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l ib r a r y
ROOM 5030
JUN 141972
TREASURY DEPARTMENT
Snyder address, Jackson Day Dinner, Los ihgeies
June 5, 1947
S-351
Bill tenders
..
June 3. 1947
Bill offering
June 6, 1947
Debt limitation
June 6, 1947
8
............................
9
..........................xo
S'-354
Bill t e n d e r s ................... .............. , . . . . . . .
June 10, 1947
S-355
Cufctomsi Wheat
June 1 1 , 1947
xi
. . . . . . . . . . . . . . . . . . . . . . . .
S-356
12
. . . . . . . . .
13
• • • • • • • • • • • • • • • • •
14
. . . . . . . . . . . . . . . . . . . . . . . .
S-359
X5
Customs? Quota commodities. . . .
June 11, 1947
S-357
Customs: Philippine commodities
June 11, 1947
S-358
Customs: Wheat
June 11, 1947
1
......... . . . . . .
............
. . . . .
S-352
. . . . . . . . . .
S-353
...............
Customs: Cotton
June 11, 1947
..........
...............
. . . . . . .
16
..................... ..
18
..........................................
S —362
19
S-360
Cotton entered for consumption
June 11, 1947
8-361
Market transactions
June 13, 1947
Bill o f f e r i n g .................................................
June 13, 1947
S- 363
20
4-l/4 Treasury Bonds,. 1927-52, called for r e d e m p t i o n ....... .
June 13,
1947
S-364
21
Tariff-rate quota on fish increased
June 12,
1947
S-365
22
Statistics of Income for 1944, Part 1
June 25,
1947
S—366
Finland pays $164,852*24 on debt
June 13,
1947
S-367
• . . . • • • . • • . • •
........................
..........................
Snyder statement after Truman* s veto of tax reduction bill
June 16, 1947
S-368
23
.
32
. .
33
Bonds issued-redeemed through May 31, 1947
.................
pg 2
34
.«•
35
Tax Treatment of Family Income
• • • • • • • • • • , • • • •
June 18, 1947
S-370
36
Cotton quotas withdrawn from warehouse
June 18, 1947
S-371
98
Bill tenders
June 17, 1947
Bill offering
June 20,
1947
...............
S-369
. ........ .
lo47
...............
. ,
100
• • •
103
S-373
Gutt statement on Transactions in Gold at Premium Prices
Juno 24,
1947
S-374
Unfreezing of Tangier
June 25,
1947
.......................... ............ .
8 -3 7 5
Supplemental quota on cotton filled
June 23,
1947
S-376
..
• • • • • •
Bill tenders
. . . . . . . . . . . . . . . . . .
June 24,
1947
8-377
.....
......... .
qQy
108
Stanley 8 . Surrey to leave to become professor, University of
California: Adrian W. DeWind succeeds ......................
June 25,
1947
S-379
Snydsr statement on Marshall Harvard address
June 25, 1947
S-380
105
106
Tax evasion investigations
. . . . . . . . . . . . . . . . .
June 25,
1947
S-378
Bill offering
June 27, 1947
99
S-372
7/ 8% Certificate offering, Series F-1948
June 23,
. . . . . . . . . . .
...............
109
HO
m
S-381
Bill tenders
. . . . . . . . . . . . . . . . . . .
July 1,
1947
S-382
113
.........
Bartelt statement, Subcommittee, House Committee on Armed
Services, redemption and negotiability of Leave Bonds
. . . .
June 30, 1947
Anendments to tax regulations, Clifford and other decisions
July 2, 1947
S-383
. .
114
118
Pg 3
Subscription figures on 7/ 8% Certificates
July 1, 1947
S-384
Fiscal year end statement, 1947
July 2, 1947
S-385
Debt limitation
July 2, 1947
Bill offering
July 3, 1947
Bill tenders
July 8 , 1947
• • •.
. . . . . .
• • • • • • « . .............
134
. . . . . . . . . . . . . . . . . . . . . . . .
S-387
135
136
S-388
. . . . . .
........
. . . .
Customs: Quota commodities
July 9, 1947
S-390
Customs: Cotton
July 9, 1347
121
• • • • ......................... . . . . . .
S-386
Customs: Philippine commodities
July 9, 1947
S-389
Customs: Wheat
July 9, 1947
120
• • • .............
S-391
137
138
. . . . . . . . . . . . . .
139
140
S-392
Bill offering ......................................
July 11, 1947
S-393
Market t r a n s a c t i o n s ............... , . .............. ..
July.15, 1947
S-394
Bill tenders’
July 15, 1947
.............
143
••••
144
S-395
Si^xnifian±nxnxHxm:nxnxBxi^]xx:xDaaxB.xiax$ixBXiix]axnxxixaxmaax3axnx$ix8.xnxn±4Sn
xrfcadgnni&yniSiffii
xfix&Sh&cm
Snyder=Dalton letters on Anglo-Anerican Financial Agreement
July 15, 1947
S-396
• • .145
Edward H. Foley address, National Barkers Association, Howard
U n i v e r s i t y .................................
July
16, 1947
S-397
Bonds issued-r©deemed during June,
Snyder accepts invitation to visit Brazi 1
July
17, 1947
S-398
Excise Taxes on Communications
July
21, 1947
S-399
154
1947
. . . . • • • . • •
155
156
. A •
pg 4
Bill offering • • • • • * • * • • • • • • • • • • • • • •
July 18, 1947
S-400
179
Joseph J. O'Connell resignation • • • • » • • • • • • • *
July 18, 1947
S-401
180
Speculation in gold}Snyder-Federal Reserve statement • ••
July 18, 1947
S-402
181
7/8$ Certificate offering « • • • • • • • • • • • • • • *
July 21, 1947
S-403
182
Snyder address, Bryant College, Providence
August 8, 1947
S-404
185
•••••••*
Bill tenders •• • • • • • • • • • • • • • • • • • • • «
July 22, 1947
S-405
192
Bill offering • • • • • • • • • • • • • • • • • • • • «
Ju3y 25, 1947
S-406
193
Bill tenders • . . . . • • • • • • • • • • • • • • • • • •
July 29, 1947
S-407
194
Tax study on Federal-State Tax relations
August 4, 1947
S-408
195
0O0
•••••••••
Ÿ
TREASURY DEPARTMENT
î
Washington
(The following address by Secretary Snyder
at a Jackson Day Dinner at the Biltmore Bowl,
Los Angeles, California, is scheduled for
delivery at 10?00
Pacific Coast time,
Thursday, June 5/19^7* arid is for release
at"that timeV)
r
I feel it a rare privilege to Join with such a distinguished
group of representative Democrats in this annual rededication
of our party principles. The opportunity to visit Los Angeles
again is a sincere pleasure to me, particularly on this
important occasion.
Your western metropolis has written an almost unrivaled
success story among the cities of the world. It is in itself
a living and vital example of those democratic ideals of enter
prise to which our party has always devoted its entire
energies.
As Director of War Mobilization and Reconversion, I had
full opportunity to appreciate your productive contribution
to the winning of military victory. I also know of your far
sighted planning to insure Industrial prosperity in this new
era of peace. The practical vision of your leadership will,
I am sure, continue its most important role in the growth of
the West.
We appropriately dedicate this meeting tonight to the
memory of Andrew Jackson. And, in his name, we honor also
those other statesmen who molded the Democratic Party doc
trines, and who contributed so immeasurably to the material
and spiritual growth of our Ration.
Before his life of distinguished service to country
ended on June 8 , 18*1-5> Jackson had become an outstanding ad
vocate of human rights. He was the product and the represen
tative of the great, new West of his day, the friend of the
common man, and their idol. Following his precedent, the
Democratic Party has consistently and effectively fought for
the economic development of the West.
As we pay tribute to Jackson tonight, we venerate, too,
the memory of Thomas Jefferson, whose sensible philosophies
are so deeply ingrained in our system of Government,
5-351
2
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I have been especially interested in a particular phase
of the administration «of Jefferson which, I believe, is little
known.
The guiding principle of his financial policy was the
maintenance of revenues adequate for the liquidation of the
public debt.
In October of 1809, Jefferson wrote to his Secretary of
the Treasury, Albert Gallatin, that the ’’discharge of the
debt is vital to the destinies of our Government.” Gallatin
wholeheartedly agreed and, during his tenure, he ably and
efficiently carried out that objective. In the eight years
of Jefferson1s administration, the national debt was reduced
from $83,000,000 to $57,000,000. And, in addition, it was
during this period that Louisiana was purchased for
$15,000,000.
And, it is well to note here that this purchase insured
the destiny of the United States as a great continental
power, uniting the vast resources of the West with those of
the East.
Thus, Jefferson and Gallatin were the first to activate
the theory that during times of national peace and prosperity,
the Treasury must show ample surplus which can be applied to
ward an orderly reduction of the public debt. They recognized
that only through adherence to such a sound financial policy
could the Nation be prepared to cope with any future emergen
cies that might arise. They realized that our permanent eco
nomic health rests upon our fiscal solvency.
To those who have followed the efforts of President
Truman to preserve a sound state of national finances, these
are familiar words. The maintenance of the integrity of our
national credit is one of our primary obligations today - an
obligation which is too often overlooked by those who place
tax reduction over debt reduction.
As Secretary of the Treasury, I shall bend every effort
to carry out the sound financial policies of this Administra
tion, I know that this program recommends itself to the
American concept of good business.
I
would call to your attention that out of the cash bal
ance of the Treasury, and out of revenues, we have been able
already to reduce the public debt by about $23,000,000,000
from its peak reached some fifteen months ago, Practically
all this reduction has been effected in Government securities
held by the banking system. We must, and we will, persist in
our program for repayment of the debt.
3
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3
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Any pledge Which our Democratic leadership makes for
the future can be entirely supported by the record of our
past accomplishments. Vie have been faithful to our promise
of human betterment and to our philosophy of furthering the
cause of freedom for men and women everywhere.
We are entitled to great satisfaction in the progress
of this country under Democratic administrations. Especially,
we as a party, and the Nation, as a whole, can find cause for
gratification in our record of the past fourteen years.
We will not soon forget the wisdom of action which
lifted our economy from the depths of depression, and set at
work the forces of recovery,
Franklin D, Roosevelt, by his inspired leadership, gave
a discouraged people new confidence and hope. To him, our
country and the whole world owe a debt of lasting gratitude,
The permanent social and economic gains developed under his
leadership stand today as a great bulwark for our entire
economy.
Social security and unemployment insurance; insurance of
bank deposits, the "Truth in Securities" law; aid to agricul
ture; national recognition of the rights of workmen to bargain
collectively with their employers - these are some of the
lasting achievements of Democratic administration. They have
today the approval of all the people regardless of party.
Nor shall we forget the far-sighted steps taken to pro
vide for the military preparedness of our Nation - steps
taken against stubborn opposition V which nevertheless proved
our salvation.
For there is no more inspiring chapter in our history
than the miracle of production for war that was performed
under the aggressive direction of a Democratic Administra
tion,
The organization and deployment of our military forces,
and the effectiveness and brilliance of their campaigns
amazed our allies and overwhelmed our enemies.
The Democratic Party is not content, however, to rest
upon any past achievements. What we dp today, what we pro
pose for the future - these are our vital concern. We would
not have it otherwise, and the record we are writing now,
under the leadership of President Truman, deserves and is
receiving the approval and the confidence of the American
people.
4
The burden of peace and postwar transition fell on the
shoulders of Mr* Truman. He has borne his heavy responsi
bilities - the heaviest in the world - with outstanding
courage and with consummate skill.
The victory over our enemies, which came well ahead
of schedule, precipitated the tremendous peacetime problems
of demobilization and reconversion - problems which were no
less vital to national security than those faced - and
solved - in wartime.
Foremost of the problems, certainly foremost in the
minds of their families, was the return to civilian life
of more than ten million members of our armed services.
The swift and orderly discharge of our servicemeri and
women, their return to peaceful pursuits, and their absorption into our economy, are accomplishments of which
we can indeed be proud.
The industrial changeover from war to peacetime pro
duction was completed more rapidly than anyone dared pre
dict. While making every effort to guard against the twin
dangers of depression and inflation, we settled the war
contracts, and cleared the war plants for a volume of
civilian output never before matched in peacetime, Our
level of employment is proportionately high. Our national
income is at unprecedented heights.
This condition is a tribute to the vitality of the
American system of free enterprise. But, it is also the
product of wise policy and prudent management on the part
of your Administration.
President Truman relinquished as rapidly as possible the
necessary wartime controls over our economy. He sought to
retain temporarily those controls he knew were essential to
the national welfare. Particularly he made effort to enforce
wise restraint in such vital fields as prices and wages, and
over the distribution of those commodities that persisted in
short supply.
The President attacked inflationary dangers with every
facility at his command. He has endeavored to reduce such
pressures through the operation of fiscal policies - through
the reduction of bank-held debt serving as a credit base and
through the maintenance of our tax structure. But, the most
important weapon he has brought to bear as a preventive
measure against economic strain is that of moral suasion. In
dealing with labor-management difficulties that naturally
followed in the wake of war, his policy has been one of fair
ness, of conciliationj but also of unfaltering firmness for
the national good.
5
His courageous actions saved- the country from disastrous
strikes in rail and coal industries. Yet he protected the
rights of labor during this time of stress, even as he was
diligent to protect the country against the disaster of in
dustrial warfare.
During these recent months the more temperate attitudes
of both labor and management, the orderly adjustments that
have been effected in matters of wages and working conditions
in industry after industry, are proving the value of real col
lective bargaining.
It is gratifying to note the voluntary steps taken by
industry and labor for solving their difficulties.
The Administration’s fiscal policies have been closely
related to those in the economic field. It Is our policy to
practice utmost economy in Government, and to maintain the
revenues at a level sufficient to secure a balanced budget
and provide for debt reduction.
Substantial progress has been made in the reduction of
federal expenditures as we convert the Government Into a
normal peacetime pattern. Billions of dollars which had been
previously authorised by the Congress were frozen, and recom
mendations for calcellatlon of this approved spending were
made to the Congress.
The budget expenditures of our Government were reduced
from a peak of more than $ 100,000,000,000 for the 1945 fis
cal year, to ¿63,700,000,000 in fiscal 1946; and expenditures
for fiscal 1947 will be, according to the latest estimates,
around $41,250,000,000. The President, in furthering this
program of economy, has recommended an additional cut to
$ 37 ,500,000,000 in fiscal 1948,
The President has sought to make the economies effected
wise economies. He has cautioned against ill-considered
slashes in the budget that would work injustices on our
veterans, that would endanger our national security, or that
would curtail unduly the services to which our people are
entitled.
Particularly, he has held it to be false economy to
reduce our military services below the level of safety in
this still turbulent world.
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And, he has warned that we must maintain ,the, highest
standards of character, ability, and energy in the impor
tant administrative posts of Government. He has moved
vigorously to improve the efficiency of the entire federal
establishment.
He has,spoken out against so-called economy promoted
solely for political expediency, which would paralyze the
development of our natural resources. When we consider the
mighty contribution of these projects to the development of
our Nation, in such states as California, and in the West,
we must realize that careful and wise expenditures for this
purpose are sound investments, providing benefit for all
our people.
As a result or the Administration's program of sound
economy, and of the high revenues produced by the present
level of our prosperity, we shall have a federal budget
not merely in balance, but one that will show a surplus
when the present fiscal year ends on June 30.
ït is your Democratic Administration that has accom
plished this goal so speedily after the conclusion of a
global war that had to be won regardless of its cost.
Equally important in maintaining our present degree of
prosperity is a sound and well-balanced postwar tax program.
Federal taxation must be simple in administration and should
w o r k as little hardship as possible on the general public.
It should be flexible so that frequent revision of the basic
tax structure will not be necessary.
The program should be fair in its treatment of different-,
groups, should interfere as little as possible with incentives
to work and to invest, and should help maintain the broad
consumer markets that are essential for high-level production
and employment.
I have recently presented a broad program of study to
the Ways and Means Committee of the House, providing the
basis for the preparation of a sound balanced tax program.
The difficulties incident to the development of a sound
and constructive tax program are many. But by a careful re
duction of these problems to their simplest form, their solu
tion will be expedited. Then business and government may
more properly plan for the future.
Finally, I would call your attention to the policies
of your Administration in the field of foreign affairs.
As Democrats and as citizens of this Republic,, we can re
joice in the leadership that has brought about an unprece
dented unanimity of opinion in our dealings with other
nations.
It is our policy to support the United Nations. I am
confident that the Presidents attitude of tolerant firm
ness and cooperation will ultimately attain lasting peace
within this framework.
We have sought to render financial and material assist
ance, and to contribute to the reconstruction and development
of war torn lands commensurate with the leadership our
Nation must provide.
We have helped to develop, and support those international
efforts to expand world trade, a program upon which the peace
of the world depends fully as much as it does upon political
considerations.
Of particular importance is the policy of the Adminis
tration In extending assistance to nations seeking to preserve
their freedom against pressures from without.
Again, I say we Democrats can take justifiable pride in
having provided such guidance to the cause of world amity.
We can be grateful for our wise leadership in domestic affairs
that has met so successfully the problems of the aftermath of
war.
Above all, we can rejoice that we have a leader In the
White House, a Democratic President, who brought into the
national emergency a courage, a practical competence, a
national perspective - and a nearness to the people out of
which flows his concern for the welfare of all.
The people of America are well aware of the burden that
rests upon their President. These Democratic testimonials
throughout the country this year can serve no greater purpose
than to demonstrate the affection and esteem which we hold
for Mr. Truman, and to reaffirm our confident support of his
Admini stra11 on.
The strength of our Party depends upon continued adher
ence to our Democratic principles.
President Truman today exemplifies these principles.
Through his leadership, our Party cap reach even greater
heights of service - our country can attain an unparalleled
prosperity and a peaceful security.
0O0
8
TREASURY DEPARTMENT
Washington
Press Service
No. S-352
FOR RELEASE, &QRNING NEWSPAPERS,
Tuesday, June '3V-. 1947_________ _
The Secretary of the Treasury announced last evening
that the tenders for $1 ,300,000,000, or thereabouts, °£91-day
Treasury bills t V b e dated June 5 and to mature September 4, 19^7,
which were offered on May 29, 1947, were opened at the Federa
Reserve Bankston June 2.
\
r
}
V .i
x
,
,
The details of this issue are as follows:
•t ;
Total applied for
Total accepted
Average price
^toft^ooo
(Includes $14,356,000 entered
on a fixed-price basis at
99.905
and accepted
99.905/ Equiv. rate of discount approx.
Range of accepted competitive bids:
High - 99.906 Equiv. rate of discount approx. 0.37<g per annum
Low - 99.905
"
(69 percent of the amount bid for at the low price was accepted)
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. .Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL
Total
Accepted
Total
Applied for
Federal Reserve
District
$
12,620,000
1,558,141,000
20.715.000
12 655.000
7.675.000
.
910,000
$
8,807,000
1,078,401,000
14.515.000
9.555.000
5.505.000
910,000
191,114,000
23.480.000
4.025.000
6.890.000
5,480,000
36.101.000
133,044,000
16.567.000
3.095.000
5.960.000
4.829.000
26.181.000
$ 1 ,879,806,000
$1,307,369,000
0O0
9
TREASURY DEPARTMENT
Washington
FOR RELEASE, .MORNING' NEWSPAPERS,
Friday, June 6, 1947______ , -
Press Service
Wo, S-353
- The Secretary'of the Treasury, by this public notice, invites
tenders for $1,300,000,000,. or thereabouts, of 91^day Treasury
bilis, for cash "and in exchange for Treasury bills maturing June 12,
194?> to be issued on a discount basis under competitive and
fixed^price bidding as hereinafter provided. The bills of this
series will be dated June 12, 1947, and will mature September 11,
1947, 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, $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 Standard time,
Monday, June 9, 1947, Tenders will not be received at the Treasury
Department, Washington, ^ach 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 i 3 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 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 arc 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 public an
nouncement will be made by the Secretary of the Treasury of the
amount and price range of accepted bid 3 . 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 $200,000 or less from any one bidder at 99*905 entered
on a fixed^prlce basis will be accepted in full. Settlement for
accepted tenders in accordance with the bids must be made or com
pleted at the Federal Reserve Bank on June 12, 1947, in cash or
other immediately available funds or in a like face amount of
Treasury bills maturing June 12, 1947. Equal treatment will be
T-- 2
accorded all tenders, whether the bidders offer to exchange maturing hills or to pay ca3h for the new hills hid for• Cash adjust
ments will he made for differences between the par value of
maturing hills accepted in exchange: and the issue price of the new
hills*
The income derived from Treasury hills, whether interest or
gain from the sale or other disposition of the hills, shall not
have any exemption, as such, and loss from the sale or other dis»
position of Treasury hills shall not have any special .treatment,
as such, under Federal tax Acts now or hereafter-enac-ted* The- '
hills shall he subject to estate,' inheritance, gift, or other
excise taxes, whether Federal or State, hut shall he exempt from
all •taxation now: or hereaf ter imposed ph the principal or Interest
thereof by any''State, or any of the possessions of .the XJnited;.
Statesi'or by any local taxing Autfaqpt^..
'ts^tlon
the amount'of discount at which Treasury hills are.originally sold
hy the United States shall he considered to he. interest.. Under
Sections 42 and il7(a)(l) of the Internal Revenue Code, as amended
hy;Seótión 115:of the Revenue Act of 19^1, the amount of discount
at whiph bills issued hereunder are sold shall not,he considered
to accrue until such hills shall he 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
fop such hills, whether on original5issue or(oh~ subsequent pur
chase, and the amount actually received either upon sale or re
demption at maturity during the taxable year fdr which- the return
is made, as ordinary* gain or loss.
.; t
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Treasury Department Circular N o . 4l8, as amended,.and this
notice, prescribe the terms of"the Treasury hills and govern the
conditions of their issue. Copies of the circular may he obtained
from any;Federal Reserve Bank or Branch.
oOo
STATUTORY DEBT LIMITATION
AS OF MAY 31, 194.7
June 6 , 1947
Section 21 of the Second Liberty Bond Act, as amended, provides that the face
amount of obligations issued under authority of that Act, and the face amount of
obligations guaranteed as to principal and interest by the United States (except
such guaranteed obligations as may be held by the Secretary of the Treasury),
“shall not exceed in the aggregate 1)2755 000,000,000 outstanding at any one time#
For purposes of this section the current redemption value of any obligation issued
on a discount basis which is redeemable prior to maturity at the option of the
holder shall be considered as its face amount . 11
The following table shows the face amount of obligations outstanding and the
face amount which can still be issued under this limitation:
Total face amount that may be outstanding at any one time
$>2755 000,000,000
Outstanding May 31, 1947
Obligations issued under Second Liberty Bond Act, as amended
Interest-bearing
Treasury bills••••«••••.... 4 16,001,766,000
Certificates of indebtedness
26,29357535000
Treasury notes,............#
13»6b7»208»400 & 555962,727,400
Bonds
Treasury...•••*•.......... 119,322,892,950
Savings (current redenp. value) 5I52395 568,212
D e p o s i t a r y # 332,7135 000
Armed Forces Leave...••••••
1.765»424»775
Special Funds
Certificates of indebtedness 12 , 508,400,000
Treasury notes............. 13*677» 573.000
Total interest-bearing...................
Matured, interest-ceased.
.........
Bearing no interest
War savings stamps........!......
71,1145412
Excess profits tax refund bonds.
20,382,262
Special notes of the United States:
Intemat’
11 Bank for Reconst#
and Development series..••••• 565,785,000
I n t e m a t ’l Monetary Fhndseries 1,749»000» 000
Total..«..
Guaranteed obligations (not held by Treasury)
Interest-bearing
46,115,136
Debentures: F.H.A# ........... .
Demand obligations : C.C.C. ...... 124,651,453
Matured, interest—c
e
a
s
e
d
.
172,660,598,937
26*185.973,000
2545809,299,337
235, 508,991
2*314,785,000
257,451*090,002
170,766)589
_____ 6,528,875
177,295,464
Grand total outstanding.
.... .
Balance face amount of obligations issuable under above authority
257,628»385,466
17*371,614, 534
Reconcilement with Statement of the Public Debt - May 31, 1947
(Daily Statement of the United States Treasury, June 2, 1947)
Outstanding
Total gross public debt.•....................................•#*
258,343,439,566
Guaranteed obligations not owned by the Treasury.*••.•••••••*,»*
177,295,464
Total gross public debt and guaranteed obligations.,......
258,520,735,030
Deduct - other outstanding public debt obligations
not subject to debt limitation..... ...... .
892*349,564
257,628,385,466
S-354
TREASURY DEPARTMENT
Washington
for release, morning newspapers,
Tuesday, June 10, 1947
Press Service
No. S-355
The Secretary of the Treasury Announced last evening
that the tenders for $1,300,000,000» or thereabouts, of 91 -day .
Treasury bills to be dated June 12 and to mature September 11, 19H,
which were offered on June 6, 19^7 > were opened at the Federal
Reserve Banks on June 9#
The details of this issue are as follows:
Total applied for - $1*9^3>318,000
.
Total accepted
- 1,303,378,000 (includes $17,518,000 entered
on a fixed»price basis at
99.903 and accepted in full)
Average price
- 99.905
Equiv. rate of discount approx.
0 .376 % per annum
Range of accepted competitive bids:
High - 99.906 Equiv. rate of discount approx. 0.372$ per annum
Low - 99.905
"
"
”
"
"
0-376^
( 65 percent of the amount bid for at the low price was accepted)
Total
Applied for
Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL
$
12 ,260,000
1,600,429,000
35.684.000
14.100.000
6.530.000
2 .800.000
175,898,000
13 020.000
2,580,000
21 ,156,000
1 1 ,660,000
47,201,000
.
$1,943,318, 000
0O0
Total
Accepted
i8 ,130,000
1,047,079,000
32.184.000
10 600.000
5,830,000
2 ,800,000
.
126, 898,000
9.065.000
1 .950.000
17.831.000
8,860,000
32.151.000
$1,303,378,000
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Wednesday , June 11, 194-7.
P^essc,S,e^ ioe
lio‘‘ s~3-5°
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 President’s 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, 1947, as follows:
Wheat
Country
of
Origin
Canada
China
Hungary
Hong Kong
Japan
United Kingdom
Australia
Germany
Syria
New Zealand
Chile
Netherlands
Argentina
Italy
Cuba
Prance
Greece
Mexico
Panama
Uruguay
Poland and Danzig
Sweden
Yugoslavia
Norway
Canary Islands
Rumania
Guatemala
Brazil
Union of Soviet
Socialist Republics
Belgium
Imports
Established May 29, 1947, to
May 31 « 1947
Quota
(Bushels)
(Bushels^
Wheat flour, semolina,
crushed or cracked
wheat, and similar
wheat products
Imports
Established sMay'29, 1947 to
Quota
: May 31, 1947
(Pounds)
(Pounds)
3,815,000
795,000
10 ,247
24,000
13,000
13,000
8 ,0 0 0
75,000
100
1,000
5,000
5,000
1, oco
100
100
1 ,000
1 ,000
14,000
100
2,000
100
2,000
12,000
1 ,000
1,000
1 ,000
1,000
1 ,000
1 ,000
1 ,000
1 ,000
1,000
1 ,000
1,000
100
100
100
100
4,000,000
800,000
-oOo—
10,247
13
TREASURY DEPAKIM0JT
Washington
K»H IMMEDIATE RELEASE
Wednesday» June 11» 1947«
Press Service
No# S-357
The Bureau of Customs announced today preliminary figures showing
the imports for consumption of commodities vdthin quota limitations
provided for under trade agreements, from the beginning of the quota periods
to May 31, 1947, inclusive, as follows:
_____
. Unit :Imports
Commodity
:___ Established Quota_______: of
:as of May
_________ _____________ ^Period and Country:Quantity :Quantity:31, 1947
Whole milk, fresh
or sour
Calendar year
3 ,000,000
Gallon
2,609
Cream, fresh or sour
Calendar year
1,500,000
Gallon
555
Fish, fresh or frozen,
filleted, etc*> cod,
haddock, hake, pollock,
cusk, and rosefish
Calendar year
15,000,000
Pound
9*702,928
90.000.000
60.000.000
Pound
Pound
Quota filled
Quota filled
White or Irish potatoes:
certified seed
other
12 months from
Sept* 15, 1946
Cuban filler tobacco un
stemmed or stemmed (other
than cigarette leaf'tobacco)
and scrap tobacco
Calendar year
Red cedar shingles
Calendar year
1,3$0,300
Square
8^-4,905
Molasses and sugar sirups
containing soluble non
sugar solids equal to
more than 6% of total
soluble solids
Calendar year
1 ,500,000
Gallon
197,185
Pound
(unstemmed
22,000,000 equivalent)
Quota
Filled
14
TBEASUKI DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Wednesday« June 11, 1947*
PfTeSScS®^TLCe
No° b“*35o
The Bureau of Customs announced today preliminary figure showing
the imports for consumption of commodities on Which quotas were prescribed
by the Philippine Trade Act of 194-6, from January 1, 1947, to May 31, 194-7,
inclusive, as follows:
Products of
Philippine Islands
Buttons
:
:
Established Quota
Quantity
850,000
: Unit of
: Quantity
Gross
; Imports as of
¡ May 31, 1947
56,073
Cigars
200,000,000
Number
3,100,089
Coconut Oil
448,000,000
Pound
12,071,839
Cordage
6,000,000
it
946,689
Rice
1 ,040,000
11
50
112 ,000,000
1 ,792 ,000,000
ft
6, 500,000
it
Sugars, refined
unrefined
Tobacco
—
ft
709,971
TREASURY DEPARTMENT
Washington
Press Service
No. S-359
FOR IMMEDIATE RELEASE
Wednesday* June II» 1947»
The Bureau of Customs announced today preliminary figures showing the
quantities of wheat and wheat flour entered, or withdrawn from warehouse, for
consumption under the import quotas established in the President’s proclamation
of May 28, 1941, as modified by the President's proclamations of. April 13, .1942,
and April 29, 1943, for the 12 months commencing May 29, 1946, as follows:
:
Country
of
• . Origin
Canada
China
Hungary
Hong Kong
Japan
United Kingdom
Australia
Germany
Syria
New Zealand
Chile
Netherlands
Argentina
Italy
Cuba
France
Greece
Mexico
Panama
Uruguay
Poland and Danzig
Sweden
Yugoslavia
Norway
Canary Islands
Rumania
Guatemala
Brazil
Union of Soviet
Socialist Republics
Belgium
Wheat
:
Imports
; Established : May 29, 1946, to
:
Quota
: Mav 28* 1947
(Bushels)
(Bushels)
664
795,000
> —
—
**
—
100
100
100
0$
00
r**
-
100
2,000
100
910
M
V
,
- ,
—
1,000
'
.
w»
100
-
—
-
é
%
—
—
- «■*
-
—
&
.*•
1,000
100
100
100
100
¿¡0
Wheat flour, semolina,
crushed or cracked
"wheat, and similar
wheat products
:
Imports
Established :May 29,1946,
Quota
:to May 28,1947
(Pounds)
(Pounds)
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 , 0Ò0
1,000
1,000
1,000
-oOo-
—
-
— c
—
—
*■
»
—■
—
—•
4,000,000
800,000
1,952,705
2,930
1,880
257
—
100
—■
1,000
1,958,872
**
treasury:department
Washington
50R IMMEDIATE RELEASE
Wednesday« June 11, 1947«
"
Press Service
No* S-360
The Bureau of Customs announced today that preliminary data on imports
of cotton and' cotton waste chargeable to the quotas established by the^
President’s proclamation of September 5, 1939* as amended* for the period
September 20, 1946, to May 31, 1947, are as follows:
COTTON (other than linters)
(In pounds)
Country of
Origin
Egypt and the
Anglo-Egyptian
Sudan»*.*•••••».••••
Peru.
British India.••«..*
China* ••«•••••.*•••*
Mexico...........
Brazil*•.
Union of Soviet
Socialist Repub-*
lies....••••••• ••...
Argentina.
Haiti.
Ecuador..••••••••••«
Honduras
Paraguay.•••••••••..
Colombia.••••••••••«
Iraq.
British East
Africa*•...•••••••••
Netherlands East
Indies«....«....«.*•
Barbados• . • • • « • . . « * •
Other British
West Indies 1/ . ....
Nigeria«• • « • • • • . . . • •
Other British
West Afric a 2/ • . • . •
Other French
■Africa 5 /. « * • . . * «
Algeria and Tunisia
Kuwait
Under 1-1/8” other
than rough or harsh
under 3/4,,
Imports Sept*
Established 20, 1946, to
May 3I 5 1947 ....
Quota
783,816
247,952
2,003,483
1,370,791
8,883,259
618,723
1,167,578
344
8,883,259
618,723
475,124
25,348
5,'203
237
9,333
752
871
124
247,952
5,081
«■f
-
1-1/8” or more
but less than
1-11/16” U
Imports Sept*
20, 1946, to
May 31.1947
36,415,1174
9 ,209,346
. --
Imports Sept*
20, 1946 , to
Mav 31. 1947
—
.
30,134,546
—
>-
"vm
“f
rnm
31,900
.y
fit
***
-
mm
.*»■■
—
—
rnm.
195
2,240
Less than 3/4”
harsh or rough j/
i
«*•
mm
71,388
-
—
.
—
■
r
21,321
•if
5,377
16,004
.
mm.
—
*-•
—
689
»
14,516,882
—
-
-
—
10,948,285
45 ,656,420
1/ Other than Barbados, Bermuda, Jamaica, Trinidad, and Tobago*
2/ Other than Gold Coast and Nigeria*
3/ Other than Algeria, Tunisia, and Madagascar.
4/ Established Quota - 45,656,420«
5/ Established Quota — 70,000,000*
237,600
30,372,146
/ >
17
-2
-
COTTON WASTE!
(In poupdg)
COTTON CARD STREPS made from cott-pn having a staple of less than 1-3/16 inches
in "length, COMBER WASTE, LAB WApTE, SLIVER WASTE, AND ROVING WASTE, WHETHER
OR NOT MANUFACTURED OR OTHERWISE ADVANCED IN VALUE: Provided, however, that
not more than 33- 1/3 percent of the quotas shall be filled by cotton wastes
other than 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, Belgium, Germany, and Italy:
Country of Origin
: Established
TOTAL QUOTA
United Kingdom«....•
Canada*.......... .
France*.............
British 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
Totals
5,482, 50?
1/
Established
Imports
Total imports
Sept* 20, 1946, 33-1/3$ of Sept* 20, 1946,
to May 31, 1947 Total Quota to May 31,1947 1/
_
69,757
■63,627
—
r-
.6,347
T-r
145,731
Included in total imports, column 2*
-oÔo«r
1,4 4 1,15 2
—
75,807
22,747
14,796
12,853
25,443
7,088
r*
1,999,886
-
*r
-T
-
—
18
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Wednesday» June II, 19^7
Press Service
No. S-361
A proclamation of the President dated June 9* 19^7*
modifies the proclamation of September 5* 1939# so as to
permit the entry for consaaption or withdrawal from ware
house for consumption during the period June Ik to
September 19* 19^7* of 23*09^*000 pounds of cotton having
a staple of 1-3/8 inches or more but less than 1-11/16
inches in length, in addition to the quantity of cdtton
having a staple of 1-1/8 inches or more but less than
1-11/16 inches in length* the entry of which has already
been made under the said proclamation of September 5* 1939*
during the present quota year.
In order that all importers may have equal oppor
tunity at the opening of the quota on June 16 * 19^7* no
entries of such cotton shall be accepted before 12 noon»
E.S.T.* on June 16, or its time equivalent in other time
belts.
oOo
19
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Friday, June 13, 1 9 4 7 ________
Press Service
No* S -362
During the month of May, 1947, market transactions
In direct and guaranteed securities of the Government for
Treasury investment and other accounts resulted in net
sales of $338,623,000, Secretary Snyder announced today.
0 O0
u
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS
Friday, June 13, 1947
Press Service
No, S -363
The Secretary of the Treasury, hy this public notice,
invites tenders for $ 1 ,300,000,000, or thereabouts, of 91 -day
Treasury bills, for cash and in exchange for Treasury bills
maturing June 19, 1947* to be issued on a discount basis undOr
competitive and fixed-price bidding as hereinafter provided.
The bills of this series will be dated June 19 ,..1947*
will
mature September 18, 1947* 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, $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
Standard time, Monday, June 16* 1947. 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 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 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 phyment 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 submitt
ing 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. Sub
ject to these reservations, tenders for $ 200,000 or less from
any one bidder at 99*905 entered on a fixed-price basis will be
accepted in full. Settlement for accepted tenders in accordance
with the bids must be made or completed at the Federal Reserve
Bank on June 19, 1947, in cash or other immediately available
funds or In a like face amount of Treasury bills maturing June 19,
1947. Equal treatment will be accorded all tenders, whether the
2
bidders offer to exchange maturing bills or to pay cash for the
new bills bid for* Cash adjustments will be made for differ
ences between the par value of maturing bills accepted in ex
change and the issue price of the new.bills.
The income derived from Treasury bills, whether interest
•or gain from the 3ale 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, an such, under Federal tax Acts now or hereafter
enacted. The bills shall be subject to estate, inheritance,
gift, or other excise taxe.s, whether Federal or State, hut
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 con
sidered to accrue until such bills shall be sold, redeemed or
otherwise disposed of, and such bills are excluded from con
sideration 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 dif
ference between the price paid for such bills, whether on
original issue or oh 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 Wo. 4l8> as amended, and
.this notice, prescribe the terms ,of the Treasury bills and
govern the conditions of their issue. Copies of the circu
lar may be obtained from any Federal Reserve Bank or Branch.
oOo
■
21
TREASURY DEPARTMENT
Washington
Press Service
Wo. S-364
for release* morning newspapers*
Friday* June 13* 1947
Secretary of the Treasury Snyder announced today that all
outstanding 4-1/4 percent Treasury Bonds of 1947-52 are called
for redemption on October 15* 1947# and will be redeemed in
cash.
There are now outstanding $758*945*800 of these bonds.
The text of the formal notice of call is as follows:
*
#
*
*
.
*
FOUR AND ONE-QUARTER PERCENT TREASURY BONDS OF 1947-52
NOTICE OF GALL FOE REDEMPTION
To Holders of 4-1/4 percent Treasury Bonds of 1947-52*. and Others
Concerned:
v i.
Public notice is hereby given that all outstanding 4-1/4
percent Treasury Bonds of 1947-52* dated October 16* 1922, are
hereby called for redemption on October 15* 1947# on which date
interest on such bonds will cease.
2.
Full 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.
/s/ John W. Snyder
Secretary of the Treasury
TREASURY DEPARTMENT
Washington* June 13* 1947.
oOo
22
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Thursday, June 12, 1947
Press Service
The Bureau of Customs announced today that the tarlffrate quota of 15/000,000 pounds of fish, fresh or frozen
(whether or not packed in ice), filleted, skinned, boned,
sliced, or divided into portions, not specially provided
fort cod, haddock, hake, pollock, cusk, and rosefish, en
titled to entry for consumption at 1-7/8 cents per pound
during the calendar year 1947 has been increased to
23,906,423 pounds.
The Canadian Trade Agreement of November 25, 1938,
prescribed that if the average apparent annual consumption
of such fish in the United States during the 3 calendar
years preceding the year in which such fish were entered,
or withdrawn from warehouse for consumption, exceeds
100,000,000 pounds, an additional quantity of such fish
equal to the amount by which 15 per centum of such aver
age apparent annual consumption exceeds the 15,000,000
pounds may be entered, or withdrawn from warehouse, for
consumption in that year at the 1-7/8 cents per pound rate.
It has been determined that the average annual consumption
of such fish for the calendar years 1944, 1945, and 19^0
was 159,376,156 pounds.
0O0
23
TREASURY DEPARTMENT
Washington
Press Service
No. S-366
FOR RELEASE,
Wednesday. June 25, 1947
Secretary of the Treasury Snyder today made public data which will
appear in the report "Statistics of Income for 1944, Part l.” These data,
comprising the first of two groups of tabulations to be released, are
prepared from the individual income tax returns for the income year 1944,
under the direction of Commissioner of Internal Revenue Joseph D. Nunan, Jr,
Summary data
There were 47,111,495 individual income tax returns filed for the
income year 1944, an increase of 3,389,457 returns, or 7,8 percent,
over the number filed for 1943, The 1944 returns include 18,427,413
optional returns, Form TRT-2, the withholding receipts for tax withheld on
wages; 18,942,560 short-form returns, Form 1040; and 9,741,522 long-form
returns, Form 1040#
Adjusted gross income of 4113,714,736,245 is reported on 46,919,590
returns, and adjusted gross deficit of $249,771,165 is reported on
191,905 returns.
The tax liability for 1944 is $16,216,401,179, an increase of
$1,766,317,039, or 12,2 percent, over the income and victory tax on
1943 income tabulated in last year's report.
Individual returns, 1944 and 1943:
Summary data
____ (Money figures in thousands of dollars)
1944
Total individual returns:
Number of returns•••••...•
Adjusted gross income less
Taxable individual returns :
Number of returns*......
Nontaxable individual returns:
Number of returns•••••••••••
Adjusted gross income less
adjusted gross deficit.....
For footnotes, see p. 17.
1943
Increase
Number or:
amount
:Peroent
3,389,457
7.75
116,464,965 1/105,861,957 10,603,008
14,450,084 1,766,317
16,216,401
10.02
12.22
40,240,137 2,114,331
42,354,468
114,761,385 1/104,445,596 10,315,789
14,450,084 1,766,317
16,216,401
5.25
9.88
12.22
47,111,495
43,722,038
4,757,027
3,481,901
1,275,126
36.62
1,703,580
1/1,416,361
287,219
20.28
- z Returns included
The individual income tax returns included in this release
are for the calendar year 1944, a fiscal year ending within the
period July 1944 through June 1945, and a part year with the
greater part of the accounting period in 1944. The returns in*
clude Forms Vi-2 and 1040 filed by citizens and resident aliens
and Form 1040B filed by nonresident aliens having a business with
in the United States. Tentative returns are not included and
amended returns are used only if the original returns are excluded.
Statistics are taken from the returns as filed, prior to revisions
that may be made as a result of audit.
Form W-2, the withholding receipt for income tax withheld on
wages, is the optional return which may be filed by persons whose
total income is less than $5,000 consisting of wages shown thereon
and not more than $100 of other wages, dividends, and interest.
The tax liability is determined by the collector of internal revenue
on the basis of the income reported, in accordance with a tax table
provided under supplement T of the Code, which allows for exemptions
claimed by the taxpayer and also allows for deductions and tax credits
approximating 10 percent of the income* Husband and wife may file a
combined return on Form W-2 if their aggregate income meets the re
quirements for use of this form. On such combined returns, the tax
as determined by the collector is the lesser of two amounts; the
tax on the combined income and the aggregate tax on the separate
incomes•
Form 1040, the regular income tax return, which may be either
a long-form return or a short-form return, is used by persons whose
income exceeds the limits specified for Form W-2 and by persons who,
although eligible to use Form W-2, find it to their advantage to use
Form 1040* Persons with adjusted gross income of less than $5,000,
regardless of the source, may elect to file the short-form return
on which deductions and tax credits' are not itemized, the tax being
determined from the tax table provided "under supplement T. Persons
with adjusted gross income of $5,000 or more, and persona with ad
justed gross income of less than $5,000 who wish to claim deductions
in excess of the amount allowed through the use of the tax table
file the long-form return and compute the tax liability.
Data in this release present a complete coverage of the returns
filed for’1944* For the returns with adjusted gross income under
$25,000, data, except number of returns, and their distribution by
adjusted gro6s income classes are estimated on the basis of samples
as explained on pages 7 and 8*
- 3 -
9A
¿'4
Changes in the Internal Revenue Code
Amendments to the Internal Revenue Code provided by the Revenue Aot
of 1943 and the Individual Income Tax Act of 1944 affeot the compara
bility of the income and tax data for 1944 with that for 1943« Among the
principal changes ares
(a) Every person, citizen or resident, including minors, who had
$500 or more gross income is required to file a return. A husband and
wife may make a joint return even though one spouse has no income.
(b) Form W-2, the withholding receipt for income tax withheld on
wages, replaces the optional return, Form 1040A, and may be used as a
return, at the option of the taxpayer, if his total income is less than
$5,000 consisting of the wages shown thereon and income from other wages,
dividends, and interest totaling not more than $100.
(c) The taxpayer's marital status is determined as of the last day
of the taxable year, unless his spouse dies during the year, in whieh
case such determination is made as of the date of spouse's death.
(d) A normal-tax exemption of $500 is allowed as a oredit against
net income for the purpose of the normal tax; however, in the case of a
joint return pf husband and wife the normal-tax exemption is $1,000 ex
cept that, if the adjusted gross income of one spouse is less than $500,
thw normal-tax exemption is $500 plus the adjusted gross income of such
spouse,
(e) Surtax exemptions of $500 for the taxpayer, $500 for his spouse,
and $500 for each dependent with respect to whom exemption may be claimed
are allowed as a credit against net income for the purpose of surtax.
Suoh dependents must have received from the taxpayer more than one-half
their support for the year and must have had less than $500 gross inoome
during such year,
(f) A dependent is defined as a close relative with Income of less
than $500 who received more than one-half of his support from the tax
payer. A close relative meanst Son, daughter, or a descendant of either!
stepson, stepdaughter, son-in-law, daughter-in-law; father, mother, or
ancestor of either; stepfather, stepmother, father-in-law, or mother-inlaw; brother, sister, stepbrother, stepsister, half brother, half sister,
brother-in-law, or sister-in-law; uncle, aunt, nephew, or nieoe; provided
he or she is a oitizen of the United States, Canada, or Mexico, and has
not filed a joint return with another person. Dependents meeting these
qualifications need not be under 16 years of age.
(s) Adjusted gross inoome is defined as gross income less business
deductions, expenses of travel and lodging-in Connection with employment,
reimbursed expenses in oonneetion with employment, deductions attributable
to rents and royalties, certain deductions of life tenants and income bene
ficiaries of property held in trust, and losses from the sales or ex
changes of property.
(h) Musterlng-out payment with respect to service in the military or
naval forces of the United States is exoluded from gross income.
(i) A special deduction for the blind of $500 is allowable in com
puting net income.
(j) The deduction for contributions, as well as the deduction for
medical and dental expenses is based on adjusted gross income instead
of net income.
(k) An option&l standard deduction in lieu of allowable deductions,
tax credits for foreign tax paid and tax paid at source on tax-free
covenant bonds, and credit against net income for Government interest,
is provided; suoh standard deduction is $500 if the adjusted gross
income is $5,000 or more; or it is approximately 10 percent of the
adjusted gross ineome if the adjusted gross income is less than $5,000
in which case the tax liability is determined from the tax table (sup
plement T) the computation of which utilises the standard deduction*
In case of husband and wife filing separate returns, the standard
deduction is not allowed to either if the net income of one of the
spouses is determined without regard to the standard deduction*
(l) The victory tax of 5 percent on the victory tax net inoome is
repealed*
(m) The earned income credit allowed against net income for normal
tax computation is repealed*
(n) The normal tax rate is reduced from 6 percent to 3 percent*
(o) The former surtax rates of 13 percent on surtax net income not
over $2,000 progressing to 82 percent on surtax net income over $200,000
are increased to 20 percent on surtax net income not over $2,000
progressing to 91 percent on surtax net income over $200,000*
(p) The optional tax table (supplement T) is revised to reflect the
increase in tax rates as well as the increased allowance for deductions
from 6 percent of gross income to approximately 10 percent of adjusted
gross income, and is extended to cover the tax on adjusted gross income
of not more than $5,000 from any source whatsoever*
(q) Returns for a fiscal year ending in the period July through
November 1944 are subject to the law applicable to taxable years beginning
on January 1, 1943, as well as the law applicable to taxable years be
ginning on January 1, 1944* A tentative tax is computed under eaoh law,
after which each tax is prorated according to the number of days in eaoh
year, end the total tax is the sum of the prorated taxes*
Adjusted gross income
Adjusted gross income, introduced by the 1944 act, is defined as
gross income minus allowable trade and business deductions, expenses
of travel and lodging in conneotion with employment, reimbursed expenses
in connection with employment, deduotions attributable to rents and royalties
oertain deductions of life tenants and income beneficiaries of property
held in trust, and allowable losses from sales of property* Should these
allowable deductions exceed the gross income, there is an adjusted gross
deficit* Adjusted gross inoome provides a means whereby different kinds
of gross income are placed substantially on a par with each other, so that
in eaoh case the tax liability may be determined by means of a tax table*
In the case of a wage earner with no income except wages his gross income
for tax purposes is his total receipts; in the case of a merchant, however,
gross income is total sales, less cost of goods sold* Formerly,the tax
rates could not be applied to the income of the merchant and wage earner
until the net income of each had been determined after deducting not only
cost of doing business but also all deductions and credits the law allowed,
including allowable personal expenses such as contributions, medical expenses
taxes, interest, and casualty losses.
25
- 5 In table 1 showing sources of income, the net profit and net loss
from similar sources are tabulated in juxtaposition* When these positive
and negative amounts are combined with the other items of income the
result is adjusted gross income (or deficit)*
Deductions
The 1944 act in effect divides all deductions into two groups*
One group, deductible from gross income in computing adjusted gross
income, consists of expenses incurred in trade or business, deductions
attributable to the production of rents and royalties, expenses of
travel and lodging in connection with employment, reimbursed expenses
in connection with employment, deductions for depreciation and de
pletion allowable to a life tenant or an income beneficiary of property
held in trust, and allowable losses from sales or exchanges of property*
These deductions, except losses from sales of property, are not tabulated
and the income to which they relate is reported as a net figure*
The seoond group of deductions consists of the allowable personal
expenses having no relation to business or investments, such as contri
butions, medical expenses, taxes, interest, and casualty losses, which
are deductible from the adjusted gross income for the computation of net
income* To relieve taxpayers of the burden of having to itemise these
deductions in detail and of having to support them with evidence, the
1944 act provides a substitute called the optional standard deduction,
which the taxpayer may use, if he chooses, instead of itemising his
actual deductions* If the adjusted gross income is $5,000 or more,
the standard deduction is $500* If the adjusted gross income is less
than $5,000, the standard deduction is approximately 10 percent of the
adjusted gross income, and is allowed automatically through the use of
the tax table* In the case of husband and wife living together and
filing separate returns, the standard deduction is not allowed to the
remaining spouse if the net income of one spouse is determined without
regard to the standard deduction*
For the segment of taxpayers who do not use the standard deduction,
the itemised allowable personal expenses which are deductible from
adjusted gross income are tabulated in table 1 as well as the resulting
net income* For the taxpayers who use the standard deduction, neither
the standard deduction nor the net income is available*
Exemptions
Under the 1944 act, the amount of exemption allowed as a credit
against net inoome for the purpose of computing the normal tax and the
amount of exemption allowed for computing the surtax are determined
separately* The normal-tax exemption, not tabulated in statistics, is
$500 for the taxpayer, except that, if husband and wife file a joint
or oombined return, the normal-tax exemption is $500 plus the amount of
the smaller of the two adjusted gross inoomes but not more than $1,000*
If the optional tax is paid, normal-tax exemption is allowed automatically*
-
6
-
The surtax exemption» in reality & per capita exemption» Is $500
for the taxpayer, $500 for his spouse if a joint or combined return is
filed, and $500 for each dependent with respect to idiom the taxpayer
(and spouse, on a joint return) may claim a surtax exemption. A
dependent is a clote relative with income of less than $500 who received
more than one-half of his support from the taxpayer. If the optional
tax is paid, surtax exemption is allowed automatically.
There were 111,321,075 surtax exemptions claimed on the income tax
returns for 1944. Slight duplication in exemptions exists on account
of dependents with less than $500 income, who file a return in order to
claim refund of tax withheld on wages; such wages are not taxable to
the dependent nor to the taxpayer claiming the exemption. The amount
of surtax exemption tabulated in this release includes the surtax
exemptions from returns with optional tax, whereiii this exemption is
allowed automatically, as well as the surtax exemptions from returns
on which the tax is computed.
Tax liability, payments, and overpayment
The normal tax rate is 3 percent on the normal tax net income, and
the surtax rate is 20 peroent on surtax net income not over $2,000
increasing at graduated rates to 91 percent on surtax net income over
$200,000. An optional tax table, stating the tax liability for various
adjusted gross income brackets, is provided in supplement T of the
Code and may be used at the election of the taxpayer whose adjusted
gross income from whatever source is less than $5,000. The tax therein
is computed at the same rates as sure used for computing the tax in
detail; and there are allowed the normal-tax exemption, surtax exemptions
for the number of persons with respect to whom surtax exemptions may be
claimed, and the standard deduction which is 10 percent of the amount of
the midpoint of each adjusted gross income bracket. This midpoint is
also the base for the optional tax computation.
The Federal income taxes of most individuals are collected on
a current tax payment basis through the tax withheld from wages and/or
the payments made on Declaration of Estimated Income Tax, Form 1040-ES.
In cases where these payments are insufficient to cover the total tax
liability, the balance is paid in cash with the filing of the final
return after the close of the income year. Overpayment of tax is
refundable to the taxpayer unless he signifies on his return that he
wishes the overpayment to be credited on 1945 tax liability. The
overpayment tabulated in this release does not show separately the
auaounts refunded and credited on 1945 tax; however, these amounts will
be available in the report.
o r*
¿b
- 7 Classification of returns
For the tables in this release, individual returns are classi
fied as taxable and nontaxable, as returns with standard deduction
or with itemised deductions, by adjusted gross income classes, and
by the marital status of the taxpayer*
The classification of returns as taxable and nontaxable is
based on the existence or nonexistence of a tax liability*
Adjusted gross income, being common to all types of returns,
supplies the base for adjusted gross income classes regardless of
the amount of net income or net deficit when computed* Returns with
adjusted gross deficit are designated no adjusted gross income and
the size of the deficit is disregarded*
Returns with standard deduction are optional returns, Form W-2 j
short-form returns, Form 1040} and long-form returns, Form 1040,
with adjusted gross income of #5,000 or over on which the #500
standard deduction is used*
Returns with itemized deductions are long-form returns, Form 1040,
on which deductions are itemized in detail} long—form returns, Form
1040, with no deductions, filed by spouses of taxpayers who itemized
deductions (such spouses are denied the standard deduction)} and re
turns, Form 1040, with no adjusted gross income whether or not deduc
tions are itemized*
The classification of returns according to the marital status
of the taxpayer, applied to all returns, is based on the marital
status of the taxpayer at the close of the taxable year, or on the
day before the death of a spouse* The four classifications ares
Joint returns of husbands and wives, separate returns of husbands
and wives, separate community property returns, and returns of
single persons. Returns in each of the classifications, except
that of joint returns of husbands and wives, are classified as re
turns of men or returns of women* The head of family status is
abolished by the 1944 act.
Description of the sample and limitations of data
Tables 1 and 2 in this release were derived from a basic sample
of individual income tax returns. Forms 1040 and W-2, composed of
the following nine strata» (a> 1 peroent of taxable assessable re
turns, Form W-2} (b) 1 percent of taxable nonassessable returns.
Form W-2} (o) 1 percent of nontaxable returns, Form W-2} (d) 1 per
cent of taxable assessable returns, Form 1040, with adjusted gross
income under #7,000} (e) 1 percent of taxable nonassessable returns.
Form 1040, with adjusted gross income under #7,000} (f) 1 percent of
nontaxable returns. Form 1040, with adjusted gross income under #7,000}
(g) 10 percent of returns, Form 1040, with adjusted gross income from
#7,000 to #10,000} (h) 20 percent of returns,Form 1040, with adjusted
gross income from #10,000 to #25,000} and (i) 100 percent of returns,
-
8
-
Form 1040, with adjusted gross income of #25,000 and over. Taxable as
sessable returns are taxable returns showing tax withheld and/or declara
tion payments totaling less than the tax liability. Taxable nonassessable
returns are taxable returns showing tax withheld and/or declaration pay
ments equal to or in excess of the tax liability. Precise 1 percent,
10 peroent, and 20 percent representation of returns with adjusted gross
income under #7,000, from #7,000 to #10,000, and from #10,000 to #25,000,
respectively, was, of course, not achieved. However, the universes, on
an over-all national basis, applicable to each of the strata (a) to (h),
inclusive, were independently determined and the data tabulated from the
sample were extended to such universes, so that no random sampling error
attaches to the total number of returns for each of the various strata.
A relatively negligible error in the total number of returns does result,
however, from the use of rounded extension factors.
In computing the possible variation of a given frequency due to
random sampling, a range of two standard errors was used; chances are
19 out of 20 that the frequency as estimated from the sample tabulation
differs from the actual frequency, if the entire universe were tabulated,
by less than twloe the standard error. Variation beyond the two-error
limit would occur only 1 time in 20 and would be sufficiently rare to
Justify a two-error range in defining sampling variability. Aooordingly,
frequencies of the magnitude of 1 million or more in cells associated
with taxable or nontaxable adjusted gross income classes under #7,000 are
subject to variation of less than 3 percent; frequencies of 100,000 or more
are subject to variation of less than 10 percent; frequencies of 10,000 or
more are subject to variation of less than 30 percent; and frequencies of
less than 1,000 are subject to 100 percent or greater variation. Frequencies
of 1,000 to 10,000, subject to maximum variation of between 100 and 30 percent,
are shown in tables 1 and 2 with footnotes to emphasise their great variability;
however, frequencies of less than 1,000, and corresponding money amounts,
are omitted from the tables, since such da'ta are considered too unreliable
for general use. In determining the variability of cell frequencies due to
random sampling, consideration was given to the fact that data for taxable
adjusted gross income classes under #7,000 are composites derived from one
or more of the strata (a), (b), (d), and (e), and data for nontaxable classes
are generally composites derived from strata (c) and (f), so that frequencies
of like magnitude may be subject to different degrees of sampling variability,
depending on the proportions contributed by the various strata. In order to
determine sampling variability associated with specific frequency levels,
without reference to their composition, a comprehensive standard error formula
was utilised, which involved a downward revision of sample sizes to offset
any minimization of error which might result from use of the composite, rather
than the component, frequencies.
. J ^ u!nCie8' *n
associated with adjusted gross income classes from
#7,000 to #25,000, of magnitude of 100,000 or more are subject to less than
2.5 percent variation; frequencies of 10,000 or more are subject to less than
10 percent variation; and frequencies of 1,000 or more are subject to less
than 30 peroent variation. The degrees of variability noted above relate
only to cell frequencies and do not indicate the variability associated with
money amounts of income, deductions, or tax.
Table 1« - Individual returns for 1944» by taxable and nontaxable returns and by adjusted gross income classes - Part I, « n returns; Part II, returns
with standard deduction; Part III, returns with itemized deductions: Number of returns, sources of income, adjusted gross income, deductions, sur
tax exemption, tax liability, tax payments, and tax overpayment
PART I. - AIL RETURNS
Adjusted gross income 3/ classes
1
2
5
4
5
6
7
8
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
SO
51
52
55
54
55
56
57
Taxable individual returnst
0.5 under 0.75
0.75 under 1
1 under 1.25
1.25 under j.,5
1.5 under 1.75
1.75 under 2
2 under 2.25
2.25 under 2.5
2.5 under 2.75
2.75 under 5
5 under 5.5
5.5 under 4
4 under 4.5
4.5 under S
5 under 6
6 under 7
7 under 8
8 under 9
9 under 10
10 under 11
11 under 12
12 under 15
15 under 14
14 under 15
15 under 20
20 under 25
25 under 50
50 under 40
40 under 50
50 under 60
60 under 70
70 under 80
80 under 90
90 under 100
100 under ISO
150 under 200
200 under 250
250 under 500
500 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 5,000
5,000 under 4,000
4,000 under 5,000
5,000 and over
Total taxable individual returns
Nontaxable individual returns: 18/
No adjusted gross Income 19/
Itader 0.5
0.5 under 0.75
0.75 under 1
1 under 1.25
1.25 and over
Total nontaxable individual returns
Qrand total
58 Individual
Iimb —
Individual
income
59
returns with adjusted gross
under $5,000
returns with adjusted gross
0f $5,000 and over
Total
number
of
returns
Salaries
and
wages U
2,045,206
1,071,591
2,100,718
2,9S0,919
5,477,486
5,264,7051
5,512,445
4,119,028
5,459,860
4,857,752
5,565,526
5,405,802
5,884,555
5,150,449
2,870,005
6,042,240
6,582,114
2,786,617
2,514,455
6,519,005
4,155,166 12,125,501
2,785,527
9,595,592
1,777,741
6,604,705
1,059,256
4,125,642
955,071
5,812,905
417,756
1,645,458
220,512
819,425
151,105
565,675
111,991
455,110
88,911
574,650
67,595
286,724
267,449
57,575
46,056
215,421
190,297
58,565
129,466
756,752
67,557
492,058
525,505
58,455
408,846
41,610
20,422
245,872
11,844
161,150
7,255
115,442
78,107
4,668
5,065
55,590
2,155
59,408
4,875
102,840
56,525
1,565
16,776
665
551
8,902
10,109
518
5,840
155
5,769
159
62
2,705
655
58
12
449
6
155
2
1
5
5
2
1
Divi
dends
and
interest 5/
(Adjusted gross income classes and money figures in thousands of dollars)
Income
Annui
Sales or ex
Sales or ex
ties
Kents and
Business or
changes of
Uiscelchanges of prop from
Partnership 9/
and
royalties 7 /
profession 8/
capital
laneous
erty other than estates
penassets 10/
income-15/
capital assets 11/ and
—
sions 6/
trusts 12 t
Net profit Net loss Net profit. Net loss Net profit Net Ices Net gain Net loss Net gain Net loss
52,515
59,812
66,900
71,686
76,956
80,845
75,805
72,759
75,268
72,464
149,051
111,068
116,790
109,515
166,915
150,776
110,951
98,675
88,269
81,608
72,757
70,114
64,782
58,400
248,578
184,706
155,919
204,076
142,640
108,884
85,270
66,556
51,950
45,781
150,058
68,978
59,460
29,442
50,050
20,690
54,522
25,951
18,596
6,519
5,584
5,585
8,799
7,755
5,025
9,656
15,657
10,845
12,058
10,617
7,258
8,597
7,717
7,515
8,455
9,487
7,275
5,596
8,204
6,405
5,546
5,169
1,658
1,626
1,227
1,251
1,061
1,556
5,586
1,927
2,057
2,456
1,456
1,085
1,050
589
564
567
984
595
156
51
101
154
68
64
55
6
•
-
55,692
56,519
65,274
64,290
70,197
71,559
67,995
75,600
72,207
65,227
118,740
97,095
79,162
59,554
85,187
65,715
44,220
41,192
52,817
28,752
25,798
25,819
18,584
17,571
65,446
45,769
26,259
55,417
22,665
14,850
10,808
8,054
5,497
5,955
12,061
5,727
5,740
2,505
2,612
690
1,506
496
75
1,921
164
—
2
-
2,440
4,545
4,895
6,985
6,857
8,109
9,589
8,979
8,618
7,715
14,072
10,926
6,274
5,845
6,144
5,559
2,674
2,469
2,052
1,617
1,557
1,105
1,245
912
5,684
2,595
2,122
2,074
2,054
955
600
519
271
244
627
255
92
189
114
58
195
76
61
6
1
2
—
55
166,047
515,215
442,202
487,455
515,258
550,654
501,790
491,470
465,050
440,102
746,462
572,468
489,007
427,500
649,508
511,245
407,208
554,780
292,989
246,700
212,124
187,254
165,747
142,029
552,845
526,126
217,579
268,224
150,175
97,558
69,025
49,682
55,584
27,825
75,512
57,106
18,545
10,625
15,110
5,257
8,955
1,707
5,119
756
1.644.520 147.222
11.706.681
267.147
6
—
-
5,571
9,174
10,855
10,097
12,570
11,825
11,189
11,751
8,595
9,184
15,299
12,812
7,495
6,602
12,667
8,446
4,961
5,219
5,795
5,444
5,652
5,276
5,151
1,956
12,958
7,476
6,525
8,994
6,554
4,854
5,249
5,001
2,084
1,565
6,567
5,805
1,155
1,182
565
601
1,299
542
654
208
19C
54
9
42.554.468
89.729.018
5.829.799
169.660
191,905
5,260,590
851,628
220,255
157,609
95.042
29,666
768,465
515,271
102,606
82,805
98.918
12,620
20,572
22,640
10,775
7,915
19.408
1,060
2,066
5,208
1,967
1,492
1.950
10,165
56,169
54,278
15,655
15,861
17.741
11,496
5,090
2,055
615
1,059
775
12,909
154,404
99,829
60,921
41,856
42.646
255,586
17,522
6,218
2,815
5,168
5.187
4.757.027
1.595.729
95.951
11.745
127.870
21.084
592.546
268.095
826
1,885
1,476
1,409
1,225
2,208
2,460
5,965
1,845
2,807
5,745
5,245
5,497
5,425
4,565
5,467
2,511
2,152
1,665
1,066
678
1,057
854
718
2,110
925
555
656
475
295
126
45
60
25
45
51
9
29
4
426
5
—
•
498
-
5,828
5,602
6,578
6,012
8,021
8,885
7,656
7,798
7,495
8,554
12,652
9,057
8,882
7,577
10,965
12,054
6,021
5,200
4,591
5,945
5,241
5,057
2,411
2,427
8,406
5,448
5,810
4,151
2,554
2,459
972
656
456
554
805
285
121
69
62
50
54
25
16
5
1
—
1
5.745.686 48.175
1.109.544
5,715 29,765
7,044
2,490
5,578
741
100
2,055
1,225
2,554
5.897
6.218
15,854
28,980
44,246
47,668
55,911
70,019
84,002
90,510
77,462
90,628
172,668
144,935
148,655
151,585
228,615
227,991
201,566
189,115
166,794
156,455
145,968
152,225
124,229
120,174
505,506
571,192
277,844
411,764
276,682
206,559
146,694
110,009
84,005
62,166
185,259
75,712
57,189
25,876
25,245
15,555
14,997
5,954
5,140
2,956
4,797
5,017
4,056
-
28.725
6
80
—
-
58.217
91,124,747
5.925,750
181,405
1.772,589
168.506
12,099,227
555.240
44,645,941
79,652,198
1,262,960
155,057
1,122,759 126,728
6,996,985
410,865
1,229,616 60,865
2,467,554
11,472,550
2,660,770
46,546
5,100,242
124,576
4,542,795
41,578
5,581
8,150
10,802
14,465
15,251
18,009
20,851
22,959
22,257
19,181
42,157
40,147
57,686
54,122
58,948
50,409
55,129
28,918
26,548
24,056
19,510
18,449
17,954
15,449
61,577
46,152
55,971
49,202
55,506
29,571
22,687
17,461
14,296
14,276
45,401
26,414
17,611
9,951
16,679
12,996
20,054
11,674
10,511
5,502
5,658
25,525
517
1,649
1,472
1,805
2,984
5,200
5,555
5,595
2,159
1,525
5,052
2,482
1,158
1,795
2,827
1,497
1,895
1,722
1,621
1,270
1,259
711
1,065
696
5,419
2,141
1,451
2,240
1,151
1,120
798
445
575
284
1,166
574
185
218
284
455
796
25
521
4,564
7,228
8,816
8,751
10,291
10,645
7,945
11,542
8,542
15,060
20,161
19,455
25,250
17,747
40,360
59,096
25,552
22,661
21,916
20,152
18,095
18,044
16,455
15,028
66,001
47,940
58,402
59,056
40,698
52,051
25,961
21,726
14,858
12,055
45,964
20,899
14,757
9,621
11,186
8,287
15,625
9,906
9,842
5,744
50
1,557,580
2,586,259
5,921,519
4,825,895
5,614,142
6,574,685
6,645,165
6,811,467
7,507,911
7,222,747
15,578,815
10,594,197
7,516,504
4,915,701
5,057,085
2,693,021
1,645,762
1,279,045
1,060,155
951,557
775,780
715,970
620,510
558,495
2,224,022
1,504,511
1,049,789
1,450,927
907,988
645,765
468,959
548,712
259,874
202,711
584,702
267,591
146,956
95,709
108,299
68,726
95,265
55,754
46,865
21,226
14,108
6,566
15,529
7,719
1
2
5
4
5
6
7
8
9
10
11
12
IS
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
—
6
-
-
-
12,944
20,511
28,178
27,155
54,125
50,540
25,065
28,615
27,698
22,945
56,576
35,725
55,525
25,504
35,552
22,456
15,615
10,622
8,114
7,492
5,055
5,445
4,214
4,075
15,696
9,048
8,809
10,857
6,715
4,581
2,498
1,860
1,584
1,669
2,584
889
578
465
415
81
179
50
115
2
1
—
1
-
192.744
62.525
62.088
911.224
572.502
14,570
7,046
5,281
1,802
2,927
5.046
11,664
11,097
5,566
2,010
786
2.757
2,156
555
489
692
51
269
56,591
4,676
1,928
1,055
1,014
2.466
2,655
1,748
1,788
991
754
3.761
5,454
10,156
6,651
5,061
2,822
4.996
52.675
51.659
4.189
67.528
224.405
66.514
129,616
544,055 140,066
42,204
97,851
185,251
419,400 ^90,554,141
SB
797,962
24,510
51,784
759,650
184,202
25,910,825
5»
6
86,590 1.142.016
47,111,495
649,650
5,772.409
484
1,465
959
1,958
629
1,524
2,766
2,688
1,181
1,206
1,426
1,710
5,041
1,650
848
658
1,591
1,502
1,444
945
665
945
721
610
5,210
1,849
1,199
2,087
1,597
1,175
962
558
516
587
802
582
290
98
186
84
76
71
7
Adjusted
gross
Income 14/
84,567
-a
en
(25)
-
,
«
,
114.761.585 49
22/ 249,771
947,548
476,487
195,918
149,507
185.892
50
51
52
55
54
55
11.657
51.101 2I/1 .705.580
56
922.881
606.602 SAl6,464~965
57
r o
—
j
Table 1. - Individual returns for 1944, by taxable and nontaxable returns and by adjusted gross Income classes - Part I, all returns;
Part II, returns with standard deduction; Part III, returns with itemized deductions: Number of returns, sources of income, adjusted
gross income, deductions, surtax exemption, tax liability, tax payments, and tax overpayment - Continued
PAST I. - ALL RETURNS - Continued
(Adjusted gross income classes and money figures in thousands of dollars)
Total taxable individual returns
lontaxable individual returns: 18/
Mo adjusted gross Income 19/
Under 0.5
0.5 under 0.75
0.75 under 1
1 under 1.26
1.25 and over
Total nontaxable individual returna
Grand total
Individual returns with adjusted gross
income under $5,000
Individual returns with adjusted gross
Income of $6.000 mtd over ______________________
fcr footnotes, see p. 17,
1,645,474
2,659,601
5,524,746
5,557,541
5,687,396
5,852,444
5,741,190
5,722,221
3,780,515
5,565,985
6,099,517
4,277,725
2,765,607
1,591,894
1,595,577
591,101
295,682.
196,511
142,894
115,781
85,924
72,269
57,676
47,994
161,466
82,551
46,585
48,759
25,556
15,265
7,910
6,086
5,219
2,225
4,904
1,495
625
528
296
144
145
60
56
IS
4
5
5
_______________ i_
51.606.896
225,978
2,595,750
812,169
284,695
192,606
_____ 146.549
4.065.642
Tax lia
bility 16/
28,775
117,588
252,116
552,824
457,886
568,240
620,010
644,419
719,094
756,140
1,452,575
1,209,589
955,019
671,120
758,757
452,645
506,455
255,541
224,555
206,799
180,968
174,545
157,262
147,550
647,519
505,475
594,428
598,052
419,786
520,470
245,292
191,<*S
146,989
118,224
560,446
174,045
97,965
65,495
75,515
48,200
66,467
57,556
51,678
15,178
10,046
4,845
9,511
4.801
16.216.401
•an
am
mm
ms
ms
m
55.660.558
16.216.401
52,265,092
8,765,590
5,597,446
7,451,011
Tax
withheld
Payments
on 1944
Declaration
of Estimated
Tax 17/
68,585
157,714
255,954
550,315
417,626
505,995
5SE,553
571,845
645,165
658,579
1,290,842
1,064,482
806,218
554,409
514,997
256,176
119,355
85,749
65,597
57,996
44,608
42,908
54,250
50,755
125,156
85,210
56,654
72,267
44,421
29,587
21,042
14,575
10,541
7,217
18,899
6,915
2,962
1,757
1,820
1,112
699
422
120
85
51
Balance
of tax
due at
time of
filine
Overpayment
(refund, or
credit on 1945
tax)
5,124
14,559
25,191
28,224
55,646
45,849
52,055
54,020
57,525
60,652
127,955
115,787
115,065
102,855
179,456
165,246
155,957
124,588
116,949
112,495
104,511
101,741
95,502
90,586
419,785
541,606
279,207
440,822
519,897
248,475
192,957
151,825
118,789
95,620
298,824
145,555
85,509
56,092
64,219
41,565
58,495
52,557
29,955
14,404
9,ae
2,175
8,884
4.680
6,073
25,144
40,490
58,716
71,760
87,544
85,945
89,068
90,661
87,405
159,669
125,556
96,952
72,367
102,621
76,879
68,021
59,014
52,059
45,196
59,855
57,054
54,655
51,505
129,759
98,895
72,457
104,625
68,846
51,978
58,292
29,655
21,856
18,594
51,850
25,525
15,286
8,984
9,705
6,265
8,506
4,955
2,528
1,086
812
2,668
626
121
51,006
57,829
65,499
64,429
67,146
66,946
70,525
70,515
72,255
70,295
125,871
92,017
65,166
58,498
58,518
25,656
14,855
11,809
10,272
8,886
7,784
7,560
7,125
5,276
27,181
18,252
15,850
19,660
15,578
9,568
6,980
5,009
5,997
3,206
9,126
5,525
1,794
1,520
2,452
759
1,062
555
722
398
25
9.545.227
5.515.697
2.410.917
1.255.440
2,700.
