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Now in applying these exemptions, we realize it will be necessary to make a mathematical adjustment in the upper areas so as to avoid the flowing of the tax-reduction impact clear through the income scale. We would suggest that those changes be made. Our problem is how much would this cost. It is possible to calculate it very easily although I must say roughly.
In terms of the revenue proposed by the Treasury under the Treasury's proposed rates, this change in exemptions to remove all Federal income taxes from families whose income is inadequate to meet this minimum budget would cost roughly $4 billion. To break it up a little more, to take the income taxes of all of the families below $2,000 would cost only $1 billion. In other words, to prevent income taxes from aggravating or creating substandard' living conditions would reduce the tax revenue roughly $4 billion below the Treasury's proposal. We think those exemption changes should be made.
We also urge that Federal excise taxes on common consumption items--really common consumption items that go into a budget like this-should be raised. By "raised" I mean lifted. By "lifted” I mean done away with, should not be applied on these minimum. necessary consumption items, and of course no new sales taxes or general or specific excise taxes should be levied on these common consumption items.
Now I come to the final point of my presentation, the question of alternatives to this type of revenue, alternatives to the revenue that comes from forcing American families further down below the minimum standard of living for health and efficiency.
If you think of the many alternative sources of revenue that have been presented to you and I know you are much better acquainted with them than I-if you think of them in terms of being alternatives: because that is what they are, alternatives to poverty-creating taxes, the proposals for alternative sources will have considerable weight with this committee. We believe, first, that the elimination of the poverty-creating taxes does not necessarily mean reducing actual tax revenue.
Second, we believe that any alternative source of tax revenue is. more desirable than taxes which force American families not to eat enough, to be ill clad, and not to see the doctor when need be. These seem to be the real choices before this committee.
There are two types of alternatives. One type is the type of alternative taxation which involves the closing of escape routes for taxation, the closing of loopholes which are indefensible on every basis of equity and justice.
The second type, not in exactly the same category, is merely the burdensome and difficult imposition of higher taxes on levels other than the minimum levels. There I think there is a distinction to be made between the closing of the loopholes which have been tax escapes. We merely want to suggest several possible alternatives. I do not suggest these with any degree of finality, any degree of final determination of income that would come from them, but I want to propose them to you as alternatives to the taxes that would otherwise be proposed on the low-income, substandard-income families of our country.
In the first place, of course, there is the possibility of increasing the intake from profits. I know the arguments against additional
income taxes on profits, but I think if you compare the alternative with the burden of taxes on substandard families, you will recognize that if need be there is an additional source of at least $7 billion in terms of alternatives, with which you are actually faced, which could be gotten from corporate taxes.
Secondly, income splitting, withholding tax on dividends, you know the arguments for these. I do not need to repeat them. Let me make this point. The evidence is that just by imposing the withholding tax on dividends you raise around $200,000,000 a year. This step alone would raise more than three times the revenue that you would lose by ending all taxes, income taxes, on incomes less than $1,000.
We think at least 2 billion dollars more could be raised by eliminating income splitting, by withholding taxes on dividends, and by rigid enforcement of existing tax schedules.
A second suggestion has to do with accelerated amortization of corporations.
I heard Defense Mobilization Director Wilson say the other day that they had certificates of necessity for 6 billion dollars. The indications are that this sum will increase considerably. This comes out of the Public Treasury. We think it is very questionable to give the United States Steel Corp. a $1,250,000,000 new steel plant near Clinton virtually free of cost, virtually completely out of the public treasury, and that is an example of what would be done under this.
We think a more rigid application of this policy could save at least 1 billion dollars a year by eliminating unnecessary accelerated amortization allowances.
By proper changes in the estate and gift taxes you can get another $500,000,000. Can anyone justify going easy on estate and gift taxes of well-to-do groups when the price of that consideration is heavy taxes on the ill-clad, the ill-fed, and ill-housed?
In the same way if we want to be tough on depletion allowances on properties—and the Treasury has presented you with ample evidence in this case--you have an alternative which would give you an additional income of 500 million dollars. We ask: Can anyone justify satisfying the lobbyists of these greedy special interests at the cost of taxes on decent American families living at or near poverty conditions?
