TIME: Almanac 1993/TIME Almanac 1993.iso/time/election/24elect/24elect.008

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                                                                                March 1, 1926 

TAXATION 

Unison



     For four days representatives of the House and of the Senate
in joint conference struggled to reconcile the two tax reduction
bills passed by their respective chambers. There was a divergence
of some $125,000,000 between the two bills. So there was good
ground for conference.

     The greatest struggle was over estate taxes, which the House
members were eager to retain and which the Senate wished to
abolish. Finally a 20% maximum estate tax, with a personal
exemption of $100,000, was agreed on. So the joint conference
finally gave birth to the third tax reduction bill of the season-
a compromise in which all shades of political affiliations were
represented, but in which the tax views of the Administration
appear uppermost.

     The main features of the new tax bill as compared with the
old tax law:

     Normal taxes. 1 1/2% to 5% (formerly 2% to 6%).

     Personal exemptions. For single persons $1,500 (formerly
$1,000); for married persons $3,500 (formerly $2,500:; for
dependents $400 each (no change).

     Earned Income Deduction. 25% of tax (no change). All income
under $5,000 net is "earned" (no change). Maximum income which
may be classed as earned $20,000 (formerly $10,000).

     Surtaxes. 1% to 20% on amounts of greater than $100,000
(formerly 1% to 40% on amounts greater than $500,000).

     Estate taxes. Exemption of $100,000 (formerly $50,000). 1%
to 20% on amounts greater than $10,000,000 (formerly 1% to 40% on
amounts greater than $10,000,000). Credit on inheritance taxes
paid to states of 25% (no change) during 1926, and credit of 80%
thereafter. (The old estates taxes were reduced 15% retroactively
in regard to the old law).

     Gift taxes. Abolished (formerly 1% to 40%). Retroactive
reduction the same as for estate taxes. (Last week a Federal
judge in Manhattan declared the gift tax unconstitutional. The
Government will appeal the case.)

     Automobile taxes (formerly 5%). On trucks, abolished; on
passenger automobiles, 3%; on tires and parts, abolished.

     Theatre admissions tax. One cent on each ten cents or
fraction (no change). Tickets costing $.75 or less (formerly
$.50) exempt.

     Tax publicity. Abolished.

     In addition many minor taxes were abolished, including those
on the following items: Cameras, films, firearms, ammunition,
smokers' articles, slot machines, mah jong sets, object d'art,
jewelry, bowling alleys and pool rooms, shooting galleries,
riding academies, yachts, deeds and conveyances. Taxes on lower-
priced cigars were reduced.

     The estimated loss of revenue resulting from this bill is
$387,811,000 for the calendar year of 1926 and $343,000,000 for
the calendar year of 1927. For various reasons it is believed
that the loss of revenue for the fiscal year 1925-26 will be only
$208,000,000, and for 1926-27 only $307,000,000. (In 1925-26, for
example, the first six months' revenue has already been collected
under the old law.) So it is not believed the Treasury will face
a deficit. The chief items which go to make up the grand
reduction of 1926:

     SOURCE                                            REDUCTION

Income taxes  . . . . . . . . . . . . . . . . . . . $164,400,000
Estate tax  . . . . . . . . . . . . . . . . . . . .   15,000,000
Gift tax . . . . . . . . . . . . . . . . . . . . . .   2,000,000
Capital stock tax . . . . . . . . . . . . . . . . . . 68,500,000
Cigars . . . . . . . . . . . . . . . . . . . . . . .  17,000,000
Automobiles . . . . . . . . . . . . . . . . . . . . . 80,400,000
Jewelry . . . . . . . . . . . . . . . . . . . . . . .  8,000,000
Admissions and dues . . . . . . . . . . . . . . . . .  1,250,000
Mah jong sets . . . . . . . . . . . . . . . . . . . .      1,000


March 8, 1926
TAXATION
The Bill Is Signed

     The tax reduction bill of 1926 last week ceased to exist.
Instead there came into existence the "Revenue Act of 1926" - for
the tax reduction bill in the form in which it had been issued by
the Joint Conference Committee was transformed into a law without
alterations.

