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Thus the estimates of increase in living cost since 1939 vary from 31 percent to 48 percent, and it takes from $1.31 to $1.48 today to buy what $1 bought in 1939. Any housewife will testify that the higher estimates come nearer giving the real increase in the cost of living.

HOW MANY INDIVIDUALS OR HEADS OF FAMILIES ARE THERE IN THE LOW INCOME GROUP

IN THE UNITED STATES WITHOUT DECENT LIVING STANDARDS ?

A little over a year ago I wrote Randolph Paul, then Chief Counselor and tax expert of the Treasury Department, for certain information regarding the distribution of income payments and tax burdens in the United States. I asked him to break this down as nearly as he could in such a way to show the income tax burden of people with annual incomes of $1,000, $1,500, $2,000, $2,500, and $3,000. After some delay, I received that information. I was amazed at the facts. Had the statement not come from the Treasury Department over the signature of its then Chief Counselor and special tax expert, I would have doubted its authenticity and its reliability. I am including tables containing this information at the conclusion of my remarks as exhibits III and IV.

The Treasury Department estimated at that time the total income payments for 1944 at $157,000,000,000. The estimate was very accurate and the tables were made up on that basis. An examination of this information shows the following distribution of that $157,000,000,000 in income payment during the year 1944:

1. Sixty-seven million three hundred thousand income recipients will receive total incomes of $157,000,000,000 against which one places a personal tax liability-Federal and other personal taxes of $22,000,000,000, leaving a net income of $135,100,000,000.

2. Of this number 21,600,000 recipients received last year $19,200,000,000 in incomes of $1,000 or less and paid $500,000,000 in taxes. Their net income after taxes was $18,700,000,000 or an average of approximately $873 each for the year. Of this number 12,250,000. were single persons and 9,370,000 were married persons or heads of families.

3. The table further shows that there were 24,400,000 income recipients last year with incomes from $1,000 to $2,000 who received $42,400,000,000 and paid $4,100,000,000 in taxes, leaving a net income after taxes of $38,300,000,000 or an average of approximately $1,500 a year after taxes. Of the 24,400,000 income recipients there were:

(a) Four million nine hundred and eighty thousand single persons and 7,450,000 married persons or heads of families with incomes from $1,000 to $1,500.

(6) Two million four hundred and ten thousand single persons and 9,580,000 married persons or heads of families with incomes of $1,500 to $2,000.

4. This table further shows that there were last year 12,200,000 income recipients who received $34,600,000,000 in incomes of from $2,000 to $3,000 a year and paid $3,400,000,000 in taxes, leaving them $31,200,000,000 after taxes or an average of approximately $2,500 a year. Breaking this group down we find that included:

(a) Nine hundred and seventy thousand single persons and 6,590,000 married persons or heads of families with incomes of $2,000 to $2,500.

(0) Five hundred thousand single persons and 4,110,000 married persons or heads of families with incomes of $2,500 to $3,000.

The table can be broken down, of course, still further. But I am interested here primarily in the lower income groups.

I call attention to the definition of "personal taxes” as given by exhibit III:

"Personal taxes consist of Federal, State, and local individual income taxes, estate, inheritance and gift taxes, property taxes (excluding taxes in business property and rented houses) taxes and licenses on motor vehicles not used in business, miscellaneous personal taxes and nontaxes payments to Government."

The complete tables or exhibits III and IV give a clear picture of the number of persons we have in the Nation in each income group.

WHAT HAS OUR TAX POLICY FOLLOWED DURING THE PAST 6 YEARS DONE TO THIS LOW

INCOME GROUP!

An examination of the cost-of-living index and all the changes in the laws providing for tax exemption under our income-tax policies shows definitely that as the cost of living went up, the income-tax exemption of the low-income groups

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came down. This has continued to a point where it is impossible for the lowincome groups to live decently. We are taking money we call taxes—in reality blood money—from that group, money that is absolutely required to give them a decent living. The tax policy we have been following for low-income groups is taking bread, butter, and milk away from children and is taking the clothes off their back. I am placing in the Record as exhibits V and VI, two statements showing just how exemptions were lowered and how the 1944 law changed prior exemptions.

