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Labor Action, 13 January 1947


I.L. Goslin

Truman Reports on Labor, Budget
and Taxes Before 80th Congress

Tax Issue


From Labor Action, Vol. 11 No. 3, 20 January 1947, pp. 3 & 5.
Transcribed & marked up by Einde O’Callaghan for ETOL.


There are many people who, when the word “taxes” is mentioned, shy away with fright because of a feeling that there is something very intricate and specialized about taxation beyond the knowledge of the ordinary person. This attitude, created by the professional economists in the tow of big business, prevents the workers and the labor movement from expressing as vigorous an opinion on taxation as they arc ready to express on wages. True, you will find in labor papers articles on taxation problems, and often very good ones; but only when a proposed tax is outrageously unfair to the workers – such as a sales tax – do the men in the shops speak up as vigorously as they do on wage demands.

We think that this situation should be changed. For taxation concerns workers just as much as wages do. The experience with the withholding tax proved this; it had the virtue (if none other) of showing you in dramatic and concrete form just how taxation cut into your income.

Now we are up against a new Congress which has to enact tax legislation. All kinds of proposals are in the air, and it would be well for workers to scrutinize them carefully. Indifference today may mean paying tomorrow.

The Knutson Proposal

The most widely publicized proposal so far is that of the Republican House leader, Harold Knutson, in the form of his HR-1. Knutson proposes a cut in income taxes “across the board” of 20 per cent. This, he says, will mean that everyone’s tax burden will be lightened equally. The tax burden of a worker making, say, $2,000 a year and the tax burden of the president of Alfred du Pont making, say, $500,000 a year will both be cut 20 per cent. Could anything be fairer, asks Knutson?

Knutson’s proposal reminds us of the famous crack made by the writer, Anatole France, who said that under capitalism the rich and the poor are equally free to starve. For Knutson’s proposal is really outrageously biased in favor of the rich and against the workers.

The idea of an even percentage of taxation on all incomes is thoroughly unfair. Taxation should be based on ability to pay, which means that a capitalist should be taxed a far larger percentage than a worker. Correspondingly, when taxes are cut, that same criterion should be applied.

To prove this assertion, we wish to quote from a letter sent to the New York Times on January 8 by a researcher of the Amalgamated Clothing Workers of America. He points out that the 20 per cent cut proposed by Knutson can be understood only in terms of how much of an increase in spendable income will result. He then traces the percentage of increase for each income category. Thus, in the lowest taxable category, $1,200, the Knutson proposal would leave such a person with $1,170 spendable income instead of $1,162, an increase of merely 0.7 per cent. Likewise with a person earning $2,000, who would be left with $1,848 instead of $1,810, an increase of merely 2.1 per cent.

Helps the Rich

But the higher the income the greater the percentage increase in spendable income would result from the Knutson proposal. Thus, a man with a $100,000 income would be left with $49,498 instead of $36,873, an increase of 34.3 per cent. And a person taking in $500,000 per year would be left with $157,927 instead of $92,536, an increase of 70.6 per cent As the writer quoted puts it:

“The 20 per cent across the board reduction will increase spendable income by less than 1 per cent for those in the lowest brackets and by almost 72 per cent for those in the $300,000 class.”

That, in practice, is what the proposal of the Republican leader, Knutson, would mean. It is clearly legislation in favor of the rich – which is not at all surprising, since such legislation is the natural function of a capitalist party.

None of the other Congressional leaders have attacked the Knutson proposal in principal. Some, following Truman’s cue, have argued against tax reductions, but they have not objected to Knutson’s proposal on the ground that it discriminates against the poor. Now the chances are that Knutson’s proposal will not pass, but that a less sharp tax reduction will be enacted. What is important, however, is that the line of reasoning Knutson adopts – and the strictly phony line of cutting “everybody’s” taxes equally – is that of the leaders of both capitalist parties.

President Truman came out against tax reductions. He wants to maintain tremendous expenditures for military purposes: 11 billion dollars for the military and ½ billion for atomic bombs. Despite all the talk of a peaceful world and the United Nations, the workers of this country will continue paying for the war preparations and maneuvers of American imperialism.

In this situation – where the Republicans propose tax legislation favorable to the rich and the Democrats reject any move to lighten the tax burden of the poor – it is necessary for the labor movement to come forward with vigorous demands of its own. A labor tax platform would, we believe, include the following points:

  1. The exemption from income tax payments of those with the lowest incomes: $5,000 and below. This would be in accordance with the principle of taxation according to ability to pay.
  2. An annual income ceiling of $25,000 per year. This is comfortable enough for anyone to live on and the excess taxed from the rich would make up for the reduction in tax revenues as a result of exempting the lower brackets from income taxes.
  3. The maintenance of the wartime excise taxes on luxury items, scheduled to expire on July 1. Most of these items – such as taxes on cabarets, furs, jewelry – concern only the rich. In turn, labor should press for a reduction of taxes on those items – such as refrigerators, cigarettes and radios – which concern the masses of the country.
  4. There are still accumulated in the banks of American capitalism millions of wartime profit. As a result of a recent tax windfall, the big corporations have been getting millions in tax rebates. (You don’t notice the capitalist press “viewing with alarm” this rebate as it does portal-to-portal pay for the workers.) We propose a 100 per cent tax on all of these war profits, even if they have to be collected after the war’s end.
  5. And finally we propose a capital levy. The trouble with all other tax legislation is that it touches only what the capitalist makes in a given year. But to lighten the burden of the poor – who, according to a recent estimate, work one day in thr,ee to pay taxes to the government – it is necessary to tax the ACCUMULATED income of the capitalists.


That, as opposed to the reactionary, tax programs of the Republicans and Democrats, is a bold tax program with which labor could rally great support throughout the nation. It is just- as important as wage increases and should net be neglected by the working people of this country.

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