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Per capita cost of government

1894.
$12. 50 | 1930_

$89. 76 1902 17. 05 | 1940.

135. 79 1913 27. 32 1947

350.00 1923.

74.00 In our fiscal policies we also must take cognizance of the fact that our Federal debt is today about $250,000,000,000. Interest on this debt is approximately $5,000,000,000 a year.

It is evident that public finance has attained such proportions that today unsound tax policies could easily cause booms and busts. Even more serious is the fact that today unsound tax policies could bring to us the despair of economic stagnation, the chaos of inflation, the defilement of the integrity of the national debt, and, worst or all, the fall of our form of government and our ideals.

It is for these reasons that we strongly endorse the words of the national master when he says, “It would be more statesmanlike if those who are doing so much talking and making so many promises to cut taxes would turn their energies to cutting expenditures and reducing our debt. Cutting income taxes has a strong political appeal among a limited group, but it would be far better to pay our debts while we are able to pay and reduce the dangerous inflationary pressures we are under, rather than to increase such pressures, as cutting taxes instead of debts would do."

Because of the tremendous importance of sound tax policies to our national economy and our form of government, every group in America should take upon itself the responsibility of bringing to its members the opportunity to understand the workings of taxation in our economy. Then every citizen would be able to judge for himself whether a certain tax proposal would damage or improve the performance of our system. This is the only safeguard against acceptance of specious arguments and public response to irresponsible political appeals. Our ability to establish such a safeguard may well be the real test of our democracy.

At this point we again quote the national master: “Wild statements that reduced taxes would encourage such an expansion in industry that the additional income would actually increase tax receipts are not impressive in light of the fact that business is more prosperous than ever before, and those who can get the location, the equipment, the material, and the labor are already going into business as fast as they can.” Any increase in the national income that might result from lower taxes would be in dollars and only to a negligible extent in goods and services produced-plainly more inflation.

GOVERNMENTAL EXPENDITURES

Resolution No. 47, by Holmes, is covered in the statement below :

While Government spending is not a part of taxation, it is directly related to it. In a republic governmental expenditures should be limited to those services necessary to protect the citizens from physical and economic aggression and to permit the citizens to provide themselves with economic, social, and cultural benefits not otherwise satisfactorily obtainable. Whenever an appropriation is proposed consideration should be given not only to the value of the services to be provided or objectives to be attained, but also, in addition, consideration should be given to the possible adverse effect of higher taxes upon the performance of the economy.

Every possible effort should be made to gain economy and efficiency in government. A careful examination should be made of all departments of government in order to eliminate useless and unnecessary jobs and even projects. Agencies and bureaus created to provide services for which a need no longer exists should be abolished.

We endorse the recommendation of the national master that the various committees of Congress equip themselves with adequate staffs to make thorough and continuing independent studies of all the administrative departments of government. We recommend in addition that the selection of people for these staff positions be purely on the basis of merit and completely divorced from political patronage.

Because of the tremendous expenditures for national defense, we recommend that the National Grange urge representatives of our Government in the United Nations to direct their energies toward speedy adoption of a program of world-wide disarmament.

Outlays for foreign relief, reconstruction, and development should be held to a minimum, consistent with recovery and humanitarian considerations. Aid to any foreign country should be contingent upon that country's making a maximum effort to take care of her own people and to attain recovery as speedily as possible.

TAXATION GUIDEPOSTS

We recommend the following guideposts for the National Grange tax policy:

1. Taxes should be based on ability to pay and benefits derived and should fall equally on persons in like circumstances.

2. The tax system should impose the least possible restriction upon the expansion of production and employment and the launching of new enterprises and should absorb as little as possible of the buying power of consumers.

3. Taxes should be adequate to meet the cost of government and to maintain confidence in the integrity of the dollar and the public debt.

4. Our debt-retirement policy (budgetary surpluses and deficits) should be coordinated with economic conditions to promote a stable price level, full employ. ment, full production, and an expanding economy.