I want to discuss each income-tax group separately. But before I do so I wish to discuss the per capita system which was adopted last year and which has been bearing down hard on certain low-income groups. This system does away with the exemption we had for the head of a family and gives a straight $500 exemption for each person in the family. It has reduced the exemption for a man and wife as low as $500, as far as the normal tax is concerned.

Let us take a concrete example. I have a case in mind of a man who was in this low-income group. He had a wife and two children. Last year he received an exemption of $1,200 as head of a family, plus $350 for each child or å total exemption of $1,900. He died last June. His wife has no income and is compelled to work to support that little family. She has the same rent, heat, and light bills to pay. She is trying to maintain the same home. She is trying to do all of this in addition to taking care of her little family. Her income-tax exemption has been reduced from $1,900 to $1,500 by the per capita system. Let us suppose that the wife had died. Despite the fact that the husband would have the same household expenses, would have to employ someone to care for the children, his income-tax exemption would be reduced to $1,500.

This part of the law is absolutely unfair. The taxpayers' normal tax exemption has been reduced to $500 for a man and wife which means that a man and wife with $1,000 income has to pay an income tax. This applies to many old couples with small incomes. No tax of this kind can be justified on the ground that "every person should pay a direct tax." You are taking food out of these poor people's mouths, clothes off their back and forcing on them inadequate housing. Surely no once can contend that $1,000 a year will give a man and wife decent housing, food, aņd clothing anywhere today.

Since I am from Michigan, may I interject just one little phase of the Michigan tax policy which affects this group. The Treasury Department says that 80 percent of the living costs is subject to a sales tax. · This means that this old couple in the $1,000 income group has to pay a 3 percent sales tax on 80 percent of their income or $24 a year additional.

THE EFFECT OF OUR PRESENT INCOME-TAX POLICY ON OUR LOW-INCOME GROUP

The following will show the effect of our income tax and anti-inflation policy on our low-income group:

I. HEAD OF FAMILY WITHOUT DEPENDENTS AND WITH A $2,500 ANNUAL INCOME

A married man or head of a family without children had a $2,500 income tax exemption in 1939. His exemption was reduced through the years until in 1944 he has a family exemption of only $500 for normal tax purposes and $1,000 for surtax purposes. In 1944 he paid, according to the Treasury Department schedules, $300 income tax and, if he was a worker, he paid $25 social-security tax, leaving $2,175 after the payment of these two taxes. Depending on whose living cost estimates we use, it takes from $1.31 to $1.48 today to buy what $1 bought in 1939; $1,470 to $1,660 bought the same living in 1939 that $2,175 buys today. So this man with a wife who had an income of $2,500 in 1944, through increased tax rates, increased living costs and decreased tax exemption is forced to a $1,470 to $1,660 a year living standard in terms of the 1939 dollar. We have increased his income tax 1212 percent, increased his living costs from 31 percent to 48 percent, and reduced his purchasing power to anywhere from $1,470 to $1,660 a year in terms of the 1939 dollar. This does not include the increase in excise and other taxes on hundreds of articles he is compelled to buy.

Now let us see just what a 15 percent increase in wages under the "Little Steel" formula will do for this man and to what extent it will help him to offset his increased living cost. Fifteen percent would increase his pay check by $375 a year. According to Treasury Department schedules his income tax would increase from $300 to $378. Thus far you have not increased his pay enough to give him back what you took away from him in income taxes, and he has nothing left to pay for increased living costs. The employer has given this man $375 in pay increases and the Treasury Department has taken $78 additional taxes out of him, leaving him a net increase of $297. So this 15 percent increase has in effect become a 11.88 percent increase or less than 12 percent. This $297 will buy anywhere from $200 to $227 on a 1939 basis. Thus this 15 percent increase has actually restored only from 8 to 9 percent of his 1939 purchasing power. Adding this to his 1939 purchasing power, thus this $2,500 wage earner in 1944 will have a purchasing power of from $1,670 to $1,887 on a 1939 basis. It is evident that no increase of wages of 15 percent under the Little Steel formula or any other formula will place this man and others like him back upon a 1939 living-cost standard.

