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![handle is hein.tera/taxfeaturs0014 and id is 1 raw text is: Special 21st National Tax Conference Issue
MONTHLY TAx FEATURES
Col3plght 1970 by Tax Foundation, In c, 50 Rckefeller Plaza, New York,N. Y. 10020
January 1970
Vol. 14, Number I
.1lthur F. ttrs, Dimsellor it) President Nixon accepts the ait.
isal lTa TI1 01h11 ht301 Sitc., Awsaril (Or DissliSgullihd Piutlic Service
t i.s thert C. 't)Slt, Chairnian, Fintsce Ctsonlittee U.S. Steel
(iiltsiiralioI (let) at lhe Foinlllatio's 3ls2nl innuhal dinnesr.
Bennett Cites Problems
In Writing New Tax Bill
Noisdv is ever isllv hal)py with a tax bill, observed Senator
Wallace I'. lltnniett (l-1Uta h). iii describing for attendees at the
21st Natioal 'ax Cofeience the difficulties exlperienced in cost-
posing Itsl' Snate's vesion of the Tax Refotil Hill of 1969. The
(suitercnce is O0111rd sy Tax Fonndatisn, Isc.
Whenever. Senator lisnnett
adddt. is te iamne if ,'eroi, Lay Tax Compicily To
tlI' patt'rni of tax burdens is to
,,v sifte,. it unnes nup,,'ard i, Marginal Rate Setup
dh-lianee Of the law of gravity. ti o ces', I
shsti~sse i s~e te f gsttty 'It is not nsecessatry to look
Just twtesn one ilan thinks lie v'rv far for the Inici1i sl soinrce
las found a loophole ini siale tax of the ever-iicreasing comiplexity
law. the slaker, a ranking Re. of the income tax.., it is Site
Iulican mtemler of the Finance Iur ogrssively graduated margisal
Cmittle sal. ie sees another rate structure, Norman It. Ture
twis1 clinging to what hr believes of the Plannig Iesearch Cor-
is tseSs taxattin. porantiun told attendees at the
Sionic lt'sists ltaned whihl 21st National Tax Ctnference.
Wsilhug oni It' m:easire, the This ife stnictnre, said 're,
Sesaoir said, incnled tite one Princial of the Corporation's
thalt good ax bills aind politics Econmies Department, has ex-
di sOt nix.'' erited ''enormos pressures for
IHs sail lie belieed Ithe new' changes in she law tt afford ex-
bill came too soon after a change ceptions frosts the full aipplication
its adslrisistation, and that coni- of the high, graduated rates with
sit,'tc' inesls.bers learned that it is respect to particular groups of
diffliclt n wite a tax bill when ltaxpayers.
Osse prty controls the White It. slol be obvious, Tare
Iltise and the other party the sail, that the searelh for tax
Conigri's,. shelters will continti, so long as
marginal rate graduation con-
tisnes tn affnrd such strong in-
Investment Credit entiv.i for tax heh*'s.
Progressively gradualed niar-
Not Inflation's Cause g r ,sit rates, lie said, ca.
Ilt, a addriss to Tax Founla. hardly he justified ii terms of
tlin's 21st National Tax C(us. their contributions to the total
fert-ice, lesif It. Olsen, Senior revensnes.
Vice Plesilent ani Ernisonist
f th' Fiist Natinal City 13an1k Saulnier: Tax Cuts
singledl it tivo IIIvisionis of the
'raIx Ref,,ri Act if 1969 tio sho,,w Peril Money Raising
los tle iissct of tax changes
is tsis oflte'n siubld lsass Isge Iii sile opsisnion of lor. lStay.
S isal iesilen snludit sousend I. SauhSihser, Irnard Col-
Small inqovcnn5t ill VC lily. Isge Pinfessor of esonomics, [lie
'Iss' 1m l provisisns, ie said, fiscal 1969 record has two ser-
wre i'epal oi he hiuesten' sshy nIegative implcations.
tax srsdt, andSl I prlotosal to ii an address to the 21st Na-
ilpis' Fish'sal tax os state asish tional Ta Conifereace, Dr.
Size(,londs. t r. Osne emi- Saulnier said the first negatise
sizes'd that twein Ie ecsooic iuillitions could he phrased
rseslt of a tax cleige is ardvse, thus' 'If we cannot manage to
g i'aItr ih'niisy is cohsnitted have a [Feelral) budget surplus
fTaking issue wit!) igusetius for more tlhani a feuw quarters
fer tiliiating the investnment during a period of rapi infla-
tax ci'ltit that sIte sinilns to sion, %chat can we expect during
iivistinit rm'iled by ste cirdit stable periods?
cissi1s iles'S dliterly to inflation- 'The seconl negative implica-
my I'emsnes. Mr. Olsen said: tion1,le said, is that as things
''i lhuns calital isuniuesi are going, lite Irden of stop-
fi' lith inllaioniy piesusres in ping inflation is Iseing shifted
I. 9ti is like' blasinig she therio. mnore and more onto mnonetary
nlus'lsr filr lie h'IIriilnitire. policy.