We make the following specific recommendation regarding taxation :

HIGHWAY FUNDS

Each State, by constitutional amendment or otherwise, should prevent diversion of highway funds to nonhighway purposes.

PERSONAL INCOME TAXES

1. Averaging of income and carrying forward of losses for a period up to 3 years should be allowed.

2. Personal income taxes should be maintained on a broad base.

3. To discourage corporation farming and large capitalists from acquiring large acreages of farm land, losses on agricultural opertions should be deductible only from income derived from agricultural operations.

4. Equality in Federal income taxation should be established among those States which have community-property laws and those which do not.

ESTATE AND GIFT TAXES

1. Because it appears that taxes imposed at death are less likely to have a depressing effect on incentive to enterprise and production and consumption than other taxes, increased revenues should be obtained from this source.

2. The use of trusts and gifts to escape taxation should be investigated and these avenues of escape closed.

EXCISE TAXES

Be it resolved, That the National Grange go on record as opposed to any general sales tax, as putting an unfair burden of the costs of government upon the poor, and as supporting only sales tax on special articles of trade such as luxuries, liquor, tobacco, and other nonessentials; and we oppose the use of a graduated tax on cigarettes.

Whereas consideration is now being given to the revision of the Federal tax structure for the purpose of formulating a fair and equitable tax policy; and

Whereas the imposition of excise taxes on automotive and petroleum products by the Federal Government constitutes unfair and discriminatory taxation and imposes an unfair burden on motor-vehicle owners; and

Whereas these taxes were originally imposed in 1932 as temporary measures to provide revenues during the period of the depression and were continued and increased during World War II; and

Whereas the emergencies for which these taxes were imposed do not now actually exist and there remains no valid reason for their continued imposition; and

Whereas these taxes constitute an invasion of a field of taxation by the Federal Government which properly should be reserved to the States: Therefore be it

Resolved, That when Congress moves to reduce taxes the National Grange strongly urges the repeal of all Federal automotive excise taxes, including the Federal tax on automobiles, trucks, trailers, busses, automotive parts and accessories, tires and tubes, and gasoline and lubricating oils.

Whereas taxes are levied on the manufacture and sale of oleomargarine; and

Whereas producers and the consuming public have mutual interests in the manufacture and consumption of oleo: Therefore be it

Resolved, That the Washington office be requested to investigate the manufacture and sale of oleo and report to the next national session.

TAX REDUCTION

I. Whereas the following conditions exist in our Nation :

1. The national debt is at an all-time high, and prudence demands it be reduced when economic conditions permit;

2. Further inflationary price rises still threaten; 3. Needs for foreign relief and reconstruction may be great; 4. Full employment prevails; and 5. Personal income and national production are at peak levels: Therefore be it

Resolved, That the National Grange recommend at this time that no reduction in Federal income taxes be made as long as the foregoing conditions prevail.

II. Whereas we recognize the following situation:
1. The time may come when reduction in taxes may be justified ;

2. Taxes on the lower- and middle-income groups have a direct effect on the consumption of farm products;

3. A strong level of buying power by the lower- and middle-income groups is essential for any farm program based on abundance and a minimum of price regulation and support;

4. Many corporations and individuals are reporting profits which are excessive: Therefore be it

Resolved, That the National Grange urge that, when economic conditions warrant revision in taxation, it be in the direction of greatest reduction in the tax on lower- and middle-sized incomes. This can be done in two ways:

1. An increase in exemptions.

2. A greater percentage reduction of the tax rate for the lower-income brackets such as is involved in a fixed point reduction in the tax rate at every level.

We believe that every citizen should be conscious of the cost of government, and this condition is best realized when nearly every citizen pays some income tax. For this reason this committee recommends that, when income taxes are reduced, most of the reduction should come from a reduction in the tax rate of the lowerand middle-income levels rather than from an increase in the level of exemptions.

