to bring us into the safety zone of wartime taxation.
Congressional
action to date is not in fact bringing us into that zone.
Only by
a trebling or quadrupling of the present Congressional tax effort
can the Treasury goal be approximated and the safety zone be
reached.
You will note that ia discussing wartime tax considerations
X have not mentioned the traditional factor of revenue need as
an element in tax policy. J s t mmmm®-
im *ir*± v
7
most of it should be made by somebody else.
Allied to this is
the irrational hope that by refusing to accept the fiscal symbol
of wartime hardships* the hardships themselves can be conjured
recognize that, in wartime, customary ways of living and customary
values have to give way to the all-embracing effort to preserve
freedom and prevent further aggression.
This witches’ brew of
limiting factors is familiar to every intelligent observer of
the home front in this war.
Setting the various limits side by side, we find that the
economic maximum of wartime taxes lies a long way above the
necessary minimum.
Taxes can pull their share of the wartime
load without cutting into incentives and production. But setting
the political maximum against the necessary minimum, the picture
is much blacker*
the smaller the share of the job left for taxation to do*
If taxes
were left with the whole job of curbing inflation, the necessary
minimum would be high*
Consequently, there would be a narrow
spread between the economic minimum and the economic maximum of
wartime taxation*
In fact, the measures I have just listed do an
important part of the job and therefore broaden the area between
;|||
the upper and lower limits*
fhe Political Maximum* So far, I have talked in terms of the
economic limits of taxation*
No one is more aware than I that
there is also a political maximum, a limit compounded, I might say,
of quite different elements than the economic maximum*
One of
these elements is an almost sentimental fear that taxes will reach
levels where they really hurt*
Mother is the tendency of each
group in the community to feel that sacrifice is needed, but that
most of it
The type of taxes we choose to do our wartime tax job will
also affect the minimum and maximum economic limits.
If we
choose a sales tax with its callous indifference to variations
in individual circumstances and it® tendency to work against* not
with* our direct controls* the necessary minimum war taxes will be
igher and the economic maximum will be lower.
If, on the other
hand* we depend most heavily on the income tax and tailor it
carefully to individual circumstances* we increase the spread
between the economic minimum and maximum.
The size of our necessary minimum program also depends on
the other measures we take to deal with the problem of inflation
|
.
and the problem of distributing our short supply of consumer goods.
The larger the share of the job done by such measures as bond-selling
campaigns, credit restrictions, price and wage control, and rationing
the smaller the
financial incentives and morale that war production would suffer*
The upper economic limit of war taxes* then* is found where the
taxes reduce total output either by impairing incentives or by
releasing resources from civilian production which cannot be
utilised in war production#
Spread Between Minimum and Maximum#
I do not mean to imply
that the upper and lower economic limits of wartime taxation are
absolute limits, nor that they are a question merely of the amount
of taxes we levy#
These limits will depend in substantial degree
on the understanding of the people and their willingness to
participate in an all-out war effort#
The greater the understanding
and sense of sacrifice, the lower we can set the minimum needed to
prevent inflation, and the higher we can push the maximum to which
taxes can go without impairing morale and war production,#
The type of taxes
They are conditioned by the scale of war expenditures and by the
character of the non-tax controls we have set up to curb inflation
and distribute fairly the necessities of life*
Until taxes reach
a level where, in concert with other control measures, they give
us & fighting chance to throttle inflation and to distribute the
costs of war fairly, they are dangerously inadequate*
The Economic Maximum*
Turning to the upper limit of wartime
taxes, we find both an economic and a political maximum for
efficient war taxation*
The economic maximum is reached at the
lower of the two following levels*
The first is the level at
which further taxes would so reduce the demand for consumer goods
that men and machinery would be released that could not be absorbed
by the war sector of our economy and would therefore run to waste*
The second is the level at which further taxes would so impair
financial incentives
* 2 slacken our current war effort.
And, as this audience knows,
the Treasury's recent tax recommendations were designed to
intensify, not slacken, that effort.
But the makers of wartime
tax policy must increasingly have in mind the impact of current
tax legislation on the postwar economy.
I.
Determinants of Wartime Tax Levels
In attempting to set in proper perspective the demands of
the present and the demands of the future on our wartime tax
system, it may be helpful to examine the factors that determine
the upper and lower limits of efficient war taxation.
The Necessary Minimum.
The minimum level, the lower limit
of safety in war taxes, is primarily a function of the need for
inflation control and the companion need for equitable distribution
of warfs economic burdens.
These needs do not operate in a vacuum*
They are conditioned
WARTIME TAXES AMD THE POSTWAR ECOHOlff
Just a year ago I had the privilege of speaking at the new
School for Social Research, and it is a real pleasure to be able
to be with you again.
a wartime revenue act*
At that time I spoke on the birth of
To&»w I address myself to the later stages
of the life history of wartime tax acts, namely, their postwar
effects.
A
year ago our major preoccupation on the military fronts,
as well as on the home fronts, was overwhelmingly with the immediate
job of winning the war*
of tax policy.
That preoccupation was also a characteristic
While postwar considerations were important, they
were not given major emphasis*
I think we face a somewhat different situation today.
The postwar element of all our activities, Including our tax
activities, looms ever larger*
It would be tragic to assume that
this growing significance of postwar problems gave us license to
slacken our current
B
* 7 ^
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7y
<f&-?4g-.
-2-
3 S , 3
^rotti
pAT
fa*
Gene rax
School for Social R e s e a r c h JSww--t-C^i£L
gy, is
scheduled for delivery at 8 p,irug Eastern War Time,
November 16* 1943* and is for release at that txmeT)
,;'V;
■.V
TiiEASOHT DEPARTMENT
Washington
(The following address by Randolph !* Paul,
General Counsel of the Treasury, before the New
School for Social Research, New York City, is
scheduled for delivery at S p.m., Eastern War Time,
November 16, 1943, and is Tor releaseat that time.)
.
..
y
>v
■
TREASURY DB^AHjMSNT
■■ Washington,
7
■
..
(The foilowing, address by Randolph E* ;Paul , General
Counsel of the Treasury, •before the .Hew School for
Social Research,. New York’City,- is..scheduled for
delivery at S-p.m,-, Das tern War, .Time.,; November 16, 19^3 *
and js for release at that; time
WARTIME TAXES AH) THE .POSTWAR SQQHQHY' "
«’
iT r
l ’!;/-' .1.' 'v *‘Y“ ' * : ’ *
r•
; ’•
Just a year ago I had the privilege .of speaking at the new School
for Social Research, and it is a real pleasure.,tp'he able to "be with
you again. At that time J spoke oii-the birth•of •a wartime revenue act. .
Tonightpaddress myself- to the later stages'of, the life history of wartime
tax acts; namely, their postwaf -effects. . A.year ago our major preoccu
pation on the military.fronts, as well as.,on the home frohts, was
overwhelmingly with the’immediate job of winning the war. That pre
occupation was also a characteristic of tax policy*. While postwar
considerations were important"; they were, not given-major emphasis.
..
X think we face a somewhat different situation-today. ' The postwar
element of all our activities including, .our tax activities,' looms ever,
larger.
It would, be tragic to-assuhe ;that this, growing-significance of
postwar problems gave us license to slacken* our-current war effort*
And, as this audience knows,-'the Treasury';s .recent t a y recommendations
were designed to intensify, not ‘slacken, that effort. But the makers of
wartime tax policy must increasingly have-an-mind the -impact of current
tax legislation on. the postwar economy; '"
.’
It-: -Detarmihants’of Wartime. Tax-.levels
In attempting- to set: i n jproper.perspectiye the demands of the present
and the demands of the .-.future on our wartime tax-system, it may be help
ful to examine the faot-ors' that' determine ..the, upper and' lower limits of. ■
efficient war taxation-*
''
*
.;,
’ ,' " i
The Necessary, Minimum'. The minimum level, the lower limit of
safety in war taxes, is primarily a function of the need for inflation •
control and the companion need for equitable, distribution '-of warJs
•
economic burdens,
These needs do not operate., in a vacuum, "They are
conditioned by the scale of War expenditures .and. by -the character of the .
non-tax controls we have set up to curb inflation .and distribute, fairly
the necessities of. life. ; Until taxes reach a level -where, in concert .
with other. Control measures, they give us a .fighting chance to throttle,
inflation and to distribute the Costs of. war .fairly, they are dangerously
inadequate,.
'';■
. ’ ... .
•. '
. -r
39-?l
2
‘’
The Economic Maximum, Turning to the upper limit of wartime taxes,
we find "both an economic and a political maximum for efficient war taxa
tion. The economic maximum is reached at the lower of•the two following
levels.
The first is the level at' which''■■further' faxes would so reduce
the demand for consumer goods; that .men. and machinery."would he released
that could not. he absorbed by- the wap sector-- of our'economy and would
therefore run to waste, The* second is the level at which further taxes
would so impair financial incentives and morale that war production
would suffer.
The upper economic limit of war taxes, then, is found
where the taxes reduce total output either by impairing incentives or by
releasing resources from civilian -production which.cannot be utilized in
war production,
Spread Between Minimum and Maximum.' I do/nat mean t:o imply that
the Upper and lower1 economic limits of wartime taxation .’are absolute limits,
nor that they are a question merely of the amount of taxes we,', levy. These
limits will depend in’ substantial degree On the understanding of the people
and their willingness' to participate in an all^OUt war effort.;.The-greater
the understanding and sense of sacrifice, the lower we can 'set..the minir*
mum needed t o 'prevent inflation, and-the higher we can .push the maximum
t o ‘which taxes can go- without'impairing morale and*war production*•
The type of taxes we -choose to do our. wartime tax job will also
affect.the minimum and maximum economic limits.
If we choose a sales tax
with its callous' indifference to variations in individual circumstances
and its-tendency to' work against,'not with, our- direct Controls, the
necessary'minimum war" taxes Will be higher and the economic maximum •.wi 11
be lower.
If, on'the other hand; we depend'most heavily o n ;the income
tax and tailor i t jcarefully tc individual circumstances* we-increase the
spread between the economic minimum and maximum.
The size of our necessary' minimum program' also depends on the other
measures we take to deal with the problem of inflation and the problem of
distributing our short'supply of consumer' goods.- -The -larger -the share of
the job done by such measure's as bond-”selling campaigns., ?.credit,-restrict
firms, price and wage control, and rationing, -the smaller the share -of
the job left for taxation to do.
If taxes were: left .with the, whole job
of curbing inflation, the necessary minimum would be high*. Consequently,
there would be a narrow spread'between the ecbn'omic minimum and the economic
maximum .of wartime taxation.
In fact,- the measures: 1 have jus-f listed do
an important part 'of the job and therefore .broaden .'the area- between the
upper and lower•limits.
% Lk
, -.'i
’
The political Maximum. So -far, I have talked in .terms of- the economic
limits of taxation. Uo one -is more' awia're than I that, there is. also a po
litical' maximum, a-limit compounded,. I might say, .of .quite different
element's than the-economic maximum. One of these' elements is. an almost
sentimental fear that taxes will reach levels where they .really hurt,
Another is the tendency of each group ip the community to feel that
sacrifice is needed, but that m°st of it should be made by somebody else.
Allied to tpis is the irrational hope that by refusing to accept the
fiscal symbol of wartime hardships, the hardships themselves can be con
jured out of existence. Finally, ope encounters sheer unwillingness to
- 3 recognize^ that, in wartime, customary ways of living and
have to give way to the all-embracing'effort to preserve
vent further aggression#
This witches* brew of limiting
familiar to every intelligent observer of the home•front
customary values
freedom and pre
factors is
in this war.
Setting the various limits side by side, we find that the economic
maximum.of wartime taxes lies a long way above the necessary minimum#
Taxes can pull their share of the wartime load without cutting into
incentives and: production*- But setting the political maximum against
the necessary minimum,- the picture is much blacker#
There are ominous
signs that during 1943 the two limits may have crossed, bringing the '
political maximum below the economic minimum# Applying the measuring
rods I have just discussed to the $>10#.5 billion tax program advocated by
the Treasury, I-am forced to conclude that it is the minimum needed to
bring us into the safety zone of wartime taxation. Congressional action
to date is not in fact bringing us into that zone#' Only by a trebling
or quadrupling of the present Congressional tax effort' can the Treasury
goal be approximated and the safety zone be reached.
You, will note'that in discussing -wartime tax considerations I have
not ■mentioned'’the traditional factor of Revenue need as an .element in
tax policy*". When we refer to *•*revenue heeds,** we are really referring
to-the need to avoid’borrowing,;and thus to hold down the debt with which
we shall -have to deal in the postwar period. There can be no doubt that
we w i l l -get the money needed to finance the war#\ The crucial question
is how we get the money we need# ■ The more taxes we have now, the less
the chance that our wartime borrowing will put our postwar taxes into
a strait jacket of debt service# '■
v*
Postwar Considerations# We begin to see -'that between the “maximum
.and minimum tax limits set by the wartime situation’the optimum level
will be determined by postwar considerations# « 'And those considerations
point toward the economic’maximum rather than the economic minimum.
The .closer we can get to the-wartime'economic maximum, the more we can
restrict the growth of the public d'ebt'and the piling up'of potentially
explosive holdings of currency, bank deposits> and redeemable or nego
tiable bonds#
The closer we can. get to the,wartime economic maximum,
the stronger will be our- postwar tax weapons against the force’
s of
postwar inflation# The danger of spontaneous combustion of our vast
savings backlog will be greatly reduced if we go into the immediate post
war period with a strong and even severe tax structure# Finally, the
closer we can get to the wartime maximum, the less we shall be in the
position of discriminating against our fighting men#
It would be dis-.
criminationV of the rankest sort to levy on the postwar earnings of
servicemen the'taxes that well-paid civilians, that is, ourselves,’ ought
to have paid during the war#
II.
The panacea of Substituting Economy for Taxes
It is argued in some quarters that economy in government expend!- .
tures can in large part be substituted for additional taxes.
It is
a matter of record that the Treasury has strongly and repeatedly urged
the adoption of rigid economy measures in government. But such economy
must be consistent .with the demands of an unstinting war effort.
I cannot visualize a cut in'expenditures du-Hng total war that would
give us license to set our revenue'sights below the Treasury’s $10*5
billion program.
The Effect of Economy pa Tax Heeds. However, to forestall the
charge that I am evading tite ‘issue, let me entertain for a moment the .
unrealistic assumption that we can do justice to the nation’s war needs
and yet pare expenditures far below estimates. How would such economy
affect our tax goals?
The case for higher taxes would not be so urgent if economy materially
lessened inflationary pressure. Actually, the reduction in this pressure
would be only a fraction o f ‘the cut in expenditures.
In the first place,
insofar as the cut resulted from reduction of prices for war supplies, it
would be offset largely by a reduction in excess profits and income tax
revenues* Ho real easing of the inflationary situation results from
taking what was going to be excess-profits tax revenue.and rechristening
it ’’reduction of expenditures.”
In the second place, even where the cut in expenditures is'real and
not -nominal, it does not. result in an equivalent reduction in inflationary
pressure.
Civilian industry is only too anxious to have more manpower and
materials to tool up for postwar production and to provide more housing,
transportation, equipment, and so forth. Accordingly, any drop in the
income of war workers as a result of reductions in government expenditures
would probably be offset in large part by increases in the employment and
income of workers-in civilian industry.
If a net decrease in the income
paid to consumers did occur, moreover, it would be more likely to cut
into their savings than into their attempted spendings.
Some lessening
of inflationary pressure would, of course, be achieved to the extent that
supplies of consumption goods were expanded. But any resources released
to civilian industry would in large part be used for repairs, maintenance
and retooling rather than to produce finished consumers’ goods.
The upshot is that the wartime economic minimum of revenue needed
for inflation control could be reduced only by a small fraction of any
cut in expenditures.
The designers of the Treasury’s $10.5 billion
revenue program were conscious that it was uncomfortably close to
the wartime economic minimum* 3ut it was difficult to go beyond this
goal in the face of the limited taxable capacity of taxpayers in the
- 5 lower and middle "brackets, who have not shared in wartime increases in
income or who -are bound by pre-war commitments, There is'little likeli
hood that a wartime economy program will affect the taxable capacities
of this group.
Consequently, the $10,5 billion program continues to be
the smallest we can conscientiously recommend.
The most we can expect
from any feasible cut in expenditures is a narrow and much^needed
margin of taxes above the economic minimum demanded by war.
fhe Possibility of Effecting Economy. As I implied a moment ago, ;
it is far from clear that we can in fact cut war expenditures at all
sharply without impairing the war effort. Economy at the expense of •
war output is unthinkable*
To- my mind, economy means to buy oxyly what
is needed and to make sure that full value is received for the money
outlay. . In a global war, there is practically no limit: to what is
needed.
The gods of war are insatiable, Expenditures could, of course,
be cut and inflationary pressure eased by cutting war production. But
the fact is that while we civilians have enough, and even more than
enough, to take care of our minimum needs, our own armed forces and
those of our fighting allies still have unfilled war needs. Moreover,
the rapidly changing technology of modern war constantly turns qp new
and pressing needs.
To sacrifice war production to civilian production
would be perverted economy.
It would be extravagant squandering of the
time needed for victory and, pore important, of the lives of countless
fighting men.
Few of the advocates of •economy, of course, are so extreme as to
advocate reducing war production in such a short-sighted effort to
benefit•civilian consumers. Most of them center their attention on
eliminating inefficiency in war production -v that is, on getting value
for our money,
(Jetting value for money spent is genuine economy, and
the Treasury is deeply concerned about such economy. But opportunities
for cutting government expenditures through the elimination of wast.e
and inefficiency are smaller than many people suppbse.
In the first place, the prevalence of "inefficiency1* is exaggerated.
The vivid examples often mentioned are unrepresentative.
In a country
of 130,000,000 people, it is always easy to find fifty glaring examples
of situations which-in fact are very rare* By such "examples" you can
readily make out a case' that Americans stand over six feet six in their
stocking feet or that they are under five feet tall — just as you can
make out a case for astounding efficiency or outrageous inefficiency in .
war' production.
3'ct^v
Secondly, there is a tendency to identify inefficiency with highs*
costs, A.good deal of what looks like "inefficiency," is simply the
cost of adapting to changes in war conditions, To start producing anti~
submarine craft, for instance, and then shift suddenly to other, types
of production raises costs. But it isn*t necessarily inefficient, any
more than it is inefficient to pay money for fire insurance on a factory
and then not have a fire.
To demand that our procurement agencies should
cut costs by blocking costly shifts in war production would amount to de
manding that they stop learning from experience and giving the nation
- 6the benefit* True, our war outlays are so huge that a saving of only a small
fraction justifies diligent effort in rooting out inefficiency. But we must not
overestimate the amount of genuine economy-that can result from our efforts.
Incidentally, even where we find serious inefficiency, it does not follow
that aggregate government outlays should be cut. Where inefficiency is exposed
and corrected, it means that somebody has discovered a way of getting the same
supplies with less work and less, expense. . But it also means that, if we do as
much work as before by more efficient methods, we can get more supplies for the
same money. Where heightened efficiency opens this sort of opportunity, we should
seize it for the same reason that w© should reject suggestions to expand consump
tion goods output by skimping .our fighting men,
XII.
Postwar Inflation Dangers
Every day the press is full of news about measures to hold the line against
inflation.
I -cannot refrain from adding parenthetically that such news rarely
assigns taxes their rightful place in the fight to hold the line. Howevdr, that
is probably .quite natural, since taxes are a background force, operating'to 're
lieve pressure on the front-line forces of price control and rationing. Most
students of the question have been agreeably surprised at the degree of success
achieved by our inflation controls to date,.wherever they have not been breached
by direct political pressure. But it must be recognized that inflation will not
stay put. It will crop up. at the first, and, indeod, at every opportunity of
consumer goods and services. It is especially in the post-armistice period that
inflation may disrupt our economic processes.
In speaking of inflation and its dangers, whether in time of war or in the
postwar period, X am not talking about the German type of inflation after the
last war when German money became valueless. W e are in virtually no danger of
such a catastrophe. Bather. I have in. mind the kind of inflation we had after
the last war when the cost of living went to 211 percent of its prewar level and
wholesale prices went: to 240 percent of their prewar level. That kind of infla
tion, even if no worse than it was after the last war, would be disastrous enough
to warrant very great effort and sacrifice to avoid it.
Inflation Forces. The end of active hostilities will unleash political and
economic forces that raay irresistibly drive us to post-armistice inflation. There
will be an inevitable dilution of patriotism and o f 'the willingness to accept
controls that smack of regimentation.
Patriotic appeals to saving will no longer
have their present effectiveness. The red tape of price control and rationing,
which is accepted as a necessary nuisance in ^wartime, will become a galling and
intolerable restriction when victory has been won. Enforcement of controls will
become much more difficult when civilians regain their mobility, by renewed access
to gasoline and rubber. ■ I do not decry the unwillingness of the American people
to retain restrictive wartime controls for a long period after*the war.
I regard
it rather as one of our best guarantees, though a negative, one, of the free
democratic system we are fighting to retain.
However, if the impatience*of the American people with wartime control'
bursts its bounds too soon after the w a r , :we may be faced with economic disaster.
A great fund of •.accumulated war savings will overhang our postwar market.
Desirable as it is to have a large volume of savings out of
current income to lessen current inflationary pressure,
••
~ 7 such savings are not an unmixed 'blessing* In fact, the greater the
contribution they make to the. present fight against inflation, the
greater the threat they^offer to future price stability.
In the three and one-half years ending June 3°» 19^3* the American
people added the staggering total of $55 billion to their accumulated'
savings. Of this total increase in individual savings, $2*+ billion
are in the form of currency and checking accounts; $21 billion are in
the form of redeemable or marketable bonds.
If our direct and indirect controls, on one hand, and our capacity
to revert to peacetime’production, on the other, prove sufficient to
cope with postwar inflation, these accumulations may settle down into
permanent savings* But if people make up their minds that prices are
rising and are likely to keep on rising; the process of spontaneous
combustion may kindle the fires of inflation. People will want to
spend their funds before price rises sap their purchasing power and '
devaluate their savings. To keep these combustible funds within
manageable limits is one of the chief assignments of wartime taxes.
I must confess that the taxes we have and seem likely to get may not
keep liquid savings within manageable limits. We shall have to rely
heavily On self-restraint and very likely also on an extension of
direct controls into the immediate postwar era.
Increased Money Supply and the Role of Business Savings. The total
increase in the money supply in recent years is enormous.
Combined
business and individual accumulations of currency and checking deposits
rose $26.5 billion, or 59 percent, in the two years ended last June.
Of this growth, $19 billion occurred in the second of*the two years.
Although we lack figures showing who holds the added currency, Pederal
Reserve figures are available oh checking deposits* Prom these it is
clear that most o f ‘the added checking deposits belong to business
rather than to consumers.
Some people are very much comforted by this
fact. This sense of comfort is legitimate in wartime, when liquid
business funds are largely tied down by priorities and other restric
tions. However, in the postwar period; these-business accumulations
will be a real source of concern.*
During the war, business is steadily piling up cash balances.
It is selling inventories it cannot replace*
It is wearing out
machinery it cannot fully maintain. And, because credit restrictions
’and shortages of suitable goods severely limit new sales on an in
stallment basis, it is reducing outstanding installment debts.
Its
opportunities and temptations to spend these balances are severely
restricted*by wartime regulations. Thus, liquid funds of business
are fairly non-inflammable as regards wartime inflation*
-8
But with the return of peace*, business will naturally strive to replen
ish its inventories* renovate its. equipment, and again push installment
selling. Accumulated funds of business will tend to go into circulation at
least as rapidly as those held by consumers* Some $15 billion of reserve
funds which corporations have put into Government bonds during.the year ending September 30, 1943, will be a further inflationary threat after the war*
Business will quite naturally- want to draw these funds out and put them into
circulation* With business,, as well as with consumers, any signs of a run
away market will be the signal.for a rush to spend accumulated funds before
their value melts away* A flash flood of business spending will eventually
pour into the same stream as consumer spending*
In the .postwar period, the
two forces vail be reinforcing and not offsetting, and will tend to makea joint attack on price stability.
Records of past wars make it clear that post-armistice inflations are
commonly more drastic than aptual wartime inflations* Tnis is no mere coin
cidence. It results from a relaxation of wartime controls, from impatience
with restrictions, from the unleashing of speculative motives, and from the
cumulative effects of increases in,money and bank deposits during the war*
Heavy wartime taxes and maintenance of such taxes until it is clear that
postwar inflationary pressure is under control are the best weapons against
these dangerous inflationary forces* The inflation thunderheads on the
postwar horizon should have a. sobering effect on any optimism about wartime
taxation. They afford little aid and comfort to the enemies of a vigorous
additional tax program,
IV.
Postwar Unemployment Dangers
Our economic system in the postwar period faces not only the menace of
inflation, but also the rigors of unemployment.
Inflation and unemployment
are the Scylla and Charybdis of demobilization periods*. If we escape one,
we are reasonably sure to have trouble with.the other* We may, in fact,
run athwart both in the same stormy voyage;, and contrary to.the metaphor,
it is even possible that we will have to..wrestle with .both..at the same time]
Nature of the Problem* The inflation danger and the unemployment ,
danger unfortunately do not cancel out* ..It is true, of course, that the
same pressure of spending powrer which threatens inflation creates a strong
market for many key products*
It does not follow, however, that .it auto
matically creates employment. The danger of unemployment during demobiliza
tion results not from any lag in consumer demand, but from a lack of the
equipment and materials needed to employ labor in satisfying tnat demand*
The initial problem of post-armistice unemployment is thus.likely to be
a bottleneck problem* After the bottlenecks are, .broken, the danger of un—
employment becomes largely one of inadequate purchasing power*
In this
situation, some pressure toward higher prices may actually be beneficial,
since it m i l activate production and employment* But until we have
cleared the decks for action, we are only too likely to burn up our wartime
savings accumulations in a post-armistice spending spree that will express
itself not in more goods, but only in higher prices.
c
«• Q *•
The Impact of Current Tax Payment. Given the prospect of unemployment
and cyclical fluctuation after the war,-it becomes important to correlate
tax payments closely with the receipt of inoome.
During an economic down
turn and. a period of developing unemployment, -a mass of accruing but unpaid
taxes can have a' seriously depressing effect* ‘ If taxes payable out of
a declining'income in., the. current'year are based on a higher income in the
preceding year, ‘the effect will’be -to dampen consumer markets, and .reinforce
the -downtrend* " The situation during- the rising phase of the cycle is
.analogous* '.. if taxes in the current'year are based on the smaller income of
t h e ,preceding year,3 people will be in a fictitiously easy-financial position*
Upward pressures-may'be unduly reinforced.
In '.connection with the, effects of taxation on the business cycle,; the
Current Tax Payment Act, passed earlier this year, is an •extremely ‘important
safeguard*
For the most part,
and especially in the lower brackets,.cur
rent payment avoids the lag which tends to accentuate fluctuations*.. Or,
•put positively, -current payment has: a countercycle effect* Taxes drop when
•income drops, and rise when income rises*/ The .drain ori-purchasing power is
minimized ’when incomes-are on the downgrade, and maximized when incomes are
on'the upgrade*
•'
-■
Current payment has another important advantage-in 'this connection#
It permits speedy legislative adjustment of tax collections to the fluctuat
ing requirements of our economy.
It' permits .tax 'adjustments to be paired
with Government spending policy in smoothing out-the extreme fluctuations
of the business cycle*'
,
,
Under Our present withholding‘.system, .we have not yet achieved the
maximum exactness in current collection of liabilities* Yeartrend adjust•m.ents are necessary, and some of these will be fairly substantial* The
•Treasury has,-therefore, recommended that the withholding system be adjusted
.to .match the 'amount, withheld 'more closely with the amount; of taxes owed*
•This wotiid be' accomplished by graduating^ the .withholding rates and b y nar
rowing wage brackets.;in withholding tables*. This adjustment is urged with
■ an eye to avoiding a tax .overhang in the demobilization period. .
Social -Security. Another wartime fiscal measure-which does ..yeoman
■service for the postwar period is the Social, Security program*. Expansion
. of unemployment insurance, and schemes providing for dismissal or separa
tion pay on an'insurance-basis,, offer an attractive hedge against our com
bination of inflation .and .unemployment dangers# They withdrawn spending
powrer steadily during, periods of strong; employment, both during...and after
the war*, During periods-, of wreak employment,., they offer life blood to
a faltering economic system*..' If unemployment is widespread, •a, strong
Social Security program "will .support markets*
If unemployment is spotty,
Which is more likely, Social Security wall -protect the individuals whose
-luck.is bad* On all counts, the strengthening of;Social Security deserves
high rank as1 a war measure which, provides insurance against postwar
.instability*'
..
?
.
10
V.
Distribution, of Tax Bardens
Costs oif War. The fallacy still persists that the cost of the war in
economic.tends can be postponed until after the war.
It persists in
spite' of the fact that exploding this particular fallacy is one of the
favorite ^indoor sports” of economists.
They are fond of. pointing out
that no method of war finance can shift real burdens from the war to the
postwar period.
Methods of .finance 'cannot give people more food, hous
ing, and clothing during the war at the expense of less after the war.
Nor can any financial legerdemain levy on the future to put weapons into
the hands of our fighting forces in Italy and the Solomons. 'Whether we
borrow or whether we tax will have only a minor effect on our total burden.
Generally speaking, heavy taxes tend to minimize the wear and tear on the
plant and eauipment of our civilian economy and thus leave the future with
a better equipped economic system.
On' the 6 the r hand, borrowing may have
a psychological advantage over taxation because the fallacy of postponement
persists. People may feel that they are postponing costs and therefore
accept more willingly the direct' sacrifices of war, '
Distribution of Costs Between Civilians and Servicemen, Whet is
really postponed through borrowing is not the cost of war but the dis
tribution of its cost. War finance can do a great deal to shift burdens
among the people who will be members of the community after the war. As
I hinted previously, the patterns of war finance into which we are
drifting involve a discrimination against men now serving in the armed"
forces.
Civilians at home are, with few exceptions, better paid than
they ever have been in their lives. Despite tax and price increases and
a- huge war effort, they are maintaining consumption comfortably above
subsistence levels. At the same time, they are saving as never before,
and with these savings will exercise a claim on postwar goods and services.
In large part, these savings reflect our failure to tax more heavily in
wartime. As one would expect, they take the form primarily of direct or
indirect ownership of public debt.' The combination of insufficient taxes
in wartime and the handmaiden of a huge public debt means heavier taxes
in the postwar period than would otherwise be necessary.
Thes-e taxes will fall partly on the fortunate owners of wartime
savings,■but also in part on people who have not shared in the savings
boom because they were in military service.
It seems a curious way of
distributing war burdens to ask our fighting men on one hand to bear the
dangers end forego the nrofits of "war, and on the other t o ‘share pro rata
in the burden of servicing the bonds held by civilians who were prospering
at home, Yet, by setting wartime taxes too low, we shall be causing pre
cisely, this injustice.
Distribution Among Income Groups. Our decisions on war finance will
affect the distribution of war costs not only'between soldiers and '
civilians but also among different income groups after the *war.- The level
of wartime taxes, through its effect on borrowings, governs the amount of
taxes we shall have to levy after the war to service the public debt.
Moreover, it determines:, in U r g e p^rt what income, groups become, government
•creditors.- A war financed mainly by borrowing,. especially.
accompanied
b y inflation;, builds up: heavy -credits in. the. hands...of high-income groups
against the rest of the population., Depending on the postwar distribu
tion of tax burdens, such debt financing may lead to a postwar redistribution
of burdens.bearing heavi ly on. the- lower income groups. ...
r
Although as in previous wars the. larger part of the. public debt is .
being absorbed by savers in the higher.income brackets, savers, in the
lower income brackets are accounting.for- a substantia^ share- of total
-savings*' They are buying a large volume of War Bonds* Large wartime
accumulations ..of paper-money are also generally thought to represent
-savings from low- and moderate incomes.
In addition, many people whose
income § 'and. savings have risen sharply during the war ,wi.ll slide back into
moderate:.or- low-income brackets, after the war* . .These factors reduce the
likelihood that Government bonds will, be as. heavily concentrated „in the
hands of the higher income groups as they have been in previous wars.
In
terms of an undesirable postwar redistribution of burdens, then, the social
cost .of inadequate war tajces, though.-high,, may be .lower in this than in
previous wars.-. ■ •
\
EJ
.
. Wot only the magnitude but-also-the type of wartime taxes .we levy
'.will aff eqt'the- postwar.distribution of burdens.
If, for^ example, we
adopted a sales tax during the war, we'might find.it difficult to uproot
it after the war.
The burden .of postwar-.taxes would press more heavily
.on-;the low income groups in that case than if the same revenue were raised
through the income tax. By the same,token! increased wartime'reliance on
personal income- taxes will,have long-run advantages in distributing war
costs* . , .. • '
.
'•
'•
Prom this cursory resume, it becomes clear that the,taxes we levy in
wartime powerfully affect postwar distributions of’ costs among income groups.
If war finance leaves, a legacy of huge war debts,and regressive taxes, we
shall be i.ll-*equipped to follow the traditional, precepts of equity in
government finance* ..- To. guard against this outcome, war finance should rely
heavily on taxes, especially personal income taxes, emd should continue to
direct a large part of its bond-selling efforts to.the lower income groups.
V
-
VI.
12
-
Corporate Tax Policy
In appraising the postwar effects of wartime taxes it is also
'important to examine the postwar impact of corporate tax policy.
This
impact revolves around the effect of corporation taxes bp "both cost
structures and financial positions.,
Effect on Cost Structures. Corporate taxds must he high enough to
prevent, disproportionate war profits.
If profits were allowed to exceed
reasonable bounds, it would be difficult to justify denials‘of wage and
price,increases.
If the defense,line.against such increases crumbles,
costs will rise sharply. But on the other hand* unduly high, corporate
taxes may weaken the resistance of management to pressures for*higher
costs. Once costs have pushed upward, it is very difficult to put them
back into their former place.. Since a high cost level tends to hobble
production, wartime taxes on corporations must walk a perilous tight rope.
They must be high enough'not to give labor and farmers a cause for action
on the' wage.and price fronts; yet, they must not be so high as to remove
the profit brake on costs.
Effect on Financial Position. The postwar health of corporations
depends also on the amount and liquidity of corporate accumulations.
With
respect to their;.amount» , taxes have a negative function*, namely, to avoid
impeding their normal growth.
Corporate profit, and reserve figures indicate
that wartime taxes have performed this function.generously.
The average
total annual profits after taxes for 19^1, 19^2, and 19U 3 will equal the
peak profits of 1929 end will more than double the ..profits for 1937a Even
"after taxes and dividends, corporations will have accumulated over.$15
.billion of undistributed corporate, profits during 19^-2 , 19^+3* and 19W*,
These figures do not, of course, imnly that every corporation will have
a sound financial position at the end of the war. But they do indicate
that wartime taxes have not, generally speaking,, prevented the attainment
of such a position.
With resnect to the postwar liquidity of corporate assets, tax
policy can serve a positive function.
One source of reconversion funds
with roots in tax policy is the postwar credit undeh the excess-profits
tax.
Corporations .are entitled to a rebate of 10 percent of their excessprofits tax payments.
Although the bonds issued to evidence the credits
do not mature immediately upon the cessation of hostilities, they become
negotiable at that time. They may be sold or used as the basis for loans.
The excess-profits tax credit will thus supply many corporations with
badly needed funds for the process of reconversion.
Our existing tax law provides further assistance to many corporations
by allowing the so-called carry-back of losses and unused excess-profits
tax credits. Under the loss carry-back provision, the corporation may
offset its current year losses against profits in the preceding two years
and obtain a corresponding tax refund. Unused credits under the excessprofits tax may be similarly carried ba.ck, These provisions pecognize the
arbitrariness of the annual accounting period.
They will grant corporations
whose wartime profits are converted into postwar losses a refund of at least
part of their wartime taxes.
These refunds are a potential source of funds
for the difficult transition period.
- 13 The Treasury has recognized, however, that the carry-backs will not
serve their maximum purpose unless the promise of refunds is quickly con
verted into the fact of cash payments. Immediate access to cash Twill be
the vital need in the demobilization period. The Treasury has therefore
recommended a number of measures to accelerate refunds of war taxes under
the carry-back provisions. If these measures are adopted, a siibstantial
sector of the war economy will be guaranteed the lubricant of cash for the
process of postwar reconversion.
Nearly 50 percent of American industry is currently engaged in the
production of war goods. Delay in reconverting it to peacetime production
might mean inflation, or unemployment, or both. It might also spell loss
of markets for the firms caught in the bottleneck. Since lost markets
will be difficult or even impossible to recapture, corporations unable to
reconvert rapidly will find their competitive position impaired. Small and
medium-sized concerns would be most likely to suffer i n the postwar scramble
for the financial and material wherewithal of reconversion. Thus, forces
which hinder reconversion will not only bring on a postwar economic crisis,
but also encourage the growth of monopolies, Insofar as corporate tax policy
in wartime removes postwar stumbling blocks, it contributes tellingly to the
reestablishment of a strong peacetime economy,
VII,
Conclusion
I have said comparatively little this evening about specific provisions
of current tax proposals. It seemed more urgent to review some of the prin
ciples t— perhaps 1 should say ^neglected principles** — that should govern
wartime tax decisions.
It becomes apparent in the course of review that wartime taxes could
play a major role in providing for the health and stability of our postwar
economy. Unfortunately, it becomes even more apparent that existing taxes
are, in fact, not playing any such role* Instead of building bulwarks
against postwar inflation and unemployment, our inadequate taxes provide
aid and comfort to these disruptive forces. Instead of distributing the
bulk of war*s costs once and for all, our inadequate taxes vail saddle
the postwar tax system — and incidentally our fighting men — with a heavier
burden of debt service.
Postwar considerations heavily underscore the need for a courageous
program of additional taxes. Failure to meet that need will expose our post
war economy to the ravages of inflation and unemployment, In this setting,
the Treasury* s proposal for 010,5 billion of additional taxes stands out even
more clearly than before as truly a minimum program.
oOo
TREASURY DEPARTMENT
Washington
FOR IMEDIATE RELEASE,
^ 0 rg»i r - rl i
j
, D c i umlr'U Ji
Press Service
_
1 ?% ?!
/ J", / $ y 3,
During the month of
no market trans
actions took place in direct and guaranteed secur
ities of the Government for Treasury investment and
other accounts, Secretary Morgenthau announced
today.
-foOo-
o O
&
TREASURY DEPARTMENT
V/ashington
FOR
IMMEDIATE RELEASE,
Monday, November 15> 1943*
During the month of October, 1943?
Press
Service
No. 39-52
no market
transactions took place in direct and guaranteed secur
ities of the Government for Treasury investment and
other accounts, Secretary Horgenthau announced today.
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
TUesd&y, November 16. 1943*
Presa Service
The Secretary of the Treasury announced last evening that the tenders for
$1,000,000,000, or thereabouts, of 91-day Treasury bills to b e dated November 18, 1943,
and to mature February 1?, 1944, which were offered on November 12, were opened at the
Federal Reserve Banks on November 15*
The details of this issue are as follows:
Total applied for - $1,221,697,000
Total accepted
- 1,001,415,000
Average price
(includes $74,198,000 entered on a fixedprice basis at 99.905 and accepted In full)
- 99.905/ Equivalent rate of discount approx. 0 ,375% per annum
Range of accepted competitive bids:
High
Low
- 99.925
- 99.905
Equivalent rate of discount approx. 0.297* per annua
*
*
*
•
•%
0.376* *
*
(82 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Total
Applied for
Total
Accepted
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
$
$
TOTAL
18,3110,000
810,755,000
28 ,760,000
29,920,OCX)
25,441,000
13,250,000
145,951,000
20,498,000
U , 560,000
24,715,000
21,382,000
71.125.000
$1,221,697,000
16,864,000
627,346,000
24,692,000
28,643,000
24,820,000
12,944,000
128,725,000
18,738,000
10,800,000
23,833,000
19,887,000
64.123.000
11,001,415,000
Washington
Press Service
FOR RELEASE, WORKING NEWSPAPERS,
Tuesday t November 16. 1943*
3 1 - O
I
The Secretary of the Treasury announced last evening that the tenders for
$1,000,000,000, or thereabouts, of 91-day Treasury bills to be dated November 18, 1943,1
and to mature February 17, 1944, which were offered on November 12, were opened at the I
Federal Reserve Banks on November 15.
The details of this issue are as fellowss
Total applied for - $1,221,697,000
Total accepted
* 1,001,415,000
Average price
(includes 174,198,000 entered on a fixedprice basis at 99.905 and accepted in fwll)|
- 99.905/ Equivalent rate of discount approx. 0.375$ per annum
Range of accepted competitive bides
- 99.925
- 99.905
High
Low
Bqulvalent rate of discount approx. 0.297$ per annum
*
• » 0.376$ *
*
(82 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Total
Applied for
Total
Accepted
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
$
$
18,340,000
810.755.000
28,760,000
29,920,OCX)
25 ,441,000
13 ,250,000
145.951.000
20,498,000
11,560,000
24,715,OCX)
24,692,000
2 8 ,643,000
24 ,820,000
12.944.000
128,725,(XX)
18.738.000
10,800,000
23,833,000
71.125.000
19,887,000
64.123.OCX3
$1,221,697,000
11,001,415,000
21,382,000
TOTAL
16,864,000
627 ,346,000
3
TREASURE BETAfifjflBfft
Washington
Press
No,
FOR R E L E A S E , MOHN£N0 NEWSPAPERS,
T u e s d a y , N o v e m b e r jL6t 1 9 4 3 >
The
S e cretary of
the t e n d e r s
for $ 1 , O O O ,000,000,
Treasury bills
F e b r u a r y IV,
ope n e d at
^de
the T r e a s u r y a n n o u n c e d l a s t
thereabouts,
to be d a t e d N o v e m b e r
1944,
the
or
which were
Federal
details
of
offered
Reserve Banks
this
18,
that
of 91-day
and
to m a t u r e
were
o n N o v e m b e r 15,
I s s u e a r e as
price
evening
o n N o v e m b e r 12,
follows:
Total applied for * $1,221,697,000
Total a c c e p t e d
1,001,415,000
Average
1943,
Service
39-53
(includes $74,198,000
entered on a fixedprice basis at 99.905
a n d a c c e p t e d i n full)
M-t'fO#- jl E q u i v a l e n t r a t e o f d i s c o u n t
approx, 0#375$ per annum
- 99.925 Equivalent rate of discount
approx, 0*291% per annum
- 99,905 E q u i v a l e n t rate of disc o u n t
approx, 0.376$ per annum
High
Low
{82 p e r c e n t o f
the a m o u n t b i d
for at
Federal Reserve
District
Total
Applied
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St, L o u i s
Minneapolis
Kansas City
Dallas
San Francisco
$
TOTAL
the l o w p r i c e
for
18,340,000
810.755.000
28.760.000
29.920.000
25.441.000
13.250.000
145.951.000
20.498.000
11.560.000
24.715.000
21.382.000
71.125.000
,221,697,000
-oOo
was
accepted)
Total
Accepted
$
16,864,000
627.346.000
24.692.000
28.643.000
24.820.000
12.944.000
128.725.000
18.738.000
10,80q,000
25.833.000
19.887.000
64.123.000
$1,001,415,000
FOR IMMEDIATE RELEASE,
.lew-ember 16* 1943.
The Bureau of Customs announced today preliminary figures showing the
quantities of coffee authorized for entry for consumption under the quotas for
the 12 months commencing October 1# 1943, provided for in the Inter-American
Coffee Agreement , proclaimed "by the President on April 15, 1941, as follows:
•
*
Country of Production
...
- -
...
-
- ---------
-.... -...........
- -
:
:
- ■
Authorized for entry
for consumption
As of (Date)
t
(Pounds)
Qjiota Quantity
(Pounds) % J
------ ------- ............. — .......
—
-
Signatory Countries:
Brazil
Colombia
Costa Rica
Cuba
Dominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Mexico
Nicaragua
Peru
Venezuela
1,353,183,480
458,336,340
29,100,720
11,640,288
17,460,432
21,825,540
87,302,160
77,844,426
40,013,490
3,910,072
69,114,210
28,373,202
3*637,590
61,111,512
Nov, 6, 1943
H
ff
H
N
H
U
tt
fl
H
tt
tt
tt
153,277,118
58,077,233
1,620,560
1,409,396
2,455,868
5,798,917
787,587
412,724
1,379,312
460*402
1,880*472
-
tt
59,587
2,204,542
tl
1,993,028
Non-signatory Countries:
51,653,778
1/
Qjaotas as established by action of the Inter-American Coffee Board on
March 11, 1943,
-o0o>
TREASURY PEP ARB'ENT
'
Washington
FOB IMMEDIATE RELEASE*
Tuesday*.November 16,: .1943
Press Service
No. 39-54
The Bureau of Custoir s announced today preliminary figures showing
the quantities of coffee authorized for entry for consumption under the
auotas for the 12 months commencing October 1, 1943, provided for in
the Inter-American Coffee Agreement, proclaimed by the President on
April 15, 1941, as follows:
Country of Production
f
•
,*
:
*
: Authorized for entry
for consumut ion
Quota Quantity :
(Pounds)
3J
:As of (Date): VPounds)
Signatory Countries?
1,353,183,480
458,336,340
29,100,720
11,640,288
17,460,432
21,825,540
87,303,160
77,844,426
40,013,490
2,910,072
69,114,210
28,373,202
3,637,590
61,111,512
Brazil
Colombia
Costa Rica
Cuba
Dominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Mexico
Nicaragua
Peru
Venezuela
Non*-signatory Countries:
81
l )
■
■
|V- ill1 !j II >
51,653,778
Nov. 6, 1943
it
it
it
«
it
it
n
it
it
it
it
it
153,277,118
58,077,233
1,620,560
1,409,396
2,455,868
5,798,917
787,587
412,724
1,379,312
460,402
1,880,472
59,587
2,204,542
it
1,993,028
ii
■'
Quotas as established by action of the Inter-Anerican Coffee Board on
March 11, 1943♦
0O0-
;pV.
IS
l&woniltional surrender is a largeorder, and there sif I*
a temptation to tattle for l i u as the possibility of pesos
approaches.
1 hope you will remember that.
V
I hope you will
ft
pot your minds to doing etnethlsf about It, sad thus continue
the patriotic record that some of you started back la those
early days of Defense.
it
o k0 s 0
I
bells and newspaper boys soiling extras*
end tbs war tbs bard way, because they here no choice except
to do it that way, or not at all*
so oftsn im
I m glad that you
the use of
over the
in it*
I
lished a
this is no
job is going
that tbs war
got sore difficult
osul Because
we are
go
*
16
*
war than I
ago.
I had m
opportunity to U tennis the actual fighting and tim nature of
o w enemy with many imeriean and British officers arid men*
I
m u given a pretty clear idea of the heroism required of our
man whan they face fin tough, fanatic la&ie, and as a result I
achieved a healthy respect far thus blood m i w e n t that goes
into every foot of enemy ground wo take,
dad I found no
evidence anywhere along the line that we art near the and, un
less the end should com through some freak of circumstance*
I do not want to underesili
sever, the effects that
the terrible defeats in Russia, or the destruction of Germany,
must have on the Iasi Home front*
fantastic.
That destruction must be
In Italy I $ m what bombs can do#
of Naples, lying in a mass of ruins.
I itw the Fort
I taw the Port of Palermo
in Sicily battered so badly that om sizable ship lay high and
dry on a wharf, blown completely out of the water.
But General
Patton assured m that Palermo w ® only three or four percent
desire
-
<land ~5i
percent destroyed,
,ve4 -atotffft
destruction.
Yes, it is conceivable that the Germans eanft take it.
is possible that the same thing will happen that happened the
last time,
fa m y be awakened some morning by whistles and
It
IB
I wondered wh&t the effect would be an Wm d^ive*
long finding out.
One of ®
I m e not
State Cbair^en called up and m M t
•11# 1 ^uees the Third, ilar Loan la off
tiie wai* *s oirei* end
there fs m need to raise suaey.11
e called in
the Advertising Council,
^^0*^*'**.«
"}"\~wif*
-Write us an advertieeapnt that will stop this in its tracks*"
wfent to w o r k a g A s t advertisement, *■£
Tau a y re-amber it.
It galas
saan a Home Front Defeat?"
"Will the Surrender of ItaLy
Then, because of the smooth working
arrangement between your people *ta£ ours, the ad started running,
the nest day, in 970 newspapers throughout the latfos,
«e
followed this up by telling the people the bitter truth about
our equlpaent lueses in ficily.
We must hare had a soberly
effect on a lot of people, because we didn't get any asore phone
calls* and that particular surge of optimism soon faded away.
1 want to make one more observation.
A year ago^ I^weat to England.
What I saw there gave use a
lot of inspiration, and a lot of confidence about the outcome
of this war.
to win.
I came tack knowing in ay heart that we ware going
The British had survived the Blits; the Russians had
stopped the German advance| we had halted the Jap drive In the
far last.
Slowly and painfully the lilies were overtaking the
snowy's lead.
Obviously, it would take & long tiaa, but in
the end we would win.
14
Mach of this change » # due to th« Jap attack at Pearl
Rarbor*
But even m i l s the laps were pulling their sneak
attack, three out of every ten O r l e a n s still felt that It
wm most important to stay out of the European war#.
the striking reversal of public sentiment from narrow
isolationism to a complete acceptance off International respondV
bllity is a momnaest to public education#
And am % of you who
are bora in this room, by writing end financing advertising
campaigns, ha! as much tt do with that education over a period
of time as any other group of people#
Since the early days, ?hen * i t of the work was done in
spare time by patriotic volunteers you have taken the war as
your professional assignment#
operation#
it is no longer a spare time
You are putting your best brains on and converting
JsikJ^ble portions of your appropriations to this war information
job#
This job which I want to repeat must be stepped up, not
tapered off, as w# march toward Victory* \
Bourn of this increased war information effort can and should
be channeled through, bond advertising#
is a double-headed job*
frnoting bonds, I feel,
Half the job is raising money, but the
other half is maintenance of interest in this war, and what
It means to every American#
We hit a high spot in this job, I believe, the day the
Third War Loan opened, which also was the day Italy surrendered*
m X3 •
A tom month* later there « g another educational job to
bo # W *
B u i I f b u t o wore preventing our * hipping froa reaching
its destination.
It became necessary either to convoy our
freighter* or limply to canalgn a good part of our aatoriol
to Davy Jonas.
An advertising campaign u s planned by you ad
a ® to tall the public about the problem, and again you n n
helped by many Influential editorial columns.
of the advertisements.
I reauber oae
It u a headed "Okay, Mr. President, go
ahead and clear the Atlantic.*
what the President u s able to do in a fireside chat, pins
ahat you were able to do, gained the support of a majority of
American voters behind the idea of arsing and convoying our.
•hips.
Fifty-five percent of the people inched the decision,
and only thirty-eight percent definitely opposed it.
I few
weeks before, fifty percent of the people had been definitely
against it ana only forty-one percent were willing to see it
done.
Here again was a victory for the policy of letting the
people know the facts.
Public sentiment is such improved now.
Today the Kation
is not only solidly behind the war, but has gone on record
ae wishing to take on a big share of the responsibility in
helping keep the world peace through world organisation.
<m
>
||lt
m
lot long after that* advertising began to appear. It was
bought arui pals far by patriotic Anaricaas who took upon thaw*
4j«* the responsibility of asking their friends s&c neighbor*
of the situation* They m m written by atom of you
awwe
advertising mn, I think* who we hero tonight* Ton sere
pioneers-then* Ton sere pioneering the biggest Jab ef public
irifara&tian in history* And you sere pioneering too la giving
advertising the dignity of social responsibility*
Obviously so could not cantinas indefinitely to find aatipasted guns and odd bits of e%aip*at in private beads for
the British to bay and use.
steps.
the tin* had cons to tabs drastic
We knew far exawple that a few snaths later there
w m l d be a cri*ls I® the British Bevy* that with the rising
poser of the S e m s a levy* Britain would have too few ships to
defend herself^letjalman keep the Invading Maxis in say kind
of check*
The pobli# had to bs aade aware of this situatlsa.
H#
aajority of newspapers went to work an the prablen editorially
and you prepared an advertising ©asspalga that helped-achieve
awaiting rasa its.
That was only three souths after Dunkirk, but
the Gallup box Scare began to look much different then it had
before*
Sixty percent of the
American people stood solidly
beck of the President in transferring over-aged destroyers to
the British to help bolster their Savy*
ginning to eee.j
The people were be
• § § w i more important, we found that this equipment could
hs sold legally to the British without involving the American
GoTerrassat ia as act of n r ,
Ihea I look hack over the last three or four year#, I
think this seating stands out above all else ia ay mind,
because the stakes ware so great*
1 as proud and happy to have
had a haad ia arranging far thia materiel to go to England ia
her darkest aoeent.
I ahudder a little to think of our c&st-
off equipment being throws iato battle against ths !asi*s
s o d s m machinery of war, bat it was certainly better than nothing
Britain «aa again armed, inefficient and meager though the
armament may have been, and civilisation passed a crisis.
But
it was a mighty narrow squeak.
It was hack in these days when we were struggling to
the public see what stark dangers lay ahead that American
advertising ®aa first came to the aid of their Govenamint.
It
seemed obvious, at least to as, that the American people wars
not getting ths true significance of the sews reports.
did not see the approaching danger.
had to be done.
They
Something ®ore positive
That something, it seemed to me, was s o ® good,
factual, hard hitting advertising to help the people see and
feel aduit we were up against.
Si* British needed help*
fomehow, by some means, we had
to get them sea® rifles, end enough ether equipment to pre
pare then for the invasion which seemed iaaiasnt —
end which,
if it had been imminent, almost certainly would have been
successful.
General Marshall, and a group frost the «ar and Raty
Departments c a m several tines to *y offlee to discuss what
night be dose.
After twenty y e a n of peace, we had very little
equipment of any sort to use in fighting a war.
Bat we felt
that if we dug deeply enough we could find sows obsolete
aateriel, end perhaps sons equipment in private hands, that
would help out.
Before long we found quite a collection of
usable materiel.
For example, we found five hundred old 75
millimeter gusts, sad four hundred Thompson sub-machine guns
left aver from the last war. The levy t u n e d up five thousand
obsolete ,63-pound bombs and the A n y found 560 hundred pounders.
S a w place, t o found 80 out of date torpedoes, and someone came
up with five hundred 38 caliber revolvers which antedated even
the first World War.
To arm the foot soldiers sad the Bene Guard, we managed
to dig up nearly a half million rifles.
We might hams added
to this several thousand more old Springfield 30-30*8, but
there was no ammunition to be found anywhere in the world, and
the gluts were no good without bullets.
9
inviting warj inviting war simply because we admitted its
approach*
But even then we had a good Idea of Hitler’s
program
Wo felt stir# ho intended to take Britain in the
Spring of 1941, and then join forces with Japan and go to w k
on us in t h ^ ^ U U
Ind we could not be' sure that this program
would not succeed*
Today everyone everywhere agrees that we were scheduled
on the aggressors’ program as much as Poland, Chechoslovakia,
or Britain*
But things were different then*
Ivon Dunkirk, and the Fall of France, did not arouse the
American people to a sense of the reality of the danger ahead*
Here was the very moment when the light of civilisation in
Europe came nearest to dying, perhaps forever*
desperate*
The British were
their entire future, their whole defense depended
upon getting materiel, and getting it quickly*
Winston Churchill had made it clear that equipment losses
at Dunkirk had been staggering*
Britain needed everything —
artillery, aawunition, aircraft, m i most of all rifles*
Every
able-bodied man in England had to be prepared to fight off
invasion, but in all Britain there were no rifles for them*
and not much of anything else, and you can’t stop Sasis with
stocks and stones*
A c t i o n a l m rvey m e © aftexmrd revealed that 90$ of
the people In the country knew about the Bond Drive, and
understood that sgfcm Bond pirch&ses were the mature m o t of
participation*
This mm an important contribution, for la
previous Driver, too much of the public took the position that
*?k©y don’t moan me**1.
You see, therefore, eceasthiwg; of the job advertising
has done*
You jsey be interested to -know that sy experience with
advertising la connection with this war started even before
the War Loans*
It started back in the days when those of ns who felt
that an attack on the United States was inevitable, were trying
to get the country ready to defend our shores against any
aggressor.
Oar biggest job was trying to make the people see
that, as the President said, w© couldn’t simply climb Into bed
and pull the covers over our heads*
jn those days -*» about four years- ago ** Gallup polls
pointed out that 92$ of all Democrats and 94$ of all mpublicaas
were saying that we simply should not fight*
let steps had to be taken to protect ourselves —
steps
that worried sob © Americans because they thought we were
m by the far Advertising Council*
Throughout the Drive* 1 m
told* practically all of the 10*000
weeklies carried advertisements which war# pall for by on# or
more local businesses*
In.A ally and weekly news papers* business supported the
campaign with m r t than eight mi' d#-h&Xf million dollars worth
of space*
On the radio j m A M a fsagmlfieeiit job#
Thu Eatioiml
Association of Broadcasters tells as 3*3Qd hours of radio time
and 200*000 mnmnemmat^ (valued at l E *000*000} carried.
Third lar Loan messages to the public* throughout the days
and nights of the Drive*
Through the Allocation flan and
additionally contributed time* advertisers played a nost ■
Important part*' Tou gave m
the -use of your beet radio audiences*
At least $3*000*000 la msfasiae apace m s provided by
advertisers tad the isagaaints themselves*^%0^eneral mgaainea*
P
f e w journals and 458 business and trad# g a m i n e s each
contributed a full page*
Advertisers and the Outdoor Industry provided by all odds
the mmi m p m s ive outdoor showing of all tines*
I i® told
this had ft vain# of $1*700*000*
This 3^sek campaign* provided by advertisers, would S « «
cost a ecjanercial advertiser ^M>*O0Q*(X)0 — 10 million dollars
a weiikI
litisasl surrender ffeils her troops are planted within gunshot
of Croat Britain?
But because the basis promts#, through th#lr propaganda
bureau, to fold up} sad because w e ’d like to get on with the
peace, too many of us are gattiag eager to sidetrack the main job
Parsanally# I think it is serious enough to call for some
body to do something} sad I csathsre tonight because I think
you advertisers aad advertising people who ar® already using
your talents and facilities and genius to make the American
people understand many ef the facts of war, can do still more.
I asked your help once before.
Representatives of your
group came to Saafelagtaa a year ago and I told them, if I
recall correctly, that we were faced with the biggest selling
job in history with practically no precedent to go o n * J
Through your advertising council, you secured the volunteer
help of the ablest advertising people in the Halted States
and the cooperation of advertisers and media, sad went to work.
I think everyone knows what a splendid job has been done.
During the Thirl ter Loan, advertisers sponsored 89,000
advertisements in the daily newspapers - s total of 61,573,588
lines, at a cost to themselves of sore than sis sad oae-half
million dollars.
Two-thirds of ths advertisements were prepared
by the advertisers themselves, and one—third were prepared for
- 5 I talked to General Doolittle about that in Tunis.
In M s
war room, lined with huge maps of the entire Allied battle front,
he showed me how aircraft are dispatched almost on a moment *s
notice to any fighting sector to take care of difficult enemy
implficements or stubborn resistance^ Jtest two days
fori I
/6w^ta
04TVU4. %
«■'
j y TfH caught
arrived in Tunis, Doolittle said
I I
in what might have been a serious trap had it not been for the
medium bombers
^pin a
.
(IIX xZ mt^
.
^
called to the scene.
b
m
i
r
d
o
r^cnll.11 ary w r l u Zfrit
^ v + o JU i ~t£ u s -L.
n
e
u rr^ J-A
^
^t^Jen^g
kt-yti?0 —
fc£+-tr#~y
Tftnnfir iinp'i'nlf"* This was only one case that Doolittle pointed
out where a temporary setback had been turned, through immediate
air support, into a victory.
But now the winter is here, and the weather is closing in.
Jimmie Doolittle and /i^Marshal Tedder cannot send airplanes
anywhere, at any time, on a moment1s notice, as they did this
summer.
Is there any promise of early peace about that?
Or, can you find hope of fuick victory in the fact that
the Allies have still not crossed that narrow ditch called the
English Channel, for the simple reason that the other side is
lined
s o lid ly
with sudden death?
Can anyone really think it
is going to be easy to bring Germany to her knees in uncon-
- 4 -
slow arid difficult process*
When I broadcast from Algiers, I
pointed out some of the difficulties of fighting oyer there*
I had no idea,* 1 said, *oi the terrible terrain in this area
oyer which we must fight the -Nazis*
The area between Naples
and Rome is mountainous and thick with trees and foliage*
It
is ideal for defensive action, because the Nazi forces can hide
high in the mountains, and fire on our forces without being
seen*
And when they are driven fro® one mountain, they need
only to retreat & few hundred yards to another and it is the
same tiling' all over again**
/ o i n c e I left Dragoni, the Allied Armies have managed to
get fifteen miles closer to Rome*
Five bloody, hard-earned
miles £ week, that«sAall* But it isn't the fault of our fight<£Sjerr
■£ JUs,A,
ing MU.^They are tough and in the pink of condition. The
/
fact is that no army in the world could move any faster, ft—
And that's the picture on the Italian front while we, back
here, are congratulating ourselves on polishing off the war in
a hurry*
Rut even that's not the whole story*
The weather is closing in over there.
Our troops may be
without air protection more of the time than they will have it,
and they tell me that air protection is just about the most
important single factor in modern invasion*
~ 3 this, gentlemen ~
next great war*
they
their next Fuehrer will win the
So here they are
these defeated prisoners —
already planning another assault on civilisation*
This is one reason why we must concentrate on fighting the
war right up to the last bitter day.
There is a good chance
that letting down now can needlessly prolong the war for weeks
and months*
I was in Italy three weeks ago*
Clark up to the front lines*
I went with General Mark
I drove in a j#§g through the
mountains to a spot within a mile of the Iasi troops*
through a small village —
a village —
I went
or what had, a few days before, been
called Dragon!*
It m s still smouldering*
American
bulldozers were busy clearing debris out of the streets so that
our supply trucks could get through.; and at one spot our jeep
had to climb high over a pile of masonry and stones that the
day before had been a public building*
there was left of Dragon! —
That was about all
that huge pile of wreckage.
It
was the same in a half dozen other small towns that we passed
through.
That happens because the Nazis don’t like fighting in
the open.
They run from building to building, and lark Clark’s
]p
'■ M Fifth /rmy or Jimmy Doolittle’s planes simply have to take the
buildings down around them.
It is, I can tell you, a mighty
-
2
-
But If the Iasi #ome^/ront should crack, that would he
a wind-fall*
In the meantime, we are only playing Hitlerfs
game when we see peace just around the corner*
I am convinced, by the m y , that the Has is have a pro
prietary interest in this wave of optimism*
The early signs
of German collapse came frof^stories printed in Nazi controlled
newspapers; then from travelers out of Germany, who reported
their observations to neutral newspaper chiefly those with prollazi tendencies*
Finally, Hitler himself managed to convey the
impression in his most recent speech that life in Germany is
hell*
I cannot think that he and Mr* Goebbels would be so
tender about keeping us posted of a coming crisis unless there
is a rabbit in the hat somewhere*
Those
hail an early crack-up of the German nation
have not talked to German prisoners, I can assure you of that*
I had some first hand reports on the state of mind of prisoners
when I was in Italy*
They are mighty arrogant.
They believe
in Adolf Hitler, and say the Russian campaign is the fault of
the German generals*
them about Democracy*
Fuehrer?
They don’t understand when you talk to
They say;
That is chaos1"
"What?
A nation without a
Then if you pursue the subject of
their present leader, they may admit he is not perfection —
tAtfUf
he will >hftvo -4a- do until they ^
find another* And — get
Gentlemen:
I an glad to have this opportunity tonight to talk to the
Kalian’s- leading advertising people, because 1 have confidence
in Uia ability of advertising m n to bring ike facts of the
war to the American public*
And today, perhaps more than at any til
since the war began, there is a vital job to be done on that
front*
The dangerous dream of a quick end to this war grows more
serious ©very day*
It is particularly pressing right now*
On
every h»"«* we see a surge of activity to prepare for post-war,
sometimes at the expeuse of the vital job at hand,
m r k e t has bean in 11 steady "pitiiirft s w
The stock
sine© word u r s t got
around that the liable arc about to crack*
The newspapers
regularly report new signs of the coming collapse of Germany*
In Washington the exodus to after-the-war jobs has started in
earnest*
ho one in Washington can give m any concrete evidence that
Germany is tottering on the brink of capitulation ~
and I have
sought out practically everyone who would have any reason to
know*
And I can tell you that on the Italian front the itaai
troops are not near cracking*
It is always possible, of course, that the people on the
Kasi io vte A vm t will be uaalle to take the bad news from Russia
/
W ' '’ft
■ ■
$r the terrible destruction our bombs are raining upon them;
TREASURY DEPARTMENT
Washington
FCE RELEASE AT 8 jOO
EWT,
Thursday. November 18. 19£3*
Press Service
ho.
7rf-
(The following address by Secretary Morgenthau
before the annual convention of the Association
of National Advertisers at the Hotel Commodore,
New York City, is scheduled for delivery at
8.00 P.M.. E.W.T..
Thursday.
November
18. 1943.
,
7.7
. - - U. J
.
and is for release at that time.)
TREASURY DEPARTMENT
Washington
FOR RELEASE AT 8:00 P,M., EWT,
Thursday, November 18/ 1943.
Press Service
No. 39-55
(The following address by Secretary Morgenthau
before the annual convention of the Association
of National Advertisers at the Hotel Commodore,
New York City, is scheduled for delivery at
8:00, P.M., E.W.T., Thursday,^November 18, 1943,
and is for release at that time.)
Gentlemen:
I am glad to have this opportunity tonight to taljc to
the Nation's leading advertising people, because I have con
fidence in the ability of advertising men to bring the facts
of the war to the American public.
And today, perhaps more
than at any time since the war began, there is a vital job
to be done on that front.
The dangerous dream of a quick end to this war, grows
more serious every day. It is particularly pressing right
now. On every hand we see a surge of activity to prepare
for postwar, sometimes at the*expense of the vital job at
hand. The stock market has been in a steady decline ever
since word first got around that the Nazis are about to
crack. The newspapers regularly.report new signs of the
coming collapse of Germany. In Washington the exodus to
after-the-war jobs has started in earnests
No one in Washington can give me any concrete evidence
that Germany is tottering on the brink of capitulation —
and I have sought out practically everyone who would have
-
2
-
any reason to know. And I canf|e,ll you that on the Italian
front the Nazi troops are hot hefir cracking.
It is always possible, of course, that the people of the
Nazi home front will be unable to take the bad news from Russia
or the terrible destruction our bombs are raining upon them.
But if the Nazi home front should crack, that would be
a wind-fall. In the meantime, we are only playing Hitlerfs
game when we see peace just around the corner.
I am convinced, by the way, that the Nazis have a pro
prietary interest in this wave of optimism. The early signs
of German collapse came from stories printed in Nazi controlled
newspapers; then from travelers out of Germany, who reported
their observations to neutral newspapers, chiefly those with
pro-Nazi tendencies. Finally, Hitler himself managed to convey
the impression in his most recent speech that life in Germany
is hell. I cannot think that he and Mr. Goebbels would be so
tender about keeping us posted of a coming crisis unless there
is a rabbit in the hat somewhere.
Those who hail an early crack-up of the German nation
have not talked to German prisoners, I can assure you of that.
I had some first hand reports on the state of mind of prisoners
when I was in Italy. They are mighty arrogant. They believe
in Adolf Hitler, and say the Russian campaign is the fault,of
the German generals. They don't understand when you talk to
them about Democracy. They say: "What? A nation without a
Fuehrer? That is chaos.1" Then if you pursue the subject of
their present leader, they may admit he is not perfection —
but he will do very well until they find another. And — get
this, gentlemen — they say their next Fuehrer will win the
next great war. So here they are -- these defeated prisoners —
already planning another assault on civilization.
This is one reason why we must concentrate on fighting
the war right up to the last bitter day; There is a good
chance that letting down now can needlessly prolong the war
for weeks and months.
I was in Italy three weeks ago. I went with General
Mark Clark up to the front lines. I drove in a jeep through
the mountains to a spot within a mile of the Nazi troops.
- 3 I went through a small village -- or what had, a few days
before, been a village — called Dragoni. It was still smoul
dering. American bulldozers were busy clearing debris out of
the streets so that our supply trucks could get through; and
at one spot our jeep had to climb high over a pile of masonry
and stones that the day before had been a public building.
That was about all there was left of Dragoni — that huge pile
of wreckage. It was the same in a half dozen other small towns
that we passe-d through. That happens because the Nazis don’t
like fighting in the open. They run from building to building,
and Mark Clark’s Fifth Army or Jimmie Doolittle’s planes simply
have to take the buildings down around them. It is, I can tell
you, a mighty slow and difficult process. When I broadcast
from Algiers, I pointed out some of the difficulties of fighting
over there. "I had no idea," I said, "of the terrible terrain
in this area over which we must fight the Nazis. The area
between Naples and Rome is mountainous and thick with trees and
foliage. It is ideal for defensive action, because the Nazi
forces can hide high in the mountains, and fire on our forces
without being seen. And when they are driven from one mountain,
they need only to retreat a few hundred yards to another and
it is the same thing all over again."
Since I left Dragoni, the Allied Armies have managed to
get fifteen miles closer to Rome. Five bloody, hard-earned
miles a week, that’s all. But it isn’t the fault of our
fighting men. They’ve got what it takes to lick the. Nazis,
man for man. They are tough and in the pink of condition.
The fact is that no army in the world could move any faster.
And that’s the picture on the Italian front while we,
back here, are congratulating ourselves on polishing off the
war in a hurry.
But even that’s not the whole story.
The weather is closing in over there. Our troops may
be without air protection more of the time than they will have
it, and they tell me that air protection is just about the most
important single factor in modern invasion.
I talked to General Doolittle about that in Tunis, in
his war room, lined with huge maps of the entire Allied battle
- 4 front, he showed me how aircraft are dispatched almost on
a moment’s notice to any fighting sector to take care of
difficult enemy implacements or stubborn resistance. Just
two days before I arrived in Tunis, Doolittle said, some of
the forces in Italy were caught in what might have been a
serious trap had it not been for the medium bombers called to
the scene.
In an hour or two the bombers had done a job that would
have been next to impossible without them and certainly would
have meant heavy, bloody losses. This was only one case that
Doolittle pointed out where a temporary setback had been
turned, through immediate air support, into a victory.
But now the winter is here, and the weather is closing
in. Jimmie Doolittle and Air Marshal Tedder cannot send air
planes anywhere, at any time, on a moment’s notice, as they
did this summer. : Is there any promise of early peace about
that?
Or, can you find hope of quick victory in the fact that
the Allies have still not crossed that narrow ditch called the
English Channel, for the simple reason that the other side is
lined solidly with sudden death? Can anyone really think it
is going to be easy to bring Germany to her knees in uncon
ditional surrender while her troops are planted within gunshot
of Great Britain?
But because the Nazis promise, through their propaganda
bureau, to fold up; and because w e ’d like to get on with the
peace, too many of us are getting eager to sidetrack the main
job.
Personally, I think it is serious enough to call for some
body to do something; and I came here tonight because I think
you advertisers and advertising people who are already using
your talents and facilities and genius to make the American
people understand many of the facts of war, can do still more.
I asked your help once before. Representatives of your
group came to Washington a year ago and I told them, if I
recall correctly, that we were faced with the biggest selling
job in history with practically no precedent to go on.
- 5 Through your advertising council, you secured the vol
unteer help of the ablest advertising people in the United
States and the^cooperation of advertisers and media, and went
to work. I think everyone knows what a splendid job has been
done.
During the Third War Loan, advertisers sponsored 89,000
advertisements in the daily newspapers - a total of 61,573,588
lines, at a cost to themselves of more than six and one-half
million dollars. Two-thirds of the advertisements were pre
pared by the advertisers themselves, and one-third were pre
pared for us by the War Advertising Council.
Throughout the Drive, I am told, practically all of the
10,000 weeklies carried advertisements which were paid for by
one or more local businesses.
In daily and weekly newspapers, business supported the
campaign with more than eight and one-half million dollars
worth of space.
On the radio you did a magnificent job. The National
Association of Broadcasters tells me 3,382 hours of radio time
and 200,000 announcements (valued at $12,000,000) carried
Third War Loan messages to the public, throughout the days and
nights of the Drive. Through the Allocation Plan and addi
tionally contributed time, advertisers played a most important
part. You gave us the use of your best radio audiences.
At least $3,000,000 in magazine space was provided by
advertisers and the magazines themselves. Two hundred and
fifty general magazines, 56 farm journals and 450 business
and trade magazines each contributed a full page.
Advertisers and the Outdoor Industry provided by all odds
the most expansive outdoor showing of all time. I am told
this had a value of $1,700,000.
This 3-week campaign, provided by advertisers, would have
cost a commercial advertiser $30,000,000 — 10 million dollars
a week.1
A national survey made afterward revealed that 90$ of
the people in the country knew about the Bond Drive, and
.*
?
- 6 understood that extra Bond purchases were the measurement of
participation. This was an important contribution, for in
previous Drives, too much of the public took the position that
™They don't mean me.”
You see, therefore, something of the Job advertising has
done.
You may be interested to know that my experience with
advertising in connection with this war started even before
the War Loans.
It started back in the days when those of us who felt
that an attack on the United States was inevitable, were^
trying to get the country ready to defend our shores against
any aggressor. Our biggest job was trying to make the^people
see that, as the President said, we couldn't simply climb into
bed and pull the covers over our heads.
In those days — about four years ago — Gallup polls
pointed out that 92$ of all Democrats ana 94$ of all Republicans
were saying that we simply should not fight.
Yet steps had to be taken to protect ourselves — steps
that worried some Americans because they thought we were
inviting war; inviting war simply because we admitted its
approach. But even then we had a good idea of Hitler's pro
gram. We felt sure he intended to take Britain in the spring
of 1941, and then join forces with Japan and go to work on us
in the fall. And we could not be sure that this program would
not succeed.
Today everyone everywhere agrees that we were scheduled
on the aggressors1 program as much as Poland, Czechoslovakia,
or Britain. But things were different then.
Even Dunkirk, and the Fall of France, did not arouse the
A m e r i c a n people to a sense of the reality of the danger ahead.
Here was the very moment when the light of civilization
in Europe came nearest to dying, perhaps forever. The British
were desperate. Their entire future, their whole defense
depended upon getting materiel, and getting it quickly.
~ 7 Winston Churchill had made it clear that equipment losses
at Dunkirk had been staggering, Britain needed everything -artillery, ammunition, aircraft, and most of all rifles. Every
able-bodied man in England had to be prepared to fight off
invasion, but in all Britain there were no rifles for them,
and not much of anything else, and you can't stop Nazis with
sticks and stones.
The British needed help. Somehow, by some means, we had
to get them some rifles, and enough other equipment to pre
pare them for the invasion which seemed imminent -- and which,
if it had been imminent, almost certainly would have been
successful.
General Marshall, and a group from the War and Navy De
partments came several times to my office to discuss what
might be done. After twenty years of peace, we had very little
equipment of any sort to use in fighting a war. But we felt
that if we dug deeply enough we could find soma obsolete
materiel, and perhaps some equipment in private hands, that
would help out. Before long we found quite a collection of
usable materiel. For example, we found five hundred old 75
millimeter guns, and four hundred Thompson sub-machine guns
left over from the last war. The Navy turned up five thousand
obsolete 30-pound bombs and the Army found 560 hundred pounders.
Some place, we found 80 out-of-date torpedoes, and someone came
up with five hundred 38 caliber revolvers which antedated even
the first World War.
To arm the foot soldiers and the Home Guard, we managed
to dig up nearly a half million rifles. We might have added
to this several thousand more old Springfield 3 0 - 3 0 % but
there was no ammunition to be found anywhere in the world,
and the guns were no good without bullets.
What was more important, we found that this equipment
could be sold legally to the British without involving the
American Government in an act of war.
When I look back over the last three or four years,
I think this meeting stands out above all else in my mind,*
because the stakes were so great. I am proud and happy to
have had a hand in arranging for this materiel to go to
England in her darkest moment. I shudder a little to think
of our cast-off equipment being thrown into battle against
the Nazifs modern machinery of war, but it was certainly better
than nothing. Britain was again armed, inefficient and meager
though the armament may have been, and civilization passed
a crisis. But it was a mighty narrow squeak.
It was back in these days when we were struggling to make
the public see what stark dangers lay ahead that American
advertising men first came to the aid of their Government. It
seemed obvious, at least to me, that the American people were
not getting the true significance of the news reports. #They
did not. see the approaching danger. Something more positive
had to be done. That something, it seemed to me, was some good,
factual, hard hitting advertising to help the people see and
feel what we were- up against.
Not long after that, advertising began to appear. It was
bought and paid for by patriotic Americans who took upon them
selves the responsibility of making their friends and neighbors
aware of the situation. They were written by some of you
advertising men, I think, who are here tonight. You were
pioneers then. You were pioneering the biggest job of public
information in history. And you were pioneering too in giving
advertising the dignity of social responsibility.
Obviously we could not continue indefinitely to find anti
quated guns and odd bits of equipment in private hands for
the British to buy and use. The time had come to take drastic
steps. We knew for example that a few months later there
would be a crisis in the British Navy; that with the rising
power of the German Navy, Britain would have too few ships^to
defend herself, let alone keep the invading Nazis in any kind
of check.
The public had to be made aware of this situation. The
majority of newspapers went- to work on the problem editorially
and you-prepared an advertising campaign that helped achieve
amazing results. That was only three, months after Dunkirk, but
the Gallup box score began to look much different than it had
before. Sixty percent of the American people stood solidly
back of the President in transferring over-aged destroyers to
the British to help bolster their Navy. The people were be
ginning to s e e . xsfm. ai/tJ
1
^ r:a sr SkWJ'- "bad'
-9 A few months later there was another educational job to
be done.. ^Nazi U-boats were preventing our shipping from
.reaching its destination. It became necessary either to con
voy our freighters or simply to consign a good part of our
materiel to Davy Jones, An advertising campaign was planned
by you ad men to tell the public about the problem, and again
you^were helped by many influential editorial columns. I re
member one of the advertisements. It was headed "Okay,
Mr. President, go ahead and clear the Atlantic."
_
What the President was able to do in a fireside chat,
plus what you were able to do, gained the support of a maiority
of American voters behind the idea of arming and convoying our
S
percent of the people backed the decision,
and only thirty-eight percent definitely opposed it. A few
weeks before, fifty percent of the people had been definitely
against it and only forty-one percent were willing to see it
done. Here again was a victory fop the policy of letting the
people know the facts.
b
Public sentiment is much improved now. Today the Nation
is not_only solidly behind the war, but has gone on record
as wishing to take on a big share of the responsibility in
helping keep the world peace through world organization.
Much of this change was due to the Jap attack at Pearl
Harbor. But even while the Japs were pulling their sneak
attack, three out of every ten Americans still felt that it
was most important to stay out of the European war.
• i
striking reversal of public sentiment from narrow
^®slationxsm to a complete acceptance of international respon
sibility is a^monument to public education. And some of you
wbo are here in this room, by writing and financing advertising
had as much to do with that education over a period
01 time as any other group of people.
Since the early days, when most of the work was done in
spare time by patriotic volunteers, you have taken the war as
your professional assignment. It is no longer a spare time
operation. You are putting your best brains on and converting
sizable portions of your appropriations to this war information
job. This job which I want to repeat must be stepped up, not
tapered off, as we march toward Victory.
-
10
-
Some of this increased war information effort can and
should he channeled;through bond advertising. Promoting bonds,
I feel, is a double-headed job. Half the job is raising money,
but the other half is maintenance of interest in this war, and
what it means to every American.
We hit a high spot in this job, I believe, the day the
Third War Loan opened, which also was the day Italy surrendered.
I wondered what the effect would be on the drive. I was not
long finding out. One of our State Chairmen called up and
said: ,fWell, I guess the Third War Loan is off — the war’s
over and there1s no need to raise money.”
So we called in the Advertising Council. I asked them:
"Write us an advertisement that will stop this in its tracks."
They went to work and in a few hours produced what I think
was a^great advertisement. You may remember it. It said:
"Will the Surrender of Italy mean a Home Front Defeat?"
Then, because of the smooth working arrangement between your
people and ours, the ad started running, the next day, in
970 newspapers throughout the Nation. We followed this up
by telling the people the bitter truth about our equipment
losses in Sicily. We must have had a sobering effect on
a lot of people, because we didn’t get any more phone calls,
and that particular surge of optimism soon faded away.
I want to make one more observation.
A year ago I went to England. What I saw there gave me
a lot of inspiration, and a lot of confidence about the out
come of this war. I came back knowing in my heart that we
were going to win. The British had survived the Blitz; the
Russians had stopped the German advance; we had halted the
Jap drive in the far East. Slowly and painfully the Allies
were overtaking the enemy’s lead. Obviously, it would take
a long time, but in the end we would win.
When I returned from the front early this month, I still
felt sure we would win but I felt far more grim about the war
than I did a year ago. I had an opportunity to discuss the
actual fighting and the nature of our enemy with many American
and British officers and men. I was given a pretty clear idea
of the heroism required of our men when they face the tough,
fanatic Nazis, and as a result I achieved a healthy respect
-
11
-
for the blood and sweat that goes into every foot of enemy
ground we take. And I found no evidence anywhere along the
line that we are near the end, unless the:end should come
through some freak of circumstance.
I do not want to underestimate, however, the effects that
the terrible defeats in Russia, or the destruction of Germany,
must have on the Nazi home front* That destruction must be
fantastic. in*Italy I saw what bombs can do. I saw the Port
of Naples, lying in a mass of ruins. I saw the Port of Palermb
in Sicily battered so badly that one sizable ship lay high and
dry on a wharf, blown completely out of the water. But General
Patton assured me that Palermo was only three or four percent
destroyed. Hamburg has been seventy percent destroyed, the
Germans themselves admit, and several other Nazi cities have
received even more destruction.
Yes, it is conceivable that the Germans canTt take it.
It is possible that the same thing will happen that happened
the last time. We may be awakened some morning by whistles
and bells and newspaper boys selling extras.
But is is also possible that we can waste a great deal
of precious time thinking about that morning, and we can divert
a great deal of our precious energy into making ready for it,
and then find that it shows no signs of coming. And in the
meantime, good American young men are losing their lives trying
to end the war the hard way, because they have no choice except
to do it that way, or not at all.
I am glad that you and I have been partners so often in
the use of advertising in connection with this war. I have
gone over the whole story because I thought you would be in
terested in it. I have liked working with you. I think you
have established a remarkable record. I think the stature
of advertising has improved immeasurably as a result of what
you people, who have thrown aside all thought of political
differences, have done.
But this is no funeral oration. Your job is barely
begun. And the job is going to get more difficult every week,
and every month, that the war wears on. Because we are going
-
12
-
to get tired. Everybody is going to get tired. Yfe are going
to want peace and relief from the restrictions that war puts
on what we do, and what we eat, and what we have.
Unconditional surrender is a large order, and there may
be a temptation to settle for less as the possibility of peace
approaches. I hope you will remember that. I hope you will
pux your minds to doing something about it, and tnus continue
the patriotic record that some of you started back in those
early days of Defense.
o 0 o
V
- 3 for such bills, whether on original issue or on subsequent purchase, and the amount
actually received either upon sale or redemption at maturity during the taxable
year for which the return is made, as ordinary gain or loss.
Treasury Department Circular Ildf 418, as amended, and this notice, pre
scribe the terms of the Treasury bills and govern the conditions of their issue.
Copies of the circular may be obtained from any Federal Reserve Bank or Branch.
|g' |
' 0f O
IlfflJ
Ifljfjf
m m
-
2
-
Reserve Banks and Branches, following which public announcement will be made by the
Secretary of the Treasury of the amount and price range of accepted bids.
Those
submitting tenders will be advised of the acceptance or rejection thereof.
The
Secretary of the Treasury expressly reserves the right to accept or reject any or
all tenders, in whole or in part, and his action in any such respect shall be final,
Subject to these reservations, tenders for $100,000 or less from any one bidder at
99.905
entered on a fixed-price basis will/be accepted in full.
Payment of accepted
tenders at the prices offered must be made or completed at the Federal Reserve Bank
in cash or other immediately available funds on
November 26, 1943
The income derived from Treasury bills, whether interest or gain from
the sale or other disposition of the bills, shall not have any exemption, as such,
and loss from the sale or other disposition of Treasury bills shall not have any
special treatment, as such, under Federal tax Acts now or hereafter enacted.
The
bills shall be subject to estate, inheritance, gift, or other excise taxes, whether
Federal or State, but shall be exempt from all taxation now or hereafter imposed
on the principal or interest thereof by any State, or any of the possessions of
the United States, or by any local taxing authority.
For purposes of taxation the
amount of discount at which Treasury bills are originally sold by the United States
shall be considered to be interest.
Under Sections 42 and 117 (a) (l) of the
Internal Revenue Code, as amended by Section 115 of the Revenue Act of 1941, the
amount of discount at which bills issued hereunder are sold shall not be considered
to accrue until such bills shall be sold, redeemed or otherwise disposed of, and
such bills are excluded from consideration' as capital assets.
Accordingly, the
owner of Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between the price paid
mm
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Friday , November 19* 1943------ •
The Secretary of the Treasury, by this public notice, invites tenders
for $ 1,000,000>000 , or thereabouts^ of
^Q^day Treasury bills, to be issued
on a discount basis under competitive and fixed^price bidding as hereinafter pro
vided.
The bills of this series will be dated
November 26. 1943
* and will
w
mature
Febp^i^^Y^Aj TRVi
interest.
when the face amount will be payable without
They will be issued in bearer form only, and in denominations of $1,000,
$ 5 ,0 0 0 , $ 1 0 ,0 0 0 , $ 1 0 0 ,0 0 0 , $ 5 0 0 ,0 0 0 , and $ 1 ,0 0 0 ,0 0 0 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the
closing hour, two o ’clock t>. m., Eastern War time,
Monday. November 22. 1943___ •
Tenders will not be received at the Treasury Department,' Washington.
Each tender
must be for an even multiple of $1,000, and the price offered must be expressed
on the basis of 100, with not more than three decimals, e. g., 99*925*
may not be used.
Fractions
It is urged that tenders be made on the printed forms and for
warded in the special envelopes which will be supplied bjr Federal Reserve Banks
or Branches on application therefor.
Tenders will be received without deposit from incorporated banks and
trust companies and from responsible and recognized dealers in investment securi
ties .
Tenders from others must be accompanied by payment tof 2 percent of the face
amount of Treasury bills applied for, unless the tenders are accompanied by an
express guaranty of payment by an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal
TREASURY DEPARTMENT
Washington
POR RELEASE, MORNING NEWSPAPERS,
Friday, November 19, 1943*_____
The Secretary of the Treasury, by this public notice,
invites tenders for .$>1,GOO,000,000, or thereabouts, of 90-day
Treasury bills, to be issued on a discount basis under compet
itive and fixed-price bidding as hereinafter provided.
The
bills of this series will be dated November 26, 1943, and will
mature February 24, 1944, when the face amount will be payable
without interest.
They will be issued in bearer form only, and
in denominations of $1,000, $>5,000, $10,000, $100,000, $5 0 0 ,0 0 0 ,
and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and
Branches up to the closing hour, two o’clock p, n f, Eastern War
time, Monday, November 22, 1543. Tenders will not be received
at the Treasury Department, Washington. Each tender must be
for an even multiple of $1,000, and the price offered must be
expressed on the basis of 100, with not more than three decimals
e, g., 99.925. Fractions may not be used. It is urged that
tenders be made on the printed forms and forwarded in the specia
envelopes which will be supplied, by Federal Reserve Banks or
Branches on application therefor,
Tendei's vail be received without deposit from incorporated
banks and trust companies and from responsible and recognized
dealers in investment securities. Tenders from others must be
accompanied by payment of 2 percent of the face amount of
Treasury bills applied for, unless the tenders are accompanied
by an express guaranty of payment by an incorporated bank or
trust company.
Immediately after the closing hour, tenders will be opened
at the Federal Reserve Banks and Branches, following which pub
lic announcement will be made by the Secretary of the Treasury
of the amount and pxace range of accepted bids, Those sub
mitting tenders will be advised of the acceptance or rejection
thereof. The Secretary of the Treasury expressly reserves the
right to accept or reject any or all tenders, in whole or in
part, and his action in anjr such respect shall be final. Sub
ject to these reservations, tenders for 4?100,000 or less from
any one bidder at 99.905 entered on a fixed-price basis will
(Ojer)
- 2 *
be accepted in full. Payment of accepted tenders at the prices
offered must be made or completed at. the Federal Reserve Bank
in cash or other immediately available funds on November 26, 1943.
The income derived from Sraa^ury bills,''Whether interest or
gain from the sale or other disposition of the bills, shaj,l not
have any exemption, &$ such* ehd lose from the sale or other dis
position of Treasury bille ehall hot have any special treatment,
as such, under Federal tot* Mte* IW* §f hereafter enacted. The
bills shall be subject to
inheritance, §fftt
otliex ^
excise taxes, whether PedeSl
State, but shall be exempt from
all taxation now or hdre&fter imposed on the principal or inter
est thereof by any
or
Of the possessions of the
United States, -or -by at i f 'p m X
authority. For purposes
of taxation the amnto^t of
at Which Treasury bills are
originally sold by the United States shall be considered to be
interest/ Under Sections 42 and 11? (a) W of the Internal
Revenue Code, as amended by Section 115 of the Revenue Act of
1941, the amount of discount at which bills issued hereunder are
sold shall not he considered to accfu.a until such bills shall be
sold, redeemed or otherwise disposed of, and such bills are ex-*
eluded from consideration as capital assets. Accordingly, the
owner of Treasury bills, (other than life insurance companies >
issued hereunder need include in his income tax return only the
♦difference between the price paid for such bills, whether on
original issue or on subsequent purchase, and the amount actually
received either upon sale or redemption at maturity .during the
taxable year for which the return is made, as ordinary gain or
loss •
Treasury Department Circular Uo. 418, as amended, and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be ob
tained from any Federal Reserve Rank or Branch.
**oCo**
November 12, 19^3
Dear Mr* Lilienthal:
I
have just learned th^t the Tennessee Valley
Authority is the first federal agency or department
whose employees are regularly devoting o v e r 15 P er
cent of their pay checks for the purchase of war
bonds. 1 want, through you, to congratulate your
entire organisation for this outstanding achievement.
Last February, the President expressed a desire
that Government employees lead the way in this essential
part of our war program. Applying 15 P er cent
every
pay check to the purchase of war bonds is not only a
sure method for the individual to accumlate financial
reserves, but it also is a positive means whereby every
citizen
render an additional essential service to
his country at home and abroad. I hope that this
standard of investment in war bonds achieved by
Tennessee Talley Authority employees will eoon be
attained throughout the Federal service.
1 wish to commend you and your entire organisation
of over 2^,000 employees for the whole-hearted support
of this part of our national program to defeat tyranny
abroad and to combat inflation at home.
Sincerely,
(Signed) H. Mergenthan, Jr.
Secretary of the Treasury
Honorable David
Lilienthal,
Chairman,
Tennessee Valley Authority,
Knoxville, Tennessee.
SlB:FS:gr
11/12/^3
TREASURY DEPARTMENT
Washington
Secretary Morgenthau today commended the Tennessee
Valley Authority on becoming the first Federal age~~~ — 1
department whose employees are regularly devoting o-vcr~
15 percent of their pay checks to the purchase of War
Bonds•
The Secretary, in a letter to Chairman David E.
Lilienthal, conveyed his congratulations to the more than
24,000 employees of the agency for ”this outstanding
achievement.”
MLast February, the President expressed a desire
that Government employees lead the way in this essential
part of our war program,” the Secretary1s letter said.
”Applying 15 percent of every pay check to the purchase
of War Bonds is not only a sure method for the individual
to accumulate financial reserves, but it also is a pos
itive means whereby every citizen can render an addi
tional essential service to his country at home and
abroad. I hope that this standard of investment in War
Bonds achieved by Tennessee Valley Authority employees
will soon be attained throughout the Federal Service.”
In closing the Secretary s a i d I wish to commend
you and your entire organization of over 24,000 employees
for the whole-hearted support of this part of our national
program to defeat tyranny abroad and to combat inflation
at home.”
-oOo-
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Thursday, November 18, 1943*
Press Service
No, 39-57
Secretary Morgenthau today commended the Tennessee
Valley Authority on becoming the first Federal agency or
department whose employees are regularly devoting more
than 15 percent of their pay checks to the purchase of
War Bonds.
The Secretary, in a letter to Chairman David E.
Lilienthal, conveyed his congratulations to the more
than 24,000 employees of the agency for ’’this outstand
ing achievement.”
’’Last February, the President expressed a desire
that Government employees lead the way in this essential
part of our war program,” the Secretary’s letter said.
’’Applying 15 percent of every pay check to the purchase
of War Bonds is not only a sure method for the individual
to accumulate financial reserves, but it also is a pos
itive means whereby every citizen can render an addi
tional essential service to his country at home and
abroad. I hope that this standard of investment in War
Bonds achieved by Tennessee Valley Authority employees
will soon be attained throughout the Federal service,”
In closing the Secretary said ”1 wish to commend
you and your entire organization of over 24,000 employees
for the whole-hearted support of this part of our national
program to defeat tyranny abroad and to combat inflation
at home,”
oOo-
- 41 -
So oft In thoologio m r *
th© diaputaats* X f c *
Hull on In utter igAor&aoe
Of *&©t fiffe. other mt&m*
And prute about an olephant
lot one of thes%o oetnl
Xu slspllfylag ou^tex laws we need, like the nea of
Indostan, to reoovcp our sight,
'•'« need the sireele of
ptstored vision so we cen see the whole elephant.
0O0
Is mighty plain,* quoth he 2
"♦Tis clear enough the elephant
Is very like a tree!**
The fifth who chanced to touch the ear
Said: *E*en the blindest man
Can tell what this resembles most)
Deny the fact who can,
This marvel of an elephant
Is very like a fan!11
The sixth no sooner had begun
About the beast to grope
Than, seising on the swinging tail
That fell within his scope,
*1 see,” quoth he, "the elephant
Is very like a rope!®
And so these men of Indostan
Disputed loud and long,
Each in his own opinion
Exceeding stiff and strong,
Though each was partly in the right,
And all were in the wrong!
So oft in theologic
The first approached the elephant
lndy happening to fall
Against his broad and sturdy side
At once began to bawl5
*Gad bless met
but the elephant
Is very like a walll®
The second feeling of the tusky
Criedt *Bol what have we here
So very round and smooth and sharp?
To me H i s mighty clear
This wonder of an elephant
Is very like a spearI®
The third approached the animal
And happening to take
The squirming trunk within his hands
Thus boldly up and spakes
*1 see** quoth he, *the elephant
Is very like a snakel *
The fourth reached out his eager hand,
And felt about the kneex
*¥«fhat most this wondrous beast is like
Is mighty plain
Conclusion
“Simplify Our Tax Laws’* Las become & kind of slogan*
t
Slogans ape valuable instruments at times*
enthusiasm needed to produce results*
dangerous weapons.
They engender the
But they may also be
Applied to tax law they are dangerous
because they compress too much Into too few words * a fault*
I hasten to add* which cannot always be fairly ascribed to
lawyers*
They end by meaning nothing, or perhaps whatever
anyone wants them to mean.
In meaning all things to all men
they mean nothing to any man*
There is profound significance
in the tale of “The Blind Men and the Elephantj *
It was six men of Indostan
To learning much inclined
Who went to see the elephant
(Though all of them were blind).
That each of observation
Might satisfy his mind.
The first approached
37 -
the present tax the amount of tax paid by deficit corporations
is relatively small - only about 11 percent of total collections
at 1942 levels of income.
Nor does this small amount of revenue come in an
equitable fashion from deficit corporations.
The taxes falling
on such corporations bear no relation to equity, to capital,
to total assets, to invested capital, to gross sales, to the
size of the deficit, or to any reasonable measure of privilege
or taxpaying ability.
The impact of the tax is capricious*
It depends upon the accuracy of a forecast made by the
corporate directors at a time when prophecy is a perilous
adventure.
In all these circumstances there remains little
excuse for encumbering corporate tax structure with this
freakish tax
r
Conclusion
"Simplify Our Tax Laws’*
-36-
under $5,000 paid capital stock and excess profits taxes
equal to 6.5 percent of their aggregate net income while
corporations with net incomes of $5 million and over paid
taxes of only 1 percent of their net*incoiae*
It is argued by some that this tax is a suitable method
of taxing deficit corporations.
1 had thought that our
purpose today should be in the other direction - to tax
corporations with swollen war profits at high rates and to
relieve corporations with deficits occasioned in large part
by economic events beyond their control.
It is true that the
old capital stock tax of the Twenties fell to a considerable
extent on deficit corporations because those corporations were
obliged to pay taxes on the fair value of capital stock
regardless of their expectations of income or deficit.
the present tax
Under
upon this point leads to the very clear conclusion that small
corporations are relatively harder hit by the tax than are
larger corporations.
This is because small corporations
experience fluctuating earnings to much greater extent than do
large corporations.
For example, in 1937 corporations with
total assets of less than $50,000 had an average declared value
of 197 percent of their equity capital while corporations with
50
million dollars or more of total assets had an average
declared value of less than 62 percent of equity capital.
In
1937 the ratio of tax to normal tax net income was 2.7 percent
for corporations with under $50,000 of total assets.
The
ratio for corporations with assets of $100,000,000 and over
was 1.8 percent.
In 1936 corporations with net income of
under $5,000 paid
based upon actual, and not declared, value..
abandoned because of valuation difficulties*
The tax was
The year 1933
saw the origin of the present type of capital stock tax, w p h
totally disregards actual value and is based upon the value the
corporation wishes to declare, with no regard for book, market
value of assets, or earnings record*
The function of
& declaration is simply to take out insurance against the
declared value excess profits tax; this tax penalises
corporations which guess wrong in making their declaration*
In
actual practice corporations make their declaration of value
entirely with the purpose of saving themselves from the
heavier i pact of the declared value excess-profits tax.
You may be interested in the relative impact of the tax
upon large and small corporations.
The Treasury’s research
upon this point leads
not the least of which Is that the same revenues c o u M he
collected from substantially the same corporations by
Increasing the corporate tax rate.
These taxes are, therefore,
nothing more than an unreasonable duplication in the corporate
tax structure, requiring for compliance scarce manpower and
trained personnel.
The Treasury did not again in 1943 specifically recommend
the elimination of the capital stock and declared value excess-profits taxes, but I would like to discuss the subject briefly
with you because I believe the days of these taxes are numbered.
I would also like to secure your cooperation in effecting their
ultimate repeal.
You all know the history of the capital stock tax.
Beginning in 1917 and through 1926 we had a capital stock tax
based upon actual,
Corporate Tax
So far I have been talking about simplification on behalf
of individual taxpayers,
I have limited my discussion of that
subject to the return front.
Much more remains to be said on
other individual tax fronts, but I should like to say a few
words before I close regarding one item of corporate, tax
simplification.
Capital Stock and the Declared-Value Excess Profits Tax
In 1942 I attempted on behalf of the treasury to persuade
Congress to eliminate the capital stock and the declared-value
excess-profits taxes.
I was unable to persuade the «aya and
Means Committee, but was more successful with the Senate
Finance Committee.
The latter committee receded in conference,
however, and we still have in the statute these utterly
indefensible taxes.
They are indefensible for many reasons,
not the least of which
• 31 -
addition we raised the present requirement relating to outside
income, other than salaries, from $100 to a somewhat higher
figure*
Additional Suggestions for Simplifying Returns
I do not want you to think that I have attempted to cover
even the limited subject of simplification on the return front*
Many additional suggestions are in the mill which, I might add,
grinds slowly.
Gould we have different filing dates by classes
of taxpayers, corporate and individual, or by divisions within
one class of taxpayers on an alphabetical basis?
How may
return forms be set up to enable taxpayers to do their arithmetic
more easily?
These are merely examples of activity in the
Treasury in Its constant effort to improve the administration
of our tax laws and to make taxpayer compliance less burdensome
than it now is*
Corporate Tax Simplification
So far I have been
30
Investigation of this proposal reveals further interesting
data*
At present the first $2,000 bracket oovers about
,000,000 taxpayers*
The remaining 23 brackets cover less
than 7,000,000 taxpayers*
The lesson of these figures is that
our rate structure lacks refinement for the great majority of
taxpayers.
However, the moment we try to provide better
progression, we have to face the necessity for graduated
withholding. \As I have said, this can be accomplished.
►product of graduated withholding —
The
which enables us to
accomplish the desirable objective of refining the rate
structure for the great majority of taxpayers
is the
elimination of many quarterly declarations for persons in
receipt of salaries above the present first bracket of surtax.
A greater number of declarations could be eliminated if in
addition we raised
Employer groups with whom withholding problems have been
sp*>—
v.
discussed have indicated the desirability of graduated
withholding from the standpoint of their relationships with
employees*
At the time for filing the first of the new
quarterly declarations this past .September, several large
employers reported that requests from employees for information
as to total amounts of wage and of withholding over the year,
as well as for assistance in the computations and the
/
preparation of the form, resulted in significant additional
burdens for their tax and accounting staffs*
the question
arises whether graduated withholding would unduly complicate
the preparation of payrolls.
Careful study, as well as
discussions with employer groups, indicates that little or no
extra burden upon employers would result*
Investigation of this
I 28 |
Treasury has recommended to the Committee that collection at
the source be made to apply to the taxpayer’s full liability
rather than merely to his partial liability under the normal
tax and the first bracket of surtax.
The method for
accomplishing this result mould be to have a series of withholding
rates applicable to gross wages, as a substitute for the present
precise rates.
This series of withholding rates would be
expressed in tables based on the status of the taxpayer.
There
could also be tables calculating the amounts to be withheld,
as at the present time*.
Any objections to the inaeeuraoles resulting from the
wide brackets in the present-law tables would be minimized by
providing substantially narrower brackets over the ranges of
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wage within which most employees fall.
Employer groups with
*27
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to claim refunds and those who have substantial additional
taxes to pay would bo permitted or required to file.
1 third
into pretation of "elimination" i» that taxpayers would be
required to furnish only a minimum of information!
their taxes
would be computed for them by the government and refunds or
additional assessments would be issued without further action
I 11 / n on their part. These alternative solutions and others are
being closely examined in the Treasury.
graduated. Withholding
Simplification is possible also in the domain of
*
withholding.
One suggestion, originat#tf^rith Judge Vineon
and recently made to the iaye and Means Committee, was that
withholding would be on a gross basis under a system which
would enable taxpaye rs to understand instantly what percentage
0f their salaries was being withheld at the source*
The
Treasury has recommended
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26
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returns play In educating citizens in their role as taxpayers
and in stimulating a sense of direct participation in
government should not be overlooked#
In discussing the elimination of returns it is important
to recognize that different people mean different things by
the phrase, “elimination of returns11, Some mean that we should
' 7
go from an annual accounting period to a payroll accounting
period, and that withholding should itself be the tax.
Ikder
this interpretation a broad class of taxpayers would be neither
required nor permitted to file.
The inequities of such
a solution and the great difficulty of drawing a line between
l
filers and non-filers make its adoption highly questionable*
Other people mean by "elimination of returns" that the annual
ac counting period be retained, but that only those who wish
to claim refunds
and find the making of returns most difficult.
It is also
argued that paper work would he reduced and administration
simplified*
On the other hand, several important considerations
militate against the elimination of returns*
If returns are
eliminated* administrative controls over taxpayers and
employers will he weakened*
The morale value of a tax return
made under penalty of perjury will he lost*
The possibility
of a cross-check of employee returns against employer reports
will he gone*
It is well to remember also that taxpayer
returns serve as the basis for adjusting the over—collections
and under-collections which are inevitable in any withholding
system.
In oases of part-year unemployment* change of family
status, and double employment, for example* these adjustments
may be quite substantial*
Then, too* the function which
returns play in
■till ooaputa their tax both ways la order to he aure that they
were paying the loweet peealhle tax. *• are worklag oa this
problem la the Treasury and. hope to presmt definite
recoacendatloM to the Congress in the aear future.
Ellnlnatlne horns &aroh IS Returns
So* that we hare collection at the eouree, you have heart
amfli discussion of the possibility of ellaiaatlag March IS
return* for persona entirely In the first surtax bracket, whose
liabilities are collected at the source. This is another wetter
_
I &
under serious consideration in the Treasury. There are
arguments on both aides of the question. On the one hand, it is
osrtain that the slialnation of laroh IS returns would simplify
taxpayer compliance and reduce taxpayer irritation. The persons
relieved of filing retoms would be those in the lowest taxable
bracket; these taxpayers are least familiar with tax procedures
and find the waking
w..ieh permits ths u m of form 1G4GI by taxpsysrs hating gross
income of not mere than §3,000 consisting of salariss, dividends
interest and asittitts#.
boundary be raised,
It has beet suggested that the 13,000
there are 6 million taxpayers having gross
incow between S3,000 sat §5,000, of which 2 million taxpayers
■miil be eligible to use form 10401, if it were extended.
It
would be a convenience to t axpeyert with iacaaes above $3,00©
to uat fora 10401.
taxpayer convenience coincide# with
administrative economy, since the estimated cost of handling
the simpler fora is less than half tbs cost of handling ths
longer Fora 1040.
On ths other hand, ths extension 1 havt suggested would
cost about SI? million In revenue, sad no doubt sany persons
entitled to use ths simplified fora under the extension would
still compute their
-
22
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outlines of which can be explained by one neighbor to another.
The minimum tax, and the table it requires, can be explained
by one expert to another, but not by neighbors over the back
fence.
It seems clear that the collection of about $300,000,000
of tax
from these particular individuals, less than 2 percent
of our income tax collections from individuals, is not worth
the complexity involved in this minimum tax.
Moreover, to
exact a tax from incomes at the subsistence level is a questionable
contribution to the fight against inflation.
The revenue will
not be lost, since it can be distributed throughout the surtax
brackets.
Extending use of Form 1Q4Q&
I now turn to a possible simplification —
for the deductions tangle.
a homely remedy
You are familiar with Supplement T,
which permits the use
c»11b
for a set of exemption* different from those applicable
for purposes of the regular Income tax.
This necessitates
a table, giving a series of breaking points showing which tsx
applies —
the minimum tax or the regular Income tax. The
treatment of Joint and separate returns presents further
complications as to choice of return.
There are several sones
in which one of two forms of filing is more desirable, the
limits of the sones varying with dependency status and division
of income between husband and wife.
Taxpayers will be forced
to make alternative computations in order to ascertain whether
to file form 1040k or Form 1040 and whether to file joint or
separate returns.
Simplicity is not to be found in mechanical forms which
are not easily understood.
It calls for a tax the baslo
outlines of which
• 80 •
elimination of the Victory tax.
The adoption of these
proposals would have enormously simplified returns.
Indeed,
it is doubtful whether any adequate simplification can be
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achieved without the elimination of the Victory tax*
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The Ways and Means Committee has adopted a minimum tax
plan in lieu of the Victory tax.
The minimum tax is three
percent of regular statutory net income with exemptions of
$500 for a single person, $700 for married persons without
dependents, and $100 for each dependent*
Married persons
filing separate returns are entitled to a single person’s
minimum tax exemption, and are required to t ake a single person’
regular tax exemption*
This proposal also increases the normal
tax to 10 percent.
I shall not burden you with a long explanation of the
defects of this substituted proposal.
You will note that it
calls for a set
* 19
a separate concept of taxable income*
set of exemptions#
The tax has a different
The dependency credit is recognised only
ij
in a oomplicatad poatwar eradit.
The faulty structura of th#
tax was racognised by Congress when it eliminated the postwar
aspects of the credit for 1943.
The lays and Means Committee
jig
has fallowed by integrating the tax with the regular income
tax for 1944*
In his statement of October 4 before the % y s and Means
Committee, the Secretary of the Treasury proposed the elimination
of the Victory tax and the lowering of the regular exemptions
for married per sons without dependents from $1,200 to $1,100,
and from $$60 for each dependent to $300.
The Secretary also
proposed raising the surtax and the elimination of the earned
income credit to recapture some of the revenue lost by the
elimination of the
*
18
•
Elimination of the Victory Tax
In the 1942 Act the Senate Finance Committee inserted,
and the conference committee accepted, the famous "Victory"
tax.
The object was to reach by a special tax incomes below
the exemption levels of the 1942 Act
$1^200 for a married
person without dependents, $500 for a single person and $350
for each dependent*
As a matter of fact, the Victory tax
collected from persons in these low brackets only about
iif
$300,000,000 of revenue.
The balance of the $3 billion yield
of the tax came from persons already subject to the regular
income tax.
It is a matter of indifference to these higher
bracket taxpayers whether a particular dollar of tax paid is
labeled Victory or income tax.
To you, I need not elaborate upon the complications of
the Victory tax.
Its special set of deductions results in
a separate cone ept
.
__
tax-exempt bondholders the exact benefit they possess today
and would limit extra computations to the few taxpayers who
own tax exempt bonds*
I am confident that such an amendment
would be constitutional*
Our rate for the first $2*000 of set income could then be
19 percent —
6 percent present normal tax plus IS percent*
the first surtax bracket*
could be 22 percent —
For the second $2*000* the rate
# percent plus 16 percent.
This
simplification can be extended throughout the rate structure.
Treatment of Tax-Exempt Securities
One precaution need be taken.
About ^ 7 billion
of partially tax-exempt securities are outstanding.
We do not
wish to enlarge the benefits of this exemption* nor do we wish
to repudiate a contract of exemption.
The status quo can be
preserved by allowing* in lieu of the present credit
against net income* a credit against the tax of 6 percent of
partially tax exempt interest, or of net Income after the
exemption* whichever is lower.
This would give partially
tax-exempt bondholders
• 15 “
palliative remedy, the treasury has recommended the
consolidation of the normal tax and the surtax*
well aware of the defects of the present system*
You are
the earned
income credit and the issuance prior to 1941 of partially
exempt federal bonds are the only remaining excuses for two
concepts of net income «*«• one for normal tax purposes and the
other for surtax purposes*
If we eliminate the earned Income
credit, only one reason remains for submitting to the difficulty
involved in expressing the rates of tax*
This complicates
returns, making necessary two statements ©f net income and two
computations of separate tax liability which must be added
together.
The obvious solution is to integrate rates into one
schedule and limit ourselves to one concept of net incoma.
Our rate for the first
V
If this earned income credit were a true earned income
credit, it might be worth the complication it involves*
The
extension of the credit to the first $3,000 of net income,
irrespective of its character, thwarts the objective of
favoring earned income*
This presumption is required by
administrative necessity; it would be impossible for the
Bureau to check the type of income received by the millions of
taxpayers in the lowest brackets*
Since we cannot achieve
a practicable discrimination in favor of earned income, we may
as well avoid the complexities inherent in an unsuccessful
attempt*
The elimination of the credit will be a distinct
step toward simplification*
Consolidation of Normal Tax and Surtax
Part of the trouble with tax calculation arises from the
fact that we have so many different rates*
As a partial and
palliative remedy, the
this level*
I should like to discuss some of these changes
with you in detail.
We shall need your help.
In the
campaign for simplification you can help best if you understand
what we are trying to do.
The Earned Income Credit
It the suggestion of the Treasury the House Ways and
Means Committee voted the elimination of the earned income
credit new in the statute.
This credit, as you know, is
10 percent of earned net income or of net income, whichever
is lower, up to $14,000.
The first $3,000 of income,
■whatever its character ~~ even though it be dividends or bond
interest - is presumed to be earned income.
The credit is
only for normal tax purposes, which means that its maximum
value at the $14,000 level is $84.
If this earned income
Simplification at the Return Level
la 1932 exemptions aad national income were at such
a level that slightly less than 2 million returns were filed
with the Bureau <tf Internal Revenue*
For the year 1944 it
is expected that more than 44 million returns will he received.
This increase in the number of taxpayers intensifies the need
fo r simplification.
The income tax must permit of simple acts
by taxpayers if full compliance is to be achieved.
Most
taxpayers are not concerned with what the statute or the
regulations or the court decisions say.
To the man in the
street the income tax return and the instructions on that
return are the whole story*
It is logical then that
simplification should commence at the return level.
The Treasury has recommended a number of changes in our
tax structure which will help to achieve simplification at
this level.
I should
may be done quickly on the basis of sufficient knowledge at
hand, and there are things which it would be unwise to attempt
without a further clarification of issues and considerable
additional investigation of law and facts.
In this latter
category fall changes in the "reorganisation" provisions and
more satisfactory correlation of the income, estate and gift
taxes.
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Powers of appointment remain troublesome, but perhaps
it is well to make haste slowly in this highly technical field
of estate tax law.
Trusts are a thorn in the flesh of the
income, estate, and gift taxes.
The Treasury is working upon
these and many other problems, and has called upon the outside
Tax Bar for suggestions and advice; a special committee is
working upon estate and gift tax correlation.
We hope to be
able to deal intelligently with these problems when we get to
the 1944 administrative revenue act.
Simplification at the Return Levej
In 1932 exemptions and
be handled by the Bureau of Internal Revenue ia a vital
matter, but it is even more vital that theae returns be aa
simple aa poaalble.
The difficulty with oomplieated return*
does not end with their filing} they m a t be audited.
Correspondence may be necessary •
Interviews with taxpayer*
and their representatives may be required.
The number of
direct oontaots with tire individual taxpayer, and the clerical
work of keeping accounts with him wad hi* employer, are matters
of intense concern to a Bureau of Internal Revenue which
desires to afford evety aid possible to pus*1*4 taxpayers.
Finally, there is the process of Judicial review.\ The simpler
cur tax laws are made, the easier the whole process of
administration and interpretation become*.
Dual Batura of the Problem
Simplification is a vast subject.
There are things that
may bs done quickly
Basie polio/ conflicts are frequent in the statutej the
essential pattern of objective is vague*
Concepts have
changed; the desire to prevent inflation is a novel tax motive*
Taxation has new folkways*
The future is & black imponderable.
In all this whirl taxpayers glance with nostalgia toward the
old certainties they once thought they had, and the present
becomes more uncertain than ever.
From the standpoint of the Treasury simplification has
vstill another definition.
We certainly recognise that the
success of the income tax depends on achieving the utmost
desirable simplicity.
This is essential to taxpayer good-will,
which in turn is essential to successful administration.
But
we have our own internal problems, which at the moment are
greatly intensified by our inability to secure accounting
machinery and hold personnel.
The number of returns which must
be handled by the Bureau
a few lixies which can he filled in swiftly without digging
deep into old papers.
In short* it means a tax structure
which the casual newspaper reader can understand with no more
mental strain than it takes to follow Joe Palooka.
Some taxpayers probably use the word "simplification
the sense of certainty.
in
They are perplexed by our tax laws.
They don't know how much they owe.
The statute is filled
with provisions which only the expert can understand, and he
sometimes has a hard time.
jy
In fact, the expert's difficulty
ffcm
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parallels the situation in idiich Robert Browning
found himself in "The Barretts of Wimpole Street."
You
remember that Elisabeth Barrett asked the poet the meaning of
some of his lines.
times he said?
After Browning had read them aloud three
"Elizabeth, when those lines were written, Ood
and Robert Browning knew what they meant.
Now God alone knows.
Basic policy conflicts
* 7 |
The Meaning of Simplification
Ihen any words become as popular as the words *tax
simplification” have recently become, one may be very sure
that the phrase means many different things to many different
people.
The words may mean so much that they mean little or
nothing.
Certainly the tern ”tax simplification” is a vague
abstraction, and it is necessary to look behind it for the
concrete meanings which it holds.
I have tried to gather
together from conversations, newspaper stories, and revenue
hearings some of these diverse meanings.
From the standpoint of individual taxpayers and the small
business man simplification means a number of things.
a minimization of tax arithmetic.
unnecessary records.
It means
It means the elimination of
It means the reduction of tax forms to
a few lines which can be
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In the pay-as-you-go procedure we were putting a burden
upon employers.
In one sense we were asking them to become
deputy collectors of internal revenue.
It was only fair,
f.
therefore, to consider their convenience, as well as the
|p
convenience of employees.
This meant that we had to reduce
the classification of employees to a minimum in order that
the accounting problems of employers would not be too Irksome.
In other words, we had to withhold on an approximate basis,
grouping particular employees according to the band method,
le did not wish to require employers to make specific computations
which would result in exact withholding.
Nor did we want to
permit too many changes In exemption status during the year.
4 choice had to be made between the relative convenience of
employers and employees.
•/jngg I •
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The Meaai&R of Simplification.
--------U P S &hy vroras become
11 \ •
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For example, It seemed very desirable when we were working on
the 1942 Revenue Act to introduce collection at the source into
our tax structure.
You will remember that such a system was
introduced at the beginning of 1943 to expedite the collection
of the Victory tax.
It was extended in the Current Tax Payment
Act to cover the normal tax and the first bracket of surtax.
In connection with collection at the source we found specific
application of the maxim that one man’s meat is another man’s
poison.
It Is to the interest of employees that the amount of tax
withheld at the source be matched as closely as possible with
final tax liability.
Government.
Under-withholding may mean loss to the
Over-withholding may mean inconvenience, and even
hardship, to employees.