55,500
17,589
4,645
5,245
5.775
7,851
4,759
1,661
1,077
1,174
5.579
mm
mm
tem
m
mm
mm
m
10,552
60,059
19,050
5,622
4,417
9.152
1
2
S
5
4
6
7
8
9
10
11
12
18
14
15
16
17
18
19
20
2
1
22
25
24
25
26
27
28
2»
È £$&£*6fieg883ggZS8{28
Taxable individual returns:
0.5 under 0.75
0.75 under 1
1 under 1*25
1.25 under 1.5
1.6 under 1,75
1.75 under 2
2 under 2.25
2.25 under 2.5
2.5 under 2.75
2.75 under 5
5 under 5.5
5.5 under 4
4 under 4.5
4.5 under 5
5 under 6
6 under 7
7 under 8
8 under 9
9 under 10
10 under 11
11 under 12
12 under IS
IS under 14
14 uixler 15
IS under 20
20 under 25
25 under 50
50 under 40
40 under 50
50 under 60
60 under 70
70 under 80
80 nader 90
90 under 100
100 under ISO
150 under 200
200 under 250
250 under 500
500 under 400
400 under 500
500 under 750
750 under 1,000
1,000 under 1,500
1,600 under 2,000
2,000 under 5,000
5,000 under 4,000
4,000 under 5,000
5,000 and over
Amount of
surtax ex
emption 15/
SS88P8
8SCSBPS
$ ÈSfcSifc&eÉSSSSSSZSJSPgSgSSSSSBÌSSSSSiSKKS
Adjusted gross income ¿ / classes
88.951
19.901
108.852
56
9.652.178
5.555.598
2.410.917
1.562.292
57
7,902,785
854,552
1,092,900
1,084,644
58
1,729,595
4,681,246
1,518,017
277,647
58
Table 1. - Individual returns for 1944! by taxable and nontaxable returns and by adjusted gross income classes - Part I, all returns; Part II, returns
with standard deduction; Part III, returns with itemized deductions; Number of returns, sources of income, adjusted gross income, deductions, sur
tax exemption, tax liability, tax payments, and tax overpayment - Continued
PART II. - RETURNS WITH STANDARD DEDUCTION 22/
Adjusted gross income 3/ classes
Taxable individual returns;
0.5 under 0.75
0.75 under 1
1 under 1.25
1.25 under 1.5
4
1*5 under 1*75
S
6
1.75 under 2
2 under 2.25
7
2.25 under 2.5
8
2.5 under 2.75
9
2.75 under 3
10
3 under 3.5
3.5 under 4
4 under 4*5
15
4.5 under 5
14
5 under 6
15
6 under 7
16
7 under 8
17
8 under 9
18
9 under 10
19
10 under 11
1 1 under 12
12 under 13
13 under 14
25
14 under 15
24
15 under 20
25
26
20 under 25
25 under 30
27
30 under 40
28
40 under 50
29
50 under 60
50
60 under 70
51
70 under 80
52
80 under 90
33
90 under 100
54
100 under 150
35
36
150 under 200
200 under 250
37
250.under 500
38
300 under 400
39
400 under 500
40
500 under 750
41
42
750 under 1,000
1,000 under 1,500
43
1,500 under 2,000
44
2,000 under 3,000
45
3,000 under 4,000
46
4,000 under 5,000
47
5,000 and over
48
1
a
s
1
1
12
20
21
22
49
50
51
52
53
54
55
Total taxable individual returns
Kontaxabie individual returns: 18/
No adjusted gross income 19/
Under 0.5
0.5 under 0.75
0.75 under 1
1 under 1*25
1*25 and over
56
Total nontaxable Individual returns
57
Grand total
58 Individual returns with adjusted gross
Number
of
returns
Salaries
and
wages ¡J
1,914,490
2,646,499
5,065,224
3,045,729
2,947,925
2,880,455
2,617,116
2,359,266
2,268,034
2,019,186
3,259,678
2,164,560
1,355,694
765,961
628,426
244,097
123,363
77,740
54,115
38,955
28,197
21,622
16,134
13,160
56,885
14,379
6,268
5,419
2,092
980
486
288
174
115
165
45
22
6
6
5
3
2
-
1,054,861
1,961,954
2,981,696!
5,695,518
4,275,047
4,840,081
5,024,995
5,059,432
5,454,912
5,515,755
9,689,95C
7,381,245
5,107,539
3,083,879
2,564,270
890,592
393,527
232,861
158,053
113,642
81,520
64,378
44,094
38,575
113,878
49,502
23,680
21,661
9,397
3-980
2,242
885
965
870
667
174
72
31
107
(23)
-
-
-
(Adjusted gross income classes and money figures in thousands of dollars)
Divi
Annui
Sales or ex
ties
changes of
Bents and
dends
Business or
Partnership 9/
and
and
capital
royalties jf
profession 8/
inter
pen
assets 10/
est 5/
sions 6/ Net prtfLt Net loss Net profit Net loss Net profit Net loss Net gain Net loss
22,515
52,991
34,814
55,180
57,595
41,992
58,598
38,967
37,22!
59,459
74,878
60,550
66,808
56,743
78,201
65,600
43,615
32,593
25,965
21,092
16,971
14,675
11,929
10, 311
30,068
14,466
7,588
8,406
3,916
2,113
1,144
727
504
188
824
64
48
31
7
15
11
1
-
5,484
5,811
8,145
5,625
5,553
6,071
4,163
3,468
5,464
5,553
3,088
5,581
3,534
3,104
2,850
-* 3,927
1,444
1,162
314
480
245
359
191
135
426
94
230
128
29
9
26
1
-
-
2
8
-
-
159,075
249,405
556,450
356,525
562,251
596,005
362,767
360,292
535,962
310,482
542,647
418,726
355,427
310,159
461,448
366,048
286,751
221,710
188,866
154,048
121,763
102,714
84,227
69,571
242,557
112,337
61,372
61,475
29,268
14,393
9,637
6,786
4,189
2,740
6,185
3,946
1,749
491
867
.
1,078
11
-
4,765
7,SOB
6,582
6,575
8,728
8,280
6,755
6,400
5,219
5,370
9,255
6,327
3,708
3,113
6,494
5*476
1,863
1,960
1,585
981
1,022
848
448
291
2,353
1,057
551
829
406
182
126
125
23
27
89
16
146
(25)
-
1,826
2,758
5,054
5,949
3,428
5,082
5,296
4,586
4,609
5,965
8,126
5,960
2,972
3,065
5,137
3,003
1,12 2
1,046
687
526
434
393
218
218
1,086
630
187
173
40
46
25
12
5
1
12
1
(23)
. -
27,171
55,552
55,965
35,977
55,705
59,275
38,777
40,049
38,237
38,763
67,087
55,370
41,441
31,124
51,373
55,489
21,650
18,746
12,370
10,886
9,559
8,067
5,769
5,260
16,161
7,651
3,395
3,665
2,293
946
502
460
281
219
135
300
383
(23)
6
(23)
(23)
'-
4,406
5,445
7,216
9,055
9,772
10,798
12,385
14,966
14,504
11,727
27,077
26,425
22,655
21,512
52,478
30,062
17,789
14,150
13,618
10,175
8,072
5,989
5,935
5,274
15,758
10,762
5,233
6,067
3,540
2,663
1,826
1,253
1,391
1,448
2,439
349
402
286
330
390
1,629
-
459
1,262
796
1,507
510
718
709
1,654
950
748
1,040
683
1,554
846
650
192
708
482
678
276
175
240
193
84
367
593
98
222
88
41
114
26
6
(23)
2
1
•
•
-
15,555
25,265
55,595
57,188
41,660
50,201
64,145
70,004
56,553
67,146
124,297
104,145
107,291
100,266
170,806
154,656
139,946
125,922
103,116
91,333
80,430
67,628
61,004
56,476
197,159
116,121
64,952
78,963
42,526
27,348
15,501
10,754
6,900
5,052
8,326
2,385
2,364
560
604
409
-
2,827
5,152
2,716
2,545
5,519
4,475
5,691
3,230
3,709
5,787
4,998
4,750
3,796
5,494
5,180
4,035
2,170
1,511
1,162
957
705
598
451
424
1 ,112
499
242
217
86
55
24
12
9
4
6
1
(23)
Sales or ex
changes of prop
erty other than
capital assets 1 1 /
Net gain Net loss
698
1,409
1,092
1,178
907
1,661
1,779
2,524
1,057
1,862
4,091
3,086
2,135
1,595
5,485
1,890
1,418
1,241
815
459
358
525
568
475
837
565
128
91
104
11
10
1
9
•
2
-
1
-
—
-
-
•
J-
-
409
•
»
-
Income
from
estates
and
trusts =*
Miscel
laneous
in
come 15/
3,892
4,477
6,175
4,694
6,224
5,858
4,526
6,733
4,815
7,100
11,076
10,996
10,996
8,201
25,742
21,695
11,998
8,752
8,898
6,051
5,269
5,309
5,656
4,523
12,625
8,013
3,640
4,642
1,822
1,675
598
590
251
276
925
489
250
Adjusted
gross
incase 1A/
1
2
5
4
5
6
-
1
500
-
-
•
-
11,617
15,704
22,050
20,175
26,244
21,045
18,927
19,294
19,749
17,601
28,301
27,695
27,236
18,218
25,409
14,970
7,860
5,665
3,255
3,145
2,231
2,348
1,491
1,256
4,787
1,914
1,856
1,534
407
418
282
174
300
94
89
1
10
2
•
231.504
373.314
82.293.764
49
9,951
3,868
967
335
-
920,461
377,435
102,998
75,972
(2Ì)
50
51
52
55
54
55
511
1,411
559
1,068
1,472
762
1,255
1,074
1,519
428
1,847
842
356
932
610
995
374
353
499
481
345
108
184
114
577
448
149
156
63
22
22
31
3
2
(23)
2
30
-
•
34,620.944
69,714,286
1,008,777
76,478
771,854
71.656
7,449,954
114,849
2,526,133
18.429
396.807
69.724
58.275
18.961
3,180,654
692,909
117,040
71,468
(24)
760,433
280,503
69,115
55,073
(24)
14,956
8,036
1,191
412
-
1,857
766
305
81
-
29,830
13,764
3,695
2,524
-
3,562
1,115
66
120
-
119,863
70,711
27,655
17,895
(24)
13,988
3,511
1,521
802
-
6,426
3,504
750
662
-
1,436
656
_
114
-
5,335
1,732
645
400
-
•8,155
978
208
-
346
213
252
-
2,390
89
-
172
-
-
-
-t
996
888
240
_
-
1,250,682
2,517,948
5,455,486
4,181,651
4,785,476
5,595,650
5,552,980
5,598,784
5,948,272
5,798,932
10,547,228
8,075,254
5,732,696
5,623,152
5,398,010
1,571,227
919,740
657,232
510,861
408,087
323,557
269,305
217,349
190,703
628,780
318,197
170,826
185,035
92,618
53,230
51,258
21,423
14,746
10,855
19,483
7,688
4,850
1,6S7
1,923
1,223
1,589
1,642
-
7
8
9
10
U
12
15
14
15
16
17
18
19
20
22
1
2
2
3
24
25
26
27
28
29
30
31
52
53
54
55
36
37
38
39
40
41
42
43
44
45
46
47
48
4,062,176
1,165,033
24,595
¿>,009
49,611
4,863
236.226
19.823
11,322
2.207
8.113
9.341
810
2.652
2.125
15.119
1.477.077
56
38,683.120
70,879,319
1,033,372
79,486
821,465
76,519
7.686,181
134,671
2,537,455
20.636
404.920
79.064
39.085
21.612
253.627
388.455
83.770.841
57
37,569,973
66,069,898
642,502
67,429
605,900
65,518
5,070,174
107,997
906,212
15,621
205,631
59,626
25,886
16,245
97,664
308,976
73,737,267
58
1,315,147
4,809,421
390,870
12,057
215,565
13,001
2,616,007
26,675
1,631,243
5,015
199,289
19,459
15,199
5,569
135,965
79,456
10,033,574
59
income under $5,000
59 Individual returns with adjusted gross
income of «5.000 and over
For footnotes, see p# 17.
Tabl* 1. - Individual return* for 1944, ty taxable and nontaxable return* and by adjusted fro**
olasaaa - Part I, all return*;
Part H , return* with standard deduction; Part III, return* with iteadsed deduction* 1 Umber of returns, source* of income, ad
justed gross income, deductions, surtax exemption, tax liability, tax payments, and tax overpayment PART II. - RETURNS WITH STANDARD DEDUCTION 22/ - Continued
Adjusted gross income 5/ classes
Taxable individual returns1
0.5 under 0.75
0.75 under 1
1 under 1.25
8
1.25 under 1.5
4
1.5 under 1.75
S
S
1.75 under 2
2 under 2.25
7
2.25 under 2.5
8
2.5 under 2.75
9
2.75 under S
10
8 under 5.5
S.5 under 4
IS
4 under 4.5
14
4.5 under 5
15
5 under 6
16
6 under 7
7 under 8
17
18
8 under 9
19
9 under 10
10 under 11
11 under 12
12 under 18
IS under 14
28
14 under 15
24
25
15 under 20
26
20 under 25
25 under SO
27
28
50 under 40
29
40 under 50
JO
50 under 60
60 under 70
SI
82
70 under 80
SS
80 under 90
54
90 under 100
SS
100 under 150
S6
150 under 200
200 under 250
87
250 voder 500
58
500 under 400
59
400 under 500
40
500 under 750
41
42
750 under 1,000
45
1,000 under 1,500
44
1,500 under 2,000
2,000 under 3,000
45
46
5,000 under 4,000
47
4,000 under 5,000
5,000 and over
48
1
e
11
12
20
22
1
2
49
SO
51
52
58
54
SS
Total taxable individual returns
Icntaxable individual returns; 18/
No adjusted gross income 19/
Uhder 0.5
0.5 under 0.75
0.75 under 1
1 under 1.25
1.25 and over
56
Total nontaxable individual returns
57
Grand total
58
59
individual returns with adjusted gross
income under #5,000
Individual returns with adjusted gross
Income of 85.000 and over
footnotes, see p. 17.
(Adjusted gross income classes and money figures in thousands of donarsi
Amount of
Tax
Tax
Balance
Payments
surtax
liability 16/ withheld
on 1944
of tax
exemption 15/
Declaration
doe at
of
time of
Estimated
filing
Tax 17/
1,542,589
2,588,205
2,952,509
5,085,542
5,161,971
5,267,553
5,160,677
8,100,204
8,119,478
2,884,055
4,855,555
5,543,624
2,112,221
1,180,285
929,651
557,461
157,228
96,009
65,512
46,476
35,598
26,208
18,845
15,462
42,098
15,791
6,855
5,776
2,269
999
514
511
182
105
170
45
19
4
4
5
2
5
26,925
107,220
209,554
316,049
405,955
495,890
552,589
545,547
600,457
608,207
1,176,325
964,735
749,658
509,056
551,555
280,256
182,109
140,022
116,020
97,772
81,552
71,259
59,875
54,809
199,914
117,795
70,752
85,551
47,5a
29,529
18,277
15,158
9,291
7,055
15,552
5,941
5,827
1,294
1,527
916
1,415
817
66,555
128,816
214,179
298,459
571,920
445,705
475,774
481,854
557,062
541,298
1,057,987
858,855
629,158
405,514
549,752
129 ,6a
57,845
55,005
24,112
17,520
12,615
10,209
6,919
5,945
17,985
8,051
5,965
5,549
1,618
717
378
ia
122
175
108
26
12
2
18
(25)
«•
5,968
9,940
16,166
18,964
24,204
50,117
56,679
58,251
59,9a
a , 491
89,400
82,067
80,918
71,290
125,729
106,574
85,508
71,515
64,507
56,880
49,855
a,OSO
57,916
56,020
156,799
82,580
50,529
63,015
55,720
22,195
i4,2a
10,456
7,109
5,699
10,249
4,609
2,672
898
1,559
475
808
751
Overpayment
(refund, or
credit on
1945 tax)
5,502
19,840
55,027
50,668
60,650
75,780
72,053
74,571
74,921
72,455
151,202
101,166
77,559
55,808
74,794
54,596
a , 651
58,256
51,528
26,589
21,762
18,975
16,951
14,4M
si,ia
50,595
18,054
21,020
11,207
7,180
4,017
2,680
2,2S9
1,856
5,127
1,594
l,ia
408
150
48,680
51,576
55,859
52,022
52,858
61,711
52,118
50,890
51,469
49,057
82,265
57,551
57,756
21,556
18,905
10,176
5,896
4,550
4,127
2,966
2,678
1,972
1,895
1,605
6,015
5,218
1,817
2,255
1,000
565
562
144
199
196
152
87
(25)
14
'mm
1
2
S
4
5
6
7
8
9
IO
1
1
12
15
14
15
16
17
18
U
2
0
2
1
2
2
25
24
25
28
27
28
29
SO
SI
S2
SS
54
SS
—
•
—
_
mm
-
-
-
-
-
-
•
-
-
56
87
58
39
40
41
42
48
44
45
46
47
48
41.958.226
9.486.599
7.155.043
1.711.491
1.405.510
785.a s
49
•
2,515,075
671,888
171,524
114,550
(24)
»
mm
54,592
15,672
2,691
-
•m
•
-
w
-
em
am
•m
-m
-
5.272.841
•
S mm
«
_
•
-
—
•
4a
607
66
2,100
(24)
. -
5,977
755
192
192
«-
•
•
58,568
16,405
2,885
2,292
(24)
54
55
’
em
•
mm
50
51
52
SS
75.064
5.094
80.159
56
45.226.066
9.486.599
7.250.108
1.716.585
1.405.510
865.604
57
45,424,885
7, 2 a, 925
6,543,716
590,470
904,604
794,867
58
1,801,185
2,2 « , 677
686,592
1,126,116
500,906
70,758
59
Table 1* - Individual return« for 1944, by taxable and nontaxable returns and by adjusted gross income classes - Part I* all returns; Part II, returns with standard deductions Part III, returns
with itemised deductions« Number of returns, sources of income, adjusted gross income, deductions, surtax exemption* tax liability, tax payments, and tax overpayment • Continued
«*
PART III. - RETURNS WITH ITEMIZED DEDUCTIONS 25/
(Adjusted gross income olasses and money figures in thousands of dollars)
Adjusted gross ineoae 3/ classes
1
2
S
4
6
6
7
8
9
10
11
12
18
14
IS
16
17
18
19
20
21
22
28
24
25
26
27
28
29
SO
81
82
8
8
84
8
6
8
6
87
88
89
40
41
42
48
44
46
46
47
48
49
60
61
62
6
8
64
66
Taxable individual returns«
0*6 under 0*75
0.76 under 1
1 under 1.25
1.26 under 1.6
1.6 under 1.76
1.75 under 2
2 under 2*25
2.26 under 2.6
2.6 under 2.76
2*75 xrnder 3
8 under 8.8
3*5 under 4
4 under 4.5
4,5 under 5
5 under 6
6 under 7
7 under 8
8 under 9
9 under 10
10 under 11
11 under 12
12 under 13
18 under 14
14 under 15
15 under 20
20 under 25
25 under SO
SO under 40
40 under 60
60 under 60
60 under 70
70 under 80
80 under 90
90 under 100
100 under 150
150 under 200
200 under 260
250 under 500
300 under 400
400 under 500
600 under 750
760 under 1,000
1,000 under 1,600
1,500 under 2,000
2,000 under 8,000
8,000 under 4,000
4,000 under 5,000
6,000 and over
Total taxable individual returns
■ontaxable individual returns : 18/
No adjusted gross income 19/
Under 0.5
0.6 under 0.76
0,76 under 1
1 under 1*25
1*26 and over
ft
Total nontaxable individual returns
ST
Grand total
68
69
Individual returns with adjusted gross
incase under «5,000
Individual returns with adjusted gross
inecaw of «6,000 and over
For footnotes, see p, 17,
Nimber
of
returns
180,718
804,420
412,262
468,716
611,986
628,867
618,888
610,789
618,688
496,269
878,488
620,967
422,047
278,276
804,646
178,669
97,149
78,868
67,876'
49,966
39,596
86,768
29,902
26,408
92,681
53,168
82,167
86,191
18,380
10,864
6,767
4,380
2,889
2,020
4,708
1,620
648
346
812
152
156
60
38
12
6
2
8
1
Salaries
and
wages l/
Dividends
Annuities Denis and royal
and
and pen ties 7/
interest^ sions 6/
Set
Net
profit
loss
86,729
188,764
288,007
426,609
682,704
728,245
869,668
982,809
1,127,202
1,203,248
2,435,551
2,014,847
1,497,166
1,041,764
1,248,686
752,866
426,898
880,813
276,067
261,009
206,408
208,070
171,527
161,722
642,875
442,637
299,823
387,186
236,476
167,171
118,200
77,224
64,626
38,638
102,175
86,349
16,704
8,870
10,002
6,840
3,769
2.706
658
449
168
1
8
2
10,002
26,821
82,086
86,606
89,364
38,868
87,405
58,792
86,045
85,005
74,178
60,518
49,988
62,670
88,712
86,176
67,357
66,281
62,803
60,616
65,786
66,439
62,862
48,089
218,810
170,240
128,380
195,669
188,728
106,771
82,125
66,629
61,446
43,595
129,215
68,914
39,412
29,411
30,042
20,677
34,511
25,960
18,696
6,819
6,684
3,885
8,799
7.768
1,641
8,845
6,494
6,219
6,605
4,546
3,075
6,129
4,263
8,980
5,865
3,907
3,742
2,292
5,364
2,476
1,901
2,007
1,324
1,146
982
872
870
1,228
8,160
1,888
1,828
2,307
1,408
1,077
1,004
689
868
367
982
698
186
44
101
164
68
64
68
•
6
8,621
28,167
29,811
50,313
54,493
82,284
29,218
83,552
88,970
24,464
61,658
41,724
87,720
28,209
88,814
80,226
22,670
22,445
20,447
17,846
14,240
16,762
12,616
12,511
49,266
36,118
22,864
81,765
20,570
18,884
10,306
7,694
6,216
8,784
11,926
5,427
3,367
2,505
2,606
690
1,606
496
76
1,921
164
•
m
-
m
•
2
business or
profession 8/
Bet
Net
profit
Loss
614
1,606
1,841
S-,034
5,429
8,028
4,298
4,393
4,010
3,760
6,946
4,966
5,502
2,778
3,006
2,835
1,561
1,424
1,364
991
90S
711
1,027
694
2,698
1,966
1,936
1,901
1,994
889
574
607
266
243
616
262
92
189
114
58
198
76
61
6
1
26,974
66,812
106,768
131,110
151,027
164,650
189,024
181,178
129,067
129,619
203,815
163,741
188,680
117,141
187,860
146,195
120,478
113,070
104,124
92,652
90,361
84,640
81,520
72,467
290,488
213,789
166,006
206,749
120,906
88,146
69,886
42,897
31,196
26,086
69,827
- 83,160
16,796
10,184
12,248
6,257
7,857
1,696
6,119
766
6
Parinership 9/
Bet
profit
808
1,872
4,251
3,722
8,641
8,648
4,486
5,531
8,876
8,814
6,044
6,485
8,786
8,489
6,172
2,970
8,098
8,258
2,412
2,465
2,610
2,429
2,688
1,665
10,626
6,419
6,774
8,164
6,148
4,672
8,123
2,878
2,061
1,686
6,477
3,789
1,010
2,499
6,716
8,661
10,481
12,261
19,819
19,887
20,606
21,109
28,482
48,871
40;779
41,364
81,119
57,807
78,356
61,420
63,191
63,678
66,102
65,537
64,696
63,226
65,698
306,847
265,071
212,892
882,801
284,166
179,011
181,193
99,264
77,103
67,114
174,912
78,327
84,824
26,516
24,641
16,124
14,997
8,984
8,140
2,966
4,797
3,017
4,086
a.
•
•
1,182
566
601
1,299
542
634
208
190
84
9
55
•
«•
. •
2
Sales or exchanges
of ospitai assetslO/
Nat
Set
gain
loss
Net
loss
46
208
148
432
119
806
2,066
1,034
281
468
386
1,027
1,486
805
217
446
885
820
766
667
489
70S
628
626
2,842
1,456
1,101
1
,866
1,609
1,182
848
582
610
387
800
682
290
98
186
84
76
71
7
6
80
•
•
978
2,705
5,586
5,429
6,460
7,212
6,466
7,998
7,958
7,464
15,061
18,724
15,032
12,810
26,470
20,847
17,840
14,788
12,729
18,863
11,438
12,461
11,998
10,176
46,619
35,890
28,737
48,136
31,766
26,908
20,860
16,207
12,906
12,828
40,962
26,064
17,209
9,664
16,349
12,606
20,064
10,046
10,811
6,802
8,688
6
498
•
1,001
2,451
8,863
8,667
4,701
4,412
8,966
4,568
3,786
4,667
7,684
. 4,807
6,086
4,084
6,786
8,020
8,861
8,689
8,480
2,988
2,686
2,460
1,969
2,005
7,294
4,960
8,667
3,934
2,248
2,426
948
644
427
830
797
284
121
69
61
SO
84
28
16
8
•
1
1
•
Sales or ex
changes of property other than
capital assets ll/
Bet
Bet
gain
lass
128
474
884
281
818
647
681
1,441
788
946
1,662
2,169
1,861
1,880
1,079
1,677
894
911
860
607
321
612
286
243
1,275
568
426
646
870
282
117
44
41
28
41
61
9
29
4
17
6
•
_
•
•
•a
•
•
6
289
913
737
1,612
2,488
2,108
2,319
820
1,095
1,205
1,640
822
864
2,217
602
1,621
1,569
1,122
788
916
60S
879
683
8,042
1,692
1,802
2,084
1,087
1,097
776
412
870
282
1,166
872
166
218
284
488
796
28
821
•
(23)
VTaoeTIncome
from
laneous
estates
incogs13/
and
trusts 12/
671
2,761
2,648
4,056
4,067
4,808
8,617
4,609
8.626
5,960
9,086
8,439
12,264
9,647
16,618
17,405
15,854
18,909
15,017
14,080
12,826
12,756
12,819
10,606
53,379
39,927
84,762
64,594
38,876
80,868
28,668
21,136
14,687
11,779
45,089
20,410
14,737
9,871
11,186
6,285
18,126
9,906
9,8a
8,744
SO
1,327
4,607
6,128
6,978
7,879
9,295
6,186
9,819
7,949
6,344
8,075
8,080
6,088
7,286
10,125
7,467
6,766
4,967
4,869
4,847
2,802
5*094
2,728
2,839
10,908
7,183
6,978
9,808
6,806
4,148
2,216
1,687
1,283
1.676
2*495
888
668
463
415
81
179
60
118
2
1
6
•
•
•
m
•
-
679,720
199,188
•
1
Adjusted
gross
inoowe 14/
86,898
268,292
466,088
644,242
880,666
981,033
1,090,188
1,212,683
1,869,63«
1,428,616
2,881,686
2,818,943
1,783,808
1,292,648
1,669,073
1,121,794
726,021
621,811
649,294
623,270
452,244
446,166
403,161
867,792
1,696,242
1,186,114
878,968
1,246,891
816,869
692,584
487,701
827,289
246,128
191,668
566,219
269,908
142,086
94,061
106,876
67,608
98,674
62,112
46,868
21,226
14,108
6,866
18,329
7.719
1
2
5
4
5
6
7
8
9
10
11
12
IS
14
16
16
17
18
19
20
21
22
28
24
26
26
27
28
29
SO
81
52
88
84
86
86
87
88
89
40
41
42
48
44
46
46
47
48
7,733,524
20,014,782
2,821.022
98.182
872,666
75,666
4,266.726
162.298
3,217.663
29,744
712,556
128.020
191,906
79,986
168,719
103,213
66,141
94,987
29,666
8,080
82,968
83,491
27,732
98,809
12,620
5,616
14,604
9,684
7,608
19,408
1,060
209
2,442
10,166
6,889
20,614
11,962
11,637
17,741
11,496
1,626
958
647
959
778
12,909
14,641
29,119
88,266
28,941
42,646
286,886
3,888
2,707
1,292
6,718
616
1,874
1,806
1,672
6,218
29,768
1,064
86
100
1,111
3,897
14,670
1,711
1,649
1,167
2.627
8,046
11,664
2 , 9a
2,888
1,801
786
2,787
694,861
280,697
69,886
8,786
76,268
16.221
166,320
248,271
17,401
36,010
24.660
22.818
3.379
64.876
9,683
16.961
8,428.376
20.246.428
2.890.858
101,917
960,924
91,787
4,413,046
400,668
8.284.964
66.764
737.096
146.388
<7.a9
108.004
689,264
216.170
22/82.694.124
7,275,968
15,682,800
620,468
67,628
616,869
68,209
1,928,811
802,867
828,408
46,244
138,424
80,410
16,816
81,688
86,667
1 1 0 ,a 4
¿2/16,616,878 68
1,164,407
6,668,128
2,269,900
34,289
484,066
28,678
2,484,286
97,702
2,911,660
20,610
698,678
64,928
11,111
26,415
608,687
104,746
15,877,261 69
1,668
1,411
1,960
2,866
8,187
24,060
«,166
208
276
441
81
269
48.127
66,891
2,286
1,889
1,068
842
2,466
2,686
768
900
761
754
8,761
5,484
204
2,768
2,094
2,489
4.996
82,467,620 49
12/249,771
27,087
99,052
90,920
78,586
186,682
22/
60
61
62
68
64
66
226,604 64
67
PO
GO
-_M<I 1 - Individual return, for 1944. by t»reble end nontaxable retara, rad by adjusted grò.* incora ole..«. - Prat I, .11 return.» Pert n , rotara. wl«i .tradurd deduotlont Pert lll. re£ £
o f T J Z L , .ouroe. of i n e « , adju.te7gro» i n o « , deduction., earter exemption. tra ILbili*. tra p-yrant., rad tra overp.y-.nt - Contino*
PART III. - RETURNS WITH ITEMIZED D8IWCTI088 26/- Continued
(Adjusted grò*, incono olea.es rad money figure, in thou«end. of doliere)
Adjusted gross ibooms z/ c losses
1
a
3
4
S
e
T
8
»
1
0
U
U
U
14
16
16
17
18
19
2
20
1
2
2
23
24
26
2T
28
29
30
SI
32
S3
34
36
36
ST
38
Taxable individual return«i
0.6 under 0.T6
0.T6 under 1
1 under 1.26
1.26 under 1.6
1.5 under 1.76
1.76 under 2
2 under 2.26
2.26 under 2.5
2.6 under 2.75
2.75 under 3
3 under 3.6
3.6 under 4
4 under 4.6
4.5 under 6
6 under 6
6 under 7
7 under 8
8 under 9
9 under 10
10 under 11
11 under 12
12 under IS
13 under 14
14 under 16
16 under 20
20 under 26
26 under 30
SO rader 40
40 under 60
60 under 80
60 under TO
70 under 80
80 under 90
90 under 100
100'rader 160
160 under 200
200 under 260
260 under 300
300 under 400
400 under 600
600 under 760
760 under 1.000
1.000 under 1.800
1.600 under 2,000
2.000 under 3,000
3.000 under 4,000
4.000 under 6,000
6.000 rad over
4,341
14,362
24,782
33,091
41,643
45.727
49,616
63,477
56,603
68,161
114,703
92,013
71,914
48,463
63,161
41,847
26,121
21,168
18,401
16,798
14.727
18,606
12,226
10,828
45,886
32,860
23.933
33,226
23,062
16,704
13,361
10,443
8,613
6,946
22,666
12,166
7,146
6,243
6,639
3,269
6,413
4,042
3,899
1,047
728
601
1,111
1,168
39
40
41
42
43
44
46
46
4T
48
49
30
6
1
62
63
54
66
66
6T
68
69
Deduction for Losaos
Taxes
28/ fro» fir©,
Contri
jiterest 27/
stoni,
butions 26/
etc. 29/
493
3,047
6,706
10,842
16,104
21,627
24,524
29,632
37,044
36.728
78.615
66.728
49,103
37,376
47,336
28,121
17,333
13,936
11,772
10,864
8,098
8,071
7,097
6,037
23,416
16,176
9,842
16,278
8,341
6,649
4,734
8,467
2,519
1,906
6,146
2,916
1,618
1,360
1,676
720
832
297
288
•6
44
(23)
1,166
29
Total taxable individual return.
Kontaxable individual returnsi
>o adjusted gro.s income 19/
1 Under 0.5
0.5 under 0.76
0.76 under 1
1 under 1.26
1.25 and over
2,335
10,738
..17,846
24,476
32,423
37,133
39,427
44.966
61,298
62,090
102.759
83,314
66,596
44,246
60,391
42,449
26.966
22,741
19,669
18,478
16,606
14,896
13,644
■"12,426
61,038
36,976
26,986
37,420
24,296
18,123
13,622
9,976
7,809
•>910
17,831
8,369
4,696
3.067
3,620
2.068
2,843
1,434
1,496
712
198
231
187
686
123
610
1,686
2.883
3,670
4,438
6,264
6.883
7,810
6,686
16,009
13,908
9,882
7,276
10,433
8,110
3,696
2,274
1,996
2,122
1,488
1,491
1,420
1,124
4,876
3,464
2,203
3,300
2,469
1,988
1,403
1,530
944
649
2,096
1,190
673
871
421
312
209
108
226
18
36
10
1,135,676
149,489
Total
deduction.
Grand total
Individual retura, with adju.ted gross
incone under $5,000
Individual returns uith adju.ted gross
;inoone of $6,000 and over
Wet
incera
)eflcit 3if
2,183
6,118
8,475
11,686
18,004
20,680
16,968
22,448
28.189
30,377
66,312
48,662
88,984
99,738
38,067
26.190
21,127
16,446
13.723
11,973
9.928
9,647
8,116
7,070
82,443
23,001
13,971
19,108
12,880
9,747
8,488
6,334
3,668
2,984
10,487
6,208
8,206
2,011
2.928
963
1,691
871
1.216
184
288
69
194
487
12,119
50,013
87,246
119,222
166,168
179,130
190,628
209,042
231,640
284,288
467,661
370,391
276,249
206,664
263.418
166,007
104,494
83,666
70,761
64,966
68,487
61,006
44,941
89,601
164,919
116,147
78,372
110.418
72,270
68,786
41,769
30,998
23,729
18,860
68,718
29,869
17,246
12,061
14,116
7,823
10,987
6,763
6.873
2,067
1,241
901
2,668
2,384
74,779
218,279
878,788
625,020
676,608
801,902
899,566
1,003,642
1,128,100
1,189,527
2,373,936
1,948,662
1,607,569
1,086,886
1,406,660
966,787
621,628
638,166
478,643
468,316
898,756
896,169
368,220
328,190
1,430,324
1,070,967
800,691
1,186,473
743,100
638,808
396,932
296,290
221,399
173,608
606,600
230,044
124,840
82,000
92,280
80,180
82,687
46,380
59,990
19,168
12,867
6,466
10,671
6,336
721,938
664,666
4,694,617
27,873,103
2.646
16,147
2T.761
36,345
43,612
49,526
64,939
62,638
60,696
48,267
89,263
66,866
44,771
29,665
34,034
19,291
10,261
7,102
6,301
4,720
3.647
3,297
2,638
2;116
7,261
3,681
2,037
2,086
1,223
616
272
248
186
56
106
21
11
26
18/
Total nontaxable individual returns
Tor footeotet« see p. 17.
MISO©11»edical
neous
nd dental
expenses 30/ deduc
tions 3l/
-
Amount of Tax lia
surtax
bility 16/
exraption 16/
Tax
with
held
Payrants
on 1944
Deolaration of
Estimated
Tax V /
Balance
of tax
due at
tin. Of
filing
Overpay
ment (re
fund, or
credit en
1945 tax)
1
2
S
4
6
6
T.
8
9
103,086
261,396
372,437
463,799
626,426
664,891
680,613
622,017
660,887
681,949
1,243,962
984,101
661,386
411,611
468,727
263,640
136,464
100.308
77,682
67,306
62.631
46,062
88,833
32.632
119,368
•8,740
89,630
42,983
21,287
12,266
7,396
4,775
3,037
2,120
4,734
1,462
•06
324
292
141
142
48
36
13
1,660
10,368
22,682
36,778
63,961
72,360
87,621
100,872
118,637
127,933
276,260
244,664
206,361
162,066
227,384
172,409
124,346
116,318
108,312
109,027
99,416
103,084
97,390
92,741
447,606
387,680
823,696
612,722
372,243
290,949
227,016
177,886
137,698
111,190
847,094
168,104
94,136
•4,199
71,786
47,285
66.062
36,619
81,678
16,178
10,046
4,843
9,611
4.801
2,260
8,896
19,765
31,874
46,706
60,288
76.669
90,009
106,103
117,061
262,666
226,629
177,080
181.096
166,266
106,684
61,488
48,746
41,484
40,476
31,993
32,700
27,881
24.790
107,171
76,179
62.669
68,718
42,804
28.669
20,664
14,427
. 10,219
7,042
18.791
6,887
2,949
1,736
1,802
1,112
699
422
120
86
81
1,166
4,620
7,026
9,260
11.442
13,732
16,376
16,789
17.680
17,161
88,633
81,721
34,118
81,663
63,707
66,872
60,428
63,074
62.442
66,618
64,469
67,691
67.686
64,666
282,986
259,222
228,677
377,807
284,177
226,277
178,694
141,369
111.680
89,921
288,675
140,726
80,887
66,194
62,860
41,092
57,688
31.686
29,968
14,404
9,238
2,176
8,884
4.680
770
3,304
5,462
8,047
11,110
18,664
18,892
14.697
16,740
14,949
28,468
22,170
19,673
16,649
27,827
22,483
21,370
20,778
20*631
18,867
18,071
18,080
17,702
17,068
78,616
68,298
64,383
83,604
67,689
44,798
34,276
26,964
19.697
17,237
48,722
23,929
12,143
8,676
9,655
6,820
7,698
.4,867
2,328
1,086
812
2,668
626
121
2,326
6,453
9,660
12.407
14,307
16,285
18,206
19,623
20,787•
21,268
43,606
34,666
26,410
17,142
19,416
13,480
8,939
7,280
6,146
6,919
6,107
6,388
6,230
3,672
21,168
16,019
12,033
17.407
12,378
8,805
6,617
4,866
8,798
3,010
8,994
3,438
1,793
1,306
2,432
739
1,032
366
722
398
26
9.663,671
6,729,602
2,388,184
3.804,206
1,006,406
467,995
49
2,701
708
1,717
1,866
1,143
6,762
7,861
783
928
886
982
3,379
10,662
1,491
2,646
2,740
2,126
9,141
60
61
62
63
64
66
10
1
1
12
13
14
16
16
1T
18
19
20
21
23
2
2
24
26
26
27
26
29
30
31
32
S3
34
86
36
ST
3
8
39
40
41
42
43
44
46
46
4T
48
1,196
1,968
6,988
3,763
3,470
2,026
1,012
3,344
2,822
3,696
3,302
2,648
8,654
6,538
6,260
14,846
224
1,094
924
1,333
2,321
23,681
1,398
2,901
16,028
17,117
13,242
31,269
616
641
3,747
6,677
6,161
28,176
8,663
10,264
87,686
88,261
84,160
114,84«
20,296
63,504
65,690
41,90«
86,01«
268,434
8,472
2,139
3,021
2,620
14,180
223,976
76,676
140,287
113.272
78,263
146.339
29.477
80,966
44,916
243,859
266,410
283,76«
780,801
13,88«
28,693
66
2S,590
42,247
14,807
22#6T8
10,484,472
2,402,07!
3,819,013
1,005,40«
496,688
6T
289,778
68
206,910
59
1,267,948
731,348
526,601
711,173
444,169
267,014
1,177.823
661,892
525,931
178,966
116,494
62,472
802,893
692,766
110,126
709,872
386,541
323,031
4,838,37«
3,023,199
1,815,177
28.139,614
14,077,440
14,062,or
283,76«
283,76«
6,729,80!
8,838,209
1,621,46«
1,869,06«
263,882
188,29!
1,596,26!
5,206,534l|
1,043,00
5,555,131
817,11.
lnooaa of #6,000 and Qfor
Tor footnotes« see p • 17*
(Adjusted gross Income classes and money figures in thousands of dollars)
Adjusted gross income Jj classes
Taxable individual returns>
0.5 under 0.75
0.75 under 1
1 under 1.25
1.25 under 1.5
1.5 under 1.75
1.75 under 2
2 under 2.25
2.25 under 2.5
2.5 under 2.75
2.75 under 5
5 under 5.5
5.5 under 4
4 under 4.5
4.5 under 5
5 under 6
6 under 7
7 under 8
8 under 9
9 under 10
10 under 11
11 under 12
12 under 15
15 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
5.000 under 4,000
4.000 under 5,000
5.000 and over
Total
number
of
Adjusted
gross
income 14/
2,045,206
2,950,919
3,477,486
5,512,445
5,459,860
3,405,802
5,130,449
2,870,005
2,786,617
2,514,455
4,133,166
2,785,527
1,777,741
1,039,286
933,071
417,756
220,512
151,103
111,991
88,911
67,595
57,575
46,036
58,563
129,466
67,557
38,455
41,610
20,422
11,844
7,255
4,668
5,065
2,135
4,873
1,665
665
351
518
155
159
62
lia
surtax
bility M
exemp
tion 15/
of
surtax ex
emption 15/ bility 16/
1,337,580
2,586,239
3,921,519
4,825,893
5,614,142
6,574,683
6,645,165
6,811,467
7,507,911
7,222,747
15,578,813
10,394,197
7,516,504
4,915,701
5,057,083
2.693.021
1,645,762
1,279,04$
1,060,155
931,357
775,780
715,970
620,510
558,495
2.224.022
1,504,511
1,049,789
1,450,927
907,988
645,765
468,959
348,712
259,874
202,711
584,702
267,591
146,936
95,709
108,299
68,726
95,263
55,754
46,865
21,226
14,106
6,566
13
.,645,474
:,659,601
i,524,746
1,557,541
>,687,596
3,832,444
3,741,190
3,722,221
3,780,515
5,565,965
6,099,517
4,277,725
2,765,607
1,591,894
1,595,377
591,101
295,682
196,311
142,894
113,781
85,924
72,269
57,676
47,994
161,466
82,551
46,585
48,759
25,556
15,265
7,910
5,086
5,219
2
,225
4,904
1,485
625
528
296
144
145
50
56
15
28,775
117,588
252,116
552,824
457,886
568,240
620,010
644,419
719,094
736,140
,452,575
,209,589
955,019
671,120
758,757
452,645
506,455
255,541
224,555
206,799
180,968
174,545
157,262
147,550
647,519
505,475
594,428
596,052
419,786
520,470
245,292
191,025
146,989
118,224
560,446
174,045
97,965
65,495
75,515
48,200
66,467
57,556
51,678
15,178
10,046
4,845
9,511
449,144
867,682
210,905
557,152
,479,432
,575,475
,611,795
,678,688
,771,092
,727,126
,049,578
,186,714
,422,521
821,601
696,944
288,155
156,125
88,657
65,399
48,709
55,891
29,488
22,748
18,818
60,212
28,652
14,948
14,324
6,231
5,184
1,708
1,080
642
452
858
255
85
42
59
2
1
25
4
2
678,547
298,505
763,717 1,287,505
1,571,594 1,807,582
1,868,459 2,082,319
2,403,112 2,530,837
2,953,455 2,550,795
5,425,888 2,652,424
5,987,557 2,842,581
4,647,811 5,011,862
4,964,576 2,950,774
9,881,476 6,257,873
8,164,055 5,777,818
6,015,218 2,471,152
5,886,982 1,415,415
5,774,091 1,197,429
488,849
1,855,172
226,226
1,015,510
146,858
750.074
103,912
600,063
81,225
510,198
60,069
411,814
49,254
567,980
58,671
506.595
51,602
272,474
101,737
1,051,258
48,623
656,155
25,615
407,874
24,556
490,702
10,764
276,457
5,415
175.075
2,881
110.596
1,858
80,601
1,076
54,562
772
42,780
1,596
99,875
597
40,255
156
18,475
71
11,576
67
15,066
55
9,208
45
14,176
5,484
2,612
1,852
1,560
7,650
21,814
54,983
94,497
147,214
199,782
260,725
544,516
408,676
925,315
858,770
707,256
495/694
528,487
290,219
175,942
139,860
118,927
106,526
90,206
84,580
75,440
68,549
286,720
206,155
149,445
202,450
127,528
86,505
58,619
44,857
51,629
25,720
65,512
27,107
13,158
8,552
9,574
7,147
10,475
2,244
1,092
1,215
35,003
45,449
53,527
61,580
65,529
90,978
110,568
120,270
145,164
141,694
265,159
182,794
109,355
66,194
75,416
58,379
21,306
16,187
12,551
11,642
9,125
8,689
7,154
6,519
24,647
15,594
10,061
12,609
6,787
4,518
2,815
1,786
1,259
867
2,102
685
295
141
158
21,455
57,960
60,416
84,424
106,583
170,985
254,914
286,255
581,177
407,040
857,804
681,285
461,984
513,092
408,818
248,393
159,227
157,196
118,975
121,900
104,797
108,252
96,487
94,365
426,164
549.156
275,277
455,800
502.157
255,955
181,750
155,470
106.958
82,405
252,475
116.959
64,825
58,568
46,850
30,192
58,721
24,250
21,257
12,390
9,285
6,566
8,876
21,465
31,702
44,017
49,798
55,993
75,911
99,256
105,762
125,027
150,585
247,651
181,840
106,250
63,514
71,804
55,728
20,605
15,698
12,255
11,738
9,237
8,708
7,284
6,751
26,049
16,674
10,705
13,408
7,268
4,615
2,949
1,894
1,515
864
2,065
655
282
140
129
64
S
2I
2
17
9
2
5
5
585
2,047
4,152
7,492
10,243
18,910
27,052
35,800
50,855
54,969
122.159
101,512
72,823
51,484
70,771
46,450
51,601
28,690
26,080
27,613
24,975
26,745
24,655
24,883
124,421
117.160
102,601
179,582
157,878
115,571
94,379
72,458
60,121
47,662
155,286
74,489
42,871
26,228
51,178
20,295
26,074
17,558
14,555
9,189
6,419
4,843
6,594
Total taxable individual returns
Nontaxable individual returns!
Ho adjusted gross income ¿2/
Under 0.5
0.5 under 0.75
0.75 under 1
1 under 1.25
1.25 and over
18/
Total nontaxable individual returns
191,905
5,260,590
851,628
220,255
157,609
95.042
20/ 249,771
947,548
476,487
195,918
149
185
225,976
2,895;750
812,169
284,595
116,068
576,239
521,512
180,127
119,810
20/ 162,184
179,604
187,476
158,628
129,784
177,569
879,508
487,969
260,477
181,807
56/ 5,267 22/ 6,567
10,475
55,425
5,585
10,18«
1,055
56/ 1,264
(M )
(**) 1
2,898
24,074
6,719
845
(M )
1.588.549
Grand total
62 2/4
Individual returns with adjusted gross
income under $5,000
Individual returns with adjusted gross
income of $5,000 and over
for footnotes, see p. 17.
2,649,298 5,059,
Amount of I Tax
surtax ex-1 llabilmption 15/ lty 16/
Tax liabiliiyjS
Adjusted
gross
income 14/
559,845
288,955 1,822,
154,055
178,188
222,105
223,832
212,401
201,781
159,228
124,393
86,625
64,915
68,845
35,798
25,168
16,619
19,253
15,216
8,745
6,572
5,574
4,225
5,488
3,003
2,881
2,256
8,057
4,145
2,717
3,090
1,621
945
87,680
156,265
250,193
307,668
344,399
577,414
556,845
294,537
226,618
186,416
221,896
133,279
97,674
78.589
98,689
85,575
65,296
55,754
50,985
44.271
40,081
57,471
38,850
52.590
158,957
92.272
74,367
106,705
72,185
51,519
57,562
29,195
21,618
18,745
56,481
22,715
17,215
14,051
10,458
8,542
9,586
4,466
5,589
1,681
2,621
4,455
82,287
115,485
138,695
141,067
150,558
125,628
98,859
78-138
56,294
42,731
45,334
25,566
15,382
10,218
11,778
8,257
5,963
4,473
3,636
2,80S
2,289
2,076
1,938
1,465
6,697
2,937
1,879
2,197
1,141
694
426
287
175
141
542
2,492
9,617
22,391
32,629
42,161
49,997
47,238
43,204
34,103
28,778
35.597
22,446
17,187
14,448
18,921
17,390
13,904
12.597
11,995
10,871
10,373
9,908
10,651
9,253
43,120
32,611
28,863
45,495
53,809
25,605
19,594
15,935
12,018
10,532
34,899
14,894
11,099
9,294
6,985
6,524
6,256
3,568
2,577
834
1,896
Table 2. - Indlridu* «turne for 1944, by Uxabie and nontaxabl. return», byadjnatad
^ M ™ ’ * * " 1* * * “*"■» “ d *
of return», adjusted gross Incoe», surtax exemption, and tax liability - Continued
MX‘
(Adjusted groas incoa» classes and noney figures in thousands of dollars)
1
2
3
4
5
6
7 !
8
9
10
U
1
2
15
14
15
16
17
18
19
20
2
1
22
25
24
25
26
27
28
29
30
31
52
53
54
55
56
57
58
39
40
41
42
45
44
45
46
47
48
058
082
977
915
218
882
550
591
,642
,551
,415
,045
,759
,749
,215
,976
,525
,747
,470
,928
,590
,954
,555
,865
,556
,224
,649
,799
854
474
515
195
102
77
186
56
20
10
12
184
658
1,654
5,297
6,927
16,216
21,214
24,085
27,048
21,565
50,449
18,924
14,779
9,759
18,870
16,458
19,110
17,586
16,218
14,795
15,972
12,857
12,142
10,874
46,156
55,042
24,613
57,278
25,250
18,654
14,066
11,054
7,275
6,419
18,056
8,528
4,255
2,590
3,818
1,698
1,446
1,416
568
611,541
669,571
650,625
557,910
554,510
502,780
470,001
404,785
575,726
505,572
445,204
252,657
140,050
77,659
70,648
55,269
18,274
12,570
9,158
7,695
5,570
4,598
5,974
5,554
10,902
6,194
5,488
5,857
1,911
1,166
726
484
554
202
556
186
78
48
44
17
25
9
7
596,245
582,818
708,575
766,550
866,602
941,556
996,516
960,475
979,090
877,077
1,450,167
866,750
591,855
566,685
585,956
226,674
156,287
104,504
86,462
80,640
65,892
57,298
55,520
48,285
187,052
138,005
95,116
151,725
85,082
65,580
47,058
36,165
28,542
19,261
64,509
52,198
17,448
15,195
15,027
7,588
15,899
7,939
8,400
1,699
2,204
362,502
428,046
455,124
592,821
586,552
379,525
545,971
311,171
288,415
259,542
546,106
185,847
111,750
60,727
59,526
27,067
15,679
9,100
6,657
5,724
4,165
3,290
2,865
2,407
8,222
4,474
2,651
2,911
1,424
878
559
552
244
140
412
140
56
55
55
14
15
802,697
10,370
172,871
56,007
550,892
58,376
75,910 ,269,755
100,475
95,529
910,024
111,845
658,155
128,712
405,459
128,782
269,865
156,994
175,158
127,220
185,222
218,559
85,585
158,025
45,745
96,458
81,115
62,797
54,681
68,085
19,578
45,692
11,777
28,274
8,957
22.874
6,721
19,741
5,510
19,544
4,074
15,852
5,770
14.875
2,881
14,296
2,451
15,468
8,275
56,557
4,527
47,758
2,588
56,522
2,743
55,624
1,458
59,525
854
51,490
549
24,549
368
19,567
241
16,084
165
11,269
590
59,540
157
21,196
11,265
8,849
10,095
5,080
10,246
5,585
6,001
855
1,751
525,914
1,028,422
1,497,741
1,740,619
1,782,548
1,700,511
1,550,079
954,755
705,924
501,225
595,204
517,658
185,076
146,966
188,781
126,555
87,976
75,756
65,652
55,660
46,719
47,149
58,828
55,485
142,275
96.595
70,688
94,127
64,955
46,509
55,507
27,166
20,519
15,6!
46,71
26,655
15,418
9,547
11.595
8,851
491,815
764,748
882,576
845,658
759,268
623,551
452,054
291,666
198,110
126,922
152,557
62,067
50,727
20,856
25,706
15,055
7,971
5,512
4,575
5,467
2.722
2,426
1,827
1,610
5,588
2.722
1,750
1,769
942
556
556
258
152
15,462
61,250
122,575
175,916
202,467
210,078
176,226
129,548
99,509
75,945
92,116
51,279
51,050
25,668
54,777
24,797
18,257
16,485
14,609
15,295
11,521
12,188
10,525
9,812
42,816
52,544
26,540
58,995
29,568
22,409
17,992
14,260
112
8,807
28,268
17,194
8,751
6,514
8,255
6,174
8,407
5,640
6,154
1,549
250
91
40
20
19
12,210
7,811
7,404
1,649
2.146.774
6JS5.255
15.587.121
38,021
1,118,697
191,410
12,006
56/6,519
20/57,575
315,487
105,435
10,318
7,019
22,118
617,247
115,655
7.320
3,792
4.320
29,490
1,571,098
287,425
24,529
21/411,452
768,450
49
50
51
52
55
54
55
1,372,555
11.698
20/51,208
396,480
157,655
21,858
11,171
21.578
18,579
776,099
177,080
14,640
6,320
9.659
1,754,148
2^/577,494
1,002,155
1 0 ,1 1 1
56
57
58
59
c* ► !
» KOI
11,001
5
5
5
5
31
- 17 Footnot«»
2/ income for 1943, tabulated hare, la total Income as tabulated In
Statistics of Income for 1943 adjusted by subtracting therefrom the net lose
from sales of capital assets, net loss from salsa of property other than capital
assets and net losses from business,.from partnership, and from rents and
royalties.
16/ Surtax exemption ie $500 for the taxpayer, $500 for the taxpayer 8.
spouse if not dependent upon another person, and $500 for each dependent with
respect to whom a surtax exemption may be claimed. Suoh dependent« must have
received from the taxpayer more than half their support for the year and muat
have had less than $500 gross Income during the year. Dependents include
only close relatives which are specified by law.
2/ Tax liability after deducting tax credits relating to income tax paid
at source on tax-free covenant bonds and to income tax paid to a foreign countr.
or United States possession. For 1943, the tax shown is the income and victory
tax on 1943 income.
16/ Tax liability after deducting tax credits relating to income tax paid
at source on tax-free covenant bonds and to income tax paid to a foreign country
or United States possession, allowed only on returns with itemized deductions.
3/ Adjusted gross income classes are based on the amount of adjusted gross
income (see note 14), regardless of the amount of net income or net deficit whe
computed; returns with adjusted gross deficit are designated no adjusted gross
income and the size of the deficit is disregarded.
17/ Payments on 1944 declaration of estimated tax include (1 ) the total
amount of estimated tax reported on Form 1040-ES and (8) the credit for prior
year overpayment if no Form 1040-ES was filed. (If Form 1040-ES was filed,
t.hfi total estimated tax.)
am v a o *» A m rn A v m im t
4/ Salaries and wages include annuities, pensions, and retirement pay not
reported in the schedule for annuities and pensions, but exclude wages of less
than $100 per return from which no tax was withheld, reported on Form W-8.
Such wages are tabulated with miscellaneous income. (See note 13.)
18/ Nontaxable returns are those with no adjusted gross income and returns
with adjusted gross income which when reduced by deductions, standard or
itemized, and exemptions result in no tax liability. The 508,946 nontaxable
returns with adjusted gross income and with itemized deductions Include
5/ Dividends, domestic and foreign, and interest before amortization of
bond premium. This item includes both taxable and partially tax-exempt interest
on Government obligations and dividends on share accounts in Federal savings
and loan associations, but excludes dividends and interest not exceeding $100
per return reported on Form W-Z. Such dividends and interest are tabulated
with miscellaneous income. (See note 13.)
19/ The no adjusted gross income classification is for returns showing
other loss on line 4, page 1, Form 1040, equal to or in excess of salaries,
wages, dividends, and interest.
6/ income from annuities and pensions is only the taxable portion of
amounts received during the year. Amounts received to the extent of
3 percent of the total cost of the annuity are reported as income for each
taxable year, until the aggregate of amounts received and excluded from
gross income in this and prior years equals the total cost. Thereafter,
entire amounts received are taxable and must be included in adjusted
gross income. Annuities, pensions, and retirement pay upon which tax is
withheld may be reported in salaries and wages.
2J Net profit from rents and royalties is the excess of gross rents
received over deductions for depreciation, repairs, interest, taxes, and
other expenses attributable to rent income; and the excess of gross
royalties over depletion and other royalty expenses. Conversely, net loss
from these sources is the excess of the respective expenses over gross
income received.
¡¡/ Net profit from business is the excess of gross receipts over
deductions for business expenses and net operating
net operating loss from business, partnership, and
the preceding year or years. Conversely, net loss
excess of business expenses and net operating loss
gross receipts frets business#
loss deduction due to a
common trust funds for
from business is the
deductions over the
2/ Partnership net profit or loss excludes partially tax-exempt
interest on Government obligations, dividends on share accounts in Federal
savings and loan associations issued prior to March 28, 1942, and net gain
or loss from sales of capital assets. In computing partnership profit or
loss, charitable contributions are not deductible nor is the net operating
loss deduction allowed.
10/ Het gain from sales or exchanges of capital assets is the amount
taken into account in computing adjusted gross income whether or not the
alternative tax is imposed. Net loss from such sales is the amount re
ported as a deduction in computing adjusted gross income. Each is the
result of combining net short- and long-term capital gain and loss and the
net capital loss carried over from 1942 and/or 1945. Deduction for the
loss, however, is limited to the amount of such loss, or to the net income
(adjusted gross income if taxed under supplement T) computed without
regard to gains and losses from sales of capital assets, or to $1 ,000,
whichever is smallest. Sales of capital assets include worthless stocks,
worthless bonds if they are capital assets, nonbusiness bad debts, certain
distributions from employees1 trust plans, and each participant's share
of net short— and long-term capital gain and loss to be taken into account
from partnerships and common trust funds.
li/ Net gain or loss from sales or exchanges of property other than
capital assets is that from the sales of (1 ) property used in trade or
business of a character which is subject to the allowance for depreciation,
(2) obligations of the United States or any of its possessions, a State or
Territory or any political subdivision thereof, or the District of Columbia,
issued on or after March 1, 1941, on a discount basis and payable without
interest at a fixed maturity date not exceeding one year from date of issue,
and (5 ) real property used in trade or business.
12/ Income from estates and trusts excludes partially tax-exempt interest
on Government obligations, dividends on share accounts in Federal savings and
loan associations issued prior to March 28, 1942, and net gain or loss from
sales or exchanges of capital assets received from common trust funds. The
net operating loss deduction is allowed to estates and trusts generally and
is deducted in computing the income to be distributed. However, in the case
of a cornuon trust fund the net operating loss deduction is not allowable,
but each participant's share.of prior year income and losses of the fund is
taken into account in determining his own net operating loss deduction.
12/ Miscellaneous income includes alimony received, prizes, rewards,
sweepstake winnings, gambling profits, recoveries of bad debts for which a
deduction was taken in a prior year, and health and accident insurance
received as reimbursement for medical expenses for which deduction was
taken in a prior year. Also tabulated in miscellaneous income is
$45,873,385 of wages not subject to withholding, dividends, and interest,
not exceeding in total $100 per return, reported as other income on
Form W-2.
14/ Adjusted gross income means gross income minus allowable trade and
business deductions, expenses of travel and lodging in connection with
employment, reimbursed expenses in connection with employment, deductions
attributable to rents and royalties, certain deductions of life tenants and
income beneficiaries of property held in trust, and allowable losses from
sales or exchanges of property. Should these allowable deductions exceed
the gross income, there is an adjusted gross deficit.
80/ Adjusted gross deficit.
21/ Adjusted gross income less deficit.
22/ Returns with standard deduction are optional returns, Form W-Z; shortform returns, Form 1040; and long-form returns, Form 1040, with adjusted gross
income of $5,000 or over on which the $500 standard deduction is used.
23/ Less than $500.
24/ Number of returns in cell is subject to sampling variation of more than
10Q percent. The number of returns and associated money amounts are not sham
separately since they are considered too unreliable for general use; howver,
they are included in totals. For description of sample, see pages 7 and 8.
25/ Returns with itemized deductions are long-form returns, Form 1040,
on whioh deductions are itemised; long-form returns, Form 1040, with no
deductions filed by spouses of taxpayers who itemised deductions; and returns.
Form 1040. with no adjusted gross income whether or not deductions are iteaiised.
26/Contributlons, reported ohly on returns with itemised deductions,
include each partner's share of oharitable contributions of partnerships, but
cannot exceed 15 percent of the adjusted gross incaze.
27/ interest, reported only on returns with itemized deductions, is that
paid on personal debts, bank loans, or home mortgagee but excludes interest
on business debts reported in schedules for rents and business, and interest
on loans to buy tax-exempt securities, single-premium life insurance, or
endowment contracts.
28/ Taxes paid, reported only on returns with itemized deductions, in
clude personal property taxes, State income taxes, real estate taxes except
those levied for imnrovements whioh tend to increase the value of property,
and certain retail taxes. This deduction for taxes does not inolude Federal
income taxes; estate, inheritance, legacy, succession, or gift taxes; taxes
on shares in a corporation which are paid by the corporation without re
imbursement from the taxpayer; taxes deducted in the schedule for rents and
business; inccme taxes paid to a foreign oountry or possession of the United
States if any portion thereof is claimed as tax credit; or Federal social
security and employment taxes paid by or for the employee.
29/ Losses resulting from war, fire, storm, shipwreck, or other oaaualty,
or theft, reported in itemized deductions, are the actual nonbusiness losses
sustained, that is, the value of suoh property less salvage value and in
surance or other reimbursement received.
50/ Medical and dental expenses, reported only on returns with Itemized
deductions, paid for the care of the taxpayer, his spouse, or dependents,
not compensated by insurance or otherwise, which exceed 5 percent of the
adjusted gross income. The deduction is limited to $1,850 if one exemption
is claimed, or to $8,500 if two or more exemptions are claimed.
51/ Miscellaneous deductions, reported only on returns with itemized
deductions, include alimony payments, expenses incurred in the production
or collection of taxable income or in the management of property held for
the production of taxable income, amortizable bond premium, special de
duction for the blind, the taxpayer's share of interest and real estate
taxes paid by a cooperative apartment corporation, and gambling losses not
exceeding gambling gains reported in income.
52/ Net deficit reported on nontaxable returns, Form 1040, with itemized
deductions. The total number of returns showing net deficit is 229,834, of
which 191,905 show no adjusted gross income, and 37,389 show adjusted gross
income of various amounts and itemized deductions of larger amounts.
55/ joint returns of husbands and wives include all combined returns of
husbands and wives, Form W-2, whether community or nonccsununity income is
reported, even though the tax is determined on the basis of separate incomes.
54/ Separate returns of husbands and wives exclude combined returns of
husbands and wives, Form W-8, even though .the tax is determined on the basis
of separate incomes.
56/ Separate community property returns of husbands and wives exclude
combined returns of husbands and wives, Form W-8, showing community property
divided in accordance with State laws and tax determined on the basis of
divided community income.
56/ Number of returns is subject to maximum sampling variation of 30 to
100 percent, depending on the number in the cell, 'or description of sample,
see pages 7 and 8.
32
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Press Service
No, S -367
The Treasury received today the sum of $164,852.24
from the Government of Finland, representing the semi
annual payment of interest in the amount of $130,025
under the Funding Agreement of May 1, 1923; $13,695.06
on the account of the semi-annual payment on the annuity
due under the postponement agreement of May 1, 1941, and
$21,132,18 on account of the semi-annual payment on the
annuity due under the postponement agreement of
October 14, 1943.
These payments represent the entire amount due from
the Government of Finland on June 15, 1947, under these
agreements,
f
0
33
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Monday, June 16/ 19^7
.
Press Service
No. S-368
Secretary Snyder today made public the following
statement after President Truman’s veto of the Tax Reduction
Bill had been made public %
The President’s veto of the Tax Reduction Bill
is thoroughly Justified by the existing financial
situation of the Government,
The President’s message
is a clear statement of the impropriety of tax reduc
tion at this time,
it constitutes firm assurance to the American
people that the Administration is determined that
the finances of Its Government will continue to be
kept on a sound basis,
A balanced budget and the
maintenance of the Integrity of our obligations are,
and must be, our foremost considerations.
With
these objectives clearly cttained, then proper
attention can be given to tax adjustment,
oOo
United States Savings gonds Issued and Redeemed Through May 31, 194-7
(Dollar amounts in millions « rounded and will not necessarily add to t©ts4§)
Amount
j Amount OutPercent Redeemed
Redeemed 1/ | standing 7j
of Amount Issued
.__
_
j Amount
Issued ¿/
1
Series A-Di
Series A -1935 (matured).. 1 1
1
255
Series B-1936 (matured),.
463
Series C-1937
585
656
Series C-1938 •«* »••••«». |
j
1 ,014Series D-1939
Series D -194-0
1,19 9
I
519 |
Series D -194-1
Total Series A
«• I
|
Series E:
1,457 j
Series E -194-1
Series E -194-2
I
6,609 s
Series E -194-3 It •f1»•»9ff | 10,829 j
12,638 !
Series E -194-4Series E -194-5
9,889
4,336 ;
Series E -194-6
Series E -194-7 (5 months). 1 U 1,668 !
326
2 / 259
55.73
150
205
220
84
506
809
978
22.87
20.22
18.35
16.18
435,
3,029
35.4-3
312
„2,203
4-,277
1,14-5
4-,4-06
5,064
7,5746,202
3,384
1,599
21,4-1
33.33
39 #50
4-0.07
37.28
2I .96
4-.20
30,861
34-«93
v
'
6,551
3,687
952
TO
V
—— ■
—
16,565
»"-“i
HP
Unclassified Redemptions |
Series A - E ..... .
Total Series A - E .... ...
j
Series F and Gs
Series F and G -194-1 ..... i
Series F and G-19A2 .....
Series F and G -194-3 •••••
Series F and G-19A4- .....
Series F and G -194-5 •*...
Series F and G-194-6 .....
Series F and G -194-7 (5
months).................
Total Series F and G ....
52,117
*
l/
£/
|y
fy
— — — r----------- -------
....... .mm*^
•
94-
94-.
..
18,321
33,796
,i
35.15
-
1,529
451
1 ,34.7
2,749
2,905
360
199
67
3,326
2,94-3
2,926
1,292
*
1,2
91
7
19,177
1,692
3,181
3,356
3,686
3,14-2
2,992
182
4-33
71,295
20,013
11.90
13 .6 1
13.449.77
6.33
2.24i
17,486
—
Total All Series j>/ .....
96.08$
93.09
32
Total Series E .......... L .47,426.
jj.-.-,—p,
)
]
10
$
1,662
4,691
¡j— ■■ ' ..... .
245
4-31
......
51,282
8.82
1
!
28.07
Less than $500,000.
Includes accrued discount.
Current redemption values.
Includes matured bonds which have not been presented for payment,
Includes $30 million reported on public debt statement as ’’unclassified sales.”
Includes Series A and B (matured), and therefore does not agree with totals
under interest-bearing debt on Public Debt Statement,
Office of Fiscal Assistant Secretary
Treasury Department.
35
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Tuesday, June 17, 19^7
Press Service
No. S-369
(Corrected)
The Secretary of the Treasury announced last evening
that the tenders for $1 ,300,000,000, or thereabouts, of 91-day
Treasury bills to be dated June 19 and to mature September 18,
19^7, which were offered on June 13, 19^7, were opened at the
Federal Reserve Banks on June 16 ,
The details of this issue are as follows:
Total applied for - $ 1 ,961 ,025,000
Total accepted
- 1,305,370,000 (includes $17,025,000 entered
on a fixed price basis at
99.905 and accepted in full)
Average price
- 99.905 -/ Equivalent rate of discount approx.
0.376$ per annum
Range of accepted competitive bids:
High - 99.907 Equiv, rate of discount approx. 0.368$ per annum
Low -'99.905
,f
"
Tl
0.376$ "
u
(65 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL
Total
Accepted
Total
Applied for
$
22,950,000
1 ,637,745,000
16 ,395,000
15,645,000
6,195,000
3 ,920,000
140,216,000
3,341,000
2,785,000
6,46^,000
4 ,050,000
$
16 ,545,000
1 ,074,070,000
1 1 ,005,000
1 1 ,445,000
5 ,495,000
1011319,000
3,920,000
99,021,000
2 ,606,000
2 ,155,000
5 ,589,000
3 ,700,000
69,819,000
$1 ,961 ,025,000
$1 ,305,370,000
0O0
36
TREASURY DEPARTMENT
Washington
FOR RELEASE, AFTERNOON NEWSPAPERS
Wednesday, June 18, 1947.________
Press Service
No. S-370
The Treasury Department today transmitted to Chairman
Knutson of the House Ways and Means Committee a staff study
entitled "The Tax Treatment of Family Income”. The study
prepared by the Treasury's Division of Tax Research, examines
alternative methods of correcting discriminations which arise
in the treatment of family income under present Federal income
tax law.
A foreword explains that no policy recommendations are
made in the study, its purpose being to present facts and
analyses which may be helpful in charting tax policy.
The treatment of family income was listed by Secretary
Snyder in a statement to the House Ways and Means Committee
last March as one of several important fields for possible
basic revision of the tax system. He informed the committee
that these fields were under study by the Treasury's tech
nical staffs.
The factual findings presented to the Congressional
committee today point out that present income tax law
discriminates between families in three respects. One of
these is residence, present law enabling couples in community
property states to save on taxes by dividing their earned
and investment community income and filing separate returns.
Another is on the basis of the nature of the income, present
law requiring earned income in non-community property states
to be taxed to the earner but permitting recipients of invest
ment income to split that income with members of their families.
The third basis is discrimination between recipients of invest
ment income, by favoring families who avail themselves of the
right of splitting investment income by gift and by such
devices as family trusts, corporations and partnerships.
Tax savings obtained by one or another of these methods
accrue to 1,400,000 couples annually, the report estimates.
To almost four-fifths of these taxpayers the saving is placed
ab $38 or less; for the remainder, the saving may be very
substantial, amounting to $12,834 to a $100,000 Income family.
37
2
Consideration has been given to the family income
problem'over a period of 25 years, the study sets forth,
■with emphasis placed chiefly on two proposed remedies .
One of these is the mandatory filing of joint returns by
all married couples, and the other is the taxing of all
earned income to the earner and all community property
income to the spouse exercising "management and control".
A third plan discussed in today's report is termed the
"dual- rate-schedule plan", which would take the profit out
of filing separate returns by prescribing a new surtax
schedule for married persons filing separate returns.
As a fourth alternative, the study sets forth the pro
posal to grant spouses in all states the option of dividing
their combined incomes for income tax purposes. Only resi
dents of community property states now have this privilege.
The proposal is analyzed in detail in the study because it
is receiving widespread attention as a possible solution
for the tax treatment of family income.
