FISCAL: Splitting the Budget

When Manhattan Tax Expert Beardsley Ruml went to Washington eleven years ago to suggest some drastic revisions in the U.S. tax system. Congress eventually was impressed with one of his ideas; it adopted Ruml's pay-as-you-go income-tax system. Last week Ruml came to Washington with a new plan—to balance the budget.

If all excise taxes except those on liquor, tobacco and gasoline were removed, said Ruml, the Government would lose some $3.4 billion in annual income. But no new taxes would have to be imposed to make up the difference. Reason: the present budget overstates tax needs by $12 billion. Ruml listed four ways the budget should be trimmed:

¶ Some $2 billion should be lopped off through greater efficiency and economy, both of which are prime goals of the Administration (see NATIONAL AFFAIRS).

¶ Capital assets which produce revenue, such as Federal National Mortgage Association mortgages and small-business loans, and assets intended to be resold, such as stockpile materials and agricultural surpluses, should not be listed as current expenses. Estimated saving: $2 billion.

¶ Real-estate purchases, plutonium-producing atomic energy plants, construction of Government buildings and other similar investments should be organized as self-financing authorities, like municipal bridge and tunnel authorities, and raise money from private sources. Saving: $4 billion.

¶ The U.S. should go on a "cash consolidated budget," i.e., include in its budgeted income such revenues as veterans' life-insurance premiums and social security payments, which are now set aside in separate trust funds. Gain: $4 billion.

Many of Ruml's suggestions were not new. "It's just taking a lot of old lumber and a few nails," said he, "and making something out of them." To many a conservative Congressman, the Ruml plan seemed little more than a bookkeeping operation, reminiscent of the New Deal's brain-trust days. Admitted Ruml: "It's a bookkeeping operation, but not 'just' a bookkeeping operation. It may be that in these years the splitting of the budget is more important than splitting the atom. We can't have a free economy with high taxes."