Mellon Tax Reduction Proposals 1927
Debate over the Mellon Tax Reduction Proposal of 1927
THE BATTLE FOR AND AGAINST heavy tax-reduction, which began November 2, when Secretary of the Treasury Mellon recommended a reduction not greater than $225,000,000, “will be between financial and corporation giants,” observes Robert Barry, Washington correspondent of the New York Evening World. Unlike the 1921, 1924, and 1926 tax-reduction battles, Mr. Average Citizen, who is found in the lower brackets, will gain only indirectly from whatever slashes may result from the Mellon recommendations. He simply is not in the picture this year; the issue is not whether there shall be relief for the small income-tax payer, but what the amount of the reduction in the higher levels shall be.
Basing their argument primarily on the ground that the Treasury has in the past consistently underestimated its revenue, the Democrats, says the Springfield Union, “are virtually united in proposing a total reduction of $400,000,000, or even $500,000,000.” Mr. Mellon’s reply to this is that such a heavy cut would threaten a budget deficit in the fiscal year 1929; that a tax policy must be based, not on past revenues, but on those likely to be available in the future. The Secretary of the Treasury, remarks the New York Sun, “arrives at his figures by simple arithmeticâ€”a science all too unfamiliar in legislative halls.”
Chairman Green, of the House Ways and Means Committee, following the hearings between November 2 and 12, hopes to have the tax-reduction bill ready for introduction with the opening of Congress, and passed by the House before the holidays. What Congress must decide, we are told, is the amount of the cuts which can be made without leaving a deficit. “Curiously enough,” notes the Providence Journal, “the United States Chamber of Commerce has a tax-curtailment program that more closely resembles the Democratic proposals than it does the Administration’s tentative outline.” This outline, as submitted by Secretary Mellon and summarized by the Washington correspondent of the New York Times, contains these five basic recommendations:
“1. Reduction of the corporation tax from 13.5% to 12 per cent., involving a revenue loss of $135,000,000.
“2. Permitting corporations with net income of $25,000 or
less, and with not more than ten stockholders, to file returns
and pay the tax as partnerships or corporations, at their option.
This would mean a reduction of $30,000,000 to $35,000,000.
“3. Readjusting the intermediate brackets of the surtax rates, applying to incomes between $18,000 and $70,000 and involving a revenue loss of $50,000,000.
“4. Repealing the estate tax, involving a loss of $7,000,000.
“5. Exempting from taxation the income from American bankers’ acceptances held by foreign central banks of issue.”