Federal Taxes on Business

Report Outline
Tax Relief for Business in Transition Period
Business Taxation and Investment Incentives
Double Taxation of Corporation Dividends
Special Focus

Tax Relief for Business in Transition Period

The revenue bill passed by the House Oct. II. and now before the Senate, will effect the first general tax reduction since 1929. The pending bill is an interim measure. It will be followed by further reduction and a broader revision of federal taxes next year. The Ways and Means Committee is expected to make tax revision its first order of business at the 1946 session of Congress.

In the fiscal year ended June 30, 1945, the federal government had a deficit of $53,600 million. Before the current tax-reduction program was projected, but after the end of this war, the Budget Bureau estimated that the deficit would be $30,400 million in the fiscal year 1946. The Treasury estimated that, even if taxes were not reduced, federal tax liabilities accruing in the calendar year 1946 would be almost $9 billion less than in the calendar year 1944—$32,500 million in 1946 as against $41,400 million in 1944.

Factors Limiting Extent of Immediate Tax Reduction

With revenue from existing taxes falling, and with a large federal deficit still unavoidable, Secretary of the Treasury Vinson told the Ways and Means Committee, Oct. 1, that it was his “considered judgment” that tax reduction for 1946 should be held to a limit of $5 billion. The transitional program which he recommended would have cut slightly more than this amount—$5,187 million—from the federal tax bill in the calendar year 1946. The House bill provides for reductions totaling $5,350 million. Before the Senate Finance Committee, Oct. 15, the Treasury head protested vigorously against overstepping the $5 billion “safety limit.” He pointed out that the House reductions would amount to $7 billion in 1947, after the excess-profits tax—retained by the House bill for 1946—had expired.