The fourth or "income-splitting plan" would reduce the
tax liabilities of approximately 4,900,000 married couples
by about $744,000,000 annually, the study.estimates. Couples
in non-community property states would be the chief benefici
aries, but couples in community property states would also
benefit to the extent that they have unequal amounts of
separate, non-community income which they are not now
permitted to split,
The study includes the following table summarizing esti
mated revenue effects under the various family income plans:
Plan
Increase (/) or : Number
: decrease (-)
: of couples
in revenue
: affécoed
(millions)
(millions)
1. Mandatory joint returns
2 . Management and control of
community income
3, Dual-rate schedule
4. Split income:
a. Splitting optional for
spouses
b. Option to split con
ditioned on inclusion
of children!s income
1/
1.-4
/ $541.7
#
/
8I .6
/ 997-7
1.4
-
743.5
4 .9
-
632.2
4.8
.6
1/
In addition, the taxes of about 7*2 million single persons
would be increased.
3:
- 3 The estimated distribution of married.couples who would
benefit from income-splitting would be as follows:
Combined
Surtax
Net Income
of Couple
Married Couples Now Filing
Joint -.Separate;
Returns: Returns: Total
(In millions)
All States
0 - ¿2,000
2,000 - '4,000
1
4,000 and over
Total'
3 -5
0-.-9
22*5
0 - $2,000
2,000 » 4,000
1.8
4,000 and over
Total
0
1.8
0
18.9
0.8
1.1
4.6
1.2
0.3
24 .7
2 .2
•p
•H
I\
O
o
•,
18.1
Couples Who
Would Benefit
From Income
0V
3-8
1.2
4.9
property States
2.1
0.3
0.5
0.1
0.9
0.5
0.1
2 .7
0
*
*
0.1
Noncommunity-property States
0 v $2,000
2,000 - 4,000
4,000 and over
Total
*
sn
16.3
0.5
16 .8
•3.5
.'0.9
20.7
0.6
0.2
4.1
3.7
1.1
22.0
1.1
4.8
1.3
0
Les s than 50,000.
Note:
/
Figures are rounded and will not necessarily add
to totals*
0O0
V
THE TAX TPEATMEHT OP EASILY IPCOLE
Division of Tax Research, Treasury Department
June 19^7
The Tax Treatment of Family Income
A major issue of long standing in individual income tax policy
pertains to the treatment of family income. This study considers
the present law treatment and four alternative methods of taxing
family income in the light of the various equity, revenue, economic,
and legal and administrative considerations involved, .Three of the
alternative methods which have been given consideration in the past
are briefly reviewed. A fourth alternative, the split-income plan,
is presented in more detail because of the current v/idespread interest
in this approach to a solution of the problem, 2?o policy recommen
dations are made in this study, which is designed to provide factual
and analytic background material which may be helpful in formulating
such recommendations.
The study was initially prepared in the Individual Income Tax
Section of the Division of Tax Research. The revenue estimates
used in the study were prepared in the Division of Research and
Statistics. In its preparation valuable assistance and suggestions
were received from other members of the Treasury tax staff, includ
ing consultation with members of the Office of Tax Legislative
Counsel on legal matters and of the Bureau of Internal Revenue on
administrative matters.
This subject has been under consideration by a committee comrposed of the technical tax staffs of the Treasury Department and
the Joint Committee on Internal Revenue Taxation. This study was
made available to the committee in draft form and has benefited
at various points by the committee’s discussions. The material
contained herein, however, is not to be considered as necessarily
representing in any v;ay the views of the staff of the Joint Committee
on Internal Revenue Taxation.
Division of Tax Research
U, S. Treasury Department
June lQhj
TEE TAX TESA.Ti.IBHT OP FAMILY IHCOME
Tattle of Contents
Page Ho.
Sunnary
1
A.
Introduction...... ; ............... ............. ...... .
B.
Principal issues.......................................
C.
Proposals previously considered..........................
1* Mandatory joint returns..................... .
2 . Dual-rate schedule........ ..........................
3* Management and control plan............... ......... .
D.
lH
The split-income plan........... ......................
1 . Analysis of p lan.... .............. ........ .
15
2 . Restricting application of plan......... .......... .
19
a. Limiting plan to an amount of income..........
19
b. Limiting plan to earned income.
..... .
20
23
3 . Treatment of the income of minor children..........
a. Per capita income-splits................. .
25
b. Exemptions for dependents.................... .
26
c. Other types of adjustments..... ............ .
’ 27
Administrative considerations
........ ...........
27
a. Income-splitting applied only to s p o u s e s . «,...
27
0» Income-splitting applied to parents and
children...... ...................... ..........
30
7
10
11
13
Appendix A - Summary of Income-split ting Devices in
Community—property and Honconnunity-property States........
32
Appendix B — The Special Case of Family Trusts............ .
Ul
Tables
1
Income tax liability under present lair for married couples
with no dependents for specified levels of net income, assuming
various divisions of income between spouses
2
Decrease in tax liability under 50:50 split— income plan compared
with present law, assuming various divisions of income between
spouses with, no dependents for specified levels of net income
Percentage decrea.se in tax and percentage increa.se in net income
after tax under 50*50 split-income plan compared with present law,
assuming various divisions of income between spouses with no de
pendents lor specified levels of net Income
x
Table of Contents « 2
1*.
Tax liability under present law and under the dual—rateschedule plan for single persons without dependents for
specified levels of net income
on
Tables - continued
Tax liabilities under pre&ent law for married couples with
one and two children for specified levels of net income,
assuming various distributions of income between family
members
/
The Tax Treatment of Family Income
Summary
1. This study examines alternative procedures for reducing tax
differences which result from the present treatment of family income
under the individual income tax* Present law discriminates between
families on the basis of residence, by enabling couples in communityproperty States to divide their earned and investment community income
between separate tax returns thereby reducing their taxes through the
double use of the lower rates of the progressive tax rate schedule.
It discriminates also on the basis of the nature of income, by requiring
earned income in noncommunity-property States to be taxed to the earner,
but affording recipients of investment income numerous opportunities
for splitting that income with members of their family. Finally, it
discriminates ¡between recipients of investment income by favoring
families who avail themselves of opportunities to split income by gift
and such devices as family trusts, corporations, and partnerships.
2. The tax value of income-splitting varies with size of income,
increasing from zero in the case of.married couples (without dependents)
with not more than $3,000 of net income to $3^2 at. the $10,000 net income
level and $12,opH at the $100,000 level. These tax savings accrue to
an estimated 1.4, million couples filing separate returns with combined
income above the first surtax bracket ($2,000 under present lav/) , almost
four-fifths of which obtain tax savings of not more than $3$. For the
balance (about 300,000), the tax savings may be very substantial. 1/
The extent of tax savings due to additional splitting of family income
with children is unknown. Discriminations of the type indicated above
tend to increase the relative tax load borne both by low-income tax
payers and by those at higher income levels who cannot avail themselves
of income-splitting techniques.
3* The Congress and the Treasury have both considered this problem
from time tox time over the past 25 years, with principal emphasis on
two tjrpes of remedial measures: mandatory joint returns, and taxing
earned income to the earner and community-property income to the snouse
exercising management and control.
y* Under mandatory joint returns, married couples would be required
to pool their income in one return, thus eliminating the division of
income between spouses as a factor in the determination of combined tax
liability. Harried couples with combined incomes above the first surtax
bracket who now file separate returns would pay higher taxes, and their
relative tax burdens would be increased in comparison with those of all
other income taxpayers. Mandatory joint returns would increase the aggre
gate tax liability of some l.U million married couples by about $5^2 million.
¿ 7 The•estimates here used assume a $l6o billion level of "income payments
in calendar year I9U7 .
mmmm
BjpNra
4
ii
5* The plan to tax community income to the spouse who exercises
management and control would eliminate the tax savings resulting from
the automatic division of income under the community-property laws,
hut would leave unaffected tax savings resulting from other forms
of income-splitting. Its adoption would increase the taxes of spouses
who now derive tax savings from reporting community income on separate
returns, and would encourage couples in community-property States to
use available income-splitting techniques. The increase in tax liability
resulting from this plan would rise as the proportion of community income
accounted for hy one'spouse increases and as the amount of such income
increases. The taxes of about 600,000 married couples in communityproperty States would he increased hy about $82 million*
6.
A third plan which has been discussed informally from time
to time is the wdual-rate-schedule plan.11
It would eliminate the tax
advantage derived from filing separate returns, hy subjecting married
persons filing separate returns to a, new surtax schedule which would
retain the present rates hut would make these rates applicable to
surtax brackets covering only half the income covered hy the present
brackets* This new surtax schedule would also apply to single persons.
The present rates and brackets wpuld continue to apply to married persons
filing joint returns. Under this plan couples would usually find it
profitable to file' joint returns* It would, raise the yield pf the income
tax by about $1 billion by increasing the combined taxes of about 1*4
million couples who now save by filing separate returns and the taxes
of about 7«2 million single persons with surtax net incomes in excess
pf $1,000.
7» An alternative to the foregoing three plans is the proposal
to eliminate tax differences resulting from the splitting of income
between couples by granting spouses in all States the option to divide
their combined incomes for tax purposes. This plan would reduce the
taxes paid by married persons who.have unequal incomes which in the
aggregate exceed the amount taxable under the first bracket reg<ardless
of whether they now file joint, or separate returns* It would benefit
spoilsos in. noncommunity-property States who have not been able to
divide, their incomes equally by currently available income-splitting
techniques, especially those with earned incomes* Spouses in communityproperty States would receive tax reductions to the extent that they
have unequal amounts of separate noncopnunity income* This plan would
reduce the tax liabilities of approximately 4*9 million married couples
by about $744 million.
8. It is possible to limit the application of the split-income
plan to earned income, which accounts for about one-half the income
reported by taxpayers with net incomes over $5»000* This limitation
would tend to restrict the application of the plan to a declining
proportion of income as the couple1s total income increases beca.use
iii the relative importance of earned income tends to decrease with
gj_2e of income« It- would tend to reduce the existing "fea-x discrimi—
nation "between community- and noncommunity-property States, "because
spouses in noncommunity-uroperty States already have opportunities
for splitting investment income* Discriminations would remain "because
some large-income spouses in noncomurunity-property States do not find
it to their interest to ta.ke full advantage of the tax savings obtainable
by splitting their investment income equally.
9« It is also possible to restrict the plan by limiting the
amount of income to be automatically split. This restriction would
affect relatively few spouses because the number of married couples
with large incomes is relatively small* Moreover, iéfc would partially
defeat the plan* s objective because high-income couples in communityproperty States would continue to possess tax advantages over .similarly
situated couples in other States* In addition, it would preserve the
present discrimination against couples with large earned incomes compared
with, those having large unearned incomes wh« have access to incomesplitting techniques.
10« The treatment of the income of minor children is one of the
more difficult problems encountered with development of a plan for
the equitable tax treatment of family income« It arises under all
three comprehensive plans discussed in the present study, the splitincome, mandatory joint returns and dual-rate-schedule plans, and is
here illustrated by a description of the problems which would arise
with reference to minor children under the split—income plan* To
ensure uniformity in the tax treatment of equal—income families under
a split-income plan, it would be necessary to discontinue separate
returns for children and to include their income with that of the
parents* Differences in size of family could be recognized either
as under present law, by providing exemptions for each dependent, or
by extending the concept, of income—splitting to children (on a per
capita basis or by allowing children less than per capita splits)*
The extension of income-splitting to children on a per capita basis
would probably result in unjustifiably large tax savings to families
with large incomes* However, at upper-income levels, the present^
exemption results in relatively small tax differences between families
of varying size* If the income of children is included in the „return
of the parents (and only the present type of dependent exemption is
retained for the purpose of differentiating tax liability by size
of family), some parents would not elect an optional split—income plan
since they would obtain a ia,x advantage by continuing te split income
with children under separate returns* This plan would cost about $t>32
million or some hundred million dollars less than the estimated revenue
loss under the optional income-splitting plan applicaole only to
spouses. In order to secure equal taxes for equal—income families of
the same size, the plan would need to be mandatory, both, as to incomesplitting and the inclusion of" children1 s income. However, complete
iv
uniformity of tax treatment for equal-income families might not he
feasible even under a mandatory plan because of the problem^of income
accumulated in trusts for members of the family* If the primary
objective is minimizing tax avoidance, the income of children might
be handled by requiring that only income of children which derives
from property traceable to the parents be included in the tax return
of the family*
11. A st>lit~*income plan limited to spouses would virtually
eliminate the legal-administrative problems which now arise from
attempts to divide income between spouses, it would reduce the
number of separate income tax returns and year-end adjustments,
and it would largely relieve couples of the need to choose between
joint and separate returns. On the other hand, the plan raises
a number of administrative issues, some of which might introduce
more or less difficult T>roblems. These include modification of
the Supplement T ta.x table and revision of the tax computation
schedule to provide for tax differences between couples filing
joint returns and all other taxpayers, and the increased difficulty
of adjusting withholding to approximate antual tax liability.
Modification of the plan involving a head-of-family status, or
limitation of the plan as to amount of income or type of income
would each raise additional adm.inistra.tive considerations* A
split-income plan requiring the inclusion of children1s income
with that of parents would reduce further the administrative
problems arising from income-splitting. However, the modification
would itself raise administrative problems involved in the identifica
tion of the children covered by the plan. The problem of the
anoortionment of ta,x liability among members of the family would
not anise if the plan were optional and limited to spouses, and
might also be avoided if the plan required the inclusion of the
income of children, so long a.s its use remained optional* If,
however, the plan were mandatory,both as to income—splitting and
the inclusion of children* s income, forma,l provision would need
to be made for apportionment of ta,x liability* This would entail
new problems which, however, might be limited to the relatively few
families who would request formal apportionment.
I
— V —
12.
Summary of estimated revenue effects under various
family plans
(assuming income payments of $166 billion
in calendar year 19 ^7 )
Plan
Number
;Increase (+) or*
ï decrease (-) î of couples
• in revenue
*
aff ected
(millions)
1.
Mandatory joint returns
* $5Ul«7
2.
Management and control of
community income
+
81.6
3.
Dual— rate schedule
+
997*7
h.
Split income;
a. Splitting optional fqr
spouses
b. Option to split conditioned on
inclusion of children’s income
1/
(millions)
l.U
.6
i.H 1/
p
-
7^3»5
M
-
632.2
% 8
In addition, the taxes of about J,2 million single persons would
be increased.
THE TAX TREATMENT 07 FAMILY INCOME
A.
Introduction
The present definition of taxpayer unit under the individual
income tax involves substantial tax differences between families \iith
equal incomes and exemptions. These tax differences arise partly
on the basis of residence, partly on the basis of the nature of
income (whether earned or investment), and in the case of investment
income, on the basis of the division of legal title to income among
the several members of the family. Although inequities inherent in
these tax differences have received intermittent consideration for
more than two decades„ the problems inolved in this area of taxation
still remain to be solved*
The differences which result from the taxation of individuals ,
on the basis of residence is a by-product of the community-property
system in effect in some of the American States. 1/ Underlying the
community-property System is the concept of the marital partnership —
the doctrine that since both spouses contribute to the economic gains
which accrue to the couple after marriage, they have equal rights to
them. There is considerable variation in detail among the communityproperty systems in use in the several States, but as a general rule
property acquired after marriage is treated as community property
shared equally by the husband and wife. Zj Income derived from such
community property belongs to the community, that is, belongs equally
to both spouses. By the same token, income earned by either the husband
or the wife (where the couple is living together) is usually regarded
to be community income. Since each owns half of the earned income,
each is considered to be a separate taxpayer unit liable for the tax
which attaches to his or her half of the income. In view of the grad
uated character of the income tax, this separate liability is in fact
a privilege to reduce the couplers tax bill in cases where its combined
surtax net income exceeds the amount taxable under the lowest surtax
bracket ($2,000 under present law). In such cases, the division of
income between husband and wife has the effect of shifting part -of the
couple’s income to a tax bracket to which a lower tax rate applies.
17
2/
The community-property States are Arizona, California, Idaho,
Louisiana, Nevada, Hew Mexico, Oklahoma, Texas, and Washington.
The Territory of Hawaii also has community-property law. Oregon’s
I&th legislative assembly recently enacted another community-property
law intended to qualify its residents, for income-splitting under the
Federal individual income tax. See Appendix A.
:
”Property acquired after marriage by purchase with separate funds or
by gift, bequest, devise or inheritance generally is not community
property,
,
48
-
2
-
The resultant tax savings increase with the size of total family income
and measure the amount of the tax difference in favor of earned income in
community-property States as compared with earned income in noncommunityproperty States. It will he noted from the table below that under present
law this difference amounts to only $38 for a married couple with no
dependents with a combined net income before personal exemption of $5,000,
but increases to $342 at the $10,000 income level, $12,854 at the $100,000
level and $23,921 at the half-million dollar level.
Comparison of tax liabilities of married couples with no
dependents in community-property and in
noncommunity-property States
Total tax on married couples
JUGt;
income
before
exemption
$
5,000
10,000
15,000
25,000
50,000
100,000
500,000
1,000,000
Noncommunityproperty State
(only one
spouse has
income)
$
798
2,185
4,o4j
9,082
2U.795
63 ,12 s
1407,465
839.715
:
Communityi property State
»(income divided
sequally between
*
spouses)
76O
1,843
3 .15 1*
6,460
18,725
50 ,27^
383,5^
815.791*
$
Tax saving ih
communitv-nronerty .States
«
«
f.
*
Amount
•
Percent
•
m
$
38
342
893
2,622
6.071
12,854
23,921
23,921
4.8/o
15.7
2 2.1
28.9
24.5
20.4
5.9
2.8
These are annual tax differences. Their cumulative value is indicated
by the fact that in the case of a $50,000 income, the tax differences
during the ten years 1937~1946 (excluding interest) aggregate $53,144 or
more than an entire year's income before taxes. The ten-year aggregates
amount to $320 at the $5,000 level, $2,864 at the $10,000 level, and
$20,633 at the $25,000 level.
Income tax differences on the basis of kind of income arise from the
circumstance that while in noncommunity—property States earned income is
taxed to the earner, ownership of investment income can be shifted for
tax purposes among family members by various income—splitting devices.
By dividing ownership of income-producing property among members of the
family, separate taxpayer units are established, each with the right
to report his income separately for tax purposes, thereby reducing the
- 3 combined tax liability of the family. In consequence, earned income
may be more heavily taxed than investment income.
Under present law,
a married man with no dependents in a noncommunity-property State having
a net income before personal exemption of $10,000 is liable to a tax of
$2,185 (an effective rate of 21.9 percent) if all income is taxable to
him, which is the case if his income is earned. If the income is de
rived from investments, ownership of which has been split between two
spouses, the effective rate of tax is reduced to 20 percent by an 80:20
split (that is, one spouse owns 80 percent of the income and the other
20 percent), 18co percent by a 60:40 split and 18,4 percent by a 50:50
split. 1 /
Finally, tax differences exist also between families with equal
amounts of unearned income. This arises from the fact that although
existing law affords opportunities to taxpayers in all of the States
to split their investment income with members of their families, dif
ferent families utilize income-splitting devices in varying degrees
depending upon their individual circumstances. The techniques of
income-splitting employed with a view to reducing tax liability are
numerous, 2 / Direct gifts to members of the family, family trusts,
family corporations, and family partnerships are all income-splitting
devices, with tax— saving effects. Where taxpayers are unable to avail
themselves of the tax savings accruing from income-splitting because
of circumstances surrounding their family relationship or the nature
of their investments, the increase in their taxes is no less real than
if the income— split ting opportunities were denied to them by law. The
benefits of income— splitting are available to residents of both communityproperty and noncommunity—property States, and in community—property
States are employed to supplement the income— splitting permitted by the
community-property system,
The effect of the distribution of taxable income between spouses
on tax liabilities under present law at various income levels is pre
sented in detail in Table 1 *
The tax savings which result from income—splitting between spouses
are enhanced, especially at the high-income levels, by the allocation
of income for tax purposes between more members of the family, Tor
example, under present law, a married couple with no dependents and a
combined net income of $25,000 would pay a total tax of $9,082 if one
spouse owned the entire income; a combined tax of $7 ,5^7 if* one spouse
owned $5 ,000, the other $20,000, and each filed a separate return;
and a total of $6,460 if each spouse owned $12,500. l/ If the couple
has two children, and ownership of the $25,000 of family income were
split in four equal portions of $6 ,250 , the combined total tax would
be further reduced to $4 ,921 , j/
17
2/
3/
See Table 1 .
‘ 4
See Appendix A.
Table 5 contains other illustrations.
- k -
Quantitative data on the importance of income-splitting within the
family are incomplete» Information showing the extent to which family
income is shared with minor children for tax purposes is particularly
lackingf From tax returns and other data it is estimated that, assuming
$l66 "billion of income payments in calendar year 19 ^-7 » about 2U. 7 million
married couples will incur tax liability under present law. Of these
22.5 million or 91 percent will file joint returns while 2*2 million or
9 percent will file separate returns* The latter group will include
.,9 million married’ couples filing separate community-property
returns and 1*3 million filing separate noncommunity-property returns.
It. should be noted that not all married couples filing separate
returns under present law derive tax benefits from doing so. In fact,
only l.H million or about Sb percent of the estimated 2*2 million couples
filing separate returns have combined surtax net incomes in excess of
$2,000, the level at which separate returns ordinarily begin to produce
tax savings under present law. Moreover, the tax benefits derived by
almost fouprfifths of.the married'couples in this group from filing
separate returns do not exceed
For the remainder of married couples
filing separate returns (about $3^0,000), the tax savings may be very
substantial depending on the amount of their combined taxable income and
the proportions of the division of income between the spouses.
It should not be inferred that the tax savings which accrue to
families as the result of separate returns are invariably the result
‘of deliberate income-splitting with a view toward tax saving. In
some cases, the relative importance of which is unknown, .two or more
members of a family receive income from independent sources without
reference to tax considerations.
It should be noted further that the problem of the definition of
the taxpayer unit involves more than the matter of tax differences for
equal income families discussed above. The tax-reducing advantages
of income-splitting among various family members results in serious
administrative difficulties and costly litigation.
B.
P rincipal issues
- Proposals for the elimination of the inequities inherent in the *
tax differences resulting from the present tax treatment of family
income under the individual income tax have been considered by the
Congress on several occa,sions in the past. These proposals reflect
the different points of view from which the problem can ,be approached»
At one extreme is the doctrine that taxpaying ability is determined
by total family income regardless of the distribution of the ownership
of such income among the members of the family. Those holding this view
51
- 5 propose that the fanily*s total incone he taxed as a unit in order that
families with equal incomes and equal exemptions ha subjected to equal
taxes. They would require that all married couple» having the same amount
of net income pay the same amount of tax, regardless of whether husband
or wife is the income receiver or whether both contribute to the family
income in varying proportions. One procedure for giving effect to this
theory is to make joint returns mandatory: to apply the graduated rates
of the individual income tax against the combined income of the spouses,
after requiring them to file a joint return. An alternative -procedure
is to continue to give married couples the option of filing joint or
separate returns, but to require those filing separate returns to use a
new rate schedule employing smaller brackets which would in effect take the
profit out of separate returns and tepd to equalise the tax on all married
couples with equal incomes. Another alternative, which has recently re
ceived considerable attention and therefore is trea.ted in this memorandum
at some length, is to tax ea.ch spouse op. one-half of the couple1 s combined
income, giving each the benefits of lower rates in the graduated surtax
schedule*
Another approach to this problem and one which is dianetricaJ-ly
opposed to any of the aforementioned procedures fjter the handling of family
income proceeds from the assumption that the family as a unit has no
combined taxpaying ability per se; thcat its taxpaying ability is composed
of the sepa.ra.te taxpaying abilities of its individual members; and that
the taxpaying ability of ea.ch of these is determined by the amount of
income of which he or she is the owner without reference to the income of
the other members of the family. This approach sanctions the tax effects
of income—splitting within the family provided that tne transferor actua.lly
parts with title to and control of the property. This, in substance, is
the ra.tiona.le underlying the present income tax practice whicn accords each
spouse the privilege of filing a separate return covering only his or her
separate income. However, even those who favor basing ta,xes on individual
legal rights to income, differ on its specific application* The large
volume of litiga,tion involving the recognition for tax purposes of income—
splitting by means pf trusts, assignments, etc., attests to the differences
in opinion as to the degree of separation of ownership .and control needed
before the tax reduction effects of income— splitting can be accepted. Some
deny that the differences in the matter of title to income between the
community-property and noncommunity—property systems are sufficiently real
to justify the present differentiation in the tax treatment of married
couples with the same combined incomes. They therefore propose to tax
personal-service income to the earner and to tax income derived from community“
property to the spouse exercising management and control« This approaches an
attempt to reconcile the ta.x effects of automatic division Qf community income
practiced in community—property States with the situation in noncommunity—
property Sta.tes when property and control are actually transferred from one
spouse to the other*
- 6 She issue involved in these alternatives — basing tax liabilities
on total family income vs. basing then on individual legal rights to
income — relates primarily to the choice of the basic tax units under the
individual income tax. Since the identification.of the taxpayer unit
under present law is unsatisfactory to many taxpayers, the objective is
to find an alternative method of identifying the taxpayer unit which will
be better fitted to the application of the doctrine that taxpayers equally
situated as to income and size of family should pay equal taxes. However,
v/hen this issue is resolved, there still remains the problem of determining
the taxpaying abilities of single persons and families of varying size, all
with equal incomes.
It is generally agreed that the relative taxpaying abilities of
families of different size cannot be determined merely with reference
to their incomes. In practice this requires an adjustment for size
of family to provide equitable relative tax loads on equal-income families
of varying size. The present income tax resolves this problem by assuming that
the. uniform per capita exemption allowed for each member of the family,
regardless of their number, is adequate adjustment for size^of family, and
that income remaining after such adjustment is homogeneous ify all respects
except as to size of income. It, therefore, applies to this homogeneous
income one rate schedule which relates taxpaying ability to size of incomeAt the lower levels of income (those falling entirely within the first
surtax bracket), present law imposes on married couples twice the tax paid
by single persons with half their income. At the upper income levels it
imposes on married couples filing joint returns (and also on those xiling
separate returns covering substantially unequal incomes) more than twice
the tax paid by single persons with half their income, whereas married
couples reporting equal incomes on separate returns pay twice the tax
incurred by a single person with one-half the income.
The information now available does not cast adequate light on the
problem of the relative taxpaying abilities of families of varying size
at all income levels. One criterion would be to impose relative tax
burdens in accordance with ratios indicated by the relative incomes needed
by families of different size to obtain the same standard of living. Al
though the available information respecting sta.nda.rds of living by size
of family is at best fragmentary and representative only of the lower
income families, it indicates, for example, that a single person living
alone needs about two-thirds the money income of a. married couple to
maintain the same standard of living; and that a married couple with
two dependents needs only about ^>0 percent more money income than one
without dependent's and only somewhat more than twice the money income
of a single person to a,ttain the same standard of living.
The use of these ratios for the purpose of appraising alternative
methods of solving the family income problem is subject to several
important limitations. 1J It appears, for example, that a married
1 j The available information pertaining to the relationships of size of
family to taxpaying ability will be treated more fully in a study
entitled nIndividual Income Tax Exemptions.n
53
- 7couple does not need twice the money income of a single person- to
attain the same standard of living because the housewife contributes
a substantial amount of real income to the family. However, the
income tax applies largely to money incomes and not real incomes*
The determination of the relative taxpaying abilities in accordance
with the above-indicated ratios would seem to involve the taxation
of the real income added by the housewife. Another limitation stems
from the fact already mentioned that the data used to obtain the
above relative income ratios pertain to relatively low-income groups
(primarily under $5,000), whereas the family income problem under
consideration pertains primarily to middle- and upper-income groups.
Finally, the proportion of income used for consumption purposes
tends to decrease and savings tend to increase as income increases.
Thus, the ratios of relative income needed to obtain comparable
levels of living would have less and less applicability, as an
index of relative taxpaying abilities, as a larger and larger
proportion of income is saved. ,
' \
v
** <
The quantitative information on the effects of a change^in the
size of families on taxpaying ability is incomplete and provides
little basis for choosing among the alternative methods of treating
family income for tax purposes discussed below.
•'
C.
Proposals previously considered
The history of the proposals to remedy the inequities in the
tax treatment of family income, v/hich covers a period of 25 years,
indicates that neither the Congress nor the Executive branch of
the Government ’has maintained a Consistent position on this problem.
Congressional and Treasury proposals have alternated between manda
tory joint returns and the plan to tax community—property income
to the spouse who manages and controls such income.
A revenue bill passed by the House in 1921 1/ required that
community income be included in the gross income of the spouse having
management and control over such income. The provision was eliminated
by the Senate and in conference the House yielded in favor of the
Senate action. 2/ In I92H, the Secretary of the Treasury recommended
l7
2/
H.R* S2U5 , sec. 20S, 67th Cong,, 1st Sess.
Conference Report. Revenue Bill of 1921, Report Ho. HS6 ,
Statement of the Managers on the Part of the HousO on Amendment
Ho. 13U.
54
- sa similar provision, 1/ “but failed to persuade the Hays and Means
Committee, 2/
In 1933» the Acting Secretary of the Treasury recommended mandatory
joint returns,
hut this recommendation v/as not adopted hy the Committee
on Ifaye and Means, That same year, the General Counsel of the Bureau of
Internal Revenue reverted to the earlier Treasury proposal and favored a
provision which would have taxed unearned community—property income to
the spouse managing such income, 4/
In the preparation of the Bevenue Bill of 1934, the Committee on
ways and Means tentatively gave its approval to an amendment requiring
husbands and \irives in all States to file joint returns. However, this
proposal was dropped because of drafting difficulties*
In May 1934,
Representative Treadway sponsored a bill to tax conimunitj^property income
to the spouse exercising management and control thereof and hearings on
it were held before a Subcommittee of the Ifays and Means Committee, 6/
Special Assistant to the Secretary of the Treasury 3, K* Bartholow
appeared as a witness in favor of the bill, jJ ilo action was taken
by the subcommittee of the Hays and Means Committee,
Tj Annual Report of the Secretary of the Treasury for the fiscal year
ended June 30» 1923, p. 9* Better from Secretary of the Treasury
Mellon to William R, Green, Acting Chairman of the Committee on
Hays and Means,
2/ A provision including community income in the gross income of the
spouse having management and control over such income was contained
in See, 213 (a) of the Treasury draft of the Revenue Act of 1924.
However, this provision was deleted by the Hays and Means Committee
in its second print on the Revenue Act of 1924, E,E, 6715 » &8th Cong,,
1st Sess., January ¿2 , 1924,
¿/ ’’Statement of the Acting Secretary of the Treasury regarding the pre
liminary report of a Subcommittee of the Committee on Hays and Means
relative to methods of preventing the avoidance and evasion of the
internal revenue laws together with suggestions for the simplifi
cation and improvement thereof,” 1933» P* 15»
4/ Letter dated December 1 5 , 1933» to L. H, Parker, Chief of Staff of
the Joint Committee on Internal Revenue Taxation, reprinted in
Community Property Income Hearings before a Subcommittee of the
Committee on Hays and Means, House of Representatives, 73r<l Cong*,,
2nd Sess,,^on H.R. S39&,
1-21, June 12-13, 1934, pp, 22-25*
M
ILid,t p, o, Statement of Mr, Treadway of Massachusetts, member of
the Committee on Hays and Means,
6 / Ibid.
Ik id., p, 31* Statement of B, H. Bartholow, Special Assistant to
the Secretary of the Treasury.
Xl
55
-9 In 1937, Under Secretary of the Treasury Magill advocated
mandatory joint returns at hearings before the Joint Committee on Tax
Evasion and Avoidance. 1 / The Joint Committee, however, did not take
action on this recommendation*
In 19 UI, the Treasury approved mandatory joint returns orovided
that this procedure would not incren.se the taxes of spouses with
separate earned incomes.. The Revenue Bill of 19^1, as reported by
the Ways and Means Committee, contained a provision for mandatory
joint returns, 2/ but did not include the Treasury*s recommendation
regarding earned income* 3 / The mandatory joint returns provision
was rejected by the House* The Senate Finance Committee inserted in
this bill a provision to tax community income to the spouse exercising
management and control thereof* bj Later the Committee withdrew its
amendment on the floor of the Senate. At that time, the Treasury took
no public position with regard to the proposal«
In 19^+2, the Treasury again advocated mandatory joint returns with
a special allowance for the earned income of the wife or the husband,
but the nroposal was rejected by both the Ways and Means Committee and
the Finance Committee. ¿/
In their consideration of the problem of taxing family income,
the Congress and the Executive branch of the Government, as well as
tho others who took part in the discussion«, appear to have been
concerned primarily with tho discriminatory aspects of the current
method of taxation* Spokesmen for the community-property States
1 / Hearings before the Joint Committee on Tax Evasion and Avoidance,
1937, Part 2, pp. 309-313*
2/ H*R. 5kl7, sec. Ill, 77th Cong., 1st Sess., July 2k, 19kl.
3./ Letter of the Secretary of the Treasury to the President, dated
July 31» 19^1» reprinted in Congressional Record, August k, 19 k!, Vol.27*
Part 13 , p* A 376U* See also Committee on Ways and Means Report No. 10 k0
on the Revenue Bill of 19^1 (H.R. 5kl7)» P* TO.
bf H.R* 5kl7, sec. 119» 77th Cong., 1st Sess., September 2, 19^1*
5./ Randolph Paul, Tax Advisor to the Secretary of the Treasury, at first
suggested that spouses having separate earned incomes not in excess
of a specified maximum be given a tax credit against the joint tax
liability consisting of the difference between the tax liability under
a joint return and the sum of the liabilities on two separate returns*
The proposed tax credit was later changed to 10 rercent of the wife* s
earnings (or the husband* s earnings if less than the wife’s) and limited
*> to a maximum of $-100* (Hearings before the Committee on Ways and Means,
House of Repre senta tives, 7 ?th Cong*, 2d Sess., on Revenue Ravi »ion of
19 ^ 2, Vols. 1 and 2 , revised, pp* 10 , S3 * and l6l2 .)
56
-
10
-
were concerned with retaining the concepts- underlying the institution
of their property laws. The following sections summarize the salient
feature« of those proposals for the treatment of family income which"
have "been previously considered and the analysis of which is already
a matter of record,
1#
Mandatory joint returns
If the filing of joint returns were made mandatory, the division
of income "between spouses would cease to he a factor in the deter
mination of their total tax liability. The couple*s tax liability
would be determined by the combined total income of the spouses and,
consequently, equal-income couples would pay equal taxes.
Mandatory joint returns would increase the tax liabilities of
spouses who now secure tax savings, by filing separate returns. In
general, the more equal the separate incomes of the spouses and the
greater their combined income, the greater would be the tax increase
resulting from mandatory joint returns. l/ The couples whose taxes
would be increased would have combined surtax net incomes in excess
of the first surtax bracket (above $2,000 under present law) who reside in
the community-property States where they automatically obtain an
equal division of community income, and those who reside in nonconnunity—property States and have separate incomes from property,
business, and wages and salaries, Mandatory joint returns would
increase the tax liabilities of an estimated l.ty- million of such
married couples and would add about $5^2 million to tax revenues,
assuming present' income tax rates and exemptions and about $166 billion
of income payments in calendar year 19^-7 <If joint returns were mandatory, the tax liability of a married
couple whose entire taxable income falls in the first bracket (not
above $2 ,000) would continue to be twice that imposed on a single
përson. with one—half the income. However, the tax liability of a
couple with taxable incomes in excess of this amount would be more
than twice that incurred by a single person with one—half the income.
The amount by which a married couplers bax exceeds twice the tax of
a single person with one—half Its income varies directly with the
graduation'of the surtax rates; the steeper the graduation, the
greater the difference. .
Mandatory joint return? would leave the absolute amount of taxés
payable by single persons unaffected, However, the relative amount
of taxes they paid would be reduced, since the tax liabilities of
some married couples would be increased,
IT
For illustration, see Table 1, w&ene column headed ,f100; 0” shows
tax liability under mandatory joint returns.
57
-
11
-
If mandatory joint returns were adopted two single people with separate
incomes (before and after marriage)^aggregating more than the amount taxable
under the, f irst surtax bracket * would increase their tax liability by marriage.
The amount of tax increase would rise with the size of their combined income, .
Much has been made of this point in the discussions of this plan. The extent
to which mandatory joint returns would create an economic barrier to marriage
in the income a£eas affected would depend in part on the weight the individuals
involved assign to economic considerations (of relatively small import in the
majority of cases) and in part on the extent to which the increased tax lia
bility incident to marriage would b-e offset by the consumption economies grow
ing out of shared living expenses.
Dual—rate schedule
One proposal for the tax treatment of family income which has been dis
cussed informally from time to time is the so-called dual-rate-schedule plan.
This proposal would eliminate the need for making the filing of joint re
turns mandatory by eliminating the'tax profit from separate returns.
Under this plan,, the splitting of income between spouses would produce no
tax savings, and virtual uniformity of tax treatment among couples with
the same aggregate incomes could be expected* This end would be achieved
in the following manner;
Married couples would retain the option of filing joint or separate
returns,. Married persons filing joint returns would use the present surtax
schedule. However, single persons and spouses filing separate returns would
be provided with a new surtax schedule which would retain the present rates
but make them applicable to tax brackets embracing only half the amount of
income covered by the present brackets. The following dual-rate schedule
is based on the present law combined tentative normal tax and surtax rate
schedule, before the five-percent reduction, which would apply to couples
filing joint returns.
Illustrative dual-rate schedule
(brackets in thousands of dollars)
.; Surtax net income bracket :
Surtax net income bracket
Combined ¡Single person and:
¡Combined Single person and:
tentative: married person :
¡tentative married person
return
rates! 5 filing separate : return : rates
ixling s eparat e •:
;
return
:
:
return
.
20$
$ 0
1
$ 0
2
62$
$ 13 - 16
$ 26 - 32
22
1 —2
65
2 - k
is -1 9
32 - 38
26
2 - 3
k - 6
.1 9 2 2
38 - Uh
69
30
6 T* g
22 - 25
kk - 50
3 - U
72
k TT 5 '
3^
g - 10
Z f w 30
75
50 - 60
38
6
10 - 12
78
5
oO - 70
30' - 35
^3
6 - 7
12
Ik
SI
70 - go
35 -M ^0
^7
i k - ' 16
8k
7 - s
k o . - ^5
So - 90
50
g - 9
16 - i s
87
90. - 100
te ‘ - 50
53
10
I
t
,
20
83
9
100 - 150
50 - 75
p
56
10 r u
20
22
90
75 - 100
150 - 200
59
11 - 13
22 - 26
m
100 and over
200 and over
12
-
Under this plan spouses could'not reduce their tax by filing
separate returns. Spouses with equal separate incomes would pay the same
tax.under either joint or separate returns. Spouses with unequal incomes
generally would find it profitable to file joint returns. 1
J
If the dua.l~ra.te-schedule plan were employed, married couples could
not reduce their tax liabilities below what ihey~would be under mandatory
joint returns. Consequently, spouses who now file separate returns would
experience tax increases similar to those which would result from mandatory
joint returns* 2/ However, unlike mandatory joint returns, the amount of
tax paid by many single persons (those with surtax net incomes, in excess'
of $1,000 under the above illustrative tax schedule) would be increased
under the dual-rate-schedule plan. j£/
The dua,l-rate~schedule plan would also impose relatively heavier
taxes on single persons compared with married couples filing joint
returns than does the preheat lavr, because it would, apply to single
persons the special tax schedule designed to remove the tax advantage
of separate returns for married couples. Under the present per capita
exemption system, the married couple with ho dependents and a combined
net income of $3*000 or less pays twice the tax imposed on the single
person with one-half its income« A similar tax ratio applies to single
persons compared with married persons now reporting equal incomes on
separate returns. However, a married couple reporting an income in
excess of the first surtax bracket on a joint return.(or reporting sub
stantially unequal incomes on separate returns)now pays more than twice
the tax incurred by a single person with one-half its income. Under the
dual-rate-schedule plan, married couples filing joint returns would pay
only twice the tax incurred by single persons with one-half the income.
1/ Except spouses with both (a)combined incomes large enough to be
subject to the maximum effective rate limitation, and (b) substan
tially unequal incomes. Eor example, suppose one spouse has a net
income of $100,000 and the other $htQ00,000* Their combined tax under
this plan would be $U,275,000 oh a joint return, and $H, 263,'5^2 on
sepa.rn.te returns, assuming present law rates and exemptions. They
could continue to reduce their combined tax bill by $11,14-38'or 0»3
percent by filing ^separate returns.
2/ See Table 1 , where Col. headed ”100 40" showp the liability under
joint returns, while other columns show liability under present law,
assuming divisions of income between spouses indicated -at the top
of the columns.
1/ See Table h.
59
- 13 -
It is estimated that,under the illustrative dual-rate schedule pre
sented above, tax yields would be increased by $99 8 million, assuming,
income payments of about $166 billion in calendar yeah 19^7* ~^his
increased yield would be obtained from about 7*2 million single persons
with surtax net incomes above $1,000, and l.U million married couples
with combined surtax net incomes above $2,000 who would tile separate
returns under present law. The higher yield under this plan compared
with mandatory joint returns is attributable to the higher tax; on
single persons,
3*
Management and control plan
The proposal to tax earned, income- to the earner and communityproperty income to the spouse exercising management and control is based
on the view that the property rights of spouses in community*»property
and noncommunity-property States are not sufficiently different to jus
tify the tax differences resulting from an equal division of community .
income in community-property States,
This plan seeks to equalise the individual income tax burdens of
married couples in community-property and noncomnunity-property States
by eliminating the automatic equal splitting of community income between
spouses for tax purposes. It undertakes to achieve this end by taxing
personaliservice income to the- earner and unearned community income to
the managing and controlling spouse. Income from separate property
would be taxed to the spouse owning the property even though such income
belongs to the community under the laws of commun11y—pr operty States,
Under"this definition of taxpayer units, the taxes of couples without
separate earned or property incomes (in the noncommunity—property sense)
would be the sane as those incurred on joint returns. The proposal would
therefore increase the taxes of spouses who would ordinarily report com
munity income on separate returns under present .law.
It should be noted that, unlike the two plans discussed above, this
plan does not attempt to obtain uniform taxes for equal-income couples in
all States, since it does not affect noncommunity forms of income-splitting.
Spouses in all States would retain the option of reporting on separate re
turns income split by noncommunity methods.
If this plan were enacted, a transition period would ensue during
which spouses in community—property States might try noncoinmunity forms
of income— splitting. During this phase, spouses with,property incomes
who formerly took advantage of the.tax savings offered by the communityproperty system would be at a disadvantage compared with spouses who were
not disturbed in the use of their accustomed income— splitting techniques,
& large part of this disadvantage would probably disappear after taxpayers
60
- 14 -
•with property incomes in community-property States became* familiar with
substitute forms of splitting income* But spouses with earned incomes
in community-property.States would not be able to turn to other incomesplitting devices since earned income cannot be split b y noncommunityproperty methods«
The plan permits the use of separate returns* Consequently,
marriage under the plan would not increase the tax attributable to
an individuales separate income, as redefined*
It is estimated that initially the plan would increase the tax
liabilities of about 600,000 married couples in community-property
States« Revenue yields-.would be increased by about $82 million,
assuming income payments of about $166 billion in calendar year 1947
and present law rates and exemptions»
Dp
The split-income plan
Currently, widespread -interest is being -directed to the plan to
grant spouses in all States tho option to divide equally their combined
incomes, exemptions, and deductions for income’tax purposes. Eight States
have requested that Congress pass legislation placing taxpayers in all
States on a uniform income tax basis. 1/ 'ji number of bills to accomplish
this end have already been introduced during the present session of
Congress (80th Congress, 1st Session)# 2/ This procedure would, in effect,
extend the tax benefits of the community-property system to married'couples
throughout the country*
i/ Colorado, Illinois, Iowa, Kansas, Nebraska, North Dakota, Oregon, 'and
South Dakota,
These are: a Senate Amendment to H.R.1030 introduced February 5, 1947
(Butler, Nebraska), H.R. 1759 (Reeves, Missouri), H.R, 2002 (Robertson,
North Dakota), S. 626 (Cordon, Oregon), S, 649.(Tydings, Maryland),
H.R. 2219 (Angel1, Oregon), H.R. 2564 (Landis, Indiana), Senate Amend
ment to H.R. 1 introduced March 25, 1 9 4 7 , (Sutler, Nebraska), H.R. 3199
(Scott, Pa.) H.R. 3228 (Doughtoh, N.C.), and Senate Amendment to H.R* 1,
introduced April 29^ 1947 (McClellan, Ark,)*
Another Senate Amendment to H.R. 1, introduced April 21, 1947 (Lucas,
Illinois), is in the nature of a substitute for H.R. 1 and, in addition
to providing for income-splitting, would also raise per capita exemption s
to |>600 and reduce the tentative surtax rates 2 percentage points in
each bracket.
The following bills would givo spouses in particular States tax
treatment comparable to that received in community-property States:
S.J. Res. 57 (Ful.bright, Arkansas), S. 550 (Longer and Young, North
Dakota), H.R. 2043 (Robertson, North Dakota), S.J. Res. 74 (Tydings*
Maryland), S. 776 (Rovercomb, West Virginia), H.R,.2461 •(Snyder, West
Virginia), H.R. 2623 (Redden, North Carolina), H.R. 2724 (Rogers,
Florida/, H.R. 2764 (Lanham, Georgia), and H.R* 3198 (Scott, Pa.)*
61
- 15 One means of implementing this plan would be to,allow spouses^
filing joint returns to (1) combine their income, (2) subtract their
aggregate deductions and exemptions, (3) calculate1 the tox Ixqba.li.tj
on one-haIf their aggregate taxable net income, and (4) multiply
this amount by two to find their combined tax xiaoility• 1/ An
alternative procedure would be to allow all spouses to file separate
returns covering half of their combined incomes, deductions and exemp
tions, Under either procedure residence or division of income between
spouses would not afford avenues for tax differences between couples,
with equal taxable incomes.
1*
Analysis of plan *
This plan would reduce the taxes paid by married persons who have
'unequal incomes which together exceed the amount taxable under the
first surtax brackets, regardless of whether they now file joint or
separate returns
The plan would reduce the total tax burden oi such
married-couples compared with single people, Married couples whose
combined surtax net incomes .do not exceed thb. first surtax -bracket
would derive no tax benefit# Other married couples would .enjoy tax
benefits which would increase ss the size of their combined income
increases, except insofar as thoy already enjoy the tax benefits cu
equal division of income by filing separate returns.
If the entire income of a couple with no dependents were owned
by one spouse, the pattern of tax savings would pe as follows: ho
tax savings would be secured by low-income couples -whose combined
surtax net incomes do not exceed the first surtax bracket. ior
couples with combined surtax net income in excess of the first bracket
the amount of tax reduction would tend to increase as income increases,
reaching a maximum of y23,921 at a combined surtax net income ox V100,000« 2j
y
Under present law, taxpayers have the option of taking the- standard
deduction instead of itemizing their nonbusiness deductions* The
standard deduction amounts to about 10 percent; oi ac justed- gross
income, for users of the Supplement T tax table and to .-.,500 -tor tax
payers with adjusted gross incomes of ,„.-5,000 or more, while spouses
filing joint returns can take only, one standard deduction, those
filing separate returns may. receive the benefit of two .standard
deductions (one for each return). Consequently, spouses filing
separate returns may have a maximum of pi,OOQ of standard deductions
as compared with the y500 limit for joint—return coupics. Thus, if
uniform taxes for couples with the same amounts of income are desired,
it would be necessary to increase the standard deduction for spouses
filing joint returns under the split—income plan •to 10 percent oi
adjusted gross income, up to a maximum of vi,000,, ’
2/ However, the percentage tax reduction would reacn its Highest value,
about 29 percent, at about '.*.25,000 of net income, as shown in. Table 3.»
Thereafter, the percentage reduction would tend to decline.with
increasing income levels, although the. amount of -reduction continues to
increase.
- lb This maximum tax. deer ease, would’remin- constant for couples with combined- sur-~
tax net income between $'*400,000 and $2,608,000, the level at which the
maximum effective rate of 85*5 percent of net income becomes operative»
Above this income level the amount of tax decrease would decline, reaching
zero at a combined surtax net income of $5»21osOOO or twice the level at
which the maximum effective rate limit applies. \j 3?or example, in the
case of a married couple with no dependents where one spouse owns the
entire income, the tax redaction would be zero at the net income level
of $3,000; $38 at the $5,000 level; $6,071 at the $50,000 level; $23,921
at the $500,000 level; and $3.,207 at the net income level of $5*000,000* 2/
The option to split income equally for tax purposes would enable
almost all spouses to minimize their combined tax liability. Except at
the highest income levels, the tax savings resulting from the plan would
increase as the separate incomes of the spouses became more unequal, j/
1 / The maximum amount of tax reduction secured from equal division of
income occurs at an income level twice as high as that necessary to
reach the top surtax net income bracket. Under the Revenue Act of
19 ^5 ♦ the highest rate (86.45 percent) becomes effective at a surtax
net income level of $200,000. Consequently, the tax saving obtained
by a 50*50 split of income between spouses reaches a maximum value
of $23,921 when a couple with no dependents has a combined surtax
net income of $400,000.
At present, the maximum effective rate limitation of 85*5 percent
of net income applies at a surtax net income of $2,608,000 for a
married couple with no dependents. The more the combined income of
the spouses exceeds this sum, the smaller the tax reduction achieved
by an equal division of income. This occurs because division would
shift income subject to the 85*5 percent effective rate to the higher
86.^5 rate which applies to the surtax net income bracket beginning
at $200*000. Ho tax reduction results from equal division when the
combined income of the spouses is twice as large a.s the income which
reaches the maximum effective rate limitation, because the maximum
effective rate' of. 85«5 percent applies to the entire net income both
before and after division of income.
2/ Corresponding calculations for other income levels in cases inhere
one spouse receives the entire income (that is, division of income
is 100s0), and where incomes are shared by the spouses in varying
proportions, will be found in Table 2,
3/ However, couples with combined incomes reaching the maximum effective
rate limitation may pay smaller taxes by reporting unequal rather
than equal incomes on separate returns. Thus, under separate returns,
the combined tax on two net incomes of $2 „500,000 each is $18,397 more
than the combined tax on the net incomes of $4 ,500,000 and $500,000.
consequently, the few couples with both unequal separate incomes and
combined incomes reaching the maximum effective rate limitation would
prefer not to split income equally under the plan.
r*o
o3
Thus,' the tax saving -accruing to a married couple, Tilth no dependents and
a combined net income of v25 ,OQG viouXd bo *2,622, if one spouse hole title
to"the entire, income, vl,d81 if-the spouse with the smaller income owned'
10 percent of the combined income, and.yl57 if the spouse with the smaller
income-, owned, 40 percent of the combined income. 1/ As a practical matter,
therefore,'the option of equal division of income would largely achieve
uniform tax burdens for equal-income couples.- The proposal would result
in more uniform taxation of such couples than formal adoption of trio
community system of property rights bv all States, since it would apply
to all the income of married couples. Under the community-property system
income from nonconsnunity property is taxable to the, awning spouse and the
tax burdens of married couples'with the same combined-income and exemptions
are not necessarily equalised because the amounts of their separate, incomes
may vary substantially* 2/
The split-income, proposal would seem to be most advantageous to married
couples in. nc^icommunity-proporty States whore (a) all or most of the couplels
income is derived from the personal services of one spouses or .from his interest
in an unincorporated trade or businessr or (h)- if the property income bulks
large, the couple has not found it feasible to split the property and income
for tax reduction purposes*
Allowing married couples in all States- the option ot equal division
of income for income tax purposes would not change the tax liabilities
of single personsj it would increase their relative tax load since they
would not share in the tax reductions which would accrue to married couple-s
under the plan#
At present, in a nonbommunity-pr©pcrty State, a married couple reporting
a combined income large enough to reach the second surtax bracket on a joint
return pays more than twice the tax imposed on a single person with half as
much income. The split‘-income plan would impose heavier relative tax
burdens than the present system on single persons compared with such married
couples since all married couples would De required to pay only twice the
tax imposed on single persons with one—half their incomes* These changes
in relative tax burdens are significant only at the higher income levels,
because at the lower income levels the ratio of the tax liability of married
and single people under the plan would approximate that under present lav;»
Under the present per capita exemption system, a married couple
with no dependents and a combined net income of ,¡.3,000 or less pays
twice the tax imposed on a single person with half as much income*
1/ Assuming*that separate returns arc already ¿being filed whore spouses
have separate:incomes-. See Table 2 for additional examples*
2/ However, in some community—property States income from separate
property is regarded as community income and is divided equally
between the spouses for tax purposes# See Appendix. A*
- IS Moreover, the difference in the rates applying to the first and second
bracket is only 1.9 percentage points so that married couples reporting
combined net ineomes as high as $5*000 on joint returns pay only slightly
more than twice the tax of single individuals with one-half their com
bined-incomes* 1/ In addition, the total tax cf a married couple filing
separate returns now approximates twice the tax of a single person with
half as much income wherever the legal division of income between spouses
is almost equal*
If the plan were adopted, it may be necessary to reconsider the
treatment of heads of families as compared with married*couples. If
married couples in noncoinmunity-property States were permitted to divide
their income equally for tax purposes, the head of family (single person
maintaining a household for a dependent) would be placed in less favor
able position con-pared with a married man who supports a wife than he 1 .
enjoys under, present law, 2/ As a result of the per capita exemption
employed under present law ($500 for each dependent) a married couple
filing a joint return pays the same tax as an equal-income single per&on with
one dependent, ¿/ The split-income plan would produce differences in
tax burden between the married couple and the head of family whenever
the income of the married couple is large enough to secure tax savings
from income— splitting* 2/ In view of these differences -it may be neces
sary to consider in conjunction with a split-income plan the case for
granting certain heads of families the tax equivalent of equal division
of income in order to place them on a comparable basis with married
couples,
It is estimated that the plan, as applied to spouses, would reduce ,
the tax liabilities of approximately U .9 million married couples, assum
ing income payments of $166 billion in calendar year 19^-7* About
million of these would be married couples who would ordinarily report
T/
A married' couple with no dependents, filing a jaint return, pays
$380 at a net income of $3,000 and $798 at r. net income of $5,000.
A single person with no dependents pays $190 at a net income of
$1,500 and $380 at a net income of $2,500. Thus, a married couple
with a net income of $3*000 pays exactly twice the tax paid by a
single person with one-half its income; while the married couple
with a net income of $5,000'pays $38 (or 5 percent of its tax
liability) more than twice the tax paid by a single person with
one-half its income.
2/ It should be noted that, in community-property States, a head of
family is already in a less favorable position, than a married
couple.
/ However, where the depend$»t has "less than $500 of gro^s income,
his income is excluded from tax.
1
65
~ 19 combined surtax net incomes of $2,OOQ or more on Joint returns, UOO,OQO
would be married couples filing separate noncommunity^property returns,
and 100,000 would be married couples filing separate community-proper y
returns.
Under present individual income tax rates and exemptions,:it is
estimated that granting spouses the option of equal division of income
would reduce the individual income tax yield by about Qfw million,
assuming income payments of $166 billion in calendar year 19^7r
2.
Restricting application of plan
Because the unrestricted application of the split-income plan would
automatically accord large tax benefits to couples with large incomes,
resulting in a shift of relative tax burden from highr^income oo lew*
income groups, consideration might be given to limiting its app^ica ion.
iwo types of restrictions can be employed: A limitation migh„ e Pl&co
on the total amount of income that may be split for tax purposes; alter
natively, the privilege might be limited to earned income,
a.
Limiting plan to an amount of income
It can be argued that there is little justification for extending
the tax benefits of automatic income-r-splitting to spouses with large
incomes. Such married couples are less likely to pool and share tneir
combined incomes equally for consumption purposes than spouses with
small or moderate incomes. Small or moderate incomes are believed to
be used primarily for consumption purposes for the joint benefit of
both spouses, whereas sharing is believed to tend to be more .limited
in the case of large incomes where savings are large and m y be used
for economic power and control rather than for consumption purposes,
Notwithstanding the existence of a general tendency in the direction
indicated, it would be difficult to justify limiting the privilege of
splitting income for tax purposes to a specified income level, oecause
the data regarding the way in which high-income spouses share and use ^
their incomes are inadequate for purposes of appraising differences in
ability to pay. Doubtless, some spouses at high-income levels share
in the enjoyment of their incomes equally, 5he way in which spouses
share income may depend not only on the size of 1&eir income, but
also on the relationship between them and on the source of their income.
Spouses are more apt to share their combined incomes when their relations
are harmonious than when discord exists between them,, Als0> there may
be a general tendency to devote earned income to the joint benefit of
both spouses more readily than trust income which one spouse has habits
ually used for his or her own benefit. These are all intangible con
siderations with broad social and political implications which are
not susceptible of measurement and go beyond the technical economic
analysis undertaken here.
66
-
20
-
•
Relatively few spouses would, be affected by any maximumvrhich is
likely to bo set under the split-in conic plan» Under the present surtax
schedule, income-splitting can only vary the taxes of couples with combinod surtax net incomes above *>2,000* It is estimated that about 5*8 mil
lion married couples will have such surtax net incomes, assuming present
exemptions and income payments of about vloó billion In calendar year
1947* ij only about 300,000 couples or about 5 percent of these would
have incomes large enough to be affected by a maximum limitation of
4-10,000 of surtax net income* This level of surtax net income is no
doubt-lower than any maximum income limitation likely to be set«
However, it illustrates the point that uniform taxes would be secured
for most equal-income couples even under a plan "which limited the amount
of income eligióle to be split* The taxes of couples with incomes ex
ceeding the maximum would tend to vary with their ability to use currently
available income-splitting techniques. High-income couples in communityproperty States would continue to possess tax advantages over couples with
equal amounts of incomes in other States* Similarly, in noncommunity—
property States, couples with large earned incomes would continue to be
at a disadvantage compared with couples with large unearned incomes be
cause of the ability of the latter to use currently available income
splitting techniques.
Uniform taxes for couples with incomes exceeding the maximum allowed
to be split could be secured by requiring them to import their combined
income on one return and arranging the computations so that income—splitting
applied to only the lower portion of their income and would not throw the
income In excess of the limit into lower brackets• ihe combined income
above the income—splitting maximum could then be treated as under mandatory
joint returnso This procedure would bo complicated and would also involve
problems of the type inherent in mandatory joint returns.
b*
Limiting plan to earned income
One of the possibilities for limiting the scope of the split—income
plan and for reducing the amount of tax relief such a plan affords highincome families is to restrict the privilege of splitting income under
the plan to earned income*This restriction would have the effect of limiting the plan to
approximately half the income reported by taxpayers with net income in
excess of *5*000. Because the relative importance of earned income to
total income tends to decrease with size of income, the proposed limi
tation would tend to restrict the scope of the income—splitting plan to
a declining proportion of income.as total income increases«
1/
Moreover, as already indicated above, about 900,000 of these couples
are already receiving as much tax benefit under separate returns as
under income—splitting, since it is estimated that about 4-.9 million
couplesgwili receive a tax decrease under income-splitting.
~
21
-
Restricting the privilege of equal incoae-splitting to e a r n e ^ i n c6ne
would tend to eliminate a large part of the basis for tax difference
between families in communityty-pr perty
States, because taxpayers in nonconmunity-property States * 1 * * ^ 7 . , t
opportunities for splitting their unearned income., ^
^JopepPy
oil the tax differences because married couples ln.nonco^unxty p
7
States frequently forego the privilege of
le ttchni^Ues.
splitting their unearned income by currently avails *+ r
R
This is evident from the fact that spouses reporting substantial i n c o g s
on separate noncommunity-property returns frequently reportUnequal
separate incomes. Moreover, the income-splits between the returns
the two spouses appear to become more unequal as income m o r e a
,
.
In view of the relatively large amounts of unearned income at
upper-income levels, it is reasonable to assume ^ h L ^ r e r S s e n t s
the unequal splits in inconfe between spouses noted above J ^ r e s e n ^
inwpstmert income. Thus, married couples with unequal splits o ± i
vestment income would pay higher taxes than those with ®qua ^ ° ^ ¡h°
earned income if the plan is restricted to earned income, ihis is shown
by the fact that under present law the tax of a m r r l e d eeuplc_ split . g
income S0i20 exceeds that incurred by one employing a 50*30
107
at a net income of. $1 5 ,000, $ 717 at a net income of $20,000, and $1,10|
at a net income of $55,000.
Moreover, couples with equal amounts of unearned income .in noncomnunityproperty States would incur unequal tax liabilities because some are^
better able to split their income than others. It should be noted, however,
that even spouses who split property incomes 50;50 in noneommunity-proper y
States by currently available techniques would be at a disadvantage com
pared with similar types of income in community-proper y ta
split-income plan were restricted to earned income; Splitting property
income in nonconnunity-propertyStates usually involves relinqui^ning
title and a considerable degree of legal control over income and its
.
source. In community-property States the husband retains a c t u a l ° ^ tro1
and management over community income, despite the fact that the wife
holds legal title to one-half of such income. Moreover, l n m o s t c o m n u n i y
Property States, it is extremely difficult for the wife to hold the husband
to account for his management of community property and income except by
dissolution of.the marital community.
The foregoing, suggests that if the plan to split income for tax
purposes were confined to earned income, an inportan area o
a
ence existing under present practice would remain.
j P ^
,
tended to all income, it would result in the imposition of uniform ax
on equal-income couples regardless of the type o* income.
i» w
.
other hand, the plan were restricted to earned income the:resuiting uni
formity in tax liability would be confined -to couples with equal amoun
of earned income, while the taxes on couples with unequal amoun s ^
unearned income would continue to vary with ability to use income-split ing
techniques.
-
22
-
One of the Arguments which nay be nade in favor of this method of
restricting the plan is that it would give more favorable treatment to
earned income and. provide the type of incentive to individual initiative
which is both desirable in the interest of high productivity and attractive
on broad social grounds. . This incentive argument applies to earned income
received by persons with relatively large incomes, such as salaried busi
ness executives, proprietors and partners. It does not apply to low-income
wage earners, since they would get little or no tax benefit from incomesplitting* :For the same reason, it does not apply to any of the single
taxpayers, regardless of the size of their earned income. Finally, it
does not apply to couples with'earned income in community-property States,
since they already divide their income, Thus, the plan under consideration
would extend preferential treatment only to earned income received by mar
ried couples in noncommunity-property States with earnings in excess of
the first surtax bracket. Whether in individual instances taxes paid by
couples with earned incomes would be lower than those paid by couples
deriving equal amounts of income from investment sources would depend
upon the ability of the family deriving income from investments to make
corresponding reductions in its tax liability by taking advantage of
income— splitting devices. In spite of these limitations, the plan has
the advantage of tending to give tax preference to the earned income of
an important group ©f high, earned income recipients at the same time
that it ensures uniformity of tax treatment among earned income recipients
in community— and noncommunity—property States. However, limiting the
incomer-splitting plan to earned income should not be,considered a substi
tute for a general earned income credit, If it is deemed to be in the
public interest to give tax preference to all earned income, the type
©f device here considered is insufficient to implement that policy.
One of the objectives of the split-income plan is to reduce the
litigation and administrative difficulties involved in determining
whether income— splitting techniques currently employed are permissible
under law. If spouses were granted the option of splitting’all income
50150» they would have no incentive to devise other methods for shift
ing income to one another for the purpose of reducing their tax liability.
Thus, some of the legal and administrative problems growing ®ut of present
practice would be eliminated. However, if the plan were restricted to
earned income, spouses would still be able to reduce their taxes by shift
ing investment income, and some of the present litigation and administrative
difficulties would remain, Moreover, restricting the plan to earned inc©me
would raise new legal and administrative problems growing out of the defi
nition of earned income, which might be more troublesome than those pre
viously encountered under the earned income credit. The tax savings involved
in the definition of earned income for earned income credit purposes were
minor compared with the tax-saving potentialities of income-splitting,
So long as taxpayers found it profitable to do so, they would try to obtain
earned income tax treatment for unearned income, adding thereby to adminis
trative complexity. They might, for example, in the case of closely held
corporations choose to withdraw earnings in the form of higher salaries
rather than dividends.
b
- 23 3*
Treatment of the Incogs,off minor children
One of the problems which arises under any plan for the^taxation of
family income concerns the treatment of income received by minor children»
Under present law, minor children receiving income of $500 or more are
required to file separate returns. The filing of a separate return on
behalf of a child results in a lower tax liability for the family than
if the income were combined with that of the parents when^the combined
income of the family (parents and children) exceeds the -first surtax
bracket ($2,000 under present law). Consequently, if minor children
continue to file separate returns under a plan taxing the income of
spouses as a unitr families with equal incomes and exemptions will not
/
necessarily pay equal amounts of income tax. Aside from the question
of independent sources of income of children, parents with substantial
property incomes will continue to avail themselves of the opportunity o
reduce the family1s total tax bill by transferring some of their incomeproducing properties to their minor children. This problem is common
to the three family income proposals, namely those for mandatory ¿oint
returns, dual-rate schedule, and the split-income plan. It^does not
arise in connection with the management and control plan, since it is
designed only to overcome the tax differences between community- and
noncommunity—property States based on differences in local law and
does not attempt to obtain uniform taxes for equal-income couples
and families in all States. Although each of the three plans for
treating family income raises different problems about the treatment
of children1s income, a discussion of the problems raised by the splitincome plan will indicate the type of issues involved,
Under present rates, a married couple with one dependent and a
combined neb income of $50,000 would have a tax; liability of $18,
if its income were equally split between the spouses. However, if the
child has independent income or if the couple can transfer sono of
its assets to thè- child in such.a way thain. one— third-of the
family*s combined income of $50,000 would be taxable to each of the^
three members of the family, its tax liability would be reduced by ?3,3g°
or IS percent. .The incidence of independent -sources of income among
children probably varies greatly with age in the case Oi earnings and
with the distribution of wealth among close relatives, such as grand
parents, in the case of property income. Also,, parents do not have
equal opportunities for transferring property and income to their
children, Consequently, some of the present differences in the tax
treatment of family income would remain under a split-income plan unless
parents were required to include all the income of minor children in their
returns. 1/ Moreover»some of the administrative and legal "burdens result
ing fron splitting income within the family "by currently available tech*
niques would continue unless the incomes of children and parents were com
bined for tax purposes. Ho doubt, the issue of whether the income of
children should be. included in or excluded fron the tax return of the par
ents will also involve middle-ground questions of source of income. Solely
from the viewpoint' of minimizing tax avoidance, the problem night be met
by requiring that only income of children which’ derives from property
traceable to the parents be included in the tax return of the family;
that earned income, and property income from other sources continue to be
included in the child1s separate return.
It will appear from the foregoing that,to the extent that it is
deemed desirable to impose equal tax burdens on families with equal
incomeg, the inclusion of the income of minor children in the tax returns
of the parents is'necessary. It should be noted, however, that the case
for the equal tax"treatment of families (including minor children) hinges
on the validity of‘ the proposition that the income of the entire family
including that of minor children is pooled and shared by all the family;
.that the family is in effect a tightly knit economic entity providing a
better unit for gauging taxpaying ability than its several members individuallyc This goes beyond technical economic considerations to the core
of the sociological problems involved in the institution of the family *
and the home* In Section D-l a.bove, it was noted that so far as parents
alone are concerned, an optional income-splitting plan was sufficient to
insure uniform taxes for equal— income couples, The decision to include
the incomes of minor children in the parents* tax return will affect the
question of whether the splitting of income be mandatory or optional.
Under a mandatory plan, families would be taxed as a unit, regardless of
whether the plan increased or decreased their total tax liability. Under
an optional plan, families would elect to cone under the plan only if it
resulted ■ in a combined tax liability lower than that imposed by present
procedure.
The primary objective of including children1s income under the plan
would be to secure uniform taxes for families with equal net incomes and
exemptions. Uniform taxes for such families could be obtained on a vol
untary basis only if for tax purposes the plan split total family income
equally among all family members, Per capita income-splits practically
always result in a minimum combined tax liability so that most families
would elect to come under such a plan, 2/ However, if families, were not
1/
However, if it' were possible to set up trusts with the power to accu
mulate income for the benefit of minor children, the income from which
is not currently distributed or distributable, such income might still
be taxed to the trust rather than to the family, thus permitting tax
differences betveen families whose taxpaying abilities over a period
of years were substantially equal. See Appendix B.
2/ Unequal splits of income nay result in a smaller combined tax liability
than equal or per capita splits for the very small number of families
with incomes large enough to benefit from the maximum effective rate
limitation.
71
— 25 —
allowed per capita income-splits, uniform taxes for families could not
"be secured under a voluntary plan* Families would elect not to use the
plan so long as they could reduce ^their taxes "by shifting income to
achieve a more equal distribution of income among family members.
This is an important consideration in the case of families with large
incomes derived from investments; it is generally of little moment to
those deriving their income from personal services. 1 /
To the extent
that the imposition of eaual taxes on equal-rincome families is regarded
as necessary, the plan would have to be mandatory if it did not provide
for splitting income with children. Moreover, it will be noted that
if the income of children is included with that of the parents under
an optional plan to divide income between the spouses, some tax dis
crimination will continue between community- and noncommunity-property
States, That is, unless present law were changed, spouses in communityproperty States would continue to be able to split their community income
equally without including the income of children, whereas spouses with
earned income in noncomnranity-property States could do so only if they
included the income of children on their return, and those with unearned
income would have to avail themselves of income-splitting devices.
If the income of minor children were combined with the income of
parents for tax purposes, it would be necessary to examine the problem
of differentiating between equal-income couples with^different numbers
of children to allow for differences in taxpaying ability*
a*
Per capita income^splits
As. already indicated, one method of obtaining uniform tax treat
ment for the income of children is to extend the concept of incomesplitting to include minor children* Under this procedure, further
income-splits on a pèr capita basis would be granted for minor children
(in addition to exemptions). Thus, a married couple with one child
would split its income three ways, one with two children four ways,
and so forth. This procedure would result in substantial tax savings
in the case of large-income families with children; the more the
children, the larger the tax savings, ¿/ The little that is^known
about the effect.of the number of the children on the taxpaying
ability of the family indicates that the tax savings which would
result from per capita income-splitting probably could not be justified.
Ho doubt there world be a number of null iple wage-earner families
that would also find it m ap rofitab le to elect income— splitting
under a voluntary plan.
See Table 5*
72
Moreover, the per capita income-splitting plan would undoubtedly
reduce the yield of the individual income tax very much more than the
estimated cost of giving spouses the option to split their incomes.
While some of the additional loss, night he recaptured hy increasing
the tax rates at the appropriate income levels, only part of the
lost ground could he regained in view of the already existing high
tax rates.
A variation of the per capita income-splits would he to allow
parents to split their income with their minor children unequally,
regardless of how ownership of such income is distributed within the
family, Each child, for example, might he assigned for tax purposes
half or a quarter as much of the total family income as each of the
parents. This would result in lower tax liabilities than the present
type of exemption except for low-income families and would lose less
revenue than a straight per capita income-splitting plan.
b• Exemptions for dependents
The present basic method of differentiating for size of family
could he retained in combination with a split-income plan for spouses.
Under this procedure, for example, spouses would he given the option
of a 50150 income-split for tax purposes provided they Included the
income of minor children in their tax returns. The dependent ex
emption would he given for each child hut no further income—-splits
would he allowed for children under the option. It will he noted
that if the present type of exemption for dependents were retained,
the differentiation in the tax liability of high-income families
with a varying number of dependents would remain relatively small.
Por example, the tax liability of a married couple with two>children
and a net income of $20,000 would he $4,370 or $323 less than the
$U,693 tax paid hy a married couple without dependents.
The inclusion of the income of minor children in the parents*
tax return, coupled with the present type of dependent exemption,
would not provide as large a decrease in tax liability for some
families as would the option to split income
between the
spouses without regard to children’s income. The converse situation
would arise in the infrequent case where the income of the minor
child very greatly exceeds the combined income of the parents.
In such cases the inclusion of the child’s income in the return of
the parents enables that income to he split with accompanying tax
savings, l/
¿/
See Table 5"where it*is shown that a 50*50 distribution of certain
net incomes among two members of a family produces a smaller tax
liability than an SOilOilO percentage distribution among three
family members.