Tax Fosndatlulon's 21st
Natinsl Tax Conference
ill New York City, DIc. 2,
centered on Federl Tax
Chn ges for the Future.
TF'l .32nl n nual dinner
sas all, held fill that dale.
lAlaterla iI Ibis MTF is
hasd on Conference ant
dinner topics. Proeelhsngs,
eoitaidlg time Conferene
!ppers and disusasion, Is
1 be avnilhdle early in
i 970.
U.S. Program
'Gap' Decried
Repeal of tie investment tax
ciedit by Congress (if thi move
is iade) wiii create an almost
frightening gap in tie Federal
program to support capital in-
vestment in tle United States,
according to Charles W. Stewart,
President, Madinery and Allied
Products Institute.
Addressing rax Foundation,
Inc.'s 21st National 'Fax Confer.
once, Stewart warned:
There shoul lie no misunder.
standing ons the part of the Con-
gress that when St repeals the in.
vestment credit, it is creating an
almost frighteniig gal in the
Federal progran to support capi-
tal investment . . . and that at
least for the long ran this gap
will have to be filled.
it is time, lie told the atten.
s!res, to be thinking and studying
how a substitute device ur system
should be shaped. In my judg.
ment, we nee a very substantial
substitte . . . and we need it
yesterday, lie emphasized. With
olt it we aight very well turn an
economic atljustnent or a trod.
erate recession into sometling
nore Serious.
''Ilie speaker estimated that in-
adequate deprieciation rites and
inflatlon will cause Aiierican
business to pay incone tax next
year on something like $10 bil-
lion of capital consumption.
Such an impact will have die
effect of retarding pro,ress by
curtailing the funds available to
industry for capital investment.
Alternatives Suggested
If die tax credit is repealed,
Stewart listed these possible al.
ternatives: scrapping the reserve-
ratio test; use of triple-declining-
balance depreciation; removing
the $10,000 ceiling on the 20 per.
cent additional first-year write-
off i new depreciable property;
apillying a five-year special amor-
tization accross-tlhe-board to pro-
,lactive eqniVIsment, or cunsidera.
tIon of firther and substantial
lilberalization of the depreciation
guidelines system.
Tax poliey as it affects capital
investnent, lie said, is a mixture
of misunderstanding and poli-
tics. lie urged more plain talk
and straight thlnkinF, saying
that those who make investment
decisions inust do a better job
of explaining them.
Citing his personal scepti-
cisa a ot tax cuts is a means
of sthulating the economy, Dr.
Saulinier said such cuts-in addi-
tion to other weaknesses -
threaten the revenue-raising ca-
sabilisy of government. Anti that
is precisely what the tax cuts
being added to the tax reform
bill threaten to do today.
Puts Spending Reform
Need Before Tax Reform
With the $201 Isillihs Feheial go'esen l I lik,'l'
to be crossed i the' next hiscal year 'adIlng as nu nini' svais
as it took two ceii inrs to achieve hrev'iisly'', Asitih F. lIsts1as
told atiendets a 'lax Foinidation, Ine,.' Il2id annual dliniss'r.
the uteed for spiendinig si'fsnin ia'iy his .is1 glulsss' : tuh
Ineeu for tax ii'ielrlll.
Dr. ltirs, COttilst'llor ti Plesi-
dent Nixon, ti6 ptincilpal speak-
Cr at the dinner was give [i e t
Foilildatiion's annal Award Ior
Distinguisied pulfie Servic.
'Itn view of tile explls e
gowth of Federal spending aid
the ineffectiveness or ineflici'ncy.
of much of it, lie drchned, I
am inclined I think that the
need for expentlittne rifortil saisy
be even grater than th i need
for tax refirms.
'he Fedetal governnmneit's
sending total passed the $100
blion mark in fiscal 1962, I)r.
Bsrns said, then added: It stow
a spears likely that tie $20 bil-
lion mark will he crossed tie nlt
fiscal year; so thnt we will lie
addini as much to the Federal
spending rate in a mere ine
years as it took nearly two ce-
tures to achieve previously.
In an alhision to the tax bill
psending before the Senate, Dr.
urns noted that nder this pro.
posal a projected shift in the tax
stnetur woald favor contsnl)-
tion at the exti'se of cast I
formation. 'Ilbss shift 1ilt be
useful in the shor' nni lie nt)-
served, but snight daimage pros.
pects'f6r long-tem grovlI of
the economy.
Civil Spendlg Blamed
.Spending i civilian pro-
grants, Dr. Ilurss said, not the
Vietnam War, is the chief cause
of the growth of the Federal
bulget. Since the end of the
Korean War, lie said, defense
outlays have been responsible for
onily alout ose-sixtlh of the
vast increase in govenent cost.
