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Federal Taxation of Small Incomes

November 7, 1925

Report Outline
Numbers of Income Taxpayers
Government Revenues from Income Taxes
Corporation Taxes Indirect Taxes and Customs
Amounts of Proposed Normal Tax Reductions
Foreign Taxes on incomes

The principal issues before the House Ways and Means Committee have been disposed of by the Committee's decisions (1) to relieve approximately 1,000,000 small income tax payers of their present direct tax payments to the Government by raising the personal exemptions, (2) to grant reductions in the lower brackets well in excess of those suggested by the Treasury, (3) to retain the distinction between earned and unearned incomes for purposes of taxation, and (4) to limit the total tax reduction in the revenue bill to be reported to the House at the opening of the next session to $300,000,000.

In dealing with surtaxes the Committee accepted the Treasury plan for a reduction in the maximum rate from 20 to 40 per cent, “but surtaxes have not been a major issue in connection with the present revenue bill. The leading issues have had to do with the policy to be adopted in the taxation of small incomes, and the policy to be followed hereafter in the retirement of the public debt. By adopting $300,000,000 as the amount to be allowed in tax reductions—instead of the larger figure that would be justified under a 50 year retirement program—the Committee, by inference, approved the Treasury policy looking to retirement of the full war debt within a period of 25 years.

The action of the Ways and Means Committee on the small income and debt retirement issues is important as a first test, but it is not conclusive, for these issues will dominate the consideration of the new revenue bill in both the House and the Senate and will not be finally disposed of until the last conference report is accepted by the two houses and the bill signed by the President.

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