- 27
If this plan were optional, some families with substantial property
incomes which they find feasible to distribute among children^would not
nqe it since they could continue t* use present income-splitting pro
cedures to effect larger tax savings than they would obtain unaer the
•plan. Consequently, complete uniformity of taxation among equal-income
families of the same size would not be obtained under the plan, «aw-*
ever the plan would tend to result in more tax uniformity than -if
the option to split income were given to spouses without requiringthe inclusion of children1© income. A mandatory plan, requiring both
income-splitting and the inclusion of children's income in the family
return, would produce even more uniformity,although there remains the
problem of the treatment of income accumulated in trust for members
of the family, particularly children, l/
Under the optional method of including children's income, the
estimated loss in revenue from the split-income plan would be reduced
by about $100 million, making the total estimated loss of^revenue from the
income— splitting plan'about' $632-million, affecting
million families.
c.
Other types of adjustments
There-are other possibilities for adjusting ability— to—pay for
size of family besides those discussed above. If it were desired to
obtain larger tax differences between high-income families of varying
size than under present law, this could be achieved by increasing the
amount of the exemptions as size of income increases, still another
method would be to impose separate tax rate schedules for each size
of family which would yield the desired tax differences at each
income level. While these are possibilities they are more complicated
than those discussed above and appear to hold little promise of prac
tical application.
h.
Administrative considerations
The adoption of a plan which allows spouses to split their income
for tax purposes, rega.rdl.es'S of the legal distributuon of that income
between the spouses, involves a number of administrative considerations,
some of which.have already been indicated in connection with the aspects
of the plans presented above. The extent to which existing legal-^
administrative problems would be reduced or eliminated by a split—income
plan and the kinds of administrative problems which would be introduced
denend upon the details of the plan. The discussion which follows
•illustrates some of the more important aspects of the administrative
issues involved in the adoption of split—income plans*
a.
Income-splitting applied only to spouses
The adoption of a plan which would give, spouses the option to
divide all their income equally (without requiring the inclusion of
children’s income in the family tax return) would virtually eliminate
-
28
-
the 1egal-admiiiistrat ive problems which now arise from attempts to divide
income between spouses. Some of the most troublesome administrative
-problems encountered under the individual income tax result from attempts
bv husbands and wives to reduce taxes by allocating income between them
without affecting the substantial ownership. Under this plan, the
administrative need to determine, as between husband and wife,_the one '
to whom income should be attributed for tax purposes will be eliminated*
In' community-property States it would largely eliminate the administra
tive need for determining domicile and for distingmisning between
the community income and the separate income of the spouses*
Under this plan, however, a substantial incentive would remain
to reduce the family1s total tax liability by further division® of
income with children. Consequently, some of the current legaltrative problems respecting income-splitting would remain^since it woul
continue to he necessary to determine the attribution of income for tax
purposes as between parents and^children*
This plan would permit spouses to divide their combined taxable
income on a joint return and would eliminate the need for filing
separate returns to minimize .the couple s taxes. There* * , AU
number of separate returns filed would be groafl? reauced. thqreb5
reducing the administrative effort needed to handle returns. Moreover,
joint returns tend to reduce the number of year-end adjustments,
particularly tax refunds, which are involved on separa o re
snouses. Under the plan, joint returns generally would. not £esttl
higher tax liability than separate returns, and there p^ld.be fewer
difficult problems of the hind now encountered by couples attem pting
to decide whether joint or separate returns produce the- lower ,nx
liability*
In contrast to the above advantages, the plan raises a number
of administrative issues, some of which might introduce »ore or less
difficult problems. If married couples with combined mcca
than $5,000 who are in the second surtax bracket affa_
*t0
V.
to be given the opportunity of finding their tax ia l
the
simplified Supplement T tax-table, it would be necessary to modify the
table to distinguish between joint end separate returns*
tax table is simpler than a table so modified in t 3a
ne ypis not a factor in the tax liabilities presented in the table.
modifying the table, the problem is to show the ^different ax
by type of return (at the income levels affected by iae plan).V 1 \
unduly complicating the table,' ospecially for the bulk of the taxpayers
who use the tax table but are not affected oy she .income-splitting pish.
If the present relatively simple withholding tax procedures were
continued under the plan, pertain taxpayers entitled to the benefi s
of income-splitting for final liability purposes would be subject to
« 29 ~
overwithholding. The maximum amount of overwithholding would "be
about $3S and would occur in the case of a married couple whose income
is entirely from the earnings of one spouse and is at the top of
the second "bracket. This additional amount of overwithholding would
not appear to he very important from the administrative standpoint,
since many of these taxpayers would he subject to overwithholding
for other reasons and would claim refunds in any event* If the
indicated overwithholding is considered objectionable, the with
holding rates could be reduced but this would in effect underwithhold
on other taxpayers.
If, for example, the second bracket withholding
rate were eliminated and all wage earners subject to only the first
bracket withholding rate, the overwithholding indicated above would
be eliminated. However, other taxpayers, such as" single persons,
with income only from earnings and with surtax net income at the
top of the second bracket v/ould be underwithheld by a maximum of
about $38, This may not be a very important amount of underwit hholding for these, taxpayers and, in many cases, the underwithholding
would more or less offset the overwithholding which v/ould occur for
other reasons. If either of these methods is considered to be unsat
isfactory, then the withholding procedures, at the expense of compli
cations, could be altered more or less to reflect the benefits of
income— splitting. The modified withholding procedures v/ould permit
employers, on the basis of information supplied by the employee, to
differentiate "between married couples in the second surtax .bracket
entitled to the benefits of income— splitting and other taxpayers in
the second surtax bracket not entitled to the benefits of incomesplitting.
tinder the plan, two tax computation schedules would be required
on the long Form 1040* one for joint returns of husbands and wives,
and the second for all other taxpayers. Compared with the single
schedule now in use, the dual-schedule return would be more compli
cated and would afford greater opportunity for computation errors by
taxpayers not using t h e ,Supplement T tax table. Moreover, certain
married^couples filing separate returns who now use either Form ¥— 2
or the Supplement T tax table (each of v/hich is limited to returns
showing less than §5 »0^0 of adjusted gross income) would be required
to file “
the long Form 10b0 and compute their final tax liability in
order to obtain tne benefit of income— splitting-. Such taxpayers
would be couples with aggregate income in excess of $5,000 but less
than $10,000, with incomes or exemptions divided unequally between
them, so that income-splitting on a joint return would produce a
ower aggregate tax liability than the filing of separate returns.
„
Under the plan, it would seem to be administratively desirable
■i°r k°th spouses to be jointly and severally liable for the tax
iability of a couple filing a joint return, even though one spouse
has all the income, exemptions and deductions. Administrative
experience indicates that many ox these couples would probably file
78
returns signed by only the spouse who owns the income, thereby resulting
in delay in the handling of these returns, including correspondence
with the taxpayers to obtain the second signature*
The foregoing discussion reflects the major administrative
considerations arising under a plan giving spouses the.option to
divide all of their income equally* However, if income-splitting
were modified to reflect other considerations, additional adminis
trative difficulties would result® ITor example, if the plan wore
extended to cover certain family, units involving a head-of-family
status (as distinguished from the normal family unit covering the
married couple), additional administrative problems would arise in
connection with the determination of taxpayers prqperly entitled to
the benefits of income-splitting under such status,
Moreover, if the optional plan were limited in its application
either as to amount of income or type of income, the incentive to
divide income would continue''to operate with respect to the categories
of income to which the income-split ting plan did not apply«. In addition,
if the plan were limited as to amount of income covered, taxpayers with
incomes just above the limit might tend to understate their incomes* If
the plan were limited to earned income, the application of a definition
of earned income would give rise to administrative difficulty, since
taxpayers would attempt to have as much as possible of their income
classified as earned«
b*
Income-splitting applied to parents and children
If a salit-income plan were modified to include the income of
children with that of the parents.,.the effect on lega.1—a>âninistractive
problems would be more extensive* Application of the plan to children
would have the advantage of reducing the problems which now arise,
and which would continue to arise under a plan, limited to spouses, from
attempts to divide income with children* Also, it would further reduce
the number of returns to be handled to the extent that separate returns
of children were eliminated*
On the other hand, the inclusion of the income of children would
produce additional administrative problems, the scope of'which would
tend to be restricted by the fact that the change would affect only
those taxpayers with combined income above the first brncket who have
children with income»» The initial administrative problem with respect
to these taxpayers involves the determination whether their children
were covered by the definition of children (such as ^minor” children)
whose income is required to be included in the return of thé parents*
77
-
31
-
Another problem which may arise in connection.with the inclusion
of the income of children involves the apportionment of tax liability
among the members of the family. If the plan applied .only to spouses
astd were put into operation by means of optional joint returns, formal
apportionment of tax liability between the spouses would not be
necessary on the tax return because the liability of the spouses could
be made joint and Several as under existing lav/. If this plan were
modified to allow income-* split ting only if the income of children were
included vrith that of the parents, formal apportionment on the tax
return of the aggregate tax liability among members^of the family
might also be avoided since the plan would be optional« If, however,
the plan were mandatory, both as to income**splitting and inclusion
of the income of children, provision for some formal method of apportion
ment of liability among the several members included in the family tax return
would seem to be necessary. An equitable system of apportionment would
■probably require computations based upon separate tax liabilities of
the family members. Under such a system, the liability of each individual
for his pro rata share of the family1.s tax liability could be determined
on the basis of the ratio of'each individual1s tax computed on a separate
return to the total of the separate taxes so computed. Therefore, this
plan would require complicated tax forms and it would also be necessaryto make some revision in the present assessment procedures. However,
it may be feasible to limit the resulting complications of this plan
to the relatively few families who would request such formal method
of apportionment®
Treasury Department, Division of Tax Research
¡fay Vj'q
-3 2
-
APPENDIX A
Summary of Income-splitting Devices in Commn ity~p rop efty and
NoncommunIty-property States
A.
The community-property system
lr . Description of the comimmity-property_^tem
At present the property rights of married persons in nine
Statas and one territory are governed by the oon^itj'-nroner *
system. l/ While its application varies from State to State, cert i i
features of the system are found in all community-property States.
Property owned hefore marriage or acquired after marriage y g
*
hequestf devise, or inheritance is regarded as the separate propertyof the spouse holding legal rights to it. Property acquired ^ other^
wavs after marriage presumptively becomes community p 1
^ '
S s f 0«ing an fqual S o .
Income from c o m n m i ^ property bel nge
to the community. Similarly, in four community-property States
•
Louisiana, Oklahoma, and Texas), income of the separate P ^ P ^ t y of on
snouse is usually regarded as community income, gj
f;°;:
separate property is recognised as separate income in other
property States.-. Where husband and wife are living together,^ <
income of either spouse is usually regarded as community income. ■
This" applies regardless of whether both ^ «nly one spouse is m
d
in the activity which is directly responsible for tne flow of earnl g
Underlying the community-property arrangement is the concept of
the marital partnership« Both spouses contribute to economic gains
which accrue after marriage... The husband is usually/“ H L ^ i f e ’
concerned with the process of monetary acquisition but the
provides the foundation for such gains by her homemaki & '
*
rearing activities. Each spouse usually has the right
and control of separate property. -The husband usually nag ge
<
management and control of community property.- ■ In stt»
property States the wife has control of her personal earnings ,nd
the income from her separate property where such income is tre-ted
as community income. Restrictions upon the husband s control of
1/ 'These a r e T risona, Callforniafldaho, Louisiana,-- Revada.^ew Mexico.
Oklahoma, Texas, and Washington and the Territory of E.waii.
_
Oregon' s LUth Legislative Assembly recently enacted another c o m m a s
property law intended to qualify its residents for income-splitting
under the Federal individual in conic tax# 2/ Among the exceptions to this rule are the following»
. ,
J
In Idaho, the income of the separate property of;« wife may
become separate income provided that specific provision for this
was made at the time the property was conveyed to ner.
In Louisiana, income from paraphernal property (separate property
■ of the wife which forms no part of the dpwry) which is manag
y
the husband becomes community income. • If tha p a ^ h e r n a ! prope y
is managed by the wife it is regarded as separate income. ^
Royalties from oil and gas leases on separate lands acquired
before marriage are c onsidered separate income in exas.
79
- 33 -
community property vyry widely. In Louisiana, mismanagement of community
-n-ropertv bv the husband may provide grounds, on court approval, tor tne
w S to'assume control and management of her half of the community property,
i n W other States, however, it is extremely difficult for the wife to
hold the husband to account except by securing a divorce which dissolves
the marital community. 1/ Similarly, the husband1s power to convey real
and personal property is subject to different degrees of restriction
depending upon the community-property State which is under considerate a
.2. Tax results of the comrnunity-property system
Under the Federal income t?x married persons have the option of
filing separate or joint returns whichever is to their advantage.
Where the combined income of the spouses is large, the communityproperty system favors the filing of separate returns. Since each
spouse owns an equal share in the community1s income, each has the
privilege of reporting one-half that income on a. separate return. _•
Where a couple's entire income is community income, the equal divisio
of that income may provide the maximum tax savings possible under
separate returns. Separate returns under the community-properts ^y
will practically always reduce taxes when the pqual div>oio^oi community
income results in a more equal distribution of income between spouses
then would have existed had there not been a community-property arrange
Dent. 2/
lot example!
A husband has a separate property income oi
$100,000 while his wife has no separate income. In addition to hiseparate property income, the husband earns $30,000 which becomes
community income. In a noncomaunity-property State a return would ^
filed reporting the income of the taisband as $130,000. Under ^
commnity
property arrangement, the husband can file a separate re urn
# :i
income as $1 1 5 ,000, the remaining $15»000
community income b e m $
reported "by his wife in her separate return*
On the other hand, the community-pranerty system may result in
increasing the total tax "burden falling on the incomes of the spouses
when it emphasizes inequalities of income "between the soouses. ihe
following offers an example of this type of situation: A wife has a
separate property income of. $100,000 and the husband e&pns -?3' »
,
becomes community income under the community-property system* *he wile s
/
"
See Community-Property Income Hearings before a Subcommittee o
Committee on Ways and Means, House of Representatives, 13rd Cong*,
2d Sess,, May 193 U, on H.R. S39^ - Statement of Miss Helen Carloss,
Department of Justice, p * ?!•
|/ Assuming that exemptions and deductions are equally divided between
spouses* However, it is possible tha,t unequal divisions o^ income
between spouses may result in a smaller combined ta„x li1 y
&
equal division of income for spouses whose combined incomes^are larg
enough to be a.ffecte& by the maximum effective rate limit.-, ion*
80
'- 54
taxable income then becomes # 1 1 5 , 0 0 0 and the husbandrs U 5 > 0 0 0 ,
thus moving part of the income into higher surtax net income brackets. '
It is possible,, however, >for a couple to modify the impact^of the
community-property system upon them when it results in an increase
in their* tax liabilities by antenuptial contracts which define how
their property rights are to be governed after marriage. Not all
community-property States permit married couples the same latitude
in this respect. In California an agreement between spouses
specifying that the property and income of each should be separatedespite local community-property law has been held to be valid. 1/
Texas, however, imposes more rigid restrictions upon spouses in
regard to alteration of community-property rights.
In addition, it is possible to change community property to
separate property by gift of one spouse to another. 2 /
Consequently,
advantage may be taken of this right whenever the community-property
system works to the tax disadvantage of the spouses.
B.
Income-splitting in noncommunity-property States
Married couples in noneommunity-property States do not have a tax
privilege directly comparable to the equal division of community
income permitted in c oxnmun ity-prop erty States. Taxpayers in non communityproperty States, however, can minimise their taxes by the following intrn— ■
family transactions.
Taxpayers in community-property'States may use many
of these transactions to supplement the income-splitting permittee by
the comiriuni ty-pr op erty system.
1,
Transfer of assets
Tax savings may be achieved by the transfer of income—producing
assets among fa.mily members so that inequalities in the size of the
incomes of individual members are reduced. In order for the transfer
to be recognisable for tax purposes,"it is necessary that the donor
irrevocably divest himself of the title and legal control of the
property in favor of the recipient who then becomes responsible for
the tax liability incurred by virtue of possession of that income.
While legal ownership of the- property has changed/ the original
owner may retain actual control over the asset and its income by
virtue of his personal relationship with the new owner.
l/ ína Claire v.- United" States (Ct. Cls.), 54 Fed.-; Supp.: 1009/
-2/ " However, property, transferred by gift may be subject to gift tax.'
- 35 On the other hand, assignnents ef the income derived from proper y
without transfer and loss of legal control over the property do not
relieve the assignor of the-tax liability brought about by possession
of such income*
2*
Family partnership
Under certain circumstances, it is possible for a taxpayer and
members of his family to enter into a business partnership which is
valid for tax purposes, By this meant, partnership income may be
dividea among family members who can reduce the taxes falling on the
combined family income by filing separate returns.
A partnership of husband and wife will usually be granted tax
recognition where each spouse either (l) invests his own capitals
(2) substantially contributes to the control and management of the
business, or (3) otherwise performs vital services, l] ^nere these
factors are lacking, tax
recognition will usually be denied
to -the partnership with the result that no tax savings ensue from it.
Thus, family partnerships whose incomes are derived principally
from personal service are considered invalid for tax purposes where
family partners do not render services commensurate with the partnership interest.
3,
Loans
Interest paid by one family member bo another is deductible
rrovided that it is paid on a bona fide loan 2/ and Bay reduce the
"tax liability of the couple when separate returns are filed, Similar y,
losses sustained because of the failure of one spouse to repay a loan
to the other spouse may be allowed as a bad debt deduction. %
0&~
business bad.debts, however, must be completely worthless to secure
1/ bCToprissioner of Internal Revenue v, Tpwgtr, 327
^SO and
Lusthaus v. Commissioner of Internal Revenue, 327
In the Tower case, it was held that the wife hi^d aptua y
tributed neither services nor capital to a partnership forme
her husband despite her contention that she had contributed assets
received from her husband as a gift three days before t
orma on
of the partnership.
* ?.
In the Lusthaus case, the -husband sold a one-half in^erest^in his
business to his wife, The wife paid for the interest w
$5 t
in cash, which the husband had previously given her for purposes ol
this transaction, and with notes payable. The partnership was denied
tax recognition on the grounds that the partnership arrangemen. was ^
superficial and did not alter the husband*s interest in the usiness*
2/ Steele, 38 BTA 5^9.
3,/ Hetherington, 20 BTA S06,
any deduction, and can be applied only against capital gains of the
teixable year with the exception that an amount up to > 1,000 can oe
allied against other income of the taxable year. 1 / A xive-year
carry-over of the had debt loss is.granted. It xs essential,
However, for the loan to he hona fide and not a gift for it to
he used as the basis fo r a had debt deduction^ Thus, money advance
w a parent to a son without a note and with no specific provision
for payment of principal or interest was deemed a gift ratnertnan
a loan and hence was disallowed as a had debt. Zj
U*
Capital transactions
Whether a joint return or separate returns are filed, husband
and wife are treated as individual taxpayers under the wash sales
provision. A husband can establish a coital loss for tax purposes
bv selling stock, on an exchange, even though on the same dayhis
wife Purchases an equal number of shares of the. same stock, 1 /
Shares of ownership in a closely held corporation m y be sold
to members of a family at far less than mrtet.price ( f o r ^ ^ l e .
sale for $10 of a share earning $100 per year), .1 ^ has been held .
that although such sales are heavily tainted w i t h ^ I L ' f ^ i l v members
the earnings due on the shares of ownership sold to
are not taxable to the original owners, since the trans.er of title
was actual and absolute, 4/
.
5 ... Estate by the entirety
Husband and wife may own property as tenants by the. entirety.
According to this concent, the husband and wife each own tne entire
property,.
.
Where a strict common-law conception of tenancy by the.entirety
exists, the income from such property is taxable only to the husband.
However, in States where the common-law rule has been -aboUsne _ , ,
income derived from property owned as an *estate- by the entire y mc.y
be taxable equally to the husband and wife,
1/
Internal Revenue Code, -Sec, 23(k)(U),
2/
Grossmanr 9
6^3*
r
...
figo.
But see Commissioner
y ygffgi ;UPrSflfteLiisi.■Mini»!.
I g s s u S r « - , - . *.«.«•
— r
one-half the property held by them as tenants by the entirety **
Florida, Maryland, Missouri, Hew York, and Oregon. For a collection
of authorities sec 1 ^ 7 C C H ^ . :
5 1 .S22 ot.^a.- In
see
"Dividing Income Between Hu'sband and Wife," federal fax Bulletin,
fey 11, I9U5 ,, p* 2--
- 37 -
6 # Joint tenancy
Property may "be held by husband and wife under a joint tenancy*
Each spouse then owns one-half the income flowing from such property
and is liable* for income tax purposes, only for his share of the
income# 1 /
7
Trusts
Trust income may be taxed to the grantor of the trust, the bene
ficiary, or the trust itself. Tax minimization may be achieved by ^
the transfer of property to trusts where the income is taxable to tne
beneficiary or the trust.
In general, trust income is taxable to the grantor where he has
not effectively divested himself of interest and control over the
trust corpus. Thus, the grantor is'responsible for the tax on trust
income where he may $ retake the trust corpus, or have trust income
accumulated for his benefit or used to nay his legal obligations#
Trust income which is taxable to the grantor is included with his
income from other sources to determine his liability under the income
tax and therefore is not helpful in minimizing the grantor s t. xes#
The beneficiary must include that part of trust income which is
currently distributable to him with his income from other sources in
determining his liability under the personal income tax* Consequently,
tax savings from the viewpoint of the grantor may result from currently
distributable trust income where the beneficiary’s income is subject
to lower surtax rates than the income of the grantor*
Trust, income not taxable to the grantor or beneficiary is taxed
to the trust as a separate entity. Where the terms of the trust
provide for the accumulation in trust of income^for unborn or unas
certained persons, individuals w.ith contingent interests o~ or- ,
future distribution, such income is taxed to the trust. A trust is
allowed an exemption of $100 and is subject to the-income t<-,x r. es
applicable to individuals. Prior to the Revenue Act of 19^2, income
accumulated by the trust and taxed to it was not taxable to the
beneficiary even though it was distributed to him in la.ter yor rs_#
Thus, it was possible to reduce the benefi cih ry’'s^tax liability by
trust agreements-which provided for the accumulation of trust income
for future distribution. During the period in which the trust income
was accumulated and not currently distributable,it was t.’Xed to t* e
trust often at lower surtax rates than would have been applicable
had the income been taxed to the beneficiary. ^ The accumulated trus
income could then be distributed to the beneficiary in 1 tor ye. „rs
TJ
ifor a collection of authoritios see 19^7
P*r^
2j Either -cting alone or with the aid of another person not having a
substantial adverse interest*
without becoming taxable to him since the trust nad already paid
x
on such income. Section 111 of the Revenue Act of:i9,^2 has_ s ^ h a t
narrowed the opportunity to minimize the beneficiary^s taxes in tri
v<av bv erlarking the scope of trust income taxable to the beneficiary
a^currentty°d istributable income• 1/ It 1« .»till possible, heaver,
for a beneficiary's tax liability to be reduced on that part of
*
lated trust income which does not fail within the scope °f currently
distributable income and hence is not taxable to him even though he
receives it as a distribution at a later date*
Physical division of the corpus of a trust is unnecessary in
order to create a separate trust. 2/ The ta^ndtiimiiing e f f e c t s of
trusts may be increased ty creating multiple trusts on the basis of
a given amount of property, In this way. advantage may be taken Of
the fact that,each of the multiple trusts is entitled tc a v1 0 emotioni thus increasing the total exemptions applicable against a
S
income; and that each trust is taxed on its income as a separate
entity 3/ so that the total trust income is split among the trusts,
thereby resulting in a reduction of total tax liability*
8*
cuity of snlitting earned income, in noncommunity*
Difficul
propt rty States
It is not practicable to split personal-service income for tax
purposes in a r.oncoirmunlty-prcperty State since ^income earned by an
individual is taxable to him even though part 01 it is imeuintely
vested in others by contract, i/
c.
Comparison of income-splitting in community and r.oncomaunit^
property States
Spouses in co^unity-property States may divide c o m i t y income
between them for income tax purposes regardless .of whether the soy.
of such income is property or personal service.- The equal ^vision o.
community income between spouses does not involve payment of gift «a*,
Spouses in nonconmunity-property States with earned t“® « ®
•generally cannot split such income and therefore are at a
|.
comp"rod to married couples in community-property States. Ihe situation
w X i e s p e o t to property income, however; is different. Harried couples
Sue Internal Revenue Code, Sec. 1 6 2 and Regulations thereundc
Z/ Helvering v, Moliva ine, 296 H.S. 438V .
_
4,
l/
'¡«here tKT income ol 'the trust is taxable to tne trust ra.her
than to the grantor or the beneficiary».
4^ Lucas v* Early 281 T
J*S* 111*
I
85
- 39
in noncommunity-property States- may split property intone
devices
which transfer legal ownership over the property source of such income*
These transfers are usually subject to gift tax. This appears to dis
criminate against married couples in noncommunity-property Stages in
view of the inapplicability of the gift tax to the equal division o.
community income between spouses.
The impact of the gift tax upon splitting of property income in
noncommunity property, however, may not be as disadvantageous as it
appears at first sight. Over a lifetime, considerable amounts of
propertv may be transferred by gift without incurring any liability
under the gift tax. The first $ 3,000 of gifts to any person during
a year is excluded from the tax, 1/ In addition, each donor is a owe
a specific exemption of $30,000 and has the option of taking the entire
exemption in one year or spreading it over a period of years. Moreover,
a taxpayer is not subject to the estate tax on that part of his property
which is transferred during his lifetime. 2/ The rates of the estate
tax are higher than those of the gift tree, In addition, the iv isa on
of property between two taxes each of which has a progressive fate
structure reduces the amount of property falling in the highest »,ur x
bracket. Thus, the first increments of property given as gifts are
transferred from the highest bracket of the estate tax to the lowest
bracket of the gift tax, ¿/ A. taxpayer can reduce the sum of his^
taxes by giving away property during his lifetime so long as the mgx es
gift tax rates applicable to his gifts are lower than the highest estate
tax rates applicable to his property* •
The counterpart of equal division of community income for income
tax purposes is not found in the present treatment of community property
by the estate tax. The entire value of the community property is
included in the estate of the deceased spouse for estate tax purposes
with the exception of that part of community property which can ee
demonstrated to have been derived from the personal service or separ. - e
property of the surviving spouse, U/
YJ This does' not apply to gifts of future interests.
2/ Unless the gift is ma.de in.de jure .contemplation of death.^
3/
U/
See "Joint Family Beturns in the Federal Income Tax, Batchford,
The Bulletin of the National Tax Association^.February 19 H2 , VoUlxvil*.
No. 5, p. 5*
.
j.
In no case, however, is the amount Included in the estate of tne de—
ceased spouse less than the amount subject to his or her power of
testamentary disposition,. Thus, in a community-property State, at
least oner-half the value of community property is included in the
estate of the first spouse to die rega,rdless of the amount contributed
to the community by that spouse. .
o
00
- *40 Thus, devices-for splitting property iacone which m y he e^plo.ed
in noncomunity-property States m y in some- instances- he core efficient
in minimizing taxes than the equal division of community income per
mitted hy community-property States« Equal division^o communi
income between .spouses does not require payment of gift tax ait may
involve even heavier estate taxes at a later period. Other income
splitting techniques may involve payment of gift tax hut ten., -o^
lighten the burden of the ©state tax* Community-property <xn<y^*e»
however, have recourse to many of the income-s "'litttn& devices u s q
ty taxpayers in noncommunity-property States and may use them where
they achieve greater tax savings than under the community-proper y
system. 2j
17
In this connection, it should he"noted that the gift tax
does not give recognition to the automatic division of community
income between spouses. Eor gift tax purposes one entire vanue
of a gift cf community property is taxed to the husband except
to the extent that such property can be shown to stem from the^
personal services or separate Property of the wife, fhat portion
of a gift of community property which stems from the personal
services or separate property of the wife is treated as a gift
of the wife.
APPENDIX B
The Special Case of Family Trusts
Family trusts may minimize taxes in two different ways;
Generally, taxes would be reduced when trust income is taxable
to the beneficiary rather than to the grantor provided that the result
ing income of the beneficiary is not greater than the remaining, income
of the grantor#
/
| ’ || ‘
'
*|II
Generally, tax savings would result when trust income is taxable
to the trust rather than to' either the beneficiary or the grantor,
provided that the top surtax rate applicable to- the trust income is
lower than those which would apply to either the income of the bene
ficiary or the grantor# Trust income is taxable to the trust rather
than to the beneficiary where such income is not o.ctually distributed
or does.not fall within the definition of "currently distributable
income* n l/
The opportunities for income—splitting by the first method would
be reduced^by broadening the scope of the tax unit so that the incomes
of at least some beneficiaries and grantors were taxed as a unit. In
this sense, tax minimization by making trust income taxable to the
beneficiary is similar to other forms of income-splitting# The various
plans for taxing family ineomé have the same advantages and disadvantages
with respect to this method of tax minimization that they possess with
regard to other income-splitting devices#
On the other hand, tax savings which result'when trust income is
taxable to the trust cannot be handled by widening the scope of the
tax unit from the individual to the family. Such trust income is
taxed separately and is not affected by the beneficiary’s or the
grantor’s status as an individual or a member of a family. For
example; a trust might be set up with the power to accumulate income
for thé benefit of children* If not distributed, such income might be
taxed to the, trust rather than to the family unit through the beneficiary
or the grantor# None of the plans for taxing family income as a unit would
bo serviceable in eliminating'this avenue of tax minimization. Moreover,
increased use of trust agreements which arrange to nave income taxed to
the trust for tax-saving purpose might result if other devices for split
ting family income were rendered useless for. tax minimization by taxing
family income as a unit*
l/
See Appendix A#
42 -
A possible nothod of approaching solutions to the tax minimization
r r o b 4 s arising iron taring income to the trust right he to incite
-ho trust's incone with that of the family in those cases where the
^
the heneficiary are both menhers of the taxable family
■ S l t ! ^ w S r . Whether the procedure of combining trust Income> wit!h
the income of the family is advisable or practicable constitutes a
problem of considerable magnitude requiring separate study.
a r a n t e r
j
89
Table 1
Incone tax liability.under present law l/ for married couples with
no dependents for specified levels of net income,, assuming
various divisions of income between spouses
Amounts of tax
Combined
&t income;
before :
personal ;
xennti on :
1001o'
j
Qyt
. 1W
IQ
!
00:20
•
70:30
5^000^000
6,000,000
10,000,000
60:40
50:50
0
.%
330
1
380
0
330
6
380
V
422
560
760
770
779
789
798
798
969
971
982
1,005
1,039
1,045
1,387
1,398
1,431
1,476
1,549
1,577
1,843
1,862
1,919
2,005.
2,119
2,165
3,154
3,192
3,306
3,554
3,629
4,Qa7
4,693
4,769
5,011
5,410
5^ ^oo
6,594
6,460
6,617
6,992
7,567
3,341
9,082
18,725
18,910
19,551
20,772
22,639
21,795
33,649
33,982
34,665
36,516
39,368
13,092
50,274
50,673
.51,908
53,970
57,697
63,128
383,544
383,548
364,028
ec4,568
333,009
407,465
815,794
815,794
315,794
815,798
817,233
839,715
4,264,897 2/- 269,647 2/•4,273,7942/
4,275,000 2/ 4.255,397 2/4,260,147
5,122,747 .2/5,128,44) f j 5,130,0002/
5,130,0.00 2/ 8,111,517 2/5,117,047 V
~ / £
—
‘ ^
y
0
,544,647
2/
6,550,000
o,550,000
5,000 o
5,000
£,003
15^000
20,000
25 ,,000
50,000
75,000
loO, ooo
*
Continued on next page
Footnotes on next pas:©
Table 1 - Concluded
Income tax liability under present law 1/ for married couples with
no dependents for specified levels of net income, assuming
various divisions of income between spouses
Combined
net income
before
personal
exemption
3 000
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
6 ,000,000
10,000,000
Effective rates
100:0
12.7 $
16*0
1 7 .k
19 .7
21.9
27.0
32 iO
36.3
R 9.6
57.5
63.1
81.5
sR.o
85.5
85.5
85-5
J
90:10
16 *0
17,3
19ik
21 *z
.
1 80:20
20.0
25*5
29*7
27.1
30;3
Rl .5
*48,7
51+.o
77.0
81.6
52.5
57.6
78.0
81,7
' 85,1
85,2
85 .k
; 60 :*40
12 .7 /
15.6
12.72
154^
16.2
17 .5
12 .7^'
13.8
16.8
18.5
23.6
33 u
^5.3
! 70-1-30
85.2
85.3
85 .k .
.
l6»U
17.9
19*2
22*0
25 a
28*0
39*1
*46.5
51.9
76.8
21.3
23.8
26.5
37.8
U5.3
50.7
76.7
81.6
85.3
85 ,*4
85-5
81,6
85,r
85-5
85.5
Treasury Department, Division of Tax Research
2/
18.6
t 50:50
12-7#
15-2
16.2
17.3
18.R
21.0
23*5
25 *8 .
37*5
W*9
50.3
76.7
81.6
85.5
85.5
85.5
May I9R 7
Internal Revenue Code, as amended by Revenue Act of 19^5*
Taking into account maximum effective rate limitation of
85*5 percent.
Rote!
Computations were made from unrounded figures and will not
necessarily agree with figures computed from the rounded
amounts .and percentages shown.
91
Table 2
Decrease in tax liability under 50;50 split-income plan compared with
present law, l/ assuming various divisions of income between
spouses with no dependents for specified levels of net income
Combined
net income
before
personal
exemption
3,000
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
6,000,000
10,000,000
;
;
;
;
;
Decrease in tax 2/
•
>
90:10
100 ;0
0
o
58
76
190
342
3S3
1,701
2,622
6,071
9,443
12,854
23,921
23,921
1,207
0
0
s?
42
38
70
162
276
675
1,245
1,881
3,914
5,719
7,363
6,265
1,444
-18,397
-18,653
-14,853
*
0
*
#
S
80;20
0
29
36
f ta
162
380
717
1,107 ,
2,047
2,869
3,696
1,444
5
-13,647
-12,953
- 5,353
Continued on next page
Footnotes on next page
70;30
v
0
19
13
44
76
152
318
532
327
1,216
1,634
485
0
-8,897
-7,253
0
s
60 j40
0
10
2
11
19
38
76
157
185
333
399
5
0
-4,147
-1,553
0
• *>C7.1
Table 2 - concluded
Decrease in tax liability under 50: 50 split-income plan compared with
present law, 1/ assuming various divisions of income between
spouses with no dependents for specified levels of net income
90:10
o
:
oo
100:0
o
3,000
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
6,000,000
10,000,000
Decrease in effective rate V
:
:
CO
Combined
net income
before
pers onal
exempti on
:
'
Q.0%
.8
1*3
2.4
3*4
6 cO '
8.5
10*5
12.1
12.6
12.9
4*8
1*4%
«8
1*2
2 *0
2,8
4*5
6,2
7.5
7*8
7.6
7.4
1,3
2«4
*
0.0
0.0
9
X
:
:
0t0%
«6
*6
70:30
60:40
0 .0 %
0.0%,
.2
ia
1,6
2,5
3.6
4.4
4.1
3.8
3*7
.3
a
.2
.3
.4
*6
2a
1.7
1.6
1.6
.4
.4
.4
*
; v ;'.
a
*
o4
*3
- .3
- .2
- a
- a
- a
|p .0
-
*
.3
Treasury Department, Division of Tax Research
l/
*
.2
.6
.8
1,0
1,6
a
-
^
*
.2
- *
0.0
-
May
1947
Internal Revenue Code, as amended by Revenue Act-of 1945.
2/ Minus sign indicates increase in tax.
Notes
*
Computations were made fran unrounded figures' and-will not necessarily
agree with figures computed from the rounded amounts and percentages
shown•
Less than 0*05 perfcent*
Table 3
Percentage decrease in tax and percentage increase in net income after
tax under 50;50 split-income plan compared with present law,1 /
assuming various divisions of income between spouses with
no dependents for specified levels of net income
Combined
net income
before
personal
exemption
-f
3,000
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
6,000,000
10,000,000
-- — ..-— ->
:
;'
;
;
t
100,îO
0*0%
4*8
7*3
12*0
15*7
22*1
26*6
28*9
24*5
21 #9
20*4
. 5*9
2*8
*
0*0
0»0
Percentage decrease in tax 2/
:
90; 10
10*0%
4*8
6,7
10*5
13 oO
17*6
21*0
2.2*6
17*3:
14,5
12*8
1*6
«0
C
* *4
# „4
- .2
*
80;20
; 70:30
0*0%
3*7
3.6
6.0
' 8.1
10*8
13.3.
14«6
9,9
7.9
6*8
o4
*
— .3
- *3
- .1
Continued on next page
Footnotes on next page
0*0%
2*4
1*3
3*1
4,0
4*6
6 *3
7.6
4.2
3*5
3oI
a
0*0
- .2'
- ,.l
0*0
:
60 ¡40
0*0%
1*3
*2
*8
1 *0
1 «.2
1.6
2*4
1 *0 •
1*0
*8
0.0
- .1
w *
0*0
Table 5 - Concluded
Percentage decrease in tax and percentage increase in net income after
tax under 50i50 split-income plan compared with present law, l/
assuming various divisions of income between spouses with
no dependehts for specifi ed levels of net income
Combined •
Percent age increase in met income after tax 2/
net income
»
1
before
100:0
90:10
•30:20
70 :30
60*40
personal
k
exemption
.
i
t
*
■
0
0
0
.ro
O
v.
6,000,000
10,000,000
■49
1.5
3.0
4.4
3.2
12.5
16.5
24.1
29.6
34.9
25.9
14.9
.2
0.0
0,0
1.6%
m
1*4
2.5
^ (»kU
W
6.0
8.9
to
r-1
rH
25,000
50,000.
75,000
100,000
500,000
1,000,000
5*000,000
0
0
v # 5*000
5,000
6,000
"8,0Q0V
10,000
15,000
"c&-
1
•
14.3
16.1
17.4
5.7
,8
- 2.5
- 2,1
-1.0
0.0%
.7
.7
1.4
2.0
3.3
4.9
6.4
7.0
7.5
8.0
1.3
*
- i,8
- 1.5
- .4
Treasury D'-"-partment, Division of Tax Research
l/
2/
0 .0 %
i2
0 .0 %
.5
.3
*7
*
.2
*2
.3.
.5
.9
.6
.8.
.8
.9
1.3
2.1
3.0
2.7
3.0
3.4
.4
-0 ,0 •
*
0 .0
- 1.2
- .8
,0.0
- .6
- .2
0.0
May
1947
Internal Revenue C0ae, as amended by Revenue ¿ict of 1945.
Minus signs indicate increase in tax or decrease' in net income
after tax.
Note;
Computations were made from unrounded figures and will net
necessarily agree with figures computed from the rounded
percentages shown.
* Less than 0.05 percent.
Table H
Tax liability under present lav/ l/ and under the dual— rate—schedule plan 2j for single persons
without dependents for specified levels of net inctme
Amounts of tax
ilet income
before
personal
exemption
$
600
800
1,000
1,500
2,000
2,500
3,000
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
9 ,000,000
Under
present
law
i►
.
19
57
95
:
:
:
$
Under
the
plan
19
57
95
285
190
295
*485
399
' 523
190
380
922
1,169
1,720
2,347
*4,270
6 ,6*45
9,362
25*137
43,477
63,541
1*093
1,435
2,247
3,197
5,965
9,049
12 ,39 s
31,564
52,692
7 *4,062
Effective rates
:
of tax
: Under ¡Under
¡present : the
: law
¡.plan
3.26
7.1
9.5
12.7
1*4.3
15.2
16.2
18.*4
19.5
21.5
23.5
28.5
33.2
37*5
50.3
58.0
63.5
81. b
419,857
407,897
8*4.0
8*40,1*47
852,107
it,275,000 3/ 4,275,000 1/
85.5
85.5
6,QUO,HOC 5 ,130,000 1/ 5 ,130,000 1/
8
,
550,000
8
,
550,000
65.5
10,000,000 !
1/
1/
Treasury Department, Division of Tax Research
footnotes on next page
: Increase in
Increase in : effective
amounts of
: rates of
tax over
: tax over
present lai*r
: present law
3 .2^
7.1
9.5
12.7
1*4.8
16.0
17.**
21.9
23.9
28.1
32.0
—
—
—
$
10
19
36
171
266
527
850
39.9
*45.2
*49 6
1,715
2 f*40*4
3,03o
63.1
6,427
9 »2 15
10,521
11,960
11,960
70.3
7*4.1
8*4.0
85.2
85 .5
85.3
85.5
—
—
—
-*
—
.5p
•8
1.3
3.*4
*4.*4
6.6
6.5
1 1 .*4
12.0
12.1
12.9
12.3
10.5
2.*4
1.2
—
—
:
Tax increase as a
:
percentage of
: iMet income
: Present
: after present
: lav/ tax
: lav/ tax
¡liability
~
~
3 *5/
5.0
7.6
18.5
22.8
30.0
36.2
*40.2
")ZD
r
’^«C
O
J
32. *4
25 .6
21.2
1c. 0
p Q
l.H
.9
1.5
*4.2
5.5
S„*4
11.1
10.0
18.0
19 .k
25.8
29.2
28.9
13.0
7.5
CO
Ol
■ M
Table
b
— concluded
Tax liability under present law l/ and under the dual-rate-schedule^plan 2/ for single persons
without dependents for specified levels of net income
Footnotes
i / Tntp-rnnl Rpvpriue Code» as amended by Revenue Act of 19 *5*
_
-j._
i u / ^ a n ^ S d V e i a i i the rates existing under present law liability but would narrow he ^ r ax braoke s
applicable to single persons and married persons filing separate returns to one-half their present w
jy Taking into account maximum effective rate limitation of 65*5 percent.
¥f
~
Note:
Computations were made from unrounded figures and will not necessarily agree with figures computed from
the rounded amounts and percentages snown.
97
Table 5
Tax liabilities under present law l/ for married couples with one
and two children for specified levels of net income, assuming
various distributions of income between family members
Co&bined net income
$50,000
• |100,000
1-24,453
18,444
20,268
17,456
16,822
15|637
16,058
$62,714
49,932
.52,017
46,859
43,862
43,496
42,754
$407,032
383,111
371,720
365,940
361,109
360,644
360,155
24,111
18,164
20,107
18,045
14,862
13,234
12,920
62,301
49,590
51,514
46,683
40,323
37,820
37,449
406,600
382,679
365,308
353,633
342,266
338,694
338,675
t
I#
Assumed percentage distribution of
income among three family members
100:0:0
50:50:0
80:10:10
60:30:10
50:25:25
40:40:20
33-1/3:33-1/3:33-1/3
V
$500,000
/
II# Assumed percentage distribution of
income among four family members Z /
100:0:0:0
50:50:0:0
80:10:5:5
70:10:10:10
50:20:15:15
30:30:20:20
25:25:25:25
Treasury Department, Division of Tax Research
l/ Internal Revenue Code, as amended by Revenue Act of 1945#
2/ Assuming separate returns are filed#
May
1947
98
TREASURY DEPARTMENT
Washington
FOB IMMEDIATE RELEASE
W ednesday, June 18, 1947
Press Service
Wo. S-371
The Bureau of Customs announced today that of the
23*094,000 pound supplemental quota of cotton having a ,
staple of 1-3/8 inches or more hut less than 1 -11/16
inches permitted entry for consumption during the period
January 14 to September 19* 1947* inclusive, by the
Presidents Proclamation of June 9* 1947* a total of
21,804,285 pounds were entered, or withdrawn from ware
house, for consumption at the opening of the quota on
June 16 at 12:00 noon, E.S.T.
0O0
99
k J kJ
TREASURY DEPARTMENT
Washington
press Service
No. S-372
RELEASE, MORNING NEWSPAPERS
Friday,
June
20, \m1947
!
oCs
ii»I"1"
.•
« mrnmmmmmt *i.»iy)-i- ,
r
tf o r
huj
The Secretary of the Treasury, by this public notice,
ijivities lender^ for, $1,100,000,000, or thereabouts, of 91-day
> for* bash and in exchange for Treasury bills
^Whurihg. June 26, 1947, to be issued on a discount basis under
v S S ^ M t i v e . a n d fixed-price bidding as hereinafter provided.
this series will be dated June 26, 1947, and will
W t u r e September'¿5,' 1947, when the face amount will be, payable
without;i.htere^tX 'They will be issued in bearer form' only, and
«¡tyill^^ominatioifsf of;.$1,000, $5,000, $10,000, $100,000, $500,000
VrSnd^ $1,;000,600 (maturity value).
•'
’t\ ■,.;
•.
-'
-' V'*1 I||Fjj
; '*
■
; ■'
•.
'‘..{ Tenders will be received at Federal Reserve Banks and
Branches up to the closing hour, two o ’clock P.M., Eastern
Standard time, Monday, June 23, 1947* Tenders will not be
received at ^he Treasury Department, Washington. 1 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 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 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
public announcement will be made by the Secretary of the Treas
ury 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. Sub
ject to these reservations, tenders for $200,000 or less from
any one bidder at 99*905 entered on a fixed-price basis will
be accepted in full. Settlement for accepted tenders In ac
cordance with the b*ds must be made or completed at the Federal
Reserve Bank on June 26, 1947, in cash or other immediately
available funds or in a like face amount of Treasury bills
maturing June 26, 1947/''EquAf'treatment will be aceordea all
tenders, whether the bidders offer to exchange maturing bills
or to pay-cash for the new bills: bid, for, £3ash adjustments
will be made for differences between -the par. yaiue of maturing
bills accepted In exchange-end the—Issua-price «T'-Jase- neW'.bllls»
The income derived from Treas^y bills,, whether interest
or gain from the sale or other disposition? the bills, shall
not have any exemption, as such, arid loss fran the sale or
other disposition* of Treasury bills ..shall not ^h£ive_ any special
treatment, as such, under Federal tax Acts no 0 nhprltance
enacted. The bills shall be suoject to estate, inheritance,
gift, or other excise taxes, whether Federal or ^tate, but^.shsll
be exempt from all taxation now or hereafter imposeo onthe
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
which Treasury bills are originally sold by the United States
shall be considered to be interest. UnderSections42
117 (a ) M ) of the Internal Revenue Code, as amended by
Section 111 of the Revenue Act of 1941, the amount of*discount
at which bills issued hereunder ?f®,sol£ ?baP,
¿»neemed
considered to accrue until such
^B-»iUded from
or otherwise disposed of, and such bills are
consideration as capital assets. Accordingly, the o™®.£
Treasury bills (other than life insurance companies) Issued
hereunder need include in his income
™
ference between the price .pale for such bilIs. whether o
original issue or on subsequent purchase, ano the amount
actually'received either upon ®al®.°r re^emPt^°n_ ^ e ag 1 7
during the. taxable year f o r which the return is made, as
ordinary gain or loss.
Treasury Department; Circular1 Wo. HI 8 , as^ a m e n d e d t h i s
notice, prescribe the terms of the Treasury bills
conditions of their issue. Copies of the circular may
obtained from any Federal Reserve Bank or Branch.
q Qo
.4 A-
TREASURY DEPARTMENT .
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Monday? June 23, 19U7*_______ _
.
Press Service
Ho, 3'-37.3
Secretary of the Treasury Snyder today announced the offering, through the
Federal Reserve Banks, of 7/3 percent Treasury Certificates of Indebtedness of
Series F-19U8, open on an exchange basis, par for par, to holders of Treasury
Certificates of Indebtedness of Series F-19l;7? in the amount of $2,915?710,000,
which will mature on July 1, 191+7* Cash subscriptions will not be received.
The certificates now offered will be dated July 1, 19U7? and will bear
interest from that date at the rate of seven-eighths of one percent per annum,
payable with' the principal at maturity on July 1, 19U8 • They will be issued
in bearer form only, 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 19Ul? 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.
The subscription books will close for the receipt of all subscriptions at
the close of business Wednesday, June 25.
Subscriptions addressed to a Federal Reserve Bank or Branch or to the
Treasury Departmentr and placed in the mail before midnight June 25? will be
considered as having been entered before the close of the subscription books.
The text of the official circular follovirs:
UNITED STATES OF AMERICA
7/8 PERCENT TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES F-19H8
Due July 1, 19l|8
Dated and bearing interest from July 1, 19U7
19U7
Department Circular No. 809
TREASURY DEPARTMENT,
Office of the Secretary,
Washington, June 23, 19U7
Fiscal Service
Bureau of the Public Debt
T.
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, from the people of
the United States, for certificates of indebtedness of the United States, desig
nated 7/8 percent Treasury Certificates of Indebtedness of Series F-19U8, in
exchange for Treasury Certificates of Indebtedness of Series F-19h7, maturing
July 1, 19U7.
II.
DESCRIPTION OF CERTIFICATES
1. The certificates will be dated July 1, 19U7, and will bear interest
from that date at the rate of 7/8 percent per annum, payable with the principal
at maturity on July 1* 19U8, They 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 and 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 certificates will be acceptable to secure deposits *f public moneys.
They will not be acceptable in payment of taxes.
lu Bearer certificates will be issued in denominations of $1,000, $5,000,
$10,000, $100,000 and $1,000,000, The certificates'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 cer
tificates.
III. SUBSCRIPTION AND-ALLOTMENT
1. Subscriptions will be received at the Federal Reserve Banks arid Branches
1nq
-
2
-
and at the Treasurer Department, Washington. 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.
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 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.
Subject to these reservations, all subscriptions will be allotted in full,
Allotment notices will be sent out promptly upon allotment.
IV.
PAYMENT
1.
Payment at par for certificates allotted hereunder must be made on or
before July 1, 19u7, or on later allotment, and may be made only in Treasury
Certificates of Indebtedness of Series F-19U7* maturing July 1, 19U7, -which
will be accepted at par, and should accompany the subscription.
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 certificates allotted, to make delivery of certificates
on full-paid subscriptions allotted, and they may issue interim receipts pend
ing delivery of the definitive certificates.
2. The Secretary of. the Treasury may at any time, or from time to time,
prescribe supplemental or amendatory rules and regulations governing the offer
ing, which will be communicated promptly to the Federal Reserve Banks.
JOHN W. SNYDER,
Secretaryof the Treasury.
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Tuesday, June 24, 19^7
Press Service
No. S-37^
Secretary Snyder as Chairman of the National Advisory
Council on International Monetary and Financial Problems has
received from K». Camille Gutt, Managing Director of the
International Monetary Fund, the following statement which has
been sent by the International Monetary Fund to all of the mem
bers of the Fund:
TRANSACTIONS IN GOLD AT PREMIUM PRICES
The International Monetary Fund has given
consideration to the international gold transactions
at prices substantially above monetary parity which
have been taking place in various areas of the world.
Because of the importance of this matter the Fund
has prepared this statement of Its views.
A primary purpose of the Fund is world exchange
stability and It is the considered opinion of the
Fund that exchange stability may be undermined by
continued and increasing external purchases and sales
of gold at prices which directly or indirectly pro
duce exchange transactions at depreciated rates. From
information at Its disposal, the Fund believes that
unless discouraged this practice is likely to become
extensive, which would fundamentally disturb the ex
change relationships among the members of the Fund.
Moreover, these transactions involve a loss to mone
tary reserves, since much of the gold goes into
private hoards rather than into central holdings.
For these reasons, the Fund strongly deprecates
international transactions in gold at premium prices
and recommends that all of Its members take effective
action to prevent such transactions in gold with
other countries or with the nationals of other
countries.
It is realized that some of these transactions
are being conducted by or through non-member coun
tries or their nationals. The Fund recommends that
members make any representations which, in their
Judgment, are warranted by the circumstances to the
governments of non-member countries to join with
them In eliminating this source of exchange insta
bility.
104
2
The Fund has not overlooked the problems aris
ing in connection with domestic transactions in gold
at prices above parity. The conclusion was reached
that the Fund would not object at this time to such
transactions unless they have the effect of estab
lishing new rates of exchange or undermining exist
ing rates of other members, or unless they result
in a significant weakening of the international
financial position of a member which might affect
its utilization of the Fund's resources.
The Fund has requested its members to take
action as promptly as possible to put into effect
the recommendations contained in this statement.
The National Advisory Council on International Monetary
and Financial Problems is in full accord with the statement
of the views of the International Monetary Fund quoted above.
0O 0
105
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS
Wednesday, June 25, 19^7_____
Press Service
No. S-375
Secretary Snyder today announced the unfreezing
of Tangier by its inclusion in General License No. 53*
This action not only removes all controls over current
transactions with Tangier but also unblocks the property
of most residents of that country under General License
No..53(A).
oOo
108
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Monday, June 23, 1947
Press Service
^°v 5~37c>
The Bureau of Customs announced today that the supple
mental quota of 23,094,000 pounds of cotton having
q I*
a staple
1-3/8 Inches or more but less than 1-11/16 inches has been
filled by entries and withdrawals for consumption filed during
the period June 16 to 23, inclusive.
No cotton having a staple length of 1^1/8 Inches or
more but less than 1 -11/16 may be entered for consumption
until.the opening of the new quota year on September 20, 19^7.
o0o
107
TREASURY DEPARTMENT
Washington
Press Service
No. S-377
FOR RELEASE, MORNING NEWSPAPERS
Tuesday, June 24, 1947_________
The Secretary of the Treasury announced last evening
that the tenders for $1 ,100/000,000, or thereabouts, of 91 -day
Treasury hills to he dated «June 26 and to mature September 2b,
1947, which were offered on June 20, 1947, were opened at the
Federal Reserve Banks on June 23.
The details of this issue are as follows:
Total applied for - $l,Sl6,713>000
Total accepted
- 1,103,664,000 (includes $16,518,000 entered
on a fixed-price basis at
99.905 and accepted in full)
Average price — 99*903 7^* Ecjuivalent rate of discount approx.
per annum
0*376/
Range of accepted competitive bids:
High - 99.906 Eouiv. rate of discount approx. 0.372$ per annum
Low - 99*905
"
"
11
*
*
0.376$ "
(59 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St;
. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL
Applied for
Total
Accepted
$
$
Total
7,242,000
1,473/568,000
32.405.000
10.765.000
' 36,890,000
10 ,800/000
153,950,000
22.375.000
2.905.000
4,372,000
887,063,000
19.695.000
6,665,000
23.770.000
10 .800.000
98 ,250,000
13.642.000
2,167,000
18.120.000
3.030.000
13.077.000
34,663,000
21.543.000
# 1 ,816,713,000
$1,103,664,000
0O0
2 ,620,000
TREASURY DEPARTMENT
v
;„
f
r*
v
,ì
/
K li p
i
i ** , í l **■- *■
.
‘’
I£ Vjashingt on
FOR IMMEDIATE RELEASE..,;f* *r
Wedne sday-, June ‘29 ; 1$A7, •
u•'
v"■¡KPres s-Sèrvi ce
* No.;; -s-370
Tax evasion In vestIgators, aásifted* by an informer,
have, turned iup-a" construction- laborer\whó, during ofour years
of war work in an American territory, won over $2-0G,000;'from
off-hour gambling, Secretary of the Treasury John. W , Snyder
¿aid. today,;
••
’>j*; •-*
The man had paid..taxe9: only on his regular wages, and
the investigation resulted In assessment ’of $l60,000 of addi
tional taxes,-interest, and penalties against him. He also
faces criminal prosecution. ; *■'‘
\
The investigation began as the, result of information
furnished the Government by an Informer'. Congress annually
appropriates $100,000 for the;paymehb of awards, to suah in
formers. The-rewards are based on a percentage of the taxes,
penalties,.finés, and forfeitures collected as a result of
the information, but may not exceed 10 percent of the amounts
recovered. However, rewards are paid only upon the furnish
ing of specific information or evidence, not mere suspicions.
A number of other large evasion cases from every part
of the country reported to the Secretary in recent weeks by
Joseph D. Nunan, Jr., Commissioner of Internal Revenue,
Include:
In a certain southern city, an Alcohol Tax agent was
waiting in line at his bank to deposit his regular paycheck.
He recognized an insurance messenger who came into the bank
to deposit a large amount of currency, Including several
$500 and $1,000 bills. This led to an income tax investiga
tion of an automobile trailer manufacturer, and the assess
ment of $2,200,000 against the firm and several associated
individuals.
An eastern textile manufacturing concern and a group
of Individuals connected with It have been assessed
$1,250,000 for failure to pay taxes on concealed sales dur
ing the war.
A physician in a northeastern city has agreed to pay
$1*650,000 In settlement of taxes evaded over a period of
15 years during which he had a tremendous medical practice.
2
A midwes'tern beer distributor has been billed for
$ 1 ,290>000 for taxes due on black market profits.
A theater chain operating in the south was found to
have evaded $650,000 of taxes by omitting from its tax returns
all profits from the ice cream, pop corn and other concessions
in the theaters.
;
...
.
.
;
.
An eastern man who posed as a ’’tax expert” faces prose
cution for preparing false refund claims for thousands of
clients. One of the facts turned up in this investigation was
that the man had tried to hide his connection with the returns
by signing them with "disappearing ink’.
A northern food and winp distributor, who.Juggled his
books to evade taxes, has been assessed over 4>800,000.
In another northern city, investigators found that
the owner of some breweries> which owe $300,000 $n.taxes on
blafck market profits, was a man who went bankrupt in a
legitimate business early in the war but who was able to buy
whole breweries a few years later by soliciting advance pay
ment for beer orders during the beer shortage of 1944.
0 O0
109
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Wednesday, June 25, 1947
Prass Service
No. 0-379
Secretary Snyder announced today that Stanley S. Surrey
will leave his post as Tax Legislative Counsel of the
Treasury Department in September to become professor of law
in the University of California at Berkeley, California.
fir. Surrey, who is 37 years of age, joined the Treasury
Department as Assistant Tax Legislative Counsel in 1938. He
previously had served on the legal staffs of the National
Recovery Administration and the National Labor Relations
Board.
A New Yorker by birth, he graduated from the College of
the City of New York in 1929 and from Columbia University
Law School in 1932. At law school he served as managing
editor of the Columbia Law Review.
The Treasury promoted Mr. Surrey to Tax Legislative
Counsel in 1942. He was on military leave in 1944 and 1945,
serving as lieutenant junior grade in the Navy, and returned
to the office of Tax Legislative Counsel in 1946.
Mr. Surrey gave a course in Federal income taxation at
the University of California during the summer of 1940. He
has lectured at various times at the Practicing Law Insti
tute, New York/ and will lecture at Columbia University Law
School during the present summer.
Adrian W. DeWind will succeed Mr. Surrey as Tax
Legislative Counsel. Mr. DeWind graduated from Grinnell
College, Iowa, In 1934, and from Harvard Law School in
1937. He practiced law in New York for a few years, and
joined the Treasury legal staff in 1943, becoming Assist
ant Tax Legislative Counsel in 1945.
oOo
110
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Wednesday, June 25, 19^7.
Press Service
No, S-380
Secretary Snyder today issued the following statement:
In my press conference this morning, in response
to questions regarding the implications of Secretary
Marshall’s address at Harvard, I indicated that we had
had evidence for some time that U, S, assistance might
he required in the reconstruction of Europe.
As Secretary Marshall indicated in his speech,
before the U. S. Government can proceed much further
in its efforts to lend assistance to the situation in
Europe and help the European world on its way to
recovery, there must be some agreement among the
countries of Europe as to their essential requirements
and the part which they will play in providing such
assistance and forming an appropriate basis for whatever
assistance might be requested of the U. S. Government.
It is for this reason that I stated it was my inter
pretation that he has asked them to make a self-inventory
and to see what they can do for themselves first.
My statements today should in nowise be
interpreted as disagreeing in any respect with the
comments made by Secretary Marshall at Harvard.
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS
Friday, June 27* 19^7
Press Service
No. S-38l
The Secretary of the Treasury, by this public notice,
invites tenders for $ 1 ,300,000,000, or thereabouts, of 91 -day
Treasury bills, for cash and in exchange for Treasury bills
maturing July 3* 19^7* to be issued on a discount basis under
competitive and fixed-price bidding as hereinafter provided.
The bills of this series will be dated July 3* 19^7* and will
mature October 2, 19^7* 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,
$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
Standard time, Monday, June 30* 19^7. Tenders will not be
received at the Treasury Department, Washington, Each ten
der 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 special envelopes which will be
supplied by Federal Reserve Banks or Branches on applica
tion 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 ten
ders 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 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
près sly 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 $200,000 or less from any one bidder at 99.905
entered on a fixed-price basis will be accepted in full.
-
2
-
Settlement for accepted tenders In accordance with the bids
must be made or completed at the Federal Reserve Bank on
July 3# 1947, in cash or other immediately available funds
or i n a like face amount of Treasury bills maturing July 3*
1947, Equal treatment will be accorded all tenders, whether ,
the bidders offer to exchange maturing bills or to pay cash
for the new bills bid for. Cash adjustments will be made for
differences between the par value of maturing bills accepted
in exchange and the issue price of the new bills.
The income derived from Treasury bills, whether interest
or gain from the sale or other disposition of the bills, shall
not have any exemption, as such, and loss from the sale or
other disposition of Treasury bills shall not have any special
treatment, as such, under Federal tax Acts now or hereafter
enacted. The bills shall be subject to estate, inheritance,
gift, or other excise taxes, whether Federal or State, but
shall be exempt from all taxation now or hereafter imposed on
the principal or interest thereof by any State, or any of the
possessions of the United States, or by any local taxing
authority. For purposes of taxation the amount of discount
at which Treasury bills are originally sold by the United
States shall be considered to be interest. Under Sections 42
and 117 (a)(1) of the Internal Revenue Code, as amended by
Section 11$ of the Revenue Act of 19**1> the amount of discount
at which bills Issued hereunder are sold shall not be con
sidered to accrue until such bills shall be sold, redeemed or
otherwise disposed of, and such bills are excluded from con
sideration 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 dif
ference 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 No.. 4l8, as amended, and
this notice, prescribe the terms of the Treasury bills and
govern the conditions of their issue. Copies of the circu
lar may be obtained from any Federal Reserve Bank or Branch.
0 O0
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Tuesday, July 1, 1 9 4 7 ______
Press Service
No* S -382
The Secretary of the Treasury announced last evening
that the tenders for $ 1 ,300,000',000, or thereabouts, of 91-day
Treasury bills to be dated July 3 and, to mature October 2, 1947,
which were offered on June 27, 1947, were opened at the Federal
Reserve Banks on June 30.
The details of this issue are as follows:,
Total applied for - $1,841,142,000
Total accepted
* 1,302,515*000 (includes $ 13,707,000 entered
on a fixed price basis at
99.905 and accepted in full)
Average price
* 99.905 -/■ Equiv. rate of discount approx.
0.376^ per annum
Range of accepted competitive bids:
High - 99.907 Equiv. rate of discount“anprox. 0,368^ per annum
Low - 99,905
"
"
"
°
"”
0.37Gfi "
"
(70 percent of the amount bid for at the low price was accepted)
Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL
Total
Accepted
Total
Applied for
$
15,370,000
1,567,531,000
16,368,000
1 ,780,000
3 ,859,000
625,000
141,904,000
1 7 .290 .0 0 0
$
,
1 3 ,3 6 8 ,0 0 0
1 0 8 7 0 ,0 0 0
1 ,102,561,000
1 ,7 8 0 ,0 0 0
3.259.000
618,000
34,710,000
99.904.000
12.460.000
12 .825.000
17 .380.000
2 .380.000
25.110.000
$1,841,142,000
$1,302,515,000
.
17 865.000
21 ,070,000
2,770,000
0 O0
TREASURY DEPARTMENT
114
Washington
Statement by Edward F. Bartelt, Fiscal
Assistant Secretary of the Treasury,
before a subcommittee of the House Com
mittee on Armed Services in connection
with various bills pending before that
Committee relating to the redemption
and negotiability of Armed Forces Leave
Bonds,
Monday, June 30, 1947
This Committee has before it a number of bills relating
to the redemption and negotiability of Armed Forces Leave Bonds.
The purpose of 1hese bills is to provide a means whereby vet
erans may receive cash for their bonds. The method of accomplish
ing this varies with the different bills. Some provide for
declaring the bonds to be immediately payable and for payment
of future claims in cash, while others provide that the bonds
shall be negotiable so that they could be sold in the market.
The views of the Treasury Department on proposed legis
lation of this character were expressed in a letter of May 19*
1947, to this Committee from Acting Secretary Wiggins, comment
ing on 24 of the bills pending before your Committee. I pro
pose today to summarize these views and to add some additional
comments♦
The Armed Forces Leave Act of 1946 provided in the main
that terminal leave payments to members and former members of
the armed forces should be made in the form of 2-1/2% nonnegotiable bonds maturing in five years. Claims for less than
$50 are paid in cash. Claims in any amount of persons dis
charged prior to January 1, 1943 (and certain other minor
optional payments) are also made in cash. Claims in excess of
$50 are payable in a single bond in multiples of $25*
cash payment for the odd amount in excess of the highest *p25
multiple. Payment in bonds instead of cash was decided upon
because of inflationary aspects.
On the basis of the Treasury’s experience in the payment
of the adjusted service bonds in 1936, the payment of the
Armed Forces Terminal Leave Bonds at this time would ;result in
putting between a billion and a billion and a half dollars into
the spending stream within a few months after the effective
date of the payment act. This amount of money, added to exist
ing purchasing power, is bound to result in further upward
2
115
pressures on prices. Inflationary dangers have not receded
since the Armed Forces Leave Act was signed last August. As
a matter of fact, price indices show a substantial increase
in prices. The Bureau of Labor Statistics consumers price
index was 155.8 in May of this year as against a level of
144.1 last August, while the index of wholesale commodity
prices is up to 147.8 as of June 21, 19^7* Q-s against 129.1
last August. Although production has come up remarkably
and shortages of goods have been eliminated in many cate
gories, inflationary forces are still strong. The putting
of 1 to 1-1/2 billion of additional cash into the spending
stream during the next few months would add to the infla
tionary pressures which still threaten the economy of the
country.
It would seem, therefore, that the reasons which
originally prompted the use of bonds payable in the future
are as strong today as they were when the policy was adopted.
In the long run, the gradual payment of the bonds as they
mature would be in the best interests of the veterans them
selves. After inflationary conditions ease dollars provided
by cashing the bonds will undoubtedly buy more.
It is understood that one of the reasons advanced for
paying the bonds now is that the Government would save money
in interest costs; the theory apparently being that the
Treasury could borrow money at lower rates of interest in
order to refund the bonds. The assumption that the Treasury
can refinance the Terminal Leave Bonds at low rates of in
terest apparently contemplates the sale of low-rate securities
to banking institutions since low-rate securities would not
appeal to other classes of investors. This would be contrary
to the sound policy of debt management which has been con
sistently followed by the Treasury.
Some of the bills would make the bonds negotiable in
order to provide a means of selling them in the market. Tfr®
Treasury thinks this would be a highly undesirable method of
accomplishing the objective. In the first place, the bonds
are in small denominations and, therefore, a legitimate mar
ket for them would be narrow. Market facilities would be
irregular, arid price quotations might vary from place to
place even at the same time.
Many sales would be made at prices considerably below
the real values of the bonds, and the holders would thus lose
a large part of the benefit which was intended by the Congress.
3
o
Sales of Liberty Bonds after World War I at substantial dis
counts was one of the main reasons that the non-negotiable
savings bonds were utilized for large scale financing in
World War II, In practice, it would be impossible to police
legislative provisions, such as are contained in some of the
bills before your Committee, that no person would be con
sidered a holder for valuable consideration of a bond unless
he took it in consideration of a payment of an amount not
less than the sum of the principal of such bond plus accrued
interest.
Moreover, I call your attention to the fact that each
armed forces leave bond is designed and printed wholly on the
theory of Ipdividual ownership and nontransferability as was
provided by the original Act, Each bond bears the legend,
"This bond may not be transferred,”
If, notwithstanding the views of the Treasury Department,
Congress should decide to enact legislation providing for the
cashing of terminal leave bonds, it is highly important that
certain provisions should be Included to provide an adminis
tratively workable law,
Numerous applications for bonds are now in process in
the offices of the various bond-issuing officers of the
Government. If the law is amended to permit an applicant to
request that his application be amended to provide for pay
ment in cash, the burden thrown on the bond-issuing officers
would be heavy. As a matter of fact, a veteran desiring pay
ment in cash would probably encounter greater delay by re
questing a change in the form of payment than he would if the
bonds were issued in accordance with the original application
and forwarded to him. If legislation is passed to provide
cash payments rather than through bonds, It should apply only
to applications made after the effective date of the new
legislation and then only in cases where the applicant had not
previously made application for a bond. In other words, a
veteran should be given a choice as to whether he wants a bond
or cash if legislation is passed, but he should not be per
mitted to apply for a bond and then change his mind and put an
application for cash in administrative channels before he re
ceives the bond. If he initially applies for a bond, he
should be required to wait until he receives the bond, which
he could then, of course, redeem for cash.
In order to give the veterans the best service, the
Treasury also thinks that it would be vise to permit the
utilization of the same facilities for the redemption of
terminal leave bonds as are now being used in connection
4
with the redemption of Savings Bonds. The use of banks and
other financial institutions as paying agents would be a
convenience to the veterans and would expedite the making
of payments* since it would provide some 15 or 16 thousand
points at which payments could be made. This arrangement
could be accomplished by appropriate language making the
provisions of subsections (h) and (i) of section 22 of the
Second Liberty Bond Act, as amended, relating to the use of
paying agents for the payment of United States Savings
Bonds, applicable to payments of Armed Forces Leave Bonds.
In the case of payments of future claims in cash, in
stead of by bonds, the legislation should clearly specify
to what extent payments in cash, that is, not involving
redemption of bonds, should include amounts equal to the
interest that would have been received If a bond had been
issued. Since veterans would presumably have the option of
applying either for cash or for a bond (which they could
subsequently redeem with interest), the provisions with re
spect to payment of sums equivalent to Interest in connection
with cash payments should presumably be on the same footing
(including taxability under section 7) as the interest payable
on the bonds.
Furthermore, the legislation should specify from what
appropriation cash payments equivalent to interest should be
paid. I think it would be appropriate to make such payments
payable from the same fund as the basic amount.
I
wish to call to your attention the fact that the
Treasury Department will have increased administrative ex
penses during the fiscal year 1948 if this legislation is
enacted. About 9 million bonds will become eligible for
redemption, and it will be necessary to anticipate reimburse
ment to paying agents and Federal Reserve Banks as well as
the administrative expenses of the Treasury Department in
processing the redemption of these bonds. It is tentatively
estimated that these expenses might amount to about $3 million,
or thereabouts, which doubtless would be available from the
appropriation made last year for making payments under the
Armed Forces Leave Act of 1946.
Finally, any legislation on this subject should have a
deferred effective date of not less than 30, and preferably
60, days after enactment before the bonds are eligible for
redemption. It would take some time to make administrative
arrangements to take care of these payments and unless a de
ferred effective date were provided, the Treasury would not
have sufficient time for making arrangements for paying and
handling the bonds. Moreover, the Department would be
flooded with mail applications and there would be long lines
of bondholders at its doors immediately after the pending
legislation should become law.
oOo
TREASURY DEPARTMENT
Bureau of Internal Revenue
Washington, D. C.
FOR RELEASE MORNING NEWSPAPERS,
Wednesday, July 2, 19^7»_____ No# s**3o3
Press Service
The Bureau of Internal Revenue today announced the
Issuance of formal amendments to the income tax regulations
Interpreting the Clifford and related decisions of the Supreme
Court * These amendments have Been adopted after consideration
of the views presented by interested persons regarding amend
ments which were tentatively proposed and which were published
in the Federal Register pursuant to the Administrative
Procedure Act on January 28, 19^7.
The formal amendments differ in several respects from the
tentatively proposed changes which were published In Jannary«
First* In accordance with suggestions made, the powers which
may be exercised Without subjecting the grantor of a trust to
Income tax on trust income have been broadened in particular
situations to promote greater equity and uniformity of treat
ment* Thus* the amendments relieve a grantor of tax on trust
Income where a power to allocate the income among any of the
beneficiaries is exercisable by trustees who are neither related
to, nor employees of* the grantor, or by such trustees in con
junction with related or employee trustees. In addition,
,
powers to invade corpus for the benefit of remaindermen are In
general given the same treatment as powers to invade for the
benefit of current income beneficiaries*
The second important change made by the formal amendments
Involves a rearrangement of the provisions of paragraph (d)
of the tentative proposals, dealing with the power to determine
or control beneficial enjoyment of corpus or income. The
arrangement of the exceptions contained in paragraph (d) has
been altered, in the interest of greater clarity, to present
a more logical classification based on the person by whom
powers may be exercised rather than on the basis of the type o
power held. However, It is to be particularly noted that this
rearrangement does not In any way restrict or curtail the powers
which, either under the present regulations or the changes which
were tentatively proposed, are exercisable without subjecting
the grantor to tax on trust income*
The formal amendments, -like the Clifford regulations issue
originally* will apply only to taxable years beginning after
December 31, 19^5#
119
-
2
-
The formal amendments are accompanied by a mimeograph
providing that where no inconsistent claims prejudicial to
the Government are asserted by the trustees or beneficiaries,
it will be the policy of the Bureau of Internal Revenue not
to assert liability of the grantor under the general provisions
of section 22(a) of the Internal Revenue Code if the trust
income would not be taxable to the grantor under the regula
tions 'as amended* The mimeograph also provides that.where the
grantor1s control over a trust created:prior to January 1, I g w
is terminated at any time prior to January 1, 1948, it will oe
the policy of the Bureau of Internal Revenue not to assert
liability of the grantor under the Clifford regulations for
1946 and 1947.
