Sales Taxes

Report Outline
Search for New Sources of War Revenue
Peacetime Experience with Sales Tax
Taxes on Sales in Time of War
Special Focus

Search for New Sources of War Revenue

Alternative Levies for the 1944 Revenue Act

A general retail sales tax stands in the background as Congress prepares to come to grips with the problem of finding additional revenue with which to finance the war. At an opportune moment it may be brought forward as a desirable alternative to increases in personal and corporation income taxes, forced savings, or other less satisfactory devices which would raise an equal amount of money for war purposes. The huge volume of transactions at retail in the United States, although already levied upon by many of the states, remains the largest single source of dependable revenue left open to the federal government.

Members of Congress reported, upon their return to Washington in mid-September after a ten-week recess, that their constituents had little complaint with the present burden of federal taxes but that there would be a “revolt of the home folks” if Congress tried at this time to impose the full $12 billion of additional levies called for by the administration. Contrary to expectations, most members of Congress found their people pleased with the withholding tax, placed in effect on July 1, but they reported definite disapproval of the present complicated system that “makes it impossible for a taxpayer to know where he stands.” Advocates of the sales tax point out that a levy on retail sales would impose no burden on the taxpayer, aside from payment of the tax; that the payments would be made in small amounts, “almost painlessly”; that the tax would yield as much additional revenue as Congress is willing to assess at this time; that it would do more to curb inflation than all other tax proposals combined.

Renewed Pressure for Federal Tax on Retail Sales

As the need for additional revenue has grown more press-ing with the rapid acceleration of war activities, proponents of the sales tax have gained in number and in voice while the opposition in Congress has tended to diminish. The general opinion is that if no acceptable alternative is developed during Ways and Means Committee hearings on the new tax bill, the sales tax may win by default.