COORDINATION AND ADMINISTRATION OF TAXATION

Our whole tax system should be overhauled, and so far as possible duplications and overlapping of taxation should be eliminated. The xing cencies of the various units of government should be consolidated as far as practicable. Every effort should be made to prevent tax evasion, and we favor adequate investigation to achieve this.

APPENDIX B

EXCERPT FROM ADDRESS OF ALBERT S. Goss, MASTER, BEFORE THE EIGHTY-FIRST ANNUAL SESSION OF THE NATIONAL GRANGE, COLUMBUS, OHIO, NOVEMBER 12, 1947

TAXATION

It would be much more statesmanlike if those who are doing so much talking and making so many promises to cut income taxes would turn their energies to cutting expenditures and reducing our debt. Cutting income taxes has a strong political appeal among a limited group, but it would be far better to pay our debts while we are able to pay, and reduce the dangerous inflationary pressures we are under rather than to increase such pressures, as cutting taxes instead of our debts would surely do.

Cutting expenses is an altogether different matter. After 15 years of reckless expenditures, it is going to be difficult to reduce what appears to be a top-heavy governmental structure without impairing some activity which has become essential by reason of great changes brought about by war or other causes. Reductions in inflated Government pay rolls and unnecessary activities should have our strong support, but we should not talk about cutting taxes until savings in expenditures have actually been made and substantial sums applied on debt reduction. Wild statements that reduced tax rates would encourage such an expansion in industry that the additional income would actually increase tax receipts are not impressive in the light of the fact that business is more prosperous and making more money than ever before, and those who can get the location, the equipment, the material, and the labor are already going into business as fast as they can.

On the other hand, we must face the fact that most nonmilitary departments of the Government, which were compelled to expand tremendously because of war conditions, have made little or no progress in curtailing their activities, while some have unnecessarily enlarged them. Despite the fact that it is illegal for a Government employee to attempt to influence members of Congress on pending legislation, many bureau chiefs and employees have carried on well-organized campaigns to prevent putting any economies into effect and have gone unpunished, although the law provides specific penalties for the offense.

The Congress and the administration itself are faced with very real difficulties in trying to secure economical administration. Government operations are so vast that no one can know what is actually going on in more than a few departments, and must depend upon department heads and bureau chiefs for their information. It is only natural that these officials should be enthusiastic over the possibilities for service which lie within their jurisdiction, “if we only had the money.” There is every urge for expansion, from the messenger to the bureau chief, and it is largely from this service that Congress must get its information.

I renew my previous recommendations that the various committees of Congress equip themselves with adequate staffs to make thorough and continuing independent studies of all the administrative departments of government. The members of the Congress should not have to devote days and days to detailed investigations which at best are mostly inadequate.

Neither should this responsibility be placed on the Comptroller's Office, which is an administrative unit itself. Its work should be to see that the accounting is adequate and accurate, but beyond this it has no business interfering with the operations of other departments or endeavoring to direct policy decisions with reference to them. Policy matters should be determined by the Congress in the light of its own investigation.

Economy would be served if corresponding committees of both Houses would maintain joint staffs for these studies. A few million dollars judiciously invested in this work would pay dividends of several thousand percent.

The attack on the tax status of cooperatives is a campaign largely waged by deception and misrepresentation. The cooperative method of doing business by joint employment of an agent to do the buying or selling for the members at cost has long been accepted as a legitimate and efficient method of operation. The patronage refund is the very heart of that method. Most of those attacking the cooperatives say they do not want to put them out of business and are not opposed to the patronage refund, but want to tax the "enormous” reserves which give the cooperatives such an advantage that they are driving other business out of the field. The president of the National Tax Equality Association, however, in his testimony before the House Small Business Committee, makes it clear that the real attack is on the cooperative method of doing business, saying: “The freedom of patronage refunds from tax liability is the main issue of the controversy.” If cooperatives are enjoying special privileges by piling up unallocated reserves, I believe the law should be amended to give equal treatment to all. However, the facts are that the amount of such "evasion,” if it exists, is so small as to be practically negligible. Taxing such reserves would not stop the hue and cry against cooperatives. The real motive is to tax patronage refunds out of business, and with them the whole cooperative system. We should resist this to the limit of our ability.