Pursuant to the Administrative Procedure Act, the formal
amendments will be published in the Federal Register, but
not become effective until 31 days after the date of publication,
oOo
120
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Tug^da,y,i....jtt.ly .1, 19*17.
Press Service
No, S-3Ô4
The Secretary of the Treasury today ahhôûiieec! the
Subscription and allotment figures with respect to the
current offering of 7/8 percent Treasury Certificates of
indebtedness of Series P-1948, dated July 1/ 1947.
Subscriptions and allotments were divided among the
several Federal Reserve 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
86,088,000
1,726,902,000
40.138.000
.
72 861.000
33.729.000
56.562.000
273.425.000
64.584.000
42.948.000
93.177.000
61.717.000
187.474.000
2n■■
,WM«1
2 9■2>, 0 0 0»1""irr
TOTAL $2,7^1,897,000
0O 0
*
21
10
Treasury Department
Washington
Press Service
Hafc&asi___
Fill BEISDXA.TE REIMSS
Wednesday, Jtf o .iL-¿242
Secretary of the Treasury John V. Slider announced today that the
Treasury closed the fiscal year 1947 with a buugct surplus or r754,000,000.
The Secretary said that this achievement of a budget surplus an a rascal
T-ear commoncinr Only ten months after m e completion of our mu.lamiry victory
was made possible by the untiring economy efforts of President Truman.
It is
noted that this occurred during a period in which a large proportion of the
total Government expenditures was still occasioned by the cost or liquidating
•
*
obligations resulting from the war *
The President, Secretary Snyder said, has constantly taken the Initiative
in cutting expenditures consistent with the national sarety and weirare.
When-
ever possible, the President has regarded the appropriations granted by Con
gress as ceilings, rather than as tar*gets.#
In numerous cases he nas cut
expenditures drastically below those authorised by Congress.
Since taking
office, President Truman has recommended'to the Congress the cancellation of
appropriations totaling over '¿>65,000,000,000,
Total Government expenditures in the fiscal year just ended amounted to
§42,505,000,000.
This is a decline of a third from the expenditures of
§63,714,000,000 during the preceding fiscal year and, a decline of .nearly 60
percent from the wartime peak of S100,397,000,000 reaoned in 1945.
The expense of the transition from war to peace continues to comprise a
substahtial proportion of Federal expenditures. Expenditures ¿or veterans
(including terminal leave), for example, amounted to §9,250,000,000 m
the year
just ended; while expenditures for UNNRA, the credit to Treat Britain,
Export-Import Bank loans, and subscriptions to the International Bank
and Monetary Fund amounted to another #5*915»000,000*
In contrast to the sharp reduction in expenditures, net receipts
were practically the same as in the preceding year.
The primary reasons
for this maintenance of receipts have, of course, been the success of the
Nation’s reconversion from a wartime to a peacetime economy, the continued
higrh level of production and employment, and substantial receipts from the
sale of surplus property.
Of great importance has been the Treasury Department’s vigorous
enforcement of internal revenue legislation.
Secretary Snyder estimated
that the extra enforcement activities of the Treasury yielded an ad
ditional $2,000,000,000 in revenue during the fiscal year.
The funds
granted to the Treasury Depa.rtm.ent by Congress for- this extra effort
have been repaid many times over.
The Secretary declared that, as long as business, employment, and
national income continue high, we should maintain tax revenues at levels
that will permit a continued reduction in the public debt.
The desira
bility of such a policy, he added, is emphasized by the fact that the
financial soundness and continued stability of the American economy is
the cornerstone of our national life.
Comparisons with April budget estimates
Receipts were $759,000,000 more than the estimates released by the
^resident on April 19 , practically all of which was due to an unexpected
increase in miscellaneous receipts*
This resulted principally from a settle
ment of accounts earlier than had been anticipated between the Reconstruction
Finance Corporation and the Treasury amounting to
relating to
sales of surplus property and repayment of capital of the Smaller >'«ar Plants
Corporation*
.
Expenditures exceeded the April estimates by 41 *235*000,©00, due largely
to the payment by the Reconstruction Finance Corporation to the Treasury in
the settlement of accounts mentioned above and to the fact that refund? of
taxes were considerably heavier than h^d been expected.
The ireasury, of
course, has no control over the amount of refunds which are required by law
to be made, but has endeavored to speed up the program as much as possible
in the interest of economy and as a service to the taxpayers*
The acceler
ation of the payment of tax refunds during the year resulted< in substantial
interest savings to the Treasury, the amount of interest paid on refunds
being 43 ,300,000 less than last year.
Reduction in debt
During: the fiscal year Jest ended the public debt —
including guaran
teed obligations held outside the Treasury — * was reduced by *11»522,000,000,
of which $754,000,000 was the result of the budget surplus.
outstanding: on June 30 was 4258,376,000,000*
The total amount
This compares with
$279,76U,000,000 at the postwar peak which was reached on February 28, 1946.
The major part of this reduction in the debt bets been accomplished by re
ducing* the Treasury cash balance from its postwar peak bo its present level.
Future reductions in the debt can occur only from budget surpluses*
Practically the entire decline in the debt since the peak has been in the
holdings of the comercial banking system.
Holdings of debt by nonbank inves
tors as a whole have remained practically constant.
This concentration of debt
reduction in bank holdings has been in accordance with the Treasury ,policy of
spreading the ownership of the debt as broadly as possible, and has helped to
alleviate inflationary pressures during the reconversion period.
This debt
reduction program was made possible by the Treasury’s policy of maintaining
a
substantial portion of the debt in short-term securities. /
This policy maintained the liquidity of the banicing system and put a
large portion of the debt in a form in which it could be easily retired.
As a
consequence of the liquidity of the banks’ Government security portfolios, the
large turnover of funds incident to the debt reduction program occurred without
disturbance to the money market.
The reduction in the debt has naturally
resulted in a substantial decline in the proportion of short-terra securities,
as well as in the proportion held by banks.
The two-fold character of.this
decline has consequently resulted in keeping the maturity distribution and the
form of the debt well adjusted to the character of its ownership.
A more detailed analysis of the fiscal year’s operations follows:
I.
BUDGET RESULTS
Budget receipts exceeded expenditures by $754,000,000, as compared with
a deficit of $20,676,000,GOG last year.
Met receipts amounted to $43,259,000,000, an increase of $221,000,000
compared with last year. Total expenditures amounted to $42,505,000,000, a
decrease of $21,209,000,000 from the year before. This improvement in the
Government’s budget of $21,430,000,000 vías accomplished notwithstanding that
LCD
- 5 in 19U7 there wer^ several large items of expenditure whioh were not in the
figures for I9I4.6, notably $1 ,1426,000,000 for subscriptions to the Inter
national Bank and the International Monetary Fund under the Bretton Woods
Agreement, $2,050,000,000 under the credit to the United Kingdom, $837*000,000
additional for United Nations Relief and Rehabilitation Administration, and
about $2 ,000,000,000 for armed forces leave.
A comparative table showing the trend of expenditures during the last
5 fiscal years is shown below (in billions of dollars):
1945
19I+6
1947
i 80.4
143.0
$ ll4-*U
Veterans Administration .............
2 .1
h. 3
Interest on the public debt .........
3*6
Tax refunds ............... .
1.7
Budget Expenditures
2/
iiiar and Navy Depa rtments ...... .
International finance
..............
United Nations Relief and Réhabilita.tien Administration ........ .
All other......
Total......... .... .........
II.
Increase (+)
or
Decrease (-)
I9I4.7 from 1
-$¿8.6
1/ 7.3
+ 3*0
4 .7
5*0
+ *3
3*0
3.0
-
-
*7
i+.ii.
+ 3*7
.1
•7
1*5
+ .8
12,5
7.3
6.9
~ .U
100.U
63.7
42.5
-21.2
PUBLIC DEBT
The gross public debt amounted to $258,286,000,000 on June 30» 1914-7»
a decrease of $11,136,000,000 during the year. In addition, guaranteed
debt held outside the Treasury declined by $366,000,000 during the year.
The sources of debt reduction during the year are indicated below:
£7 In adaition, about $2,000,000,000 of armed forces leave payments
(bonds and cash) were made during the year, classified herein
under War and Havy Departments and **¿»11 other*’ (Coast Guard).
2/ Excludes river and harbor work and flood control*
JL cL o
-
6
-
Direct debt
Decrease ih general fund balance
Budget surplus ,* a .*... i»... i * . .
a
..* i
$10,930,000,000
754.000.
000
* ,
4i♦
11 684 000*000
Excess of expenditures in trust
accounts, etc• **##•••**•••*•«••**•**
540,000^000
Subtotal i
i
Total decrease in direct debt
1 1 , 136, 000,000
Guaranteed debt
Decrease ...... . ......... .............
386.000.
Total decrease in debt
000
, ,
11 522 000,000
Changes in comuosition of debt
Marketable issues were,reduced
.^>20,904,000,000, but this decrease was
partially offset by increases in special issues to Government^trust funds and
investment accounts by $ 5,034,000,000, and nonmarketable public issueo,
12,872,000,000, represented principally by increases in armed forces leave
bonds and United States savings bonds and partially offset by a decrease in
Treasury savings notes. There was also an increase in the debt amounoing to
$2,140,000,000 resulting from noninterest-bearing special notes issued to the
International Bank and the International Monetary Fund,
Sales of United States savings bonds (including discount^accruals) ex
ceeded redemptions during the year by M 2 ,3 5 4 ,000,000, indicating a continuing
public interest in this form of savings,
The net changes in the public debt and the Treasury’s cash balance are
indicated below:
I
127
- 7 (In millions)
Change
’ During
fiscal
year
to
6/30/47
1947
From
Classification
Feb. 23,
1946
Gross uublic debt
Interest-bearing:
Public issues:
$199,310
Marketable .... .
57,206
Nonmarketable .....
June 30,
1946
June 30,
1947
2/23/46
$139,606
,56,173
$166,702
59,045
-431,108
+1,339
+20,904
+2,872
Subtotal .......
257,016
245,779
227,747
-29,269
-13,032
Special issues ••••••
20,897
22,332
27,366
+6,469
+5,034
+2,140 1
+2,140
Noninterest-bearing
notes issued to Inter
national Bank and
Monetary F u n d .... .
'
2,140
1,301
1,311
’ 1,033
-268
-278
Total gross
public debt •••.
279*214
269,422
256,286
-20,928
-11,136
General fund balance.....
25*961
14,236
3,308
-22,653
-10,930
Net ............
253,253
255,134
254,973 .- +1,725
-206
Other 1/ ......... .
Changes in maturities 2/
One of the results of the debt retirement program v/as to retire a substan
tial amount of bank-held short-term debt. In carrying out the debt retirement
program the 91 "day Treasury bills were reduced by $ 1 ,204*000,000 and the 1-year
certificates of indebtedness^/ were reduced $14,418,000,000*. In addition, all
other marketable debt callable or maturing during the year was reduced
$5,222,000,000. Changes in the maturities (based on maturity or first call
date) of the marketable public debt are indicated below:
1/
2/
V
Includes matured debt and other debt bearing no interest.
Interest-bearing marketable securities only.
Includes the .90$ - 13-month notes which matured July 1, 1946.
-
8
-
(In millions)
'''■"****pv
Feb. 28,
191+6
June 30.
I9I+6
$ 26,650
-«2,699
Within 3 months ........
$ 29,31+9
* 28,755
>
3 months to 1 year ..i..
1+0,gill
33,220
25,677 ^15,237
- 7,51+3
1 to 5 years ......... *
35,388
35,066
1+2 ,51+3 + 7,155
+
“*•>3
Maturing
Change
During
From
Fiscal
June 30, 2/28/1+6
Year
to
191+7
191+7
6/ 30A 7
3 to 10 years ... ....*•.*
33,131
32,953
191021+
-ii+, 107 " -13,929
10 to 15 years ..*.....
17 ,1+00
16 ,0Î2
13,326
- 1+.071+
- 2,686
13 to 20 years .........
17,796
21,227
27,076
+ 9,280
+ 5,819
Over 20 years ..........
25,832
22,372
111,1+05
-11,1+27
- 7,967
Total ........... .
199,810
189,606
168,702
-31,108
-20,901*
k
-^2,105.
Interest on the public debt
Interest payments on the public debt during the fiscal year amounted to
ilj.,958,000,000, compared with |i+,722,000,000 in I9I+6 . Interest payments in
1997 do not reflect the full annual interest savings which ultimately will be
effected from debt retirements made during the year. In the first placed
there is a time lag. between the retirement of debt and the time the interest
savings become effective; for instance, only about a half-year’s interest would
be saved on debt retired in the first half of the year while the interest sav
ings on debt retired in the latter half would not he noticeable until the year
following. The second factor which tends to offset interest savings on the
retirement of marketable debt is the somewhat higher average rate paid on new
issues during the year of securities such as special issues to trust funds
and Government investment accounts than the rate paid on tha issues retired.
The effect of Treasury financing during the year as it relat.es to the
interest burden of the debt is shown in the following table. It should be
noted that the figures in this table relate to computed annual interest
charges as of a specified date and not to actual payments during any par-'
ticu.iar year. The principal reason why computed interest charges currently
exceed interest payments is that accruals of discount on savings bonds (in
cluded as payments*) are still well below the average annual interest on such
bonds if held to maturity (included as charges):
-9 -
Computed Average Interest Rate and Annual Interest Charge
on Outstanding Public Debt
(Dollar amounts in millions)
-
.
Clas sificat ion
June 30, 1946
June 30, 1947
Average
Annual
Average
Annual
interest interest interest
interest
rate
charge
rate
charge
Marketablej
.381$
$
Certificates «*.••*«.• *875
1.289
Notes ......... .
2.307
Bonds... .
Subtotal •*.*.•...• 1*773
Nonmarketable:
Armed forces leave
.bonds «*.»•••*•••* i»
Savings bonds *.•••••
Savings notes *••*«•*
Depositary bonds
Subtotal *•••••••••
65
305
235
2*757
.382$
.875
1.448
2*307
3,362
1.871
—
—
2*777
1.070
2.000
1,362
72
9
2.500
2.765
1,070
2.000
2.567
1,442
2.593
$
Change in
annual interest
-charge
60
221
118
2,757
-<$ 5
- 84
- 117
3,156
- 206
45
1,420
59
7
1,531
+
+
~
*
45
58
13
2
89
--
Total
1*923
114
1.980
141
*
27
1,875
126
2.000
143
a
17
3.000
157
3.000
194
4- 37
150
547
3*147
2,510
209
687
59
O
trust fund *«**•*.*.
Unemployment trust
fund •••••*••••*•.*•
National service life
insurance fund «*••*
Other (Government em
ployees* retirement
funds, Postal Savings
System, eto. ) *•••»•
Subtotal .#*•*•*• •
•i
Special issues;
Federal old«~age and
survivors insurance
5,351
2.107
5*374
t
23
3o351
2.448
1*996
.
Note? - There are certain differences between computed annual interest charges
shown in this table and actual interest payments* The average rates shown
for savings bonds and savings notes represent the annual yield if held to
maturity* Only the discount currently accruing on savings bonds, which at
present is less than the computed annual interest charge, is included in
interest payments*, On the other hand, interest on armed forces leave bonds
and savings notes is reflected as payments only at time of redemption*
130
-
10
-
The over-all computed average rate on the interest-bearing public debt
outstanding on June 30, 1947 was 2.107 percent, compared with 1.996 percent a
year ago* This increase in the general average rate was due to the retirement
of large amounts of short-term debt bearing relatively low rates of interest,
‘ continued
I*
- issue
*
j --— t issues at higher-than and- the
of nonrnarketable and
special
average rates.
III.
GENERAL FUND
The general fund cash balance at the close of the fiscal year amounted to
$3,308,000,000, a reduction of $10,930,000,000 during the fiscal year. Depos
its with special depositaries on account of sales of government securities
(i.e., war loan accounts) decreased from $12,993,000,000 on June 30, 194b to
$962,000,000 on June 30, 1947, a decrease of $12,031,000,000.
Attachments :
No, 1 - Classified Statement of Budget Receipts and Expenditures,
Fiscal Years 1945 - 1947.
No, 2 - Composition of Outstanding Public Debt, February 28, 1946,
June 30, 1946, and June 30, 1947.
No, 3 - Disposition of fetin’ed Marketable Securities During
Fiscal Year 1947,
Attachment No. 1
CLASSIFIED STATEMHJT Ct
BODOET RECEIPTS AWD EXPENDITURES
FISCAL TEARS 1946 - 1947
loi
(In milllone of dollars)
1946
1945
Budget Receipts;
Internal revenue:
Income taxi
Withheld by employers ......................... .
Miscellaneous internal revenue ....... ...............
Social seeurity taxes ............. .... ..........
Taxes upon carriers and their employees ...............
Railroad unemployment insurance contributions .............
Surplus property (Act October 3# 1944) ... ....... •••••••••
Other miscellaneous receipts .........................
Total receipts ........ ................... .
Deducts Net appropriation to Federal old-age and eurfivora
insurance trust fund ............... ..... .........
Wat budget receipts .......... ............. .
$ 10,289
24,884
6,949
1,494
285
13
355
Id
3,369
47,740
Rational defense and related activities:
Agriculture Departasnt........ ...................
Wavy Department ........ ..... ...................
Payments for United Rations Relief and Rehabilitation .......
Surplus property disposal agencies ..................
Treasury Department .............................
United States Maritime CconiesIon ................ .
War Department............. ....................
War Shipping Administration .......................
Other .......................................
Subtotal .................... .......... .
Transfers to trust accounts, etc.«
Employees' retirement funds (United States share) ........
Rational aervioe life insurance fund.................
Railroad retirement account *.................... ..
Other ................ ......... ............
1,444
♦243
«223.
769
1,007
2,323
♦1,316
80
•
549
100
137
68
21
12
9
1
6
142
52
20
159
98
674
624
122
161
72
22
40
18
161
6
168
51
»
476
950
149
2,050
325
931
335
260
Id
107
385
20
♦317
♦950
♦51
♦2,050
-349 •
♦287
♦193
♦99
♦29
♦85
♦345
♦2
♦81
♦3
♦54
«64
-4
3,617
1,715
934
198
4,722
3,034
343
2,871
177
4,958
3,050
525
6,U2
363
♦236
«36
«182
♦3,571
«186
8,730
14,559
24,323
♦9,764
1,198
30,047
114
1,540
1,041
35,161
664
106
695
694
27,852
1,367
962
90,029
197
1,117
309
24
300
1,4&
3,227
50,399
2,042
1,646
Mget surplus (♦) or deficit (_) .......................
♦464
43,259
100,405
Total budget expendituree (exeluding publle debt
retirements) ..... .
44,703
1,201
Total, excluding corporations ....... ..........
Total Government corporations, etc. ............. .
U,239
43,038
Subtotal .................. ..............
Government corporations (wholly owned), ate, (not)«
Coamtodity Credit Corporation.......................
Export-Import Bank of Washington .......... ..........
federal Housing Administration.....................
Federal Public Housing Authority... ...............
Hone Owners' Loan Corporation ......................
Reconstruction Finance Corporation>
Rational defense and related activities .............
Other.....................................
Rural Electrification Administration
...............
Other.......................................
242
9
222
115
25
A/
-1,215
-9,586
♦837
♦336
-537
174
5,575
l,5d
442
158
271
8,832
74
462
-39,020
-1,293
-500
48,542
17,142
-31,400
247
1,381
292
A/ 2
223
tan
298
17
-24
-564
46
«19
1*18
1,355
-563
65,d9 _
42.8X9
^^2|2< x>
A/ 1,076
633
%/
1
1
¡J 202
♦719
♦19
338
235
30
27
-190
«238
-23
«386
314
«991
471
*
%/ 5
12
A / 323
A / 1,044
A/ 306
%f
20
1
A/ 275
472
*/288
A/ 3
A/ 342
A/
A/
A/
328
23
7
159
A/
-3 2
-
♦73
7
A / 1,305
100,397
63,7U
42,505
-21,209
-53,9a
-20,676
♦754
♦21,430
%/
%/
fetat - Figures are rounded to the nearest «tlllai and will not naesssarlly add to the total« ahem.
%/ Excess of credit«, deduct.
* Leas than $500,000.
1
/
«621
-2,2d
♦324
«226
«97
«1
♦59
♦2,385
-1,050
$ 30,033
19,292
8,049
1,644
380
U
494
2,886
1,929
1,283
International Monetary Fund .....................
Cosineroe Department......................... ....
Credit to United Kingdom ........ '.................
Export-Import Bank of Washington - capital «took ........ .
Federal Security Agency..... .....................
Federal Works Agency............................
Interior Department ....... ......................
Subtotal........... ......................
$
9,392
21,493
7,725
1,418
283
13
435
501
2,979
46,457
Budget Expenditures«
Osoeral:
Agriculture Department ............................
Bratton Woods Agreements Act«
Labor Department...............................
Rational Raising Agency ...........................
Panama Canal................ ...................
Poet Office Departasnt (deficiency) ............. ....
Railroad Retireeiant Board............ ............
River and harbor work and flood oontrol ...............
State Dapartmant ........................... ....
Tennessee Valley Authority .......... ............. .
Treasury Department:
Interest on the public debt ........ .......
Refunds of taxes and duties ........ .......... .
Other................. ........... ........
Veterans’ Administration ..........................
Other agencies ................ .................
*
Increase (♦) or
Decrease (-)
1947 From 1946
1947
Included trader «Oenaral, Other Agendas'1 In 1945, and "Rar A ctivitiss« In 1944 and 3947.
»
2
Attachment No
CGFPOSITION OF THE QUTSTANDING PUBLIC DEBT
(In millions of dollars)
Chang«
V
Issues
Feb. 28,
19U6
June 30,
1946
¿17,032
kUhl3
19,551
¡£17,039
34,804
18,261
119,323
180
June 30, 2/28/46
to
i9te
6 /30A 7
Public issues (interest-bearing):
H'arketabfiTobli nations:
Treasury bills «•••««*«.... .
Certificates of indebtedness....
Treasury notes .................
Treasury bonds ...... .........
Postal savings and other bonds..
Total marketable obligations..
12 1,6 3 5
180
199,810
Nonmarketable obligations:
Armed forces leave bonds .......
Treasury savings notes .......
United States savings bonds ....
Depositary bonds.... ........
6 ,01+3
146,692
Total nonmarketable obligations
Total public issues .........
Special issues to Government trust
funds and agencies ........ . •
-¿1,257
25,296 -16,117
P t ¡? -11,409
119 ,3 2 3 - 2,312
14
166
168,702 -31,108
1 1 5 ,7 7 5
189,606
6/ 30/46
to
6/ 30A 7
-if1 ,261+
- 9 ,5 0 8
-1 0 ,1 19
14
-20,904
tel
6 ,7 1 1
1+9 ,0 3 5
1+27
1,7 9 3
5,560
5 1,3 6 7
325
+ 1,7 9 3
- 2,1+83
+ 2,675
li+6
+ 1,793
- 1 ,1 5 1 .
+ 2 ,332 :
102
57,206
5 6 ,17 3
99, oi+5
4. 2,ms-
2 5 7 ,0 16
245,779
2 27 ,71+7
♦ 1,8391
-29,269
20,897
22,332
2 7,36 6
+ 6,469
+ 5 ,031+
231
7
2 ,14 0
+ 2,11+0
261
-20,928
Matured debt onwhich interest has
376
238
ceased ............. ..........
Debt bearing no interest:
International Bank and Monetary
Fund ...... .
1,0 63
955
Other.... .............. . .. .269,422
Total gross public debt ... i 279,2iU
Guaranteed debt
476
551
Not owned by the Treasury
Total public and guaranteed
2 69 ,898
279,764
debt
•*•
lit,.238
2 5,9 6 1
General fund balance ....... . ••
Total debt less general fund
255,660
balance «••••»*»»»«•••.»••• . 253,803
Note: “ Figures are rounded and will not necessarily add
802
258,286
-18,032:
-
11+5
+ 2,140
133
-1 1 ,1 3 6
461
386
258 ,376
3,308
-2 1,38 8
-22,6 53
-1 1 ,5 2 2
-10,930
255,068
+ 1,2 6 5
-
90
-
to totals.
592
Attachment No, 3
DISPOSITION OF MATURED MARKETABLE SECURITIES
■ DURING FISCAL YEAR 1947 l/
^33
(Dollar amounts in millions)
Matured securities
Disposition
Date of
maturity
Exchanged
Class
Pate of
interest
Amount
Payable
in cash
New security
1,994
l/8% Certificate
Amount
7/I/46
Note
.90$
1 4,910
8/1/46
Certificate
7/8$
2,470
1*246
h
1,223
$
$
2,916
9/1/46
h
l/8%
4,336
1,995
ti
2,341
IO/1/46
«
CO
3,440
2,000
IT
1,440
II/I/46
1!
7/8%
3,778
2,003
H
1,775
12/1/46
It
7/8i
3,768
487
n
3,281
Note
1-1/2%
3,261
3,261
------ -
1/1/47
Conversion
bond
3%
13
13
: & w*
1/1/47
Certificate
1/8%
3,330
196
1/8%, Certificate
12/15/46
~ :
3,134
2/1/47
«
7/8
4,954
1,007
«
3,947
3/1/47
It
CO
3,133
991
n
2,142
1-1/4$
1,948
1,948
7/8%
2,820
1,499
1/8%
2,775
998
44,936
19^640
3/15/47 Note
4/1/47
6/1/47
Totals
Note:
Certificate
u
- - -
l/8% Certificate
n
-
1,321
1,777
• 25,296
Figures are rounded and will not necessarily add to totals.
1/ This table does not take into account a net reduction of $1,264*000,000 in
the outstanding Treasury bills*
STATUTORY DEBT LIMITATION
AS OF JUNE 30, 1947
July 2:) 1947
JL vJ
Section 21 of the Second Liberty Bond Act, as amended, provides that the face
amount of obligations issued under authority of that Act, and the face amount of
obligations guaranteed as to principal and interest by the United States (except such
guaranteed obligations as may be held by the Secretary of the Treasury), "shall not
exceed in the aggregate $275,000,000,000 outstanding at any one time. For purposes
of this section the current redemption value of any obligation issued on a discount
basis which is redeemable prior to maturity at the option of the holder shall be
considered as its face amount."
The following table shows the face amount of obligations outstanding and the
face amount which can still be issued under this limitation:
Total face amount that may be outstanding at any one time
$275,000,000,000
Outstanding June 30, 4947
Obligations issued under Second Liberty Bond Act, as amended
Interest-bearing
Treasury b i l l s . $ 15,774,960,000
Certificates of indebtedness
25,295,970,000
Treasury notes....... .
13»702.314.700 $ 54,773,244*700
Bonds
Treasury.
.... ....... . 119,322,882,950
Savings (current redemp. value) 51,366,729,479
Depositary.... ........ .
325,426,000
Armed Forces Leave.........
1,792,972,450
Special Funds
Certificates of Indebtedness 14,403,250,000
Treasury n o t e s . • 12»963.210»000
Total interest-bearing........... .. •*••
Matured, interest-ceased.••••••..... ........ .
Bearing no interest
War savings stamps.•••*••*••.•
69,930,045
Excess profits tax refund bonds
19,185,740
Special notes of the United States:
Internat* 1 Bank for Reconst.
and Development series....
415,785,000
Internat* 1 Monetary Fund series 1,724» 000, OQQ
Total.
Guaranteed obligations (not held by Treasury)
Interest-bearing
Debentures: F. H. A
.
38,210,236
Demand obligations: C.C.C. ...____ 45»002»049
Matured, interest-ceased,
172,808,010,879
27.366,460.000
254,947,715,579
225,279,511
2.228,900,785
257.401.895,875
83,212,285
6.307,900
89.520,185
#
^57 >A9^i 41^
Grand total outstanding....................
Balance face amount of obligations issuable under above authority.... 17,pQo,583,.94^
Reconcilement with Statement of the Public Debt — June 30, 1947
(Daily Statement of the United States Treasury, July 1, 1947)
Outstanding
258,286,383,109
Total gross public debt................. .
89.520,185
Guaranteed obligations not owned by the Treasury....... .
258,375,903,294
Total gross public debt and guaranteed obligations*.............
Deduct - other outstanding public debt obligations
884,487,234
not subject to debt l i m i t a t i o n . •**
257.491,416,060
S-386
1u J
l
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Thursday, July 3 * 1947»_____No * ^-387
Press Service
The Secretary of :the Treasury, by this public notice,invites tenders for $1,300,000,000, or' thereabouts, of 91-day
Treasury;bills, for cash and in exchange for Treasury bills
maturing July 10, 1947, to be issued on a discount basis under
competitive and non-competitive bidding as hereinafter provided.
The bills of this series will be dated July 10, 1947* andrwill
mature October 9 , 1947, 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, $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
Standard time, Monday, July 7, 1947 • Tenders will not be re
ceived at the Treasury Department, Washington. Each tender must
be for an even multiple of $1,000, and in the case of competitive
tenders the price offered must be expressed on the basis^of 100,
with not more than three decimals, e. g,, 9 9 -925- 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 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 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, non-competitive tenders for $200,000 or less without
stated price from any one bidder will be accepted in full at the
average price (in three decimals) of accepted competitive bids.
Settlement for accepted tenders in accordance with the bids must
be made or completed at the Federal Reserve Bank on July 10, 1947,
in cash or other immediately available funds or in a like face
amount of Treasury bills maturing July 10, 1947. Cash arid
- 2 -
exchange tenders will receive equal treatment. Cash adjust
ments will he made for differences between the par value of
maturing bills accepted in exchange and the issue price of, the
new "bills.
....... .
•The income derived, from Treasury bills,, whether interest
or W i n 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 enapted.
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 a£e
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 o
1941, the amount of discount at which bills Issued hereunder are
sold shall not be considered to accrue until such hills shall
be, sold, redeemed or otherwise disposed of, and such bills ara
excluded from consideration as Oapital assets. Accordingly, the
owner of Treasury bills (other than life insurance companes)
issued hereunder need include, in his income tax return only
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
taxable year for which the return is made, as ordinary gain.or
loss.
•
Treasury Department Circular Ho. 4l8, as amended, and this
notice, prescribe the terms-of. the Treasury bills and gove,rn the.
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank or Branch.
oOo
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100
TREASURY DEPARTMENT
Washington
Press Service
No. S-388
FOR RELEASE, MORNING NEWSPAPERS;
'TiipRdav. July 8 , 1947
The Secretary of the Treasury announced last evening
me
^
thereabouts, of 91~aay
that the tenders for ^ ¿ 300,000,000, or Lner
O’
ctohev 9 ,
rreasury bills to be dated July 10, *na to m
ened at the
10I17 which were offered on July 3» 19*1 > 1,ere OIJC“
Federal Reserve Banks von July 7.
The details of this issue are as follows:
Total applied for
Total accepted
Average price
l ,863»
0Q0 (includes $13,o73,OOU
Q7”2 000 entered
1 ,66
300
,023,000
enueieu^
’ on a non-competitive basis endaccepted in
full at the average price shown belowJ
QQ 850 Eouiv. rate of discount approx. 0.5>V
J
i
per annum
Range of accepted competitive bids:
O.372io oer annum
High - 9$.906 Equiv. rate of discount approx.
0.748$ ‘
Low - 99 »811
r ^
.*<,\
^
^
^
!
(74 percent of the amount bid for at the low price was accepted)
$
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
13,220,000
1 ,5 5 6 ,9 7 4 ,0 0 0
6 .5 16 .0 0 0
1 .560 .0 0 0
2 .690 .0 00
625.000
69,640,000
450.000
1.190.000
2.490.000
5.125.000
1.363.000
TOTAL
Total
Accepted
Total
Applied for
Federal Reserve
District
&1 ,6 6 1 ,8 6 3,0 0 0
0 O0
,
220,000
1,268,054,00,0
1.536.000
1 560.000
690,000
625.000
16,740,000
450.000
1.170.000
2.490.000
5.125.000
1.363.000
.
$1,300,023,000
TREASURY DEPARTMENT
Washington
Press Service
No. S-389
FOR IMMEDIATE RELEASE,
Wednesday. July 9, 1947.
The Bureau of Customs announced today preliminary figures shoving
the imports for consumption of commodities on which quotas viere
prescribed by the Philippine Trade Act of 1946, from January 1, 1947,
to June 28, 1947, inclusive, as follows;
Products of
Philippine Islands
Buttons
: Established Quota
Quantity
850,000
;
:
Unit of
Quanti ty
Gross
Cigars
200,000,000
Number
Coconut oil
448,000,000
Pound
:
:
Imports as of
Juno 28, 1947
64,536
3,104,834
13,288,996
Cordage
6,000,000
1t
1,065,958
Rice
1,040,000
tt
50
1,904,000,000
11
6,500,000
11
Sugars, refined )
unrefined)
Tobacco
oOo
Ü9ISISIS
—
709,149
1
7 ÖA
JL Ü
TREASURY DEPARTMENT
!%shingt on
Press Service
No. S-390
FOR IMM DIATE R ììLEa SE,
Wednesday, June 9. 1947.
The Bureau of Customs announced today preliminary figures showing the
Imports for consumption of commodities within quota limitations provided for
under trade agreements, from the beginning of the quota periods to June 28,
1947, inclusive, as follows:
Commodity
________ __________
:
:' Unit :Imports, as
:
Established Quota
,/
of • :of June 28,
:Period and' Country: Quantitv^ ^Quantify: ; , 1947
Whole milk, fresh
or sour
Calendar year
3,000,000
Gallon
3,072
Cream, fresh or sour
Calendar year
1, 500,000
Gallon
720
Fish, fresh or frozen,
filleted, etc., cod,
haddock, hake, pollock,
cusk, and rosefish
Calendar year
23,906,423
Pound
11,605,819
90,000,000
60,000,000
Pound
Pound
Quota Filled
Quota Filled
White or Irish potatoes:
certified seed
other
u
12 months from
Sept. 15, 1946
Cuban filler tobacco un
stemmed or stemmed (other
than cigarette leaf tobacco)
and scrap tobacco
Calendar year
Rod cedar shingles
Calendar year
1, 380,300
Square
955,021
Molasses and sugar sirups
containing soluble non
sugar solids equal to
more than 6% of total
soluble solids
Calendar year
1,500,000
Gallon
248,329
iJ Quota increased per T.D. 51698.
oOo
Pound
Quota
(unstemm ed
22,000,000 equivale nt) Filled
139
TREASURY DEPARTMENT
\ Washington
Press Service
no. S-391
for i m m e d i a t e release
Wfidnesday » July 9 1 9 47
The Bureau of Customs announced today preliminary figures showing the
quantities o£ wheat and wheat flour entered, or withdrawn from warehouse, for
consumption under the import quotas established in the President’s 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, ,1947, as follows:
Whe at
Country
or
Origin
•
Imports
Established ;May 29, 1947, to
Quota
: June 28, 1947
(Bushels)
(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
Poland and Danzig
—
Sweden
—
Yugoslavia
—
Norway
Canary Islands
1,000
Rumania
100
Guatemala
100
Brazil
Union of
Socialist Republics
100
100
Belgium
4
-
—
-/
-
.—
-■
p
> '
— .
i -
800,000
■oOo-r
Wheat flour, semolina,
crushed or cracked
wheat, and similar
wheat products
:
Imports
Established :May 29, 194
: June 28, 1
Quota
(Pounds)
(pounds)
3,815,000
154,423
24,000
2,400
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, 00Ô
1,000
1, 000
1,000
1, 000
1,000
1,000
1,000
1, 000
1, 000
—
-
-
4
4,000,000
—
—
,
—
—
—
.***
—
—
—
—
—
—
:—
'—
—
—
—
-*
—
—
—
156,823
TREASURY DEPARTMENT
Washington
1 AH
JL ‘t U
'*
FOR IMMEDIATE RELEASE
Wednesday, July 9. 19¿7
Press Service
S-392
The Bureau of Customs announced today that preliminary data on imports of
cotton and cotton waste chargeable to the quotas established by the President’s
proclamation of September 5, 1939* as amended* for the period September 2u,
1946* to June 28* 1947* are as follows:
COTTON (other than linters)
(In pounds)
~
Under 1-1/8" other ~
than rough or harsh
1 WSMMk
*
under 3/4”
Country oi
,
Imports Sept.
Origin
jEstablished 20* 194b, to
__________ :
Quota
June 28, 1947
i
Egypt and the
Anglo-Egyptian
Sudan
•
783,816
Peru.............
247,952
British India......
2,003,483
China............
1,370,791
Mexico............•
8,883,259
Brazil............
618,723
Union of Soviet
Socialist Repub
lics.............
475,124
Argentina........5,203
Haiti. •••••••••..*.
237
Ecuador............
9,333
Honduras.......
752
Paraguay........ ..
871
C o l o m b i a . 124
Iraq.••«•••••••.•••
19 5
British East
Afric a..... .
2,240
Netherlands East
Indies.
>
•
71,388
Barbados.......
Other British
West Indies 1/ ....
21,321
Nigeria............
5,377
Other British
West Africa 2/.....
16,004
Other French
Africa 2/......
689
Algeria and Tunisia
Kuwait...........
1/
2/
2/
V
5/
*
1-1/8" or more
Less than 3/4"
but less than harsh or rough i/
1-11/16“ 4/ '_____________
Imports Sept. Imports Sept.
20, 1946, to
20, 1946, to
June 28, 1947 June 28* 1947..
12,164
247,952
1,167,578
344
8,883*259
618,723
36,415*174
9,209,346
25,348
5,081
-*
~
—
31,900
- 39,551,390
—
-
—
—
—
~
'
"*“
™
237,600
14,516,882
10,960,449_______ 45,659,420_____ 36,788,990
Other than Barbados, Bermuda, Jamaica, ¿rinidad, and Tobago.
Other than Gold Coast and Nigeria.
Other than Algeria, Tunisia, and Madagascar.
Established Quota -» 45,656,420.
Established Quota — 70,000,000.
See Footnote next page.
COTTON WASTES
(In pounds)
COTTON CARD STRIPS made from cotton having a staple of less than 1-3/16 inches
in length, COMBER WASTE, LAP WASTE, SLIVER WASTE, AND ROVING WASTE, WHETHER
OR NOT MMUPACTURED OR OTHERWISE ADVANCED IN VALUE; Provided, however, that
not more than 33-1/3 percent of the quotas shall be filled by cotton wastes^
other than 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, Belgium, Germany, and Italy:
Country of Origin
: Established
♦
TOTAL QUOTA
•
United Kingdom.....
Canada#-*...........
France.
British India.......
Netherlands.....t .
Switzerland.........
Belgium......... ••.
Japan........ .
China.......... ....
Egypt...........
Cuba....... .
Germany.... .......
Totals
Total imports
Sept» 20, 1946,
to June 28,1947
4, 323,457
239*690
227,420
69,627
63,240
44,388
33,559
341,535
17,322
69,757
—
69,627
-
8,135
6,347
6,54-4
76,329
21,263
5,482,509
—
145,731
Established
33-1/3% of
Total Quota
Imports
Sept» 20, 1946 to
June -23,1947 1/
1,441,152
—
75,807
22,747
14,796
12,853
—
—
—
—
—
—
—
—
—
—
—
—
25,443
—
.—
—
7,033
1,599,836
1/ Included in total imports, column 2.
*
The President's proclamation of June 9* 1947, prescribed a supplemental
quota of 23,094,000 pounds of cotton having a staple of 1-3/8 inches or
more but less than 1-11/16 inches in length for the period June 14 to
September 20, 1947, which quota was filled on June 23, 1947»
-OoO-
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Friday« July 11, 1947
Press 'Service
Np, S-393 • ..
The Secretary of the Treasury, by this public notice,
invites tenders for $1,100,000,000, or thereabouts, of 91-day
Treasury bills, for cash and in exchange^for Treasury bills
maturing July 17, Í947, to be issued on a discount basis under
competitive and noncompetitive bidding as ^ e^after provided,■
The bills of this series will be dated July 17*, 19^7*
mature October l6, 1947,7 when the face amount will be payable
interest
They will be issued in bearer form only, and
in denominations Of $1,000, $5,000, $10,000, $100,000, $50Q000 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 ; » A s t e r n
Standard time, Monday, July 14,
/Tenders wil n
received at the T r e a s u r y Department,^, ashlington. Each ten
der must be for an even multiple of. $1,000,. and in the case
of competitive tenders the price offered must be expressed
on thePbasis of 100, with not mere than three £ ® ° ^ s¿enders
99.:925. Fractions may not be used. It is urged tha
be made on the printed forms and forwardedinthe special
velopes which will be s u p p l i e d by Federal Reserve Banks or
Branches on application therefor.
Tenders will be received without deposit from incorporated
banks^n^trust companies and from EesP°nsihle^and recognized^ _
dealers in investment securities. .Tenders from others »ust.be
acfomnanied bv payment of 2 percent of the face amquntof ;is>
Treasury bills applied for, unless the tenders are ^cc°mP ™ t ed
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 „ r_
public announcement will be made by
submittiS
of the amount and price range of accepted bids.
thereof
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 ip
his action in any such respect shall be final. S j
wlth_
reservations, non-competitive tenders for $ 2°0,000 or less with
nniT5r»lce from any one bidder will be accepted m iui
^
at the averape price (in three decimals) of accepted competí
bids
settlement for accepted tenders in accordance with the
bids " m u s t be made or completed at the Federal Reserve Bank on
2
Jul¥ 17 1947, in cash or other immediately available funds
or in a*like face amount of Treasury bills maturing July 17>
loifT
Cash and exchange tenders will receive equal treatment.
Cash*adjustments will be made for differences between the par
value of maturing bills accepted in exchange and the issue
price of the new bills.
■;
The income derived from Treasury, bills, whether interest
or <*ain from the sale or other disposition of the bills, shall
not°have any exemption, as such, and loss froni the sale or
other disposition of Treasury bills shall not have any sPec*al
treatment, as such, under the mfcernal^Revemie Cod|, < » . 1 * «
amendatory or supplementary thereto. The bills shall be sub
ject to estate, inheritance, gift or other excise taxes,
whether Federal or State, but shall be exempt from all taxa
tion now or hereafter imposed on the principal o
r
,
thereof by any State, or any of the possessions 01 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 °°fist|pre| to
be interest. Under Sections 42 and 117(a)(1) of the Internal
Revenue Code, as amended by Section 115 of the Revenue Ac
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 ox, and such
bills are excluded from consideration as capital as??5f*
cordingly, the owner of Treasury bills (other than life insur
ance companies) issued hereunder need include in ^ i n c o m e
tax return only the difference between the price paid for such
bills, whether on original issue or on subsequent
'tion
and the amount actually received either u p o n “ J? retu^nlat maturity during the taxable year for which the return is
made, as ordinary gain or loss.
Treasury Department Circular Ho. 418, ^ ^ e n d e d . a n d this
notice prescribe the terms of the Treasury bills and govern
the conditions of their issue. Copies of the circular may
obtained from any Federal Reserve Bank or Branch*
0O0
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4r?O
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TREASURY DEPARTMENT
Washington
FOR RELEASE, HORNING NEWSPAPERS
Tneadav. July 15, 1947_________
Press Service
No. S-394
During the month of June, 19*17, market transactions
in direct and guaranteed securities of the Government for
Treasury investment and other accounts resulted in net sales
of $359,163,200, Secretary Snyder announced today.
oOo
f
1 AÉ
«■Sßa^»> *
TREASURY DEPARTMENT
Washington
FOR RELEASE/MORNING NEWSPAPERS
Tuesday, July 15, 1 9 4 7 ______
Press Service
^0# k'"395
*
The Secretary of the Treasury announced last evening
that the tenders for $ 1 ,100,000,000, or thereabouts, of 91 -day
Treasury bills to be dated July 17, and to mature October lb,
191*7 , which were offered on July 11, 1947, were opened at the
Federal Reserve Banks on July 14.
The details of this issue are as follows:
$1,552,038,000
1,101,548,000
(includes $14,964,000 entere*
on a non-competitive basi3 and accepted
in full at the average price shown belov
99*814 Equivalent rate of discount approx.
n r7'Zr7c?n -n#=>r» Annum
Total applied for
Total accepted
Average price
Range of accepted competitive bids:
Equiv. rate of discount approx 0.372$? P©r annum
"
"
”
-V
0.752/0
High - 99.906
Low - 99.810
(60 percent of the amount hid for at the low price was accepted)
$
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL
Total
Accepted
* Total
Applied for
Federal Reserve
District___ _
12,390,000
1,378,848,000
6 ,260,000
2.515.000
2,275*000
3 .600.000
114,731,000
1.814.000
1.005.000
15,225,000
5 ,815,000
7,560,000
$1,552,038,000’
0O0
8 9 0 ,0 0 0
'1,018,348,000
1 ,260,000
2.515.000
2.275.000
3 .600.000
41 .911.000
1.314.000
$
1.005.000
15.225.000
5.645.000
7.560.000
$1,101,548,000
i5
TREASURY DEPARTMENT
Washington
for
Press Service
No, S-396
immediate rel ease ,
Tues day, July 15, 19^7.
Secretary Snyder announced tdclay that the British Government
has informed him that, except in the case of certain countries
with respect to which temporary extensions have been agreed to
by the United States Government, the British Government is fully
carrying out its obligations under the sections of the AngloAmerican Financial Agreement which become effective today.
These sections require that beginning July 15 sterling currently
earned by third countries or otherwise available to them for
,
current payments will be freely available for current transactions
in any currency area.
Throughout the past year the British Government has been
taking steps to fulfill its commitments under the Financial
Agreement and has announced from time to time during the past
six months the relaxation of certain wartime Q °n t ? o l s ° l el ^ n
sterling. Liberalization of the use of sterling has now been
extended to most of the countries of the world, but it «as
found impossible- by the British Government to complete the
necessary technical administrative arrangements^with every
country by July 15. Accordingly, at the request of the British
Government, the United States Government has agreed to extend
until September 15 the time within which the British Governmen.
may complete arrangements with Austria, Bulgaria. China,
Denmark, Prance, Greece, Hungary, Paraguay, Poland, Rumania,
Siam, Turkey, the U.S.S.R., and Yugoslavia. Sedretary Snyder
emphasized that the two months* postponement does not Involve
any modification in the obligation of the British G a r m e n t
to permit these countries to dispose freely of the sterling
they earn between July 15 and the date the arrangements are
agreed to, but Involves only the postponement of such disposition.
Secretary Snyder pointed out that the Financia1
does not obligate the British Government to remove all exchange
controls. The steps taken do not remove, for example, the
licensing controls which the British Government exercises over
repatriation by Americans of invested capital.
Attached are the texts of letters exchanged by Secretary
Snyder and Chancellor Dalton.
***
July 14, 1947
My dear Chancellor:
As a result of recent consultations between repre
sentatives of your Government and representatives of the
United States Government and in accordance with the request
of your Government, the United States Government has
agreed to the postponement until September 15* 1947, if
necessary, of the obligations of your Government under the
Anglo-American Financial Agreement in the case of Austria,
Bulgaria, China, Denmark, France, Greece, Hungary, Paraguay,
Poland, Rumania, Siam, Turkey, the U.S.S.R., and Yugoslavia,
with the understanding that upon the date of completion
of necessary arrangements with these countries, all sterling
accruing to them after July 15, 1947, will become, freely
available for current payments in accordance with the AngloAmerican Financial Agreement.
It is my understanding that with the exception of the
temporary extensions..to which the United States Government
has agreed in the case of the countries mentioned in the
preceding paragraph, the British Government will carry
out fully its obligations under Sections 7, 8(ii) and 10
of the Anglo-American Financial Agreement. I should
appreciate your Government^s confirmation of this under
standing .
Sincerely yours,
/s/ John W. Snyder
Secretary of the Treasury
Right Honorable Hugh Dalton
Chancellor of the Exchequer
Treasury Chambers
London, England
July 15th, 19^7
Dear Mr. Secretary:
Thank you for your letter of July 14th, 19k7$
regarding the execution of the Anglo-U.S, Financial
Agreement dated December 6, 19^5.
In reply I confirm your understanding that,
with the exception of the temporary extensions^to
is fully carrying ou
Sections 7, 8 (ii) an
Financial Agreement.
Yours tineerely,
/s/ Hugh Dalton
Honorable John W. Snyder
Secretary of the Treasur
Washington, D. C.
0 O0
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T*
TREASURY DEPARTMENT
Washington
(The following address:by Edward H. Foley, Jr.,
Assistant Secretary of the Treasury, before
the National Bankers Association, Rankin
Memorial Hall/ Howard University, Washington,
D. C., is scheduled for delivery at 8:30 P *M,,
D.S.T., Wednesday, July 16, 19^-7 j and is for
release at that time'.")’1'
I
appreciate this opportunity to address the Public
Meeting of the National Bankers Association. I appreciate
it because, as the Assistant Secretary of the Treasury charged
with the supervision of the Office of the Comptroller of the
Currency, I am interested in following all developments in
the banking world. I appreciate it because, as a believer
in the democratic way ‘of life, I am interested in seeing all
segments of the community have an opportunity to participate
in all of its activities - economic, political, and social.
Banking plays a strategic role in the community. All
other types of activity depend upon it for aid and assistance;
while banking, in turn, depends upon all the rest of the
community for its customers and for its profits. The banking
business, as a consequence, tends to be prosperous or de
pressed as the whole community is prosperous or depressed.
The community is now prosperous; and the banking business
is prosperous with i t .
If we use good sense and moderation, there is no reason
why the whole community should not continue to be prosperous.
It is true that the problems of maintaining high levels of
employment and production are complex. But they are less
complex than those which we had to solve in order to defeat
the totalitarian nations; and the Gongress and the President
have pledged themselves, in the Employment Act of 19^6, to
mobilize the forces of the Federal Government, in conjunction
with those of State and local governments and those of industry,
agriculture, and labor, to maintain a high and stable level
of production and employment In the entire economy.
You probably read in last week's papers that in June the
American economy for the first time in its history provided
sixty million civilian jobs. This level of employment is a
good measure of the entire level of activity throughout the
economy. According to the most recent available'figures, the
Federal Reserve Board index of Industrial production, income
payments to individuals, steel ingot production, electric
power production, and other well recognized indicators of
business activity are at or near their peacetime highs .
3-397
2
149
This prosperity permeates the entire economy» It is not
a prosperity confined to the upper income groups - a s our
prosperity has so often heen in the past. It is a prosperity
which reaches down to the lowest income levels.
During the war, it was inevitable that there should be
jobs for all - good jobs. It is to our credit that during the
postwar transition period we have maintained most of the
advances we made in this direction during the war
Not only
have we achieved the highest level of civilian employment_in
the history of the country^ we have also achieved along with
it higher levels of income in the traditionally low-pay
occupations. Present average weekly earnings in all manufactur
ing industries are equivalent to the wartime peak of such
.earnings -- despite shorter work hours. Average hourly 'earnings
in manufacturing have moved upward without interruption for
over a year.
This far-reaching prosperity is particularly satisfying
to me because it is evidence that we are making real progress
toward providing equal opportunities to all Americans -- the
equal opportunities which will mean equal rights and the same
quality of freedom for all. president Truman put this so well
in his recent address before the Thirty-eighth Annual Conference
of the National Association for the Advancement of Colored
People when he said:
"As Americans, we believe that every man should
be free to live his life as he wishes. He should
be limited only by his responsibility to his fellow
countrymen. If this freedom is to be'more than a
dream, each man must be guaranteed equality of
opportunity. The only limit to an American’s
achievement should be his ability, his industry
and his character. The rewards for his effort
should be determined only by these truly relevant
qualities.M
I said earlier that the banking business^tends to be
prosperous or depressed as the whole country is prosperous
or depressed. The present high level of national prosperity
is directly reflected in banking statistics . hast year was
one of the best years in the banking history of the United
States. The net current earnings of all member banks of the
Federal Reserve System were at a record high level. Net
current earnings, exclusive of those derived from United States
securities, have advanced further in 1947; nnd all indications
are that 1947, like 1946, will also be a banner year in over
all bank earnings, notwithstanding the large amounts of United
States securities which have been removed from the commercial
banking system and retired as a consequence of the debt-reduction
program of the Treasury.
- 3 -
150
Earnings figures do not tell the whole story. Bank assets
criticized by the supervisory authorities have, declined to
negligible proportions; while, on the human side, banks in
recent years have made substantial progress in raising the
compensation and in improving the working standards of their
personnel.
I have not had an opportunity to analyze the operating
results of the member banks of your Association -- most of which
are organized under S#tate charter and, consequently, are not
under the supervision of the Office of the Comptroller of the
Currency. I feel sure, however, both that you are participating
in the over-all prosperity of the banking industry today, and
that you are operating with-such circumspection and are setting
up such reserves as will assure your continued prosperity in
the future.
But my primary interest in talking to you today is not
that of congratulating you on the prosperity of your industry.
It is rather that of thanking you for your services to™the
Government during the war and the postwar adjustment
particularly for your services to the Treasury Department in
connection with the savings bond program. Most important of
all, I want to ask your continued cooperation in this program.
As you know, the Treasury Department during the months
of June and July is conducting a special campaign to stimulate
the payroll savings plan, and to popularize the bond-a-month
plan for the purchase of savings bonds by regular deductions
from checking accounts.
These two plans comprise the principal driving force
behind our effort to maintain a widespread distribution of
the public debt. The cooperation of banking institutions is
essential to both of these plans. The bond-a-month plan is,
of course, operated by banking institutions themselves and will
finally depend for its effectiveness upon your zeal and your
efficiency in urging your customers to establish and maintain
bond-a-month allotments.
While it is not as directly tied in with the banking
system as the bond-a-month plan, the payroll savings plan
also depends upon your cooperation for its effectiveness. Many
industrial and commercial firms have established payroll savings
plans on the advice of and with the cooperation of their bankers.
Many banks have long maintained payroll savings plans for their
own employees. If any of you do not have such a plan in your
own banks, I urge that you install one without delay. In
addition to providing payroll ssviiigs facilities for their own
employees, many banks act as issuing agents for the bonds'
purchased on payroll savings plans established by their customers .
Furthermore, many bankers as directors of industrial and commercial firms have been of invaluable assistance to the payroll
savings plan by pointing out to their fellow directors the
desirability of establishing or maintaining such plans in the
concerns under their direction.
I ask your cooperation in. all of these activities.
Mr. Vernon L Clark, the National Director of sales of savings
bonds, and his staff will be glad to extend you every assistance
in promoting savings bond sales. I shall confine myself,
therefore, to a few remarks on the social and economic necessity
for the program.
But let me first say just a word about one thing which the
program is not intended to accomplish. It is not intended to
finance the Government. The Federal Government had a surplus
of receipts over expenditures for the fiscal year which ended
on June 30; and it will have a larger excess: of receipts over
expenditures In the current fiscal year. Furthermore, because
of the substantial amounts of expenditure items which do not
require the current disbursement of cash, but which the Govern
ment, in accordance with sound accounting principles, has entered
as current expenditures, the Treasury is able, on net balance,
to retire substantial amounts of debt held by the public in
addition to the retirements of publicly held debt made possible
by the budgetary surplus itself.
The sale of savings bonds at the present time, therefore,
does not result in an increase in the public debt. It results
rather in increasing the share of the debt held by individuals
and^in accelerating the retirement of debt held by other classes
of investors, including commercial banks.
It Is clear, therefore, that the objectives of the savings
bond program are not fiscal. They are not based on the needs,
of the Treasury. They are based on considerations concerning
the welfare of the whole economy.
What are these considerations? What are our underlying
objectives in pushing the sale of savings bonds to small
Investors? There are two major social objectives: a long-term
one and a short-term one.
The long-term objective is to maintain and, if possible, to
increase the present widespread distribution of the public debt.
Before the war, the public debt stood on a relatively
narrow base. During the war, the great majority of the people
became Government bondholders, A very large proportion of the
•Peopie who bought bonds during the war still hold them. Many
01 them are still purchasing more.
- 5 -
152
ye want tg keep it that w a y , It is good .for the bondfielders and it is goad fpr the country, It gives to the
npgp|.e a greater sense of economic security and an enhanced
feeling of personal dignity. It adds an important new tie
the many ties which help to bind them to the community,
and makes them feel that its welfa.re is their welfare. It
causes them to take an increased interest in national issues.
It gives them a direct stake in the finances of the United
States.
We want, therefore, to maintain, and, if possible, to
enlarge the present broad base of the ownership of the public
debt. This is the major long-run objective of the savjngs
bond program — of the bond-a-month plan and of the payroll
savings plan. But, in the ;short run -- during the period
immediately ahead^— these plans have an additional objective.
This immediate objective is that of helping to resist upward
pressures on prices.
We have beaten the primary causes of inflation. We have
won the war. The soldiers and the sailors who fought so well
are back at their civilian jobs. The war plants are now
producing peacetime goods. The pipelines running from
producer to consumer are nearly full. The United States Govern
ment is operating at a surplus.
But the process of restoring balance in the economy is a
slow one. We must have patience.. Production -- particularly of
durable goods -- is not yet able to meet the full demands of
our backed-up purchasing power. The dollars which we save now
will stand us and the whole economy in good stead at some later
time when every additional dollar spent will mean, not higher
prices, as it w^uld today, but more production and more jobs.
Saving up purchasing power -- deferring it from the ofesent
to the future -- is, therefore, one of the major objectives of
the savings bond program. Every dollar put into savings bonds
at the present time helps to strike a blow at inflation. It
does this in two ways: First, it withholds a dollar from the
consumers1 goods markets. Second, it permits the retirement
of a dollar of bank-held debt.
The objectives of the savings bond program
both the
long-range objective of maintaining the widespread distribution
ot the public debt and the short-range objective of resisting
upward pressures on prices -- are worth-while objectives. They
are worth striving for. ■
-
6
153
-
I know that we can count upon your continued cooperation
in the savings bond program, as well as in all other matters
affecting the national welfare which you have an opportunity
to influence in your capacity as bankers. Such cooperation
is in accord with your ideals and with your traditions.
But you are not merely bankers; you are also Americans.
And as Americans you are concerned with a far wider field of
activity — a field of activity transcending the bounds of
banking and transcending even the territorial limits of this
country. ;
The period immediately ahead is a critical one during
which the world must choose whether the great strides which we
have made in science and in industry during the past few
decades will be used for the betterment of the human race or
whether they will be turned to its self-destruction.
The United States is making every>effort to prevent the
world from being divided into armed camps. We want to achieve
the ideal of one world, for we know that in this ideal lies the
only assurance of enduring peacen But we cannot accomplish
this alone. All countries must be willing to sink their dif
ferences in the cause of world unity.
Many barriers have been raised to world-wide cooperation
in the reconstruction of the devastation
both material and
moral -- wrought by the last war. We must do all that we can
to tear these barriers down.
One way of doing this will be to realize here in America,
and to carry to the world, that message of equality of opportunity
for all’classes of citizens, which President Truman expressed
in his address to the National Association for the Advancement
of Colored People in the passage which I quoted earlier this
evening.
Cooperation and amity between races,here at home is a long
step toward cooperation and amity between nations. Your
Association is one of the many influences working toward this
greater cooperation and amity at home; and I know that, with
the passing years, your message will reach an ever-widening
segment of the whole community.
0O0
United States Savings Bonds Issued and Redeemed Through June 30, 1947
(Dollar amounts in millions - rounded and will not necessarily add to totals)
Amount . i Amount
| Amount OutIssued 1/ •Redeemed l/ ] standing 2/
Series A «43
Series A •1935 (matured)
Series B 1936 (matured)
Series G -1937 ........
Series C 1938 ........
Series D 1939 .... ....
Series D 1 9 4 0 .......
Senes D *1941 ............
Total Series A-D .........
1,200
519
246
433
347
152
207
222
85
4,700
1,692
255
463
586
6$8
1,018
Series E :
1,463
Series E-1941.... 1 ....
6,620
Series E-1942 ............
10,840
Series E-1943.............
12,660
Series E-1944 ............
9,899
Series E-1945 ............
4,340
Series E-1946 ............
U 1,983
Series E-1947 (6 months)..^_________
Total Series E ..... 47,804
Unclassified Redemptions
Senes A*-®
Total Series A-E ......... i
Series F and G ;
Series F and G -1941
Series F and G-1942
Series F and G-1943
Series F and G-1944
Series F and G-1945
Series F and G -1946
Series F and G -1947
months ) ............
..••••
......
......
......
......
......
(6
52,504 j
1/
10
30
239
507
811
978
434
Percent Redeemed
of Amount Issued
96.471
93.52
59.22
23.10
20.33
18.50
16.38
3,008
36,00
1.146
4,387
7,522
6.146
3,337
1,873
21.67
33.73
39.98
40.58
37.91
23.09
5.55
16,886
30,917
35.32
no
-110
18,689
33,815
186
1,343
2,740
317
2,233
4,334
5,138
3,753
6,506
1,002
no
U
35.60
1,530
3,183
3,356
443
464
2,892
jfaOÖO
375
3,143
2,992
211
3,313
2,932
2,914
12.16
13.92
13.83
10.17
6.71
2.61
1,456
.07
17,592
9.08
51,407
28.64
78
1,457
Total Series F and G .....
19,349
Total All Series $f ......I
71,389 1
1,757
20,446
¿/ Includes accrued discount.
2/ Current redemption values.
.
,, L+
1/ Includes matured bonds which have not been presented
pa ^
.
tt
4/ Includes $59 million reported on public debt statement as «unclassified sales.
if S e l v e s SeriS A and B? (matured), and therefore does not agree with totals
under interest-bearing debt on Public Debt Statement.
Office of Fiscal Assistant Secretary - Treasury Department.
TREASURE DEPARTMENT
Washington
FOE RELEASE MORNING NEWSPAPERS
Thursday« July 17, 19¿7______
Press Service
No* b~398
John W. Snyder, Secretary of the Treasury, announced today
that he had accepted an invitation of President Dutra of Brazil to
pay a social visit to his country.
Secretary Snyder stated that he was pleased to have the
opportunity to visit Brazil on account of the long friendship of
the two countries, and also because of his desire to obtain, first
hand, more knowledge of our neighbor countries.
The Secretary plans to leave Washington by air on July 21, and
will be accompanied by Honorable Carlos Martins, Brazilian Ambassador
to United States; Honorable William Pawley, United States Ambassador
to Brazil; Major General Harry H. Vaughan, U. St. Army; Honorable Stanley
Woodward, State Department; and Honorable Orvis A. Schmidt, Treasury
Department*
'
•fl r*r>
TREASURY DEPARTMENT
1 DO
Washington
FOR RELEASE, MORNING NEWSPAPERS,.
Monday. July 21. 194-7«
____
' Press Service
No. S-399
The Treasury Department today made public a staff study entitled
“Excise Taxes on Communications % prepared by the Department’s Division
of Tax Research* The study is one of a series on excise taxes which is
being prepared in connection with the Treasury’s work on postwar tax
revision* It does not make any policy recommendations.
Revenues of the various branches of the communication industry,
their economic backgrounds, and past and present excise taxes levied on
them are reviewed in the study’s factual data and analyses* Effects of
the taxes on profits, on business, costs and competition, and on consumers
are discussed* Administrative problems of the taxes also are considered.
Services covered are the long distance telephone and telegraph, both wire
and radio; local telephone; wire and equipment services*
Estimated federal revenues from the taxes in question for the fiscal
year 1947 are as follows: ,toll telephone, telegraph, leased wires, and
wire and equipment services 1255,500,000; local telephone, $165,500,000.
■* .
Toll telephone and telegraph messages were taxed under the Revenue
Acts of 1914, 1917 and 19IS, and together with cable messages and leased
wire services have been taxed continuously since 1932. The study points
out that uniformity in the taxes on the various long distance services was
lacking until 1943, when, with the exception of international cable
messages and of toll telephone messages of 24 cents and less, a uniform
rate of 25 percent was imposed.
The study cites figures for 1944 showing that telephone service
comprised in dollar volume about 75 percent of taxed long distance
communication services, domestic telegraph 15 percent and international
telegraph and leased wires each about 5 percent*
The existing taxes appear to have different effects on the Gainings
of different long distance communication services, the study states*
The effect on profits ”is probably least serious for the telephone business,
where facilities now are being used at close to capacity,” it is stated.
"‘
The rate of return in this industry generally has been so favorable that
rates for long distance service have been declining. Under such conditions
the existence of the tax would normally tend to postpone rate reductions
rather than decrease profits.”
_
^*nG casG of telegraph service, the study reports, ’’the
oi tne tax may^ curtail profits to a more important degree. The
olegraph service has been declining for some time relative to
service, and consumers may be more sensitive to the tax in the
existence
demand for
telephone
ease of
- 2 •
-r„ ttî nw
unfavorable profit position of the
S ^ m f b ^ a u s e of thf tax may have serious
cons cqucn'cos •M
.
,•
Inequitable effects of the communications tax o n businesses using
^
.
*v,+r^ nut
^incG communication costs are a
the taxed
^
SOmc firms and types of businesses
larger. Propo
^
discriminate against those having the
than others, the tax terns
Weight of the' discrimination
greater need for communication services, weiga
q f
ZTTar-j m m s competing,businesses because of unequal dxstance frem
/
markets*
- Apparently "oO percent or more of total expenditures fof long distance
communication services are for business purposes.
profits would not be very serious*
The tax oh'Vdre and equipment service applies to
■ protective, receding and control, end entcrtaim^t ser^cos. Thcse
services, the study states, are highly specialized and the volume 1
,
busSeos’is small,* m t h the demand largely of a bus^ess oaturo. J h o pro*sent
tax probably does not greatly .reduce the volume Of business of the firm
supplying most of those services*
0O0
1
EXCISE TAXES ON COMMUNICATIONS
Part I
—
Excise Taxes on Long Distance Communication Service
Part II
-
Excise Ta,x on Local Telephone Service
Part II I -
Excise Tax on Wire and Equipment Service
Division of Tax Research, Treasury Department
July 1947
57
1 58\J
JL
Excise Taxes on Communications
One of the important questions in:tax revision concerns
the changes to he made in the extensive list of excise taxes*
This.study is one of a series on the commodities and services
sùhjeò't to excise ;tax. The purpose of the studies is to make
available data on tax rates, revenue.and the economic background
of the industry ànd to discuss the effects of the tax on profits,
on business costs and competition and on consumers. The adminis
tration of the.tax and the principal technical problems that
arise are also considered* The studies ;are not intended to make
policy recommendations but to provide information and analyse?
which would be useful in appraising the desirability of changing
or eliminating the taxes involved*
The study was initially prepared in the Miscellaneous Tax,x
Section-of.the Division of Tax Hesearch. The revenue estimates
used in the study werè prepared in the division of Research and
Statistics*. In its preparation valuable assistance and'sugges
tions' were received from other members of the Treasury tax staff,
including consultation with members of the Office of Tax
Legislative Counsel on legal matters and of the.Bureau of
Internal Revenue on administrative matters.
The general aspects of excise taxes were considered by. a
‘committee' composed of the technical tax staffs of tfhe Treasury
Department .and .the Joint Committee .on; Internal Revenue Taxation*
The detailed analysis of the individual taxes, however, has
'been prepared, independently and reflects only the views of the
Treasury Tax Staff,
Division of Tax Research
U.. S. Treasury' Department
t
Excise Taxes on Gommunicat ions
TABLE DE CONTENTS
PAIT î - Excise Taxes on Long Distance Communication Services
.
_
\
'
••• Page No,
V.
t
^
' I'
"j
I•
II.
III.
IV.
Changes in taxes since 191^
Revenue collections. 193^“^
••••
••*.•* ****'‘ ’*
and estimates for 19^F
3
3
3
6
Economic background ox tne inuus^jy
B, Rates .... ....... N ; *
C . . Character of demand ..*•••*, •••.•••••.•••
D. Outlook for the industry
;ff * ';
••••. J
‘ .
9
.
V.
VI,
VII,
2
Effects of the tax j*»j l* y 11*»* 'M l Ä f y ****2 V
1’ * j
A. Effects 'of the' tax on profits...... ,'Ziy
B. Effects of the tax on ‘business costs and
competition «'«... •♦*•••• .v.«••*...... ....
C. Effects of the tax on consumers
. .
'.'•••
Administration and compliance ....... .......
q
t* “
^
L •.
Technical problems •.... ..................
A. Differential rates ....................... "**
B„ Timing of tax rate changes ............... .
Appendix*
Structure of the Long Distance Communication
Industry ............... .................. *
(Continued)
lU
lU
y
-j r
!
«sÄ
h, '
59
+■ 11 TABLE OF CONTENTS
Page No,
PART II - Excise Tax on Local Telephone Service
I*
22
**•.»?v.r+
Description of the tax <* ■ ; . . . ...
•*22
II» .Changes in tax since. 1^41,,f. . * * . . . . , . . . . . . > . 2 2
III»
Revenue collections 1942^1946 and. estimates for 1947
and 19^8 *
.
.
*
v.»...*•
■IV»
Economic Background of the. industry *V. .............. J •♦’•
A. Character of supply .* *. *......;. •. • . ......
*
B* Rates .... *..... ...............••••......*»
C* Character of demand
»•|... ........
D. Outlook, for the industry
♦
Effect of the tax *i
•.... *****
A, On profits ,**.»***'***.......
*..... a **»* *
B* On business costs and competition .*. >*........; *
C * On consumers
i»;........... f.*••••••••♦* •
V*
VI*
'23
23
24
27
¿1
2S
28!
3^
3^
Administration and compliance ............... 31
VII.
*•«******* •*r'■*•*'* 1 - 32
Technical problems
PART III I*
II*
Excise Tax. on fere and. Equipment Service **.*;;♦
33
.*****»
33
******
33
Description of the tax
j
Changes in tax since 1941 ,*.. v......'. v
XXX 4 Revenue Collections
IV4
♦*•'*
.*»*’••*•♦•*’♦***
/
*
•
3^
Economic‘background of the industry »»*■*■,********• ¿** i*»• *
A. Character of supply . ♦*.'*
*»./** ...,*•*** .*■*-■
B. Character of demand ;*..«........ ************ *••*
34
34
35
V.
Effects of the tax..........
37
, VI.
Administration andcompliance
(Continued)
*•
37
•TJlBLE O'P iCDFTSNIS
TABLES
Page No,
PART I
-
1
2
3
'
.b
i.
Long distance rapid communication: revenue toy
type ;of service and type ofV ©airier*19^4 * •»• •'•••■* '
Approximate distritoution of revenues from rapid
r,., .intercity ■communication business toetween t h e !
i • principal telegraph »and telephone 'carriers and ...
<<•.< airmail, -1880-19^5
<*I»...*•■
•i;»• «?.••••••
‘
5
Excise Tax on Local Telephone Service:
Consumers?«Price Index.of■Cost of Residential
Telephone Service, 1935-*^-9^7
f !| i
; « ■* ! t *.
* 1 • ; * *
.
. . .
g|
:■
,v:
26
t:
v
Local telephone service revenues, net income, and
rate•of return-©n•invested, capital of the American
Telephone and Telegraph Company, 1929~X9^
i-i tm s!i:! i:sii; i: t! i
'
Ak
r;
•r
'
.
♦-f.Selected data for telephone carriers, 1929—19^' •••• r '25
2
3
^ ■
* v •-Operating'revenues’and net income of principal
•r :i wire-telegraphj ocean cable, radiotelephone* tand
;{• •Glas s tA ■telephone carriers, •
**•»%*
^
v-v *• *i ,V~ .•.•
■; v -y,'1..;' \
'
i.r- Western Union Telegraph Company: operating revenues,
operating expenses, and net income after taxes, toy
y- -months, «19Hh~19^7
»• *»• *•*•
*•*?j> *||| -M*y
PART XI—
■! 1
Excise Taxes on Long Distance Communication Services?
■
29
f■■
PART IIIr>!Excise;Tax on. Wire.and-Equipment Services
1
f,,,Cross, receipts and-net. income- of the American ,
District Telegraph Company, 1930-I9U 6
.......
f
3^
EXCISE IAXE'S ON COMMUNICATIONS
Jbrcise:-Taxes bn Long Distance Communication Services; .