But the question cannot be approached
only from this one angle.
In the pay-as-you-go
- 4 What is simple may not be equitable*
of necessity be complicated*
What is equitable may
In other words* simplicity and
equity are often incompatible and we are forced to choose
between them.
In choosing we must weigh advantages gained
against advantages lost, knowing what we are doing when we
make an election.
A sufficiently desirable objective, either
by way of relief pr by way of preventing tax avoidance, may
be worth some complication.
A particular item of simplicity
may not be worth the inequity it entails*
The question is one
of price, and our first choice should be the simplicities that
are the best bargains*
Then, too, there is something ad hogiinem about
simplification.
What is simple to one taxpayer may not be
simple to another who plays a part in administering the tax.
for example, it seemed
very simply*
But the relief provisions which that rate makes
imperative must be extremely complicated*
Still another
contribution to complexity stems from oar manifold system of
administrative and judicial interpretation#
War taxation adds its own complications*
You are all
familiar with the paradox on the economic front that in wartime
increased purchasing power means fewer purchasable goods*
The
same condition that produces plentitude of income also produces
scarcity of goods.
On the simplification front one finds
another curious paradox*
War taxation leads at the same time
to a general demand for simplification and a maximum of
specific requests for complicating amendments*
Competing Considerations
We have then a basic conflict*
In tax law, as more
generally, there are almost always competing considerations.
What is simple may
- 2 ~
Apparently I did not talk for thirty minutes when I was
last In Chicago for I do not believe tbat I said everything
there is to say about simplification*
Perhaps you will allow
me to begin now where I left off then*
today we sometimes think that we are victims of a malady
which never attacked anyone before*
But complaints about the
complexity of our tax laws are an old story*
The patient has
been suffering for a long time; the disease has become a national
scourge| it has even crossed national boundary lines*
Causes of Complexity
The first thing we discover when we attempt to diagnose
this complaint is that there is no single cause.
did not become complicated overnight*
Our tax system
Some complexity originates
in a commendable Congressional desire to prevent tax avoidance.
Sometimes a commendable desire to give tax relief results in
complication.
A 90 percent excess profits tax can be written
very simply.
SIMPLIFYING OPR TAX LAWS
I fti it i piculiif disidvi&tigi thii
h littli
more than a month ago here in Chicago* I addressed a group of
business men#
My subject was "Simplification of Our Tax Laws#"
I am here today to discuss "Simplifying Our Tax Laws*"
You see
my dilemma*
It reminds me of a story which is told of the eminent
naturalist* Agassis.
When he was to deliver his first visiting
lecture in Zurich, he hau grave doubts about his ability to
occupy the prescribed three-quarters of an hour*
He was
speaking without notes, and from time to time he glanced
anxiously at the watch that lay before hi® on the desk.
When
he had spoken half an hour* he felt that he had told the
audience everything he knew in the world.
"From that point on",
he said, "I began to repeat myself and I have done nothing else
ever since."
Apparently I did not
..1.1-
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TREASURY DEPARTMENT
Washington
(The following address by Randolph E. Paul,
General Counsel of the Treasury, before the
National Tax Association at the Palmer
House, Chicago, is scheduled for delivery
at 1:30 p. a.. Central War Time, Monday,
November 22'. 1^43, and is Tor release at
that time.)
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TREASURY DEPARTMENT
Washington
(The following address by Randolph E. Paul,
General Counsel of the Treasury, before the
National Tax Association at the Palmer
House, Chicagoj is scheduled for delivery
at 1:30 p. n u t Central Way Time, Monday,
November 22, 1943* and is for release at
that time*)
SIMPLIFYING OUR TAX LAWS
I, am at a peculiar disadvantage this afternoon. A little more than
a month ago here in Chicago, I addressed a group of business men. My
subject was nSimplification of Our Tax Laws.’L I am here today to discuss
uSimplifying Our Tax Laws.51 You see m y dilemma.
It reminds me of a story which is told of the eminent naturalist,
Agassiz. When he was to deliver his first visiting lecture in Zurich, he
had grave doubts about his ability to occupy the prescribed three-quarters
of an hour. He was speaking without notes, and from time to time he glanced
anxiously at the watch that lay before him on the desk. When he had spoken
half an hour, he felt that he had told the audience everything he knew in
the world. ”From that point on” , he said, ”1 began to repeat myself and
I have done nothing else ever since*”
Apparently I did not talk for thirty minutes when I was last in Chicago
for I do not believe that I said everything there is to say about simplification* Perhaps you will allow me to begin now where I left off then.
Today we sometimes think that we are victims of a malady which never
attacked anyone before* But complaints about the complexity of our tax laws
are an old story* The patient has been suffering for a long time; the dis
ease has become a national scourge; it has even crossed national boundary
lines.
Causes of Complexity
The first thing we discover when we attempt to diagnose this complaint
is that there is no single cause* Our tax system did not become complicated
overnight. Some complexity originates in a commendable Congressional desire
to prevent tax avoidance. Sometimes a commendable desire to give tax relief
results in complication#
90 percent excess profits tax can be written
very simply. But the relief provisions which that rate makes imperative
must be extremely complicated. Still another contribution to complexity
stems from our manifold system of administrative and judicial interpretation.
39-38
~2 War taxation adds its own complications. You are all familiar with
the paradox on the economic front that in wartime increased purchasing
power means fewer purchasable goods. The same condition that produces
plentitude of income also produces scarcity of goods. , On the simplification
front one finds another curious paradox.. War taxation..leads at the same
time to a general .demand for simplification and.a maximum of specific re
quests for complicating .amendments.
.
Competing Considerations
W e have then a basic conflict. In tax law, as more generally, there
are almost always competing considerations. What is simple may not be
equitable. What is equitable may of necessity be complicated. In other
words, simplicity and'equity are often incompatible and we are forced to
choose between' them. In 'choosing we must weigh advantages gained against
advantages lost,-knowing whap we are doing when we make an'election. A sufficiently desirable objective, 'either, by way of relief or by way of pre
venting tax avoidance, may be worth some complication. A particular item
of. simplicity may not be worth the, inequity it entails. The question is one
of, price, and our first choice should be the simplicities that are.the best
bargains. ■
.
'Then, too, there is something ad.hominem about simplification. What
is simple to one taxpayer may not be simple to another who plays a part in
administering the tax. For example, it seemed very desirable when we were
working on the 194^ Revenue Act to introduce collection at the source into
our tax structure. You will remember that such a system was introduced at
the beginning of 1943 to expedite the collection of the Victory tax. It
was extended in the Current Tax Payment Act to cover the normal tax and the
iirst bracket of surtax.
In connection with collection at the source we
found specific application of the maxim that one m a n ’s meat is another m a n ’s
poison,
:.
It is to the' interest of employees that the amount* of tax withheld at
tne source. be .matched as closely as possible with final fax liability,
Under-withholding may mean loss to the Government,
Over—withholding may
mean inconvenience, and even hardship, to employees. But the question cannot be approached only from this one -angle*
.In the pay-as-you-go procedure we were putting a burden upon employers.
In one sense we- were asking them to become .deputy collectors, of internal
revenue.
It was only fair, therefore, to consider their convenience, as
well as^the^convenience of employees. This meant, that we had to reduce the
classification of employees to a minimum in order that ..the accounting'prob
lems of employers would not be too irksome, .. In other words > we had to with
hold on an approximate basis,.grouping particular employees according to the
band method. We did not wish to require employers.to make specific compu
tations which would result in exact withholding. Nor did we want to permit
too many changes in exemption status during the year. A choice had to be
made between the relative convenience of employers and employees.
«*•3- "**
The Meaning of Simplification
When any words become as popular as the words ’’tax simplification’*
have recently become* one may be very sure that the phrase means many dif
ferent tnings to many different people * The words may mean so much that
they mean little or nothing* Certainly the tern **tax simplification’* is
a vague abstraction, and it is necessary to look behind it for the concrete
meanings which^it holds* I have tried to gather together from conversations,
newspaper stories, and revenue hearings some of these diverse meanings*
From tne standpoint of individual taxpayers and the small business man
simplification means a number of things*
It means a minimization of tax
arithmetic* It means the elimination of unnecessary records. It means the
reduction of tax forms to a few lines which can be filled in swiftly without
digging deep into old papers*
In short, it means a tax structure which the
casual newspaper reader can understand with no more mental strain than it
takes to follow Joe Palooka*
Some taxpayers probably use the word «simplification” in the sense of
certainty. They are perplexed by our tax laws* They don’t know how much !
they owe. The statute is filled with provisions which only the expert can
understand, and he sometimes has a hard time. . In fact, the expert’s difIiculty n°¥/ and then parallels the situation in which Robert Browning found
himself in ’’The Barretts of Wimpole Street.’’ Xou-remember that
Elizabeth Barrett asked the poet the meaning of some of his lines. After
Browning had read them aloud three times he saidt .^Elizabeth, when those
alone
G °d ^
Robei-t Bro™ i n g knew what they meant.
Now God
P°licy ° onflio'ts are frequent in the statute; the essential
i^aSon
f VaS? ? ’ C0ncepts ^
ohan8ed5 the desi« to prevent
niisition is a novel tax motive. Taxation has new folkways. The future is
to¥fardkthePoi1derab+ e^ +?* ^
moTunoertSn t h ^ l v ^ f
this whi;rl taxP ay ^ s glance with nostalgia
3
^
had> *"d
^
Wcome
definite, the'Standpoint of the Treasury simplification has still another
? certainly recognize that the success of the income tax
t 2 S v L L o r i l b f i T 5 t V < * e s i * a h i e Simplicity. This is essential to
n, x y , ®
which in turn is essential to successful administration
t e n J f ^ r °ur
y y rnal Probl« ^ which at the moment t e “
Syin!
The number°nf°f +
b 0 secure accounting machinery and hold personnel,
is a vital m t t e r W h S+W ^ ° ^ mUSt b® handled b-/ the B’oreau of Internal Revenue
as p o S i M e
T h P d J ’m 1 i f 7 X
m v s vital htat these re
thcny
with complicated returns does not end with
view* £ t + w ’ they must be audited. Correspondence may be necessary.
Intero / d i r e o f ^ ^ r 5 ^
^
r®Presentatives may be required. The number
k e e n i ™ = oontacts.™'yb the individual taxpayer, and the clerical work of
to a B u r ^ r 011^ ?
f3? and h13
are matters of intense concern
to
Intel,nal R e w m u 0 whi<* desires to afford .every aid possible
puzzled taxpayers, Finally, there is the process of judicial review.
-4
The simpler our tax laws are made,- the easier the whole process of admin-*istration and interpretation becomes*
Dual Nature of -the Problem
Simplification is a vast subject. There are things that may be done
quickly on the basis of sufficient knowledge at hand, and there are things
which it would be unwise to attempt:without a further clarification of
issues and considerable additional investigation of law and facts. In this
latter category fall changes in the ^reorganization11 provisions and more
satisfactory correlation of the income, estate and gift taxes. Powers of
appointment remain troublesome, ..but-..perhaps it is well to make haste slowly
in this highly technical field of estate tax law. Trusts are a thorn in
the flesh of the income, estate, and gift taxes. The Treasury is working
upon these and many other problems, and has called upon the outside Tax Bar
for suggestions and advices a-special committee is working upon estate and
gift tax correlation, YTa hope to be able to. deal intelligently with these
problems when we get to the 1944 administrative revenue act.
Simplification at the Return Level
In 1932 exemptions and national income Were at such a level that
slightly less than 2 million returns were filed, with the Bureau of Internal
Bevenue.- For the year 1944 it is expected that more than 44 million returns
will be received. This increase in the number of taxpayers intensifies the
need for simplification, The income tax must permit of simple acts by tax
payers if full compliance is to be achieved. Most taxpayers are not con-*
cerned with what the statute or the regulations or the court decisions say.
To the man in the street the inpome tax return and the instructions on that
return are the whole story. It is logical then that simplification should
commence at the return level,
The Treasury has recommended a number of changes in our tax structure
which will help to achieve simplification at this level, I should like to
discuss some of these changes with you in detail* We shall need your help.
In the campaign for simplification you can help best if you understand what
we are trying to dof
The Barned Income Credit
At the suggestion of the Treasury the House Ways and Means Committee
•voted the elimination of the earned income credit now in the statute* This
credit, as you know, is 10 percent of earned net income or of not income,
whichever is lower, up to $14,000. The first $3,000 of income, whatever its
character *— even though it be dividends or bond interest - is presumed to
be earned income. The credit is only for normal tax purposes, which means
that its maximum value at .the $14,000 level is $ 84,
If this earned income credit wore a true earned income credit, it
might be worth the complication it involves. The extension of the credit
to the first $3,000 of net income, irrespective of its character, thwarts
•t
- 5 -
the objective of favoring earned income* This presumption is required by
administrative necessity; it would be impossible for the Bureau to check
the t;ype of income' received by the millions of taxpayers in the lowest
brackets. Since we cannot achieve a practicable discrimination in favor
of earned income, we may as well avoid the complexities inherent in an un
successful attempt. The elimination of the credit will be a distinct step
toward simplification.
Consolidation of Normal Tax and Surtax
Part of the trouble with tax calculation arises from the fact that we
have so many different rates. As a partial and.palliative remedy, the
Treasury has recommended the consolidation of the normal tax and the surtax.
You are well aware of the defects of the present system, The earned income
credit and the issuance prior to 1941 of partially exempt federal bonds are
the only remaining excuses for two concepts of net income — * one for normal
tax purposes and the other for surtax purposesf If we eliminate the earned
income credit, only one reason remains for submitting to the difficulty
involved in expressing the rates of tax. This complicates returns, making
necessary two statements of net income and.two computations of separate tax
liability which must be added together.
The obvious solution is to integrate rates into one schedule and limit
ourselves to one concept of net income.
Our rate for the first $2,000 of
net income could then be 1 9 -percent — * 6 percent present normal tax plus
13 percent, the first surtax bracket. For the second $2,000, the rate could
be 22 percent — r 6 percent plus 16 percent. This simplification can be
extended throughout, the rate structure.
Treatment' of Tax-Exempt Securities
One precaution need be taken. About $7 billion of partially taxexempt securities are outstanding. W e do not wish to enlarge the benefits
of this exemption, nor do we wish to repudiate a contract of exemption.
The status quo can be preserved by allovdng, in lieu of the present credit
against net income, a credit against the tax of 6 percent of partially tax
exempt interest, or, of net income after the exemption^ whichever is lower.
This would give partially tax-exempt bondholders the exact benefit, they
possess today and would limit extra computations to the few taxpayers who
own tax exempt bonds, I am confident that such an amendment would be con
stitutional,
•
..
.
-
Elimination of the Victory Tax
In the 194^ Act the Senate Finance Committee inserted, and the con
ference committee accepted, the famous ^Victory” tax. The object was to
reach by a special tax incomes below the exemption levels of the 1942 Act —
$1,200 for a married person without dependents, $500 for a single person
and $350 for each dependent* As a matter of fact, the Victory tax collected
from persons in these low brackets only about $300,000,000 of revenue#
1
— 6—
The balance of the $3 billion yield of the tax caup from persons already
subject to the regular income tax. It is a matter of indifference to these
higher bracket taxpayers whether a particular dollar of tax paid is labeled
Victory or income tax*
*
To you, I need not elaborate upon the complications of the Victory tax*
Its special set of deductions results in a separate‘concept of taxable
income, The tax has a different set of exemptions* The dependency credit
is recognized only in a complicated postwar credit* The faulty structure
of the tax was recognized by Congress when it eliminated the postwar aspects
of the credit for 1943. .The Ways and Means Committee has followed by inte*?
grating the tax with the regular income tax for 1944*
In his statement of.October 4 before the Ways and Means Committee, the
Secretary of the Treasury proposed the elimination"of the Victory tax and
the lowering of the regular exemptions for married persons without dee
pen dents from $1,200 to $lj100, and from $350 for each dependent to $300*
The Secretary also proposed raising the surtax and the elimination of the
.earned income credit to recapture some of the revenue lost by the elim
ination of the Victory tax. The adoption of these proposals.would have,
enormously simplified returns* Indeed* it is doubtful whether any adequate
•simplification can be achieved without the elimination of the Victory tax*
The Ways and Me’ans Committee has adopted a minimum tax plan in lieu
of the Victory tax*. The minimum tax is three percent of .regular statutory
net income with exemptions of $500 for a single person, $700 for married
persons without dependents, and $100 for each dependent* Married persons
filing separate returns are entitled to a single person1s minimum tax
exemption, and are required to take a single person's regular tax exemption*
This proposal also increases the normal tax to 10 percent*
I
shall not burden you with a long] explanation .of the defects of this
substituted proposal. You will note that it calls for a set of exemptions
different from those applicable for purposes of the regular income tax.
This necessitates a table, giving a series of breaking points showing which
.tax applies — the minimum tax or the regular income tax,* The treatment
of joint and separate returns presents further complications as to choice
of return* . There are several zones in which one of two forms of filing is
more desirable, the limits of the zones varying with dependency status and
division of income between husband and wife. Taxpayers will be forced to
make alternative computations in order to ascertain whether to file Form
1040A or Form 1040 and whether to file joint or separate retui’ns*
Simplicity is not to be found in mechanical forms which are not easily
understood. It calls for a tax the basic outlines of which can be explained
by one neighbor to another. The ininimuxa tax, and the table it requires, can
be explained by one expert to another, but not by neighbors over thq back
fence. It seems clear that the collection of about $300,000,000 of tax from
thqse particular individuals, less than 2 percent of our income tax col
lections from individuals, is not worth the complexity involved in this
minimum tax* Moreover, to exact a tax from incomes at the subsistence level
is a questionable contribution to the fight against inflation. The revenue
will not be lost, since it can be distributed throughout the surtax brackets
Ex-bending Use of Form I04QA
I now turn to a possible simplification — - a homely remedy for the
deductions tangle. You are familiar with SupplementT, which permits the
use of Form 1040A’by taxpayers having gross income of not ipore than $3,000
consisting of salaries, dividends, interest and annuities, it has been
suggested that the $3*.000 boundary be. raised. There are' 5 million taxpayers
having gross income between $3,000 'and $5>000, of which 2 million taxpayers
would be eligible to use Form 104QA, if it were extended. It would be
a convenience to taxpayers with incomes above $3,000 to use Form 1040A. Tax
payer convenience coincides with administrative economy, since the estimated
cost of handling the simpler form is less than half the cost of handling the
longer Form 1040.
v J m*
On the other hand, the extension 1 have suggested would cost about $17
million in revenue, and no doubt many persons entitled to use the simplified
form under the extension would still compute their tax both ways in order to
be sure that they were paying the lowest possible tax. We are working on
this problem in the Treasury and hope to present definite recommendations to
the Congress in the near future.
Eliminating Some March 1$ Returns
Now that we. have collection at the source, you have heard much dis
cussion of the possibility of eliminating March 15 returns for persons
entirely in the first’ surtax bracket, whose liabilities are collected at the
source. This is another matter under serious consideration in the Treasury.
There are arguments on both sides of the question. On the one hand,’ it is
certain that the elimination of March 15 returns would simplify taxpayer
compliance and reduce taxpayer irritation. The persons relieved of filing
returns would be those in the lowest taxable bracketj these taxpayers are
least familiar with, tax procedures and find the making of returns most dif
ficult. 'It is also argued that paper work would be reduced and adminis
tration simplified.
On the other hand, several important considerations militate .against
the elimination of returns* If returns are eliminated, administrative con
trols over taxpayers and employers will be weakened. The morale value of
& t a x return made under penalty of perjury will be lost.. The possibility
of a cross-check of employee returns against employer report's will be gone.
It is well to remember also that taxpayer returns serve as the basis for
adjusting the over-collections and under-collections which are inevitable
in any withholding system. In cases of part-year unemployment, change of
family status, and double employment, for example, these adjustments may •
e quitesubstantial. Then, too, the function Which returns play in edu
cating citizens in their role as taxpayers and in stimulating a sense of
direct participation in government should not be overlooked.
discussing the elimination•of retufns.it is important to recognize
that' different people mean different things by the. phrase, '‘elimination
d returns'’, Some mean that we should go from an annual accounting period
-
8
-
to a payroll accounting period, and that withholding should itself be the
tax# Under this interpretation a broad class of taxpayers would be neither
required nor permitted to file# The inequities of such.a solution and the
great difficulty of drawing a line between filers and non-filers make its
adoption highly questionable. Other people mean by “elimination of returns"
that the annual accounting period be retained, but that only those.who wish
to claim refunds and those who have substantial additional taxes to pay
would be permitted or required to file# A third interpretation of “ elim
ination" is that taxpayers would be required to furnish only a minimum of
information; their taxes would be computed for them by the government and
refunds or additional assessments would be issued without further action on
their part. These alternative solutions- and others are being closely
examined in the Treasury.
Graduated Withholding
Simplification is possible also in the domain of withholding# One.
suggestion,.originating with Judge Vinson and recently made to the Ways and
Means Committee, was that withholding would be on a gross basis under a system
which would enable taxpayers to understand instantly what percentage of their
salaries was being withheld at the source. The Treasury has recommended to
the Committee that collection at the source be made to apply to the taxpayer's
full liability rather than merely to his partial liability under the normal
tax and the first bracket ,of surtax. The method for accomplishing this
result would be to have a series of.^withholding rates applicable to gross
wages, as a substitute for the present precise fates. This series of with
holding rates would, .be expressed in tables based, on the status o f ,the tax
payer. There could also be tables calculating the amounts to be withheld,
as a£ the present time.
Any objections to the inaccuracies resulting from the wide brackets in
the present-law tables would be minimized by providing substantially narrower
brackets over the ranges of wage within which most employees fall.
Employer groups with whom vtithholding problems have been discussed
have indicated the desirability of graduated withholding from the standpoint
of their relationships with employees., At the time for filing the first of
the new quarterly declarations this past September, several large employers
reported that requests from employees for information as to total amounts of
wage and of withholding over the year, as well as for assistance in the
computations and tii6 preparation of the form, resulted in significant addi
tional burdens for,their tax and accounting staffs. The question arises
whether graduated withholding would unduly complicate the preparation of
payrolls. Careful study, as well as discussions with employer groups,
indicates that little or no extra burden upon employers would result#
Investigation of this proposal reveals further interesting data. At
present the first $2,000 bracket covers about 33,000,000 taxpayers# The
remaining 23 brackets cover less than 7,000,000 taxpayers. The lesson of
these figures is that our rate structure lacks refinement for the great
majority of taxpayers. However, the moment we try to provide better pro
gression, we have to face the necessity for graduated withholding.
- 9 -
As I have said, this can be accompli shed. The by-product of graduated with-*
holding — which enables us to accomplish the desirable objective of refining
the rate structure for the great majority of taxpayers. — is the. elimination
of many quarterly declarations for persons in receipt of salaries above the
present first bracket of surtax. A greater number of declarations could be/,
eliminated if in addition we raised the present requirement relating to out
side income, other than salaries* from $100 to a somewhat higher' figure,
■
Additional
forSimplifying Returns
v
I do not want you to think that 1 hare attempted. -to cover even the
limited subject of simplification m tb© return front. Many additional
suggestions, are in the mill which,, 1 might aid, grinds slowly. Could w© ’
have different- filing' dates by c r a n e s of taxpayers, corporate and individual,
or by divisions within oh© class of taxpayers on an alphabetical basis?. How ■:
may return forms be set up to enable taxpayers to do their arithmetic more
easily?...These are merely examples of activity in the Treasury in its constant
effort to-improve the administration of our .'tax laws and to make taxpayer .
compliance less burdensome than it now is*
C orporate Tax Simplification
So far I have been talking about simplification,on behalf -of indi
vidual taxpayers, I have limited m y discussion of that subject to the return
front. Much more remains' to. be said on other individual tax fronts, but
I should like to say a f e w words before X close regarding one item of cor
porate tax simplification.
Capital Stock and the Declared-Value Excess Profits- Tax.
^In 1942 I attempted op behalf-of the Treasury to persuade Congress .to
eliminate the capital stock and the declared-value excess-profits taxes,
X was unable to persuade the Ways and Means Cordmittee, but was more suc
cessful with the Senate finance Committee. .The -latter committee receded in,
conference, however, and we. still have in the statute these utterly indefen
sible taxes. They are indefensible for many reasons, not the least of which
is that the same, revenues could be collected from substantially the same
corporations by increasing the corporate tax rate. These taxes are, there
fore, nothing more than an unreasonable duplication in the corporate tax ..
structure, requiring for compliance scarce manpower and trained personnel*
^The Treasury did not again in 1943 specifically recommend
ination of the capital stock and declared value bxcess-profits
I would like to discuss the subject briefly with you .because I
days of these ...taxes are numbered* , 1 would also like to .secure
eration in effecting their ‘ultimate repeal*
the elim
taxes,.but
believe the
your coop
You all know the history of .the capital stock tax. Beginning in 1917
and through 1926 we had a capital stock tax based upon actual, and not
declared, value. The tax was abandoned because of valuation difficulties.
The year 1933 saw the origin of the present type of capital stock tax, which
,
-
10
totally disregards actual value and is based upon the value the corporation
wishes to declare, with no regard for book, market value of assets, or
earnings record. The function of a declaration is simply to take out InV
surance against the declared value excess profits tax; this tax penalizes
corporations which guess wrong in making their declaration. In actual
practice corporations make their declaration of value entirely with the
purpose of saving themselves from the heavier impact of the declared value
excess-profits tax.
You may be interested in the relative impact of the tax upon large and
small corporations. The Treasury’s research upon this point leads to the
very clear conclusion that small corporations are relatively harder hit by
the tax than are larger corporations. This is because small corporations
experience fluctuating earnings to much greater extent than do large cor
porations . For example, in 1937 corporations with total assets of less than
$50,000 had an average declared value of 197 percent' of their equity capital
while corporations with 50 million dollars or more of total assets had an
average declared value of less than 62 percent of equity capital. In 1937
the ratio of tax to normal tax net income was 2*7 percent for corporations
with under $50,000 of total assets* The ratio for corporations with assets
of $100,000,000 and over was 1.8 percent. In 1936 corporations with net
income of under $5,000 paid capital stock and excess profits taxes equal
to 6.5 percent of their aggregate net income while corporations with net
incomes of $5 million and over paid taxes of only 1 percent of their net
income*
It is argued by some that this tax is a suitable method of taxing
deficit corporations.
I had thought that our purpose today should be in
the other direction
to tax corporations with swollen war profits at high
rates and to relieve corporations with deficits occasioned in large part by
economic events beyond their control. It is true that the old capital stock
tax of the Twenties fell to a considerable extent on deficit corporations
because those corporations were obliged to pay taxes on the fair value of
capital stock regardless of their expectations of income or deficit* Under
the present tax the amount of tax paid by deficit corporations is rela
tively small - only about 11 percent of total collections at 1942 levels of
income*
Nor does this small amount of revenue come in an equitable fashion
from deficit corporations. The taxes falling on such corporations bear no
relation to equity, to capital, total assets, to invested capital, to gross
sales, to the size of the deficit, or to any reasonable measure of privilege
or taxpaying ability* The impact of the tax is capricious* It depends upon
the accuracy of a forecast made by the corporate directors at a time when
prophecy is a perilous adventure* In all these circumstances there remains
little excuse for encumbering corporate tax structure with this freakish
tax*
Conclusion
“Simplify Our Tax laws’1 has become a kind of slogan*. Slogans are
valuable instruments at times* They engender the enthusiasm needed to
produce results* But they may also be dangerous weapons* Applied to tax
law they are dangerous because they compress too much into too few Tjords —
a fault, I hasten to add, which cannot always be fairly ascribed to lawyer
They end by meaning nothing, oh* perhaps-whatever anyone wants them to mean
In meaning all things to all men they mean nothing to any man* There is
profound significance in the tale of “The Blind Men and the Elephant:”
It was six men of Indostan
To learning much inclined
Who went to see the' elephant
(Though all of them were blind).
That each of observation
Might satisfy •his mind*
The first' approached the elephant
And,-happening:to fall
Against his broad and sturdy side
At once began to bawd:
“God bless meJ but the elephant
Is- very like a wall
The second feeling of the tusk^
Cried:.“Hoi what have we here ,•
So very round and smooth and shprp?
To me *tis mighty clear
This wonder of an elephant
Is very like a spearl“
The third approached the animal
And happening to take
The squirming trunk within his hands
Thus boldly up and spake:
“I see,“ quoth he, “the elephant
'Is very like a snakei"
The fourth reached out his eager hand,
And felt about the knee:
“What most this wondrous beast is like
Is mighty plain,” quoth he:
“ ’Tis clear enough the elephant
Is very like a treelu
The fifth who chanced to touch the ear
Said: “S*en the blindest man
Can tell what this resembles most;
Deny the fact who can,
Tliis marvel of an elephant
Is very like a fanl”
-
12
-
The sixth no sooner had begun
About the beast to grope
Than, seizing on the swinging tail
That fell within his scope,
nI see,?1 quoth he, l,the elephant
Is very like a rope!11
And so these men of Indostan
Disputed loud and long,
Each in his own opinion
Exceeding stiff and strong,
Though each was partly in the right,
And all were in the wrong!
So oft in ideologic wars
Tlie disputants, I ween,
Rail on in utter ignoranceOf what each other mean,
And prate about an elephant
Not one of them has seen!
'
In simplifying our tax laws we need, like the men of Indostan, to
recover our sight* We need the miracle of restored vision so hare can see
the whole elephant*
0O0
!»
11
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Monday, November 22, 1943»
Press Service
9 -S f
Secretary of the Treasury Morgenthau today announced an offering,
through the Federal Reserve Banks, of ?/8 percent Treasury Certificates
of Indebtedness of Series G-1944, open on an exchange basis, par for par,
to holders of Treasury Certificates of Indebtedness of Series $-1943,
maturing December 1, 1943* Cash subscriptions will not be received.
The certificates now offered will be dated December 1, 1943 , and
will bear interest from that date at the rate of seven-eighths of one
percent per annum, payable semiannually on June 1 and December 1, 1944*
They will mature December 1, 1944* They will be issued in bearer form
only, with two interest coupons attached, in denominations of $1,000,
$5,000, $10,000, |100,000 and $1,000,000.
Pursuant to the provisions of the Public Debt Act of 1941, interest
upon the certificates now offered shall not have any exemption, as such,
under Federal tax Acts now or hereafter enacted. The full provisions
relating to taxability are set forth in the official circular released
today.
Subscriptions will be received at the Federal Reserve Banks and
Branches and at the Treasury Department, Washington, and should be ac
companied by a like face amount of the maturing certificates. Subject
to the usual reservations, all subscriptions will be allotted in full.
There are now outstanding $3,799,736,(XX) of the Series $-1943 cer
tificates.
The text of the official circular follows:
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Monday, November 22, 194-3*____
Press Service
39-59
Secretary of the Treasury Morgenthau today announced an offering,
through the Federal Reserve Banks, of 7/8 percent Treasury Certificates
of Indebtedness of Series G-1944* open on an exchange basis, par for par,
to holders of Treasury Certificates of Indebtedness of Series E-1943*
maturing December 1, 194.3* Cash subscriptions will not be received.
The certificates now offered will be dated December 1, 194-3* and
will bear interest from that date at the rate of seven^eighths of one
percent per annum, payable semiannually on June 1 and December 1, 1944*
They will mature December 1, 194-4* They will be issued in bearer form
only, with two interest coupons attached, in denominations of $1,000,
$5,000, $10,000, $100,000 and $1,000,000.
Pursuant to the provisions of the Public Debt Act of 1941* interest
upon the certificates now offered shall not have any exemption, as such,
under Federal tax Acts now or hereafter enacted,
The full provisions
relating to taxability are set forth in the official circular released
today.
Subscriptions will be received at the Federal Reserve Banks and
Branches and at the Treasury Department, Washington, and should be
accompanied by a like face amount of the maturing certificates. Subject
to the usual reservations, all subscriptions will be allotted in full.
There are now outstanding $3*799*736,000 of the Series E-rl943
certificates.
The text of the official circular follows:
UNITED STATES OF AMERICA
7/8 PERCENT TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES G-1944
Dated and bearing interest from December 1, 1943
1943
Department Circular No. 727
Due December 1, 1944
TREASURY DEPARTMENT,
Office of the Secretary,
Washington, November 22, 1943*
Fiscal Service
Bureau of the Public Debt
1,
The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par, from the people of the
United States for certificates of indebtedness of the United States, designated
7/8 percent Treasury Certificates of Indebtedness of Series G-1944, in exchange for
Treasury Certificates of Indebtedness of Series E-1943, maturing December 1, 1943*
from that date at the rate of 7/8 percent per annum, payable semiannually on June 1
and December 1, 1944*
They will mature December 1, 1944, and will not be subject
to call for redemption prior to maturity,
2,
The income derived from the certificates shall bo subject to all Federal
exempt from all taxation now or hereafter imposed on the principal or interest
thereof by any State, or any of the possessions of the United States, or by any
local taxing authority.
3,
The certificates will be acceptable to secure deposits of public moneys,
T„ey will not be acceptable in payment of taxes.
4»
Bearor certificates with interest coupons attached will be i s s u e d d e n o m —
not ke issued in registered form.
now or hereafter prescribed, governing United States certificates
2
-
III.
1.
-
SUBSCRIPTION AND ALLOT* SNT
Subscriptions will bo roceived at tho Federal Reserve Banks and Branches
and at the Treasury Department, Washington.
Banking institutions generally may sub
mit subscriptions for account of customers, but only the Federal Reserve Banks and
the Treasury Department are authorized to act as official agencies.
Others than
banking institutions will not be permitted to enter subscriptions except for their
own account.
2,
The Secretary of the. Treasury reserves the right to reject any subscrip
tion, in whole or in part, to allot less than the amount of certificates applied
for, and to close the books as to any or all subscriptions at any time without
notice; and any action he may takf in thebe respects shall be final.
these reservations, all subscriptions Will b© allotted in full.
Subject to
Allotment notices
will be sent out promptly upon allotment*
IV.
1.
PATlSllT
Payment at par for certificates allotted hereunder must be made on or be
fore December 1, 1943* or on later allotment, and may be made only in Treasury
Certificates of Indebtedness of Series E-1943, maturing December 1, 1943, which
will be accepted at par, and should accompany the subscription.
V.
1.
GENERAL PROVISIONS
As fiscal agents of the United States, Federal Reserve Banks are authorized
and requested to receive subscriptions, to make allotments on the basis and up to
the amounts indicated by the Secretary of the Treasury to the Federal Reserve Bc.nks
of the respective districts, to issue allotment notices, to receive payment for
certificates allotted, to make delivery of certificates on full-paid subscriptions
allotted, and they may issue interim receipts pending delivery of the definitive
certificates.
2.
The Secretary of the Treasury may at any time, or from time to time, pre
scribe supplemental or amendatory rules and regulations governing the offering,
which Will be communicated promptly to the Federal Reserve ’Brinks.
HENRY MORGENTHAU, JR.,
Secretery of the Treasury.
▼» tom m hm * M
ta
f«f* Mfe iff tiW*K
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so
of tO* Italian 0# woffc out loglo*
lertlvoly a o&Ooroat %m& p H ^ s »
m m i l «o ife# l m ® m i#*»
In osar
si to to* ostoto
.gift to* m *
ottyjioA to I0® &seao*rts o f
Mr* Arties Oof&oso oaoo os#«?oo4* *tos ooooopt
* tfosofoi1* lift* fOOS*&
* fMMTi®M of piiafSiX Oovolopooxit*
#it it*** %m *oajrt* Osar* tat*& t & f & M t w ith to# Ooroolooa took o f
oioofloo * potto ottOort too
m m m m » of wO*t i*y tas^osd.
$o**14orlsg to* o i f f loottio* l£*olv*&, ttosgr too** itataft rmmxkMtol?
M
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hosoirsf, itoo i t s # O s*' f l a o l l y orrlvod for t, m rnptm m m l*# rm g p **lm \
of imf trim*for *oxt«spt* is, to* ilgtet of sof rich, If ttriMtartitc*
m x m flm m mm
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t&# mpp*Xl*%* oporto*
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if ilia m%%r* « & p * In tassoi* t&rnm i» Hi# siditi#ise&
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*;Utst &&%« wcmld Us asiijtti t» gift tm *
a
*MMF #f
fistic*. flit tax, m H m initial tr»**af«r *fc«ri4 m tiim *
#* Pii»ft»t«ft* S9S lit# £6 <1934)»
gf* jMMr «r
us Mss* u* ass Ip*
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7
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B.J.
(1938).
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m tm im
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#f ftsau
fhm t l p t f i t t a M of tto ralaotioa footer i* t o l w a h®*« V
IH# aaoeafortatlo foot that llin ttur&aa of ralaatioa to plaeod
upoa
tto
tax apoa
taxpoyor* who aaot M r o gift
tho *»tifo
▼olu*
if tto aotaarial ort to mot oaffloifttMr *atu*o to doai with
Jftff
tto oeaploaitioo of fcio i r n p i i »
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ero< ttould prorid* oaao eoaool&tloa.
%*itt m **> whieh M
i
/ t ooo extraao to M
« t l U « to tto a m r a a t i r o tto ipootloa
h o t t e r a r o y « r * l o i u ^ ^ t » r » « t dofwmdoat wpoa to®
of «AO of too pftVMMM > to doduOtitla I t * ttO to* ^*MM>
A t too ottor to tto m t i a * % i * ooeioioa* including tto «*tiro
oorpua whor® tt* m m w m » €m pm d» upon tt® grantor1*
tirtt of ohlidroa* iueut tt* ohltdroa** reaching aajoritf* # £ ® u l d
tt* M
looted® &te oatlr® carpa® if tto co»tiag«m<gr ooro
aeialy anrrloge or tt® tirtt of i*#a«t
Court b m t e
to aaottor context tt*
o t U I K to o r a l m t o tit# f*«*ihilttjr of ro~
a*rriogo#“ l a t it dooo mot folio* that tt would to prepared to
laport tt* *a*o aottod of appraioal into tt« gift to* statute J
At oar rat#. It would hardly roouiro * v o t t o t U * of tto rorartor
Involved in th® licLoa* oooo* whor® tto grantor*# reaotulsltlon
of tt® property hlagod upon tto oarlior death of hi# opouoo and
d o c t o r , oad tto i*tt®r«# failure to loav® Im m
tto property of tor ranching tto ago of twon ty-f iro
^
t® appoint
aittation
noeoosarliy ejlLfefor & go®#*# tat it **a#t at toast to ®a
“educated m m d W deriving fraa raoooftably eoariaoiag data.
***
A t tto present ttao it io aot j l r a r chore education «»d« end
guessing. par# aad slaplo# hogiffir
$®r®»tt Circuit too
refused to allow §*sy deduetioa for tto reverter where it depended
Of. Boris Bond Sitymii, 41 $*$*&* «»$
B&*isd Bold ihfti a
ooyoy
$&&
to axtaod Hit i m t fcoaaflts I#
efclldroa from thoroafto r wm p « i M
taft tfea* t&o gift m i laaoaplat**
ty
$mfov& i a t t
tfc* Japroa# Court ha*
iid lo a ia i. In
«asa#«tioii» tfeat t e eoattagoaoy «f
n a a r r U it 1# m%
wmtmtlm ef control stun# tiic ao&saat
of naolher party is roomirod*
»
Irot&orliood ? . Hals* tea*
«.s. m* ioo cim>*
la oltfeor i » |
tfeo property should
sufeject I# •elate tax
Bat c f , drethortaed a* i*laiee%o«*# f i t l « i * f § (1 9 $ * } { 6 o w .
it### stre e t tru st Ce.» 1 M t« ($ d ) i l * (C .C .A . I I I , 1942)»
y
tfca ftai^ sad tfoMaatta dsoisiaas i t s w apaa at laaat I w
tell# f»r®fcla*i»s.
Fha firat iasalires tha dat*f»twtti©» o f ofcaihar
ecynoalc ©oalroX haa $aai?ad sat «f Ht@ gfaator*.and th# aaeoad
rsvslsaa shamt tfea vaJLastlatt faelor*
la sa far a# iha first la
aeaearaed, It la aot slwara a slagda aattor to eoaeimfta that tha
donor h m m 'lim mlafcad aaosoals ecmtral*
a*jr prsrlda far a
Far «s*»?}ia, tfca 4 e » f
af tha trust prime tpal t© bin If hs
aatrlaa or has ebll&vaa* | Is it ©orrset ta tell la omah a saaa
that eoatrol hi s baati raliaaulshad* rahjact te a prsftalaa far Its
rat||p If a apaeiflad eoatiagaiier ©aamra# or is It m tm
to aoaelmda that sostral la still ratalaad feseausa tha ©airarrw&ea
of ih# ecMitla«M«r dasaada, to aa in&sflaafrla axtsat, w pm tha
doaor M a s e l f t
RaallatlaaXI/ apaatedag* af aaarsa# m » h m a
difficult dagrta aaaatlaa hor© and it is aaaally difficult to
prapsrtr ©mild la sul praha&i<y !• taaad j & tafta ©a tha ground
that tha aotmarial art la not pr*j>ar©d to sop# with «ooh
tlagsa&laa >
V
u
sob-
triaga ms to tha saeoad important lass* fallat©*
ia| la tha waha of tha liilth sad hafrlftei&a eaa«
'
Ibi vslJlu# of
%hm v ororoloaoJy
a s
I
iaWw#t orftinnriir doollao*
•nor tfeo Anto of Initial. t»sasf#ir ant tho dift^tox
render of tfeo ror»«ii«Mfc*y. lntotooi * | J L
.
on
*&» #**"
xoducod
onion*
probate « U U
involved*
to o « m
ton
b
m
e
m
m
m
of tHo U M o r t o i n t U *
lot of* noiorhof v* Mlgglno, 129 I.
tiJHI Ik w m *
W>2
.
IT
m m ia t e low If1 li tm %U * t e t e t Vkmm m goof.
a M i l
a* the Hcdlaak dooioioa wsayr
A*
rwiata
s w o t o t e o i g r iatoroolo^wro iiaxlmo la tat rIA of t e a *
fhm
e x t e t of t e e®«% in gift lax* t e o t e * wm not oloor.
*te
te ins »i#t to eoaftetjfc te mtn**f te revorotoaiury tateoot
/
At t e ao*to of wtmnAos
£ rnmm t e
t e t e jaropanr •» t e
I T A o A t e l t e original t e a o f o r ana not ooxptoio w l U
roioa** of tei- n
v a u XA
M
w
txtoreot*
te
tba tailor oiloraoiiro
I t e fr«*a i*r* fmotioo I t e r i o * pooitioiu
la o t e of t e
Saitk *&& Koto loot to deotoiOftii t e gift t o woult to lnp©»«4 oaly
ti$oa t e r * t e of tei m s n t r
t e a r o U a t j u t e o d or t m i f i m d ,
Aloe# o t e r proporly ialoroolo eowpooiag t e truol *to t e j o o l to
, T T
t
1
t e nl t e Solo- of t e initial troaofor**
® a t * U « & to »
'
' ' £ 3 }*
ft# gift tax root
ooeopo froa t e t e t e t e of t e Ij&ytflll t e l o t e
«n
aoy t e a to oxooodiagto mm&X
jf
^
m m * Qp** &p*n w* wm> ittt,
u * i« 4, i*y»«9
mm*
H & H*t* HI 183*
Of. Geo&wiA f. N $ « w * a * 4f f# & * p p » fSH
|1M)#
iai#r«.*t «f iii# grs»i«* M m r
* t o » x *
% i m
r
X
p
m
m
A
i»4*
y * * * * l& & Hui ii* tr®n»f«r woi a * * * m * i * » * ®tAJ««i©4 in
gifl iHE«
Mm Wmtrm* Qevr#lm%im of ®ttt and &»**%• tun* (1944)
66 Harr* %-* Swr# l. Xf*
daathar ^Jaattai* apoarantly m&m b y Hr* » N » U m
by m im m m to tha
0* r a m r o d to
jmv
apiataa* li tins! %hm baoaflaiaria* * 0/
tar* in aatiafaetiaa of thalr aaeoadary
liability, daaplta th# faet that tha^ nay b* daprlrad of thalr
baaefita uadar tan tra&afar*
l|J tim
aaaa tafartaaata aaa~
tim & m *? b***ta * U truat# aoatatalac a coaplax of rwrtad l»t*ra«ta
•van though %h& graator ha* railoaulabad nil •atrlaga* H w t w »
raaote*
Hr* d a a U a a M a r t a a ^ a m r ^ r aaisaodaa* though* that
auah » tr&aafar would b# a taaaahl#
M r at bm t raiult
would abaolra from tax^fca t«tr typo of § rsaafar iataadad ta ha
ra*eh«& fcy CoiMpraaa* ^ f h a unhappy paaaibliltiaa feraaaaa hr tha
dastlaa ftMM to ha aaually taaigatfiaaat whara tha grantor baa »
*oatlogout raYaraftaanry iatoraat*
®hiaf M U « *
Stan# had
axnggaratad e4»lnlatr*J|*a difficult!#* and paaaibla iaa^uitiaa
la tha
e a » a A * » d tha Oourt ooaduotad an ardarly ratraat
fra® tha su^aaoisary and i*at©iij&.hi,.a paaltloaa aansuplad la that oaaa*
n#
ist*
Ssepyre* #»$«, t&s ©ssffmtutios rs^utrsft ss&»r
i m
I& m i
W &
'p yi
M
#»tfilgr*
a** p p # l i i out of tho ptoportr
sss Harrison ▼* Soi^ww tru st fts** <&t
4S1 (1942) •
.Hit sourts
*r« »s*
,|S y4 ii<»|g aov ^ r 4 m t of solusties*
Bopoolt it ttm it Go. of **itl*toro, W
*«
^
hssltss*
i#« X o i w r i m i w* loft
«*** «• < * * » > * & » » *
f, Stats Sirs#* trust 6o«* 128 t* (M) lift (0*48*1. i»*#
1143); Ooaitsl Hsaovor ftssft ft trust fts* r* Cows.# lift t*
(M) ftfO (C.C.A. 3ft# m i l *
Mr* t o t t o
to
v o t o t t o t o # not p ^ w i
^
M a i t o t o t «i l » i ! »
* f « » t o 0 1 « ot»4»«tio» to tox*
«n a *
tm
m
m
difficult!** yauil otooaftly M K f m %
mtotto
too t o
•stto t o u T
t o
toft
w f i i t i a g ft forototoftfr i a l m i i *aul*
prtotoiy to ntftjM* to «||% ^tax if t o
lt#P)¥j a * r i «
tofloftoi** g |
doototo
**« *,
« * *« *• « * » « « »
t o t o * 1****
%»ftlljr ***$&•*
f r u o t m t o d t o t o i a i f t t o i t o of t o
« * w s t t o of t o foooito* io t o f * — m%
upon t o t o l o of t o o o t o t t o t o t o v * m%l& t o d to oxfcptoir
nMttlto*
If ft croator* for *x sm p l** « i t o U * t o ft
m tot rosorria# » lifft o o t o o to fctoolf, &* w t o * to i t o l o fo*
ft gift -|®s oft t&« roftftloAof* lost .if too t * M w f o » * o 4 mm& tteo oftiito
pyopoapty ojowipi f#£ oft oacifoftoiy r w » l # e<mtiair®R#y» bft o o o M ¥•
Safe StfgfiMS r. C g a # t 12# V. (24) 287, 241 (C.C.1. l*t» 1943},
•art. <m M
i
817 B.S. K M
(1942).
tS«« 3 i’anl, r«d«rel £•**»« «■* Sift taxation (1543) Il7.13.
It##
§it*G9*
Urn 14.
M i m*tt
m.% is #»• #14* quasi lent timt aria* uadtr ateii«»a
a£ tht #sti»fe® in* t«* olh«r t o n ISOS
i&*t lit
ft #*»»•£**>• tsfetag |to®i »l dtalli.
m e t i e a $92 (•)
4tt»is *it3i property m% % *<8mlamll? peetiiMg mt &*&%h tmt
vitfe iiiitrtti* t ^ u m t o f o f v o*v*t«4«
Vfe* tfesa&l* m *m t it a
trm m tm r later f t f M . Hat tit* mtmmkTfs o f %Mm t m it tht *»!«•
«f III# tr»**a£«rr»4 proptrty *t tfta
*s*«a
lato
m
(1349)*
M f » r i B « Pa M i o n i t
$•#
ft Otaau* »
A m t h $rt»i3i it
«*$* 19$. U Q - U
f. |i$J 3$f* 2ti (0*4*4.
iti* 1942). otrt. denied. Sit Sf.S. §§§ (1443).
Of * HoateaNot, ite&ft* on Oifit $a$Jtei to Oeatlagtaeiat (1941)
20 feu** $B0* $94.
Of. e®a*. f. Beek1# ittai#, i*t »* ( m l m $ *
194$).
m
(tJL* m*
L mjl&I
I** if
Araftoto
*»•&
&m*ply $ m m Iirrlo# of
lfie iita M i oxoopt fo f o» Ito lo tM fel»f» I t ** »**»«iglH j|^
voooiikod « U m i wfcoa U « o
n
mmy
o*pH oi% .
th e r * Is U n i t to add, in the way of Jnettflcatioa or criticism,
to the C e m r t U disposition of the m t f l i r probleiu
t o t o of Hr* K a t i e s a M f c * « opinions —
«*i»
that a gift is eeapleted
vhm i economic centrel 1» surrendered by the doner — - 1* adeenately
tome*
« $
Certainly this concept of a transfer by gift 1« Ihadaaemtnl,
any theory of watunl exelasireness U
hardly m adegn&te response to sey
taalifledly hold* M
p i t aside.
the
It is
opinion an-
& m t r i t f readers * transfer ineoaplete,
end that the § t o t slows either hot or cold t© salt the rogulroaants
of taxability#
She estate tax reachee fnricm* traaefera which are
ordinarily regarded ae acoylata gifts, hat are^lwrerthelea# treated
m
% m
Oowmoa
ae incomplete aatli death ewertrkes the greater.,
..
examples
are an irrevocable transfer reserving a U f a eetate la the grantor*
a treat reweoeble %
the grantor is e e a J u n c U o n with persons possess
ing a substantial adverse l & f c m e « » * and tenancies h y the entirety
created %
one of the spoases*
la of a slailar character.®
1 transfer subject to a referter
the theory that the estate and gift
tax concept* of completeness are coterminous w l i
siaply wife
the gift tax off the booh# unless the grantor released all possible
contacts with the property.
la other words, Congress weald be pre~
rowed to haws intended that only a transfer in c o a t e a p l a U o a of
death should feel both the eetate aad gift tax.*
«r. Justice
Blade1* theory that the gift tax ie a fora of de*n-pey*«at or
security with respect to the eetate tax seeas to be a each aore
logical deduction frees the present system of transfer taxation
t S t c *
Sm
his t l i M i t l a g oplnlous la Btsaomaim a. tf» 0, Panasgr ®e,
ail tf.8. 436, 446 u * 4 0 ) | »hltasy a. »te** Ta* O a a l w U t .
« 8 8.8. sao, 648 (1940); *#la*ria* f. O U f f o r * , 809 8.8,
331, 386 (1940); I c l m t i f a. Ballask. 309 9.9, 106, 188
(1940); Sajstty v. aat-'ont, 308 9.9. 486, 499 (1940); Blsglaa
r. Salt®, 80S
8.8. 473, 480 (1940); Baltsd Stataa T. i M t t a ,
806 8.8. 363, 878 (1989); Seififc a. Baary, 806 8.8. 184, 181
(1988).
Bat caapara U a
opinion la Bslaorlag a, Braaa.
309 8.8. 461 (1940).
l y 'i i y *
b l n i l t C ». St. leala ttaln Trust
6a.,
896 8.8. 39 (IBM);
Bee'sar t. 8t. k a i l Baton Trust 6o.« 898 8.8. 48 (1936)•
Osrapsrs the dissenting opinion la Belaoring a. St. leule
Balsa Trust
0®
„
318 8.8. at 168.
896 8.8. 89. 4? (1936).
**& *• laapirad a
fh© raaooalag la tha &alth and
&%u*m% hr «r# Jaattoa M a r t a * tfloa law rapaatadly a?$»asad tha
a f
rm cm t shift# la tha 6 w f l * » tax illite4*«.
*• »«w *4 ***** **
loaf aa a traaafar rssarrla# a rsrartar wao eaaj&sta for t « U I #
tax purpaaaa uadar th© xula of th© diaaardad ftftl
!3U
decisions, th© ©aas txanafar sigh* jirafsrly ha soaaldarsd a
d*fiaittra taaafcXa *lft.
f e t th# M j ^ S
dactalaa fed craatad
a diffaraat context, and the & ls*r aaraaas af a raaartar %ma plaaod
ia tik* 9mm eatsgovy a« a traat reserving to th© grantor aatll
tha Instant af death a pa*©r to revoke a r ofea«a f e a a f l a t a r l W9
of the Sanford aaaa accordingly required tha
coaolueloa that a transfer reserving a reverter vea aa incomplete
gift*
-IKr* Jostle© M a r t a
referred to the $esrtfa e e n a e m , la
that aaaa, ever *the difficult!©* af aSaialatratiaa «ad jarohahle
ineauilie* of a contrary decision,* and aoataadad that the aaaa
considerations vara sjif&ie&hie here*
* Indeed,* he concluded.
* a a y i W a of taxation vhieh requires valuation af tha donor1#
rotalaad lataraai, la tha U # t
of tha eontingeaeiee iavoivod, and
calculation of tha value of tha outeecuant remainders h y reeert ta
higher mathematics heyond tha fees af tha taxpayer, a a h l M | » tha
artificiality of tha d o r a r m « a t fa apfdlaatlen af tha d a t * * ^
Sag, 79 (1936 Kd.), Art. 3.
Cf.
^
W
*
aiggtHB T. G otm ., 189 f.
e«rt. «*ai«4, SIT 8.8. 888 (1942)j I m u
(M ) 6 9 1 , «R6 (0.8.4. 24, 1941 )i
Sapp. 874, 878 (1948)
818 9.8. a
187.
».
Kerartiult
U * *•
TV « M y , 4T f.
I* H | M g w t l M teUMtti
to. * » « « • » « * dl.jwww*
of two odfittioooi. t t s u f t O ^ M W « M .
**»• ***** * *
*°
•fta#t that the gift# e#r# not e##pi#t# fc###**## t h « w i « « *®
do*### in
©▼cactus© ^
to accept the r##»i»d*r#*
fki# arguae&t m #
paint tag eat that th# gift tan ©tfetut## *• correctly
oo».t™*4 nr *>» n i o * U M ^ f *•
• » 4wMMf‘* ♦***•*•*
0? aarrender of doalnloc ever the p r e t t y .
•purported to give the property to «©»#eae
X»ter &ceert&lned end this
v m
eaoagh.^
t»^»^r««r#
identity could he
**>• •#«*»& objection t#
tn# Ceeatcaioner1# poeltioio w&m Wiat I# any event h# hfcd erred la
refusing to ante# ell#*#### for the m i n # of to# donor* # roverelonery
Inhoreet*
however* the #omrt concluded that dea lt# peat progroee
• Im epifeifttag the value of that which a#©#© to 0# nneppfaiaabl©,*
the eotaiiri&l art we© not coasp#tent to cop# vlth a W f e f a i o i u u y
inter##* dependent #$## «»«h factor# #• wh#th*r tfc# daubster could
flurry » M ha## children and toother th* children could attain
few
me Veemetm to^ww®
« K « « » «•***•
31* B,8. m*
g«* a o t ^ U ^
{s'
IS'
J6r* «Jm*ti©e Blmok ftlio roforrod to log* 7»
\
\
( m e Id.)* Art*, a. S, If* If*
*ho rifft t w artleioo
doml wit1 % € concept of a t m t f w
to vmiumtioa.
la
aad th© other two rolmt©
T. Humphrey** SOf 0.3* id* SI
^ (itii)* tins Coart M L mot toon vtiy Utpr©*«od fcgr;4moi© 8
mo off meting roomrwod poworo to aitor boaofici&i internet*,
io© also M lm im w* Comm** m
f* (2d) 3f*« M S
imz), wort* «©&!**, 31? 0 .B* IW Jp « > *
§ ^ i §
318 8,8. •« lift..
IIf k
14. at 181.
1
Of. Albert B. U s t s r , 1 *.*. 308 (1943)
(C.O.
X«t,
Haying disposed ©f Its# annoying theory of
«xclualve"»
ness* tho f#«ri i o & « y i M tfc* *fc»nts eiisetlon* vhsthsr
tad ©©assisted a gift of th* rsnoindsr*
fhs %
rolled
oa the already feailior ergunsat that #ao r s a l l e U e T u l a # ©sold
0© planed ©a the Interest Oesous© of the eoatiagea©!©* surrounding
It*
ffe» Court, however* refused to *o©es^i any m m sotlen that
the complex! ty of # property interest ©ronhsd hy a trust con serve
to defeot a tax*
for ashy year© Congress fee# sought vigorously
to ©loss tax loopholes ogoiast Ingenious trust instruments*
though these eoneept* of property end
Sow
rmXum m y h* slippery sad
elusive they ©an mot escape taxation s© long am they are mood la
TV*
tli# world of husinees*
H @ t statutory isuguage, on reinforced
fcy the House and Senate CeaasUtee deports. ' «»• considered suf
ficiently W o o d to sahraee «property* however conceptual or ©onCourt then defined a gift la ti
. over tho property put la trust,* ' finally. ©eeaon*©
eoatrei woe ©smoldered ahsndenad ©t o r though tho torao ©f tho
| return la the event that the grantor
ms
m*
IHA*
©rttiuisn tft 2 Fa»l* litoral ****** fflft
§,*•§* a t lift*
$tas Saprsa# Co art gyamtsd esriiorari im the Balth sad
lehlaett# cess* hecant# of an alleged conflict *ith the Court1*
®pl»iq*« la a»©
mi
rfanfard
b s »m
7
I* **» U
i
<®s*
the B e v e n w e n t again conceded that t^jp value of the reversionary
interest we* iamtuie free gift tar*
*asi the Court* through
hr* bustle* Blech* addressed itself solely to the remainder
interest*
$h* Justice emphatically disapproved the notion that
the s&nford opinion * imtiaated a p g § m i poller against allowing
the sans property to he taxed hath a* am estate and a gift.*#
he alluded to language In the % p f e r ^ eplaion whleh had meted
that the two taxes are met "always Mutually sxeluslvs* and had
referred to the gift tax credit* designed to soften the Blew of
two levies*
la the Sanford ease the eaphasis obviously had heea
against everlapplag* hat the Court was r o w apparently aware ef
the feet that It had unfortunately swept toe far afield in testify*
lag the previous d e c i s i o n . ^ hr* Justice Blest? mow articulated a
■ aew philosophy as a fraaeworh for the interpretative process*
11 tinder the statute the gift tax)eaounts im sene instances to a
security* a fora ef down-paynent #m the estate tax which secure# the
eventual payment of the .latter; It is in no sense doolie taxation
M
as the taxpayer suggests*** this system of down~paynsnts was
1^ regarded by ths(^ourt as the Congressional plan for integrating ths
estate and gift levies*
128 ». (24) ?42 (C.6.A. 24, 1942), ror*g 40 f. Sapp. 19
(1941) M B s .
\
L
See Brief for Boenondont. p. 8. Snlth r. Shaughnosey, SI#
9
V. S. 176 (1943).
m
>■
bs-
Compere the Supreme Court* • acquiescence la fee CoTeruuont'e
concession In the Bollock cooo.
See M 1 m l , Federal Setate
and Sift * M » t l o m (1942) 1 7.26.
But of. Sstute of Sanford
r. C o n . , 308 U. S. 39, 60*1 (1939).
L ^ x *.
.
« & ♦
116 f. (24) 691 (C.C.A. 24, 1941).
*3?hs ays ter;/ deepeas ahaa it Is acted that oat of the throo
judges who concurred la the MarshalX opiaioa participated
la the Ssith dseistoa
The reverter question appeared once sere is the Second
Circuit in Smith v, Shauidmeasy. which dealt with a trust pro
viding
fo r
a life estate in the grantor*s wife and a return of
the corpus to the grantor If he survived her* In the event that
the grantor predeceased her, the property was to pass to her ap
pointees, or, In default of appointment, to her distributees*
The district court had allowed a gift tan confined to the wlfc*s life
estate. The Second Circuit,
on
the other hand, imposed a tax
upon the entire value of the trust property despite the Govern
ment* s concession that the tax base should he reduced by the value
the court*e refusal to reeogniss the concession was its method
of reversal. The opinion was
mr
curlast, consisted of one sentence,
made no mention of the painstaking opinion in the Marshall case
which was directly In point,
end
relied exclusively upon Hersog v.
Commissioner, which involved a different problem
Upon a rehearing the court considered the
m p p tm m tm g
question whether an allowance should, ha «*de for the value of
the reversion*^ interests. the court refused to sanction an
adjustment in tax base on the ground that the value of the
remainders was not affected ty the jjosslbility that the daughter
ai^ht never have off«?>rtng attaining Majority* if her children
eventually reoeived the remainders* they would enjoy their full
value* unimpaired by the alternative possibility under the
scheme of disposition* But this disposition of the valuation issue
ignores all contingencies which affect the ehanees of realisation.
The remainders are* in effect, treated as if they were entirely
free of contingencies, rue loss of control by the grantor should
be decisive in determining whether or not a taxable gift has been
node; other contingencies, however, nay still affect the value of
the gift, although as a practical natter they nay not be amenable
to the art of valuation and are therefore ignored for administrative
reasons.
%
5^0*9^
Helverlag f. Boblnelfc®* 12# F» (2d) 832 (C#C#A., 3d* 1942)
139 I. (24) id 834*
Cf. Coma. T. M^raiuO.!, IBS F* (2d)
948* 947 (€.0«d. 2d, 1942),
Q
problem ©f/^eversionsyy I a n d
the gift tax
tura-a «p «caln/W the MoMnaU, owe deolfled hjr the «hir*
Circuit. this ease involved two taxpayers, a aether and
daughter. the latter had created tee trusts proriding for
tli# payment of income to herself for life* and thereafter to her
aether and stepfather, and, upon the death of either* to the
survivor. After the tei^tiaation of the life estates the principal
was to he paid over to the daughter's issue attaining the age of
twenty-one, or, in default of such issue, to the appointees of
the survivor of the three life tenants* the mother had estab
lished a similar trust except that the initial life estate was
for her benefit, the court again sustained the Commissioner,
selecting &• the vital factor the grantor1s surrender of economic
control over the trusts except for the possibility that the
A
(A
^ daughter rs&ain childless or her children fall to reach majority«
"thus* the settlors could not themselves bring about the exercise
v
of their powers of appointment without committing a crime.
m %o
furthermore, since the gift tax is iapes^jupoa the donor's transfer
rather than the donee's receipt* It was deemed immaterial that the
ultimate takers of the remainder were not in existence.
mm
o
. ^ |%%
1 2 ? F. (34) 942 (C.C.A. §th* 1942).
Another quest ion in
the ease related to reciprocal transfers as affecting the
concept of adequate and full consideration.
/4 %
12? I. (2d) at 943. Of. Estate of Horatio Oates Bloyd*
4? B.f .A. M 9 (1942).
Id. at 944. Of. hstate of J. §» Bodson, 1 f. 0. 416* 423
(1943)#
/
Hi
/S ^
C£. Holies r. Oowa.« 104 I, (2d) 144 (C.6.A, 9th* 1939).
A
similar issue came before the fifth Circuit la Commissioner
v. fochean. Involving trusts which provided for a reverter
coatlugest upon the prior death of the grantor*® spouse and
daughter* and the latter* s failure to leave issue and to appoint
the property after attaining the age of twenty-five. It was held
that a taxable gift had been effected *to t
extent end value of
the estates and interests in the property then transferred*9
and that the provision for a reverter did not affect the complete
ness of the gift but only its value, fhe court refused to delve
deeply into the problem because sines the Hallock and Sanford
decisions *caste down to confuse and confound followers and expounders
of gift tax law, the voices of both board members and circuit Judges
are merely voices crying in the wilderness*, and perhaps until the
Supreme Court has spoken authoritatively on the question they would
do best to decide the ouestions posed with as little bewordling end as f
m
reasons as possible.* this left only the troublesome question of
valuation* the Coma-ssloner claiming that the entire value was taxable
either because the reverter was too remote to make allowance therefor
or because Its value had not been established.
fhe court rejected
the first reason* and considered the second Inadequate since no
valuation issue had been raised below, fhe case was accordingly
remanded to the Board in order to evaluate the reverter. /
1
LS
B . 1. Rep, Ho* 708, 72d Cong., let Sees., p . 27 (CJI. 193S-1,
Fart 2, p. 476); Sea. Rep. Id. 665, 72nd Cong., 1st Sees.,
p. Stf (0,2. 1929*1, Fart 2, p, 524),
See also Hughes
Ooaau, 104 7. (2d) 144 (C.C.R. 9th, 1939), approved la the
Marshall opinion.
I
B ill
_i
A s im ila r "parade of imaginary horribles* takes place ia
£
the Sanford opinion*
308 C. S* at 46.
Power* of Appointment and Estate faxes*
Cf • Kisenstein,
II (1943) 52 Tale
A* «T, 494, 639*
&
125 f *
(24) at 946, referring to Ithaca Trust Co. r* United
States, 279 If. S. 151 (1929).
Guggenheim, 1 f. 0. 845 (1943).
See also Estate of Simon
fudge Prank urges that the
fallacy la the taxpayer's contention "stems largely f r < m ^ — ^
lack of recognition of the eely character of the word (Walua'.
It is a bewitching word which, for years, has disturbed mental
peace and caused numerous useless debates.
Perhaps it would
be better for the peace of men's minds if the word were
abolished,
leans of good paper and gallons of good ink hare
been wasted by those who hare tried to giro it a constant
and precis# meaning."
See also fudge Frank’s opinion In
Andrews ▼. Corns., 135 f. (2d) 314, 317 (C.C.A. 3d, 1943), cert.
tS
denied, Oct. I I , 1943.
4b
For some mysterious reason the court observes (at 947) that
it is not settled whether the remainders in question would bo
included in the decedent's gross estate under the Haliock ease,
but that such inclusion is assumed for present purposes,
does not seem to bo any doubt on the subject.
There
in th#
resent f»®o edBirol hud passed outj of the donor9s bands
sad a ©oapXeted transfer dad ©eea effected %ritdi» the broad and
comprehensive Xanguoge of the statute as rolaforood by the
explanatory committee reports'
wjH
fti© first argument endeavored to distinguish, for gift
tax purposes, between a rested and contingent remainder* on
the theory that a coat ingest remainder is not a e m u l a t e d gift.
this dogged reliance on property lav vas dismissed by a reference
to the Hallock case, which had conclusively “destroyed such a
word-Juggling c o n t e n t i o n . * ^ Another argument advanced by the
taxpayer emphasised that Congress did not intend to impose a tax
determined by estimates of value which nay turn out to he wrong In
actuality* especially since the donees night he required te pay a
II
tax on property which they never finally enjoyed.*1 hut* replied
the court* this argument “would preclude a tax on any *value1
which is not almost certain to correspond with actual enjoyment**
although value “ seldom does so correspond.*
In tax law* *as almost
always* •value* Involves a conjecture* a guess* a prediction, a
prophecy,
bith reference to the taxation of life estate# the
Supreme Court has relied on educated guesses* as of a given date
based on the mortality tables* disregarding the fact that actually*
In the particular ease before it* the prophecy has turned out to be
wrong because the life tenant did not live up to her expectancy.*
L '
Finally* the court rejected the argument thriving on the Sanford
case* namely* that since the remainders would feel the Impact of as
estate tax they were immtne from gift tax.
Judge Frank confined the
broad language of the Sanford opinion to a trust wherein the donor
retains the power to determine the recipients of its benefits.
L- tjjjjj
$##
BiMit
*At
701 (1941) » HoiTl.®
m & m U 43 ».*.&. 1036 (1941 )5 Curl 3.
329 (1941 )5
43 H.f
W M t ® Marshall, 43 &•£•&• 99 (1940)5
8 arr* &©!««». 41 B.9.4. 1333 (1940) •
|j
M
f * C M ) 943 (9.6.*. 34. 1943).
I»# M r . 747.
I
Me
(1943) 9 W* of &*i.
ttm
Interpretation* which accented taxpayers*
understanding of the ialloclc and ^ n f o r d eases* underwent initial
9
appellate scrutiny la Seagals*loner y. Marshall.
She greater la
t ile ea*e had established two irrevocable tract# providing that
the property was to r e t e a to her If she survived the life
tenant*
If the grantor died first* the property was to pass to
her children and their issue*
She Casuals* loner and taxpayer agreed
that the life estate urns taxable and that the value of the reversionary
interest was not taxable*
Hence the only euestion left for
consideration was whether the value of the remainder -** described
as contingent —
was subject to gift tax*
this issue was resolved
®y the Second Circuit in the Ceauissloaer* s favor after painstaking
analysis by Judge frank of the taxpayer*s various arguments*
c P
309 If* S. 106 (1940), overruling Helrering v. St.
r
Union trust Co.* 296 0. S. ®
Union trust Co.» 296 If. 3. 48
■/y
* / /%
*
r
y *
\ f/*
(1936); Beefcer »* St. l«mte
(X936).
See 2 Foul* federal Estate end 0ift taxation (1943)
8 17.14, a. I lk
See* e.g.# Elagins r* Saith, 308 If. S. 473, 477 (1940).
Is tat e of Sanford f* Coma., 308 8. 8. 39 (1939)*
See 2 Faul, federal Satate sad 61ft taxation (1943) 88 17.06,
V \ A
17.07.
(/7^3)
\ /^ 6
318 0. S. 176 (1943), noted W s i Harr. 1. See. 1010 (1848).
318 If. S. 184 (1943).
■■
m m
mm
/y 1
Jglp
f HO
VIS1343 )
"V
I
A?
V
■Mmm
/
m jKBESLeS6jB
flie mounting est* to tax misfortunes of grantors who have
1
retained reversionary interests have recently be«n paralleled
©y similar unhappy experiences with the gift tax*
//
h
*
r
In Belverlmt
W
v* Halloed*^ /on will recall, it was valiantly contended that
« reverter did not subject a transfer to estate tax since it did
not prevent the conviction of the gift frier to the decedent1#
demise,
fhis argument having failed to convince a reconstituted
^ A ^ cA
j^ l L
\ j t * '- * r r ~ * s
Supreme Court* no re allviwt© the pitfalls of property law,**
™
Jp*-**
taxpayers thereupon argued that a reverter was equally potent to
reader a transfer incomplete for gift tax purposes,
fhe claim
that what is good for the goose should In all fairness be good
for the gander —
we know* of course, that this canon is not
J
unyielding in the tax field
was bolstered by the unnecessarily
-**
ji/'
broad language of the Sanford opinion which dwelt upon the
jsr
mutually exclusive character of the estate snd gift taxes**
Again the Hupresse Court was not impressed, and la Smith v *
J*
4#
*>«d B o S i a a t f y. iielvgrlag r tt Interred, with *
minimum of ceremony, the attractive theory of mutual exclusiveness*
I have Choaen to discuss today in mmm detail tills new and provocative
chapter in gift tax incidence.
Proceeding on the familiar principle
(L^J
that the present and future m y be better understood if we glance ^
^ m the past, I shall preface my analysis of the recent Supreme
Court decisions and their implications with a running review of
i\
earlier decisions In the lower courts*
TREASURY DEPARTMENT
Washington
(The following address by Randolph E. Paul,
General Counsel of the Treasury, before
the session on "Taxation of Trusts and
Estates" of the National lax Association
Convention at the Palmer House, Chicago,
is scheduled for delivery at 11 a. m»,
Central War Time, Monday, November 22,
1943, and is for release at that time»)
TREASURY DEPARTMENT
Washington
(The following address by Randolph E. Paul, General Counsel
of the Treasury,.before the session on .“Taxation of Trusts
and Estates1’ of the National Tax Association Convention at
the Palmer House, Chicago, is scheduled for delivery
at 11 a* m,, Central War Time, Monday, November 22, 1943s
and is for release at that time*!
REVERTERS UNDER THE GIFT TAX
The mounting estate tax misfortunes of grantors who have retained re
versionary interests have recently been paralleled by similar unhappy
experiences with the gift tax* In Helvering v* Hallock, l/ you will recall,
it was valiantly contended "that a reverter did not subject a transfer to
estate tax since it did not prevent the completion of the gift prior to the
decedents demise* This argument having failed to convince a reconstituted
Supreme Court which had become more alive than ever to tne pitfalls of
property law, 2/ taxpayers thereupon argued that a reverter was equally
potent to render a transfer incomplete for gift tax purposes* The claim
that what is good for the goose should in all fairness be good for the
gander — we know, of course, that this canon is not unyielding in the tax
field 3/ — was bolstered by the unnecessarily broad language of the
Sanford opinion hj which dwelt upon the mutually exclusive character of the
estate and gift taxes#_ 5/ Again the Supreme Court was not impressed, and
in Smith v. Shaughnessy 6/ and Robinette v# Helvering 7/ it interred, with
a minimum of ceremony, the attractive theory of mutual exclusiveness*
I have chosen to discuss today in some detail this new and provocative
chapter in gift tax incidence^ Proceeding on the familiar principle that
the present and future may be better understood if we glance back to the
past, I shall preface my analysis of the recent Supreme Court decisions and
their implications with a running review of earlier decisions in the lower
courts*
The Board* s, interpretation, which accepted taxpayers! understanding of
the Hallock and Sanford cases, 8/ underwent initial appellate scrutiny in
Commissioner v* Marshall* .9/ The grantor in this case had established two
1/ 309 ,U. S. 106 (1940), overruling Helvering v. St* Louis Union Trust Co*,
296 U. S t 39 (1935); Becker v. St* Louis Union Trust Co., 296 U. S* 48 (1935).
2/ See 2 Paul, Federal Estate and Gift Taxation (1942) § 17.14* n* 11.
3/ See, e.g., Higgins v* Smith, 308 U. S. 473, 477 (1940).
4/ Estate of Sanford v. Comm., 308 U. S. 39 (1939)*
5/ See 2 Paul, Federal Estate and Gift Taxation (1942) §§ 17.06, 17.07* '
6/ 318 U. S. 176 (1943), noted in (1943) 56 Harv* L. Rev. 1010.
7/ 318 U. S. 184 (1943).
•
v
.
.
„
mA
8/ See Meta Biddle Robinette, 44 B.T.A. 701 (1941)'; Morris Michel, 43 B.T.A.
1036 (.1941); Carl j. Schmidlapp, 43 B.T.A. 829 (1941); 'Margaret White
Marshall, 43 B.T.A* 99 (1940); Marrs McLean, 41 B.T.A. 1266 (1940).
9 / 1 2 5 F. (2d) 943 (C.C.A. 2d, 1942).
See (1942) 9 U. of Chi. L. Rev. 747.
39-60
- 2irrevocable trusts providing that the property -was to return to her if she
survived the life tenaht.
If the grantor died first, the property was to
pass to her children and their; issue* The Commissioner and taxpayer agreed
that the life estate was taxable and that the value of the reversionary
interest was not taxable.
Hence the only question left, for consideration
was whether the value of fhe remainder — - described as contingent — was
subject to gift tax. This issue was resolved by the Second Circuit in the
Commissioner’s favor after painstaking analysis by Judge Frank of the tax
payer 1s various.arguments*
The first argument endeavored to distinguish, for gift tax purposes,
between a vested and contingent remainder, on the theory that a contingent
remainder is not a completed gift* This dogged reliance on property law was
dismissed by a reference to the Hallock.case, which had conclusively
"destroyed such a word-juggling contention. " u
Another argument advanced
by the taxpayef emphasized that Congress did not intend to impose a tax
determined by estimates of value which may turn out- to be wrong in actuality,
especially since the donees might be required to pay a tax on property which
they never finally enjoyed* 2/ But, replied the court, this argument "would
preclude a tax on any 1value* which is not almost certain to correspond with
actual enjoyment," although value "seldom does so correspond.!* In tax law,
"as almost always, *value* involves a conjecture, a guess, a prediction,
a prophecy. With reference to the taxation of life estates the Supreme
Court has relied on educated guesses, as of a given date based on the mortal
ity tables, disregarding the fact that actually, in the particular case
before it, the prophecy has turned out to be wrong because the life tenant
did not live up to her expectancy." j/ Finally, the court rejected the argu
ment thriving on the Sanford case, namely, that since the remainders would
feel the impact of an estate tax they were immune from gift tax*
Judge Frank
125 F. (2d) at 945.
1
A similar "parade of imaginary horribles" takes place in the Sanford
opinion* 308 U* S. at 46* Cf. Eisensiein, Powers of Appointment and
Estate Taxes:
II (1943) 52 Tale L. J. 494, 539*
3/ 125 F* (2d) at 946, referring to Ithaca Trust, Co. v. United,States,
279 U. S. 151 (1929).
See also Estate of Simon Guggenheim, 1 T* C* 845
■ (1943).
Judge Frank urges that the fallacy in the taxpayer 1s contention
"stems largely from lack of recognition of.the eely character of the
word ‘value1. It is a bewitching word which, for years, has disturbed
Cental peace and caused numerous useless debates. Perhaps it would be
better for the peace of m e n fs minds if the word were abolished. Reams
of good •paper and gallons of good ink have been wasted by those who
have tried to give it a constant and precise meaning*" See also Judge
Frank’s opinion in Andrews v. Comm,, 135 F. (2d) 314, 317 (C.C.A. 2d,
1943), cert, denied, Oct. 11, 1943*
1/
2/
- 3 -
confined the broad language of the Sanford opinion .to a trust wherein the
donor retains the power to determine the recipients of its benefits. 1 /
In the present case control had passed out of the donor*s hands and a com
pleted transfer had been effected within the broad and comprehensive
language of the statute as reinforced by the explanatory committee reports.
2/
A^ similar issue came before the Fifth Circuit in Commissioner v, McLean, 3/
involving trusts which provided for a reverter contingent upon the prior
death of the grantor1s spouse and daughter, and the latter*s. failure to leave
issue and to appoint the property after attaining the age of twenty-five.
It
was held that a taxable gift had been effected "to the extent and value of
the estates and interests in the property then transferred , 11 lj and that the
provision for a reverter did not affect the completeness of the gift but
only its value. The court refused to delve deeply into the problem because
since the Hallock and Sanford decisions" ’’came,down to confuse and confound
followers' and expounders of gift tax law, the voices of both board members
and^ circuit judges are merely voices ciying in the wilderness, and perhaps
until the Supreme Court has spoken authoritatively on the question they would
do best to decide the questions posed with as little bewordling and as few
reasons as possiole.” 5/ This left only the troublesome question of valua
tion, the Commissioner claiming that the entire value was taxable either
because the .reverter was too remote to make allowance therefor or because
its value had not- been established. 6j The court rejected the first reason,
and considered the second inadequate since no valuation issue had been
raised below. The case -was accordingly remanded to the Board in order to
evaluate the reverter.
i r i b ? some mysterious reason the court observes (at 947 ) that it is not
settled whether the remainders in question would be included in the
decedent’s gross estate under the Hallock case, but that such inclusion
is assumed for present purposes. There does not seem to be any doubt
on the subject.
u
H. R. Rep, No. 708, 72d Cong., 1st Sess,, p. 27 (C.B. 1939-1, Part 2,
p. 476); Sen, Rep. No, 665, 72nd Cong.*, 1st Sess., p. 396 (C.B. 1939-1,
Part 2, p. 524)*
See also Hughes v. Comm., 104 F. (2d) 144 (C.C.A. 9th,
1939), approved in the Marshall opinion.
3/ 127 F, (2d) 942 (C.C.A. 5th, 1942),- Another question in the case re
lated to reciprocal transfers as affecting the concept of adequate and
full consideration.
v
127 F. (2d) at 943. Cf. Estate of Horatio Gates Lloyd. 47 B.T.A. 349
(1942).
5/ Id. at 944. Cf. Estate of J. G, Dodson, 1 T, C, 416 , 422 (1943).
y Cf. Hughes v, Comm,, 104 F, (2d) 144 (C.C.A. 9th, 1939).
~ 4 The problem of reversionary interests and the gift tax turned up again in
the Robinette case l/ decided by the Third Circuit* This case involved two
taxpayers, a mother and daughter* The latter had created two trusts pro
viding for the payment of income to herself for life, and thereafter to her
mother and stepfather, and, upon the death of either, to the survivor*
After the termination of the life estates the principal was to be paid over
to the d a u g h t e r s issue attaining the age of twenty-one, or, in default of
such issue, to the appointees of the survivor of the three life tenants*
The mother had established a similar trust except that the initial life
estate was for her benefit* The court again sustained the Commissioner,
selecting as the vital factor the grantor*s surrender of economic control
over the trusts except for the possibility that the daughter might remain
Childless or her children fall to reach majority* ’’Thus, the settlors could
not ttoamselves bring about the exercise of their powers of appointment with
out committing a crime*” 2/ Furthermore, since the gift tax is imposed.upon
the donor* s transfer rather than the donee*s receipt, it was deemed immaterial
that the ultimate takers of the remainder were not in existence*
Upon a rehearing 2/ the court considered the supplementary question
whether an allowance should be made for the value of the reversionary in
terests, The court refused to sanction an adjustment in tax base on the^
ground that the value of the remainders was not affected by the possibility
that the daughter might never have offspring attaining majority* If her
children eventually received the remainders, they would enjoy their full
value, unimpaired by the alternative possibility under the scheme of dis
position, But this disposition of the valuation issue ignores all contin
gencies which affect the chances of realization* The remainders are, in
effect, treated as if they were entirely free of contingencies* The loss
of control by the grantor should be decisive in determining whether or not
a taxable gift has been made 5 other contingencies, however, may still affect
the value of the gift, although as a practical matter they may not be amend
able to the art of valuation and are therefore ignored for administrative
reasons*
The reverter question appeared once more in the Second Circuit in
Smith V, Shaughnessy, 4/ which dealt with a trust providing for a life
testate in the grantor* s wife and a retuwn of the corpus to the grantor if
he survived her* In t h e 'e v e n t 'that the grantor predeceased her, the
property was to pass to her appointees, or, in default of appointment, to
her distributees* The district court had allowed a gift tax,confined to
the wife *s life estate* The Second Circuit, on the other hand, imposed
a tax upon the entire value of the trust property despite the Government
concession that the tax: base should be reduced by the value of the grantor s
17
H
u
Helve ring v, Robinette, 129 F* (2d)' 832 (C*C«A* 3d, 194-2 )•
129 F. (2d) at 834* Cf. Comm* v* Marshall, 125 F. (2d) 943, 947
(C*C*A* 2d, 1942)*
129 F* (2d) at 835.
,___ _
128 F* (2d) 742 (C*C.A. 2d, 1942), rev*g 40 F* Supp* 19 (1941).
- 5 -
reversionary interest* 1/ More baffling than the .court’s refusal to
recognize the concession 2/ was its method of reversal* The opinion was
per curiam, consisted of one sentence, made no mention of the painstaking
opinion in the Marshall case which was directly in point, and relied ex
clusively upon Herzog v* Commissioner, 3/ which involved a different
problem*. M
The Supreme Court granted certiorari in the Smith and Robinette cases
because of an alleged conflict with the Court’s opinions in the Kallock and
Sanford cases* 5/ In the Smith case the Government again conceded that the
value of the reversionary interest was immune from gift tax, 6/ and the
Court, through Mr* Justice Black, addressed itself solely to the remainder
interest* The Justice emphatically disapproved the notion that the Sanford
opinion ’’intimated a general policy against allowing the same property to
be taxed both as an estate and a gift.” if He alluded to language in the
Sanfox-d opinion which had noted that the two taxes are not ’’always mutually
exclusive” and had referred to the gift tax credit, designed to soften the
blow of two levies* In the.Sanford case the emphasis obviously had been
against overlapping, but the Court was now apparently aware of the fact that
it had unfortunately swept too far afield in justifying the previous
decision* 8/ Mr* Justice Black'now articulated a new philosophy as a frame
work for the interpretative process:
’’tinder the statute the gift tax
amounts in some instances to a security, a form of down-payment on the
estate tax which secures the eventual payment of the latter $ it is in no
sense double taxation as the taxpayer suggests.” 9/ This system of downpayments was regarded by the Court as the Congressional plan for inte
grating the estate and gift levies*
Having disposed of the annoying theory of mutual exclusiveness, the
Court considered the ’’basic question” whether the grantor had completed
a gift of the remainder* The taxpayer relied on the already familiar
argument that ”no realistic value” could be placed on the interest because
1 / See Brief for Respondent, p. 8, Smith v. Shaughnessy, 318 U. S* 176
(1943)*
2/ Compare the Supreme Court’s acquiescence in the Government’s conces
sion in the Hallock case. See Paul, Federal Estate and Gift .Taxation
(194-2) § 7*25* But cf. Estate of Sanford v. Comm*,. 308 U. S*. 39,
50-1 (1939).
3/ 116 F. (2d) 591 (C.C.A. 2d,. 1941).
y
The mystery deepens when it is noted that one of the three judges who
concurred in the Marshall opinion participated in the Smith decision*
5/ 313 U,S. at 178.
6/ Ibid*
7/ Ibid.
8/ Compare criticism in 2 Paul, Federal Estate and Gift Taxation (194-2)
§17.07.
9/ 318 U.S. at 179.
6of the contingencies surrounding it*
he Court, however, refused to ’accept
any suggestion that the complexity of a property interest created by a trust
can serve to defeat a tax*
For many years Congress has sought'vigorously to
close tax loopholes against ingenious trust instruments. Even though these
concepts of property and value may be slippery and elusive they can not
escape taxation so long as they are used in the world of business*” 1/ The
statutory language, as reinforced by the House and Senate Committee Reports,2/
was considered sufficiently broad to embrace " property, however conceptual
or contingent." 3/ The Court then defined a gift in trust as "the abandonment
of control over the property put in trust." y
Finally, economic control was
considered'abandoned even though the terms of the transfer stipule, ted for its
return in the event that the grantor survived another person* 5/
In the companion Robinette case Mr* Justice Black disposed of two aaditional taxpayer objections. The first was to the effect that the gifts
were not complete because there were no donees in existence to accept the re
mainders. This, argument was overcome by pointing out that^the gift tax
statute, as correctly construed by the regulations, 6/ is imposed upon the
donor’s transfer or surrender of dominion over the property* 7/ xhe taxpayers
"purported to give the property to someone whose identity could be later
ascertained and this was enough." 8/ The second objection to the Commissioner's
position was that in any event he had erred in refusing to make allowance for
the value of the donor’s reversionary interest.
However, the Court concluded
that despite past progress "in appraising the value of that which seems to be
unappraisable,” the actuarial art was not competent to cope with a reversion
ary interest dependent upon such factors as whether the daughter would marry
and have children and whether the children would attain majority. 9/ Gift
tax was therefore imposed upon the entire corpus*
1/
2/
318 IT.S. at 180.
See note 2/ page 3. Mr. Justice Black also referred to Reg. 79 (1936 Ed.),
w
# 17, 19.
_ ^ I'hg first two articles deal with the concept of
Arts.
2, 3,
a transfer^and7the other two relate to valuation.
In Rasquin v. Humphreys,
308 U.S-. 54, 56 (1939), the Court had not been very impressed by A r t i c l e ;
as affecting reserved powers to alter beneficial interests. See also
Higgins v. Coram,, 129 F. (2d) 237, 243 (C.C.A. 1st, 1942), cert, denied,
317 U.S. 658 (1942).
318 U.S, at 180.
u*^
3^ffij,^
Cf. Albert D. Lasker, 1 T.C.
Reg-. 79 (1936 Ed.), Art. 3.
Cf. Higgins v. Comm., 129 F.
denied, "317 U.S. 658 (1942);
(C.C.A, 2d, 1941)3 Hernstadt
318 U.S. at 187*
Id. at 188,
208 (1942).
See note 2/ above.
(2d) 237, 242 (C.C.A. 1st, 1942), cer •
Herzog v. Comm., 116
S 5
v. Hoey, 47 F. Supp. 874, &«6 (142).
- 7.-
. The reasoning,in the Smith and Robinette cases, inspired a dissent by
Mr. Justice Roberts, who has repeatedly opposed the- recent shifts in the
Court’s tax attitudes* 1/ He agreed that as long-.as a transfer reserving
a reverter was complete for estate tax purposes under the rule of the dis
carded St, Louis Trust decisions* %J the same transfer might properly be
considered a definitive taxable gift. But the Hallock decision had created
a different context,:and the disappearance of a reverter was placed in the
same category as a power reserved, until the instant of death, to revoke the
trust or change beneficiaries* 2/ The reasoning of the Sanford case ac
cordingly required the conclusion that a transfer Reserving a reverter was
an.incomplete gift, Mr, Justice Roberts referred to the Court’s concern, in
that case, over "the difficulties of administration and probable inequities
of a contrary- decision,” and contended that the same considerations were applicable here,
"Indeed,” he concluded, "a system of taxation vdrLch requires
valuation of .the donor’s retained interest, in the light of the Contingen
cies involved, and calculation of the value of the subsequent remainders by
resort to. higher mathematics beyond the ken of the taxpayer, exhibits the
artificiality of the Government’s application of the Act." 4/
:
•
4
■ -
■
;*
-4
■ ’■
1 ... ,,r
a
'
jf.
'
l' ■ . ?
: There is little to add, in the way- of justification or criticism, to
the Court’s, disposition of the reverter problem. The main burden of
Mr* Justice Black’s opinions — that a gift is comple ted when economic con
trol is surrendered by the donor ^ is adequately borne*
Certainly .this
concept of a transfer by gift is fundamental, once any-theory of mutual
exclusiveness is cast aside.
It is hardly an adequate-response to say that
the • Hallock-opinion unqualifiedly holds that a reverter renders a transfer
incomplete,^and that the Court blows either hot or cold to suit the re
quirements of taxability, The estate tax reaches various transfers which
are ordinarily -regarded as completed gifts, but are nevertheless treated as
incomplete, until death overtakes the grantor, 5/ .Common examples’are an ir
revocable transfer reserving .-a life estate in the grantor, 6/ a trust
1/
See his dissenting opinions in-Wisconsin’v, J„ Cc Penney Co,, 311 U,S*~
435, 446 (.1940); Whitney v0 State Tax Commission, 309 U,S* 530, 542
(1940); Helvering vj Clifford, 309 U,S<, 331, 332 (1940); -Helvering v*
Hallock, 3p9 UoS, 106,. 123 (1940.) 1 Deputy v* duPont, .308 U.S, 422, 499
' (1940); Higgins v, Smith, 308 U.S. 473* 420 (1940)$ United- S*tates v,
.Jacobs, 306 U.S0:363, 373 (1939); ^elch v* Henry, 305 U'.S. 134* 151
(1932)., But compare his .opinion in Helvering v. Bruun, 309 U„Sc 461(1940),
2/ Helvering. v P S t L o u i s Union-Trust CoP, 296 U*S„ 39 (1935); Becker Vf
• St, Louis Union Trust Co,, 296 U.S, 42 (1935)*
3/ Compare the dissenting opinion in Helvering v, St,* Louis Union Trust Co,,
296 U f5,, 39, 47 (1935),
*
y
318 U.S,1'at 183,
$ .
5/ See Higgins v. Comm., 129 F, (2d) 237, 241 (CfC.A. Ist,-1942)> cert*
denied, 317 U.S, 658 (1942),
6/ See 2 Paul, Federal Estate and Gift Taxation (1942) §17,12.
- 8revocable by the grantor in conjunction with persons possessing a substan
tial adverse interest, l/ and a tenancy by the entirety created by-one of
the spouses, 2/ A transfer subject to a reverter is of a similar character,3/
The theory that the estate and gift tax concepts of completeness are coter- ~
minous would simply wipe the gift tax off the books unless the grantor re
leased all possible estate tax contacts with the property.
In other words,
Congress would be presumed to have intended that only a transfer in contem
plation of death should feel both the estate and gift tax, 4/ \Mr, Justice
Black*s theory that the gift tax is a form of down-payment or security with
respect to the estate tax seems to be a much more logical deduction from the
present system of transfer taxation.
For if the drafters contemplated such
sharply drawn lines of incidence, except for an isolated blur, it is strange
that they remained silent when it was so easy to be explicit, 5/
Mr. Justice Roberts’ emphasis upon the intricacies of valuation does
not present a formidable objection to tax. Even he admits that a transfer
reserving a reversionary interest ?Jould probably be .subject to gift tax if
the Hallock decision had never arrived on the scene, 6/ In that event, the
same valuation difficulties would obviously confront taxpayers. Equally
complex valuation problems have not frustrated the administration of the
estate tax, 7/ The erection, of tax results, in the present case, upon the
1/
2/
3/
y
5/
6/
7/
See Id, §17.09.
See id. §16.09.
MWe mast put to one side questions that arise under sections of the
estate tax law other than §302 (c) /now §811 ( c — sections, that is,
relating to transfers taking place at death.
Section 302 (c) deals
with property not technically passing at death but with interests
theretofore created, The taxable event is a transfer inter vivos, Bat
the measure of the tax is the.value of the transferred property at the
time when death brings it into enjoyment,1* Helvering v. Hallock, 309
U.S. 106, 110-11 (1.940). See Higgins v. Comm-., 129 F. (2d) 237, 241
(C^C.A. 1st, 1942), cert, denied, 317 U.S. 658 (1942).
Cf, Nossaman, Taxes on Gifts Subject to Contingencies (1941) 20 Taxes
650, 694.
Cf. Comm. v. Beck’s Estate, 129 F. (2d) 243* 245 (C.C.A. 2d, 1942),
318 U.S, at 182.
Compare, e.g., the computation required under section 812 (d), where
taxes are payable out of the property bequeathed to charity* See
Harrison v. Northern Trust Co., 317 U.S. 476, 481 (1942). The courts
themselves are not always hesitant in adding new burdens of valuation.
See Helvering v. Safe Deposit & Trust Co. of Baltimore, 316 U.S. 56
(1942); Comm, v. State Street Trust Co., 128 F. (2d) 618^ (C.C.A, 1st,
1942); Central Hanover Bank & Trust Co. v. Comm., 118 F.^ (2d) 270
(C.C.A. 2d, 1941).
-9basis of the valuation factor, would lead to extremely anomalous results#
If a grantor, for example, established a trust reserving a life estate to
himself, he would be liable for a gift tax on the remainder, but if he
transferred away, the entire property except for an extremely remote contin
gency, he would be free of gift tax on the same interest#
' Another objection apparently.made by Mr. Justice Roberts, by reference
to the Sanford opinion, is that the.beneficiaries may be required to pay
tax, in satisfaction of their secondary liability, despite the fact that
they may be deprived of their benefits under-the transfer#
But the same
unfortunate contingency besets all trusts containing a complex of varied
interests even though the grantor, has relinquished all ’’strings” however
remote. Mr, Justice Roberts apparently concedes, though, that such
a transfer would be a taxable gift# 1/ Any other result would absolve from
tax the very type of transfer intended to be reached by Congress# 2/ The
unhappy possibilities foreseen by the justice seem to be equally insignifi
cant where the grantor has a contingent reversionary interest# Chief Justice
Stone had exaggerated administrative difficulties and possible inequities in
the Sanford case, 3/ and the Court conducted an orderly retreat from the un
necessary and untenable positions occupied in that case.
Even in tax law it, is an ill wind that blows no good# As a result of
the Hallock decision many grantors having remote reversionary interests in
trusts created many years ago were anxious to get rid of them. The extent
of the cost in gift tax, however, was not clear#
Thus the tax might be con
fined to the value of the reversionary interest at the moment of surrender 4/
or it might embrace the entire property on the ground that the original
transfer was not complete until thq release of the reversionary interest#
The latter alternative would flow from Mr# Justice Roberts’ position#
In
view of the Smith and Robinette decisions the gift tax would be imposed only
upon the value of the reverter when relinquished or transferred, since other
property interests composing the trust are subject to tax at the date of the
initial transfer. 5/ The gift tax cost entailed by an es.cape from the
tentacles of the Hallock decision may thus be exceedingly small, 6/
1/ Cf. E. A. Hayes, B.T.A# Memo; Op,, April 20,'1942, C.C.H# Dec. 12, 506-A.
—/
H#S* at 183# Of. Goodwin v# McGowan, 47 F* Supp. 798 (-1942), where the
interest of the grantor never ripened into possession but its.transfer was
nevertheless subjected to gift tax#
y See- Warren, Correlation of -Gift and Estate Taxes (1941) 55 Harv. L# Rev. 1,17.
4/ It is assumed that the statute of limitations as to all other interests,
running from the date of creation of the trust, has expired.
5/ This result, it seems, would allow some value to escape tax# The value of
the reversionary interest ordinarily declines after the date of initial
transfer and the gift tax on the surrender of the reversionary interest
would apparently be on the' reduced value#
6/ Even if the reverter were assigned to charity, there would probably still
be a gift tax because of the uncertainties involved. But cf# Meierhof v#
Higgins, 129 F. (2d) 1002 (C.C.A. 2d, 1942).
- 10 -
The Smith and Robinette decisions leave open at least two basic prob
lems. The first involves the determination of1;whether economic control
has passed out of t h e grant or, -and the second revolves about the valuation
factor.
In so far as the first is concerned, it is not always a simple
matter to conclude that the donor has relinquished economic control. For
example, the donor may provide for a return of the trust principal to him
if he marries or has children.
Is it correct to hold in such a case tnat
control has been relinquished, subject to a provision for its return if
a specified contingency occurs, or is it more appropriate to conclude that
control is still retained because the occurrence of the contingency depends,
to an indefinable extent, upon the donor himself? Realistically speaking,
of course, one has a difficult degree question here and it is equally dif
ficult to predict how the courts will react* l/ If e contingency of this
character is not regarded as the'retention of control, 2/ the property
would in all probability, be taxed in toto on the ground that the ^actuarial
art is not prepared to cope with such contingencies. 2/ This brings us to
the second important issue following in- the wake of the Smith and Robinette
cases.'
.* ^
The significance of the valuation factor is driven home b y the uncom
fortable fact that the burden of valuation is placed upon the taxpayer, who
must pay a gift tax upon the entire value if the actuarial art is not suf
ficiently mature to deal with the complexities of his arrangement* 4/ Of
course, the gift tax credit should -provide some consolation. 5/ At one
extreme is the Smith case, w h i c h should settle in the affirmative the
question whether a reversionary interest dependent upon the prior death of
w
2/
2/
Cf. Doris Bond Sherman, 41 B.T.A. 898 (1940), wherein the Board held
that a power to extend the trust benefits to children born thereafter
was governed by the Sanford case and that the gift was incomplete.
The Supreme Court has indicated, in another connection, that the con
tingency of remarriage is not the retention of control since the con
sent of another party is required. Brotherhood v* Pinkston, 293
96, 100 (1934).
In either event the property should be subject to estate tax*
But cf. Brotherhood v. Pinkston, 293 U.S. 96 (1934); Comm, v* State
Street Trust Co., 128 F# (2d) 618 (C.C.A. 1st, 19421.
See, however, Charles A. E# Goodhart, T.C. Memo# Op#, June 14, 1943>
C.C.H# Dec. 13, 279, holding that; a donee is not liable as transferee
because his contingent interest-is too remote, for valuation#
The
Robinette decision is cited in support of the conclusion#
Cf# Estate of Lester Field, 2 T.C* 21, 24 (1943)f
one of two persons 1/ is deductible from the tax base* 2/ At the other is
the Robinette decision, including the entire corpus where the reverter is
affected b y the grantor^s marriage, birth o f .children,•and the childrens
reaching majority, 3/ Would ,the Court include the entire corpus- i f .the
contingency were solely marriage or the birth of issue? In another context
the Court has been willing to evaluate the possibility of.remarriage, ij
but it does not- fpllow t’hat it would be prepared to import the same method
of appraisal-into the-gift'tax statute, .5/. At, any rate, it would hardly re
quire a valuation of the reverter involved in- the McLean case, where the
l/
In Hughes v. Comm,, 104 F. (2d) 144, 148 (C.C.A, 9th, 19397, the court
indicated that the Treasury should consider actual health factors in
addition to the expectancies revealed by the mortality tables. The
general practice is to the contr.ary (see 2 Bonbright, Valuation of
Property (1937)
(1938) 47 Tale L, J. 1354, 1358, including
: that-of the' Treasury, See Meierhof v, Higgins, 129 F* (2d) 1002, 1006
(C.C.A* 2d, 1942)c In view of Ithaca Trust Co* v, United States, 279
U,S, 151.(1929). events after the date of gift should not affect the
valuation as of such date, based on the teachings of the mortality
tables. See further Estate of Simon Guggenheim, 1 T,C,. 843 (1943)*
Cf, Matter of White* 208 N.T. 64, 101 N.E. 793 (1913). But cf. Note
(1938) 47 Tale L, J, 1354, 1358-9, 1381.
•
2/
3/
4/
5/
It is difficult to estimate the effect, in the present context, of
-Helvering v®. Taylor, 293 U eS, 507 (1935), refusing to sustain a defi4ciehCy^which was ,le.rbitrary and excessive” despite the taxpayers
failure to establish the correct amount of tax.
-The value o f ‘the reversionary interest may depend sQlely on the grantor
life expectancy.
Thus in Daisy B. Plummer, 2 T.C, 263, the grantor re
served a right to regain a stated portion of principal during her life
time and the reverter was actuarially computed,
If the entire.corpus is taxed, there is the additional question whether
a release of the reversionary interest at a later date would be subject
to gift tax* As a matter of justice, the tax on the initial-transfer
should suffice,
Brotherhood v, Pinkston, 293 U,S, 96 (1934),
Cf, Matter of Rothfeld, 163"'Mis c. 11, 296 N.T. Suppf|320 (1937);
see Note (1938) 47 Yale L, J, 1354, 1361, But cf. Comm. v. State
Street'1Trust Co,, 128 F. (2d) 618 (C.C.A. 1st, 1942).
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Press Service
No. ? -
—
j)
vj |
If ’ - 1 U
The report made to Secretary Morgenthau last March by the
Committee on Intergovernmental Fiscal Relations will receive
i&arj-e-r attention at the annual conference of the National Tax
Association opening its business sessions in Chicago today, the
Treasury has been advised*
In its report, the committee, made up of leading authorities
•on taxation and public finance, recommended an action program
to resolve conflicts between Federal, Stat^aad local governments
over taxation and to improve generally all intergovernmental
fiscal relationships.
A session of the National Tax Conference starting at 2:30
P.M. Sunday in the Palmer House, Chicago, will be devoted to a
study of these recommendations and of a report to be made by an
NTA committee on Coordination of Federal, State and Local Taxes.
Speakers will include Roy Blough, Director of Tax Research,
Treasury Department, and Harold M. Groves, Professor of
Economics at the University of Wisconsin. Pro|*. Groves w%s a
member of the Committee on Intergovernmental Fiscal Relations and
served as its chief of staff.
The Intergovernmental Fiscal Relations report has just been
made available to the public in revised form. It was printed at
the order of the Senate Finance Committee, to which "the
Secretary/of the Treasury transmitted the report in accordance with
a Senate /resolution authorizing the study which the committee
made. The title of the printed version is ’’Federal, Statehnd
Local Government Fiscal Relations”, and copies may be had frcm
the Superintendent of D0cuments, G0vernment Printing Office,
Washington, at 75 cents'each. 'The official designation is
Senate Document 69.
TREASURY .DEPARTMENT
Y/ashington
FOR IMMEDIATE RELEASE
Saturday, November 20, 1943■«
Press Service
No* 39-61
The report made to'Secretary,Morgenthau last March by
the Committee on Intergovernmental Fiscal Relations will
receive prominent attention at the annual conference of the
Rational Tax Association opening its business sessions in
Chicago today, the Treasury has been advised*
In its report., the committee, made up of leading author
ities on taxation and public finance, recommended an action
program to resolve conflicts between Federal, State and local
governments over taxation and to improve generally all inter
governmental fiscal relationships,
A session of the National Tax Conference starting at
2?30 p.ml Sunday in the Palmer House, Chicago, will be devoted
to a study of these recommendations and of a report to be made
by an NTA committee, on Coordination of Federal, State and
Local Taxes. Speakers will include Roy Blough, Director of
Tax Research, Treasury Department, and Harold M f G-roves,
Professor of Economics at the University of W i s c o n s i n P r o
fessor Groves was a member of the Committee on Intergovern
mental Fiscal Relations and served as its chief of staff.
The Intergovernmental Fiscal Relations report has just
been made avai lable to the public in revised form. It was
printed at the order of the Senate Finance Committee, to
which the Secretary of the Treasury transmitted the report
in accordance with a Senate resolution authorizing the study
which the committee made. The title of the printed version
is "Federal, State and Local Government Fiscal Relations",
and copies may be had from the "Superintendent of Documents,
Government Printing Office, Y/ashington, at 75 cents each.
The official designation is Senate Document 69,..-oOo-
m
-
U
-
of Indebtedness offered, and that the market not
trade in any of the marketable securities offered in
the Drive*
[To avoid unnecessary transfers of funds from one
locality to another, the Treasury requests that all
subscriptions by corporations and firms be entered and
paid for through the banking institutions where funds
are located. This request is made to prevent disturbance
to the money market and the banking situation. The
Treasury will undertake to see that statistical credit
is given to any locality for such subscriptions that the
corporations and firms may request; except subscriptions
from insurance companies will be credited to the State
of the fiome ^ffice as in the past.
X
[in order to help in achieving its objective of
selling as many securities as possible outside of the
\
banking system, the Treasury requests the cooperation
of all banking institutions in declining to make specu
lative loans for the purchase of Government securities.
The Treasury is in favor of the banks making loans to
facilitate permanent investment in Government
securities*.
/
provided such loans are made in accord with the /oint
%
^Statement issued by the National and State Bank Supervisory
Authorities on November 23, 19h2.
£) (Q 0
in the 2-l/U% and 2-1/2% Bends-under a formula to
be announced later.
The 2-1/2% Bond will be dated February 1. 19^*
due March 15, 1970, callable March 15, 1965*
I
be issued in coupon or registered form at the option of
the buyers, in denominations from $500 to $1,000,000.
if?
Commercial banks, which are defined for this purpose
as banks accepting demand deposits^ will not be permitted
I
to own these bonds until
I
19^» except for the
limited investment of time deposits.
The 2-1/M# Bond will be dated
due Sept. 15, 1359
# callable Sept. 15*/ , will be issued
in coupon or registered form at the option of the buyers,
in denominations of $500 to $1,000,000. Commercial banks, I
which are defined for this purpose as banks accepting
demand deposits, will not be permitted to own these bonds
}
of time deposits.
(The 7/8% Certificate of Indebtedness will be dated
February 1, 194U, due February 1, 19^5. and will be
issued
in denominations of $1,000 to $1,000,000 and in coupon
for® only.
Treasury will request that, until after February
15, 19Uh, commercial banks not buy the 7/8% C ertificates
2
-
investors * the quota for which is $g-l/2 billion. This
will not preclude the acceptance of subscriptions from
other non-banking investors at any time during the Drive.
MI subscriptions for Savings Bonds and Savings Notes
received at the Federal Reserve Banks or at the Treasury
of the United States between January 1 and February 29,
19^4, will be credited to the Drive.
The goal and the type of securities to be offered were
determined by the Treasury after consultation with the
Chairmen of the State War Finance Committees, officials
of the Federal Reserve System, the American Bankers
‘Association and other investment authorities.
The securities to be sold under the direction of
the War Finance Committees will consist of:
Series I Savings Bonds
Series F and G Savings Bonds
Series C Savings Motes
2-1/2# Bonds of 1965-70
2-1A # Bonds of 1956-59
7/S# Certificate of Indebtedness
In view of the fact that many commercial banks accept
time deposits and perform in their own communities the
same functions as those performed by other savings insti
tutions, the Treasury will permit such commercial banks
to make a limited investment of their time deposits only
PRESS RELEASE
Secretary Morgenthau announced today that the
Fourth War Loan Drive would start January 18* and
would run until February 15# 1944.
The goal has been set at $14 billion. Five and
one-half billion dollars of this amount is to be raised
directly from individuals.
The State War Finance Committees will have the
task of raising this $14 billion. These committees are
being strengthened and expanded to meet the necessity
of increasing the number of people who are buying War
Bonds. Millions of volunteer salesmen are now ready
to carry this campaign for funds to every individual
investor in hoses and in plants throughout the nation.
The major emphasis throughout the entire peiod of
the Drive, January IS to February 15, will be placed on
the quota of $5-1/2 billion for individuals. During
the period from January IS to February 1 only sales to
individuals will be reported by the Treasury. The report
ing of sales to individuals will be supplemented starting
February 1 with reports of sales to other non-banking
-
2
-
investors - the quota for which is $8
This
will not preclude the acceptance of subscriptions fro®
other non-banking investors at any time during the Drive.
p U l subscriptions for Savings Bonds and Savings Notes
received at the Federal Reserve Banks or at the Treasury
of the United States between January 1 and February 29,
I9HH, will be credited to the Drive.
jThe goal and the type of securities to be offered were
determined by the Treasury after consultation with the
^fhairmen of the State far finance Committees, officials
of the Federal Reserve System, the American Bankers
Association and other investment authorities.
IS.' securities to be sold under the direction of
the War Finance Committees will consist of:
-
Series 1 Savings Bonds
Series F and G Savings Bonds
Series G Savings Notes
2-1/2$ Bonds of 1965-70
/ 2-1/H$ Bonds of 1956-59
7/8$ Certificate of Indebtedness
j~In view of the fact that many commercial banka accept
time deposits and perform in their own communities the
same functions as those performed by other savings insti
tutions, the Treasury will permit such commercial banks
to make a limited investment of their time deposits only
Cj^
~
(Zj
a
(c
,
Secretary Morgenthau announced today that the >
Fourth War Loan Drive would start January 18, and
would run until February 1§, igLU.
phe^goal has been set at $\kj b i M W h . Five and
one-half billion dollars of this amount is to be raised
directly from individuals.
The State War Finance Committees will have the
cbO~&,
task of raising this SlH, billion
«
These committees are
being strengthened and expanded to meet the necessity
of increasing the number of people who are buying War
Bonds. Millions of volunteer salesmen are now ready
to carry this campaign for funds to every individual
investor in homes and in plants throughout the nation.
jjThe major emphasis throughout the entire peiod of
the Drive^January 18 to February 157-will be placed on
the quota of $5^
for individuals. During
the period from January 18 to February 1 only sales to
individuals will be reported by the Treasury. The
report
ing of sales to individuals will be supplemented starting
February 1 with reports of sales to other non-banking
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Monday, November 22, 19A3._____
Press Service
Ho. 39-62
Secretary Morgenthau announced today that the Fourth War Loan Drive
would start January 18, and would run until February 15, 1944.*
The goal has been set at 114,000,000,000.
Five and one-half billioj
dollars of this amount is to be raised directly from individuals*
The State rrar Finance Committees will have the task of raising this
$14,000,000,000. These committees are being strengthened and expanded t<
meet the necessity of increasing the number of people who are buying War
Bonds* Millions of volunteer salesmen are now ready to carry this campaign
for funds to every individual investor in homes and in plants throughout the
nation.
The major emphasis throughout the entire period of the Drive - January 18
to February 15 - m i l be placed on the quota of $5,500,000,000 for individuals.
During the period from January 18 to February 1 only sales to individuals will
be reported by the Treasury, The reporting of sales to individual wall be
supplemented starting February 1 with reports of sales to other non-banking
investors - the quota for which is $8,500,000,000.
This will not preclude
the acceptance of subscriptions from other non-banking investors at any time
during the Drive.
All subscriptions for Savings Bonds and Savings Notes received at the
Federal Reserve Banks or at the Treasury of the United Stages between January 1
and February 29, 1944, will be credited to the Drive,
a- cd
The goal and the type of securities to be offered -were determined by th
Treasury after consultation with the chairmen of the State War Finance Commi
tees, officials of the Federal Reserve System, the American Bankers Associati
and other investment authorities.
The securities to be sold under the direction of the War Finance Commit
tees will consist of:
Series E Savings Bonds
Series F and G Savings Bonds
Series C Savings Notes
2-1/2$ Bonds of 1965-70
2-1 / 4$ 'nonds of 1956-59
7/8$ Certificate of Indebtedness
In view of the fact that many commercial banks accent time denosits and
-
2
-
to make a limited investment of their time deposits only in the 2-1/4# and
2-1/2# Bonds under a formula to be announced iater.
The 2-1/2# Bond will be dated February 1, 1944, due March 15, 1970,
callable March 15, 1965, and m i l be issued in coupon or registered form at
the option of the buyers, in denominations from $500 to $1,000,000. Com
mercial banks, which are defined for this purpose as banks accepting demand
deposits, will hot be permitted to own these bonds until February 1, 1954,
except for the limited investment of time deposits.
The 2-1/4# Bond m i l be dated February 1, 1944, due Sept. 15, 1959,
callable Sept* 15, 1956, and m i l be issued in coupon or registered form at
the option of the buyers, in denominations of $500 to $1,000,000.
Commercial
banks, which are defined for this purpose as banks accepting demand deposits,
will not be permitted to own these bonds until September 15, 1946, except for
the limited investment of time deposits.
The 7/8# Certificate of Indebtedness will be dated February 1, 1944, 1
due February 1, 1945, and will be issued in denominations of $1,000 to
$1,000,000 and in coupon form only.
The Treasury will request that, until after February 15, 1944, com
mercial banks not buy the 7/8# Certificates of Indebtedness offered, and
that the market not trade in any of the marketable securities offered in
the Drive,
To avoid unnecessary transfers of funds from one locality to another,
the Treasury requests that all subscriptions by corporations and firms be
entered and paid for through the banking institutions where funds are located.
This request is made to prevent disturbance to the money market and the bank
ing situation. The Treasury will undertake to see that statistical credit is
given to any locality for such subscriptions that the corporations and firms
may request; except subscriptions from insurance companies will be credited
to the State of the home office as in the past.
In order to help in achieving its objective of selling as many securi
ties as possible outside of the banking system, the Treasury requests the
cooperation of all banking institutions in declining to make speculative
loans for the purchase of Government securities. The Treasury is in favor
of the banks making loans to facilitate permanent investment in Government
securities provided such loans are made in accord with the joint statement
issued by the National and State Bank Supervisory Authorities on
November 23, 1942.
o 0
0
TREASURY DEPARTMENT
Washington
-$
FOR RELEASE, MORNING NEWSPAPERS,
Tuesday, November 23» 1943»
Press Service
\
'
1
The Secretary of the Treasury announced last evening that the tenders for
$1,000,000,000, or thereabouts of 90-day Treasury bills to be dated
November
26, 1943,
and to mature February 24, 1944, which were offered on November 19, were opened at the
Federal Reserve Banks on November 22.
The details of this issue are as follows:
Total applied for - $1,621,636,000
Total accepted
- 1,003,704,000
Average price
(includes $73,132,000 entered on a fixedprice basis at 99.905 and accepted in full)
- 99-906/Equivalent rate of discount approx. 0-376% per annum
Range of accepted competitive bids:
High
Low „
- 99.910 Equivalent rate of discount approx. 0.360% per annum
- 99.906
«
«
h
»
n
o.376% w
M
(63 percent of the amount bid for at the low price was accepted)
Federal Reserve
District_______
Total
Applied for______
Total
Accepted______
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
#
$
TOTAL
48,235,000
1,123,203,000
28,815,000
49,146,000
18,275,000
31,362,000
131,520,000
19,079,000
7,825,000
23,581,000
' 20,320,000
119.775,000
$1,621,636,000
34,543,000
683,667,000
20,216,000
35,725,000
15,615,000
14,525,000
74,613,000
10,430,000
7 441,000
20,399,000
10,600,000
80*925.000
,
$1,008,704,000
TREASURY DEPARTMENT
V/ashington
FOR RELEASE, MORNING- NEWSPAPERS,
Tuesday, November 23. 1943.
11-22-43
’
Press Service
No*
The Secretary of the Treasury announced last evening that
the tenders for $1,000,000,000, or thereabouts of 90-day Treasury
bills to be dated November 26, 1943. and to mature February 24,
1944, which were offered on November 19, were opened at the Fed
eral Reserve Banks on November 22.
The details of this issue are as follows:
Total applied for - $1,621,636,000
Total accepted
- 1,008,704,000 (includes $78,182,000 .
entered on a fixed-price basis at 99.905 and accepted in
full)
Average price
- 99.906/Equivalent rate of discount approx.
0.376/a per annum
Range of accepted competitive bids:
High
Pew
- 99*910
0.360$
- 9 9 .9 0 6
0.376$
Equivalent rate of discount approx,
per annum
Equivalent rate of discount approx.
per annum
(63 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Total
Applied for
Total
Accepted
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago St. Louis
$
#
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL
48,235,000
1 , 1 2 3 , 203,000
2 8 , 815,000
.
49.146.000
18 275.000
31.362.000
131.520.000
19.079.000
34,548,000
683,567,000
20,2X6,000
.
23.581.000
20.820.000
119.775.000
35.725.000
15 615.000
14.525.000
74.613.000
10.430.000
7,441,000
20.399.000
10.600.000
80,925.000
$1,621,636,000
$1,008,704,000
7,825,000
oQo
trkasuht depabteekt
Washington
fo e immediate
w m kS E ,
m rnm Service
Tuesday. November 2 3. 1943.