Effective control of Iublic ex-
penditres, Dr. lilims said, will
reliire larger reliance on volit-
teer efforts for dealing wvtIs our
great social ills. le added:
There is a great need ... for
I pendiiure studies hsy organi7a.
tios that are independent of
government aad that have no
direct stake in any of ste [g'-
ersinentalj programs.
In view of its precmilnence in
fiscal research and ia sifthlic edt,.
cation, the Tax Foundation is
especially well equipped to or-
ganize leains of economists, ac-
cotintants, political scientists and
nanagenment exlerts5 for the con-
crete sludy and evaluation of tIe
msajor branches of Federal ix-
Isendittire.
Mall From the Chief
Tbwair s~iitpapi
whh, t. a d., '.I d
ItesS ii ,tt'qiit.'s , lh 'l+tt't.
aind t ,ili ttd i ori 'tsoitr
, .th sit.. it iu be tt Ii.*
lhii tihe - oa , sts , t,..
lIltsll Ps.4tdent Nixon t.
s los /t' TFil Iln
ion. h11., tI /leil12id an.
u.,ll diottr-at n'hi, I.
Itlionl wia honowlld - hrgaln.
.ht yo. larwit Ito Wil
',ol is A1a Id far 1)i., Iin.-
jiihed Pulic Servire, the
l'iridefilial sstrsogr laid,
'yt give ',sgsiltislill o it
susisl ttltsth s' sitlie to ',roi.
dents. Iti hit'yt been in Ihe
tladits is Ih te ids n Ithe
Tax F 'siisdatn svad slts:
Tiiitall littler Orssl.'sl lst,'st
. I19 IIss'lsl ittes lsgstttulati.,
tolsshtir and bellr e.l',' to
all who Itrild lanighf.I
itinlner.
Harriss Critical of
'Misrepresentation'
The msisse of worth. inde'd,
sle ini si 'pl i'it l l lts t'll, ls's
dealing witl economic si. phs,
particislarly Ies, was ciitiried
ny Professr C. Lowell I l:lit isf
Cilubia Utivtisitv il n ad-
dress t Tax Fonnlation. Isi.'s
21Ist Ntationial 'Tax C insf'sn i..t
One iiistse. lie said, standstls oit
above others. I sefir Its th
treai t i fi i of op tratins a, dif-
feent from peollle. 'lie tisi
agail] . . . taxes on indiithials
have been contrasted witli iawes
on eolorations as if lsiis' ss
taxes wsere it 'lpeole' taxlt ..
I igher tax biiidl'iis sit st list -
ations, lie continte(), ate inthl-
preld as liressunihly int hltsutl
people.
Sonnt'lsow0', Itt h1lts ddlils'r-
alelv. fil(r ioualyll' ty nnislils,-
ing oversight, speakis lime
ignored the basic riality this all
taxes issjst lie paid hy tinitn
belings-as owllels, tsr as if'tip-
ients o payltentts for tlls sie % ic'vs
of labor or prolerty.
A cut its the iInnatiti in-
coltie tax Sate by is!Ialss one5' itt
two peicentie pilat a %'Ia,
said Professsr Ilatis elws dsi
in his aleiess, wosld l oisitit
snubstantial refrin Otver III pr
15 years withoit mucli declin
iu ret'i'llitc.
Estimate Amendment Means $6 Billion Loss
Edwin S. Cohen, Assistant
Secretary ol [Ite 'reasury for
Tax Policy, spekLing at It' first
session of [Ite 21st all-day Na-
tIonal Tax Conference outlined
Isis estinatles of revene losses to
dir Treasury if various isersonal
income tax exeriitions sid slr-
duiction proliosals became effec-
tive.
One proposed ineastlo for
$1,000 in exemptins and deduc-
sinus if approved, he declared,
ight mean a hoss of as much as
$6 billion anunsally by the time
the provisions of the bill were
phsed in. This, lie said, would
be an intoleralble loss to the
naton's revenue.
Iletailing thie plogris of Ih
tax bill roi its inceltilln. S,'r',.
lary Clisn reCallih liat alit
his aides splent tIl' inonh% is
appearances biefsore the Il nis,'
Ways aid ivcans Coniiiitee anl
three weuks before the Siimute
Fihlaice (iiiittee ss ;Itshn ci-
sislered ier bill.
lie said that after the hill li'-
came law, the Tre'assurny svisd
try to quickly get (it titlei nsuiy
rsllings so that btsilnus t'ln sighl
have some gihles undur the iw
tax legislation. lie said tiha in
future [Ite Treasry wonld h suk
harder to remnove she dead
wood nus clttesiag tax law.](ViewImageLocal?handle=hein.tera/taxfeaturs0014&div=1&collection=&method=preview&ext=.png&size=3)