1« Description of the taxes
The principal long distance communications services subject to
tax ares
...
. . ...... ..
....
1* Toll telephone and radiotelephone.messages...
;r 2* ..ITire 'telegraph» radiotelegraph and cable -messages
; 3/'.; Leased wires 1/
} ....
\
.
1 "
■«„ '*
•Messages are taxable when payment therefor is made within'the
United States irrespective of where they originate. The taxes are
payable by the person paying the transmission Charge and are collected
by the person receiving the payment* _
- \
•
The tax does not apply to amounts paid by a common, carrier,,
telephone or telegraph company, or radio broadcasting statioh for leased
wire services utilized in the conduct of its business*
Exempt ions common to all- servi ces ares
.1.*
Services utilized-in the collection or dissemination of hews
by or for the public press, radio broadcasting, or a news
ticker service furnishing a general news service similar to
that of the public press*
t1
' •
2«
Services furnished to the States and political subdivisions*
3«
Services furnished to the Red Cross*
”V
Services furnished directly to the Federal Government, ctj
1/ Services taxed as leased wire services include the followings
(a) private line telephone service (taxable as local telephone
service when entirely within a local exchange area); (b) private
line Morse telegraph service; (c) teletypewriter, teleprinter,
and-telemeter service; (d) radio program transmission, and
(e) photograph or facsimile transmission* Payments for leased
wires-used exclusively in rendering a service taxable as a wire and
equipment service are not taxable*
2j Exempted by regulation, Federal Register, Vol* $, p. 1+615»
II.
Changes in taxes since 19lk
Telegraph. and. telephone messages were taxed in the Revenue,
19lU, hut leased wires were not taxed until the Revenue Act of
The tax rates and effective dates of the changes since those Acts are
shown helowS
Changes in tax rates since 191^
Rate
Revenues Effective
Act • date
Toll telephone
Telegraph
: leased
î wires
Cable
I91 H
Oct. 23
(l^ if message is over I$$>)
No tax
No tax
1916
Sept« 9
(«-- ealed---------- )
No tax
. No tax
1917
Nov. 1
(5 ^ if message is over 15^ )
No tax
No tax
191 s Apre 1*
I9 I9
(5^ if message is 15 Î to 50j£; )
îlOjé if message is over 5.0p )
192 U July 2
-_----- -—
10 percent
Repealed ***!■?•— *
1932
June.. 21
10/ if message is :
to 99^5
15 / if message is
$1.00 to $ic99;
20/ if message is
$Eo00 or over
5 percent
10/ per ■
message
5 percent
19^1
Oct, 1
5 / for each 50 /" of
10 percent
10 percent 10 percent
19^2 Nov. 1
20 percent if message 15 percent
is over 2 W
15 percent 15 percent
y
19 U3 Apr, 1,
I9UU
25 percent if message 25 percent
is over S W
fraction thereof, if
message is over •2^/
25 percent 25 percent
a/ Rate on international messages maintained at 10 percent,
h/ Effective date, May 1, 19^+* ‘
w
¿/
- 3 -
III»
161
Revenue collections 1936—46 and estimates for-i&i?_spd—1,94j3
Collections from these .three taxes l/ are estimated to amount to
3.5 percent of total excise.tax collections for ’the*fiscal year 1947.
The combined yield is about;55 percent higher than the. yield of tax on
local telephone service. .
§’* ;.' .
f r *.*;■'
Collections., fiscal years 1936-1948
• ;
t I
‘
*
(In millions)
.'
.•
1•■fvi:
Collections;
.
Toll
Fiscal *
telephone
year
and
telegraph
$ 19.8
23.1
22.5
1936
1937
1938
1939
1940
1941
1942
*
22.6
25 »0
25.9
45.1
t ; Leased
i .. wires a/
•. $ 1.3 V
1,5
1.5
:
¡ ¡ I
%
l 1*
M
1.5
1.4
1.4
3.1 } - t
Fiscal
year
:
i
s
s
2 “Collecti ons
■ ■■ rv’
. Toll
:
telephone ; Leased
,- ;-and
s wires a/
telegraph :
1943 .f |f $’85.6
: 134*1
1944 .
195.7
1945
’221,4
1946
1947 (est.) 25.5,5 b/, d/
1948 (est.) ,255.0 b/
' !
$5.5
7.2
12.3
13.0
c/
c/
a/ Includes wire and equipment'service beginning October 1, 1941*'
b/ Includes leased wires and wire and equipment service*
c/ Included 1» toll telephone and telegraph.
IV.
Economic background Of the industry
A.
Character, of supply
Rapid long distance communication service.is,available through the
telephone:, radiotelephone, ¡telegraph, radiotelegraph,; cable (international
only), leased -wires* (either telephone or telegraph) y-’and. air mail. Not
all types of facilities are available between any two points, however.
The latest complete-'figures, which are for 1944, show that telephone
service comprises ;about .75: percent of..-taxed long distance communication
services,•domestic.telegraph 15 percent and international telegraph and leased
wires each about 5 percent;. (Table l!t -and Appendix, p. 16) The Belx system is
the major -long distance harrier, providing about 80 percent of the telephone
and leased viire service* (Table 2) Wes.tern Union provides all domestic
\ J
Including colledtidns from the-, tax on wire and equipment service.
Table 1
1 Long distance rapid communications
revenue by type of service
and type of carrier, 19^4
(in millions)
Company
=Other operating*
*
Tyne of long distance service
♦
___
, _______ ,
________ ________-_•
revenues
operat ing
SToli telephone a n d ^ 6iGgrapk and cable messages^eased*( local service,* revenues
— :— — — wires
*—
‘
etc* /
s
»
* radiotelephone
messages
s Domds-fic
domestic -c- *
. international
--- m --
Western Union
Bell.System
Ocean cable carriers
Radiotelegraph carriers
Other Class A and B telephone
carriers
Total
$ 687*5 ±J
2/
.
$ 15^-9 ■
2/
16*2
13*0
2/
gf
-
31 .U
$ 719.3
$ 18*6
$ 15^.9
/
. 0 7 .9
$ $o3
$ **.l
H 6*2
2/
i
l.l
16,9
2*3
l6«g
SKI 1 /
loO
$ 52*8
,$'185-9
1,030*91/ r;i;:7^.o7
$ 1 ,106»6
97-1
$ 2,081c1*
Treasury Department, Division of Tax Research
Source: Federal Communications Commission, Statistics of' the Communications Industry in the United States,
Year Bnded December ^1» 1 9 ^ s Tables 19» 3^ » 37®
.’.
Rote: Data for a few.small carriers not included*
1 / Includes $2*2 million from radiotelephone service* ,
- V
l^ Includes some local private line revenues which are taxable as leased wire services»
^
n
~ 5
Table 2
t
'jjjiey principal.:.. t©ia-> - "•/'■
'
Apprpxfinai:;e^ d^strdjbi^tiop.+ o£vreyenuepv.from..rapid.
\
'
graph and telephone carriers and airmail, A> «■■
'
1880 - 1945 1/
, ■
Year
Total
k
.’
“is0Lll}.wis’.pf'dollars Y
:Telegraph -»vespern
’Tel ephope - 3e], 1
Uniôh and Postal"'
System 2 /
’ercent .
Percent..:
Amount
AmohntKö f total
,of .total :■.Amo lint
i. .P e rc e n t
: of •tot^.1
i1*?\>*•. VI
1880
13 vis i r •10Ö.Ö
mm
j’ ■'
1895
33
29 3/ ! V'’-g7agr 1 'A'
~ - .;
1 2 .1
yOU
.q 0
re /
1910
:84
^
A . .. '1..., •
'
.46.4 ■ A .45 '. »
53• 6
1920
267
■125 1 ' •'•■'46.8 • ‘•142nt* *4r
53.2.' .
1930502 • !14S "
<'2945' 1‘' 349
; 69.5"'
,5 '., .... ‘ i„öt ■
S3
1933
;■346
•96
» 0?v
244 ■ ‘ '".70.5 .. gv '. ' ... 1.7r iy o
f '0 ; '276
389
1935 •
ID'S- ’; •, *.* T O£tn/
Ct
;.71.Q '. . j ‘. - .
4 .8
r*
1
*
1936...: .436 •115
■'v '26A
O i l
''71.3
‘ Xq" > X
1937 ' '
‘'456 .-' 117"-'' ■ '-'25.7 • ‘^ 0 .7
V 71..7 ’ 'g ’ i s
•. " .2 . 6
-r
1938
438 ■•l a s
•
' 24.'g' ■ 31?
! : 72.4 ■'¿." i s '
1939
• 45
3 '10-9- .. : f% ' ' 0w U<Z..'.f ycr ' ‘ • 338. ••' ’ 73.0 ■ x è T
' . 1 3.5 .•
1940
494
114
23.1 ' 361
■
73.119
' 3.8 V
1941
672
131
22®8
418
73,0
• 24
4,2
1942
715,( f ' .146 , ■•5 ' ■;- -20*4 ' ' 536
•7 5 .Ö
V - ■ 4..
.6.
-..■
1943
884 l
-•V6T'
•••••-Tè.9
654 .■ ' ' 7 4 .a • • 63' 4/' ’ “ .7.1 '
1944
987.
174’" '
17.6 ' • ’ 734'
'74.4 ; "■ is . 4,/.:
ÿ iû
1945 . 1,067 ' •y,183«vr- •' '17.1 ' ' - :803
' ;' 75.3 "
8f4? "
Irèasury D epartm ent, h i v isio n - o f 'Ta-siPe se a rch
Sources: ( l )
(2)
(S)
]/ .
J
2y
J
1880-1940.' United States Senate, Hearings before a. Sub* ..
committee of Committee on Interstate Commerce.. 78th Gnriyrp..^s,
1st Session, on S» Pes0 95, Part 2, p. 243T ’r ~'
"
■i
*
lelephcpe and -telegraph,”1941*1945. -■Federal .'C.oiraaupicatiQns.:,.
Commission, Statistics oi /the- Communications-.Industry in the
United .'States ..and Operating Bata fforo Honthly R & p h r p * ' r \ f
^rT‘>
,Telegraph?dftd:;Cabl^Carriers<j
' 1 T"! r" - > '- * * r1-...
*
Air .mail/ '1941 «1945. 1 Post-Office' Department,' ik^übli shed "data
Data for. telegraph and telephone-oh a calendar year- basis . . ''Data 'for
airmail on a fiscal year basis®
■
•
Message and leased*line toll revenues, including telegraph and TUX®
artly estimated and include caD^e. rpyepues of, Yvestern Union®
■
oes not include rev-ende^rom thb' 6 ^ airmail sent to or by*’‘
members of'
the armed forces.
, -.Ay ■;
- ‘6 ~
telegraph service and about UO percent of the international telegraph,
service. Most of the international telegraph service is provided by
smaller companies, \j
The companies providing long distance communication services are
characterised by large fixed capital investment, Generallys they have
the exclusive right to provide a particular type of service and their
rates are subject to Federal or State regulation under- the general...
principle of providing a fair return on the investment.
There is a certain amount of competition among the taxed .services,
but each has some, distinctive advantages whiph affect- its competitive
position. The principal service of the telephone companies is the
oral message, affording person to person conversation. Telegraphic
service provides a written record but fewer words in relation to cost
than the telephone. The more recently developed TWX. service of the
American Telephone and Telegraph Company, a privatp wire service, pro—
vides a written message to any subscriber to the service. The Western
Union Company is at a distinct disadvantage in private wire competition,
since the telemeiep which it introduced to meet the competition of TWX,
has not become popular« As a result of the development of telephone
and air mail service» this Company, which once handled 100 percent of
the rapid domestic inter-city communication business, provided only
17 percent of the total in 19^5» (Table 2 )
The adequacy of facilities and financial position of the two
principal companies differ substantially. Telegraph facilities now
are probably more than adequate. In contrast, the facilities of the
American Telephone and Telegraph Company were inadequate during
the war, and it is now undertaking the largest inter-city construction
program in history,. The carriers operating primarily in the international
field have facilities much in excess of service requirements,
B,
Rates
The basic charges for telegraph services remained unchanged from
1920 to 19U6, blit the Western Union Company was.granted increases in June
and December, 19^6 after wage increases had resulted in a deficit. The
long distance .telephone business has long been profitable and a number
©f rate reductions have been made during the past 25 years, . The rates
are now at their lowest level and there has been no indication that
inter-state rates will be increased, although intr-a-state ipereases have
been requested.
*'
1J See appendix -^Structure of the Industry,tf for details on character
of supply.
■; The regulation of rates- and-service, in. thes?- industries, has.
important, hearing; on tha.adjustments that, may he. made ..in response, to.
any~-redwtion >in., demand caused by the tax* ;..Such.a .lo.ss, in hnsjine^s . ...,.
may. 'affejpt the rate structure .-and .result, in changes ...in. the. supply pf f ...
façiiitig s,:>.The,part icular adjustment., in contrast :;
to non-rregulat ed ....
^industries','; depends, to a substantial extent on. the.,attitudes of .the:. ....
regulatory bodies, and the. other factors..to which rthey give .ponside?9^ ...a
tion in- the.public, interests, hong, distance communication Is.suh je.ct........;
to. regulation-by -the Federal -Coramunicat ions ...Commission with respect ......
to inter-state traffic, while regulation of intranstate traffic -falls.,.,<under the jurisdiction of the several State commissions* Moreover,
the adjustments that may be made in rates..may -not ,bp the.- sajiioofor’
telephone and telegraph carriers b€?cause of the"difference in the
économie-position. of.;these,^ indus tries*
*V ;-.;#
¡g
G»
Character of demand ■
. • ... .r..
:
• ...
;; >-.^1
%, • .The?demand fôr long distance .communication, is. composed of\ business
requirements.* .-urgent personal needs and. optional personalvexpenditures^
business -usage is the,, largest element in both telephone .and telegraph:
revenues, but appears to be more important in the. case; of..telegraph* .1 /
Where, the communication service is a shall factor* in the,*costs of
p
business, it is not likely that the demand will b e ;affected.-very greatly
by a change in the price for the service* In thé ca.se of personal usage
the .effect of.price changes on demand would v.axy with the urgency-; of the
need* .There fs. insufficient evidence to determine .whcther on.,lb-alancp .;
demand for long, distance communication as a whole is relatively, respon-,
S.ive...or unresponsive, to price changes,, but..the. indications are .that it
is .relatively unresponsive,
.
.. .
.■
; During, .the war the. demand.for telephone service exceeded the supply
despite-¡.the,,existence- of the. tax,, .Telegraph facilities, were.'noy,. in--full
use because of manpower shortages, but telegraph revenues rose* Prior to
the war, telegraph revenues had recovered very little from the depression
low and represented., a “declining, proportion of total' intër-city'...communtr
eat ion, as was.,'i'ndiçatëd above
T câble- 2 )* .There ha-s been Insufficient
experience with the I9U 6 rate increases to ascertain .with l'a'ny degree of
certainty *the effect of. price on demand*, The Western. Union, action in
requesting rate increases would seem to indicate.-that the Company thinks
demand will be r educed proportionately less .than the change in rates ,
but-.-.thO; Federal Communications Commission has expressed, doubt .concerning
this* gj
" .
‘*-,’ . ^
l/ See page 21 below-»
^
'
..V'
;
2/ Federal Communications Commission, In the Matter of Western Union
Telegraph Company Petition for Bate Increase , Docket No» 7 ^ 5 »
*June U, 19 h6 , pp. V3 Η3Ü. '' ';
S
V g«
Demand, for long distance telephone service has shown a long-term
upward trend "because of the increased efficiency of thè telephone,
greater social acceptance anct the lowering of rates* These develop
ments may have strengthened-thè demand for telephone service to such
an extent that future price changes may have a relatively minor effee
on demand* Studies "before- the war "by the American Telephone and Telegraph
òompany’s experts can be interpreted as indicating that an increase m
the price of telephone service;by say, 10 percent , would cause total
revenues to increase by 6 to 8 percent in the next year or so, provided
national income remained the same, \j
'
1
D,
Outlook for the industry
For the near future the prospects for long distance services of
the Bell System appear to be relatively favorable* The supply of
facilities is expected to be larger as a result of the substantial
construction program of 19 ^ 5“ 19 ^ 7 «
increases, in. telegraph rates
and decreases in long distance telephone rates in 19 ^° should strengthen
the competitive position of telephone service* As a result, the System
should receive a larger relative share of the total volume of long distance communication business and an increase in gross receipts at the
existing high level of national’ income* Costs, however, have also
increased, substantially*
The outlook for telegraph-service in the immediate future is much
less favorable than for telephone service, but it is possible that profits
may be better than in the past•several years. <tj Physical facilities
are adequate, although service has been curtailed somewhat by the^clos
ing of unprofitable offices*
While Western Union is engaged in a
mechanization program designed to speed transmission and cut operating
costs, the benefits apparently *will not be noticeable before the end of
I9 U 7 , at the earliest* j/ A small increase in wages was granted by
!_/ Federal Communications Commission, Proposed Report, Telephone
Investigation.,' Washington 193^» P« 7^5• The studies of the American
Telephone and Telegraph experts were directed toward ascertaining
the effect of rate decreases rather than increases* They found that
rate decreases resulted in increases in the volume of business vary
ing from 20 to HO percent of the rate reductions* The figures in the
text were derived by assuming that rate increases have exactly the
opposite effect of decreases.
For I9H 6 the Western Union Company had a loss of approximately
$9 million. It reported a net profit for December 19 H 6 and for the
first b months of 19^-7 profits amounted to $3*9 million compared with a
$ 5«9 million lossr in the same'-per iod-of MUG»*
•
jjj Federal Communications Commission, In the Matter of Western Union,—
June U, 19 ^6 , p. 13*
164
- 9 -
Western. Union on April 1 to most of H b employees, Ho indication has
been given regarding a possible further rate increase«
The longer-run effect of recent changes on the
of. telegraph service is not clear. However, unless
provement is made in telegraphic- service, the trend
to be unfavorable. International carriers^ with an
also do no't seem to have too favorable an. outlook.
V.
Effects of the tax
A.
competitive position
some fundamental im
will probably continue
excess of facilities*
..
Effects of the tax on profits
During the war both the telephone and telegraph companies were
unable to handle all demands for service because of shortages of facili
ties of personnel. Under these conditions it is unlikely that the taxes
had any appreciable effect on profits. The domestic and international
telegraph carriers as a ¿ho1b earned.some profits during the war while
they lost $1 million in 1939» (Table 3 )» Telephone profits after taxes
remained practically unchanged at about $350 million but were much larger
before income and excess profits taxes.
In view of the wartime distortion of demand and supply in the
communications field, this period does not provide a very good indica
tion of the effect which the existing taxes would have on profits under
normal conditions. The rate changes.in 19^-1 were relatively small and
were followed shortly by the conversion of the economy to a wartime
basis. The taxes probably reduce demand for the taxed services, although
the reduction in demand may be proportionately less than the rate of tax.
Erom the information available* however, it appears that the existing
taxes may have somewhat different effects on the different segments of
the industry.
The effect of the tax on profits is probably least serious for
the telephone business, where facilities now are being used at close
to capacity. The rate of return in this industry generally has been s
so favorable that rates for long distance service have been declining.
Under such conditions the existence of the tax would normally tend to
postpone rate reductions rather than decrease profits«, Inter-state
business may continue on a profitable basis without rate increases unless
costs rise materially, but rate increases are now being requested on
intra-state calls because of reduced profits resulting from higher costs.
The existence of the tax may counteract to some extent the increases in
profits that would be obtained from the higher rates«.
In the case of telegraph service, the existence of the tax may
curtail profits to a more important degree. The demand for telegraph
service has been declining for sometime relative to telephone service,
-
10
-
Table 3
Operating revenues and het income of principal wire telegraph,
ocean cable, radiotelegraph, and Class A telephone
carriers, 1936-^194 6
(in millions.)
Year
Yiire- telegraph and oceancable carr iers
Nei
Operating ’ :
revenues
: income
T ' Hadiote legraph
:
carr iers
Net
: Operating :
income
: revenues
| 8.810.1
9.8
1936
1937
1938
$ 132,2
134*6
• 122.4 ■
$ 6*9
1,1
(5 .5 ).:
1939
1940
1941
127*4
131*4'.
- 149.3
(2 .4 )
1.9
6.2
II.5'
13.2
15.0
’
1942
1943
1844
167.7
193*2
202.8
8.9 •
•3.7
10.9
12.5
13*5
16.8
1945
1946
208*9
193.3
(2.3)
(9.5)
%%'
99
^
£
: Class A telephone 1
::
: .carriers
:
Net
: icil
: revenues : income 1/ 2/
'$ 313.7
3.00 •1
325.1,
1 0*2
.1.3
0.3
1.4
2.1
1.6
0.9
• 2.1
1.7
2,4 •
0*9
'
,|362.8
364.1
324.0
346,6
369.7
AJZ f
tCV
vc9 OC-j
*Z £.*7 •t
Ac
uOi
385.8.
369.4 ■
556.9
682.8
765,7
329.7
351.9
340o8.
886,1
921.8
v#/
2/
Treasury Department, Division of Tax Kesearcn
Source:
.
Federal Communications Commission, Statistics of the Communications
Industry in the United States , Year- Ended December 31, 1944; Data
frolTlfonthl^r^^rts of Principal Telephone Carriers, Radiotelegraph
Ca rrier ¿~J~"and "Telegraph and Cable Carriers»
Note:
( ) Denotes a loss*
\ J
Includes profits from local as well as long distance operations*
2/ Greatly overstated by intercompany duplication*
z j
Not available«,
11
165
and consumers may be more sensitive to the tax in the case of telegraph
service» Moreover, the existence of the tax'may curtail to some extent
the rate increases that might otherwise be requested.
In view of the
unfavorable profit position of the industry (Table 4), any reduction in
profits because of the tax may have serious consequences. The Congress,
in the bill providing for the merger of Postal Telegraph and Western
Union (effected in 1943), evidenced a desire to have an independent
nationwide telegraph service. If such a service cannot be maintained
profitably on a private basis, it might have to be'subsidized* The
Federal Communications Commission has pointed out that the Company is
in a precarious position, l/
fhe tax on international telegraph messages is less likely to be
an important factor in determining profits than the tax on domestic
messages since the rate is 10 percent.and there is less competition
from untaxed air mail. However, nearly all. of the carriers which are
primarily international-operators are operating at a loss, and repeal
of the tax would be helpful to them.
33• • Effects of the tax on business costs and competition
The tax tends to have inequitable effects on businesses using the
taxed services. It is believed that.as high as 80 percent of telegraph
usage is for business purposes.
2/ Fifty percent, or more of long
distance telephone revenues 3/ and 100 percent of leased, wire revenues are
Federal Communications Commission, In the Matter of 'Western Union etc.
June 4, .1946, p. 13.
; '
"~7~
2/ Western Union obtains about 60 percent of its revenues from 300,000
icharge (business) accounts. The remaining 40 percent is believed to-be
split equally...between business and personal use.
In 1941, the Vice1 ;
f
President of Western Union stated that 90 percent of telegrams or
cablegrams are of a business nature except on holidays *such as
Christmas. Unit.ed States Senate, Hearings before the Committee on
jhnance on H.R. 5417 (Revenue Act.of 1941), p. 85.
3/ In the third quarter of 1946 business expenditures were divided in
the following proportion:
Manufacturing, 20#; wholesale, 18#; retail,
1 5 o.; finance, 5#; public utilities and transportation,:7#; services,personal; and business,' 14#; government,'5#; other, 16#. American,
Telephone and Telegraph .'Company, Analysis of Business and Residence
Toll Usage, Combined Associated Company and Long Lines,■Third Quarter,
^Figures refer only to.- traffic in excess of 24 miles. (Government
expenditures are not taxed, but removal of such, expenditures from the
tabulation would change only'slightly the relative importance of
various types of taxed business expenditures..
If
Table 1+
Western Union Telegraph Company? operating revenues, operating
expenses, and net income after taxes, "by months, I9UI+-I947
(In thousands)
Month5Jan«
Feba
Mar a
Apr,
May
June
July
Aug,
Sept •
Oct,
Nov,
Dec»
iqi+i+
Operating revenues
i 19^+5 :
l°Wo
$ 15,328 $ 15,0« $ 13.575
iqi+? i 1 9 4 4
12,770
li+9i+gg
iJ+*799
16,007
1 5 ,61+6
15,539
15,51^ 2/
15,ogi+
15»79S
15*156
15,660
lH,s6g
l
6
¡¿ S O
17,939
15,gSS
17,091
l6 ,igg
1 7 ,65g
Net income after taxes
■
* i 6 ,3 3 0 $ n , 8>»9 $ I 2 ,i8 0 r :o $ 13,995
13*89!+
1^,733
1 6 ,1 0 1 . 16,009
1 5 »3^2 l*+,833
16,312
16,027
1 5 ,1+ U
Operating expenses
iqi+6 1/
1945
ll+,9gl+
11*226
12 ,05!+
1 1 ,7 1 2
11,010
12,776
I 2 ,2l+g
12,267
12,056
11,5 2 1
12J21
13*531+'
*13,071
12,379
16,667
1 6 ,1+30
12,561+
12,596
12 ,ll+g
.lUjl+22
1 3 ,1+20
1 2 ,1+gl
1 3 ,1+1+1
15,365
1 6 ,26g
15,367
i6,5*+5 5/
12,126
12,232
12*073
12,035
16 ,13 1
ll+,206
lg ,201
IS,733 1/
ii+»U03
ii+s532
13,1+61+
li+,3i+g
Total $165*901+ $192,892 $183,326
13*753 i/.
$li+5 s509 $160,255
$i6g,i1+2
i
19U7
$13 » 7 ^
12,321
1914:14. g Tqhq
$ 51+5
$ 753
1946
: 19^7
$(2,,5l+l) $ 156
(2 ,021 )
531
1+69
705 l,.l6 l < 69!+)
6?9 ( 166 ) ( 1+06)
267
551
<
58)
1,066
9 S3
61+6 1 ,09!+
760
1+93
.636
619. g05 ; (2,91+1 )
653 (6 ,0lg) (l,li+2 )
( 6g9)
5S3
599.
S35 (7 ,773 ) ( 12 7 )
171 ;
1 ,1+76 2,225
$g,316 ^ 5 ,11+9 ) $(g,90l+)
Treasury Department, Division of Tax Research
Source? Federal Communications Commission, Operating Data from Monthly,Reports,of Telegraph and Cable Carriers.
1/ Retroactive wage increases not prorated on a monthly ba.sis prior to January, 1946»
2/ Various rate schedules changed, certain categories of low-rate services eliminated, and 10.percent increase
~ made oh full rate, day letter, night letter, serial and press messages, Ten.percent; increase effective for
one year only, Increase granted June 12,
•
• A ' ■.
,
.
3/ Includes increased wages and social security taxes of $5»l+7l+*ObO for the period June 2—August 31» 9
116 0
acceptance of recommendation of the Fact Finding Board«.
.
1+/ Wage increases made retroactively on December 29 by Natiohal War Labor Board* Computed to be
to December 29, 19^+5»
•.
~
•
5 / Ten percent rate increase granted, effective December 29»
166
-
- y
-
¿rom "business concerns. The overall ayeragp -for the•tthrse.er taxes-,;i:s about
6o percent. Communication costs are a larger proportion of total costs
foy some ;firms •and types of "businesses than others,. --Consequently » the
taxes'tend to.discriminate against those -having .the greater -need, for
communication servicesv' if 'As long distance telephone, telegraph andleased.wire- rates vary with distance, the taxes also discriminate against
sellers-.competing; in the same/\*raarkpt ¿but situated at unequal .distances •
from the marketo The 'taxes also, affect the competitive -relationships- of
the’different types of Icommunication services. Where two services differ
in price:,, the addition-of the» tax increases the/ absolut e: differential,;
.ipythe-? cost- -of- the. -services. 2j Jn contrast to/the.- recent increase .intelegraph- rates^longt .distance telephone rates have.-,been* reduced since;•
the imposition of1
-the" tax. The resulting increase, in-the tax- costi to
telegraph users, and decrease in tax cost on telephone service may have
further weakened the competitive position of telegraph. .Unless hew "forms
of telegraph service are developed or technological improvements result
„.in rate-reduct ions, the:-competitive disadvantages induced by. the tax will
continue to handicap the telegraph industry.
C.
Effects of the tax on consumers
■
• v.
Apparently sixty.percent or more of- total expenditures for long
distance communication services are for business purposes. As total
consumer expenditures represent a higher proportion of income in the lower
income groups than the higher income groups, the./'portion.'-of: the tax that
is passed on by business users to consumers probably is regressive. Direct
consumer expenditures for long distance telephone, and telegraph -seryice
by income classes are not^available, nòr are such expenditures :taken into
account in the Consumer's [ Price Index of.the Bureau-.of labor Statistics.
Whi-le many such messages,.are made because of urgent personal-needs, the
large, volume of personal long dist.ènce...te,lephone.-calls .(25P. million a year
at thp level of the .third, quarter of l$Uo) points,to ,a, large .social h'
:
element in. such messages. As long.distance „telephone calls and telegrams
are relatively expensive, direct consumer .expenditures may well be profgressiye, but this may ".not be, sufficient to. .offset .the regressive nature
of the tax on business expenditures for these services.
Expenditures for long.distance, communication services -also -seem. -to,,
fluctuate less, than national income, so that the, taxes have the effect "
of withdrawing/relatively .more, from.the income .stream in periods, of. low
business activity. than .periods of high business activity.
5. ,
If See..United, States .Senate,,’ Hearings before. .the Committee on .Finance- \
on H.R»
(Bevéhue Act oT iq U^), tegt.imony by the -International.
..Apple' Assotíiatioh’vrith, respect. to.,thè importance, of long 'distance, v.
telephone.calls in the merchandizing of carloads o.f. fresh fruits.:.- ■
2/ The President of Western Union inu"his. .testimony- at* .the Hearings before
the Committee on -Ways "and"Means, May 22, 19^7» mentions this effect.
- ih -
VI, Administration and compliance
These taxes are» for the most .part, not difficult to administer*
It is estimated that only about 7,000 concerns filè"returns. However,
the fact that local telephone service and international telegraph
messages are taxed at lover ratés thah long distance telephone an
domestic telegraph gives rise to.some problems of classification and.
bookkeeping* Taxpayers request, rulings in doubtful classification
..cases, and these must be given, consideration, by the Bureau* In addition,
different rates for different, types of services complicate billing
operations. These difficulties are not as great under existing rates as
under some of the former tax schedules and are not alone considered
sufficient to justify uniform rate's for all communication services«,
VII*
Technical problems
Two important technical questions which arise under these taxes are:
1 . Whether the different types of services should be taxed
at different rates.
..
20 The basis on which changes in tax rates are to be
made effective.
A c Differential rates
At the present time long distance communication services are taxed
at a uniform rate of 25 percent, except international telegraph of
cable dispatches, which.are taxed at 10 percent. Prior t.o the Eevenue
Act of 19^3 the taxes on domestic communications were not uniform* In
the Eevenue Act of I9H 2 there were three rate g r o u p s : 20 percent on
telephone messages; ,15 percent on telegraph and cable messages and leased
wire service; and'10 percent on international telegraph and cable
dispatches, The 10 percent rate on international dispatches has been
maintained in the interest of .inter—American communication relations*
Uniform tax ratés are desirable for several reasons* Differential
rates give rise to competitive advantages for the services taxed
lower rates* Most of the services are directly competitive ahd- the
choice of the medium used.may.$e ba.sed largely on cost# Many business
users have the alternative of using the leased wire service or regular
message 1service of the telephone or telegraph. Differential rates
might cause important shifts in demand. Other business users that do
not have such freedom of choice would be treated inequitably if the
service required by them were taxed at a higher rate« Uniform rates,
also, are of advantage from the point of view of administration und the
work of the reporting carriers because, there is no need to decide: in
which class a particular type of: service falls#
. .
:. ;
î»r
-
An important consideration in determining excise tax rates is the
condition of the industry subject to tax. As previously indicated*
the position of the telegraph industry in the long distance communica
tion field has deteriorated* With the tax added to the recent rate
increases on telegraph, its ability to compete with telephone is substan
tially different from what it was before the tax increases were made
during the whr0 The present outlook for profits is not very favorable*
although rt may improve with "technological developments® lower tax
rates for telegraph than telephone would help to improve the position
of the carrier and maintain this form of communication* but would raise
the question of whether such a policy should be followed in the treat«*
ment of competing services® Differential rates would* of course, add
somewhat to administration and compliance problems«
Timing of tax rate changes
A change in tax rates gives rise to the need for applying different
rates on service rendered before and after a given date. The Revenue
Act of 1943 provided that in the case of the taxes on leased wires, wire
and equipment service, and local telephone service, the increased rates,,
should be applicable only to ^mounts paid on bills rendered on or after,
a specified date«, 1/ In the case of long distance telephone calls and
telegraph and cable messages, tie increased rates were made effective
on a service rendered basis«
The telephone companies have requested that any tax reductions be
handled on the same basis as the increases in 1943 , i,e, 3 on a bill
rendered basis for leased wire and wire and equipment service, g/' Under
the bill rendered basis some customers would get the benefit of~the
reduction for a longer period of time than others, depending on the
illing periods used in individual cases by any company and by different
companies* Since the bill rendered system was used for the I9U 2 and
9 3 Revenue Act increases, the diverse results of a decrease would tend t(
oancel out for many customers the benefits on disadvantages they received when the rates were increased.
1/ Section 302 of the A c t 4 Section 1655 (h)(3 ) of the Internal Revenue
— 5®' Section 606(h) of the Revenue Act of I9U2 contained a similar
provision.
2/ Testimony of Harry C. G-retz, Assistant Comptroller, American Telephone
and telegraph Company, and Harold V. Bozell,- representing the United
states Independent Telephone Association, Hearings before the
Committee on Wavs and Means, May 2 1 , 191*7 .”“
— _
-
Appendix
' v/¿ . y : ;y .....|| .
Structure of -th$ Long. pikti&ö^CeBä^
Indus trv,'
Jin
I*
Concentration of supply ■ . ... „
,
'
5
^
The telephone is by far the most comHionly^ueeh form o£, fcpg f
distance coramunication>'« An approximate'd 16irA^i&tjj;;©n; of the., revenue
in 19-44 of the different types of taxed; s%r^fc-e$^jiej:.given-, in. the
table below. l/
■
m T / ;'
'r
' W s 'i.u' - ' - - = - M
-. -
Revenues
Type of service
Toll telephone and radio
telephone
-Telegraph and cable:
Domestic
International
Percent of total
?T
Q .rto
.X¿
<g> r(
la
*'•■•"Ç „¿'LV
..73*8f . '
1;
Z
■ Í54;0.
.
\
47.9
:
,.>"h
.
Total
' - ... ;
-;V-, 5*4 .
52.8
Leased wires
‘ ’.-15.3 •
•‘4 .9 :
. .-100*0?« . . .
1 974:.9
Most of the long distance conmunication:services,are,provided
by two companieso The proportion'of the differenti types cf. services
provided by the principal carriers was -roughly .as-*xoil owe. in 1944«
Type of service
Toll and radio
be 1 ephon e a/
'
: ■ Other.Bell
: 'Western •
;
’ ... ;To_ta>l ■
: -Companies..
: System : Union •;
( Percent)
96.
.
Leased wires
.00
CO
-
'
’
ioo- ;
, « •4
":ioo > ' .
. ’ '.ioo- : ’
•--lOO'
3S: * v-Cl V '
CO
Te 1 eg rap h and cable-: ■
Domestic
International
•
;•.
'-
i
,X00’
^7
Radiotelephone calls are not accorded the special 10 percent
rate given to international cable and radiotelegraph messages.
T7
See Table 1 for details.
168
- - 17. -
The 3ell System provides practically all. of the long distance
toll telephone service while the Western Union Telegraph Company ^
occupies the same relationship with respect to domestic telegraph
message service. Leased wire services are provided by both Western
Union and the Bell System in about a 1 to"¡10' ratio. In the interna
tional cable and radiotelegraph field Western Union does about
40 percent of the business, and the rest is handled by about a dozen
specialized international carriers.;'' :ln6ther form of international
communication, the radiotelephone, is exclusively owned by the
American Telephone and Telegraph Company. ? Radiotelephone receipts
are about 5 percent of the cable and radiotelegraph receipts for
international business.
II.
Types of services provided
y
-
’•
■ >
..* • " .
i^
t '. -1i:'
••
’TV'' V' ?■'*.
Western Union a,nd the international cable and radiotelegraph
carriers offer a wide variety of. telegraphic services designed to
meet different types of demand. In spite of the number of types
of service offered, most of Western Union*s domestic telegraph
message revenue comes from the following:
*
1 • full rate messages
The basic message, ,
ten-word minimum rate.
■ .
2,
Day letters fifty-word minimum rate,
deferred in transmission- to full rate
messages.
-‘ :
‘
3.
Wight letters Twenty-five word minimum
rate, not delivered before .9 A. M.
following day accepted.
. ' "•
,
,
’ . .
. ...
In 1940 Western Union received between 75 andJ80 percent of its
domestic message revenues from these three types, 1 / full rate ^
messages, provided about 55 percent of the revenues, day letters,
15 percent, and night letters, 10 percent.
17
Unitfid States Senate. Hearings before a Subcommittee of the
* Committee on Interstate Commerce Pursuant to S. Res. 95, 77th
Congress, 1st session, p. 245. All references to Western Union
prior to the merger, with Postal Telegraph in October 1943 also
include Postal Telegraph .
; h t r.
.
Only four classes of long distance toll telephone service are
available; • ...
• X-, Point to point day calls The basic service9
• . .
minute.minimum rate* •• ./-■•'*
‘
.2^ Person to person, day calls A-premium charge
■
over the point to point rau-e*
?ointvto point night sails Accepted from' -■
6 P.'M. to 4:SO A.H.- at'rates 20 to 30 pareen
lower than day rates
4 . Person to person night calls. P'r^mvw rate. over
1 the basic point to point night rate*
“Leased wire services offered by tiestern Uhion and
Telephone and Telegraph, are quité similar, éxoept for ..private line
tSenhono. service'which. is provided only-by the Amenoan.-wlephone
^ t S g r a p h Company. ' The overlapping leased
are: (l) private line Morse telegraph
U l * 6l.et^e^riter
(AmericanPTelephone and Telegraphier teleprinter gestern
ser/icei 1/ (3 ) private line telephoto graphic service* and (4) ,ro
grain (radio broadcasting) transmission service.
s e r v i c e - !
Ill®
Compétition among services
While telegraph messages, long distance telephone calls
leased
service haVe the advantage of permitting the transmission of « r e
in'relation to
oo.stj but is slower*
' Air iail- service has greatly reduced _the'; volume of
telegrams because transmissioh generally is about as r p-- “
much cSaper. The latest <0946$ air mail rate .reduction to 5 cents
did no? noticeably affect the night letter business because most of
..it had already been lost to air sail prior to this reducti . J
ll
Jhe teletypewriter and t e ^ p r S ber provide, a written message
is transmitted over telegraph or telephone wires.^ .
.
Conference at Treasury Department with representative
Western Union Telegraph Company, February b, 194 f.
w hich"
269
- is The -telephone is the mgst important long- distance service of the
American Telegraph an$-^Telephone Company and the most important com
petitor of Wes
;UHion telegram service. The Company also offers
private w i r V telegraph ‘service'^and the teletypewriter (TWX). ’Western
Union is at somewhat .of. a disadvantage in the private wire competition
because :of' its. limited:."technological developments« The telemeter
which .it introduced i,o -meet the ‘competition of
is similar to but
less popular than the latter . f Timed wire messages were also intro
duced to 'meet TIaQU competition, but were declared unlawful by the Federal
Uommunicatddhs. Cominissioh ’in 1942» i f As a ,-con sequence .of the competition from- now forms of long, distance
comm.unicatibn, Western Union .handled only about 17 percent of the total
rapid domestic intercity .'communications business in 1*945 as against
100 percent •around.'1880. (Table- 2.); In the •international.field.,.cable
carriers are'.being supplanted.by radio telegraphy and air ma ii.
y
IV.
Adequacy Of .the service
Both Ac s t e m .Union and American Telephone and Telegraph provide
a nationwide netv/ork of facilities. However, several limbs during the
last ten years^ ana-especially in the last year or so, Ties t e m Union
has engaged in" A cost reducing program which-has involved the closing
of its least profitable offices. Consequently, telegraphic service
is less' accessible’-than- it used to be, and some doubt has been ¡raised .
whether the Company is making available all the service that is
needed.
Since 1926 the American Telephone end. Telegraph Company has
folloYied a policy of building its plant in anticipation of future
needs. Facilities were, 'inadequate during the war, but the largest
intercity.; construction program in history was begun immediately after
the war. b /
\ f
2f
3f
4/
5f
Federal Communications Commission,■Deoislon and Reports, Vol. 9, p. 190.
Federal Communications Commission, Supplemental Report on the Telegraph
Industry, Tia.shington, 1940, pp* 138 , 159»
Federal Comniunications Commission, In the fetter of the ’
destern Union
Telegraph Company Petition for fete Increase, Docket -Ho. 7445,
June 4, 194%, p * 12.
The adjustments in telegraph service and plant have resulted in a
decline of the net book cost of plant (land lines only) f r o m ’^327
million as of the end of 19.3.0 to ¿‘224 million as of the end of 1944.
United States Senate, op. cit., Part 2, pp. 239, 241 j Federal
Communications Commission, Statistics of the Communications Industry
in the United States, Year Ended December 31, 1944, p . 159«
American Telephone arid Telegraph Company, Annual Report for the
Year 1945, p* 2.
~
20
-
The carriers operating primarily in the international field have
facilities much in excess of.service requirements• l/. Originally; all /
international messages were sent by\.cable, hut the development of the
radiotelephone and radiotelegraph resulted’in.the huilding of competing
systems* •
*
V.
Costs and rates
...
Rates for telegraph messages which make up most of the Western;
Union1 s revenues are based on a combination of the number, of words,
and the distance transmitted. Distance is basecl upon, a zone -system;
The rate for messages of similar wordage and distance depends upon
the type of handling given and the purpose of the message. The
basic rate and service pattern was set up in the 1880 !s.,-2/ A- number
of special reduced rate message services,, such as tour ate t /timed 'wire,
and greeting messages, were introduced, ip the 19301s in an attempt /to
offset the decreasing volume of business.,- Host of these specialclassifications are no longer in existence because it was found that
they did not create a net increase in receipts.
While variations from, the full-rate message were introduced by
Western Union from time to time, the charges for full rate, and day
and night'letters remained unchanged from 1920 to. 1946. Ten percent
increases over the pre-1946 level were granted in..June and December
1946 z! but schedule realignments made the •overall' effect about
27 percent higher. The rate increases in 1946 were permitted by the
Federal Communications Commission because wage increases had resulted
in a loss for 1945 and Western Union expected 1946 operations to be •
.
unprofitable. 4/ The 1945 deficit was contracted in spite of the
largest gross revenues in the history of Western Union. The Company
is now attempting to reduces current costs and to put; into effect, some
mechanical developments which will reduce costs in the future.
17 Federal Communications Commission, Supplemental Report on the
Telegraph Industry, Washington, 1940, pp* 143V148, The situation
■apparently has' not changed.since the-report was issued.
2/ The night-letter classification was introduced about 1910, when
Western Union was owned by the- American Telephone and Telegraph
Company...
/..
3/ Federal Communications Commission,. In the. Matter of Western Union,
etc«, June 4 and December 27, 1946.
4 / The loss for the full year 1946 amounted to about $9 million.
Long distance telephone rates are reasonably similar in form to .telegraph message rates as they vary with distance- and- time consumed '
(which can be considered roughly analogous to the number of words,)«
The American Telephone and' Telegraph' Company- has ’f6l'lowêd a- policy
of 'research and technological 'development v/hich "has enabled it to ■
g;ive cons is tently better long-Uisikince 'còiiimùnic.atión service® sAt ; "
the "éame’ time, the fompàny has réducVd rates considerably in the 1
last *2‘
5 ÿ é a r s -and has still been::able to- earn"a reasonable raté"of
return'* ' 'Through better service and 'lowered' rates' the Bell System•has '-improved*' its competitive position 'relati ve to"'“Western 'UnionV
, ¿..‘-'^i'ffhe'he Were ;long distance ‘telephone -rate reductions in 1926-,
1927, 1929 and 1950, but no reductions were made from 1930 to 1934,
when prices of many other goods and services foil very drastically*
The ‘Federal' Oo-mmunications' 'Commission, was set up in’ 1934' 'and- s"dWequentlÿ^ gr;eaterr Federal control *has beCn etère-ised over -interstate“ : •
rates* 1/
Since 1934 there have been a fairly large number of
reductions, two, having been made in 1946, Transcontinental /station-to-staticn, daytime telephone calls nòw cost only |i2o50 for three
'minutes.-as against $>10.25 in 1934 and almost--$13 ’in' 1927.- 'A threemin ut ertele typewriter transcontinental ’exchange hookup now costs
”;
-*•••'
only $1,75* By contrast, a ten-word one-way full rate transcontinental
telegram costs $>1,44 as against $£¿20 in the- 1920fs and 1930’s,
The relationship of. the minimum.charge for long-distance telephone,
telegraph, and TVÎX services varies according' to the location- of the
two geographic points being considered. Spmjetiiro s one i.s.lower and
sometimes the ether. In terms of words that can be transmitted for
the minimum charg'd, the long-distance telephone and TT1ÎC probably are
always cheaper,- ' The -rate structure "for telegraph service best suited
to maintain its' Compétitive position and to provide adequate service
at reasonable charges is under investigation by the Federal Communica
tions Commission, as the Commission is not satisfied with the present
rate structure, 2 /
1/ ’ The Interstate (iommerce Commission had the power to control rates
prior to the institution of the Federal Communications Cominissioh.a
2/ Federal "Communications Commission-, 'In -the^ hatter of -Western Union,
etc., June 4, 1946, o, 33.
- 22 -
PART II -
I.
Excise Tax on Xiocal Telephone Service
Description of the tax
The tax applies to payments by subscribers for the ordinary
residential or business telephone service within a local exchange, ar a.
Payments by subscribers for toll' calls costing 2*4 cents or less are
included, and private line telephone circuits entirely within a local
exchange area are also considered- to be a local telephone ser ce«K
Amounts paid for coin-operated telephone service are taxable^to tae^
extent of any guaranteed amount plus any fixed monthly or other periodic
charge which has to be paid by the location owner* The tax is payable
by the peirson making the payment and is collected by the person furnish
ing the service,
^
Payment for services rendered to the States and their political
subdivisions, the Red Cross, and the Federal Government is exempt, 1/
IIo
Changes in tax since 19*41 •j
Charges for local telephone service were first taxed by tlui Revenue
Jet of 19U 1 «, Subsequent changes in the tax rate are shown below;
Changes in tax rate since 1'9*41
Revenue Act
J Effective date
iqhi
19*42
Oct. 6
Nov. 2
May 1, 1 9 ^
19^3
,
4
Rate
6 percent
10 percent.
15 percent
Revenue collections 19*42-19*46 and estimates for 19kl and 12*4g
Collections from the tax on local telephone service are estimated
to amount to about 2. 3 percent of total excise tax collections in the
fiscal year 19*47. The yield is about 65 percent of that from the taxes
on long distance and leased wire communication services* Annual collec
tions are shown below;
if Exempted by regulation. Federal Register, Vol* 9* P» ^15*
171
- 23 Collections, fiscal years 19^2- 19^8
• (In millions)
. fiscal year
.... . ¿„I.; , i Collections
i9Uè *!v'..- 7 :* t S
¿2
■ f S K l i r i " 19U3 - ' '
*' .
1 (t.i r
1 1 1 9 # * •*
’ ■'v
‘ 'l
.
•| p
191+5
. . V',
1-
| ■•*7 7 | li l ' I9U6
'L ,
. 19^7 (est.)
;.i
I9U 8 (est.) *
,
26 .8
'
' t
67,0 ' ... L ■
90»2 ’
;
133.6
;
1 ^ 5 .7
. t
’.165 »5 (Re vi s¡bd)
■ •200*0 "
r
/
Economic background of the industry
A.,..-Character of. supply .
The telephone industry is characterdzed-by large fixed investment,
franphises,». (and governmental regulation of rates¿1 While certain parts
of the telephone .plant are designed solely-for long distance service,
the local fplant.. facilities, of course, are used in effecting long'
" distance.callse, Rates are regulated so as to permit ajf-air rate of
return on. investment-- .These determinations are made “by different*
todies, the .Federal Communications Commission on inter-state service’ ■
'
and the. several. State ..commissions on i-ntra-state service.
The American. Telephone and Telegraph Company .and its 20 associated' ‘
companies have virtual control of the-local telephone'.‘business in the:
United States« During the first three decades of this century the Bell
System purchased many of the independent companies« At the end of
I932 , the Bell System controlled .about 79 percent* of the phores and by
the end, of 1.9^6 about SI percent** ¿/. Approximately. 6,000 small independent
companies own. the rest of the phones* The percentage of revenues from
local service accruing to' the System is larger than the ratio of phones
controlled because the.independent- companies are usually located in small
communities and do not receive the benefit of the. higher receipts from
business phones* The Company has always considered the furnishing of
1/ Federal Communications Commission, Investigation of the Telephone
Industry in the United States, House'Doc« Ho» 3^0 > 7&th Congress,
1st session, Washington, 1939, P* 128; Wall Street Journal, December 30 ,
19 H6 «
telephone service as a natural ponopoly, and since the passage of the
Willis-Graham Act of 1921 it has been- fairly free to acquire W
independent company. 1/ However, it has not. in recent years attempted
to obtain complete control of the' industry*
The number of telephones in operation, .increased every year from
1875 to 1929 . gj During the depression the number of telephones n
operation declined and did not recover to the.^ ^ 9 !evel witil 1 39(Table l) The number increased-about one-third between t- .
and 19 U5 . In spite of the great increase in installations during t i
period, all demands were not met because of wartime restrictions and
shortages. With the end of wartime restrictions, the
began an immediate program of expansion. At the end o 19
e 0
number of phones for the Bell System and independents combined was 31*7
million,,an increase of ‘^ p e r c e n t over the 19 U5 .year-end ,total. In
spite of this increase, there we'fe about 2.5 million requests for ins
~tions at the end of I9U 6 , or the same as the year before, l/ Installations
have been held up largely by the-time required-to manufacture and install
the complex central office switching equipment*
B*
Rates
..
^
Hates charged on local telephone service vary among localities
and are subject to differences in State regulatory practidesr :: roller
ing increases made after World War X, there were no important .change*
in basic’rates until 3$H6. There was a slight decline between 1935
and igl+1 , but no change .in prices to consumers during the war except for the increase in excise tax, (Table- 2> Although basic rates
remained substantially unchanged for a. long period, the rate of-return permitted to be. earned has shown- a long-term decline. *£/
IB
probably were not reduced.during the period between the wars because
the increase in the demand for local telephone service apparently
leads to higher unit costs which the companies have only been able
to offset by technological developments and increased^employee worJc _
loads. Because of higher costs, rates are now being increased*
it , pp* lb-5- 1 ^-6 , and p • 1 ^2.
|V Federal Communications Commission,' Statistics of the Cppm^ i cations ^
Industry In the United States* Year Ended December 31. l?/±ii>
Washington,19^6» p •-l6 *. . . . .
, m _ ■‘ . ,^
l/ Wall Street Journal, on* cit,*, American Telephone and Telegraph
Company, op. cit., 19^6, p . 2 *
_
_ .. ,
U/ See Federal Communicat ions Commission, Proposed Report
Investigation, Washington, 193^* P* 7^2» for long-term dec me. in
rate of return allowed by commissions.
...
;
1 J federal Communications .Commission, .gp
Table 1
Selected data for telephone carrier's&■>192-9 ->1946
'■
' '. -V- f .J
(in millions)
.«
9
Telephones in.operation
Year *-5.
Total 1/SBusiness jg/îResidential 2/»
local ■ sNet operating
income
service
l/sbefore taxes 3/
revenue .
1929
I93O
1931
1932
1933
193^
20.2
20 62
19 »7
17
$ 02.0
780.0
776.0
72I.O
64-0.0
63I.O
1935
1936
1937
193g
1939
17 .u
18,4
19*5
16 .7
I7 .O
w
—
—
•.;'*.
.«
—
677.0
—
-
20.0
20.8
-
6.8
1 1 .1
717*0
764*0
775-0
811.0
1940
21.9
7*1
11.-9
858.0
I9U1
19^2
10 )
I9UI+
I9U5
I9U6
23*5
24.9
26.4
7.6
7 .7
26.9
28 »0 4/
31 4 1 .
8*3
8*4‘
5/
5/
12 .9
íu.i
ihc7
15 *0
'
.
5/
5/
923.0
9S4 eo
1 ,01+5*0
1,084.9
1 .143-7
1,2.75*8
$ 37U
371
378
283
265
277
299
360
372
364
4o6
440
501
584
654
690
716
557
Treasury Department, Division of Tax Research
Sources
1/
2/
3/
4/
5/
Federal Communications Commission, Statistics of the
. Communications Industry in the United Stales , Year Ended
December 31, 1939-1944.
Partly estimât ed by American Telephone and Telegraph Company<,
Clas s A and E telephone carriers only. Figures.do not add to
total but give a good idea of the distribution of all phones
by type of subscriber,
Carriers having annual operating revenues in excess of $ 250,0006
Estimated from data in Wall Street Journal, December 30 , (1946,
and .American Telephone and Telegx*aph -Company5 Annual Report for
the Year 1945, p, 2 ; 1946, p, 5» \
.f
Not available,
•• .
||
- 26 Table 2
Consumers1 Price Index of Cost of Residential Telephone Service,
1935-19^7
(1935- 1939 = 100 )
Year
•
[
•
Index
" "
Year
1935
1936
1937
1938
1 0 1 ,2
100 , g
9 9 . 1*
9 9 .5
19^1
1939
J
Month
0
Index
March
June
S e p t.’
Dec,
. 9S0S
loUoT
99®2
9 8 .8
19^0
19^1
19^2
99«3
9 9 »i*
99*9
19^2
105 »1*
March
June
Sept»
Dec«
io l*.7
io U ,7
10M
10g 06
19U3
is k k
191*5
19U6
io s „6
111.9
113,6 113,6
191*3
March
June
Sep t.
Dec.
logo6
lo g *6
lo g 06
lo g .6
Mar oh
June
Sept*
Deco
lo g »6
13.3 6
11306
113.6
19H5
March
June
S e p t.
D ec,
113,6
113,6
113,6
113,6
19U6
March
June
, , Sep t.
Dec.
113.6
113 06
March
11^,0
l 9 '4 f
191+7
.
Treasury Department, Division of Tax Research
Source; Unpublished data from Bureau of Labor Statistics«.
Notes Index includes all taxes, excise and sales.
113*6
113 06
173
- 27 -
In the review by regulatory commisslons of requests for raliée
increases,,- the .effect of.the excise, may receive consideration« ;
r.Tp- the ,r. ,^
extent that thb.t^'•reduces ..dem^id^ the telephone carriers may requesthigher rates,.in p,rder to compensate ¡for loss of revenue, There is 'no ,
-v
evidence regarding the. extent _fo^,which weight is given to this factor j' ftyf#
by the. variolas regulatory commissions.
»
'•*? ,7
' vvi
0«
Character of dh^aridV ’
9
4
,
v:--f* f!l T .
The demand ‘for local, ¡telephone service arises- from both business
and personal p.aeds» .^/hi;lef 35 ..’
percent,, or less: of the phoiie.s in use are 'Am \
located, in. husiness establishments .(Table: 1.) a larger-properticn. of the '<v •
local telephone receiptsVis.'derived from business -calls; beeaiis.e business - >
phones are riot on a flat monthly rate basis as often -as..residence',phogftBteVi v‘:
The estimates of the American Telephone and Telegraph dompany indicate
that about 5P percept pf the tax revçpupSrfrpm local telephone•service
are derived, from business concerns,*;
•• * ’ •
>•'
;'v'«
'. •Qver.ja ...long period of. time there has^ been an upward trend in „the
•
.use of telephone service as the population .increased,; service .improved». .
and the standard of living.improved*;: .For the operation of practically’ $
all businesses,' the telephone is a necessity« The.,telephone is also /
looked upon as an essential part of the standard of living at certain
income levels. Because competition from other forms of „lo.cal .communica
tion is at a minimum and because the service is considered essential by
so many users, the demand for local telephone service is unlikely to be :
.
greatly affected by price changes within fairly wide liraitsV
D.
Outlook 'for the industry!
t
;■
e
The outlook for.the demand for;local'telephone service-, in favorable, -v
The backlog qf orders at the end-.of I9U6 plus currently received orders ■
may result in the installât ion.-of no re phones in 19^7 than in 19 ^6 , which'
was the largest, year for installât ions, ‘ There -were 2»5 :million phones'
1/ According to the Company about. 5Q percent of tax charges, collected ...
by it are from residential consumers and 5® percent' from-business
concerns» , (-Memorandum "entitled ^Excise Taxes Won Communication
Services,M submitted to Treasury Department by the American Tele
phone and Telegraph Company,. September 13, 19^6 )« As about 50 percent
of long distance revenues in the third quarter of 19h6 were derived
from business concerns (American Telephone and Telegraph Company,
’Analysis of Business and Residence Toll Usage, Combined Associated
Company and Long Lines, Third Quarter, IÇUG*), it can be inferred that
50 percent of the local revenues are also from business concerns.
on order !*a% thb-ëhdh&£■ 19 ^6 ."T/ .
’
When the backlog has "been fille'd th;
é :'' v‘->1
rate
^ay*r
1 &-:‘é ' X $ © c t .-tci'revert to a moié normal basis/ /The '''| ■*”
increased- demand- required' 'large filant additions at artime i*rhêh 'cohbtru&m; :
tion dè^sy,âr^:
"ÿiit^ -high. Operating personriel -costs have 'also dh-'^ -'r■ •
" '_
creased and the workers were recently--granted wage' increasesi^'iii^fhved5"
and more efficient equipment is being placed into operation, but the
savings therefrom probably cannot offset the
i$ ; t
rate of return on investment for the Bell System, as a whole, in recent
years fms^baen tfrë*-16<#©bt in the history Of the Syst'emduring’the
early^ 1930 ^ .-'Jt/^Tha :rat e of return reflects "operations fr-om long"'’
'
distance -as':wëll^%s'vlo'êal' service, but since local-service•actfc>%its lor’ '-•
oveiS:':hâlf>î■th■e•^to't'aí gross receipts, it'- is an in^ortaht-V’
determinant-in vth e^ 'é até x e fi-b e td rn v •*•&;'v- '
!- "'•'•'T ■
r'v s'
'P P J
m&d& application for rate increased?fb'r local-’ y<
telephone service and intra-state long; distanceservice"dh ^abodt''25-—
States. 1 / Similar applications are planned in other States. Bate
increased requested have- not been stated in percentage-term's-in moft
cases^butviii a"few States a 12-13 percent figure wafs-imentioned*
Eight'-Statesi h^ve' -already granted the full amount rfe^iibsfcbd^bb-fc'*' n _
these areithevlesb populous States*
.
V* ^ E ffe ct o f th e ta 3c ■
«’ ***
gm^
v-l v I
||| ®gj; Ip;
1^ • -■ ’ -
A*' pQn^rbfi.tS #*
.
'*■
‘
r**p»,r,av% •
•
&/* • :'r ■ I
V ||
& **
J .
| ’t v('y'l*
Wartime earnings of the telephone companies were very slightly
lower after all taxes than in the late 193 -Q'$1 although'1tlie^ a^rhihgs
before taxes increased substantially» The average net income per
year'b^'hthelBeil System was about $172 million in the period 1^42—'/j
19 ^ vhsr-doftiparCd-;with.-$17 ^ million ¿h'the-period 1936-1939* (Table j)'
O n : o t h e r bahdt 'net income b efo re taxes o f 'a l l la rg e telephone^ ^ ; *'•
companicys rose .'from $tyo6 m illio n 'in 1939 to $ 7l 6 m illio n in 19^ 5 * (Table !/•'
lj Wall. Street doUrnaly 'Eeçëmber/-30y 19^6? *Américain Téléphoné and- ?:
Telegraph Company/ Annual Béport for- thé’ Year 19^6, p»< .*5*
J
-'
2j American; Telephone -and-iPa.legraphvGom^any, .Annual Béport, 19^-6 ’••'* '
p. 3 -^ud Table-3* • ’’ <■-- ” A V
>•' '
1 / - M i , p. 5«-.. i- 'm '•
J
174
—* oO
C.J
3
Local telephone service revenues, net income, and rate of return on
invested capital of the American-, telephone and Telegraph Company,
..
.1929 - 19^6 1/
(Dollar amounts in;millions)
Year
; Local service .1
;
revenues
?
1929
1932
■ 1936
1937
1932
1939
I94O
I9kl
I9U 2
19^3
19 m
19 U5
191+6
$ 691*14
l Hate of return on
; invested capital
,
6 7 0 .7 ,7
f;
201.3
3.3
122 »3
5.0 .
. 1 SÛ.7
132.3
665*2
703.1»
6*3
6.5
I55.5
713,1
.
737*7
Si+6.3
;3$fet income
6*6
190*3
210*5
6.3
191*3
6 .1
i 6U *3
5.U
5«7
396*0
951.6
936.9
l s0Ul*2
177 «8
169.9
177.1
1,163.3
203o6 2,
5o5
5.5
5 .7 1 /
Treasury Department, Division of Tax Hesearch
Source;
1929*^19^3s
Standard and Poor?s Corporation, Industry Surveys«
f1Telephone and Telegraph,n Part 2 , fehruary 3,191+6,
■P- *1-95
I9UH« 19146 s American Telephone and Telegraph Company, Annual
Report for the Year 19^-5 and 191+6»
1/ Consolidated hasis* Uet income, and r.ate of return apply to all
activities of the System* Local telephone service, however, is ••
the source of somewhat over half the gross receipts*
2/ Includes"$l6*7 million credit for" excess-profits tax credit
carryback*
2J Computed "before inclusion’of.excess-profits tax credito
-
-
The excise tax probably had ho appreciable effect on profits during
most of the war période Since the demand for new installations could
not be met because of labor and material shortages and Government
orders, it is doubtful whether the volume of business was reduced by
the tax. Moreover, the companies, apparently did not seek to have rates
increased to offset any possible effect of the tax.
Under normal conditions it is believed that the effect of the
tax on profité would not be very serious» The character of the demand
is such that the amount of the tax should not be a very important factor.
Moreover, no non-taxable service can be substituted® A substantial pro
portion of the demand is for btisiness use and a large proportion of
residential subscribers are on a monthly rate which prevents curtail
ment of demand except by dispensing with the use of a phone. Because
of the control of supply a reduction in demand is not likely to result
in a reduction in rates, and telephone carriers may request higher
rates, if necessary, to compensate for any loss of revenue. The exis
tence of the tax may indirectly affect profits in case regulatory
commissions should be less liberal in granting higher rates on telephone
service than they would be in the absence of the tax, 1 /
B,
On business costs and competition
About half of the receipts from the tax are payments on business
expenditures for telephone service and enter into business costs.
Local telephone service makes up a larger proportion of the costs of
some types of businesses than others, and the tax tends to discriminate
against those who have the most need for the service. Information
on the importance o f .communication costs by types of business is not
available.
Q,
On consumers
The overall burden of the tax is likely to be proportionately
heavier on low income consumers than on high income groups. The
tax payments made by business firms are likely to be shifted forward
to consumers in the long run together with other costs, and thus be
distributed regressively in accordance with total consumer expendi
tures. Direct consumer expenditures for local telephone service
1j Moreover, the Bell System companies have charged off liberal amounts,
for depreciation® These practices have been criticized by several
State commissions and there is a possibility that the companies
may be required to readjust their capital bases or their deprecia
tion charges.
175
- 31 were moderately progressive according to a study of .
19^-1 consigner
expenditures. 1/ However, a
study of urban consumer expenditures
alone showed a very regressive pattern. 2/ As it is reported that most
of the new phones installed in the last year or so by theBell System
were in low rental neighborhoods %] it is possible that direct con
sumer expenditures have shifted ’6y6r to a regressive pattern. Even,
if the shift 'in direct consigner* outlays has not gone this far, the
regressive business cost factor is probably important enough to make
the total effect of the tax of a' regressive nature.
Revenues from local telephone service are relatively insensitive
to changes in the level of income. During the period 1929 ~ 19^0»
consumer expenditures for local telephone service fluctuated less than
half as much as national income« h/ During the war, receipts
increased less than would have been expected on the basis of the 1929*-.
19^0 experience, but since that time have expanded faster than income,
apparently as the result of working off the backlog of unfilled orders
accumulated during the war.
Local telephone service is included in the Consumers* Price.Index
of the Bureau of Labor Statistics, but the present tax represents only
about .1 of 1 percent of the total Index.
VI.
Administration and compliance
It is estimated that only about 6,000 telephone companies file
returns for this tax. The principal admin1strative problem arises from
the fact that local telephone, service is taxed at a lower rate than
other service and is subject to different exemption provisions. This
gives' rise to some problems of classification and requests for rulings
in doubtful cases have to be considered by the Bureau* In addition,
different rates for different types of service complicate billing
operations. However, these difficulties are net considered sufficient
to indicate uniform rates on local and long distance service for
administrative reasons.
1/ Department of Agriculture, Rural Family Spending and Saving in
Wartime, Miscellaneous Publication No. 520 , Washington, 19^+3»
pp. 50-51; Department of Labor, Family Spending and Saving in
Wartime, Bulletin No, 822 , Washington, 19^5» P> 126 .
2/ Bureau of Labor Statistics, unpublished data,.
1/ Wall Street Journal, opa cit.
3 / Computed from data in Survey of Current Business, June, 19^.
- 3,2-
711. Technical -problems .
*
," , 2
The only important technical problem that is Involved in this, tax
is the method' of giving effect to a, change in rates.
Changing the rate on.local.telephone service will involve extra
bookkeeping work on the part of the telephone companies unless the
change is made on a bill.rendered basis. Local telephone bills are
generally on a flat monthly basis and the billing is staggered over ’
the month. If the rate change were made applicable to service rendered
on or after a specific date,, the companies would have to pro-rate
charges for services in the bills rendered before and after such date.
To avoid this extra work, the Revenue Act of 19^3 provided that the
increased rate for local telephone service should be applicable only
to amounts paid on bills rendered on or after a specified date, if
The telephone companies have requested that any tax reductions
be handled on the same basis as the increases in 19 ^3 » i.e», on a bill
rendered basis, j?/ Under the bill rendered basis some customers would
get the benefit of the reduction for a longer period of time than
others, depending on the billing periods used in individual cases for
any company and by different companies» Since the bill rendered system
was used for the 19^2 and 19^3 Revenue Act increases, the diverse
results of a decrease would cancel out for many customers the benefits
or disadvantages they received when the rates were increased*
1 / Section.302 of the Act 9 Section 1655 (b)(3 ) of the Internal Revenue
Code. Section 606(b) of the Revenue Act of 19^2 contained a similar
provision.
2j Testimony of Harry Ca Gretz, Assistant Comptroller, American
Telephone and Telegraph Company, and Harold V<, Bozell, representing
the United States Independent Telephone Association, Hearings before
the Committee on Ways and Means, May 21, 19^7*
Jf
.
- 33 PART III
I,
—
Excise Tax on Wire and Equipment Servi©©"
Description of the tax
The tax ©n wire and equipment service applies to payments for
the following services provided by means of wires: i f
1 . Information services
2 . Protective services, such as burglar and fire alarm
3*
Recording and control serviees
Entertainment services
The tax is payable by the person paying for the service and is
collected by the person furnishing the service«.
Payments for the following services are exempt from the tax;
1 . Services utilized in the collection or dissemination of
news by or for the public press, radio broadcasting, or
a news ticker service furnishing a general news service
similar to that of the public press*
2* Services furnished to the States and political subdivisions.
II.
3.
Services furnished to the Red Cross.
h.
Services furnished directly to the Federal Government. 2f
Changes in tax since 19^1
The Revenue Act of 19Ul imposed a tax on the payments made by
Subscribers to wire and equipment services. At the time this tax
was imposed the payments for leased wires used in furnishing such
Services were subject to the tax on leased wires (See Part I, p. 2 ).
Subsequently, by the Revenue Act of 19^2» payments for leased wires
used exclusively in furnishing a service taxable as a wire and
equipment service were specifically exempted«.
1/ See Regulation U 2 , Section 130 .38(b).
2/ Exempted by regulation, Federal Register, Vol* 9 s P® U615 *
- 34 -
The rates of tax on wire and equipment services as such
have been as follows:
, :.,y *
Revenue Act
1941
1943 .
III.
..Effective date
’
Rate
' Oct. 1
5 percent
r. .May 1 ,, .1944 . ...
8 percent. ..
Revenue collections
^
^Collections from the tax.on wire and equipment service
are included with those from the tax on leased wires in the
official collection figures. In the fiscal year 1946 about
$13 million was collected from the two taxes. Only a small
proportion of the total is believed to have been derived
from the tax oh wire and equipment service.
IV.
Economic b a c k g r o u n d ^ l /
A. Character of supply
'y*;y
'
The services taxed as wire and equipment service are
highly specialized and the volume of business is very small.'.
'v
Information services: These•services consist of stock
and commodity quotations provided by ticker and specialized
news services, such as financial, sporting or racing news.
The quotation services are provided principally by one
company. 2/ Different companies specialize in particular
types of- newsservices, ■as for example, Dow-Jones9 in.
financial news.
if The analysis of these industries has been limited by
the lack of published information .on the .companies
providing the servi cas.»
2/ The Western Union Company, which has all of the business
outside of the Wall Street district.. The revenue from ■ this source and its news services amounted to $2.5 million
in 1944. (Federal Communications Commission, Statistics
of the Communications Industry in the United States,
Year Ended December 31, 1944, Washington, 1946, p. 163.)
1
•Ài
- 35 Protective, recording and control, services ; Apparently most of
these services are provided by a single company* If Its volume of
business in 19^6 was about $lU million* (Table l) It had subscribers
located in about 1,000 municipalities* 2/ The company maintains central
offices where instruments record information transmitted from the
subscribers1 premises. When fire or police action is required the
company notifies the public authorities. In the case of recording and
control services, instruments indicate physical, chemieal or mechanical
conditions at the premises, such as the amount of liquid in a tank.
The company performs the remote control operations necessary to keep ~
the equipment operating' as’desired by the subscribers*
Entertainment services; These services consist of furnishing music
to eating ànd recreational establishments for entertainment and to
offices and factories as aids to workers*. The music is furnished by an
orchestra-òr records played in central stations located in various
towns and.upipedn to the subscribers over leased telephone wires. One
of the principal suppliers of this type of’service is Muzak.
Since each of the services subject to tax is specialized in form,
there is ‘probably little, if any, competition between the different
types* Moreover, each type appears to be wholly or largely controlled
by a single coneern. ■ Hone of the services, except those provided by
Western Union, is subject to Federal regulation because- the suppliers
are not common carriers £ut lease their wires from the communication
companies. Consequently, they are generally in a position to adjust
their rates or services as they may desire in response to any reduction
in receipts caused by the tax. In some eases, however, such adjustments
would be conditioned by. the availability ©f non-taxed services whidh
could be substituted for the taxed service,
B,
Character of demand
The demand for these services is largely of a business nature,-and
is probably not very responsive to changes in price* The charge for
the serviee is usually on a flat basis,%]. so that the amount of service
1/ The American District Telegraph Company - a subsidiary of Western
Union. This company leases over ~(0 percent of all fire alarm equip
ment .used for connecting subscribers’ premises to outside points.
(Indictment, United States of America v a The Gamewell Com-pany,
American District Telegraph Company, etc., in the District Court of
the United States for the District of Massachusetts, Criminal Action
Ho. 1 7 ,623 ,)
.2/ Standard and Poor’s Corporation Records.
jfJ Wired music is charged for on the basis of the revenues or seating
capacity, usually the latter, of the restaurants or clubs using the
service. Stock and commodity quotation services of Western Union
are furnished on a fee basis adjusted to the mileage of the subscriber
from the exchange and the number of subscribers in a given area.
- 3$ r.
Table. 1
Gross receipts and net income of the American
District Telegraph. Company, 1930 - 19 M-0
(In millions)
Year
.r
Gross
:
r e c e ip ts •
Net
18
income * ?
