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Frank Demby

War Taxes Mount

(August 1941)

From Labor Action, Vol. 5 No. 32, 11 August 1941, p. 2.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

After three months of consideration the House Ways and Means Committee brought in a proposal to raise $3,529,200,000 in new taxes. It is expected that the federal government will raise between nine and ten billion dollars from existing taxes. The additional revenue, provided there is no increase in expenditures, will be covered by taxes. The remainder will be raised through borrowing. It also means that this is the largest tax bill in the history of the country. Just a reminder that war costs money.

The bill is really a case of the mountain laboring and bringing forth a mouse. None of the basic issues are tackled. Recognizing that this is decidedly a compromise measure. Representative Doughton, chairman of the Ways and Means Committee, following the lead of President Roosevelt, announced, in pleading for a “gag” rule to speed the debate, that the committee would have to consider a new tax bill for next year which would probably broaden the income tax base and levy a federal sales tax. These have been the basic demands of the bosses, who, as usual, try to throw the main burden of taxation onto the backs of the masses. On the other hand, the bill sidesteps the issue of imposing a genuine excess profits tax by merely increasing the excess profits rates a piddling 10 per cent.

Joint Returns

The most highly publicized feature of the new tax bill – the only part of the bill open to debate in the House of Representatives – is the proposal to compel married couples to file a joint tax return. A storm of protest has risen from press and pulpit against this measure on the ground that it penalizes marriage, will encourage divorce and immorality, and breaks down the sanctity of the home. At this writing it appears that the joint return, designed to raise more than $300 million, will be eliminated.

However, the joint return doesn’t mean higher taxes for the wealthy, for the wives of the rich don’t work. It is true that they may have separate incomes in the form of inheritance or property gifts from their husbands; but the main burden of the joint return would fall on those middle class and working class families where both husband and wife work, with combined incomes ranging from $4,000 to $10,000. Since the greatest number of working women come from the ranks of the working class, a broadening of the income tax base and a lowering of exemptions – as is proposed for next year – would result in the joint return affecting the upper strata of the workers more than any other group. This is one of the main dangers inherent in the proposal. On this practical ground alone, leaving aside the fundamental questions of the family and the institution of marriage, the joint return should be opposed.

The bulk of the new tax revenue is to be raised from corporate and individual taxpayers – nearly two and a half billion dollars. In comparing the additional amounts to be raised from corporations and individuals, we see the manner in which the refusal to levy a 100 per cent excess profits tax and substantially higher corporation taxes, is allowing the big bosses to escape at the expense of the middle and working classes. New taxes from corporations are expected to raise $935,000,000. New taxes from individuals will raise an expected $1,521,000,000 (the big increase in the surtax rates falling on those making from $2,000 net income to $10,000 net income). This means an increase of 72.7 per cent in the taxes paid by individuals as against an increase of only 35.8 per cent in the taxes paid by corporations. In the words of Godfrey N. Nelson, tax expert of the New York Times: “Charging themselves with the duty of raising an enormous additional amount of revenue, the Congress has made the burden of such load to fall disproportionately upon the individual taxpayer. It has been said that we shall pay the additional taxes even if we have to borrow on do so.” To enable the middle class to pay these new taxes, the Treasury is obligingly selling “tax anticipation” notes.

Power to Destroy

”The power to tax,”’ goes the well known saying, “is the power to destroy.” In this case, what is involved is the beginning of the destruction of the middle class, the traditional bulwark of American capitalism. The far-reaching social implication of burden of the middle class will only be seen in the years to come, but in its own way it is already an indication of the approaching revolutionary crisis in the United States. One of the most penetrating predictions of Marx was that in which he predicted the gradual disappearance of the middle class as capitalism matured and began to decay. This prediction has often been attacked as incorrect, and the United States, with its vast middle class, cited as proof of Marx’s error. But, even if somewhat belated, the middle class IS being wiped out (by the big capitalists). The process, which began with the onset of the great depression of 1929, – particularly on the tax front.

The impression has been carefully cultivated by the boss press that the workers have escaped “paying their share of the new taxes.” The Republican minority of the Ways and Means Committee, while it couldn’t agree on any specific measures, submitted a minority report attacking the New Deal spending and calling virtually for the elimination of WPA, NYA and CCC appropriations. To them, of course, the existence of 5,000,000 and more unemployed is of no importance. But the workers have not escaped. They will not be taxed directly, rather they will be made to suffer the most vicious forms of taxation – excise or indirect taxes. An additional $900,000,000 is to be raised in excise taxes. These taxes on various commodities and services (mostly necessities) are, of course, passed on to the consumer in the form of higher prices. It means that those who can least afford to pay them will bear the overwhelming burden of these new taxes. It also means that at the same time that the government is supposed to be taking action to prevent rising prices, it introduces a tax bill which must result in higher prices! However, we should not expect logic from capitalist politicians.

Some of the increases in existing excise taxes as well as some of the new excise taxes are as follows: distilled spirits, an increase of $1.00 a gallon to yield $122,300,000; wines, increased rates to yield $5,000,000; automobiles, tax increased from 3½ to 7 per cent, to yield $74,900,000; tires and tubes, increased rates to yield $44,600,000; matches, a tax of 2 cents per 1,000, to yield $21,000,000; playing cards, rate increased from 11 to 13 cents, to yield $1,000,000; radios and receiving sets, rate increased from 5½ to 10 per cent, to yield $9,400,000; telephone bills, a tax of 5 per cent, to yield $43,600.000; transportation of persons, which excludes tickets for 30 days or less, a tax of 5 per cent, to yield $36,500,000; a “use” tax on automobiles, yachts and airplanes of $5.00 each per year, to yield $180,200,000 (imagine placing yachts and airplanes in the same class as second-hand automobiles!); bowling alley, pool or billiard table tax, $15 each, to yield $3,400.000; soft drinks, a tax of one-sixth cent per bottle or its equivalent, to yield $22,600,000; also a 10 per cent tax on the following items: phonographs and records, musical instruments, sporting goods, luggage, electrical appliances, photographic apparatus, electric signs, business and store machines, rubber articles, washing machines for commercial laundries, jewelry, furs and toilet preparations.

For those making under $2,000 a year – that is, 70 per cent of the nation – these excise taxes alone (not counting the state taxes and “voluntary” contributions of various types) will mean a greater increase in their already high taxes than is the case with the wealthy. The writing of a real tax bill – one which would raise the money from those who can afford it by a capital levy on all those with incomes over $10,000 a year – that, of course, is too much to expect from those docile representatives of big business in Congress. But we should at least expect the honorable congressmen to read their own tax bill – even if they don’t debate it. That is most unlikely since only three days have been allowed to consider a bill which is 95 pages in length!

Thus does the Congress, by its very actions, reveal the fakery and hypocrisy which is involved in every tax bill.

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