I want to emphasize that I am referring only to the low-income group and not the worker in the high-wage bracket. Nevertheless we must bear in mind that it is the annual earnings and not the hourly wage rate which determines whether or not a worker is in the low-income group.

If this man lived in a sales-tax State, he would have to pay among other taxes a sales tax on 80 percent of his living costs. In Michigan this additional tax would have amounted to $52.20. In 1944 there were 6,590,000 married persons or heads of a family with incomes of from $2,000 or $2,500 a year.

II. HEAD OF A FAMILY WITHOUT DEPENDENTS WITH AN ANNUAL INCOME OF $2,000

A head of a family without dependents with an annual income of $2,000 was exempt from income taxation in 1939. In 1944, according to Treasury Department deduction schedules, he paid $202 income tax. If he was a wage earner, he paid $20 social-security tax, leaving a net balance after the payment of these two taxes of $1,778. Approximately from $1,200 to $1,357, depending on whose increased-living-cost estimates we take, would have purchased the same living in 1939 that this $1,778 purchased today. So this $2,000-a-year head of a family in 1944 is forced to a 1939 living standard of from $1,200 to $1,357. In 1944 there were 9,589,000 married persons or heads of a family with annual incomes from $1,500 to $2,000.

III. HEAD OF A FAMILY WITHOUT DEPENDENTS WITH A $1,500 ANNUAL INCOME

A head of a family without dependents with a $1,500 annual income was exempt from payment of income tax in 1939. In 1944 he paid, according to Treasury Department schedules, $98 income tax. If he was a worker, he paid $15 additional in social-security taxes, leaving him a net balance after the payment of these two taxes of $1,387. Depending upon whose living cost estimates we adopt, $937 to $1,060 would have purchased the same living in 1939 that $1,387 buys today. So this $1,500-a-year head of a family in 1944 is forced down to a 1939 living-cost standard of from $937 to $1,060. In 1944 there were 7,450,000 married persons or heads of a family with annual incomes of from $1,000 to $1,500.

IV. HEAD OF A FAMILY WITH NO DEPENDENTS WITH AN ANNUAL INCOME OF $1,000

The head of a family without dependents and with a $1,000 annual income paid no income tax in 1939. In 1944, according to Treasury Department schedules, he pays $12 income tax and if a worker he pays $10 social-security tax, leaving a net balance after the payment of these two taxes of $$978. Depending on whose increased-living-costs estimates are used, $660 to $746 would have bought the same living cost in 1939 that $978 buys today. This head of a family with a $1,000 income is forçed to a 1939 living-cost level of from $660 to $746. There were 9,370,000 heads of families in 1914 with incomes of $1,000 or under.

V. SINGLE PERSON WITH $1,000 INCOME A single person with a $1,000 income was exempt from payment of income taxes in 1939. In 1944 he paid $89 tax and if he was a worker he paid $10 social. security tax, leaving him $901 net income after the payment of these two taxes. Depending upon whose increased-living-cost standards we use, $608 to $688 would have brought the same living in 1939 that $901 buys today. This single person with $1,000 income is forced to a 1939 living cost standard of from $608 to $688 a year. In 1944 there were 12,250,000 single persons with annual incomes of $1,000 or under.