$ 8>5
$ i»9
S»5
1.6
/19TS
. 1955,• 5935 "•
7«9
7-9
g,0
Li
.1936
1937
^ 193.8
g*2
g*5
g*7
1930
1931 •
. 1932
%<$
Year
Net
; Gross
:
g r e c e ip ts i income
1939
I9U0
,19Ul
$ .9^0 .
9*3
9o6
* 1.2
11*0
... 1.3
12.7
12.3
iU 5
1-5
19U2
I9U3
19HU
1,5
1 *U
I9U5
19U6
13.1
i* i
lU.l
1*3
1.5
1.2
Treasury Department0 Division of Tax Research
Sources
$ U$
St^id^rdard Poor 8s Corporation Records*
.1*2
178
purchased cannot "be varied except by dispensing with it* The informa
tion services such as those providing quotations and financial news
are necessities for financial concerns, and substitute forms are not
available. Some substitution is possible in the case of the protective
services, as a concern might use a night watchman instead of the automatic
protective device. However, the limited number of subscribers l/ and
the high average charge for the services suggest that demand arises from
the lslrger and more financially stable business, 2/
The demand for the music service may be more sensitive to price
and income changes» This is a relatively new type of service and
although demand expanded rapidly during the last few years, the service
is prbbably not considered essential. Moreover, there are substitute
forms of entertainment such as a record amplification system, which
%
may be less satisfactory but is cheaper and is not taxable as a wire and
equipment service,
V, Effects of the tax
The tax at the present rate probably does not greatly reduce the
volume of business of the firms supplying these services. Most of them
appear to be in a position to adjust rates in order to maintain profits
if receipts are reduced. The effects of the tax may be more serious
in the case of the entertainment services where there is more opportunity
to use alternative forms of service. However, this type of service is
experiencing a more favorable expansion in demand than the others.
Since the services are used almost exclusively by other businesses,
the tax enters into business costs and discriminates against those
specialized businesses which must use these services. It also dis
criminates against the suppliers of the taxed services where the
subscribers are induced to use some form of non-taxed service,
VI.
Admini stration and compliance
Only a few returns are received under this tax and no serious administrative problems have arisen®
1/ At the end of I9H6 1 the American District Telegraph Company had only
h 2,000 subscribers
(Standard and Poor’s Corporation Records).
2/ Gross receipts of tne American District Telegraph Compapy declined
by less than 10 percent during the depression in the early 1930 's,
179
TREASURY DEPARTMENT
Washington ~
FOR RELEASE,' MORNING:"ÑfeWSPAPERS1
Friday,
July 18, .19^7
-............ ■■ »;/ ) ..■■ .
1■. '■
V".
Pres$ Service
No. S-4p0
The Secretary of the Treasury, by this public notice,
invites tenders for $1,100,000,000, or thereabouts,, of 91 -day ’
Treasury bilis, for ¿.ash and in exchange for Treasury bills .
maturing July 2k, ■1947, to be issued on a discount basis under
competitive and non-competitive bidding as -hereinafter provided.
The bills of this series will be dated July 2k, 19^7* and will
mature October 23* 1‘9^7* 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, $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
daylight saving tiine, Monday, July 21, 19^7.-. Tenders ;;wi11 n o t '
be received at.the Treasury Department,, Washington;. Each..ten
der must be‘ for an even multiple of $1,000, and in the casé of
competitive tenders 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 special, envelopes which
will be supplied by Federal Reserve Banks or Branches on appli
cation therefor.
■
V
5• j3B ■.....
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 /
Treasury bills applied for, unless the tenders are accompanied
by an express guaranty of payment by any Incorporated 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
Treasury of
the amount and price range of accepted bids .- .Thoáet subjtjtting
tenders will be advised of the acceptance or rejection-^thereof♦
The Secretary of the Treasury expresssly 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, non-competitive tenders for $200,000 or
less without stated price from any one bidder will be accepted
in full at the average price (in three decimals) of accepted
competitive bids. Settlement for accepted tenders in accord
ance with the bids must be made cb? completed at the Reserve Bank
2
ôn July 24, 1947, in cash or other im&edl&tely available funds
o? in a like face amount of Treasury billes maturing July 24
1947. Cash and exchange tenders ttill receive equal treatment.
Cash adjustments will be made for differences b o ^ e ^ ^ h ^ p a r
value of ’maturing bills accepted in exchange and the issue
price of the new bills.
|,
>4 •
The income derived from Treasury hills,^whethe^nt^?|t.
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
treatment, as such, under the Internal Revenue Code,_or laws
amendatory or supplementary thereto. The bills shall be sub
ject to estate, inheritance, gift orcthere.- excise
whether Federal or State, but shall be
»^thereof
now or hereafter imposed on the principal^or interest thereof
by any State, or any of the possessions of the UnitedStates,
or by any local taxing authority. For purposes of taxation the
amount of discount at which Treasury bills are origlnallysold
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 ® ° ^ i
be considered to accrue until such bills shall.be
_
or otherwise disposed of, and such bills are ex°?-uded £
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 d e
ference 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
taxable year'for which the return is made, as ordinary gain or
loss,
'-'
,
'
i.
'll
. ‘*
Treasury Department Circular’No. 4l8, as. amended, and tbi
notice, prescribe the terms of thé Treasury bills and govern
the conditions of their issue. Copies of the circular may b
-obtained/from any Federal Reserve Bank or Branch. ,,
0O 0
TREASURY DEPARTMENT
Washington
Press Service
No, S-401
FOR IMMEDIATE RELEASE
Friday, July 18, 1947
The Secretary of the Treasury
effective August: 1, 1947, the date
resignation as General Counsel for
Treasury, he has designated Thomas
Afcting General Counsel,
has announced that
of Joseph J. 0 ’Connell’s
the Department of the
J, Lynch to serve as
The President and the, Secretary of the Treasury ac
cepted Mr. O ’Connell's resignation with reluctance and
commended him for the outstanding service he has rendered
to the Government during the past 13 years. His career,
which began with his appointment as an Attorney in the
Public Works Administration in 1933, was marked by his
efficiency and loyalty. He transferred to the Treasury in
1938 and while Special Assistant to the General Counsel
served as the Treasury Member of the Temporary National
Economic Committee. In addition to his responsibilities as
General Counsel for the Treasury Department, he, for a time,
supervised the Bureau of Internal Revenue,
Mr. and Mrs. O ’Connell reside in Silver Spring, Maryland,
and are the parents of a daughter, Sheila,
Mr. Lynch is a graduate of the University of Michigan
and practiced law in Toledo, Ohio, from 1925 to 1934 when
he accepted an appointment with the Securities and Exchange
Commission, which he served as Assistant General Counsel,
In 1939, he was appointed Special Assistant to the Attorney
General,, From 1940 to 1943 he served with the War Produc
tion Board and Its predecessor agencies in the capacity of
Assistant General Counsel, He was appointed Assistant
General Counsel for the Treasury in 1943.
Mr, and Mrs,. Lynch reside in Chevy Chase and are the
parents of two sons and one daughter.
0 O0
TREASURY DEPARTMENT
Washington
Press Service
No. S-^02
FOR IMMEDIATE RELEASE
Friday. July 18, .19*17
The Secretary of the Treasury, John W. Snyder, and the
Board of Governors of the Federal Reserve System today issued
the following joint statement:
It Is well known that active speculative niarkets in gold exist in various foreign countries. For
the most part, these markets are Illegal,
In a
few instances importation or sale of gold Is
°
is tolerated. Under present circumstances gold is
traded in many foreign centers, often against U. b.
dollars, at prices above monetary parities, pie Pr®
miums differ from one center to another, so that specu
lators can make large profits by purchasing gold in one
foreign market and.selling It In another.
The International Monetary Fund recently Issued
a statement deprecating international dealings In
gold at premium prices, and requesting member coun
tries to take such action as they can within their
jurisdictions to prevent such dealings. The Fund
emphasized that these transactions tend to^undermine
exchange stability and cause gold to flow into private
hoards rather than into monetary reservesk Further
more, in countries where the gold is sold, P ^ e n t is
often made with dollars illegally acquired or held.
Moreover, foreign exchange which otherwise could be
used for sorely needed imports Is diverted to the pur
chase of gold for private hoards.
In view of these circumstances, and on general
grounds of the national policy, the Treasury Department
and the Board of Governors of the Federal Reserve
System request American individuals, banks and business
enterprises to refrain from encouraging and facilitating this traffic and in particular to refrain
•tending the use of their facilities and funds for the
carrying out of such transactions.
0O0
182
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Monday, July 21, 19U7*
"-------------------------- -----
Press Service
No. s-403
Secretary of the Treasury Snyder today announced the offering, through the
Federal Reserve Banks, of 7/8 percent Treasury Certificates of Indebtedness of
Series G-19U8, open on an exchange basis, par for par, to holders of Treasury
Certificates of Indebtedness of Series G-19U7, in the amount of $1,223,1^53*000,
which will mature on August 1, 19U7. Cash subscriptions will not be received.
The certificates now offered will be dated August 1, 19U7, and will bear
interest from that date at the rate of seven-eighths of one percent per annum,
payable with the principal at maturity on July 1, 19U8. They will be issued
in bearer form only, in denominations of $3.,000, $ 5 *000, $ 10 ,000, $ 100,000 and
$1 ,000 ,000 .
Pursuant to the provisions of the Publio Debt Act of 19Ul, as amended,
interest upon the certificates now offered shall not have any exemption, as
such, under the Internal Revenue Code, or laws amendatory or supplementary
thereto. The full provisions relating to taxability are set forth in the
official circular released tod^y.
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.
The subscription books will close for the receipt of all subscriptions at
the close of business Wednesday, July 23.
Subscriptions addressed to a Federal Reserve Bank or Branch or to the
Treasury Department, and placed in the mail before midnight July 23, will be
considered as having been entered before the close of the subscription books.
The text of the official circular follows:
183
UNITED STATES OF AMERICA
7/8 PERCENT TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES G-19U8
Due July 1 , 19 U8
Dated and bearing interest from August 1, 19h7
19 U7
Department Circular No. 810
TREASURY DEPARTMENT,
Office of the Secretary,
Washington, July 21, 19U7.
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, from the people of
the United States, for certificates of indebtedness of the United States, desig
nated 7/8 percent Treasury Certificates of Indebtedness of Series G-19U8, in
exchange for Treasury Certificates of Indebtedness of Series G-19U7* maturing
August 1, 191+7.
II.
DESCRIPTION OF CERTIFICATES
1. The certificates will be dated August 1, 19h7y and will bear interest
from that date at the rate of 7/8 percent per annum, payable with the principal
at maturity on July 1, 19U8. They Will not be subject to call for redemption
prior to maturity.
2. The income derived from the certificates shall be subject to all taxes
now or hereafter imposed under the Internal Revenue Code, or laws amendatory or
supplementary thereto. 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 of the United States, or by any local taxing
authority.
3. The certificates will be acceptable to secure deposits of public moneys.
They will not be acceptable in payment of taxes.
U. Bearer certificates will be issued in denominations of $1,000, $S>,000,
$10,000, $100,000 and $1,000,000. The certificates will not be issued in regis
tered form.
£. The certificates will be subject to the general regulations of the
Treasury Department, now or hereafter prescribed, governing United Stages cer
tificates.
III.
SUBSCRIPTION AND ALLOTMENT
1. Subscriptions will be received at the Federal Reserve Banks and Branches
and at the Treasury Department, Washington. 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.
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 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.
PAYMENT
1. Payment at par for certificates allotted hereunder must be made on or
before’August 1, 19U7, or on later allotment, and may be made only in Treasury
Certificates of Indebtedness of Series G-19U7* maturing August 1, lyhl, which
will be accepted at par, and should accompany the subscription.
V.
GENERAL PROVISIONS
1. As fiscal agents of the United States, Fed'eral Reserve Banks are author
ized and requested to receive subscriptions, to make allotments on the basis and
vco to the amounts- indicated by the Secretary of the Treasury to the Federal Re
serve 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 oi
the definitive certificates.
2. The Secretary of the Treasury may at ary time, or from time to time,
prescribe supplemental or amendatory rules and regulations governing the offer
ing, which will be communicated promptly to the Federal Reserve Banks.
JOHN W. SNYDER,
Secretary of the Treasury
TREASURY DEPARTMENT
Washington
(The following address by Secretary Snyder
before the graduating class of Bryant College,
Providence, Rhode Island, at the Albee Theatre
is scheduled for delivery at 12:00 Noon, E.S.T.,
August 8, 1947* and is for release at that time*)
I
was genuinely pleased to receive the invitation to
participate in the 1947 graduation exercises of Bryant College.
I deem it a real privilege to Join with your friends gathered
here, to honor you members of this senior class.
You deserve sincere congratulations in receiving these
certificates today. By your scholastic achievements, you have
demonstrated both a willingness and an ability for worthwhile
accomplishment in the business and community life of your
country.
Certainly, you may take particular satisfaction in secur
ing a diploma from an institution of such reputation as Bryant
College. Throughout more than eighty years of existence, this
institution has devoted its entire efforts to fostering the
highest principles of American commercial enterprise. It has
rendered a notable service and made a material contribution to
our economic scheme. It has won the confidence, the respect,
and the commendation of businessmen everywhere.
As graduates of Bryant College, you may have full assur
ance that you have been properly and thoroughly trained for
the field of modern day business competition.
I
believe that you are entering upon your careers at one
of the most interesting and opportune periods of our history,
There are, of course, numerous and difficult obstacles
which you must overcome on your road ahead. But, there are
also great possibilities before you. The measure of success
which may be achieved today is well worth your wholehearted
effort.
We are all fully aware of the rapid and essential changes
in our social and economic life which hpve resulted both from
the last war and from general world conditions.
S-404
2
For we are now passing through an economic revolution
which is affecting every phase of our human experience* Our
manner of living, our individual associations, our govern
ments - locals state, and national - our world relationships,
both economic and political - all these are being deeply and
permanently readjusted from the earlier precepts of our
national life.
The growth of training in commercial lines is one of the
outstanding developments of our educational system in this
century. It is a development that has paralleled the growing
intricacies of our economic structure. It has resulted from
public recognition’for the necessity of specialized training
in this most important field.
Today, interest in such training has been reflected in an
ever-increasing demand upon the facilities of our educational
institutions.
The fact that so many of our servicemen and women, taking
advantages of veterans' educational benefits, have turned to
training in business and commercial lines Is especially sig* .
nifleant.
Surveys made among the veterans enrolled In commercial
courses, and there are hundreds of thousands of them, indi
cate that a large number are preparing themselves for the
operation of small, individually owned businesses.
This specialized training holds for them a far greater
promise of success. And, reduction in the mortality rate
among the smaller enterprises of the Nation, due to this
preparation, will exert a stabilizing effect upon the entire
business strueture.
Those who would prosper today, In the field of small
business, must be prepared to meet problems unknown a few
generations ago. Merchandising is now a much more intricate
system.
In addition our small merchant has become a tax collecting
agent; he must keep adequate recordsfin order to meet the re
quirements of the Federal and State tax laws; and unless he has
at least elementary knowledge of such matters as competitive
merchandising, profit margins, inventory management, accounting,
and even labor relationships, he is not likely to remain in
business very long.
187
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3
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Here in these United States, under our system of free
enterprise, we have created an industrial establishment of
unparalleled opportunity for individual and national pros
perity.
But, it is a vastly complicated structure we have built
in this economy of ours. For its continued proper functioning
we shall need all the ingenuity, all the intelligence, all the
skill, and all the training we can bring to bear.
I congratulate you of this senior class, who have, through
the years spent here at Bryant, equipped yourselves for a worth
while position in our present economic system.
I should like to mention some particular fields which
seem to offer unusual opportunities for successful careers.
Our government, itself, has of necessity been greatly
expanded to provide the services required by an enlarging
population, a growing social consciousness among our people,
and a constantly broadening economic structure. Here, it
seems to me, is an especially attractive field for those who
qualify.
For example, take the Treasury Department, with its some
90,000 employees, collecting revenues during the last fiscal
year in excess of $43,000,000,000, and disbursing $42,500,000,000
as authorized by the Congress.
Certainly this is Big Business. And I know you businessminded young men and women will appreciate my satisfaction
that the Government operated last year with a balanced budget
and with a, surplus.
Under Treasury Jurisdiction come such important public
servl.ce functions as law enforcement, the printing of currency,
securities, and stamps, producing of coins, operations in the
collection of revenues, Government purchasing, and the disburse
ment of funds, as required by law, in the management of our
national debt and attendant fiscal operations. For all these
varied duties, many thousands of employees with particular
technical abilities and skills are necessary.
Many of the positions require training in those fields
which are given particular attention in our schools of commerce
and business.
Just now, our Government is in process of reduction from
a wartime to a peacetime level of operation and employment.
But in the years ahead, not only the Federal establishment,
but the Government at all levels will require a continuing
flow of men and women from our institutions of higher learning.
For successful functioning, it will' need personnel skilled in
the secretarial arts, in accounting, in civil administration,
in business management, in personnel direction, in purchasing,
in economics, in finance.
The Treasury, working through the colleges and universi
ties, has sought to encourage students to interest themselves
in the fields in which it operates.
I hope that some of the members of this graduating class,
will, in the years ahead, seek to devote their talents and
energies to the field of Government.
For, if the Government is to discharge properly its public
service functions, if it is to preserve and protect our social
principles, its policies must be determined by men of the high
est integrity and fidelity; its operation must be wisely and
prudently managed by men of technical ability and sincere al
legiance; its personnel must be well trained and efficient.
Another field offering particular opportunity to those
entering a business career is that of foreign commerce. We
anticipate a coming period of worldwide exchange of goods on
a scale greater than ever before,
The war torn nations of the world, partly because of
disastrous weather conditions affecting many phases of recon
struction, have not all made the progress toward rehabilitation
of production that was expected. These countries have been
unable to supply sufficient of their domestic goods to exchange
for those products of ours they so desperately need.
Much of their purchasing has been food and other necessi
ties for existence, rather than products for the reconstruc
tion of their industry.
But we have reason for hope that the corporate efforts of
the Nations will, in the years ahead, create a widely expanding
commerce. It is to this end that such organizations as the
International Monetary Fund, the World Bank, and the Inter
national Trade Organization have been constituted. This Nation
has taken the lead in these efforts to revitalize world trade.
Finally, there are the great possibilities in the produc
tion, financing, and distribution of goods and services at
home,
This is the most important field of all, and is undoubtedly
the one in which most of you are Interested.
5
Thé rapid conversion of our enterprise from war to peace
was an amazing accomplishment. We have attained a peacetime
prosperity unknown before to any Nation,
We still have problems to be met. We can solve these
problems of national import if we will exercise the moderation
and good sense and the same statesmanship we employed to solve
the problems of production for war.
When we examine the present unsatisfied demand for pro
duction in almost every field of our national output, when
we consider the vast opportunity uncovered in our wartime
research, when we realize the savings and cash resources of
our industries and our people, when tfe recognize the worldwide
demand for our goods, there is ample reason to view the years
ahead with optimism.
You 1947 graduates are fortunate in that you enter upon
your careers during such a period. You are in a far different
position than those graduates of the late ^ O ’s and early *3 0 *s
who competed for scarce jobs during the dark days of depression.
We all know of their struggle to accomplish successful careers.
Many of them are the leaders of today.
But it is a truism that keen competition and hardship
inspire the greatest of human effort. So, it will be up*to
you to prove whether you really are more fortunate than they.
X find it difficult to decide whether the greater test of*
character is made under favorable, or under adverse conditions.
Sometimes it appears more difficult to-survive good fortune
and praise than hardship or criticism.
In the final analysis, it is character which will deter
mine the extent of individual attainment. I know that at
Bryant College you have been indoctrinated with those ideals
of character which will well adapt you to a constantly
changing world.
Our exceedingly complex economic and business relation
ships demand the highest ethical standards on the part of
those who direct and those who serve.
The survival of our free enterprise system, under which
we have thrived,, depends upon the maintenance of our high
social standards.
As you progress through the years to positions of greater
and greater responsibility, you will be called upon to display
wise tolerance and fair play in all manner of human relation
ships. It is through such a spirit that the problems that
arise will be alleviated.
I have firm confidence in the inherent honesty and fair
ness of the vast majority of our citizens as individuals, and
as the directors of our enterprise. The derelictions of a
few emphasize the importance of those moral qualities that
have made us great as a people. It is to your generation that
the responsibility for promulgating those ideals will rest to
an ever increasing degree.
You college-trained men and women have an obligation,
as well as a privilege, to contribute to the charting of our
future national course along the line of a sound economy at
home, and in our leadership in world affairs. It has not been
many generations since higher education was only for the few.
We have come to recognize that education for the many is in
dispensable - a necessity for all those who have the ability
and desire to improve their circumstance and opportunity for
service.
American youth, thus trained, will be prepared to deal
with the problems that face us as a Nation emerging from a
devastating world war.
-
All of you have an opportunity to contribute, through the
ballot, through enlightened opinion, or through actual service
to the further development of your country, and to the promo
tion and protection of sound governmental policies.
Equipped as you are by your training, you will exert a
definite influence toward a wider understanding of national
problems and national affairs,
I will mention just one of the problems that we face as
a result of the war, but one of particular interest to the
business world in which you will serve. This is the manage
ment of our national debt.
As Secretary of the Treasury I cannot overemphasize the
importance of the financial obligations which our country has
assumed- There can be no compromise in our determination to
pay that which we justly owe. No matter how difficult the
road, you of this generation must make it a part of your creed
that we as a people stand unalterably for financial integrity
in our Government.
191
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7
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Nor can there be any compromise either in our determi
nation to exercise such international leadership to which
our capabilities for world betterment impel us.
The path to worldwide stability may be a long and trying
one. But we will not bring about any durable peace unless we
exert our vigorous influence toward that end, X commend to
you the Presidents management of our international affairs.
This policy finds its source, and is deeply rooted, in the
ideals of the American people. It has their whole-hearted
support, regardless of political affiliation.
The paramount position of our Nation today is largely
due to the character of the American people. We have, of
course, been singularly endowed in the wealth of our country’s
vast physical resources - her extensive store of minerals, <
her abundant timberland, her fertility of soil, her vital
river systems, and her many other native advantages.
But all these gifts have been utilized and made productive
by the American character. Our power and our strength can be
attributed to the American philosophy of individualism.
We have earned, and well earned, our prosperous state.
The rapid development of our great industries - mining, agri
culture and manufacturing - was not a happenstance. It was
an accomplishment in suffering, struggle, and unabated hard
work.
You young men and women inherit the accumulated knowledge
which was gained during the years of our national progression.
This knowledge will greatly ease your path. And, although you
will meet .strong competition in the business world, it will be
a competition of an enlightened social order.
You have received a sound and a practical training. You
possess the courage, the imagination, and the energies of
youth. Even more important, you have the assurance that genu
ine endeavor here in our country will receive a compensatory
reward. Your opportunities for achievement are unlimited.
0O 0
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS
Tuesday, July 22, 19^7_________
Press Service
K o * S-405
The Secretary of the Treasury announced last evening
that the tenders for $ 1 ,100 ,000 ,000 , or thereabouts, of 91 -day
Treasury hills to ho dated July 24 and to mature October 23,
1947 , which were offered on July 18 , 1947* were opened at the
Federal Reserve Banks on July 21#
The details of this issue are as follows:
Total applied for
Total accepted
Average price
$1,600,796,000
1,101,260,000 (includes $17*649,000
entered on a non-competitive basis
and accepted in full at the average
price shown below)
99.813 Equiv. rate of discount approx.
0.740$ per annum
Range of accepted competitive bids:
High -99C
& Q3 Equiv. rate of discount approx. 0.376^ per annum
(46 percent of the amount bid for at the low price was accepted)
$
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St, Louis
Minneapolis
Kansas City
Dallas
San Francisco
8,515,000
1,446,440,000
10,865,000
1.727.000
2.055.000
5 ,118,000
96.977.000
1 ,585,000
3,999,^00
15.930.000
4.125.000
3 .460.000
TOTAL
Total
Accepted
Total
Applied for
Federal Reserve
District
$1 ,600 ,796,000
0O 0
$
£
a,
1.461,000
1ÌQ48Ì798,'000
711,000
1.727.000
1.647.000
3.010.000
20.894.000
1.545.000
3.927.000
11 690.0 0 0
.
.
2 3 9 0 .0 0 0
3,460,000
$1 ,101 ,260,000
193
TREASURY 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
Friday, July 25, 1947
Press Service
No* S-4o6
The Secretary of the Treasury, by this public notice,
invites tenders for $1,100,‘000,000, or thereabouts, of 91-day
Treasury tyLlls, for cash and in exchange for Treasury bills
maturing July 31, 1947* to be issued on a discount basis under
competitive and non-competitive bidding as hereinafter provided.
The bills of this series will be dated July 31, 1947, and will
mature October 30, 1947, 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,
$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
daylight saving time, Monday, July 28, 1947. Tenders will
not be received a,t the Treasury Department, Washington. Each
tender must be for an even multiple of $1,000, and in the
case of competitive tenders 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
he 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 Incorporated
banks and trust companies and from responsible and recognized
dealers5in 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. •i
2 1•
| , if|
:V'V'
Immediately .aft er ;
the ’clo sing hour, tenders will be , /
opened at the Federal Reserve. Banks and Branches, following; ;
which public announcement wiil be made by ,the Secretary. of the
Treasury of the amount and ;pr.ice range of accepted bids. Those
submitting tenders will be advised Of the acceptance or rejec
tion 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, non-competitive tenders for
$200,000 or less without stated price from any one bidder will
be accepted in full at the average price (in three decimals)
2
of accepted competitive bidfe; Settlement tôt accepted tenders
in accordance with the bids must be made 6t completed at the
Federal Reserve Bank on JÜlÿ 31, 19^7, in cash or other immedi.
ately available funds or in a like face amount of Treasury
bills maturing July 31, 19^7. Cash and exchange tenders will
receive equal treatment* Cash adjustments will be made for
differences between the par value of maturing bills accepted
in exchange and the issue price of the new bills.
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 the Internal Revenue Code* or .laws
amendatory or supplementary thereto. The bills shall be sub
ject 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 interests Under
Sections k2 and'117(a)(1) of the Internal Revenue Code, as
amended by Section 115 of the Revenue .Act of.19^1# the amount
of discount at which bills issued hereunder are- sold shall not
be considered to accrue until such bills shall be sold,'-re-n • ••
deemed or otherwise disposed of, and such bills are excluded
from considération as capital assets. .Accordingly* .the ovpBt
of Treasury bills (other than life, insurance companies) issued
hereunder need include in his income tax return only the dif
ference between the price paid for such bills, whether on
original Issue or on subsequent purchase, and .the amount actu
ally received either upon sale or. redemption at maturity ■
during the taxable year for which the return is made, as ordi
nary gain or loss.
-S ‘
- 0v
„
Treasury Department Circular No. 418, as amended., and. thia
notice, prescribe the terms ofi the. Treasury bills and govern
the conditions of their issue. Copies of the circular may be
obtained from any Federal Reserve Bank or1Branch.
oOo
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS*
Tue sday, July 29, 1947
Press Service
No* S-407
The Secretary of the Treasury announced last evening
that the tenders for $1*100,000,000, or thereabouts, of 91-day
Treasury bills to be dated July 31, and to mature October 30,
1947, which were offered on July 2 % 1947* were opened at the
Federal Reserve Banks on July 2o.
The details of this issue are as follows:
Total applied for
Total accepted
$1,671,145,000
1,101,522,000 (includes $ 19 ,542,000rentered
on a non-competitive basis and accepted
in full at the average price shown below)
Average price * 99*8l3/Equiv. rate of discount approx. 0.740$
per annum
Range of accepted competitive bids:
High *99.905 Equiv. rate of discount aporox. 0.376$ per annum
Low -99.810
"
"
•'
”
”
0.752$ *
”
(25 percent of the amount bid fpr at the low price was accepted)
Federal Reserve
District
Boston
New York* ,
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St, Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTAL
Total
Applied for
$
7 ,035,000
1,498,119,000
13 .103.000
1.400.000
2 .290.000
279.000
110,774,000
1.055.000
985.000
14.622.000
Total
Accepted
‘ 1 ,9 6 0 ,0 0 0
1,015,332,000
2 ,0 66,000
1 ,1 25,000
2 ,290,000
2 3 9 ,0 0 0
43.577.000
755.000
835.000
11 955.000
13.647.000
8,491,000
11 2 0 5 .0 0 0
$ 1 ,671 ,145,000
$ 1 ,101 ,522,000
9,528,000
.
0O 0
.
■
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Monday, August .4, 1947.______ _
Press Service
No. S-4o8
The Treasury Department today made public a staff study
of Federal-State tax relations, pointing out fields in which
Federal and State taxes overlap heavily and analyzing pro
posals for better coordination. The study, entitled "FederalState Tax Coordination", is one of a series being prepared by
the Treasury's Division of Tax Research in connection with
postwar tax revision.
Information contained in the study supplements that in a
report on Federal, State and Local Government Fiscal Relations
prepared in 1942 by a special committee appointed by the
Secretary of the Treasury, a n d ’published as Senate Document
No. 69, 19^3. Developments since 1942, arising largely
through^ the impact of the war, have modified some of the prob
lems which the 1942 report considered. The new study presents
an account of these developments, tabulates the principal con
flicts in Federal and State tax levies of the present time, and
indicates the most promising subjects 'for a practicable nearterm coordination program.
Indicating a widespread current interest in the subject,
State Governors and other State officials recently held sev
eral meetings with Congressional authorities on tax coordina
tion matters. Taxpayers are raising problems in this field
with increasing frequency with the Treasury Department and
other Federal agencies. The State Governors devoted a substan
tial part of their 19^7 annual conference to this problem.
The study released today is not intended to make policy
recommendations.
A table accompanying the study, summarizing Federal-State
tax overlapping in the fiscal year 1946, shows that of
$39,000,000,000 Federal and $4,900,000,000 State collections
of that year, more than 90 percent came at both levels from
the same tax categories, including income, death and gift,
liquor, tobacco, gasoline, admissions, and stock transfer taxes
^ Income taxes lead the list of those discussed in the study.
Individual net,incomes are taxed by 29 States and the District
of Columbia as well as by the Federal Government. Corporate
income taxes are imposed by 31 States and the District of
Columbia as well as by the United States.
i no
lab
2
•'The area of Federal-State conflict, particularly in the
individual income tax field, is not as hroad as appears at
first sight", the study remarks. "So long as personal exemp
tions provided by State lavs are substantially higher than
those under the Federal tax, a large number of taxpayers in
the lower Inc o m e* levels will be subject to one only, the
Federal tax* Moreover* the continued and expanded use of
mutual deductibility provisions Will preclude the imposition
of confiscatory levies at the higher income levels.
Observing that the State governments are well established
in income taxation and that it is a primary reliance for State
revenues, the study says a coordination program should proceed
on the assumption that both Federal and State authority will
continue in this field.
"Coordination will come largely through a positive program
of cooperation pointed in the direction of (a) intensified
Federal-State and interstate cooperation in tax administration,
(b) more uniformity in the definition of tax bases, (c) wider
use of deductibility provisions by the remaining States, and
(d) resolution of jurisdictional conflicts between States , the
income tax discussion concludes.
With respect to inheritance, estate and gift taxes, the
study points out that the Federal Government derives less than
2 percent of its internal revenue from the estate tax (includ
ing the gift tax) and the States not more than 3 percent* The
States1 quest for more revenue from this source, and the
broader question of Federal-State death tax coordination, are
closely associated with the better integration of the estate
and gift taxes.
The study says the taxing of tobacco products has gradually
developed into an example of extreme overlapping. At present,
38 States have tobacco taxes, and these taxes have been growing
in importance as revenue sources* Administration of tobacco
taxes is more difficult and costly for the States than for the
United States, primarily because the Federal tax is collected
from a relatively few manufacturers, the State taxes from a
great many wholesalers and retailers.
"It has been suggested that the solution of this problem
will ultimately require the withdrawal of the States from the
field under an arrangement which will assure them of replace
ment revenues", the study points out• "In the immediate future,
the scope of coordination will probably be limited to such ad
ministrative cooperation measures as the States are able to
develop with one another*"
É
®S®
In liquor taxation, "so much variety has developed that
it would require much space to describe in detail the country1s
taxes on alcoholic beverages," the study says. In the absence
of any coordination plan, the Federal and State Governments
have developed separate alcohol control systems along with
their liquor taxes, Tiiese taxes yielded the Federal Government
$2,500,000,000 and the State Governments $466,000,000 in the
fiscal year 1946.
The present diversity of State liquor taxes, and the fact
that taxation Is closely tied to liquor regulation, are cited
as among the reasons for recent recommendations that the
Federal 'and State Governments continue to go their own ways in
this field. Administrative cooperation, the study states, is
about the only contribution which the Federal Government can
make to coordination under the existing circumstances.
Reviewing gasoline taxes, the study cites the fact they
are levied by the Federal Government, by all State governments
and by certain local governments in seven States, with the com
bined rate reaching lG|r cents a gallon in some localities of
Alabama and Mississippi. This tax is one of,the most important
sources of State revenue. The Federal tax originated as an
emergency measure in 1932»
Although the consequences of dual taxation are perhaps
less serious in the field of gasoline taxation than in almost
other min. the. realm. of Federal—State
duplication , accord—
any gflHiip
.1
ing to the study, it is concluded hat "it may be well to
explore the possibility of Federal withdrawal from motor fuel
taxation in exchange for State withdrawal from another area."
Such an arrangement, it is believed, might make a significant
contribution, to oostwar tax revision.
The study found no compelling reasons for an immediate
coordination effort in the taxation of either amusements or
stock transfers.
Tables which are presented with the study provide
tailed data on rates and- exemptions of State taxes and
some cases city taxes in the various fields discussed.
tables are up-to-date, surveying the State taxes as of
first of the current month.
0O0
de
in
The
the
FEDERAL-STATS TAX COORDINATION
Division of Tax Research, Treasury Department
July 1947
133
FEDERAL-STATE TAX COORDINATION
Table of Contents
Page No
Introduction
... ............. ............
1
2
Exemptions and rates ................... ....... . •
Mutual deductibility.... .................. ....
Uniformity of tax bases ......... ........ .•*.....
Canadian and Australian developments ...............
2
4
5
6
7
8
9
Inheritance, Estate? and Gift Taxes ................... ••
11
Effectiveness of crediting device .............. «•»«
State tax jurisdiction ....... ..... .
11
12
13
U
15
Administrative problems .............. .
Coordination proposals ....... .... ...... .
15
16
17
19
State systems ........ .................... ..**•*
Coordination problem .................. ...... ....
19
21
dn
Extent of duplication ...................................
Coordination proposals ........ ................ .
22
22
25
Types of overlapping taxes ................ .
Stock Transfer Taxes ...... ..... ... ...... ..... .
State General Sales Taxes and Federal Miscellaneous
Manufacturers1 and Retailers’ Excises ..............
.
••f
25
27
29
200
Table of Contents (Continued)
Tables
1.
Federal and State Tax Collections for Fiscal Year 1946
(Exclusive of payroll taxes)
2*
State Individual Income Taxes: Personal Exemptions and
Credits for Dependents, juiy i, 19 4 7
3*
State Individual Income Taxes: Rates, July 1, 1947
4#
State Corporation Net Income Taxes: Hates, July 1, 1947
5.
Federal and State Income Tax Liability (Effective Rate)
for a Married Man without Dependents, at Selected Net
Income Levels
6*
State Income Taxes: Deductibility of Federal Income Taxes
from Gross Income in Computing Net Income, July 1, 1947
7*
Types of State Death Taxes, July 1, 1947
8,
State Cigarette Excise Taxes, July 1, 1947
9-*
City Cigarette Excise Taxes, July 1, 1947
10«
State Excise Taxes on Cigars, July 1, 1947
11«
State Excise Taxes on Smoking and Chewing Tobacco and Snuff,
July 1, 1947
12« 'State Excise Taxes on Distilled Spirits, July 1, 1947
13«
State Excise Taxes on Wines, July 1, 1947
14«
State Excise Taxes on Beer, July„l, 1947
15*
State Gasoline Tax Rates., July 1, 1947
16«
Frequency Distribution of Local Gasoline Tax Rates , August 1, 1946
17*
State Taxes on Amusements, January l, 1947
18*
City Taxes on Amusements., January 1, 1947
19 ,
State Sales Taxes: Types and Rates, July 1, 1947
20
Federal-State Tax Coordination
The coordination of Federal-State taxes, frequently discussed
in the Thirties and interrupted by the war, is again receiving
widespread attention* State Governors and other State officials
recently held several meetings on the subject with Congressional
authorities. Taxpayers are raising problems in the field with
increasing frequency with the Treasury Department and other Federal
agencies. The State Governors devoted a substantial part of their
1947 Annual Conference to this problem.
A complete account of the growth and extent of intergovern
mental fiscal conflicts, together with a detailed history of the
intergovernmental fiscal coordination movement in the United States,
was contained in a report on Federal, State and Local Government
Fiscal Relations published as Senate Document No. 69, 73th Congress,
1st Session. That document, prepared by a special committee appointed
by the Secretary of the Treasury and submitted by him without recom
mendation to the Senate in response to Senate Resolution 160, presented
an account of the situation as it existed in the fall of 1942. Sub
sequent developments, largely through the impact of war, have modified
some of the problems in the field of Federal-State fiscal relations,
particularly with respect to a number ©f taxes, and have als© served
t© enlarge the scope of administrative cooperation between the several
governments.
This study, prepared in the Division of Tax Research, supplements
Senate Document No* 69 by presenting an. account of post—1942 develop
ments, together with a tabular presentation of the current situation
with respect to the principal taxes involved in Federal-State tax
relations. It is not-intended to make policy recommendations, but
to provide information and analysis which would be useful in a con
sideration ©f the coordination problem and to indicate the subjects
considered to have most promise in connection with the formulation of
a practicable near-term Federal-State tax coordination program.
Division of Tax Research
U. S. Treasury Department
July 1947
202
FEDERAL-STATE TAX COORDINATION
Introduction
The report on Federal, State and Local Government Fiscal
Relations, prepared by a Special Committee appointed by the Secretary
of the Treasury and submitted by him without recommendation to the
Senate in response to Senate Resolution 160, contains a complete
account of the growth and extent of intergovernmental fiscal conflicts
together with a detailed history of the intergovernmental fiscal
This document was
coordination movement in the United
completed in the fall of 1942« Subsequent developments, largely
through the impact of the war, have modified some of the problems in
the field of Federal-State fiscal relations, particularly with respect
to a number of the taxes, and have also served to enlarge the scope of
administrative cooperation between the several governments* The
present memorandum supplements Senate Document 69 by presenting an
account of post-1942 developments, together with a tabular presentation
of the current situation with respect to the principal taxes involved
in Federal-State tax relations, and indicates the subjects considered
to have most promise in connection with the formulation of a practicable
near-term coordination program.
The extent of Federal-State tax overlapping is indicated by
Table 1 *. During the fiscal year 1946, when Federal tax collections
(exclusive of payroll taxes) amounted to approximately $39 billion
and State tax collections (exclusi/e of payroll taxes) amounted to
$4.9 billion, tax categories used by both levels of government
accounted for more than 90 percent of all collections, and included
income, death and gift, liquor, tobacco, gasoline, admissions, stock
transfer and miscellaneous sales taxation*
1/
Federal, Stacie and Local''Government Fiscal Relations, 78th
Congress, 1st Session, Senate Document ft'o, 69, 1943* p. 595
203
-
2
-
Income Taxes
Historically the taxation of income began approximately the same
time at both the Federal and State levels, but most of the States waited
a decade or more after the adoption of the Federal tax before embarking
on this field.
Today 29 States and the District of Columbia impose
individual net income taxes. In addition, 2 States impose taxes on
income from, intangibles only and two tax such income under their property
taxes0 Corporate income taxes are imposed by 31 States and the District
of Columbia# Two cities also tax income, although at low rates. The
Philadelphia tax applies only to the earned income of individuals and
the net profits of professional and unincorporated businesses. Toledo
imposes a similar tax but extends the base to include the net income
of corporations.
The rate in both cities is a flat one percent#
The widespread use of the income tax by the Federal Government
and the States and its occasional use at local levels has focused
attention on the need for intergovernmental coordination in this
field# In recent years the income tax has become the most important
single source of Federal revenue and is an important source of State
revenue as well# During the fiscal year 1946, Federal income and
profits tax collections amounted to $31.3 billion and accounted for
76.9 percent of total internal revenue collections# During that
same period State corporation income taxes amounted to $436 million
and individual income taxes to $395 million and together accounted
for 16#9 percent of State tax revenues, excluding unemployment
compensation taxes#
The imposition of duplicate levies on the same tax base, aside
from adding to the tax burden, increases the cost of taxpayers*
compliance (particularly for corporate taxpayers) and involves
duplicate administrative costs for the taxing governments#
Exemptions and Rates
The income taxes imposed by the States show some resemblance
to the Federal taxes but depart from them and from one another in
sufficient degree to make for substantial diversity. Like the
Federal tax, all State individual income taxes grant personal
exemptions# (Table 2) The exemption is generally stated as a
deduction from income but five States express the exemption in the
form of a tax credit# The exemptions granted to a single person
or to a married couple or head of family are generally higher than
the.j|i*5Q0 per capita exemption allowed for Federal income tax purposes#
However, in all but four States, the credit for dependents is lower
than the $>500 Federal exemption for dependents. The frequency
distribution of the size cf the personal exemptions and credits for
dependents allowed under State income taxes as of July 1, 1947', is
as follows;
:
Married couple or
|
Dependents
;
head of family
Amount of i Number of : Amount of ¡Number of ; Amount of ; Number of
States
: exemption ;
States
; exemption ;
exemption ;
States
Single person
t
1
1
1
3
1
16
1
1;
1
2
i
500
600
700
750
800
1,0 0 0
1 ,2 0 0
1,500
2,000
2,500
3,000
ilote;
J 1,2 0 0
1,500
1,600
1,800
2,000
2,400
2,500
3,500
4,500
$ 200
250
300
320
333
400
500
750
1
6
1
1
9
JL
7
2
1
7
3
4
2
1
8
3
1
For the five State’s which express t!he exemption in the form
of a tax credit, these credits have been converted into their
deduction equivalents.
With few exceptions, the State income tax rate schedules are
graduated, but none approaches the heights of the Federal schedule.
The highest State rate is 15 percent levied at $15,000; 25 States
go no higher than 7 percent, and 8 have maximum rates of less than
5 percent. In only 3 States does graduation reach beyond the $525,000
level# Approximately two-thirds of the States terminate graduation at
the $-10,000 level or below (Table 3)#
Of the 31 States which tax corporate income 25 apply flat rates
and 6 graduated rates# The rates are uniformly low, 8 percent being
the maximum (Table 4). The frequency distribution of rates imposed
under State corporate income taxes as of duly 1, 1947 is as follows« 1/
•
Number of
States
l/
________________ Rate (percent)
; 1.5 ; 2
;
:
;
;
: 1 ; 5
; 3 : 3.75 : 4
:
;
7
1
; 4
4.5 : 5
:
O
c
• t>
*2
:
5.5
6 ; 8
1
5 ; 2
For the six States which apply graduated rates the maximum rate
is used«
- 4 -
205
The foregoing catalogue of variations in Federal and State
income taxation tends to exaggerate the state of anarchy in the
field* A'number of devices have been developed which are successful
in achieving a substantial amount of coordination#
Mutual deductibility
Under Federal law, State income taxes are allowed as a deduction
in computing net income for Federal income tax purposes# Similar
provisions in approximately two-thirds of the States allow taxes paid
to the Federal Government to be deducted in computing State tax
liability# As a result of the deductibility feature of State and ■
Federal laws, the combination of the Federal and State income tax
rate cannot be confiscatory so long as neither rate alone is confis
catory#
Thus the maximum effective rate of 85#5 percent under the
Federal tax plus a maximum rate of 15 percent under the State tax
would produce a combined rate of only 85*86 percent if reciprocal
deductibility is in effect and of 87.68 percent if the Federal
Government permitted but the State denied 'the deduction# Table 5
illustrates the effect of the deductibility feature of income taxes
for a married man without dependents at selected income levels* In
the case of a $250,000 income, for example, the effective rate of
the Federal tax alone (assuming no State tax) is 76#5 percent# If
the individual is also subject to the Minnesota.tax which imposes an
effective tax of 9*7 percent, the combined burden of both taxes, as a
result of the deductibility provision of both laws, raises the combined
tax liability over that due under Federal l&w by only 0*3 percent# In
the case of a person subject to the Hew York income tax, which does not
allow the Federal tax as a deduction, the combined Federal and State
tax amounts to 77 percent.
In addition to reducing the overall burden on taxpayers residing
in income tax States, deductibility has the further effect of minimizing
interstate differentials in tax burdens* The combined effective rate
of the Federal and State income taxes, especially in the higher income
brackets, is not appreciably affected by the existence or nonexistence
of a State tax# It will be noted by reference to Table 5 that the net
effect of the 10-percent Minnesota tax on the total tax burden at the
$>1 ,000,000 net income level is only 0 .2 percent#
Mutual deductibility is an effective coordination device partic
ularly at the higher income levels, where a confiscatory rate might
result from the combination of Federal and State taxes. 1 /
This fact
l /
'
It should ‘be noted that, as' a result of tho recent1 introduction of
the 10 percent standard deduction (with an upper limit of $500)
for purposes of computing Federal income tax liability, most tax
payers in income tax States with incomes of less than $>'5,000 do not
have occasion to itemize the deduction of taxes paid to States; the
majority of taxpayers with incomes below $10 ,0 0 0 are also in this
category#
5
notwithstanding only one State (Idaho in 1941) has recently adopted
a deductibility provision with respect to both individuals and
corporations, Pennsylvania repealed the deductibility provision
with respect to the corporate income tax in 1943, while in 1941
Wisconsin limited its deduction to 10 percent of net income in the
case of corporations and 3 percent in the case of individual income
taxpayers. (Table 6 ) Arkansas in 1947 limited its deduction to 50
percent of the Federal tax#
Uniformity of tax bases
Another factor which has made for coordination of Federal and
State income taxes is the adoption of similar definitions of tax
bases. While there are incidental variations which suffice to
complicate appreciably the compliance problems of taxpayers, defini
tions of net taxable income in the several States do not on the whole
differ markedly from one another or from the Federal definition.
Several States use the Federal definition of "net income” for corporate
tax purposes, with certain adjustments, l/ The progressive individual
income tax enacted by Vermont this year adopts the Federal definition
of ”net income” with certain ndjustments, e.g., the exclusion of income
expressly exempted from taxation by the States and the exclusion of
capital gains and losses. It also adopts the Federal system of personal
exemptions (^500 each for the taxpayer, his spouse, and each of his
dependents), and uses the Federal definition of "dependent”, z j
The
Federal definition of "adjusted gross income” is used (except for
exclusion of capital gains and losses) and an optional simplified tax
table is provided for all persons whose adjusted gross income is less
than ^5,000*
The adoption of uniform definitions of income by the States and
the Federal Government would make the use of a joint Federal-State
income tax return practicable• This would also clear the way for
single administration of Federal and State taxes in the event that
it was desired to eliminate duplicate administration. It should be
kept in mind that the use of the same tax base and the same tax
return would not necessarily require the various States to impose
similar tax rates.* Each State could continue to adjust its rates
and exemptions to suit its own revenue needs.
In some cases, present differences between the Federal and the
State tax bases are so small as to suggest that uniformity could be
quite readily obtained. Some attempts have already been made to
develop uniform definitions of net income with a view to making the
1/
2/
Connecticut, Massachusetts, liew Yorlc, Pennsylvania and Vermont,
It differs from Federal law, however, in that an additional
&500 exemption is allowed to persons over 65 years of age.
207
6
use of a joint State-Federal income tax return practical. Federal
and New York State officials in particular did considerable work at
the technical level toward this end some ten years ago but negotiations
were not carried to completion. However, sufficient progress Was made
to hold out promise of ultimate success along this line* Uniform
definition of the tax base and the uso of common tax returns would
open the way to Federal-State agreements for unified administration
of the two taxes which would be practicable even if it were limited to
only some of the States while others continued their present independent
policy* Such a system was successfully employed in both Australia and
Canada before the last war* In Australia, the Commonwealth administered
the State tax in one State and in the other five, the States administered
the Commonwealth Tax. In Canada the Dominion administered the taxes of
three provinces*
State tax jurisdiction
The growing use of income taxes at the State level has aggravated
the results of the application of different jurisdictional rules in the
several States* The diversity of State laws in the determination of the
tax base results in the taxation of the same income by mere than one
State and is one of the more troublesome aspects of multiple taxation*
Under the individual income tax, varying definitions of ’’resident”
result in an individual being subject to tax in more than one State on
the same income. With respect to the corporation income tax, the great
variety of formulas for apportioning income between the States makes
possible both complete duplicate taxation and complete exemption*
The problem of jurisdiction has received considerable attention
in recent years* States have been urged by the Council of State
Governments to adopt uniform and reciprocal rules for the allocation
of income arising from interstate transactions or income arising out
of the State of domicile of the taxpayer* l/ With respect to the
specific problem arising in connection with the taxation of airlines,
a special committee of the. National Association of Tax Administrators
drafted a statute embodying provisions for interstate allocation of
airline tax bases for property and income tax purposes*
The Congress has also considered State jurisdictional Issues
arising in restricted fields. In the case of the individual income
tax, it considered a proposal to eliminate multiple taxation of
Federal compensation of Federal employees by limiting State taxes
to the State of domicile* 2/ In the field of corporation taxes,
the 78th Congress directed the Civil Aeronautics Eoard to develop
T/ Council of State Governments, ”Wartim6 arid ^Postwar Proi>l&m& and j
Policies of the States,” 1944, p. 44*
Z/ The 0*Eara Bill, H,R. 127, 80th Congress, 1st Session*
- 7 -
the means for eliminating multiple taxation of airlines* \ f
The
CAB report -recommended that the Congress prevent multiple taxation
of airlines by providing a uniform basis for the determination of
taxable situs and by setting up formulas for allocating the tax
base among the States* Z J
The Bulwinkle Bill now pending in Congress
follows closely the recommendations of the Civil Aeronautics Board
report and proposes formulas for allocating the tax base of airlines
among the States* 3/
Administrative cooperation
Recent years have witnessed substantial progress in income tax
coordination through Federal-State and interstate cooperation in
administration* Federal law now grants the States the privilege of
inspecting income tax returns as well as returns for other types of
taxes* Furthermore, the Federal Government furnishes copies of
returns to the States on request and payment of a fee* Most of the
States now make regular use of Federal income tax information and
some informal cooperation between the administrative staffs also
occurs* By far the most significant form of Federal assistance to
State tax administrations is the. special transcript services provided
by the Bureau of Internal Revenue to the States at nominal expense*
The States which arrange for this service automatically receive data
on subsequent readjustments of Federal tax liability*
This makes
available to the States the benefit of Fedoro.l income tax enforcement,
including audits. Exchange of information betw.-en States is also
progressing*
State and local governments on their part assist the Federal
Government in the administration of the income tax by acting as
collecting agents in withholding the Federal income tax from salaries
and wages paid by State and local governments*
Experienced State tax administrators anticipate further progress
in coordination through administrative cooperation*
The Council of
State Governments, for instance, has proposed the enactment of both
Federal and State legislation authorizing contracts between Federal
and State administrative agencies to permit exchange of information
and use of one another's personnel and other facilities* The Council
has also sponsored State adoption of a model bill which would give
tax administrators discretionary authority to make available on a
reciprocal oasis, to officials of other States and the Federal Government
tax reports, tax returns, auditors' investigations and related materials*
Some of the States have already enacted enabling legislation of this type*
If
2 /
5 /
Publ ic Law 416, 78th Congress, 2nd Session*
Civil Aeronautics Board, "Multiple Taxation of Air Commerce ,
79th Congress, 1st Session, House Doc*, No* 141*
H.R* 1241, 80th Congress, 1st Session.
'
n
209
8
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Canadian and Australian developments
The wartime experiences and postwar plans of Canada and Australia
for fiscal coordination are of interest since these countries are in
the process of working out somewhat similar problems but in a very
different setting*
The federal governments in Canada and Australia
have greater powers than our Federal Government* Australia has six
statesj Canada has nine provinces* Australia’s population is only
about 1/20th and Canada’s only about l/l2th of that of the United States*
Finally, in a country the size of the United States with its great
variations in industrial and economic patterns, the problems are much
more complicated and difficult of solution* It is instructive to look
at the experience of these countries even though their techniques have
no immediate applicability to the United States*
In both Canada and Australia the coordination of federal and state
income taxes has played an important part in the- broader issues of fiscal
coordination* Prior to the/war, as noted above, coordination between
the Commonwealth and the state income taxes in Australia and the Dominion
and provincial taxes in Canada had J^een achieved by amalgamated adminis
tration* However, the problem of duplicating rates remained* As a war
measure, the central governments in both countries preempted the income
tax field for the. duration of the war period and in return gave the
states grants equal to their prewar revenue from this source* The
central government justified its action on grounds of its need for
revenue to finance the war and the usefulness of heavy income taxes in
the control of inflation*
In working out postwar arrangements with their states (or provinces),
the central governments of these two countries hive met with varying
degrees of success# In Australia, the central government indicated its
intention at the January 1946 Premiers* Conference to continue the ex
clusive use of the income tax permanently* After long conferences the
§tate representatives accepted this decision, but insisted on a revision
ef the reimbursement grants* It should be noted that whereas during the
war period the grants given to the states for the use of the income tax
were merely replacement grants equal to their prewar revenue from this
source, the postwar arrangement employs an adjus ted.population basis
which takes into account both the age distribution and the density of
the population* Thus, the new basis involves an important- geographic
redistribution of revenues*
§§
The Canadian Dominion-Provincial wartime tax, agreements expired
in the spring of* 1947* In anticipation of the termination of these
agreements., a Dominion-Provincial Conference was held in August 1945*
In this conference, the federal government submitted a comprehensive
program of iiscal coordination which included (l) a coordinated program
of counter-cyclical public investment employing additional grants to the
provinces, (¿) a broad social security program with the federal govern
ment carrying a larger share of the cost, and (3 ) a reallocation of
revenues under which the provinces would give up the income taxes and
succession duties and would receive per capita grants which would be
subject to ad jus tinent ''for increases in population and gross national
product*
Despite subsequent offers of liberalization of federal payments,
no general agreement with the provinces could be reached primarily
because of the opposition'of Ontario and Quebec,'and in June 1947
when the budget was presented, the federal government offered to
negotiate fivre-year agreements with individual provinces* Agreements
have been signed by three provinces (British Columbia, Manitoba, and
Nova Scotia) and negotiations are under way with other provinces* It
is .expected that all will sign, except perhaps Ontario and Quebec*
Their opposition appears to rest primarily on economic grounds,, namely,that the federal plan would lead to a n e t >transfer of income from their
residents to residents of other -provinces*
Coordination problem .
The area of Federal-State conflict, particularly in the individual
income tax field, is not as broad as appears at first sight* So long
as personal exemptions provided by State laws are substantially higher
than those under the Federal tax, a large number of taxpayers in the
lower income levels will be subject to only one, the Federal tax.
Moreover, the continued and expanded use of mutual deductibility pro
visions will preclude the imposition: of confiscatory levies at the
higher income levels* Such conflicts as exist in the- income tax field
can in large measure bd resolved without a revolutionary change in the
relationship of the Federal Government and the States through devices
already tested and proved to be effective* These devices are adequate
to enable the Federal and State governments to follow an integrated
income tax program involving a minimum of administrative expense to
the governments and a minimum of compliance costs to the taxpayers#
211
10 -
The State governments are well established in income taxation
and rely primarily on this' revenue source for progression in their
tax systems* A program for intergovernmental coordination in this
area, at least for the near future, should proceed on the assumption
that both the Federal and State governments will continue in the
field and that the passage of time will not of itself resolve the
problem. Coordination, will come largely through a positive program
of cooperation pointed in the direction of (a) intensified FederalState and interstate cooperation in tax administration, (b) more
uniformity in the definition of tax bases, (c) wider use of deduct
ibility provisions by the remaining States, and (d) resolution of
jurisdictional conflicts between States,-
Inheritancej Estate and Gift Taxes
Remarkably little development has occured in the death-gift tax
field during the past five years* The structure and the rates of both
State and Federal taxes have remained practically unchanged# During
fiscal year 1946, the Federal estate and gift tax produced 1.676*8 million*
or less than 2 percent of internal revenue collections* The State taxes
on inheritance, estate and gifts produced that year $146 million, or less
than 3 percent of State tax collections*
The striking feature of Federal-State relations in the death tax
field is the crediting device, introduced in 1924 and amended in 1926,
which enables taxpayers to claim taxes paid to States as a partial credit
against Federal tax liability* The net effect of this device is that
States are able to impose taxes on estates up to 80 percent of the Federal
liability under the 1926 law without increasing the taxpayerrs total tax
burdens#• "Within this limit, State taxes have only the effect of preempting
for the States revenue which otherwise would be payable to the Federal
Government* The original purpose of the crediting device was to eliminate
interstate competition for wealthy residents and to encourage uniformity
in State death taxation* Interstate competition is no longer a consider** ation but in the realm of interstate uniformity less has been achieved*
The crediting mechanism has not disposed of the problems of dual adininistration, multiple State taxation, and the excessive diversity which
characterizes the overlapping system of death taxation* Most of the
States have passed laws to take full advantage of the Federal,credit,
but the actual methods chosen by them differ considerably#
Types of State taxes
For more than a decade every State, except Nevada, has had some form
of death tax# Four types of State death taxes are now in use: the in
heritance tax-, the estate tax independent oT the Federal levy, the so-called
differential estate tax (designed to absorb the difference between State
duties otherwise imposed and the maximum credit allowed under the 1926
act) and the estate tax based on the Federal levy.
Table 7 indicates the types and combinations of death duties imposed
by each of the States* Thirty-seven States levy inheritance taxes. Five
have only this type of death duty# Thirty-one of the inheritance tax
States.have also enacted differential estate taxes* l /
Rhode Island,
which is one of the thirty-one States levying both an inheritance tax and
T/
Inheritance taxes are levied by The' District' of Columbia and t h e '
Territories of Ilawaii and Alaska* The District of Columbia and
Hawaii levy differential estate taxes as well*
a differential estate tax, imposes still a third death duty in the form
of an independent estate tax. Oregon, the remaining inheritance tax
State, does not levy a differential estate tax, but imposes an independent
estate tax.
Ten States taxing the transfer of property at death do not levy in
heritance taxes. Two of these, North Dakota and Utah, levy only an
independent estate tax. Four, Alabama, Arkansas, Florida and Georgia,
have enacted estate taxes conforming in their entirety to the provisions
of the 1926 Federal estate tax, Mississippi’s estate tax is based upon
the provisions of the 1926 Federal tax, but the exemption is only v50,000,
half of the amount allowed under the 1926 Federal tax. New York levies
rates which arc 100 percent of the 1926 Federal rates. 1/ Oklahoma levies
an independent and a differential estate tax.'
Effectiveness of crediting: device
The foregoing diversity in the types and structure of death taxes
results in wide interstate variation in death tax burdens. ■ Only a very
few States have confined their taxes to 80 percent of the 1926 Federal
rates. Most States impose additional burdens on estates of less than
v100,000 and also levy burdens in excess of the amount allowed as a
credit against Federal tax on estates of more than vlOO,000.
In the decade following 1926, the Federal estate tax rates wore
increased several times, ■without a corresponding increase in the scope
of the crediting provision, with the result that the States’ share of
total death tax revenues decreased. A/hile the specific exemption under
the 1926 Federal estate tax law (which serves as the basis for computing
the State credit) is v100,000, the specific exemption under the present
Federal estate tax law is ,„,60,000, 2/ In consequence, no estate tax
credit is at present permitted for taxes paid to States on the large
number of federally taxable estates which amount to less than 6100,000.
Furthermore, since the* Fuderal rates in the upper brackets of the estate
tax rate schedule were increased, the relative share of death taxes
subject to State credit on large estates has declined. Between 1931
and 1944 the percentage of Federal estate tax liability represented by
credits, claimed for taxes paid to the States declined from 76 to 10
percent.
.
The credit does not apply to the Federal gift tax, enacted in 1932.
The Federal gift tax rates are three-fourths of the estate tax rates and
a separate exemption of :n3 0,000 is allowed for the gift tax. In addition,
the gift tax provides f o r „an annual exclusion of v3,000 per donee. Because
1 / However, under the Now York law, the specific exemptions (V20,Q00 for
transfers to spouse and v5,000 to lineal ascendants and descendant^
and certain other named relatives) are taken out of the first bracket,
which is fixed at ,.150,000.
The v60,000 exemption was adopted in 1942 and replaced the former
::40,000 exemption and y4Q,0Q0 life insurance exclusion.
214
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of the different Federal tax treatment accorded dispositions during life
and dispositions at deaths transfer tax liability varies appreciably
depending upon.when and how disposition is made. The amount of tax lia
bility can be substantially reduced by systematic distributions of the
property among the heirs during the lifetime of the transferor# Property
so transferred is subject to the Federal gift tax and the crediting device
is inoperative. To the extent that the lower rates under the gift tax
encourage the distribution of estates during the lifetime.ff the owners,
the amount of the estate subject to State taxes and the amount of State
revenue is reduced.
In their efforts to increase collections from the transfer, taxes
and to maintain their relative position in the field, States have enacted
gift taxes, as well as independent death taxes. The first State gift
tax; law was enacted in 1933, one year after the Federal tax became, lav/,
and by 1942, 12 States had entered this field (Table 7), In most States,
gift and death tax rates are identical.
As a result of the States* efforts to increase their revenues, some
ef the Federal-State death tax coordination achieved by the introduction
of the crediting device has now been dissipated. To remedy this situation
it has been proposed that the crediting device be continued but that it be
modernized and expressed in terms of the present Federal rates. The proposals usually suggest rates high enough to assure that most, if not all,
of the States suffer no loss in revenue. Such action would probably
restore some uniformity to the State laws and would lead to some simpli
fication of administrative procedures. Under the present system an
executor of an estate has to deal with both Federal and State (often more
than one State) governments. Although joint appraisals and joint audits
have been worked out on an informal basis in some States, there is no
formal arrangement for joint administration.
State tax jurisdiction
An independent but equally difficult problem in the field of death
taxation is the question of State jurisdiction to tax. Disputes con
cerning the taxpayer’s domicile have led to the taxation of the same
estate- by more than one State. The United States Supreme Court in recent
decisions has declined to accept the role of arbitrator in these disputes.
In the absence of interstate comity, it has been suggested that the Federal
Government assume the role of arbiter in this field. This suggestion stems
from the thought that through the use of a liberal credit and suasion, the
Federal Government might be able to stimulate the resolution of jurisdic
tional disputes.
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215
Tobacco Taxes
The.taxation of tobacco products has gradually developed into an
example of extreme overlapping* The Federal Government has been in the
field continuously since the Civil iar* State taxation of tobacco is a
comparatively recent development but has made rapid strides in the last
few years; Iowa enacted the first State tobacco tax in 1921, By 1931
the number of States taxing tobacco had increased to 14 and during the
next decade the number more than doubled to a total of 29 by 1941; The
State tobacco tax continues to grow in importance, and some laws that
began as temporary emergency measures have become permanent; At present
38 States have tobacco taxes* eight of which wore enacted in 1947* A
number of States increased their rates in 1947 and some States which had
formerly imposed their taxes as emergency levies made them a permanent
part of their tax systems.
State taxes
State taxes on tobacco are very largely cigarette taxes; only 10 tax
cigars and 9 tax some other form of tobacco products (smoking tobacco,
cheWing tobacco or snuff); Table 8 shows the States which tax cigarettes
and the level of rates imposed* In addition, cigarettes are also taxed
by a number of municipalities (Table 9)* In some cases, the addition of
a city tax makes tax administration nthroe-deepH, as for example in
Alabama* Florida and Georgia,- The extent of State taxation of other
tobacco products is Indicated by Tables 10 and 11 w States which have
general sales taxes, but no special tax on tobacco, usually include
tobacco in the base of sales tax. Most of the States which tax tobacco
products also require the annual licensing of tobacco distributors,
wholesalers, and retailers; In most cases these fees are imposed as
aids to tax administration and are nominal in amount,’
In terms of revenue significance, tobacco taxes are much more
important in the Federal revenue system than in that of the States, In
1946 tobacco taxes ranked ninth as State revenue producers. However, they
are increasing in importance. State collections in fiscal year 1946 were
4199 million compared with ylO? million in 1941 and 111 million in 1931*
Federal tobacco taxes produced vl>l66 million in the fiscal year 1946,
when they accounted for 2,9 percent of internal revenue collections,'
The measure of State cigarette taxes is usually expressed in terms
of packages of a specified size or number of cigarettes. In only two
cases is the tax based on retail price. The State cigar tax rates on the
other hand are frequently graduated according to retail price. With few
exceptions, the State tax on other forms of tobacco products is also'based
on retail price*
Administrative problems
The administration of tobacco taxes at the State level has serious
limitations. Important among these is the lack of control over inter
state shipments. Interstate parcel post shipments provide an important
means of tax-evasion. The National Tobacco Tax Conference, composed tf
State tobacco tax administrators, has been engaged for some time in an
effort to evolve methods of meeting this form of evasion. Through co
operative efforts of State administrators, through the enactment of use
taxes, and through the cooperation of tobacco manufacturers and whole
salers, some progress has been made, but the States are not satisfied
with the effectiveness of their enforcement and are seeking Federal
assistance in handling this problem*
The States have assisted each other through exchange of information
on interstate shipments. For example, the Florida law requires all tobacco
dealers to furnish the State administrator of tobacco taxes the names and
addresses of all persons to whom they ship cigarettes, both in the State
and out of the State. This list is furnished on a reciprocal basis to
other States. Hie usefulness of such information to another State depends
upon the form of its tax and the number of its enforcement officers. If
the State has a use tax, It can collect the tobacco tax from the consumer
provided it has enough inspectors and collectors. Some State adminis
trators have gentlemen’s agreements with larger manufacturers who undertake
not to make shipments to individual consumers within the State but ship
only to licensed wholesalers and retailers. Some States have enacted laws
making possession of a certain number of unstamped cigarettes presumptive
evidence that they are held for sale. 1/ In Nov/ York an investigating
force is stationed at the terminals of the tubes and ferries to pick up
persons importing tax-free cigarettes from New Jersey.
Enforcement measures devised by the States leave the bulk of the
mail order problem unsolved. For several years the State administrators
have urged Federal legislation which would make available to them the
records of the Post Office Department. More recently the National Tobacco
Tax Association has sponsored legislation which attempts to place responsi
bility on the Federal Government for enforcement of State taxes on tobacco
involved in interstate shipments to persons other than licensed dealers. 2/
Under this legislation any person selling tobacco products in interstate
1/
2j
In New York, for example, possession of 1,000 cigarettes in unstamped
packages and in Alabama possession of more than 30 packages of un
stamped cigarettes is presumptive evidence that they are held,for the
purpose of evading the required taxes.
H.R, 3345* Both Congress, 1st Session, and a number of other similar
bills.
17 -
commerce, who ships such products to persons other than licensed distri
butors ^in a State taxing the sale or use of tobacco products, would be
required to forward to" the tobacco tax administrator of the buyer's
State monthly information regarding such shipments « Violation of the
provision would be punishable by,fine and imprisonment«
The Secretary
of the Treasury would be authorized to issue rules and regulations for
enforcement©
The administration' of State tobacco taxes is more difficult and
costly than Federal administration primarily because, the Federal tax is
collected at the manufacturers' level, whereas the State taxes are
collected from wholesalers, and in the case of retailers5 purchases across
State boundary lines, from retailers* l/ In the case of out-of-State
purchases by consumers, collection can be made only through the costly
and cumbersome use taxes«
Tobacco manufacturing is concentrated in the
hands of a small number of companies and consequently the Federal tax
involves only a small number of direct taxpayers« For the fiscal year
1941 the Bureau of Internal Revenue reported the cost of collection to
be less than one-fifth of one percent (0.18 percent)«
Coordination proposals
The coordination of tobacco taxes has been the subject of lengthy disIn 1934 the Graves-Edmonds
eussions , particularly,among State officials«
plan, which offered a four-point program for coordinating Federal-State;
taxes,' proposed that Congress provide-for the distribution of 1 cent of
the Federal cigarette tax to the States in proportion to population, pro
vided that the States withdrew from the tobacco tax field* 2/ In January
1933, Chairman Dough ton of the Viays and Means Committee introduced a
resolution calling for the sharing of one-sixth of the Federal tax
collections with the States along the lines of the Graves-Edmonds plan«
In 1942, the Intergovernmental Fiscal Relations Committee recommended
that the Federal tax on;cigarettes be increased to the extent of 2 cents
per standard package and that the share of Federal revenues represented by
this portion of the tax be distributed to the States (which withdraw fromthe field) on the basis of population, with urban areas given a weight of
150 percent©
l /
2/
An important factor in State administration costs is*~the discounts on
tax stamps given to the tobacco merchants or wholesalers* Discounts
ranging from 5 to 10 percent are most common*F. S„ Edmonds was a member of the Pennsylvania State Senate and
Mark Graves was president of the New York State Tax Commission©
During the interval since the formulation of the above recommendation,
State taxation, of tobacco has boepme .more widespread and varied and1
,the
nroblcn- of coordination more difficult,
that tire, State sharing in
...
Federal revenues in an amount corresponding to a 2 cent cigarette a, ax would
have left most of the States at least as well off as they ^wore on tne basis. :,
of their own. imposed tax. That Situation no longer prevails*
The problem of intergovernmental fiscal relations in the oobacco tax,
field is not so much one of overlapping Federal-State taxation, o& tne ^
inability of the States to efficiently administer their own taxes with^ _ «
respect to interstate shipmentse 'So long as tobacco is taxed at relatively.
high rates in some of the States but not in others, tax consioeiY'tiofis are
bound to influence the movement of tobacco from States not imposing tobacco
taxes to States which do. The Federal Government is unable to give appreci
able assistance to taxing States in the administration of those taxes
because the collection of Federal taxes and State taxes involves an entirely
different grouo of taxpayers. The Federal tax is collected from a relaiive y
few manufacturers; the State taxes from a large number of whblcsalers and
retailers. It has been suggested that the solution of this problem m i x
-ultimately require the withdrawal of the States from the field under ¿in . ■ arrangement which will assure them of replacement revenues. In tne immedi ui e
future, the scope of coordination will probably be limited to such adninis.^^
trative cooperation measures as the States are able to develop with one
another.
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219
Liquor Taxes
Prior to the repeal of the 18th Amendment, there were no liquor
taxes in force in the United States* At that til e, wiuh a view to
forestalling the development of unnecessary Federal-State conflict, a
number of proposals were made that the manufacture of alcoholic beverages
be taxed exclusively by the Federal Government and the revenues shared
with the States, Such proposals wore included, for example in the
Fosdick-Scott study, l/ the report of the Interstate Commission on
Conflicting Taxation, 2/ and the Graves—Edmonds plan* No plan of coordination was adopted, however, and the Federal and State governments
developed their separate alcohol control systems* In the space of little
more than 10 years, so much variety has developed that it vould^require
much spaqe to describe in detail^the country’s taxes on alcoholic
beverages. In the meanwhile, the revenues from this source have become
an integral part of State fiscal systems, and more importantly, have
become closely tied to the financing of specific functions. In conse
quence, any system of coordination which might now be proposed, must
not only take duo account of the varying revenue stakes' of the several
States in this field, but of the vested interests of specific functional
groups as well.
In the fiscal year 1946* the Federal Government derived. -J2.5 billion
from this source, which accounted for approximately 6 percent of all^
internal revenue collections« State governments collected .„4o6 million
or about 10 percent of their tax revenues.
State systems
Overlapping taxes extend to afl three levels of government and take
the form of specific excises levied on the threie principal types of
alcoholic beverages, distilled spirits, wine, and beer (Tables 12-14)*
as well as occupational license taxes Imposed on the privilege Of
engaging in the various branches of the alcoholic beverage business*
Although there are Instances of municipal excises bhe imposition of
excises at the local level is not common** 3J Licenses are levied by -
y r . B* Fosdick and A, L , Scott, Toward Liquor Control, N.Y., 1933, p. 122.
2j Conflicting Taxation, the 1935 Progress lioport of the Interstate Com
3J
mission. on Conflicting Taxation, p. o„
Among the local excises are the following:
Distilled spirits
Abbeville, Ala.
Birmingham, Ala.
2% of retail price
Jefferson County, Ala.
New Orleans, La.
Shreveport, La.
Baltimore, kd.
Garret County, ÇcU
40$ per gal.
50?- per gal.
.
*
,nne
Beer
3f per 12 oz.
