Taxation for National Defense

Report Outline
Coming Consideration of New Tax Bill
American Tax Structure in World War
Present and Proposed Taxes for Defense
War Income and Excise Taxes in Britain
Special Focus

Coming Consideration of New Tax Bill

Imposition of heavier taxation to help defray the costs of national defense and of aid to Britain has moved into the foreground of public interest with announcement by Chairman Doughton (D., N. C.) of the House Ways and Means Committee that that body will begin consideration of a new tax bill in mid-April. Armed with data on the yield of existing taxes drawn from the March 15 returns, and with Treasury estimates of the probable yield of rate changes and proposed new levies, the committee will have the task of determining what proportion of defense costs it will recommend be met from current revenues and of proposing taxes designed to achieve that objective without restricting the progress of the defense program or imposing inequitable burdens on any class of taxpayers. The taxes already levied by Great Britain to finance her war effort, and any new British taxes that may be announced in the budget for the fiscal year 1941–42, to be presented to the House of Commons in the near future, will meanwhile provide a comparative measure of the burdens which the American people will be called upon to bear in making this country the “arsenal of democracy.”

Tax Objectives in Financing of Defense Program

Figures given in President Roosevelt's budget message last January indicated that the cost of the national defense program from June, 1940, to June, 1942, would be $28,480,000,000. It is now necessary to add to that total the sum of amounts subsequently requested, which were not included in the budget, as well as the $7,000,000,000 recently appropriated for expenditures under the lease-lend act. A table prepared by the Office of Production Management lists defense appropriations and contract authorizations, voted or requested through March 15, 1941, for the period from June, 1940, to June, 1942, totaling $39,177,800,000. That sum includes the $7,000,000,000 for British aid.

The President noted in his budget message that there was “no agreement on how much of such an extraordinary defense program should be financed on a pay-as-you-go basis and how much by borrowing,” but he said “a start should be made this year to meet a larger percentage of defense payments from current tax receipts.” Secretary of the Treasury Morgenthau told a subcommittee of the Senate Finance Committee, February 12, 1941, that “if the Congress would adopt a program under which we could raise through revenues an amount sufficient to finance two-thirds of all expenditures, and one-third from borrowing, I think it would be a very wholesome method to follow.”