^
f /
Secretary df the Treasury Morgenthau announced today that the
subscription books for the current offering of 7/8 percent Treasury
Certificates of Indebtedness of Series 0-1944* ©pen to the holders
of Treasury Certificates of Indebtedness of Series S-1943 maturing
December 1, 1943* will close at the close of business tomorrow, Hoes®ber 24*
Subscriptions addressed to a Federal Reserve Bank o r Branch, or
to the Treasury Department, and placed in the nail before 12 o'clock
isidnight, Wednesday, Horeisber 24, will be considered as hairing been
‘entered before the d o s e of the subscription books.
Announcement of t h e amount of subscriptions a n d their division
among the several Federal Reserve Districts w i l l be m d e
0 0 c?
later.
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Tuesday^ November 25, 1943.
Press Service
No. 39-64
Secretary of the Treasury Morgenthau announced
today that the subscription books for the current
offering of 7/8 percent Treasury Certificates of
Indebtedness of Series G-I9 4 4 , open to the holders
of Treasury Certificates of Indebtedness of Series
B-1943 maturing December
1,
1943, will close at the
close of business tomorrow, November
24.
Subscriptions addressed to a Federal Reserve
Bank or Branch, or to the Treasury Department, and
placed in the mail before
12
o ’clock midnight,
Wednesday, November 24, will be considered as having
been entered before the close of the subscription
books.
Announcement of the amount of subscriptions
and their division among the several Federal Reserve
Districts will be made later.
-0 O 0 -
November 23, 194-3
STATEMENT BT SEC RETART MORGENTHA.U:
When the Treasury made public the tentative proposal for an
International Stabilization Fund, I said that we were studying means
of encouraging and facilitating international investment for reconstruc
tion and development* A few weeks ago I appeared before the Congressional
Committees and summarized for them the principles which we believe should
guide us in the establishment of a United Nations Bank for Reconstruction
and Development©
The technical staffs of the Treasury and other interested departments
and agencies have now prepared a tentative proposal for such a Bank0
This tentative proposal is being sent to the Finance Ministers of the
United Nations and the countries associated with them, for consideration
and for study fcy their technical staffs© The Finance Ministers have been
informed that this tentative proposal does not represent the official
views of this Government but it is an indication of the views held by our
technical staffs©
We are releasing for publication the tentative proposal for a United
Nations Bank for Reconstruction and Development and a covering memorandum
on the problem of international investment* These two documents, sent to
the Finance Ministers, are being released to make them available for
public discussion© It is our intention to discuss the tentative proposal
with business, banking and other interested groups in this country©
The technical staffs of the Treasury and other departments of this
Government are of the opinion that an International Stabilization Fund
and a Bank for Reconstruction and Development could help provide a sound
financial foundation on which private enterprise can build a prosperous
world economy*
A United Nations Bank
For Reconstruction and Development
One of the important international economic and financial problems
which will confront the United Nations at the end of the war will be the
unprecedented need for foreign capital.
In the areas devastated by war
or plundered and ravaged by the enemy, factories and mines, public utili
ties and railroads, public buildings and public works will have to be re* paired or restored.
In all of the United Nations,
industries now produc
ing war goods will require capital for reconversion to peacetime production*
Finally, in many areas of the world, large investment will be needed for
industrial/ agricultural and commercial development.
Countries whose productive capacity has been seriously impaired by war
will find-that their industries cannot provide the capital goods and their
people cannot provide the savings they require for reconstruction.
Most
non-industrial countries will of necessity be dependent upon foreign invest*ment to acquire the funds for the purchase of machinery, equipment, and
other capital goods for development# And .even in those countries where
a considerable part of the need for capital can be met locally, there will
be some need for foreign capital to supplement the funds that can be raised
at home.
With the return of an assured peace, private financial agencies may
be expected to supply most of the needed short-term foreign capital# When
the shipping situation is improved and peacetime industry' here and abroad
has recovered, many business firms will be eager to sell their products
abroad on reasonable and even generous credit terms. And banks likewise
will hasten to expand their foreign business, reopening and establishing
branches abroad, and assisting in the financing of international trade.
It is not unreasonable to hope that with the return of peace there
will afso be a gradual resumption of long-term international investment,
particularly in the form of the establishment of foreign "branch plants and
the acquisition of shares in established foreign enterprises. With the
groY/th of confidence in monetary stability, foreign investments m i l
gradually assume the form of publicly floated loans to governments and
municipalities, and to public utilities and other industries.
This flow of private capital to war stricken countries will be en
couraged by an adequate program of international relief and rehabilitation
which helps to quickly restore to a working basis the economic life of
those countries. Another, and possibly even more important, stimulant to
foreign investments, Y/ould be the existence of an international agency,
such as the International Stabilization Fund, designed to promote stability
of foreign exchange rates and freedom from restrictions on the vathdrawal
of earnings.
Such an agency could do much to enhance the attractiveness
of foreign investments*
-
2
-
■'■Tiile there will undoubtedly be substantial amounts of long-term
foreign investment even in the early postv/ar period, the flow of capital
to countries greatly in need of foreign capital is likely to be inadequate
for many years to come* Private capital will understandingly hesitate to
venture abroad in anything like the required volume*
It has suffered too
many losses from war, from depreciating currencies, from exchange restric
tions, and from business failures and defaults* There is little evidence
to justify the hope that in the years immediately after the war investors
will lend the large sums that can be economically used in foreign countries*
Obviously, it would be desirable to encourage in every way, the pro**
vision of capital for productive purposes through the usual private invest
ment channels, and to the extent that private investment is inadequate, to
provide supplemental, facilities* The problem is fundamentally an inter
national problem and only an international governmental agency equipped
with broad powers and large resources can effectively encourage private
capital to flow abroad in adequate amounts and provide a part of the
capital n o t .otherwise available.
The primary aim of such an agency should be to encourage private
capital to go abroad for productive investment by sharing the risks of
private investors and by participating with private investors in large
ventures* The provision of some of the capital needed for reconstruction
and development, where private-capital is unable to take the risk, is
intended to remain secondary in the operations of such an agency*
It
should, of course, scrupulously avoid undertaking loans that private in
vestors are willing to make on reasonable terms.
It should perform only
that part of the task which private capital cannot do alone.
The need for foreign capital will be so great and the provision of
adequate capital so important that it would be extremely shortsighted to
neglect this urgent international problem.
If private capital should suf
fice there would then be little for an international agency to do, beyond
encouraging private investment.
If, however, private capital were to prove
unable fully to meet the needs, then such an international agency would be
able to fill the breach until private capital again flowed freely and the
demand for foreign capital throughout the world became less urgent.’
It is imperative that we recognize that the investment of productive
capital in undeveloped and in capital needy countries means not only that
those countries will be able to supply at lower costs more of the goods the
world needs, but that they wii1 at the same time become better markets for
the world’s goods.
By investing in countries in need of capital, the lend
ing countries, therefore, help themselves as well as the borrowing
countries.
If the capital made available to foreign countries vijquld not
~ 3 -
otherwise have been currently employed, and if it is used for productive
purposes, then the whole world is truly the gainer*
Foreign trade everywhere will be increased,* the real cost of producing the goods the world
consumes will be lowered; and the economic well-being of the borrowing
and lending countries will be raised*
One great contribution that the United Nations can make to sustained
peace and world-wide prosperity is to make certain that adequate capital
is available on reasonable terms for productive uses in capital-poor
countries* With abundant capital, the devastated countries can move
steadily toward rehabilitation and a constantly improving standard of liv
ing. Nothing could be more conducive to political stability and to inter
national collaboration* Without adequate supplies of capital, however,
recovery in Europe and Asia m i l be slow and sporadic, and economic dis
content and international bitterness will in time assume disturbing pro
portions, To spend hundreds of billions to fight a war thrust upon us,
and then to balk at investing a few billions to help assure peace and
prosperity would appear to be a singularly unwise policy.
Accompanying this memorandum is a draft proposal for a Bank for
Reconstruction and Development of the United and Associated Nations* The
draft was prepared by the technical staff of the'United States Treasury in
consultation with the technical staffs of other department§^of this
Government. The proposal has neither official status nor the approval of
any department of this Government*
It is in outline form touching on the
more important points and is intended only to stimulate thoughtful dis
cussion of the problem in the hope that such discussion will call forth
constructive criticism, suggestions, and alternative proposals for pos
sible later submission to the appropriate authorities* and to the public*
A United Nations Bank for Reconstruction and Development is proposed
as another international agency needed to help attain and maintainworld
wide prosperity after the war*
It is designed as a companion agency to an
International Stabilization Fund. Each agency could stand and function
effectively without the other; but the establishment of such a Bank mould
make easier the task of an International Stabilization Fund, and the suc
cessful operation of an International Stabilization Fund woutd enhance
the effectiveness of the Bank. Together, the two institutions could help
provide a sound financial foundation on which private enterprise can
build a prosperous world economy.
Henry Morgenthau, Jr*
Secretary of the Treasury*
Washington, D* C.
November, 1943.
U? $.* Treasury
November, 19*+3
preliminary Draft Outline
of a proposal for
A United nations Bank
For Reconstruction and Development
Preamble
1* The provision of foreign capital will be one of the
important international economic and financial problems of
the postwar period. Many countries will require capital for
reconstruction, for the conversion of their industries to
peacetime needs, and for the development of their productive
resources*
Others will find that foreign investment provides
a growing market for their goods.
Sound international invest
ment can be of immense benefit to the lending as. well as to
the borrowing countries*
2. Even in the ear^y ;posbwar. yeans It may be hoped
that a considerable part
for international
investment will be provided % r 6ugh private investment chan
nels* It will undoubtedly bq. necessary, however, to encour
age private investment by assuming some of the risks that will
be especially large immediately after the war and to supple
ment private investment with capital provided through inter
na ti onal cooperation*
The United nations Bank for Recon
struction and Development Is proposed as a permanent institu
tion to encourage and facilitate international investment for
sound and productive purposes.
3* The Bank is intended to cooperate with private finan
cial agencies in making available long-term capital for recon
struction and development and to supplement such investment
where private agencies are unable to meet fully the legitimate
needs for capital for productive purposes.
The Bank would
make no loans or investments that could be secured from pri
vate investors on reasonable terms? The principal function of
the Bank would be to guarantee and participate in loans made
by private investment agencies and to lend directly from its
own resources whatever additional capital may be needed.
The
facilities of the Bank would be available only for approved
governmental and industrial projects which have been guaran
teed by national governments.
Operating under these princi
ples, the Bank should be a powerful factor in encouraging the
provision of private capital for international investment.
\
-
2
-
H. By making certain that capital is available for producf i ^ d h s e s 'oncreasonable terms, 'the Bank'can’make ah im
portant ;;:contrihutioH"-’to‘-'enduring peace'and'prdSpe^ity.' With
"adequate-’Capital/:cdunthies affected'by”the war can move
steadily;toward‘reconstruction, and the newer countries can
uhdertaka'the-ecoiiomic development of which 'they-are capable.
International investment for these purposes'Cdn'b^ a signifi
cant factor in expanding trade and in helping to maintain
af,Hi'gb ley4l' df-business activity'"throughout -the world.
}'■'?' .
"IV
The purposes of t h e ‘Bank
1.
To assist in the reconstruction and development of
member'countries by booperating/with private.financial
''agencies' -in. the provision Of capital’.for. sound and
’• '
• constructive international' investment. ■ ;
2. 'To provide Capital' for-reconstruction arid-'(development,
under conditions''Which will amply safeguard the Bank’s
'funds/ when-private financial agencies'-are unable to
supply the'-'needed'capital for -such purposes on reason-?
_able terms consistent with the borrowing policies of
member countries.
••i; y-.-. •• ..y-;
3* •To facilitate a rapid-and smooth' transition from
a wartime'economy'to;:a peacetime"economy by increasing
the flow o f ’international investment, ■'and thus to ,help
■ ^y-avpid serious''disruption of the'economic "life of mem•’ bei•Countries* •••.
~A
To assist in raising the productivity of member countries
• by Helping to make available through international col• laboration long-term capital for-the sound development of
product ive'resources'. ’.
5* To-promote the long-range balanced growth-of international
• • trade among member countries*
‘
*
IT> "Capital Structure of the ‘Bank /•
$10 billion consisting of ‘shares -having a par ‘value
equal to $100,000*
2* CThe' shares of the Bank shall be non-transferable, nonassessable, ‘and non-taxable.
The' liability on shares
’ shall be limited to the unpaid portion of the subscrip
tion price,
'
' ■
;T '
-33*
EaOfr-government which is a member of the International
* 'Stabilization Fund'shall subscribe- to a-number’-of shares
' y to be determined by an agreed upon formula,
The formula
shall take into account such relevant data as the
national income arid the international trade of the mem
ber couhtry.
1)
Such a formula woujid make the subscription of the United
States approximately one-third of the total.
4*
payments on subscriptions to the shares of the Bank shall
be made as follow^;.
"a,
b.
The initial payment of each member country shall be
20 percent of its subscription, some portion of which
(not to exceed- 20 perc'ent) shall be in gold and the
remainder in local currency. The proportions to be,
paid.in gold and local currency shall be graduated
according to ek agreed, .upon schedule which" shall take
'into account t h e .adequacy of .the gold and' free foreign
.exchange holdings' pf 'dach member- country.
The member countries shall 'make the initial payments within '$0 days after the date set for the
; operations' of the Bank to begin. 'The remainder '
of their respective- •subscriptions shall be paid
in such amounts' and'at such times as the Board
of Directors may determine, but ■not more than 20
percent of the subscription may be called in any
one. year,.
c.
Calls for further'payment on subscriptions shall
be Uniform on all shares, and no calls shall be
made unless funds are needed fo'r the operations
of the Bank.
The proportion of subsequent pay‘ ments to be made in gold shall be determined by
the schedule irt iT-U-a-as it applies to each mem-*
ber country at the time of each call.
5.
A substantial part- Of the subscribed-capital of the
Bank shall be reserved in the form of unpaid sub-*
scriptions as a surety'fund for the securities guaran
teed by the Bank or issued by the Bank.
6*
When the cash resources of the Bank are substantially
in excess of prospective needs, the Board m a y return,
subject to future call, uniform proportions of the sub
scriptions.
When the local currency holdings'of the
Bank exceed 20 percent of the subscription of any member country, the Board may arrange to repurchase with
local currency some of the shares held by such a country.
- k -
7*
Each member country agrees to repurchase each year its
lbbai^cu^rihc^ held by the Bank amounting to not more
t h a n '-2''percent; of its paid subscription, paying for it
with §9 id; 'provided, ‘ however, that»
a*
‘ b,
c.
^Hfs reddirement may be generally suspended for
any yeiar:by a ‘three-fourths vote of the Board,
1Tb country shall be required to repurchase local
currency ih any given year in excess of one-half
of the addition to its official holdings of gold
during the preceding year *
The obligation of a member country to repurchase
it is local currency shall be limited to the amount
of the local currency paid on its subscription,
8*
All member countries agree that all of the local cur
rency holdings and other assets of the Bank located in
their countries shall be free from any special restric
tions" as to their use, except such restrictions as are
consented to by the Bank,, and subject to IV-13,. below,
9.
The resources and the facilities of the Bank shall be
used exclusively for the benefit of member countries.
III,
The International Monetary Unit
1,
The monetary unit of the Bank shall be the TJnitas of
the International Stabilization Fund (137-1/7 grains
of find gold, that is,, equivalent to $10 U*S.),
2*
The Bank shall keep its accounts in terms of unitas.
The local currency assets of the Bank are to be
guaranteed against any depreciation in their value in
terms of unitas*
IV*
1,
Powers and Operations
To achieve the purposes stated in Section I, the Bank
may guarantee, participate in, or make loans to any
member Country and through the government of such
country to any of its political subdivisions or to
business or industrial enterprises therein under con
ditions provided below.
a.
The payment of interest and principal is fully
guaranteed by the national government.
b.
The borrower is otherwise unable to
funds from other sources, even with
government's guaranty of repayment,
ditions which in the opinion of the
reasonable.
secure the
the national
under con
Bank are
.5 -
c0
A cbmpetent'committee has made a careful study » ’
of the merit3' of 'the project or the program
and, in a;written report, Concludes that the loan
would serve directly or 'indirectly t o •raise-' the
productivity of the borrowing country and that
■ the 'prospects' 'are favorable' to the servicing of
*•
the'loan0 The majority of the committee making
the report shall consist of members of the tech—
• ’ • nical staff of the Bank* •The committee shall in■ ‘ elude an expert selected by the country requesting
• ' the loan ¥rho;may or may not be a member of the
technical staff of .the Bank*
'dV
•
The Bank shall make arrangements to assure-the
use of the proceeds of''any loan-which it guar•'antees, participates in', or makes, for the pur
poses for which the loan was approved*
e * •;The Bank shall guarantee, participate in or make
’• ■loans only at reasonable.'fates of interest with
a schedule of'repayment, appropriate to the 1
; ' *. .character ■of -the -project and the -balance of pay
ments prospects of the country,of the borrower*
■”
2 % >&£! decordance* w ith the ■provisions in IV-1, above, t he
Bank may guarantee in whole or in part loans made by
private investors provided further:
. a*
The rate of interest and other conditions of the loan
are'reasonable*
"
•
.
*
b*' The'Bank is compensated, for its jrisk in guaranteeing
the loan0
*
Tlie Bank may participate in loans .placed through the usual
investment channels, provided all the' conditions listed
under IV*-1 above are met except that the "rate of interest
may be higher than if the loans were guaranteed by the
Banko
*0
',
M * -The Bank may encourage and facilitate international .
investment in equity, securities' by securing .the guarantee
of governments o f conversion into, foreign exchange of the
current earnings of such foreign held investments* In
promoting this objective the^ Bank may also participate in
such investments, but its aggregate participation in such
equity securities shall not exceed 10 percent of its paid
in capitalo .
" >
'
■„- 6 -
5* - The Bank-may-publicly offer any securities- it has
«
previously acquired© To facilitate-the’placing of such
securities, the Bank may, in its discretion, guarantee
them©
6©
The Bank shall make no loans or investments that can be
placed through the usual private investment .channels on
reasonable terms© The Bank shall by regulation prescribe
procedure for its operations t h a t - m i l assure the appli^
cation of this-principle©
7o
The Bank shall impose no condition upon a loan as to the
particular member country in which the .proceeds of the
loan must-be spent j provided, however, that, the proceeds
of a loan may not be spent in any country which is not a
member countxy without the approval of the Bank©
So
The Bank in making loans shall provide that:
a0
The foreign exchange in connection with the
project or program shall be provided by the
....Bank in the currencies of the. countries in
which the proceeds of the loan will be spent
and only with the approval of such countries©
bo
The local currency needs in connection with
the project shall be largely financed locally
without the assistance of the Banko
Co
In special circumstances, where the Bank con
siders that the local part of any project
cannot be financed at home except on very un
reasonable terms, it can lend that portion to
the borrower in local currency©
, ,
d©
i/i/here the developmental program will give rise
to an increased need for foreign exchange, for
. purposes not directly needed for.that program
yet resulting from the program, the Bank will
provide an appropriate part of the loan in gold
or desired foreign exchange©
~*9o When a loan is made by the Bank it shall credit, the
account of the borrower with the. amount of the loan©
Payment shall be made from this account to meet {
drafts covering audited expenses© .
- 7 -
10©
Loans participated in or made by the Bank shall contain
the following payment provisions;
a«,
Payment of interest due on loans shall be
made in currencies acceptable to the Bank
or in gold*, Interest will be payable only
on amounts withdrawn©
b0
Payment on account of principal of a loan
shall be in currencies acceptable to the Bank
or in gold© If the Bank and the borrower
should so agree at the. time a loan is made,
payment on principal may be in gold, or at
the option of the borrower, in the currency
actually borrowed0
Co
In event of an acute exchange stringency the
Bank may in its judgment accept for periods
not exceeding 3 years at a time the payments
of interest and principal in local currency®
The Bank shall arrange with the borrowing
country for the repurchase of such local cur-rrency over a period of years on appropriate
terms that safeguard the value of the Bank *s
holdings of such currency0
do
Payments of interest and principal, whether
made in member currencies or in gold, must
be equivalent to the unitas value of the loan
and of the contractual interest thereon®
llo
The Bank may levy a charge against the borrower for its
expenses in investigating any loan placed, guaranteed,
participated in, or made in whole or in part by the
Bank©
12©
The. Bank may guarantee, participate in, or make loans
to international governmental agencies for objectives
consonant vdth the purposes of the Bank, provided
that one-half of the participants in the international
agencies are members of the Bank©
13©
In considering any application to guarantee, participate
in, or make a loan to a member country, the Bank shall
give due regard to the effect of such a loan on
business and financial conditions in the country in
which the loan is to he spent, and shall accordingly
obtain the consent of the country affected©
~ 8,-
14-0
15.
At the request of the countries in which portions of
the loan, are spent, the Bank Yd 11 repurchase for gold
or needed foreign exchange a part of the expenditures
in the currencies of those countries made by the borrower
from the proceeds of the loan0
With the approval of the representatives of the
governments of the member countries involved, the
Bank may engage in the' following operations:
a©
It may issue, buy' or sell, pledge, or
discount any of its own securities and
obligations, or securities and obliga
tions taken from its portfolio, or secur
ities which it has guaranteed©
b©
It may borrow from any member governments,
fiscal a g e n q i e s , central banks, stabilization
funds, private financial institutions in
member countries, or from international finan
cial agencies©
c©
16©
It may buy or sell foreign exchange, after
consultation with the. International Stabili* zatioh Fund, where such transactions are
necessary in connection with its operations©
The .Bank may act as agent or correspondent for the
governments of member countries,, their central banks,
stabilization funds and fiscal urgencies, and for
international financial'institutions.
The B a n k ‘may act as trustee, registrar or agent in
connection Y d t h loans guaranteed, participated in,
made, or placed through the Bank©
17©
Except as otherwise indicated the Bank shall deal
only Y d t h or through:
, a 0 .The governments of member countries, their
central banks,■stabilization, funds and fiscal
agencies©
b0
The International Stabilization Fund and any
other international ^financial agencies owned
predominantly by member governments©
The Bank may, nevertheless, W i t h the approval of the
member of the Board representing the government of the
country concerned deal Ydth the public or institutions
of member countries in its (the Bank*s) oym securities
or securities Which it has guaranteed©
— 9 -
18.
If the Rink shall declare any country as suspended from
membership* the member governments and their agencies
agree not to extend any financial assistance to that
country without the approval of the Bank until the
country has been restored, to membership*
19*
The Bank and its officers shall scrupulously avoid
interference in the political affairs of any member
country* This provision shall not limit the right
of an officer of the Bank to participate in the
political life of his own country*
The Bank shall not be influenced in its decisions
with respect to applications for loans by the
political character of the government of the
country requesting a loano Only economic considerations
shall be relevant to the Bankfs decisions*
V*
1.
Management
The administration of the Bank shall be vested in a Board
of Directors composed of one director and one alternate
appointed by edph member government in a manner to be
determined by it*
The director arid alternate shall serve for a period of
three years, subject to the pleasure of their government*
Directors and alternates may be reappointed*
2*
Voting by the Board shall be as follows:
a*
The director or alternate of each member country
shall be entitled to cast 1,000 votes plus one
vote for each share of stock held* Thus a
government owning one share shall cast 1,001
votes, while a government having 1,000 shares
shall cast 2,000 votes*
b*
No country shall cast more than 25 percent of the
aggregate votes*
c*
Except where otherwise provided, decisions of
the Board of Directors shall be by simple
majority of the votes cast, each member of the
Board casting the votes allotted to his govern
ment* When deemed to b e in tire best interests
of the Bank, decisions of the Board may be made,
without a meeting, by polling the directors on
specific questions submitted to them in such
manner as the Board shall by regulation provide*
..* ,,
’
.
IQ w
The Board of Directors shall' select a- President' of1 the
Bank, who 'Shall be the ^chief of- the-operating staff of
the Bank and ex-officio a member 'of -the Board, and one
or more vice presidents,
Slie President .and V i c e -presi
dents of'-the Bank* shall(hold office for four years,
Shall b e ’eligible for reelect,ion ,.;and ..may. be removed
for cause'at any time %■ the Board. i:The. staff of the
.B a n k 'shall be selected 'in accordance with regulations
established by the Board of Directors
:
.The'. 'Board of Directors shall appoint.from.among its
members, -an Executive Committee ’of: not more'than nine
members. The President of the Bank shall be; ah exOfficio niember of the .Executtve 0ommi-ttee,.
The Executive Committee shall be continuously' avail
able at the head office of the' Bank and, shall exer-rcise the authority delegated to it by the. Board,
In
the absence o f any member of the Executive Committee,
his alternate on the Board shall .-act in his place.
Members’of. the Executive Committee shall receive ap
propriate .remuneration,
■ • '•
The Board of Directors shall select on Advisory
Council of seven members. The Council shall advise
with the-Board and the'officers of the. Bank "on mat
ters of general policy. The Council shall meet
annually and on such other occasions as the Board
may request.
The members of the Advisory Council shall be selected
from men of outstanding ability, but not more than
one member shall be selected from the same* country.
They shall serve for two years, and the term of any
member may be renewed. Members of the Council shall
be paid their expenses and a remuneration to be fixed
by the -Board,
The Board of Directors may appoint such other com
mittees as it finds necessary for the work of the
Bank.
It .may also appoint advisory committees chosen
wholly or partially from persons not regularly em^
ployed by the Bank.
The Board of Directors may at any meeting authorize
any officers or committees of the Bank to exercise
any specified powers of the Board except the power
to mak e < guarantee or participate in loans.
Such
powers shall be exercised in a manner consistent with
the general policies and practices of the Board.
- u
-
The Board may by a three-fourths vote delegate to
the Executive Committee the power to make, guarantee
or participate in loans in such amounts as may "be
fixed by the Board,
In: passing upon amplications for
loans, the Executive Committee shall act under the
requirements specified for each-type of loan.
8.
A member country failing ,jto meet-its financial obli'gations to the Bank may be declared in default and it
may be suspended from membership during the period of
its default provided a -majority of the member countries
:
• so decide. While undor suspension, the country .shall
*be denied the privileges of membership, but shall be
subject to the obligations of membership. At the end
of one year the country shall be automatically, dropped
from membership in the Bank unless it has been restored
to good standing by.a majority of the member countries.
If a member count ry elects to vithdraw or is dropped
from the Bank its shares 'of stock shall,, if the Bank has
a'surplus, be repurchased at the. price paid,. If the
B a n k ’s books show a loSsV-such country shall bear a pro
portionate sharb of the 16ss..The Bank shall have 5
years in which to liquidate its., obligations to a member
withdrawing or dropped .from the Bank5
.
„ Any member country that withdraws or is dropped from,
the International Stabilization Bund, shall relinquish
its membership in the Bank unless three-fourths. of-th£
member votes favor its remaining as a member,
.
9.
10.
The yearly net profits shall be applied as follows:
a.
All profits shall be distributed in proportion
to shares held, except that one-fourth of the - .
profits shall be applied to surplus until the
surplus equals 20 percent of the capital,
b.
Profits shall be payable in a country's local
currency, or in gold at the option of the Bank.
The Bank' shall collect and make available to member
countries and to the International Stabilization Bund
financial and economic information, and reports re
lating to the operations of the Bank.
countries shall furnish the Bank with all
information and data, that- would facilitate the
operations of the Bank.
Member
-oOo-
POE IMMEDIATE EELEASE,
November 23» 1943
The Bureau of Customs announced today preliminary figures showing
the quantities of coffee authorized for entry for consumption under the
quotas for the 12 months commencing October 1, 1943, provided for in
the Inter-American Coffee Agreement, proclaimed by the President on
April 15* 1941* as follows:
Country of Production
*
•
:
:
t
«
Quota Quantity
(Pounds) Xj
: Authorized for entry
:
for consumption
f
*
♦
«
_ lAs of (Date) : (Pounds)
Signatory Countries:
Brazil
Colombia
Costa Eica
Cuba
Dominican Eepublic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Mexico
Hicaragua
Peru
Venezuela
1*353,183,480
458,336*340
29,100,720
11,640*288
17,460,432
21,825,540
87*302,160
77*844,426
40*013,490
2,910*072
69,114*210
28,373*202
3,637*590
61 *111, £>12
Hon-signatory Countries:
51,653,778
X/
Hov, 13, 1943
it
it
it
ii
it
it
|
ft
w
ii
H
ft
II
II
169,986*734
66*797,382
1*620*537
1,716,157
2*569,114
5*979,455
787*587
450,791
1,379,312
460*402
3,094,976
59,587
3*205*675
1,993*069
Quotas as established by action of the Inter-American Coffee Board on
March 11* 1943*
►oOo-
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Wednesday. November 34. 1943*
Press Service
No. 39-65
The Bureau of Customs announced today preliminary figures showing the
quantities of coffee authorized for entry for consumption under the quotas
for the 12 months commencing October 1, 1943, provided for in the InterAmerican Coffee Agreement, proclaimed by the President on April 15, 1941, as
follows:
Countxy of Production
:
:
: Authorized for entry
Quota Quant ity :
for consumution
•
•
(Pounds) ] J
:As of (Date) : (Pounds)
Signatory Countries:
Brazil
Colombia
Costa Rica
Cuba
Dominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Mexico
Nicaragua
Peru
Venezuela
Non-signatory Countries:
1/
1,353,183,480
458,336,340
29,100,720
11,640,388
17,460,432
21,825,540
87,302,160
77,844,426
40,013,490
2,910,072
69,114,210
28,373,202
3,637,590
61,111,512
51,653,778
Nov. 13, 1943
it
it
it
tt
«
it
it
it
ti
it
ti
it
IT
169,986,734
66,797,382
1,620,537
1,716,157
2,569,114
5,979,455
787,587
450, 791
1,379,312
460,402
3,094,976
59,587
3,205,675
1,993,069
Quotas as established by action of the Inter-American Coffee Board on
March 11, 1943,
oOo-
for such bills, whether on original issue or on subsequent purchase, and the amount
actually received either upon sale or redemption at maturity during the taxable
year for which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418, as amended, and this notice, pre
scribe the terms of the Treasury bills and govern the conditions of their issue.
Conies of the circular may be.obtained from any Federal Reserve Bank or Branch.
Reserve Banks and Branches, following which public announcement will be made by the
Secretary of the Treasury of the amount and price range, of accepted bids.
Those
submitting tenders will be advised of the acceptance or rejection thereof.
The
Secretary of the Treasury expressly reserves the right to accept or reject any or
all tenders, in whole or in part, and his action in any such respect shall be final.
Subject to these reservations, tenders for $100,000 or less from any one bidder at
99.905 entered on a fixed-price basis will be accepted in full.
Payment of accepted
tenders at the prices offered must be made or completed at the Federal Reserve Bank
in cash or other immediately available funds on
December 2, 1943
.
The income derived from Treasury bills, whether interest or gain from
the sale or other disposition of the bills, shall not have any exemption, as such,
and loss from the sale or other disposition of Treasury bills shall not have any
special treatment, as such, under Federal tax Acts now or hereafter enacted.
The
bills shall be subject to estate, inheritance, gift, or other excise taxes, whether
Federal or State, but shall be exempt from all taxation now or hereafter imposed
on the principal or interest thereof by an3r State, or any of the possessions of
the United States, or by any local taxing authority.
For purposes of taxation the
amount of discount at which Treasury bills are originally sold by the United States
shall be considered to be interest.
Under Sections 42 and 117 (a) (1) of the
Internal Revenue Code, as amended by Section 115 of the Revenue Act of 1941, the
amount of discount at which bills issued hereunder are sold shall not be considered
to accrue until such bills shall be sold, redeemed or otherwise disposed of, and
such bills are excluded from consideration as capital assets.
Accordingly, the
owner of Treasury bills (olpher than life insurance companies) issued hereunder
need include in his income tax return only the difference between the price paid
TREASURY DEPARTMENT
Washington ,
FOR RELEASE, MORNING NEWSPAPERS,
Friday*
November 26, 1943
—
------
The Secretary of the Treasury, by this public notice, invites tenders
for $ 1,000,000,000 , or thereabouts, of
91 -day Treasury bills, to be issued
fgjt
' 5SS”
on a discount basis under competitive and fixed-price bidding as hereinafter pro
vided,
The bills of this series will be dated
December 2, 1943
% and will
ifa-r»eh 2, 1944________ , when the face amount will be payable without
njb
Si
interest.
They will be issued in bearer form only, and in denominations of $1,000,;
mature
|5,000, $10,000, $100,000, $500,000, and $1,000,000 (maturity?- value).
Tenders will be received at Federal Reserve Banks and Branches up to the
closing hour, two o ’clock p. m., Eastern War time,
Monday, November 29, 1943
Tenders will hot be received at the Treasury Department, Washington.
Each tender
must be for an even multiple of $1,000, and the price offered must be expressed
on the basis of 100, with not more than three decimals, e. g., 99.925.
may not be used.
Fractions
It is urged that tenders be made on the printed forms and for
warded in the special envelopes which vd.ll be supplied by Federal Reserve Banks
or Branches on application therefor.
Tenders will be received without deposit from incorporated banks and
trust companies and from responsible and recognized dealers in i n v e s t m e n t securi
ties.
Tenders from others must be accompanied by payment of 2 percent of the face
amount of Treasury bills applied for, unless the tenders are accompanied by an
express guaranty of payment by an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federa
TREASURY DEPARTMENT
Washington
The
tenders
bills,
Secretary
FOR RELEASE, MORNING NEWSPAPERS,
F r i d a y , N o v e m b e r 26, 1 943.
11-24-43
' : --------------of* t h e T r e a s u r y ,
for $1,000,000,000,
to. b e
.series w i l l
1944,
when
or thereabouts,
i s s u e d on a d i s c o u n t
f i x e d - p r i c e b i d d i n g as
2,
the face amount will
issued
$ 5,000,
$10,000,
basis
1943,
of
$500,000,
and
invites
91-day Treasury
competitive and
•T h e
b i l l s 'of t h i s
and will mature March
be paya b l e w i t h o u t
in b e a r e r f o r m only,
$100,000,
p u b l i c notice,
under
hereinafter provided.
be da t e d D e c e m b e r
will be
by this
interest.
in denominations
and $1,000,000
2,
They
of $ 1 , 0 0 0 ,
(maturity value!
T e n d e r s w i l l b e r e c e i v e d at. F e d e r a l R e s e r v e B a n k s a n d B r a n c h e s
u p t o t h e closing' h o u r , t w o o ^ l o c k p, m., E a s t e r n W a r t i m e , M o n
day, N o v e m b e r 29, 1943.: T e n d e r s w i l l n o t b e r e c e i v e d a t t h e T r e a s
ury Department, Wash i n g t o n .
E a c h t e n d e r must be f or an even m u l
t i p l e o f $ 1 , 0 0 0 , a n d t h e p r i c e o f f e r e d m u s t be' e x p r e s s e d on t h e
b a sis of 1 00, w i t h n o t m o r e t h a n t h r e e d e c i m a l s , e. g., 9 9 , 9 2 5
Fractions m a y not be used.
It i s u r g e d t h a t t e n d e r s b e m a d e on
t h e p r i n t e d f o r m s a n d f o r w a r d e d in t h e s p e c i a l e n v e l o p e s w h i c h
w i l l b e s u p p l i e d b y F e d e r a l * R e s e r v e B a n k s o r B r a n c h e s on a p p l i c a
tion there f o r .
Tenders will be received without deposit from incorporated
banks a n d t r u s t c o m p a n i e s a n d f r o m r e s p o n s i b l e a n d r e c o g n i z e d
d e a l e r s in i n v e s t m e n t s e c u r i t i e s *
Tenders f r o m others must be
a c c o m p a n i e d b y p a y m e n t of 2 p e r c e n t o f t h e f a c e a m o u n t of T r e a s
u r y b i l l s a p p l i e d for, u n l e s s t h e t e n d e r s a r e a c c o m p a n i e d b y a n
e xpress g u a r a n t y of p a y m e n t b y a n " i n c o r p o r a t e d b a n k or t r u s t
company.
.
I m m e d i a t e l y a f t e r t h e c l o s i n g h our, t e n d e r s w i l l b e o p e n e d
at t h e F e d e r a l R e s e r v e B a n k s a n d B r a n c h e s , f o l l o w i n g w h i c h p u b lic a n n o u n c e m e n t w i l l b e m a d e b y t h e S e c r e t a r y of t h e T r e a s u r y of
h e a m o u n t a n d p r i c e r a n g e of a c c e p t e d b i d s .
Those submitting
t e n d e r s w i l l b e a d v i s e d of t h e a c c e p t a n c e o r r e j e c t i o n t h e r e o f ,
he S e c r e t a r y of t h e T r e a s u r y e x p r e s s l y r e s e r v e s t h e r i g h t to
a c c e p t or r e j e c t a n y o r a l l t e n d e r s , in w h o l e o r in p a r t , a n d h i s
a c t i o n in a n y s u c h r e s p e c t s h a l l b e f i n a l .
Subject to these r e s e r
vations, t e n d e r s f o r $ 1 0 0 , 0 0 0 o r l e s s f r o m a n y o n e b i d d e r a t 9 9 . 9 0 5
e n t e r e d on a f i x e d - p r i c e b a s i s w i l l b o a c c e p t e d in f u l l .
Payment
t e n d e fs a t t h e p r i c e s o f f e r e d m u s t b e m a d e o r c o m p l e t e d
F e £ e r a l R e s e r v e , B a n k in c a s h or o t h e r i m m e d i a t e l y A v a i l a b l e
t u n d s on D e c e m b e r 2, 1 9 4 3 .
39-66
(O v e r )
T h e i n c o m e d e r i v e d f r o m T r e a s u r y b i l l s y .whether- interest) or
g a i n f r o m . t h e s a l e or o t h e r d i s p o s i t i o n of t h e b i l l s , s h a l l n o t
h a v e a n y e x e m p t i o n , as such,, a n d l o s s f r o m t h e s a l e o r o t h e r d i s
p o s i t i o n of T r e a s u r y b i l l s s h a l l n o t h a v e a n y s p e c i a l t r e a t m e n t ,
as such, " u n d e r F e d e r a l 'tax A c t s n o w o r h e r e a f t e r e n a c t e d *
The
b i l l s s h a l l b e s u b j e c t t o estate, i n h e r i t a n c e , gift, o r o t h e r
e x c i s e ta x e s , w h e t h e r ■F e d e r a l o r S t a t e , b u t s h a x l . b e e x e m p t f r o m
a l l t a x a t i o n n o w or h e r e a f t e r i m p o s e d on t h e p r i n c i p a l o r i n t e r
est t h e r e o f b y a n y S t a t e , or a n y of t h e - p o s s e s s i o n s of t h e U n i t e d
S t a t e s , or b y a n y l o c a l t a x i n g a u t h o r i t y ,
For purposes o f t a x a ' t i o n ' t h e a m o u n t of d i s c o u n t at w h i c h T r e a s u r y b i l l s a r e o r i g i
nally sold by the U n i t e d States shall be considered to be i n ter
est'.
U n d e r S e c t i o n s 42 a n d 1 1 7 (a) (1) of t h e I n t e r n a l R e v e n u e
C o d e , as a m e n d e d b y S e c t i o n 1 1 5 of t h e R e v e n u e A c t of 1941, t h e
a m o u n t ■of d i s c o u n t a t w h i c h b i l l s i s s u e d h e r e u n d e r a r e s o l d shall
n o t b e c o n s i d e r e d t o a c c r u e u n t i l s u c h b i l l s s h a l l b e sold, r e
d e e m e d or o t h e r w i s e d i s p o s e d of, a n d s u c h b i l l s a r e e x c l u d e d f rom
c o n s i d e r a t i o n as c a p i t a l a s s e t s . A c c o r d i n g l y , t h e o w n e r of T r e a s
u r y bills (other than l ife i n s u rance companies) issued hereunder
n e e d i n c l u d e in h i s i n c o m e t a x return, o n l y t h e d i f f e r e n c e b e t w e e n
t h e p r i c e p a i d f o r S u c h b i l l s , w h e t h e r o n 'o r i g i n a l i s s u e o r on
s u b s e q u e n t - p u r c h a s e , a n d t h e a m o u n t a c t u a l l y - - r e c e i v e d e i t h e r upon
s a l e or r e d e m p t i o n " a t m a t u r i t y d u r i n g t h e . t a x a b l e - y e a r f o r w h i c h
t h e r e t u r n is m ade, a s o r d i n a r y g a i n o r l o s s .
; ,
T r e a s u r y D e p a r t m e n t C i r c u l a r U o. 418, as a m e n d e d , a n d t h i s
n o t i c e , p r e s c r i b e t h e t e r m s o f t h e T r e a s u r y b i l l s a n d g o v e r n the
c o n d i t i o n s of t h e i r I s s u e .
C o p i e s o f t h e c i r c u l a r m a y b e obtained
f r o m any F e d eral R e s e r v e B a n k or Branch* ,
. ,
3
income tax and also for any taxes withheld from wages.
The payments of
estimated tax, to be made in connection with the filing, are only the
difference between the total estimated tax and these credits.
While most farmers do not work for wages, some of them who work parttime during slack farming seasons
house, or stock yard —
—
perhaps at a near-by cannery, packing
may have had some tax withheld from such wages and
therefore will be entitled to take credits accordingly.
The general requirements for filing a declaration, for both farmers
and non-farmers, include all persons who had in the calendar year 1942 or
expect to have in the calendar year 1943 any of the following amounts or
types of income:
1. More than $100 gross income from a source outside of wages subject
to withholding and also sufficient gross income to require filing an income
tax return (#500 for a single person, #1200 for a married couple, or $624
for an individual married person)*
2. Wages subject to withholding totaling more than $2,700 if single,
or $3,500 if married (married couples must file
declarations if such wages
of husband and wife, together exceed $3,500).
In addition, the declaration is required of any person who was required
to file an income tax return for 1942 and who expects his wages subject to
withholding in 1943 to be less than similar wages were in 1942.
- 0-
Anyone who filed a declaration on or before September 15 but who underestimated
his tax substantially —
20 per cent in the case of a non-farmer, or 33-1/3
per cent in the case of a farmer —
should file an amended declaration by
December 15 to avoid penalties prescribed by law for such substantial under
estimates.
The special provisions relative to farmers will apply to all
persons who expect that at least 80 per cent of their total estimated gross
income from all sources will be from farming.
The other persons who must file by December 15 are those who did not
file in September because they anticipated that their income for the year
would not be sufficient to require filing but who now find that their income
will be high enough to require filing a declaration.
"Extensive efforts have been made to provide farmers with all the
information they will need to complete this filing, and I have instructed
^
the Collectors' offices to give every possible assistance to farmers,"
Commissioner Hannegan said.
"Many farmers already have the forms which were sent them in August.
These forms are still good and may be used.
Any farmers needing more forms,
however, will be supplied promptly upon request to the Collectors.
"In addition, any farmer who desires to make a precise estimate, for
which Form 1040F (Schedule of Farm Income and Expenses) is useful, may also
get these forms from Collectors.
their tax —
However, farmers desiring only to approximate
within the permissible 33-1/3 per cent margin of error —
will
find the simplified worksheet, which is supplied to all taxpayers, adequate
for this purpose."
Farmers and others filing declarations for the first time will find that
the form provides credit for any tax paid this year on account of their 1S42
I
-rvL
fyi
December 15, 1943 is a special tax date for American farmers,
farmers,
'~2co_
Commissioner of Internal Revenue Robert 1. Hannegan said today*
Although a limited number of non«*farmers also will have tax payments
to make or declarations of estimated tax to file, Commissioner Hannegan
explained that December 15 will be the first date by which farmers will be
required to file "Declarations of Estimated Income and Victory Tax", similar
#0 the declarations filed by nearly twelvexmillion persons on September 15.
"By the very nature of his business, the farmer could not be put on
quite the same basis as the city wage earner when Congress adopted the payas-you-go system," Commissioner Hannegan explained.
"In the first place, the farmer usually has no wages from which tax can
be withheld.
In the second place, because of the hazards of weather and other
conditions of agriculture, the farmer could hot be expected to estimate his
income until most of the crops were gathered and sold.
"Therefore, to make the pay-as-you-go system as fair as possible to
farmers, the law makes two special provisions.
Eirst, farmers who file
returns on a calendar year basis need not estimate their income and tax
until December 15 of each year, and second, a farmer’s estimate will be exempt
from penalties for understatement if the tax estimate is within a 33-1/3 per
cent margin of error(based on the annual tax return to be filed, as usual,
the following March)•
"Under these provisions, the farmer is enabled to pay his income taxes
substantially in the same year as the income is received, which is the primary
objective of the pay-as-you-go system —
with due regard for the special
difficulties of the farming business."
Dedember 15 is also a filing date for two other groups of citizens
7
/
TREASURY DEPARTMENT
Washington
•FOR RELEASE HORNING NEWSPAPERS,
Thursday, December 2, I9h3.
Press Service
No.. 39-67
. December 15, 19^3 is a special tax date for American farmers,
Commissioner of Internal Revenue Robert E* Hannfcgan said today..
Although a limited number of non-farmers also will have tax payments
to make or declarations of estimated tax to file, Commissioner Hannegan
explained that December 15 will be the first date by which farmers will
be required to file "Declarations of Estimated Income and Victory Tax",
similar to the declarations filed by nearly twelve million persons on
September 15*
"By the very nature of his business, the farmer could not be put on
quite the same basis as the city wage earner when Congress adopted the payas-you-go system," Commissioner Hannegan explained,
"Xn the first place, the farmer psually has no wages from which tax
can be withheld*
In the second place, because of the hazards of weather
and other conditions of agriculture, the farmer could not be expected to
estimate his income until most of the crops were gathered and sold,
fTherefore, to make the pay-as-you-go system as fair as possible to
farmers, the law makes two special provisions. First, farmers who file
returns on a calendar year basis need not estimate their income and tax
until December 15 of each year, and second, a farmer*s estimate will be
exempt from penalties for understatement if the tax estimate is within
a 33-1/3 per cent margin of error (based on the annual tax return to be
filed, as usual, the following March).
"Under these provisions, the farmer is enabled to pay his income
taxes substantially in the same year as the income is received, which is
the primary objective of the pay-as-you-go system — with due regard for
the special difficulties of the farming business,"
December 15 is also a filing date for two other groups of citizens.
Anyone who filed a declaration on or before September 15 but who under
estimated his tax substantially — 20 per cent in the case of a non-farmer,
or 33-1/3 Per cent in the case of a farmer — should file an amended
declaration by December 15 to avoid penalties prescribed by law for such
substantial underestimates.. The special provisions relative to farmers
will apply to all persons who expect that at least SO per cent of their
total estimated gross income from all sources will be from farming,
The other persons who must file by December 15 are those who did not
file in September because they anticipated that their income for the year
would not be sufficient to require filing but who now find that their in
come will be high enou^a to require filing a declaration,
2
^Extensive efforts have been made to .provide farmers with all the
information they will need to complete this filing, and I have instructed
the Collectors' offices to give every possible assistance to farmers,”
Commissioner Hannegan said,
"Many farmers already have the forms which were sent them in
August, These forms are still good and may he used. A&y farmers need
ing more forms, however, will he supplied promptly upon request to the
Collectors,
”In addition, any farmer who desires to make a precise estimate,
for which Form lObOF (Schedule of Farm Xacome and Expenses) is useful, may
also get these forms from Collectors, However, farmers desiring only to
approximate their tax — within the permissible 33 ~l / 3 Per cent margin of
error — will find the simplified worksheet, which is supplied to all tax
payers, adequate for this purpose,”
Farmers and others filing declarations for the first time will find
that the form provides credit for any tax paid this year on account of
their 19^2 income tax and also for any taxes withheld from wages. The
payments of estimated tax, to be made in connection with the filing, are
only the difference between the total estimated tax and these credits.
While most farmers do not work for wages, some of them who work parttime during slack farming seasons
* perhaps at a near-by cannery, packing
house, or stock yard — may have had some tax withheld from such wages
and therefore will be entitled to take credits accordingly,
The general requirements for filing a declaration, for both farmers
and non-farmers, include all persons who had in the calendar year 19^2 or
expect to have 1in the calendar year 19^-3 any of the following amounts or
types of income:
1, More than $100 gross income from a sourcq outside of wages
subject to withholding and also sufficient gross income to require filing
an income tax return ($500 for a single person, $1200 for a married couple,
or $ 62 b for an individual married person),
2* Wages subject to withholding totaling more than $2,700 if single,
or $ 3,500 if married (married couples must file declarations if such wages
of husband and wife, together exceed $3 *500 ),
In addition, the declaration is required of any person who was re
quired to file an income tax return for 19^-2 and \irho expects his wages
subject to withholding in 19*+3 to be less than similar wages were in 19 ^ 2 .
- 0-
3 placed in charge of the Memphis office in 1901. Later assignments
carried him to New Tork City, Philadelphia, St, Louis, and other,
districts, and in 1903 he was placed in charge of the New England
district, with headquarters at Boston, remaining there, with inter
ruptions for assignments with President Taft, until he "became a part
of Woodrow Wilson’s official family in 1912*
While with Wilson at Versailles, Mr. Murphy surprised himself
hy readily picking up the rudiments of conversational French, and
quickly found himself at ease with Europeans. He later was able to
turn this faculty into good account on a tour of European capitals in
which he did much to further cooperation and friendly relations "between
United States authorities and foreign police organizations.
Information
he obtained on operations of international counterfeit rings proved of
great value to the Service.
Mr. Murphy was "born in Columbus, Ohio, November 29, 1878. He was
educated in the public schools there. His father was a Secret Service
Officer for thirteen years, until his death in 1906, being Agent in
Charge in the St. Louis District for much of this time, and it was
natural for his son to turn to the Service.
The retiring Assistant Chief is an enthusiastic golfer apd bridge^
player. He is a member of the National Press Club and the
Country Club of Washington. He 1
"•»
and will continue to make his hon
the World War presid
White House Detail i
Chief on direction 0
placed at the head of the
1919, "became Assistant
J,
Mr. Murphy accompanied President Wilson to Versailles after the
armistice, and on visits to Belgium, Italy, Prance, England and Scotland,
and later on a trip to the West floast of the United States.
In November 1920
ed President Elect Harding on a
vacation in Plorida,
ith him until the inauguration on
March U, 1921. After
,th on August 2, 1923, Mr. Murphy
was in charge of the Detail with President Coolidge until after
Warren Harding was buried. He later headed the Detail with PresidentElect Herbert Hoover until"Hoover took: office March 4,
~
1 The Assistant Chief was on vacation in Plorida on the night
Zangara attempted to assassinate President-Elect Pranklin
D. Roosevelt, and he promptly took charge of the investigation of the
crime and cooperated with the State's Attorney until Zangara was con
victed. When President Roosevelt decided to visit South America in
1937* Secretary Morgenthau placed the protective responsibility on
Mr. Murphy, and he has had similar assignments on several other of
the Roosevelt trips.
Mr. Murphy made a spectacular debut with the Service in which his
father, John E. Murphy, also served with distinction. When young Joe
entered the service in 1899 the Elder Murphy had for more than a year
been on the trail of one of the shrewdest counterfeiting gangs ever
known to the Service, the Philadelphia-Lancaster gang. These clever
and wealthy criminals had selected a location for their manufacturing
plant that was extremely difficult of observation, the exit being
visible only from the nearby home of a wealthy, elderly lady.
Young Joe "obtained a job" with an express company at Lancaster.
He approached the old lady as a young stranger far from home, urgently
in need of living quarters, and was permitted to occupy her front room.
Prom this vantage he and the agents assigned to the case covered
the operations of the counterfeiters. In a few weeks the country was
astounded by the news of arrest of persons prominent in society, charges
of bribery against public officials and the subsequent withdrawal of a
$100 note from circulation because of the clever counterfeits intro
duced by the gang. The investigation disclosed that the same gang had
defrauded the government of millions of dollars throu^i use of counter
feit revenue stamps as well as currency.
Having thus established himself as an investigator, the
>unger
Murphy rose rapidly in the Secret Service organization. He
3 given
temporary charge of the Kansas City office the next year, and was
Joseph E. Murphy, Assistant Chief of the United States Secret
Service since 1919. who more than any other one man has carried
personal responsibility for the safety of Presidents of the United
States, will retire from active service November a*
, the Treasury
announced today*
Mr* Murphy is
65 years
old.
For most of his ^5 years with the Secret Service Mr. Murphy’s
major assignment has been guarding'or directing the protection of
Chief Executives, from Theodore Roosevelt to Franklin Delano Roosevelt.
Yet during this period he figured prominently in scores of counter
feiting and other law enforcement investigations, including the Teapot
Dome oil frauds
*
Mr. Murphy is the second veteran Secre' “ vice intimate of
presidents to retire
ois year.
Colonel Ed
W. Starling retired
on November 1 after
years with the White House Detail.
Colonel
Starling joined the Service in 191*+, served under Mr* Murphy, like
Mr. Murphy accompanied President Wilson to the Versailles peace
conference and on his later European tour, and participated in the
protective arrangements thrown about subsequent presidents at home
and abroad.
Colonel Starling hteseirf headed the White House Detail
Lief
Wilson
ret Service Chief
Wilson^.-fr»-"ft)mgugplii|, tiiu 11ittroacw
--- efficient
piperformance
sai
t vthe lengthy aei---- -efficient
of duties
of
performance
of duties
of
Xity constituted a bright
brig]
exceptional responsibility
chapter in the history
of the organization.
first duty as a protector of Presidents
came when he was a youngster both in years and in the Service. When
president Theodore Roosevelt visited Seattle in May 1903. Mr* Murphy
was one of the guarding force. Later he went with wppflny-W rm a t.riji
to Panama, the first time a President had left the Continental United
States*
k
^
For most of a decade Mr. Murphy matched his wits against the
counterfeiters that were plaguing the New England district, but he
was detached for White House duty frequently during the Taft Adminis
tration* He spent four seasons with the President at his summer home,
and accompanied Mr. Taft on two trips across the continent, to Panama,
and on other tours.
In November 1912 Mr* Murphy was assigned to the protection of
President-Elect Woodrow Wilson, and he remained with the White House
Detail of the Secret Service after Mr* Wilson took office and throughout
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
F r i d a y , N o v e m b e r 26, 1 9 4 3 *
J o s e p h E*
Secret
Service
Murphy,
since
Press Service
No, 3 9 - 6 8
Assistant
1919,
Chief
who more
than any
carried personal responsibility for the
of t h e U n i t e d S t a t e s ,
will retire
of the U n i t e d
other
safety
from active
States
one man has
of p r e s i d e n t s
service November
30,
the Treasury announced today,
Mr* Murphy is 65 years old*
For most of his 4-5 years with the Secret Service Mr. Murphy’s
major assignment has been guarding or directing the protection of
seven Chief Executives, from Theodore Roosevelt to Franklin
Delano Roosevelt* Yet during this period he figured prominently
in scores of counterfeiting and other lav/ enforcement investi
gations, including the Teapot Dome oil frauds case.
M r . M u r p h y is t h e s e c o n d v e t e r a n S e c r e t S e r v i c e i n t i m a t e
of p r e s i d e n t s t o r e t i r e t h i s y e a r .
C o l o n e l E d m u n d W* S t a r l i n g
r e t i r e d on N o v e m b e r 1 a f t e r 2.9 y e a r s w i t h t h e W h i t e H o u s e D e t a i l .
C o l o n e l S t a r l i n g j o i n e d t h e S e r v i c e in 1914, s e r v e d u n d e r
Mr* M u r p h y , l i k e Mr. M u r p h y a c c o m p a n i e d P r e s i d e n t W i l s o n t o t h e
V e r s a i l l e s p e a c e c o n f e r e n c e a n d on h i s l a t e r E u r o p e a n t our, a n d
p a r t i c i p a t e d in t h e p r o t e c t i v e a r r a n g e m e n t s t h r o w n a b o u t s u b s e
quent p r e s i d e n t s at h o m e a n d abroad.
Colonel
years.
Starling headed the White
House Detail
for
seven
S e c r e t S e r v i c e C h i e f F r a n k J. V/ilson s a i d t o d a y t h a t t h e
l e n g t h y s e r v i c e s o f t h e t w o m e n in e f f i c i e n t p e r f o r m a n c e of
d u t i e s of e x c e p t i o n a l r e s p o n s i b i l i t y c o n s t i t u t e d a b r i g h t c h a p
t e r in t h e h i s t o r y of t h e o r g a n i z a t i o n *
J o e M u r p h y ’s f i r s t d u t y a s a p r o t e c t o r o f p r e s i d e n t s c a m e
w h e n h e w a s a y o u n g s t e r b o t h in y e a r s a n d in t h e S e r v i c e .
When
P r e s i d e n t T h e o d o r e R o o s e v e l t v i s i t e d S e a t t l e in M a y 1903,
Mr* M u r p h y w a s o n e o f . t h e g u a r d i n g f o r c e *
L a ter he went w i t h
T. R . ” on a t r i p t o P a n a m a , t h e f i r s t t i m e a p r e s i d e n t h a d
left t h e C o n t i n e n t a l U n i t e d States.
*
2
> ;
F o r m o s t of a d e c a d e Mr* M u r p h y m a t c h e d h i s w i t s a g a i n s t t h e
counterfeiters that w e r e p l a g u i n g the N e w E n g l a n d district, but
he was d e t a c h e d f o r W h i t e H o u s e d u t y f r e q u e n t l y d u r i n g t h e T a f t
A d m i n i s t r a t i o n * . H e spent f o u r s e a s o n s w i t h t h e P r e s i d e n t a t his
s u m m e r h ome, a n d a c c o m p a n i e d M r • T a f t o n t w o t r i p s a c r o s s t h e
c o n t i n e n t , t o P a n a m a , a n d on o t h e r t o u r s .
In N o v e m b e r 1 9 1 2 Mr, M u r p h y w a s a s s i g n e d t o t h e p r o t e c t i o n
of P r e s i d e n t - E l e c t W o o d r o w W i l s o n , a n d h e r e m a i n e d w i t h t h e W h i t e
H o u s e D e t a i l of t h e S e c r e t S e r v i c e a f t e r Mr, W i l s o n t o o k o f f i c e
a n d t h r o u g h o u t t h e W o r l d W a r P r e s i d e n t ’s t e n u r e ,
He was placed
at t h e h e a d o f t h e W h i t e H o u s e D e t a i l in 1912, a n d on J u l y 27,
1919, b e c a m e A s s i s t a n t C h i e f on d i r e c t i o n o f P r e s i d e n t W i l s o n .
Mr, M u r p h y a c c o m p a n i e d P r e s i d e n t W i l s o n t o V e r s a i l l e s a f t e r
the a r m i s t i c e , a n d on v i s i t s t o B e l g i u m , Italy, F r a n c e , E n g l a n d
a n d S c o t l a n d , a n d l a t e r on a trip; t o t h e W e s t C o a s t of t h e U n i t e d
Stat e s ,
In N o v e m b e r 1920, h e a c c o m p a n i e d P r e s i d e n t - E l e c t H a r d i n g on
a v a c a t i o n in F l o r i d a , a n d r e m a i n e d w i t h h i m u n t i l t h e i n a u g u r a
t ion on M a r c h 4, 1 9 2 1 .
A f t e r P r e s i d e n t H a r d i n g ’s d e a t h on
A u g u s t 2, 1923, Mr, M u r p h y w a s in c h a r g e of t h e D e t a i l w i t h P r e s
ident C o o l i d g e u n t i l a f t e r W a r r e n H a r d i n g w a s b u r i e d .
He later
headed the D e tail w i t h P r e s i d e n t - E l e c t H e r b e r t H o o v e r unt i l
Mr. H o o v e r t o o k o f f i c e M a r c h 4, 1 9 2 9 .
T h e A s s i s t a n t C h i e f w a s o n v a c a t i o n in F l o r i d a on t h e n i g h t
Giuseppe Zangara a t t e m p t e d to a s s a s s i n a t e P r e s i d e n t - E l e c t Franklin
D. R o o s e v e l t , a n d h e p r o m p t l y t o o k c h a r g e of t h e i n v e s t i g a t i o n of
the c r i m e a n d c o o p e r a t e d w i t h ' t h e S t a t e ’s A t t o r n e y u n t i l Z a n g a r a
was c o n v i c t e d .
When President Roosevelt decided to visit South
A m e r i c a in 1937, S e c r e t a r y M o r g e n t h a u p l a c e d t h e p r o t e c t i v e r e
s p o n s i b i l i t y on Mr. M u r p h y , a n d h e h a s h a d s i m i l a r a s s i g n m e n t s
on s e v e r a l o t h e r of t h e R o o s e v e l t t r i p s .
Mr, M u r p h y m a d e a s p e c t a c u l a r d e b u t w i t h t h e S e r v i c e in
w h i c h h i s f a t h e r , J o h n E. M u r p h y , a l s o s e r v e d w i t h d i s t i n c t i o n *
W h e n y o u n g J o e e n t e r e d t h e s e r v i c e in 1 8 9 9 t h e e l d e r M u r p h y h a d
for m o r e t h a n a y e a r b e e n on t h e t r a i l o f o n e o f t h e s h r e w d e s t
counterfeiting gangs ever kno w n to the Service, th e Phi l a d e l p h i a Lancaster gang.
These clever and wealthy criminals had selected
a location for their manufacturing plant that was extremely dif f i
cult of o b s e r v a t i o n , t h e e x i t b e i n g v i s i b l e o n l y f r o m t h e n e a r b y
home o f a w e a l t h y , e l d e r l y l a d y .
- 3 Y o u n g J o e " o b t a i n e d a job" w i t h a n e x p r e s s c o m p a n y a t L a n c a s
ter.
H e a p p r o a c h e d t h e o l d l a d y as a y o u n g s t r a n g e r f a r f r o m hom e ,
u r g e n t l y in n e e d of l i v i n g q u a r t e r s , a n d w a s p e r m i t t e d t o o c c u p y
her fr o n t room.
P r o m this v a n t a g e h e a n d t h e age n t s a s s i g n e d to t he case
c o v e r e d t h e o p e r a t i o n s of t h e c o u n t e r f e i t e r s .
In a f e w w e e k s t h e
c o u n t r y w a s a s t o u n d e d b y t h e n e w s of a r r e s t o f p e r s o n s p r o m i n e n t
in s o c i e t y , c h a r g e s of b r i b e r y a g a i n s t p u b l i c o f f i c i a l s a n d t h e
s u b s e q u e n t w i t h d r a w a l of a $ 1 0 0 n o t e f r o m c i r c u l a t i o n b e c a u s e of
the c l e v e r c o u n t e r f e i t s i n t r o d u c e d b y t h e g a n g .
The investigation
d i s c l o s e d t h a t t h e s a m e g a n g h a d d e f r a u d e d t h e G o v e r n m e n t of m i l
lions o f d o l l a r s t h r o u g h u s e of c o u n t e r f e i t r e v e n u e s t a m p s as w e l l
as c u r r e n c y .
H a v i n g t h u s e s t a b l i s h e d h i m s e l f as a n i n v e s t i g a t o r , t h e y o u n g e r
M u r p h y r o s e r a p i d l y in t h e S e c r e t S e r v i c e o r g a n i z a t i o n .
He was
g i v e n t e m p o r a r y c h a r g e of t h e K a n s a s C i t y o f f i c e t h e n e x t ye a r , a n d
was p l a c e d in c h a r g e of t h e M e m p h i s o f f i c e in 1 9 0 1 ,
Later assign
men t s c a r r i e d h i m t o H e w Y o r k City, P h i l a d e l p h i a , St, L o u i s , a n d
oth e r d i s t r i c t s , a n d in 1 9 0 3 h e w a s p l a c e d in c h a r g e of t h e H e w
England district, w i t h h e a d q u a r t e r s at Boston, r e m a i n i n g there,
with i n t e r r u p t i o n s f o r a s s i g n m e n t s w i t h P r e s i d e n t Taft, u n t i l he
b e c a m e a p a r t o f W o o d r o w W i l s o n ’s o f f i c i a l f a m i l y in 1 9 1 2 .
W h i l e w i t h W i l s o n at V e r s a i l l e s , Mr. M u r p h y s u r p r i s e d h i m s e l f
by^readily p i c k i n g up the r u d i m e n t s of c o n v e r s a t i o n a l French, a n d
quickly f o u n d h i m s e l f at ease w i t h Europeans.
He later was able
to t u r n t h i s f a c u l t y i n t o g o o d a c c o u n t on a t o u r of E u r o p e a n c a p i
tals i n w h i c h h e d i d m u c h t o f u r t h e r c o o p e r a t i o n a n d f r i e n d l y r e l a
tions b e t w e e n U n i t e d S t a t e s a u t h o r i t i e s a n d f o r e i g n p o l i c e o r g a n i
zations,
I n f o r m a t i o n h e o b t a i n e d on o p e r a t i o n s of i n t e r n a t i o n a l
c o u n t e r f e i t r i n g s p r o v e d of g r e a t v a l u e t o t h e S e r v i c e ,
Mr. M u r p h y w a s b o r n in C o l u m b u s , Ohio, N o v e m b e r 2 9 , 1 878.
He
was e d u c a t e d in t h e p u b l i c s c h o o l s t h e r e ,
His f a t h e r was a Secret
S e r v i c e O f f i c e r f o r t h i r t e e n y e a r s , u n t i l h i s d e a t h in 1906, b e i n g
A g ent in C h a r g e in t h e St, L o u i s D i s t r i c t f o r m u c h of t h i s t ime,
and it w a s n a t u r a l f o r h i s s o n t o t u r n t o t h e S e r v i c e .
T h e r e t i r i n g A s s i s t a n t C h i e f is a n e n t h u s i a s t i c g o l f e r a n d
bridge p l a y e r ,
H e is a m e m b e r o f t h e N a t i o n a l P r e s s C l u b a n d t h e
B u r n i n g T r e e C o u n t r y C l u b of W a s h i n g t o n . "-He l i v e s a t 2 9 1 5 C o n
n e c t i c u t A v e n u e , N. W , , a n d w i l l c o n t i n u e t o m a k e h i s h o m e in
W a s h i n g t o n a f t e r ' s p e n d i n g t h e w i n t e r in F l o r i d a .
H e is a b a c h e l o r .
-oOo-
the March return, the Collector will then give you a refund or credit.
q.
Suppose I made a big mistake and overestimated in September, what pan
I do?
A.
You too may file an amended declaration by December 15. In this case if
you receive a bill from, the Collector for an instalment resulting from
your September declaration, you should send this bill with your amended
declaration to the Collector, along with any revised payment shown to be
due for December on your anended declaration.
q.
Can a husband and wife make a joint declaration, and If they do can they
file separately next March?
A.
Yes.
q.
What if I don’t file a declaration?
A.
There is a penalty Of 10 percent of the tax for failure to file a
declaration on time.
q.
What if I don’t pay an estimated tax instalment on time?
A*
If the payment is late, there is a penalty of |2«50 or 2-1/2 percent of
the tax, whichever is greater, for each instalment which is late.
,q.
Where can I get copies of the forms or assistance in filling them in?
A.
S*om your local Collector of Internal Bevenue. If you have forms left
over from September, however, they are still good*
q.
Hasn’t the Victory tax been changed lately?
A.
The only change In the Victory tax which affects the declaration relates
to the post-war credit. If you use the simplified worksheet, no change
is necessary. If you use the more precise worksheet, give yourself
credit for all of the post-war credit (formerly, taking this credit
depended on purchases of war bonds, etc.)*
q.
Will I still have to file an annual tax return by next March 15?
A.
Yes. Nothing in the pay-as-you-go system changes the requirement for
filing an annual tax return. The only difference Is that when you do
file your annual return you will have paid all or a substantial part
of the tax, and the only payment that you will have to make on the annual
return will be any amount o*f tax which your annual return may show that
you owe after deducting the amounts already paid under the pay-as-you-go
system. In fact, many persons may be eligible for refunds or credits
because their annual returns may show that they have paid somewhat more
than the correct tax.
1
-
2
-
sources to require filing an annual income tax return ($500 for
a single person, $1200 for a married couple, or #624 for an
individual married person).
b.
Wages subject to withholding exceeding #2700 if single or
exceeding $3500 if married ($3500 either individually or
together in the case of husbands and wives both receiving wages).
In addition, a declaration must be filed by any person who was required
to file an income tax return for 1942 and who expects his wages subject
to withholding in 1943 to be less than the wages received in 1942.
Q.
How accurate must m y estimate be?
A.
It should be as accurate as you can reasonably make it, especially since
by December 15 there will be only two weeks of the year left. However,
no penalty will be assessed if the tax is not underestimated by more than
20 percent in the case of a non-farmer or 33-1/3 percent in the case of
farmers.
Q.
How much is. the penalty far underestimating?
A.
Generally 6 percent of the deficiency, but in some cases it may be less,
as shown in the examples below:
Examp3.es where margin of error is 20 percent:
(a)
Net estimated tax plus taxes withheld is $500; tax shown on
final return is $650; 80$ of $650 Is $520. Since $500 is
outside the margin of error, the penalty is 6$ of $150 (the
difference between $500 and $650) or $9. This penalty of
$9 is applicable because it is less than $20, the difference
between $500 and $520.
(b )
Net estimated tax plus taxes withheld is $500; tax shown on
final return is $630; 80$ of $630 is $504. Since $500 is
outside the margin of error, a penalty is due. The amount of
the penalty is $4, the difference between $500 and $504.
This penalty of $4 is applicable because it is less than $7*80,
which is & f o of $130, the difference between $500 and $630.
For farmers the margin of error is 33-1/3 pereent instead of 20 percent,
and in computing the penalty, 66-2/3 percent is used instead of 80 percent.
Q c
When will the penalties, if any, be determined?
A.
After the taxpayer files his March 15 annual income tax return showing
the correct tax for the year*
Q.
Suppose I overestimate,' what happens?
A.
If an overestimate results in overpayment of the correct tax shown in
A&VANCM TOT RErs^gffi
/
WEDNESDAY, DECEMBER'^ 1 9 4 3 .
. QUESTIONS AND ANSWERS ABOUT TBS
DECEMBER 15 INCOME TAX DECLARATION
Q*
What kind of tax filing is to be made December 15?
A*
Declarations of estimated income and Victory tax, estimating how much
tax certain persons will owe on their 1943 income in excess of income
tax payments already made or of income tax withheld from wages or
salary during the year*
Q,*
Wasn’t that done.September 15?
A.
Yes. Nearly twelve million taxpayers filed declarations September 15*
The only persons who have to file now are those who did not file then
but are required to do so by December 15 either because, in the case of
farmers, they had an automatic postponement, or because they did then
not expect enough income to require filing but now anticipate higher
incomes which do require filing of declarations. Also, any persons who
filed in September 'Who underestimated the tax— by 20 percent if nonx farmers or 33-1/3 percent if farmers— should file amended declarations
by December 15 to avoid penalties*
Q.
What is an amended declaration?
A*
It is, in reality, a substitute declaration
It is file, on a similar
form and is distinguished only by writing the word "amended” at the top
of the front page of the form*
Q>
What is the purpose of these declarations?
A*
To put all taxpayers, as nearly as possible, on the pay-as-you-go
system of tax payment, so that they will be able to pay their taxes
in the same year that they get their income*
Q*
What, information is required?
A*
You estimate your 1943 income and Victory tax, based, on your estimate
of 1943 income and then deduct any payments made this year on 1942 tax
(probably instalments in March and June)— and also any taxes withheld
and estimated to- be withheld from wages* The remainder is the amount
you owe and must be paid on or before December 15*
Q*
How do I know if I have to file a declaration by December 15?
A*
If you filed in September you don’t need to file now unless you believe
you underestimated the tax by more than 20 percent (33-1/3 percent if a
farmer) in which case you should file an amended declaration to avoid
penalties. If you did not file in September you should file a declaration
if you had in 1942 or expect to have in, 1943. income of any of the following
amounts or types;
a.
More than $100 gross income other than wages which are subject
to withholding aid also expect sufficient gross income from all
TREASURY DEPARTMENT
W A S H IN G TO N
25
O F F IC E O F
COMMISSIONER OF INTERNAL REVENUE
A D D R E S S R E P L Y TO
November 26, 1943
C O M M IS S IO N E R O F IN TERN A L R EV EN U E
AND R E F E R TO
M
EM
ORANDUMFOR:
Mr* Schwarz or
Mr. Shaeffer:
Attached questions and answers have been approved by Mr. Hannegan
and all other necessary persons in the Bureau*
Please distribute them as soon as possible to your regular lists,
also your farm list and please advise me if copies can also be mailed
promptly to all individual daily and weekly newspapers*
Irving Perimeter,
Public Relations Officer.
TREASURE DEPARTMENT
Washington
FOR R E L E A S E , M O R N I N G N E W S P A P E R S ,
W e d n e s d a y , D e c e m b e r S, 1 9 4 3 .
11-27-43
Press
No*
Service
39-69
QUESTIONS AND ANSWERS ABOUT THE
D E C E M B E R 15 INCOME TAX DECL A R A T I O N
Q*
What kind
of
tax
filing
is
to b e m a d e D e c e m b e r 1 5 ?
A*
D e c l a r a t i o n s o f e s t i m a t e d i n c o m e a n d V i c t o r y tax, e s t i
m a t i n g h o w m u c h tax c e r tain persons will owe on their
1 9 4 3 i n c o m e in e x c e s s o f i n c o m e t a x p a y m e n t s a l r e a d y
m a d e o r o f i n c o m e t a x w i t h h e l d f r o m w a g e s or s a l a r y
d u r i n g the y e a r .
Q*
W a s n ’t t h a t d o n e
A.
Yes*
Ne a r l y twelve mill i o n taxpayer^ filed declarations
S e p t e m b e r 15*
T h e o n l y p e r s o n s w h o h a v e to f i l e n o w a r e
t h o s e w h o d i d n o t f i l e t h e n b u t a r e r e q u i r e d to d o so b y
D e c e m b e r 3,5 e i t h e r b e c a u s e , i n t he c a s e o f f a r m e r s , t h e y
h a d an a u t o matic postpo n e m e n t , or b e c a u s e they did then
n o t N e x p e c t e n o u g h i n c o m e to r e q u i r e f i l i n g b u t n o w a n t i
c i p a t e h i g h e r i n c o m e s w h i c h d o r e q u i r e f i l i n g o f declara'
tions.
A l s o , a n y p e r s o n s w h o f i l e d in S e p t e m b e r w h o
u n d e r e s t i m a t e d t he t a x - - b y 2 0 p e r c e n t if n o n - f a r m e r s o r
3 3 - 1 / 3 p e r c e n t if f a r m e r s - - s h o u l d f i l e a m e n d e d d e c l a r a
t i o n s b y ' D e c e m b e r 1 5 to a v o i d p e n a l t i e s .
Q.
What
A.
It is, in r e a l i t y , a s u b s t i t u t e d e c l a r a t i o n *
It is
f i l e d o n a s i m i l a r f o r m a n d Is d i s t i n g u i s h e d o n l y b y
w r i t i n g the w o r d ’’a m e n d e d ” a t the t o p o f the f r o n t p a g e
o f the f o r m .
Q.
What
A.
T o p u t a l l t a x p a y e r s , a s n e a r l y a s p o s s i b l e , o n the
p a y - a s - y o u - g o s y s t e m o f t a x p a y m e n t , so t h a t t h e y w i l l
b e a b l e to p a y t h e i r t a x e s in the s a m e y e a r t h a t t h e y
get their income*
Q.
What
A.
Y o u e s t i m a t e y o u r 1 9 4 3 i n c o m e a n d V i c t o r y tax, b a s e d
on y o u r estimate of 1 943 income an d then d e d u c t a ny
p a y m e n t s m a d e this y e a r o n 194 2 tax ( p r o b a b l y i n s t a l
m e n t s in M a r c h a n d J u n e ) - - a n d a l s o a n y t a x e s w i t h h e l d
a n d e s t i m a t e d to be w i t h h e l d f r o m w a g e s .
The remainder
is the a m o u n t y o u o w e a n d m u s t b e p a i d o n o r b e f o r e
D e c e m b e r 15 <>
S e p t e m b e r 15?
is a n a m e n d e d d e c l a r a t i o n ?
is
the p u r p o s e
information
of
these
declarations?
is r e q u i r e d ?
2
Q.
H o w do I k n o w
D e c e m b e r 15?
if I h a v e
to f i l e a d e c l a r a t i o n b y
A.
I f y o u f i l e d in S e p t e m b e r y o u d o n ft n e e d to f i l e n o w
u n l e s s y o u b e l i e v e y o u u n d e r e s t i m a t e d the tax b y m o r e
than 20 p e r c e n t (53-1/5 p e r c e n t if a farmer) in w h i c h
c a s e y o u s h o u l d f i l e a n a m e n d e d d e c l a r a t i o n to a v o i d
penalties.
If yo u did n o t file in S e p t e m b e r y o u should
f i l e a d e c l a r a t i o n if y o u h a d in 1 9 4 2 o r e x p e c t to h a v e
in 1 9 4 3 i n c o m e o f a n y o f t h e f o l l o w i n g a m o u n t s o r t y p e s :
a.
More than $100 gross income o t h e r than wages
w h i c h a r e s u b j e c t to w i t h h o l d i n g a n d a l s o
expect sufficient gross income from a l l s o u r c e s
to r e q u i r e f i l i n g a n a n n u a l i n c o m e t a x r e t u r n
($500 for a single person, $ 1 2 0 0 for a m a r r i e d
c o u p l e , o r $ 6 2 4 f o r a n i n d i v i d u a l m a r r i e d person.)
b.
W a g e s s u b j e c t to w i t h h o l d i n g e x c e e d i n g $ 2 7 0 0 i f
single or exceeding $ 3 500 if marr i e d ($3500
e i t h e r i n d i v i d u a l l y o r t o g e t h e r in t h e c a s e o f
husbands and wives b o t h receiving wages).
In addition, a d e c l a r a t i o n m u s t be filed b y a n y p e r s o n
w h o w a s r e q u i r e d to f i l e a n i n c o m e t a x r e t u r n f o r 1 9 4 2
a n d w h o e x p e c t s h i s w a g e s s u b j e c t to w i t h h o l d i n g in
1 9 4 3 to b e l e s s t h a n the w a g e s r e c e i v e d i n 1 9 4 2 .
Q.
How accurate must my
A.
It s h o u l d b e a s a c c u r a t e a s y o u c a n r e a s o n a b l y m a k e it,
e s p e c i a l l y s i n c e b y D e c e m b e r 1 5 t h e r e w i l l b e o n l y two
w e e k s o f t he y e a r l e f t .
However, no p e n a l t y will be
a s s e s s e d if t h e t a x is n o t u n d e r e s t i m a t e d b y m o r e t h a n
20 p e r c e n t in the case o f a n o n - f a r m e r o r 33-1/3 p e r c e n t
in the c a s e o f f a r m e r s .
Q.
H o w m u c h is
A.
G e n e r a l l y 6 p e r c e n t o f the d e f i c i e n c y , b u t i n s o m e
it m a y b e l e s s , as s h o w n in t he e x a m p l e s b e l o w :
Examples
(a)
estimate be?
the p e n a l t y f o r u n d e r e s t i m a t i n g ?
where m a r g i n of
cases
e r r o r is 2 0 p e r c e n t :
N e t e s t i m a t e d t a x p l u s t a x e s w i t h h e l d Is $ 5 0 0 ;
t a x s h o w n o n f i n a l r e t u r n is $ 6 5 0 ; 8 0 $ o f $ 6 5 0
is $ 5 2 0 .
S i n c e $ 5 0 0 is o u t s i d e t h e m a r g i n o f
e r r o r , the p e n a l t y is 6 $ o f $ 1 5 0 ( t h e d i f f e r
ence b e t w e e n $ 5 0 0 a n d $650) o r $9.
This penalty
o f $ 9 is a p p l i c a b l e b e c a u s e it is l e s s t h a n $ 2 0 ,
t he d i f f e r e n c e b e t w e e n $ 5 0 0 a n d $ 5 2 0 .
5
(b)
N e t e s t i m a t e d t a x p l u s t a x e s w i t h h e l d is $ 5 0 0 ;
t a x s h o w n o n f i n a l r e t u r n is $ 6 3 0 ; 8 0 $ o f $ 6 3 0
is $ 5 0 4 .
S i n c e $ 5 0 0 is o u t s i d e the m a r g i n o f
e rror, a p e n a l t y is due.
T h e a m o u n t o f the
p e n a l t y is $4, the d i f f e r e n c e b e t w e e n $ 5 0 0 a n d
$504.
T h i s p e n a l t y o f $ 4 is a p p l i c a b l e b e c a u s e
it is l e s s t h a n $ 7 . 8 0 , w h i c h is 6$ o f $ 1 3 0 , the
d i f f e r e n c e b e t w e e n $ 5 0 0 a n d $630.
F o r f a r m e r s the m a r g i n o f e r r o r is 3 3 - 1 / 3 p e r c e n t i n s t e a d
of 2 0 p e r c e n t , a n d in c o m p u t i n g the p e n a l t y , 6 6 * 2 / 3 p e r
c e n t is u s e d i n s t e a d o f 8 0 p e r c e n t .
Q.
When will
the p e n a l t i e s ,
A.
A f t e r the t a x p a y e r f i l e s h i s M a r c h 1 5 a n n u a l
r e t u r n s h o w i n g t he c o r r e c t t ax f o r the y e a r .
Q.
Suppose
A.
If a n o v e r e s t i m a t e
t a x s h o w n in the M a h o i
give you a refund or
Q.
Suppose I made a big mistake
S e p t e m b e r , w h a t c a n I do?
A.
Y o u too m a y f i l e a n a m e n d e d d e c l a r a t i o n b y D e c e m b e r 15.
In t his c a s e if y o u r e c e i v e a b i l l f r o m the C o l l e c t o r
for an instalment resulting from your September d e c l a r a
tion, y o u s h o u l d s e n d t his b i l l w i t h y o u r a m e n d e d d e c l a
r a t i o n to the C o l l e c t o r , a l o n g w i t h a n y r e v i s e d p a y m e n t
s h o w n to b e due f o r D e c e m b e r , o n y o u r a m e n d e d d e c l a r a t i o n .
Q.
Can a h u s b a n d and wife m ake a joint declaration,
t h e y do c a n t h e y f i l e s e p a r a t e l y n e x t M a r c h ?
A.
Yes.
Q,.
What
A.
T h e r e is a p e n a l t y o f 1 0 p e r c e n t
to f i l e a d e c l a r a t i o n o n time.
of
Q.
What
tax I n s t a l m e n t
A.
If the p a y m e n t is l ate, t h e r e is a p e n a l t y o f $ 2 . 5 0
2 - 1 / g p e r c e n t o f the tax, w h i c h e v e r is g r e a t e r , f o r
i n s t a l m e n t w h i c h is l ate.
I overestimate;
if I d o n 5 t f i l e a
if
I don't
pay an
if any,
be
determined?
income
tax
what happens?
I n o v e r p a y m e n t o f the c o r r e c t
the C o l l e c t o r w i l l t h e n
.
and overestimated
in
and
if
declaration?
estimated
the
tax
for failure
on
ti m e ?
or
each
4
o f the
«
forms or a s s i s t a n c e
Q.
W h e r e can I get
i n g t h e m in?
copies
A.
Prom your local
have forms left
still good.
Colle c t o r of Internal Revenue.
If you
o ver from September, however, they are
Q.
H a s n Tt the V i c t o r y t a x b e e n
A.
T h e o n l y c h a n g e in t he V i c t o r y t a x w h i c h a f f e c t s the
d e c l a r a t i o n r e l a t e s to the p o s t - w a r c r e d i t .
If y o u use
the s i m p l i f i e d w o r k s h e e t , no c h a n g e is n e c e s s a r y .
If
y o u u s e the m o r e p r e c i s e w o r k s h e e t , g i v e y o u r s e l f c r e d i t
f o r a l l o f the p o s t - w a r c r e d i t ( f o r m e r l y , t a k i n g this
credit d e p e n d e d on p u r c h a s e s of war bonds, etc.).
Q.
Will I still have
M a r c h 15?
A.
Yes.
N o t h i n g i n the p a y - a s - y o u - g o s y s t e m c h a n g e s the
r e q u i r e m e n t for filing a n annual tax return.
The only
d i f f e r e n c e is t h a t w h e n y o u do f i l e y o u r a n n u a l r e t u r n
y o u w i l l h a v e p a i d a l l or a s u b s t a n t i a l p a r t o f the tax,
a n d the .only p a y m e n t t h a t y o u w i l l h a v e to m a k e o n the
a n n u a l r e t u r n w i l l b e a n y a m o u n t of t a x w h i c h y o u r
a n n u a l r e t u r n m a y s h o w t h a t y o u o w e a f t e r d e d u c t i n g the
a m o u n t s a l r e a d y p a i d u n d e r t he p a y - a s - y o u - g o s y s t e m .
In f act, m a n y p e r s o n s m a y b e e l i g i b l e f o r r e f u n d s o r
cr e d i t s b e c a u s e their a n n u a l r e t u r n s m a y show that they
h a v e paid, s d m e w h a t m o r e t h a n the c o r r e c t tax.
changed lately?
to f i l e an a n n u a l
o
in f i l l
Oq -
tax return b y next
(22 A p p e n d i x d . )
The exemption provisions require the determination of the
questions ■whether sales are made to governmental agencies and whether
the articles or services are for the exclusive use of these agencies*
Because of the numerous types of contracts under which sales are made
to the Government and the greatly expanded scope of its activities,
considerable work is required to establish proof of the conditions
upon which the exemptions depend* The services of employees taking
care of these details could be better utilized in other activities.
Repeal of the exemption privileges also may well increase the net
revenues of the Federal Government because it is believed that the
present system results in considerable loss of revenue through care
lessness, errors, and possible fraud* The tremendous volume of paper
work involved makes it impossible for the personnel now available to
check adequately transactions for which tax exemptions are requested,
(21 Appendix^ 'cont* d.)
r
Termination of certain governmental excise tax exemptions
Section 307 of the House bill provides for the termination of
numerous excise tax exemptions on sales of goods and services to the
Federal Government as requested by the President in a letter dated
August 11, 194-3, to the Chairman of the Committee on Ways and Means,
The chief taxes affected are the manufacturers* and retailers* excise
taxes, the taxes on the transportation of persons and property, and
those upon charges for the use of communication facilities.
It is
believed that this amendment would achieve considerable savings in the
manpower now used by the Federal Government and private business to
administer these exemptions
(20 Appendix J&'cont'd.)
Another consideration involves the retailers* excise taxes.
At the present time these are levied at 10-percent rates. The House
bill follows the Treasury’s proposals in providing for 25-percent
rates on fur and fur—trimmed articles, toilet preparations, and
luggage and related goods. With respect to the jewelry excise, however
the bill provides for a 20—percent rate, compared to the 30-percent
rate recommended by the Treasury. In the light of the optional
character of the bulk of the items covered by the jewelry tax, the
unprecedentedly high demand for these items, and the limited supplies
that are available, the Treasury believes that the jewelry tax should
be at least as high as the other retailers* excises.
or
(19 Appendix^^ont*d.)
The Federal Communications Commission has indicated the
desirability of maintaining the present 10-percent rate on inter
national cable and radiotelegraph messages in order to facilitate
its efforts in promoting international communications* The Commission
has also indicated the desirability of continuing the existing tax
differential between the taxes on telephone toll message charges
and domestic telegraph charges* The House bill proposes to tax these
two services at 25-percent rates. It should also be noted that because
of competitive relationships existing between domestic telegraph
messages and leased wire services, the taxes on these two types of
services should preferably be at the same level. The House bill
provides for a 25 -percent tax on domestic telegraph messages and
a 20-percent tax on leased wire, teletypewriter, and talking circuit
special services
(18 AppendixjSfcon^d.)
r
Finally, special problems are raised by "the excise "tax provisions
in the House bill* The first relates to the amount of tax increase on
fermented malt liquors. An increase of $1 per barrel as provided
in the House bill would represent .2 cents per 8-oz. glass and .3 cents
per 12—oz. bottle# Xf distributors were permitted to increase their
unit selling prices by a full cent they would gain larger profits
because of the tax and the Treasury would not get the full benefit
of the higher consumer outlays. On the other hand, if price increases
were not permitted, distributors would be compelled to absorb a part
of the higher tax. A $3 per barrel tax increase as originally
recommended by the Treasury would more nearly approximate full cent
price increases on customary units of sale.
(17
r
cont*d.)
A further difference between the House bill and the Treasury* s
excise proposals is the failure to repeal the tax on transportation
of property -which was enacted last year. This tax is undesirable,
since it disturbs existing price and competitive relationships and
results in discrimination among competing producers. It conflicts
with the Government*s efforts to stabilize prices and the advantages
■which would follow its repeal would more than offset the $170 million
decrease in revenue.
(16 Appendix
>nt*d.)
The second reason why the House bill does not meet the Treasury’s
$22 billion excise tax goal is that it includes rate increases below
the levels recommended by the Treasury for the taxes on distilled
spirits, fermented malt liquors, wines, general admissions, trans
portation of persons, and jewelry* The higher rates proposed by the
Treasury would raise $689 million more than those in the House bill*
The Treasury again recommends the wartime increases originally proposed
for these taxes.
These increases are fully warranted in view of the
great wartime increases in demand for these articles and services and
the prevailing scarcities in their supply.
Taxing soft drinks and candy and chewing gum as recommended by
7
the Treasure would raise $367 million* The supplies of these items
are appreciably below the wartime demands of consumers and, consequently,
the proposed taxes could be shifted forward to consumers without reducing
the total volume of sales* While vending machine operators probably
could not find a satisfactory method of shifting the taxes on these
products, it is believed that they generally could continue to operate
profitably by distributing non-taxable products such as nuts, raisins,
cookies, and non-aerated soft drinks
The first reason is that the recommended increases in tobacco
taxes and the proposals for taxing soft drinks and candy and chewing
gum were not adopted in the House# These recommendations would raise
$852 million# Failure to provide for wartime increases in the tobacco
taxes cannot be justified on the basis of the prevailing demand and
supply conditions in the industries involved. The proposed tax
increases could be passed forward to consumers without burdening
tobacco growers, manufacturers or distributors* From the standpoint
of the probable effects on consumers and the industries, there are
just as good reasons for obtaining additional revenue from the tobacco
taxes as from the other excise taxes included in the House bill.
\
(13 Append!
35
Analysis of excise tax provisions in House Bill
The magnitude of our war finance requirements and the need for
absorbing excess consumer spending power to the greatest extent
possible demand that every effort be made to reach the
excise tax goal recommended b y the Treasury*
billion
The provisions in the
House bill would go only about half the way toward meeting the
Treasury1s goal.
There are two principal reasons for this difference
12.
A detailed comparison of the Treasury’s excise tax proposals
Tan. and
m t h iKe changes contained in the House-
the existing rate
together -with the estimated revenue effects, is showi in Exhibit
11. (Appendix^ cont’d.)
The Treasury also proposed to raise an additional $852 mil
lion from rate increases in the tobacco taxes and from new taxes
on soft drinks and candy and chewing gum.
None of these proposals
is included in the House bill/Urtinally, the House bill does not
provide for repeal of the tax on transportation of property,
10 ♦ (Appendix^ ^ o n t *d •)
Excise tax changes included in the House bill, but not in
the Treasury’s proposals, are the increases in rates on electric
light bulbs, international telegraph messages, and -wire equipment
services, and the new excise on pari-mutuel betting*
The addition
al revenue from these changes is estimated to be about $51 million
In most cases the items selected for heavier taxation in the
House bill are the same as those in the Treasury*s recommendations.
Some of the rate increases in the House bill, however, are not as great
as those suggested by the Treasury.
As a result the House bill would
raise an additional $1.1 billion from items included in the Treasury’s
proposals, -whereas the Treasury suggested raising about $1.8 billion
from these same sources.
8, ( A p p e n d i x ^ c o n t 1d.)
2
m
General comparison of Treasury recommendations and the House
action on excise taxes and postal rates
The Treasury’s excise tax proposals to the Committee on Ways and
■.
•■
■' ;;r‘■
'
,/ ■
■
:
Means were designed to raise an additional $2
A r.
AV.
’
:
■ .
billion of revenue #
\fe.
■ V n nn
K
The excise tax
changes embodied in the House bill are estimated to raise an addi
tional fl.2 billion of revenue.
The bill also provides for higher
postal rates estimated to_ produce an increase of $184 million in
postal revenues,
■
7, ( A p p e n d i x 'eont1d)
Third, under the excise method, we would be certain that a net gain,
rather than
a loss, would be achieved on the anti-inflation front.
The
excise tax proposals -would not affect the farm parity index, while a gen
eral retail sales tax designed to raise the same amount of revenue would
increase the index by more than 2 per cent.
The excise proposals would
increase the cost-of-living index by about 1 per cent, while an equivalent
sales tax would raise it by almost 3 per cent.
These increases would occur
at a time when vigorous action is being taken along many fronts to
living costs down.
keep
The net effect on business costs would be minor under
the excise method, particularly if the recommended repeal of the tax on
transportation of property is accepted.
Under the sales tax method price
ceiling adjustments to compensate for the sales tax on various business cost
items would be unavoidable.
From the standpoint of the effects on the
parity index, the cost-of-living index, and on business costs, therefore,
the excise method
offers significant advantages.
Therew o u l d be no risk of
upsetting the Government’s wartime stabilization program, particularly because
the costs of basic necessities would not be affected.
6. (Appendix^^pont*d.)
Second, the lower income groups -®ould not be forced to
reduce their consumption of the necessities of life as they
inevitably would under a sales tax.
A retail sales tax, ap
plying to the bulk of consumer purchases, does not give these
groups any real choice between paying the tax and escaping it
by cutting their taxable purchases.
Higher prices for the
things they buy, whether induced by a sales tax or any other
cause, simply mean that many low-income consumers must exist
at a still lower living standard
5* (Appendj
ont*)
There are at least three fundamental reasons "why the (excise
'****Jl' •
method is to be preferred*
V“rvyVv'yv\
First, the added administrative and
compliance effort would be only a small fraction of what would
be entailed by a retail sales tax*
There would be no substantial
enlargement of Bureau of Internal Revenue staff*
Few new adminis
trative procedures would have to be established, and the added
number of taxpayers would be far less than the 2 l/2 million firms
jWhiftU would be covered by a retail sales tax,
While formulating the Treasury’s excise program, we made
comparisons with a sales tax proposal designed to yield an
equivalent amount of revenue*
To raise $2 l/2 billion by means
of a sales tax would require about a 4, per cent rate on all retail
sales, on basic living needs as well as on non-essentials and
luxuries*
If food sales were exempted, the required rate would
be more than 6 per cent, and if the exemption were extended to
cover also medicines and clothing, the required rate would be
over 9 per cent.
(Append! J0<Jpnt 'd.)
Similarly, there is every reason to believe that the
higher taxes would not cause hardship for consumers.
The prices
of only a relatively few non-basic commodities and services would
be affected.
Consumers in a difficult economic situation would
be given a real choice between paying the higher taxes and de
creasing their purchases of these non-essentials and thereby
relieving themselves of part or all of the taxes
2. (Appendix
Substantial wartime increases in our excise taxes on
consumer goods and services are justified on several grounds.
The additional administrative costs would be relatively small
for the Government, as would the taxpayers* costs of compliance.
There is every reason to believe that few, if any, of the business
concerns affected would be unduly burdened, since the higher
levies generally could be shifted to consumers with little dif
ficulty.
Wartime supply shortages are troublesome for many
industries, to be sure, but these very shortages, coupled with
the high level of consumer income, create a market situation
extremely favorable to forward shifting of excise taxes.
Excise taxes
1,
General basis for recommendations
—
We have recommended that an additional $2 l/2 billion be raised
through increases in the rates and changes in the basis of several
existing excise taxes and through enacting two new excises.
In addi-
I
tion,\^he tax on the transportation of pr ope r t ^ i s re commended
repeal^^The specific items selected for heavier taxation, as well as
the level of the proposed rates, were determined after detailed
anal ysfs had been made of the demand and supply conditions in the
different industries, and after consideration had been given to the
manner in which producers and consumers would be affected.
Moreover
the Treasury recommendations on excises are part of a.program* ttfat-
ropt--ffi-ijitftrt.
^
ijr'win!nf»i^iinrV^i
ifi
>frih‘f“A‘*K*ft
- 7 - (Appendix
However, if the coal « a ^ i r o n Sw*ee9Mkls to be retained
j
fy
A
in Section 735,
the
amendments introduced in the House Bill^
In the case of
coal mines and timber blocks, the distinction between new
and old properties appears to be a tenuous one which has
resulted in some inequities.
Q
m
to. »q^«,ii5 imaatey corporate lessors of coal amfe
A
iron and timber properties should
be entitled to the
same relief now granted by the law to the operators of such
properties
- 6 - (Append!
Last year, when the Revenue Bill of 1942 was being
considered by your Committee, the Treasury w
1r
the
rinmi11irin1
formula which was made applicable to producers
of coal, iron, and timber*
We believed then, as we believe
today, that a measure which distributes tax relief without
regard to need not only deprives the Government of much
needed revenues, but also results in an inequitable distri
bution of the wartime tax burden among business enterprises.
tl,4
- (Appendix*
Second, we believe that the problem faced by the
natural gas industry as a result of accelerated output is
rather than a^fraa* problem, /Heliyf*
primarily a
"ffwniitai.
Srorft '.taxes is ouerght layisfae
its ^bfiS ewnr^i 4’n
to 11,^ - ^ r waiU
^
1*
§? in'" v"**
The Treasury is of the opinion that
the position of the natural gas industry is not so unique
jgf thag respectxthat it should be relieved of the wartime
taxes which Congress has imposed upon industry as a -whole.
-'3
Our reasons are twofold*
,CT^tiSfi -•madar.
(Appendix
First, we bolimim 'bloat CttU
flrmfl.ft*!1
i? <
^ ro ic ijm ^
H£0fau/t44rt ^<SL— *
steadies of\^ number of the representative companies in this
industry it appears that the Industry, as a Dhole, is now
t
11
UAC&njQ
earning as much per unit of output, after excess-profits taxes^
7 ■ ' “'v'v
as it earned during the base period years.
It is our belief
that the excess-profits tax cannot be said to be injuring an
industry if this tax allows the industry to retain its normal
unit profits.
-"2
(Appendix
The Treasury recognizes that natural gas is a depletable
resource, the production of -which has greatly increased since
the beginning of the -war.
It "would not be opposed to the
amendment of Section 735 to include ^rodgcers of natural gas.
However, the natural gas companies -which will benefit under
r\
the provisions of the House bill are primarily engaged in the
operation of pipe lines.
Some of these companies produce no
natural gas and all of them buy a substantial percentage of
the gas carried in their pipe lines.
would be
The Treasury believes it
to extend the relief now afforded to depletable
resource industries to these companies.
Appendix
Special excess-profits tax treatment -with respect
to the accelerated output of certain natural resources
A.
The extension of the coal and iron gartee of Section 735 to
the natural gas industry
The House bill provides special excess-profits tax treatment
for natural gas companies -with respect to income from the
production, storage and transportation by pipe lines of natural
gas.
The treatment given -would be the same as that now granted
under Section 735 (b)(2) with respect to income from coal and
iron mines.
- 4 -
(Appendix m Cont *d*)
On the other hand, the Treasury does not believe that the
extension of percentage depletion to vermiculite, feldspar, lepidolite,
spodmene and potash can be justified even as a war measure*
Although
the first four of these minerals are used in war production, we have
been informed by the War Production Board that the current output of
all of them is adequate to meet present wartime requirements*
Con
sequently, these four minerals stand in no different position from all
the other minerals which have important wartime uses but with respect
to which
no critical supply situation exists*
Potash also has important
wartime uses, but officials of the War Production Board do not believe
that the granting of percentage depletion to this mineral can be ex
pected to bring about the discovery and development of any new potash
deposits*
The vast bulk of the potash reserves in this country were
discovered by Government geologists and are found on public lands*
The
exploitation of these deposits is controlled by the Department of the
Interior, and without the approval of the Secretary of this Department it
would be impossible for new companies to engage in the production of potash#
->*
(Appendixfl^tfont *d)
The Treasury’s position with respect to the extension of
percentage depletion to strategic minerals as a wartime measure is
the same as that with respect to the exemption of these minerals from
excess~profits taxes.
If, hut only if, the allowance of percentage
depletion for the duration of hostilities will contribute to the war
tth%tI
effort, the Treasu]
P
Such allowances despite our firm
conviction that the percentage depletion provisions in the present
law have, in general, enabled many individual and corporate taxpayers
to avoid their fair share of the Nation’s tax burden.
Generally, our
position with respect to percentage depletion is the same as was
expressed in hearings on the 19^2 Bevenue Bill. 1/
However, on the
basis of the representations of the War Production Board that percentage
depletion for these metals for the duration of the war will contribute
to the war effort, we concur in the action taken in the House Bill in
granting percentage depletion to fluorspar, flake graphite, sheet mica,
and beryl.
1 / See Secretary Morgenthau’s statement, page S, and
testimony
v pp. SU, 2.9&S, 3^32, Hearings Before Ways and Means Committee, 0
77th Congress, Second Session.
A year ago the Treasury, after consultation with officials
of the War Production Board, recommended that the income from
the production of 11 strategic minerals be exempt from excess-
U
U X —
and flake graphite, to this list of minerals; both of these minerals
are of jfesfestrategic importance*
However, we see no possible
reason for the inclusion of vermiculite among these strategic
minerals*
Although this mi
_
>
the opinion of officials in the War Production Board that the
present supply is more than adequate#
The bulk of this mineral
is used for building insulation in competition with rock wool and
asbestos, products which no one mould presume to say were of
strategic importance*
EFFECTIVE NET* TAX RATES ON CORPORATION INCOME
AS THE PROPORTION OF TAXABLE EXCESS PROFITS VARIES
>
Under Present Law, H. R. 3 6 8 7 and Suggested Revisions in 8 0 Percent Limitation
* A fte r p o s tw a r re fu n d .
N o te : N o rm a l ta x a n d s u rta x n e t incom e assum ed e q u a l and g re a te r th a n $ 5 0 ,0 0 0 .
Office of the Secretary of the Treasury
Dwiston of Tax Research
B-476
Appendix w
Table I
Effective tax rates on corporation income as the
proportion of taxable excess-profits varies, under present law,
H. R. 3687, and suggested revisions in the 80-percent limitation
Taxable excess
profits as a
percent of
taxable income
Notes
Total taxes as a percent of income under
• Present law : H. R. 3687 i Revision A
Revision B : Revision C
•
4
4
, Net l Gross ! Net! Gross* Net
Gross * Net ! Gross! Net
1 Gross «
4
4
4
4
4-
4
0
10
20
30
40
50
40.0
45.0
50.0
55.0
60.0
65.0
40.0
44.1
43.2
52.3
56.4
60.5
40.0
45.5
51.0
60
70
80
90
100
70.0
75.0
80.0
80.0
80.0
64*6
68.7
73.0
78.5
80.0
80.0
80.0
7 2 .3
72.4
7 2 .0
5 6 .5
62.0
67.5
4
40.0
44.6
49.1
53*7
58.2
62.8
67.3
71.9
7 2 .8
7 2 .4
72.0
4
4
4
40.0
44.5
49.0
53.5
58.0
62.5
40.0
44.5
49.0
53.5
58.0
62.5
40.0
45.5
51.0
67.0
71.5
76.0
80.0
80.0
6 7 .0
71.5
76.0
80.0
80.0
62.0
67.5
40.0
44* 6
49.1
53.7
58.2
62.8
40.0
45.5
51.0
56.5
62.0
67.5
40.0
44.6
49*1
53.7
58.2
62.8
73.0
78.5
80.0
80.0
80.0
67.3
71.9
76.4
80.0
80.0
73.0
78.5
80.0
80.0
80.0
67.3
71.9
76.4
76.9
76.5
5 6 .5
‘’Gross** and ’’Net” refer to taxes before and after the postwar refund,
respectively. The capital-stock and declared-value excess-profits tax
are not included in this computation. Normal-tax and surtax net income
are assumed equal and greater than $50,000.
- 3 -
(Appendix
W
.
excess profits, and in order that a smoother graduation in effective
tax rates may be provided as taxable excess-profits represent a larger
and larger percentage of total incorn^ revisions aawbe made in the
SO-percent limitation.
Revision A would substitute an 85-percent excess-profits tax with
no postwar refund for the 95-P@rcent excess-profits tax and 10-percent
postwar refund in the House Bill.
The SO-percent limitation would re
main in effect.
Revision B wouldJ^flHS?’ the SO-percent limitation^ 1W taxes (after
ra th e r thai^ t?efnrfi . t
.
h
g
■ -a kin ^ , 1 a ^
_
sM jla
^
z
U
~ffrrt
h M U u JtA i ^ y u , 7 t ji
in most instances, of charging the reduction in taxes resulting from
the SO-percent limitation against the taxpayer’s postwar refund, rather
than against gross taxes.
Revision C would raise the present limit of SO percent to 85 per
cent, but would not change the basic structure of the limitation.
The effective tax rates which would result from these changes are
presented in Table I, both before and after the postwar refund, if any.
In Chart I the effective tax rates after the postwar refund are shown,
1(
| ____
J H
I \
I _ _
__
I
I*
OlJ M a *
j
- 2 -
(Appendix
taxable excess profits reduces taxable normal profits.
A, reduction in
normal profits, and, therefore, a reduction in normal taxes and surtaxes,
increases the portion of total tax liabilities (SO percent of surtax net
income which remains unchanged) called excess-profits taxes and increases
the postwar credit.
Although gross taxes remain at SO percent of income,
net taxes after the postwar refund are thus reduced.
Therefore, increases in the excess-profits-tax base will reduce taxes
on corporations subject to the 80-percent limitation, and increases in
the excess-profits-tax rate will leave them unaffected.
Only increases
in the normal-tax or surtax rate, by reducing their postwar refunds, can
increase the overall tax burden on these corporations without a
change in the limitation.
Under a 95-percent excess-profits tax, or 85^- percent after
deducting the postwar refund, a still greater limitation in the
excess-profits tax results.
In order that an increase in excess-
profits taxes will apply to those corporations earning the largest
Appendix f( t /
Possible revisions in the gO-percent limitation to effect
a more satisfactory graduation in effective rates
The Revenue Act of 19^2 provided for a limitation on the excess-
profits tax so that in combination with the normal tax and surtax it
will not exceed gO-percent of surtax net income.
This limitation was
cent of excess-profits taxes as limited.
The excess-profits tax as limited is computed by taking gO per-
this figure.
The balance is termed excess-profits taxes and is used
in computing the postwar refund of 10 percent of excess-profits taxes.
Thus on a given level of income subject to the gO-percent limi
tation, effective tax rates after the postwar refund are- rodueed as
the percentage of that income represent«fced by taxable excess profits
increases.
Since normal profits (normal-tax net income) are determined
by subtracting taxable excess profits’from total income, an increase in
■ »< «
T»vvx fHx>
X
U
v
¥ o B 8 iM .e _ c o m p u t a t io iB ^ n f t e r t h e
tax 1 iabi 1i tvy^jr-ori n. hus band
>
House a i l j r i j M t i t f ¥nw i
Net
income
a i
(g)
in llfy t o
d e t e r m in e
th e
s m a lle s t
^>1, c_50 uet income and^wife wi ‘
trW.$375 net income T^*'"tr
TVUL
Regular
personal
exemption
and credit
for depend
ents
f t » . y » > t«
,^ P en^l3t__g
Income
subject
to regular
rates
(3)
Regular
tax
Personal ex
emption and | Income
credit for
subject to
dependents
minimum
for purpose■ | tax
of minimum
tax
(R\
A2
jL
Jh)
j
>SW
Tax liability
(^he larger of
column U or 7
for each
numbered line)
Minimum
tax
(I)
_____
Joint return
$ 2,125
^4 m
Separ*ate returns
(2 )
1
(V,
VP/
Husband
Wife
Total
Sspar*ate returns
$ 2 ,250
None
None
$1 ,0 0 0
$1 , 1 2 5
$3 3 * 7 5
Husband claiming credit f o r *3 dependents, wife claiming credit for no dependents
1,250
875
2,125 •
1,550
None
500
2,050
375
375
None
56.25
86.25
soo
500
1 ,3 0 0
U50
375
825
13.50
1 3 .5 0
86*25
( 2 k+•7!
99.75
1111
Husband{claiming\credit for 2 dependents, wife claiming credit for 1 dependent
IsM
w
(5)
Husband
Wife
Total
Separ?ite returns
(6 )
(V
J)
1J
Husband
1 ,2 5 0
875
2 ,1 2 5
1,250
Total
Husband
(9)
it*
n il
S u t l\ V )
1 7 .2 5
700
600
1 ,3 0 0
16*50
8 .2 5
2*1.75
16*50
8*25
2^.75
S50
1,200
400
None
92*00
2,050
Uoo
9 2*00
None
600
70 0
1 ,3 0 0
19.50
92.00
5.25
2^.75
97*25
5.25
Husband claiming credit for no dependents, wife claiming credit for .3 (dependents
1,2 50
875
u ij
P
“31 PR
o f TW*VV i VVfltI
500
1 7 2 .5 0
None
1 7P RO
r.
LGVtvNWv llO i
75©
TR
1-/
22.50
OO OP
C.
1 7 2 .5 0
2 .2 5
825
1 7 ^ .7 5
LO
Sov>YCfc *.
5*75
OJ
-fa
e
Total
1 1 .5 0
h•
-rf
(Vfi?° N/
50
25
75
Husband claiming credit for 1 dependent, wife claiming credit for 2 dependents
ftll B
Separate returns
1 ,200
850
2 ,0 5 0
1 3 s - (Appendix B)
The following table shows the number of taxpayers and the amount
of tax increase or tax decrease and the net change 3 by net income
classes under the House bill and the Treasury integration plan.
Net income plass
(in thousands)
House
s Number of
s taxpayers
: (millions)
* Treasury integration Plan
bill
• Number of
s
Amount
4k taxpayers
s Amount
(millions)
(millions)
: (millions)
Reduced taxes
$ 0 - 1 3
3 5
Over 5
Total
23.2
2.7
.3
26.2
1 - 342.3
- 24.5
3^
- 370.3
Ml
15.7
1.8
,5__
18.0
$ - 357.2
- 27.9
- 50.7 .
- 435.9
Increased taxes
$ 0 - $-3
3 - 5
Over 5
20.2
Total
26.2
2.0 .
189.6
27.5
5.0
52.7
217.1 ^ ___ 3^2____
406 .0
99.0
206 f3
4.59.2
34.4 ‘
711.3
11.8
3.2
1.4
48 .8
71.1
155.6
Net change
&
$ 0 - $ 3
3 5
Over 5
Notes
3.2
1.4
1.7
- 152.7
28 .2
213.6
Due to rounding the sum of the individual items may not
add to totals.
— 7a - (Appendix B)
The Treasury plan would exempt 9.1 million taxpayers who now pay
a net Victory tax of $274*9 million.
Including these^ there would
be IB million taxpayers with a total reduction in tax of $435*9 million.
The Treasury plan would increase the liability of approximately 3 4 million
taxpayers by $711*3 million
- Y - (Appendix B)
7*
The House
would exempt only about 130,000 taxpayers
who now pay. a net Victory tax of about $600,000•
Including these taxpayers,
a total of approximately 26 million taxpayers would obtain a reduction
in tax of $370.3 million.
On the other hand, another 26 million tax
payers would pay an increase in tax aggregating $459.2 million.
-
- (Appendix B)
Ti .......... rFi ffi i I'll" I1" 1
ni ’.... rii --tii n m *—
thR i|nnom^.to||ijvith
t s r ^ r s r sm
n^llion ! ------ | r ....... T
..
'
i a m . r w e m i m - t i m e ^ m o ,i..
1lrvW
t h ie
Treasury plan
(fcJ
$ a (Appendix B)
6#
It is clear that the House $ i l l would make the income tax
more complicated and would impose greater administrative burdens than
the Treasury integration plan*
The repeal of the Victory tax is an
important step toward simplification but under the House ^ i l l this is
offset to a large extent by other complications introduced by the Sill,
which would not exist under the Treasury plan.
tl
«
5*
6v-
(Appendix B)
Another difficulty under the House Bill is that some taxpayers
who may now file a simplified return would be precluded from doing so.
Under the regular income tax, the exemptions^on separate returns are
lower than those on a joint return.
Many married couples with a combined
gross income of more than $3 ,000, wishing to file a joint return to take
advantage of the higher exemptions, will therefore not be able to file
a simplified form, since Form 10A0A is limited to a return with a gross
income of $3,000 or less.
jO^
5& (Appendix B)
5
using form
1040A)
after making IB different computations of tax
the •wife before ascertaining the least
f- the Treasury integration plan and under
the present law the multiplicity of computations is not necessary.
/O
(Appendix B)
J*,* A. further complication for many taxpayers introduced by the
House bill is the necessity/ if separate returns are filed, to allocate
as
the dependent exemption in such manner as to reduce the tax liability to
a minimum.
Many computations m a y be needed by taxpayers ■with several
dependents to find the procedure that -will result in the least tax for
a couple.
It is true that in many cases it Yjould be possible for infor
mation to be provided to guide married couples to the expeditious
determination of their tax liability under either the minimum tax or the
regular tax.
Nonetheless, the problem of complying with the income tax
law will be much more complicated for many couples with low incomes under
the House bill than under the present law or/under; the Treasury integration
plan.
Many couples with low incomes in the area where it is now a matter
of indifference whether they filed Joint or separate returns or how they
divided the dependent credit would, under the House bill, need to make
numerous computations before reaching the most advantageous tax result.
i §1 j§
; /■/■. ■ i| •;SB /
For example, a married couple with an aggregate net income of $2,125 and
with three dependents could, depending upon the procedure that happened
to be selected, reach
10
different tax results
(5
using form
1040
and
- 9 -
(Appendix B)
The relationship between the personal exemptions and dependent
credits under the minimum tax and the regular tax may result in much
confusion.
For example, a husband and -wife having two dependents may
lift:
file separate returns } each claiming one dependent.
B i l l on^spouseynay have an exemption of
subject to a
3
exemption of
1350
tax rate.
#100
Under the House
for one dependent and be
percent tax rate, while the other spouse may have an
for the other dependent and be subject to a
23
percent
- B - (Appendix B)
The complexities with respect to joint or separate returns under the
House2bill follow from (a) the provision that a married couple filing
separate returns shall each be allowed an exemption of
$500
in contrast
with the $1,200 allowed on a joint return under the ordinary income tax,
(b) the provision that no part of the personal exemption allowed on a
separate return may be transferred from one spouse to another, and (c)
the variation between the personal exemption and dependent credit under
the minimum tax as compared with the regular tax.
- 7 -
(Appendix B)
Under the simple integration plan suggested by the Treasury, there
is only one breaking point which can be stated in terms of surtax net
income for all taxpayers, just as under present law.
^ >elkduA^ 4» <*>
Con*j g&e,
The accompanying
J
chart/illustrates the difference in this respect between the Treasury
proposal and the House
Jill.
-
6
—
(Appendix B)
culation can be simplified, but for those required to use the regular
income tax form, complexities could not be avoided.
The breaking points
are difficult to compute and -would not be known to most taxpayers unless
the Treasury undertook to supply a complicated series of tables indica
ting the zones of advantage under joint and separate returns.
A sample
of this type of table, relating only to one assumed division of income
(50- 50) between husband and wife, and only to a married couple with one
dependent, follows:
Combined net income
$
*TyPe
of return resulting
in lesser tax
m
800.00 - $1,070.60
1,070.60 - £ t 083»33
Over
&)Q&3w3&5’iU.L1
Separate
Joint
Separate
- 5 -
(Appendix B)
Under present law it is to the^advantage pf a married couple to file
separate.returns' if their combined surtax net income exceeds $2 ,000.
If their surtax net income is below that amount, it is ordinarily a matter
of indifference to them whether they file separate or joint returns.
House bill, heavever, igpnnrrag illn l i
The
md makes it advantageous
for some such couples to file^ — nt returns and for others to file /separate
returns.
At the same time, however, it makes the determination of whether
a joint return or separate returns should be filed, a complex problem for
many of these taxpayers.
law, there are two.
Instead of one breaking pbint, as under present
Instead of one breaking point fixed in terms of sur-
tax net income, as under present law, the House bill results in twoAbreaking
points.
On incomes above the higher breaking point and on incomes' below
the lower breaking point separate returns are advantageous.
In the area
between, joinl
OJVL.
is
primarily onIthe
division of
of income
income between husband and wife and also^S* ths
number of dependents.
For individuals filing under Supplement T the cal-
4 —
3*
(Appendix B)
Married taxpayers would find it much easier to comply with the
income tax under the simpler Treasury integration plan than under the
House 6 q.11, since under the bill the determination of whether a joint
return or separate return would be more advantageous may involve numerous
complications.
3 - (Appendix^ B)
Under the simpler integration plan suggested by the Treasury, there
would be 4-3.2 million taxpayers, a reduction of 9.1 million.
number of taxable returns would be
would be joint returns
36.5
million, of which
6*7
The total
million
*- 2 —
2*
(Appendix B)
The administration of the income tax would be much easier
under the simpler Treasury integration plan than under the House bill.
For one thing, there would be a large reduction in the number of returns
involving a small amount of tax.
Under the present income tax and
Victory tax the estimated number of taxpayers for calendar year 1944
is approximately 52.3 million.
