Tax Reduction, 1958

Report Outline
Tax Reduction and the Business Slump
Previous Tax Cuts to Revive Business
Current Proposals for Tax Reduction
Reluctance to Resort to Tax Reduction

Tax Reduction and the Business Slump

Failure of the economy to show clear signs of spontaneous resurgence from the current business recession has provoked widespread demands for reduction of federal taxes. Leading business and labor organizations, private associations engaged in economic research, and prominent economists and other individuals have called for a tax cut to arrest a decline which, unless halted, may feed on itself and throw the country into deep depression. Specific proposals differ in detail but have in common the aim of stimulating revival of commerce and industry by expanding consumer and business spending.

A few public figures have spoken out flatly against resorting to tax action which would inevitably push the federal government into a new splurge of deficit financing. Bernard M. Baruch, for example, told the Senate Finance Committee on April 1 that it would be “folly” to reduce taxes at this time. Warning of the perils of inflation, Baruch declared that price, not tax, reductions would afford the “best stimulant to our economy.”

The more general opinion has been that the recession at hand is more threatening than problematical future inflation. Reduced federal revenues, it has been pointed out, have already made resumption of deficit financing a certainty. The government, moreover, is obligated by the Employment Act of 1946 to try to hold business investment and consumer purchasing power at high levels. That act makes it the continuing responsibility of the federal government to devote “all its plans, functions, and resources” to creating and maintaining conditions of maximum employment in ways which promote the system of competitive private enterprise.