Bald, bashful, nervous Treasury Secretary Henry Morgenthau had mapped his campaign like a general getting ready for a spring offensive. He had stored up quantities of materiel for verbal war. His scouts had reconnoitered the House and Senate. This week, as his adding machines rolled forward, Mr. Morgenthau invaded Congress with the greatest army of tax proposals ever seen on earth.
His timing was perfect. U.S. taxpayers have started filing returns for 1941. When they get a look at Mr. Morgenthau’s spring invasion, 1941’s record taxes will look like a minor skirmish with a band of Indians armed with bows & arrows.
Congress dearly loves to harry Mr. Morgenthau with guerrilla tactics, to snipe at his rear with embarrassing questions, cut off his flanks with counterproposals. But this time General Morgenthau had not given Congress time to mobilize. Treasury and Congressional experts had worked out the campaign together. Mr. Morgenthau had smoothed the way for his Blitzkrieg by luncheons with big, ham-handed Chairman Robert L. (“Muley”) Doughton of the House Ways & Means committee (which starts the tax bill rolling) and urbane Chairman Walter F. George of the Senate Finance Committee. With their help, Strategist Morgenthau thought that he could make it.
The Treasury wanted more than the additional $7,000,000,000 the President had asked for in his budget message. Mr. Morgenthau suggested raising an estimated $8,145,000,000 in extra taxes, making the total 1942 tax burden more than $20,000,000,000. Specifically: 1) an additional $3,350,000,000 from personal income taxes; 2) $3,345,000,000 more from corporations; 3) $1,450,000,000 more from excise taxes, gifts and estates. The big news to U.S. taxpayers:
SINGLE MARRIED
INCOME PERSONS PERSONS*
Present Proposed Present Proposed
$ 800 $ 3 $ 8 $… $…
1,000 21 40
1,500 69 128
1,600 79 147 6 16
2,000 117 230 42 80
3,000 221 470 138 285
4,000 347 735 249 535
5,000 483 1,023 375 805
8,000 1,031 1,990 873 1,735
10,000 1,493 2,720 1,305 2,435
12,500 2,178 3,740 1,960 3,425
15,000 2,994 4,888 2,739 4,535
20,000 4,929 7,473 4,614 7,060 50,000 20,882 28,098 20,439 27,490
100,000 53,214 73,030 52,704 72,355
500,000 345,654 433,030 345,084 432,355
1,000,000 733,139 883,030 732,554 882,355
∎ From individual income taxes, Mr. Morgenthau would eliminate the 10% earned-income credit. (Its benefits would remain on incomes under $3,000.)
∎ Surtax rates would start at 12% instead of 6%, rise to 86% instead of 77%. The basic U.S. tax rate (including 4% normal tax) would be a flat 16%.
∎ Mr. Morgenthau would revive his 1941 proposal (which Congress trampled flat) to compel husbands & wives with separate incomes to file joint returns. Expected yield: $350,000,000.
∎ Biggest news of all: Mr. Morgenthau would start withholding up to 10% of the taxpayer’s net income (after deductions for dependents) from salaries, pay rolls, dividends and interests on corporate securities. This painless extraction method would mean that Mr. Morgenthau could start collecting the difference between last year’s 2% surtax and this year’s 12% right away, instead of waiting until tax time rolls around again next March. On March 15, 1943, the taxpayer would figure out his other deductions, file his return as usual. If he had paid too much, the Government would give him a rebate; if he had paid too little, he would write out a check for the difference. Real horror note: instead of refunds, a credit might be given on the following year’s taxes.
∎ On corporations, Mr. Morgenthau would up excess-profits taxes 15% all along the line, would replace the present 6% and 7% surtax with a “war surtax” of 31%
∎ To protect small businesses hard hit by rationing and priorities, a credit would be allowed against war surtax, amounting to 10% of the drop in their earnings. (In no case would the credit be more than 20% of their surtax net income.)
*Without dependents.