Tax and Debt Limitation

Report Outline
Tax Revolt and Measures to Ease Tax Load
Movement for Ceiling on Income-Tax Rates
Case for and Against Tax and Debt Limits

Tax Revolt and Measures to Ease Tax Load

Budget estimates submitted to Congress by President Truman on Jan. 21 indicate that, without additional taxes, the federal government will incur a deficit of $8.2 billion in the fiscal year 1952 and a deficit of $14.4 billion in the fiscal year 1953. Deficits of that magnitude will raise the public debt from an estimated $260,222 million next June 30 to an estimated $274,922 million on June 30, 1953, The latter sum is within $78 million of the present statutory debt limit of $275 billion.

The President conceded in his budget message that “the increase in expenditures immediately ahead” could not be met on a strict pay-as-we-go basis. He said, however, that the situation called “at the very least for the amount of additional revenue by which last year's legislation fell short of my recommendations”. In 1951 the President sought a minimum of $10 billion in additional revenue, but the 1951 Revenue Act is expected to increase federal receipts by only between $5.4 and $5.7 billion annually. In effect, therefore, the current proposal is for tax changes to yield an additional $4.3 to $4.6 billion. In his economic message, Jan. 16, the President had put the same request in the form of an “urgent recommendation” and said the added revenue could be obtained “by eliminating loopholes and special privileges, and by some tax rate increases”.

Opposition in Congress to Truman's Tax Requests

Three tax bills, enacted since the Korean war began in mid-1950, already have raised federal taxes by around $15 billion a year and increased the burden of those taxes by nearly one-third. Reaction in Congress to President Truman's request for still another increase was strongly adverse among majority as well as minority spokesmen. What the President had to say in his budget and economic messages did not alter previously expressed opposition to any new major tax legislation at the present session.