Under the House B i l l the number of tax
payers would remain approximately the same as under present law.
Because of the filing of joint returns, the number of taxable returns is
less than the number of taxpayers.
'The number of taxable returns would
be reduced from 44.1 million (aider present law to 41.7 million^inder
the House bill.
$
Compared with the 8.2 million joint returns under present
law there would be 10.7 million joint returns under the House Bd.ll.
Appendix B
Integration of the Victory tax with the income tax under the
House bill and the Treasury integration proposal, com
pared with present law
1*
Both integration plans, the one contained in the House bill
and the Treasury proposal, would repeal the Victory tax and the earned
income* credit.
The House R i l l increases the normal tax rate from
L
6
percent to
10
JbffVuZ-
percent, reduces the surtax rateslin some brackets and
increases thenkin others.
A taxpayer would be required to pay the tax
computed on the basis of these changes but not less than a minimum tax
of
3
percent on net income in excess of exemptions of
person or a married person filing a separate return,
$$00
$700
couple filing a joint return, and $100 for each dependent.
for a single
for a married
Under the
Treasuiy integration proposal exemptions are reduced from $500, $1,200
and
$350
3
to
to $ 500, $1,100 and $300 , and/surtax rates are increased ty
7
percentage points,
s
APPENDIX »A” (CONTINUED)
The Treasury recommended increases in corporate surtax rates,
but no change in the amount of excess-profits taxes.
does not change surtax rates.
The House bill
It increases the revenue from excess-
profits taxes by increasing the rate from 90 to 95 percent and by
making changes in the excess—profits credit.WThe Treasury recommended
an increase in estate and gift tax rates
and a reduction in exemptions
The House bill does not change the estate and gift t a x e s J f ^ n the case
of excise taxes, the House bill differs from the Treasury’s
rec3ommendations in that (l) it does not increase tobacco taxes, (2) it
does not tax soft drinks, candy and chewing gum, (3) its rate increases
generally are lower than those recommended, and (A) it retains the tax
on transportation of property^fEinally, the House bill provides for
increases in postal rates on which the Treasury made no recommendations
/
APPENDIX A
Summary Comparison of the Treasury Proposals
With the House Bill
v
.
\M /
It may be helpful to the Committee to compare, the major provisions
of the Treasury proposals -with those of the House bill as background
for its consideration of that bill.
While the Treasury proposals rely
heavily on the individual income tax for additional revenue, the income
tax changes in the House bill are designed primarily to integrate the
Victory tax -with the income tax.
the earned income credit.
Both would repeal the Victoiy tax and
The Treasury proposal would effect a small
reduction in the credit for dependents and the exemption for married
persons 5
it would increase surtax rates substantially, both to replace
the Victory tax and to increase revenues.
a
3-oercent
The House bill imposes
minimum tax with lower exemptions than the regular tax$ it
also increases normal tax rates and adjusts surtax rates, primarily in
order to replace the Victoiy tax burden.
LIST OF APPENDIXES
Summery Comparison of the Treasury Proposals with the House Bill
Integration of the Victory Tax with the Income Tax Under the
House Bill and the Treasuiy Integration Proposal $ Compared
with the Present Law
Possible Hevisions of the 80-»peroent Limitation to Effect
More Satisfactory Graduation in Effective Hates
Additional Tax Relief for Corporations Engaged in the Mining
of Certain Strategic Minerals
Special Exeess-Profits Tax Treatment with Respect to the
Accelerated Output of Certain Natural Resources
Excise Taxes
Corporation income and excess profits tax rates
1,
m
r r^i t o s
Fre sent.»&&&«
Normal tax rates
Normal tax net income
Not over 3 2 5 ,0 0 0
First $5 ,0 0 0 .
Next 1 5 ,0 0 0
Next
5»000
Over $25,000 to $50,000 (notch)
X
'
t
19
i
No
change
$h,250 plus 31#
of excess over
3 2 5 ,0 0 0
2
Over $5 0 ,0 0 0
2.
f
b f o
Surtax rates
Surtax net income
10
Not over $2 5 ,0 0 0
Over $2 5 ,0 0 0 to $5 0 ,0 0 0 (notch)
$
82,500 plus 22/0
of excess over
$25,000
26
$
ItoJ
$
Combined normal and surtax rates
25$ to 29
Not.over $25,000
Over 3 2 5 ,0 0 0 to $50,000' (notch)
Over $50,000
h.
$3,500 ulus 3g$
of excess over
$25,000
16
Over $5 0 ,0 0 0
3,
'l
Excess profits tax rates
fo
'
.
29 $
55$
69$
ho
30 $
$
9 0 $
No
change
Treasury Department, Division of Tax fiesearch
^0 33$
lij^v
■
|
/
d
Exhibit 10
IN D IV ID U A L
I N C O M E
T A X
Effective Rates for Married Person without Dependents
* I n c lu d e s N e t V ic to r y Tax; n e t i n c o m e
Office of the Secretary of the Treasury
Division of Tax Research
*
a s s u m e d to b e 9 0 %
^ E x e m p tio n s $ 5 0 0 ~ $ 1 , 1 0 0 $ 3 0 0 ; a n d n o t V i c t o r y
o f g r o s s in c o m e .
T a x a n d e a r n e d i n c o m e c r e d i t e lim in a t e d .
B-450-2
Estimated excise tax liability under the Treasury proposal as
presented to the Committee on Ways and Means of the House
of Representatives on October 4, 1943, as compared
with present law for a full year of operation 1 /
Present tax
1. Distilled spirits.
$6 per gallon (draw-back
of $3.75 per gallon on
nonbeverage alcohol).
2. B eer---------------- ------------- -~i------3. W ine:
(а) Still:
Under 14 percent alcohol.. .
14 to21 percent alcohol------Over 21 percent alcohol—
(б) Sparkling.----------— -----------(c) Other----------------------- - - - -----4. Cigarettes_____ A ---------- - - ------------
$7 per barrel-----------------
$10 per gallon (draw. back of $7 per gallon
on nonbeverage alco
hol) .
$10 per barrel---------------
10 cents per gallon—
40 cents per gallon—
$1 per gallon-----------10 cents per half pint.
5 cents per half pint.
$3.50 per thousand. _
50 cents per gallon------$1 per gallon_________ A
$2 per gallon_________J20 cents per half pin t. . j . .
10 cents per half p in t..y
$5 per thousand______ >
Article or service
Intended retail
price—
5. Cigars.
Over
N ot
over
Cents
Cents
Intended retail
price—
T ax per
4
6
8
15
20
Cents
$2.50
3.00
4.00
7.00
10.00
19. Candy and chewing gum .
N one.
T otal additional revenue, items 1 to 1 9 . . ---------
repeal of tax bp .
. Less
transportation of property,
3H
f m 87.2
210.5
61.1
371.3
T ax per f
thousand
N ot
over
Oyer
6. Chewing and smoking tobacco' 18 cents per pound.
and snuff.
7. General admissions---------------------- I cent per 10 cen ts.. .
8. Cabarets_________________________ 5 percent of charge. .
9. Club dues and initiation fees-------- II percent of charge .
f$10 per alley—— -----10. Bowling alleys, billiard p a rlo rs.... \$10 per table— . —
11. Transportation of persons------------ 10 percent of charge.
12. Communications:
20 percent of charge.
(o) Toll service____ _________, (6) Telegraph, etc.:
15 percent of charge------(1) Domestic_______ , - - t 10 percent of charge------(2) In tern atio n al..- - - - - - 15 percent of charge----- (c) Leased wires, etc/.----- -------10 percent of charge------13. Local telephone service--------------10 percent of retail price.
14. Jew elry . . . — —
------15. F u r and fur-trimmed articles.......... ____do____ i..-.-- - - - - - - - - 16. Luggage, handbags, wallets, e t c ... 10 percent of manufac
turers’ sales price on
luggage only.
10 percent of retail price
17. Toilet preparations.
None_____ L—-------!----- 1
18. Soft drinks______ _
20
Estim ated
additional
revenue from
proposals (iii
millions) 1
Proposed tax
-
5
7
9
17
22
Cents
3H
5
7
9
17
. 22
67.7
$12.56
13. 06
14.00
17.00
30.00
35.00
40.00
34 cents per pound.
3 cents per 10 cen ts..
30 percent of charge-----20 percent of charge-----20 percent of charge-----$20 per table----------------25 percent of charge____
46.2
327.0
91.3
5.1
27.0
212.7
.d o .
20 percent of charge. .
10 percent of charge— ._
20 percent of ch a rg e ..-. 1.
15 percent of charge
30 percent of retail price.
25 percent of retail price.
____ d o . . . . , ...........
25 percent of retail price.
Bottled drinks, 1 cent
y'perj&ach 5 cents of inTerfaed retail price; the
equivalent taxes of $1
per gallon on sirup and
25 cents per pound on
carbonic acid gas used
in
unbottled
soft
drinks.
Articles intended to re
tail from 5 to 15 cents
per bar or package, 1
cent per each 5 cents of
intended retail price;
other items, the equi
valent tax of 35 per
cent of manufacturers’
sales price.
3.15
167.3
-54,-8-'
53.4
51.4
177.0
0^90.0
2,681.4
170,5 5J
Total additional revenue, items 1 to 2 0 ... .^2,511.1
Treasury Department,
Division of Research and Statistics.
November 29, 1 ^ 3
1/ Estimates of additional revenue are for a full year of operation
at levels of business estimated for calendar year 1944.
2/ Estimated additional net revenue yield after allowance for in
creased drawback on nonbeverage alcohol of & 12 .8 millions.
5/ Including the effects of H. R. 5359, Public Law 180, approved
November 4, 1943.
BxkiiUit 9 - Table 3a
Effective rates of individual income tax under present law*
the Treasury proposal of Oct* 4 , 1943, and two alternative schedules
Married person «* two dependents
Present law - $1,200, $350
Proposals
- $1,100, $300
Exemptions:
#0
Net income l
before
ftf Present law
personal
ft0 including
exemption * net Victory
tax 1 /
t
$
1,7 0 0
1,800
1,9 0 0
2,000
2,50 0
3 ,0 0 0
4,000
5,000
6,000
8,000
10 ,0 0 0
12 ,5 0 0
15 ,0 0 0
20,000
25,000
50,000
* 75,000
100,000
500,000
1,000,000
5 ,000,000
2 .1 #
2*2
2*2
2 .?
6*4
8.9
12 .1
14.6
1 6 .3
1 9 .4
22*1
25*2
28.0
33*5
38.3
5 2 .8
6 1 .6
6 7.8
88.0
89.9 2 /
90*0 2/
: Treasury :
S proposal, J Treasury
1 Oct* 4, t proposal A
1
«
2/
Increase
1
% Treasury
i Treasury
ft proposal,
#
1 proposal B I Oct. 1*.
t
0
s
19“*3 ...
-
- 2.156
- .7
«•
1.556
2*8
1.656
1.756
4,1
9*0
>*.2
2.9
3.2
4*5
9-3
13.2
19.4
23.9
27.1
9 .8
.6
1,2
2 .6
13.7
3.9
24.2
27 .1*
6 .7
8 .7
1 0 .2
1 2 .1
1 2 .8
18*8
23.3
2 6 .5
1 9 .8
31,5
3 2 ,0
3 2 ,0
3 5 .6
35.5
39.0
1*1.9
1*6.9
51.1
35.0
39.7
4 3 .3
*19.6
55.0
70.1
77.2
81.1*
93.1
94.5
95.7
13.5
14.5
3 8 .0
1*0.2
1*3.8
H6.7
5 7 .0
6 2 .7
68.9
1 5 .2
16 * 1
1 6 .7
1 7 .3
1 5 .6
1 3 .6
5 .1
6 3 .6
6 8 .7
73.2
88*6
88.4
9 0 .8
9 2 .6
Treasury Department, Division of Tax He search
1/
1
t
Effective rates
9 1 .2
93*4
'
S
**»7
5.7
+'SfB
j1
Treasury 1 Treasury
: proposal A 1i proposal B
i
111
i
5
i
- 2 *1 $
- .6
.7
1.3
3.0
4 .3
7 .3
9.3
10 .8
1 2 .6
1 3 .4
1 3 .8
1 3 .S
1 3 .5
12.8
9*9
7.2
5.4
*6
•9
2 .6
- 2.156
- .5
.9
1.6
3.5
4.8
7.7
9.6
1 1 .1
1 2 .6
12 .9
12.8
1 2 .2
10.3
8 .4
4.2
2.0
.4
,.1#3
3.5
November 29, 19^3
Maximum earned income credit assumed, Victory tax net income assumed to he ten-ninths of
net income*
Talcing into account maximum effective rate limitation of 90 percent*
Exhibit 9 - Sable 3
Amounts of individual income tax under present law, the Treasury proposal of Oct* 4, 19 U 3 ,
and two alternative schedules
Married person - two dependents
Exemptions;
$
1,700
1,900
2,000
2,500
1,800
i5.000
,000
,000
5
; Present law
including
l
l net Victory
tax 1/
$
10,000
12,500
15.000
20.000
25.000
50.000
75.000
100,000
500,000
1 ,000,000
5,000,000
$
: Treasury :
:
:
t
:Treasury
s Treasury t proposal,; Treasury r Treasury
lproposal A : proposal B l Oct* 4, s proposal A {proposal B
I
s
27
28
56
$
5*
84
233
397
776
81
225
384
485
SIS
753
.
1*163
1,588
1*196
1,628
2,523
3*555
2,557
3.546
6,489
9*912
13*750
35*037
57.919
81,435
465.418
6,284
9*388
4,870
4*962
4,207
6,693
9*574
26,392
46,209
67,803
^39*931
898,800 2j
4,1*98,800
2/
945.418
,785,418
12,780
31*3^
2/
51,642
73*17^
443,089
908,089
4,628,089
Treasury Department, Division of Tax Research
1/
Amount of increase
22 2a.
**
**
159
267
1.553
2,208
8.000
19U 3
i58
6,000
’
Treasury
proposal,
Oct*
35
9
730
A
Jl
Amount of tax
I
Net income
before
personal
exemption
1 200, $350
1 100, $300
$ ,
$ ,
Present law
Proposals
$
30
60
90
246
412
791
, ll
1.643
12
2*563
3*%5
4,745
6,034
8,753
11,678
28,481
47,678
68,726
442,107
912,107
Ij^,672,107
- $35
-
12
12
23
66
117
268
433
609
970
1*3^7
1,818
2,282
3*219
4,176
8,645
11,710
13*632
25.^87
46,618
286,618
- $35
9
18
32
- $35
14
11
26
7^
130
87
306
11*5
291
466
481
664
6119
1,010
1.287
1,601
1.827
2,060
* 2,104
2,089
1,004
1*338
1,726
2,077
2*695
>206
4,952
5*433
5*371
3,158
129 2
9*289
* #)
1,469
923
2,176
13*307
173,307
November 29* 19^3
Maximum earned income credit assumed* Victory tax net income assumed to "be ten-ninths of
net income*
Taking into account maximum effective rate limitation of 90 percent*
Effective rates of individual income tax under present law*
the Treasury proposal of Oct* 4, 19143, and two alternative schedules
Married person — no dependents
Exemptions} Present law - $1,200
Proposals
- $1*100
i
before t Present law : Treasury™nr™
§
•
personal t including : proposal, ; Treasury : Treasury
exemption i net Victory : Oct. 4, l proposal A ^proposal B
f
»
tax I f
i
•
* 19^3
$
1 ,1 0 0
1*6$
m
1,2 0 0
1*8
2 .%
2 .5$
2.3#
1 ,5 0 0
8.0
7.2
5.3
7 .5
1,6 0 0
8.4
8*8
6.3
9.4
1,800
8.0
10.8
11.2
11.9
1,9 0 0
11.8
3.7
12.9
12.3
2,000
9*4
12.8
1 3 .2
13.9
2,500
11*9
1 6 .7
17.2
17.8
3,000
19.3
2 0 .4
20.9
1 3 .5
4,000
16.2
2 5 .0
2 6 .1
25.7
5»ooo
28.2
2 9 .0
1 7.9
29.3
6,000
1 9 .6
32.0
31.1
31*7
8,000
3 5 .4
22.3
3 5 .4
35*5
24.7
10,000
38.6
38.0
'38.9
12 ,5 0 0
42.5 *
£l*6
*40,4
27.5
15,0 0 0
30.2
45.8
44.2
42.3
20,000
51.3
48.9
45.4
35*5
25*000
40.1
56.9
52.8
*48.2
50,000
54.2
63*6
7X.1
5 7 .8
75,0 0 0
62.6
78.0
64.2
69.5
100,000
68.6
82.0
69.2
73*7
500,000
88.1
93.2
8 8 .7
, 8 S.5
1,000,000
9 4 .6
89.9 2/
90.9
91.3
5 ,000,000
9 0 .0 2/
9 2 .6
95.7
93*5
mm
i
j Treasury l
fti
•
• proposal, :
l Treasury
# Oct* 4, 1 proposal j
.*
i
1943
;t
- 1 .6#
0 .5
1.9
2.1
2*8
3*1
3*4
4 .8
6 .3
8*8
10,3
11*5
13*1
14.2
15.0
1/
Maximum earned income assumed*
0 .6
2.2
2.4
3.2
3*5
3 .8
5 .4
'6.9
9*5
11.1
1 2 .2
1 3 .4
17.0
13*9
14.1
14^0
13.4
12.7
9*5
5.0
4.7
5.7
5*1
.6
1.0
2.6
1 5 .6
1 6 .3
16 .8
1 5 .4
1 3 .4
Treasury Department, Division of Tax Research
Z j
- 1*6$
6.9
$ Treasury
:proposal B
- 1*6$
0*8
2*7
3*1
3.9
4.2
M
.
6*0
7.^
9.9
11*4
12.4
13.2
13.3
12*9
12*1
9.9
8*0
3*7
1 .6
.7
.4
1.4
3.5
November 297 19^3
Victory tax net income assumed to be ten-ninths of net income*
Taking into account maximum effective rate limitation of 90 percent*
y a o r r a f s 04 j ugTArgrrsrj
gu oo m ©
m sqex.
c is B e u f
J » m *
Effective rates of individual income tax under present law,
the Treasury proposal of October 4, 19 4 3 , and two alternative schedules
Single person « no dependents
Exemptions; Present law - $300 Proposals - $500
Net incomes________________ Effective rates_____________
s____________ Increase_________ ____
before * Present law s Treasury ^Treasury j Treasury : Treasury : Treasury : Treasury
personal : Including net : proposal : proposal : proposal : proposal : proposal s proposal
B
A
•
.•Oct.4, 1943s
:
B
A
exemption jVictory tax l/s0ct*4, 1943s
$
500
600
1.855
5.055
»+.5?6
2 *8#
1*7#
4.7$
2 .8
2
.
1
*
10.5
1
0
.1
SOO
11.3
7.8
2 .6
3.0
12.4
1 2 .0
9.4
900
13.3
1
5
.0
i
4
.o
2
.8
3.3
1,0 0 0
13.5
10,7
3.2
1 6 .5
3.7
1 ,1 0 0
15.0
11* 8
15.5
4.1
1
6
.8
1
7
.8
3.5
1,2 0 0
1 2 .8
1 6 .3
5.0
14.7
2 0 .7
4.3
19.0
1,5 0 0
19.7
4
.7
5 .4
20
.6
21*5
1,6 0 0
15*2
19.9
6.6
2l*.0
2,000
5.9
16.7
23.3
22.5
8 .2
7.4
2 6 .6
26.0
2 5 .2
2,500
17.8
29*2
9.5
2 7 .8
8.7 *
28.7
3,000
19.1
1 0 .1*
32.4
32 .0
11.3
4,000
31.1
20*7
1 2 .3
34.4
11.5
22.1
3 M
5,000
33.6
1 3 .0
1 2 .3
36.6
23.4
6,000
36.3
35.7
13.7
13.5
3«.9
8,000
. 39.2
39.3
2 5 .7
4l,0
1*2.2
13.9
1 ^ .3
10,000
2 7 .8
41.7
14.9
1*2.8
1 3 .8
1*4.2
30.4
4 5 .4
12 ,50 0
4
4
.5
46.6
bs.b
13.5
15.3
15,0 0 0
33.1
1 2 .8
5 4 .0
47.1
15.9
3 8 .1
20,000
50.9
4 9 .6
58.8
1 6 .3
11.9
42.6
25,000
5^ .5
8.1*
1
6
.1
61*.
6
7
2
.2
50,000
5
8
.7
5 6 .1
6.2
14.7
6l*.9
70
.2
64.0
75,000
7 8 .7
4.6
12.9
69.8
82.6
74.2
100,000
6 9 .7
88.6
88.8
.5
88.4
4.9
500,000
93.3
1*0
4.7
1,000,000
90.0 2/
90.9
91.3
94.7
2*6
9 2 .6
5.7
90 .0 2/
93.5
5 ,000,000
95.7
November 2 9 ,
Treasury Department, Division of Tax Besearch
1J Maximum earned net income assumed. For Victory tax purposes, gross income is assumed
ten-ninths of net income.
2I Taking into account maximum effective rate limitation of 90 percent.
2 .25s
3.5
3.9
4.3
4.7
5.1
6.0
6.3
7.4
8*8
10*0
11*7
12.6
1 3 .2
1 3 .3
1 3 .1
12*3
1 1 .3
9 .0
7 .1
2.6
.9
.1
,3
1.4
3*5
1943
to be
aRnTuTT
TatJT
X
Amounts of individual income tax under present law,
the Treasury proposal of October 1+, 19H3, and two alternative schedules
: Treasury
: proposal
:
B
VJ1
O
o
Single person - no dependents
Exemptions! Present lav — $900 Proposals - $900
ITet income\X
#
Amounts o f ta x
In crease
s
Presen
t
law
:
Treasury
;
Treasury
:
Treasury : Treasury : Treasury
before
personal {in clu d in g n e t : proposal ; proposal : proposal : proposal : propo sa l
A
A
:
B
:0ct*l+ . 191+3!
^Scemption'l sV ictory t a x l / :0 c t .l + , 19^3*
—
•*
—
*»
600
$
28
$
10
$
11
$
30
$
17
$
27
800
900
. 1 ,0 0 0
1 ,1 0 0
1 ,2 0 0
1 ,9 0 0
1 ,6 0 0
2 ,0 0 0
2 ,9 0 0
3 ,0 0 0
l+,000
9 ,0 0 0
6 ,0 0 0
8*000
1 0 ,0 0 0
1 2 ,9 0 0
1 9 ,0 0 0
2 0 ,0 0 0
2 9 ,0 0 0
9 0 ,0 0 0
7 5 ,0 0 0
1 0 0 ,0 0 0
9 0 0 ,0 0 0
1 ,0 0 0 ,0 0 0
9 ,0 0 0 ,0 0 0
1/
2
J
62
89
107
130
153
220
2U3
333
m
57U
S29
1 ,1 0 9
1,1(01
2 ,0 9 2
2 .7 8 3
3 ,8 0 2
X ,g68
7 ,6 2 6
10,61*1+
2 8 ,0 9 8
1+8,001
6 9 ,6 6 9
1*1+1,863
8 9 9 ,5 0 0 2 /
M 9 9 .5 0 0 2 /
81
108
135
165
195
285
316
1*50
630
835
1,2X 5
1 ,6 8 0
2,11(0
3 ,1 3 5
X .215
5 ,6 7 0
7 ,2 6 5
1 0 ,8 0 0
ll(, 710
3 6 ,1 0 5
5 9 ,0 3 5
8 2 ,5 7 5
1(66,570
91(6,570
>(,786,570
81+
112
llJO
171
202
295
329
I+63
630
860
1 ,2 8 0
1 ,7 2 0
2 ,1 8 0
3 ,ll(5
U.170
5 ,5 3 0
6 ,9 9 5
1 0 ,1 8 0
1 3 ,6 2 0
3 2 ,2 8 0
5 2 ,6 5 0
7U.230
X % ,2 0 5
9 0 9 ,2 0 5
1(,629,205
90
120
150
182
2ll(
310
3lA
1+80
663
875
1 .2 9 5
1 ,7 3 5
2 ,1 9 5
3 ,1 1 5
X ,0?5
5 ,3 * 5
6 ,6 7 0
9,1(25
12,1+10
29 .3x5
1+8,690
6 9 ,7 7 0
XX3.235
9 1 3 ,2 3 5
X ,6 7 3 ,2 3 5
19
23
28
35
1+2
63
75
117
181+
26l
1+16
575
739
1 ,0 8 3
1.X 32
1 ,8 6 8
2 ,2 9 7
3.17X
i+,066
8,01+7
11,031+
2^707
1+7,070
2 8 7 ,0 7 0
22
27
33
1+1
*+9
75
86
132
20l+
286
1+91
615
779
1 ,0 9 3
l ,3 « 7
1 ,7 2 8
2 ,0 2 7
2.55X
2 ,9 7 6
l+,222
l+,6l+9
X .565
2,3X 2
9 ,7 0 9
1 2 9 ,7 0 3
$
13
28
39
&3
52
6l
90
101
1X7
219
301
1+66
630
79X
1 ,0 6 3
1 ,3 1 2
1 ,5X 3
1 ,7 0 2
1 ,7 9 9
1 ,7 6 6
1 ,2 8 7
61+9
103
1 ,3 7 2
1 3 .7 3 5
1 7 3 ,7 3 5
Maximum earned net income assumed. Por Victory tax purposes, gross incot^^Ls assumed to be
ten-ninths of net income*
...y: J S i g
Taking into account maximum effective rate limifet'ion of 90 P rrt‘r>^auM>f^
ipcprpT-P ? — £€rpX© 5
jsacnxd i x h-
xaollj
Amounts of individual income tax and effective rates under present law, under the proposal to
integrate the Victory tax, and under H. R. 3 ^ 7
Married person®
Exemptions*
t
9f
Ret income* Present
before
* law,
personal * including
exemption *net Victory
* tax 1/
$
600
$
1
800
7
14
1,000
20
1,200
1 ,5 0 0
29
1*700
35
1 ,9 0 0
42
2 ,0 0 0
58
2 ,3 0 0
116
2 ,5 0 0
199
267
3 ,0 0 0
Amount of tax
f
i
*
: Proposal *
to
*
*
* integrate * H.R*
* Victory * 3^87
tax
*
S
**
two dependents
Present law and H.R. 3^87 m $1,200, $350
$ 1 ,1 0 0 , $300
Integration proposal
Effective rates
1
•
f
Increase
|
•
#
: Present
*<TroposaJ) :
s
1 Proposal
law,
*
to
:
*
*
* to
1 Integrate 1 H . R * including * integrate * H.R.
Victory * 3 ^ 7 1 net Victory Victory * 3&87
*
1
tax 1/ S
tax
tax
*
I
*
f
m Increase
f
• Proposal :
to
*
*
«9 integrate * H . R .
* Victory *3687
f
♦
tax
*
mm
$
- 1
.2 $
—
$ - l
m
m
m
m
Mr
m
- 7
- 7
•?
0m
1.4
**
- 14
- 11
•3t 1 /
3 tl.
0k
.8 W
- 20
- 11
k
9 2/
1*7
99
m
- ll
1*2 2 /
- 29
1*9
18 2 /
**
1.4
2*1
ll
2^ h
- 35
2/
1 .6 2 /
2 *2
$
44
2
- 12
30 W
2 .3 *
8
- 25
66
2*9
3*3
1*7 1 /
33 1 /
16
- 24
4.0
5 .1
92
i3 2
5 -7
6*4
176
138
- 21
7 .0
5 .5
17
8*4
14
286
8*9
19
9 *5
253
4gb
U s5
1
1 2 .1
12*9
12*2
5 ,o o o
30
515
1U.9
16
l 4 .6
746
5 ,0 0 0
765
1 5 -3
730
35
69
22*9
2 2 .8
2 ,2 0 s
1 0 ,0 0 0
2 2 .1
83
2 ,2 9 1
2 ,2 7 7
188
2 5 ,0 0 0
38*3
3 8 .9
9 .7 6 2
139
9 .5 7 1*
3 9 .0
9 ,7 1 3
5 0 ,0 0 0
2 6 ,6 6 2 2 6 . 9 3 5
270
5 2 .8
53*9
53*3
2 6 ,3 9 2
5&3
6 8 .7
6 7 .3 0 3
&7
6 7 .8
6 8 ,1 9 0 6 8 ,6 5 0
6 8 .2
1 0 0 ,0 0 0
387
1 ,5 8 0
8 2 .4
8 3 .0
2 0 7 ,6 2 2 2 0 8 ,0 7 4
2 5 0 ,0 0 0
2 0 6 ,0 4 2
2 ,0 3 2
S 3 .2
4 4 2 ,6 2 2 4 4 3 ,0 7 4
8 8 .0
88*5
8 8 .6
500 ,0 0 0
3 ,1 4 3
2 .6 9 1
^ 3 9 .9 3 1
1 ,2 0 0
1 ,0 0 0 ,0 0 0
1 3 ,8 2 2
8 9 8 ,6 0 0 2 /
8 9 .9 U
9 1 .3
9 1 2 ,6 2 2 9 0 0 ,0 0 0 2 /
9 ° ; 0 J Z .
Treasury Department, Division of Tax Research,
1/ Maximum earned income assumed. For Victory tax purposes,gross income is assumed to beTTisiP^
2/ Minimum tax
2 j Taking into account maximum effective rate limitation of 90 percent*
*
Less than *05 percent*
EG-
-
.256 - .25S
■ 1.4
- 1*7
- 1*9
2 .1
- .1
•4
.7
*7
•6
•8
*7
.8
•6
•5
.4
.6
•5
1 .4
- .9
-1.1
- *9
- *7
- .6
- .6
-1 * 3
- 1 .0
- .8
- *5
•
•3
*7
.8
1 .1
•8
•8
.6
*
income*
Exhibit 4 - Table 2
Amounts of individual income tax and effective rates under present law, under the proposal to
integrate the Victory tax and under H* R, 3687
Married person — no dependents
*
v
I
Exemptions: Present law and H.R* 3687 - #1,200
\
Integration proposal-#1,100
„ '*}.
—.
Amounts ef tax
Effective rates
Net income/
Increase
: Present *Pr©posal :
:
Increase
s
before 8 Present ^Proposal 5
•
•
Proposal
Proposal
:
.•
V
* ■
law,
t te
:
:
1 to
5 H«R* |
law,
personal
te
te
:
H*R* : including :integrate:
:
!h *r *
exemption * including l integrate* 3687
integrate *3687
integrate: 3687 nlet Victory■: Victory *
:
s
Victory
:
aet
Victory
o
o
: tax X/ : tax :
s Victory s
: Victory 3
tax i/ 1 tax *
*
*•
tax t
:
s
1
:
:
: tax e•
$ 600
•2 %
$ i
- .2 K - .2 K
$ - 1d # - 1
800
8
—
—O
$ 3_2/
1*0
1*0
.
4
*
2
/
-5
- *6
- 6
1,000
—
,
*•
15
15
- *6
1«5
*9 2 ] - 1*5
9 2/
- 6
1,200
21
$ 22
1
1*8
15
1.8 |K/ 1.J 2/
•1
- «5
88
1 ,5 0 0
- 10
69
79
♦6
9
5*3
5.9 U 4.6
- .7
1,700
132
-8
7.2
123
7.8
6*8
9
115
*5
- .5
1,900
166
161
176
10
8 .7
-5
8 .5
9.3
.5
- «3
2,000
188
198
10
—4
184
9.2
9*4
- *2
9.9
.5
2,300
11
264
0
11*0
253
253
0
11*5 11*0
.5
2,500
308
11
2
297
299
12*3 12*0
11*9
*1
•4
3,000
418
414
13
405
13.9 13.8
13*5
•4
•3
9
4,000
668
18
21
16.2
647
665
16.6 16.7
.5
.5
5,000
928
21
894
915
34
17*9
18*3 18.6
.4
*7
10,000
2,536
46
2,467
2 ,5 1 3
69
24*7
2 5 .1
25.4
.7
.5
25,000
161
4 0 .1
10,079 10,196
U
10,035
*2
.6
40*3 40.8
50,000 27,075
2 7,1 0 6 27,460
5 4 .2
31
385
.8
•1
54.2 54*9
100,000 68,584
68,730 69,280
146
696
68*6
6 8 .7
•1
6 9.3
*7
208,186 208,732
250,000 206,858
1,328 1,874
82*7
83.3 © .5
.7
.5
500,000 440,747
443,186 4 4 3 ,73 2
88*1
88.6 8 8 .7
2,439 2,985
*6
.5
1,000,000 899,000 2/ 913,186 900,000 3J
14,186 1,000
91.3 9 0 .0 2/
89.9 2/
1.4
Treasury Department, Division of Tax Research
November 29, 1943
1/ Maximum earned income assumed* For Victory tax purposes, gross income assumed to be ten-ninths of net
income*
2 j Minimum tax*
2/ Taking into account the maximum effective rate limitation of 90 percent*
# Less than #05 percent*
_____
■
___________V
, •
_____ |
mm,
mm
______ _______
mm
a/y -
--
-
'VV •
Exhibit 4 - Table 1
Amounts of individual income tax and effective rates under present law, under the proposal to
integrate the Victory tax and under H. R. 3687
Single person - no dependents
Exemptions:
Amounts of tax
PwnAQO 1
before
personal
exemption
$
600
800
1,000
1,200
1,500
1,700
1,900
2,000
2,300
2,500
3,000
4,000
5,000
10,000
25,000
50,000
100,000
250,000
500,000
1 ,000,000
to
law,
including integrate
net Victory Victory
tax
tax l/
$
17
62
107
$
153
220
265
310
333
4oi
446
57U
829
1,105
2,783
10,644
28,058
22 $
66
110
15^
220
264
308
330
396
44o
565
815
1,085
2,735
10,445
27,550
69,665
69,270
207,97*4
208,750
1*3,750
913,750
441,863
899,500
2/
Present law - $500
Proposal
— $500
N
Effective rates
*
H.R.
3637
23
69
115
l6l
230
276
322
3 U5
4l4
46o
590
Increase
Proposal *
to
1 H.R.
integrate
*3687
Victory
tax
$
5
4
3
1
0
-1
-2
-3
-5
-6
$
6
7
8
8
10
11
12
12
13
l4
j
16
2,795
-14
-20
-48
2 7 ,9 2 5
-199
-508
776
21
25
12
-14
-73
r-245
I,4i6
1,887
14,250
2,527
500
850
1,130
10,630
69,9*0
209,390
* * ,3 9 0
900,000 2 /
-395
Proposal
to
law,
including integrate
net Victory Victory
tax 1J
tax
3 .7$
2.8$
7.8
8.3
11.0
10,7
12.8
1 *4.7
12.8
1 *4.7
15.6
16.3
16.2
16.7
16.5
17*
17.2
17.6
15.5
17.8
19 .I
20.7
22.1
18.8
20.4
21.7
27.*4
41.8
55.1
27.8
42.6
56.1
69.7
83.2
88.4
90.0
69.3
2/
83.5
88/f)
91 . V
H.R.
3687
.8$
3.*$
8.6
11.5
13 .^
15.3
.5
.3
.1
0
-.1
-.1
16.2
16.9
-.2
17.3
18.0
18.4
19.7
21.3
22.6
28.0
>42.5
-.2
- .2
-.3
-.4
-.4
-.5
-.8
-1.0
-.4
56.0
69.9
83.8
88.9
90.0
:
Increase
^Proposal s
:
to
* H.R.
:integrate
*3687
: Victory ♦
f
♦
:
tax
2/
.3
.4
1.4
1.0$
.9
.8
.7
.7
•6
.6
.6
,6
.6
.5
.5
.5
.1
-.1
-.1
.2
.6
PL
©
Treasury Department, Division of Tax Research
November 29, 19^3
1/ Maximum earned income assumed. For Victory tax purposes, gross income is assumed to be ten-ninths of net
income.
2/ Taking into account maximum effective rate limitation of 90 percent.
* Less than .05 percent.
LIST OF EXHIBITS
EXHIBIT 1 -• Estimated Inorease of Treasury Proposals
Over; Yield of Present Law
X
/
EXHIBIT 2
"i
x
EXHIBIT 3 «
Comparison of Combined Normal and Surtax Hates
Under Present Law# Treasury Proposal to Integrate
Viotory Tax, and House Bill
EXHIBIT 4
Amounts of Individual Income Tax and Effective Hates
Under Present Law, Treasury Proposal to Integrate
Victory Tax# and Ho^se Bill
X
*
tfYkrf?•»K
< ilIH m •*•“ ! _
1 1"~*----------- * I** «nd Propoa»l*
Tables 1# 2# and 3
Comparison of Surtax RateJUnder Present law and Proposal
EXHIBIT 5
Amounts of Individual Income Tax and Effective Hates
Under Present Law and Proposal
/ EXHIBIT 6
Tables 1# 2# and 3
X
EXHIBIT 7 -
Charts Individual Income Tax — Comparison of Effective
Rates for Married Person Without Dependents Under
Present Law and Proposal
x
EXHIBIT 8 —
Comparison of Surtax Rates Under Present Daw# Treasury
Proposal, and ,1Alternative Schedules
EXHIBIT 9 —
Amounts of Individual Income Tax Under Present Law,
Treasury Proposal, and^ Alternative Schedules
^
^pM-
L
jzTvf° -
Tables 1# la, 2, 2a, 3 and 3a
3^
EXHIBIT 10 -
OJx
>posali
-JrnatV
EXHIBIT 11 .. Comparison Corporation Income and Excess Profits iax
v EXHIBIT 12 mm Corporate Net Income, Inoome Taxes and Dividends, 1936*194.
? EXHIBIT 13 ..The Effeot of Borrowing on Net Income After Taxes of an
Excess-Profits Taxpayer Using the Invested-Capital Creai
EXHIBIT 14 —
/ EXHIBIT 15 —
Comparison of Estate Tax R a t o S U n d e r
Law and Proposal
Present
Amounts of Estate Tax4» and Effective Rates Under
Law and Proposal
Present
Coaparison of excise taxes and postal rates under present law, Treasury proposal and House bill (H.B.
(concluded)
1/
3687}
Estimated change in budget position of the United States for a fu ll year of operation at levels of income for the calendar
2/ Estimated*additional net revenue yield after allowance for increased drawback on nonbeverage alcohol of $12.8 > illio a.
2/ Estimated additional net revenue yield after allowance for increased drawback on nonbeverage alcohol of $ 4-9 million.
Comparison of excise taxes and postal rates under present law, Treasury proposal and House M il (H.B. 3^8?)
(continued - 4)
•
•
e
Article or service
Present law
••
•• .
•
e
Treasury proposal
1
1
: Estimated additional
:
revenue i f
s
Treasury : House
h ill
:
proposal ;
House h ill
f•
t
EXCISES - (Concluded)
21. Pari-mutuel wagering
22. Transportat ion of
property
Hone
Hone
3i» of charge ( 4)6 per
Repeal
5io of amount wagered
-
$
29.I
$ - 170.3
Ho change
-
short ton on coal)
$2,511.1
Additional revenue :from excises
$1 , 194-8
POSTAL RATES
a. First class — local
2fi per oz.
Ho change
3^ P®* oz.
-
h. Airmail
6{s per oz.
Ho change
8)6 per oz.
-
10.4
c. Third class
1^ end l|)6 per 2 oz.
Ho change
2fi and 3j^ per 2 oz.
-
73.8
d. Fourth class
Various
Ho change
3io of present law rate or1
1)6, whichever is greater
-
4-7
-
4*3
e. .Registered mail
15)6 to $1 per article
Ho change
20)6 to $1.35 per article
f . Insured mail
5 j6
to 35/6 P®* article
Ho change
10^ to 70)6 per article
)
g. C.O.D. mail
12)6 to 45{* P®* article
Ho change
24^ to 90)6 per article
)
h. Money orders
6)6 to 22)6 per article
Ho change
10)6 to 37/6 per article
$
58.6
•p 4
/
Additional revenue from postal rates
Additional revenue from excise taxes and postal rates
Treasury Department, Division of Tax Research.
ITooWotes cqn.tlnu.od oaa following page.
-
12.1
-
21.9
-
$ 2 , 5 1 1 .1
$ 18 3 .8
$ 1 ,3 7 8 .6
November 26, 1943
Comparison of excise taxes and postal rates tinder present law, Treasury proposal and House till (H.R.
3687)
(continued - 3)
Article or service
t
•
:
•
s
•
•
9
#
House bill
Treasury proposal
Present law
•
:
•
#
:
Estimated additional
revenue if
Treasury s House
-proposal s bill
EXCISES - (cont’d.)
$ 167.3
10$ of retail price
30$ of retail price
20$ of retail price
(exempts silver-plated
flatware)
10$ of retail price
25$ of retail price
23$ of retail price
54.8
54-8
l6. luggage, handbags,
wallets, etc.
10$ of mfrs. sales
price on luggage only
25$ of retail price
25$ of retail price
53-4
53*4
17- Toilet preparations
30$ of retail price
23$ of retail price
25$ of retail price
51.4
51.4
18. Electric light bulbs
and tubes
3$ of mfrs. sales price
No increase
23$ of mfrs. sales price
-
20.0
14. Jewelry
15. Fur and fur-trimmed
articles
19. Soft drinks
None
Bottled drinks, 1/6 per each
3$ of intended retail price;
the equivalent taxes of $1
per gal* on sirup and 25p
per lb. on carbonic acid gas
used in unbottled soft drinks
None
177.0
20. Candy and chewing
gum
None
Articles intended to retail
from 5$ to 15^ per bar or
package, 1/£ per each 5f1°*
intended retail price; other
items, the equivalent tax of
35$ of mfrs. sales price
None
190.0
$
81*9
\
Comparison, of excise taxes and postal, rates under present law, Treasury proposal and House bill (H.B* 3^ 7)
(continued - 2)
e
•
•
.
Article or service
t
•
e
Present law
•
9
:
}
Treasury proposal
♦
.. . :
: Estimated additional
:
revenue 1/ -i Treasury : House
i proposal
s bill
House bill
EXCISES - (conVd.)
6. Chewing, smoking
l8$ per lb.
34$ per lb*
Ho increase
1$ per 10$
3$ per 10$
2$ per 30$
11$ of charge
30$ of charge
20$ of charge
8. Cabarets
5$ of charge
30$ of charge
9. Club dues and
initiation fees
11$ of charge
10. Bowling alleys,
billiard parlors
11. Transportation of
persons
tobacco and snuff
7- General admissions,
lease of boxes or
seats, etc.
12. Communications
a. Toll service
b. Telegraph, etc.
(1) Domestic
(2) International
c. leased wires, etc.
( d. Wire and equip
ment services
13. Local telephone
service
$
)
)
)
46.2
327-0
$ I63.5
30$ of charge
91.3
91.3
20$ of charge
20$ of charge
5-1
5*1
$10 per alloy
$10 per table
20$ of charge
$20 per table
20$ of charge
$20 per table
27.0
27.0
10$ of charge
25$ of charge
15$ of charge
212.7
70.9
20$ of charge
25$ of charge
25$ of charge
15$ of cjjarge
10$ jpF' charge
of charge
20$ of charge
10$ of charge
20$ of charge
25$ of charge
15$ of charge
20$ of charge
31-5
36.9
5$ of charge
Ho increase
7$ of charge
10$ of charge
15$ of charge
15$ of charge
48.9
43.9
)
)
)
Comparison of excise taxes and postal rates under present lair, treasury proposal and House bill (H.B. 3^ 7)
*
Treasury proposal
Present law
Article or service
1
House bill
t
;_____________________
i
:
s
Estimated additional
revenue 1/______
Treasury
:
House
i
proposal___ s---- M U
EXCISES
1.
Distilled spirits
$6 per gal* (drawback of
$3.75 per gal* on nonbeverage alcohol)
2. Beer
$10 per gal. (drawback of
$7 per gal. on nonbev
erage alcohol)
$ 487.22/
$9 per gal. (drawback of
$5 per gal. on nonbev
erage alcohol)
$7 per barrel
$10 per barrel
$8 per barrel
10$ per gal*
50$ per gal*
$1.00 per gal.
$2,00 per gal.
20$ per half pt.
10$ per half pt.
15$ per gal.
60$ per gal.
$2.00 per gal.
15$ per half pt.
10$ per half pt.
$ 370.13/
210.5
70*5
8l.l
20.0
3. Wine
a. Stills
Under 14$ alcohol
14-21$ alcohol
Over 21$ alcohol
b. Sparkling
o. Other
40$ per gal*
$1.00 per gal.
10$ per half pt.
5$ per half pt.
)
)
)
)
)
4. Cigarettes
a. Small
b. large
5. Cigars
$3.50 per M
$8.40 per M
No increase
Intended retails
Over
4*
4$
M
8 $
15
20 $
1
s Not
s over
4$
4$
6A
8 $
15 >
20 $
1
Tax
per
-
I
•
M
$ 2.50
3.00
4.00
7.00
10.00
15.00
20.00
Intended retail:
Over
5
7
9
17
$
$
$
$
22 $
Not
a over
5 A
7 $
17 ^
22 $
-
5
Tax
)
)
)
)
per
5 M
s
$12.50
13.00
14.00
17.00
30.00
35*00
40.00
No increase
)
)
)
)
)
)
67.7
'
N d r T fev 5
fetteated change in the
position of the M M States resulting t*m the
WU1 tf IM S {8.8. 888?) M y m r i Ijr 18* Haase #£
Swwfew M,
**r • fall yearof n m U * *t Intel* Of inseas oetiaated for tin* calendar year K M J/
flu stiJUUUpoo of doXlsrs)
ll»»»«l 9 W
_ m i w t li» a>
individual i w taxi Sliafnate the earned incus* eroditj tm sm m the m d tax rate
fine* * percent to lfl p n w t , d ^ r M m U m M r I M m l excise tarn exoedt as incurred
*® Jf£* «* b,“ ia?w * irerM# a jpaelal deduction M r hltad individrolaj alter w i n rates
applicable
86,000 sari**(net Jaroaef repeal the notary is*. s » M ® M r a -t»«—
tea ef • percent ef the exeeee a f / M i n w star « J Ser a single person er a nsrried m m
,u i *f * «**•*• retwa, i » Sec « ***8 ef a fseily «r a serried amyl* filing o m return,
aad flse far each dependent} require a earned person filing a separate roturo te Me#
personal asaaptlae ef » j Unit tea te 80 percent ef taxpayer's aet insane ......... .
m » e
Corporation
imn
ad eneeae profits taws* increase excess profits tax rate free 96 percent
te 96 percent* isarease eases* profits tas spasm* exenpUro «ro*JM0O to «10,C00| ndnee
***** preflts erodit based on invested capita! 1a tanutets o»«f «8Mllion| alls* rollaf '
M e r Section T » of t.* Internal Hmmmm M e te seal -^6»an^>wro»rtiee aad t U h v tracts
sat in operation daring the base period aad te aataTOl W ^ e U a r o i M Halt the eeepe ef
tbe let pertaining to roasgetiatis* ef ror contrasts — - fetal (gross) **ee*#**#***•#* o §X*e8
too* |m stm r crodit ...... . «* 4I*$ '
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mmium ie ^ w n w ro raw a ttron^ronw»Miw ^ r iroroM nraniroaMn..ia.aroiae>i«MieTrtir, nnjron inn■i
tmmmvf
i/
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t l » •^Hwkt«a
***
i r r.r.TJrlnW
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M t e r
to ro flo o t t l » not fc^roragMKit to too
^3P0® ^
**
position o f tto
lie I 0 H .
5t«tos r»ff*dt-
po*^toa of too tilX totiok iaeiooso® F«d«m3l coooifpto uadi o a t p m A l t a P M to
wcteat * * ^»**to»ttoo w to t o govKronxxtai sasolso tax
./
X99.8
*“
( f lt t o IIZ , 3oetto« 007 o f tho
V
Zpfl>” Bt •?**— *» « ■ M * . r o t yield ef tbe falU oror p r o m t law.
***** *»■****■
« t b « r t i n tbe c r o w V i i t w y tan, U r o t t M
in tho yield ef
growth of the public debt, and the imminence of inflation,
force the conclusion that the Treasury1s $10*5 billion
additional revenue goal is much nearer the minimum than
the maximum demanded by total war*
Conclusion
I.
This states®nt has dealt largely with the technical
aspects of the Treasury proposals and the Bouse Bill*
I believed that I could be of most assistance to the
Committee by concentrating on these aspects of the
pending bill.
I have given special emphasis to simplification
because of the crucial necessity of simplifying our
tax laws*
Unnecessary complications can put our entire
wartime income tax program in jeopardy*
I hope that the Committee will not misunderstand
my emphasis upon simplification and technical matters*
Total war makes broad demands on our tax system*
Present
taxes do not meet these demands, either in terms of
paying for the war as we go, or in terms of combatting
inflation*
The legacy of taxes at present levels will be
not only a huge debt, but may also be a demoralized
price structure both during and after the war*
The
growth
5?
post-par crisis, witnout the addition of complex renego
tiation- of-contracts issues to its calendar*
The renegotiation statute is not a taxing statute,
but tide proposal would tend to confuse renegotiation
with taxes.
It is also to be recognized that renegotiation
cases, under the terms of the House amendments, will
demand a large part of the time of any tribunal*
Many
issues will be presented, often difficult of proofj take
for example the issue of a large contractor’s efficiency
or lack of it, whicji might occupy the Court for weeks*
It seems inevitable that few cases will be susceptible
of quick disposition*
It Is my very firm conviction that if the trial of
renegotiation cases is added to the task that will con
front the Tax Court, the prompt collection of revenue
will be impaired, the rights of the Government and of
taxpayers will be prejudiced, and the deservedly high
reputation of the Court may greatly suff er*
Any Impair
ment of the reputation and efficiency of the Court would
constitute a most serious blow to the proper administration
of the tax law*
66 *
Renegotlatl on of Contracts
f—
I think the agencies principally concerned may
wish to present their views on the renegotiation provi
sions of the House 6111*
However, I should like to
present the Treasury position on one of the renegotiation
provisions that vitally airacts the revenue system*
I
refer to the provision permitting aggrieved contractors
to secure a redetermination of excessive profits by fee
Tax Court of the United States*
I think it cannot be too
strongly emphasised that the choice of the Tax Court as
a forum for renegotiation litigation Is an unwise one*
For many years it has been recognised that the volume
and complexity of Federal tax cases require a specially
qualified and skilled tribunal, such as the Tax Court,
fVV
whichjshall devote its entire time and efforts to their
consideration and disposition.
‘This need threatens to
become even more pressing after the war*
The inevitable
accumulation of cases during the war and the development
of many excess profits tax cases, particularly those
arising under the general relief provisions of Jection TBS,
make it obvious that the Tax Court faces a possible
post-war crisis,
vuVi x V t v
It is very doubtful M A a general sales tax without
the exemption of necessities of life would really be
helpful in financing the war or restraining inflationary
price rises.
The imposition of a substantial sales tax
would almost surely be the signal for widespread demands for
higher wages and farm prices which* if allowed* would result
in large additional costs to Government and Increases in
the cost of living over and beyond the amount of the tax.
These dangers are much greater In the sales tax than in
excise taxes or income taxes.
Excise taxes touch in only
minor respects commodities that are necessities of life*
while income taxes have personal exemptions which protect
minimum living standards.
Personal exemptions could be Introduced into the sales
tax, but the inconvenience of distributing and using exemption
coupons and the resultant reduction in revenue would be serious
factors.
Even the most simple sales tax would require the
use of much precious manpower and machines by Government and
tVeit
business.
It is doubtful ^ m a n p o w e r and those machines
could be secured without interfering with the war effort#
t|« Renegotiation of Contracts.
at that point.
A sale a tax with such exemptions would
yieldI about *2.6 billion.
however , of that amount about
|1*2 billion would come from goods and services already
subject to Federal excise taxes.
The tax yields from the
sale of these commodities can be increased or decreased by
adjusting the excise t&x rates.
to produce revenue from them;
Mo sales tax is needed
All that is left after
excluding such commodities is 11.4 billion.
Mearly *600
million of the $1.4 billion would come from equipment,
chemicals, and materials used in business and thus entering
into the costs of doing business, with resultant increases
in the costs of doing business and in prices to the Government
and to the public.
Most of the remaining $800 million tax would be on
items that might properly be subject to sales taxation.
It is hardly necessary to point out that the expenses to
2 1/2 million businessmen and increased costs to Government,
as well as the use of precious manpower, would not be
justified by yields of this kind when there are other methods
of raising money at hand which do not call for heavy increases
in costs of administration and compliance.
It is very doubtful
Sudh a tax would be very harsh, especially on low
income families with children*
It is completely lacking
in any relation to ability to pay because it hits families
much harder than single individuals at the same interns
levels and it hits people with small incomes much harder
than people with larger ones*
Such a tax would be opposed
to every principle of tax equity and would in my opinion
interfere with the war effort*
There are many proponents of the sales tax who would
agree with these criticisms and who propose to meet them
by allowing exemptions of the necessities of life*
Such
exemptions would indeed improve the character of the tax,
although they would still leave the discrimination against
large families*
However, the exemptions would quickly
remove so much of the tax base as to leave little more than
an empty shell.
The exemption of food would reduce the yield by $£•£
billion; the exemption of medicine would reduce the yield
another fBOO million; the exemption of clothing would reduce
the yield by another $1*1 billion*
Those exemptions do
not include all of the necessities of life, but let/us stop
at that point#
For an elaboration of the points just made, I
should like to refer you to Appendix fr.
This appendix
also co pares the Treasury excise tax proposals with the
House M i l provisions, analyses those provisions, and in
dicates why it is desirable to terminate excise tax
exemptions on sales to the Federal Government, as recommended
by the President*
G. *-$5— -The Sales Tax
The Treasury proposals do not include a general sales
tax*
I should like briefly to state the reasons for our
decision.
The form of sales tax which would produce the most
revenue and cause the least rupturing of price ceilings
is the retail sales tax.
The highest rate I have heard
f
mentioned is 10 per cent*
That is over three times as
high as the rate now in force in any State,
A 10 per cent sales tax with no exemptions for
necessities of life would raise at current sales levels
about $6 billion, or about one-tenth of this year1a estimated
deficit.
Such a tax would
51 *
taxation and in setting the proposed rates, the Treasury
gate careful consideration to the demand and supply
conditions in affected industries and to the impact on
producers sad consumers*
The t&*5 billion excise tax
reo> amende tioa^^Sa^ designed to he a part of a balanced
oterall program.
Selected excises have much to commend th«a as a
source of wartime revenue,
They iatohr e little increase
in administrative machinery and compliance costs*
it
the same time, in most cases the higher levies would be
shifted to consumers, thus avoiding undue burdens on
business concerns.
Since only & few non-essentials are
affected, and since theXtax can be avoided or reduced by
cutting consumption of the taxed Items, the excises will
not cause hardship for consumers*
Excise taxes are far superior to a sales tax.
They
involve only a small fraction of the administrative and
compliance effort demanded by a sales tax*
Second, they
bear on non-essentials rather than necessities.
Third,
they support rather than jeopardise the Government's
program to stabilise the cost of living*
For an elaboration
I should like to report to the Committee that
the Treasury is
b o w
making an extensive study of all
phases of estate and gift taxation.
For example,
we are investigating the possibility of integrating
the estate and gift taxes and correlating them with
the income tax.
An advisory committee, comprising
some of the leading tax practitioners in the estate
and gift tax field, is aiding us in this study.
It is hoped that the study will lead to recommendations
which will simplify these taxes and make them more
effective and more equitable.
It is anticipated that
this study will be completed before the Congress considers
the next tax bill.
F ‘4 — 3^,—
Excise T a x e s
The Treasury recommended that an additional $2.5
billion be raised through increases in the rates and
changes in the base of several existing excise taxes
L ^
.
(Stt 6»W«Wt » 0
anu through tne enactment of two new excises, . It further
recommended that the tax on transportation of property be
repealed.
In selecting specific items for heavier
taxation and in
The proposed changes in the estate and gift tax pro
visions should be permanent, rather than simply for the
I
duration of the war.
1/
I should like
XT
Tib technical estate and gift tax provisionsof
the House Bill deserve comment.
As passed by the
House, the bill contains an estate tax amendment
mien provides that in valuing stock or securities
the value of which cannot be determined by reference
to bid and asked prices or to sales prices by reason
of the absence of listings for sales, there shall be
considered, in addition to all other factors, the
value, of stock or.securities of comparable corpora
tions which are listed on an exchange.
It is
believed that this amendment is highly undesirable
because it can only lead to continuous, unnecessary
and costly litigation, and harbors dangerous poten
tialities for imposing unjust tax burdens upon the
recipients of closely held stock.
The House Bill also provides that in certain
instances the appointment of a trustee, the vesting
of discretion in a trustee as to the selection of
beneficiaries or the distribution of benefits, or
the exercise by a trustee of such discretion shall
not fee deemed a taxable gift.
this provision is
completely divorced from any reasonable classification
of trusts and is enmeshed in ambiguities which can
only produce manifold administrative difficulties
and increase the litigation burden of taxpayers.
- 48
E, f— 9 c — •Estate and ftifjfc *axes
In seeking sources of additional wartime revenue, we
cannot afford to overlook estate and gift taxes*
Increases
in these taxes have not kept pace with tax increases
generally.
Small as their relative contribution to the
total has been in the past, it has fallen during the war.
Estate and gift tax collections £6r the fiscal year 1944
are expected to represent a smaller proportion of total
,Ux receipts than at any time during the past 10 years.
* (SfcflL WKVuVft Ifc, )
In a period when huge additional revenues are needed,
the beneficiaries of estates and gifts should contribute
their full share to the cost of the war along with other
groups of taxpayers.
Yet, relatively few estates are
subject to tax, and rates in the lower and middle brackets
continue to be moderate.
The Treasury has, therefore,
recommended that the estate tax exemption be reduced from
160,000 to $40,000 and that estate tax rates be raised.
Corresponding increases in the gift tax are also suggested.
For a comparison of rates and tax under the present law and
the proposals, see Exhibits 14, 15 and 17.
These changes
would add $400 million to our revenue* on a full-year basis.
The proposed changes
part ceased, and that a taxpayer seeks to use the deduction
or credit as an offset to the profits of an enterprise to
which the deduction or credit does not bear a reasonable
business relationship*
The amendment in no m y abridges
the privilege of doing business in individual, partnership,
or corporate form, or the privilege of filing a separate or
a consolidated return, or any of the numerous choices which
the structure of the tax system is intended to afford*
But the amendment does operate whenever under any of these
privileges or choices such a distortion or perversion of
a deduction or credit appears.
Hence tie scope of the
amendment in its field is precisely the same as that of
Sections 46 and 141 of the present law, where analogous
distortions or perversions have been frequently described
by the Committee as "milking* or shifting of deductions and
credits*
The Treasury believes with the House that the
amendment is a significant part of an equitable tax structure
and that it is well adapted to accomplish its purpose*
&at»te and Sift * « • £
defunct corporation having large current, fast, or prospec
tive losses, deficits, or large current or unused profits
credits.
The utilisation and advertisement of such devices .
has disturbed resp onsible taxpayers and their attorneys
iriib have refused to use these schemes.
It is also disturbing
to the Government in its effort to administer the revenue
laws equitably and uniformly.
The amendment disallows the part of the deduction or
credit involved in the tax avoidance device, but only if
the acquisition of an interest in or control of a corporation
or property has occurred on or after October 8, 1940, and
then only if one of the principal purposes "for which (the)
acquisition was made or availed of is the avoidance of
tax
by securing the benefit of’ such deduction or credit.
The
■
amendment is directed solelgf at those devices which distort’
or pervert the natural business relationship between a
deduction or credit and the enterprise which produced it,
and for the benefit of vhieh the deduction or credit was
provided by law.
The gist of the distortion is the cir
cumstance that such natural relationship has in whole or in
part ceased,
/
- 45
producers of natural gas, this provision in the louse
Eill appears to be undesirable*
developed in Appendix f*
this point is further
This appendix also contains a
statement of the Treasury position with respect to the
broadening of the excess-profits-tax relief for coal and
iron mines and timber tracts*
Tax relief measures can serve very useful purposes.
But unless they are handled very carefully, they may
simply become tax loopholes*
If tax relief is distributed
without regard to need, it deprives the (roveroaent of much
needed revenue, and distributes tax burdens inequitably
among business enterprises*
It must not be forgotten
than reduction in the tax liabilities of especially favored
taxpayers means increased tax burdens on all other taxpayers.
If.
Acquisitions to frvoid Income or faxcess-^rofits Taxy^ ~
At this point I would like to discuss one technical
amendment which is of major importance.
Section 115 of
the House Bill is intended to curb the development of a public
market in which alleged tax benefits may be bought and sold.
The currently advertised schemes are designed to enable a
taxpayer with large war profits to avoid income and excessprofits taxes by purchasing for such purpose a losing or
defunct corporation
—
•
generally has a higher credit standing than the small and
therefore gets larger tax benefits from borrowing than the
small corporation*
this advantage will be reduced by the
reduction in percentage allowances on invested capital*
1/
Specific belief treasures in the House Sill
^
The House Sill provides special tax treatment for certain
mine owners and operators.
It extends percentage depletion
and excess-profits~tax exemption to several minerals as a
means of stimulating their wartime production.
In so far
as these fall within the category of strategic minerals
designated by the War Production Board, the Treasury con
curs with tax measures which will accelerate their output.
But for minerals not so designated it is believed that the
✓
The House ®L11 also extends to. the natural gas industry
the special excess-profits-tax treatment now granted with
respect to the accelerated output of depletable natural
resources.
In so far as this treatment is extended to non
after taxes of an excess-profits taxpayer using the invested
capital credit will be found in Exhibit 13.
43
The Treasury il o agrees with the provisions reducing
by one percentage point the invested capital credit in
/
each of the brackets above 15 Million*
Invested capital
is generally used as a base for computing excess-profits
credits only by those corporations which earned a low rate
of return during the base period* ~ Where such earnings
were abnormally low, corporations are protected by the remedy
\
in Section 722*
But corporations the base-period earnings
of which were normally low should not be provided an escape
from taxes on war-increased profits*
Since a large in-
vested^capital credit unrelated to base-period earnings
tends to provide such an escape, the proposed reduction will
reduce an unfair advantage gained by large corporations
having a history of low normal earnings*
The proposed reduction of the invested capital credit
will also reduce the advantage gained by large corporations
on borrowed capital*
Because 50 percent of borrowed capital
is included in invested capital, corporations can get a
tax advantage by borrowing at rates of interest below the
percentages allowed Wn invested capital*
The large corporation
generally has a
- 4k&.
/
Changss la
Exemption* and
gfredits under the Souse flllll
the House gill provides for an increase fro* 15,000 to
$10,000 in the specific excess-prof it a-tax exemption.
1/
This provision, which m s recommended by the Treasury last
year, will distribute the exeess-profita-tax burden more
equitably between large and small business enterprises.
The profits of small business are likely to fluctuate
more widely than profits of large business.
Base-period
earnings under the average-earnings method are, therefore,
a lees reliable index of normal earning! for small business
than for large.
An increase in exemption tends to avoid
a penalty on normal fluctuations and earnings without forcing
a resort to the relief provisions of See^ 723.
.JProfits of small business are e=bsa more likely to
A
reflect a return on managerial efforts than & return on
invested capital*
Consequently * the increased ex swaption
also aids small corporations using the invested capital
base for determining excess profits*
the treasury also
excess-profits-tax rates will reach only a limited
1/
range of excess profits.^
✓
1/
A revision of the 80 percent limitation will improve
the relationship of net taxes payable by corporations
not subject to the tax ceiling and those which are
subject to the tax ceiling* in Appendix C to this
statement, there are outlined three alternative
methods of revising the 80 percent limitation to gain
these advantages, which would still prevent net
corporate taxes from exceeding 80 percent of net
income*
40 •
It is recognised that tha combined corporate and
Individual taxes on dividend income are higher in this
country than in England and in Canada* and that steps
Bust he talign, after the war to relieve corporate stock
holders of their dieproportionate tax burden.
However,
ao long as the war continues and corporations generally
are able to maintain present abnormally high level* of
earnings, the discrimination against this elass of inoome
recipient will continue to be more apparent than real.
The taxation of the excessive profits of corporation
imposes no real burden on corporate stockholders
I have indicated why the Treasury prefers to raise
«
additional revenue by means of an increase in surtax
'
rather than an increase in excess-profits tax.
However,
if your Committee should decide in favor of an inereass
in the excess-profits-tax rate, the Treasury suggests
an upward revision of the 80 percent limitation on
corporate taxes.
Without this revision the increase in
{ excess-profi ta-tax rates
39
waj^distributadJr
la spite of war taxes, dividends
for 1941, 1942, and 1943 are estimated at $4*5 billion,
$4.1 billion, and $4*0 billion, respectively*
It is
estimated that even after paying taxes and dividends,
American corporations will accumulate over $13*.billion
114
-00*1
of undistributed profits for the three years 1942, 1943,
A
A
ifoil IMPt*
Recent studies show that liquid assets of corpora
tions have risen even taster than retained earnings.
Mon-financial corporations increased their holdings of
currency, bank deposits, and United States Government
securities by $12 billion during the two years 1941 and
1942 according to an estimate prepared by the Securities
and Exchange Commission*
If the accumulation of liquid
assets in the first half of 1943 should continue at the
present rate through the year, the total increase would
be $25 billion for the three years 1941, 1942^and 1943.
k study just released by the Federal Reserve Board indicates
that business deposits, both corporate and non-corporate,
totalled $30 billion on July 31, 1943.
It Is recognised
i"
3/
h imhiIhi
i
i:
i
i
i ,i i ,j
„ :r n
ht i________ (—
* * * * * * * * **
Dividend payments in 1936 and 1937 are generally con
ceded to have been abnormally high as a result of the
undistributed profits tax in effect during those years.
and without impairing the sound financial condition of
corporations generally#
Corporate prefits (excluding
dividends received) will reach an estimated level of
$22*6 billion for M B .
This is more than four times
the corporate profits for the year 1937, one of the most
prosperous years of the Thirties*
Taxes have also risen
sharply during this period, both because of increases
in corporate incoxae and because of increases in rates*
But they have failed to keep pace with earnings*
In
193'/^corporations had left less than $4 billion, after
paying $1-1/4 billion of taxes*
In 1943,corporations
.'0m-
will have left nearly $9*2 billion, even after paying
$18.5 billion of taxes*
In 1944* corporate profits after
taxes at present rates are expected to reach $9*9 billion,
or three times the average annual profits after taxes
from 1986 through 1989*
pi^gYCS
OK
A dividend* and undistributed prof Its figures are also
impressive*]/
Average dividends from 1986 to 1940 were
$4*1 billion, 1937 being the pefck year^ when $4*8 billion
wi Y,
www distributed*
V
See Exhibit 12*
- 37
credit) on each dollar of excess-profita from 81 to
85-1/2 cents*
tinder the Treasury proposal for an
increase in surtax rates, not more than 50 cents would
ordinarily be taken out of each dollar of normal profits,
and the present figure of 81 cents for
would not be touched* a
The increase in surtax proposed
by the Treasury is less likely to impair financial
incentives than would an increase in the excess-profits**
tax rate.
With corporate rates at their present levels,
the impact on incentives cannot be ignored in making
tax decisions*
The Treasury agrees that our corporations should be
kept *in a sound financial condition so that they may be
able to convert to peacetime production and provide
employment for sen leaving the armed forces after the war.**
But figures on corporate earnings, dividends, and
accumulations make it clear that added taxes can be levied
without unduly burdening irofits and profit incentives,
and without impairing
1/
Corporations with income between'$25,000 and $50,000
will, of course, be subject to higher marginal surtax
rates as a result of the^not^h provision.
2/ See |iijS 5, House Report on the Revenue Bill of 1943*
38 **
capital but low normal earnings, receive substantial
war profits without becoming subject to excess-prof its
taxes*
The same is true of corporations with high b&se-
period earnings now engaged in the production of war
materials*
Other corporations have had their excess-
profits tax liabilities substantially reduced by the
special relief provisions in the tax law*
Still others
will ultimately have a substantial proportion of their
excess-profits taxes refunded to them under the operation
of the carry-back provisions.
The surtax thus offers
greater assurance that all corporations which have
benefited from the war will make an additional tax
contribution*
A further reason in favor of a surtax-rate increase,
as distinguished from an excess-profits—tax rate increase,
may be found in the comparative effect on managerial
profit incentives*
Financial incentives to efficient
management depend upon the number of cents the corpora
tion retains out of each additional dollar of profit*
The House Sill would increase the net tax (after postwar
credit)
36
corporate profits*
On. the other hand, it will not
strike approximately one-half of the excess-profits,
nor will It touch the most profitable corporations*
To
reach corporate profits generally, an increase in surtax
rates would be necessary.
To reach the bulk of excess-
profits and the most profitable corporations, added
excess-profits taxes would have to be coupled with an
upward revision of the 80 percent limitation*
Because of its broad coverage, the corporate surtax
affords an instrument for tapping war profits that are
not defined as excess^rofits in our tax law*
At best,
it is extremely difficult to single out excess^profits
and war profits by legal definition*
An excess-profits
tax cannot be a perfect instrument; a 90 percent or a
95 percent excess-profits-tax rate does not mean that
the Government will recapture 90 or 95 percent of the
war profits of corporations.
In the area labelled
"normal profits" there are bound to be some war profits.
For example, many corporations with large invested
capital
34
become subject to the BO percent ceiling as
y
a
result
of the 5 percentage-point increase in the excess-profits
tax rate#
The effect will.be to limit still further
the range of corporations to who® the full increase would
apply.
It would apply only to the residual class,
namely, corporations that pay excess-profits taxes, but
will not become subject to the 80 percent tax ceiling#
^
In contrast with the House Bill, the Treasury proposal
would increase the net liability of all corporations#
For those subject to the 80 percent ceiling, an increase
in the surtax would mean a decrease in the share of their
80 percent tax represented by excess-profits taxes#
As
a result, their postwar credit would be smaller and their
net liabilities correspondingly larger, even though their
gross tax payments were unaffected*
For all other
corporations, both the gross payment and the net liability
would be increased#
From the foregoing analysis it is apparent on the
f one hand that the House Bill will not strike corporate
profits generally, but only a restricted segment of
corporate profits#
$ L H h v u
i
<U*J*x£ZL-f e .
/a^>u4^a
*"* 3 3 —
*
unused excess-profits credits? and (£) provides special
tax treatment for certain natural resources industries* 1/
/
I should like to discuss these matters in detail*
4*
Comparative fj'fects of Increases in Surtax and
increases in Excess-ftofits faXr^ST
Unlike an increase in surtax rates, which would
increase the net tax liability (after postwar credit)
of all taxpaying corporations, the increase in the excessprof its-tax rate under H. E* 8687 will increase liabilities
for comparatively few corporations*
Corporations not
subject to the excess-prof its tax {and those already subject
to the 80 percent ceiling on corporate taxes will have
;
|
^ no added tax to pay*
'
$
! coo
Of 263,-§ii taxable corporate returns
-©00.
^ estimated for 1944, 71, ©Si* or about 27 percent will be
subject to excess-profits tax*
Moreover,^ the 80 percent
ceiling will apply to 4,300 corporations or approximately
6 percent of all excess-profits taxpayers.
This 6 percent,
however, will pay about 40 percent of total excess-profits
taxes in 1944.
An additional 3,200 corporations will
become subject
2/
A comparison of corporation income and excess-prof its
tax rates is shown in Exhibit 11*
* 32 »
years are combined with the net income for two years,
jf ^’ey should be, it becomes apparent that the
75@percent cancellation is a windfall which has made
it easier, not harder, to pay taxes on 1944 income*
The Treasury suggested to the Ways and Means Committee
T
(a)
that the surtax on larger corporations (those with
net income in excess of $26,000) be increased by 10 percen
tage points and on smaller corporations by 4 percentage
^
point s; (b) that no change be made in the excess-prof its ~
tax rates; and (c) that certain changes be made in the
existing provisions for carry-back of losses and unused
excess-profits credits*
CtAsjwuau A
The bill passed by the House (a) makes no change in
x
the surtax rate; (b) raises the excess-profits-tax rate
to 96 percent; (c) reduces the excess-profits credit for
some corporations by lowering the percentages allowed
on invested capital; (d) raises the specific exemption
for excess-profits taxes from $6,000 to $10,000;
(e) makes no change in the carry-back of losses and
unused
- 31 *
existing income tax rates are confiscatory* Those who
mke this contention point to the combined burden of
current taxes, uncanceled 1342 liabilities, and State
income taxes* It is said that this combination will
i
exceed 100 percent of income in 1944*
Such statements are grossly misleading. They ignore
two facts. The first is that the Federal income tax
allows for the deduction of State income taxes in comput
ing net income* This deduction protects the taxpayer
from & confiscatory combination of State and Federal
taxes, even if the State tkx does not permit the deduction
of the Federal tax*
The second fallacy lies in comparing two years*
taxes, or 1-2/8 year*s taxes, with one year’s income*
The uncanceled part of the 1942 tax is, in no sense a
tax on 1944 income. This becomes entirely clear when
it is realised that a person having no 1942 income has
no uncanceled tax to pay in 1944, and would therefore not
be covered by the schedules combining the two year?*
taxes* is a matter of fact, when the taxes for two
years
♦ 30 m
In an attempt to prove that American taxes are
too high, it is argued that taxes in the United States
aije higher in terms of dollars per capita than in the
United Kingdom and CanadaJt/ This argument is, of
course, grossly misleading, since it gives absolutely
no indication of real burdens# How burdensome a given
tax will be is determined by the ratio of the tax to
the income from wtiich the tax is paid* Personal incomes
here are larger than in either Canada or Great Britain*
Furthermore, the rates of income tax and excise taxes
are higher in the Allied countries than here. Practically
any citizen of the United States,- if given the choice
of paying'American, Canadian, or British taxes, would
\
V\orc W 0 S*U. w
V\A
choose the American tax systeia since his tax^rrould he
lowefe
#
c# The argument of oonflgcation*-"^
In connection with the argument that taxes will
exceed capacity to pay, it is contended that our
existing
1/ See
fc4o\s41 'vfc< ^
4.
\3v\i of
hM I
T
i
e
.
/tV
the fiscal year 1944.
r
lh© corresponding figures hefore
subtracting personal taxis are $88 billion and $148
billion*
_
In other words# personal taxes show an
increase of $18
.111cn while incones before 11
show an inoreasej .of $8Chbillion# -Less than ©ne*fourth
of the-increase|in annual Income payments generated by
defense and War activities is being absorbed by taxes*
In an attempt to prove
before taxes will be $3j580,and after existing taxes,
about $1*500*
The demands of wartime living on incomes
of this siz® leave little margin for additional taxes
and afford few opportunities for inflationary spending*
Nevertheless, the urgent requirements of war
finance demand that we tap even this small margin of
disposable income*
Under the Treasury proposal^ one-half
of the income tax increases would fall oi, persons with
net incomes of less than $5,000 and about one-fourth
on persons with' less than $3,000*
Much the same
proportions hold for the complete Treasury program,
including proposed changes in corporation taxes and in
excise taxes*
b*
Capacity to pay
A second contention is that the American people
do not have the capacity to pay additional income taxes,
the facts contradict this contention*
Individual incomes
after personal taxes amounted to $65 billion in the fiscal
year 1939 and are expected to amount to $126 billion in
the fiscal year 1944.
a*
Tax burdens on the lower income groups
It is contended that persons with incomes of less
than $6,000 are the ma^or source of inflationary
pressure and that these persons would ©scape their fair
share of the additional tax load under the Treasury
proposals.
Although at 1944 levels of income about
81 percent of the bbotal cash income will be received
by persons with incomes under $6,000, only 65 percent
of the net income above income tax exemptions will be
received by this group*
Likewise, although 61 percent
of total income will bo received by persons with incomes
under $8,000, only 89 percent of the net income above
income tax exemptions will be received by this group*
Looking behind these aggregates to individual
cases, we find that the margin of disposable income over
and above wartime needs is very narrow for the millions
of persons in the lower income brackets*
Out of 67*3
million income recipients in the calendar year 1944,
68.2 million a rt expected to receive net incomes of
less than $8,000*
The average cash income per recipient
before taxes
b.
The House Sill
v
Revenue id only an incidental consideration in the income
tax provisions of Hie House Bill#
Those provisions will add
$228 million to income tax revenues*
Of this amount about
$90 million is attributable to the changes made in connection
with Victory tax integration.
About $150 million is attri
butable to the disallowances of deductions for Federal import
duties and miscellaneous excise and stamp taxes not otherwise
deductible as business expenses. 1/ The other individual
income tax changes made by the Mouse bill are of a technical
character*
3*
>
Answer to Criticisms of the Treasury proposals for
i
tm m
m•
Higher Income Ttoas ^-rr
■>mtm
I should now like to examine with you some criticisms that
have been made of the Treasury*s affirmative income tax proposal!
The three arguments 1 shall examine are (1) that the Treasury
proposals would not bear heavily enough on the lower income
brackets;
(3)
that the American people do not have the capacity
to pay more income taxes; and (3) that income tax rates in
1944 will he confiscatory*
____ _
1/ This disallowance was recommended by the Treasury* At ~
present, the allowance of deductions under Section 23(c) is
inconsistent and depends entirely on the legal language
used in imposing the tax* For example, admissions taxes
are allowed as deductions, hut the cabaret tax is not.
Uniformity in the matter of deductibility is desirable.
Revenue, administrative, and equity considerations also
suggest disallowance of these taxes in so far as they
constitute personal expenses.
integration segment of the Treasurer individual income
tax proposal*
the Treasury has also recos® ended as
part of & $10# billion program of wartime taxes that an
a
additional $8*5 billion of revenue be raised in individual
income taxes*
The surtax rate increases suggested to
raise this revenue of course include the changes designed
to absorb the Victory tax*
Exhibit 5 appended to this
statement shows the schedule of surtax rates proposed to
tne Ways and Means Com!ttee on October 4, 1943.
(See also Exhibits 6 and 7))
1/
^Two alternative schedules
for raising approximately $8.5 billion of added income tax
revenue are also attached for the convenience of your
Committee (See Exhibits 8,
8 and 10).
It will be seenjthat
these alternative schedules would impose a heavier burden
in the lower income brackets than the October 4 proposal.
Zj
17 It will be seen from exhibit 5 that the treasuryis
2/
recomending that 4 separate surtax brackets of $500 each
be substituted for the present first bracket of $£,000.
This change enables, a better adjustment of taxes to
capacities to pay in the lower income brackets.
Persons with net incomes of less than $5,000 would pay
$8*5 billion out of the total of $8.5 billion additional
Income tax under the Treasury proposal of October 4$
$3.9 billion out of $8.7 billion under Alternative
proposal A; and $4.4 billion out of $6.8 billion under
Alternative proposal B*
b*
The Mouse bill
- 24 -
/
Putting the minimum tax in its proper perspective,
it is not an overstatement to say that its complexities
will jeopardize the whole income tax system*
Merely to
v/ collect $161 million from 9 pillion taxpayers near the
bottom of the income scale, it endangers the collection
of more than $17 billion from over 60 million taxpayers
y'
throughout the scale*
The Bouse Sill offers the American
taxpayer a minimum tax *cure* that is worse than the Victory
tax ^disease'*.
We cannot afford to disappoint the mass of
taxpayers-who have been promised relief from the complexities
of our present dual tax structure.
cannot risk* a break
down in the mainstay of our f ederal tax system in the midst
of total war.
The question of Victory tax integration Is of crucial
importance.
I am firmly convinced that the Treasury in
tegration proposal would achieve real simplification at a
/ • modest and entirely reasonable cost.^
y
2.
Increase in Revenue
a.
The Treasury proposal
Thus far, 1 have discussed only the Victory tax
integration segment
e*
Conclusion on simplification
Simplicity in Income taxation implies both mechanical
ease of compliance and understandabllifcy of the basic tax
rules*
The integration scheme in H* E* 3687 violates
both of these standards*
It has been amplyj'illustrated
that the mechanical problems of compliance under the
mini rum tax may be even more burdensome than those associated
with the Victory tax.
But even assuming that master
tables could be developed to cope with most of the mechanical
S '
complexities of the House Sill, the problem of simplicity
would not be solved*
/
The minimum tax and its relationship
to the regulaY tax completely defy understanding on the
part of the average taxpayer*
A tax law which affects
over 50 million people must be made understandable to them
if it is to survive.
It must be explainable to them over
the radio, in the press, and through the mails*
I might
be able to visualise mechanical guides which would help
To
^
taxpayers^in robot fashion atnafehs through income tax
y
compliance under the House
I cannot visualise an
information campaign that could make this tax understandable
to taxpayers generally.
Putting the
** 2 2 m
proposal would simplify the entire income tax structure
in eliminating $275 million of tax for the 9 million
taxpayers least able to pay and most expensive to tax*
In contrast, the House bill complicates that structure
and multiplies the compliance burdens of over 50,000,000
persons merely to keep the 9 million taxpayers on the
rolls, and to exact from them the relatively small sum
of $161 million* It seems utterly unreasonable to
erect a mountain of complexity for such a molehill of
revenue*
e* Conclusion on simplification*
iiHiHUn Mumu'
mi« — iummgwiwn m
u» iin i< iw i<ii'ftl>*nii>w..... .
<mH m *~ m # m m *"m ****
• El *
^
totaling $711 million*
The House Bill increases
liabilities for 26*3 million taxpayers, the increases
totaling $459 million*
While the 9 million taxpayers
who would be exempted under the Treasury proposal pay
$275 million under present law, they would pay only
^
$161 million under the House Bill,
This figure of
$161 million measures the reduction involved in their
elimination from the income tax rolls*
Any integration plan will inevitably change
liabilities of many taxpayers*
The major concern should
be that the changes meet the tests of simplicity and
fairness*
The Treasury changes meet these tests far
better than the changes in H« R* 3687*
While the Treasury
integration proposal would reduce taxes only for tax
payers in the lowest brackets and subject to family
X
responsibilities, the House Bill would apply reductions
to taxpayers with incomes as high as $3,981 (married
person with 2 dependents) and $4,672 (married person
with 3 dependents)*
More important, the Treasury
proposal
- m
~
their necessarily complicated annual return next March <
with the assurance that future income tax returns
would be both more understandable an# simpler.
d. fax increases and decreases under the House Bill
and the Treasury integration proposal**^
Some contend that the Treasury proposal achieves
simplicity at an excessively high cost in tax reduction
for taxpayers in the lowest brackets and that the House
r
Bill Involves no corresponding cost. I should like to
cite the facts refuting this contention.
The Treasury integration proposal would exempt
entirely 9.1 million taxpayers who now pay a net fictory
tax of $275 million. Including these, it would reduce
taxes for 18 million taxpayers, the combined reduction
✓ totaling $436 million. The louse Bill exempts only
130,000 taxpayers, but reduces taxes for a total of
26.2 million taxpayers; the aggregate reduction is
$370 million, only $66 million less than the Treasury
proposal. The Treasury proposal would increase
liabilities for 34.4 million taxpayers, the increases
totaling
- 19
c* Contrast of House Bill with Treasury Integration
proposal from the standpoint of simplicity*^*"
The contrast between the House Bill and the Treasury
proposal on the score of simplicity is complete* What
the House Bill gains in removing the Victory tax, it
loses in introducing the minimum tax* It retains the
complexities of a double tax system and adds special
vagaries of its om* It burdens administration with new
problems at a time when it is still faced by the enormous
task of adjusting itself to current collection* Worst
of all, it will require taxpayers to struggle with the
new minimum tax concept even before they finish hurdling
the Victory tax barrier*
Under the Treasury proposal, on the other hand, there
would be no double tax base, no double exemptions, and no
multiple choices and computations* Administration would
be simplified by dropping the Victory tax* Similarly,
withholding would be simplified by dropping the Tai'niispim
withholding feature necessary to guarantee collection of
the Victory tax. Most important, compliance would be
simplified* Taxpayers could face the prospect of filing
their
- 18 of 41*7 million returns, representing 52*4 million
taxpayers, in contrast with the Treasury proposal,
which would require only 38*5 million returns representing
43*2 million taxpayers* 2/
The House Bill, like the
present law, requires millions of returns from persons
in those income brackets in which the ratio of adminis
trative effort to tax proceeds is hipest*
Moreover,
the complexity and confusion generated by the double
exemptions and computations and by the involved choice
between joint and separate returns will inevitably
burden administration*
Both in terms of the taxpayers
who will throng the collectors9 offices for help, and
in terms of the volume of errors that taxpayers will
r
make, the House Bill magnifies the problems of
administration*
s
/
s
c* Contrast of House Bill with
Treasury integration, etc*
^' "irhxfer presant Taw the 'figures would, W
returns and 53*3^taxpayers*
Ws \VIib ^
44*1 million
No shift of part of the exemption from one to the
other is permitted as under present l a w a n
argilopiM?a&e
d-ivifi1 on*Sf the.ftwta l 1exesiption»> Situations will
frequently arise, therefore, where one spouse is entitled
to a refund1and the other is subject to additional
tax*
Yet, because the exemption is fixed at $500, the
opportunity that exists today for canceling out the
refund and. the additional liability is removed*
For
example, if the wife works part of the year but does
not take any of the withholding exemption, she is entitled
to a refunli
The husband, who takas the entire withholding
|||
exemption, will probably have to pay additional tax*
But oven if the wife’s refund is equal to or greater
than the husband’s remaining liability, there is no
way of shifting the personal exemption and thus offsetting
one against the other.
He will have to pay the tax and
she will, have to wait for a refund*
(5)
Complication of the administrative process
The House Bill also makes heavy I emends upon adminis
tration*
For 1944, it will require the filing and processing
of 41.7 million
16 r
(4)
Complication of the withholding process^ "
In addition to complicating tax returns and the
filing process, K* R* 3687 complicates collection at
the source and raises new problems for employers*
Many
employers withhold on the "exact* basis instead of by
wage brackets, either to approximate the final liability
more clo oly or because their mechanical equipment
requires the use of the exact commutation*
Since the
Victory tax exemption is $624 regardless of family
status, present law requires the employer to apply
only one act of exemptions varying with family status*
But under the House Bill the minimum tax will also have
variable exemptions*
with two
Employers will thus be confronted
ets of varying exemptions, as well as two
tax rates, in determining how much to withhold*
The problem of year-end refunds and additional tax
payments is also aggravated* J / Husbands and wives filing
separate returns have fixed exemptions of $500 each*
17 The treasury'lias r e c o m ^ ^
i T n "the withholding
procedure that would minimize the problem of year-end
refunds and additional tax payments* The Treasury
proposed that withholding e applied on a graduated
basis to the taxpayerfs full liability rather than merely
to his partial liability under the normal tax and the
first bracket of surtax* It also proposed narrower
withholding brackets to adjust amounts withheld more
closely to actual tax liabilities*
^
(3)
Decreased us# of the simplified r e t u m r
^
Another undesirable b^produdi*of the House bill
is that it would in offset &@ny the use of the simplified
f o m (104OA) to many taxpayers now able to u*>e that
1o m » Husband ami wife mgr use F o m 104OA as a separate
return m long as both 'u>e it and neither has more
1:<
'than $3,000
f gross income# * the House BAH# by providing
married couples with a $1*200 exemption if they file
joint returns but a combined exemption of only $1*000
if they file separate returns, places a premium on
joint returns*
As a result, many married persons with
combined gross incomes between $3*000 and 16,000* who
now file separate returns on Form 1Q4QA, will be
penalized by a $200 reduction
X continue fco use Vvm, 1040A*
^
in exemption
if they
Plainly, they will turn
to the' more complicated Form 1040*
Since it is desirable
to extend rather than restrict the use of the simplified
/
f om, this affect of the House Bill is unfortunate#
(4) Complication of the irithholdiM
(b)
— 14 *
The illustration in Appendix B shows that the
tax differentials under the various procedures for
competing the tax can be very substantial*
On the modest
4 |._
H
,
iaoosie of ^2,12S in the sxaapla cited, the tax liability
computed on Form 1040 ranges from $24*75 under the most
I||p n ■
•
'
adv&itagaous method to $174*75 under the least advan
tageous method of filing#
(c)
Estimates indicate that the House Bill will
confront well over 10 million married couples with the
choice between Joint and separate returns#
Under that
bill it Is estimated that 10#7 million joint returns
will be filed for 1944* 1/
In addition* a number of
separate returns will also be filed by married couples
where both receive income*
T m great majority of
millions of married couples will decide to file either
joint or separate returns only after making difficult*
time-consuming comparisons*
(3)
1/
Decreased use of
m i o S .joint rSfSSTlrf
expected, while under the Treasury integration
proposal, the figure would be 6*7 million*
vlVuftroJC low
"n
of the dependents between husband and wife*A To bo
absolutely certain that they have arrived at their
lowest possible tax, this couple would also have to
make nine tax determinations on the short fora (1040A)*
the actual case in which 18 tax computations would be
loads to ascertain the lowest tax would be rare*
But
the mere fact that such cases can occur and that a
problem similar in kind, if not in decree, will be
faced by many taxpayers is a serious indictment of
this phase of the House Bill*
With such extreme complexity established beyond;
any doubt, the question might still arise (a) whether
tli© number of necessary tax computations is much larger
than under present law, (b) whether the tax differentials
involved are substantial, and (c) whether many taxpayers
will be affected*
(a)
There is no incentive under present law for
married persons with small incomes to file separate
returns, and the problem of allocating dependents is
thereby avoided*
(b) The illustra
The regular tax exemption, on the other| hand, will be
creator under a joint return than under separate returns,
thus offering an inducement to file joint returns*
By
setting the credit for dependents at $100 for the minimum
tax in contrast with $360 for the regular tax, the House
fell further complicates the choice between joint and
separate returns*
The large number of variables injected by the House
%ill will force husband and wife who both receive income
to compute a series of alternative taxes to ascertain
their lowest possible liability*
I should like to cite
an example which brings home more forcibly than any
lengthy explanation the nature of the compliance burden
imposed on these taxpayers*
The example is that of a
married couple with three children, and a net income of
$2,125, of which the husband receives $1,250 and the
wife, $875*
Using Form 1040, this couple could reach
five different tax results*
separate tax computations*
This would involve nine
These computations are
necessary to determine the maximum tax advantage under
(1) joint or separate returns and (2) different divisions
11
*
Because of these variables* no clear dividing lines or
income zones can be established to guide taxpayers into
one type of return or the other*
In order to determine
their lowest tax ^liability, they will have to resort
to a method of trial and error Involving numerous alter-*
native computations*
Merely stating the provisions of the House Bill
on this point demonstrates how bewildered the taxpayer
will be*
Under the minimus tax husband and wife receive
an exemption of $500 each, or a total of $1,000, if they
file separate returns, but only one $TO) exemption if
they file a joint return*
Under the regular income tax,
their exemption is still $500 each, or a total of $1,000,
on separate returns, but is $1,200 on a joint return* J/
In other words, the minimum tax exemption will be smaller
under a joint return than under separate returns, thus
offering an inducement to file separate returns*
the regular
37 ''Hone of "'the ""$500 exemption allowed on & separate return
may be shifted from one spouse to the other under either
the minimum or the regular tax*
but is forced upon millions of taxpayers not now
affected by it because of the difference in aggregate
exemptions depended! upon whether separate or joint
returns are filed*
Under present law the problem is
restricted to the comparatively few married couples
having combined net incomes reaching beyond the first
surtax bracket*
The choice is fairly clear*
It
involves persons who are for the most part familiar
with tax procedure*
To married couples with surtax
net incomes below $2,GOG, it is generally a matter
of indifference whether they file separate or joint
returns*
However, under the House Sill it is no longer
a matter of indifference*
Married taxpayers in even
the lowest income brackets, many of them newcomers to
the income tax, will be driven to compare the tax
advantages of joint and separate returns*
They will
find that the advantage shifts with the size of income,
with the particular division of income between husband
\,
and wife, and with the number and division of dependents*
Because of these
~ 9
tax applies and below which the minimum tax applies*
/
But this mechanical guide eanjiot remove the confusion
inherent in having two alternative taxes side by side*
The confusion caused by the House Bill may perhaps
best be visualized by a specific example*
Take the case
of i married couple with two dependents, the husband
having $900 of net income from business and the wife
$700.
their minimum combined liability under the
House Sill will be realised by filing separate returns,
each claiming one dependent,
the husband will be
subject to the regular tax, the wife, to the minimum
tax.
The husband will get a $350 credit for the one
dependent and will apply a 23 percent rate to his income.
The wife will get a $100 credit for the other dependent
and will apply a 3 percent rate to her income.
The
confusion in this family is apparent.
(2)
The necessity of comparing taxes under
separate and joint re turns
~
-r:e,yn;rir:- -— —---------------------
✓
—
-
---
»■ ■*
«"}
Under the House Bill the problem of choosing between
joint and separate returns is not only greatly complicated,
but is
provided for users of the simplified form# This is all
to the good, but it is only a small part of the simpli
fication that is needed#
The House gill does not eliminate the dual set of
personal exemptions and will still require users of the
"long form* (Form 1040) to determine which of two
taxes applies to their income^* in addition, it will
confuse taxpayers with its complicated minimum tax#
It will make it disadvantageous for many taxpayers now
using the simplified form to use that form in the future.
It will require millions of married couples to go
through a series of alternative tax computations to
ascertain their lowest possible liability*
(1) Confusion caused by minimum tax
The House Bill provides that taxpayers shall pay
either the minimum tax or the regular tax, whichever is
larger.
Two alternative taxes with different rates
and exemptions will confront taxpayers using the
long
f o n ^ J A table can be appended to that form showing
the net income ’’breaking points” above which the regular
b.
%
Analysis of the integration plan in B»R» 8687
In the process of absorbing the Victory tax Into
the regular income tax structure, both the louse Sill
and the Treasury proposal eliminate the earned income
credit and thereby simplify tax computation*
But the
real promise of simplification this year lies in
substituting a single income base for a double base,
a single set of exemptions for a double set, and a
single tax computation for a double one*
The Treasury
integration proposal would realise this promise in full*
The louse M i l realises the same promise only in a
minor degree, and at the same time adds some complexities
found neither in the present law nor in the Treasury
proposal*
The House Bill eliminates the f>gross” base of the
Victory tax and substitutes a single for a doublo tax
computation on the simplified fora (Form 10401}*
Both .
the regular income tax and the minimum tax are computed
on the basis of income tax net income*
Moreover, a
table indicating the regular tax and minimum tax is
proyided for
«* 0 **
new sxsBptlanSjfop th e ¥£otarr<—
Inn-iraa rftng^ff rip*" nr,M r'
'
■
' *LI
W th n
tp p rn T T flis ta
tssn the
Treasury proposal employs no minimum tax but would
reduce the credit for dependents by $50 and the exemption
for a married oouple by $100, Comparative burdens
under the House Bill and the Treasury integration proposal
are shown in Exhibit 4, Hf
4 comparison of surtax and normal tax rates under the
Bouse and Treasury proposals will bs found in Exhibit 3
appended to this statement* The combined normal tax ana
surtax under the House Bill is one percentage point
higher than the combined taxes under the Treasury inte
gration proposal in the ranges from sew to |6,0w* «»
112,000 to §70,000. In the ranges between $6,000 and
$1J£O0O# and above.$70,000, the two plans apply the
same combined tax rates*
m 5 **
spueini personal
($500 fur it sliigl#
individual m a tmrried ptrsoa filiag a aoparato return*
and $700 far a aarriai couple filing a Joint return*
plus $100 for each dependant) 1 / j (d) s*ts the personal
exesaption under 'the pegul&f income tax at 1500 for each
married person filing a separate return; (e) increases
the normal tax rqte from 6 percent to 10 percent; and
(f) decrease# surtax rate# by 1 percentage point on
surtax net income between $6*000 and $12*000 and increases
by 1 to 3 percentage points on surtax net income
above $38,000. The combined normal tax and surtax
increase would be 4 percentage points on net taxable
income up to $6*000; 8 points between $6*000 and $12,000;
4 points between $12,000 uni $38,000; and 5 to ? points
above that level.
Comparing the Treasury proposal with the House Bill,
we find that they differ sharply in the technique of
integration. The principal difference is thin The
House Bill
TV< VvcToxy -tea
substitutes a 3 percent minimum tax^vith
new exemptions..^. ..
_...
._
2/ The taxpayer pays either this minimum tax or the tax
~ eoznuted at the regular rates and exemptions* whichever
is higher.
-
4-
Victory tax. Both the Treasury proposal and the Boose
Bill recognize this fact by replacing the Victory tax
with adjustments in the regular income tax* 1/
a. Comparison of Treasury and Bouse Bill Methods
of integration*^
The method suggested by the Treasury to absorb the
Victory tax into the regular insane tax structure would
(a) repeal the Victory tax} (b) ellainate the earned
income credit; (o) reduce the personal exemption for a
carried person or head of family fro* $1,200 to $1,100,
and the dependent credit from $350 to $300, leaving the
single person*s exemption unchanged; and (d) increase
surtax rates by 3 percentage points on surtax net income
up to $38,000, and by 4 to 7 point® above that level.
The Bouse Bill (a) repeals the Victory tax;
(b) eliminates the earned income credit; (e) imposes a
minimum tax of 3 percent on the excess of net income
over
1/ One proposal for simplification recommended by the
Treasury Ms already been adopted and will apply to
1943 tax returns filed next March* In Public Law
1
the Congress changed the Victory tax
rate from a gross to a net basis by providing for
automatic current allowance of the postwar credit.
This change eliminates a complicated step In computing
the Victory tax.
<m 3 **
C. The Individual Income Taxi
The major objectives of the Treasury individual
income tax proposal ar« (1) to simplify the income tax
by absorbing the Victory tax into the regular incometax structure, and (2) to add $©»5 billion to tax
revenues. The major objective of the incus* tax provi
sions in the House Bill is to replace the Victory tax
with a minimum tax and adjustments in the regular
inoom
The Chairman of this Committee and many others have
expressed concern over the complexities of our tax laws
urgent desire to simplify our tax structure
xum irvasury shares the view that simplification is a
first order of business, and on several occasions has
made specific suggestions to this end. Especially in
the case of the individual income tax, which directly
affects more than SO million taxpayers, simplification
has become crucially important. Bo really effective
simplification is possible without eliminating the
Victory tax.
** 2 '*■
m follows:
Under
House
Bill
Individual income taxes
6*528.5 Billion
I
226.0 million
1*128.1
467.9
1,194.8
Postal revenues
m
s
V
There
attached
as
oomp&ring
and Means
V
For a detailed comparison of
the present lew
%f
This estimate is^'ln contrast
of a yield of $2*13$ million*
of
Hons#
liabilities under
t see Exhibit 2<
W a >j j
<k *\&
W\1<k >*£
• i
A
A .
Introduction
The purpose of ny statement today is, first, to
explain in detail the apeeiXio recommendations of the
Treasury and to compare then with the provisions of
H. E. 3667, the Bouse Bill; second, to indicate acme of
the technical considerations underlying the Treasury
proposals; and, third, to examine with you some of the
principal criticisms which have been made of the
Administration* s proposals for $20.5 billion of
additional taxes.
B.
Revenue comparison of the Treasury proposals and
the House Bill (!i. g, 3687)
In his statement to the Ways and Keans Committee on
October 4, 1*3, the Secretary recommended wartime tax
S8
.
.
increases totaling $1019 billion for a full year of
operation.
(See Exhibit 1)
would raise $2.05 billion.
The bill now before you
These totals are made up
as follower
Statement of Randolph Paul*
General Counsel of the Treasury,
8|mp|
belore tiie Smate Finaaa® Coaaitta#
Nov amber S%. 1^43
Statement'of Randolph Paul,
General Counsel of the Treasury,
before the Senate Finance Committee--- - -■
November 29, 1943
A. • Introduction
'•
-
v
* 1*
The purpose of my statement today is, first, to explain.in detail the
specific recommendations of the Treasury and to compare them with.the pro
visions of H. R. 3687, the House Bill; second, to indicate "some of the.
technical considerations underlying the ;Treasury proposals'j and, third, to
examine 'with ybu some of the principal criticisms which have- been made of
the Administration’s proposals for $10,5 billion of additional taxes.
B.
Revenue comparison of the Treasury-proposals and the House Bill (H.R. 3687)
In his statement to; the Ways and' Means Committee1 oh October 4, 1943, the
Secretary r e commended wartime tax *increases totaling $10*58 billion for' a full
year ■ofoperation*
(See Exhibit 1) The bill now .before you would raise
$2.05 billion/- These totals are made up as follows:
Increases Under
Treasury
1 Hou’
se
proposals 1/
Bill
Incftvidual income taxes
Corporate taxes
Estate and' Gift taxes
Excise taxesPostal revenues
M
- £ yd
xe
S'^u j
'$ 6,528.5 million
1.138.1
'
401.6
2.511.1
$10,579.3
*•
If 226.0 million
; 467.9 ;
1 ,194.8
1 5 8 .8
~ $2047.5
2/
There is attached hereto as appendix A a statement comparing the
proposals made by the Treasury to the Ways and Means Committee with the
provisions of..the House Bill,,.
C.
The Individual Income Tax
The major obje ctives, of the Treasury individual income tax proposal are
(1) to simplify the income tax by absorbing the Victory tax into* the regular
income tax structure, and (2) to add $ 6.5 billion t o ‘tax revenues.. The major
-objective of the income tax provisions in the House Bill is to replace the
Victory tax with a minimum tax and adjustments in the regular income tax.
1/
£or a detailed comparison of estimated.liabilities under.the present law
and the Treasury proposals, see Exhibit 2..
.
i
2/
This estimate is in contrast with the Ways and Means.Committee’s estimate
of a yield of $2,139 million,
a
39-70
'
o
1.
Simplification Through Victory -Tax Integration
The Chairman of this Committee and many others have expressed concern
over the complexities of our tax laws and a n urgent desire to simplify our tax
structure*
The Treasury shares the view that simplification is a first order
of business, and on several occasions has made specific suggestions to this
end.' Especially in the case of the individual income tax, which directly
affects more than 50 million taxpayers, simplification'has become crucially
important. No really effective simplification is possible without eliminate
ing the Victory tax. Both the Treasury proposal and the House Bill recognize
this fact by replacing the Victory tax with adjustments in the regular income
tax. 1/
*r
a.
|Hi i p I .!|! j
- •
Comparison of Treasury and House Bill meunods of integration
|1
The method suggested by the Treasury to absorb the Victory tax into the
regular income tax structure would (a) repeal the Victory tax; (b) eliminate
the earned income credit; (c) reduce the personal exemption for a married
person or head of family from $1,200 to $1,100, and the dependent credit
from $350 to $300, leaving the single person's exemption unchanged; ana
(d) increase surtax rates by 3 percentage points on surtax net income up to
$38*000, and by 4 to 7 points above that level*
The House Bill (a) repeals the Victory tax; (b) eliminates^ the earned
income credit; (c) imposes a
p
t
tax of 3 percent on the excess of net
incoke over special personal exemptions ($500 for a single- individual or
a married person filing a ‘separate return, and $700 for a married couple
filing a joint return* plus $100 for each dependent) 2/; (d) sets the^
personal exemption under the regular income tax at $500 for each married
person filing a separate return; (e) increases the normal tax r’
ate from
^
6 percent to 10 percent; and (f) decreases surtax rates by 1 percentage point
on surtax net income between $6,000 and $12,000 and increases them by
o
3 percentage points on surtax net income above $38,000*. The combined normal
tax and .surtax increase would be 4 percentage points on net taxable
up to $6,000; 3 points between $6,000 and $12,000; 4 points between $12,00
and $38,000; and 5 to 7 points above that level.
Comparing the Treasury proposal with the House Bill, we find that they
differ sharply in the technique of integration.
The principal difference
is t h i s T h e House Bill substitutes for the Victory tax a 3 percent
minimum tax with new exemptions; t h e .Treasury'proposal employs no minimum
tax but would reduce the credit for dependents by $50 and the exemption
1/ One proposal for simplification recommended by the Treasury has already
been adopted and will apply to 1943 tax returns filed next March*
h
Public Law 178, the Congress changed the Victory tax rate from a gro 3
a net basis by providing for automatic current allowance of the P°st™?;+
T M-fr change eliminates a complicated step in computing the i
"t$3tX '
2/ The taxpayer pays either this minimum tax or the tax computed at the regula
rates and exemptions, whichever is higher*
- 3 ~
a married couple by $100* Comparative burdens under the House Bill and the
Treasury integration proposal are shown in Exhibit 4* %f V'.
b#
Analysis of the integration plan in H.K# 3687
In the process of absorbing the Victory tax into the regular income tax
structure, both the House Bill and the Treasury proposal eliminate the earned
income credit and thereby simplify tax computation# But the real promise of
simplification this year lies in substituting a single income base for
a double base, a single set of exemptions for a double set, and a single tax
computation for a double one# The Treasury integration proposal would
realize this promise in full* The House Bill realizes the. same promise only
in a minor degree, and at the same time Adds some complexities found, neither
in the present law nor'in the Treasury .proposal# . .
. The House Bill eliminates the ^gross’1 base, of the Victory tax and
substitutes a single for a double tax computation on the simplified f o r m (Form 1040A)# Both the regular income..tax and the "minimum tax are, computed
on the basis of. income tax net .income.# ..'Moreover, 'a table .indicating the '.
regular tax and; minimum tax is provided, for users of the simplified form.
This is all to the good, 'but. it is only a small, part of the simplification
that is needed#'
The House Bill does not eliminate the dual set of. personal exemptions
and will still, require users of the .’'long form’1 (Form, 1040) to determine
which of two. taxes applies to their incomes#
In addition, it will confuse
taxpayers with its complicated minimum tax# ’I t will make it disadvantageous
for many taxpayers now using the. simplified form to! use that form in the
future# It will require millions of married couples to go through a series
of alternative tax computations to ascertain.their lowest possible liability#
(1)
Confusion caused by minimum tax
The House Bill provides that taxpayers, shall pay either the minimum tax
or the regular tax, whichever is larger*
Two alternative taxes with different
rates and exemptions will .confront taxpayers using the ."long, form." A. table
can be appended to that ‘form showing, the net income "breaking, points" above
which the1regular tax applies and below which' the minimum tax applies*.
But this mechanical guide cannot remove the confusion- inherent, in having two
alternative taxes side by side#
The confusion caused by the House Bill m a y perhaps best be visualized
by a specific example#' Take the case of a married couple with two dependents,
the husband having $900 of net income from business and the wife $700f
1/
A comparison of surtax and normal tax rates -under the- House and. Treasury
proposals will be found in Exhibit 3 appended to this .statement#
The
combined normal tax and surtax under the House Bill is one percentage
point higher than the combined taxes under the Treasury integration
proposal in the ranges from zero to $6,000, and $12,000 to $70,000# In
the ranges between $6,000 and $12,000, and above $70,000, the two plans
apply the same combined tax rates#
A *“
Their minimum combined liability under-the House Bill will be realized
by filing' separate returns,-' each claiming one dependent#;,: The husband
will be subject to the regular.tax, the wife, to the 'minimum tax*
The
husband will get a.;£35Q. credit'for the one dependent, and. will apply a
23 percent rate to his income*
The. wife will get. a £1QQ: credit for the
other dependent and.will'apply a. 3 percent rate t’o her,.income.
The,
confusion in this family-is apparent*
. (2) The necessity of comparing taxes'under separate 'and
. •
' joint returns#
;
. * * ‘‘ '* ,. 1AV,-
SliSSy™
.Under the'House Bill-'the problem of -choosing, between joint and
separate returns is not only greatly complicated, but is forced upon
millions of taxpayers not now affected by it because of;the difference
in aggregate exemptions depending.upon whether separate .or joint returns
are filed. Under present law the problem is restricted to the- compara
tively few -married couples having combined net incomes., reaching beyond
the. first surtax bracket, 'The choice is- fairly clear-. . It. -involves
persons;who hre, for the most part familiar with tax .procedure. - To mar
ried couples witli surtax net incomes below-•2,000, it is generally a
matter of indifference whether 'they file separate or joint returns....
However , under the House Bill, it is -no'longer ..a matter ,of indiff er-ence. Harried taxpayers in'even t h e ■lowest•income" brackets, 'many of them
newcomers to the income tax*■will be driven'to compare the taxi advantages
of joint and separate returns. " They will find that the advantagp shifts
with the -size of income, with thfe particular‘division of income between
husband, "and wife, and .-with the- number and division of dependents.
Because .of-these variables, ho clear, dividing lines or income zones, can
be ,established to guide taxpayers into one type of return-o'r the other*
In order to determine their lowest tax liability,- they will have to resort
to a method of trial and error involving numerous alternative computations.
Merely stating the provisions'of the House Bill on this, point demonstrates how bewildered the taxpayer will be* Under the minimum -tax
husband-and- wif e" receive, an exemption of £.500 each,.or a total of £l, 000,
if. they,file separate returns, but only one £700 exemption,if they file a joint return. '.Under -the regular income tax* their exemption is still
|500 each, or a total of £1,000, on separate returns, but is £1,200 on a
joint return. 1/ In other words, the minimum tax exemption will be smaller
under a joint return than under separate returns, thus offering an induce
ment to file separate returns.
The regular tax exemption, on the other
1/
None of the $500 exemption allowed on a separate return may be -shifted
from one spouse to the other under either-the minimum or .the regular
tax.
'*■’r
':5 ;,;i* ,v
y
**
*
.
,
hand, m i l be greater under a joint return than under separate returns,
thus offering an inducement to file joint returns,. By setting the credit
for dependents at $100 for the minimum tax in contrast with $350 for the
regular tax, the.. House Bill further complicates the choice between joint
and separate returns e
•
'
■ j Sj
The large number of variables injected-by the--House-.Bill m i l force
husband and wife w h o both, receive income to compute a series of alternative
taxes, to ascertain their lowest possible liability, 1 should like to cite
■an example Yrhich brings home more forcibly than any lengthy explanation the
nature of the compliance burden imposed on these taxpayers, : The example is
that of a. married couple witlr three ■children and a net income1-'-of $2 ,125 , of
which the husband receives $1,250 and the wife, $875® Using Form'10^0,
this couple could reach five different, tax results, .This would involve nine
separate tax computationso These computations are necessary to determine
the maximum tax advantage, under (l) joint or separate returns' and (2) different divisions of the dependents between husband, and wife0 (See..illusr*
tration in Appendix B,) To be absolutely certain that they have arrived
at their lowest possible- tax, this couple would also have to make nine tax
determinations on the short form (1040A),. The actual case in which 18 tax
computations would be made to ascertain the lowest tax v/ould be rare. But
the mere fact that such-cases can occur and that a problem similar in kind,
if not in degree, will be'faced by many taxpayers i s <a serious indictment
of this phase of the House Bill, .
With such extreme complexity established beyond any doubt, the question
might still arise .(a) whether the number of necessary tax computations is
much larger than under- present law, (b) Whether the 'tax differentials in
volved are substantial, and (c) whether many taxpayers will be affectedo
(a) There is no incentive u n d e r present law for married -.persons*
with small incomes to file separate returns, and the problem of allocating
dependents is thereby avoided,
(b) The illustration in Appendix B shows that the tax differentials
under the various *procedures for computing the tax can be very substantial.
On the modest income of $2,125 in the example cited, the tax liability
computed on Form 1040 ranges from $24-,75 under the m ost.advantageous method
to $174-o75 under the least advantageous method of filingo
(c) ; Estimates indicate that the House Bill will confront well over
10 million married couples’with the choice between- joint--and. separate
returnso Under that bill it .is estimated that 10,7 million joint returns
will be filed for 1944-o 1/ In addition, a number of separate returns will
l
1/
under'present law,'8,2 million joint, returns are expected, while under
the*Treasury integration proposal, the figure would be 6,7 million.
also be filed by married couples -where both receive income® The great
majority of millions of married couples will decide to file either joint
or separate returns only after making difficult, time-consuming comparisons0
(3)
Decreased use of the simplified return
Another undesirable by-product of tbs House bill is that it would in
effect deny the use of the simplified form (104.0A) to many taxpayers now
able to use that form® Husband and wife may use Form 1040A as a separate
return as long as both use it and neither has more than tD^OOO ox gross
incomeo The House Bill, by providing married couples with a 51,200
exemption if they file joint returns but a. combined exemption of only
$1,000 if they file separate returns, places a premium on joint returns0
As'a result, many married persons with combined gross incomes between
53,000 and -§6,000, who now file separate returns on Form 1040A, will be
penalized by a $200 reduction in exemption if they continue to use Form
IO4OA 0 Plainly, they will turn to the more complicated Form 1040© Since
it is desirable to extend rather than restrict the use of ths simplified
form, this effect of the House Bill is unfortunate©
(4)
Complication of the withholding; process
In addition to complicating tax returns and the filing process,
Ho R® 3687 complicates collection at the source and raises^new problems
for employerso Many employers witliliold ori the ^oxact** basis instead 01
by wage brackets, either to approximate the final liability more closely
or because their mechanical equipment requires the use of the exact
computation© Since the Victory tax exemption is $624 regardless of family
status, present law requires the employer to apply only one set of exemp
tions varying with family status© But under the House Bill the minimum
tax will also have variable exemptions© Employers will thus oe ^confronted
with two sets of varying exemptions, as well as two tax rates, in deter
mining how much to withhold©
The problem of year-end refunds and additional tax payments is also
aggravated© 1/ Husbands and wives filing separate returns have ximed
exemptions of $500 each® No shift of part of the exemption from one to
the other is permitted as under present law© Situations will frequently
1/ 'The ? reasiiiy hits ^reciWaerded changes in the vmthholQing procedure uhat
would minimize the ^-oblem of year-end refunds and additional tax
paymentso The. Treasury proposed that withholding be applied on a
graduated basis to the taxpayer*s full liability rather m a n mere y
to his partial liability under the normal tax and the first bracket
of surtax® It also proposed narrower withholding brackets to adjust
amounts withheld more closely to actual tax liabilities#
7
arise, therefore, "where one spouse is entitled to a refund And the other
is subject to additional tax0 Yet, because, the exemption is fixed at'
$500, the opportunity- that exists today for canceling out the refund and
the additional liability is removed,® For:.example., if.the -wife works part
of the year but does not take any of the Ydfhholding exenption, she is
entitled to a refund* The husband, who takes the e^tir^iy^t.Jiholding
exemption, will probably have to pay additional’'tax®,. Butfeyen if the w i f e 's
refund is equal to or greater than the husbandfs remaining liability, there
is no way of shifting the personal exemption and thus offsetting one against
the other© He will have to pay the tax and she will have to wait for a
refund©
V u
.
(5)
Compileat ion of the administrative nr ocess
■ *The House Bill also makes heavy demands tpon administration© For
194-4* it will require the. filing and .processing of 41©7 million returns,
representing 52*4 million., taxpayers, in contrast with the Treasury
proposal, which'would require qnly 36©5 million returns representing
43o2 million taxpayers©
The & $ $$, Bill, like the present'law, requires
millions of returns from persons in those income brackets in which the
ratio; of administrative effort to tax proceeds .is highest© Moreover, the
complexity and confusion generated by the double exemptions and computations
and by the •involved choice between joint and separate returns will inev«
itably burden administration® Both in terms of the taxpayers Yfho trill'
throng the collectors1 offices for help, and in terras of the volume of
errors that taxpayers will mate, the House Bill magnifies the problems
of administration-
V
Co
Contrast of .House Bill with Treasury integration proposal
■ from the standpoint of s d ^ l j S ^
«
u> JJ" 1'• : •
The contrast between the House Bill and the Treasury proposal on the
score of simplicity is complete© What the House- Bill gains in removing
"the Victoiy tax, it loses in introducing the minimum tax© It retains the
complexities of a double tax system and adds special vagaries of'its ov/n0
It burdens administration with new problems at a time when it is .still
faced by the-enormous task of adjusting itself to, current collection©1*
Worst' of all, it .will require taxpayers to .struggle with the :hew minimum
tax concept even before they finish hurdling the Victory tax barrier©
■
\
*
'
✓
• . .v*■'
"it
,\
I‘
Under the Treasury proposal, on the other hand, there would be n o ’'
double tax base, no double exemptions, and no. multiple choices, and
computations© Administration would be simplified by dropping the Victory
tax0 Similarly, vdthholding would be simplified by dropping the minimum
Under present law the figures"wouff
52©3 .million taxpayers©
and
X
s «•
■withholding feature necessary to guarantee collection. of the Victory .tax0
M o s t ’important, compliance would be simplified* Taxpayers -could face,
the prospect of filing -their necessarily ■.complicated annual, return next
March with the assurance that future income- tax /-returns .would be both
more- understandable and simpler*
•.*
*r
" •" .. ' ^ ■
d0
Tax increases and decreases under the. House Bill and the.
Treasury integration proposal
\
?■ f.