     There were three brief steps in making the bill into an act
of Congress. Mr. Green, the Chairman of the Ways and Means
Committee, told the House: "I came back today with the best bill
I could get." There was a small minority in opposition which
wanted to recommit (send back to committee for amendment or for
other purposes) the bill because a retroactive reduction was
made in last year's estate taxes, but they were prevented from
getting their motion before the House because only one motion to
recommit is allowed and a Florida member beat them to it with a
motion to recommit to have estate taxes entirely abolished. The
House as a whole had no sympathy with the proposal to wipe out
estate taxes, and voted down the motion with a chorus of ayes.
This little maneuver was undoubtedly planned in advance. In short
order the bill came to a final vote, of 354 to 28. The opposition
was made up of 16 Republicans, mostly Progressives, eight
Democrats, three Farmer-Laborites and a Socialist.

     Next day the Senate took action. By unanimous consent the
rules were laid aside so that the bill could be taken up
immediately. Senator Smoot, Chairman of the Finance Committee,
like Mr. Green in the House, explained that it was the best bill
that could be got. Senator Fletcher of Florida attacked the bill
because estate taxes had been restored in conference. And Senator
Neely of West Virginia declared it was a millionaire's bill, and
wanted the taxes on admissions and on automobiles entirely
stricken out. He moved to recommit the bill. Senator Robinson of
Arkansas, the Democratic leader, made a point of order - that the
bill could not be recommitted because the House in passing it had
discharged the joint conference committee - in short there was no
committee to which the bill could be recommitted. Vice President
Dawes ruled the point well taken. Mr. Neely appealed to the
Senate from the Chair's decision, but the Vice President was
upheld 62 to 8. Soon came the final vote - 61 to 10 for passage.
Five Progressive Republicans, four Democrats and the Farmer-Labor
Party (Mr. Shipstead) were alone in opposition.

     The bill was engrossed, signed by Speaker Longworth, signed
by Vice President Dawes, sent to the White House.

     There it was singed by the President while the leaders who
ushered the bill through Congress stood genially by, and Senator
Simmors of North Carolina, who delayed the proceedings 20 minutes
by coming late, rushed around cigar in hand, at one time almost
burning the back of the President's neck, at another the hand of
Senator Smoot.

     So it was done and Senator Smoot and Representative Green
carried off the two pens used by the President in signing, and
the Treasury set about estimating the amount of income it could
expect in the next few years. In spite of the large reduction in
taxes the Treasury hopes for a surplus of $67,000,000 for the
fiscal year (1926) ending next June and for a surplus of
$11,000,000 at the end of the following fiscal year in June 1927.


November 15, 1926
TAX TALK

     It was with a shrewd move that President Coolidge sought to
counteract the Democratic fervor which grew loud with the
election returns. He knew that as soon as Congress opened in
December there would be a clamor for a general tax reduction,
that Senator Furnifold McLendel Simmons of North Carolina,
ranking Democrat on the Finance Committee, and many another anti-
Administration man would champion such a plan. So what could be
wiser than for the President to be Champion Tax Cutter No. 1? In
the first Cabinet meeting after election day he explained his
scheme, then he held a short conference with Secretary of the
Treasury Mellon and General Lord, Director of the Budget Bureau.
It mattered not if the general policy of Mr. Mellon was to use
Treasury surplus to retire the national debt; this time the
President had to make a political move and make it quickly. The
announcement came from the White House: A study of the revenue
returns shows a surplus in excess of $250,000,000; hence the
President will recommend that Congress speedily vote a 10% or 12%
rebate or refund on the income taxes payable in 1926 for incomes
of the calendar year 1925. This applies to all corporations,
industries, individuals, but not to so-called nuisance and
admission taxes.

     Immediately Republicans began to point with pride; many a
businessman from Wall Street to the Golden Gate was pleased.
Senator Simmons reflected the Democratic opinion, said:

     "The President's announcement will be pleasing to the
taxpayers of the country, because it indicates a willingness to
concede to them what he persistently denied before the disaster
which overtook his party last Tuesday.

     "Of course, the announcement amounts to a humiliating
surrender for the President and the Administration and would
never have been made except to cover retreat; but it is artfully
devised to mislead the country and to deny the taxpayer the full
benefit of relief to which he is entitled. . . ."

     The Democrats plan to fight the President's refund plan with
a higher ante - a general tax reduction in the lower brackets of
incomes and a cut in corporation taxes of 10% to 13 1/2%.

     Cautious Reed Smoot, most eminent Republican financier in
the Senate, said that not more than a 10% reduction was
advisable.