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Percent

13.5 12.0 12. 6 11.6 12.4 11.5 11.3 15.6 16.6 14.9 11.4 6. 5 8.0 7.9 7.9 9.1

8.2

1910. 1911. 1912. 1913. 1914. 1915. 1916. 1917, 1918. 1919. 1920. 1921. 1922. 1923.. 1924, 1925. 1926. 1927 1928 1929. 1930. 1931 1932. 1933. 1934. 1935. 1936. 1937 1938. 1939 1940. 1941. 1942 1943. 1944. 1945. 1946.

Millions

$7, 352

7,081
7, 561
7, 821
7, 638
7,968
9, 532
13, 147
16, 232
17, 710
15, 908
10, 478
10, 883
11, 967
12, 623
13, 567
13, 204
13, 251
13, 550
13, 824
11, 388
8, 378
6, 406
7, 055
8, 486
9, 595
10, 643
11, 265
10, 071
10, 547
11, 010
13, 894
18, 569
23, 035
24, 187
25, 432
28, 933

Millions

$4, 450
3, 915
4, 335
4, 387
4, 516
4, 395
5,055
8, 329
9, 660
9, 877
8, 368
3, 795
4,850
5, 608
5, 560
6, 866
6, 617
6, 314
6, 687
6, 741
5, 114
3, 482
2, 285
2, 993
3,531
5,052
5, 361
6, 093
5, 041
5, 262
5, 361
7, 723
11, 286
14, 138
13, 531
13, 711
16, 649

Millions

$33,064
32, 490
34, 456
37, 762
36, 367
38, 254
44, 913
53, 360
58, 121
66, 136
73, 393
58, 333
60, 517
70, 675
70, 634
75, 187
80, 396
78, 502
81, 044
85, 954
75, 364
59, 853
43, 605
42, 006
49, 448
56, 398
65, 707
61, 556
66, 412
71, 515
78, 364
95, 266
122, 477
151, 358
161. 882
163, 170
167, 176

Percent

22. 2 21.8 21.9 20. 7 21.0 20.8 21. 2 24. 6 27.9 26.8 21.7 18.0 18.0 16.9 17.9 18.0 16.4 16.9 16.7 16.1 15.1 14.0 14.7 16.7 17. 2 17.0 16. 2 18.3 15. 2 14.7 14.0 14. 6 15. 2 15. 2 14.9 15.6 17.3

8.0 8. 3 7.8 6.8 5.8 5. 2 7.1 7.1 9.0 8. 2 9.9 7.6 7.4

6.8

8.1 9. 2 9.3 8.4 8.4 10.0

Including Government payments, 1933–46.
? Bureau of Agricultural Economics series.
Source: Bureau of Agricultural Economics, Division of Statistical and Historical Research.

Mr. HALVORSON. I would like to say a little more on the matter of equity capital. Not only are the liquid assets of corporations high but even the assets of the higher income people is such that they hold a great volume of governmental bonds and other things like that, and that they could, if they were willing to venture, cash them in and get money that could be invested in stocks.

Secondly, we do recognize that equity capital is a serious problem. But we do not like to think-and I think it is unsound—that the only way to keep our capitalistic economy going is to have a class of capitalistic plutocrats. We think if we are going to have a strong democracy we need a lot of capitalists. Therefore we think that every thought should be given to devising ways in which a small saver can invest in equity capital, or make equity investments.

For example, investment trusts is one method. It might be that insurance companies should eventually be given authority to invest in common stocks. We know that over the long run, if they could just pull through the downs, they are going to get a higher return on equity investments.

7260548-31

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