-
HE
’ Some contend that the Treasury proposal- achieves simplicity at an
excessively high cost in tax reduction for taxpayers in the lowest brackets
and that the House Bill involves no corresponding costo I should like to
cite the facts refuting this Contention*
•
The Treasury integration, proposal -would, exenpt entirely. 9ol million
taxpayers who now pay a net Victory tax of $275 million® Including these,
it would reduce taxes for IS million paxpa&av#, the .combined !reduction
totaling $436 million* The % h s e Bill exempts only 130,000 taxpayers,
but reduces taxes for a total -of # ^ -i4illion taxpayers; the aggregate
reduction is $370 million, only ^
BifliiOn less than the Treasury proposal®
The Treasury proposal would increase liabilities, for 34 04 million taxpayers,
the increases totaling $7ll ndlllon* The -Hox^e Bill increases liabilities
for 2 6 03 million taxpayers, the increases totaling $459 million* While the
9 million taxpayers who Would be exempted under the Treasury proposal pay
$275 million under present law, they would pay only $161 million under the
House Billo This figure of $161' million,measures the reduction involved
in their elimination from the income-tax rolls0
Any integration, plan wifi inevitably change, liabilities of many tax
payers* The major concern should be that the changes meet the tests of
simplicity and fairness* The treasury changes meet these tests far better
than the changes in H* R* 3687* While the Treasury integration proposal
would.reduce taxes only for taxpayers in the -lowest brackets and subject
to family responsibilities, the House Bill would apply- reductions, to tax
payers'with incomes as high as $3y931 (married person with 2 dependents)
and $4,572 (married person with 3 dependents)* ;More important, the
Treasury proposal would simplify the entire income tax structure in ,
eliminating $275 million of~tax for the 9 million taxpayers least able to
pay and most expensive to tax* In contrast, the House Bill' complicates
that structure and multiplies the compliance burdens of over 50,000,000
persons merely to keep the 9 million taxpayers on the rolls, and to exact
from them the relatively small sum of $161 million* It seems utterly
unreasonable to erect a mountain of complexity for such .a molehill of
revenue*
-—
e* --.Conclusion, .on .pimolif jcatj on
Simplicity in income taxation implies both mechanical ease of
compliance and understandability of the basic tax rules* The i n t e g r a t i o n
scheme in H* R* 3687 violates both of these standards * It has been amply
- 9 ~
illustrated that the mechanical problems of* compliance under the minimum
tax may be even more burdensome than those associated with the Victory
tax0 But even assuming that master.tables could'be developed to cope
with most of the mechanical complexities of the House Bill, the problem
of simplicity would not be Solved® The 'minimum tax and its relationship
to the regular tax completely defy understanding on the part of the
average taxpayer® A tax law which affects over SO- million people must
be made understandable to them if it is to survive® It must be explain
able to them over the radio, in the press, and through the mails® I might
be able to visualize mechanical guides which would help taxpayers to
stumble in robot fashion through income tax conpliance under the House
Billo I cannot visualize.an information campaign that could make this
tax understandable to taxpayers generally®
Putting the m i n m u m tax in its. proper perspective, it is not an over
statement to say that its complexities will jeopardise the whole income
tax system® Merely to- collect $161 million.from 9 million taxpayers near
the bottom of the income scale, it endangers•the collection of more than
$17 billion from over 50 million taxpayers throughout'the scale® The
House Bill offers the American taxpayer a minimum tax “cure" that is worse
than the Victory tax “disease"® ' We cannot /afford to disappoint the mass
of taxpayers who have been promised relief from the complexities of our
present dual tax structure® We cannot risk a breakdown in the mainstay
of our •Federal t a x ,system in the midst of total war®
The question of Victory tax integration is of crucial importance®
I am firmly convinced that the Treasury integration proposal would
achieve real simplification at a modest and entirely reasonable cost0
2®
Increase in Revenue
a,®
The Treasury proposal
Thus far, I have discussed only the Victory tax integration segment
of the Treasury individual income tax proposal®- The Treasury has also
recommended as part of a $1005 billion program of wartime taxes that an
additional $6®5...billion of revenue be raised in individual income taxes®
The surtax rate increases suggested to raise this revenue of course in
clude the changes designed to absorb the Victory tax® Exhibit 5 appended
to this statement shows the schedule of surtax rates‘proposed to the Ways
and Means Committee on October A* 1943® 1/ (See also Exhibits 6 and 7®)
1/
It will be seen Trom exhibit 5 that the Treasury is recommending that
4^ separate surtax brackets of $500 each be substituted for the present
first bracket of $2,000® This change enables a better adjustment of
taxes to capacities to pay in the lower income brackets®
.10
—
Two alternative schedules for raising approximately $605 billion of added
income tax revenue are also attached, for the convenience of your Committee
(See Exhibits 8, 9 and 10)o It will be eeenthat these alternative
schedules would impose a heavier burden in the lower income brackets than
the October % proposal0 1 / . ■
b0
The House Bill
•j v,
Revenue is only an incidental consideration in the income tax
provisions of the House Bill© Those provisions will add $226 million to
income tax revenues0 Of this.amount about $90 million is attributable
to the changes made in connection with Victory tax integration© About
$150 million is attributable to the disallowances of deductions"for
Federal import duties and miscellaneous excise and stamp taxes not other
wise deductible as business expenses© 2/ The other individual income tax
changes made by the House Bill are of a technical character©
3®
Answer to Criticisms of the Treasury Proposals for Higher
Income Taxes
.
I should now like to examine with yo(u some criticisms that have been
made of the Treasuiy*s affirmative income tax proposals©' The three
arguments I shall examine are (l) that the Treasury proposals would not
bear heavily enough on the lower income bracketsj (2) that the American
people do not have the capacity to pay more income taxes, and (3) that
income tax rates in 1944 will be. confiscatory©
a©
Tax burdens on the lower income groups
It is contended that persons with incomes of less than $5,000 are
the major source of inflationary pressure and that these persons would
escape their fair share of the additional tax load under the Treasury
proposalso Although at 1944 levels of income about 81 percent of the
1/ Persons with net incomes of less than $5,000 would pay $3©5 billion
out of the total of $605 billion additional income tax under the
.Treasury proposal of October 4j $3«9 billion out of $6©7 billion under
Alternative proposal A* and $4o4 billion out of $6©8 billion under
Alternative proposal Bo
2/.This disallowance was recommended by the Treasury© At present, the
allowance of deductions under Section 23(c) is inconsistent and depends
entirely on the legal language used in imposing the tax© For' 'example,
admissions taxes are allowed as deductions, but the cabaret tax is not©
Uniformity in the matter of deductibility is desirable© Revenue,
administrative, and equity considerations also ’suggest disallowance of
these taxes in so far as they constitute personal expenses©
- 11- -
total cash income will, be received by persons with incomes under $5,000,
only 65 percent of the net income'above income tax exemptions will be *
received by this group0 Likewise^ alt hough 6l percent of total income
will be received by persons with incomes under $3,000, only 39. percent of
the net income above income tax exemptions Yd.ll be received by this'group6Looking.behind:these aggregates to individual cases,.we find that
the margin of disposable income over and above wartime needs is very *::
narrow^for the millions of persons in the lower income brackets® Out of
67o3 million income recipients in the calendar year 1944, 58®2 million
are expected, to receive net incomes of less than $3,000o The average cash
income per recipient before taxes will be $1,650, and after existing taxes,
about $1,500o The demands of wartime living on incomes of this size leave
little margin for additional taxes and afford few opportunities for infla^
tionary spending®
Nevertheless, the urgent requirements of war finance demand that m
tap even this small margin of disposable income® Under the Treasury
proposal one-half of the income tax increases Y/ould fall on persons with
net incomes of less than $5,000 and about one-fourth on persons Yirith less
than $3,000® Much the same proportions hold for the complete Treasury
program, including proposed changes in corporation taxes and in excise
taxes o
■
.. |j h ,
.r., .
bo
Capacity to pa?/-
A second contention xs that the American people do not have the '
capacity to pay additional income taxes® The facts contradict this con
tention^. Individual incomes after personal taxes amounted to.$65 billion
■in the fiscal year 1939 and are expected to amount to $126 billion in
the fiscal year 194-4-0 The corresponding figures before subtracting
personal taxes are $68 billion and $148 billion® In other words,, personal
taxes show an Increase of $19 billion While' incomes before taxes show an
increase of $80 billion. Less than one— fourth of the increase in annual income
payments generated, by.defense and war activities is being absorbed by taxes.
In an attempt to prove that American taxes are too high, it is argued
that, taxes in the United States are higher in terms-of dollars per capita
than in the United Kingdom and Canada® 1/ This argument is, of course,
grossly misleading, since it gives absolutely no indication of real burdens®
How burdensome a given tax will; be is determined by the ratio of the tax
0 the income from Y/hich the tax. is p aid0 Personal incomes here are larger
than In either Canada or-Great Britain® Furthermore, the rates’
-of income
tax and excise taxes are higher in the Allied countries than here® Pracically any citizen of the United States, if given the choice of paying
V
See Page 8, House Report No® 871.on the Revenue Bill of 1943®
American, Canadian, or British taxes, would choose the American tax system,
since his tax here would be the lowest©
Co
The argument of confiscation
In connection with the argument that taxes will exceed capacity to
pay, it is contended that our existing income tax rates are confiscatory©
Those who make, this contention point to the combined burden of current
taxes, uncanceled 1942 liabilities, and State income taxes© It is said
that this combination will exceed 100 percent of income in 1944o
Such statements are grossly misleading.-, They ignore two facts© The
first is that the Federal income tax allows for the deduction of State
income taxes in computing net income© This deduction protects the tax
payer from a confiscatory combination of State and Federal taxes, even
if the State tax does not permit the deduction of the Federal tax©
The second fallacy lies, in comparing two years’ taxes, or 1-1/8,
y e a r ’s taxes, with one y e a r ’s Income0 The uncanceled part of the 1942
tax is in no sense a tax on 1944 incomeo This becomes entirely clear
when it is realized that a person having no 1942 income has no uncanceled
tax to pay in 1944* and would therefore not be covered by. the schedules
combining the two y e a r s ’ taxes© As a matter of fact, when the taxes for
two years are combined with the net income for two years, as they should
be, it becomes apparent that the 75 percent cancellation is a windfall
which has made it easier, not harder, to pay taxes on 1944 incomeo
Bo
Corporation Taxes
The Treasury suggested to the Hays and Means Committee (a) that the
surtax on larger corporations (those with net income in excess of $25 ,000)
be increased by 10 percentage points and on smaller corporations by
4 percentage points; (b) that no change be made in the excess-profitstax rates; and (c) that certain changes be made in the existing provi
sions for carry-back of losses and unused excess-profits credits© The
Treasury proposals would increase corporate tax revenues by $1,138 million©
The bill passed by the House (a) makes no change in the surtax rate;
(b) raises the excess-profits**tax rate to 95 percent; (c) reduces the
excess-profits credit for some corporations ty lowering the percentages
allowed on invested capital; (d) raises the specific exemption for excessprofits taxes from $5,000 to $10,000; (e) makes no change in the carry
back of losses and unused excess-profits credits; and (f) provides special
tax treatment for certain natural resources industries© 1/ The House Bill
y
A comparison of corporation income and excess*profits tax rates is
shown in Exhibit 11©
~ 13 -
Increases^corporate tax revenues try
discuss these, matters, in-detail 0 '
1®
$468
■,
million* I should like to
.. ' -;
Comparative Effects of Increases in Surtax and Increases
in Excess-Profits Tax
Unlike an increase in surtax rates., which would increase the net
tax liability (after postwar credit) .of all taxpaying corporations, the
increase in the excess-profits-tax-rate under .ft© R© 3687 will increase
liabilities for comparatively few. corporations.* . Corporations not subject
to the excess—profits tax and those already subject to the 80 percent
ceiling on corporate taxes will have no added tax to pay© Of 263,000
taxable corporate returns estimated for 1944, '71,000, or about 27 percent
will be subject to excess—profits tax 0 Moreover, the 80 percent ceiling
will apply to 4 , 3 0 0 ’corporations or approximately 6 percent of all excessprofits taxpayers© This 6 percent,.however, will pay about 40 percent of
total excess—profits taxes in 1944® An additional 3,200 corporations will
become subject to the 80 percent•ceiling as a result of the 5 percentagepoint increase in the excess-profits tax rate© The effect will be to
limit still further the range of corporations to whom the full increase
would apply 0 It would apply only to the residual class, namely, corpora
tions that pay excess—profits taxes, but will not become subject to the
80 percent tax ceiling©
’ '
In contrast with the House Bill, the Treasury proposal would increase
the net liability of all corporations® For those subject to the 80 per
cent ceiling, an increase in the surtax would mean a decrease in the share
of their 80 percent tax represented by excess—profits taxes 0 As a result,
their postwar credit would be smaller and their net liabilities corres
pondingly larger, even though their gross tax payments were unaffected©
For all other corporations, both the gross payment and the net liability
would be increased©
" -1 ’ / y
From the foregoing analysis it is apparent on the one hand that the
House Bill will not strike corporate profits generally, but only a re
stricted segment of corporate profits© * On the other hand, it m i l not
strike approximately one—half of the excess—profits, nor will it touch
the most profitable corporations© To reach corpoiate profits generally,
an increase in surtax rates would be necessary© To reach the bulk of
excess—profits and the most profitable corporations, added excess—profits
taxes would have to be coupled with an upward revision of the 80 percent
limitation©
'
Because of its broad coverage, the corporate surtax affords an in
strument for tapping war profits that are not defined- as excess profits in
our tax law© At best, it is extremely difficult to single out excess
profits and war proxlts ’
ey legal definition© An excess—profits tax can
not be a perfect instrument^ a 90 percent or a- 95 percent excess—profits—
tax rate does not mean that the Government.mil recapture 90 or 95 percent
of the war profits of corporationso In the area labelled "normal profits”
there are bound to be some war profits*; For-example, many corporations
■with large invested capital but low normal earnings, receive substantial
war profits, without becoming subject to; excess—profits taxes 0 The same
is true o f '
“corporations' with' high' bas'e^bribd e'arnipgs now engaged in the
production of war materialso Other corporations have had^ their excess*,
profits.tax liabilities substantially reduced by the special relief
provisions in the tax law* Still others, m i l ultimately have a substantial
proportion of their excess-profits: ta?ces. refunded to them under the opera*
tion of the carry-back previsions* The surtax thus offers greater assurance
that all corporations which ha^e: benefited, from the war will make an addi
tional tax, contribution*
■ .A further reason in. favor"of a surtax-rate increase, as distinguished
from an exc e s s-p r ofit s-t ax rate increase,:may be found in^ the comparative
effect on managerial profit incentives*. Financial incentives to efxicient
management depend upon the number of cents the corporation... retains out ox
each additional dollar of profit* The. House Bill would increase the net
tax (after postwar credit), on each.dollar.,of excess—profits^ from 81 to
85-1/2 cents* Under the Treasury proposal for an increase in surtax: rates,
not more-than 50 cents would ordinarily be taken out of each dollar of
normal'profits, and the present 'figure of ,81 cents for excess profits
would not be touched* 1/ The increase in surtax .proposed by bhe Treasury
is less likely to impair financial incentives than would an increase m
the excess—profits—tax rate* ,.TJfth;
-corporate rates at their present levels,
the impact on incentives cannot be. ignored- in making tax decisions*
The Treasury, agrees^hat our corporations should be kept fin^a sound
financial condition=so that, they may be able to convert to peacetime pro
duction and provide employment- .for men leaving the armed forces after .he
war*” 2/ But figures on corporate earnings, dividends, and-accumulations
make it clear that added taxes can be levied without unduly..burdening
profits and profit incentives, and without impairing^ the sound^financial
condition of corporations generally* Corporate profits (excluding
dividends received) vid.ll reach an estimated level ox ^ 2*6 billion or
l9A3o This is more than four times the corporate profits for the year
1937 one of'the most prosperous years of the ...Thirties* Taxes have also
risen sharply .during this period, both because of increases^in corpora e
income and because of increases in rates* But they have failed to xeep
pace .with earnings* In 1937 corporations had left less^tban 74 bxllion,
after paying $1—1/4 billion of taxes* In 1943 corporations wil
ave_
left nearly $9*2 billion, even after paying $13o5 billion of taxes* xn
1944. corporate profits after taxes at present rates are expected to reacn
.$909 billion, or three times the average annual profits after taxes from
193^ through 1939>
l/
2/
C.orp orations with income between $25 <000 and $ 50,000 Will> of cours ,
be subject to higher-marginal surtax' rates as a result of t h e notch
provision*
See Fage 5, House Report No* 871 on the Revenue Bill of 1943o
15 -
Figures on dividends and undistrp.but ed profits are also impressiveo^/
Average dividends f r o m '1936 to 1940 were' $4®1 billion, 1937 being the
peak year, when $ 4*8 billion were distributed® 2/ In spite of war taxes,
dividends for 1941, 1942, and 194-3 are estimated at $4..5 billion, $4*1
billion, and $4*0 billion, respectively*, It is estimated-that even after
paying’taxes and dividends, American corporations will accumulate over
$12 billion of undistributed profits for the three years 1941, 1942, and
1943 i
Recent studies show that liquid assets of corporations have risen
even faster than retained earnings©. Hon*financial corporations increased
their holdings of currency, bank deposits, and United States Government
securities by $12 billion during the two years 1941 and 1942 according
to an estimate prepared by. the Securities and Exchange Commission© If
•the accumulation of liquid assets in the first half of 1943 should continue
at the present rate through the year, the total increase would be $25
billion for .the three years 1941, 1942, and 1943® 4 study just released
by the Federal Reserve Board indicates that business deposits, both
corporate and non—corporate, totalled $30 billion on July 31, 1943o
It is recognized that the combined corporate and individual taxes on
dividend income are higher in this country than in England and in Canada,
and that steps must be taken after the war to relieve corporate stock
holders of their disproportionate tax burden* However, so long as the
war continues and corporations generally are able to maintain present
abnormally high levels'" of earnings, the discrimination against this class
of income recipient wi 11 continue to be more apparent than real* The
taxation of the excessive .profits of corporation imposes no real burden
on corporate stockholders®
I have.indicated why the Treasury prefers to raise additional revenue
by means of an increase in surtax rather than an increase in excess**
profits tax* However, if your Committee should decide in favor of an
increase in.the excess—profits—tax rate, the,Treasury suggests an upward
revision of the 80 percent limitation on corporate taxes* Without this
revision tlie increase in, oxcess-rprofits—'
tax rates m i l reach only <
a limited range of excess profits*2/
*
1/
y
2/
See Exhibit' 12 *
Dividend payments in 1936 and 1937 are generally conceded to .have been
abnormally high as a result of the undistributed profits tax in effect
during those years*
A revision of the 80 percent limitation will improve the relationship
of net taxes payable by corporations not subject to the tax ceiling
and those which are subject to the tax ceilingo In Appendix G to
tills statement, there are outlined three alternative methods of
revising the 80 percent limitation to gain these advantages, which
would still prevent net corporate taxes from exceeding 80 percent of
net income*
-16 -
oo
^
Changes in Excess-Profits Tax Exemptions and Credits
under the House Bill
The House Bill provides for an increase from. j>5',000 to $10,000 in
the specific excess—profits—tax exemption© 1 / This provision,'Which was
'recommended by the Treasury last year, will'distribute the excessyprofitstax burden more equitably between large and small business enterprises©
The profits of small business are likely to fluctuate more widely
than profits of large business© Base—period earnings under the averagerearnings method are, therefore, a less reliable index of normal earnings
for small business than for large© An increase in exemption tends to
avoid a penalty on normal fluctuations and earnings without forcing a
resort to the relief provisions of Section 7220
Moreover, profits of small business are more likely to reflect a rer
turn-on managerial efforts than a return on invested capital© Consequently,
the increased exemption-also aids small corporations using the invested
capital base for determining excess profits©
The. Treasury also agrees with the provisions reducing by one per—
centage point the invested capital credit in each of the brackets above
$5.million© Invested capital is generally used as a base for computing
excess—profits credits only by those corporations which earned a low'
rate of return during the base period© Where such earnings were
abnormally low, corporations are protected by the remedy in Section 722 ©
But corporations the base—period earnings of Which were normally low should
not be provided an escape from taxes on war— increased profits© Since a
large invested— capital credit unrelated to base,—period earnings tends to
provide such an escape, the proposed reduction will reduce an unfair ad
vantage gained by large corporations having a history of low normal
earnings©
¥he proposed reduction of the invested capital credit will also re
duce the advantage gained by large corporations on borrowed capital© Be
cause $0 percent of borrowed capital Is included in invested capital,
corporations can get a tax advantage by borrowing at rates of interest
below the percentages allowed on invested capital© The large corporation
generally has a higher credit standing than the small and. therefore -gets •
larger tax benefits from borrowing -than the small corporation© This ad
vantage will be reduced by the reduction in percentage allowances on in— "
vested capital© 2/
V
2/
See Page '57, House Report Ho© £71 on'the Revenue Bill of 19A3©
An illustration of the effect of borroiving on net income after taxes
of an excess-profits taxpayer using the invested—capita!! credit m i l
be found in Exhibit 13©
- XI ~
3o
Specific Relief Maasures in the House Bill
The House Bill provides special tax treatment for certain mine owners
and operatorso I f extends percentage depletion and excess—profits-tax
exemption to several minerals as a means of stimulating their wartime
production® In so far as these fall within the category, of strategic
minerals designated by the War Production Board, the Treasury concurs
with tax measures which will accelerate their output 0 But for minerals
not so designated it is believed that the proposed treatment'if un
warranted o A further statement on the Treasury positi:on is contained
in Appendix Do
'
■ The Honse Bill also extends to the-natural gas industry the special
excess-profits-tax treatment now granted with respbct to the accelerated
output of depletable natural resources® w in so far as this treatment -is
••ext'Ghded'-to non—pkdducers of natural gas, this provision in .the House
Bill appears to be undesirable® This p o i n t ,is further developed in ' .
Appendix E© ;This appendix, also contains a statement of the Treasury •
position with respect to the broadening of the excess-profits^tax relief
for coal and iron miners and timber tracts®
Tax relief measures can serve very useful purposes® But unless they
are handled very carefully, they may simply become tax loopholes0. If tax
relief is distributed without regard, to need, it deprives the Government
of much needed revenue, and distributes tax burdens inequitably'among
■business enterprises® It must not be forgotten tha f reduction in the
tax liabilities of especially favored taxpayers means increased tax
burdens on all other taxpayers©
4-o
Acquisitions to Avoid Income or Excess^Profits Tax
At this point I would like to discu.ss one technical amendment which
is of major importance © Section 115 of. the House Bill is intended to
curb-the development of a public market in-Which alleged tax' benefits
may be bought and soldo The currently, advertised schemes are .designed to
enable a< taxpayer with large war profits to avoid income and excess— .
profits taxes b y purchasing for such purpose a losing:or defunct corpora
tion having large' current, .past, or prospective losses, deficits, or large
current or unused profits credits®; The .utilization and advertisement of
such-devices has disturbed responsible taxpayers and their'attorneys who
have refused to use these schemes® It is also disturbing to the Government
in its effort to administer the revenue layers equitably and uniformly®
The amendment disallows the part of the deduction or credit involved
in the tax avoidance device, but only if the acquisition of an interest inor control of a corporation or property has occurred on or after October B,
194-0, and then only if one of the principal purposes nfor which (the) -x-x-xacquisition was made or availed of is the avoidance of
tax by securing
the benefit of" such deduction or credito The amendment is directed solely
18 -
at those devices which distort or pervert the natural business relationship
between a deduction or credit'and the enterprise which produced it, and
for the benefit of which the deduction or credit was provided by law0 The
gist of the distortion is the circumstance that such natural relationship
has in whole or in part ceased, and that a taxpayer seeks to use the
deduction or credit as an offset to the profits of an enterprise to which
the deduction or credit does not bear a reasonable business relationship*
The amendment in no way abridges the privilege of doing business in indi
vidual, partnership, or corporate form, or the privilege of filing a
separate or a consolidated return, or any of the numerous choices which
the structure of the tax system is intended to afford* But the amendment
does operate whenever under ary of these privileges or choices such a dis
tortion or perversion of a deduction or credit appears* Hence the scope
of the amendment in its field is precisely the same as that of Sections
4.5 and l^l of the present law, where analogous distortions- or perversions
have been frequently described, by tile Committee as nmilking" or shifting
of deductions and credits0 The Treasury believes with the House that the
amendment is a significant part of an equitable tax structure and that it
is well adapted to accomplish.its purpose*
E,
Estate and Gift Taxes
_
::
In seeking sources of. additional wartime revenue, we cannot afford
to overlook estate and gift taxes* Increases in these taxes have not
kept pace with tax increases generally* Small as' their.relative contri
bution to the total has been in the. past, it has fallen during the. war0
Estate and gift tax collections for the fiscal' year 194-4 are expected to
represent a smaller proportion of total tax receipts than at any time
during the past 10 years 0 (See Exhibit 1 6 o)
In a period when huge additional revenues are needed, the benefi
ciaries of estates and gifts should contribute their full share to the
cost, of the war along with other groups of taxpayers0; Yet, relatively
few estates are subject to tax, and .rates in the lower and middle,
brackets continue to be moderate* The Treasury has, therefore, recom
mended that the estate tax exemption be reduced from $60,.000;.t o .$40,000
and that estate tax rates be raised* Corresponding increases in the
gift tax are also suggested* For a comparison of rates and tax under the
present law and the proposals, see Exhibits 1*4, 15 and 1 7 o ,These'. changes
would add $4.00 million to our revenues on a full-year basis*
. :
>~19 -
The proposed changes in the estate and gift tax provisions should be
permanent, rather,-than simply for the duration of.the war© 1/
I should like to report to the- Committee that the Treasuiy is now
making an extensive study of all phases of estate and gift taxation0 For
example, w e .are investigating the possibility of integrating the estate
and gift taxes and correlating them with the. inccane tax® An advisory
committee, comprising some of the leading tax practitioners in the estate
and gift tax field, is aiding us in this study® It is hoped that the
study will lead to recommendations which will simplify these taxes and
make them more effective and more equitable® It is anticipated that this
study will be completed before the Congress considers the next tax bill*
F.
Excise Taxes ■
. :M
The Treasury recommended that an additional #2*5 billion be raised
through increases in the rates and changes in the base of several existing
excise taxes and through the enactment .of ;two new excises0 (See Exhibit 18*)
It further recommended that the tax on transportation of property be re
pealed® In selecting specific items for heavier taxation and in setting
the proposed -rates, the:'Treasuiy gave, careful consideration to the demand
and supply conditions- in- affected•industries and to the impact on pro
ducers and consumers® The
M i l i o n excise,rtax.'recommendation was "de-,
signed to be a part of a balanced overall program®
Selected excises have much to commend them-'as a source of wartime
revenue® They.involve little increase in administrative machinery and
compliance costs® At the same time, in most cases the higher levies
would be shifted to consumers, thus avoiding undue burdens on business
concerns® Since only a few non-essentials are affected, and since the
1/
Two technical estate and gift tax provisions of the House Bill deserve
comment,® As passed by the House, the bill contains an estate tax
amendment which provides that in valuing stock or securities the value
of which cannot be determined by reference to bid and asked prices or
to sales prices by reason of the absence of listing for sales, there
shall be Considered, i n addition to- all other factors, the value of
stock or securities of comparable corporations which are listed on
an exchange® It is believed that this amendment ‘is highly undesirable
because it can only lead to continuous, unnecessary and costly
litigation, and harbors dangerous potentialities for imposing-'unjust
tax burdens upon the recipients of closely held stock®
The House Bill also provides that in certain instances the appoint
ment of a trustee, the vesting of discretion in a trustee as to the
selection of beneficiaries or the distribution of benefits, or the
exercise by,a trustee of such discretion shall not be deemed a taxable
gift® This provision is completely divorced from aiy reasonable classi
fication of, trusts and is enmeshed.in ambiguities which can only
produce manifold administrative difficulties and increase the
litigation burden of taxpayers®
tax can be avoided or. reduced by cutting consumption of the taxed items,
the excises will not-„ cause..hardship -for consumers0
Excise taxes are far. superior, to a sales tax0 They involve only
a small fraction of the administrative and compliance effort demanded
by a sales taXo Second, they bear pn non-essentials rather .than neces
sities,) Third, they support rather than jeopardize the Governments
program to stabilize the cost of livingo
For an elaboration of the points just made, I should like to refer
you to Appendix F e This appendix also compares the Treasury excise tax
proposals with the House Bill provisions, analyzes those provisions, and
indicates why it is desirable to terminate excise tax exemptions on sales
to the Federal Government, as recommended by the President*
'
p
Go The Sales Tax
The Treasury proposals do not include a general sales tax*
like briefly to state the reasons for our decision,)
I should
The form of sales tax which wpuld prpduce the most revenue and cause
the least rupturing of price ceilings is the retail sales tax* The
highest rate I have heard mentioned is 10 per cento That is over three
times as high as the rate now i n force in any State*
A 10 per cent sales tax with no exemptions for necessities of life
would raise at current sales levels about $S billion, or about onetenth of this year*s estimated deficit*
Such a tax would be very harsh, especially on low income families
with children* It is completely lacking in any relation to ability to
pay because it hits families much harder than single individuals at the
same income levels and it hits people with small incomes, much harder
than people with larger ones0 Such a tax would be opposed to every
principle of tax equity and would in iry opinion interfere with the war
effort*
There are many proponents of the sales tax who would agree with
these criticisms and who propose to meet them by allowing exemptions of
the necessities of life* Such exemptions would indeed improve the
character of the tax, although they would still leave the discrimination
against large families* However, the exemptions would -quickly remove
so much of the tax base as to leave little more than an empty shello
The exemption of food would reduce the yield by $2*4 billion^ the
exemption of medicine would reduce the yield another $200 million$ the
exemption of clothing would reduce the yield by another $1*1 billion*
Those exemptions do not include all of the necessities of life,' but let
us stop at that point* A sales tax with such exemptions would yield
-
21
-
about $2*6 billion® However, of that amount about $1*2 billion would
come from goods and services already subject to Federal excise taxes0
The ta x yields from the sale of these commodities can'be; increased or
decreased by adjusting.the excise-tax rates* No sales tax is needed
to produce revenue from them* .All that is left after excluding such
commodities, is $1*4 billion* Nearly.$600 pillion of the $1*4 billion
would come'from equipment, chemicals, and•materials -used in business
and thus entering*into^the costs of doing business with resultant &
increases in t h e .costs 'of doing business arid in prices- to the Govern
ment and to the public <>
Most;of the remaining $800 million, tax.would be on items that '
might^ properly oe subject to sales taxation* It is hardly -necessary
to point out that the expenses, to 2 .1/2 million businessmen and ./
increased costs to Government^ as well as the use of prqcious manpower
would not be. justified by yields of this kind when-there-are-other
methods of raising money at hand which- do not call for heavy increases
in costs of administration and compliance*
It is very doubtful whether,-a general sales tax, without the
exemption of;necessities of life would really be helpful in' financing
the war of. restraining inflationary price rises* The imposition of -■
a substantial sales tax would almost purely be the signal for wide—
spread demands for-higher wages and f arm prices which, if allowed, *'
would result in large additional costs to Government and increases in
the cost o f living over and beyond the amount of the tax* These '
dangers are much greater in the sales tax than in excise taxes or
income taxes* Excise taxes touch in only minor respects/.commodities:
that are necessities of life, while income taxes have personal
.exemptions which protect minimum living standands*
■ •
.Personal exemptions could be introduced'into the sales tax, bub
the inconvenience of distributing and using exemption coupons and-' the
resultant reduction in revenue would be serious factors* Sven the most
simple sales.tax would.require the use cf much precious manpower and
machines.by Government and business* It is doubtful whether t h a t ‘man
power and those, machines could be .secured without-interfering with the
war effort*'
H*
Renegotiation of Contracts
. * think the agencies principally-epneerned may wish to present their
views on the renegotiation provisions of the: House Bill* - However, I should
ike to' present the Treasury position on .one- of the renegotiation provi
sions that vitally affects the revenue, system* I refer- to the provision
permitting Aggrieved contractors to secure a; redetermination of excessive
profits by tbp. Tax Court of the United...States. I think-it cannot be too
strongly emphasized^that the choice of the Tax Court as a forum for re
negotiation litigation is an unwise.one* For mary years it has been
recognized that the volume and complexity of Federal tax cases require
a specially qualified and skilled tribunal, such as the Tax Court, which
-
22
shall devote its entire.time and efforts to their consideration and
disposition* This need threatens to become even more pressing after the
war* The inevitable accumulation of cases during the, war and tne
„
development of many excess profits tax cases, particularly those arising
under the general relief provisions of Section 722, make it obvious that
the Tax Court faces a possible postwar crisis, without the addition of
complex .
.renegotiation-of^contracts issues to its calendar*
The renegotiation statute is not a taxing statute, but this proposal
would tend to-confuse renegotiation with taxes* It is also to be recog
nized that renegotiation cases, under the terms of tne House ^amendments,
will demand a large part of the time of any tribunal* Many issues m i l
be presented, often difficult of proof* take 'for example the issue of
•a large contractor*s efficiency or lack of it, which might occupy the
Court.for weeks* It seems inevitable that few cases will be; susceptible
of quick disposition*
-^
It is my .very firm conviction'that--if the-trial of renegotiation
cases is added to tbte task that will confront the"Tax; Court, the prompt
collection of revenue w.ill .be impaired,-the rights of the Government and
of taxpayers m i l be prejudiced, and'the deservedly high reputation of
the Court may greatly suffer* Any. impairment of the reputation and
efficiency of the' C o u r t :would 'constitute:a most';serious blow t o the
proper administration of .the. tax law*
. ...
I*
Conclusion
V.
.
-
This statement has dealt largely ,vdth:the technical aspects of the
Treasury proposals and the House Bill® I believed that I could be of
most assistance to the Committee■byConcentratingon these aspects of the
pending ’bill*
"
X have given special emphasis to simplificiation because bf the
crucial necessity of simplifying our tax laws * -•'Unnecessary complications
can put our entire'wartime income tax.program i n jeopardy*•
I hope that the Committee will not misunderstand my emphasis upon
simplification and technical matters* Total.,war..'makes--broad-demands on
our tax system* Present taxes' do not meet these, demands, .either^in terms
of paying for t.he war as we go, or in terms -of combatting inflation* inG
legacy of taxes at present levels will be not only a huge debt, but may
also be a demoralized price structure.both during and after the war* m e
growth of the public debt, and the imminence of inflati on, force the con
clusion that the Treasury »s & Q * 5 billion .additional revenue goal is macn
nearer the minimum.than the maximum demanded by total war*
-•
oOo ■
\
LIST OF EXHIBITS
EXHIBIT I - - Estimated Increase of Treasury Proposals Over Yield of
Present Law
EXHIBIT 2 -- Estimated Tax Liability by Sources, Present Law and Proposals
EXHIBIT 3 -- Comparison of Combined Normal and Surtax Rates Under Present
Law, Treasury Proposal to Integrate Victory Tax, and House Bill
EXHIBIT 4 ~ - Amounts of Individual Income Tax and Effective Rates Under
Present Law, Treasury Proposal to Integrate Victory Tax, and
House Bill
Tables 1, 2, and 3
EXHIBIT 5 - - Comparison of Surtax Rates Under Present Law. and Proposal
EXHIBIT 6 - - Amounts of- Individual Income Tax and Effective Rates Under
Present Law. and Proposal
Tables 1, 2, and 3
EXHIBIT 7 - - Chart:
Individual Income Tax — - Comparison of Effective Rates
for Married Person Without Dependents Under Present Law and
Proposal
EXHIBIT 8 - - Comparison of Surtax Rates Under Present Law, Treasury
Proposal, and Two Alternative Schedules
EXHIBIT 9 - ~ Amounts of Individual Income Tax Under Present Law, Treasury
Proposal, and Two Alternative Schedules
Tables 1, la, 2, 2a, 3 and 3a
EXHIBIT 10 •— To be Supplied later
EXHIBIT 11 -— Comparison of Present and Proposed Corporation Income and
Excess Profits Tax Rates
EXHIBIT 1 2 - — Corporate Net Income, Income Taxes and Dividends, 1936-1944
EXHIB.IT 13 *— The Effect of Borrowing on Net Income After Taxes of an
Excess-Profits Taxpayer Using the Invested-Capital Credit
EXHIBIT 14 >*
— Comparison of Estate Tax Rates. Under Present Law and Proposal
EXHIBIT 15 ■— Amounts of Estate Tax and Effective Rates Under Present Law
and Proposal
EXHIBIT 16 -— Estate and Gift Tax Collections as a Percent of Net Receipts
EXHIBIT 17 -— Chart: Federal Estate Tax —
for State Death Taxes
Effective Rates Before Credit
EXHIBIT 18 -— Comparison of Excise Tax Liability Under Treasury Proposal
and Present Law
__
Exhibit X
Estimated increase of the revenue program of the Treasury presents^ to the Committee
on Ways and Means of the House of Representatives on October h, "19^3♦ over the
yield of the present law assuming a full year of operations at levels of
income estimated for the calendar year 19 UU
(In billions of dollars)
: Increase
;
over
; present
Individual.income tax;
Increase surtax rates; reduce the personal
exemption of married couples and heads of families to $1*100 and reduce
the dependent credit to $300; repeal the Victory tax and repeal the
earned income credit
f ..............,
f...,. ,...... *
6,53
Corporation income taxes;
Increase surtax rates, the combined normal
and surtax rate reaching a maximum of 50 percent as compared with the
present maximum of ho percent on corporations with income in excess of
$50,000
,<•••• r. ... ....................... .......... ..
rrf
.
lr1^
Estate and g^ft taxes;
Increase estate tax rates, reduce specific
exemption from $60,000 to $40*000, and increase gift tax rates to
three-quarters of the new ana higher estate tax rates ., ?....... t..... *
.^0
m
Excise taxes ^........... f
Total increase
Treasury Department,
Division of Research and Statistics.
1/
*
...... .*......»
2 .51
10 ,5s
November 2 9 , 19^3
The net Victory tax after postwar credit, rather than the gross Victory tax,
is contained in the yield of the present 2,aw,
,
Exhibit 2
Estimated tax liability under the Treasury proposal as presented to the Committee on fays and
of the
House of Representatives on October 4 . 1943. as compared with the tax liability under the present law
for a full year of operation l/
(in millions of dollars)
;
: Increase or
Yield of
;
Yield of
: decrease (-)
tax program
: present law
: over yield of
______________:________________ : present law
General and special accounts
1.
Internal revenue;
(l) Income and excess profits taxes:
Corporation:
Income 2]
Excess profits tax
Declared value excess profits tax
Total corporation (gross)
Less postwar credit
Total corporation (net)
Individual;
Net income tax (gross)
Victory tax (gross)
Less postwar credit
Victory tax (net)
Total individual
Total income and excess profits taxes
(2 ) Miscellaneous internal revenue:
Capital stock, estate, and gift taxes:
Capital stock tax
Estate tax
Gift tax
Total capital stock, estate, and gift taxes
Taxes on commodities and services:
Liquor taxes:
Distilled spirits (domestic and imported) (excise tax)
Fermented malt liquors 2j
Rectification tax 2j
Vines (domestic and imported) (excise tax) 2(
Special taxes in connection with liquor occupations
Container stamps
Floor stocks taxes
All other
Total liquor taxes
Tobacco taxes;
Cigarettes (small) 2[
Tobacco (chewing and smoking)
Cigars (large) 2j
Snuff
Cigarette papery and tubes
All other 2j
Total tobacco taxes
5.872.7
10,888.8
105.6
16,867.1
1 .088.9
I 5 .77S.2
4 .734.6
10,888.8
105.6
15 .729.0
1.088.9
i4 ,64o.l
1,138.1
23.892.1
—
—
—
23 ,b92.1
14.105.5
5 .324-1
- 2.066.0
3 ,256.1
17 .3&3 .5
9.786.6
- 5.324.1
2.066.0
- 7 T238VT
6 ,528.5
39 .670.3
32.003.6
7.666.6
400.0
902.1
62.1
400.0
522.4
4 0.2
96£75
4oi.b
735-2
504.0
487.2
210.5
11.5
36.6
11.0
9 .|
61.1
--
im .2
2j
2j
1,222.4
714.5
11.5
97.7
11.0
H
1.6
2 ,066.7
892.8
Retailers* excise taxes:
Jewelry, etc*
Furs
Toilet preparations
Luggage
, handbags, wallets, etc*
Total retailers' excise taxes
99-5
31.7
21.9
--
758-8
.1
.1
1 .463-2
977.9
485.2
25.0
19.0
25.0
19.0
7-5
4/
51.6
7-5
4/
5i7&
251.1
251.1
54.3
•9
3.5
54-3
•9
3-5
25.0
40.0
48.5
3.6
25.0
40.0
5-0
5.0
3-5
1.1
2.8
ii »9
10.5
-2.0
.8
190.0
177-0
45*0
7-0
1.3
—
—
—
—
|
-—
-—
48.5
3-6
—
—
--
3.5
--
1.1
2.8
11.9
10.5
5.0
2.0
1
—
—
- 5.0
_
—
—
190.0
177.0
831.5
469-5
§S£o
256.5
89.2
38.2
167.3
54.8
51.4
$8 .4
331-9
93-0
Miscellaneous taxes:
Telephone, telegraph, radio and cable facilities, leased wires, etc.
Telephone bill
Transportation of oil by pipe line
Transportation of persons
Transportation of property
General admissions
Cabarets, etc.
Club dues and initiation fees
Leases of safe deposit boxes
Use of motor vehicles and boats
Coconut and other vegetable oils processed 2j
Oleomargarine, etc*, including special taxes and adulterated butter
Sugar tax
Coin-operated amusement and gaming devices
Bowling alleys and billiard and pool tables
All other, including repealed taxes 2 /
Total miscellaneous taxes
379-7
371.3
40.0
67.7
6.2
—
—
1-3
Manufacturers' excise taxes:
Gasoline
Lubricating oils
Passenger automobiles and motorcycles
Automobile trucks, busses and trailers
Parts and accessories for automobiles
Tires and inner tubes
Electrical energy
Electric, gas, and oil appliances
Electric light bulbs
Radio receiving sets, phonographs, phonograph records, and
musical instruments
Refrigerators, refrigerating apparatus and air-conditioners
Business and store machines
Photographic apparatus
Matches
Luggage 5/
Sporting,goods
Firearms, shells, pistols and revolvers
Candy and chewing gum
Soft drinks
Total manufacturers' excise taxes
1.138.1
1.6
1,309.9
1,264.1
85.O
13.2
Stamp taxes:
Issues of securities, bond transfers, and deeds of conveyance
Stock transfers
Playing cards 2]
Silver bullion sales or transfers
Total stamp taxes
1,138.1
-s.
—
86.4
35*0
58.4
494-3
15213
152.7
146.7
14.5
354-5
490-4
110.7
11.3
6.5
115.5
2.0
—
121.2
97.8
14.5
141.8
170.3 6/
163-5
19.4
6.2
6.5
115.5
2.0
.....
31.5
48.9
—
212.7
- 170.3
327.0
91.3
5.1
—
—
—
3-1
3-1
61.0
12.2
28.8
1.2
61.0
12.2
1.8
1.2
27.0
—
573-2
1 .511-1
~ ~ W .6
Total taxes on commodities and services
6,420.4
3 .909-3
2,511.1
Total miscellaneous internal revenue
7 .784.6
4 .871.9
2,912.7
2 ,799.0
207.0
3 ,006.0
2 ,799.0
207.0
3 ,006.0
*
3,268.7
262.7
3.268.7
50,723.6
40.144.2
10 ,579-3
12.1
12.1
--
(3 ) Employment taxes:
Employment by other than carriers:
Federal Insurance Contributions Act
Federal Unemployment Tax Act
Total
Taxes on carriers and their employees (Chap.
Internal Revenue Code)
Total employment taxes
9,
—
—
Subchap, B of the
Total internal revenue
2-
Railroad unemployment insurance contributions
3*
Customs
400.0
400.0
4-
Miscellaneous receipts
581.0
581.0
51.716.7
41.137.3
Total yield, general and special accounts
—
10 .579-3
Treasury Department, Division of Research and Statistics.
Note:
l/
2/
3/
/jj
5/
6/
2/
Figures are rounded and will not necessarily add to totals.
Estimates of the yield of the tax program and of present law are at levels of income estimated for the calendar year 1944 *
Collections for credit to trust funds are not included.
These estimates are after allowances for drawbacks of $ 27*6 millions under the proposal and of $ 14*8 millions under present law.
Less than $.03 million.
The tax on luggage has been changed from a manufacturers' excise to a retailers' excise tax.
Including the effects of H.R. 3338 , Public Law l80 , approved November 4 » 1943*
Includes collections from taxes on narcotics; taxes wider the National Firearms Act; and the tax on hydraulic mining, all of which
are effective currently.
In addition includes collections from repealed taxes not reinstated by the Revenue Act of 1941 and collec
tions from the following excise taxes repealed by the Revenue Act of 1942: Rubber articles, electric signs, optical equipment, and
washing machines.
Exhibit 3
Comparison of combined normal and surtax rates
under present law, under the proposal to
integrate the Victory tax, and under H.R.3587 l/
Surtax
net income
(in thousands)
2
0
4
2 4
6
8
6
8 - 10
]
Present
law 2/
: Proposal to
: integrate
: Victory
:
tax 2/
H. R. 3687
19
22
26
30
34
22
25
29
33
37
23
26
30
33
37
38
42
46
49
^52
41
45
49
52
55
41
46
50
53
56
22
20
22
26
26 - 32
32 - 38
44
38
55
58
61
64
67
58
61
64
67
71
59
62
65
68
72
44
50
50 - 60
70
60
70 - 80
80 - 90
69
72
75
78
81
74
77
80
84
87
75
78
81
84
87
83
85
87
88
90
92
93
94
90
92
93
94
mm
-
-
«• 12 |
14
- 16
- 18
- 20
10
12
14
16
18
-
a.
-
-
90'
100
150
Over
-
-
100
150
200
200
Treasury Department, Division of Tax Research
November 29, 194-3
l/ The present exemptions of $500 for a single person, $1,200
for a married couple, and $350 for each dependent are retained
in H. R. 3687, Under the proposed integration plan, they are
$500, $1,100, and $300, respectively. The earned income credit
is eliminated under both H. R. 3687 and the proposed integration
plan.
2/ Includes 6 percent normal tax. However, under present law the
earned income credit reduces the normal tax rate by 0.6 percent
with respect to earned net income up to $14,000.
3/ Includes 10 percent normal tax.
Exhibi t' H - Table- 1 '
..
Amounts of individual income tax and effective rates under present law, under the proposal to
integrate the Victory tax and under H* R. 3687
Single person - no dependents
Exemptions:; Present law - $500
Proposal
- $500
Amounts of tax
Effective ..rates
~
Net income
^Proposal
Increase
Increase
Present
Present
Proposal r
before
Proposal
to
Proposal
law.,
law,
to
H.E.
personal
HJU.
including integrate
to
including Integra tel H.E.
i' H.E.
--to
exemption net Victory Victory
integrate . 3687 net Victory Victory : 3687 integrate : 3687
3687
tax
tax 1f
Vic tory
tax 1/
Victory
taxr
;/
l. "
<
tax
•1 tax
22 $
6
17 $
$
600 &
23 $
..8$
1 .0$
5 $
5*W
3•
62
800
%
.6-6
8.6
69
7.S
7
8.3
.9
*-5
8
1,000
107
110
10.7
11.0
115
11.5
.8
3
-.3
I5U
161
1
8
12.8
1,200
12.8
13 .5+
...1
I53
*7
1,500
220
230
10
220
0
0
15+.7
1^.7
15.3
.7
1,700
265
261*
276
11
15.6
16.2
.6
15.5
- .1
322
-2
12
16.2
1,900
3O 8
310
lb . 3
.6
.1
16.9
0
3^5
12
2,000
16
.-7
16.5
.6
330
333
-3
1 7.3
kOl
Uik
2,300
396
-.-2
X % k
18.0
-6
13
17.2
1*6©
2,500
me
-6
17 .s
1*1*0
t k
17.6
18. 1*
.6
- .2
16
3,000
19
.
.
1
565
18.8
590
-9
19-7
-3
•5
^,000
829
815
21
850
20 .1*
21.3
20.-7
-.1*
.5
25
5,000
22.1
1 ,105 .
1,085
1,130
-20
21.7
22.6
-.5+
-3
10,000
1*8
12
27.3+
27.8
28.0
.1
2,-783
2,735
2,795
-.5
-3-1*
1*2.6
10 ,-6Hi*
25,000
10 ,1*1*5
10,630
1*2.5
5+1.8
-.8
-199
-.1
50,000
28.,05g
- 5O 8
56.1
56 .O
55 .-1
- 1.0
~.l
-73
27,550
27,985
21*5
100,000
69,665
69.7
69,910
69,270
.2
-.u
.
69.9
69.3
-395
208,750
83.2
250,000
1 ,1*16
83.5
83.8
209,390
776
,6
207,97^
•3
500,000
1*1+1,863
1*1*3,750
1*1*1*,3 90
88 .U
88.1*
88.9
1,887
2,527
A
.5
*
1 ,000,000
899,500 2/ 913,750
900,000 2/ 1^,250
500
90..0 2/
90.0 2/ 1 .1*
91.5+
Treasury Department, Division of Tax Research
1/ Maximum earned income assumed. For Victory tax purposes,.- gross income is assumed to he ten-ninths of net
income...
2/ Taking into account maximum effective rate limitation of 90 percent.
*
Less than .0 5 percent.
Exhibit 4 - Table 2
Amounts of individual income tax and effective rates under present law, under the proposal to
integrate the Victory tax and under H. R. 3687
Married person - no dependents
Exemptions:
Net income
before
exemption
-
-
$
600
Amounts of tax
■rre sent
Proposal
19.Wf
H.R.
^ to
including
integrate
3687
net Victory Victory
tax 1 f
tax fp_J
._■— .—
jj,
8
15
800
1,000
1,200
1,500
1*700
1,900
2,000
2,300
2*500
3,000
1+.000
5,000
10,000
25,000
50,000
100,000
250,000
506,000
1 ,000,000
1
21
79
123
—
-
—
—
*
*
22
88
132
166
176
188
253
297
198
26U
308
3
9
2/
2/
15 w
69
115
l 6l
181+
253
299
'1+05
1+18
1+11+
61+7
668
665
89U
928
915
2 Ml
2,536
2.513
10,035
10,079
10,196
27,106
27 *1+60
27,075
68,531+
68,730
69,280
206,858
208,186 208*732
Hi+3,186 Ui+3,732
i+i+o,7^7
899,000 2 / 913,186 900,000 3 /
Present law and H.R. 3687 - $1,200
Untegration proposal - ipl,100
Effective rates
Present:
:
Proposal:
n
increase
-nropo sal »
law,
:
to
to
: H.R.
^including iintegrate H.R.
integrate 3687 : net Victory • Victory: 3^87
vlatory *_ _
I
.tax X f
t___tax
»
#tax
j;
•
m
■
§ - 1
.2#
$ - 1
- 8
m
1.0
5
.1+# 2/
—
-66
- 15
1-5
.9 2/
1
- 6
1.8
1 .8 #
1 .3 w
-10
9
1+.6
5.3
5*9
8
7.2
9
7*8
6.8
10
8.5
8.7
9-3
10
- 1+
9*1+
9.9
9*2
11
11
If
13
18
21
13.5
13.9
16.2
16.6
3^
17*9
2I+.7
1+0.1
5^*2
18.3
25*1
U0 .3
21
1+6
1+1+
31
ll+6
0
9
69
161
385
696
1,328
l, 87l>
2.H39
2,985
ii+,is6
1,000
11.0
11.9
68.6
82.7
88.1
89.9 1 /
11.5
12.3
5%*s
68.7
83.3
88.6
91.3
11.0
12.0
13.8
16.7
18.6
25.1+
1+0.8
5U.9
69.3
8 3 .5
88.7
90.0 2 /
:
Increase
:r roT)o sal :
:
to : : H.H.
:integrate:
3687
: Victory :
* ’tax *;:
-.2j>
-.2#
-1.0
— .6
- .6
-1*5
.1
.6
.5
•5
*5
*5
.1+
.1+
.5
.1+
.5
.2
.1
.1
.5
.5
1 .1+
Treasury Department, Division of Tax Research
November 29, 19I+3
1/ Maximum earned income assumed* Eor Victory tax purposes, gross income assumed to be ten-ninths of net
income.
2 / Mini mujn t a x ,
3 / Taking into account the maximum effective rate limitation ©f 90 percent.
* Less than .05 percent.
- .5
-♦7
-.5
- .3
- .2
0
.1
.3
.5
.7
.7
.6
.8
*7
.7
4
Exhibit 1+ -
Table 3
Amounts of individual income tax and effective rates under present law, under the proposal to
integrate the Victory tax, and under EL R. 3 ^ 7
H.R.
3687 - $ 1 ,200 , $350
posal
~ $ 1 ,100 , $300
exemptions;
P.ff0* ti3tp. rat <=ts___
___
* ____________
Increase
••
*
Amount of tax
Net income: Present
before
i
law
personal : including
exemption : net Victory
tax 1/
Too"
$
800
1,000
1 ,2 0 0
1.500
1 ,70 0
1,900
2,000
2,300
2.500
3.0 0 0
1+,000
5.000
10,000
25.000
50.000
100,000
250r000
500,000
1 000,000
,
1/
2/
3/
*
$
Proposal
to
integrate
Victory
tax
c.
Increase
Proposal
to
H.R.
integrate
Victory
3687
tax
H.R.
3687
1
$
7
3 £/
9
18 £/
l b
U
20
29
35
1+2
58
116
159
267
1+85
$
66
132
176
286
515
730
2,208
9r57>+
26,392
67,803
206 ,0^2
*69*931
U1+
,
8 9 8 ,8 0 0 3 /
2l+ 2/
30 2/
765
2,291
9,713
26,662
68,190
207,622
1+1+2,622
912,622
Maximum earned income assumed.
Minimum tax
92 *
138
253
1+86
7 I+6
2,277
9 ,76 2
26,935
68,650
208 ,071+
1+1+3 ,07 !+
900,000 2 /
-
1.
$ -
U
11
ir
11
12
* 35
2
8
16
1?
m
1
16
69
188
5^3
8I+7
2,032
3 ,1^3
1,200
.2$
.9
.9
1 . 1+
1.7
1*9
2 .1
2 .2
2 .9
5*1
6 .1+
8.9
1 2 .1
lU .6
2 2 .1
3 3 .3
52 .8
6 7.8
82.1+
88.0
89.9 3 /
.8
1.2
1 .1+
2*3?
1 .6
3-3
5*7
7*0
1+.0
9*5
1 2 .9
15*3
22.9
38 .9
53*3
68.2
83.0
88 .5
91*3
Research,
For Victory tax purposes, gross income is assumed to
stive rate limitation of
Less than .05 percent.
'2R21+
- 21
- Ik
19
30
35
23
139
270
337
1,580
2,691
13,822
1
7
- 7
* lb
- 20
- 29
Proposal t
to
:
integrate:H.R.
Victory : 3687
tax
:
; Proposal :
Present
:
to
t
law
including : integrate: H.R*
net Victory:
Victory : 3687
:
tax
:
tax l/
30 percent.
1.7
2/
g
g
£/
2/
5*5
8 .1+
12 .2
1 I+.9
22.8
1 . 1+
1*7
1*9
2.1
.1
.1+
*7
*7
.6
.8
.7
.8
.6
39*0
53*9
.5
6 8 .7
8 3 .2
88.6
90.0 3 /
.1+
.6
*5
l»l+
- *9
*1 .1
- *9
* *7
-
.6
-
.6
-1*3'
-l.O
.8
-
- -5
*
.3
.7
.8
1.1
.8
November 29, 19*+3
.8
.6
He
EXHIBIT 5
Comparison of individual surtax rate schedule under
present law and proposal 1/
Surtax
net income
(In thousands)
1 0
.5
1
1.5
2
-T
r*
-r
-•
Bracket rate
: Present law ;
: Total surtax cumulative
Proposal
; Present law ;
$
$ .5
1
1.5
2
4
13 %
13
13
13
16
21 %
24
27
30
35
130
195
260
580
$ 105
225
360
510
1,210
4
6
8
10
12
V
T
*T
—
6
8
10
12
14
20
24
28
32
36
40
45
49
53
57
980
1,460
2,020
2,660
3,380
2,010
2,910
3,890
4,950
6,090
14
16
18
20
22
—
16
18
20
22
26
40
43
61
46
65
49
52
68
71
741
4,180
5,040
5,960
6,940
9,020
7,310
8,610
9,970
11,390
14,350
26
32
38
44
50
32
38
44
*fi ’ 5Q
60
55
58
61
63
66
77
79
81
83
85
12,320
15,800
19,460
23,240
29;840
18,970
23,710
28,570
33,550
42,050
60
•*
69
86
87
88
200
over
72
75
77
79
81
82
90
90
90
36,740
43,940
51,440
59,140
98,640
139,140
50,650
59,350
68,150
77,050
122,050
167,050
-
6
6
70
80
90
100
150
200 and
—
*—
-r
70
**
80
-»■ 90
— 100
150
Normal tax
89
Treasury Department, Division of Tax Research
i/
65
Proposal
November 29, 1943
Under the proposal, the Victory tax and earned income credit are
eliminated. The proposed exemptions are $500 for' a single person,
$>1100 for a married couple, and $300 for each dependent; under
present law, the exemptions are $500, $1200, and $350, respectively.
v
Exhibit 6 - Table 1
Amounts of individual income tax and effective rates
under present law and proposal
Single person - 1T0 dependents
Exemptions:
Present law - $500
Proposal
- $500
Net income
________ Amounts of tax_____ r.
before
: present law, j
;
personal
: including net{Proposal;Increase
:
exemption ;Vjctory tax 1 /;______ 2/;
600
soo
900
1,000
1,100
1,200
$
17
62
85
107
130
153
1,500
1,600
2k}
2,000
333
2,500
220
$&
2?. $
81
108
165
195
10
19
23
28
35
42
285
318
75
135
65
117
446
630
6,000
829
1,105
1 ,401
835
1,2%
1,680
2,l4o
184
26l
4i6
575
739
8,000
10,000
2,052
2,783
3,135
4,215
5,670
7,265
1,083
1,432
1,868
2,297
10,800
14,710
36,105
59 »035
3.174
3,000
*+,000
5,000
12,500
15,000
20,000
25,000
50,000
75,000
100,000
500,000
x.000,000
5,000,000
571+
3,802
4,968
7 ,62b
10,644
28.058
48,001
69,665
t o , 863
82,575
466,570
899,500 jl/
946,570
4 ,t o . 500 1 / 4,786,570
4,066
8,047
11,034
12,910
24,707
47,070
287,070
treasury Department, Division of Tax Research
:__________ Effective rates_______
: Present law, :
♦
; including net{Proposal:Increase
:Victory tax j\J~\______ 2/;_________
2.8$
7.8
9.4
10.7
11.8
12.8
14.7
15.2
16.7
17.8
19,1
20.7
22,1
23,4
25.7
-27.8
30.4
33.1
38.1
M $
10,1
12.0
13.5
15.0
16.3
19.0
19.9
22.5
25,2
27*8
31.1
42.6
33.6
35-7
39.2
42.2
45.4
48.4
54.0
58,8
56,1
72,2
64.0
69*7
88.4
78.7
82.6
90,0 1 /
90.0 y
93.3
94.7
95-7
1.7*
2.4
2,6
2.8
3.2
3.5
%3
4.7
5.9
7,4
8.7
10,4
11.5
12.3
13,5
l4.3
i 4,9
15.3
15,9
16.3
16.1
14.7
12.9
4.9
4.7
5-7
November
29 ,
i/ Maximum earned income credit assumed. Victory tax net income assumed to be
ten-ninths of net income.
zJ. Victory tax and earned income credit eliminated,
£i Taking into account maximum effective rate limitation of 90 percent.
19^3
Exhibit 6 - Table 2
Amounts of individual income tax and effective rates under
present law and proposal
Married person - No dependents
Exemptions:
$
’" T' J-r-Amounts of tax
:
ctive rates
*
%f
: Present law
;
:Present law,
• .T.
: including net : Proposal: :Increase :i.neluding net :Proposal :Increase
•
: Victory tax l/: ~.... 2/:t
7'ictory tax 1/:
2/
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2,75©
3,000
4-,000
5,000
6,000
8,000
10,000
15 ,000.;
20,000
25,000
50,000
75,000
100,000
500,000
1,000,000
5,000,000
%
O
Net income
before
personal
exemptions
Present law - $1^200
Proposal
1,100
1
15
29
79
134188
242
297
351
405
647
894
1,173
1,780
2,467
4,533
7,100
10,035
27,075
46,955
68,584
$
$
~X5
22
29
41"
108
180
255
335
417
504
594
999
1,409
1,864
2,829
3,885
46
67
93
120
153
189
352
515
6,867
10,356
14,230
35.;5711
58,477
82,005
440,747
465.994
899,000 2/ 945.994
4,499,000 2/4,785,994
13.5
691
19.6
22.3
24.7
2,334
30,2
35.5
8,496
11,522
13,421
25,247
46,994-,
286,994
3.2/
7.2
10.3
12.3
14.9
16.7
18.3
19 .S
25.0
16.2
17.9
1,049
1,418
3,256
4,195
Treasury Department, Division of Tax Research
1 .5 %
2,3
5.3
7.7
9.4
10.8
11.9
12,8
40.1
54.2
62.6
68.6
' SS.l
89.9
90.0
4.8
5.6
6.3
38.9
8.8
10.3
11.5
13.1
1
/l 0
J-4
45.8
15.6
51.3
16.3
16.8
17.0
15.4
13.4
5 .0
4.7
5.7
28.2
31.1
35.4
56.9
71.1
78.0
.82.0
93.2
94.6
2/
- 1 .5/
1.0
1.9
2.6
3.4
4;i
9 5.7
November 29* 194-3
i/ Mo.xi.mum earned income credit assumed. Victory tax net income assumed to
l ye ten-ninths of net incomd,
J Vicoory Tax and earned income credit eliminated.
2/ Talcing into account maximum effective rate limitation of 90 percent.
Exhibit 6 - table 3
Amounts of individual income tax and effective rates
under present law and proposal
Married person - two dependents
Exemptions:
Present law - |1200,
Proposal
- $1100,
1350
$300
Net income
before
personal
exemption
:
Amounts of tax
:
Effective rates
• Present law, ;
.
*
': Present law, •
: including net:Proposal* Increase; including net :Proposal: Increase
:Victory tax l/;
2/:
•Victory tax 1/
2/:
f
27
39
$
58
81
116
165
159
225
267
384
485
753
730
1,163
979
1,588
1,553
2,523
2,208
3,555
3,144
4,962
4,207
6,489
6,693
9,912
9,574
13,750
26,392
35,037
46,209
57,919
67,803
81,435
439,931
46®,418
898,800 3/
945,418
4,498,800 V 4, 785,418
1,800
2,000
2,300
2,500
3,000
4,000
5,000
6,000
8,000
10,000
12,500
15,000
20,000
25,000
50,000
75,000
100,000
500,000
1,000,000
5,000,000
1
#
- 12
23
49
66
117
268
433
609
970
1,347.
1,818
2,282
3,219
4,176
8,645
11,710
13,632
25,487
46,618
286,618
Treasury Department, Division of Tax Research
2.2$
2.9
5.0
6.4 .
8.9 |
12.1
14.6
16.3
19.4
22,1
25.2
28.0
33.5
38.3
52. 8
61.6
67.8
88,0
89.9 3/
90.0 V
1,5%
4.1
7.2
9.0
12.8
18.8
23.3
26.5
31.5
35.6
39.7
43.3
49.6
55•0
70.1
77,2
81.4
93.1
94.5
95.7
November 29, 1943
Maximum earned income credit assumed. Victory tax net income assumed to
be ten-ninths of net income.
2/ Victory tax and earned income credit eliminated.
V Taking into account maximum effective rate limitation of 90 percent.
]/
- .7%
1.2
2.1
2.6
3.9
6.7
8.7
10.2
12.1
13.5
14.5
15.2
16.1
16.7
17.3
15.6
13.6
5.1
4.7
5.7
Exhibit 7
IN D IV ID U A L
IN CO M E TAX
Effective Rates for M arried Person without Dependents
* I n c lu d e s N e t V ic to r y Tax; n e t i n c o m e a s s u m e d t o b e 9 0 % o f g r o s s in c o m e .
*Exemptions $500 - $1,100~ $300; and n e t Victory Tax ond earned income cre d it e/iminoted
Office of the Secretary o f the Treasury
Division o f Tax Research
b -*s o -i
------
-----
--
-------------
----- --- ................... -
Exhibit
8
Comparison of surtax rates under present law,
the Treasury Proposal of October h, 19^+3»
and two alternative schedules l/
Surtax
:
net income
:
(In thousands) :
$ 0
-* *
•5 1,0 1,5 2
-
•5
1.0
1*5
2
k
k
6
8
10
12
6o
70
80
90
100
150
200
61
65
68
55
^7
50
n
55
58
kk
61
63
50
-
—
-
70
80
90
100
150
200
and over
Normal tax
2k
66
7h
77
79
81
83
58
60
62
6h
66
68
70
72
50
53
55
58
61
6h
66
69
85
69
86
72
75
77
79
87
90
76
78
80
82
8h
81
82
90
90
87
88
6
6
6
6
88
88
Treasury Department, Division of Tax Research
1/
28
ho
^3
h6
32
38
60
26
28
32
36
h9
52
-
2k$
ho
ho
hh
hh
20
22
26
-
25
28
ho
h3
h6
h9
52
20
-
-
22fo
2k
ho
h5
h9
53
57
16
18
-
21$
Treasury
alternative
proposal~B
31
36
—
-
: Treasury
: alternative
; proposal-A
31
36
Ik
16
Treasury
Proposal
\ October h,
;
19^3
27
30
35
—
—
26
32
38
hh
50
13
13
13
-
18
20
22
13 f
6
8
10
12
—
lh
16
]
Present
law
86
72
75
78
81
8h
87
November 29» 19^3
Under each of the proposals, the Victory tax and earned income
credit are eliminated and the exemptions are $ 500 , $ 1 ,100 , and
$300 .
Exhibit -9 - .Table. 1
-
.........“
ts of indi.idual
T
C l
^
S tertetive* schedules
the Treasury proposal of Oet-^er h .
Single person - no dependents
Bxemptionsi Present law - $500 Proposals - $500
Increase
Net income
"before
personal
exemption-
$
500
600
Amounts of~tax
Present law : * Treasury
"•Treasary
including m e t ::proposal
^Proposal
Victory tax 1./rOct^U.. 10M •—
-- -
$
goo
900
1.000
1*100
1,200
1.500
1.
bOO
2,
-000
220
2'43
2.500
333
m
3 .0 0 0
57^
U,ooo
5.000
6.000
8.000
10,000
12.500
15.000
2 0 .0 0 0
25.000
50.000
75.000
106,000
>00,000
1 , 00,000
5 ,000 ,00c
27
17
62
85
107
130
153
829
1*105
81
108
135
165
195
285
US
450
630
235
1,2^5
1,680
i*Uoi
2,lU0
2.052
2r?S3
^,135
3,802
U, 96g
7,626
10,6UU
28.052
u s,001
69,665
UUi ,863
899?500 2/
U,U 99,500 2 /
U*215
5^ 70
7,265
_m,soo
710
36,105
59,035
-82,575
A
U66,570
9^6,57®
U, 786,570
$
:Treasury .-Treasury : Treasury*,
:Proposal :proposal
I proposal:
A
;
:
B
iOct>4,19^31
8U
10
19
112
23
lUO
28
171
35
U2
65
75
$
28
202
310
3UU
US0
665
875
1,295
295
329
U65
650
860
1,280
1*735
1,720
2,180
3.1*+5
U,170
5,^30
6,995
10,180
13,620
32,280
52,650
7^ 2 30
UUU,-205
909,205
U, 629,205
,
2,-195
3,115
U,095
5,3^5
6,670
9^25
12,Ul0
29,3^5
U8,650
69,770
UU3.235
913,235
U.673*235
I
90
101
18U
132
20U
261
286
U16
575
U£ll
117
739
l#083
l,U 32
I,
86s
2,297
3? 17^
U,o 66
8,oUj
Treasury
propo sal
B
615
779
1,093
1,387
1,728
2,027
2,55^
2,976
Ur222
II,
03**
12*930'
U,6U9
U,565
2U,707
2,3**2
U7,070
287,070
129,705
9,705
lU?
219
301
U 66
630
79U
1,063
1,312
1*5^3
1,702
1,799
1,766
1,287
6U9
105
1,372
13,735
171*135.
November 29, 19U3
.
ten-ninths 01
asury Depart,. T.t, Division of Tax Research
purposes, gross income is assumed to be
.'laximuu earned net income assumed^ Por Victory tax
into account Baxlmum effective jrate limitati on of 90 percent.
Exhibit 9 - Table la
Effective rates of individual income tax under present law,
the Treasury proposal of October 4, 19^3» and. two alternative schedules
Single person - no dependents
________________________ ________ Exemp tions: Present law - $500 Proposals - $500
Net income:_____ _____________Effective rates _____ ___________ ;
Increase
: Present law : Treasury
: Treasury
Treasury 1 Treasury ; Treasury
before
personal : in clu din g net : proposal : proposal
proposal : proposal t proposal
exemption :Victo!ry tax l / : 0 c t . 4 f 19^3 »
B
A
A
: 0c t . 4 , 1943:
_
—
_
—
$
500
6oo
2.8#
*t.5#
5.0#
1.8$
1.7 #
^.7#
7 .S
goo
10 .1
10 .§
2.8
2.4
11.3
9*4
12.0
12.4
900
2.6
3.0
13.3
1,000
10 .7
2
.g
14.0
15.0
13.5
3.3
1 1 .g
1*100
15.0
I6 .5
15 .5
3.2
3.7
1 2 .g
1,200
16.3
1 6 .s
17,6
4.1
3.5
1,500
14.7
19.0
20.7
5.0
19.7
4.3
2 1.5
15 .2
20.6
1,600
5.4
19.9
4.7
22.5
16 .7
2*000
24.0
6.6
23.3
5.9
25.2
2,500
26.6
26.0
7*4
8.2
17.8
2
7
.g
28.7
29.2
3,000
19*1
8.7
9*5
4,000
32.0
32.4
10.4
31.1
1 1 .3
20.7
2 2 .1
5,000
34.4
33-6
1 1 .5
12.3
3 U -7
23.
4
36.3
36.6
13.0
6,000
35*7
12.-3
8,000
39.2
38*9
25*7
13 .7
39.3
13.5
27 *g
42.2
10,000
14.3
4l . o
h i .7
13*9
44.2
42.8
45.4
12,500
30. 4
14.9
l$ .g
15,000
46.6
48.4
44.5
15-3
33-1
13*5
12.8
20,000
54.0
38.1
47.1
50.9
15 .9
25,000
42.6
5H .5
49.6
16.3
5 8 .g
11.9
72.2
50,000
5 6 .1
64.6
58.7
1 6 .1
8.4
75,000
70.2
14 .7
64.0
64.9
6.2
78.7
100,000
82.6
69.8
12,-9
74.2
4.6
69.7
g g.6
500,000
gg.il
88,8
4*9
93*3
*5
9U .7
1,000,000
90.0 2/
1.0
90.9
91.3
92.6
5,000,000
90.0 2/
2.6
95.7
93. 5 _____ 5 -2_____
Treasury Department, Division of Tax Research
November
l/
2/
: Treasury
: propo sal
:
B
2.2#
3*5
3*9
4.3
H.7
5.1
6.0
6.3
7A
8,8
10.0
1 1 .7
12.6
13-2
13.3
1 3 .1
12.3
1 1 .3
9.0
7*1
2.6
.9
.1
•3
1.4
___ 3-5_________
29, 19^3
Maximum earned net income assumed. For Victory tax purposes, gross income is assumed to be
ten-ninths of net income.
Talcing into account maximum effective rate limitation of 90 percent.
Exhibit 9 - Table 2
Amounts of individual income tax under present law, the Treasury proposal of Get. 4, 19^3
and two alternative schedules
Married person - no dependents
Exemptions* Present law - $1,200
Proposals
- $1,100
Net income
Present law
before
including
personal
*
net
Victory
exemption
tax l/
$
1,100
1,200
1,500
1,600
$
h
:
t
l
IS
21
79
101
Amounts of tax
Treasury •propo sal,r Treasury
Oct. 4 , t proposal A
19^3
t
-
$
27
233
264
1,900
2,000
2,500
3,000
166
1SS
225
255
4,000
647
5,000
6,000
8 ,000
10,000
12,500
15,000
20,000
25,000
50,000
894
75,000
100,000
500,000
1 ,000,000
^'5,000,000
1,173
1,780
2,*67
3 .1*37
*+r533
7,100
10,035
27,075
U6,955
68,584
440,747
28
202
m
297
$
112
1,800
405
-
.
10S
135
195
U17
594
999
1,409
1,8 64
2,829
3,885
5,316
6,867
10,356
14,230
35,-571
58,1*77
82,005
465,994
899,000 2/
945,994
4 ,499,000 2/ 4,785,99^
r Treasury
£ proposal B
i 4q
- $18
30
120
150
7
33
39
- $18
Q
J?
4l
49
214
246
51
59
58
67
70
80
278
67
120
189
352
515
691
1,01*9
76
90
149
223
446
613
1,028
1,448
1,#0U
2,851
3,858
5,200
6,632
9 ,78U
13,200
31,812
52,146
73,702
443,647
908,647
4 ,628,647
:Treasury
; proposal B
- $18
6
29
3^
-
$
Increase
Treasury
- proposal, r Treasury
Oct. U,
propo sal A
I9U3
628
1.0U3
1,1*63
1,919
2,839
3,795
5 ,oi*5
6,352
9,089
12,044
1,418
1*879
2.331*
3^56
48,164
lj.,195
8,496
11,522
69,248
442,671
912,671
i*.672,671
13,421
25,21*7
46,994
286,994
28,913
134
208
381
551*
731
1*071
1,391
396
569
746
1,763
1,059
1,328
l,lo8
2,099
2 ,684-
1,819
1,989
3.165
2,009
1,838
1,209
>+,737
5,191
5,118
2,900
9 ,61*7
129,647
664
1,924
13,671
173,671
Treasury Department, Division of Tax Research
November 29,. 19^3
if
Maximum^ earned income assumed.. Victory tax net income assumed to be ten-ninths of net income.
2./ Taking into account maximum effective rate limitation of 90 nercent.
Exhibit 9 - Table 2a
Effective rates of individual income tax under present law,
the Treasury proposal of Oct. 4, 1943, and two alternative schedules
Married person - no dependents
Exemptions;-
Net income
before
personal
exemption
$
1,100
1,200
1,500
1,600
Effective rates
Present law
including
net Victory
tax l/
1 *6#
1.8
5-5
6,3
1,800
8.0
1,900
2,000
8.7
9.4
2-35i
7.2
8.4
10.8
11.8
12.8
11.9
3,000
13,5
4,000
16.2
19.8
25*0
5,000
6,000
8,000
10,000
12,500
15,000
17-9
28.2
19.6
22.3
24.7
31.1
35 .^
25,000
50,000
75,ooo
100,000
5oorooo
1,000,000
5,000,000
27,5
30.2
35.5
4o.i
54.2
62.6
68.6
88.1
89-9 2/
90.0 2/
Increase
; Treasury r
: proposal,; Treasury ; Treasury
; CTct. 4, ; proposal A :proposal B
: 19U 3
:
_
—
2 , 5 0 0
20,000
Present law - $1,200
proposals
- $1,100
16.7
38,9
42.5
45.8
51.8
56*9
71.1
78.0
62*0
93-2
94.6
95,7
2.3$
7.5
8.8
1 1.2
12.3
13.2
1 7.2
20.4
25.7
29.0
Z
-
%
8v0
9,4
11.9
12.9
13-9
17.8
20.9
2fo.l
29-3
31*7
32.0
35.6
38.6
38.0
35-5
90.9 *
4o.4
42.3
45-4
48.2
57*8
64.2
69.5
88.5
91-3
92.6
93,5
41.6
44.2
48.9
52.8
63.6
69.5
73.7
88.7
Treasury Department, Division of Tax Research
Treasury
proposal,
Treasury
; Treasury
Oct. 4, proposal A rproposal B
19U 3 ;
-
1 .6#
0.5
l«9
2.1
2.8
-
1 .6#
0.6
2.2
3.4
3,1
2.4
3.2
3,5
3,8
4.8
5-4
6.3
8.8
6.9
10.3
11.5
13.1
14.2
15.0
15.6
16.3
16.8
17.0
15 .U
13 .^
5,0
'4.7
5-7
9-5
11.1
12.2
13.4
13,9
l4.l
l4.o
13-4
12 .7
9-5
6.9
5-1
.6
1.0
2.6
-
1 .6 #
0*8
2.7
3,1
3-9
4.2
4.5
6.0
7-4
9,9
11.4
12.4
13.2
13*3
12*9
12.1
9,9
8.0
3-7
1.6
-7
.4
1.4
3*5
November 29, 1943
l/ Maximum earned income assumed. Victory tax net income assumed to be ten-ninths of net income.
2/ Taking into account maximum effective rate limitation of 90 percent.
Exhibit 9 - Table 3
Amounts of individual income tax under present law, the Treasury proposal of Oct. 1,
and two alternative schedules
19U3 ,
Married person - two dependents
Exemptions:
iNlet income
before
persona.!
exemption
$
1,700
t
:
1
:
*
Present law
including
net Victory
tax l7
35
1,800
39
1,900
2,000
2,500
3,000
12
l,ooo
5,000
6,000
8,000
10,000
12,500
15,000
20,000
25,000
50,000
75,000
100,000
500,000
1,000,000
5,000,000
58
159
267
1*85
730
979
1,553
2,208
3.1W*
>-,207
6,693
9,57>+
26,392
Present law - $1 ,200, $350
Proposals
- ’♦'1 ,100 , $300
Amount of tax
:Treasury
Treasury
tproposal
iOct. 1 ,
proposal A
:■ l9>+3
$
28
$
27
56
5^
81
8l
225
233
38l
397
.
:Treasury
‘
.proposal B
$
30
60
753
1,163
1,523
776
1,196
1,628
90
216
ll 2
791
1,211
+1,61+3
2,523
3.555
3 ,5U 6
2,557.
2,563
1,962
>+,870
6,23l'
9*388
12,780
.... 6,189.. -
9,912
13.750
35.037
31V.31*
51,612
16,209
57.919
81,:
>+35
1+65 ,Ul8
>+39,931
898,800 2/
9 k % lis
1,198,800 2/ l+,785,Ul8
67,203
1
73,17>+
113,089
908,089
« m
-r.
Treasury Department, Division of Tax Research
628,089
3, >+95
>+.7>+5
6,031+
8.753
11,678
28,181
>+7,673
68,726
112,107
912,107
1+,672,107
Amount of increase
: Treasury
1Treasury
t Treasury
£ proposal
: Oct. 1,
:proposal A
proposal
:
19>*7
~$35
- $35
-$35
- 12
- 11
- 9
12
ll
18
26
32
23
66
7^
87
ll 5
130
117
1
268
>♦ 33
609
970
1 .3>+7
1,818
2,282
3,219
>+,176
8,615
l l ,710
13,632
25, >+87
16,618
286,618
291
306
166
619
1,001
1 ,33 s
181
661
1,010
1,287
1,601
1,726
2,077
2.695
3,206
>+,952
5, >+33
5 .37 I
3,158
9,289
129,289
1,827
2,060
2,101
2,089
i ,->+69
923
2,176
13,307
173.307
November 29,
19I3
X./ Maximum earned income credit assumed.
Victory tax net income assumed to be ten-ninths of net income.
2:/ Taking into account maximum effective rate limitation of 90 percent.
»• V< AWUVVU pAV* J
176
145
..............** X\ .
374
Exhibit 9 - Table 3a
Effective rates of individual income tax under present law*
the Treasury nroposal of Oct*. 9, 1993, and two alternative schedules
Married person - two dependents
Exemptions: Present law - $1*200, $350
Proposals
- $1,100, $300
~rp-rp
Net income
before
personal
exemntion
1
1 .T00 1 ,soo
1,900
2,000
2,500
3*000
Effective rates
Present law
including
net Victory
tax l/
2.1$
2.2
2.2
2*9
i.9
:8.9
9,000
5 »ooo
12.1
6,000
16.3
19.9
22.1
29.2
8,000
10,000
12,500
15,000
20,000
25,000
50,000
75,000
100,000
500,000
i9.6
28.0
33.5
38.3
52.8
61.6
67*8
88.0
89.9 2/
90.0 2/
;
:
:
:
Increase
Treasury:
proposal
Treasury
Oct. 9, : proposal A
19^3
1.5#
2.8
9.1
9.0
12.8
18.8
23>3
26.5
31*5
35.6
39.7
^ 3 .3
99.-6
55*0
7011
77*2
81.9
93*1
9^* jT
95*7
Treasury
proposal B
:
Treasury r
proposal,; Treasury
Oct. 9, : proposal A
19^3
-
1 .6$
2-9
9.2
9*3
1.3,2
19.9
23.9
27*1
32,0
35,5
39*0
91.9
96.9
i,?5
3-2
9.5
9.8
1 3 .7
19*6
29 *,2
27.9
32.0
35*0
38.0
90.2
93.8
51.1
62.7
68.9
63.6
73.2
88.6
68.7
88*9
96.7
57*0
-
2.1$
*7
.6
1 .2
2.6
3*9
6.7
8*7
10.2
12.1
13*5
19.5
15.2
16.1
16.7
17*3
15*6
13*6
5.1
:
:
Treasury
proposal B
:
-
2.1 $
.6
*7
U3 .
3.0
U.3
7*3
9*3
10.8
12,6
13.9
13.8
13.8
13*5
12.8
9*9
7.2
5*9
.6
*9
2.6
-
2 .1$
-
*5
*9
1.6
3*5
9.8
7*7
9*6
11.1
12.6
12.9
12.8
12.2
10.3
8.9
9.-2
2.0
*9
.9
1*3
3.5
91.2
90.8
9.7
33.U
92.6
5*7
November 29 , 1993
Treasury Department, Division of Tax Research
l/ Maximum earned income credit assumed. Victory tax net income assumed to be ten-ninths of net income.
2/ Taking into account maximum effective rate limitati on of 90 percent.
1,000,000
5 ,000,000
3 .35?
Exhibit 11
Corporation income and excess profits tax rates
Present law
{Treasury proposal
H.R, 3687
1 . Normal tax rates
Normal tax net income
Not over $25*000
first $5,000
Next 15,000
Next;
5,000
Over $25,000 to $50,000 (notch)
15 $
No
change
17$
No
change
$U,250 plus
of excess over
$ 25,000
Over $50,000
2.
Surtax rates
Surtax net income
Not over $25,000
Over $25,000 to $50,000 (notch)
100
$ 2,500 plus 22$
of excess over
$25,000
Over $50,000
3-
^
l 6$
$3,5 0 0 plus 38$ |
No
of excess over ; change
$25,000
26$
Combined normal and surtax rates
Not over $ 25,000
25
Over $25,000 to $50,000 (notch)
5%
6$
Over $50,000
ko$
50$
Excess nrofits tax rates
treasury Department, Division of {Tax'Research
$
30p
to
2
to 33 0
%
No
change
No
change
November 29, 19^3
Exhibit 12
Corporate net income, income taxes and dividends,
1936
“
1944
(in millions of dollars)
t
i
Actual
1936
i
1937
t
1938
t
:s
1999
:
l94o
Estimated
1^4Tl/
1942
1943 j/s
1944
All returns
1.
2.
3*
4>
5-
Compiled net profit
.... .............. ........... ........... *........ ....................................
Net operating loss deduction
................ ..............................................................
Net income (line 1 minus line 2 ) ]§/• ........... ......................................... *........... .........
Dividends received 6/ ..... ................................. .................................................
Tax-exempt interest^/ ................. ......... .......... •••.............. .................... ............
o. Net income excluding dividends received and tax-exempt interest (line 3 minus line 4 minus line 5 ) 5 / .......
. Net income excluding dividends received (line 3 minus line 4 ) 5 /***’................. .................. .
. Compiled net profit excluding dividends received (line 1 m inus line 4 )
................. .
2
9.
Income and excess p ro fits taxes:
Income tax ................................................................................................. .................................. . 7 '..
rlO.11.
12.
13 .
........
Undistributed profits tax
.... vTV .VTTTrrvr-.*.... ;rf-^. i.c^V.-'fv’Trrrr............ . .
.................
Excess profits tax (after deduction of entire postwar credit) ............................................
Declared value excess profits tax .......................................... ...............................
Total income and excess profits taxes .................... ..............................................
14 .
15 .
Compiled net profit excluding dividends received, after taxes (line 8 minus line 13) .......................
Net dividends paid 9 / .......................................... ........ ................ *....................
lb. Compiled net profit or loss excluding dividends received, after taxes and net dividends paid
(line 14 minus line 1 5 ) .... *.................. .............................................................
17 .
Net income excluding dividends received, after taxes (line 7 minus line 13) 5 / ........ .....................
l8. Net income or deficit excluding dividends received, after taxes and net dividends paid (line Y] minus
7.830
7.771
7.771
2 ,b77
724
4 .37o
5.094
5.094
7 .89o
2,682
741
4,407
5.148
5.148
1,025
145
—
22
1,191
___ 1.057
176
3.903
.4.703
43
1,576
3.872
.. £.832___
800*
3.903
960*
3.872
8oo*
line 15) £/•••••............................................................ ........................ ..........
960*
4.131
4.131
1.791
732
7.178
9.348
7.178
123
9.225
2,021
it§o6
4 #50^
5.272
5.272
1,608
2,340
2,340
1.216
854..
—
—
6
----- 860—
-ee
—
l6
1.232
35Q____
21,400
1.550 ’
l 30
6.421
7.204
2.23?
809
13.296
14,107
7.327
14.437
783
21,750
16,675
800
19.050
19.850
20,200
.
, 2.144 ,-r
--
374
31
2,549
4,300
.
—
7.350
3.357
64
7.166
8/
100
11,750 8/
26,100
500
25,600
1,60b
700
23,30c
24,000
24,500
24.100
600
23.500
1,500
800
21,200
22,000
22,600
4..wy)
4 ,700 |gjgj
—
8,850
100
13.450 8 T
-9,800
100
i4,6bo g/
1,480
4.040
4.778
._._3 i.8.
4i-,
4.068
7.271
4.463
8,450
4.100
9.150
3.222
710
2,808
4.350
5.150
5,800
1 .742*
199
9,900
4.100
4.000
4.040
4,655
6.941
8,100
8,550
9,400
199
587
2,478
4,000
4,550
5.300
6,725
9,028
11,406
22,550
25,300
600
6.725
9.028
l )779
18,316
33p
17.986
2 ,09 ^
27,400
500
267900
1,400
500
1,480
1 .742*
uae
Returns with net income
1.
2.
34*
5*
Compiled net profit
............... ................................................ .........................
Net operating loss deduction
............................ ....................................... ......... .
Net income (line 1 minus line 2 ) .......................... .......... ........................... .............
Dividends received 6 (
............-..... ............................. ................... ................
Tax-exempt interest j/ .......................................................................... *............
0. Net income excluding dividends received and tax-exempt interest (line 3 minus line 4 minus line 5 ) .... * •• •
7 . Net income excluding dividends received (line 3 minus line 4 ) ...............*.......................... .
o. Compiled net profit excluding dividends received (line 1 minus line 4 ) ......................................
9.
10 .
11,
12.
13.
Income and excess profits taxes:
Income t a x ..................................... ........ ................................ .................. .
Undistributed profits t a x ....................................... ..........................................
Excess profits tax (after deduction of entire postwar c r e d i t ) ........................ ...................
Declared value excess p r ofits-tax ............................................ .............. *.............
Total income and excess profits taxes ................................. .................................
14. Compiled net profit excluding dividends received, after taxes (line 8 minus line 13) ••»•»«.................
Net dividends paid 2 / .... ...................................................... ..............................
lb- Compiled net profit excluding dividends received, after taxes and net dividends paid (line 14 minus line 13 )
15 .
17 .
Net income excluding dividends received, after taxes (line 7 minus line 13) ............... *................
l8. Net income excluding dividends received, after taxes and net dividends paid (line 17 minus line 19) ..... ..
9.726
9,848
—
9.726
2,504
T7fW
9.848
2.515
419
^915
1,625
W
420
123
1085
^7946
350
50£_
157391
22.200
1 ,35°
24.700
1.300
25,000
7)248
15.894
20,250
20,850
22,800
9.431
9.554
23.400
25.500
16,224
21,200
24,000
26,000
854
1,216
2.144
3.745
4,300
4.500
4.700
6
---- 860
16
1,232
31
2.549
64
7.166
100
13.450
9,800
100
1 14,600
6,016
3,783
27133
7.005
4.036
2,969
9.058
4.426
7.222
7.222
7.334
7.334
5.100
5.100
1.023
145
1.057
22
43
1,276
1.191
—
176
6,031
6,058
4.240
4.675
1.356
4.794
3.155
l,2bd
1,08$
6.031
6,058
4.240
1.356
1,264
1,085
1.955
171
2,018
16b
2,594
:
i
8/
100
11.750 8/
9.450
y
10,550
4.000
11,400
4.000
4.632
5.450
6,650
7.400
9.950
10,900
6,900
1,200
200
.200
1,600
6,016
2,233
6,882
2,846
8,728
4,302
9.100
5,100
1.850
12b
300
2.058
169
299
2.525
1,641
146
307
2,094
1.787
800
200
200
1,200
1,000
37
1,824
100
1,100
6,050
Returns with no nel
1.
2.
3*
Compiled net loss or deficit 2/ .......... *....... ..... ......... ........................................... .
Dividends received 6/ .............................................................................. ..........
Tax-exempt interest’j J ................... ............................. ................... *..................
4. Deficit, excluding dividends received and tax-exempt interest (line 1 plus line 2 plus line 3 ) .............
9. Deficit, excluding dividends received (line 1 plus line 2 ) ....................... ......... ............. •••*
236
2.364
2,128
322
2,507
3.072
2,186
2,760
6. Net dividends paid 2 / ............................ *...........................................................
Deficit, excludii£ dividend# received after net dividends paid (line 3 plus line 6) 10/ ..... ..............
27
2.155
38
67
58
32
2,223
2,827
2,035
2,258
7«
166
312
17275
1.977
2,22b
(*)
l/
2j
Figures are rounded and will not necessarily add to totals.
Source for years 1936- 1941 . Statistics of Income, Fart 2 .
Compiled net loss or defioit.
Preliminary figures.
Estimates prepared in connection with the Statement by the President on the Summation of the
1944
Budget, released August
1,
$ 43 .
2/
Compiled net profit (or loss) as defined in.Statistics of Income, equals compiled receipts which include dividends received and tax-exempt interest, minus compiled
deductions, which exclude net operating loss deduction.
4/ The first year's net loss allowed to be carried over is for a taxable year beginning on or after January 1 , 1939: the first year in which this loss is allowed as a
deduction is in a taxable year beginning on or after January 1 , 194O.
2 / Cumulation of this item for the years 1940-1944 would involve double counting of net operating loss dkluction; once in the year in which the net operating loss
occurs,
once in the year to which it is carried forward.
6/ Dividends froa domestic corporations subjeot to income taxation under the Federal tax law. This is tb amount used for computation of dividends received credit.
j] Includes both partially and wholly tax-exempt interest.
0/ Excludes the effect of the carryback of net operating losses and the carryback of unused excess profit! credit.
9/ Dividends paid to stockholders other
domestic corporations; includes cash end assets other than corporation'• own stock.
10/
100
1,500
November
Treasury Department, Division of Research and Statistics.
Note:
1.400
D e ficit corporations are lia b le fo r only the ca p ita l stock tax which is included as a deduction in c.spiled net p ro fit or loee.
1.300
200
200
1.700
1,500
100
1,600
2% 1943*
Exhibit 13
The effect of borrowing on net income after taxes of an
excess-profits taxpayer using the invested-capital credit
A corporation with an invested capital of $5,000,000 earns $500,000.
It is, therefore, subject to the excess-profits tax which it computes by
using the invested-capital credit.
Assume that it borrows $100,000 at 3-percent interest and uses the
funds for building up working capital, therefore, actually decreases its
net profits before taxes by the amount of interest - $3,000. Yet, its
net profits aJdter taxes are increased by this debt# The computation is
as follows, Ignoring the specific excess profits' exemption of $5,000.
s-profits tax
Before
borrowing
After
borrowing
Net income before taxes and
before interest deduction
$500,000
$500,000
0
1,500
Net income before taxes
500,000
498,500
Excess-profits credit:
$5,000,000 x 8 percent
400,000
400,000
0
3,500
400,000
100,000
403,500
95,000
81,000
76,950
$500,000
$500,000
3,000
Interest deduction (50 percent)
$100,000 x 7 percent (50 percent)
Total
Taxable excess profits
Excess-profits tax (81 percent)
Normal-tax and surtax
Net income before taxes and before
interest deduction
Interest deduction (100 percent)
0
Net income before taxes
Income subject to excess—profits tax
500,000
Taxable normal profits
Normal-tax and surtax (40 percent)
400,000
160,000
497,000
95,000
402,000
160,800
241,000
237,750
$259,000
$259,250
Total tax
Net income after interest and taxes
100,000
The taxpayer, therefore, gained $250 after taxes, merely by
borrowing and increasing working capital.
This gain may be compared with the effect on n®t income after taxes
if this taxpayer had used the average-earning credit. In this event, net
income after taxes would have decreased by $570. The advantage to the
corporation with the invested-capital credit is almost 1 percent of the loan
EXHIBIT 14
Comparison of estate tax rate schedule under present law
and proposal 1/
Net estate
after specific
exemption
(000) 2/
| Ak r
Not over il 5
10
1
5 —
10
15
20
15
30
20 * r
40
30 —
50
40
60
50
70
60
70
100
150
100 —
200
150
250
200
300
250
300
350
400
350 **
450
400 —
—
500
450
600
500
700
600 _
800
700
900
BOO
1,000
■900
1,250
1,000
1,500
1,250
2,000
1,500
2,000 T» 2,500
2,500 ** 3,000
4,000
3,000
5,000
4,000
5,000 ~r» 6,000
7,000
6,000
7,000 mmm 8,000
9,000
8,000
9,000 — 10,000
Over 10,000
.
s
;
:
Bracket rate
Present
law
3 I
7
11
11
14
18
22
25
28
28
30
30
30
32
32
32
32
32
35
35
35-37
37
37
39
42
45
49
53
56-59
63
67
70
73
76
76
77
Total estate tax
cumulative
Present
; Proposal
:
:
s Proposal :
•
•
c
cf
O/o
8
12
16
20
24
28
31
34
37
40
43
45
40
51
54
57
60
63
66
69
72
75
78
79
80
80
80
80
80
80
80
80
80
80
80
$
150
500
1,050
1,600
3,000
4,800
7,000
9,500
12,300
20,700
35,700
50,700
65,700
81,700
97,700
113,700
129,700
145,700
180,700
215,700
251,700
288,700
325,700
423,200
528,200
753,200
998,200
1,263,200
1,838,200
2,468,200
3,138,200
3-,838,200
4,568,200
5,328,200
6,088,200
Treasury Department, Division of Tax Research
1/
2/
$
250
650
1,250
2,050
4,050
6,450
9,250
12,350
15,750
26,850
46,850
68,350
90,850
114,850
140,350
167,350
195,850
225,850
288,850
354,850
423,850
495,850
570,850
765,850
963,350 1,363,350
1,763,350
2>163,350
2,963,350
3,763)350
4)563,350
5,363',350
6,163,350
6,963,350
7,763,350
do 1943
IQ/.d
November 29,
Before deduction of credit for State Death taxes#
The specific exemption under present law is $60,000, under the
proposal 340 ,000 *
EXHIBIT 15
Amount of estate taxes and effective rates
under present lav and proposal 1J
Net estate
Before
specific
exempt ion
(000 ) 2 /
$
50
*
'
i f ,v
; proposal
*
♦
Present
law
$
0
60
0
so
100
150
200
1+00
1,6 0 0
600
soo
1,000
2,000
M o o
6,000
10,000
20,000
1+0,000
100,000
(
Amount of tax
$
650
2.050
6 ,1+50
M o o
17,900
12,350
32.700
51,150
1 ^ 5 .7 5 0
9 M oo
159,700
229.700
303,500
726,200
1,802,800
3,093,000
6 ,01+2,600
13,7^2,000
29 ,11+2,000
7 5 .31+2,000
30,350
263,650
396,250
51+0,350
1,331,350
2.931,350
“+,531.350
7.731.350
15,731,350
31,731,350
79,731.350
♦
*
j
•
•
increase
in
tax
•Increase
<
?Present
Proposal! in effec
law
<tive rates
5
650
$
2.050
“+,850
7,550
12,950
1 8 ,1+50
51,250
103,950
16 6 ,5 5 0
237,350
60 5.150
1,123,550
M 33.350
1,633,750
1 ,939,350
2 ,539,350
“+.339,350
Treasury Pepartment, Division of Tax Research
1/
2/
Effective rate
i
<•>
2.0#
l+*3
11.-9
l6.lt
23,6
26*6
28.7
30 .1+
36.3
1+5.1
51.6
6o«l+
68.7
72.9
75.3
1,3#
3.H
sa
1 2 .1+
20,6
2 5 .6
36.1+
“+3-9
1+9.5
5“+.l
66.6
73.3
75*5
77.3
73,7
79*3
79.7
ITpvowrber 39, 19 U 3
Before deduction of credit for State death taxes,
The specific exemption under the present lav is $60,000, under the
proposal $Uo,000*
1 ,3*
3.H
6a
7.6
8.6
9.2
12,3
17.3
20.8
23.7
30.3
23.2
23.9
1 6 .9
9.9
6,5
M
EXffi'XI? 16
Estate and gift tax collections as a percent of net receipts
Fiscal years 1 9 1 7 ~ ^
(Dollar amounts in millions)
•
t
Fiscal ;
year :
*
Estate
tax
1913
6-1
97.5
m s
82.0
m i
1920
1921
1922
1923
192U
1925
1926
1927
192s
1929
1930
1931
1932
1933
1931*
1935
1936
1937
$
15^.0
139 .h
126.7
103 .O
101 .h
116.0
100.3
60.1
61.9
6 U. 8
29.7
loh.o
lUo.h
1939
3 3 2 .3
19^2
19^3
19UU
330.9
3 5 5 .2
3U0.3
U1U.5
511. s
$
6 .1
^7-5
82.0
i§
*?
103.6
156*.0
-
m
if
$
; Tlotal estate
! Total estate l
3Sfet
:and gift taxes
l
and
* receipts : as $ of net
1 gift taxes j
t receipts
—
7.5
3.2
«*
*T
*r
hg.l
h 7 .h
1938
19^1
Gift
tax
*T
103.5
21S. 8
281.6:
362,2
1940
?
;
h.6
9.2
11*1
160.1
23.9
3^ -7
2 S.h
29.2
5 1 ,9
92.2
33.0
hh.g
$ 1.129-3
3 , 66 h .6
5.152.3
6 ,69^.6
5.62U.9
^, 109,1
u,007.1
U, 012.0
3.760.1
3 .962.8
h fl 29 .U
139
126.7
103.0
10^.9
119-2
100.3
60.1
61.9
6M
U 8.1
U 7 J4
h,o^2f3
k,033-3
9.177-9
3 .I9O.O
2.005-7
2.079.7
-$4
l.JO
1*59
1.55
2 .7 b
3*39
3.16
2.57
2 .8 8
3,01
2.^3
1 .U9
if 53
1.55
1.51
2.36
1.65
3.63
3^*3
113.2
212.1
376-9
3 . U 5 .6
3 .600*5
M lM
3 0 5 .5
5.028.8
5-58
9.21
6.08
5.859.7
5 , l 6 h .8
7.12
6 .9s
5.367.1
6.68
&I6.9
360.7
360.1
^07.1
^32-5
7.607,2
5.35
3^36
Uii7.5
12.799.1
22 ,071.6
556.6
32.1^7.9
2.03
1 .U6
(est.)
Treasury Departin cat, Divi sion of Tax Besearch
Source:
uQVemhcr 2 9 , ' 19^3
Annual Heport of the Secretary of the Treasury t 19^2 and
S tat ernent of' the President on the Summation of the 19hh
Budget* August 19^3*
Exhibit 17
FEDERAL ESTATE TAX
Effective Rates, Before Credit for State Death Taxes
S p e c ific
E x e m p t io n
$ 6 0 ,0 0 0
* Specific Exemption $40,000
Exhibit 18
Estimated excise tax liability under the Treasury proposal as
presented to the Committee on Ways and Means of the House
of Hepesentatives on October 4, 19^3* as compared
with present law for a full year of operation 1 /
1. Distilled spirits ......
$.6
B e e r ........
Wine ?
(a) Still:
Under l4 percent
alcohol .....
14 to 21 percent
alcohol
Over 21 percent
alcohol ......
(b) Sparkling .......
(c) Other
Cigarettes
per gallon (drawback of $3*75 P er
gallon on nonbev©rage alcohol).
$10 per gallon
(draw-back of
$7 per gallon
on nonbeverage
alcohol).
$7 per barrel ..... $10 per barrel •* •♦
10 cents per gallon
50
40 cents per gallon
$1 per gallon
$1 per gallon
10 cents pep half
pint .....
5 cents x>er half
pint
$ 3.50 per thousand.
$2 per gallon
20 cents per half
pint ......
10 cents per half
nint ......
$5 per thousand ...
Intended
retail
price.
‘Hot
Over
ever
5. Cigars
8
15
20
6.
Chewing and smoking
tobacco and snuff.
7. General admissions .....
8. Cabarets ...... .
9. Club dues and initiation
fees .................
10. Bowling alleys, billiard
parlors
ia. Transportation of persons
12 . Communications t
(a) Tf>ll service .....
(b) Telegraph, etc,:
(1) Domestic *...
(2) International
(c) leased \/ires, etc*
13 . Local telephone service
14* .Jewelry
16 .
Pur and fur-trimmed f'
a r t i c l e s .... .......
Luggage, handbags, wallets,
etc*.............. .
lax per
thousand
2*
4
Over
6
8
15
20
Hot
over
CentsCents
—
3i
3t
5
5
7
7
9
9
17
$ 2.50
3.00
4.00
7.00
10.00
15.00
20,00
2/ $487.2
210.5
cents per gallon
Intended
retail
price-
Cents Cents
—
24
4
b
15 .
Proposed tax
Present tax
Article of service
Estimated
additional
revenue from
proposals (in
millions)!/
17
22
.....
6l.l
371.3
Tax per
thousand
67.7
$ 12.50
13.00
l4.oo
22
17.00
30.00
35.00
—
40.00
46.2
18 cents per pound
$4 cents per pound
I cent per 10 cents
5 percent of charge
3 cents per 10 cents
30 percent of charge
327.0
II percent of charge 2J percent of charge
5.1
$10 per alley ..... 20 percent of charge )
$10 per table ..... $20 per table ...... )
10 percent of charge
20
percent of charge.
15
10
15
10
10
of
of
of
of
of
percent
percent
percent
percent
percent
•price
25
percent of charge
27,0
212.7
...... d o .... .
charge 20rpercent
charge 10 percent
charge 20 percent
charge 15 percent
retail 30 percent
\
..price -
of
of
of
of
of
)
)
charge)
charge)
charge)
charge
retail
91.3
.....do*.......t .... 25 percent of retail
price
10 percent of manu- ....*&oT ...........•*
facturers* sales
price on luggage
only.
3*15
48,9
167.3
53*4-
3^
Exhibit IB (Continued)
Article or service
Present tax
18. Soft drinks.......•>.*
10 percent of re
tail price........
None...............f
19. Candy and Chewing gum.
None........ .
17. Toilet preparations...
Total additional revenue, items 1 to 19...
20. Less repeal of tax on
transportation of property................
Total additional revenue, items 1 to 20
Treasury Department,
Division of Research and Statistics*
Proposed tax
Estimated
additional
revenue from
proposals (in
millions) 1/
25 percent of re51*4
tail price.......
Bottled d r i n k % l cot per 177*0
each 5 cents of in
tended retail price;
the equivalent taxes
of $1 per gallon on
sirup and 25 cents
per pound on carbonic
acid gas used in un—
bottled soft drinks.
Articles intended to
’190.0
retail from 5 to 15
cents per bar or
package, 1 cent per
each 5 cents of in
tended retail price;
other items, the
equivalent tax of 35
percent of manufac
turers’ sales price.
........ ........... ... 2,681*4
...................... - 170.3 2/
.............. ..... ..42,511.1
November 29, 1943
1/
Estimates of additional revenue are for a full year of operation at levels
of business estimated for calendar year 1944.
2/
Estimated additional net revenue yield after allowance for increased
drawback on nonbeverage alcohol of $12*8 millions.
2/
Including the effects of H# R* 3338, Public Law 180, approved
November 4, 1943*
Inevitably we shall experience much greater financial
sacrifice than we have thus far.
Taxation now,
during the war, is the easiest way to make that sacrifice.
In presenting our national fiscal problem to you,
I have endeavored to perform the duty placed on the
Secretary of the Treasury by law and tradition.
I have
endeavored to show you as objectively and as clearly
as I can that a tax program of not less than $10,5 billion
is needed to safeguard the financial and economic future
of this country during the war and after the war.
From every point or vies it is a minimum fiscal program
in the light of the deficit, the accumulated debt, and
the inflationary pressure.
In view of all these facts, the House Bill, in
my opinion, falls far short even of an attempt to meet
our fiscal needs in a realistic or courageous way.
Let us bear in mind that an essential part of
fighting a war is paying for it in the right way at
the right time.
of war.
There is no escape from the costs
It is a great fallacy to suppose that we can
fight history*s greatest war to save what we hold most
dear without financial sacrifice.
that we can pay much higher taxes; they do not In any
degree affect our moral obligation to meet now all of
the costs of the war that can be met by current taxation;
and they do not affect In significant jdegree the
serious inflationary dangers that face us for the
balance of this fiscal year# the succeeding fiscal
years as long as the war shall last, and In the postwar
period*
Our tax goal# as I pointed out to the
Ways and Means Committee* was the amount that we
believed could be fairly distributed without undue
sacrifice and hardship.
There is nothing in the new budget figures in
our opinion to warrant reducing our goal below $10*5
billion of additional wartime taxes.
If no one had
*
originally expected more than a $57 billion deficit for
the fiscal year 191*1*, the amount would appear tremendous
which it truly is.
It is no less so because it
represents a reduction from a previously estimated
higher figure.
$57 billion is equal to last year’s
record deficit, and is almost three times the deficit
of 191*2.
~
15
~
The Bureau of the Budget has just released
estimates that total expenditures for the fiscal year 1941;
y
which ends next June
will amount to $98 billion
'/ ;
instead of the
last August.
$106
billion in the estimate issued
It is understood that this decrease In
expenditures represents a combination of changes in
the war program and a delay in reaching the production
goals of some items.
Revenues were estimated at
s
$1^1 billion instead of
$58
billion.
The over-all
result of the revision is to reduce the previously
✓
^
expected deficit from $68 billion to $5? billion for
the fiscal year
19W+ -
12
That means we cannot significantly relax our spending.
1 am not In sympathy with any measures or any proposal to
cut expenditures In any way that will make our total
production anything less than an all-out effort.
At the time 1 appeared before the lays and Means
Committee, I said that KJille it may be possible,
and I hope it is, to curtail some governmental
expenditures, even that will not lessen our need for
getting at this time all that the American people can
possibly give us in additional taxation.*
still my position.
That Is
11
-
Perhaps the most superficially plausible and
therefore the most insidious argument I have recently
heard Is that economy In governmental expenditures is
a substitute for higher taxes.
Economy Is always an
Important objective and a tax bill makes It neither
more nor less desirable.
I am In complete and hearty
sympathy with any measure that can be adopted to reduce
governmental costs, to reduce even war costs so long
as the reductions do not Impair our war effort.
But
If we are to fight the war to a speedy conclusion we
cannot relax our fighting or our production for war.
I think this would be a poor excuse to give to the
returning soldier who will be interested to know what
sacrifices we incurred at home to protect his future.
In fact, however, $10.5 billion of additional
taxes would have very important effects on the deficit,
the debt, and the inflationary pressure,
in its direct
effects on spending, in the renewed assurance it would
' give that the elected and appointed representatives
of the people take the problems of the public debt
seriously, and in the sobering influence it would have
on public understanding of the true cost of the war,
a $10.5 billion increase in taxes would be immensely
beneficial.
9
There are few indeed who have followed with care the
developments of the recent past who are not concerned
over the possible breakdown of the stabilization program.
Higher wartime taxes obviously cannot meet the danger
alone but they are necessary If It is to be met.
I have also been told that some people have a
defeatist attitude toward our fiscal problem.
They argue that since the deficit is so large, the
Government debt so huge, and the Inflationary
possibilities of surplus Income and accumulated private
savings so great, a few billion dollars more or less
will not make a great deal of difference and that therefore
we might as well avoid the unpopularity of imposing
additional taxes.
I have been told that the American people do
not believe In the dangers of inflation.
1 cannot
believe that Is true* but there may be a confusion of
meaning.
If by Inflation Is meant a situation where
money becomes worthless, I agree that the danger now
is not of that character.
It is rather the danger
of substantial and continuous and, at least In part,
permanent rises in prices that would undermine standards
of living, reduce the value of investments and impair
the security we seek to achieve through savings and
Insurance.
Unfortunately, lack of belief In the
But we cannot expect these controls to hold
Indefinitely In the face of a continued large surplus
of income over goods and a great accumulation of
spendable liquid wartime savings.
Day after day, the
continuous pressure of spending power has been
cracking our price controls a little here and a little
there and threatens to produce a major breakdown.
We are courting danger if we do not do all that
is possible through the tax mechanism to strengthen
the foundations of our stabilization program.
—
6—
If those who hold this surplus income try to spend
It on consumer goods the inevitable result will be
black markets, ruptured price ceilings, and substantial
increases in the cost of living, followed by tremendous
pressures for higher wages and farm prices, which will
set in motion further forces in the spiral of Inflation.
Up to this point spending has been held down and
we have avoided disastrous price Increases. We have
done this through a variety of measures. Price ceilings
and rationing, wage and salary stabilization, and the
taxes already Imposed have all had a restraining effect.
The campaigns for the voluntary purchase of War Bonds
with their emphasis on saving have been a strong
Influence in curbing spending.
The incomes of the American people are not only
ample to pay much higher taxes.
The spending power
of these incomes is so great as to threaten rapid and
burdensome increases in the cost of living.
About
half of American productive effort is going into
war equipment and supplies for our armed forces.
These
products are not available for civilian consumption.
Yet our people are being paid for all they produce.
They thus have far more money to spend than there are
I
goods on which to spend it*
In the fiscal year 19ii4
this surplus of Income over goods is expected to
amount to about
taxes.
$56
billion after payment of personal
It Is clear that we are not paying all the wartime
taxes that we can and should pay.
We are not now fighting
an all-out war on the fiscal front.
All the estimates
of national income, by whomever made, bear eloquent
testimony to the fact that the ability of the American
people to pay increased taxes is far from being exhausted.
In the fiscal year 1959 individuals had incomes, after
personal taxes, of
$65
%
billion.
In the fiscal year 19^4»
it is estimated that individuals will have Incomes of
/
$126 billion, after allowance for all present taxes.
That is, after paying taxes, incomes of people in the
s
United states will have almost doubled since 1959*
If
In this situation
we pay in taxes any less
than we can now afford to pay, we shall be unfair to
those who must face the accumulated bill after the war
has been fought and won.
Ve shall be doing a
particularly great injustice to the men who are fighting
our battles on foreign
the
10,000,000
soil.
le snail not only be asking
members of the armed forces to give
the most Important years out of their lives to fight
the war.
fe shall also be requiring them as a large
body of future taxpayers to pay in taxes after the war
what we could and should have paid while they were
fighting.
—
2
*•
The outstanding fact In our financial picture is
the stupendous bill which this war will leave behind.
On that point there can be no quibbling.
We are
accumulating debt at the rate of over $150 million
a day.
Last month (October, 1945) the Federal Government
I
spent $5.6 billion more than it collected in revenue.
/
In the fiscal year 19l|2 the deficit was $21 billion,
in
1.945
It was $ 57'"billion, and in 191*4 it is expected
to be $57"billion again.
On the basis of any estimates
we can now make, we foresee a public debt at the end of
the present fiscal year of about $200 billion.
On such
a debt the interest charges alone will be close to $ v billion
a year.
As the war continues, the debt, the interest, and
the problems of repayment will grow larger and larger.
When I appeared before the lays and Means Committee
of the House on October ij. to present the Administration’s
suggestions for increased war taxes, I gave to that
Committee as best I could a picture of the financial
position of the nation and its wartime revenue needs.
I stated that the fiscal situation required much heavier
wartime taxation and that It was our opinion that the
people could pay additional wartime taxes of at least
$10.5 billion.
The lays and Means committee and the
House reached a different result and approved a bill
increasing revenues by only
$2
billion.
In view of
this wide difference on a matter so important to the
present and future welfare of this nation, we have
carefully reviewed the fiscal situation.
I am appearing
before you today to present our conclusions.
Statement of Secretary Morgenthau before the
Finance Committee of the
United States Senate
November 29, 1943.
When I appeared before the Ways and Means Committee of
the House on October 4 to present the Administrations sugges
tions for increased war taxes, I gave to that Committee as
best I could a picture of the financial position of the nation
and its wartime revenue needs, I stated that the fiscal situ
ation required much heavier wartime taxation and that it was
our opinion that the people could pay additional wartime taxes
of at least $10.5 billion. The Ways and Means Committee and
the House reached a different result and approved a bill in*
creasing revenues by only $2 billion. In view of this wide ■'
difference on a matter so important to the present and future
welfare of this nation, we have carefully reviewed the fiscal
situation. I am appearing before you today to present our
conclusions.
The outstanding fact in our financial picture is the
stupendous bill which this war will leave behind. On that
point there can be no quibbling. We are accumulating debt at
the rate of over $150 million a day. Last month (October, 1943)
the Federal Government spent $5.6 billion more than it collected
in revenue. In the fiscal year 1942 the deficit was $21 billion,
in 1943 it was $57 billion, and in 1944 it is expected to be
$57 again. On the basis of any estimates v/e can now make, we
foresee a public debt at the end of the present fiscal year of
about $200 billion. On such a debt the interest charges alone
will be close to $4 billion a year. As the war continues, the
debt, the interest, and the problems of repayment will grow
larger and larger.
In this situation if we pay in taxes any less than we can
now afford to pay, we shall be unfair to those who must face
the accumulated bill after the war has been fought and won.
We shall be doing a particularly great injustice to the men who
39-71
- 2 -
are fighting our battles on foreign soil. We shall not only be
asking the 10,000,000 members of the armed forces to give the
most important years^out of their lives to fight the war. We
shall also be requiring them as a large body of future taxoayers
to pay m taxes after the war what we could and should have
paid while they were fighting.
It is clear that we are not paying all the wartime taxes
that we can and should pay. We are not now fighting an all-out
war on the fiscal front. All the estimates of national income,
by whomever made, bear eloquent testimony to the fact that the
ability of the American people to pay increased taxes is far
from being exhausted. In the fiscal year 1939 individuals had
incomes, after personal taxes, of $65 billion. In the fiscal
1944, it is estimated that individuals will have incomes
of $126 billion, after allowance for all present taxes. That
is, after paying taxes, incomes of people in the United States
will have almost doubled since 1939.
The incomes of the American people are not only ample to
pay much higher taxes. The spending power of these incomes is
so great a s t o threaten rapid and burdensome increases in the
cost of living. About half of American productive effort is
going into war equipment and supplies for our armed forces.
These products are not available for civilian consumption. Yet
our people are being paid for all they produce. They thus have
far more money to spend than there are goods on which to spend
it. In the fiscal year 1944 this surplus of income over goods
is expected to amount to about $36 billion after payment of
personal taxes. If those who hold this surplus income try to
spend it on consumer^goods the inevitable result will be black
markets, ruptured price ceilings, and substantial increases in
the cost of living, followed by tremendous pressures for higher
wages and farm prices, which will set in motion further forces
m the spiral of inflation.
Up to this point spending has been held down and we have
avoided disastrous price increases. We have done this through
a variety of measures. Price ceilings and rationing, wage and
salary stabilization, and the taxes already imposed have all had
a restraining effect. The campaigns for the voluntary purchase
of War Bonds with^their emphasis on saving have been a strong
influence in curbing spending.
- 3 But we cannot expect these controls to hold indefinitely
in the face of a continued large surplus of income over goods
and a great accumulation of spendable liquid wartime savings.
Day after day, the continuous pressure of spending power has
been cracking our price controls a little here and a little
there and threatens to produce a major breakdown. We are
courting danger if we do not do all that is possible through
the tax mechanism to strengthen the foundations of our stabili
zation program.
I have been told that the American people do not believe
in the dangers of inflation. I cannot believe that is true,
but there may be a confusion of meaning. If by inflation is
.meant a situation where money becomes worthless, I agree that
the danger now is not of that character. It is rather the
danger of substantial and continuous and, at least in part,
permanent rises in prices that would undermine standards of
living, reduce the value of investments and impair the security
we seek to achieve through savings and insurance. Unfortunate
ly, lack of belief in the danger of inflation does not remove
that danger. There are few indeed who have followed with care
the developments of the recent past who are not concerned over
the possible breakdown of the stabilization program. Higher
wartime taxes obviously cannot meet the danger alone but they
are necessary if it is to be met.
I have also been told that some people have a defeatist
attitude toward our fiscal problem. They argue that since the
deficit is so large, the Government debt so huge, and the infla
tionary possibilities of surplus income and accumulated private
savings so great, a few billion dollars more or less will not
make a great deal of difference and that therefore we might as
well avoid the unpopularity of imposing additional taxes.