2% of retail price
5$ to 404 per gal.
St.i.5Q per bbl.
2$ per 12 oz,
or fraction
thereof.
4C)& per bbl*
(,1.50. per bbl,
2$ on 12 oz. or less:
5-P/3C on 12 to 32 oz
-
20
-
220
either the State or local governments, and not infrequently by bo.h. -.he
larpest license fees are for distillers and brewers, usually between *500.
and v2,500 each, although a few States have much larger ,ees, as xor
example, the 47,500 license for Class A distillers in New York«, smaller
fees are required of wholesalers, retailers, restaurants and hotels, and
miscellaneous dispensers. These licenses while intended to be regulatory
in character are not insignificant revenue producers ana in the fiscalyear 194.6 produced approximately 466 million at the State level.
State rates on alcoholic beverages vary widely. The rates cn beer
r a n f r o m 62 cents per barrel in several of the States to as much as
¿,7,00 or. more in two States. In general, however, the State rates on
beer are far below the v8.00 per barrel Federal rate. In approximately
one-third of the States, the beer tax ranges from ;„1.0G to ^l.,5P per
barrel. In three-fourths of the States it is below v3*00 a barrel.
The State taxes on distilled spirits are also low, compared with
the present Federal rate of v9.00 per gallon. In five States, the tax is
less .than a a gallon while in thirteen States it ranges from *1.00 to
el«50 and in ten other States it ranges from yl«50, to v3.00 per gallon.
Of the 16 monopoly’-States, seven impose no tax and the remainder impose
taxes, generally 10 percent of the retail selling price. North Carolina
which has county-operated stores levies a State tax of 8-1/2 percent of
retail price.
Because of the variations in methods of classifying wines under
State taxes, it is difficult to compare State and Federal wine taxes.
The Federal tax classifies still wines into 3 categories: \1) no^ more
than 14 percent alcohol, (2 ) over 14 percent but not over 21 percent
alcohol, and (3) over 21 percent but not over 24 percent alcohox, and
applies rates of 15 cents, 60 cents, and v2 .00, respectively,^per wine ga_lon,
Federal rates on artificially carbonated wine and sparkling wine are
;2„00 and v3.00, respectively. Some of the States make no distinction
between light and fortified wines and where- distinctions are made^the
classes do not always correspond to those of the Federal tax. 'with
respect to light wines (defined as containing not more than 14 percent
alcohol) ii of the States impose rates below the Federal rate of 15 cents.
With* respect to fortified wines (containing over 14 percent alcohol) onlysix States impose rates as high as the Federal rate of 60 cents.
Three States (Kansas, Mississippi, and Oklahoma) have prohibition
and allow only liquors of low alcoholic content to be sold. Sixteen
States have alcoholic beverage monopoly systems and depend for revenues
largely on profits from liquor sales rather than on taxes. In the fiscal
year 1945 the net income of the 16 State monopoly systems amounted to
more than p U 3 million 0
*
21
-
221
Coordination problem
The present wide diversity in State liquor taxation practice constitutes a major obstacle to a program of coordination and more particularly
to a system of State sharing in Federal collections such as was propose
at the time of prohibition repeal. Recent studies have recommended that
the Federal Government and the States continue their separa e pa»
i.
the taxation of alcoholic beverages exploiting independent and overlapping
sources* l/ These studies recognize that taxation of liquor is close y
tied to regulation of liquor consumption which under the 21st Amendment
and Federal legislation has been left entirely to State determination.
Existing circumstances make interstate variation in liquor taxation
almost inevitable and confine to administrative cooperation the scope of
the contribution which the Federal Government can make to coordination.
Some measure of Federal-State administrative cooperation has already been
achieved, particularly in the detection of illicit distilled spin s
manufacturing« In the direct tax administration procedure less complete
cooperation has been developed but the free exchange of enforcement
information between the Federal Government and the States now in process
of-development holds some promise that the Federal Bureau of Internal
Revenue can assist States in reducing their administrative costs and the
compliance burdens imposed on taxpayers, State sovereignty m l i q u o r
consumption policy tends to produce wide interstate variation in axa 10
of liquoro
1 / Newcomer, Mabel, "The Federal, State .and Local Tax Structure after
th* War»" Proceedings of the American Philosophical Society, June 16*
1944o The Report of the Intergovernmental Fiscal Relations Committee
while'making no major recommendations does suggest that Federal
occupational and license taxes should be eliminated but the licenses
retained for administrative purposes (p* 514)*
222
Gasoline ’Taxes
Extent of duplication
The gasoline tax was first introduced by the States, beginning
with the Oregon law of 1919 and is now in universal use* Local
gast>line taxes are imposed in seven States<i The Federal Government
did not enter the field until 1932. As'a result of the taxation bythree levels of Government, the combined r-a-ta in sene cases is high,
reaching lOg cents in some localties in Alabama and Mississippi
compared with a 4g~ cent combined rate in '-lour of the States and
tho District of Columbia,, (Tables 15 and 16)
The gasoline tax has become one of the most important sources
of State revenue. Collections in 1946 amounted to >900 million or
more than the total yield of the State individual and corporate
income taxes and accounted for 18 percent of total State tax revenues.
Federal gasoline tax collections in 1946 were-s.406 million or less
than one percent of total internal revenue collections.
The State gasoline tax has been developed largely as a benefit
tax on highway users arid has usually been earmarked for highway
purposes* Most non-highway consumption of gasoline has been exempted
from taxation or taxes paid thereon refunded. In many States gasoline
taxes have been earmarked for servicing of highway debto In 1940, 38
States used part of their gasoline taxes for servicing indebtedness.
One-fourth of the States used over 20 percent of their motor fuel taxes
for this purpose*
The Federal tax was introduced along with a number of other
excises as an emergency measure, limited to one year, during the
depression (in 1932), but has been repeatedly renewed. The original
rate of 1 cent per gallon was increased to 1-g- cents from June 18,
1933 to January 1, 1934. At the end of that period it reverted to
1 cent and remained at that level until it was again raised to lgf cents
in the Revenue Act of 1940*
Coordination proposals
Frequent proposals have been made for the repeal of the Federal
gasoline tax» The Senate Finance Committee, in 1933 and 1935 recommended
its elimination on the grounds that it was an unwarranted invasion of a
field of taxation formerly reserved to the States*, The Interstate
Commission on Conflicting Taxation in 1933 and the Council of State
Governments in 1937 urged the Federal Government to relinquish this
source of revenue to the States. This proposal has been strongly
supported by the States, by the petroleum industry, by highway
organizations and by some members of Congress« Recent research
studies have also recommended the "withdrawal of the Federal
Government from the motor fuel tax fieldo The Intergovernmental
Fiscal Relations Committee suggested that separation of sources
in the motor fuel tax field might take the form of exclusive
Federal taxation of fuel used in aviation and exclusive State
taxation of other motor fuel® \J Two-thirds of the States now
exempt aviation fuel from State taxation and the remaining States
either have special aviation tax provisions or do not receive much
revenue from this source©
The Civil Aeronautics Board in its report on Multiple Taxation
of Air Commerce expressed the opinion that the States should refrain
from the taxation of aviation fuel used in interstate commerce but
indicated the desirability of having the Treasury study the problem
for the purpose of working out some equitable relationship between
the States and the Federal Government with respect to the taxation
of motor fuel and aviation gasoline# The Buiwinkle Bill (H.R, 1241)
now pending in Congress proposes to implement the suggestion of the
Civil Aeronautics Board by instructing the Treasury to consult with
the Governors and fiscal authorities of the States With respect to
the State and Federal taxation of aviation fuel and recommend to
Congress a program in this field»
A recent study of American highway policy concluded that the
direct and clear-cut way to preserve a sharp line of distinction
between appropriate spheres of the Federal and State Governments
is to leave the States exclusive jurisdiction of the speoial
motor-vehicle charges. Federal participation in highway financing
would therefore be limited to such expenditures as can be justified
The foregoipg proposals proceed from the view that the Federal
Governments participation in motor fuel taxation rests on weaker
grounds than its participation in most other areas of taxation
shared by Federal and State governments. The States entered this
field of taxation more than a quarter century ago* a dozen years in
advance of the introduction of the Federal gasoline tax0 However*
the consequences of dual taxation are perhaps less serious in the
field of gasoline taxation than in almost any other in the realm of
Federal-State duplication© However* the imposition of separate
Federal and State taxes croates some administrative problems*
and entails some addition to administrative costs or taxpayers*
TJ The recommendation presupposes that aviatiorPgas’oTine’1 will remain
2/
a product separate from motor vehicle gasoline.
Charles Bearing* ’’American Highway Policy,” The Brookings
Institution, Washington 1942, p# 175«
compliance burdens because the taxes are imposed on different bases
and are 'collected at different levels® The widespread use of this
source by all of the States and interstate cooperation in administration
have minimized State administrative problems associated with the move
ment of gasoline across State boundaries® However, since the States
would welcome Federal withdrawal and appear desirous of being left
exclusive use of this area, it may be well to explore the possibility
of Federal withdrawal from motor fuel taxation in"exchange for State
withdrawal from another area. If timed to coincide with the overall
revision of the Federal excise structure anticipated for the near
future, such arrangement might make a significant contribution to
postwar revenue revision« It would be necessary to give special
consideration to the taxation of aviation gasoline, which, if not
reserved for the Federal Government, might -possibly be handled by
requiring States, as one of the conditions of Federal withdrawal
from motor fuel taxation, to agree to a line of policy calculated
to minimize State imposed tax-impediments to interstate aviation®
225
- 25
Amusement Taxes
The Fédéral Government has levied taxes on admissions since
1917. The rate on general admissions had been l/ for every 10/
or fraction thereof until the Revenue Act of 1943 (effective
April 1, 1944) increased it to 1/ for each 5/ or major fraction
thereof which is the approximate equivalent of a 20 percent rate.
Most of the revenue acts prior to that of 1941 exempted admissions
below a certain level« These exemptions in many cases were suf
ficiently high to cover the usual admission charges to motion
picture theaters and thus did not affect the majority of theater
admissions. 1[ The present tax, however, allows no exemption in
terms of admission charges and a large.portion of the yield
(perhaps at least 80 percent) is derived from motion picture
theater admissions* A Federal tax is also imposed*on admissions
to cabarets, roof gardens, etc* The rate, sinco July!, 1944,
has boon 20 percent of the total charge tç. the patron, including
amounts paid for admission, refreshments, services, etc. Special
taxes, are also applied to admissions sold in excess of established
price and to the lease of boxes or seats.
In the fiscal year 1946 the Federal Government collected
$343 million1from taxes on general admissions (theaters, concerts,
etc.) and $72 million from cabarets and roof garden admissions or
a total of |415 million. This total compares with prewar yields
of $71 million in 1941 and i>21.9 million in 1940.
Types of overlapping taxes
State amusement taxation began with the Connecticut tax of
1921 which was levied as a supplement to the Federal tax (50 percent
of the Federal tax). The use of the Federal tax as a base v/as
apparently intended to simplify administration and compliance. The
TJ The following exemptions have.been allowed :
Revenue Act of
1917
1918
1921
1924
1926
1928
1932-1939
1940
1941
:
Exemption_____
5 - 10/
0
10/
50/
75/
#3
40/
20 /
0
.
increases in the Federal exemption in 1924, 1926 and 1928, however,
resulted in important reductions in the base of the State tax and
in 1929 Connecticut substituted a tax based on theater seating
capacity®
Although amusements of one type or.another are taxed in’most
of the States, general admissions taxes are imposed by less than
half of the States® (Table 17*) Of the States which tax general
admissions, more than half reach admissions through the general
sales tax rather than through a specific excise* The rate applicable
in sales tax States is in all cases 2 percent® In States which have
-specific excises on admissions the rate in several cases is 1 cent
for each 10 cents or fraction thereof (which is the rate formerly
imposed by the Federal Government)«
A number of States impose a tax on admissions to selected classes
of amusements such as boxing, wrestling, athletic exhibitions, and
racingc The rates applied to gross receipts from boxing and wrestling
range from 3 percent to 10 percent with 5 percent the most commonly
used rate0 Admissions taxes on horse racing are either flat amounts
per admission (ranging from 10 cents to 20 cents) or a percentage of
admission receipts ranging from 10 percent to 15 percent®
State 'collections from amusement taxes levied independently of
the general sales taxes amounted to $11 <>9 million in 1946* No data
are available with respect to amounts collected from amusements under
the general sales taxes«
A number of cities impose amusement taxes and a few cities
derive substantial revenue from such taxes* There is some indication
of an increasing use of this tax at the local level® The State of
Washington, v/hich had a specific admission tax on public amusements,
repealed this tax in 1943 and granted the cities and counties permission
to levy such taxes® By February 1944, 65 Washington cities, including
all those over 10,000 population, adopted admissions taxes« Table 18
presents available information regarding city admissions taxes*
There is also Federal, State and local overlapping with respect
to taxes on certain special types of'amusement, e„g*, bowling alleys,
billiard and pool tables, and coin-operated amusement and gambling
devices. The former tax was first imposed by the Federal Government
under the Revenue Act of 1914 but was repealed in 1926» It was re
enacted in 1941 along with a number of other excises* The present
rate is $20 per table or alley per year* Some of the State and local
governments also impose similar taxes* In some cases, the State tax
is limited to areas outside of cities and towns, with the right to
-impose licenses in cities or towns left to the municipality. In
other States, a minimum rate is prescribed, and sometimes a maximum
rate (often high enough to permit a prohibitive tax), with power to
fix the actual i*ate left to the cities or counties. The State rates
generally fall within the range of $5 to $40 per table or alley
per year«,
*
227
- 27 -
The Federal tax on coin-operated amusement and gambling devices
was also imposed under the Revenue Act of 1941» The present rates
are $10 and $100, respectively, per year per machine. States and cities
also tax such devices. State rates vary widely and in several cases
reach $100 per year per machine and in the case of some cities also
reach $100 per year per machine. Although State and city taxes are
not in all cases overlapping, the combination of Federal-State or
Federal-city rates may reach relatively high levels. Since these
taxes, particularly at the State and local level, tend to be of a
sumptuary nature and in some cases are dearly intended to be
prohibitive, no particular issues have been raised as a result of
the overlapping in this field.
Since an important part of State taxation of amusements results
from the application of the general sales tax, the problem in this
field is not so much one of amusement tax overlapping as one of
overlapping between the State general sales taxes and Federal excise
taxation. Because the State rates under the sales taxes are extremely
low (2 percent in all cases), the overlapping in this field has
attracted little attention.
Duplicate administration occurs only where the taxes are on
the same base (chiefly where both tax theater admissions). Both
Federal and State taxes are collected from the operators of the
amusement enterprises. Legal incidence of the Federal tax on
general admissions rests on the purchaser of the admission, \J
In some of the States, authority for passing on the tax is found in
permissive or mandatory statutes or in administrative regulations,
but generally the proprietor is held ultimately liable. In some
of the States the tax is collected from consumers as an addition
to the price charged for admission. In others the tax applies to
gross receipts from sales of admissions and may or may not be passed
on to the consumer in the form of increased prices.
Nature of problem
The Intergovernmental Fiscal Relations Committee concluded, with
respect to Federal-State overlapping, that "Amusement taxes seem to
have been successfully applied at both levels, without conspicuous
advantages for either, or major problems in the overlap*" 2/ The
Committee called attention, however, to the question which^arises
of whether the two taxes shall apply to prices before or after tax
and indicated that the former procedure is usually followed,
1/
2/
Legal incidence of ^fche Federal cabaret tax, however, falls upon
the proprietor,
Committee Report, p, 545,
The expanding use of admissions taxes at the local level thus
far has created no special problems* In only a few cases are city
and State amusement taxes overlapping* Of the cities shown in
Table 18 only those in Alabama, Missouri and West Virginia overlap
State taxes and in the case of the Missouri cities the tax is of
limited application#
All factors considered, there are no compelling reasons for
an immediate coordination effort in the field of amusement taxations*
Due partly to the fact that interstate commerce is not a consideration,
State and municipalities are able to administer this group of taxes
with reasonable success* Amusement taxation, can at best merit a
low priority in a near-term program for Federal-State fiscal coordination*
Stock Transfer Taxes
The problem of Federal-State overlapping in the field of
stock transfer taxes is of limited geographical significance»
Although the Federal Government and six States 1 / impose stock
transfer, taxes, overlapping is primarily a Federal-New York
problem as a result of the large concentration of security
transactions in New York* Approximately 85 percent of the
aggregate value of all transactions in stocks in the United
States are effected in New York. These security transactions
are subject to a Federal tax consisting of 5 or 6 cents per
$100 ©r fraction thereof^ depending on the market value of
the shares sold, and a New York State tax of 1 cent to 4 cen%s
per share, depending on the market value of the shares sold. 2/
A tax on stock transfers was imposed by the Federal Govern
ment- during the Civil War, the Spani sh-American War and the
First W o r l d ' . War, In the first two instances, the tax was repealed
a few years after the end of the war, •It became a permanent part
of the Federal revenue system after the First World War, The
State of New York has taxed security transfers since 1905, shortly
after the repeal of the Federal tax of the Spanish-American war era*
While the role of the Federal Government in the taxation of
security transactions rests on firmer foundations because of the
nation-wide character of the security market and the control of
these markets by the Federal Government, the taxation of security
transfers by New York State has advanced to a point where revenue
Considerations are paramount. -In fiscal year 1946, New York State
received $26.6 million from tnis source. This wTns more than the
total yield of its estate tax and was equal to approximately 4 per
cent of total State revenues (exclusive of unemployment compensation
taxes). Federal revenues from the stock transfer tax amounted to
$30 million-in the fiscal year 1946,
IT" Florida, Massachusetts, New York, Pennsylvania, South Carolina*
..■end Texas,
2/ When the-'Sslling price per share is less than $20, the Federal
tax is 5-cents per $100 of par value, and on no par value stock,
5 cents per share. Yihen the selling price is $20 or more per
share the rate is 6 cents per $100 of par value, and on no
par value’-stock, 6 cents per share. The New York State tax is
1 cent per share when the selling price is less than $5$ 2 cents
when $5 to #10? 3 cents when $10 to $20; and 4 cents when $20
and over.
- 30 -
The combination of Federal and State stock transfer taxes
has been levied for some years and while some complaints have
been made by security brokers, no evidence has been presented
to indicate that the dual levy has had an appreciable effect on
' the volume of security trading* This consideration coupled with
the facts that the stock transfer tax is relatively simple to
administer (by means of stamps) ^nd that its double compliance
and duplicate administrative cost aspects are not serious, lead
most investigators to the conclusion that the problems arising
from overlapping taxation in the field are of secondary importance#
230
State General Sales Taxes and Federal Miscellaneous
Manufacturers’ and Retailers * Excises
In addition to the overlapping which exists with respect to
the specifio «xcises discussed above, it should be noted that the
general sales taxes now imposed by 27 States duplicate specific
Federal manufacturers’ and retailers’ excises on a number of
commodities and services« l/ Table 19 summarizes the principal
features of the State sales taxes. Most of the State taxes apply
to retail sales of tangible personal property, but in general the
tax is also extended to encompass certain services« Previous
reference has been made to the taxation of amusements under the
State sales taxes«, A number of States apply the sales tax to
selected public utility services« .Duplication of the Federal taxes
on transportation and communication services, for example, occurs
in a number of States«., In the case of the Federal taxes on communication
transportation, and general admissions, the liability is upon the person
paying for the service and the person providing the service is required
by law to collect the tax from the former« .
Although only four of the Federal excises are retailers* excises
(furs, jewelry,,luggage, and toilet preparations),, in the case of a
number of the commodities subject to Federal manufacturers’ excises
it is the practice to bill the buyer at the retail level, separately
for the excise tax«. While legal liability for the tax is upon the
manufacturer, the manufacturer, wholesaler and retailer quote the
tax paid by the first party as a separate part of the selling price«
The practice of separately stating the tax has long been employed in
connection with certain Federal manufacturers’ excises, as for example
the gasoline tax* .However, the practice increased recently, in
connection with price control« Where a seller wished to pass on any
increase in excises during price control, it was necessary to quote
the tax separately« Subsequent to the end of price control, a number
of producers and distributors have continued the practice of listing
the amount of tax in quoting the price« This practice has made the
consumer conscious of the duplication resulting from the Federal
excises and the State sales tax«
Yvhile-in this general field, the duplication between general
sales taxes imposed by the States and selective excises collected
by the Federal Government is of secondary importance in comparison
with the economic impact of the Federal excises, the existence of
the duplication will probably be one of the factors considered in
connection with the re-examination of the Federal excise structure
which the Congress is expected to undertake in connection with
postwar tax revision«
1^
Général sales' taxes are also''impb'sed b y Dew' Vork' City
Orleans and by more than 50 California cities« Other
impose business license taxes based on gross receipts
retail sales, e>g.*,. Salt Lake City, Utah? Seattle and
Washington? and a number of West Virginia cities,
and New
cities
from
Vancouver,
r.o
¿ .c c
Table 1
Federal and State Tax Collections for fiscal year 194-6
(Exclusive of payroll taxes)
(in millions of dollars)
Tax
*
State
Federal
t
Net income
Individual
Corporate
Death and gift
i To,705
$ 395
12,462
436
677
143
Alcoholic beverages
2,526
466 1 /
Tobacco
1,16 6
199
Gasoline
406
900
Admissions
415
Stock transfer
Other
Total
12 2/
30
30
2,564
2,338
&38»971 2/
U,919 2/
Treasury Department
Division of Tax Research
Source;
1/
2J
¿J
Federal: United'States Treasury pepartment, Treasury
Bulletin, June 1947; State: Bureau of the Census,
«State Tax Collections in 1946," August 1946.
Includes both excises and licenses,
Collections from special admissions taxes. Excludes amounts
collected from admissions under the general sales taxes..
Exclusive of v1.7 billion Federal and *1 billion State
payroll taxes.
Table 2
State Individual Income Taxes: personal Exemptions
and Credits' for Dependents
July 1, 1947
States
Personal exemptions
Married or head
Single
of family
v3,500
'iv*
1/( 1000)
20 1/( 2000)
2,500
3.500
3.000
4, 500-2/
750
1, 500
1.000
2,000
1,000
2.500
700
1,500
10 1/ ( 1000)
20 1/ ( 1500)
1,500
1/ ( 1000)
50 1 /(2500)
1, 000
2,500
1,000
2,000
2,000
2,500
10 1/(1000)
30 1/(2000)
1,000
2,500
1,200
2,400
1,000
2,000
200
200
1,500
2,500
1,000
2.500
1,000
2,000 2/
500
1 .500
1,000
2,000
750
1.500
1,000
1,800
Alabama
Arizona
Arkansas
California
Colorado 12/
Delaware
Georgia
Idaho
Iowa
Kansas
Kentucky
Louisiana $/
Maryland
Massachusetts 6/
Minnesota
Mississippi
Missouri
Montana
Ne# Hamphsire 7/
New Mexico
New York
North Carolina
North Dakota
Oklahoma
Oregon 9/
South Carolina
Tennessee 7/
Utah
600
1,200
500
Vermont 10/
1,000
Virginia
1,000
2,000
“,000
8 1/(800)
Wisconsin 11/
17.50 1/(1600)
District of Columbia 1,000
___
2 , 5 0 0 _______
Treasury Department, Division of Tax Research
1/
2/
3/
4/
%/
233
Credit for
dependents
•„■ 300
4 2/(320)
400
400
75 O
200
400
200
5 2/(250) 4/
200
10 1 /(500 )
40Q
400
250
10 2/(333)
400
400
300
200
400
200
500
500
300
200
300
500
200
4 2/(320 )
400
Tax credit deductible from amount of tax rather than from net income. Sum
in parenthesis expresses tax credit as income exemption on assumption
that latter is always deducted from lowest income bracket.
Tax credit deductible from amount of tax rather than from net income. Sum
in parenthesis is the amount by which the first dependent raises the level
at which a married person or head of family will first become taxable.
Exemptions shown are applicable to taxable years beginning after Dec, 31,
1944 and before Jan. 1, 1948, Permanent exemptions are 42 ,000 and 43,500.
In the case of a dependent father, mother or grandparent, the taxpayer
may take a deduction of v300 in lieu of 45 tax credit.
The exemptions and credits for dependents are deductible from the lowest
income bracket and are equivalent to tax credits of 420, 450, and 4*8,
respectively.
(Footnotes continued on following page)
Table Z
State Individual Income Taxes? Personal
Exemptions and Credits for Dependents, duly 1-, 1947, (Concluded)
jy
The exemptions shown consist of a specific exemption of $2,000 on
earned income, in addition to a personal .exemption on earned
income of $500 for husband or wife and a credit for each dependent
of $>250* A person whose’total income from all sources does not
exceed $1,000 and whose income together with his spoused does
not exceed $1,500 may have an exemption of $1,000 on his property
income*
7/ Tax applies only to interest and dividends,
8/ An additional exemption of $1,000 is provided for a married woman
with a separate income,
9/ For taxable years beginning on or after January 1, 1947.the exemptions
will be increased or decreased depending upon the approval or rejection
of the sales tax by a referendum vote on October 7, 1947* If the sales
tax is approved, the exemptions will be $900 and $1,800.and the credit
for dependents $400$ if rejected, the exemptions will be $500 and $1,000
and the credit for dependents will remain* at $300*
IQ/ An additional $500 exemption is allowed to taxpayers over 65 years
of age*
<1.1/ For purposes of the surtax, an additional tax credit of $37,50 is
allowed*
12/ Exemptions shown are applicable to the period May 1, 1947 to December
31, 1948* Permanent exemptions are $1,000 and $2,500 and the credit
for dependents is $400*
Ta.t>le 3
State Individual Income Taxes: Hates
July 1» iÿ+7
0
OJ
4ft
Ala
Ariz
Ark
Calif it 2}
Colo U
1.0
1.0
1.0
1.0
j.yj
I .25
1.0
1.0
2*0
1.0
2.0
1.0
2.0
2.0
2.0
1.0
3*5 " C o
3*0
3.0
3*o
3*0
1.0
1.0
5*0
2.0
6.0
2,0
5*0
2.0
5*0
3.0
Co
oTo67o
Co
Co
2.0
w
Ordinary income, 2$; investment income, 5/»
C o
C o
Cô
Co
2.0
2.0
2.0
2,0
2*0
3*0
3*0
Co
g.O
Co
5*0
370
^
la. 2*/
Karra
Ut V
*•'
^
p
C.+ A
\J
v
^
-"
5.0
6.0
6.0
7.0
MI ss
Mo 7/
Mont
H,
M.
1.0
1.0
1.0
1*0
1.0
2.0
2.0
1*5
2.0
3.0
3*0
3*5
1.0
1^0
2,0
2.0
1.0
1.0
1.0
1.0
1.0
1.0
1,0
1 ,0
E, Y. 6 /
C.
D.
Okla 1 / 2 /
Ore 1/10/
2,0
3*0
1.0
3*0
3*0
3.0
Co
Co
Co
Co
5*0
5.0
6,0
6*0
6.0
1.0
2.0
2.0
3.0
5*0
5*0
5,0
370
6.0
7.0 7*0
7.0
KVt
2 i0 3*0 C o
2.5 3*0
3*0 3.0 C o
Income from intangibles, average property tax rate
___
3*0
2.5
C o
î f T capital gains, 3
g.o
s.o
9.0
s.o
0• 0.
1.0
r 50
„Over
: to
: 100 I 100
7*0
interest ;
9.0
10.0
5*0
6*o
3.0
3*0
0
3*0
•
3*o
5*o
5.0
2.0
2*0
2,0
-2*0
M>
12^5
12.5
12*5
15*0
0
1.0
Co
0
2.5
2.0
1.0
-pr
2.0
1,0
2.0
O>
r-î
Del .
Ga »
Idaho,
Ky ll
Da
Md 1 / kj
Mass 5/ •
Minn By
3.0
3*0
1*5
b
Stati
Brackets of net income after -personal exemption (in thousand )f dollars)
to which designated p ercentage rates apply
t 25 t 30
12 : 15
11
9 * io
0 :1 :2 :3 Îk ; 5 : bi 7 *
t to 't to
:
to
:
to
to
to :
to r to : to t to : to : to : to
: 30 î 50
r
20
:
25
15
7 : S :
1 t 2 :3 :^ t5 ibi
2.0
Continued on f ollawing.,pag,u
1.0
1.0
7*0
7*5
6.0
6.0
10.0
7*5
7.0
7 .0 . ?.o.
6.0
10.0
375
Co"
Tab..! c 3
-
State Individual Income Taxes: Rates». July lf. 19 U7 (continued)
State
S, C.,
T onii 1 1 /
Utah
vt y
Va
Wis 12 /
D, C.
:0 ? 1
: to : to
i- 1 : 2
2.0
2.0
interest
1 .U ¿.0
1.0
2.0
1.5
1.0
1.0
Brackets of net income after personal exemption (in thousands of iolla.rs)
to which designated percentage rat es apply
: 2 :3
: 4 : 5 : b t 7 t 8 : 9 * 10 : 11 : 12 : 15 : 20 : 25 : 30 :
50
: to : to : to : to : to t to : to : to : to : t* : to : to : tc : to ; to :
to
13-. : 4 . 5 : 6 : 7 : 8 ' : 9 : 10 : 11
: 12
15 : 20 : 25 Ì ^0 : 50 : 100
•
3»o 3.o : 4.0 4.0 5.0
ana aiviaenas, up
3.0 4.0 5*0
2.0 _ 3 *o 3.0 4.0
1.5 2.5 2.5 3.0
1.2 5 1.5 2.0
1 .0 1 .0 1.0
2.5
l.o
3*0
1 .5
3.5
1 .5
4.0
1.5
4.5
1.5
5.0
5*5
1.5
2.0
6*0
2.0
7.0
2.0 i 2.5
.
: Over
:• 100
3.0
Trr’r
y
California, Colorado, Kentucky, Oklahoma, Oregon and Vermont provide an optional simplified tax table top individual,
with an adjusted gross income (defined the'same as for Federal income tax purposes) of $5,000 or less. In computing
the table, Colorado, Kentucky and Oklahoma allow a standard deduction of 10 percent while California and Oregon
allow 6 percent. In addition, Colorado, Oklahoma and Oregon allow deduction of Federal income tax liability as
determined by the Supplement T table,
Maryland provides an optional simplified tax return for individuals whose gross income is $5,000 or less and
consists only of salary, wages, or compensation for personal services; or dividends, interest and annuities
not in excess of $100, The return allows a 10—percent standard deduction,
2/ Thb rates shown apply to the taxable years beginning after December 31, 19^2 and before January 1 , 19 U8 .
The permanent rates are:
'
1 st - $ 5,000
lj>
$15,001 - $ 20,000 kfi
'* «
5»ooi -• 10,000 2
20,0 0 1 - 25,000 5
O-?
10,001
15,000
3
Over - 25,000 6
3/ Cross income in excess of $200 derived from dividends, royalties, and interest is subject to a 2 percent surtax,
~or the period May 1, 1947 to December 31*- 19^8 the following temporary rates are applicable:
1st - $ 1,000
I/?
$3,000
$ 4,000
2
$
6,000 - $7,000 5$
$9,000 - $10,000 Sfo
~
2,000
I2
U ,000 5,000
3
7,000 - 8,000 6
10,000 - 11,000 9
2 ,000 3,000
2
5,0006,000
4
2,000 - 9,000 7
Over 11,000
10
The
amount
of
tax
payable
under
these
rates
wafe
reduced
by
50
percent
for
the
taxable
years
19^2-19^6*
Ml
Table 3
. ,
.
-State Individual Income Taxes: Batea, July 1, 19^7 (concluded)
k/ Effective January 1, 19^8, the rate on ordinary income will be 2*5 percent*
5 / x temporary additional tax equal to 10 percent of the tax is applicable to the years 1936 through I9 H0. A second
additional tax equal to 3 percent of the tax is applicable to 19^2 ana succeeding years*
6/ The rates are 8 -percent on the bracket $9*001 to $12*500 and 9 percent on the bracket $12,501 to $20,000*
i] The rates apply to total income, not merely to the Portion of net incomes falling within a given bracket, out as a
result of the following tax credits* the schedule in effect is a bracket rate schedule:
$1,001 - $2*000 $5
$5 »ooi - $7 »000
$ 55
2,0 0 1 - 3,000 15
7,001 - 9*000
90
S/ The tax poyable’under thes^rates was reduced by^25 percent for the taxable years I9HI-I9HU and by 5°
for I9U 5 and 19 U 6 . Capital gains are taxed at one-half the regular rates. Income from unincorporated business
is taxed at 3 percent*
9/ .The rates are:
1 st $ 1,500
*
1 ,5 0 1 3,000
3,001-
U,500
'
1$
2)o
Jb
w
K501 - $6,000 h*
6 ,0 0 1 - 7,500 m
Over
7 ,50 0 . 6/0
¥l/ The ratf aS?Lahle^fd?videndsCf?on corporations having at least 75 Percent of their property subject to the
Tennessee ad valorem tax is 4 percent.
“12/ Surtax: Normal tax less $37-50 divided by 6 .
rv?
03
fm n 4
State Corporation Net Income Taxes: Rates
Jul,y 1, 1947
Rate
Arkansas
%
o
o
o
First $1
$1,001 - $2,000
2,001 - 3,000
3,001 - 4,000
4,001 - 5,000
5,001 - 6,000
Over 6,000
1%
w
=€iß=o
<y> o
« o
o
o
o
Arizona
Mississippi
Z%
Alabama
1%
First $3
$3,001 6,001 - 11,000
11,001 - 25,000
Over 25,000
California
4% 1/
Colorado
5%
Connecticut
2%
4%
5%
6°/o
Missouri
2%
Montana
b% 6/
New Mexico
2%
b%
2%
Z%
New ^ork
5%
11/
4 ^ (or alternative
minimum tax) i f plus
tax on allocated
subsidiary capital 8/
North Carolina
First $3,000
$3,001 - $8,000
8,001 * 15,000
Over
15,000
Z%
b%
6%
en
North Dakota
6%
(or alternative
minimum tax) 3/
Oklahorna
4%
Oregon
co
Idaho
1%
2%
•to/
Ó/0
z U
(or alternative
minimum tax) 2 ¡
District of
Columbia
Georgia
2%
000
Fir st $4,’
& ry
$4 ,001 - HP( t,000
7,001 - 10j,000
10 ,001 - 15,,000
15 ,001 - 25,,000
Over 25,,000
Pennsylvania
4t%
b ^ fo
1-ÿ?
First $1 ,000
$1,001 - $2,000 Z %
.2,001 - 3,000 4 %
3,001 * 4,000 b %
5,000 6 %
4,001
Over
5,000 8 %
Iowa
2%
Kansas
2%
Kentucky
4%
Lcuisiana
4%
South Carolina
4^o (or alternative
minimum tax) 9/
5-3/4^
Tennessee
Utah
Z%
(or alternative
minimum tax) 10/
Vermont
Virginia
Wisconsin
Maryland
l ¥
4/
Massachusetts
¥
5/
'Minnesota
6%
^Trè^wy^'é'paTtrfrent~ "RTvtTîüh■a t -Tsisrl^smrch:
Footnotes on following page*
Normal tax:
oaf
C/o
First $1 ,000
$1,001 - $2,000 2
3,000 si,
2,001 r
3,001 - 4,000 w °
4Í001 - 5? 000 ‘i%
ca f
5,001 T
6,000 O/O
. Over
6,000
uai'tg nc$|al tax
XVJji.QaJa
239“
Table 4
State Corporation flet Income Taxes:
Footnotes
Rates, July 1, 19^7 (concluded)
Pop taxable years beginning after December 31» 19^2 nnci. before January 1,
I9I48,. the amount of tax payable under this rate is reduced by 15#*
The alternative tax is: 1 mill per dollar of the sum of interest—
ifbearing debt, capital stock, surplus, undivided profits and reserves,
less deficit and stocks and securities held* Minimum tax, $10*
The alternative tax is* 2$ of a ba.se consisting of net income plus
u
salaries paid to officers and to stockholders holding more than 5/« of
stock, less $10,000.
Effective January 1, 19^-8, the rate will be H$#
% Includes the additional lj>fa applicable to the years 19^7~1950• &
51
temporary additional, tax equal to XOfo of the tax is applicable to the
years I936- 19 H8., A second .additional tax equal to 3 percent of the
tax is applicable to 19^2 and subsequent years#
Minimum
tax, $5*
y
The alternative taxes are: (a.) ^¡5
$ of 30$ of a base obtained as follows:
(entire net income plus compensation paid to officers and holders of
more than 5i° of issued capital stock) minus ($5*000 plus net loss xor
the reported year), or the portion of such amount allocated to the
State; or (b) one mill per dollar valuation of allocated business and
investment capital. Minimum tax, $25*
The ra.tes on subsidiary capital n.re: First $50,000,000, \ mill per
S/ dollar, $50,000,001 - $100,000,000, \ mill per dollar, over $100,000,000,
l/8 mill per dollar#
The alternative tax is: 3$ of a base obtained as follows: (entire not
/ income plus compensation paid to officers and to stockholders owning in
excess of 5 of issued capital stock) minus ($6,000 and deficit for
year)#
10 The alternative tax is: l/20 of V/o of the value of the tangible
property within the State. Minimum tax, $10#
The 5$ rate is applicable to the period Hay, 1, 19^7 to December 31,
11/
I9H 8/ The permanent rate is r/O*
i/
u
2
/
240
Table 4
State Corporation Het Income Taxes:
footnotes
v
Bates, July 1* 19^7 (c o b eluded)
ij Boy* taxable years beginning after December 3^> 19^2 and before January 1»
19 US, the amount of tax payable under this rate is reduced by 15/<?.
2/ The alternative tax is: 1 mill per dollar of the sum of interestbearing debt, capital stock, surplus, undivided profits and^reservos,
less deficit and" stocks and securities held. Minimum tax, 4)10 ,
3/ The alternative tax is? 2$ of a base consisting of net income plus
salaries paid to officers and to stockholders holding more than 5$ of
stock, less $10 ,000»
kf Effective January 1, 19^8, the rate will be 4$,
5/ Includes the additional 1J$ applicable to the years 1947-1950. A
temporary additional tax equal to 10$ of the tax is applicable to the
years I936-I9US* A second additional tax equal to 3 percent of the
tax is applicable to 19^2 end subsequent years*
6/ Minimum tax, $5*
' .
.
jf The calternative taxes are: (a)
of 30$ of & base obtained as follows:
(entire net income plus compensation paid to officers and holders of
more than 5$ of issued capital stock) minus ($5,000 plus net loss for
the reported year), or the portion of such amount allocated to the
Sta,te; or (b) one mill per dollar valuation of allocated business and
investment capital. Minimum tax, $25*
S/ The re,tes on subsidiary capital are: Eirst $50,000,000, %
-Per
^
dollar, $ 50,000,001 - $100 ,000,000, £ mill per dollar, over $ 100 ,000,000,
l/8 mill per dollar.
9/ The alternative tax is: 3$
$ ^ase obtained as follows: (entire not
income plus compensation paid to officers and to stockholders^owning in
excess of 5$ of issued capital, stock) minus ($6,000 and deficit for
year).
=*■: 2
^
The alternative tax is: 1/20 of 1$ of the value of the tangible
12 1
property within the State* Minimum tax, $10*
I9Î4.7 to December 31»
1 1 / The 5$ rate is apiilicable to the period May, 1,
IQHg, The permanent rate is
1
Tabic 5
Federal and State Income Tax Liability (Effective Rate)
for a Married Man without Dependents, at Selected Net Ipcomo Levels 1]
Net Income
beforo
Personal
Exemption 2/
$
2,000
3,000
3 ,ooo
10,000
25,000
50,000
100 ,1)00
250,010
500,000
1 ,000,000
*
•
*■
New York 3/
é
Ç
—
.2$
.7
1.5
2*7
Effactive rate of tax
Federal
:Combined Federal : Combined Federal
iKinnesota (assum-:
and
r
and
:
îing no deduction î (ass\iming no
Sta.te tax) :
New York 3/
i
Minnesota b/
ïfor Federal tax) î
—
9 .5#
9 .5#
12.S
13*2
IvO$
12.7
16.5
17*2
16 «0
2.U
22.8
U .6
. 23,9
21.9
38.1
37*5
36.3
7.3
8.7
3.1
3.3
9.3
9*7
3A
3.5
9*9
9*9
3*5
--ary"-1
v
Treasury Department, Division of Tax Research
b9,6
63.1
76.5
si. 5
sb.o
50.6
63.7
77*0
82.0
SH.H
50.8
63.7
76.8
81.7
8^*2
1 j United States Internal Revenue Code, as amended hy the Revenue Act of 19^5, applicable to 19^6 and
subsequent years; New York and Minnesota, income tax laws applicable to taxes paid in 19^-6.
2/ Prior to allowable deductions for income taxes. The Federal Government allows taxpayers to deduct State
income taxes in computing net taxable income for Federal purposes, and similarly Minnesota, allows
deduction of the Federal tax in computing the State tax. New York does not allow deduction of the
Federal income tax I n computing the State tax.
3/ Takes into account the 50-percent reduction In taxes paid in 19^6.
Uf Takes account of reciprocal deductibility under Federal and Minnesota taxes.
(V)
4is,
F—-*
Table 6
State Income Taxes: Deductibility of Federal Income
Taxes from Gross Income in Computing Net Income 1/
July 1, 1947
State
Alabama
Arizona
Arkansas •
California
Colorado
Connecticut
Delaware
District of Col*
Georgia
Idaho
Iowa
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Minnesota
Mississippi
Missouri
Montana
New Hampshire
New Mexico
i
:
**
Individual
income tax
’ yes
*—
yes
yes
no
yes
la/
None imposed
yes
no
yes
yes
yes
yes
yes
yes
no
Earned income and
business income - yes
Interest, dividends,
annuities and
capital gains
— no
yes
no
yes
.yQS
no 2/
yes
Corporation
income tax _
yes
yes .
ye s la/
no
yes
no
None imposed
no
yes
yes
yes
yes
yes
yes
no
no
yes
€/
no
yes
yes
None imposed
yes
New York
North Carolina
North Dakota
Oklahoma
Ore gon
no
no
yes
yes
yes
no
no
yes
yes
no
Pennsylvania
South Carolina
Tennessee
Utah
Vermont
None imposed
no
no 2/
yes
yes 3/
no
no
yes
yes
no
Virginia
'Wisconsin
no
yes 4/
242
•
no
yes y
Treasury Department, Division of Tax Research
1/
In general, each State which permits the deduction of Federal i n c / ^ - ^ - ^
taxes limits such deduction to taxes paid on that part of it:come
, »
subject to its own income tax. IsJ The deduction may not exceed 5 0 of the/
The tax applies only to intangibles.
The deduction may not exceed *500*
The deduction is limited to 3 percent in the case of non-corporate
and 10 percent in the case of corpora*"'
Types of State Death Taxes
July 1, 1947
X*
inheritance tax only
Idaho
Illinois
2*
Sduth Dakota
West Virginia
Wyoming
Alaska
Estate tax. based on Federal levy
Alabama
Arizona
New York
'Georgia
Mississippi
Arkansas
Florida
Inheritance and differential estate tax
Connecticut
Delaware
Indiana
Iowa
Kansas
Kentucky
Maine
Maryland
Massachusetts
Michigan
Missouri
Montana
Nebraska
New Hampshire
New Jersey
New Mexico
Ohio
District i
Pennsylvania
Columbia
South Carolina Hawaii
Texas
Vermont
Inheritance and difieren tial estate tax (also gift tax)
California
Colorado
Louisiana
5*
Mirme so ta
North Carolina
Termessee
Virginia
Washington
Wisconsin
Inheritance and independent estate tax (also gift tax)
Oregon
6,
Independent estate tax
North Dakota
Utah
7,
Independent and differential estate tax (also gift tax)
Oklahoma
8,
Inheritance, independent and differential estate tax (also gift tax)
Rhode Island
9, No transfer tax
Nevada
Treasury Department, Division of 1'ax Research
^
Table 8
State Cigarette Excise Taxes
July 1, 1947
(Per standard package of 20 cigarettes)
1 cent
Tiest Virginia
4 cents
Florida
Maine
Massachusetts
Mississippi
Pennsylvania
]
*
2 cents
Arizona
Iowa
Kentucky \J
Montana
Nevada
New York
Ohio
Oregon 4^/
Utah
Vermont
•Washington 3/
Wisconsin
*
t
2-g- cents
New Hampshire 2/
5 cents
Louisiana
Oklahoma
.
3 cents
Alabama
Connecticut
Georgia
Idaho
Illinois
Indiana
Kansas
Michigan
Minnesota
Nebraska
New Mexico
North Dakota
Rhode Island
South Carolina
South Dakota
j
Tennessee 3/
Texas
6 cents
Arkansas
Treasury Department, Division of Tax Research
l/
The statutory rate is 1 cent for each 10 cents of the retail price or
fractional part thereof*
Zj The statutory rate is 15 percent of the retail price*
3/ If the retail selling price for each cigarette is more than 1 cent, the
tax in Tennessee is 15 percent, and in Washington 20 percent, of the sales
price*
4/ This tax will not go into effect until approved by a referendum vote on
October 7, 1947*
245
Tabi© 9
City Cigarette Excise Taxes *
(Per standard package of 20 cigarettes)
July 1>: 1947
1-è- cents
1 cent
Florida
Chipley 2/
Marianna 3{
Panama City 4/
Alabama
Decatur l/
Horthport 1/
Ragland
Tuscaloosa \J
Florida
Pe Funiak Springs
Fort Myers
Pensacola
Wewahitchka
6/
2 cents
Alabama
Abbeville"
Anniston
Attuila 1IJ
Bessemer l/
B irmingham 1/
Gadsden
Mobile County 5/
Montgomery l/
Prattville
Tarrant City l/
Maryland
Baltimore
Colorado
Denver
West Virginia
Wheeling
Florida
Miami
Missouri
Columbia
Excelsior Springs
Jefferson City
Kansas City
Moberly
Richmond
St* Joseph
St, Louis
Nebraska
Omaha
Virginia
Richmond
Treasury Departmentf Division of Tax Research
*
The list of cities shown here is not necessarily complete*
Footnotes on next page*
O
A
p
¿4b
Table 9
City Cigarette Excise Taxes (Concluded )
Footnotes
l/
In the "police jurisdiction" which is outside of, but within three
miles of the corporate limits of the city, not including erri ory
within any other incorporated municipality, the rate is half t
2/ If^he*retail selling price per package is 10 cents or less, the
tax is 1 centj if more than 10 cents per package, the rate is
J
3/
The^statutory rate is 1 cent for the first 10 cents of the retail
price plus 1/2 cent for each additional 5 cents or fraction thereof
of the retail price#
1
4/ If the retail price per package is 14 cents or less e
cent; if more than 14 cents, the rate is 1*1/2 cents#
5 / The statutory rates are as follows:
^
Cigarettes measuring 3 inches or less in length and weighih n
over 3 pounds per 1,000, 1 cent per 20 cigarettes j
iPn<r+h
Cigarettes measuring over 3 inches but not over 6 inches m length
and weighing not over 6 pounds per 1,000, 2 cents per 2 cigare e ,
Cigarettes measuring over 6 inches in length and weighing over
6 pounds per 1,000, 4 cents per 20 cigarettes.
6/ The statutory rate is 1 cent per 15 cents or fraction thereof of
the retail price.
Sources:
Commerce Clearing House, Corporation Tape Service; A. lâ. Hillhouse
and Muriel Isagelssen, TTChere Cities Pet iheir u - o n ^ , Municip
Finance Officers Association, Chicago, 1945; Tax Institute,
-Tw m ;,. November 1946; Public Management, February 194/-,
National” Tobacco Tax
^~P?55i5dI5Fs of the Twentieth
Annual Conference, 1946#
247
Table 10
State Excise Takes ón Cigars
July 1, 1947
„,
Alabama
sWeighing not more thah* Weighing more than 3 pounds
4 3 pounds per 1^000
i
P er l gQQO
______
|
’
:Intended retail price: Tax per
Tax per 1^000
*
: oyer J hot over
; 1.000—
$
9/
14/
20/
1.00
9/ *
14/
20/
Arizona
$ 1 .0 0
4.00
5t00
10 ¿do
1.00
5/
3 .33-1 / 3
10.00
3-1 / 3/
5/
1.00
2.00
3.00
5.00
10.00
13.50
5/
Georgia
1.00
3-1/3/
8/
10/
20/
Louisiana
.75
5
Maine
•
/
8/
15/
20/
20 percent of retail price
Ù
10/
20/
5/
8/
15/
20/
Mississippi
l/ for each 5/ of retail price or frac t ion al
part thereof.
New Hampshire
15 percent of the retail price
New Mexico
1.00
Oklahoma
1.00
10.00
6/
3-1/3/
5.00
10.00
3-1/3/
3.00
10,00
3-1 / 3/
5/
9/
10/
20/
1.00
2.00
3.00
5,00
10.50
13.50
3-1/3/
South Carolina
1.00
3-1/3/
Tennessee
1.00
3-1/ 3/
5/
¥ .
10/
20/
Treasury Department* Division of Tax Research
2.00
3.00
5.00
20.00
27.00
248
Table 11
State Excise Taxe^j on Smoking and Chewing Tobacco and Snuff
State
Smoking Tobacco
Alabama
l/ per 5/ retail
price or fraction
thereof
Arizona
l/ per ounce or
major fraction
thereof
Louisiana
Chewing Tobacco
•
^
per 5/ retail
price or fraction
thereof
: l/ per ounce or major
fraction thereof 1 /
Snuff
\
per 5^ retail
price or fraction
thereof
js /
l/ per ounce or
major fraction
thereof
l/ per 5/ retail
price or fraction
thereof
Maine -
20% of retail price
Mississippi
l/ per 5p retail
price or fraction
thereof
New Hampshire
15% of retail price
20% of retail prioe
20% of retail price
15% of retail price
15% of retail price
2/ per l-l/4 ounce
or fraction thereof
North Dakota
Oklahoma
20% of factory list
price
20% of factory list
price
South Carolina
l/ per 5f retail
price or fraction
thereof
l/ per 3 ounces or
fraction thereof
l/ per 3 ounces or
fraction thereof
Tennessee
5% of retail price
5% ©f retail price
5% of retail price
•
.. * ..j...
Treasury Department','Division o f T a x ’Research
1/
Cavendish is taxed at the rate of
^
per ounce or fraction thereof.
Table 12
State Excise Taxes on Distilled Spirits
l/ -
duly 1, 1947
(per gallon)
50/ to #1.00
California
Missouri
Nebraska
Nevada
South Dakota
5 States
* #1 *00 to #1,50
Arizona
Connecticut
Delaware
Georgia
Illinois
Kentucky
Maryland
Massachusetts
Minnesota
New Mexico
Rhode Island
Texas
Wisconsin
13 States
*|1.50
to $2,00 *
•
•
•
#2.00 to #3.00
Colorado
Florida
Louisiana
New Jersey
New York
North Dakota
Arkansas
Indiana
South Carolina
Tennessee
6 States
4 States
Treasury Department, Division of Tax Research
Three States (Kansas, Mississippi, and Oklahoma) prohibit the sale of
liquors of alcoholic content above Z » 2 % (4% in Mississippi)* Sixteen
States have liquor monopoly systems (Alabama, Idaho, Iowa, Maine,
Michigan, Montana, New Hampshire, Ohio, Oregon, Pennsylvania, Utah,
Vermont, Virginia, Washington, West Virginia, and Wyoming)• Some of
the monopoly States impose taxes, generally expressed in terms of a
percentage of retail price. Vermont., however, imposes a tax of $2*80
per gallon and thus falls in the group of States with highest taxes.
North Carolina has county operated stores in counties which vote in
favor of their operation and the State imposes a 'tax of 8-g percent
of retail pri.ce*
Table 13
State excise taxes on wines 1/
July 1, 1947
Light wines
(per gallon)
!/ to 10/
: 10/ to 15/
] 15/ to 20/ ¡20/ to 30/;
California Colorado
Missouri
Connecticut
Rhode Island Louisiana
Illinois
Nebraska
Nevada
.visconsin
South Dakota Maryland
New Mexico
iMassachusetts
30/ to 40/
¡40/ to &0/ ' 60/ and over
Minnesota Arizona
Delaware
North Carolina
Kentucky
North Dakota
Florida
Georgia
Indiana
Arkansas
South Carolina
Tennessee
New Jersey
New York
'Texas
4 States
7 States
4 States
5 States
3 States
3 States
3 States
Fortified wines
(per gallon)
1/ to 10/
5 10/ to 20/
30/ to 40/
: 20/ to 30/
40/ to 60/
-
California
Massachusetts
Missouri
Rhode Island New Jersey
New York
Wisconsin
2 States
5 States
Colorado
Connecticut
Delaware
Kentucky
Louisiana
Maryland
Nevada
New Mexico
Texas
3 States
^rizona
♦
•>~w
South Dakota
Illinois
Indiana
Nebraska
North Dakota
’
6q / and over
Arkansas
Florida
Georgia
South Carolina
Tennessee
Minnesota
2,
States
4 States
6 States,.
Treasury Department, Division of Tax Research
1/
Classifications of wines under State taxes vary widely. For purposes *f this table, wines
containing not more than 14 percent alcohol are classified as light wines and those
containing over 14 peroent are classified as fortified wines., Three States (Kansas,
Mississippi and Oklahoma) prohibit the sale of liquors of alcoholic content above 3*2 per
cent (4 percent in Mississippi)., Sixteen States have licUor monopoly systems:^ Alabama,
Idaho, Iowa, Maine, Michigan, Montana, New Hampshire, Ohio, Oregon, Pennsylvania, Utah,
Vermont, Virginia,.Washington, West Virginia and Wyoming, Some of the monopoly States
impose taxes on wines# North Carolina has county operated stores in counties which vote
in favor of their operation and the State imposes a tax of 8—1/2 percent of retu.il price
on distilled spirits ahd fortified wines sold in these stores.
Table 14
State Excise Taxes on Beer
-
July 1, 1947
(per 31-gallon barrel)
50/ to #1.00
; #1.00 to #1.50
California
Colorado
Maryland
Missouri
Nevada
Wyoming
6 States
«¡j)3 .00 to V 4 .00
Alabama
Idaho
New Hampshire
North Carolina
Tennessee
Vermont
Kansas
7 States
Connecticut
Delaware
Illinois
; #1.50 to 4 2 .00;
Kentucky
Louisiana
New Mexico
Massachusetts
Michigan
Montana
Nebraska
New Jersey
New York
Oregon
Rhode Island
Texas
Washington
Wisconsin
14 States
5 States
Arizona
Indiana
Minnesota
North Dakota
Ohio
Pennsylvania
South Dakota
Virginia
West Virginia
Iowa
g. States
#4 .0 0 to |5.0 0
Arkansas
Georgia
Maine
South Carolina
Utah
#2.00 to #3.00
States
#5 .0 0 to #8 .0 0
Florida
Mississippi
Oklahoma
3 States
252
Table X5
S ta te G asoline Tax H ates, J u l y 1 , 19^+7
Missouri . Distv of Columbia
Illinois
M assachusetts 1/
Mi chimin
Hew Je r s e y
1
Connecticut
Delaware
Indiana
Iowa
Kansas
Maryland
Minnesota
Nevada Z j
New Hampshire
New York
North Dakota
Ohio
Pennsylvania 1/
Rhode Island
South Dakota
Texas
Utah
Wisconsin
Wyoming
5
5.5(i
Oklahoma
»
i
19
6/5
colorato 1/
:
:
California
Vermont
2
Arizona
Kentucky
Montana
Nebraska
New Mexico
Oregon
Washington
West Va* 1/
— ------ A
'
___ __* ----------
6«54
Arkansas
Georgia
louisianS^
Tennessee
Idaho l/
Maine
Mississippi
North Carolina
South Carolina
Virginia
Treasury Department, Division of Tax Research
1/ The rates shown for the following States include temporary rates of xndi“
eated amounts which exoire on the dates shown! Colorado, 2 cents, July 1,
1953; Idaho, 1 cent, March 1, 19>»9; Pennsylvania, 1 cent, May 3 1 , lguy,
Florida, West Virginia, 1 cent, July 1, 19U9i and Massachusetts, 1 cent,
2/
H e v a d l t o o s e s an additional 1* cents levy during the period July 1, 19^7
to June 30, I9U9 for the benefit of county and city road purposes m
those counties which approve the additional tax*
253
Table 16*
Frequency distribution of Local Gasoline Tax Rates
August 1* 1946
Counties
Municipalities
State 1/
? 20 ? 30 *Total
‘ If ; it : lit ; 20 *Total:
»
5 10 î
!
Î
|i/lo# ;
A
Alabama 2/
146
2
17
q
j
Florida
169
7
2
1
1
27
1
8
23
31
......
2
2
1
41
201
New Mexico
Wyoming
Total
1
1
3
26
1
Nevada
8
3
Mississippi
Missouri
1
2
— «
4
17
263
—
—
7
—
2
2
—
11
Treasury Department* Division of Tax Research
Source:
y
u
American Petroleum Industries Committee of the American
petroleum Institute* mimeograph dated August 29, 1940#
The States in which these municipalitie s or counties are located
impose the following rates? Alabama 60 , Florida 70* Mississippi 60,
Missouri 20* Nevada 40, New Mexico 50, Wyoming 40«
Rates apply only in the town or city* Rates in the police jurisdiction are, in most cases* lower. In general they are half the city
or -«¡town rates.
O CA
254
Table :17
State Taxes on Amusements 1/
January 1* 1347
State and
*Tax applicable to 2j
legal citation : ___________ „____ _
Exemptions J j
Tax rate and measure
Alabama *
Amusement operators
2% of gross receipts
Arkansas *
Sales of admissions'
to places of amuse—
ment
2% of gross receipts
Connecticut
Operators of theaters
(including moving
picture shows)
Ranges from 25/ a day for
seating capacity of less
than 500 to $8 a day for
capacity of 2,500 or more
Iowa
Sales of admissions
to places of amuse
ment and athletic
events
2% of gross receipts
Kansas
Sales of admissions
to places of amuse
ment
2% of gross receipts
Kentucky
Sales of. admissions
to places of amuse
ment â j
Admissions of 12 cents
or less;, activities of
non-profit organiza
tions; fairs
Admissions o f 14 cents
or less; ..activities of
non-pr«fit organiza
tions; fairs
Admissions of 14 cents
•r less; activities of
■ non-profit organiza
tions; fairs
Rate
Tickets costing
11/ - 18/
19/ - 28/
¥
29/ - 38/
m
33/ - $1-00 - 3/ Plus ¥
additional for each 10/ or
fractional part in excess
¥
• of.38/
$1,01 and over - 10/ pins 1/
additional for each 25/ or
fractional part in excess
of $1.00
(Continued)
None specified
Admissions of less than
11/; first 50/ of
admissions to athletic
contests; race tracks
(taxed at 15/ per
admission); municipal
bathing beaches and
pools; admissions
where 75$ of the gross
receipts are to be used
exclusively f#r chari
table, religious, and
educational purposes;
dramatio or musical
productions presented
by civic organizations
in municipal parks.
Louisiana
Operators of theaters,
moving picture shows,
skating rinks, and
similar places of
amusements*
Rapges frsm $10 ®n gross
annual receipts of less
than $2,500 to $2,750
on gross receipts of
$550,000 or more
Maryland
Amusement operators
f- *f 1% o f gross receipts;
passes or reduced rates
an additional tax: ad
mission not in excess
None specified
Activities of non-profit
organizations
Of 50/, 5/; 5¥-$i,°°,
lO/; over $1*00, 15/
Mississippi
.Amusement operators
1/ f o r each 10/ or
fraction of admissions
ever 25/; ■£/ f5ir eaoil
10/ or fraction of
admissions of 25/ or
less
Missouri
*
Montana
Nlrth Dakota •
Ohi#
Sales of admissions
to places of amuse
ment
Operators of moving
picture theaters
7$
o f admission paid
of gross receipts
in excess of $3,000
per quarter
Sales of admissions
t* places of amuse—
• ment
2$ tf gross receipts
Amount received for
admission to places
of amusement
yf0 o f admission paid
(Continued)
Activities of non-profit
organizations; fairs%
athletic games between
high schools and grammar
schools
None specified
Activities of non-profit
organizat ions
Admissions of 10 cents or
less; activities of non
profit organizations;
fairs
Activities of non-profit
organizations; agri
cultural fairs; benefits
for war veterans,
municipal fire or police
•deptsy municipal corpor
ations (if admission
price is 40/
1ess)
orb
256
Table 17
State Taxes on Amusements (Continued)
S ta te and
j Tax a p p lic a b le to 2/
lep'al citation_:
:' Tax rate and measure
*
Exemptions
2% of gross receipts
Fairs; church activities
Admissions to places
of amusement
1/ for each 10/ or
Moving picture theaters and
public bathing beaches (both
of -which are otherwise taxed)
activities of non-profit
organizations; fairs,
amateur performances;
athletic contests of
colleges, schools
South Dakota *
Sales of admissions to
places of amusement
2% of gross receipts
Admissions of 14/ or less;
activities of non-profit
organizat ions; fairs
Tennessee
Operators of theaters,
moving picture and
vaudeville shows
yfo of gross receipts;
None specified
Amusement operators
l/ on each 10/ or
fraction of admission
where admission ex
Oklahoma *
. Sales of admission* to
places of amu renient
South Carolina
Texas
fraction, of admission
paid
4% if they operate
bank night, lottery,
or similar system
5
ceeds V P e r Person>
Season tickets: 10$
of amt* paid;
Complimentary tickets
Jam© as on other
tickets
Racing: 1/ on each
10/ or fraction
Utah *
Amount paid for
admission to places
©f amusement
West Virginia"
Sales of admissions
"t© places of amuse
ment
yarning
Anount paid for ad
mission to places of
amusement
Admissions of ^¡¡1^ or less,
except in case of ad
missions to racing;
activities of non-profit
organizations
2$ of admission paid
State fairs
2% of gross receipts
Admissions under 5/i
activities of non-profit
organizations where no
professional talent is
hired
2% of admission paid
reasury Department, Division of Tax Research
Admissions of 24/ or less
State Taxes *n Amusements (concluded)
Footnotes
1/
This tabulation excludes:
(a) business licenses or inspection fees,
(b) taxes assessed upon amusement operators under the Indiana and West Virginia
gross income taxes, the New Mexico gross receipts taxes, the Arizona and North Carolina
general sales taxes, and.
(c) taxes of limited application such as those restricted to horse racing, boxing
and wrestling matohes.
Ten States impose taxes on admissions to horse races: Arkansas, Delaware, Florida, Illinois
Kentucky, Louisiana, Nebraska, New Jersey, New Mexico and New York.,
Gross receipts from boxing and wrestling matches are taxed in: California, Delaware,
Idaho, Illinois, Indiana, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota,
Montana, Nebraska, New Jersey, New York, North Dakota, Pennsylvania, Rhode Island, South
Dakota, Texas, Virginia, Washington, West Virginia and Wisconsin, In most States the
rate is % of gross receipts. In other States the rate is either
or \Q% of gross
2/
,
y
y
*
receipts.
State taxes on amusements are collected in the first instance from operators of amusement
places. In most cases they add the tax to the price of admission. Authority for passing
on the tax is found in some cases in mandatory or permissive statutes and in other cases
in administrative regulations.
In the case of the States marked with an asterisk, the exemption shown in terms pi price
of admission results from the operation of the bracket system under the sales tax.
In places of entertainment vhere food or drink are served and professional entertainers
are employed, the tax is 2$% of the total charge or cover charge whichever is greater.
Amusements are taxed under the general sales tax.
258
Table 18
City Taxes on Amusements l/
January 1, 1947.
Base
City
Alabama
Bay Minette
Bessemer
Cl ponton
Gadsden
Mobile
Piedmont
Talladega
California
Bakersfield
San Bernardino
San Diego
Stockton
Georgia
Augus ta
Admission price, motion picture
theaters
Admission price
15/ or less
Over 15/
Per admission
Admission price
Admission price
Admission price (in excess of 10/)
motion picture theaters
Admission price
Per
Per
Per
Per
admission (in excess of 15/)
admission
admission
admission
Admission price
$5 or less
Savannah
Over si-5
Admission price
|5 or less
Kansas City
St* Louis
New York
Rate
b%
%
21
10%
10%
10%
10%
3/
1/
2/
l/ per 50/ or
fraction thereof
2%
l/ per 50/ or
fraction thereof
2%
Over 4'5
Missouri
Hannibal
*
Gross receipts, theaters and
other places of amusement
Gross receipts, wrestling and
boxing, professional concerts,
public "hi IIs (hut not theatres
and motion picture shows)
Admission price, sports
z /
(Continued)
o
o/
C/o
b%
. ■ -
¿öö
Table 18
City Taxes on Amusements (Concluded)
Rate
Base
City
Pennsylvania
Philadelphia
Admission price
Virginia
Falls Church
Norfolk
Per admission
Admission price (in excess of 4/0
l/ per 10/ or
fraction thereof 3/
.
*^r.
1P per lOp or
fraction thereof
rAdmission price
Richmond
Washington 4^/
Bellingham
Everett
Seattle
Sedalia
Spokane
Admission
Admission
Admission
Admission
Admission
Yiest Virginia
Charleston
Clarksburg
Per admission
Admission price
price
price
price
price
price
;
1/ per 20/
l/ per 20/
l/ per 20/
5%
1/ per 20/
Iff
1^
per 50)/ or
fraction thereof
Treasury Department, Division of Tax Research
Sources:
Commerce Clearing House. Corporation Tax Service; A.M. Hillhouse
nnil Muriel Maeelssen, Where Cities Get Their Money, Chicago, 1946
(and 1947 Sunni amenth Public Management, January and December,
1946; Federation of Tax Administrators, Amusement Taxes, Mimeograph
RM-241, March 19, 1946*
The data shown here were obtained from several sources (indicated Above)
'
...
The New York legislature in March 1947 authorized counties (except the
counties in which New York City is located) and New York City to impose
taxes- -nod?-in exceed, of 5 'percent on admissions to theaters and other
places of .amusement (except race- tracks, boxing and^wre.s.tling matches):
1/ and are not necessarily complete,
5/
3/
y
and- roof gardens and cabarets©
,
In the case of roof gardens, carbarets and night clubs, a tax of 5 percen
is applied to 50 percent of the total charge to the patron including amounts
paid for admission, refreshments, etc,
__
The State of Washington repealed its amusement tax in 1943 and grante
permissive authority to; city and county governments to levy such taxes.
Latest available data indicates that approximately 65 cities, including all
those having a population greater than 10,000 have adopted admissions taxes.
Table 13
State Sales Taxes: Types and Rates
July 1, 1947
State
Type of tax. 1/
-J-a.
Ariz.
Retail sales
General sales
4rk* 2/
Retail sales
Retail sales
Retail sales
Retail sales
Retail sales
Gross income
Calif*
Colo*
Conn.
HIIn-a.,
Iowa
Kans.
-La«
Md*,
Mi oh.
Miss.
Retail sales
Retail sales
Retail sales
Retail srO es
Retail sales
Gross receipts
Mo •
New Mex.
Retail sales
Gross receipts
: Use
: tax
X
■X'
X
X
X
X
X
X
X
Rates on retail sales
Amuse- :
: Tangible :
Restau
Automo
ment :
: personal :
rants
biles
: places :
; property :
2
2
1/2 2/
2
T
2
2
2
2
2-1/2
2
2 2/
2-1/2
• 2
3
3
26/
1/2
2 6/
1/2
2
2
16/.
2
22/
2
1
.X
3
210/
.X
2
28/
.
2
•
Public ;
util- :
ities :
B on receipts from «ther specific sources
* '
.... — --- ---------- -— -- -- -
1
2
Manufacturing, preparation for sale of agricultural
and horticultural products, slaughtering animals for
food, sales of feed to poultrymen or stockmen- for own
use, 1/4%; extracting, processing, printing and pub
lishing, contractors, advertising, 1%? hotels, apart
ment houses, office buildings, and garages, credit
and collection agencies, 2%•
2 4/ Printing and photography, 2%.
2-1/2
O
2 5/
3
3 2/
1
1/2
1
2
2
2
.2
1 ■
2 •
2 4/
24/
All other income, 1%, exoept that received from
wholesales, display advertising, and industrial
processing, 1/4%; drycleaning and laundering, 1/2%.
3
3
X ài/
2
2 2/
3 2/
2 12/ Wholesaling, 1/8%; manufacturing, 1/8-1%; contractors,
1%j extracting, 2—2^%; all other businesses and pro—
fessions not specifically exempted, 2%.
2
2
2
2
1 n/
2
2
2 y
.
Wholesaling, 1/8% extracting, 1/2 or 2%; processing
and manufacturing, 1/4 or 1/2%; contractors, 2%;
real estate c*mmissions, factors, agents, brokers,
advertising, personal and professional services, 2%.
(Continued)
r\3
CO
.o
Table 13 — Continued.
State Sales Taxes: Types and Rates
July l r 1347
;
State
: Use
Type of tax 1/
: tax
Rates on retail sales
: Public :
¿muse— :
: Tangible :
Restau : util— :
Automo
ment :
: personal :
rants : ities :
biles
places :
: property ;
N.C. 13/
N. Dak.
Ohio
Okla.
General sales
Retail sales
Retail sales
Retail sales
X
X
X
X
3
3
3
3
2
2
2
2
3 y
2
3
2 M/
2
R. I.
S. Dak.
Tenn.
Utah
Wash.
Retail sales
Retail sales
Retail sales
Retail, sales
Retail sales
Gross receipts
X
X
X
X
1
2
2
2
1
2
2
'2
2
X
j y
1/4
3
1/4
Retail sales
2 8/
2
Gross income
1/2
1/2
W. Va-.
Wyo.-
Retail sales
X
2
y
2
Wholesaling, 1/ 20%.
2 y
3.
2
215/
1
2
2
2
3
1 à/
2 4/
1/4
2
65/IOO
2
2
Printing and publishing, advertising, hotel service,
auto storage, 2%.
216/
§|j jjj
2
1/2
Rates *n receipts from other specific sources
I.3-5.2
Wholesalers (except wholesalers of wheat, oats and
barley, which are 1/100%), extractors, manufacturers
printers and publishers, 1/4%; all other businesses
and professions not specifically exempted, l/2%*
All services exoept personal and professional
services and public utility services, 2%.
Wholesaling, 135/1000%; extracting, 1 .3~7 «8% j
manufacturing, 33/100%; contractors, 2%; Industrial loan companies 1%; all other businesses
not specifically exempted, 1%.
2
Treasury Department, Division of Tax Research
Footnotes on following page.
■ro
r~-~}
Table 13 - Concluded
State Sales Taxes; •Types and Rates
July 1, 1947
Footnotes
1/
Type of tax;
(1 ) Retail sales - imposed upon sales of tangible personal property at retail or for consumption. In most States
applies also to admissions and restaurant and public utility sales*
_
_
(2 ) General sales - applies to whole*..ling, extractive industries and manufacturing in addition to sales at retail
(3) Gross receipts - includes sales.of public services and personal and professional services in addition o
transactions and receipts under (1/ and (2).
(2), and (3), to receipts from
(4 ) Gross income - applies, in addition to all transactions and receipts under (l),
interest,
rents and dividends.
non—business activities such as •wages and salaries oi employees,
2/ Applies to new automobiles only. .
y
y
y
y
y
y
y
10/
a/
a/
w
w
Rates in cities cr incorporated towns bordering other States same as that in adjoining otate.
-Julies to all public utilities except transportation, in Missouri, all except transportation of freight.
.
applies -co ail puunc u n x
v
1
T_ Illinois the rates on utilities are imposed unaer a
applies to telephone and telegraph services, gas and electricity sales* In Illinois tne rc.xes on
, ,,
separate act.'
The 2% rate is applied to 98^ of gross receipts.
tax and are exempt from the sales tax while sales of used motor vehicles
Sales of new motor vehicles are taxed under the u
are taxed under the sales tax.
Tax applies to rentals as well as sales.
Applies to gas and electricity only.
The rate on retail sales of pasteurized milk is lA-#
Applies to automobiles, trucks and tractors.
The rate on industrial sales of gas and electricity is 1^.
Maximum tax of SIS on a single article.
„
The sales tux specifically exempts sales of motor vehicles but a special excise tax of 2* 1.: levied uponthe * ™ n s f ^ o f
ownership and the use of a vehicle registered in the State and upon the use of a vehicle registered .or the first tir
State..
Applies to -all public utilities except water and transportation of freight.
i5/ Specifically excluded are street railway fares and intra-state movements of freight and express.
±y
rv>
CD
ro
@FedFRASER