REMEDY

It is, naturally, difficult to make a definite proposal as to what should be done to relieve this low-income group from unjust burdens. Increased pay would, of course, help. However, I believe that placing the income tax exemptions upon a basis so that an individual or a family would be exempt from taxation on that portion of their income required to pay for a decent living, would go far toward bringing relief to the low-income groups. From 1931 to 1939 a married man or head of a family had an exemption of $2,500, and a single or a person not the head of a family had an exemption of $1,000. In 1940 this exemption was reduced to $2,000 for a married person living with a spouse or the head of a family, and to $800 for a single person or married person not living with spouse or not the head of a family.

To give Congress an opportunity for direct consideration, I have introduced a bill today to place the income-tax exemption of individuals and heads of families back to a 1940 basis. This would give a married person living with a spouse and head of a family an exemption of $2,000, and a single or married person not living with a spouse and not head of a family an exemption of $800. Because of the increased cost of living, I am av the credit for each dependent at $500 where it is today.

WHAT WILL THIS POLICY COST?

I am frank to state that I do not know what this increase in family tax exemption will cost the Treasury Department. I am basing my bill to increase the tax exemption solely upon the principle that everyone is entitled to a decent living and, as stated in the beginning of my remarks, that taking money we call taxes from the low-income groups-money which should be spent for bread, butter, milk, food, decent housing, and decent living-cannot be justified even on the ground that everyone should pay an income tax to make people tax conscious.

HOW CAN WE REPLENISH THIS LOST REVENUE?

First. It is my candid opinion, from a study of both war and nonwar expenditures, that if we eliminate waste which can be reasonably eliminated in both our war and nonwar expenditures, the amount which will be eliminated will more than offset the amount of revenue lost to the Treasury Department by increasing the tax exemptions, under my bill. There is one chapter in this war for which this generation will be condemned in no uncertain terms by the coming generation which will pay taxes. That is the outrageous waste of the taxpayers' money both inside and outside the war effort. This is all the more true when we think of the millions of people in the low-income group from whom we have taken and are taking these taxes. I am satisfied and I say again that it is my honest opinion that every dollar lost to the Treasury Department by an increase of this tax exemption can be offset by elimination of waste. I believe I have shown that millions of these people are being deprived of a decent living, of bread and butter through this tax and anti-inflation policy.

Second. However, assuming we cannot or will not eliminate this waste, how can this revenue be replaced? I refused to go along with a tax policy which would limit incomes to $25,000. I did so on the ground that this was not the American way. It was not the way of free enterprise. If Congress can limit incomes to $25,000 a year, it can limit incomes to $2,500 or even $1,500 or any other amount per year. A policy of this kind would have made impossible the success of men such as Ford, Edison, Knudsen, and many others who started life at the workbench and built up great industries through their genius. However, I did say at that time that I would go along with every reasonable policy of taxing down the higher incomes at least during the war period. Let us examine the record and the distribution of incomes according to the tables which I am inserting in the Record.

In the first group we find that 100,000 individuals received last year $7,400,000,000 in incomes of $25,000 or more and paid $4,400,000 in taxes. This left them, according to the table, a net amount after taxes of $3,000,000,000 or an average of $30,000 each per year. We find further that 500,000 individuals received last year total income payments of $8,100,000,000 in income of $10,000 to $25.000 and $2,400,000,000 in taxes. This left them a total income after taxes of $5,700,000,000 or an average of $11,400 a year after taxes. Surely these two groups could pay more taxes if necessary so that the low-income group could live decently. If we go still further, we find that 1,800,000 individuals received last year $14,500,000,000 in incomes from $5,000 to $10,000 each and paid $2,800,000,000 in taxes. This left them $11,700,000,000 or an average of $6,500 a year after taxes. I am sure that, these people could and would be willing to pay more taxes if necessary to relieve the low-income groups.

I want to call attention to the fact that since the tables in exhibits III and IV were compiled last January, the 1944 tax law was passed. This law repealed the victory tax adding that tax to the surtax. It increased the taxes some what on the higher income brackets and this increase will, of course, raise the total revenue of the Treasury Department.