I think this would be a poor excuse to give to the returning
soldier who will be interested to know what sacrifices we in
curred at home to protect his future.
In fact, however, $10.5 billion of additional taxes would
have very important effects on the deficit, the debt, and the
inflationary pressure. In its direct effects on spending, in
the renewed assurance it would give that the elected and appointed
representatives of the people take the problems of the public
debt seriously, and in the sobering influence it would have on
public understanding of the true cost of the war, a $10.5 billion
increase In taxes would be immensely beneficial.
- 4 Perhaps the most superficially plausible and therefore the
most insidious argument I have recently heard is that economy
in governmental expenditures is a substitute for higher taxes.
Economy is always an important objective and a tax bill makes
it neither more nor less desirable, I am in complete and hearty
sympathy with any measure that can be adopted to reduce govern
mental costs, to reduce even war costs so long as the reductions
do not impair our- war effort. But if we are to fight the war to
a speedy conclusion we cannot relax our fighting or our produc
tion for war. That means we cannot significantly relax our
spending. I am not in sympathy with any measures or any pro
posal to cut expenditures in any way that will make our total
production anything less than an all-out effort.
At the time I appeared before the Ways and Means Committee,
I said that 11while it may be possible, and I hope it is, to
curtail some governmental expenditures, even that will not less
en our need for getting at this time all that the American
people can possibly give us in additional taxation.” That is
still my position.
The Bureau of the Budget has just released estimates that
total expenditures for the fiscal year 1944 which ends next
June 30 will amount to $98 billion instead of the $106 billion
in the estimate issued last August. It is understood that this
decrease in expenditures represents a combination of changes in
the war program and a delay in reaching the production goals of
some items. Revenues were estimated at $41 billion instead of
$38 billion. The over-all result of the revision is to reduce
the previously expected deficit from $68 billion to $57 billion
for the fiscal year 1944.
There is nothing in the new budget figures in our opinion
to warrant reducing our goal below $10.5 billion of additional
wartime taxes. If no one had originally expected more than a
$57 billion deficit for the fiscal year 1944, the amount would
appear tremendous, which it truly is. It is no less so because
it represents a reduction from a previously estimated higher
figure. $57 billion is equal to last year’s record deficit, and
is almost three times the deficit of 1942.
The budget revisions do not alter the fact that we can pay
much higher taxes; they do not in any degree affect our moral
obligation to meet now all of the costs of the war that can be
met by current taxation; and they do not affect in significant
- 5 degree the serious inflationary dangers that face us for the
balance of this fiscal year, the succeeding fiscal years as
long as the war shall last, and in the postwar period. Our
tax goal, as I pointed out to the Ways and Means Committee, was
the amount that we believed could be fairly distributed without
undue sacrifice and hardship. From every point of view it is
a minimum fiscal program in the light of the deficit, the accu
mulated debt, and the inflationary pressure.
In view of all these facts, the House Bill, in my opinion,
falls far short even of an attempt to meet our fiscal needs in
a realistic or courageous way.
Let us bear in mind that an essential part of fighting a
war is paying for it in the right way at the right time. There
is no escape from the costs of war. It is a great fallacy to
suppose that we can fight history’s greatest war to save what
we hold most dear without financial sacrifice. Inevitably we
shall experience much greater financial sacrifice than we have
thus far. Taxation now, during the war, is the easiest way to
make that sacrifice.
In presenting our national fiscal problem to you, I have
endeavored to perform the duty placed on the Secretary of the
Treasury by law and tradition. I have endeavored to show you
as objectively and as clearly as I can that a tax program of
not less than $10.5 billion is needed to safeguard the financial
and economic future of this country during the war and after the
war.
0O 0
TREASURY DEPARTMENT
Washington
Press Service
FOR RELEASE, MORNING NEWSPAPERS,
Tuesday, November 30» 1943*
<37-7
2-
The Secretary of the Treasury announced last evening that the tenders for
$1,000,000,000, or thereabouts,of 91-day Treasury bills to be dated December 2, 1943,
and to mature March 2, 1944, which were offered on November 26, were opened at the
Federal Reserve Banks on November 29.
The details of this issue are as follows:
Total applied for - $1,544,032,000
Total accepted
- 1,006,307,OCX)
Average price
(includes $63,543,000 entered on a fixedprice basis at 99.905 and accepted in full)
- 99.905^ Equivalent rate of discount approx. 0.3753* per annum
Range of accepted competitive bids:
High
Low
(Excepting one tender o f $10,000)
- 99.925 Equivalent rate of discount approx* 0.297$ per annum
- 99*905
"
«
*
«
«
0*376$ *
"
(61 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Total
Applied for
Total
Accepted
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St* Louis
Minneapolis
Kansas City
Dallas
San Francisco
*
17,705,000
1,144,478,000
29,945,000
42,798,000
14,191,000
19,180,000
148,838,000
17,785,000
5,140,000
17,857,000
8 ,445,000
77.670,000
♦
$1,544,032,000
$1,006,307,000
TOTAL
15,053,000
690,244,000
20,234,000
37,565,000
11,578,000
18,818,000
109,542,000
14,431,000
5,062,000
17,038,000
8,182,000
58.560,000
TREASURY DEPARTMENT
Washihgtbn''
Pre88 Sorvic#
FOR RELEASE, UORK1KG H3SSPAPKRS,
Tuesday, November 30. 1910.
The Secretary of the Treasury announced last evening that the tenders for
$1,000,000,000, or thereabouts,of 91-day Treasury bills to be dated December 2, 1943,
and to mature March 2, 1944, which were offered on November 26, were opened at the
Federal Reserve Banks on November 29.
The details of this issue are as follows:
Total applied for - $1,544,032,000
Total accepted
- 1,006,307,000
Average price
(includes $63,543,000 entered on a fixedprice basis at 99*905 and accepted in full)
- 99.905/Equivalent rate of discount approx. 0.375$ per annum
Range of accepted competitive bids:
(Excepting one tender of $10,OCX))
- 99.925 Equivalent rate of discount approx. 0.297$ per annua
- 99.905
*
»
•
"
*
0.376$ *
*
Hi*h
Low
(61 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Total
Applied for
Total
Accepted
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
#
17,705,000
1,144,47B, 000
29,945,000
42,796,000
1 4 ,19 1,0 0 0
19,160,000
14 6 ,838,000
17,785,000
5,140,000
17,857,000
0,445,000
7 7 ,670,000
1
$1,544,032,000
$1,006,307,000
TOTAL
1 5 ,053,000
690,244,000
20 ,234,000
37,565,000
1 1 ,578,000
10,818,000
10 9 ,542,000
1 4 ,431,000
5 ,062,000
17,038,000
0 ,102,000
S8.560.0Qg
TREASURY DEPARTMENT
Washington'
F O R R E L E A S E , M O R N I N G NEWSPAPERS',
T u e s d a y , N o v e m b e r 30, 1 9 4 3 .
The S e c r e t a r y of
tenders
bills
the. T r e a s u r y a n n o u n c e d
for $1,000,000,000,
to b e
which were
or
thereabouts,
d a t e d D e c e m b e r 2,
1943,
offered on November
26,
serve B a n k s
The
Press
No.
on N o v e m b e r
details
of
last
evening
Service
39-72
that
the
of 91-d a y T r e a s u r y
and
to m a t u r e
M a r c h 2,
were
opened at
the
1944,
Federal
Re
29.
this
issue are as
follows:
Total
Total
applied for - $1,544,032,000
accepted.
1,006,307,000 (includes $63,543,000 e n
tered on a f i x e d - p r i c e basis at 9 9 . 9 0 5 a n d a c c e p t e d
in full)
Average price
- 99*905 / E q u i v a l e n t rate of discount
approx. 0.375$ per a n num
Range
of a c c e p t e d
competitive bids:
High
- 99.925 Equivalent
How
- 99.905
(61 p e r c e n t
of the amount bid
Federal R e s e r v e
Dis t r i c t
n
for at
Total
Applied
Boston
New Y o r k
Philadelphia
Cleveland
Ric h m o n d
Atlanta
Chicago
St, L o u i s
Minneapolis
Kansas C i t y
Dallas
San F r a n c i s c o
$
TOTAL
rate
tf
the
for
17,705,000
1,144,478,000
29.945.000
42.798.000
14.191.000
19.180.000
148,838,000
17.785.000
5.140.000
17.857.000
8.445.000
77.670.000
$1,544,032,000
-oOo-
(Excepting one tender
of $10,000)
of discount approx.
0,297$ per annum
of d i scount approx,
Q*376$ per annum
low price was
accepted)
Total
Accepted
$
15,053,000
690.244.000
20.234.000
37.565.000
11.578.000
18.818.000
109.542.000
14.431.000
5.062.000
17.038.000
8.182.000
58.560.000
$1,006,307,000
Tt'i-'1 1
FOB IMMEDIATE RELEASE,
November SO. 1945,___
The Bureau of Customs announced today preliminary figures shoving the
quantities of coffee authorized for entry for consumption under the quotas
for the 12 months commencing October 1, 1943, provided for in the InterAmerican Coffee Agreement, proclaimed by the President on April 15, 1941, as
follows:
$
:
S Quota Quantity I
Authorized for entry
$
(Pounds) 1/
;
for consumption
________ __________________;__ __________________ i As of (Date) : (Pounds)
Country of Production
Signatory Countries;
Brazil
Colombia
Costa Rica
Cuba
Dominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Mexico
Nicaragua
Peru
Venezuela
1,353,1^480
458,336,340
29,100*720
11,640,288
17,460,432
21,825,540
87,302,160
77*844,426
40,013,490
2,910,072
69,114,210
28,373,202
3,637,590
61,111,512
Non-signatory Countries;
51,653,778
1,/
Nov
it
ti
H
II
H
t!
II
ft
It
It
It
It
0
171,490,961
73,659,174
1,696,892
1,716,157
2,569,114
6,449,376
940,160
2,512,417
1,379,318
460,324
3,582,062
499,439
307,182
3,687,973
ft
1,991,001
20, 1943
Quotas as established by action of the Inter-American Coffee Board on
March 11, 1943.
-oOo-
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Wednesday, December 1. 1943.
Press Service
3 9 -73
The Bureau of Customs announced today preliminary figures showing the
quantities of coffee authorized for entry for consumption under the quotas
for the 12 months conmencing October 1, 1943, provided for in the InterAmerican Coffee Agreement, proclaimed by the President on April 15, 1941, as
follows:
Country of Production
___
...
:
:
1
Quota Quantity :
(Pounds)
1/
;
*
Authorized for entry
for c o n s u m p t i o n ______
As of (Date)
i
(pounds)
1;353,183,480
458,336,340
29,100,720
11,640,288
17,460,432
21,825,540
87,302,160
77,844,426
40,013,490
2,910,072
69,114,210
28,373,202
3,637,590
61,111,512
Nov. 20, 1943
it
ft
n
if
it
Signatory Countries:
Braz il
Colombia
Costa Rica
Cuba ,
Dominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Mexico
Nicaragua
Peru
Venezuela
Non-signatory Countries:
1/
51,653,778
11
it
»»
11
it
tr
it
»»
n
171,490,961
73,659,174
1,696,892
1,716,157
2,569,114
6,449,376
940,160
2*512,417
1,379,318
460,324
3,582,062
499,439
307,182
3,687,973
1,991,001
Quotas as established by action of the Inter-American Goffee Board on
March 11, 1943,
- 0O 0-
1HMS8HT DSPAHMEBT
Washington
Press Seriice
FOB IMMEDIATE RELEASE,
Wodnsaday, Docaafoer X, 1943.
3 ?- 7 f
The Secretary of the Treasury today announced the final subscription and
i
allotment figures with respect to the current offering of 7/8 percent Treasury
Certificates of Indebtedness of Ssrlss 0*1944*
Subscriptions and allotments were divided among the several Federal Re*
serve Districts and the Treasury as follows s
Total Subscriptions
Received and Allots
Federal Reserve
t e M g i l ------
| 084,829,000
1,9X8,558,000
138,438,000
140,937,000
79,521,000
96,005,000
414,034,000
86,099,000
82,577,000
79,064,000
76,300,000
222,554,000
1.236.000
#3,520,152,000
Boston
M M Tor*
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St* Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTAL
0
(O &
I* c
TREASURY A P A R T M E N T
Washington
FOR IMMEDIATE RELEASE,
Wednesday. December 1. 1943
Press Service
No. 39-74
The Secretary of the Treasury today announced the final subscription and
allotment figures with respect to the current offering of 7/8 percent Treasury
Certificates of Indebtedness of Series G-1944*
Subscriptions and allotments were divided among the several Federal Re
serve Districts and the Treasury as follows:
Federal Reserve
District
Total Subscriptions
Received and Allotted
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTAL
$
184,829,000
1,918,558,000
138.438.000
140.937.000
79.521.000
.
96 005.000
414.034.000
86 ,099,000
82.577.000
79.064.000
76.300.000
222.554.000
1 .236.000
)3,520,152,000
oOo
5
New London, Connecticut.”
Age matched the spirit of the California youngster’s
contribution, in a letter from Kingston, New York, reading:
’’Enclosed please find a small contribution (five dollars). I am
an elderly man inearly 77) who can have only temporary
employment, but I want to help a little, if I can, and want no
interest on anything I can do.”
There was a heart throb, too, in a note from a Brooklyn
woman: ’’Please accept the enclosed for the Treasury of the United
States as a New Year token ($18.75) for the safe returi/of my son.”
The names of four sergeants, four corporals, eleven privates
first class
and eleven privates were listed as contributors to
platoon
a fund of $40 which the Treasury received from a/GHsaspKHy of
*\
Army Engineers, apparently on foreign service. This is a
voluntary patriotic gesture to our fine Government,” wrote the
sergeant who collected the fund. An unnamed officer of the company
gave $8 of the $40, the sergeant said, and the enlisted men
gave the rest.
If a donation is made unconditionally, it goes into the
general fund of the Treasury. If the donor specifies a particular
use of his money, the amount is added to a Congressional
appropriation covering such a purpose. Every contributor
receives a Treasury acknowledgement.
the Treasury Department. I am therefore enclosing herewith $100
as such.”
A woman living in Brooklyn, N.Y., said: ”1 am enclosing $5
as a donation to our American soldiers on the fighting front
who are giving their lives to protect our civilians.”
The proprietor of a second-hand store in Seymour, Missouri,
sent $25 with the explanation that the sum represented the
proceeds of a pie supper at his place of business November 11.
”Please use this money to help whip Hitler and the Japs,” he added.
Two recent remittances not only aided the war effort but
also helped relieve the penny shortage. The postmaster at Oran,
MiBBOuri, forwarded 149 pennies to the Treasury, reporting
that a resident of Oran turned them in at the Post Office and
asked that the Government make use of them. ”He wanted nothing
in return,” the postmaster's message said. A woman's Bible class
in Austin, Texas, at about the same time sent 1,503 pennies to
be used for the purchase of oxygen for the Army Air Force.
A nine-year-old of Sacramento, California, became a benefactor
of the Coast Guard when he sent $20 with this letter: ”0n October
28 I will be 9 years old. My grandfather is giving me $20 for my
birthday. Here it is. My birthday will be a very happy one
if you will give this $20 to the Coa$fTGuard Academy at
‘3
"Some time ago I sent you one hundred and ten dollars. I am
now sending you four defense bonds I purchased while in the
Army. This will make up in full the money I received over
$21 a month, which I feel is sufficient pay for a soldier. Use
this money to purchase medical supplies for wounded soldiers."
Hundreds of regular contributors began making weekly
or
monthly remittances in 1942 or 1943. One of these, an American
oil company official stationed at Maracaibo, Venezuela, has had
his hew York bank send the Treasury $416 each month for the
last fourteen months, his total now being $5,824. Thirty-one checks
totaling $4,650.48 have been received since March, 1942, from
the proprietor of a souvenir store in Mexico City. The
storekeeper explained in the beginning that he intended to
remit 25 percent of each month’s sales by his store to American
citizens, and would add $200 occasionally out of his own means.
It is not unusual for a regular contributor to regard his
writers
or her donation schedule as a definite pledge. Letter^ now and
then
apologize to the Treasury for
failure to remit "on time."
Most of the expressions accompanying the gifts are brief
but heartfelt, such as this recent one from a Dayton, Ohio,
resident: "Because of the many blessings received from the
goodness of this country, I felt that I should make a gift to
General Dwight D. Eisenhower, Allied ^ ommander/-in-chief
in North Africa-Sicily-Italy, has just joined the list of
contributors. General Eisenhower received a $25 war bond
as a gift from a Philadelphia admirer, and forwarded it to the
adjutant general of the War Department at Washington with
a memorandum stating: "I request that you deliver this to the
United States Treasury with the request that proceeds be used
to further the war effort.’1
In the same mail was another $25 war bond which Private
Gilbert M. Tuoni, member of an Army boat company on duty at
an eastern port of embarkation, said he was presenting to the
Treasury "as my modest contribution toward our victory."
There have been many other gifts from military or
near-military sources. A Missourian who felt that he was
overpaid for the time he spent in the Army recently squared
his account in accordance with that view. Writing from St.
Louis, he said:
"Being an ex-soldier, having served seven months in the
U.S. Army, I feel that fifty dollars and up a month is too much
money to pay a soldier, especially one in training.
W9mx«xmm*
TREASURY D EPARBIENT
Washington
K E RELEASE,MORNING NEWSPAPERS
Sunday, December 5 , 1943
Press Service
No. 3 9 - 7 5
1275743
In the two years since the Japanese attacked Pearl Harbor,
men, women and children have donated to the
Government for war purposes a total of $ 3
,
f
^
a freasury
report revealed today.
Hie cash gifts, in amounts ranging upward from one cent,
came from almost as wide a variety of persons as could he found
in the returns from a Federal census. Seme of the contributors
not only made their donations hut also paid taxes and bought
bonds in large amounts; sane sent their gifts because they had
no taxes to pay; some donated their money instead of buying
bonds or war savings stamps because they "wanted nothing in
return."
•
.
Thousands of letters, all warm with simply-phrased love of
country, -have accompanied the contributions. The letters are filed
in the Treasury's Division of Bookkeeping and Warrants, and it
is not a mere figure of speech to say that in the rooms where
the files are kept, the wartime beat of the American heart
can be heard.
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS
Sunday, December 5, 1943
12/2/43
Press Service
No. 39-75
In the two years since the Japanese attacked pearl Harbor, approximately
40,000 men, women and children have donated to the Government.for war purposes
a total of $5,106,989*44, a Treasury report revealed today.
The cash gifts, in amounts ranging upward from one cent* came from almost
as wide a variety of persons as could be found in the returns from a Federal
census. Some of the contributors not only made their donations but also paid
taxes and bought bonds in large amounts; some sent their gifts because they
had no taxes to pay; some dohated their money instead of buying bonds or war
savings stamps because they ’’wanted nothing in return.”
Thousands of letters, all warm with simply-phrased love of country, have
accompanied the contributions. The letters are filed in the Treasury’s Divi
sion of Bookkeeping and Warrants, and
it is not a mere figure of speech to say
that in the rooms where the files are
kept, the wartime beatof the American
heart can be heard.
General Dwight D. Eisenhower, Allied cammander-in-chief in North AfricaSicily-Italy, has just joined the list of contributors. General Eisenhower
received a $25 war bond as a gift from a Philadelphia admirer, and forwarded
it to the adjutant general of the War Department at Washington with a memo
randum stating: ”1 request that you deliver this to the United States Treasury
with the request that proceeds be used to further the war effort.”
In the same mail was another $25
war bond which privateGilbert M. Tuoni,
member of an Army boat company on duty at an eastern port of embarkation, said
he was presenting to the Treasury ”as my modest contribution toward our victory.
There have been many other gifts from military or near-military sources.
A Missourian who felt that he was overpaid for the time he spent in the Army
recently squared his account in accordance with that view. Writing from St.
Louis, he said*
’’Being an ex-soldier, having served seven months in the U. S. Army, I
feel that fifty dollars and up a month is too much money to pay a soldier,
especially one in training.
’’Some time ago I sent you one hundred and ten dollars. I am now sending
you four defense bonds I purchased while in the Army. This will make up in
full the money I received over $21 a month, which I feel is sufficient pay for
a soldier. Use this money to purchase medical supplies for wounded soldiers.”
Hundreds of regular contributors began making weekly or monthly remittances
in 1942 or 1943. One of these, an American oil company official stationed at
Maracaibo, Venezuela, has had his New York bank send the Treasury $416 each
month for the last fourteen months, his total now being $5,824. Thirty-one
checks totaling $4,650.48 have been received since March, 1942, from the
proprietor of a souvenir store in Mexico City, The storekeeper explained in
the beginning that he intended to remit 25 percent of each month’s sales by
his store to American citizens, and would add $200 occasionally out of his own
means•
It is not unusual for a regular contributor to regard his or her donation
schedule as a definite pledge. Letter writers now and then apologize to the
Treasury for failure to remit "on time."
Most of the expressions accompanying the gifts are
such as this recent one from a Dayfcon, Ohio, resident:
blessings received from the goodness of this country, I
make a gift to the Treasury Department. I am therefore
$100 as such."
brief but heartfelt,
"Because of the many
felt that I should
enclosing herewith
A woman living in Brooklyn, N. Y., said: "I am enclosing $5 as a donation
to our American soldiers on the fighting front who are giving their lives to
protect our civilians."
The proprietor of a second-hand store in Seymour, Missouri, sent $25 with
the explanation that the sum represented the proceeds of a pie supper at his
place of business November 11. "Please use this money to help whip Hitler
and the Japs," he added.
Two recent remittances not only aided the war effort but also helped
relieve the penny shortage. The postmaster at Oran, Missouri, forwarded 149
pennies to the Treasury, reporting that a resident of Oran turned them in at
the Post-Office and asked that the Government make use of them. "He wanted
nothing in return," the postmaster's message said. A woman’s Bible class in
Austin, Texas, at about the same time sent 1,503 pennies to be used for the
purchase of oxygen for the Army Air Force.
A nine-year*i*old of Sacramento, California, became a benefactor of the
Coast Guard when he sent $20 with this letter; "On October 28 I will be 9
years old, My grandfather is giving me $20 for my birthday. Here it is. My
birthday will be a very happy'one if you will give this $20 to the Coast Guard
Academy at New London, Connecticut."
Ago matched the spirit of the California youngster’s contribution, in a
letter from Kingston, New York, reading; "Enclosed please find a small contri
bution (five dollars). I am an elderly man (nearly 77) who can have only
temporary employment, but I want to help a little, if I can, and want no
interest on anything I can do."
There was a heart throb, too, in a note from a Brooklyn woman: "Please
accept the enclosed for the Treasury of the United States as a New Year token
($18.75) for the safe return of my son."
3
The names of four sergeants, four corporals, eleven privates first class
and eleven privates were listed as contributors to a fund of $>40 which the
Treasury received from a platoon of Army Engineers, apparently on foreign
service. ’’This is a voluntary patriotic gesture to our fine Government,”
wrote the sergeant who collected the fund. An unnamed officer of the company
gave $>8 of the $40, the sergeant said, and the enlisted men gave the rest.
If a donation is made unconditionally, it goes into the general fund of
the Treasury. If the donor specifies a particular use of his money, the
amount is added to a Congressional appropriation covering such a purpose.
Every contributor receives a Treasury acknowledgment.
oOo
/
(
M S P ; 0ft
for such bills, whether on original issue or on subsequent purchase, and the amount
actually received either upon sale or redemption at maturity during the taxable
year for which the return is made, as ordinary gain or loss.
Treasury Department Circular Ho. 418, as amended, and this notice, pre
scribe the terms of the Treasury bills and govern the conditions of their issue.
Copies of the circular may be obtained from any Federal Reserve Bank or Branch.
-
2
-
Reserve Banks and Branches, following which public announcement will be made by the
Secretary of the Treasury of the amount and orice range of accepted bids.
Those
submitting tenders will be advised of the acceptance or rejection thereof.
The
Secretary of the Treasury exoressly reserves the right to accept or reject any or
all tenders, in whole or in part, and his action in any such respect shall be final.
Subject to these reservations, tenders for $100,000 or less from any one bidder at
99.905 entered on a fixed-phioe basis will be'accepted in full.
Payment of accepted
tenders at the prices offered must be made or completed at the Federal Reserve Bank
in cash or other immediately available funds on
-
December 9. 1943
£ 2^.
;
The income derived from Treasury bills, whether interest or gain from
the sale or other disposition of the bills, shall not have any exemption, as such,
and loss from the sale or other disposition of Treasury bills shall not have any
special treatment, as such, under Federal tax Acts now or hereafter enacted.
The
bills shall be subject to estate, inheritance, gift, or other excise taxes, whether
Federal or State, but shall be exempt from all taxation now or hereafter imposed
on the principal or interest thereof by any State, or any of the possessions of
the United States, or by any local taxing authority.
For purposes of taxation the
amount of discount at which Treasury bills are originally sold by the United States
shall be considered to be interest.
Under Sections 42 and 117 (a) (l) of the
Internal Revenue Code, as amended by Section 115 of the Revenue Act of 1941, the
amount of discount at which bills issued hereunder are sold shall not be considered
to accrue until such bills shall be-sold, redeemed or otherwise disposed of, and
such bills are excluded from consideration as capital assets.
Accordingly, the.
owner of Treasury bills (o^her than life insurance companies) issued hereunder
need include in his income tax return only the difference, between the price paid
/
& M k
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Friday. December 3. 1943______ *
£5
The Secretary of the Treasury, by this public notice, invites tenders
for $ 1,000.000.000 , or thereabouts, of „ 2 J _ -day Treasury bills, to be issued
fii"
,lt & T
on a discount basis under competitive and fixed-price bidding as hereinafter pro
vided.
The bills of this series will be dated
March 9. 1944
mature
interest.
December 9. 1943
. and will
, when the face amount will be payable without
They will be issued in bearer form only, and in denominations of $1,000,
$5,000, $10,000, $100,000, $500,000, and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the
Monday. December
6. 1943___ •
Tenders will not be received at the Treasury Department, Washington.
Each tender
closing hour, two o Tclock p. m . , Eastern War time,
must be for an even multiple of $1,000, and the price offered must be expressed
on the basis of 100, with not more than three decimals, e. g., 99.925.
may not be used.
Fractions
It is urged that tenders be made on the printed forms and for
warded in the special envelopes which will be supplied by Federal Reserve Banks
or Branches on application therefor.
'
Tenders will be received without deposit from incorporated banks and
trust companies and from responsible and recognized dealers in investment securi
ties.
Tenders from others must be accompanied by payment of 2 percent ef the face
amount of Treasury bills applied for, unless the tenders are accompanied by an
express guaranty of payment by an incorporated bank or trust company.
>
Immediately after the closing hour, tenders will be opened at the Federal
TREASURY DEPART M I T
Washington
POR RELEASE* MORNING NEWSPAPERS,
Friday, December 3, 1943«______
15 2-43
-
The Secretary of the Treasury, by this .public notice*
invites tenders for §!,•0 0 0 ,0 0 0 ,0 0 0 * or thereabouts, of
9 1 -day
Treasury bills* to be issued, on a', discount basis under compet
itive and fixed-price bidding as hereinafter provided.
The
bills of this series, will be dated December 9, 1943, and will
mature March. 9, 1944, when the face amount will be payable
without interest.
They will" be issued in bearer form only,
and in denominations of $>1 ,0 0 0 , $5 ,0 0 0 , $1 0 ,0 0 0 , $1 0 0 ,0 0 0 ,
$5 0 0 ,0 0 0 , and $1 ,0 0 0 , 0 0 0 (maturity' value).
Tenders will be received at Federal Reserve Banks and
Branches up to the closing hour, two o’clock p. m., Eastern
War time, Monday, December 6 , 1943* Tenders will not be re
ceived at the Treasury Department, Washington. Each tender
must be for an even multiple.of $1 ,0 0 0 , and the price offered
must be expressed on the basis or 1 0 0 , with not more than
three decimals, e. g., 9 9 .9 2 5 . Fractions may not be used.
It is urged that, tenders be made.on the printed forms and
forwarded in the special envelopes;which will be supplied by
Federal Reserve Banks or Branches on application therefor.
Tenders will be received without deposit from incorpo
rated banks and trust companies and from responsible and
recognized dealers in investment securities. Tenders from
others must be accompanied .by payment of .2 percent' of the
face amount of Treasury bills applied for,.unless the tenders
are accompanied by an express guaranty of payment by an in
corporated bank or trust company.
Immediately after‘the'-closing hour, tenders will be
opened at the Federal Reserve Banks and Branches, following
which public announcement will be made by the Secretary of
the Treasury of the amount and price range of accepted bids.
Those submitting tenders will be advised of the acceptance
or rejection thereof. The Secretary of the Treasury ex
pressly reserves the right to accept or reject any or all
tenders, in whole or in part, and his action in any such
respect shall be final, Subject to these reservations,
39-76
(Over)
2
tenders for $j>100,GOQ or less from any one bidder at 99*905
entered on a fixed-price basis will be accepted in full. Pay
ment of accepted tenders at the prices offered must be made or
completed at the Federal Reserve Bank in cash or other immedi
ately available funds on December-9, 1943i. :
The income derived from Treasury bills* whether interest
or gain from the sale or other disposition of the bills, shall
not have any exemption, as such, and loss from the sale or
other disposition of Treasury bills shall not have any special
treatment, as such, under Federal tax'Acta-now or hereafter
enacted. The bills shall be subject to estate, inheritance,
gift, or other excise taxes, whether Federal or State, but.
shall be exempt from all taxation now or hereafter imposed on
the principal or interest'thereof by any State, or any of the
possessions of the United States, or by any local taxing
authority. For purposes of taxation the amount of discount
at which Treasury bills are originally sold by the United States
shall be considered to be interest. Under Sections-42 and 117
(a) (1) of the Internal Revenue Code, as amended by Section 115
of the^Revenue Act,of 1941* the amount of discount at which
bills issued.hereunder are sold shall not be considered to
accrue until such bills shall be sold, redeemed or otherwise
disposed of, and such bills are excluded from consideration as
■capital assets. Accordingly, the owner of Treasury bills
(other than life insurance companies) issued hereunder need
include in his income tax return only the difference between
the price paid for such bills, whether on original issue or
on subsequent purchase, and the amount actually received either
upon sale or redemption at maturity during the taxable year for
which the return is made, as ordinary gain or loss*
Treasury Department Circular ITo. 418, as .amended, and this
notice, prescribe the terms of the Treasury bills and'govern
the conditions of their issue. Copies of the circular may be
obtained from any Federal Reserve Bank or Branch.
oOo-
«- 7 r
In both drives a minimum of from t■vro and one-half to seven times
as many people personally solicited bought bonds compared to those who
•were not personally solicited* What is more, it was precisely in the
non-urban market that the greatest increases in bond buying were
evidenced as a result of personal solicitation.., It is clear that we
have not reached the point of diminishing returns insofar as personal
solicitation is concerned.
That is the area of opportunity we are more fully cultivating.
But to do so effectively unnecessary hazards and obstacles must not be
placed in our path. To us, at the War Finance Division, this means one
thing, above all, at the present time — that S. 1457 should not be
enacted.
- 0O 0-
- 4 ..Some sponsors of: S. 1457 have charged that the Government is in
directly paying the cost of .War.Bond advertising inasmuch as the
individuals engaged in such advertising are permitted as a- practical
matter to charge the cost/1 of the advertising as a part of the cost
of operating the business*
fiitvt
|. 8 . . . . .
This is a dangerous half-truth* What those who favor Government
paid advertising fail to point out is that the very same firms; who
are sponsoring War Bond advertising today would be" advertising their
own products rather than War Bonds if 3. 1457 were enacted. And what
they fail to mention also is that advertising expenses incurred irithe promotion of commercial products or a trade name is likewise
deductible as a legitimate cost of operating a business.
The great merit of voluntary sponsored advertising has been its
ability to induce many advertisers to replace straight commercial copy
with War Bond copy.
Surveys of the Second and Third War Loan Drives indicate pretty
clearly where the areas for real improvement in our War Bond campaigns
really lie.
It is not primarily in advertising - rural or otherwise.
And in saying this I want to emphasize as strongly as I know how that
no group in' our national life has made a greater; contribution to the
success of the War Finance program than the rural.?press of this nation.
Ffom its raided has developed the rural advertising offensive of which
we at the Treasury are so proud. From its ranks•have been recruited
many of our greatest leaders. In- its columns, our messages have found
thrilling expression and the most faithful support,, The militant
volunteer support that we have received from this field is in the
finest traditions of the free press. It is because of the truly
American, volunteer support that w e have, received in such great
measure from the nation*s rural press that we are so reluctant to have
the relationship disturbed.
According to the surveys we have made, the real areas for impr ove—
ment in coming War Bond Drives lie, not in advertising, but in utiliz
ing more fully the opportunities for personal solicitation. Every in
vestigation that we have made and every report we receive from the
field underline again and again the importance of searching •out
Mr. John Q. Citizen at his home, approaching him at the factory bench,
calling on him at his office, seeking, him out, if necessary, in- the
fieldo This we have begun to dof During the Third Drive, both in
urban and rural areas, solicitors, reached more than twice 'as many
people as in the April Drive. Of more importance, while the solicita
tion campaign reached many more people than before, the effectiveness
of solicitation remained uh dimini shed*
- 5 -
It was also contended before the Senate Committee that War Bond
advertising copy is not of proper quality# The advertising released
to daily and weekly newspapers by the Treasury Department is written
by leading advertising agencies whose outstanding ability is recognized
by commercial advertisers and the advertising fraternity generally.
The best advertising brains in America*, specialists in framing appeals
to all strata of the population', are Available to the Treasury Depart
ment, without charge, through the facilities of the War Advertising^
Council - the very people who would have to be consulted, and paid, if
S. 1457 Were enacted into Taw*
An argument levelled against the present voluntary sponsored pro
gram is that the Treasury* is spending a very large sum of money in the
preparation of mats and materials which are sent to all newspapers in
the United States and which are not being used. Government paid
advertising, it is claimed, will eliminate this waste.
This charge is
completely unjustified, since all Treasury mats and materials, with what
we consider to be only unavoidable exceptions, are distributed only on
request.
r
It has been stated, also, that the nsme of the Government should
appear in,War Bond advertising. Advertisements now released by the
Treasury Department already include the statement nThis advertisement
prepared under the auspices of the U. S. Treasury Department and the
War Advertising Council”, thereby signifying its official nature.
It is regrettable that the Canadian experience has been drawn upon
to justify Government sponsored advertising.
I have tie greatest
admiration for the Canadian war effort and nothing that I say is intended
as a reflection upon it. I do believe, however, that while there are
many lessons in the Canadian experience we might profitably take to heart,
there are many pointers too that they might profitably pick up from us.
There is no warrant for the inference that "the high productivity
of the Canadian paid advertising plan in volume of sale s to individuals
and at l o w cost attest to the feasibility of the Government using its
own resources and controlling its official messages1*. It may well be
true, as the Committee Report asserts, that in Canada "all the press
advertising amounts to four and one—half hundredths of one percent of
the amount of bonds sold". But we repeat again what we said in another
connection *— <- there simply is no evidence whatsoever that advertising,
and advertising alone, is responsible for the notable War Bond record,
either of the Canadians or of ourselves, to date.
Furthermore, to declare, as does the Report, that "paid Government
advertisements must be used to persuade earlier buyers to retain these
Bonds" and, thus, cut down the number of redemptions, is to show a lack
of understanding of the Canadian experience. The redemption of Canadian
War Savings Certificates and the resale of their Victory Loan Bonos to
the banks are proceeding at a rate considerably higher than in the
United States.
_
an awareness in the minds of the public as to the .desirability of a given
product. That, voluntary sponsored advertising has done In greater
measure than -we ever had reason to expect.
Surveys conducted for the
Treasury indicate that from 84 to 90 percent of the-American public, in
urban and rural regions, are aware of War Bonds and War Bond Drives#
What is more, these suryeys indicate an ever-growing awareness of
War Bonds and War Bond. Drives* And the growth in awareness is greatest
precisely in those rural areas that, the sponsors of S. 1457 declare are
most in need of Government paid advertising# In the Second War Loan
Drive 67 percent of all those living in*rural areas knew of the drive;
in the Third War Loan, this awareness figure had jumped to 84 percent,
A recent study of Bond buying during the Third War Loan Drive in
dicates, moreover, that there was no difference whatsoever in the per
centage of the .non-farm population that bought extra Bonds in counties
with a town of *10,000 or over as, compared with the percentage of the
non-farm population that bought esetra Bonds in counties without a town
of 10,000# In both types, of co^dniti^s precisely the same proportion
of the people bought extra.War Bonds r-r 39 percent to be exact. And
since the income of people in counties with no large towns is lower,
it appears that they were more e$-equately covered by the Drive as many
of them bought extra Bonds in, spite of their lower incomef
Of equal interest in this connection, the advertising appearing
in weekly newspapers — and the weeklies, for the most part, circulate
in the smaller towns and cities — increased in Vfilue from $1,201,000
in the Second w ar Loan Drive to $1,942,000 in the Third War Loan# There
.was' also an increase in the number of separate advertisements run —
from 33,164 in the Second War Loan Drive to 63,846 in the Third.
This
is'a striking refutation to the claim b y various witnesses before the
Senate Committee of ”the growing resistance to locally sponsored Bond
advertising in smaller communities”#
It would be erroneous to infer that the striking results achieved
in counties with towns of population of 10,000 or less were produced by
advertising in weeklies alone, and we draw no such inference# We.do not
imagine that these smaller communities are closed off from,the rest of
America — that radio wave lengths stop at county boundaries -- that
farm and other magazines do not regularly go into these areas — that
newspapers published in larger cities are not read in the smaller com
munities — that these areas have been stripped of all the bill-boards
which carried War Bond messages in the Third War Loan Drive — • that
theaters viere suddenly nailed up in these areas, m th all their War Bond
trailers and patriotic posters# N o / ’we d o n ’t imagine any of these things
any more than we believe that, the 67,976,376 lines — the-equivalent of
about 40,000 pages — of Third War Loan advertising printed in weekly
newspapers was not read. But the report of the Senate Banking and Cur
rency Committee declared thats”the heavy barrage of eye appeals is
seldom, if ever, seen by 52$ of our population residing in the smaller
cities, towms and rural regions#”
*
nThe question of paid advertising presents
a serious problem for the Government* The
value of such advertising cannot be doubted,
and if the operation could be 'governed by
the same considerations as those which de
termine the action of private enterprises,
it would be much simplified*
A private en
terprise may advertise in a selected number
of mediums most useful for its purpose with
out any limitation except its own desires or
ability to pay, If the Government engages
in such a campaign, it must advertise in
every newspaper and periodical in America
without discrimination* All must have equal
treatment, and should have equal treatment*
The Government mu at be thoroughly democratic
and impartial in a matter of' this sort* To
make the advertisement thorough and effective,
it should be done on a broad and liberal scale*
The cost of .such ah undertaking vould be very
great and would exceed the appropriation which
the Congress has thus far made available for
the sale of Liberty Bohds*n
The development, since the Liberty Loan days, of radio broadcast
ing and the motion picture only give added force to this reasoning of
Secretary McAdop*
So much by way of general remarks on the proposed legislation*
I come now to the arguments advanced in favor of Senate Bill 14-57*
The sponsors of the measure take the position.that Government
paid advertising will evoke a sustained demand for Government securities
on the part of all citizens even though the advertising would- be permit
ted in weekly, semiweekly and triweekly newspapers wherever-published,
but as to daily newspapers would be limited to those published in
cities, towns, villages, townships and communities of 10,000 population ’
or less,
We of the War Finance Division do not share this view* While we
have a healthy respect for advertising learned from intimate association
With the industry and from experience in the War Bond Drives, we also
have a pretty fair idea of what may legitimately be expected from
advertising, and what may not*
There is no exact, automatic cause — effect relationship between
advertising and the sale of War Bonds any more than there is such
a relationship between commercial advertising and the sale of any
product.
The purpose of advertising, as tab understand it, is to create
Advertisers and the Outdoor Industry provided by all odds the most
expansive outdoor showing of all time, with 20,000 sponsored 24-sheet
poster panels and 30,000 donated by the industry* The estimated value
of the outdoor advertising was f>l,800,000, including car cards and
three-sheets;
The National Association of Broadcasters reports that advertisers
and radio stations devoted radio time and talent which they valued at
112,000,000 to Third War Loan messages to the public, throughout the days
and nights of the Drive.
This 5-week campaign put on by advertisers alone would have cost
a commercial sponsor 124,000,000 — double the proposed annual appropria
tion under S. 1457J
Add to this the value of publicity contributed by the motion picture
industry — producers, distributers, and exhibitors; chain radio and news
papers; department store displays; bank, school and railroad displays; and
most important of all, the selfless, untiring work of five million War
Bond volunteers, who without by-line or credit-line, carried the national
message, by word of mouth into every nook and cranny of the country; —
and one begins to form some comprehensive idea of the staggering scope of
this unparalleled undertaking.
Senate Bill 1457 authorizes and directs the Secretary of the Treasury
to purchase from 12-J- to 15 million dollars of advertising. To attempt to
duplicate out of public funds the estimated value of measurable advertis
ing contributed in support of the War Bond campaign during 1943 would re
quire, however, an authorization to spend a minimum of 100 million dollars.
And this estimate takes no account of the voluntary assistance of adver
tising agencies and millions of individuals whose contribution to the sell
ing effort is literally incalculable*
A 12 or 15 million dollar subsidy wall add nothing to the advertising
and publicity the Bond effort is already receiving.
On the contrary, it
may wrork ’irreparable harm. The War Finance•Division cannot, in good
conscience, ask some newspapers to contribute War Bond advertising volun
tarily as a patriotic service while others are free to withhold their
support until they receive a Government subsidy. Far from increasing the
total amount of advertising, a Government subsidy on the scale envisaged
by S, 1457 might decidedly lessen the volume we now enjoy.
The demand for Government sponsored advertising is nothing new.
Secretary McAdoo, directly in charge of the Nation’s Bond effort in the
last w?ar, had to face the problem. His words are worthy of quotation for
they express in essential particulars our views today:
Statement of Ted R* Gamble,
National Director of the War Finance Division of
the Treasury Department,
before the Committee on
Ways and Means of the House of Representatives.
December 3, 1943*
-V
As National Director of the United States Treasury Department’s War
Finance Division, entrusted with the task of promoting the sale of
Government securities, I feel it my duty to lay before you my views on
Senate Bill 1457 and the majority report of the Committee on Banking and
Currency which accompanies it*
Permit me to say, first of all, that, given the total tax revenues
under existing legislation, ’’The broad objective of a Nationwide stabilization plan can best be achieved”, as the Committee Report correctly
points out, ”by Government borrowing from all its citizens by means of
Bond sales to individuals*” It is iry considered opinion, however, that
the passage of S* 1 4 5 7 'and its enactment into law might well be the means
of retarding the very stabilization program it sets out to aid*
The Treasury today is already favored with the greatest advertising
operation in the history of the world — a consistent, carefully con
ceived effort reaching, we have reason to believe, into every city, town,
hamlet and county In America* This nation-wide effort, conducted along
voluntary lines, attains volume peaks, during drive periods, which have
never before been equalled on either a paid or a voluntary basis*
Let me itemize briefly the advertising record for the recent Third
War Loan Drive in September 1943*
Daily and Sunday newspapers published 88,947,War Bond advertisements *•
a total of 6l,573,5S8 agate lines, with a value at published national rates
of $6,697,353,45* Approximately 92*5 per cent of this space was paid for
by advertisers and about 7. 5 per cent was contributed by the newspapers*
Weekly aid semi-weekly newspapers carried 63,846 advertisements
aggregating 67,976,376 agate lines valued at $1,942,181*60* About 87 per
cent of this space was paid for by advertisers*
Daily and weekly newspapers published Third War Loan advertising
with a value of $8,639,540*05 of which 91*2 per cent was purchased by
advertisers*
At least $1,380,000 in magazine space was provided by advertisers
and the magazines themselves* Twro hundred and thirty-six general magazines
55 farm journals, and 513 business and trade magazines each contributed
a free Vfar Bond advertisement*
^ | | ^ ip i« p ^ q w « p p ig iP ()n ig m ia iM > w iiiu ii*iiv ii.i| iiiu i ........ .............................. .
‘ y .-*
—
|'
- 2 As you know, we now depend upon cooperation by advertisers,
publications, radio, and the advertising industry generally,,
to provide, without cost to the Treasury, the huge amount of
advertising space and time required to reach and convince
130 million people. By this means we are amply reaching all
the important markets that; would be available through this
subsidy.
The added impact, if there is any, would be of
doubtful value.
So far, our cooperative plan has worked very successfully.
Had the Treasury paid, for the advertising used during the three
weeks of the Third War Lba'n, it would have cost $30 millions.
This includes the value of only those advertisements, radio
programs, or billboards given over to War Bond promotion; it
does not take into account the innumerable ^reminders’* in
advertisements for products.
But we cannot continue this method if we pay some of those
cooperating, and leave the others in status quo* Hither we must
pay all or none. And it certainly seems wasteful to pay any of
them as long as the vast majority are willing to continue
supporting Bond drives on a patriotic basis.
At the Senate hearings on this Bill, it was indicated
that firms advertising Bonds can, as a result, take certain
credits on their tax liabilities which are not otherwise avail
able.
This is untrue,. Under present regulations, a firm is
permitted to regard a reasonable amount of advertising, if
this has been its custom in the past, as legitimate business
expense. Advertising, used to promote War Bends represents
conversion of publication or billboard space, or radio time,
which the advertiser would use otherwise to promote his
products or to keep his trade name alive during the war*
It
cannot be said, therefore, that the Treasury is paying for
Bond advertising even indirectly.
I think it might be wise for your Committee to lend its
weight now in stopping this proposal from becoming law, rather
than waiting until it has become law, and then attempting to
curtail the funds involved. Judging by any standards, the
money involved in this useless and dangerous subsidy repre
sents non-essential spending.
Sincerely,
(Signed) Henry Morgenthau, Jr*
Senator Harry 2, Byrd
United States Senate
Washington, D. C*
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Friday. December 3. 194.3 o
Press Service
No0 39—73
Secretary Morgenthau last night made public the following letter
to Senator Byrd, voicing the Treasuryfs opposition to the Bankhead Bill
scheduled to be taken up by the Ways and Means Committee of the House
of Representatives at 10:00 AoM©, today:
December 2, 194-3
Hjy dear Senator:
On November 14., 194-1> I made to the Joint Committee on
Reduction of Non-Essential Federal Expenditures, of which
I am a member, a number of recommendations for reducing non-
essential Government costs© Most of these recommendations
were taken, and resulting savings are noted in your recent
reporto
I should like now to call the attention of the Committee
to another potential waste of Government funds which, in my
estimation, should be stopped in its tracks0 I refer to the
$15 million subsidy to certain small newspapers, recently
voted by the Senate in the Bankhead Billo A companion bill
■ now in the House, calls for a similar subsidy of $30 millionso
At this time, when your Committee and most of the rest
of us are seeking ways of curtailing non-ressential Government
spending, I think this proposal to distribute a sizable amount
of the taxpayers* money'in such a way that it will not contri
bute to winning the war, or to any legitimate requirement-of
our economy, is inexcusable©
Ostensibly, this proposal was made in an effort to help
sell War Bonds0 I should like to have it on the record that
it will not help sell War Bonds, and as a matter of fact, it
is likely to prove an almost insurmountable hurdle to the
continued promotion of War Bonds©
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Friday. December
1943o
Press Service
No0 39-78
Secretary Morgenthau last night made public the following letter
to Senator Byrd, voicing the Treasury’s opposition to the Bankhead Bill
scheduled to be taken up try the Ways and Means Committee of the House
of Representatives at 10:00 A oil®, todays
December 2, 194-3
My dear Senator:
On November 14, 1941, I made to the Joint Committee on
Reduction of Non-Essential Federal Expenditures, of which
I am a member, a number of recommendations for reducing nonessential Government costs© Most of these recommendations
were taken, and resulting savings are noted in your recent
report©
I should like now to call the attention of the Committee
to another potential waste of Government funds which, in my
estimation, should be stopped in its tracks© I refer to the
§15 million subsidy to certain small newspapers, recently
voted by the Senate in the Bankhead Bill© A companion bill
now in the House, calls for a similar subsidy of §30 millions©
At this time, vrhen your Committee and most of the rest
of us are seeking ways of curtailing non-ressential Government
spending, I think this proposal to distribute a sizable amount
of the taxpayers* money'in such a way that it will not contri
bute to winning the war, or to any legitimate requirement of
our economy, is inexcusable©
Ostensibly, this proposal ?ras made in an effort to help
sell War Bondso I should like to have it.on the record that
it will not help sell War Bonds, and as a mat ten of fact, it
is likely to prove an almost insurmountable hurdle to the
continued promotion of War Bonds©
-
2
-
As you know, we now depend upon cooperation "by advertisers,
publications, radio, and the advertising industry generally,
to provide, without cost to the Treasury, the huge amount of
advertising space and time required to reach and convince
130 million people. By this means we are amply reaching all
the important markets that would be available through this
subsidy.
The added impact, if there is any, would be of
doubtful value.
So far, our cooperative plan has worked very successfully.
Had the Treasury paid for the advertising used during the three
weeks of the Third War loan, it would have cost $30 millions.
This includes the value of only those advert!sements, radio
programs, or billboards given over to War Bond promotion; it
does not take into account the innumerable ”reminders” in
advertisements for products*
But we cannot continue this method if we pay some of those
cooperating, and leave the others in status quo? Bither we must
pay all or none. And it certainly seems wasteful to pay any of
them as long as the vast majority are willing to continue
supporting Bond drives on a patriotic basis.
At the Senate hearings on this Bill, it was indicated
that firms advertising Bonds can, as a result, take certain
credits on their tax liabilities which are not otherwise avail
able. This is untrue. Under present regulations, a firm is
permitted to regard a reasonable amount of advertising, if
this has been its custom in the past, as legitimate business
expense. Advertising used to promote War Bonds represents
conversion of publication or billboard space* or radio time,
which the advertiser would use otherwise to promote his
products or to keep his trade name alive during the war.
It
cannot be said, therefore, that the Treasury is paying for
Bond advertising even indirectly.
I think it might be wise for your Committee to lend its
weight now in stopping this proposal from becoming law, rather
than waiting until it has become law, and then attempting to
curtail the funds involved, Judging by any standards, the
money involved in this useless and dangerous subsidy repre
sents non-essential spending.
Sincerely,
(Signed) Henry Morgenthau, Jr.
Senator Harry ?• Byrd
United States Senate
Washington^ D. 0.
Comparison of principal items of assets and. liabilities of national banks — continued
Page h
(In thousands of dollars)
? Oct. 18,
:
•
1943
LIABILITIES
Deposits of individuals, partner
ships and corporations:
Demand.........................J |.$
“i®®
30,901,323
. 9.501,37?
6.139
30,
1943
‘ June
s
$30,518,146
,
6,918
4.582,436
8 971,178
31,
9**2
! Dec.
i
:
$
!
;
m
26,730,691
8,307.5,19
,
9.073
4,833.109
2,695,194
Increase or decrease :
since June 30. 19k3 :
Amount :
Percent :
$383,177
530,201
-784
6,264,617 -
1.26
5.91
- 11.33
136.71
4 170,632
1 193,860
,
6
,013.994
14.37
-32.39
124.43
-91,310
-87,771
-3,39
-1.19
-58,177
11,138,239
-8.66
33.202
944.31
24,350
6.24
12.86
11.195.791
21.93
3.61
-13.921
6,694
-9.53
2.60
-7,227
72,092
95,315
20.035
~ -^*8
5.01
17.63
7* 84
187.kk2
180,215
8.39
k»82
11.376.006
20.77
11.178
3.20
Postal Savings deposits..... .
Deposits of U. S. Government.... . 10,8^7,053
Deposits of States and political
subdivisions.... .............
. 2,603.884
2.900,361
-10.22
-296,477
Deposits of hanks 1/*,.... .
7,156.360
7.401,534
• 7.313.763
157,403
2.20
Other deposits (certified and
cashiers1 cheeks, etc.).........
-20,kk3
633.962
Total deposits 1/............ .61,787.055
54,769.361
50,648,816
,
12.81
Bills payable, rediscounts & other
liabilities for borrowed money....•
36.718
4.231
3.516
32,487
Other liabilities................ .
UlH,6Ui
41,286
373.355
390,291
Total liabilities, excluding
. 62,238,^
55.146,947
51,042,623
,
CAPITAL ACCOUNTS
Capital stock:
Preferred stock.......
.
137,076
146,047
-4,950
Common stock...•••••••
. 1.364.329
1.360,932
1.357.635
3.397
.25
Total..........................
.
1,^98,008
1.503.682
-.10
•1,553
Surplus.........................
.^
1,438,645
. 1.510,737
, k
2*k5
Undivided profits...............
584,169
5*t0.524
51,670
8.85
Reserves..... ..................
255.504
•____ 275.539 ____ 268,555
6.98k
Total surplus, profits, and
reserves...... ..........
. 2,422.115
2.327.397
9k.718
2.234,673
4.07
Total capital accounts........► 3.918,570
3,825,405
2.kk
3,738,355
Total liabilities & capital
accounts 1/............... , 66.156.98*1
58,972.352
54,780,978 .7,184,632
12*18
Reciprocal balances with banks in
the United States................ . . 360,484 ____ 327.657
349.306
10.02
32.827
Ratio of loans to total deposits...
lbTW
NOTE: Minus sign denotes decrease.
1/ Excludes reciprocal interbank demand balances with banks in the United States, the amounts of
613,519
671,696
7 017,694
3.22
767.83
11.06
7 091.467
132,126
1 496.455
635.839
1 74.673
36 06
93.165
Increase or decrease
since Dec. 31. 19k2
Amount
: Percent
$ ,
,
15.60
21.99
which are shown above.
statement showing comparison of principal items of assets and. liabilities of active national baxtfcs as of
October IS, 19^3, June J>0, l9*+3» and December 31 , 1942
(in thousands of dollars)
s
:
i
•
dumber of banks,...................
ASSETS
Loans on real estate........ ......
Other loans, including overdrafts*.
Total loans................... .
U. S, Government securities:
Direct obligations..............
Obligations fully guaranteed,.,.
Total U. S. securities..... .
Obligations of States and
political subdivisions..........
Other bonds, notes and
debentures.......................
Corporate stocks, including stock
of federal Reserve Banks........
Total investments......... .
Total loans and investments...•
Currency and coin..................
Reserve with federal Reserve Banks.
Balances with other banks 1/......
Total cash, balances with
other banks, including re
serve balances and cash
items in process of
collection l/........ ..........
Other assets.......................
Total assets l / ................
Oct. 18, : June 3 0 ,
1943
:
19*+3
•
«
5.058
5,066
: Dec* 3 1 ,
19 I+2
*
•
•
5,087
: Increase or decrease : Increase or■ decrease
: since June 30, 1943 ! since Dec. 31, 1942
Amount
:
Percent : Amount
:
Percent
-8
- .1 6
-29
-.57
($2 ,136,260
( 7 .053.883
9 ,1 9 0 ,1^3
1 0 ,7 7 5 .3 16
$2,187,264 )
8 ,0 13 ,5 3 4 )$1 ,5 8 5 ,17 3
10,200,798
1 .5 8 5 .17 3
(2 g. 5 1 4 .63 u
( 1,675.768
35.709.814 30,190,1+02
2 2 ,2 6 1,4 10 >
5 ,5 19 ,4 12
1 ,56 3.9 4 1 )
5 .5 19 .4 12
2 3 .8 2 5 .3 5 1
$ 1 0 ,7 7 5 ,3 1 6
3 5 .70 9 .8 1 ^
17.25
$ 5 7 4 ,5 18
5 .6 3
17.25
5 7 4 ,5 18
5 .6 3
18.28
11,884,463
49.88
18.28
11,884,463
49.88
1,984,169
2 .026,333
2,022,493
-42,164
-2.08
-38,324
-1.89
1,266,527
1,340,099
1,441,184
-73.572
- 5.4 9
-174,657
-12.12
1 4 5 ,8 1 1
171.744
33.728.578
42,918,721
806,51+6
7.853.296
6,567.5^9
19 3 .76 0
-25.933
,
6 ,9 62,9 16
6 ,5 2 1
2 3 ,0 17
166,30 9
- 1 5 .1 0
1 5 .9 4
16.22
.81
.29
2.53
-47,949
11.623.533
12,198,051
79.568
-373.200
-533.400
- 2 4 ,7 5
42.29^
3 2 .3 7
10 .8 5
-4 .5 2
- 7 .3 4
195.847
25,869
7,184,632
1.29
3.13
12,18
-827,032
4,987
"
1 1 ,376,006
- 5.09
.5 9
2 0 .7 7
39.106.321
U 9 ,8 8 1,6 3 7
8 13,0 6 7
7 .3 7 6 .3 13
6 ,733.858
15,U23,238 15.227,391
826 ,21+0
852,109
6 6 ,1 5 6 ,981+ 58,972,352
27,1+82,788
37.683,586
733.499
8,249.513
7 ,267,258
1 6 ,250,270
81+7,122
5 4 .780,978
5 377,743
- 2
decreased $1^2,000,000 since June and $261,000,000 since December last year.
Cash of $613,000,000, balances with other hanks, including cash items in
process of collection, of $ 6 ,73 ^»000 ,000 , and reserves with federal Reserve
hanks of $ 7 >6 7 6 ,000 ,000 , a total of $1 5 »^-2 3 »000 ,000 , increased $1 9 6 ,000,000
since June hut showed a decrease of $627,000,000 under the amount reported in
December last year.
The unimpaired capital stock of the hanks on October 16, 19 U 3 , was
$1,^96,000,000 including $132,000,000 of preferred stock.
Surplus of $1,511
undivided profits of $6 36 ,000 ,000 , and reserves of $ 2 7 5 ,000 ,000 , a total of
$2,^22,000,000, increased $95,000,000 since June and $167,000,000 since
December 19^2.
The percentage of loans and discounts to total deposits on October 16, 19 ^3 ,
was 1 7 .I&, in comparison with 1 6 .7 8 on June 3 0 , 19 ^ 3 , and 20.lU on December 3 1 ,
19^2.
TREASURY DEPARTMENT
Washington
FOR RELEASE,
Press Service
7,
/ r/
~7c^
3 9- 7 ?
The total assets of national hanks on October IS of this year amounted
to more than $66 ,000 , 000 , 000 , it was announced today by Comptroller of the
Currency Preston Delano*
Returns from the call covered the 5*^58 active national
banks in the United States and possessions.
The assets reported were greater by
$ 7 , 000 , 000,000 than those reported by the 5,066 national banks on June 30, 19^3 ,
the date of the previous call, and an increase of $11,000,000,000 over the
amount reported by the 5>087 active banks on December 31 * 19^2 .
The deposits of the national banks on October IS, 19^3* were nearly
$ 62 , 000 ,000 , 000 , an increase since June 3^* 19^-3
of
$ 7 *000 , 000 , 000 , and an in
crease since December 31 last year of $11 , 000 , 000 , 000 .
Included in the current
deposit figures are demand and time deposits of individuals, partnerships and
corporations of $ 30 , 901 , 000,000 and $9 , 501 , 000 , 000 , respectively, United States
Government deposits, including War loan and Series E bond accounts of
$10,8^7,000,000, deposits of States and political subdivisions of $2,600,000,0
J
postal savings of $ 6 ,000 ,000 , deposits of banks of $ 7 ,31 ^,000 ,000 , and certified
and cashiers* checks, cash letters of credit and travelers1 checks outstanding
of $ 61 ^,000 ,000 .
Loans and discounts were $10,775*000,000, an increase of $1,585*000,000, or
17 percent, since June 30 , 19^3* and an increase of $575»000,000, or nearly 6
percent, since December 31* 19^2,
Investments in United States Government obligations, direct and guaranteed,
of $ 3 5 ,7 1 0 ,000 ,000 , showed an increase of $ 5 *5 1 9 *000 ,000 , or over IS percent,
since June 30 , 19^3, and an increase of $11,SS^,000,000, or nearly 50 percent,
since December 19^2.
Other bonds, stocks and securities held of $ 3 ,39 7 »°00 »000,
which included obligations of States and political subdivisions of $1 ,98^,000,000,
TREASURY DEPART MEM?
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Tuesday, December 7,1945*______
12-4-43
Press Service
No. 39-79
The total assets of national Banks on October 18 of this
year amounted to more than $6 6 ,0 0 0 ,0 0 0 ,0 0 0 , it was announced
today by Comptroller of the Currency Preston Delano.
from the call covered the
5,0 5 8
United States and possessions.
Returns
active national banks in the
The assets reported were greater
by $7 )0 0 0 ,000,000 than those reported by the 5,066 national
banks on June 30^1943, the date of the previous call, and an
increase of $1 1 ,0 0 0 ,0 0 0 ,000 over the amount reported by the
5,087 active banks on December
1942.
The deposits of the National banks on October 18, 1943,
were nearly $62,000,000,000, an increase since June 30, 1943 of
$7,000,000,000, and an increase since December 31 last year of
$1 1 ,0 0 0 ,0 0 0 ,0 0 0 . Included in the current deposit figures are
demand and time deposits of individuals, partnerships and cor
porations of $3 0 ,9 0 1 ,000,000 and $9 ,5 0 1 ,0 0 0 ,0 0 0 , respectively,
United States Government deposits, including War loan and
Series E bond accounts of $10,847,000,000, deposits of States
and political subdivisions of $2,600,000,000, postal savings of
$6 ,0 0 0 ,0 0 0 , deposits of banks of $7 ,3 1 4 ,0 0 0 ,0 0 0 , and certified
and cashiers’ checks, cash letters of credit and travelers’
checks outstanding of $6 1 4 ,0 0 0 ,0 0 0 .
Loans and discounts were $10,775,000,000, an increase of
$1,585,000,000, or 17 percent, since June 30, 1943, and an in
crease of $575,000,000, or nearly 6 percent, since December 31,
1942.
Investments in,United States Government obligations, direct
and guaranteed, of $35,710,000,000, showed an increase of
$5,519,000,000, or over 18 percent, since June 3 0 , 1943, and an
increase of $11,884,000,000, or nearly 50 percent, since Decem
ber 1942. Other bonds, stocks and securities held of
$3,397,000,000, which included obligations of States and politi
cal subdivisions of $1 ,9 8 4 ,0 0 0 ,0 0 0 , decreased $1 4 2 ,000,000 since
June and $261,000,000 since December last year#
- 2 -
Cash of $813,000,000, balances with other banks, including
cash items in process of collection, of $>6 ,7 3 4 ,0 0 0 ,0 0 0 , and re
serves with Federal Reserve banks of $>7,876,000,000, a total of
$15,423,000,000, increased $196,000,000 since June but showed a
decrease of $827,000,000 under the amount reported in December
last year.
The unimpaired capital stock of the banks on October 18,
was $1,496,000,000 including $1 3 2 ,0 0 0 , 0 0 0 of preferred
stock. Surplus of $1,511,000,000, undivided profits of
$636 ,0 0 0 ,0 0 0 , and reserves of $2 7 5 ,0 0 0 ,0 0 0 , a total of
$2 ,4 2 2 ,0 .
6 0 ,0 6 0 , increased $95,000,000 since June and $187,000,000
since December 1942.
1943 ,
The percentage of loans and discounts to total deposits qn
October 18, 1943, was 17.44, in comparison with 16.78 on June 30,
1943, and 20.14 on December 31, 1942.
Page
3
Statement showing comparison of principal items of assets and liabilities of active national banks as of
October 18, 1943* June 30» 1943, and December 31, 1942
(In thousands of dollars)
:
t
Number of banks.........................
Oct. IS, i
19^3
:
June 30*
:
Dec. 3 1 ,
19^3
1942
5,-058
5,066
5,087
$1 0 ,7 7 5 ,3 1 6
($2 ,136,260
7 ,0 53,8 83
10.775,316
9,l90,lte
Increase or decrease ; Increase or decrease
; since June 30, 1943 : since Dec. 31, 1942
;■ Amount
: Percent
: Amount.
: Percent
-8
-. 16
-29
-,57
ASSISTS
Loans on real estate...... ...........
Other loans, including overdrafts...
Total loans..,...... ........ ......
U. S. Government securities;
Direct obligations....... .... .....
Obligations fully guaranteed.....
Total U. S. securities. ........ .
Obligations of States and
political subdivisions.............
Other bonds, notes and
debentures..... .... . ...... ..... ....
Corporate stocks, including stock
of Federal Reserve Banks..-.*...,. ..
Total investments...... .........
Total loans and investments*,....
Currency and coin............... .
Reserve with Federal Reserve Banks..
Balances with other banks l/....— •.
Total cash, balances with
other banks, including reserve balances and cash
items in process of
collection l/...............,..
Other as sets#
*••
assets X/»
* • • • •#
35l709.8l4 (28,514,634
( 1 ,6 75,76 8
35,709.81^ 30,190,402
$2,187,26!* )
$1,585,173
17.25
$57“+,518
5 .6 3
10,200,798
1,585,173
17.25
574,518
5.63
22 .261,410 )
1 .56 3 ,9“a )
5 .519 ,412
18.28
11.884,463
49.88
23,825,-351
5 ,519.^12
18.28
11,884.463
49.88
8 ,013.53“+ )
l . J Z k . l b S
2,026,333
2 .022,493
-42,164
-*2.08
1.266,527
l,3te,099
1.441.184
- 7 3 ,5 7 2
-5.“+9
-17“+,657
-12.12
1^5.811
39,106,321
49 ,88 1,6 37
193.760
-25,933
5,-377,743
6 .962,916
6,521
- 1 5 .1 0
1 5 .f t
6,733.858
171,7^
33,728,578
42,918.721
806,546
7,853,296
6 ,5 6 7 ,5te
.81
.29
2.53
-+*7.9“*9
11,623,-533
12,198,051
79.568
-373.200
-533,“+00
-2+*. 75
42.29
32.37
10.85
-4.52
- 7 , 3 “*
15.te3.238
852,109
66 ,156 ,9 ft
15,227,391
826,240
58,972,352
1.29
3.13
12.18
- 827,032
“+,987
1 1 .3 7 6 ,00 b
-5.09
.59
20.77
813,067
7 ,8 76 ,313
27,482,788
37,683,586
7 3 3 ,“+99
2 3 ,0 1 7
8,2te.513
7 ,26 7,2 58
166.309
16 .250,270
195,81*7
847,122
5“)-.780.978
25,869
7 ,13l*, 632
16 .22
- 3 8 ,32 !*
-I .8 9
Comparison of principal items of assets and liabilities of national banks - continued
Page *+
(in thousands of dollars)
Oct. 18, ; June 30, : Dec. 31, 1
Increase or decrease : Increase or decrease
19*+2
:
1943
:
since June 30, 19*+3 + since Dec.- 3 1 , 1942
1943
:
Amount
: percent : Amount
; Percent
*
LIABILITIES
Deposits of individuals, partner
ships and corporations:
$3 0 ,518 ,l *+6 $ 26 ,730 ,6 9 1
$*+,170 ,6 32
1 .2 6
15.60
**».*• $30*901,323
Demand ....... .
#383,177
530,201
1 ,193,860
8,971,178
Time. ....... -.......... .
9*501, 379
8 ,30 7,5 19
l*+.37
5*91
-78*+
6,918
Postal Savings deposits.... .
6,13*+
-32*39
“ 2,-939
-11*33
9 ,0 73
6 ,26*+,617
6 ,0 1 3 ,9 *+*+ 12*+.-*+3
*+,582 ,*+36
1 3 6 .7 1
4,833,109
Deposits of 17- S. Government...... 10,8*+7,053
Deposits of States and political
- 10 .2 2
2 ,900,361
2,695,194
subdivisions. ............... .
2 ,603 ,88 *+
- 296 ,*+77
“91,310
-3.39
2.2 0
7 ,156,360
7,401,534
Deposits of banks l/ .............. 7*313*763
-1*19
157, *+03
-87*771
Other deposits (certified and
-8.66
633.962
- 20 ,l+*+3
-3 * 2 2
671,696
cashiers* checks, etc.)...*.*..*
6 13,519
-58,177
12.81
7 ,0 17,6 9 4
5076*+8,8l6
Total deposits 1/.... ........ 61,787,055
21.99
54 ,76 9 ,36 1
11,138,239
Bills payable, rediscounts & other9*+*+.3l
33,202
32,487
liabilities for borrowed money..
767*83
3,516
36,718
4,231
6 .2*+
I
I
.06
*+l,
286
2
*
+,
350
4i4,64i
Other liabilities.. .. .............
390,291
373,355
Total liabilities, excluding
12.86
7 ,091,467
55,146,947
capital accounts l/ .......... 62,238,1+1 *+
51,0*+2.623
21*93
11,195*791
CAPITAL ACCOUNTS
Capital stock;
- 3.61
132,126
-4,950
“13,921
preferred stock* ................
137,076
146, o 47
-9.53
6 ,69*+
Common stock........ ........
*25
.*+9
1,357,635
3,397
1,364,329
1,360,932
-.10
1,*+98,008
1*503,682
Total.........................
-7,227
1,496,455
-1*553
72,092
5 .0 1
1,438,645
Surplus...... .
... .......... 1,510,737
36768 *
2.*+5
1 ,474,673
8.85
534,169
540,524
17.63
51,670
Undivided profits*. ...............
95,315
635,839
255,504
7.8*+
6 ,98*+
2.60
R 6S 6PV 6S« •«••r# •••••r••» •♦♦♦••••
20,035
268,555
275*539
Total surplus, profits, and
94.718
187, *+*+2
reserves *...*. ..........»*- 2,1+22,115
*+.07
8*39
2.327,397
2,234,673
*+.82 "
2.*+*+
Total capital accounts.......* 3,918.570
180,215
93,165
3,825.405
3,738,355
Total liabilities & capital
11 ,376,006
12.18
54,780,978
7,184,632
accounts 1/. ........ ..... ... 66 ,156 ,98*+
20.77
58,972,352
Reciprocal balances with banks in
10.02
3*20
11,178
3*+9,306
32,827
360,*+8*+
--the United States. ..............
327,657
20.1 *+$
Ratio of loans to total deposits.. —
lb.78$
1 7 .41$ .
1 /ExcludesUr e c ip r o c a l ° i n t e r banked emand balances with hanks in the United States, the amounts of which are shown above.
December 2, 1943
STATUTORY DEBT LIMITATIOS
AS OP NOVEMBER. ^P* 1943
^Section 21 of the Second Liberty Bond Act, as amended, provided that the
face amount of obligations issued under authority of that Act, * shall not exceed
in the aggregate $210,000,000,000 outstanding at any one time*
The following table shows the face amount of obligations outstanding and the
face amount which can still be issued under this limitations
Total face amount that may be
outstanding at any one time
$210 ,000 ,000,000
Outstanding as of November 3®» 19^3*
Inters st-bearing s
Bonds $67,940,349,000
Treasury
Savings (Maturity
33,022,858,825
value)*
Depositary
399,82*4,25©
719*672,907
Adjusted Service
i
$ 1 0 2 ,0 8 2 ,7 0 * ,9 8 2
27,687,610,400
Treasury notes
Certificates of
Indebtedness
Treasury Bills
(Maturity value)
28 ,066 ,911.000
13*073*822,000
Matured obligations, on
which interest has ceased
Bearing no interest (W,S,
Savings stamps )
68.828.343.400
200,825,575
202,415,459
Face amount of obligations
issuable under above authority
171.3l4,289,4l6
$ 38 ,6 8 5 *7 10*534
Beconcilement with Daily Statement of the United States Treasury
November 10* 1943
Total face amount of outstanding public debt obligations
issued under authority of the Second Liberty Bond Act,
Deduct, unearned discount on Savings bonds (difference
between current redemption value and maturity value)
Add other public debt obligations outstanding but not
subject to the statutory limitations
Interest-bearing (Pre-War, etc*)
$195*942,720
Matured obligations on which
- ^
interest has ceased
Bearing no interest
9bbtQ7b tlS2
Total gross debt outstanding as of November 3®» 19^3
♦Approximate maturity value* Principal amount V current
redemption valuei according to preliminary public debt
statement $26,697»013*319
3 9 - Z
0
$171,314,289*416
164.988.W3,910
1.164.956.325.
8i66.l58.4QO.235
December 6, 1943
STATUTORY DEBT LIMITATION
AS OR NOVEMBER 30. 1943
Section 21 of the Second Liberty Bond Act, as amended, provided that the
face amount of obligations issued under authority of that Act, 11shall not exceed
in the aggregate $210,000,000,000 outstanding at any one time."
The following table shows the face amount of obligations outstanding and the
face amount which can still be issued under this limitation;
Tbtal face amount that may be
outstanding at any one time
$ 210 , 000 , 000,000
Outstanding as of November 30, 1943:
Int e re st-b ear ing:
Bonds Treasury
$67,940,349,000
Savings (Maturity
value)*
33,022,858,825
Depositary
399,824,250
Adjusted Service
719.672.907
Treasury notes
Certificates of
Indebtedness
Treasury Bills
(Maturity value)
$102,082,704,982
27,687,610,400
28.066.911.000
13.073.822.000
Matured obligations, on
which interest has ceased
Bearing no interest (U.S.
Savings stamps)
68.828.343.400
$170,911,048,382
200,825,575
202.415.459
Face amount of obligations
issuable under above authority
171,,314.289.416
$ 38,685.710.584
Reconcilement with Daily Statement of the United States
Treasury. November 30, 1943
Total face amount of outstanding public debt obligations
issued under authority of the Second Liberty Bond Act.
Deduct, unearned discount on Savings bonds (difference
between current redemption value and maturity value)
Add other public debt obligations outstanding but not
subject to the statutory limitation:
Interest-bearing (Pre-War, etc.)
$195,942,720
Matured obligations on which
interest has ceased
7,936,840
Bearing no interest
966.076.765
Total gross debt outstanding as of November 30, 1943
*Approximate maturity value,
principal amount (current
redemption value) according to preliminary public debt
statement $26,697,013,319
39-80
oOo-
$171,314,289,416
6.325.845.506
164,988,443,910
1.169.956.325
$166,158,400,235
wii..
, ,ys. .‘tt,, 1s csgssssacsv*
TBEASUHT S « l l S S B
fvaehington
tor b e u a s k
, m m m
b w s p a p o s
Press Service
,
Ttt«»day. Pac M t e w 7. 1943.------
The Secretary of the treasury announced last evening that the tenders for
H fQG0,0OO,OQO# or thereabouts, of 91-day treasury bills to be dated Deeeaber 9, 1943,
m iiftto nature March 9, 1944, which were offered on Decesteer 3, mere flfsod at the Fed
eral Reserve Banks on December 6*
The details of this Issue are as follows:
Total applied for — $1,694,400,000
Total accaptad
- 1,011,652,000
ill)
Average price
M
(include. £3.887,000 entered on a fi»d-prio.
basis at 99.905 and accepted in full)
- 99 ^905/ Equivalent rate of discount approx. 0.375s per annua
Hangs of accepted cospetitive bids:
- 99.910 Equivalent rate of discount approx. 0.35M per s s »
- 9 9 .9 0 5
low
*
e
e
*
«
0 .3 7 6 $
«
*
(5 2 parent of the awrant bid for at the low price was accepted)
Total
Federal Beeerve
Total
District------
teSAgaisE.
Boston
New fork
Philadelphia
Cleveland
# 15,155,000
1,153,216,000
82,836,000
63.705.000
.
13 862.000
Richaond
8,665*000
Atlanta
167 ,263,000
Chicago
Minneapolis
Kansas City
Dallas
San Francisco
110 . 686.000
#1,696,600,000
51,011,652,000
.
23 821.000
19,966,000
TOTAL
8 ,003,000
109 ,2a , 000
19.990.000
6 ,366,000
21.589.000
18.862.000
77.776.006
31.270.000
6,395,000
St. louia
10.067.000
612,977,000
66.660.000
50.985.000
10.958.000
TREASURY DEPARTMENT
Washington
Press Service
FOR RELEASE| MOEKING HEWSPAPSRS,
Tuesday. December 7. 1943.
3 f 'M
The Secretary of the Treasury announced last evening that the tenders for
11,000,000,000, or thereabouts, of 91-day Treasury bills to be dated December 9, 1943,
and to mature
larch
9, 1944,
which were
offered on December 3, were opened at the Fed
eral Reserve Banks on December 6.
The details of this issue are as follows;
Total applied for - $l,694j400,GQ()
Total accepted
- 1,011,452,000
Average price
(includes $63,887,000 entered on a fixed-price
basis at 99.905 and accepted in full)
- 99.905/ Equivalent rate of discount approx. 0.375$ per annum
Range of accepted competitive bids:
High
Low
- 99.910 Equivalent rate of discount approx. 0.356$ per annum
- 99.905
**
»
»
M
**
0.376$ n
tt
(52 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Total
Aoolied for
Total
Accepted
Boston
Mew York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St, Louis
Minneapolis
Kansas City
Dallas
San Francisco
1
i
TOTAL
15,155,000
1,153,216,000
82,836,000
63.705.000
13.862.000
8.145.000
167,263,000
31.270.000
4.395.000
23.821.000
19,946,000
110.486.000
$1,694,400,000
10 ,067 ,ocx)
612.977.000
66,660,000
50.985.000
10.958.000
8,003,000
109.241.000
19.990.000
4,366,000
21.589.000
18.842.000
77.774.000
|1,011,452 ,000
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
T u e s d a y , D e c e m b e r 7* 1 9 4 3 •
1 2 - 6 - 4 2 ----—
----- ---------The
Secretary
the te n d e r s
ury bills
1944,
of t h e T r e a s u r y a n n o u n c e d
for $1,000,000,000,
details
1943,
o f f e r e d on D e c e m b e r
eral R e s e r v e B a n k s
on D e c e m b e r
of t h i s
last
or thereabouts,
t o b e d a t e d D e c e m b e r 9,
which were
The
Press Service
N o . 39*^81
and to
3, w e r e
evening that
of 9 1 - d a y T r e a s
m a t u r e M a r c h 9,
o p e n e d at t h e F e d
6*
issue are as
follows:
Total applied for - $1,694,400,000
Total accepted
1,011,452,000 (includes $63,887,000
e n t e r e d on a f i x e d - p r i c e b a s i s a t 9 9 . 9 0 5 a n d a c c e p t e d
in f u l l )
Average price
- 9 9 * 9 0 5 / E q u i v a l e n t r a t e of d i s c o u n t a p p r o x
0 . 3 75/o p e r a n n u m
Range
c o m p e t i t i v e b ids:
of a c c e p t e d
High
- 99*910 Equivalent
0 . 3 5 6/o p e r
- 9 9 .9 0 5 E q u i v a l e n t
0.37^o per
Dow
(52 p e r c e n t
of t h e a m o u n t
bid for at t he l o w p r i c e wa s accepted)
Federal R eserve
District
Total
Applied for
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. L o u i s
Minneapolis
Kansas C i t y
Dallas
San F r a n c i s c o
$
TOT A D
r a t e of d i scount a p p r o x
annum
r a t e of d i s c o u n t a p p r o x
annum
1 5 ,1 5 5 , 0 0 0
1 ,1 5 3 ,2 1 6 , 0 0 0
8 2 ,8 3 6 , 0 0 0
63.705.000
13.862.000
8.445.000
167,263,000
Total
Accepted
$
10,067,000
612.977.000
66,660,000
50.985.000
.
1 0 958.000
8 ,0 0 3 ,0 0 0
4.395.000
23,821,000
19,946,000
110,486,000
109.241.000
19.990.000
4,366,000
21.539.000
18.842.000
77,774,000
$1,694,400,000
$1,011,452,000
31,270,000
2
• C P m * QAkD M H f r S j / GOMBSR
i-Ap WASTE, SLIVER WASTE, AND ROVING WASTE,.
* W H E T H E R 'OR N O T MANUFAC^U&JSD O R O T H E R W I S E A D V A N C E D 1 $ T O p *
commencing September 20, 'by- Coun tries of Origin:
A nnual ,quo,tas
Total quota, provided, However, that not more than, 33-0./3 percent/, of- t^e,,
quotas shall he filled by cotton wastes other than card strips/.jan.d comber
wastes made from cottons of-1— 3/16 inches or more in staple ■lepgth in the •
case of the following countries:
United Kingdom, France, Netherlands,
Switzerland, Belgium, Germany and Italy:
— -------------------- — __________ (In, Pounds)_________ _ _ _ ___________________
t
■
TOTAL IMPORTS*"1'*:EStABDTSHEDTImports Sept* 20,
Country of Origin : Established :Sept, 20,. 1943 :33~l/3$ of :1943, to
■
...
, { TOTAL QUOTA :
37, 1943 iTotal- Quota: Nov« 27, 1943
l/
Unitea Kingdom......
4,323,457
Canada../.........,.239,690 *
France.........
227,420
British India.......
69,627
Netherlands.........
68,240
Switzerland....,...*
44,388 *
Belgium........... *
38,559
Japan«•*** *.*••**..•
341,535
China......... .
17,322 T
Egypt*...... .......
8,135 T
Cuba....................... 6,544
Germany....,.... .
76,329
Italy........
21,263
ft^-ALS
.■*/*■*/—
'
*
—
v
'
1,441,152
‘ ‘
75,807
22,747 -•
,14,796
l£,853
*
—
-
-' 1
5,482,509
—
—
«
'
W; ■'
'
~
«.» ■
^4
’ -
~
25,443
7,088
'
"
•
1,599,886
----=----------------------- -
Xj— Included in total imports,-column 2.
5/- The BreBident‘s proclamation, signed March 31, 1942, exempts from import
- quota restrictions card strips made from cottons having a staple 1-3/16
inches or more in length.
— OUCH*
POE IMMEDIATE RELEASE,
December 7. 1943.
The Bureau of (histoms announced today that preliminary reports'from the
collectors of customs fehov imports of cotton and cotton waste chargeable to the
import quotas established ^y the President’.s proclamations of September 5, 1939
and December 19, 1940, as follows, during the.period September 20, 1943, to
November 27, 1943s
:'
COTTON HAVING A STAPLE OP LESS THAN 1-11/l6 INCHES■(OTHER-THAN' HARSH OR HOUGH
COTTON OF LESS THAN 3/4 INCH IN STAPLE.LENGTH AND CHIEFLY USED-IN THE' MANU
FACTURE OF BLANKETS AND BLANKETING, AND OTHER THAN LINTERS);'" Annual quotas
commencing September 20, by Countries of Origin*.
(In Pounds)
Country of
Origin-1 •
_ ___ _______
:
Staple length less
: Staple length 1-1/8" or more
I________ than 1-1y 8 11
■:
but: less than 1-11/1611
*
{Imports Sept*: Established - Imports Sept.
:Established! 20, 1943, to l
Qqota
;
20, 1943, to
i Quota"
{Nov, 27, 1943* 45.6fi6.42Q-r ffPV* S7,. I94g
Egypt and the Anglo—
Egyptian Sudan........
P e n n ........... ...... . •
British India...........
China..............
Mexico................. .
Brazil.......... .
Union of Soviet
Socialist Republics...
Argentina.......... .
Haiti.. ........ .
Ecuador........ ...... ..
Honduras.... .......... .
Paraguay. ................
Colombia................
IT°&C^, • • ^» • ••• *> ♦*<►♦■*•••#
British East Africa.....
Netherlands East Indies.
Barbado s..............••
Other British West
Indies l / ........... *
Nigeria.,................
Other British West
■Africa j
Other French Africa 2>/.
Algeria and Tunisia.....
783,816
247,952
2,003,483
1,370,791
8,883,259
618,723
475,124
5,203
237
9,333
752
871
124
195
2,240
71,388
Z j
---
16,362,697
* 368,913
— .
*•*
—
**
—
**
—
—
■-
21,321
5,377
—
— .
-
—
**
**
—
-
—
m*
16,004
689
14,516,882
1j
73,576
*** V
— h
8,883,259
410,330
—
—
**
m
9,367,165
■
45,656,420
.Other than Barbados, Bermuda, Jamaica, Trinidad, and Tobago.
Other than Gold Coast and Nigeria.
..Other than Algeria, Tunisia, and Madagascar*
(Over)
16,731,610
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Wednesday, December 8. 1943.
Press Service
No. 39-^82
The Bureau of Customs announced today that preliminary reports from
collectors of customs show imports of cotton and cotton waste chargeable
import quotas established by the President’s proclamations of September
and December 19, 1940, as follows, during the period September 20, 1943,
November 27, 19435
the
to the
5, 1939,
to
COTTON HAVING- A STAPLE OF LESS THAN 1-11/1$ INCHES (OTHER THAN HARSH OR ROUGH
COTTON OF LESS THAN 3/4 INCH IN STAPLE LENGTH AND CHIEFLY USED IN THE MANU
FACTURE OF BLANKETS AND BLANKETING, AND OTHER THAN LIFTERS). Annual quotas
commencing September 20, by Countries of Origin?
______ ____________________(jn Pounds)
________ 1
■
:
Staple length less
: Staple length 1-1/8” or more
5 _____ than 1-1/8”
:
but less than 1-11/16”____ _
Country of
:
:Imports Sept.: Established : Imports Sept.
Origin
:Established:20, 1943, to ♦
Quota
'
20, 1943, to
___________ _____________ ?
Quota
:Nov. 27, 1943: 45,656,420 : Nov, 27, 1943
Egypt and the Anglo^Egyptian Sudan*.......
P
e
r
u
.
t.,.
British India.
China..........'.
Mexico,................
Brazil............y#*
Union of Soviet
Socialist Republics...
Argentina............ .
Haiti,
Ecuador,.................
Honduras.
Paraguay.
Colombia.
Iraq....................
British East Africa.....
Netherlands last Indies.
Barbados............... *
Other British West
Indies 1/.............
Nigeria,
Other British West
Africa 2/............,
Other French Africa 3/..
Algeria and Tunisia..,..
.783,816
247,952
2,003,483
1,370,791
8,883,259
618,723
73,576
7*
8,883,259
410,330
16,362,697
368,913
-
475,124
5,203
237
9,33?
752
871
124
195
2,240
71,388
. *r
-
r
—
—
—
—
-
T*
T*
*r
T■1*
**
'
21,321
5,377
-
—
16,004
689
—
14,516,882
—
-r
9,367,165
—
—
—
16,731,610
45,656,420
1/ Other than Barbados, Bermuda, Jamaica, Trinidad, and Tobago.
2/
3/
Other than Gold Coast and Nigeria,
Other than Algeria, Tunisia, and Madagascar.
-
2
-
COTTON CARD STRIPS, 2/ COMBER WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE,
WHETHER OR NOT.MANUFACTURED OR OTHERWISE ADVANCED IN VALUE.
Animal quotas
commencing September 20, by Countries of Origin:
Total quota, provided, however, that not more than 33-1/3 percent of the quotas
shall be filled by cotton wastes other than card strips 2 ] and comber wastes
made from cottons of 1-3/16 inches or more in staple length in the case of the
following countries* United Kingdom, France, Netherlands, Switzerland,
Be Ig ium, Ge rmany and 11 aly ?
(In Pounds)
•
f
:TOTAL IMPORTS
:ESTABLISHED: Imports Sept, 20,
Country of Origin : Established :Sept. 20, 1943 *33-1/3^ of ?1943, to
* TOTAL QUOTA SNov. 37. 1943 :Total QuotaiNov. 27* 1943 , 1/
United Kingdom......
Canada..............
France
Brit ish India;
Netherlands..;....#*
Switzerland.
Belgium*
Japan*
China...*;....... *.*
Egypt, .. ..........
Cuba, *■»
*
Germany..,,».«...*..
Italy,**, ..«•« *•*« *'.«*
4,323,457
239*690
227*420
69|627
68,240
44,388
38,559
341*535
17,322
8,135
6,544
76,329
21,263
—
rr
■j
*«*
r
-
5,482,509
1,441,152
***
75,807
22,747
14,.79 6
12,.853
•r
•r
25,443
7,088
1,599,886
**
r
*
*
4
-
-
1/
Included in total imports, column 2.
2/
The President *s proclamation* signed March 31,' 1942, exempts from import
quota restrictions card strips made from cottons having a staple 1-3/16
inches or more in length.
voOof
-
Commodity
Silver or "black
foxes, furs,
and articles*
Foxes valued
under $250 each
and whole furs
and skins
Tails
2
-
*Imports as of
• Unit
•
of
:Nov. 27,
:
s
Established Quota
*Period and Country * Quantity: Quantity: 1943
Period * May —
Nov. 1943
All countries
33,229
12 months from
Dec* 1, 1942
5,000
Number
Piece
Paws, heads, or
other separated
parts
n
500
Pounds
Piece plates
it
550
Pounds
It
500
Unit
Articles, other
than piece
plates
**oOo*w
( Quota. filled)
463
(Qiota filled)
-
105
FOR IMMEDIATE RELEASE,
December 7* 1943«
The Bureau of Customs announced today preliminary figures for imports of
commodities within quota limitations provided for under trade agreements, from
the beginning of the quota periods to November 27, 1943, inclusive, as follows;
Commodity
♦
•
Established Quota
:
«
Quantity
tPeriod and Country!
i
J t
5
Unit
:Imports as of
; Nov. 27,
of
1943
Quantity :
Whole milk, fresh
or sour
Calendar year
3,000,000
Gallon
6,566
Cream, fresh or spur
Calendar year
1,500,000
Gallon
844
Fish, fresh or
frozen, filleted,
etc*, cod, haddock,
hake, pollock, cusk
and rosefish
Calendar year
17,804,128
White or Irish
potatoes!
certified seed
Other
12 months from
Sept* 15, 1943
Red cedar shingles
Calendar year
90.000.
60.000.
2,506,072
Cuban filler tobacco,
unstemmed or stemmed
(other than cigarette
leaf tobacco), and
scrap tobacco
Calendar year
22,000,000
Molasses and sugar
sirups containing
soluble nonsugar
solids equal to
more than 6$ of
total soluble
solids
Calendar year
1,500*000
Pound
14,828,350
000 Pound
000 Pound
14,303,720
3,158*658
Square
Pound
(unstemmed
equivalent)
Gallon
1,339,824
(Quota
filled)
310,055
TREASURE DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Wednesday, December •8 1 9 4 3 *
..
Press Service ■'
jj0> 3 9 - 8 3
The Bureau of Customs announced today preliminary figures for imports Of
commodities within quota limitations provided for under trade agreements, from
the beginning of the quota periods to November 27, -1943, inclusive, as follows:
Commodity
'■»'
'-’
Unit
:Imports as i
:
Established Quota
;
of
: Nov. 27,
:Period and Country ; Quantity : ■ Quantity
1943 ;
Whole milk, fresh
or sour
Cream;.fresh or sour
Fishjr fresh or
frozen, filleted,
etc., cod, haddock,
hake, pollock, cusk
and .rosef ish
White or Irish
potatoes;
certified seed
Other
Red cedar shingles
Calendar year
3,000,000
Gallon
•~ Calendar year
1,500,000
Gallon
Calendar year
17,804,128
'
6*,566
•'•r' 844
Pound
14,828,350
000 Pound
000 Pound
14,303,720
3,158,658
.1.2 months from
Sept. 15, 1943
90.000.
60.000.
Calendar year
Cuban filler tobacco,
unstemmed or stemmed
(other than cigarette
leaf tobacco), and
scrap tobacco
Calendar year
Molasses and sugar
sirups containing
soluble nonsugar
solids eaual to
more than Qfo of
total soluble
solids •
Calendar year
2,506,073
Square
Pound
(unstemmed
22,000,000 equivalent)
(Over)
1,500,000
Gallon
1,339,824
(Quota
filled)
310,055
p
:
: Unit
: Imports as of
Commodity; .
-•£ Established Quota
*
of . *( .•.Uov. 27, *--*•
■vr,,v.;v }.Pe.Tiod and Country: Quantity; Quantity :
1943
SiIvey or hlack .j,•- •v: r i;M ‘■ ■
foxss, 'furs,'
and apt iclesi ,..
ftp
Poxes valued
u n d e r ;$250 each . Period - ’May v
and #hoie furs
Nov, 1943
and- skins:
;.'-V 'All countries
33,229
12 months f rom
Dec. 1, 1942
5,000
Piece
f- 500
Pounds
550
Pounds
Tails
* .... ‘
Paws, heads, or
ether separated
varts
ti
piece plates
it
Articles, other
than piece
plates......
nr
;
.
. 500
Number
Unit
(Qpota filled)
463 :
(Qpota filled)
% &
d m f " :
-
105
1942, and April 29* 1943* for the 12 months commencing May 29, 1943, as follows:
|
i
*
•
Country
of
Origin
•
2Wheat flour* semolina, crushed
:or cracked wheat, and similar
2
:
wheat products
2
Imports
2
Imports
X
x
2
*Established:May 29* 1943
2EstablishedtMay 29, 1943
•
*
Quota
I to Nov. .27. 1943
Quota
:to Nov. 27. iL943:
(Pounds)
(Pounds)
(Bushels)
(Bushels)
WHEAT
795,000
Canada
*»
China
Hungary
«*
Hong Hong
Japan
100
United Kingdom
Australia
100
Germany
100
Syria
Hew Zealand
**
Chile
100
Netherlands
2,000
Argentina
100
Italy
mm
Cuba
1,000
France
•
Greece
100
Mexico
Panama
Uruguay
mm
Poland and Danzig
<m
Sweden
Yugo slavia
•
Norway
m
Canary Islands
1*000
Humania
100
Guatemala
100
Brazil
Union of Soviet
Socialist Republics
100
100
Belgium
800,000
795*000
mm
*•
mm
mm
m
«
mm
mm
«H»
«9
*
mm
mm
mm
4Hi
/
•
mm
nm
mm
3,815*000
24,000
13,000
13,000
8,000
75*000
1,000
5,000
5,000
1,000
1,000
1,000
14,000
2,000
12,000
1,000
1,000
1,000
1*000
1,000
1,000
1,000
*
1,000
1*000
1,000
—
196*840
•
«*»
*»
—
—
mm
«
—
mm
mm
—
—
. ~
mm
mm
«w
**
mm
mm
mm
mm
mm
**
•
-
795,000
4*000,000
■
**
*
-oOo-
mm
m
196*840
__ —
TREASI&? DEPARTMENT
Washington
immediate r e l e a s e ,
Wednesday, December 8, 1943.
Press Service
No. 39-84
for
The Bureau of Customs announced today preliminary figures showing the
quantities of wheat and wheat flour entered, or withdrawn from warehouse, for
consumption under the import quotas established in the Presidents proclamation
of May 28, 1941, as modified by the President’s proclamations of April 13, 1942,
and April 29, 1943, for the 12 months commencing May 29, 1943, as follows?
WHEAT
Country of
Origin
Wheat flour, semolina, crushed
or cracked wheat, and similar
wheat products
■ '
.
imports •
:
Imports
Established:May 29, 1943
Established : May 29, 1943
? to Nov. 27, 1943
Qpota
Quota
:to Nov, 27,1943
(Bushels)
(pounds)
(Pounds)
(Bushels)
795,000
Canada
China
Hungary
—
Hong Kong
Japan
100
United Kingdom
Australia
100
Germany
100
Syria
New Zealand
Chile
100
Netherlands
2,000
Argentina
100
Italy
Cuba
1,000
France
Greece
100
Mexico
Panama
Uruguay
-T
Poland and Danzig
Sweden
Yugoslavia
Norway
-r
Canary Islands
1,000
Rumania
100
Guatemala
100
Brazil
Union of Soviet Socialist Republics
100
100
Belgium
795,000
—
800,000
795,000
*r
ISj§
V
-
*
T
—■
r*
—.
3,815,000
24,000
13t000
13,000
8,000
75,000
1,000
5,000
5,000
1,000
1,000
1,000
14,000
2,000
12,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
196,840
T
—
**
-
r
rr
r*
-
—
—
A
—
—
—
—
4,000,000
196,840
*9*
FOR IMMEDIATE RELEASE,
December 7. 1943.
2Jhe Bureau of Customs announced today preliminary figures showing the
quantities of coffee authorized for entry for consumption under the quotas
for the 12 months commencing October 1, 1943, provided for in the Inter***
American Coffee Agreement* proclaimed by the President on April 15, 1941, as
follows l
Country of Production
*
•
S
l
Quota Qjaantity
(Pounds) 2 j
§
f
•
♦
?
i
t
Authorized for entry
for consumption
As of (Date)
: (Pounds)
Signatory Countries?
Brazil
Colombia
Costa Rica
Cuba
Dominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Mexico
Nicaragua
Peru
Venezuela
1,353,183,480
458,336,340
29,100,720
11,640,288
17,460,432
21,825,540
87,302,160
77,844,426
40,013,490
2,910,072
69,114,210
28,373,202
3,637,590
61,111,512
lov* 27, 1943
tt
a
ff
180,402,035
83,342,496
1,696,911
1,716,157
2,664,122
7,341,998
938,025
2,510,843
1,379,318
460,324
9,362,423
500,406
307,300
4,850,381
ft
1,991,173
tt
w
tt
ft
t<
f!
ft
ff
ff
ii
Ron-signatory Countries?
51,653,778
1/
Quotas as established by action of the Inter-American Coffee Board on
March 11, 1943*
-oOo-
TREASURY- DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Wednesday, December 8, 1943*
Press Service
No. 39-85
The Bureau of Customs announced today preliminaiy figures showing the
quantities of coffee authorized for entry for consumption under the quotas
for the 12 months commencing October 1, 1943, provided for in the InterAnerican Coffee Agreement, proclaimed by the President on April 15, 1941, as
follows:
Country of Production
:
:
Quota Quantity ::
Authorized for entry
(Pounds)
1/
:
for consumption
: As of (Date)
: (pounds)
Signatory Countries:
Brazil
Colombia
Costa Rica
Cuba
Pominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Mexico
Nicaragua
Peru
Venezuela
Non-signatory Countries:
1/
1,353,183,480
458,336,340
29,100,720
11,640,288
17,460,432
21,825,540
87,302,160
77,844,426
40,013,490
2,910,072
69,114,210
28,373,202
3,637,590
61,111,512
51,653,778
Npv. 27, 1943
tt
il
it
it
n
ii
it
n
it
it
n
it
it
it
180,402,035
83,342,496
1,696,911
1,716,157
2,664,122
7,341,998
938,025
2,510,843
1,379,318
460,324
9,362,423
500,406
307,300
4,850,381
1,991,173
Quotas as established by action of the Inter-American Coffee Board on
March 11, 1943.
- A -
result of a self-imposed rationing system inaugurated by distillers, combined
■with an order of the War Production Board restricting the use of bottles to
65
percent of the number used in certain base periods of 1942*
’’This reduction in withdrawals, together with increased purchasing power
of the public, has created a large shortage of liquor, and has resulted in
black market prices and the hoarding of stocks by some wholesalers and re
tailers, and, to some extent, by preferred consumer customers.
"This Unit has been conducting an extensive survey of the black market
conditions, which has disclosed numerous violations of Internal Revenue laws
and price ceiling violations on the part of wholesalers and retailers.
These
investigations are resulting in the seizure of liquors, the arrest of
violators, the reporting of cases to United States Attorneys for prosecution,
and the institution of proceedings to annul or revoke permits of wholesalers.”
He said a survey ty the Unit indicated the bottle scarcity might be
alleviated to considerable extent if bottlers shifted to quart packages
instead of the various sizes used heretofore.
0O 0
- 3 -
contain little or no Juniper flavoring —
for gin
under
the standards of identity —
product was made from inferior spirits.
the essential flavoring material
and that in many instances the
The Bureau of Gustoms has been
asked to withhold release of imported gin products until samples have been
examined in Treasuiy laboratories.
Similar difficulties have developed in connection with some ^whiskies’*
in the import trade, and the Unit is withholding action on label applications
until samples are analyzed.
The so-called whiskies in some cases have been
found to be cane spirits and flavoring, often bearing little resemblance
to whisl^’.
Steps are being taken to require age statements on products that
are found to be whisljjr.
Mr. Berkshire said the Unit would enforce the labelling regulations
stringently on these imports, as the quality of much of the product examined
is so inferior as to cause adverse consumer reaction.
Recent weeks have seen several substantial seizures and arrests in
connection with ^cutting* and bottling operations in New York, Pennsylvania,
and New Jersey, with some cases also involving counterfeit revenue stamps
and labels.
This traffic in adulterated end mislabelled liquors constituted
a serious enforcement problem/in prohibition days and in the early years
following repeal.
The isolated seizures of this type in November were the
*yr\fryuis
first of importance inyponths.
it
rate of approximately 65 percent of withdrawals during 1 9 ^ .
This is the
Failure of wholesalers to keep required Records of sa3.es and falsifi
cation of these records have been among the most numerous violations
discovered.
The agents have been interested particularly in tracing large
unit sales which might indicate a diversion into black market channels.
Proceedings looking to revocation of permits to do business are being
instituted in cases where regulations have been violated.
Prosecutions for
failure to obtain retail permits also are being instituted against some
p e d d l e r s * o p e r a t i n g outside regular trade channels.
Mr. Berkshire emphasized that the Alcohol Tax Unrt^s particular concern
is the administering of the revenue laws as applied to alcoholic beverages
and the maintenance of fair trade practices.
In the revenue field, the drive against illicit distilling brought
seizures of 507 stills in a four weeks1 period, an increase of
46
percent over
the same four weeks last year when *5noonshining!*''was at the lowest level since
the repeal of national prohibition.
The amount of mash seized at these stills
increased 106 percent over the 1942 period, indicating some increase i n the
size of the plants captured.
Sugar rationing and other war factors have
helped to keep illicit distilling at extremely low levels despite the high
level of federal taxes and the shortage of tax-paid liquor.
The southeast Atlantic states continue to provide the bulk of still
seizures, with a tendency in recent months toward an increase in such viola
tions, compared with the autumn of 1942*
Agents are giving close scrutiny to imports of gin from Cuba and Mexico.
Mr. Berkshire said that it has been found that many such shipments of gin
TO i
Mr.Easton
what do you "think of
the wisdom of taking- some
of the w r a p s off our
activities against the
liquor black market?
I will clear with
Revenue, of course.
Mr,Berkshire goes up
before the Van ¥uys
committee on Friday,but
plans to be available
lust for questioning,
without making a formal
statement.
Could we release some of
this before the hearings?
Coffelt
Mr. Schwarz
31'
Striking at the so-called Black Market in liquor
r
invoking Internal
Revenue regulations set up to ^nsure fair trade practices in the industry,
the Treasury’s Alcohol Tax Unit is conducting a nationwide investigation
which hspB* result
in numerous civil and criminal cases against violators^,
it was revealed today*
The Unit also moved vigorously against what has the appearance of an
incipient mild revival of *^oonshiqSjig*^ and has ^Stepped ori* several
isolated •butting* and false-labelling conspiracies.
Bureau of Customs, the Unit has acted to halt
Working with the
importation of synthetic
and substandard spirits where misClabelling is involved.
The *fair trade*investigation, which is continuing, constitutes a new
approach to the problems resulting from shortage of distilled spirits result
ing from wartime conditions.
Stewart Berkshire, head of the Alcohol Tax Unit of the Bureau of
Internal Revenue, pointed out that violations of rationing orders primarily
are a responsibility of state or local liquor control boards, and that vio
lations of price ceilings primarily are matters for the Office of Price
Adminis t rati on•
However, a widespread probe
many cases
by Alcohol Tax agents has shown that in
corollary violations of Internal Revenue laws and regulations
have occi(re^which are subject to federal prosecution, or civil action.
Unit is cooperating with the other agencies -where violations outside its
immediate jurisdiction are uncovered
The
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
F r i d a y , D e c e m b e r 10, 1 9 4 3 *
12-9-43
:
Striking at the
so-called Black Market
Internal Revenue regulations
insure fair t rade practices
hol T a x U n i t
resulting
it w a s
is
Press Service
No. 3 9 - 8 6
invoking
set up to p r o t e c t t h e r e v e n u e an d
in t h e
industry,
conducting a nationwide
in n u m e r o u s
in l i q u o r b y
civil and
criminal
the Treasury*s A l c o
investigation which
cases
against
is
violators,
r e v e a l e d today,
T h e U n i t also m o v e d v i g o r o u s l y a g a i n s t w h a t has t h e a p p e a r
a n c e o f a n i n c i p i e n t m i l d r e v i v a l of m o o n s h i n i n g , a n d h a s s t e p p e d
on s e v e r a l i s o l a t e d c u t t i n g a n d f a l s e - l a b e l l i n g c o n s p i r a c i e s *
W o r k i n g w i t h t h e B u r e a u of Customs, t h e U n i t has a c t e d to h a l t
i m p o r t a t i o n of s y n t h e t i c a n d s u b s t a n d a r d s p i r i t s w h e r e m i s l a b e l
ling is i n v o l v e d .
T h e f a i r t r a d e i n v e s t i g a t i o n , w h i c h is c o n t i n u i n g , c o n s t i
tutes a n e w a p p r o a c h t o t h e p r o b l e m s r e s u l t i n g f r o m s h o r t a g e of
distilled spirits resulting f r o m wartime conditions.
S t e w a r t B e r k s h i r e , h e a d o f t h e A l c o h o l T a x U n i t of t h e
Bureau of Internal Revenue, p o i n t e d out t hat v i o l a t i o n s of r a t i o n
ing o r d e r s p r i m a r i l y a r e a r e s p o n s i b i l i t y o f s t a t e o r l o c a l l i q u o r
control boards, a n d t h a t v i o l a t i o n s of p r i c e c e i l i n g s p r i m a r i l y
are m a t t e r s f o r t h e O f f i c e o f P r i c e A d m i n i s t r a t i o n .
,
!.
However, a w i d e s p r e a d probe b y A l c o h o l T a x agents has shown
that in m a n y c a s e s c o r o l l a r y v i o l a t i o n s o f I n t e r n a l R e v e n u e l a w s
and r e g u l a t i o n s h a v e o c c u r r e d w h i c h a r e s u b j e c t t o F e d e r a l p r o s e
cution o r c i v i l a c t i o n .
T h e U n i t is c o o p e r a t i n g w i t h t h e o t h e r
a g e n c i e s w h e r e v i o l a t i o n s o u t s i d e its i m m e d i a t e j u r i s d i c t i o n a r e
uncovered.
F a i l u r e of w h o l e s a l e r s t o k e e p r e q u i r e d r e c o r d s o f s a l e s a n d
falsification of t h e s e r e c o r d s h a v e been am o n g the most n u m e r o u s
violations discovered.
The agents have been interested p a r t i c u
larly in t r a c i n g l a r g e u n i t s a l e s w h i c h m i g h t i n d i c a t e a d i v e r
sion i n t o b l a c k m a r k e t c h a n n e l s ^
Proceedings looking to r e v o c a
tion of p e r m i t s t o do b u s i n e s s a r e b e i n g i n s t i t u t e d in c a s e s
2
where regulations have been violated. Prosecutions for failure to
obtain retail permits also are being instituted against some ped
dlers operating outside regular trade channels.
'&*• B e r k s h i r e e m p h a s i z e d t h a t t h e A l c o h o l T a x U n i t fs p a r t i c
u l a r c o n c e r n is t h e a d m i n i s t e r i n g o f t h e r e v e n u e l a w s as a p p l i e d
to a l c o h o l i c b e v e r a g e s a n d t h e m a i n t e n a n c e of f a i r t r a d e p r a c t i c e s .
In the revenue field, the drive against illicit distilling
brought seizures of 507 stills in a four weeks’ period, an in
crease of 46 percent over the same four weeks last year when moonshining was at the lowest level since the repeal of national pro
hibition. The amount of mash seized at these stills increased
106 percent over the 1942 period, indicating some increase in the
size of the plants captured. Sugar rationing and other war factors
have helped to keep illicit distilling at extremely low levels
despite the high-level of Federal taxes and the shortage of taxpaid liquor.
The southeast Atlantic
continue to provide the bulk
of s t i l l s e i z u r e s , w i t h a t a n i e n c y ih r e c e n t m o n t h s t o w a r d a n
i n c r e a s e in s u c h v i o l a t i o n s ,
w i t h t h e a u t u m n of 1942,
A g e n t s a r e g i v i n g c l o s e s c r u t in y t o i m p o r t s of g i n f r o m C u b a
and Mexico.
Mr, B e r k s h i r e s a i d t h a t it h a s b e e n f o u n d t h a t m a n y
s u c h s h i p m e n t s of g i n c o n t a i n l i t t l e o r n o J u n i p e r f l a v o r i n g -the e s s e n t i a l f l a v o r i n g m a t e r i a l f o r g i n u n d e r t h e s t a n d a r d s of'
i d e n t i t y -- a n d t h a t in m a n y i n s t a n c e s t h e p r o d u c t w a s m a d e f r o m
inferior spirits.
T h e B u r e a u of C u s t o m s h a s b e e n a s k e d t o w i t h
hold r e l e a s e of i m p orted gin p r o d u c t s u n t i l samples h a v e b een
examined in T r e a s u r y l a b o r a t o r i e s .
S i m i l a r d i f f i c u l t i e s h a v e d e v e l o p e d in c o n n e c t i o n w i t h s o m e
" w h i s k i e s 11 in t h e i m p o r t t r a d e , a n d t h e U n i t is w i t h h o l d i n g a c t i o n
on l a b e l a p p l i c a t i o n s u n t i l s a m p l e s a r e a n a l y z e d .
The so-called
w h i s k i e s in s o m e c a s e s h a v e b e e n f o u n d t o b e c a n e s p i r i t s a n d
flavoring, often b e a r i n g l i t t l e r e s e m b l a n c e to w h i skey. Steps are
b e ing t a k e n t o r e q u i r e a g e s t a t e m e n t s on p r o d u c t s t h a t a r e f o u n d
to b e whisk;ey.
Mr*. B e r k s h i r e s a i d t h e U n i t w o u l d e n f o r c e t h e l a b e l l i n g r e g u
l a t i o n s s t r i n g e n t l y on t h e s e i m p o r t s , as t h e q u a l i t y o f m u c h of
the p r o d u c t e x a m i n e d is s o i n f e r i o r as t o c a u s e a d v e r s e c o n s u m e r
reaction.
Recent weeks have seen several substantial seizures and
arrests in connection with cutting and bottling operations in Rew
York, Pennsylvania, and Rew Jersey, with some cases also involving
counterfeit revenue stamps and labels. This traffic in adulterated
** J :m
and m i s l a b e l l e d liquors constituted a serious enforcement probl e m in p r o h i b i t i o n d a y s a n d in t h e e a r l y y e a r s f o l l o w i n g r e p e a l f
T h e i s o l a t e d s e i z u r e s of t h i s t y p e in N o v e m b e r w e r e t h e f i r s t
of i m p o r t a n c e in m a n y months.
As
to
the g e n e r a l
liquor situation,
Mr*
Berkshire
said*
’’W i t h d r a w a l s o f d i s t i l l e d s p i r i t s f r o m b o n d f o r c o n s u m p t i o n
f o r t h e p a s t s i x m o n t h s a r e at t h e r a t e o f a p p r o x i m a t e l y 65 p e r cent of w i t h d r a w a l s d u r i n g 1942*
T h i s is t h e r e s u l t of a s e l f imposed rationing system inaugurated by distillers, combined
w i t h a n o r d e r o f t h e W a r P r o d u c t i o n B o a r d r e s t r i c t i n g t h e u s e of
b o t t l e s to 65 p e r c e n t o f t h e n u m b e r u s e d in c e r t a i n b a s e p e r i o d s
of 1 9 4 2 .
’’T h i s r e d u c t i o n in w i t h d r a w a l s , t o g e t h e r w i t h i n c r e a s e d p u r
c h a s i n g p o w e r o f t h e p u b l i c , h a s c r e a t e d a l a r g e s h o r t a g e of
l i q u o r , a n d has r e s u l t e d in b l a c k m a r k e t p r i c e s a n d t h e h o a r d i n g '
of s t o c k s b y s o m e w h o l e s a l e r s a n d r e t a i l e r s , a nd, to s o m e extent,
by p r e f e r r e d c o n s u m e r custo m e r s .
’’T h i s U n i t h a s b e e n c o n d u c t i n g a n e x t e n s i v e s u r v e y o f t h e
black m a r k e t conditions, w h i c h has d i s c l o s e d num e r o u s v iolations
of I n t e r n a l R e v e n u e laws a n d p r i c e c e i l i n g v i o l a t i o n s on the
part of wholesalers and retailers,
These investigations are
r e s u l t i n g in t h e s e i z u r e o f l i q u o r s
the arrest of violators,
t h e r e p o r t i n g o f c a s e s t o U n i t e d S t a t e s Attornej^s f o r p r o s e c u
tion, a n d t h e i n s t i t u t i o n o f p r o c e e d i n g s t o a n n u l o r r e v o k e p e r
mits of w h o l e s a l e r s . ”
He said a s u rvey by the U n i t indicated the bottle scarcity
m i g h t b e a l l e v i a t e d t o c o n s i d e r a b l e e x t e n t if b o t t l e r s s h i f t e d
to q u a r t p a c k a g e s i n s t e a d o f t h e v a r i o u s s i z e s u s e d h e r e t o f o r e .
-0O 0-
for such bills, whether on original issue or on subsequent purchase, and the amount
actually received either upon sale or redemntion at maturity during the taxable
year for which the return is made, as •rdinary gain or loss.
Treasury Department Circular No* 41&, as amended, and this notice, pre
scribe the terms of the Treasury bills and govern the conditions of their issue.
Copies of the circular may be obtained from any Federal Reserve Bank or Branch.
Reserve Banks and Branches, following which public announcement will be made by the
Secretary of the Treasury of the amount and urice range of accepted bids.
Those
submitting tenders will be advised of the acceptance or rejection thereof.
The
Secretary of the Treasury exoressly reserves the right to accept or reject any or
all tenders, in whole or in part, and his action in any such respect shall be final.]
Subject to these reservations, tenders for $100,000 or less from any one bidder at I
99.905 entered on a fixed-price basis will be accepted in full.
Payment of accepted
tenders at the prices offered must be made or completed at the Federal Reserve Bank
in cash or other immediately available funds on
December l o ,
1943
--------- ( T T ^
The income derived from Treasury bills, whether interest or gain from
the sale or other disposition of the bills, shall not have any exemption, as such,
and loss from the sale or other disoosition of Treasury bills shall not have any
special treatment, as such, under Federal tax Acts now or hereafter enacted.
The
bills shall be subject to estate, inheritance, gift, ot other excise taxes, whether
Federal or State, but shall be exempt from all taxation now or hereafter imposed
on the principal or interest thereof by any State, or any of the possessions of
the United States, or by any local taxing authority.
For purposes of taxation the
amount of discount at which Treasury bills are originally sold by the United States
shall be considered to be interest.
Under Sections 42 and 117 (a) (l) of the
Internal Revenue Code, as amended by Section 115 of the Revenue Act of 1941* the
amount of discount at which bills issued hereunder are sold shall not be considered
to accrue until such bills shall be sold, redeemed or otherwise disposed of, and
such bills are excluded from consideration as capital assets.
Accordingly, the
owner of Treasury bills (other than life insurance companies) issued hereunder
need include in his income tax return only the difference between the price paid
K$MX
TREASURY -DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Friday, December 10, 1943
«
The Secretary of the Treasury, by this public notice, invites tenders
for $1,000,000,000-
, or thereabouts, of
91
-day Treasury bills, to be issued
on a discount basis under competitive and fixed—price bidding as hereinafter pro
vided,
The bills of this series will be dated
March
mature
interest.
16,
1944
December 16, 1943
and will
> when the face amount will be payable without
5S£
They will be issued in bearer form only, and in denominations of $1,000,
$5,000, $10,000, $100,000, $ 500,000 , and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the
closing hour, two o ’clock t>. m., Eastern War time,
Monday, December
13, 1943—
Tenders will, not be received at the Treasury Department, Washington.
•
Each tender
must be for an even multiple of $1,000, and the price offered must be expressed
on the basis of 100, with not.more than three decimals, e. g., 99.925.
may not be used.
Fractions
It is urged that tenders be made on the printed forms and for
warded in the special envelopes which will be supplied by Federal Reserve Banks
or Branches on application therefor.
Tenders will be received without deposit from incorporated banks and
trust companies and from responsible and recognized dealers in investment securi
ties.
Tenders from others must be accompanied by payment of 2 percent rf the face
amount of Treasury bills applied for, unless the tenders are accompanied by an
express guaranty of payment by an incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal
TREASURY DEPARTMENT
Washington
F O R R E L E A S E , MORNING- N E W S P A P E R S ,
F r i d a y , D e c e m b e r IQ, 1943*______
12-9-43
The Secretary of the Treasury, by this public notice,
invites tenders for $1,000,000,000, or thereabouts, of 91-day
Treasury bills, to.be issued on a discount basis under competi
tive and fixed-price bidding as hereinafter provided.
The bills
of this series will be dated December 16, 1943, and will mature
March 16, 1944, when the face amount will be payable without
interest.
They will be issued in bearer form only, and in denom-
inations of $1,000,'$5,000, $10,000, $100,000, $500,000, and
■$1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and
Branches up to the closing hour, two o ’clock p. m., Eastern War
time, Monday, December l3» 1943* Tenders will not be received
at the Treasury Department, Washington; Each tender must be for
an even multiple of $l;000, and the price offered must be ex
pressed on the basis of' 100, with not more than three decimals,
e. g., 99.925. Fractions may not be used. It is urged that
tenders be made on the printed forms and forwarded in the spe
cial envelopes which will be supplied by Federal Reserve Banks
or Branches on application therefor.
