THE RECESSION: Ford's Risky Plan Against Slumpflation

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IMMEDIATE TAX CUTS: All taxpayers would get back 12% of the federal income taxes that they have paid on 1974 earnings, up to a maximum of $1,000 —which is the size of the rebate that typically would go to a family of four that earned $41,000 or more last year. If Congress enacts his plan by April 1, Ford said, the rebate would be paid in two installments: half in May, half in September (though some Treasury aides doubt that the Internal Revenue Service has the manpower to get the checks out so fast). Taxpayers first will have to compute their liability under the current rules, filing returns and paying any additional amount that might be owed under present law by April 15. The IRS then would calculate the rebate on each return and mail it out automatically; no taxpayer would have to file separately for the rebate. Any taxpayer who is owed a refund under present law would get three checks: one for that refund, then two for the rebate. The IRS expects to mail rebate checks to some 83 million families and single taxpayers.

Big corporations, smaller enterprises, farmers, lawyers, doctors and other self-employed people would save $4 billion this year by deducting from their tax bills 12% of the amount that they spend to buy new machinery and equipment. At present the credit is 7% for most companies, and it would drop back to that rate next year. Utilities, however, would get an extra break: their credit would rise from 4% now to 12% this year, then stay at that level through 1977, so long as they invested in power plants that use fuels other than oil or natural gas. Utilities need special help because they rely mostly on borrowed money to expand and modernize, and they had severe trouble raising cash in last year's supertight credit markets. Ford noted in his State of the Union speech that utilities recently have canceled or postponed 60% of the nuclear power plants that they had planned to build and 30% of the nonnuclear facilities because they could not get financing, individual incomes earned in 1975 and beyond would be reduced by an average 9%. This year's reduction would total about $16.5 billion. The mechanism: cuts in the tax rates on the first $6,000 of taxable income (the first $8,000 for single people). Every payer would get some reduction. On a taxable income of $6,000, payments to the Government by a married couple filing jointly would decline from the present $1,000 to $790, a cut of 21%. On a taxable income of $44,000,* the tax would go down from $14,060 to $13,930, or less than 1%.

Ford also proposed an increase in the "lowincome allowance," calculated to remove from the tax rolls entirely all people below the poverty line—now figured as $5,600 in gross income for an urban family of four. If Congress approves the new schedule by April, the Administration promised, withholding rates would be reduced beginning in June. Corporate income taxes would be lowered too—from 48% of profits now to 42%. Savings to companies: about $6 billion a year.

ENERGY: Prices of oil products and natural gas would rise sharply. A family of four that has earnings in the $10,000 to $12,000 range now spends about $950 annually on gasoline, heating and utility bills. By Frank Zarb's estimate, that cost would go up some $250.

The idea, bluntly put, is that the U.S.