I want especially to stress again the fact that the plight in which the lowincome group finds itself, should bring home to everyone of us the absolute necessity of eliminating every dollar of waste and excess cost in government. This applies both to our war and nonwar expenditures.

PROSPERITY AND PURCHASING POWER

Before I conclude I wish to make one more observation. Real, sound, peacetime prosperity can come only by increasing the purchasing power of the millions of people in the low-income group. Let us go over exhibit III again. A total of 21,600,000 income recipients, including 9,370,000 heads of families, received last year $19,200,000,000 in incomes of $1,000 or under. Suppose we could increase that average income to $1,500 a year. We would be adding $9,000,000,000 to our total income payments. Let us go further: 12,430,000 income recipients, including 7,310,000 heads of families, received last year $18,420,000,000 in income payments of $1,000 to $1,500. If we could bring that average up from $1,500 to $2,000, we would be adding $6,215,000,000 to our income payments. Then let us go still further and take the 11,990,000 recipients, including 9,580,000 heads of families, who received income payments of $1,500 to $2,000 and increase them from $2,000 to $2,500, or $500 a year. We would be adding nearly $6,000,000,000 more to the income payments. Let us stop there. Surely this could be done without bringing about inflation, since practically every dollar would be spent for decent living. If we could do this we would be adding nearly $23,000,000,000 to our income payments. While some of this money would undoubtedly go back in taxés under my proposed bill, the greater part would be added to the purchasing power of the Nation, providing jobs for service men and women and others doing much toward starting the wheels of peacetime prosperity rolling.

Previous to World War II there were 54,000,000 workers organized and unorganized in America. The reason we have enjoyed constitutional government for 150 years is because these millions of workers and millions of others like them bave believed in constitutional government. If and when you shake their faith in constitutional government, all the rights we enjoy under the Constitution, including the right to own property, will be a thing of the past.

Unless this low-income group is given relief from this unjust burden of taxation, being permitted to earn and enjoy a decent living, they will turn to some ism for relief. They are in the majority and in the final analysis will say what kind of a government we will have.

EXHIBIT I.-Estimated cost of living for a 4-person manual worker's family at

maintenance level as defined by the Work Projects Administration in 33 large cities as of June 15, 1943

City

Total

Food

Clothing Housing

Furniture, Fuel and furnishings, light household

equipment

Miscella.

neous

Atlanta.
Baltimore.
Birmingham
Boston..
Buffalo.
Chicago.
Cincinnati.
Cleveland
Denver.
Detroit.
Houston.
Indianapolis.
Jacksonville.
Kansas City.
Los Angeles.

$1, 641.23
1, 641.32
1, 590.17
1, 716. 69
1,633. 30
1, 778. 64
1, 666. 95
1, 763. 96
1, 594. 06
1, 798. 05
1, 582. 37
1. 620. 71
1, 651.32
1, 541. 23
1, 622.21

$647.30
680. 46
658. 23
651.52
656.03
686. 10
664. 21
691.33
645. 37
675. 24
621.34
646. 07
685. 16
626.75
629.07

$201.95
209. 21
216. 78
207.75
213.44
198. 05
226. 68
226.94
203. 17
214.40
201.83
200.12
187. 72
211.93
212. 96

$290.98
254, 93
246. 40
271.79
259. 74
306.79
276.02
304.77
243. 05
324, 94
250.00
254. 57
237. 25
221.02
250. 33

$98.01
109. 38

76.43
154. 32
114. 92
132. 64

99. 41 117. 27 114. 86 125. 21

85. 30
106. 49
116. 22
113. 69
71.07

$36. 86
45. 06
39. 02
39. 71
40. 65
38. 65
44. 61
40.91
39. 22
38. 86
40.92
41. 78
40.95
39. 96
41. 42

$339.13
342. 28
353. 31
391. 60
348.52
416. 41
356. 02
382.74
348. 39
419.40
382.98
371. 68
384.02
327.88
417.36

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