Tenders will be received without deposit from incorporated
banks and trust companies and from responsible and recognized
dealers in investment securities. Tenders from others must be
accompanied by payment of 2 percent of the face amount of Trea
sury bills applied for, unless the tenders are accompanied by
an express guaranty of payment by an incorporated bank or trust
company.
Immediately after the closing hour, tenders will be opened
at the Federal Reserve Banks and Branches, following which pub
lic announcement will be made by the Secretary of the Treasury
of the amount and price range of accepted bids. Those sub-^
mitting tenders will be advised of the acceptance or rejection
thereof. The Secretary of the Treasury expressly reserves the
right to accept or reject any or all tenders, in whole or in
part, and his action in any such respect shall be final.
39-87
(Over)
2
S u b j e c t t o t h e s e r e s e r v a t i o n s , t e n d e r s f o r $ 1 0 0 , 0 0 0 or l e s s f r o m
a n y o n e b i d d e r a t 9 9 * 9 0 5 e n t e r e d on a f i x e d - p r i c e b a s i s w i l l be
a c c e p t e d in f u l l .
P a y m e n t of a c c e p t e d t e n d e r s a t t h e p r i c e s
o f f e r e d m u s t b e ' m a d e -or c o m p l e t e d a t t h e F e d e r a l R e s e r v e B a n k in
c a s h o r o t h e r i m m e d i a t e l y a v a i l a b l e f u n d s on D e c e m b e r 16, 1943*
s*
»
T h e i n c o m e d e r i v e d f r o m T r e a s u r y b i l l s , w h e t h e r i n t e r e s t or
g a i n f r o m t h e s a l e d r o t h e r . ' d i s p o s i t i o n o f t h e b i l l s , s h a l l not
h a v e a n y e x e m p t i o n , a s such, a n d l o s s f r o m t h e s a l e o r o t h e r
d i s p o s i t i o n of T r e a s u r y b i l l s s h a l l n o t h a v e a n y s p e c i a l t r e a t
m e nt, a s such, u n d e r F e d e r a l t a x A c t s n o w o r h e r e a f t e r enacted.
T h e b i l l s s h a l l b e s u b j e c t t o est a t e , i n h e r i t a n c e , g i f t , or other
exc i s e taxes, w h e t h e r F e d e r a l or State, but s h a l l be exempt from
a l l t a x a t i o n n o w o r h e r e a f t e r i m p o s e d on t h e p r i n c i p a l o r i n t e r
est t h e r e o f b y a n y S t a t e , o r a n y o f t h e p o s s e s s i o n s o f t h e U n i t e d
S t a t e s , or b y a n y vl o c a l t a x i n g a u t h o r i t y .
F o r p u r p o s e s of t a x a
t i o n t h e a m o u n t ofv d i s c o u n t a t w h i c h T r e a s u r y b i l l s a r e ori g i n a l l y
sold b y the U n i t e d States shall b e c o n s i d e r e d to be interest.
U n d e r S e c t i o n s 42 a n d 1 1 1 (a) (1) O f t h e I n t e r n a l R e v e n u e Code,
as a m e n d e d b y S e c t i o n 1 1 5 o f t h e R e v e n u e A c t o f 1941, t h e a m o u n t
of d i s c o u n t a t w h i c h b i l l s i s s u e d h e r e u n d e r a r e s o l d s h a l l n o t be
c o n s i d e r e d t o a c c r u e u n t i l s u c h b i l l s s h a l l b e sold, r e d e e m e d or
o t h e r w i s e d i s p o s e d of, a n d s u c h b i l l s a r e e x c l u d e d f r o m c o n s i d e r
a t i o n as c a p i t a l a s s e t s .
A c c o r d i n g l y , t h e o w n e r of T r e a s u r y
b i l l s ( o t h e r t h a n l i f e i n s u r a n c e c o m p a n i e s ) i s s u e d h e r e u n d e r need
i n c l u d e in h i s i n c o m e t a x r e t u r n o n l y t h e d i f f e r e n c e b e t w e e n the
p r i c e p a i d f o r s u c h b i l l s , w h e t h e r on o r i g i n a l _i s s u e _o r on s u b
s e q u e n t p u r c hase, a n d t h e a m o u n t a c t u a l l y r e c e i v e d eith e r upon
sale, o r r e d e m p t i o n a t m a t u r i t y .during t h e t a x a b l e y e a r f o r w h i c h
t h e r e t u r n is mad e , as o r d i n a r y g a i n o r l o s s ,
T r e a s u r y D e p a r t m e n t C i r c u l a r D o . 418, as a m e n d e d , a n d this
n o t i c e , p r e s c r i b e t h e t e r m s o f t h e T r e a s u r y b i l l s a n d g o v e r n the
conditions of their issue.
C o p i e s of the c i r c u l a r m a y be o b
t a i n e d f rom a n y F e d e r a l R e s e r v e B a n k or Branch,
-oOo
'i
TREASURY DEPARTMENT
Washington
F O R IM E D I A T E R E L E A S E ,
F r i d a y . D e c e m b e r 10. 1 9 4 3 .
V i n c e n t P.
Callahan,
Press Service
No. 3 9 - 8 8
radio
executive and former n e w s
paperman,
today resigned
and Radio
of t h e W a r F i n a n c e D i v i s i o n
Department.
He
leaves
as D i r e c t o r
of Advertising,
Press
of t h e T r e a s u r y
the Tre a s u r y to return
to private
business.
In 1 9 4 1 ,
the Defe n s e
Mr.
C a l l a h a n was
Savings
of a l l a d v e r t i s i n g ,
promotion
of the
During
the
Staff,
press
sale
appointed Chief
Later
he was p l a c e d
and radio
in h i s t o r y .
for
in c h a r g e
in c o n n e c t i o n w i t h t h e
of W a r B o n d s .
current
year the W ar Bond
ported with more than $100,000,000 worth
advertising
of R a d i o
in a l l m e d i a ,
prog r a m was
sup
of contributed
the greatest promotion
campaign
TEKASUBT DKPASmKT
Washington
Press Service
FOB BEUSA3S, w m sm ®SS®3PAPKBS,
Monday» December 13. 1943*
^Secretary of the Treasury Morgenthau announced today that all outstand
ing >-l/4 percent Treasury Bonds of 1944-46 are called for redemption 0®
April 1$, 1944. Approximately H , 519,©GO,000 of these bonds are now out
standing*
^JPhe text of the formal notice of call is as follows 1
BOEDS o r 1944-44
EOTICE OF d H FOE .IBMgglQM
To Holders of >4/4 percent Treasury Bonds of 1944-46, and Others Concerned*
X* Public notice is hereby given that all outstanding 3-1/4 percent
Treasury Bonds of 1944-46, dated April 16, 1934, are hereby called for
redemption on April 1$, 1944, on *hieh date interest on such bonds will
cease*
2* Holders of these bonds nay, in advance of the redemption date,
ibe offered the privilege of exchanging all or any part of their called
ibonds for other interest-bearing obligations of the United States, in
jwhich event public notice will hereafter be given and an official circular
|governing the exchange offering will be issued*
3.
Full information regarding the presentation and surrender of the
_ A * for cash redemption under this call will b# found in Departnent
Circular 1C T 66, dated duly 2 1 , 1941*
Henry Morgenthau, dr*,
Secretary of the Treasury*
tmsmrnm,
Washington, December 13, 1943*
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Monday, December 13, 1943*
12-11^43
Press Service
•No. 39-89
Secretary of the Treasury Morgenthau announced today that
all outstanding 3-1/4 percent Treasury Bonds of 1 9 4 4 - 4 6 are
called for redemption on April 15, 1944.
Approximately
$1,519,000,000 of these bonds are now outstanding.
The text of the formal notice of call is as follows?
THREE AND ONE-QUARTER PERCENT TREASURY BONDS OP 1 9 4 4 - 4 6
NOTICE OF CALL FOR REDEMPTION
To holders of 3-1/4 percent Treasury Bonds of 1 9 4 4 - 4 6 ,
and Others Concerned:
1,
Public notice is hereby given that all out
standing 3-1/4 percent Treasury Bonds of 1 9 4 4 -4 6 , dated
April 16, 1934, are hereby called for redemption on
April 15, 1944, on which date interest on such bonds
will cease,
2* Holders of these bonds may, in advance of the
redemption date, be offered the privilege of exchanging
all or any part of their called bonds for other interestbearing obligations of the United States, in which event
public notice will hereafter be given and an official
circular governing the exchange offering will be issuedf
3. Pull information regarding the presentation and
surrender of the bonds for cash redemption under this
call will be found in Department Circular No. 666, dated
July 21, 1941.
Henry Morgenthau, Jr,,
Secretary of the Treasury,
.
v •* ,■ ,
TREASURY DEPARTMENT,
Washington, December 13, 1943.
-0O 0-
TREASURY DSPART1CTT
Washington
FOE RELEASE, MORS DIG NMSP A P K R S ,
Tuesday. December 16« 1943»
Pr® 8® Service
The Secretary of the Treasury announced last evening that the tenders for
$ 1 ,0 0 0 ,0 0 0 , OCX), or thereabouts, of 91-day Treasury bills to b e dated December 16, 1943,
and to mature March 16, 1946, which were offered on December 10, w ere op en ed at the
Federal Reserve Banks on December 13.
The details of this Issue are as follows:
Total applied for - #1,816,956,000
Total accepted
- 1,000,179,OCX)
Average price
(includes $65,767,000 entered on a fixedprice basis at 99.905 and accepted in full)
- 99.905^Squivalent rate of discount approx. 0.375* P«r annum
Range of accepted competitive bide:
»igh
L ciT
- 99.925 Equivalent rate of discount approx. 0.297* per annua
- 99.905
*
*
»
«
«
0.376* «
**
(66 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Total
Applied for
TfetaX
Accented
Boston
Few York
Philadelphia
Cleveland
fticbiRond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
$
$
15,915,000
1 ,2 2 1 ,238,000
TGTA:
w , 3 m ,o o o
605 ,210,000
54,467,000
58 ,400,000
22,364,000
18,418,OCX)
19 0 ,2 5 1,0 0 0
33,455,000
5,788,000
3 5 ,618 ,0 0 0
1 9 ,860,000
13 9 ,18 0 ,0 0 0
33,907,000
52,163, OuQ
1 9 ,475,000
12,660,000
114,543,000
20,490,000
5,724,000
26,978,000
13,982,000
84.667.000
31,814,954,000
n,000,179,000
TREASURY DEPARTMSRT
Washington
FOR RELEASE, MORNING NaTSPAPEBS,
Tuesday. December lit. 19A3._____
Press Senrice
?o
The Secretary of the Treasury announced last evening that the tenders for
II ,000,300,000, or thereabouts, of 91-day Treasury bills to be dated December 16, 1943,
and to mature March 16, 1944, which were offered on December 10, were opened at the
Federal Reserve Banks on December 13*
The details of this issue are as follows:
Total applied for - $1,814,954,000
Total accepted
- 1,000,179,000
Average price
(includes 165,767,000 entered on a fixedprice basis at 99*905 and accepted in full)
- 99. 905/ Equivalent rate of discount approx. 0.375$ per annum
Range of accepted competitive bids:
High
Low
- 99*925 Equivalent rate of discount approx. 0.297$ per annum
- 99.905
*
*
*
*
•
0.376$ »
"
(46 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Total
Applied for
Total
Accepted
Boston
Sew York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
9
9
91,814,954,000
91,000,179,000
15,915,000
1,221,238,000
54,467,000
58,400,000
22,364,000
18,418,000
190,251,000
33,455,000
5,788,000
35,618,000
19,860,000
139.180.000
TOTA;
10,380,000
605,210,000
33,907,000
52,163,000
19,475,000
12,660,000
114,543,000
20,490,000
5,724,000
26,978,000
13,982,000
81,667.000
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING- NEWSPAPERS,
Tuesday, December 14, 1943*
12-13-43
Press Service
No, 39-90
The Secretary of the Treasury announced last evening that
the tenders for $1,000,000,000, or thereabouts, of 91~day Treas
ury bills to be dated December 16, 1943, and to mature March 16,
1 9 4 4 , which were offered on December 10, were opened at the Fed
eral Reserve Banks on December 13*
The details of this issue are as follows;
Total applied for - $1,814,954,000
Total accepted
- 1,000,179,000 (includes $65,767,000
entered on a fixed-price basis at 99f905 and accepted in
full)
Average price
- 99*905/Equivalent rate of discount approx
0*375?? per annum
Range of accepted competitive bids:
High
Low
- 99*925 Equivalent rate of discount approx
0.297?? per annum
- 99*905 Equivalent rate of discount approx
0.376% per annum
(46 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Total
Applied for
Total
Accepted
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St> Louis
Minneapolis
Kansas City
Dallas
San Francisco
1
$
TOTAL
15,9x5,000
1,221,238,000
54,467,000
58,400,000
22,364,000
18,418,000
190,251,000
33,455,000
5,788,000
35,618,000
19', 860,000
139,180,000
10, 380:, 000
605,210,000
33,907,000
52,163,000
19,475,000
12,660,000
114,543,000
20,490,000
5,724,000
26,978,000
13*982,000
84,667,000
$1,814,-954,000
$1,000,179,000
oOo-
TREASURY DEPARTMENT
Washington
Press Service
Ho. 3
I f -
FOE IMMEDIATE RELEASE,
Tuesday, Decamber lU, 19^3»
The Treasury received today the sum of $233*9*5 * °6 from
the Government of Finland, representing a payment of principal
in the amount of $SH ,000 and the semiannual payment of interest
in the amount of $136,220.00 under the Funding Agreement of
May 1, 1923, and $ 1 3 ,695.06 as the sixth semiannual annuity due
under the postponement agreement of May 1, 19^1 • | %his payment
represents the entire amount due from the Government of Finland
on December 15, 19^3 under these agreements.
-oOo*
TREASURY DEPARTMENT
Washington
FOR I M M E D I A T E RELEASE,
T u e s d a y , D e c e m b e r 14, 1 9 4 3 *
The Treasury received
f r o m the G o v e r n m e n t
of principal
payment
of
in
Funding Agreement
the
sixth
agreement
This
o f M a y 1,
payment
the G o v e r n m e n t
of
the
sum of $233,915.06
representing a payment
of $ 8 4 , 0 0 0 and
in the a m o u n t
the
semiannual
today
o f Finland,
the a m o u n t
interest
Press Service
No. 39-91
o f M a y 1,
the
semiannual
of $136,220.00 under
1923,
a n d $ 1 3 , 6 9 5 . 0 6 as
a n n u i t y due u n d e r
the p o s t p o n e m e n t
1941.
represents
Finland
the
entire
on D e c e m b e r
these agreements.
oOo-
amount
15,
due
from
1943 under
s*femt
2
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I
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1*P§ - 5.433
Or*r 4,733
« w 5,0«3
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#f
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m*ji»iL
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mill tt at a aasiarau
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Xm o m nwcsa irithln Vht*h It I* aftnatacMM <W* *«nrU* ««*»*•«
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or <%) J»lat wttonma aitor^l. 36*7,
■aTfpfa
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fjrp# #f wtttxm
CoaHaod M t k « M
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tmemm 41rid »4 * tm m * 4iTi&*A 1 la m m iiri&mA I
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immmme tmx
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$ goo - *1,0 7 1 * soo - 11,363 » * » • tt.309
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Oror 5,167
(tor 5,558
k,30f - 5 .m
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CM<M»r to p a rto m t. S ivtaion of fw t Kowwroh
Jj im m Ii i d*pma«nt •»•«* tokM tor
m nm
**•*
*Mto»to
iMMtor 8, 19^3
nito !« « • » Iwmm.
Q
B*
Consistency of Treasury position
Although not a technical point there is one other statement in
the Joint StaiT statement that oalls for comment.
On page 3 It Is
stated that the Treasury position before the House Ways and Means
Committee was that "there was no better way of accomplishment" of the
objective of taxing those now subject only to Tlctery tax than the
integration plan now contained in the House Bill.
This is not an
adequate presentation of the position taken b y the Treasury before
the Ways and Means Committee.
The Treasury was asked its opinion
of the plan with no advance knowledge of the plan.
On the basis of
a hasty review of the major points of the proposal ©vsr a few minutes
n
tentative reaction was given to the Committee that at the moment no
bettor a l t o m a t l v e came to mind to accomplish the objective of keeping
on the tax rolls ths 9,000,000 taxpayers at the bottom of the taxable
Income scale.
After the Treasury had had an opportunity to study the integration
plan now in the House Bill, It stated unequivocally to the Committee on
Ways and Means that the plan was "hopelessly complicated .*
However,
the Treasury was not afforded an opportunity to discuss its objsctlons
in do tall boforo the Ways and Means Committee.
It Is to bo noted that
the Joint Staff statement failed to mention the later elarification of
the Treasury position on the House Bill integration plan.
P
'-i'S
0.
Kalatlonahln of ttfaaawnr i n U m t U n pgopoaal to rm m laA w of
«>•
memo.iMamtaai
l a w . t « cmmaai
Th« Joint Staff a t a t m a a t Indicate* (pp. 3 • H) that tha Svoamijr
did not present an Integration proposal to the Committee on Ways and Means*
The Treasury income tax proposals to the Congress thlsffall hare from
the first contained the integration element.
The proposal submitted to
the Ways end Means Committee was designed not only to raise revenue hut
to absorb the Victory tax burden Into the regular income tax structure.
At that time* no need was seen for singling out ths lntagration features
of the proposal for separate presentation*
It was thought that lntagration
would b o accomplished as part of a general Increase in Income tax rates
together with other changes (such as lowered exemptions and repeal of
the earned income credit)* and that a separate discussion of the
Integration segment of the proposal would merely complicate the problems
before the Ways and Means Committee*
However, the Senate finance Committee was confronted with a specific
integration proposal in the House Bill*
Hopes for a general upward
revision of income tax rates had not materialised*
Therefore, to aid
the Committee in the consideration o f matters before it* the integration
segment of tho Treasury proposal was trsatsd separately to facilitate
analysis and comparison with the integration provisions of the House Bill*
S % )
1.
0.
*.
.f • " “ ■ • M X *
attributable to the returns of the $ million taxpayers eliminated
under the treasury integration plan would not b e as great as the revenue
that would be eolleeted from them*
.
T
Quite aside from the (unte^rfble
I
implication that a tax is worthwhile if it does not ooet 100 peroent to
oelleet is the feet that in fudging whether an administrative expenditure
U worthwhile olt.rn.tiw. op.r.tio». ■*.« *. oon.id.rl.
W a r
as
personnel is freed from tho administrative tasks involved In ths handling
o f thoso millions of minor itsmsf increased attention mould be d e v o t e d .
h
te more adequate eolleetion from other more profitable areas of the tax
bass with rssults that might bs expeeted to exceed the amount of rovei L \
lost by eliminating these small taxpayers*
Moreover, any consideration
o f the costs of maintaining these small accounts on ths tax rolls should
\
I
include the withholding burdens imposed upon employers and the taxpayers*
I
own tasks of compliance, as well as merely costs to ths Bursas of
Internal Be venue.
B. Estimated r e v e n u e ^
O n page 13 ths Joint Staff statement implies that the
represented the yield of the minimum tax at |l6l,000,000, whereas ths ||
actual yield would b s mors*
the treasury figure does not relate and
was never intended to relate to the whole minimum tex*
It Is the
g
Vv
a
i
estimate of how much the $ million persons who would bs wholly relieved I #
from income tax under ths treasury proposal would pay under the louse B 1 H «
'Ii
merely of the application of ft 3 percent rate to the excess of the wages
over ft uniform withholding exemption, for example, $12 for ft weekly
payroll, regardless of the wage-earner** family status.
Under the House
Bill if he found that minimum tax withholding applied, hie computations
would require use of a separate set o f exemptions that vary with family
statue as do those for regular income-tax wlthholdlng^fun&er the treasury
Integration proposal, withholding would he least complicated since there
would ho only one set of exemptions and rates to apply.
Under present
law, payroll procedures are simplified by the fact that all wage earners
subject merely to Victory tax withholding can ho treated uniformly.
Under the House B U I , complications would he increased since differentiation
according to family status would h e required for both minimum end regular
taxes.
If.
Other point* on Integration
A.
Administrative problem under House B U I
1.
the Joint Staff statement attempts to rebut the treasury**
contentlen that the House Bill would unduly complicate the administrative
process by stating (on page 12) that elimination of 2.b million returns
"cannot be termed an addition to the problem of administration.11 this
y fig g g t* truism does not constitute an answer to the evidence presented
by the treasury to show that administrative burdens would he greatly
increased under the House Bill,
the benefits of eliminating 2.^ million
returns would ho far mors than offset by the complexities o f the tax
computations, the resultant large numbers of errors, and the necessity
for furnishing the majority of taxpayers with assistance In determining
the most advantageous method of filing under the House
wiU be subject to two different taxes, with different exemptions and
rates* will not ha at all rare under the House hill* Taking merely the
ease eited in the Treasury*e statement* we see that with the husband*t
1noons at IJOD* he would he subject to the regular tax* while his wife
would he subject to the aiainaa tax if her lneoae fell anywhere between
$600 end $888. Two texee side by eide will he a'vssy real problem for
nuaerous taxpayers*
in . OMmiuatioB *y
th*
& sm S iU
trm
uHm stated that tha prortulon
tha House »IU
substituting varying minimum tax exemptions for the present fixed Victory
tax exeaption would complicate withholding operations (Hearings* p. 28* 29)
This eonelusion is attacked on page 13 of the Joint Staff etatenent. It
is asserted that a table would ho provided froa which employer© could
readily deteraine* in eaoh individual ease* whether withholding is to
/ho computed by uso of the alniaua tax or tho regular inoona tax rates
and exemptions#
.
This answer does not aeet the point in question for the many employers
who uso the more accurate ’•precise* method of withholding* A table of
/this p o rt would of course be provided* and is in fact in use under present
law* The complication is introduced* however* la tho next step after
|he employer has used mush a tabls to deteraine which of the alternative
hates for withholding applies* Under present law if he finds that
Victory tax withholding is appropriate* tho remaining oo^mtation consists
A
to im yinx *. (toiroa tw m « to »lda with tha tm gslur
II.
Sht CooalttM rtiff atotai on page k that, bawuat a table guiding
taxpaysrs into either the minimum or the regular tan can he prepared,
the treasury 1* wrong In asserting that there will he two alternative
taxes# that ie* the minimum tan and the regular tan* aide hy elde under
the Bouse hill, Aside from the disadvantage that the tabular guide will
itselfn^ya devise new to Imorleen taxpayers* It le obvious that the
preparation of mechanical gulden done not conjure the minimum tan out
of enietenoe. Share are etlH two tunes (one of then entirely new) te
he explained* two tanoe to he understood* and two taxes te he dealt wlth«
Shoes who explain the tan hy written or spoken word will have to labor
through both the minimum tan and the regular tax; no mechanical guide
gan relieve then ef the task of explaining* nor the taxpayer from the
taak of trying te understood* two different time with intricate^
Interrelations*
for many married couples* moreover* the two taxes will setua&y
he elde hy elde at a practical natter In tie course of their tan
computations* Many couples filing separate returns will find that the
husband le subject to the regular tan and the wife to the minima tan*
cr vice versa* It i« to he noted that the £oint Committee staff did
not dispute the example given in the Treasury** statement illustrating
this point (page S6 of the Bearings)* the cases wh©re husband and wifs
of the Joint Staff statement w o l d hold only under tho *>0-50 division
of incomt which is implicitly assumed in ths table*
If# for exaisple#
a couple without dependents had somewhat so?i than ^ » 7 3 ^ (2 times
$ 2 ,367 ) dividsd U 5 -5 5 instead of 5 0 -5 0 ns la table U# separate returns
would not be desirable* ] J
With a more uneven distribution o f income
the incones at the breaking points Increase*
On page 10 the Joint Staff statement asserts as an advantage of
the House bill that it raises the amount of combined net income above
which it is desirable for a married couple without dependents to file
separate returns from $3,200 to $b,?33.
At the same time it cites the
lowering of this amount to $1,600 under tho Treasury proposal as a
disadvantage*
This argument entirely misses the essential point that#
putting asideepiity questions and looking at the problem from the stand
point of simplification or complexity# it makes no significant difference
whether this point Is hi$h or low*
The important thing for purpoees of
simplification is that the point be clearly defined and readily determinable
Under both the present law and the Treasury proposal the breaking-point
is constant in terms o f surtax net income* and may be computed at a
glance in terms of net income*
Under the House bill the breaking-point
is variable and difficult to determine#
1J
If the split was U 5 - 5 5 * separate returns would result in a total
tax of $062 as compared with $059 under a Joint return. An
increase in the inequality of the division of income between
husband and wife would increase the disadvantage o f separate
returns at this combined net income level.
complexity.
■;.4
As the number of such guide tables wa* increased, an
$$$■
f■
increasing numbsr of taxpayers would come within the purview of one
or more tables.
She complexity of such a system of multiple guides
would render thjm impracticable.
An analystji of table U. page 10 of the statement of the Joint
Committee Staff .fringe out d e a r l y the essential difference between the
joint vs. separate returns problem in the regular Income tax area under
the House bill ae compared with the problem under either the present
law or the Treasury integration proposal.
As the table shows, the amount of combined net Income above idiieh
separate returns become advantageous varies under all threa tax methods
with the number of dependents*
That the table does not show is the fact
that the point above which separate returns bscoms advantageous is fixsd in
terms of surtax nst income under both present law and the Treasury pro
posal.
Under present law this point is at $3*000 of combined surtax net
incomes under the Treasury proposal Involving a $500 first income bracket*
this point would bs at $500 eomblntd surtax net income*
These points are
constant regardless of ths number of dependents and regardless of the
division of income*
By striking contrast* under the House bill this
point varies in terms of surtax net Income with both the number of
dependents and the percentage division of income*
~
Xn this connection* it should be noted that* just as in table 3#
the breaking-points under ths House bill indicated in table
page 10
nevertheless, ths advantage of joint returns for thin couple would
exceed that of a coaple with the same Income, equally divided.
With a HO
-60
split the cowhined tax under •operate returns would he $868.87 ** compared
with $
858.67 under
returns.
An additional table would he
necessary to guide the couple with the hO
-60 split
of Income.
Separate
additional tahlee would likewise he required for each different division
of income if taxpayer* are to he guided to Joint or eeparate returns hy ths
use of tahlee.
%J
Some of the variations in the ranges of advantage caused
hy variations in the division of income are illustrated in * the attached
Exhibit 1.
It should he noted that, as the figures in table 3
th* statement
indicate, the ranges of advantage vary with the number of dependents,
fhis is further demonstrated in Exhibit 2.
TOS
from these examples and the tahlee here presented, it is de ar , as
ths treasury previously pointed out, that both tha division of income
and the number of dependents are important in determining the sense of
advantage for one type of return or the other.
Mo reaver, they bring
into clear focus the important practical coneidaration that a number
of tahlee like sample table 3 would he necessary to meet the hulk of
taxpayer situations.
Whese tables would have various maximum and
minimum limits for t h ^ n « » ^ ^ each spouse for various dependency
statuses.
Such tahlee would tend to overlap, with a taxpayer finding
himself on more than one table, thu s adding to the coafuslo$„.and
/ in addition to the defect« of the lower limits, admitted on page id
of the statement of the Joint Committee Staff, thie analysis shows
that the upper limits of t&bis 3 mre ambiguous.
1
not meet the condition! under which joint re torn* were advantageous,
«1 nee the gfosa Income of one spouse was less than the minimum of
$ 5 ^5 .85 .
Actually, however, this couple should file joint returns
since the liability under joint returns would h e $10.35 «* compared
with $3 b. 3 h under separate returns.
Again, taka the east of a eoople without dependante receiving a
combined grots income equal to $5*®35-^6.
their income wee
divided equally each receiving $ 2 ,5 1 7 -7 3 *hey would be guided by the
table into joint returns. 1/
If, however, they received the same
combined gross Income, or $ 5 *0 35 -^*, divided unequally« Uo—bO, one
would receive $2,0lh.lH; the other, $3,021.2$.
offer no guide.
*he table would
It would in fact imply that joint returns would not
be advantageous, since the income of one spouse exceeded the maximum
allowed by the table.
^ T r~ It this Income level with a 50-50 split of income .heir
liability would *8X be the same or $$5$.b7 under either joint or
separate returns.
However, the adequacy and usefulness of this type of table
as a guide to the taxpayer is dubious and at best H a l t e d .
Shore is no guidance for great numbers of taxpayers,
for example,
suppose the husband earns $2,b00(and the wife 11,000*
If thsy
have no dependents, table 3 would not guide them because the
husband* s earnings would exceed the maximum income for one spouse
to which the table would be applicable.
If they have ®
four
dependents, table 3 would not answer their problems because the
wife's Income would be lees than the minimum amount assumed for one
spouse where there are food dependents*
The table sets H a l t s within which joint returns give the low
est tax.
If it is to be a guide to the taxpayer, he wculd
presumesbly have a right to expect that optside these limits joint
returns would not give the lowest tax.
is not the case,
But in numerous situations this
for example, suppose that a married couple with no
dependents received a combined gross income of $ 1 ,1 1 1 *70 * i.e., two
times $3$$.85*
If their Income was divided equally, each receiving
$555*^5, the table would guide them into joint returns. 1/ Suppose,
however, they received the same gross income of $ 1 ,1 1 1 *7 0 , divided
$700 and $bll.7Q.
l/
This table in itself would imply that they did
At this combined income level the liability under joint or
separate returns would bdidtntical, 1. e*, $10*35*
Point that perlexity is same on the
'short as it is on the long form
At sevesal points, notably page 9 C bb enmi"*— S w p e W the
?
Joint Staff statement suggests that couples using the short
form (lOhOA) would avoid any laborous computations.
.. i1■i*lll^ IWBWiA— — —
^
In fact, however, the fundamental
perplexity with respect to the choice of joint or separate returns
is
hy no means limited to users of Form lOHO.
It is practically
the same whether the taxpayer uses or intends to use either 10U0
or lOUOA.
The simplification of the arithmetic in the final
computation does not affect the basic perplexity.
Furthermore,
even though to reach the smallest tax the taxpayer ultimately
chooses the short form in the process of arriving at this decision
he would in many cases have to make trial computations involving
both long and short forms.
C.
Determination of income levels affected by
complexity of choice
the Joint Staff statement (page 9) denies the truth of
assertion that because of variables in the possible division of income
and dependents between husband and wife *no clear dividing lines or
income zones can be established to guide taxpayers into one type
of return or the other.®
Table 3
9
Joint Staff
statement appears to be offered ae a sample of the type of table
which might be used to guide the taxpayer into the type of return
verted to net Income by subtracting 6 percent for average deductions,
l
and are multiplied by two, they
m
^
with the Treasury s
figures for breaking points assuming a 50-50 division of income,
given on page
2
2 of Appendix B of the Hoveaber 29* ifl® statement
(page 5 / of Finance Committee Hearings).
/3
similar dilemma*
Under the Treasury proposal the choice between
joint and separate returns would not only be clear-cut but would
be the same as it is under present law, thus requiring no
reappraisal of the most advantageous method of filing*
I I
A
%he tax it hi® tie®# for® 10^K), while he may find the tax In a table
for each alternative if **• usee Form 10^0-A.
The Joint Staff statement (on page S) questions the Treasury
assertion that the Houee hill will confront more than 10 million
married couplee vith the choice between joint and separate return#.
The figure of 10 million is, if anything, an understatement.
Under
the House hill, virtually every husband and wife, both receiving
income, except those in relatively high brackets, will face the
complex problem of choosing between joint and separate return#.
The choice will, a# noted above, require the weighing of many
complicated factor# not now involved in the tax law.
While guides
may be established to reduce the complexity for some taxpayers, they
can at best cover only part of these married couples.
With or
without the guides, however, the problem will be confusing and
often complex.
The Joint Staff statement goes on to say (page 11) that even if
the Treasury assertion is true, "it follows that the only possible
reason that the Treasury proposal would not confront a good many more
than 10 million couples with this dilemma Is that their proposal
completely relieves 9 million persons of any tax whatsoever."
It is
not clear whether an implication is intended that the Treasury
proposal would confront more than 10 million married couples with a
//
3.
Humber of taxpayers affected by the complexity
It la asserted on page 3 of the Joint Staff statement that the
cases where complications arise under the House bill are "limited
to those persons who choose to file on the long fora of return with
the hope that a few dollars of tax could be eared.*
The quoted
statement Implies that persons filing the long form to tare taxes
should pay the penalty of suoh complexity.
However, the fact that
people in very large numbers compare liabilities when there is a
Y o /& & r c c + t /~
chance of saving money( as Is Indicated by the fact that about half of
v
pUs>
the persons eligible to use form IOHq a {normally filer)on form lQ^KjO
makes the problestane of taxpayer understanding and convenience, not
one of penalty.
The further Implication that only persons seeking
to save tax use the long form is contrary to the fact that many
persona are required to file the long form because the sources or
the site of their Incomes may bar XXI them from the use of the short
form lOhOA.*
\
Moreover, the complications In the choice between Joint and
separate returns and In the division of dependents between spouses
are not limited to form 10^0, the long form.
Persons filing
form 10*40-A, the short form, also have to make the choice by eomparlng liabilities under Joint and separate returns and various divisions of
dependents.
The only difference between forms
10*40 and 10*40-A
is
that for each of these possible divisions the taxpayer has to compute
la* offer* no incentive for married couples with snail incomes to
file separate returns, and on the other that it sokes no difference
to such taxpayers which type of retuns they file,
Flret of all, it
should he said that there is no inherent contradiction between the
two statements, ewen without qualifications.
Second, the treasury's
statement that under present law it is a natter of indifferenoe to
married couples with surtax met income helow $2,000 whether they
file separate or Joint returns d e a f l y applies only so long as no
sxemptlon Is wasted.
If the filing of separate returns results In
unused exemptions under present law. It Is no longer a matter of
Indifferences it Is simply irrational*
waste and thereby reduce the exemption*
crease In exemption*
Filing separate returns may
It cannot result in an in
Therefore, while It may ho a matter of Indiffer
ence whether joint or separate returns are filed (where no exemption
is wasted), there cannot In any exeat he any incentive (in terms of
rates and exemptions) to file separate returns* the Treasury's state
ments are wholly consistent with each other*
The points Just mads clearly Indicate the Irrelevancy of the
assertions la the Joint Staff statement that there ie *absolutely
no difference between the number of possible computations under
the present lav and under the Reese bill *««* (Page 8}
ether Assertion# on this subject require mention*
One or two
On page 8 it ie
noted that in 4 of the 8 cases listed In the table prepared bp the
treasury showing alternative computations, some of fee regal .jr
income tan exemption was unused*
assumption*
this was said to bo a&*absar&*
However, because of fee existence of fee minimum tax.
It Is entirely possible to “waste" some of fee regular income tax
exemption and yet obtain fee lowest combined tax liability In fee
face of such wastage*
therefore, lose of part of the regular exemption is no guarantee feat
a given method of filing is disadvantageous* ‘
» farther point is made that "many of fee possible allocations
lependeney credit would not bo permitted under the existing
sh requires feat the taxpayer receiving dependency credit must
4
provide fee major support of fee dependent*11
(Rage 8}
he a matter of
pxmetleo, it is well known feat dependents are not in fact allocated
according to the major rapport principle*
would be well-nigh Impossible*
To enforce felt principle
The Bureau of Internal Revenue has not
attempted to prevent taxpayers from allocating dependents in any maimer
they see fit*
On page 8 fee Joint Staff statement asserts th&t the Treasury’s
testimony contradicts itself in raying on fee one hand feat present
than $2,000 produces no tax advantage, and (2 } this Is a fact
easily explained to and understood by taxpayers, the problem of
alternative tax computations is, for all praetical purposes,
non-existent under present lavs.
tinder the louse bill, where (1) the amounts of the exemption
o A-£_
4rS different under joint and separate returns and under both the
minimum tax and the regular tax, and (2 ) the rates may also differ
ae between joint and separata returns and different allocations
of dependents, the choice between joint and separate returns is
anything but clear*
The advantages do not run all in the direction
of joint returns In one Income area and all in the direction of
separate returns in another.
There are several opposing factors and
several different zones of advantages.
Where husband and wife are
subject to the minimum tax, separate returns result in a larger
exemption than a joint return; where they are subject to the
regular tax, separate returns result in a smaller exemption.
In
addition, tha credit for dependents varies as between the minimum
tax and the regular tax*
The combination of these factors mhkes
the choice between joint and separata returns and different divisions
of dependents a very real and very complex one under the House bill.
in, part of the area where separate returns hare been preferable,
joint r a torus will become advantageous*
Therefore, there will
not only he a problem of complexity in choosing the method of
filing, there will also ha a shift to separate retorns for many
persons now filing joint retorns, and vice versa.
—»
Under present law there is no incentive to file separate
returns on form 10^0 as long as combined surtax net income does
not exceed $2,000. It Is common knowledge that no advantage results
from ths use of separate returns in this area.
Conceivably,
married couples can go through the motions of the alternative
computations.
It is entirely unrealistic to assume that they
will do so, however, since the choice is entirely clear without
such computations,
filing separate returns^results in neither
lower rates nor higher exemptions! in fact, the only possible change
in liability by filing separate returns In the area under $2,000
Is an increase in liability resulting from loss of part of the
personal exemption under the regular tax and a decrease in the
amount of postwar credit under the Ylebory tax.
Table 2 prepared
by the «Toint Committee supports exactly this view.
It is to bs
noted that every one of the liabilities computed on separate
returns it greater than the joint-return liability*
Since (1) the
filing of eeparato returns for combined surtax net incomes of less
The whole point is that for the very taxpayer involved in the example
separate returns would now he more advantageous than the joip^t return.
More
over the advantage lies in a particular division of dependents, to the hudand
and one to the wife hut this advantage becomes known only after
are made.
^
computations
C co
"
it
/file jointly, the regular tax if they file separately, or rice
versa; the minimum tax may ap ly If dependents are allocated in
one way, the regular tax, if another.
Several alternative
computations, often involving first the minimum and then the
regular tax, will therefore he nec ssary In many cates to arrive
at the filing combination Involving the smallest amount of tax.
The statement questions the validity of the Treasuxy's
example illustrating the series of alternative tax computations
necessary under the Bouse bill to determine the lowest combined
tax for a husband and wife both having income.
reproduced on page 5 of statement.)
(Bxample SBffciBX
The «Tolnt Staff does not deny
that IS tax determinations would be necessary under the Bouse bill.
However, on pages 5 through S, the Committee XSX attempts to show
that the same choices and alternative computations would be
possible under present law.
It is true that IS computations could
he made under present law in the situation citid.
The crux of the
matter, however, is not that ^ h e computations are possible, but
rC/
r:
___ ___*__ __ _____ --
that taxpayers would not find any point in making thern^i Under
present law, the choice between joint and separate returns is
perfectly clear and requires no alternative computations.
Under
the Mouse bill, the choice is not clear; In fact, In a considerable
part of the area where joint returns have heretofore been clearly
prefsrabla, separate returns will become advantageous . ( Likewise,
x
fhe points regarding complexity, raised by the Joint Committee
Staff statement, are answered In the following discussion.
I#
The problem of the choice between joint and separate returns
fhe Treasury and the Staff of the Joint Committee differ
sharply on the complexity involved in the choice between joint and
separate returns under the minimum tax.
fhe chief points of
t
difference center on! (l) the nature and magnitude of the complexity
under the House Ull and its comparison with present law; (2) the
number of taxpayers affected by the complexity involved in the
choice; (3 ) the income ranges in which the choice between joint
and separate returns must be faced.
A.
fhe nature and magnitude of alternative tax computations
On page 3 the Joint Staff states that *n© income taxpayers will
have to compute two different taxes to determine their tax liability.
This statement is in error.
Although once the decision to use joint
or separate returns has been made and the allocation of dependents
decided upon, oily one tax — ■ either the regular or the minimum —
will apply to each spouse^ jt k e process of choosing will itself
frequently involve confusing switches between the regular and minimum
Q/QS
Many married couples where both spouses receive income will
tax.
have to compute both minimum and regular taxes in comparing the
advantages of joint and separate returns and of different divisions
of dependents between spouses,
fhe minimum tax may apply if they
Statement of Randolph E. Paul,
General Counsel for the Treasury,
before the Senate Finance Committee
December 15, 1943
It was very kind of the Committee to give an opportunity to answer the
statement of the Joint Staff made before the Committee yesterday. The time
available has not been all I should have liked to have since some of the
points involved are complicated §,nd require extensive analysis. However,
I am presenting to the Committee at this time a general answer to the
Joint Staff statement and I am also furnishing a detailed answer to all
points in that statement* In m y answer I have endeavored to keep discussion
on an objective basis and to avoid questioning the motives or the frankness
of any person whose opinion may differ from mine.
I think it clear that any
other course is not in the interest of expeditious procedure or intelligent
assistance to this Committee.
It cannot be denied — and I see no denial in the Joint Staff state
ment of December 14 —- that the Treasury’s integration proposal is far
simpler than either the present law or the House bill. If simplicity is the
controlling objective, the Treasury’s integration proposal is clearly the
preferable method of integration.
However, I pointed out in m y statement of November 29 that under this
proposal 9 million taxpayers are relieved of income tax. These 9 million
taxpayers would have paid only $161 million of tax under the House bill*Under the Treasury's proposal, the amount payable by these taxpayers would
have been collected from other taxpayers. There would, therefore, have been
no loss of revenue.
It is generally agreed that real simplification cannot
be achieved without dropping these 9 million taxpayers from the rolls.
The removal of these taxpayers from the rolls is a question of policy
for the Committee, The pertinent policy considerations on this point have
been fully explored and there is no need to repeat them at this time. If
the Committee desires to keep these 9 million taxpayers on the rolls even
at the expense Of obvious complication of the tax structure, the question for
the Committee then becomes, What type of income tax should be used to reach
them?
Eliminating the Treasury integration proposal, the alternatives are the
present victory tax and the minimum tax contained in the House bill. The
issue is not simply between the Treasury integration proposal and the minimum
tax. If the Treasury proposal is rejected, the issue — and it is a vital
issue — is between the victory tax and the minimum tax. The dropping of
taxpayers from the rolls is not involved in this issue.
39-92
« 2 The Treasury and everybody else who recommended integration of the
victory tax dxd so in the hope that integration would eliminate existing
complications.
Unless these complications are clearly and unmistakably re*moved by the minimum tax, there is absolutely no point in making this switch
to another income tax method#- The Joint Staff has presented arguments in an
attempt to prove that the House bill is less complicated than the victory tax.
We are answering these arguments point by point later in this statement. We
are convinced that the victory tax is less complicated than the minimum taxf
.Both taxes are admittedly complex.
In view of the sharp difference of
opinion among the experts, your Committee must at least have reached the con
clusion tnat it is debatable whether one is more complicated than the other*
Under these circumstances every policy argument is against switching from the
victory tax to the minimum tax.
The taxpayer confusion and misunderstanding that would arise from
a switch at this time is in itself an unanswerable argument against turning
to the minimum tax.
In the next few months the Treasury will be devoting
every effort and cooperating with every educational facility to explain the
victory tax so that millions will be enabled to fill out their March 15
returns.- .
This education of taxpayers is necessary even if the victory tax is
replaced by the minimum tax, since returns for 1943 to be filed in March, 1944,
will still be based on the victory tax.
This process of education under the victory tax will be difficult
enough. But just as soon as it is achieved, the Treasury would have to turn
around and go through the entire process of education all over again for the
minimum tax. As a matter of fact it will be necessary to explain both the
victory tax and the minimum tax at the same time to millions of taxpayers
who would on March 15, 1944 file 1943 returns on the victory tax basis and
1944 declarations on the Ednimum tax basis. Satisfactory taxpayer education
and compliance is impossible under these conditions.
Adoption of the minimum tax would necessitate new withholding tables
and new withholding exemptions, presumably to become effective on April 1, 1944.
Retention of the victory tax, without other changes in the income tax rates,
would make unnecessary any change in the withholding tables and exemptions.
Consequently, in addition to all of the taxpayer confusion which a switch
from trie victory tax to the minimum tax would involve, an added burden would
be thrown on employers by the change in withholding necessitated by the
minimum tax#
-3This problem can only be approached from the standpoint of administration
and taxpayer compliance* The Treasury Department through the Bureau of Internal
Revenue must administer the income tax* In the opinion of the Commissioner of
Internal Revenue both the victory tax and the minimum tax are a handicap to
satisfactory administration* However, the Commissioner has stated his opinion
that of the two the victory tax is the lesser evil* I quote from a letter
the Commissioner of Internal Revenue sent to the head of the Joint Staff
dated December 2, 19^3t
* # *
111
should like to state at the outset that
the minimum tax of the type proposed or any other tax
separate from the regular income tax which will involve
exemptions and credits for dependents different from those
allowed for the regular income tax will be verydifficult of administration.”
* # #
^Comparison with Victory Tax
As between the minimum tax in H* R. 3687 a-fld
the present Victory tax which includes the compulsory
current use of post-’
■war credit, the administrative
burden would be less if the Victory tax were continued.”
# * #
”* * * Especially in view of the change from one
system to another, the minimum tax * * * would cause
greater difficulties than those under the present law.
In this regard, as I stated above, the Victory tax or
any minimum tax necessarily adds serious administrative
burdens to the regular income tax system and serious
difficulties for the taxpayers.”
It is earnestly urged upon the Committee that the judgment of the admin
istrative agency having the burden of collecting the $17 billion under our
existing income tax system is entitled to great weight when the question is
one chiefly of administration*
It is, in our opinion, a compelling reason
against switching at this time from one complicated tax to another compli
cated tax*
It is possible within the framework of the Victory tax to take some
steps in the direction of simplification.
The Victory tax rate could be
fixed at a flat Jfj> rate.
This change would involve the least sacrifice in
taxpayer education in respect to 19^-3 tax liability under the Victory tax.
It would avoid the confusion involved in switching from a 3$ Victory tax with
one set of concepts to a 31 ° minimum tax with a totally different set of con
cepts, This suggestion was made to the Ways and Means Committee before that
committee commenced its work on the Treasury proposals of October U, 19^3*
- k As I have said, I am'replying point by point to the Joint S t a f f s
criticism of my statement of Hovember 29» 19^3» At this stage, i would like
to repeat the main arguments made in my statement:
1. The minimum tax involves the difficult problem of two alternative
taxes and obliges taxpayers to decide which of the two taxes is applicable.
2. For millions of taxpayers it will necessitate a comparison of" tax
liability under separate and joint returns that is not present today.
3*
1} will decrease the use of simplified form lOhOA,
H* It will complicate the withholding process end place additional
burdens on employers.
5* It will greatly increase the administrative burden upon the, Bureau
of Internal Revenue.
6 . It unnecessarily reduces the present tax liability of about
taxpayers.
26
million
I said in my statementof November 29 » 19 ^3 > that the minimum tax in its
proper perspective may jeopardize the whole income tax system* The recent
statement of the Joint Staff does not face the reality of this possibility.
It is necessary to the survival of a tax law affecting over'50 million people
that the law be made understandable to those people.
I see no hope of satis
factorily explaining to millions of taxpayers over the radio, in the press,
and through the mail two complicated taxes under which they must file at the
same time returns for the year 19^3 and 'declarations for the year 19Uh.
I therefore repeat what I said in my original statement that the minimum
tax endangers the collection of more than §1J billion from over 50 million
taxpayers throughout the income scale. I also repeat what I said in response
to' a question asked during my testimony of November 29th that the Victory tax
is the lesser of the two evils with which the Committee is confronted if it ■
decides as a matter o^ policy that it is essential to keep on the tax rolls
9 million taxpayers who pay a total tax of only $l 6l millions.
o0o*r
.
- 5 The points regarding complexity, raised by the Joint Committee Staff
statement, are answered in the following discussion.
I.
Tfo.
Q Pr?folem of the choice between .joint and separate returns
The Treasury and ihe Staff of the Joint Committee differ sharply on the
complexity involved in the choice, between joint and separate returns under
the minimum tax. The chief points of difference center on*
(l) the nature
and magnitude of the complexity under the House bill and its comparison with
present law*
(2) the number of taxpayers affected by the complexity involved
m the choice^ (3) the income ranges in which the choice between joint and
separate returns must be faced.
A*
The nature and magnitude of alternative tax conputations
O11 P&ge 3 the Joint Staff states that ”no income taxpayers will have to
©ompute two different taxes to- determine their tax liability.”
This statement
is in error. Although once the decision to use joint or separate returns
has been made and the allocation of dependents decided upon, only one tax —
either the regular or the minimum — will apply to each spouse, the process of
choosing will itself frequently involve confusing switches between the regular
and minimum taxes. Many married couples where both spouses receive income will
have to compute both minimum and regular taxes in comparing the advantages of
O o m t and separate returns and of different divisions of dependents between
tax may apply if they file jointly, the regular tax if
y file separately, or vice versa* the minimum tax may apply if dependents
are allocated in one way, the regular tax, if another. Several alternative
computations, often involving first the minimum and then the regular tax, will
therefore be necessary in many cases to arrive at the filing combination involv
ing the smallest amount of tax.
The statement questions the validity of the Treasury's example illustrating
°f alternative tax computations necessary under the House bill to
determine the lowest combined tax for a husband and wife both having income!
(Exanple reproduced on page 5 of statement.) The Joint Staff does not deny
hat 18 tax determinations would be necessary under the House bill. However
al tern at *^ ^ t
?* th* Coimittee ^ t e m p t s to show that the same c h S aAd
lternative computations would be possible under present law. It is true that
Irv^Tt^Ztf
t te made.under present law in the situation cited. T h f
tf
matter, however, is not that the computations are possible, but
that taxpayers would not find any point in making them. Under present law the
anerLtivr:od,0t^-and
fact
V
^
at;°n s *
retUrnS iS perfeot^
Under the House bill, the choice is not clear: in
been*clearlv°preferaMp ^
°f+tbe area where doint returns have heretofore
S u H t a t f ? 1 ’ separate returns will become advantageous. The whole
point is that for the very taxpayer involved in the example separate re+m-n^
would now be acre advantageous than the joint r e L n . " o r e o ^ h e ^
Wife
b„?
division of dependents, two to the husband and one to the
separate returns for many persons now filing joint returns, and vice versa.
Under present law there is no incentive to file separate returns on
Form 1040 as long as combined surtax net income does not exceed $2,000. It
is common knowledge that no advantage results from the use of separate returns
in this ares* Conceivably, married couples can go through the motions of
ohe alternative computations. Ityis entirely unrealistic to assume that they
will do so,^ however, since the choice is entirely clear without such compu
te o10ns. Filing separate returnst results in neither lower rates nor higher
exemptions; in fact, the only possible change in liability by filing separate
returns in the area under $2,000 i,s an increase in liability resulting from
loss of part of the personal exemption under the regular tax and a decrease
in the amount of postwar credit under the Victory tax. Table 2 prepared by
the Joint Committee^supports exactly this view* It is to be noted that every
one of the liabilities computed on separate returns is greater than the jointreturn liability. Since (l) the filing of separate returns for combined
surtax net incomes of less than $2,000 produces no tax advantage, and *(2)
this is a fact easily explained to and understood by taxpayers, the problem
of alternative tax computations is, for all practical nurposes, non-existent
under present laws.
Under the House bill, where (l) the amounts of the exemption are different
under joint and separate returns end under both the minimum tax and the
regular tax, and (2) the rates may also differ as between joint and separate
returns and different allocations,of dependents, the choice between joint and
separate returns is anything but clesx, The advantages do not run all in
the direction of joint returns in one income area and all in the direction of
separate returns in another# There are several opposing factors and several
different zones of advantages, Where husband and wife are subject to the
minimum ta.x, separate returns result in a larger exemption than a joint
return; where they are subject to the regular tax, separate returns result
in a smaller exemption. In addition^ the credit for dependents varies as
between the minimum tax and the regular tax. The combination of these factors’
makes the choice between joint and separate returns and different divisions
of dependents a very real and very complex one under the House bill.
The points just made clearly indicate the irrelevancy of the assertions
in the Joint Staff statement that there is ’’absolutely no difference between
the number of possible computations under the present law and under the
House bill .
(Page 8) One or two other assertions on this subject require
mention. On page o it Is noted that in 4 of the 5 cases listed in the table
prepared by the Treasury showing alternative computations, some of the regular
income tax exemption was unused. This was said to be an ’’absurd” assumption,
However, because of the existence oi the minimum tax, it is entirely nossible
to ’’waste11 some of the regular income tax exemption and yet obtain the lowest
combined tax liability in the face of such wastage. Therefore, loss ox part
of the regular exemption is no guarantee that a given method of filing is
disadvantageous.
- 7 The further point is made that “man- of the possible allocations of the
dependency credit -would not be permitted under the existing law which requires
tnat the taxpayer receiving dependency credit must provide the major sunp’ort
of the dependent
(PageB) As a matter of practice it is well known that
dependents are nothin fact allocated according to the major support orinclple
To enforce this principle would be well-night impossible* The Bureau of
Interna-. Revenue has not attempted to prevent taxpayers from allocating de
pendents in any manner they see fit,
On^page^o the Joint Staff statement asserts that the Treasury*s testimony
conuradices itself in saying on the one hand that present law offers no
incentive for married couples with small incomes to file separate returns
ana on the other that it makes no difference to such taxpayers which type9of
return they file. First of all, it should be said that there is no inherent
^1
on^^a<^^c^^on between the two statements, even without qualifications, Second
the Treasury’s statement that under present law it is a matter of indifference
to married couples with surtax net inccme below B2.000 whether they file
separate or joint^returns clearly applies only so long as no exemption is
^as 6 f _^
filing of separate returns results in unused exemptions under
present law, it is no longer a matter of indifference; it is simply irrational
Filing separate returns may waste and thereby reduce the exemption. It canin an increase in exemption. Therefore, while it may be a matter
of indifference whether joint or separate returns are filed (where no exemption
is wasted) there cannot in any event be any incentive (in terms of rates and
exemptions) to lile separate returns. The Treasury’s
i tements are Y/holly
consistent with each other.
*
Number of taxpayers affected by the complexity
lb is asserted on page 3 of the Joint Staff statement that the cases
where complications arise under the House bill are “limited to those persons
who choose to file on the long form of return with the hope that a few dollars
oi tax could be saved.” The quoted statement implies that persons filing the
long form to save taxes should pay the penalty of such complexity. However
the lact that people in very large numbers compare liabilities when there is a
chance of. saving money (as is indicated by the fact that about 4-0 percent of
the persons eligible to use Form 1040A filed on Form 1040 in ,1942) makes the
problem one of-taxpayer understanding and convenience, not one of penalty,
further implication that-only persons seeking to save tax use the long form
is contrary to the fact that many persons are required to file the long form
because the sources or the size of their incomes may bar them from the use of
the short form 1040A.
Moreover, the complications in the choice between joint and separate re
turns and in the division of dependents between spouses are not limited to
lorm 1040 the long form. Persons filing Form 1040A, the short form, also
have to make the choice by comparing liabilities under joint and separate re
turns and various divisions of dependents. The only difference between
orms 1040 and f04OA is^that for each of these possible divisions the taxpayer
+ s to c ampu be ;ohe tax if he uses Form 1040, while he may find the tax in a
table
each alternative if he uses Form 1Q40A.
x
o
r
-
8
-
.+ +?e ^01nt Staff statement (on page 8) questions the Treasury assertion
tnat the House bill m i l confront more than IQ million-married couples tfith
the choice between joint and separatevreturns. The figure of 10 million is
if anything, an understatement. Under the House bill, virtually every
*
husband and wife, both deceiving income, except those in relatively* high
brackets, will face the complex problem of choosing between joint and separate
returns . The choice will, as noted above, .require the weighing of many complicated factors not now involved in the tax law. While guides may be estab
lished to reduce the complexity for some taxpayers, they can at best, cover
only part of these married couples. With or without the guides, however the
problem m i l be confusing and often complex.
^
The Joint Staff statement goes on to say (page 11) that even if the
Treasury assertion is true, "it follows that the only possible reason that
the Treasury proposal would not confront a good many more than 10 million
couples with this dilemma is that their proposal completely relieves 9 million
persons of any tax whatsoever," It is not clear whether an implication is
intended that the ^Treasury proposal would confront more than 10 million
married couples with a similar dilemma. Under the Treasury proposal the
choice between joint and separate returns would not only be clear-cut but
would be the same as it is under present law, thus requiring no reappraisal
of the most advantageous method of filing.
At several points, notably page 9, the Joint Staff statement suggests
that couples using the short form (1040A) would avoid any laborious oomputa- ,
lions• In^fact, however, the fundamental perplexity with respect to the
Ciioiee df Joint or separate returns is by no means limited to users of
f orm 104.0, It. is practically the same whether the taxpayer uses or intends
to use either 1040 or 1040A, The simplification of the arithmetic in the
final computation does not affect the basic perplexity. Furthermore ■even
though^ wo reach the smallest tax the taxpayer ultimately chooses the short
■01m, m the process of arriving at this decision he would’ in many cases
have to. make trial computations involving both long and'short forms.
Determination of income levels affected bv
complexity of choice
v'";
,
I°int Staff statement (page 9) denies the truth of the assertion
that because of variables in the possible division of income and dependents,
between husoand and wife "no clear dividing lines or income zones can be
\
established J:o guide taxpayers into one type of return or the other," Table 3
on page 9 of the Joint. Staff statement appears to be offered as a sample of /
tne type of table which might be used to guide the taxpayer into the type of
re warn which w ould be advantageous for him tohise.
This table is consistent with a table'previously submitted by Treasury;
it difiers from the Treasury figures in that it is on a gross income basis
rather than a net income basis and that by assuming maximum and minimum in
comes for each spouse it makes certain limiting assumptions as to the division
of income , If the gross income figures in Table 3 for a married couple with
one dependent are converted to net income by subtracting 6 percent for average
deductions, and are multiplied by two, they check with the Treasury’s figures
for breaking points assuming a 50r-50 division of income, given on page 2 of
Appendix B of the November 29, 1943 statement (page 58 of Finance Committee
Hearings),
However, the adequacy and usefulness of this type of table as a guide to
the taxpayer is dubious and at best limited. There is no guidance for great .
numbers of taxpayers. For example, suppose the husband earns ,,>2,600 and the
wife $L,0QQ. If they have no dependents, table 3 would'not guide them because
the husband’s earnings would exceed the maximum income for one spouse to which
the table would be applicable. If they have four dependents, table 3 would
not answer their problems because the w i f e ’s income would be less than the
minimum amount assumed'for one spouse where there are four dependents *
The table sets limits within which joint returns give the lowest tax. If
it is to be a guide to the taxpayer, he would presumably have a right to expect
that outside these limits joint returns would not give the lowest tax. But in
numerous situations this is not the case. For example, suppose that a married
couple with no dependents received a combined gross income of 91 ,1 11 ,70 , i.e.,
two times $555,85. If their income was divided equally, each receiving'$555. 85 ,
the table would guide them into joint returns, 1/ Suppose, however, they
received the same gross income of $1,111.70, divided $700 and $411.70. This
table in itself would imply that they did not meet the conditions under which
joint returns were advantageous, since the gross income of one spouse was less
than the minimum of $ 555 ,85 ^ Actually, however, this couple should file joint
returns since the liability under joint returns would be $ 10,35 as compared
with $36 ,34 under separate returns.
Again, take the case of a couple without dependents receiving a combined
gross income equal to $5,035*4$. If their income was divided equally each re
ceiving $2,517.73 they would be guided by the table into joint returns, 2/
If, however, they received the same combined gross income, or $ 5 ,035.46 ""divided
unequally, 40-60,^one would receive $2,014,18; the other, $3,021.28. The table
would offer no guide , It would in fact imply that joint returns would not be
advantageous, since the income of one spouse exceeded the maximum allowed by
the t a ble.
1/
At this combined income level the liability under joint or separate returns
would be identical, i.e,, $10.35,
2/
At this income level with a 50^50 split of income their liability would be
the same or $ 858,67 under either joint or separate returns.
-
10
-
.Nevertheless, the advantage of joint returns for this couple would exceed
that of a couple with the same income, equally divided* With a 4-0**60 split
the combined pax under separate returns would be $868,37 as compared with
$858,67 under joint returns,- An additional table would be necessary to guide
the couple Tilth the 4-0-60 split of income. Separate additional tables would
likewise be required for each different division of income if taxpayers are
to be guided to joint or separate returns by the use of tables* . 1/ Some of
the variations in' the ranges of advantage caused by variations I n the division
of income are illustrated in the attached Exhibit 1*
It should be noted that, as the figures in table 3 in the statement
indicate, the ranges of advantage vary with the number of dependents. This is
further demonstrated in Exhibit 2,
*
From these examples and the tables here presented, it is clear, as the
Treasury previously pointed out, that both the division of income and the
number of dependents are important in determining the zones of advantage for
one type of return or the other. Moreover, they bring into clear focus the
important practical consideration that a number of tables like sample table 3
would be necessary to meet the bulk of taxpayer situations. These tables
would have various maximum and minimum limits for the income- of each spouse
for various dependency statuses. Such tables would tend to overlap, with
a taxpayer finding himself on more than one table, thus adding to the confusion
and complexity. As the number of such guide tables was increased, an increase
ing number of taxpayers would come within the purview of one or more tables,
The complexity of such a system of multiple guides would render them imprac-^
ticable.
An analysis of table 4-, page 10 of the statement of the Joint Committee
Staff, brings out clearly the essential difference between the joint vs,
separate returns problem in the regular income tax area under the House bill
as compared with the problem under either the present law or the Treasury
integration proposal.
As the table shows, the amount of combined net income above which separate
returns become advantageous varies under all three tax methods with the number
of dependents, Vfhat the table docs not show is the fact that the point above
which separate returns become advantageous is fixed in terms of surtax net
income under both present law and the Treasury proposal. Under present law
this point is at 32,000 of combined surtax net income $ under the Treasury
proposal involving a- $500 first income bracket, this point would be $500
combined surtax net income, These points are constant regardless of the number
of dependents ajid regardless of the division of income, By striking contrast,
under the House bill this point varies in terms of surtax net income with
both the number of dependents and the percentage division of income.
17
In addition to the defects' of the lower limit's ^ admitted on page 12
of the statement of the Joint Committee Staff, this analysis shows
that the upper limits of table 3 are ambiguous.
11
In this connection, it should be noted that, just as in table 3, the
breaking-points under the House bill indicated in table 4 / page 10 oi the Joint
Staff statement would hold only under the 50-*50 division of income which is
implicitly assumed in the table* If^ for example, a couple without dependents
had somewhat more than $4*734 (2 times $2*367) divided 43-35 instead of 30^50
as in table 4, separate returns wonld not be desirable. y
With a mere uneven
distribution of income the incomes at the breaking points increase*
On page 10 the Joint Staff statement asserts as an advantage of the House
bil.3, that it raises the amount of combined net income above which it is desirable
for a married couple without dependents to file separate returns from $3,200
to $4,733* -it the same time it cites the lowering of this amount to $1,600 under
the Treasury proposal as a disadvantage*
This argument entirely misses the es
sential point that, putting aside equity questions and looking at the problem
from the standpoint of simplification or complexity, it makes no significant
difference whether this point is high or low# The important thing for purposes
of simplification is that the point be clearly defined and readily determinable.
Under both the present law and the Treasury proposal the breaking-point is
constant in terms of surtax net income, and may be computed at a glance in terms
of net income* Under the House bill the breaking-point is variable and difficult
to determine#
II•
Complexity in having a minimum tax Side by side with the regular tax
The Committee staff states on page 4 that, because a table guiding tax
payers into either the minimum or the regular tax can be prepared, the Treasury
is wrong in asserting that there will be two alternative taxes, that is, the
minimum tax and the regular tax, side by side under the House bill. Aside from
the disadvantage that the tabular guide will itself bo a device new to American
taxpayers, it is obvious that the preparation of mechanical guides does not
conjure the minimum tax out of existence# There are still two taxes (one of them
entirely new) to be explained, two taxes to be understood, and two taxes to be
dealt, with* Those who explain the tax by written or spoken work will have to
labor through both the minimum tax and the regular tax; no mechanical guide can
relieve them of the task of explaining, nor the taxpayer from the task of trying
to understand, two different taxes with intricate interrelations*
For many married couples, moreover, the two taxes will actually be side by
side as a practical matter in the course of their tax computations# Many couples
filing separate returns will find that the husband is subject to the regular tax
and the wife to the minimum tax, or vice versa* It is to be noted that the
Joint Committee staff did not dispute the example given in the Treasury’s state
ment illustrating this point (page 26 of the Hearings)* The cases where husband
and wife will be subject to two different taxes, with different exemptions and
rates, will not be at all rare under the House bill* Taking merely the case
cited in the Treasury’s statement, we see that with the husband’s income at $900,
he would be subject to the regular tax, while his wife would be subject to the
minimum tax if her income fell anywhere between $600 and $888* Two taxes side by
side will be a very real problem for numerous taxpayers*____ ______________________
1/ If the split was 45-r55, separate returns would result in a total tax of $862
as compared with $859 under a joint return* An increase in the inequality of
the division of income between husband and wife would increase the disadvantage
of separate returns at this combined net income level.
III.
Complication of withholding under House Bill
The Treasury has stated that the provision of the House Bill substituting
varying minimum tax exemptions for the present fixed Victory tax exemption
would complicate withholding operations (Hearings, p. 28, 29), This conclu
sion is attacked on page 13 of the Joint Staff statement*
It is asserted
that a table would be provided from which employers could readily determine,
in each individual case, whether withholding is to be computed by use of the
minimum tax or the regular income tax rates and exemptions.
This answer does not meet the point in question for the many employers
who use the more accurate ’’precise*1 method of withholding. A table of this
sort would of course be provided, and is in fact in use under present law.
The complication is introduced, however, in the next step after the employer
has used such a table to determine which of the alternative bases for with
holding applies.
Under present law if ha finds that Victory tax withholding
is appropriate, the remaining computation consists merely of the application
of a 3 percent rate to the excess of the wages over a uniform withholding
exemption, for example, $12 for a weekly payroll, regardless of the wageearner’s family status.. Under the House Bill if he found that minimum tax
withholding applied, his computations would require use of a separate set of
exemptions that vary with family status as do those for regular income-tax
withholding.
Under the Treasury integration proposal, withholding would be least
complicated since there would be only one set of exemptions and rates to apply.
Under present law, payroll procedures are simplified by the fact that all wage
earners subject merely to Victory tax withholding can be treated uniformly.
Under the House Bill, complications would be increased since differentiation
according to family status would be required for both minimum and regular taxes.
IV.
Other points on integration
A.
Administrative problem under House Bill
1.
The Joint Staff statement attempts to rebut the Treasury’s conten
tion that the House Bill would unduly complicate the administrative process by
stating (on page 12) that elimination of 2.4 million returns ’’cannot be termed
an addition to the problem of administration.” This truism does not constitute
an answer to the evidence presented by the Treasury to show that administrative
burdens would be greatly increased under the House Bill. The benefits of elimi
nating 2.4 million returns would be far more than offset by the complexities of
the tax computations, the resultant large numbers of errors, and the necessity
for furnishing the majority of taxpayers with assistance in determining the
most advantageous method of filing under the House Bill.
2.
On page 15 of the Joint Staff statement it is argued that the costs
of administration attributable to the returns of the 9 million taxpayers
eliminated under the Treasury integration plan would n o t be as great as the
revenue that would be collected from them* Quite aside from the untenable
implication that a tax is worthwhile if it does not cost 100 percent to
collect is the fact that in judging whether an administrative expenditure
is worthwhile alternative operations must be considered,
Insofar as
personnel is freed from the administrative tasks involved in the handling
of these millions of minor items, increased attention could be devoted
to more adequate collection from other more profitable areas of the tax
base with results that might be expected to exceed the amount of revenue
lost by eliminating these small taxpayers* Moreover, any consideration
of the costs of maintaining these small accounts on the tax rolls should
include the withholding burdens imposed upon employers and the taxpayers’
own tasks of compliance, as well as merely costs to the Bureau of
Internal Revenue#
B*
Estimated revenue from the minimum tax
On page 13 the Joint Staff statement implies that the Treasury
represented the yield of the minimum tax at $161,000,000, whereas the
actual yield would be more*
The Treasury figure does not relate and was
never intended to relate to the whole minimum tax* It is the estimate of
how much the 9. million persons who would be wholly relieved from income
tax under the Treasury proposal would pay under the House Bill*
C.
Relationship of Treasury integration proposal to remainder of
the Treasury individual income tax proposal
The Joint Staff statement indicates (pp»
4-) that the Treasury
did not present an integration proposal to the Committee on Ways and Means.
The Treasury income tax proposals to the Congress this Fall have from
the first contained the integration element*
The proposal submitted to
the Ways and Means Committee was designed not only to raise revenue but
to absorb the Victory tax burden into the regular income tax structure*
At that time, no need was seen for signling out the integration features
of the proposal for separate presentation*
It was thought that integration
would be accomplished as part of a general increase in income tax rates
together with other changes (such as lowered exemptions and repeal of
the earned income credit),ahd that a separate discussion of the integration
segment of the proposal would merely complicate the problems before the
Ways and Means Committee*
However, the Senate Finance Committee was confronted with a specific
integration proposal in the House Bill* Hopes for a general upward
revision of income tax rates had not materialised.
Therefore, to aid
the Committee in the consideration of matters before it, the integration
segment of the Treasury proposal was treated separately to facilitate
analysis and comparison with the integration provisions of the House Bill*
(Hearings, pp. 25*^32)
- H
D.
-
Consistency of Treasury position
Although not a technical point there is one other statement in
the Joint Staff statement that calls for comment. On page 3 it is
stated that the Treasury position before the House Ways and Means
Committee was that lfthere was no better way of accomplishment^ of the
objective of taxing those now subject only to Fictory tax than the
integration plan now contained in the House Bill.
This is not an
adequate presentation of the position taken by the Treasury before the
Ways and Means Committee.
The Treasury was asked its opinion of the
plan with no advance knowledge of the plan. On the basis of a hasty
review of the major points of the proposal over a few minutes a tentative
reaction was given to the Committee that at the moment no better alternative
came to mind to accomplish the objective of keeping on the tax rolls the
9j000,000 taxpayers at the bottom of the taxable income scale.
After the Treasury had had an opportunity to study the integration
plan now in the House Bill, it stated unequivocally to the Committee on
Ways and Means that the plan was hopele s s l y complicated.11 However,
the Treasury was not afforded an opportunity to discuss its objections
in detail before the Ways and Means Committee. It is to be noted that
the Joint Staff statement failed to mention the later clarification of
the Treasury position on the House Bill integration plan#
Exhibit 1
Income ranges within which it is advantageous for married couples
to file (a) separate or (b) Joint returns under Ht R. 3687.,
assuming three different percentage divisions of income between
' husband and wife
Married couple — one dependent 1/
Comb ined net income
Type of return
resulting in.
Income divided : Income-divided : Income divided:
lesser tax
60 - 40 '
70 - 30 \
:
___ 5P - 50
$
800 - $1,071
1,071 - «5,167
Over
5,167
$
800 - $1,363
1,363 -
$
800 - $1,309
Separate
5,558
1,309 -
5,898
Joint
Over 5,558
Over
5,898
Separate
ispsl
Treasury Department, Division of Tax Research
December 8, 1943
1/ Assuming dependent credit takeh by-spouse with larger income.
Exhibit 2
Income ranges within which it is advantageous for married
couples to file (a) separate or (b) joint returns under
H, Fu 3687, assigning three different dependency statuses 1/
.
______
No dependents
$
700 - ft* 045
Combined net i n c o m e _______ sType of return
: One dependent
sTwo dependents: resulting in
•
______ j_______________; lesser tax
$
BOO - ift, 433
$
900 - $1,820
Separate
1,045 *
4/733
1,433 -
5,033
1,820 -
5,433
Joint
Over
4,733
Over
5,083
Over
5,433
Separate
Treasury Department, Divisible M
Eeseardh
December 8, 1943
1/ Division of income between husband and wife assumed to be such
that the potential advantage from the use of either type of return
will be at a maximum.
- 3 -
y. Gmmkt provisions
1.
As fiscal agents of the United States, Federal Reserve Banks are authorised
and requested to receive subscriptions, to make allotments on the basis and up to
the amounts indicated by the Secretary of the Treasury to the Federal Reserve Banks
of the respective Districts, to issue allotment notices, to receive payment for cer
tificates allotted, to make delivery of certificates on full-paid subscriptions
allotted, and they may issue interim receipts pending delivery of the definitive
certificates.
2.
The Secretary of the Treasury may at any time, or from time to time, pre
scribe supplemental or amendatory rules and regulations governing the offering, which
will be communicated promptly to the Federal Reserve Banka.
KERRY MORGBHTHAU, JH.,
Secretary of the Treasury.
tions of $1,000, $5,000, $10,000, $100,000 and $1,000,000.
The certificate® will not
be issued in registered form*
5.
The certificates will be subject to the general regulations of the Treasury
Department, now or hereafter prescribed, governing United States certificates.
in. subscription Aim kuxymmt
1.
Subscriptions will be received at the Federal Reserve Banka and Branches and
at the Treasury Department, Washington.
Commercial banks are requested not to pur
chase and subscribers are requested not to trade in the securities allotted hereunder
until after February 15, 1944.
Banking institutions generally may submit subscrip
tions for account of customers, but only the Federal Reserve Banks and the Treasury
Department are authorised to act as official agencies.
Others than banking institu
tions will not be permitted to enter subscriptions except for their own account.
Subscriptions must be accompanied by payment in
full for
the amount of certificates
applied for.
2.
The Secretary of the Treasury reserves the right to reject any subscription,
in whole or in part, to allot less than the amount of certificates applied for, and
to close the books as to any or all subscriptions at any time without notice; and any
action he may take in these respects shall be final.
all subscriptions will be allotted in full.
Subject to these reservations,
Allotment notices will be sent out prompt
upon allotment•
IV. PATUK8T
1.
Payment at par and accrued interest, if any, for certificates allotted here
under must be made on or before February 1, 1944, or on later allotment.
accrued interest is $0,024 per $1,000.
One day's
Any qualified depositary will be permitted to
make payment by credit for certificates allotted to its customers up to any amount
for which it shall be qualified in excess of existing deposits, when so notified by
the Federal Reserve Bank of its District.
UNITED STATES OF AMERICA
7/8 Percent Treasury Certificates of Indebtedness of Series A-1945
Dated and bearing interest from February 1, 1944
1944
Department Circular No. 731
Due February 1, 1945
TREASUHT DEPARTMENT,
Office of the Secretary,
Washington, January 18, 1944.
Fiscal Service
Bureau of the Public Debt
X.
1.
OFFOTDBG OF CERTIFICATES
The Secretary of the Treasury, pursuant to the authority of the Second
liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the people o f the United States for certificates of indebtedness of the United
States, designated 7/8 percent Treasury Certificates of Indebtedness of Series A-1945.
These certificates will not be available for subscription, for their own account, by
commercial banks, which are defined for this purpose as banks accepting demand de
posits.
The amount of the offering is not specifically limited.
II.
1.
DESCRIPTION OF CERTIFICATES
The certificates will be dated February 1, 1944, and will bear interest from
that date a t the rate of 7/8 percent per annum, payable semiannually on August 1, 1944
end February 1, 1945.
They will mature February 1, 1945, end will not be subject to
call for redemption prior to maturity.
2.
The Income derived from the certificates shall be subject to all Federal tax*.
now or hereafter imposed.
The certificates shall be subject to estate, inheritance,
gift or other excise taxes, whether Federal or State, but shall be exempt from all
taxation now or hereafter imposed on the principal or interest thereof by any State,
or any of the poseesaions of the United States, or by any local taxing authority.
> -
3.
The certificates will be acceptable to secure deposits of public moneys.
Thflf
will not be acceptable in payment of taxes.
4.
Bearer certificates with interest coupons attached will be issued in denosdna
■7
1.
?.
GfflIBRAL PROVISIONS
As fiscal agents of the United States, Federal Reserve Banks are authorised
and requested to receive subscriptions, to sake allotments on the basis and up to the
amounts indicated by the Secretary of the Treasury to the Federal Reserve Banks of the
respective Districts, to issue allotment notices, to receive payment for h a n d b a l l © t t e d J
to make delivery of bonds on full-paid subscriptions allotted, and they may issue interia
receipts pending delivery of the definitive bonds*
2.
The Secretary of the Treasury may at any time, or from time to time, prescribe
supplemental or amendatory rules and regulations governing the offering, which will be
communicated promptly to the Federal Reserve Banks.
BSBHt MDRGSRTKAIJ, JR.,
Secretary of the Treasury.
- 4 -
M
course by formal receipt from the Collector of internal Revenue.
6.
Except as provided in the preceding paragraphs, the bonds will be subject to
the general regulations of the Treasury Department, non or hereafter prescribed, governing United States bonds.
III.
1.
S0BSCRIPTIOH AND A I X O B O T T
Subscriptions will be received at the Federal Reserve Banks and Branches and
at the Treasury Department, Washington.
Subscribers are requested not to trade in the
securities allotted hereunder until after February 15, 1944.
Banking Institutions
generally nay submit subscriptions for account of customers, but only the Federal Re
serve Banks and the Treasury Department are authorised to act as official agencies.
Others than banking institutions will not be permitted to enter subscriptions except fop
their own account.
Subscriptions must be accompanied by payment in full for the amount
of bonds applied for.
2.
In whole
The Secretary of the Treasury reserves the right to reject any subscription,
op
In part, to allot loss than the amount of bonds applied for, and to close
the books as to any or all subscriptions at any time without notice; and any action he
■ay take in these respects shall be final.
Subject to these reservations, and to the
limitations on commercial bank subscriptions prescribed in Section I of this circular,
all subscriptions will be allotted in full.
Allotment notices will b e sent out promptly
upon allotment.
IF.
1.
PAUfisBF
Payment at par and accrued interest, if any, for bonds allotted hereunder must
be made on or before February 1, 1944, or on later allotment.
( i s 10.062 per 11,000.
One day's accrued inters!
Any qualified depositary will b e permitted to make payment by
credit for bonds allotted to it for itself and Its customers up to any amount for which
it shall be qualified in excess of existing deposits, when so notified by the Federal
Reserve Bank of Its District.
5.
Any bond# issued hereunder which upon the death of the owner constitute part
of his estate, will be redeemed at the option of the duly constituted representatives
1
of the deceased owner* s estate, at par and accrued interest to date of payment,—
Pro
vided:
(a) that the bonds were actually owned by the decedent at the
time of his death; and
(b) that the Secretary of the Treasury be authorised to apply
the entire proceeds of redemption to the payment of Federal
estate taxes.
Registered bonds submitted for redemption hereunder must be duly assigned to *?he Sec
retary of the Treasury for redemption, the proceeds to be paid to the Collector of
Internal Revenue at
__ _ _ _ _ for credit on Federal estate taxes due from estate
of
.*
Owing to the periodic closing of the transfer books
and the impossibility of stopping payment of interest to the registered owner during the
d o s e d period, registered bonds received after the closing of the books for payment dur
ing such closed period will fee paid only at par with a deduction of interest from the
2[ti2ft km -
date of payment to the next interest payment date;-* bonds received during the closed
period for payment at a date after the books reopen will be paid at par plus accrued
interest from the reopening of the books to the date of payment.
In either case checks
7
for the full six months* interest due on the last day of the closed period will be for
warded to the owner in due course.
PD 1782,2
All bonds submitted must be accompanied by Form
properly completed, signed and sworn to, and by a certificate of the appoint
ment of the personal representatives, under seal of the court, dated not more than six
months prior to the submission of the bonds, which shall show that at the date thereof
the appointment was still in force and effect.
Upon payment of the bonds appropriate
memorandum receipt will be forwarded to the representatives, which will be followed in
1* An exact half-year* s interest is computed for each full half-year period i r r e specify
of the actual number of days in the half year* For a fractional part of any half year, 1
computation is on the basis of the actual number of days in such naif year.
2. The transfer books are closed from February 16 to March 15, and from August 16 to
"September 15 (both dates inclusive) in each year.
3. Copies of Form PD 1782 may be obtained from any Federal Reserve Bank or from the
Treasury Department, Washington, D. C.
- 2 -
at the rate of 2-1/4 percent per annum, payable on a semiannual basis on September 15,
1944, and thereafter on March 15 and September 15 in each year until the principal
amount becomes payable.
They will mature September 15, 1959, but may be redeemed at th«]
option of the United States on and after September 15, 1956, in whole or in part, at par|
and accrued interest, on any interest day or days, on 4 months' notice of redemption
given in such manner as the Secretary of the Treasury shall prescribe.
In case of par
tial redemption the bonds to be redeemed will be determined by such method as may be
prescribed by the Secretary of the Treasury.
From the date of redemption designated in
any such notice, interest on the bonds called for redemption shall cease*
Ill
2.
The income derived from the bonds shall be subject to all Federal taxes, now
or hereafter imposed.
The bonds shall be subject to estate, inheritance, gift or other
excise taxes, whether Federal or State, but shall be exempt from all taxation now or
hereafter imposed on the principal or interest thereof by any State, or any of the pos
sessions of the United States, or by any local taxing authority.
3.
The bonds will be acceptable to secure deposits of public moneys.
They will
not be entitled to any privilege of conversion.
4.
Bearer bonds with interest coupons attached, and bonds registered as to prin
cipal and Interest, will be issued in denominations of $500, $1,000, $5,000, $10,000,
$100,000 and $1,000,000.
Provision will be made for the Interchange of bonds of dif
ferent denominations and of coupon and registered bonds, and for the transfer of regis
tered bonds, under rules and regulations prescribed by the Secretary of the Treasury.
Except as provided in Section I of this circular, these bonds may not, before September
15, 1946, be transferred to o r be held by commercial banks, which are defined for this
purpose as banks accepting demand deposits; however, the bonds may be pledged as collat-j
eral for loans, including loans by commercial banks, but any such bank
acquiring such
bonds before September 15, 1946, because of the failure of such loans to b e paid at
maturity will be required to dispose of them in the same manner as they dispose of ©the*
assets not eligible to be owned by banks.
QHITSD STATES OF AMERICA
2-1/4 PESCaif TR3ASWHT BCBDS OF 1956-59
Dated and bearing interest from February 1, 1944
Due September 15# 1959
REDEEMABLE AT THE OPTION OF THE UNITED STATES AT PAR AND ACCRUED INTEREST ON AND
AFTER SEPTEMBER 15, 1956
Interest payable March 15 and September 15
TREASURY DEPARTMENT,
Office of the Secretary,
Washington, January IS, 1944.
1944
Department Circular No. 730
Fiscal Service
Bureau of the Public Debt
I.
1,
OFFERING OF BONDS
The Secretary of the Treasury, pursuant to the authority of the Second Liberty
Bond Act, as amended, invites subscriptions, at par and accrued interest, from the
people of the United States for bonds of the United States, designated 2-1/4 percent
Treasury Bonds of 1956-59*
2.
The amount of the offering is not specifically limited.
These bonds will not be available for subscription, for their own account, by
commercial banks, which are defined for this purpose as banks accepting demand deposits,
except as follows:
a commercial bank holding savings deposits as defined in Regulation
of the Board of Governors of the Federal Reserve System may subscribe to the bonds of
fered hereunder, to the 2-1/2 percent Treasury Bonds of 1965-70 offered simultaneously
herewith under Treasury Department Circular No. 729# and to Series F-1944 and Series
G-1944 United States Savings Bonds under Treasury Department Circular No. 654# Second
Revision, but the amount of such subscriptions shall not exceed, in the aggregate, 10 pe
cent of the savings deposits as shown on the bank1s books as of the date of the most
recent call statement required by the supervising authorities prior to the date of sub
scription for such bonds, or $200,000, whichever is less.
No such bank shall hold more
than $100 ,000 (issue price) of Series F and Series G Savings Bonds (Series 1944)# combin
II.
1.
DESCRIPTION OF BONDS
The bonds will be dated February 1, 1944# and will bear interest from that dat«
V.
1.
GJ23SEAL PROVISIONS
As fiscal agents of the United States, Federal Reserve Banks are authorised
and requested to receive subscriptions, to make allotments on the basis and up to the
amounts indicated by the Secretary of the Treasury to the Federal Reserve Banks of the
respective Districts, to issue allotment notices, to receive payment for bonds allotted,
to make delivery of bonds on full-paid subscriptions allotted, and they may issue in
terim receipts pending delivery of the definitive bonds.
2.
The Secretary of the Treasury may at any time, or from time to time, prescribe
supplemental or amendatory rules and regulations governing the offering, which will be
communicated promptly to the Federal Reserve Banks.
h ©; r t k o r g s n t h a u , j r .,
Secretary of the Treasury.
memorandum receipt will be forwarded to the representatives, which will be followed in
due course by formal receipt from the Collector of Internal Revenue.
6.
Except as provided in the preceding paragraphs, the bonds will be subject to
the general regulations of the Treasury Department, now or hereafter prescribed, govern
ing United States bonds.
III.
1.
SUBSCRIPTION AND AlLOTMisHT
Subscriptions will be received at the Federal Reserve Banks and Branches and
1
at the Treasury Department, Washington.
Subscribers are requested not to trade in the
securities allotted hereunder until after February 15, 1944.
Banking institutions gen-
©rally may submit subscriptions for account of customers, but only the Federal Reserve
Banks and the Treasury Department are authorized to act as official agencies.
Others
than banking institutions will not be peraitted to enter subscriptions except for their
own account.
Subscriptions must be accompanied by payment in full for the amount of
bonds applied for.
2.
The Secretary of the Treasury reserves the right to reject any subscription,
in whole or in part, to allot less than the amount of bonds applied for, and to close
the books as to any or all subscriptions at any time without notice; and any action he
may take in these respects shall be final.
Subject to these reservations, and to the
limitations on commercial bank subscriptions prescribed in Section I of this circular,
all subscriptions will be allotted in full.
Allotment notices will be sent out promptly
upon allotment.
IV.
1.
PAYMENT
Payment at par and accrued interest, If any, for bonds allotted hereunder must
be made on or before February 1 , 1 9 4 4 , or on later allotment.
is 1 0 .0 6 9 per 1 1 ,0 0 0 .
One day’s accrued interesj
Any qualified depositary will be permitted to make payment by
credit for bonds allotted to it for itself and its customers up to any amount for which
it shall be qualified in excess of existing deposits, when so notified by the Federal
Reserve Bank of its District.
- 3 5.
Any bonds issued hereunder which upon the death of the owner constitute part
of his estate, will be redeemed at the option of the duly constituted representatives
of the deceased owner* s estate, at par and accrued Interest to date of payment,"’* Pro
vided:
(a) that the bonds were actually owned by the decedent at the
time of his death; and
(b) that the Secretary of the Treasury be authorised to apply
the entire proceeds of redemption to the payment of Federal
estate taxes*
Registered bonds submitted for redemption hereunder must be duly assigned to "The Sec
retary of the Treasury for redemption, the proceeds to be paid to the Collector of
Internal Revenue at .....
...
for credit on Federal estate taxes due from esta
^
*"
Owing to the periodic closing of the transfer books and
---
—
.....
the impossibility of stopping payment of interest to the registered owner during the
closed period, registered bonds received after the closing of the books for payment dur
ing such closed period will be paid only at par with a deduction of interest from the
*
2
date of payment to the next interest payment date;** bonds received during the closed
period for payment at a date after the books reopen will be paid at par plus accrued
interest from the reopening of the books to the date of payment.
In either case checks
for the full six months* interest due on the last day of the closed period will be for
warded to the owner in due course*
_
PD
All bonds submitted must be accompanied by Form
o
properly completed, signed and sworn to, and by a certificate of the appoint
ment of the personal representatives, under seal of the court, dated not more than six
months prior to the submission of the bonds, which shall show that at the date thereof
the appointment was still in force and effect.
Upon payment o f the bonds appropriate
i*
exact half—year*s interest is computed for each full half-year period irrespectiT
of the actual number of days in the half year. For a fractional part of any half year,
computation is on the basis of the actual number of days in such half year.
2. The transfer books are closed from February 16 to March 15, and from August 16 to
September 15 (both dates inclusive) in each year.
2 * Copies of Form PD 1782 may be obtained from any Federal Reserve Bank or from the
Treasury Department, Washington, D. C.
at the rate of 2-1/2 percent per annum, payable on a semiannual basis on September 15,
1944, and thereafter on March 15 and September 15 in each year until the principal
amount becomes payable.
They will mature March 15, 1970, but may be redeemed at the
option o f the United States on and after March 15, 1965, in whole or t** part, at par and
accrued interest, on any interest day or days, on 4 months' notice of redemption given
in such manner as the Secretary of the Treasury shall prescribe.
In case ©f partial re
demption the bonds to be redeemed will be determined by such method as may be prescribe*
by the Secretary of the Treasury*
Fro® the date of redemption designated in any such
notice, interest on the bonds called for redemption shall cease.
2.
The income derived from the bonds shall be subject to all Federal taxes, now
or hereafter imposed.
The bonds shall be subject to estate, inheritance, gift or other
excise taxes, whether Federal or State, but shall be exempt from all taxation now or
hereafter imposed on the principal or interest thereof by any State, or any of the pos
sessions of the United States, or by any local taxing authority.
3.
The bonds will be acceptable to secure deposits of public moneys•
They will
not be entitled to any privilege of conversion.
4*
pal and
Bearer bonds with interest coupons attached, and bonds registered as to princi
interest,(will beissued-in
$100,000 and $1,000,000.
denominations of $500, $1,000, $5,000, $10,000,
j
Provision will be made for the Interchange of bonds of differs
denominations and of coupon and registered bonds, and for the transfer of registered
bonds, under rules and regulations prescribed by the Secretary of the Treasury.
Except 1
as provided in Section I of this circular, these bonds may not, before February 1, 1954#]
be transferred to or bo held by commercial banks, which are defined for this purpose as 1
banks accepting demand deposits; however, the bonds may be pledged as collateral for
loans, including loans by commercial banks, but any such bank acquiring such bonds befoij
February 1, 1954, because of the failure of such loans to be paid at maturity will be
required to dispose of them in the same manner as they dispose of other assets not eligi|
to be owned by banks.
UNITED STATES OF AMERICA
2-1/2 PERCENT TREASURY BONDS OF 1965-70
Dated and bearing interest fro© February 1, 1944
Due March 15, 1970
REDEEMABLE AT THE OPTION OF IBS UNITED STATES AT PAR AMD ACCRUED INTEREST ON AND
AFTER MARCH 1$, 1965
Interest payable March 15 and September 15
1944
Department Circular No. 729
____
TREASURY DEPARTMENT,
Office of the Secretary,
Washington, January 18, 1944.
Fiscal Service
Bureau of the Public Debt
\
I.
1.
OFFERING OF BONDS
The Secretary of the Treasury, pursuant to the authority of the Second Liberty
Bond Act, as amended, invites subscriptions, at par and accrued interest, from the
people of the United States for bonds of the United states, designated 2-1/2 percent
Treasury Bonds of 1965-70.
2.
The amount of the offering is not specifically limited.
These bonds will not be available for subscription, for their own account, by
commercial banks, which are defined for this purpose as basks accepting demand deposits,
except as follows:
a commercial bank holding savings deposits as defined in Regulation
of the Board of Governors of the Federal Reserve System may subscribe to the bonds of
fered hereunder, to the 2-1/4 percent Treasury Bonds of 1956-59 offered simultaneously
herewith under Treasury Department Circular No. 750, and to Series F-1944 and Series
G-1944 United States Savings Bonds under Treasury Department Circular No. 654, Second
Revision, but the amount of such subscriptions shall not exceed, in the aggregate, «**■
10 percent of the savings deposits as shown on the bank’s books as
of the date of the most recent call statement required by the supervising authorities
prior to the date of subscription for such bonds, or 1200,000, whichever is less.
No
such bank shall hold more than $100,000 (issue price) of Series F and Series G Savings
Bonds (Series 1944), combined.
II.
1.
DESCRIPTION OF BONDS
The bonds will be dated February 1, 1944, and will bear interest from that date
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Storsday. M e m b e r 16. 1043.
Press Service
39
-
Secretary of the Treasury Morgenthau today released the official «!*•
* ~ ~ Z
---------- 7 ^ *
» —W W
W W A M Q
WUW
* V M * UU
WO*-
M U H i l tfi'iVB
bO
%Qf
d>4./,4
percent and the 2«*l/2 percent bonds* Such banks will also be permitted to
subscribe to Series F and Series G savings bonds on and after January 1 l$4i
The formula for commercial bank participation in these securities is that
any bank holding savings deposits as defined in Regulation Q of the Board
of Governors of the Federal Reserve System n a y subscribe to any or all of
the four bonds in an amount not to exceed, in the aggregate, lOpereent of
its savings deposits as shown on the bank*® books as of the date of the
«ost recent call sta tement required by the supervising authorities prior
to the date of subscribing for such bonds, or $200,000, whichever is less*
Under no circumstances, however, will a bank be allowed to hold more than
§100,000 (issue price) of Series F and Series G savings bonds (Series 1944)»
combined*’,
All subscriptions received from commercial banks under this formula
are to be considered outside of the goal of $14,000,000,000 and will not be
a part of any quotas*
The texts of the official circulars followt
TREASURY DEPARTMENT
Washington
FOR RELEASE, M O R N I N G N E W S P A P E R S ,
T h u r s d a y , D e c e m b e r 16, 1 9 4 5 .
S e c r e t a r y of
official
circulars
tions
the
of
a n d the
bonds
the T r e a s u r y M o r g e n t h a u
containing
the
2-1/2 percent and
7/8 p e r c e n t
which will
be
sol d ,
and Treasury
Drive beginning
Press
No#
Treasury
today
detailed
Service
39-93
released
terms a n d
the
condi
2-1/4 p e r c e n t T r e a s u r y bonds,
certificates
together with Series
savings notes,
during
of
E,
the
indebtedness,
P and. G s a v i n g s
Fourth War Loan
J a n u a r y 18.
The S e c r e t a r y a n n o u n c e d that com m e r c i a l banks h o l d i n g s a v
i n g s d e p o s i t s w i l l be p e r m i t t e d to s u b s c r i b e d u r i n g t h e F o u r t h
W'ar L o a n D r i v e to the 2 - 1 / 4 p e r c e n t a n d t h e 2 - 1 / 2 p e r c e n t
bonds.
S u c h b a n k s w i l l a l s o b e p e r m i t t e d to s u b s c r i b e to S e r
ies F a n d S e r i e s G s a v i n g s b o n d s o n a n d a f t e r J a n u a r y 1, 1 9 4 4 #
The formula for commercial b a n k p a r t i c i p a t i o n in these s e c u r
i t i e s is t h a t a n y b a n k h o l d i n g .savings d e p o s i t s a s d e f i n e d in
R e g u l a t i o n Q o f the B o a r d of G o v e r n o r s o f t h e F e d e r a l R e s e r v e
S y s t e m m a y s u b s c r i b e to a n y o r a l l of the f o u r b o n d s in a n
a m o u n t n o t to e x c e e d , in the a g g r e g a t e , 10 p e r c e n t o f its s a v
i n g s d e p o s i t s as s h o w n o n the b a n k ’s b o o k s as of the d a t e o f
the m o s t r e c e n t c a l l s t a t e m e n t r e q u i r e d b y the s u p e r v i s i n g
a u t h o r i t i e s p r i o r to t h e d a t e o f s u b s c r i b i n g f o r s u c h b o n d s , o r
J 2 0 0 , 0 0 0 , w h i c h e v e r is l e ss.
U n d e r no circumstances, however,
w i l l a b a n k b e a l l o w e d to h o l d m o r e t h a n $ 1 0 0 ,0 0 0 ( i s s u e p r i c e )
of S e r i e s F a n d S e r i e s
savings bonds (Series 1944), combined#
All subscriptions received from commercial banks
this f o r m u l a a r e to b e c o n s i d e r e d o u t s i d e of the g o a l
$ , 1 4 , 0 0 0 , 0 0 0 , 0 0 0 a n d w i l l n o t be a p a r t o f any q u o t a s ,
The
texts
of
the
official
circulars
under
of
follow;
s
UNITED STATES OF AMERICA
2—1/2 PERCENT TREASURE BONDS OF 1965-70
Dated and bearing interest from February X9 1944
Due March 15, 1970
REDEEMABLE AT TIE OPTION OF THE UNITED STATES AT PAR AND ACCRUED INTEREST ON
AND A£TBR MARCH 15, 1965
Interest payable March 15 and September 15
TREASURY DEPARTMENT,
Office of the Secretary,
Washington, January IS, 1944o
194-4
Department Circular No© 729
Fiscal Service
Bureau of the Public Debt
I©
OFFERER! OF BONDS
1.
The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the people of the United States for bonds of the United States, designated
2- 1/2 percent Treasury Bonds of 1965-70. The amount of the offering is not
specifically limited,
2,
These bonds m i l not be available for subscription, for their own account
by commercial banks, which are defined for this purpose as banks accepting demand
deposits, except as follows? a commercial bank holding savings deposits as
defined in Regulation Q of the Board of Governors of the Federal Reserve System
may subscribe to the bonds offered hereunder, to the 2-1/4 percent Treasury .
Bonds of 1956-59 offered simultaneously herewith under Treasury Department
Circular No. 730, and to Series F-1944 and Series G-1944 United States Savings
Bonds under Treasury Department Circular No. 654, Second Revision, but the
amount of such subscriptions shall not exceed, in the aggregate, 10 percent of
the savings deposits as shown on the bank’s books as of the date of the most
recent call statement required by the supervising authorities prior to the date
of subscription for such bonds, or $200,000, whichever is less, No such bank
shall hold more than $100,000 (issue price) of Series F and Series G Savings
Bonds (Series"1944)> combined,
II.
DESCRIPTION OF BONDS
1, The bonds will be dated February 1, 1944, and will bear interest from
that date at the rate of 2— 1/2 percent per annum, payable on a semiannual basis
on September 15, 1944, and thereafter on March 15 and September 15 in each year
until the principal amount becomes payable. They will mature March 15, 1970,
but may be redeemed at the option of the United States on and after March 15,1965,
in whole or in part, at par and accrued interest, on any interest day or days,
on 4 months’ notice of redemption given in such manner as the Secretary of the
~ 2 Treasury shall prescribe* In case of partial redemption the bonds to be redeemed
will be determined by such method as may be prescribed by the Secretary of the
Treasury. From the date of redemption designated in any such notice, interest
on the bonds called for redemption shall cease.
2, The income derived fr&m the bonds shall be subject to all Federal
taxes, now or hereafter imposed.
The bonds shall be subject to estate, inherit*./:
ance, gift or other excise taxes, whether Federal or State, but shall be exempt
from all taxation now or hereafter imposed on the principal or interest thereof
by any State, or any of the possessions of the United States, or by an local
taxing authority.
3. The bonds will be acceptable to secure deposits of public moneys.
will not be entitled to any privilege of conversion.
They
, 4* Bearer bonds with interest coupons attached, and bonds registed as to
principal and interest, will be issued in denominations of $$ 00, $ 1 ,000, $ 5, 000,
$ 10 , 000, $100,000 and $ 1 ,000, 000. Provision will be made for the interchange
of bonds of different denominations and of coupon and registered bonds, and for
the transfer of registered bonds, under rules and regulations prescribed by the
Secretary of the Treasury, Except as provided in Section I of this circular,
these bonds may not, before February 1 , 1954; be transferred to or be held by
commercial banks, which are defined for this purpose as banks accepting demand
deposits; however, the bonds may be pledged as collateral for loans, including
loans by commercial banks, but any such bank acquiring such bonds before
February 1 , 1954, because of the failure of such loans to be paid at maturity
will be required to dispose of.them in the same manner as they dispose of other
assets not eligible to be owned by banks,
5. Any bonds issued hereunder which upon the death of the owner constitute
part of his^ estate, will be redeemed at the option of the duly constituted
representatives of the deceased owner*s estate, at par and accrued interest to
date of payment, A/ Provided;
(a) that the bonds were actually owned by the decedent at
the time of his death; and
(b) that the Secretary of the Treasury be authorized to
aPPly "the entire proceeds of redemption to the payment
of Federal estate taxes.
Registered bonds submitted for redemption hereunder must be duly assigned to
"The Secretary of the Treasury for redemption, the proceeds to be paid to the
Collector of Internal Revenue at .
for credit on Federal estate taxes
due from estate of _____ _____________ ,» Qv&ng to the periodic closing of the
transfer books and the impossibility of stopping payment of interest to the
registered owner during the closed period, registered bonds received after the
closing of the books for payment during such closed period will be paid only
at par with a deduction of interest from the date of payment to the next
y
An exact half-year’s interest is computed for each full half-year period
irrespective of the actual number of days in the half year. For a frac4tional part of any half year, computation is on the basis of the actual
number of days in such half year.
- 3 interest payment date; 1/ bonds received during the closed period for payment
at a date after the books reopen -will be paid at par plus accrued interest from
the reopening of the books t o ‘.the date of payment*- In either case checks for
the full six months 1 interest due on the last day of the closed period M i l be
forwarded to the owner in due course•• All bonds submitted must be accompanied
by Form PD 1782, 2/ properly completed, signed and sworn to, and by a certif
icate of the appointment of the personal representatives, under seal of the
court, dated not more than six months prior to the submission of the bonds,
which shall show that at the date thereof the appointment was still in force
and effect,' Upon payment of the bonds appropriate memorandum receipt will be
forwarded to the representatives, which will be followed in due course by formal
receipt from the Collector of:Internal Revenue,-
6 ,' Except as provided in.the preceding paragraphs,' the bonds will be
- subject to the general regulations of the Treasury Department, now or hereafter
prescribed, governing United States bonds,
Ilf,
SUBSCRIPTION AND A L I O T M T O
1, Subscriptions will be received at the Federal Reserve Banks and
Branches and at the Treasury Department, Washington, Subscribers are requested
not to trade in the securities allotted hereunder until after February 1 £, 19 44 .
Banking institutions generally may submit subscriptions for account of customers,
but only the Federal Reserve Banks and the Treasury Department are authorized
to act as official agenciesf Others than banking institutions will not be
permitted to enter subscriptions except for their own account.- Subscriptions
must be accompanied by payment in full for the amount of bonds applied.for.
2. The Secretary of the Treasury reserves the right to reject any sub
scription, in whole or in part, to allot less than the amount of bonds applied
for, and to close the books as to any or all subscriptions at any time without
notice; and any action he may take in these respects shall be final, Subject
to these reservations, and to the limitations on commercial bank subscriptions
prescribed in Section I of this circular, all subscriptions will be allotted in
Allotment notices will be sent our promptly upon allotment.
IV.
PAYMENT
1. Payment at par and accrued interest, if any, for bonds allotted here
under must be made on or before February 1 , 1944, or on later allotment.
One
day’s accrued interest is $>0*069 per $1,000. Any qualified depositary will be
permitted to make payment by credit for bonds allotted to it for itself and its
customers up to any amount for which it shall be qualified in excess of existing
deposits, when so notified by the Federal Reserve Bank of its District.
1/ The transfer books are closed from February 16 to March 15, and from August 16
to September 1 $ (both dates inclusive) in each year.
2/ Copies of Form PD 1782 m a y be~ obtained from any Federal Reserve Bank or from
the Treasury Department, Washington, D. C,
i
- 4V*
GENERAL PROVISIONS
If As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions, to make allotments on the
basis and up to the amounts indicated by the Secretary of the Treasury to the
federal Reserve Banks of the respective Districts, to issue allotment notices,
to receive payment for bonds allotted, to make delivery of bonds on full-paid
subscriptions allotted, and they m ay issue interim receipts pending delivery
of the definitive bonds.
J
2, The Secretary of the Treasury may at any time, or from time to time,
prescribe supplemental or amendatory rules and regulations governing the
ottering, which will be communicated promptly to the Federal Reserve Banks*
HENRI MORGENTHAU, JR.,
Secretary of the Treasury.
r
UNITED STATES OF AMERICA
2-1/4 PERCENT TREASURY BONDS OF 1956-59
Dated and bearing interest from February 1, 1944
Due September 15* 1959
REDEEMABLE AT THE OPTION OF THE UNITED STATES AT PAR AND ACCRUED INTEREST ON AND
AFTER SEPTEMBER 15, 1956
Interest payable March 15 and September 15
1944
Department Circular No. 730
TREASURY DEPARTMENT,
Office of the Secretary,
Washington, January IB, 1944*
Fiscal Service
Bureau of the Public Debt
I,
OFFERING O F BONDS
1| The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest,
from the people of the United State# for bends of the United States, designated
2-1/4 percent Treasury Bonds of 1956-59* The amount of the offering is not
specifically limited»
2. These bonds will not be available for subscription, for their own account,
by Commercial banks, which are defined for this purpose as banks accepting demand
deposits, except as follows* a commercial bank holding savings deposits as defined
in Regulation 1$ of the Board of Governors of the Federal Reserve System may sub
scribe to the bonds offered hereunder, to the 2-1/2 percent Treasury Bonds of
1965-70 offered simultaneously herewith under Treasury Department Circular No. 729,
and to Series F-1944 and Series G-1944 United States Savings Bonds under Treasury
Department Circular No. 654, Second Revision, but the amount of such subscriptions
shall not exceed, in the aggregate, 10 percent of the savings deposits as shown on
the bank*s books as of the date of the most recent call statement required by the
supervising authorities prior to the date of subscription for such bohds, Or
•1200,000, whichever is less. No such bank shall hold more than $100,000 (issue
price) of Series F and Series G Savings Bonds (Series 1944), combined.
II.
DESCRIPTION OF BONDS
1* The bonds will be dated February 1, 1944, and will bear interest from
that date at the rate of 2-1/4 percent per annum, payable on a semiannual basis
on September 15, 1944, and thereafter on March 15 and September 15 in each year
until the principal amount becomes payable.
They will mature September 15, 1959,
but may be redeemed at the option of the United States oh and after September 15,
1956, in whole or in part, at par and accrued interest, on any interest day or
days, on 4 months* notice of redemption given in such manner as the Secretary of
the Treasury shall prescribe. In case of partial redemption the bonds to be re
deemed will be determined by such method as may be prescribed by the Secretary of
the Treasury, From the date of redemption designated in any such notice, interest
on the bonds called for redemption shall cease,
-
2
-
2. The income derived from the bonds shall be subject to all Federal taxes,
now or herafter imposed.
The bonds shall be subject to estate, inheritance, gift
or other excise taxes, whether Federal or State, but shall be exempt from all
taxation now or hereafter imposed on the principal or interest thereof by any
State, or any of the possessions of the United States, or by any local taxing
authority,
3• The bonds will be acceptable to secure deposits of public moneys.
will not be entitled to any privilege of conversion,
They
4* Bearer bonds with interest coupons attached, and bonds registered as to
principal and interest, will be issued in denominations of $500, $1,000, $5,000,
$10,000, $100,000 and $1,000,000, Provision will be made for the interchange of
bonds of different denominations and of coupon and registered bonds, and for the
transfer of registered bonds, under rules and regulations prescribed by the
Secretary of the Treasury* "Fxcept as provided in Section I of this circular,
these bonds may not, before September 15, 1946, be transferred to or be held by
commercial banks, which are defined for this purpose as banks accepting demand
deposits; however, the bonds may be pledged as collateral for loans, including
loans by commercial banks, but any such bank acquiring such bonds before
September 15, 1946, because of the failure of such loans to be paid at maturity
will be required to dispose of them in the same manner as they dispose of other
assets not eligible to be owned by banks#
5# Any bonds issued hereunder which upon the death of the owner constitute
part of his estate, will be redeemed at the option of the duly constituted repre
sentatives of the deceased ownerTs estate, at par and accrued interest to date
of payment,!/ Provided:
(a) that the bonds were actually owned b y the decedent
at the time of his death; and
(b) that the Secretary of the Treasury be authorized to
apply the entire proceeds of redemption to the payment
of Federal estate taxes#
Registered bonds submitted for redemption hereunder must be duly assigned to
nThe Secretary of the Treasury for redemption, the proceeds to be paid to the
Collector of Internal Revenue at _______ i°r credit on Federal estate taxes
due from estate of
_____#” Owing to the periodic closing of the
transfer books and the impossibility of stopping payment of interest to the regis
tered owner during the closed period, registered bonds received after the closing
of the books for payment during such closed period will be paid only at par with
a deduction of interest from the date of payment to the next interest payment
date;2/ bonds received during the closed period for payment at a date after the
books reopen will be paid at par plus accrued interest from the reopening of the
T7 An exact half-year*s interest is computed for each full half-year period
irrespective of the actual number of days in the half year#
For a fractional part
of any half year, computation is on the basis of the actual number of days in such
half year,
2/ The transfer books are closed from February 16 to March 15, and from August 16
to September 15 (both dates inclusive) in each year.
books to the date of payment. In either case checks for the full six months'
interest due on the last day of the closed period will be forwarded to the owner
in due course. All bonds submitted must be accompanied by Form PT) 1782, l/
properly completed, signed and sworn to, and by a certificate of the appoint
ment of the personal representatives, under seal of "the court, dated not more
than six months prior to the submission of the bonds, which shall show that at
the date theredf the appointment was still in force and effect. Upon payment of
the bonds appropriate memorandum receipt will be forwarded to the representatives,
which will be followed in due course by formal receipt from the Collector of
Internal Revenue,
6, Except as provided in the preceding paragraphs, the bonds will be subject
to the general regulations of the Treasury Department, how or hereafter prescribed
governing United States bonds,
III,
SUBSCRIPTION AND ALLOTMENT
1, Subscriptions will be received at the Federal Reserve Banks and Branches
and at the Treasury Department, Washington, Subscribers are requested not to
trade in the securities allotted hereunder until after February 15, 1944*
Banking institutions generally may submit subscriptions for account of customers,
but only the Federal Reserve Banks and the Treasury Department are authorized to
act as official agencies.: Others than banking institutions will not be permitted
to enter subscriptions except for their own accounts Subscriptions must be ac
companied by payment in full for the amount of bonds applied for,
2, The Secretary of the Treasury reserves the right to reject any subscrip
tion, in whole or in part, to allot less than the amount of bonds applied for, and
to close the books as to any or all subscriptions at any time without notice^ and
any action he may take in these respects shall be final. Subject to these
reservations, and to the limitations on commercial bank subscriptions prescribed
in Section I of this circular', all subscriptions will be allotted in full.
Allotment notices will be sent out promptly upon allotment,
IV,
PAYMENT
1, Payment at par and accrued interest, if any, for bonds allotted here
under must be made on or before February 1, 1944, or on later allotment. One
day's accrued interest i.s $0,062 per $1,000, Any qualified depositary will be
permitted to make payment by credit for bonds allotted to it for itself and its
customers up to any amount for which it shall be qualified in excess of existing
deposits, when so notified by the Federal Reserve Bank of its District,
V
Copies of Form PD 1782 may be obtained from any Federal Reserve Bank or from
the Treasury Department, Washington, D. C.
V
GENERAL PROVISIONS
1. As fiscal agents of the United States, Federal Reserve Banks are
authorized and requested to receive subscriptions, to make allotments on the
basis and up to the amounts indicated by the Secretary of the Treasury to the
Federal Reserve Banks of the respective Districts, to issue allotment notices,
to receive payment for bonds allotted,to make delivery of bonds on full-paid
subscriptions allotted, and they may issue interim receipts pending delivery
of the definitive bonds.
2. The Secretary of the Treasury may at any time, or from time to time,
prescribe supplemental or amendatory rules and regulations governing -the ’Offering,
which will be communicated promptly to the Federal Reserve Banks#
HENRY MORGENTHAU, JR.,
Secretary of the Treasury#
UNITED STATES OF AMERICA
7/8 Percent Treasury Certificates of Indebtedness of Series .A-1945
Dated and bearing interest from February 1, 1944
1944
Department Circular No, 731
Due February 1, 1945
TREASURY DEPARTMENT,
Office of. the Secretary,
Washington, January 18, 1944,
Fiscal Service
Bureau of the Public Debt
I,
OFFERING OF CERTIFICATES
1. The Secretary of the Treasury, pursuant to the authority of the Second
Liberty "Bond Act, as amended, invites subscriptions, at par and accrued interest
from the people ,of the United States for certificates of indebtedness of the
United States, designated 7/8 percent Treasury Certificates of Indebtedness of ,
Series A-1945. These certificates will not be available for subscription, for
their oim account, by commercial banks, which are defined for this purpose as
banks accepting /demand deposits. The amount of the offering is not specifically
limited
II,
DESCRIPTION OF CERTIFICATES
!"• The certificates w i i r be dated February 1, 1944* and will bear interest
from that date at the rate of 7/8 percent per annum, payable semiannually on
August 1, 1944* and February 1,-1945* They will mature February 1, 1945* and
will not be subject,to call for redemption prior to maturity.
2. The income derived from the certificates shall be subject to all Federal
taxes, now or hereafter imposed. The certificates shall be subject to estate,
inheritance,- gift or other excise taxes, whether Federal or State,, but shall be
exempt from all taxation now or hereafter imposed on the principal,or interest
thereof by any State, or any of the possessions o f ‘the United States, or by any
local taxing authority.
(
3* The certificates will be acceptable to secure deposits of public moneys,
They Trill not be acceptable in payment of taxes.
4* Bearer certificates with Interest coupons attached will be issued in
denominations of $1,000, .§5,000,. $10,000, $100,000.and $1,000,000. The certifi
cates will not be Issued in registered form..
5* The certificates will be subject to the general regulations of.the
Treasury Department, now or hereafter prescribed, governing United States certifi
cates .
III.
SUBSCRIPTION AND ALLOTMENT
1, Subscriptions will be received at the Federal Reserve Banks and Branches
and at the Treasury Department, "Washington, Commercial banks are requested not
to purchase and subscribers are requested not to trade in the securities allotted
hereunder until after February 15, 1944,, Banking institutions generally may
-
2
-
submit; Subscriptions for account of customers, but only the Federal Reserve Banks
and the Treasury Department are authorized to act ad official agencies; Others
than banking institutions m i l not be permitted to enter subscriptions except
for their own account. Su d s cripuions must be accompanied by payment in full for
the amount of certificates applied for;,
2 , The Secretary of the Treasury reserves the right to reject any subscription^ in whole or in part, to allot less than the amount of certificates applied
lor? and to close the books as to any or all subscriptions at any time v&thout
notice^ and any action he may take in these respects shall be final. Subject to
these reservations, all subscriptions will be allotted in full. Allotment
notices will be sent out promptly upon allotment,
IV,
PATMENT
1* Payment at par and accrued interest, if any, for certificates allotted
hereunder must^be made on or before February 1, 1944, or on later allotment. One
day's accrued interest is $0,024 per $1,000. Any qualified depositary will be
permitted to make^payment by credit for certificates allotted to its customers
up to any amount for which it shall be qualified in excess of existing deposits
when so notified by the Federal Reserve Bank of its District,
V.
GENERAL PROVISIONS
1, As fiscal agents of the United States, Federal Reserve Banks are author
ized and requested to receive subscriptions, to make allotments on the basis and
up to the amounts indicated by the Secretary of the Treasury to the Federal
Reserve Banks of, the respective Districts, to issue allotment notices, to receive
payment for certificates allotted, to make delivery of certificates on full-paid
subscriptions allotted, and they may issue interim receipts pending delivery of
the definitive certificates,
, * The Secretary of the Treasury may at any time, or from time to time, pre
s e n c e supplemental or amendatory rules and regulations governing the offering
which will be communicated promptly to the Federal Reserve Banks,
HENRI MORGENTHAU, JR.,
Secretary of the Treasury.
FOR IMMEDIATE EELS
Igggaber
im
*.
She Bureau of Customs announced today preliminary figures shoving the
quantities of coffee authorised for entry for consumption under the quotas
for the 12 souths commencing October 1* 1943, provided for in the Inter*
American Coffee Agreement, proclaimed by the President on April 15, 1941, as
follows:
Country of Production
:
: Qpota Quantity
t (Pounds) 1/
:
e
e
1 Authorised for entry
*
for consumption
:/As of (Bate) : (Pounds)
Signatory Countries:
Brasil
Colombia
Costa Rica
Cuba
Dominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Mexico
Nicaragua
Peru
Tenesuela
1,352,183,480
458,886,840
28,100,720
U,640,288
17,460,432
21,825,540
87,302,160
77,844,426
40,013,490
2,910,072
69,114,210
26,373,202
3,637,590
61,111,612
Non-signatory Countrios:
51,653,778
Xf
s
0
195,714,775
103,112,835
1,795,268
2,197,675
2,679,500
8,869,133
938,518
8,847,429
1,379,318
460,824
9,699,148
600,406
342,525
5,289,657
s
1,991,188
Bsc* 4, 1943
«
s
s
s
n
N
S
«
•
H
S
Qiotas as established by aetlon of the Inter^Anerican Coffee Board cm
March 11, 1943*
TREASURE DEPARTMENT
Washington
POE IMMEDIATE EELEASE,
Wednesday, December 15, 1943.
Press Service
No, 39-94
Tile Bureau of Customs announced today preliminary figures showing the
quantities of coffee authorized for entry for consumption under the quotas
for the 12 months commencing October 1, 1943, provided for in the InterAmerican Coffee Agreement, proclaimed by the President on April 15, 1941, as
follows*
Country of Production
: Quota Quantity ?
Authorized for entry
i
(pounds)
1/ :
for consumntipn
>■
; As of (Date)
; (Pounds)
Signatory Countries?
Brazil
Colombia
Costa Bica •
Cuba
Dominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Mexico
Nicaragua
Peru
Venezuela
Non-signatory Countries^
1/
1,353,183,480
458,336,340
29,100,720
11,640,288
17,460,432
21,825,540
87,302,160
77,844,426
40,013,490
2,910,072
69,114,210
28,373,202
3,637,590
61,111,512
51,653,778
Dec, 4, 1943
n
IT
tl
II
If
IT
tl
ft
IT
If
It
tr
195,714,775
103,112,835
1,795,258
2,197,675
2,679,500
8,869,133
938,518
3,847,429
1,379,318
460,324
9,699,148
500,406
342,525
5,239,657
tr
1,991,188
tf
Quotas as established by action of the Inter-American Coffee Board on
March 11, 1943,
-oGO-
I do not believe that the glory of America belongs
only to the past. I believe that the real promise of
America belongs to the future. Between the goal of
securing maximum utilization of our resources and the
goal of achieving a more equitable distribution of wealth,
there need be no conflict. Our history has been testimony
to that fact, and our future will be the record of its
fulfillment.
Perhaps for a long time to come* if the post-war period
lives up to our hopes and expectations.
But this would take me into new vistas beyond the
scope of tonight1s address for I have no intention of
discussing the broader phases of fiscal policy beyond the
reconversion period.
I would like to make, however, a few general
observations. The war has opened the eyes of the American
people to the tremendous productivity of industrial and
agricultural America. The shortages of peacetime goods
and services that exist now have not blinded us to the
enormous potentialities for abundance inherent in our
productive mechanism. It is precisely this unexampled
capacity to produce upon which the future prosperity and
welfare of our people ultimately depend.
To help society achieve more fully the promise of
abundance implicit in our capacity to produce; to help
maintain output and employment at a level more nearly
corresponding to our true productive potential; and to
secure this at a price that a peaceful democracy can pay; —
that will constitute the greatest task of economic
statesmanship in the post-war world.
rationing, should be kept in effect as long as necessary;
and high income taxes, as long as possible.
< Let me explain the difference between “necessary*1
and “possible11 in the statement which I hare just made.
While I believe that we should keep the direct controls
as long after the war as necessary, I do not believe that
this will be very long. I feel certain that the last of
them can be done away with as soon as the reconverted
plants commence to pour their flood of consumers* goods
on the market.
I have said, however, that the high rates of taxation
should be kept as long as possible.
I think that the case
here is very different. High personal taxes serve the
anti-inflationary purpose of absorbing surplus purchasing
power; and this may be very useful and necessary in the
reconversion period. But they also serve the purpose of
helping to pay off the national debt; and this purpose is
also useful and necessary.
It seems to me, therefore, that, while the criterion
with respect to the removal of the controls should be “How
soon can we remove them without risking inflation?*p the
criterion with respect to wartime rates of taxation should
be “How long can we keep them without risking unemployment?”
- 26 fron wort in demobilising the war effort and reconverting
private industry, but also the large liquid resources
piled up during wartime, it is easy to conjure up the
specter of a post-war inflation.
Against this must be set the powerful force of human
foresight and sobriety. The reconversion period is bound
to be attended by considerable unemployment, and each
individual will naturally ask himself how he is going to
come out in the swirl of readjustments he sees around him.
His natural tendency will be to "play it close to the chest!1
and handle his reserve funds as carefully as possible.
This human tendency alone may maintain a high rate of
saving during the reconversion period, and so forestall
the possibility of a post-war inflation.
Ie hope that this will be so; but counting on it would
be as improvident as counting on an internal smash-up in
Germany to win the war. He must consequently lay our plans
to prevent a post-war inflation from occurring, but stand
ready to adjust any such plans on short notice to
conditions
as they actually develop during the reconversion period.
What should these plans be? It seems to me that the
direct controls, such as price ceilings, priorities, and
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25
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which the Treasury has made recommendations to the
Congressional committees ■—
will be available to carry
on the work of reconversion.
In addition, there is
provided in the present law a post-war refund, irrespective
of future tax status, of ten per cent of the excess profits
tax paid in the war period.
For the reasons given, I do not believe that the
adequacy of business funds for reconversion purposes
will present a major problem.
But I cannot speak with
equal assurance with respect to the prospects for the
control of individual spending during the reconversion
period —
the third post-war problea to be discussed.
Immediately following the end of the actual fighting,
we can probably expect a let-down in the willingness of
people to submit from patriotic motives to a continued
reduction in their consumption.
There is likely to be a
demand for an immediate end of the direct controls; and
this demand may, to some extent, succeed.
For some time,
however, while industry is being reconverted and the war
effort demobilized, there will be only a very gradual
increase in the supply of consumers' goods.
When it is
considered that there will be available to be spent
currently, in addition to the incomes being received for
the production of^consumers*) goods, not merely the incomes
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Second, in addition to their savings froa
undistributed earnings, American corporations have piled
up a large volume of liquid assets as a result of repayment
of receivables, and in some cases reduction in inventories,
and the general inability to expend depreciation and
depletion reserves which has been brought about by wartime
conditions.
Reserve
According to the estimates of the Federal
Board, the demand deposits of nonfinaneial businesses
including unincorporated Enterprises^ amounted to over
30 billion dollars at the end of last July; and, according
to Treasury estimates, the holdings of Government securities
payable for the most part on demand or at very short term —
by nonfinaneial corporations alone, amount at the present
time to about 20 billion dollars.
Each of these figures
is far above any peacetime precedent; but, to make the
picture brighter, American business, during the same time
it has been acquiring them, has reduced the amount of both
its bank loans and its bonded debt.
Third, generous carry-back and carry-forward provisions
included in the corporation tax laws insure that corporation
suffering losses during the reconversion period, or even
earning incomes of less than their excess profits credit,
will receive substantial refunds of the taxes paid in their
prosperous years.
These refunds —
for the expediting of
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My second point with respect to the reconversion
period relates to the adequacy of corporate financial
resources to carry on the work of reconversion.
The
adequacy of these resources is important, not merely or
even principally from the point of view of the corporations
involved, but fro* the point of view of the whole economic
system.
Me in the Treasury have given careful consideration
to this matter, and believe that funds for the reconversion
of war industry will be ample, provided that a prompt
settlement is made of canceled war contracts.
Our reasons
for believing this are as follows:
First, the wartime period has been a profitable one
for American corporations as a whole.
Set corporate profits,
after taxes, have averaged about twice as much per year
during the wartime period as they did in the years 1935
through 1939
(the
base period for the
FSB
index of industriaj
production); and, by and large, the greatest increases
have gone to those firms whose problems of reconversion
will be greatest.
Corporate dividend ploicy, furthermore,
has been so conservative that most of the increase in
corporate earnings has been added to surplus.
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Payments to contractors should be Just in accordance
with a fixed standard of equity; that is, they should be
enough to sake the contractors and their subcontractors
I
whole for the losses they have sustained as the result of
the contract cancelations.
It is important also, that payments to contractors
should be prompt.
This is not primarily for the benefit
of the contractors themselves —
that they will appreciate it —
the country as a whole.
although I have no doubt
but for the benefit of
A dollar paid out in the settlements
of war contracts during the early reconversion period may — I
in terms of national well being -- be worth several dollars ;
paid out a year or so later.
It is far more important,
therefore, that the settlements be prompt than that they
be accurate to the last dollar according to some accounting
concept, which may itself be open to question.
The settlement of war contracts along the lines which
I
I have Just outlined will involve a heavy outflow of funds
from the Treasury in the few months immediately following
the end of the war.
ft are prepared for this outflow, and
we feel that there will be few occasions when a disbursement!
of funds may be made with so little real cost to the
Government and so much benefit to the economy.
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and material resources involved in making goods which
we will never use; and, second, it gives the maximum
stimulation to the men and management released from making
such goods to seek employment in the production of goods
for which there is a human need, and so hastens the process
of reconversion.
The(abrupt) cancelation of war contracts will give rise
to two problems.
These are:
First, provision for the
labor thrown out of employment; and second, compensation
for the contractors.
The first of these problems should be settled with
liberality; the second, with the utmost of speed.
A generous treatment of the labor displaced by contract
cancelation is required, not merely by considerations of
common humanity and fair dealing, but also by considerations
of economy; for without it, we are unlikely to secure
abrupt cancelation at all, and there is no form of relief
more expensive than the production of unneeded tools of
war.
We should be sure, however, that the treatment accords
labor displaced from war production is of such a character
that it encourages, rather than slows down, its quest for
peacetime employment.
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carry on the work of reconversion; and, third, the
control of individual spending daring the reconversion
period.
If the war should end today on all fronts, there
would be outstanding ©ore than 75 billion dollars of war
contracts on which deliveries had not yet been made.
Much of the material covered by these contracts would be
of no use to the Government if it were delivered after
the immediate emergency of this war had passed.
This is
because there are no goods with respect to which obsolescence
runs faster than it does for the goods of war; so the best
preparation for future wars consists in maintaining the
skills and plant capacity necessary for the development,
production, and use of new war goods rather than in hoarding
vast Quantities of old ones.
Part of the undelivered contracts would still exist
merely in blue-prints in the hands of the contractors,
while part would be represented by goods in process, some
of which in turn could be converted into peacetime goods.
In my opinion, all war contracts should be canceled
immediately upon the passing of the military need for the
goods contracted for.
reasons.
this is desirable for two important
First, it avoids the tremendous waste of human
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from a lack of demand for goods and inflation from a
/
/
. . .....
shortage of goods* The unemployment of the reconversion
period will be caused, however, not by a lack of demand
for the finished products, but because the plants are not
yet ready for mass reemployment, and so may go hand-in-hand
with inflation*
Once the period of reconversion is over and the
tremendous potentialities off the American economy which
have been demonstrated during the war period are directed
to the production of the goods of peace, the main hazard
of inflation will be over.
The task of statesmanship in the period immediately
following the war will be to hasten the reconversion process
while mitigating its hardships and reducing its human costs.
This task will, of course, be easier if a termination of
the war on one front before the other should make it possible
to complete part of the reconversion process under a wartime
environment.
But we must press for victory against Japan
as well as Germany without regard for the economics of
reconversion.
This evening I shall discuss only three aspects of
fiscal planning for the reconversion period, and these
briefly.
They are, first, the cancelation of war contracts;
second, the adequacy of corporate financial resources to
18
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Immediately following the close of the war, we
will be confronted with the problem of reconversion.
fhe period of reconversion will be a time fraught with
exceptional hazard to our economic structure.
During normal times, most of our people are engaged
in producing goods which they and their fellow workers
can buy with their wages.
During wartime, they are largely
engaged in producing war goods which they cannot purchase
with their incomes, but the excess purchasing power which
is thereby created is held in check by direct controls,
by personal taxation and by Government borrowing from
individuals.
The people are willing to accept and cooperate
with these measures because of patriotism and the allpervading spirit of sacrifice which exists during wartimes.
During the reconversion period, however, while the tools
of production for peace goods are being made ready,
purchasing power may outrun the goods available for purchase i
while wartime measures of control may be relaxed if the
people do not recognise the need for continued restraint.
A price inflation is, consequently, one of the hazards
of the reconversion period.
Stalking hand-in-hand with
it goes the hazard of unemployment,
normally, these two
are never seen together, since unemployment usually rises
/
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I
think it can be fairly said of the United States,
as the late Chancellor of the Exchequer, Sir Kingsley Wood
recently said of Great Britain, that
*. . . ve have
revolutionised public opinion as to what are fair rates
for Government war borrowing."
I believe that this
revolution in opinion has a sound basis in underlying
economic realities, and is applicable to the coning times
of peace also.
I hope that the policies of the Government
will be directed to this end.
Financing the Post-War Readjustment
I come now to the second major division of ay topic,
that is, the problems of the post-war readjustment period.
I approach this subject with some trepidation.
Ho
post-war plan will be of any value unless we win the war
and are in a position to put it into effect.
not yet in the bag.
The war is
Hitler’s post-war plan is slavery,
and there will not be room for both his plan and our own.
You all remember the recipe for rabbit stew which
begins "First catch the rabbit."
planning.
So it is with post-war
We must first win the war; and we must not let
anything, even post-war planning, distract our minds from
this for an instant.
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16
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investment of their demand deposits
with
time of issuance of over ten years.
a maturity at
The great majority
of the securities sold to commercial banks have had
maturities far shorter than this.
Indeed, more than half
of the total increase in the portfolios of commercial banks
since Pearl Harbor has been in the form of three-month
Treasury bills and one-year certificates of indebtedness.
This concentration of sales to commercial banks in short
securities insures that our banking system will be in a
strong and liquid position to meet the problems of the
post-war period.
Finally, w© have financed this war at an average rate
of slightly less than 1 - j A per cent.
This compares with
an average rate of about U-l/U per cent on the securities
issued to finance the last World War.
Interest rates have remained stable during the wartime
period and confidence in the continuation of this stability
has been and is widespread and well justified, and has
caused investors to subscribe to new issues of Government
securities in successive war loans without any sign of
holding back in anticipation of higher rates.
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Marketable securities, toy contrast, would be
offered in small blocks, oftentimes through irregular
channels where the original holders may not receive full
value, and might dribble into the market in such a way
as to keep it continually disturbed.
They might not be
fitted by coupon rate, maturity, or other characteristics
for the predominant demand then existing in the market,
but they would have been cast in whatever mold they were,
once and for all, and the market would have to make the
best of it.
To the extent that the refunding of demand obligations
would have been accomplished by the sale of securities
to banks, so also would the marketable securities find
their ultimate lodgment in banks, but only after a roundabout
journey, probably involving both loss to their original
purchasers and a higher interest cost to the Treasury.
It seems clear, therefore, that the Treasury is in
a much better position to refund the non-negotiable
securities than the individual would be to refund negotiable
securities through the market.
The third of the principles governing our borrowing
policy has been the maintenance of the liquidity of the
banking system.
We have laid down the policy that no
securities will be offered to commercial banks for the
- lb This problem is that the holders of these seeurities
may dispose of them and spend the proceeds on consumers'
goods at a
time
when the supply of such goods will be
scarce; and the spending can result only in price rises.
This problea would exist* however* whether the securities
were payable on demand or were negotiable and payable at
the close of a fixed tera* and will be somewhat less
troublesoae for demand securities* because* as 1 have
already pointed out* the liquidation of this type of
security will never be precipitated by the fear of a fall
in the price of the security itself.
The other problems which will be caused by holdings
of Government debt by snail investors in the post-war
period are minor, relative to the major problem which 1
have just mentioned; and will be less serious with deaand
obligations than with negotiable obligations of fixed tera.
When savings bonds are presented for redemption to
the Treasury and it is necessary to refund then* the
Treasury offers the type and maturity of new securities
best suited to the market at the time, and offers these
securities for distribution through the regular channels
of the Government security market.
of savings bonds to a*all investors than it would be with
the only practicable alternative to this course.
This
alternative would be the sale to snail investors of
marketable securities payable by the Treasury only after
the expiration of a fixed term of years.
The fixing of a definite term on securities sold to
small investors by no means insures that they will be held
by these investors for the full term.
By and large, the
holders of marketable securities would sell then on the
Baae occasions when holders of redeemable securities would
redeem theirs.
Indeed, there is one important occasion
upon which marketable securities would be sold, but
redeemable securities would not be redeemed —
that is,
the fear of a decline in price, from which the nonnegotiable
securities are immune.
Mow it may appear, at first glance, that while the
Treasury{should jbe properly concerned with redemptions, it
should not be concerned with market sales, since it must
meet the redemptions out of its own pocket; while the
market sales will be taken up by somebody else*
This type
of reasoning would suffice for a private borrower, but it
is entirely inadequate for the Treasury since It overlooks
the real problem which the holdings of Government securities-!
whether redeemable or marketable —
will present in the post-war period.
by small investors
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12
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the banks to provide this necessary circulating medium,
■Jt
even if adequate markets exist for them elsewhere.
^The amount of Government securities which would thus
have to be sold to the banks in any event is substantial;
but, in practice, I must admit that this haw^proved little
of a problem, since it has taken care of Itself by the
rapid expansion of the borrowing needs of the Federal
Government and the slower development of nonbanking sources
for Federal borrowing.
For this reason, we have directed our main effort to
the sale of securities to nonbanking investors.
During the
past year, we have sold to such investors, net after all
#
switches and redemptions, about forty billion dollars of
Government securities, as compared with about thirty billions
absorbed by the banks.
Second, we have tried to make the securities sold to
the small investor as riskless as possible.
The Treasury
has considered itself the trustee of the inexperienced
investor.
It is with this in view that the Department1s
appeal to small investors has been confined to Series 1
bonds which are non-negotiable, payable on demand and hence
are guaranteed against fluctuations in market values.
The Treasury is less concerned with the large volume
of demand obligations which is being built up by the sale
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excises proposed by the Treasury this year and the spendings
tax proposed last year are cases in point.
The test should
be rigid* however* and the considerations of public policy
should be important before a tax is placed on the statute
books* the burden of which is distributed in a manner other
than that in which we would be willing to distribute the
burdenl/of an increase irO the individual
I turn now to our policies with respect to wartime
borrowing.
These have been dominated by the following
considerations*
First, we have tried to borrow as much as possible
from investors other than commercial banks.
must be stated subject to some qualification.
This principle
It would
neither be possible nor desirable to do all of our borrowing
outside of the banking system.
I have already explained
that one of the reasons for borrowing at all* rather than
relying exclusively upon taxation* is that an expanding
wartime economy needs —
even at a constant price level —
a greatly increased amount of currency and bank deposits.
These can be obtained* under existing institutions and in
wartime* only by a corresponding increase in the Government
security holdings of commercial and Federal Reserve Ranks;
and a sufficient amount of securities have to be sold to
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to enter war plants in o r d e r ( t o ^ a r n incomes supplementary
to those of their husbands.
It would, therefore, aggravate
the labor shortage.
It would be very difficult to administer.
This would
be true, not only for the Treasury, but also for the taxpayers
-
as it would require the use of forms and questionnaires far
more complex than any involved in the administration of the
individual income tax.
It seems to me that the basic problem of the taxation of j
individuals in wartime is really not very complex.
Aggregate
individual income is higher, and the Government must tax a
portion of it away.
There may be a great deal of dispute
as to which income brackets should be drawn upon the most
heavily, but any reasonable pattern of withdrawal can be
effected by means of the individual income tax.
I think it is a good rule when any other tax is
proposed, that you first express the distribution of its
burden in terms of the individual income tax, and then ask
yourself whether you would consider it reasonable that the
burden of the individual income tax itself should be so
altered.
If the answer is *Mo,® then the other tax should
be placed on the defensive and its proponents made to
justify it by reasons of strong public policy.
this can be done —
Sometimes
for example, I believe that the luxury
hundred dollars for a single person, twelve hundred dollars
for a married couple, and three hundred fifty dollars for
each dependent.
believe
that
I cannot accept this view; and I do not
the advocates of the sales tax would, if they
•i
realized the full implications of their proposal.
Third, it is often proposed that we should place a
special tar on increases in individual incomes; that is,
tax a man with an income of, say, three thousand dollars
more heavily if he has recently come up from one thousand
dollars than if he had been receiving three thousand
dollars for some time.
This proposal seems to me to be
wrong on a number of counts*
It is unfair.
It seems to me that, consciously or
unconsciously, it is based in part on the feudal concept
that every man should stay in his place, and it strikes
at the root of the principle that every man may rise
according to his worth —
a principle which has given so
much life and hope to the American scene for generations
past.
It is uneconomic.
It would undermine the incentive
of workers to transfer to war industries located in
inconvenient places and to work long hours at hard jobs.
Particularly, it would strike at the incentive for wives
8
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taxes, for it means that we have acre dollars to spend
than things to buy with the®.
Second, the view is sometimes voiced that, while we
have exhausted our ability to pay some kinds of taxes,
such as income taxes, we have not exhausted our ability
to pay other kinds of taxes, such as sales taxes,
see no merit in this view.
I can
Ability to pay resides in
persons, rather than in kinds of taxes —
both income an#
sales taxes must be met from the same pay envelopes; and
if we have the ability to pay one, we have the ability to
pay the other.
The income tax can be adjusted, and is adjusted to
the personal circumstances of those upon whom it is levied.
Exemptions are granted commensurate with family status, so
that the tax does not fall with merciless brutality upon
those with small incomes and large families.
Bo such
adjustment mechanism is customary or practicable for the
sales tax.
The view that we have exhausted our ability
to pay additional income taxes, but still have the ability
to pay a sales tax, logically reduces itself to the view
that the principal additional ability to pay in the economy
resides in that portion of incomes falling within the
exemptions from the individual income tax —
that is, five
Government is purchasing about one-half of the total volume
of goods and services being produced, while the remaining
50 percent is being purchased for private nee.
Federal
taxes, however, are bringing in only about 20 percent of
the gross income generated by production, leaving about
80 percent in private hands.
There is, thus, a discrepancy
equivalent to about 30 percent of the value of total output
which makes up the Federal deficit on the one hand and the
corresponding necessary private savings on the other hand.
To the extent that total borrowing exceeds the-aggregate
amount of savings consciously and intentionally undertaken,
we are placing liquid assets in the hands of persons who
may use them to put added pressure on price ceilings.
It
is to aid in immobilising such unstable accumulations, as
well as for fiscal and equitable reasons, that the Treasury
considers the need for additional taxes so urgent.
£ do not desire to go into the matter of particular
types of wartime taxes at any length this evening, but I
should like to make some general observations.
First, there can be no doubt of the ability of the
people of the United States to pay taxes much higher than
those now levied.
itself is hard.
Of course, it would be hard because war
But the very fact that we are threatened
with inflation is evidence of our ability to pay higher
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6
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enterprises were taxed away, there would be no economic
incentive to call forth these exertions.
■ii
The borrowing which is justified entirely by the
I
special considerations which I have just enumerated would
have to take place for our wartime economy to operate
smoothly, no matter how willing Congress might be to levy
additional taxes or the people to bear them.
This borrowing I
alone would amount to a great deal of money by peacetime
standards; but it would certainly be much less than the
nearly fifty billion dollars a year which we should have
to borrow even if the Treasury tax proposals were grunted
in full.
An additional amount of borrowing —
over and above
the minimum required on economic grounds —
can also be
accomplished without danger of inflation to the extent
that individuals can be induced, for patriotic reasons,
to increase their savings.
This the Treasury is endeavoring I
to do by means of the payroll savings plan and the War Loan
campaigns.
The volume of total savings required is dictated by
the else of the deficit and may differ materially from
the sum total of savings which would occur from economic
and patriotic motives.
At the present time the Federal
5 -
than they are being replaced, and the depreciation reserves
set aside to offset this wear and tear are piling up in
cash.
At the same time, the accounts receivable of these
firms are running down, which results also in piling up
cash.
These funds are all available to be lent to the
Government; but they are not available to be taxed since
they represent capital, rather than income, of the firms
possessing them, and represent very
different
proportions
of the total capital of different firms, depending upon
the type of business.
A policy of borrowing these funds,
rather than taxing them away, is, therefore, clearly
indicated.
In the third place, the great wartime expansion in
the economy requires — even at a constant price level —
a great increase in the available supply of currency and
bank deposits; and this increase, under our existing
institutions and under wartime conditions, can be supplied
only by an increase in Government borrowing.
Finally, it is necessary that some financial incentive
be supplied to individuals to work long hours, and to
corporations to operate with the utmost efficiency. If
the whole of the extra incomes resulting from the overtime
pay of individuals and the efficient management of business
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•
been increased by the war to levels considerably above
those required to meet their former standards of living,
are ready and willing to lend a substantial proportion
of their increased incomes to the Government in order to
insure their future security.
Ultimately, if the war should last long enough, these
adjustments might be continued under a steadily increasing
burden of taxation until each person’s standard of living
and financial commitments had became adjusted to his place
in the war economy,
this is unlikely to occur, except in
a very long war; and, in the meantime, a considerable
proportion of the total war cost must be borrowed in order
to avoid unnecessary disruption in the economy.
In the next place, the magnitude of our war effort
is fixed by our full gross product, rather than by our net
national income.
This means that during wartime replacement^|
and repairs on plant and equipment must be postponed, as
far as possible, so that the manpower and materials which
they would otherwise have absorbed can be thrown into the
war effort.
Producers, as well as consumers, are asked by
their Government to "Use it up. Wear it out, Hake it do,
or Do without."
This means that during the war period, the capital
assets of most business firms are wearing out more rapidly
reconmended to Congress that the whole cost of the war
should be paid for out of current taxation.
But it is
these exceptions, and not the general rule, which need
special justification; and I should like to explain to
you tonight, not why the Treasury has reconaended to
Congress additional taxes, which if enacted would only
provide sufficient revenue to cover about one-half of
total Federal expenditures, but rather why it has not
asked for taxes to cover the full cost.
The use of borrowing, to the extent that it is
justified by special circtiastances. Bakes for a saoother
working of our war economy than would the exclusive use
of taxation.
borrowing
is
What are these circuastances under which
|
, < i ; V ’I
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^V'' ' '
thus the superior instrument of war finance?
In the first place, the burden of a t a x —
or of any
other compulsory levy, even if it is subsequently reimburs
able —
must be levied according to fixed rules,
these
rules can take but little account of individual circumstances
It requires considerable time for many individuals to adjust
their living standards and commitments to the new and lower
levels which would be dictated by all-out wartime taxation.
While some individuals are revising their living
standards downward, other individuals, whose incomes have
larger extent, by postponing the replace®ant of capital
goods wearing out during its course.
With these exceptions,
the whole physical cost of a war sust be paid for while it
is being fought.
What then, it may be asked, is the role of war borrowing
The answer Bust be that war borrowing is a method of post
poning, not the cost itself, but the final allocation of
the total burden of the war to some future date, when the
costs now paid for through the sale of bonds are finally
assessed in the form of taxes —
at which time it is
'
\:' ,Jgk’'■../:.
inevitable that a such larger portion of them will be paid
by the persons now in the armed forces than if they were
assessed today.
When this fact is seen in its stark reality, it is
clear that the money cost of the war should be met as far
as possible by taxes, and so be paid for once and for all
by today*s civilians at the same time that the men in the
services are paying their much higher price in human cost
on the fighting fronts.
Exceptions fro® this rule should
be permitted only when clearly justified by special
circumstances.
There are a number of these special circumstances, and
it is because of the® that the Treasury Department has never |
jsjeuj _
Financing the War and the Post-War Readjustment
I welcome the opportunity to discuss with you this
evening the problems of financing the war and the post-war
readjustment.
It is because we feel that these two problems
are so closely tied together that I have chosen to discuss
some aspects of each in the same address.
War Finance
It has come to be generally recognised that the real
cost of a war must be paid for while it is being fought.
This real cost consists in the labor put forth and the
sacrifices endured in order to produce and to use the
goods of war.
Guns cannot be fired until they and their
shells have been made, nor can they be fired with time
borrowed from tomorrow,
the labor and sacrifice involved
in these things must be made today and cannot be
postponed.
There are, of course, some exceptions to this rule.
k war may be fought, in small part, by the use of stocks
of goods accumulated before it begins; and, to a much
l
TREASURY DEPARTIN'
ITasM ngton
FOR RELEASE, 8.30 P.M., E.W.T.
Thursday 4 December 16. 19A3.
(The following address by Daniel W, Bell, Under
Secretary of the Treasury, before the Worcester
’ Economic Club at the Hotel Bancroft, Worcester,
^^Massachusetts, is scheduled for delivery at
o,30 P,M,, E.W.T,. Thursday. December 16. 19A3,
and is for release at that time,)
7
Press Service
No,
q f f 5”
2
TREASURY DEPARTMENT
Washington
Press Service
No* 39-95
FOR RELEASE, 7:30 P.M., E.W.T*
Thursday, December 16, 1943*
(The*foilowing address b y Daniel W* Bell, Under
Secretary of the Treasury, before the Worcester
Economic Club at the Hotel Bancroft, Worcester,
Massachusetts, is scheduled for delivery at
7:30 P*M*t E.W.T*, Thursday, December 16, 1943»
and is for release at that time .)
Financing the War and the Post-War Readjustment
X welcome the opportunity to discuss with you this evening the problems
of financing the war and the post—war readjustment* It is because we feel
that these two problems are so closely tied together that I have chosen to
discuss some aspects of each in the same address*
War Finance
It has come to be generally recognized that the real cost of a war
must be paid for while it is being fought* This real cost consists in the
labor put forth and the sacrifices endured in order to produce and to use
the goods of lAfar* Guns cannot be fired until they and their shells have
been made, nor can they be fired with time borrowed from tomorrow. The
labor and sacrifice involved in these things must be made today and cannot
be postponed.
There are, of course, some exceptions to this rule* A war may be
fought, in small part, by the use of stocks of goods accumulated before
it begins; and, to a much larger extent, by postponing the replacement of
capital goods wearing out during its course* With these exceptions, the
whole physical cost of a war must be paid for while it is being fought.
What then, it may be asked, is the role of war borrowing*
The answer
must be that war borrowing is a method of postponing, not the cost itself,
but the final allocation of the total burden of the war to some future date,
when the costs now paid for through the sale of bonds are finally assessed
in the form of taxes r~- at which time it is inevitable that a much larger
portion of them will be paid by the persons now in the armed forces than
if they were assessed today.
-
2
-
When this.fact is seen in its stark reality, it is clear that the
money cost of the war should be met as far as possible by taxes, and so
be paid for once and for all by today’s civilians at the same time that
the men in the services are paying their much higher price in human cost
on the fighting fronts. Exceptions from this rule should be permitted
only when clearly justified by special circumstances.
There are a number of these special circumstances, and it is because
of them that the Treasury Department has never recommended to Congress
that the whole cost of the war should be paid for out of current taxation.
But it is these exceptions, and not the general rule, which need special
justification; and I should like to explain to you tonight, not why the
Treasury has recommended to Congress additional taxes, which if enacted
would only provide sufficient revenue to cover about one-half of total
Federal expenditures, but rather why it has hot asked for taxes to cover
the full cost.
The use of borrowing, to the extent that it is justified by special
circumstances, makes for a smoother working of our war economy than would
the exclusive use of taxation. What are these circumstances under which
borrowing is thus the superior instrument of war finance?
In the first place, the burden of a tax — or of any other compulsory
levy, even if it is subsequently reimbursable — must be levied according
to fixed rules. These rules can. take but little account of individual
circumstances. It requires considerable time for many individuals to
adjust their living standards and commitments to the new and lower levels
which would be dictated by all-out wartime taxation.
While some individuals are revising their living standards downward,
other individuals, whose incomes have been increased by the w;ar to levels
considerably above those required to meet their former standards of living,
are ready and willing to lend a substantial proportion of their increased
incomes to the Government in order to insure their future security.
Ultimately, if the war should last long enough, these adjustments
might be continued under a steadily increasing burden of taxation until
each person's standard of living and financial commitments had become
adjusted to his place in the w/ar economy. This is unlikely to occur,
except in a very long war; and, in the meantime, a considerable pro
portion of the total war cost must be borrowed in order to avoid unneces
sary disruption in the economy.
In the next place, the magnitude of our war effort is fixed by our
full gross product, rather than by our net national income. This means
that during wartime replacements and repairs on plant and equipment must
be postponed, as far as possible, so that the manpower and materials
which they wrould otherwise have absorbed can be thrown into the war
effort. Producers, as well as consumers, are asked by their Government
to "Use it up, Wear it out, Make it do, or Do without.W
This means that during the war period, the capital assets of most
business firms are wearing out more rapidly than they are being replaced,
and the depreciation reserves set aside to offset this wear and tear are
piling up in cash^ At the same time, the accounts receivable of these
firms are running down, which results also in piling up cash* These
funds are all available to be lent to the Government; but they are not
available to be taxed since they represent capital, rather than income,
of the firms possessing them, and represent very different proportions
of the total capital of different firms, depending upon the type of busi
ness . A policy of borrowing these funds, rather than taxing them away,
is, therefore, clearly indicated .
In the third place, the great wartime expansion in the economy
requires «*** even at a constant price level
a great increase in the
available supply of currency and bank deposits; and this increase, under
our existing institutions and under wartime conditions, can be supplied
only by an increase in Government borrowing.
Finally, it is necessary that some financial incentive be supplied
to individuals to work long hours, and to corporations to operate with the
utmost efficiency. If the whole of the extra incomes resulting from the
overtime pay of individuals and the efficient management of business enter
prises were taxed away, there would be no economic incentive to call forth
these exertions,
The borrowing which is justified entirely by the special considerations
which I have just enumerated would have to take place for our wartime
economy to operate smoothly, no matter how willing Congress might be to
levy additional taxes or the peop3,e to bear them, This borrowing alone
would amount to a great deal of money by peacetime standards; but it would
certainly be much less than the nearly fifty billion dollars a year which
we should have to borrow even if the Treasury tax proposals were granted
in full.
An additional amount of borrowing — over and above the minumum re
quired on economic grounds — can also be accomplished without danger of
inflation to the extent that individuals can be induced, for patriotic
reasons, to increase their savings ? This the Treasury is endeavoring to
do by means of the payroll savings plan and the War Loan campaigns.
The volume of total savings required is dictated by the size of the
deficit and may differ materially from the sum total of savings which
would occur from economic and patriotic motives, Ab the present time the
Federal Government is purchasing about one-half of the total volume of
goods and services being produced, ■while the remaining 50 percent is being
purchased for private use. Federal taxes, however, are bringing in only
about 20 percent of the gross income generated by production, leaving
about 80 percent in private hands. There is, thus, a discrepancy equiva
lent to about 30 percent of the value of total output which makes up the
Federal deficit on the one hand and the corresponding necessary private
savings on the other hand.
- u -
To the extent that total borrowing exceeds the aggregate amount of
savings consciously and intentionally undertaken, we are placing liquid
assets in the hands of persons who may use them to put added pressure on
price ceilings. It is to aid in immobilizing such unstable accumulations,
as well as for fiscal and equitable reasons, that the Treasury considers
the need for additional taxes So urgent,
I do not desire to go into the matter of particular types of wartime
taxes at any length this evening, but I should like to make some general
observations.
First, there can be no doubt of the ability of the people of the
United States to pay taxes much higher than those now levied. Of course,
it would be hard because war itself is hard. But the very fact that we
are threatened with inflation is evidence of our ability to pay higher
taxes, for it means that we have more dollars to spend than things to
buy with them.
Second, the view is sometimes voiced that,, while we have exhausted
our ability to pay 'Some kinds of taxes, such as income taxes, we have
not exhausted our ability to pay other kinds of taxes, such as sales
taxes, I can see no merit in this view. Ability to pay resides in per
sons, rather than in.kinds of taxes — both income and sales taxes must
be met from the same pay envelopes; and if we have the ability to pay one,
we have the ability to pay the other.
The income tax can be adjusted, and is adjusted to the personal
circumstances of those upon whom it is levied. Exemptions are granted
commensurate with family status, so that the tax does not fall with merci
less brutality upon those with small incomes and large families.
No such
adjustment mechanism is customary or practicable for the sales tax. The
view that, we have exhausted our ability to pay additional income taxes,
out still have the ability to pay a sales tax, logically reduces itself
to the view that the principal additional ability to pay in the economy
resides in that portion of incomes falling within the exemptions from the
individual income tax — that is, five hundred dollars for a single person,
twelve hundred dollars for a married couple, and three hundred fifty
dollars for each dependent. I cannot accept this view; and I do not be
lieve that the advocates of the sales tax would, if they realized the full
implications of their proposal.
Third, it is often proposed that we should place a special tax on
increases in individual incomes; that is, tax a man with an income of, say,
three thousand dollars more heavily if he has recently come up from one
thousand dollars than if he had been receiving three thousand dollars for
some t i m e . This proposal seems to me to be wrong on a number of counts.
It is unfairo It seems to me tjhatj consciously or unconsciously,
it is based in part on the feudal concept that every man should stay in
his place, and it strikes at the root of the principle that every man may
rise according to his worth ***• a principle which has given so much life
and hope to the American scene for generations past©
It is uneconomic® It would undermine the incentive of workers to
transfer to war industries located in inconvenient places and to work long
hours at hard jobs0 Particularly^ it would strike at the incentive for
wives to enter war plants in-order to earn incomes supplementary to those
of their husbands® It would, therefore, aggravate the labor shortage®
It would be very difficult to administer® This would be true, not
only for the Treasury, but also for the taxpayers, as it would require the
use of forms and questionnaires far more complex than any involved in the
administration of the individual income tax©
It seems to me that the basic problem of the taxation of individuals
in wartime is really not very complex* Aggregate individual income is
higher, and the Government must tax a portion of it away© There may be
a great deal of dispute as to which income brackets should be drawn upon
the most heavily, but any reasonable pattern of withdrawal can be effected
by means of the individual income tax©
I think it is a good rule when any other tax is proposed, that y o u
first express the distribution of its burden in terms of the individual
income tax, and then ask yourself whether y o u would consider it reasonable
that the burden of the individual income tax itself should be so altered®
If the answer is 11Ho,M then the other tax should be placed on the defensive
and its proponents made to justify it by reasons of strong public policy®
Sometimes this can be done
for example, I believe that the luxury
excises proposed by the Treasury this year and the spendings tax'proposed
last year are cases in point0 The test should be rigid, hov/ever, and the
considerations of public policy should be important before a tax is placed
on the statute books, the burden of Yrhich is distributed in a manner other
than that in which we would be willing to distribute the burden of ah-inci’ease in'the individual income tax®
I turn new to our policies with respect toY/artime borrowing®
have been dominated by the folloY/ing considerations©
These
First, we have tried to borroY«r as much as possible from investors
other than commercial banks® This principle must be stated subject to
some qualification® It Y/ould neither be possible nor desirable to do;-all
of our borroYdng outside of the banking system® I have already explained
that one of the reasons for borrovdng at all, rather than relying exclusively
upon taxation, is that an expanding wartime economy needs r*r even at a con
stant price level t **- a greatly increased amount of currency and bank
deposits* These can be obtained, under existing institutions and in wartime,
only by a corresponding increase in the Government security holdings of
commercial and Federal Reserve Banksj and a sufficient amount of securities
have to be sold to the banks to provide this necessary circulating medium,
even if adequate markets exist for them elseY/here©
~ 6 —
The amount of Government securities which would thus have to be sold
to the banks in any event is substantial; but, in practice, I must admit
that this has proved little of a problem, since rt has taken care of
itself by the rapid expansion of the borrowing needs of the Federal
Government and the slower development of nonbanking sources for Federal
borrowing®
For this reason, we have directed our main effort to the sale of
securities to nonbanking investors® During the past year* we have sold
to such investors, net after all switches and redemptions, about forty
billion dollars of Government securities, as compared with about thirty
billions absorbed try the banks®
Second, we have tried to make the securities sold to the small investor
as riskless as possible® The Treasury has considered itself the trustee
of the inexperienced investor® It is with this in view that the Departments
appeal to small investors has been confined $0 Series E bonds which are
nonanegotiable, payable on demand and hence are guaranteed against fluctua
tions in market values®
The Treasury is less concerned With the large volume of demand obli«gations which is being built up by the sale of savings bonds to small
investors than it would be with the only practicable alternative to this '
course® This alternative would be the sale to small investors of marketable
securities payable by the treasury only after the expiration of a fixed
term of years®
The fixing of a definite term on securities sold to small investors
by no means insures that they will be held by these investors for the full
teririo 3y and large, the holders of marketable securities would sell them
op the same occasions when holders of redeemable securities would redeem
theirs® Indeed, there is one important Occasion upon which marketable
securities would be sold, but redeemable securities would not be redeemed **»
that is, the fear of a decline in price, from which the nonnegotiable
securities are immune®
Now it may appear, at first glance, that while the treasury should'be
properly concerned with redemptions, it should not be concerned w ith market
sales, since it must meet the redemptions out of its own pocket; while the
market sales will be t-aken up by somebody else® This type of reasoning
would suffice for a private borrower, but it is entirely inadequate for
the Treasury since it overlooks the real problem which the holdings of
government securities ^ whether redeemable or marketable
by small
investors m i l present in the post-war period®
This problem is that the holders of these securities may dispose of
of them and spend the proceeds o n .consumers1 goods at a time when the
supply of such goods will be scarce; and the spending can result only in
price riseso This problem would exist, however, whether the securities
were payable on demand or were negotiable and payable at the close of
a fixed term, and vnJLl be somewhat less troublesome for demand securities,
because, as 1 have already pointed out, the liquidation of this type of
security m i l never be precipitated by the fear of a fall in the price of
the security itself®
The other problems which will be caused try holdings of Government
debt by small investors in the post-war period are minor, relative to the
major problem w h i c h X have just mentioned; and will be less serious with
demand obligations than with negotiable obligations of fixed term*
When savings bonds are presented for redemption to the Treasury and
it is necessary to refund them, the Treasury offers the type and maturity
of new securities best suited to the market at the time, and offers these
securities for distribution through the regular channels of the Government
security market0
Marketable securities, by contrast, would be offered in small blocks,
oftentimes through irregular channels where the original holders may not
receive full value, and might dribble into the market in such a way as to
keep it continually disturbed© They might not be fitted by coupon rate,
maturity, or other characteristics for the predominant demand then existing
in the market, but they would have been cast in whatever mold they were,
once and for all, and the market would have to make the best of it©
To the extent that the refunding of demand- obligations vrould have been
accomplished by the sale of securities to banks, -so also would the marketable
securities find their ultimate lodgment in banks, but only after a roundabout
journey, probably involving both loss to their original purchasers and a
higher interest cost to the Treasury©
It seems clear, therefore, that the Treasury is in a much better
position to refund the non-negotiable securities than the individual woiv..^
be to refund negotiable securities through the market©
The third of the principles governing our borrowing policy has been
the maintenance of the liquidity of the banking system® We have laid d own
the policy that no securities will be offered to commercial banks for the
investment of their demand deposits with’ a maturity at time of issuance
of over ten years0 The great majority of the securities sold to commercial
banks have had maturities far shorter than this© Indeed, more than half
of the total increase in the portfolios of commercial banks since Pearl
Harbor^has been in the form of three-month Treasury bills and one-year
certificates of indebtedness* This concentration of sales to commercial
banks in short securities insures that our banking system will be in a
strong and liquid position to meet the problems of the post-war period0
Finally, we have financed this war at an average rate of slightly less
than 1-3/4 pon cent© This compares with an average rate of about 4— 1/ 4.
per cent on the securities issued to finance the last World War©
^Interest rates have remained stable during the wartime period and
confidence in the continuation of this stability has been and is widespread
and well justified, and has caused investors to subscribe to new issues of
Government securities in successive war loans without any sign of holding
back in anticipation of higher rates©
a
X think it can be fairly said of the United States, as the late
Chancellor of the Exchequer, Sir Kingsley Wood, recently said of Great
Britain, that ”, ♦ . we have revolutionized public opinion as to what are
fair rates for Government war borrowing.” I believe that this revolution
in opinion has a sound basis in underlying economic realities, and is applicable to the coming times of peace also#
I hope that the policies of the
Government will be directed to this end.
Financing the Post-War Readjustment
I come now to the second major division of my topio, that is, the prob
lems of the post-war readjustment period.
I approach this subject with some trepidation. Ho post-war plan will
be of any value unless we win the war and are in a position to put it into
effect. The war is not yet in the bag. Hitler»s post-war plan is slavery,
and there will not be room for both his plan and our own,
You all remember the recipe for rabbit stew which begins ”First catch
the rabbit,” So it is with post-war planning. Tfe must first win the warj
and we must not let anything, even post-war planning, distract our minds
from this for an instant.
Immediately following the close of the war, we will be confronted
with the problem of reconversion. The period of reconversion will be a time
fraught with exceptional hazard to our economic structure•
During normal times, most pf pur people are engaged in producing goods
which they and their fellow workers can buy with their wages.
During wartime,
they are largely engaged in producing war goods which they cannot purchase
with their incomes, but the excess purchasing power which is thereby created
is held in check by direct controls, by personal taxation and by Government
borrowing from individuals^ The people are willing to accept and cooperate
with these measures because of patriotism and the all-pervading spirit of
sacrifice which exists during wartimes.
During the reconversion period,
however, While the tools of production for peace goods are being made ready,
purchasing power may outrun the goods available for purchase, while wartime
measures of control may be relaxed if the people do not recognize the need
for continued restraint,
A price inflation is, consequently, one of the hazards of the reconver
sion period.
Stalking hand-in-hand with it-goes the hazard of unemployment.
Normally, these two are never seen together, since unemployment usually
rises from a lack of demand for goods and inflation from a shortage of goods.
The unemployment of the reconversion period will be caused, however, not by
a lack of demand for the finished products, but because the plants are not
yet ready for mass reemployment, and so may go hand-in-hand with inflation.
One© the period of reconversion is over and the tremendous potentialities
of the American economy which have been demonstrated during the war period
are directed to the production of the goods of peace, the main hazard of
inflation will be over,
c
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The task of statesmanship in the period immediately following the war
will be to hasten the reconversion process while mitigating its hardships
and reducing its human costs* This task will, of course, be easier if a
termination of the war on one front before the other should make it possible
to complete part of the reconversion process under a wartime environment.
But we must press for victory against Japan as well as Germany without regard
for the economics of reconversion.
This evening I shall discuss only three aspects of fiscal planning for
the reconversion period, and these briefly. They are, first,, the cancelation
of war contracts; second, the adequacy of corporate financial resources to
carry on the work of reconversion; and, third, the control of individual
spending during the reconversion period.
If the war should end today on all fronts, there would be outstanding
more than 75 billion dollars of war contracts on which deliveries had not
yet been made. Much of the material covered by these contracts would be of
no use to the Government if it were delivered after the immediate emergency
of this war had passed. This is because there are no goods with respect to
which obsolescence runs faster than it does for the goods of war; so the
best preparation for future Wars consists in maintaining the skills and plant
capacity necessary for the development, production, and use of new war goods
rather than in hoarding vast quantities, of old ones.
Part of the undelivered contracts would still exist merely in blue-prints
in the hands of the contractors, while part would be represented by goods in
process, some of which in turn could be converted into peacetime goods.
in my opinion, all war contracts should be canceled immediately upon
the passing of the military need for the goods contracted for* This is de
sirable for two important reasons. First, it avoids the tremendous waste
of human and material resources involved in making goods which we will
never use; and, second, it gives the maximum stimulation to the men and
management released from making such goods to seek employment in the produc
tion of goods for which there is a human need, and so hastens the process
of reconversion.
The abrupt cancelation of war contracts will give rise to two problems.
These are: First, provision for the labor thrown out of employment; and
second, compensation for the contractors.
The first of these problems should be settled with liberality; the sec
ond, with the utmost of speed.
A generous treatment of the labor displaced by contract cancelation is
required, not merely by considerations of common humanity and fair dealing,
but also by considerations of economy; for without it,, we are unlikely to
secure abrupt cancelation at all, and there is no form of relief more expen
sive than the production of unneeded tools of war. We should be sure, how
ever, that the treatment accorded labor displaced from war production is of
such a character that it encourages, rather than slows down, its quest for
peacetime employment,
*
10
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Payments to contractors should be just in accordance with a fixed
standard of equity* that is, they should be enough to make the contractors
and their subcontractors whole for the losses they have sustained as the
result of the contract cancelations*
It is important also, that payments to contractors should be prompt.
This is not primarily for the benefit of the contractors themselves —
although I have no doubt that they will appreciate it — but for the benefit
of the country as a whole. A dollar paid out in the settlement pf war con
tracts during the early reconversion period may — in terms of national well
being — * be worth several dollars paid out a year or so later,
it is far
more important, therefore, t hat the settlements be prompt than that they be
accurate to the last dollar according to some accounting concept, which may
itself be open to question*
The settlement of war contracts along the lines which I have just out
lined will involve a heavy outflow of funds from the Treasury in the few
months immediately lollowing the end of the war. We are prepared for this
outflow, and we feel that there, will be few occasions when a disbursement of
funds may be made with so little real cost to the Government and so much
benefit to the economy.
My second point with respect to the reconversion period relates to the
adequacy of corporate financial resources to carry on the work of reconversion.
The adequacy of these resources is important, not merely or even principally
from the point of view of the corporations involved, but from the point of
view of the whole economic system.
. •
We in the Treasury have given careful consideration to this matter, and
believe that funds for the reconversion of war industry will be ample, pro
vided that a prompt settlement is made of canceled war contracts.
Our reasons
for believing this are as follows?
First, the wartime period has been a profitable one for American corpo
rations as a whole. Net corporate profits, after taxes, have averaged about
twice as much per year during the wartime period as they did in the years
1935 through 1939 (the base period for the FEB index of industrial produc
tion),* and, by and large, the greatest increases have gone to those firms
whose problems of reconversion will be greatest. Corporate dividend policy,
furthermore^ has been so conservative that most of the increase in corporate
earnings has been added to surplus.
Second, in addition to their savings from undistributed earnings,
American corporations have piled up a large volume of liquid assets as a
result of repayment of receivables, and in some cases reduction in inventories
and the general inability to expend depreciation and depletion reserves which
has been brought about by wartime conditions. According to the estimates of
the Federal Reserve Board, the demand deposits of nonfinancial businesses,
including unincorporated enterprises, amounted to over 30 billion dollars’at
the end of last July,* and, according to Treasury estimates, the holdings of
Government securities
payable for the most part on demand or at very short
term —— by nonfinancial corporations alone, amount at the present tim© to
o
m
11
about; 20 billion dollars. Each of these figures is far above any peacetime
precedent; but, to make the picture brighter, American business, during the
same time it has been acquiring them, has reduced the amount of both its
bank loans and its bonded debt.
Third, generous carry-back and carry-forward provisions included in the
corporation tax laws insure that corporations suffering losses during the
reconversion period, or even earning incomes of less than their excess profits
credit, will receive substantial refunds of the taxes paid in their prosperous
years. These refunds t - for the expediting of which the Treasury has made
recommendations to the- Congressional committees — will be available to carry
on the work of reconversion. In addition, there is provided in the present
law a post-war refund, irrespective of future^ tax status, of ten per cent of
the excess profits tax paid in the war period.
For the reasons given, I do not believe that the adequacy of business
funds for reconversion purposes will.present a major problem. But I cannot
speak with equal assurance with respect to the■prospects for the control of
individual spending during the reconversion period -- the third post-war
problem to be discussed.
Immediately fallowing the end of the actual fighting, we can probably
expect a let-down in the willingness of people to submit from patriotic mo
tives to a continued, reduction in their consumption. There is likely to be
a demand for an immediate end of the direct controls; and this demand may,
to some extent, succeed.. For some time, however, while industry is being
reconverted and the war effort demobilized, there will be only a very gradual
increase in the supply of consumers* goods. When it is considered that there
will be available to be spent currently, in addition to the incomes being
received for the production of consumers*goods, not merely the incomes from
work in demobilizing the war effort and reconverting private industry, but
also the large liquid resources piled up during wartime, it is easy to conjure
up the specter of a post-war inflation.
Against this must be set the povrerful force of human foresight and so
briety. The reconversion period is bound to be attended by considerable un
employment, and each individual will naturally ask himself how he is going to
come out in the swirl of readjustments he sees around him. His natural
tendency will be to ’’play it close to the chest” and handle his reserve funds
as carefully as possible. This human tendency alone may maintain a high
rate of saving during the reconversion period, and so forestall the possi
bility of a post-war inflation.
We hope that this will be so; but counting on it would be as improvident
as counting on an internal smash-up in Germany to win the war, We must con
sequently lay our plans to prevent a post-war inflation from occurring, but
stand ready to adjust any such plans on short notice to conditions as they
actually develop during the reconversion period,
What should these plans be? It seems to me that the direct controls,
such as price ceilings, priorities,, and rationing, should be kept in effect
as long as necessary* and high income taxes, as long as possible.
12
-
Let me explain the difference between "necessary" and "nossible"
the statement which
have just made.
P
m
Ihile I believe that we should keep the direct controls as long after
the war as necessary, :;l do not believe that this will be very long. I feel
certain that the last *of them can be done away with as soon as the reconverted
plants commence to pour* their flood of consumers’ goods on the market.
I have said, however, that the high rates of taxation should be kept as
long as possible.
I think that the case here is very different. High per
sonal taxes serve the anti-inflationary purpose of absorbing surplus purchas
ing power 5 and this may be very useful and necessary in the reconversion
period. But they also serve the purpose of helping to pay off the national
debtj and this purpose is also useful and necessary.
It seems to me, therefore, that, while the criterion with respect to
e removal of the controls should be "How soon can we remove them without
u
inflation?"; the criterion with respect to wartime rates of taxation
should be "How long can'we keep them without risking unemployment?" Perhaps
for a long time to come, if the post-war period lives up to our hopes and
expectations.
r
But this would take me into new vistas beyond the scope of tonight’s
address for J have no intention of discussing the broader phases of fiscal
policy beyond the reconversion period.
I would like to make, however, a few general observations. The war has
opened the eyes of the American people to the tremendous productivity of inustrial and agricultural America, The shortages of peacetime goods and
services that exist now have not blinded us to the enormous potentialities
for abundance inherent in our productive mechanism.
It is precisely this
unexampled capacity to produce upon which the future prosperity and welfare
of our people ultimately depend.
r
e
To help society achieve more fully the promise of abundance implicit
m our capacity to produce; to help maintain output and employment at a leve
more nearly corresponding to our true productive potential; and to secure
is at a price that a peaceful democracy can pay; — that will constitute
the greatest task of economic statesmanship in the post-war world.
I do not believe that the glory of America belongs only to the past,
I believe that the real promise of America belongs to the future. Between
the goal of securing maximum utilization of our resources and the goal of
achieving a more equitable distribution of wealth, there need be no conflict
Our history has been testimony to that fact, and our future will be the
record of its fulfillment.
I
TREASURY DEPARTMENT
FISCAL SERV IC E
BUREAU OF ACCOUNTS
W A S H IN G TO N
O F F IC E O F TH E CO M M ISSIO N E R
December 7» 19 ^ 3
3
During the month of November, I9 L 3 , the following
market transactions took place in direct and guaranteed
securities of the Government:
S a l e s ......... ..... ............. $5,000,000
P u r c h a s e s .......... ......... .
..... -
Ket s a l e s .... ............. $5.000.000
~
TREASURY DEPARTMENT
Washington
POR iMMBDIATE RELEASE,
Wednesdaj, De.cember X5« 1945*
Pitess Service
No. 39-96
During the month of November, 1943, market
transactions ih direct and guaranteed securi
ties of the 0#f^rnment tor Treasury investment
and other ac&$$$$£
$3,000,000,
|n net sales of
Morgenthau announced
today,
-oOOt
sources of bogus money that for several years plagued the district
Previously he had performed similar service in the Boston district
He came to Washington as Supervising Agent in 1942,
- 2 -
At Newark and New York Mir* Maloney directed investigations
which smashed major counterfeiting gangs operating in the area,
and carried out many
such as arranging
for protection of the President and distinguished foreign
visitors.
He directed the protective detail that accompanied the
King and Queen of England on their visit to the World*s Pair in
1939*
He had charge of arrangements for the visit of Madam
Chiang Kai-shek early this year, an assignment involving as great
a variety of difficult situations as any protective operation ever
undertaken by the Service.
A
v
:/( o t all Treasury^Enf
As ijjjiint District Coordinator,.^
Treasury Enforcement
agencies from February, 1941, he played a prominent role in the
organization of port protection and other wartime services of the
Treasury and other cooperating Government and military authorities.
Mr. Maloney served in the first World War as a private in the
Army Air Force, with the Ninety-third Aerial Squadron at San Antonio,
Texas, and in France.
Mr. and Mrs. Maloney have taken residence at 2800 Ontario
Road, N.W.
Mr. McGrath, who succeeds Mr. Maloney in New York, is return
ing to a familiar field.
A veteran of 26 years with the Service,
he headed, from 1938 to 1942, a special counterfeit detail working
under Mr. Maloney in the New York area which smashed the major
/•
( 2 —
^60
^ 2 ^ i c
^
-
P
/
^Phw-g>g«ftfwaa»^today announced the appointment of James J*
Maloney as Assistant Chief of the United States Secret Service,
succeeding Joseph E. Murphy^who retired recently after 45 years
in the organization,
j^Mr. Maloney comes to Washington from New York City where he
has been Supervising Agent of this key district since 1938* Chief
Prank J, Wilson announced also that John J. McGrath has been trans
ferred from the Capital, where he was Supervising Agent of the
Washington district, to the New York City post; and has in turn
been succeeded by Harry 3). Anheier^who formerly was Agent in Charge
at New Orleans.
Mr* Maloney is 47 years old.
New York.
He is a native of Bingham/ton,
The new Assistant Chief was a law enforcement officer
in southern New York for 12 years before his appointment to the
Secret Service in 1931 as an operative at Detroit.
In 1935 Mr. Maloney was transferred to Syracuse, New York, as
Operative in Charge.
In 1936 he was moved to Buffalo in the same
capacity, and in December of that year became acting Supervising
Agent of the Newark district.
Mr. Maloney was designated Super
vising Agent in 1938, and was transferred in the same year to the
New York position.
The New York district is considered the most important in the
Secret Service field organization because of the range of activities
and the scope of work the Service is. called upon to perform.
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Thursday, December 16, 1943.
Press Service
No. 39-97
Secretary Morgenthau today announced the appointment of James J.
Maloney as Assistant Chief of the United States Secret Service, succeeding
Joseph E, Murpiy, who retired recently after 45 years in the organization.
Mr. Maloney comes to Washington from New York City where he has been
Supervising Agent of this key district since 1938. Chief Frank J. Wilson
announced also that John J. McGrath has been transferred from the Capital,
where he was Supervising Agent of the Washington district, to the New York
City postj and has in turn been succeeded by Harry D. Anheier, who formerly
was Agent in Charge at New Orleans*
Mr, Maloney is 47 years old. He is a native of Binghamton, N e w York.
The new Assistant Chief was a law enforcement officer in southern
New York for 12 years before his appointment to the Secret Service in 1931
as an operative at Detroit.
In 1935 Mr. Maloney was transferred to Syracuse, New York, as Operative
in Charge.
In 1936 he was moved to Buffalo in the same capacity, and in
December of that year became acting Supervising Agent of the Newark district.
Mr. Maloney was designated Supervising Agent in 1938, and was transferred
in the same year to the New York position,
The New York district is considered the most important in the Secret
Service field organization because of the range of activities and the
scope' of work the Service is called upon to perform,
At Newark and New York Mr. Maloney directed investigations which smashed
major counterfeiting gangs operating in the area, and carried out many
other important assignments such as arranging for protection of the President
and distinguished foreign visitors. He directed the protective detail that
accompanied the King and Queen of England on their visit to the World's Fair
in 1939. He had charge of arrangements for the visit of Madam Chiang
Kai-shek early this year, an assignment involving" as great a variety of
difficult situations as any protective operation ever undertaken by the
Service.
As District Coordinator in the states of New York and New Jersey of
all Treasury Enforcement agencies from February, 1941, he played a
prominent role in the organization of port protection and other wartime
services of the Treasury and other cooperating Government and military
authorities.
Mr. Maloney served in the first world War as a private in the Army
Air Force, with the Ninety-third Aerial Squadron at San Antonio, Texas, and
in France.
-
2
-
Mr. and Mrs. Maloney have taken residence at 2300 Ontario Road, N. M
Mr. McGrath, who succeeds Mr* Maloney in New York, is returning to
A^veteran of 26 years with the Service, he headed, from
tu
t,°
a sPec^^- counterfeit detail working under Mr. Maloney in
the New York area which smashed the major sources of bogus money that for
several years plagued the district. Previously he had perforated similar
1 ^ 1 9 4 2 in
Boston district*
He came to Washington as Supervising Agent
oOo
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Thursday, December 16, 1943*
Press Service
No. 39-97
Secretary Morgenthau today announced the appointment of James J.
Maloney as Assistant Chief of the United States Secret Service, succeeding
Joseph E, Murpl^r, who retired recently after 45 years in the organization.
Mr. Maloney comes to Washington from New York City where he has been
Supervising Agent of this key district since 1938. Chief Frank J. Wilson
announced also that John J, McGrath has been transferred from the Capital,
Y/here he was Supervising Agent of the Washington district, to the New York
City post; and has in turn been succeeded by Harry D. Anheier, Yirho formerly
was Agent in Charge at N e w Orleans.
Mr, Maloney is 47 years old* He is a native of Binghamton, New York.
The new Assistant Chief was a law enforcement officer in southern
New York for 12 years before his appointment to the Secret Service in 1931
as an operative at Detroit.
In 1935 Mr. Maloney was transferred to Syracuse, New York, as Operative
in Charge.
In 1936 he was moved to Buffalo in the same capacity, and in
December of that year became acting Supervising Agent of the Newark district.
Mr. Maloney was designated Supervising Agent in 1938, and was transferred
in the same year to the New York position.
The New York district is considered the most important in the Secret
Service field organization because of the range of activities and the
scope of work the Service is called upon to perform.
At Newark and New York Mr, Maloney directed investigations which smashed
major counterfeiting gangs operating in the area, and carried out many
other important assignments such as arranging for protection of the President
and distinguished foreign visitors. He directed the protective detail that
accompanied the King and Queen of England on their visit to the World’s Fair
in 1939. He had charge of arrangements for the visit of Madam Chiang
Kai-shek early this year, an assignment involving as great a variety of
difficult situations as any protective operation ever undertaken by the
Service,
As District Coordinator in the states of New York and New Jersey of
all Treasury Enforcement agencies from February, 1941* he played a
prominent role in the organization of port .protection and other Yrartime
services of the Treasury and other cooperating Government and military
authorities.
Mr. Maloney served in the first world War as a private in the Army
Air Force, Ydth the Ninety-third Aerial Squadron at San Antonio, Texas, and
in France.
-
2
~
Mr. and Mrs. Maloney have taken residence at 2800 Ontario Road, N. W,
Mr. McGrath, who succeeds Mr* Maloney in New York, is returning to
a familiar field* A^veteran of 26 years with the Service, he headed, from
1933 to 1942, a special counterfeit detail working under Mr. Maloney in
the Now York area which smashed the major sources of bogus money that for
several years plagued the district; Previously he had performed similar
service in the Boston district. He came to Washington as Supervising Agent
oOo
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS
Monday, December 27, 1945
Press Service
No. 39-98
Secretary of the Treasury Morgenthau today made public data
from "Statistics of Income for 1941, Part 1,” compiled from indi
vidual income tax returns and taxable fiduciary income tax returns
filed during 1948. These .data are prepared under the direction of
Commissioner of Internal Revenue Robert E. Hannegan.
The total number of returns filed for the income year 1941 is
25,954,801 of which 15,617,209 are individual returns, Form 1040;
10,252,708 are the optional returns, Form 1040A* filed by individuals
With certain gross income of $ 3,000 or less; and 84,884 are taxable
fiduciary returns, Form 1041. As compared with the^previous year,
the total number of returns increased 76 percent. The, increase is
approximately 10 million taxable returns and 1 million nontaxable
returns.
The -total net income reported is $58,868,025,304, an increase
of 61 percent.
Included is $ 17,531,107,226 gross income reported
on Form 104QA which does not provide for reporting the amount of
net income.
There are 17,587,768 taxable returns of which 17,587,471 show
net income of $45,902,883,995, and '297 show deficit.of $ 7,573,471
owing to net long-term capital loss but disclose $2 ,326,475 alter
native tax.
Of the 8 ,367,033 nontaxable returns, 8 ,267,502 show net income
of $ 12,965,141,399 — nontaxable because exemptions end credits
exceed net income; and 99,531 show-a deficit of $ 284,449,222 —
returns on which deductions equal, op exceed total income.
The total tax liability amounts to $ 3 ,907,951,001 an increase
of 161 percent over the,previous year. For taxable returns with net
income, the average tax is $222 compared with $199 for 1940 and the
effective tax rate is 8.5 percent compared with 6.4 percent for 1940.
The amount and percent of increase or decrease in number of
returns, net income, deficit, and taxes for 1941 over 1940 are as
follows:
,
Individual returns and taxable fiduciary returns, 1941 and 1940*
Number of returns, net income, deficit, and taxes
(Money figures in thousands of dollars)
1941
Increase or decrease(-}
1941 over 1940
1940
Amount
Total Individual and tax
able fiduciary returns:
Number of returns
Net income
Deficit
Total tax
Taxable individual and
fiduciary returns*
With net income*
Number of returns
Net income
Tax
Normal tax
Surtax
Alternative tax 3/
Defense ta x $ /
Optional tax
Individual returns with
no net income*
Number of returns
Deficit
Alternative tax
Nontaxable individual
returns *
With net income 6/:
Number of returns
Net income
With no net income 7/s
Number of returns
Deficit
For footnotes, see p* 14
25,954,801
Percent
14,778,159
36,588,546
311,385
1,496,403
11,176,642
22,279,480
-19,362
2,411,548
76
61
-6
161
17,587,471
1/ 45,902,884
2/ 3,905,625
556,019
1,927,715
1,092,261
1,150
328,479
7,504,649
23,558,030
1,495*930
388,950
435,331
543,299
128,350
10,082,822
22,344,854
2,409,694
167,069
1,492,385
548,962
-127,200
328,479
134
95
161
43
543
101
-99
297
7,573
5/ 2,326
46
2,551
473
251
5,023
1,854
546
197
392
8,267,502
12,965,141
7,160,813
13,030,516
1,106,689
-65,374
15
-1
99,531
284,449
112,651
308,834
-13,120
24,385
-12
8
1 / 58,868,025
292,023
2/ 3,907,951
•
- 3
The major changes in law affecting data on returns for the tax
able year 1941, ares (l) Elimination of the defense tax; (2) imposi
tion of surtax upon the entire surtax net income with an increase in
the surtax rates; (3) provision for an optional tax on individuals
with certain gross income of #3,000 or less, in.lieu of the normal
tax and surtax; (4) reduction in the minimum amount of gross income
for which a return is required to be filed from $2,000 to $1,500 for
a married person living with husband or wife for the entire taxable
year, and from $800 to $750 for a single person, a married person
not living with husband or wife, an estate, and a trust; (5) reduc
tion of the personal exemption from $2,000 to $1,500 for a married
person living with husband or wife for the entire taxable year or a
person who is head of a family, and from $800 to $750 for a single
person, a married person not living with husband or wife, or an
estate* and (6) disallowance of credit for one dependent when tax
payer is head of a family only by reason of dependents for whom he
would be entitled to credit.
The Public Debt Act of 1941 provides for the taxation of inter
est on obligations issued on and after March 1, 1941 by the United
States or any agency or instrumentality thereof.
The returns included in this report are those for the calendar
year ended December 31, 1941; a fiscal year other than a calendar
year, ending within the period July 1941 through June 1942; and a
part year with the greater part of the accounting period in 1941.
Returns from which data are tabulated are Forms 1040, 1040A, 1040B,
and 1041. Tentative returns and amended returns are excluded* '
Statistics are taken from the returns as filed by the taxpayer, prior
to revisions that may be made as a result of audit by the Bureau of
Internal Revenue.
Data for individual returns, Form 1040, with net income of
$5,000 and qver, and for taxable fiduciary returns regardless of the
amount of net income, are completely tabulated from each return*
This procedure is followed also with respect to a portion of the
individual returns, Form 1040, with net income under $5,000 while
data for the remainder of such returns and for individual returns,
Form 1040A, are estimated from samples.
For the first time, data for individual returns, Form 1040A,
are tabulated separately from data for returns, Form 1040. Return
Form 1040A, is an optional return which may be used by individuals
with gross income of $3,000 or less consisting wholly of salaries,
wages, and compensation for personal services, and dividends,
interest, rents, annuities, and royalties. Deductions and the
amount of net income are not reported. Gross income is tabulated
both as total income and net income and the optional tax, paid in
lieu of normal tax and surtax, is tabulated as total tax. The amount
of personal exemption shown in the tables is determined from the
t a x p a y e r s status as indicated on the return. Earned income credit
is computed as 10 percent of the gross income.
4
Five tables are presented in this release# Composite data for
individual and taxable fiduciary returns are shown in tables 1, 2,
and 3 whereas data for individual returns, exclusively, are shown
in tables 2-A and 3-A,
Data in table 1 are classified by States and Territories and
those in the remaining 4 tables by net income classes. Since a
classification of the returns, Form 1040A, cannot be made on the
basis of net income, data from these returns are shown in aggre
gate in the tables which present data tabulated by net income
classes#
'
Table 1. - Individual returns and taxable fiduciary returns, with net income, and individual returns wi t h no net income, 1941, b y States and Territories:
Population,
percent of population filing returns, total number of returns, and total tax; for returns with net income, number o f returns, net income, and tax;
for returns with no net income, number of returns and deficit; for returns, Form 10404, number of returns, gross income, and tax
STATES AN D TERRITORIES
(1)
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan.
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
Ne w Hampshire
New Jersey
Ne w Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington .
West Virginia
Wisconsin
Wyoming
Total
For footnotes, see pp. 14 and 15.
Population
April 1, 1940
(Sixteenth
Census) (in
thousands)
(2)
2,835
73
499
1,949
6,907
1,123
1,709
267
663
1,897
3,124
423
525
7,897
3,428
2,538
1,801
2,846
2,364
847
1,821
4,317
5,256
2,792
2,184
3,785
559
1,316
no
492
4,160
532
13,479
3,572
642
6,908
2,356
1,090
9,900
715
1,900
643
2,916
6,415
550
359
2,678
1,756
1,902
3,138
251
132,165
Percent of
population
filing re
turns
(5)
7.41
35.58
15.39
5.12
29.97
16.04
34.69
24.19
37.86
12.75
8.27
23.49
14.39
26.45
20.00
17.15
14.27
9.24
9.82
16.99
27.95
27.39
26.10
18.36
4.24
15.76
19.05
13.95
35.37
21.13
29.44
9.90
25.87
7.79
13.84
24.54
9.17 '
21.43
22.57
28.52
7.28
12.47
9.01
12.46
14*14
16.40
13.79
26.93
13.98
19.89
19.44
19.64
Total number
of individual
and taxable
fiduciary re
turns (col.
6 + 9 + 1 1 )
(4)
210,043
25,807
76,815
99,736
2,069,810
180,211
592,878
64,470
251,072
241,888
258,371
99,460
75,552
2,089,198
685,684
435,374
256,926
262,892
232,217
143,963
508,954
1,182,347
1,372,039
512,550
92,689
596,473
106,596
183,516
38,991
103,883
1,224,656
52,667
3,486,610
278,245
88,855
1,695,454
214,163
233,481
2,234,440
203,430
138,219
80,147
262,747
798,974
77,812
58,913
369,340
467,601
265,842
624,057
48.743
25,954,801
(Money figures in thousands of dollars)
Individual returns ami taxable fiduciary
returns 8/ w i t h net income, not includ
ing returns. Form 104QA
Total tax 2/
Number ox
Net income 8/
Tax
returns
(5)
28,323
2,420
8,947
16,480
296,094
23,909
110,692
37,808
45,532
54,328
41,708
13,356
5,940
345,188
76,470
30,208
23,918
29,003
34,089
15,158
81,455
171,366
220,699
51,947
14,693
87,303
9,729
15,971
6,469
10,496
190,592
6,530
686,108
39,186
3,704
243,088
28,172
28,219
338,184
32,245
13,584
3,938
43,140
126,052
7,593
5,457
56,055
53,089
25,183
62,4 U
5,723
3,907,951
(6)
(7)
(8)
102,470
13,345
40,313
69,699
1,160,181
118,965
279,186
36,278
117,693
150,510
137,807
29,186
51,485
1,184,019
432,234
350,207
191,493
167,396
127,804
85,623277,106
634,200
782,708
365,536
58,676
414,182
67,388
131,169
17,109
57,914
756,409
33,227
2,331,967
164,138
76,763
1,043,219
154,467
141,071
1,256,497
116,548
74,476
63,597
145,537
528,218
47,936
38,603
197,518
232,019
116,496
400,001
31,676
296,998
34,881
104,403
192,871
3,126,641
288,802
863,285
149,883
377,571
460,178
415,369
106,175
112,052
3,325,464
1,036,323
672,947
414,388
407,212
356,092
203,636
833,821
1,707,677
2,245,774
795,449
165,695
1,034,435
160,023
281,162
50,976
133,417
2,104,681
85,370
6,372,005
417,619
132,633
2,757,968
376,410
354,360
3,345,229
305,562
184,009
113,772
420,128
1,378,671
116,947
82,930
566,408
592,278
506,749
890,208
79,381
26,418
fe,205
7,696
16,068
265,271
22,426
97,913
36,860
39,632
52,S6o
39,443
11,093
5,126
311,575
68,620
28,622
22,631
27,017
31,732
14,074
74,915
156,090
192,668
46,957
13,735
82,449
8,461
14,799
5,695
9,463
176,533
5,949
651,215
36,839
3,511
221,853
26,937
25,126
305,279
28,769
12,813
3,693
40,075
119,046
7,006
4,982
49,916
44,062
20,986
55,041
5,301
15,602,265
41,336,918
3,577,146
Individual returns with
no net income 7/
Number of
Deficit
returns
O)
699
105
714
472
13,124
1,582
1,274
140
118
2,869
1,504
34
637
7,350
2,273
3,119
1,881
785
1,287
1,344
875
4,775
761
1,918
427
2,717
826
1,973
80
634
2,864
649
16,606
248
636
3,792
1,653
1,296
4,494
83
603
868
591
6,027
7
19
679
1,910
<33
291
382
99,828
Individual returns,
Form 1040A 9/
Gross
income
Number of
returns
(10)
1,523
297
1,616
1,233
36,374
2,595
4)626
1,899
982
9,020
4,970
171
866
17,599
5,695
3,943
3,330
1,737
3,470
2,252
3,173
12'649
7,347
2,948
807
6,168
1,361
2,694
238
910
9,221
1,061
75,634
708
721
11,021
3,793
2,986
16,343
933
1,033
'843
2,107
14,975
12
118
1,435
4,067
l)001
817
683
292,023
(ii)
•
106,874
12'357
35,788
29,565
896,505
59,664
312,418
28'052
133,261
88,509
119,060
70,240
23,430
897,829
251,177
82,048
63,552
94,711
103,126
56,996
231,573
543) 372
588,570
145,096
33,586
179,574
38,382
50'374
21,802
45*335
465j383
18)791
1,138)037
113'859
11*456
648,443
58't)43
9i'ii4
973*449
86*799
63^140
15,682
116*619
264*729
29'869
20*291
171*143
233^672
148*913
(12)
175,170
18)400
64,058
47,119
1,475)559
98*400
5 4 1)0 74
46)301
220,299
143)420
189,619
116,488
40,871
1,545,760
'436)119
130)585/
105)853
160,234
169,706
89,186
377*307
889)146
1,123)970
'249)107
58)744
309)311
66*252
79)968
16)685
37*018
71*975
790* 388
33*071
1,909*371
*187*105
18)047
1,137*040
99*965
150^879
1,731^721
*150*148
96*746
24^803
197*570
458)117
53* 770
33^689
300*106
402*618
270^883
379^301
28)751
10,252,708
17,531,107
223)765
Tax
(13)
1,905
217
1,244
411
30,792
1,483
12*677
*794
5,891
l)731
2,257
2,263
813
33,507
7)842
1,587
1*273
1*981
2 )3 5 1
1)02 0
6*500
15*085
27*948
4*990
*959
4,822
1* 268
1*172
*773
1,032
14*032
*581
33,934
2*347
*193
21,116
1*235
3*094
32*786
3*396
*771
245
3,066
7*000
*587
475
6,107
9*012
4*198
7*288
'422
328,479
ftble 2. - Individual returns an d taxable fiduciary returns, w i t h net lucerne, 1941, b y taxable and nontaxable returns, b y ne t incone classes, and
returns b y tyne of tax liability,
also aggregates for taxable and n ^ t a x ^ l e individual returns wi t h no net Income i Number o f returns, ne t Income, personal exemption, credit for dependents,
5
earned income credit, total, tay. normal tar mtrtnr nlthw,nt4wa
a...
-------- j ■ < x
_
» ... . . ?
9
Income classes a n d
Me t income Jj/ classes
JlL
Taxable individual an d fiduciary returns ,
With net income,
Fbrm 10404 (est.) jJ/
Forme 1 0 4 0 an d 1041,
U n der .75 (est.)
*75 u n d e r 1 (est.)
1 u n der 1. 5 (es$.)
1. 5 u n der 2 (est.)
2 u nder 2.5 (est.)
2.5 u n d e r 3 (est.)
3 u n d e r 4 (est.)
4 u n der 5 (est.)
5 under 6
6 under 7
7 under 8
8 under 9
9 under 10
1 0 under 11
11 under 12
12 under 13
13 u n d e r 14
14 u n der 15
15 under 20
20 under 25
25 u n der SO
30 under 40
40 under 50
50 under 60
60 under 70
70 u nder 80
80 under 90
90 under 100
100 u nder 150
150 under 200
200 under 250
250 u nder 300
300 u nder 400
400 under 500
500 u n der 750
750 under 1,000
1.000 u n der 1,500
1,500 under 2,000
2.000 under 3,000
3.000 under 4,000
4.000 under 5,000
5.000 and over
Total, returns with net income
With no net income, Fbrm 1040 jj/
Total, taxable returns (44+45)
49
SO
SI
52
53
54
55
56
57
58
59
60
61
Nontaxable individual returns,
With net income, 6/
Fbrm 10404 (est.) £ /
Fbrm 1040,
Under .75 (est.) -•
.75 under 1 (est.)
1 under 1.5 (est.)
1.5 under 2 (est.)
2 under 2.5 (est.)
2.5 under 3 (est.)
3 under 4
4 under 5
Total, returns w i t h net income
With no net income, Fbrm 1040 7/
Total, nontaxable returns (56+57)
Humber of
returns
Net
income 2 /
(5)
(8)
exetot
Credit for
Personal
dependents
exemption 10/ (individual
returns)
-
__ (£__
(♦>
in-thousands of doil.-r.)
Earned income
credit JJJ
(individual
returns)
Total
t a x 2J
-L?)
( 6)
6,199,542
10,560,017
6,135,612
382,554
1,056,002
598,479
67, £72
766,139
1,292,021
2,127,895
2,821,717
1,697,745
1,648,213
517,277
251,282
151,975
103,676
73,188
56,830
43,398
34,633
27,857
23,156
19,463
62,285
32,289
18,840
20,367
10,314
5,908
.3,660
2,405
1,656
1,223
2,784
969
434
217
244
125
114
55
84
5
25,950
676,559
1,588,178
3,752,174
5,204,885
4,650,648
5,598,869
2,290,184
1,370,260
982,494
774,381
620,596
538,784
454,595
397,750
347,673
312,292
281,887
1,070,515
718,862
514,245
699,970
459,187
322,397
236,467
179,249
140.215
115,678
333,998
166.215
96,903
59,316
84,447
55,318
68,295
47,366
41,633
8,324
23,068
22,545
5,306
561,457
953,529
2,656,488
3,212,804
2,380,151
2,255,750
681,702
328,874
196,212
133,399
93,728
72,479
55,037
43,991
35,044
29.160
24,683
78,620
40,517
23,413
25,058
12,631
7,274
4,513
2,921
2,047
1,469
5,367
1.160
510
266
293
148
131
60
40
5
112
1,576
66,914
157, 552
574,123
519,515
464,245
541,946
203,214
114,022
77,106
58,246
44,924
57,936
31,000
26, 555
22,690
2,118
9,190
54,471
86,205
138,501
160,197
262,196
146,720
104,702
87,507
78,120
69,665
66,504
61,238
67,909
54,495
59,999
50,983
999,565
184,467
153,378
940,347
180,499
138,445
108,503
85,957
70,450
59,488
181,958
95,945
55,971
35,343
51,147
39,659
49,796
99,964
26,117
4,882
14,346
14,292
10
6
10.519
17,587,471
45,902,884
________ 297
14/7.575
17,587,768 15/45,895,311
11
7
289
20,057,936
509
24,534
99,461
410,122
491,775
567,668
186,886
98,576
60,067
40,139
29,281
22,271
17,047
13,527
11,101
9,067
7,785
24,539
12,585
7,319
7,846
3,939
2,194
1,497
883
600
467
1,015
336
173
64
87
43
36
16
9
20,022
17,525
57,220
30,507
18,065
19,976
10,511
6,271
5,937
2,618
'1,802
1,289
2,941
980
449
208
231
116
102
41
27
5
9
2
4
4
2,535,936
________ 55
6
3,992,334
_______ 192
6.119
3,905,695
2.326
Number of
returns
Be turns wi t h normal ta x and surtax 12 /
S x — --------—
Tbtal (col.
Normal tax
U ♦ 12 ♦ 15
Net
income £ /
(8)
(9)
(10)
67,560
766,135
1,292,010
2,127,879
2,321,706
1,697,730
1,648,085
517,139
251,064
151,745
105,376
72,722
96,205
42,500
33,298
25,756
20,111
15,931
47,124
22,173
12,049
12,065
5,421
2,984
1,665
1,071
724
48 9
975
282
122
45
55
19
IS
8
6
1
3
26,947
676,534
1,588,160
3,752,146
5,204,861
4,650,608
5,598,409
2,289,559
1,369,328'
980,971
772,125
616,452
532,829
445,124
382,548
521,339
271,067
230,698
807,836
492,809
528,450
415,315
241,024
162,510
107,512
79,847
61,238
46,371
U S , 806
48,430
27,084
12,167
19,309
8,329
7,790
6,640
6,914
1,522
6,876
2,033
9,154
54,442
86,141
138,450
159,825
261,912
146,349
104,272
86,949
77,347
68,564
65,041
59,118
54,701
49,181
44,179
40,013
162,351
121,905
94,821
138,052
92,519
68,545
48,617
38,084
30,469
25,964
63,819
28,817
16,772
7,763
12,785
5,665
5,465
4,799
5,U7
1,145
5,268
766
2,245
17,995
26, 6 U
43,455
52,735
89,203
48,491
32,938
25,797
21,523
17,893
15,957
13,676
U,968
10,210
8,725
7,525
27,252
17,287
U,817
15,174
9,014
6,146
4,100
3,062
2,362
1,798
4,517
1,984
1,064
482
766
531
3U
264
276
61
275
1,267
6,9U
56,446
59,550
94,996
107,089
172,706
97,855
71'551
61,142
55,816
50,664
49,076
45,433
42,724
38,961
35,446
32,480
155,047
104,568
82,975
122,800
83,441
62,346
44,485
34,998
28,074
22,144
59,240
26,818
15,686
7,282
12,020
5,534
5,133
4,535
4,841
1,084
4,993
----------Defense
taxi/
(15)
(15)
1
1
1
1
5
’8
8
9
9
7
8
9
9
10
U
U
52
48
SO
78
65
53
33
24
33
22
63
14
22
22
-
11,318,242
32,710,285
2,484,393
556,019
1,927,715
658
2,484,593
556,019
1,927,715
658
4,053,166
6,971,090
5,866,187
3,013,028
697,109
-
-
-
*
858,155
284,504
1,309,494
1,024,992
553,386
149,629
33,119
1.0S9
8,267,502
99.531
475,829
250,850
1,722,470
1,809,312
1,223,291
400,356
107,404
4.540
12,965,141
14/284.449
798,008
377,929
1,913,678
1,531,475
829,455
224,616
49,678
1.603
11,592,629
(16)
55,681
68,789
242,609
605,394
536,762
213,351
67,907
5.338
4,806,858
(16)
3,241
1,748
12,911
14,744
9,935
3,302
569
___ 97
743,578
—
*
—
-
_
-
-
-
-
-
•
-
•
«S»
•
«.
-
-
-
-
m
-
m
—
-
-
-
*
*
*
-
“
-
_
_
11,318,242
32,710,285
2,484,393
556,019
1,927,715
658
—
*
- M
.
-
Grand total (46t58 o r 60 + 61)
[ndiridual returns a n d taxable fiduciary
returns wi t h net income (44tS6)
[ndiridual returns w i t h no nst
income (45+57)
footnotes, see pp. 14 and 15,
25,854,978
99,828
58,868,025
24/292,025
31,650,275
(16)
7,342,794
(16)
4,755,912
3,905,625
11,318,242
32,710,285
2,484,393
556,019
1,927,715
658
(16)
2,326
*
*
“
-
-
-
.
f)+'1
Sable 2. - Individual returns and taxable fiduciary returns, w i t h ne t incase, 1941, b y taxable a n d
returns, b y ne t lncose classes, an d taxable returns b y type of t ax liability)
also aggregates for taxable a nd nontaxable individual returns w i t h no n et Incest I Nuaber of returns, ne t incone, personal exemption, credit for dependents,
earned Income credit, total tax, normal tax, surtax, alternative tax, defense tax, average total tax, and effective tax rate - Continued
Beturns w i t h alternative tax 5 /
Net income 8 / classes
1
2
3
4
S
6
7
8
9
10
U
12
15
14
IS
16
17
18
19
20
21
22
25
24
25
26
27
28
29
30
31
32
33
34
3S
36
57
38
59
40
41
42
43
44
45
46
47
48
49
£0
51
52
55
54
55
56
57
58
(1)
Taxable individual a n d fiduciary returns §/:
W i t h net income!
Form 10404 (est.) 9/
Fbrms 1040 and 1 0 4 1 i
Under ,75 (est.)
.75 u n d e r 1 (est.
1 under 1. 5 (est.
1.5 under 2 (est.
2 u n der 2.5 (est.
2.5 under 5 (est.
5 under 4 (est.)
4 u n der 5 (est.)
5 under 6
6 u n der 7
7 u n der 8
8 under 9
9 u n d e r 10 ,
1 0 u n der 11
11 u n der 12
12 u n der 15
13 u n der 14
14 under 15
15 under 20
20 under 25
25 u n der SO
50 under 40
40 u n der SO
50 u n d e r 60
6 0 u n der 70
70 u n der 80
8 0 under 90
90 under 100
100 u nder 150
IS O under 200
200 u n der 250
250 u n der 300
300 under 400
400 under 500
500 under 750
750 u n der 1,000
1,000 under 1,500
1,500 under 2,000
2,000 under 3,000
3,000 u n der 4,000
4,000 under 5,000
5,000 an d ov e r
Total, returns w i t h net income
W i t h no ne t income, Fbrm 1 0 4 0 i _§/
Total, taxable returns (44+45)
Vontaxable individual returns!
W i t h net Incomei 6 /
Fbrm 10404 (est.)- 9/
Fbrm 1 0 4 0 i
U n d e r .75 (est«)
•75 under 1 (est.)
1 under 1. 5 (est.)
1. 5 u n der 2 (est.)
2 u n der 2.6 (est.)
2.5 u n der 5 (est.)
3 u nder 4
. 4 under 5
Total, returns wi t h net income
With no net income, Fbrm 1040 2/
Total, nontaxable returns (56+57)
Number
of
returns
Net
incese 8/
Tbtal
(col. 17 + 18)
(14)
(16)
(15)
12
6
11
16
11
IS
128
138
168
232
800
466
625
898
1,535
2,101
3,045
3,532
15,161
10,116
6,791
8,302
4,893
2,924
1,995
1,552
952
734
1,809
687
512
17 2
189
104
101
47
28
4
7
6
—
2
69,687
297
69,984
Thx
Alternative
t ax
(17)
(18)
84
36
50
64
51
374
284
371
450
558
775
1,101
1,463
2,119
3,201
5,314
8,120
10,269
60,233
62,562
58,546
102,272
87,953
69,883
59,870
47,839
59,969
35,517
118,120
67,097
59,147.
27,580
38,522
26,919
37,261
24,434
20,959
3,737
9,078
14,205
..
se
10.519
2,652,SSL
14/7.575
6.119
1,092,753
2,526
6.119
1,092,261
2.326
492
1 5 / 2 r6 2 5 r008
1,095,060
1,094,587
492
..
•
,S
-
(20)
(19)*
84
36
SO
64
61
574
284
371
430
558
775
1,101
1,465
2,119
3,201
5,314
8,120
10,269
60,284
62,564
SB, 556
102,295
87,973
69,899
59,885
47,872
59,981
55,524
118,158
67,128
39,200
27,580
38,361
26,968
57,261
24,466
21,000
3,737
9,078
14,292
3
5
IS
28
25
41
460
625
932
1,525
2,256
4,144
5,955
9,471
15,402
26,354
41,225
51,189
262,679
226,053
185,795
286,655
218,163
159,887
128,955
99,402
78,977
69,507
218,191
117,783
69,819
47,149
65,138
46,989
60,505
40,726
34,719
6,802
16,193
22,545
Effective t a x rate,
percent (returns
wi t h net
(col. 7 i 3)
Average
total ta f
(col. 7 - 2 )
Defense
ta x 4/
•
as
es
.S
a.
as
•
ms
•
•
es
se
•
-
1
2
11
25
20
. 16
16
53
12
7
19
30
52
•
39
49
a.
32
42
•
90
•
a.
s.
53
8.11
51
12
42
41
60
94
159
284
417
576
754
952
1,170
1,411
1,672
1,956
2,259
2,583
3,573
5,713
8,141
11,801
17,500
23,433
29,646
35,770
42,542
48,641
65,358
99,014
128,966
162,873
209,617
265,505
574,794
532,080
768,155
976,528
1,434,592
2,382,079
8.16
1.36
3.43
2.30
2.66
5.44
4.68
6.41
7.64
8.91
10.09
11.25
12.54
15.47
14.56
15.67
16.75
17.84
20.79
25.66
29.85
54.34
59.31
42.94
45.88
47.95
50.24
51.43
54.48
57,72
57,76
59,58
60.57
58.99
62.56
61.78
62.73
58.64
62.19
63.59
*
_
3.059.269
222
7.833
2221
58.17
8.51
8.51
_
—
•
•»es
«e
s.
•
«»
me
s.
as
as
■ es
se
_
—
es
•
—
' -
as
s.
es
se
-
•
-
-
..
..
a.
as
a.
•
as
-
•a
(17)
-
as
-
59
G rand total (46+58 o r 6 0 + 61)
69,984
15/2,625,006
1,095,080
1,094.587
492
60
individual returns a n d taxable fiduciary
returns w i t h net income (44+56)
individual returns w i t h n o n e t income (45+57)
69,687
2,632,581
1,092,755
1,092,261
492
151
6.65
297
14/7,573
2,526
2,526
-
(17)
-
61
Fo r footnotes, see pp. 14 an d 15,
Table 2-A. - Individual returns wi t h ne t income, .1941, fey taxable and non taxable returns, b y n et income classes, and taxable returns b y type of tax liability; also aggregates for +«+° m . and
individual returns w i t h n o net incomes Number of returns, net income, personal exemption, credit for dependents, earned income credit, total tax, normal tax, surtax,
alternative tax, defense tax, average total tax, and effective tax rate
(Net income classes and m o ney figures, except average total tax, in thousands of d o n »»»•«)
Returns w i t h normal tax and surtax 12/
Ne t income classes
fl)
1
2
S
4
5
6
7
8
9
10
11
12
IS
14
IS
16
17
18
19
20
21
22
25
24
25
26
27
28
29
50
51
52
55
54
35
56
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
55
54
55
56
57
58
59
60
61
Taxable individual returnss
V i t h n e t incomes
F o r m 104OA (est.) 9/
Fo r m 1040s
Under .75 (est.)
.75 under 1 (est.)
1 under 1.5 (est.)
1.5 under 2 (est.)
2 under 2.5 (est.)
2.5 u n der 5 (est.)
3 Tinder 4 (est.)
4 under 5 (est.)
5 under 6
6 under 7
7 under 8
8 under 9
9 under 10
10 under 11
1 1 under 12
12 under 15
13 under 14
14 under 15
15 under 20
20 under 25
25 under 30
30 under 40
40 under 50
50 under 60
60 under 70
70 under 80
80 under 90
90 under 100
100 under 150
150 under 200
200 under 250
250 under 500
300 under 400
400 under 500
500 under 750
750 under 1,000
1,000 under 1,500
1,500 under 2,000
2,000 under 3,000
3,000 under 4,000
4,000 under 5,000
5,000 and o v e r
Total, returns w i t h n e t income
Wi t h no net income, F o r m 1040 §/
Total, taxable returns (44+45)
Nontaxable individual returns*
With net incomes 6/~
Fo r m 1040A (est.) $J
Form 1040:
Under .75 (est.) .75 under 1 (est.)
1 under 1.5 (est.)
1.5 under 2 (est.)
2 under 2.5 (est.)
2.5 under 5 (est.)
3 under 4
4 under 5
Total, returns w i t h net income
W i t h no net income, F a r m 1040 2 /
Total, nontaxable returns (56+57)
Grand total (46+58 or 60+61)
Individual returns w i t h ne t income (44+56)
Individual returns w i t h n o net Income (45+57)
For footnotes, see pp, 1 4 an d 15.
Number
of
returns
Net
Income 1/
(2)
(5)
Personal
exemption 10/
(4)
Credit for
dependents
(S)
Earned
income
credit 2 3 /
(6)
6,199,542
10,560,017
6,155,612
582,554
55,917
757,627
1,281,524
2,121,571
2,517,362
1,694,757
1,645,774
514,275
249,078
150,524
102,440
72,278
55,985
42,757
34,072
27,374
22,776
19,134
61,158
51,609
18,384
19,785
9,988
5,755
5,541
2,307
1,606
1,178
2,664
922
408
209
229
119
104
48
50
4
9
5
15,748
669,157
1,575,321
5,741,225
5,195,153
4,642,449
5,583,497
2,276,749
1,358,489
971,826
765,131
612,875
530,776
447,880
591,504
541,667
307,168
277,123
1,051,128
703,657
501,728
680,032
444,702
312,833
228,785
172,134
135,969
111,402
319,925
157,982
90,997
57,095
79,173
53,552
61,792
41,269
57,406
6,763
20,894
18,846
2,131
557,720
948,977
2,655,755
3,210,983
2,378,882
2,253,981
680,532
328,045
195,609
132,911
93,400
72,173
54,792
45,788
34,862
29,024
24,568
78,205
40,086
23,240
24,861
12,511
7,213
4,473
2,887
2,023
1,456
3,522
1,147
500
263
286
148
127
59
38
5
11
7
112
509
24,534
99,461
410,122
491,775
567,668
186,886
98,576
60,067
40,139
29,281
22,271
17,047
13,527
11,101
9,067
7,785
24,539
12,585
7,319
7,846
3,939
2,194
1,497
883
600
467
1,013
336
173
64
87
45
36
16
9
2
4
4
i
20,032,611
289
20,032,901
2,555,956
55
2,535,992
1
3,992,334
192
5.992,525
6,971,090
5,866,187
3,015,Q28
858,155
475,829
284,504
250,850
1,509,494
1,722,470
1,024,992
1,809,512
555,588
1,225,291
149,629
400,356
55,119
107,404
1.059
4,540
8*267,602
12,965,141
99.531
14/284.449
8,567,035 13/12, 680, 692
798,008
377,929
1,913,678
1,551,475
829,455
224,616
49,678
1.605
11,592,629
55,681
68,789
242,609
605,594
556,762
213,551
67,907
3.538
4,806,858
he)
tw
________ ( M l
(161
1,056,002
1,575
66,914
157,532
374,125
519,515
464,245
541,946.
205,214
114,022
77,106
58,246
44,924
37,936
31,000
26,555
22,620
20,022
17,525
57,220
30,507
18,065
19,976
10,511
6,271
3,937
2,618
1,802
1,289
2 ,941
980
449
208
231
116
102
41
27
5
9
6
4,055,166
_
Number
of
returns
Net
income
(8)
(9)
(7)
Tax
528,479
l ■
1,427
«, 851
53,656
85,398
157,714
159,482
260,722
145,290
105,327
86,165
76,840
68,500
65,212
60;119
56,751
53,384
51,284
49,295
218,006
180,224
149,462
255,375
174,834
134,509
105,158
82,713
68,520
57,475
174,926
91,918
52,868
34,242
48,275
51,782
58,720
27,000
25,908
4,413
13,694
11,401
55,906
757,621
1,281,514
2,121,555
2,317,354
1,694,723
1,643,648
514,139
248,914
150,100
102,155
71,819
55,384
41,879
32,764
25,334
19,804
15,674
46,280
21,684
11,780
11,745
5,240
2,888
1,619
1,026
697
472
924
272
114
43
52
id
9
7
4
1
5
1 Total
(col.
11+12+13)
(10)
15,745'
669,132
1,575,510
3,741,198
5,195,135
4,642,411
5,583,044
2,276,142
1,557,579
970,354
762,990
608,790
525,047
438,619
376,215
316,098
266,926
226,979
793,550
481,916
521,064
402,375
232,983
157,251
104,535
76,509
58,964
44,753
109,869
46,766
25,511
11,621
18,256
8,329
5,220
5,797
4,764
1,522
6,876
1,343
8,795
55,627
85,334
137,664
159,109
260,459
144,929
102,911
85,618
76,112
67,443
65,827
58,047
55^650
48,225
45,374
39,264
159,038
118,944
92,515
134,257
89,339
66,297
47,241
56,475
29 j 355
23,111
6oj 545
27,842
15,667
7,414
12,071
5^665
3,659
4',188
5^531
l'l45
5,268
Normal
tax
(11)
Surtax
Defense
tax 4/
(1ST
(12)
495
2,102
17,674
26 j 291
45 j 146
52j463
88,674
48,016
32,506
25,405
21,185
17,604
15,663
13,429
11,735
10,011
8,S64
7,380
26,672
16,86711,527
14,746
8,697
5,941
3,982
2'950
2,272
1^733
4^281
918
^995
460
725
351
. 208
250
190
61
275
848
6,693
35^952
59^043
94^ 518
106^646
17lj 763
96,910
70j397
60j206
54,919
49,833
48,157
44j611
41j887
58^206
54j800
5lj 873
132,322
102j 036
80 j 961
119,447
80 j 587
6 0 j316
43j230
35*529
27^ 034
21^356
56^ 215
25^924
14^650
6^ 954
11* 348
5*334
5^451
3^958
3*341
1* 084
4 ^993
(13)
(is)
(15)
(15)
(13)
(15)
2
5
7
8
8
7
7
8
8
8
10
10
44
41
27
64
55
40
30
16
27
22
48
1
2
5
4
5
6
7
8
9
10
11
12
15
14
15
16
17
18
19
20
21
22
11,235,166
52,465,702
2,433,234
547,579
1,885,334
520
11,235.166
52,465,702
2,433,234
5 4 7.379
1.885.334
520
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
697,109
47
3,241
1,748
12,911
14,744
9,935
5,302
562
27
745,578
(16)
(16)
-
-
48
49
50
51
52
55
54
55
56
57
58
—
2
10.519
17,502,587
45,562,076
297
14/7.575
17.502.884 15/45.554,502
Total
ta? 2/
6.119
5,815,415
2.326
5,817,741
22
_
-
-
-
-
-
25,869,917
LS/56,255,195
(16)
(16)
(16)
5,817,741
11,255,166
32,465,702
2,433,234
547,579
1,885,334
520
59
25,770,089
99,828
58,527,217
14/292,023
31,625,240
(16)
7,342,794
(16)
4,735,912
(16)
3,815,415
2,326
11,235,166
32,465,702
2,455,234
547,579
1, 885, 354
520
60
61
2-A. - Individual returns w i t h net income, 1941, b y taxable and nontaxable returns, by ne t Incase classes, and taxable returns b y type of tax liability; also aggregates for taxable and
nontaxable individual returns w i t h no net income:
Number of returns, ne t income, personal exemption, credit for dependents, earned income credit, total tax, normal tax, surtax
alternative tax, defense tax, average total tax, and effective tax rate - Continued
(Net income classes and m o n e y figures, except average total tax, in thousands of dollars)
Returns wi t h alternative tax 3/
Net income classes
(1)
1
z
3
4
5
6
7
3
9
10
11
12
13
14
IS
16
17
18
19
20
21
22
23
24
25
26
27
28
29
50
31
32
53
34
55
36
57
58
39
40
41
42
45
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
Taxable individual returns:
With net income:
Form 104OA (est.) 9/
Form 1040:
Under .75 (est.)
.75 under 1 (est.)
1 under 1.5 (est.)
1.5 under 2 (est.)
2 under 2.5 (est.)
2.5 under 3 (est.)
3 under 4 (est.)
4 under 5 (est.)
5 under 6
6 under 7
7 under 8
8 under 9
9 under 10
10 under 11
11 under 12
12 under 13
IS under 14
14 under 15
15 under 20
20 under 25
25 under 30
30 under 40
40 under 50
50 under 60
60 under 70
70 under 80
80 under 90
90 under 100
100 under 150
150 under 200
200 under 250
250 under .500
300 under 400
4 00 under 500
500 under 750
750 under 1,000
1,000 under 1,500
1,500 under 2,000
2,000 under 5,000
5,000 under 4,000
4,000 under 5,000
5,000 and over
Total, returns wi t h ne t Income
W i t h no ne t income, F o r m 1040 5/
Total, taxable returns (44+45)
Nontaxable individual returns:
W i t h net income: 6/
F o r m 104Q| (est.) £ /
F o r m 1040:
Under .75 (est.)
.75 under 1 (est.)
1 under 1.5 (est.)
1.5 under 2 (est.)
2 under 2.5 (est.)
2.5 under 5 (est.)
5 under 4
4 under 5
Total, returns with net income
W i t h no net Income, Form 1040 7/
Total, nontaxable returns (56+57)
Grand total (46+58 or 60+61)
Individual returns w i t h net income (44+56)
Indj^ddual returns wi t h no net income (45+57) '
For footnotes, see pp. 14 and 15.
Ne t income
(14)
(15)
Total
(col. 17 ♦ 18)
Alternative
tax
Defense
tax 4/
(16)
(17)
(18)
(19)
-
u
2
67,879
297
68,176
3
5
11
28
18
38
455
606
910
1,472
2,142
4,083
5,729
9,261
15,090
25,566
40,242
50,144
257,798
221,720
180,664
277,656
211,719
155,585
124,253
95,625
/ 77,004
66,648
210,056
111,217
65,686
45,475
60,937
45,204
56,572
35,471
32,642
5,241
14,018
18,846
—
10.519
2,536,357
14/7,578
15/27528,785
-
-
• '
-
me
—
.—
_
6
ID
16
. 8
14
126
134
164
224
285
459
601
878
1,508
2,040
2,972
5,460
14,878
9,925
6,604
8,040
4,748
2,845
1,922 ,
1,281
909
706
1,740
650
294
166
177
100
95
41
26
5
6
5
—
85
36
30
64
49
573
283
362
416
545
729
1,057
1,385
2,071
3,122
5,159
7,910
10,029
58,968
61,280
56,947
99,119
85,496
68,212
57,916
46,238
39,187
34,364
114,582
64,076
37,201
26,828
56,205
26,118
35,061
22,812
20,377
5,269
8,426
11,401
—
6.119
1,055,705
2.326
1,056,029
83
36
30
64
49
373
283
362
416
545
729
1,057
1,585
2,071
3,122
5,159
7,910
10,029
58,967
61,279
56,940
99,100
85,478
68,199
57,904
46,213
39,175
34,361
114,368 '
64,059
37,16026,828
36,165
26,069
35,061
22,780
20,336
3,269
8,426
11,401
-
•
«•
... —
•
—
—
1
2
7
18
18
13
12
25
12
4
14
17
41
_
59
49
32
42
me..
-
(20)
S3
3.11
40
12
42
40
59
94
159
285
415
573
750
948
1,165
1,406
1,666
1,950
2,252
2,576
5,565
5,702
8,130
11,796
17,504
25,462
29,697
35,853
42,665
48,791
65,663
99,694
129,577
163,839
210,806
267,079
572,310
562,490
796,945
1,103,519
1,521,553
2,280,276
9.06
1.32
3.41
2.28
2.65
5.44
4.67
6.38
7.61
8.87
10.04
11.18
12.29
13.42
14.50
15.62
16.70
17.79
20.74
25.61
29.79
34.32
39.31
45.00
45.96
48.05
50.39
51.59
54.68
58.18
58.10
59.97
60.97
59.37
62.66
65.42
65.92
65.26
65.54
60.50
58.17
8.37
-
6.119
1,053,559
2.326
1.055.685
544
. 544
3.059.269
218
7.835
218
-
-
-
me
«•
_
m
—
•
—
Effective tax
rate, percent
(returns with
net income)
(col. 7 i ! )
Average
total tax
(col. 7 * 2 )
Tax
Number of
returns
-
«.
. me
_
...
< -
-
-
-
-
15/2,528,785
1,056,029
1,055,685
344
(17)
2,536,557.
14/7,573
1,053,705
2,326
1,053,559
2,326
344
r
-
-
68,176
67,879
297
..
_ •
- .
-
-
8.38
-
r
_
-
_
148
(17)
—
6.52
-
Table S,. - Individual returns and taxable fiduciary returns, w i t h net income, 1941, by taxable and nontaxable returns, and b y ne t income classes; also aggregates for
taxable and nontaxable individual returns with no net income:
Number of returns, sources of income and deductions, and net income
__________________________________________(Net income classes and money figures in thousands of dollars)_______________
Sources of income
Dividends
Salaries
Dividends
Interest
Capital gain 23/
Net gain
and other from dom Bank
on share ac
AnnulGovernment
from
Shoi t-term 23/
Net
compensa estic and deposits,
counts in
ties
obligations
Current
long
Net short Net short
sales of
Federal sav Rents and (indivi term capi term capi
Partially Taxable
Number of tion (in foreign
notes,
property Business
year net
term
corpora mortgages, tax-exempt (subject ings and loan royalties dual
dividual
returns
profit
tal gain
Short-term capital other
tal loss of
Net income 8/ classes.
to nor
tions 18/ corpora
returns)
associations
(subject
returns) (included
27/
gain
capital
preceding
than
(subject to
tion bonds to surtax mal tax
capital
22/
in total
taxable year gain 25/
23/
only) 19/ and sur surtax only)
income)
assets
deducted 24 /
tax) 20/ 21/
2§/
1
2
5
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
53
34
35
56
37
38
59
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
Taxable individual and fiduciary returns 0/:
W i t h net income:
Form 10401 (est.) 9/
Forms 1040 and 1041:
Under .75 (est.)
.75 under 1 (est.)
1 under 1.5 (est.)
1.5 under 2 (est.)
2 under 2.5 (est.)
2.5 under 3 (est.)
3 under 4 (est.)
4 under 5 (est.)
5 under 6
6 under 7
7 under 8
8 under 9
9 under 10
10 under 11
11 under 12
12 under 13
13 under 14
14 under 15
15 under 20
20 under 25
25 under 30
30 under 40
40 under 50
50 under 60
60 under 70
70 under 80
80 under 90
90 under 100
100 under 150
150 under 200
200 under 250
250 under 300
300 under 400
4 00 under 500
500 under 750
750 under 1,000
1,000 under 1,500
1,500 under 2,000
2,000 under 3,000
3,000 under 4,000
4,000 under 5,000
5,000 and over
Total, returns w i t h net income
W i t h no net income, Form 1040 5/
Total, taxable returns X44+45)
Nontaxable individual returns:
W i t h net income 6/:
F o r m 10404 (est.) 9/
Form 1040:
Under .75 (est.)
.75 under 1 (est.)
1 under 1.5 (est.)
1.5 under 2 (est.)
2 under 2.5 (est.)
2.5 under 3 (est.)
3 under 4
4 under 5
l
Total, returns w i t h net income
W i t h no net income, F o r m 1040 1]
Total, nontaxable returns (56+57)
6,199,542
10,297,452
(35)
(35)
(35)
(35)
(55)
(55)
(35)
-
-
-
-
67,572
766,139
1,292,021
2,127,895
2,321,717
1,697,745
1,648,213
517,277
251,232
151,975
103,676
73,188
56,830
43,398
34,633
27,857
23,156
19,463
62,285
32,289
18,840
20,367
10,314
5,908
5,660
2,403
1,656
1,223
2,784
969
434
217
244
123
114
55
34
5
10
6
•
6,006
558,692
1,408,797
3,322,186
4,810,081
4,256,260
4,622,241
1,562,457
847,343
560,111
421,998
326,082
279,236
229,449
195,970
168,069
150,465
134,335
495,o n
318,706
216,801
275,460
169,269
115,901
78,230
57,252
39,846
54,109
82,369
33,590
18,406
7,721
9,856
5,633
3,425
1,616
865
122
606
163
70,121
47,661
95,927
136,563
139,742
137,347
260,672
190,685
124,587
105,325
94,451
80,532
74,887
67,122
60,743
56,573
51,847
47,409
198,477
154,855
121,401
184,496
136,994
99,142
78,931
61,441
50,778
43,188
139,162
73,760
41,351
28,931
42,070
23,658
39,166
25,828
20,141
3,199
11,245
20,719
-
33,867
32,303
57,845
86,132
79,951
64,872
110,843
67,934
38,303
30,292
24,681
20,147
17,442
15,358
13,592
11,894
10,455
9,036
36,747
23,454
16,465
21,460
13,058
8,564
5,897
4,569
2,882
2,440
7,595
3,553
1,840
1,372
1,198
659
1,446
396
481
50
81
65
-
4,275
2,560
5,022
6,784
6,148
5,464
10,067
6,894
3,813
3,099
2,779
2,331
2,087
1,972
2,000
1,639
1,477
1,275
5,252
3,961
2,425
4,266
2,779
1,507
913
865
605
556
1,609
741
522
192
327
54
62
65
52
(15)
-
358
742
1,114
2,143
2,240
1,795
2,076
1,179
548
437
311
223
227
246
159
167
116
164
428
300
201
271
168
85
55
32
26
15
92
36
52
10
19
8
11
4
8
-
55
12
28
6
22
3
206
119
815
470
373
270
276
164
163
136
138
90
420
322
353
239
214
117
113
40
26
32
16
10
(13)
(15)
10
(13)
226
8,511
15,650
19,748
15,367
13,092
16,757
9,475
4,122
3,055
2,471
2,121
1,583
1,282
1,045
980
1,041
680
2,844
1,943
1,186
1,528
1,344
520
895
407
300
262
5?5
249
92
171
241
21
19
45
62
—
1,617
1,277
2,791
4,462
4,514
4,682
11,890
8,492
6,802
6,046
5,217
4,089
3,936
3,425
2,913
2,810
2,395
2,301
8,686
6,220
3,820
6,673
4,381
2,885
2,080
2,581
1,307
635
2,705
1,829
919
469
629
644
82.6
13
1,040
4,058
2,288
.4,772
6,134
7,286
7,930
15,685
U,678
8,954
7,688
6,324
6,341
5,426
4,371
4,896
4,034
3,762
5,724
14,130
n,480
8,682
14,704
U,749
9,S77
7,695
7,451
5,010
6,283
20 ,s n
15,025
13,750
8,210
13,741
13,807
14,702
12,290
n.isi
3,125
•7,141
8,574
8.434
8
36,122,193 3,449,560
19.524
3.108
36.125.301 3.469.084
32
879,253
1.686
880.939
1
96,41?
253
96.670
1
16,069
31
16.099
33
3
13
8
6
9
88
77
257
142
189
134
136
247
135
105
no
146
373
354
232
229
146
106
77
100
16
55
222
91
53
27
20
18
7
10
1
1
•
1,650
1,280
2,804
4,470
4,520
4,691
U,979
8,569
7,060
6,189
5,406
4,225
4,072
5,672
3,048
2,915
2,505
2,447
9,059
6,574
4,052
6,902
4,527
2,991
2,157
2,682
1,324
690
2,925
1,920
972
496
649
663
353
24
1,041
1
_
3
-
5705T
5f057
11,453
51,832
77,851
163,566
162,155
131,576
181,493
95,858
56,610
41,991
33,584
27,422
22,381
18,590
16,519
13,800
12,612
11,050
39,920
25,922
17,759
22,841
14,463
8,738
5,868
4,850
3,075
2,731
7,795
3,968
1,982
1,039
1,696
939
455
1,807
69
14
5
5
1,296,065
527
1,296,592
(55)
2
17,587,471
297
17.587.768
•
-
4,053,166
6,868,982
(35)
(35)
(35)
(35)
858,153
284,504
1,309,494
1,024,992
553,386
149,629
35,119
1.059
8,26?,502
99.531
8.367.035
231,524
113,076
996,689
1,366,496
988,702
312,427
80,078
2.256
10,9^0,210
54.275
11.014.483
61,742
12,692
50,817
17,096
7,815
2,361
619
51
153,193
66.838
220.031
42,820
8,709
40,755
10,059
4,931
1,037
237
14
108,559
18.305
126.864
4,398
958
5,883
1,191
557
191
40
4
11,222
1.823
15.045
-
-
-
-
-
-
-
47.139.784 3.689.115
1.007.803
109.715
47,082,405 3,602,753
987,812
19.991
Grand total (46+58 o r 60+61)
25.954.801
Individual returns and taxable fiduciary
25,854,973
returns w i t h net income (44+56)
Individual returns wi t h no net income (45+57)
99.828
Fo r footnotes, see pp. 14 and IS.
-
(13)
57.382
86.362
64
•
—
129,949
, 121
130,071
am
mm
499
•
40
128,041
379
i28.4il
_
3,97?
am.
8.977
a.
(35)
11,415
2,810
13,023
3,066
941
540
100
4
31,901
2.035
55.936
2,092
663
2,635
1,445
749
369
84
• 5
8,042
4.122
12.163
16.09°
5.057 1.770.496
164.006
140.584
107,639
16,069
5,057 1,738,897
161,850
136,085
8.877
5,977
2.076
31
2.157
4.501
-
•
-
-
am,
-
-
-
-
51.598
•
•
•
a.
•
am
-J
-1
4
17
•a
14
_
2,092
663
2,635
1,445
749
369
84
3
8,042
4.122
12.163
4.533
-
1
552
10,785
22,074
53,s n
63,966
71,958
170,691
128,094
126,445
106,967
93,250
79,994
72,275
64,547
57,273
53,074
49,274
44,766
172,827
124,816
93,064
126,169
83,229
61,892
43,097
33,265
29,453
21,071
55,867
23,489
15,380
6,864
8,854
4,996
4,461
2,047
1,450
3
1
163
•
-
2
3
4
5
•
•
58,966 4,605,315 2,182,25$
351
1.029
21
5 § V § 5 T 4,605,646 2,183,284
am
5,545
925
3,429
1,423
817
203
88
1
10,231
4.333
14.565
144.561 375.727
140,060 369,394
4.501
1,408
56,991
99,498
37.8,030
445,516
407,349
717,549
444,053
305,764
226,778
177,669
140,220
117,4 n
96,376
85,305
70,722
61,864
54,748
196,978
U3,830
74,938
97,150
57,189
34,614
27,108
18,749
13,803
9,421
32,365
14,887
6,308
6,419
5,593
2,918
1,871
2,169
1,751
3
•
a.
mm
40
5.245
132,018 359,163
am
579
13$,398 359,163
«•
(55)
159,534
34,335
162,558
61,021
32,485
10,501
2,487
112
442,833
31.071
473.904
•
«•
499
-
341
853
1,800
4,717
4,583
4,699
8,898
5,901.
3,867
3,023
2,255
2,123
1,630
1,467
1,202
977
1,097
872
2,957
1,339
833
941
587
440
274
346
252
87
272
155
85
19
32
6
•
Part
nership
profit
28/
6
7
8
9
10
11
12
13
14
IS
16
17
18
19
20
21
22
23
24
25
26
27
28.
29
30
31
32
33
34
35
36
37
38
39
40
41
42
45
44
45
46
-
47
12,486
5,032
29,085
35,187
19,273
6,591
2,244
108
no,oo?
11.549
121.555
70.755 S.474.818 2.304.859
68,539 6,455,95? 2,292,262
48
49
50
ma
1,730
179,740
610
129,592
3,476
668,294
1,775
485,170
1,386
266,068
267
95,048
122
26,517
7
2.2U
9,373 1,850,642
2,596
18.530
n . 7 6 8 1.869.172
2.417
18.861
12.577
51
S3
52
54
55
56
57
58
59
60
61
1
2
5
4
S
6
7
e
9
10
11
12
15
14
15
16
17
18
19
20
21
22
25
24
25
26
27
28
29
50
51
52
55
54
55
56
57
58
59
40
41
42
45
44
45
46
47
48
49
50
51
52
55
54
55
56
57
58
59
60
6J.
Table 5* — Individual returns and taxable fiduciary returns, with net income, 1941, by taxable and nontaxable returns, and by net income classes; also aggregates for
taxable and nontaxable individual returns with no net income: Humber of returns, sources of income and deductions, and net income - Continued
________________ _______
'_________
(Net Income classes and money figures in thousands of dollars)
__________________________
Amount
Source; a£ incoina - f!ont«d
Income
Net long Net loss
Oontribudistrib
Losses
Bad
from
Other
term
Total
from sales
ions 51/
from fire, debts
utable
Total
Other
income
fiduci income
capital
of prop
Business Partner
(individ Interest Taxes paid storm,
32/
deduc to bene
Net income 8/ classes
deduc
30/
aries
loss
erty other loss 27/ ship loss ual re
etc. 32/
paid
32/
Tinditions
tions
ficiaries
2g/
25/
th
@FedFRASER