Finally, if it is going to be necessary to increase taxes, and we have no question but what income taxes are already very heavy at every level of income, the fact still remains that rather than impose taxes which condemn American families to substandard living, there is still a possibility of tax revenue in the incomes above the minimum standards. Or, to put it this way, after the Treasury's proposed rates are applied, 35 billion dollars could still be taken from incomes above $5,000 before these 7 million taxpayers would be reduced to the average income levels of the 35 million taxpayers under $5,000 income levels.
Now I hasten to say we are not proposing such a tax. The point is that a vast margin of potential incomes still exists above the minimum income levels dividing poverty from minimum health existence.
I conclude with this: The alternative sources of tax revenue suggested above could raise from 15 billion to 25 billion dollars, depending on what you decide is necessary. Some of these sources should be taxed to end grossly unjust tax privileges of the greedy. All should be used to the utmost rather than to put taxes on family incomes below the proposed UE exemptions of $1,600 for a single person, $2,400 for a married couple, plus $600 for each dependent.
No taxes should be levied on American families whose income is not large enough to maintain living standards at minimum adequacy levels of health and efficiency.
That is all, Mr. Chairman.
Mr. EBERHARTER. Mr. Nixon, I think you have made a comprehensive statement here. I think the figures were taken from Treasury reports and Commerce Department reports; is that true?
Mr. Nixon. Yes, sir, that is correct, and these Department of Labor reports, Mr. Eberharter.
Mr. EBERHARTER. I notice that many of your recommendations are straight down the line with the Treasury's recommendations, practically.
Mr. Nixon. Yes, sir; that is correct. They also coincide, I think as far as the income tax levels, very generally, with the table by the American Federation of Labor.
Mr. EBERHARTER. You call attention to some loopholes here, the same proposition that the Treasury has been advancing for years. Is that correct?
Mr. Nixon. That is correct.
Mr. EBERHARTER. Your principal over-all argument, after presenting to the committee facts and figures and reasoning, is that "no taxes should be levied on American families whose income is not large enough to maintain living standards at minimum adequacy levels of health and efficiency" and "no taxes should undercut a living wage.” Is that your principal premise?
Mr. Nixon. That is the basic one.
I want to address the attention of this committee to what is the lower level. How far down will you go? How much do you know about what you are actually doing to an American family when you impose additional taxes on somebody who is already on a substandard living level?
As a matter of fact, we are disappointed that the Secretary of the Treasury did not reflect the excellent study of his own staff in his own department on this very subject. I think it would be a very constructive thing if this committee were to make a further investigation at these levels perhaps to ask the Treasury to bring its study of December 22, 1947, up to date, perhaps to ask the representatives of the Bureau of Labor Statistics, who compiled this report, to come up here and talk about this question. We think more information is necessary on it.
Mr. EBERHARTER. Who prepares these statistics on the minimum living standards of the American family?
Mr. Nixon. I have it here, sir, called the City Workers Family Budget, put out by the United States Department of Labor, Bureau of Labor Statistics, Prices and Cost of Living Branch.
Mr. EBERHARTER. When was that issued?
Mr. Nixon. This was issued in December 1947. We brought it up to date on the basis of current prices.
Mr. EBERHARTER. That is 4 years old now, and the standard of living is more costly now than when that was issued?
Mr. Nixon. In our figures here we have made adjustment for the changes in price. We repriced this budget on the basis of change in prices since 1947 to the end of 1950.
Mr. EBERHARTER. Thank you very much.
Mr. Keogh. Mr. Nixon, what is the average hourly rate of your members under existing union contracts?.
Mr. Nixon. It is a little difficult to answer. I would say around $1.50.
Mr. Krogh. For a 40-hour week?
Mr. Nixon. We are working a little more than that, Mr. Keogh, about 42 hours. The average factory wage for December 1950 was $64 and some cents. In our industry it is probably a little above that on the over-all average. In the radio section it is probably less, and in the heavy industrial equipment section it is more.
Mr. KEOGH. Are many of your workers earning under your existing contracts more than the minimum that you have described in your presentation?
Mr. Nixon. Yes, sir.
Mr. KEOGH. So that to that extent you are not talking for these members, are you?
Mr. Nixon. No, sir. The emphasis here is on the low-income people, although you will remember, Mr. Keogh, if the worker worked a full 52 weeks at the present weekly wage, he would earn around $3,300, which is already $300 or $400 below the budget for a family of four. If he is a single man, that is quite a different matter; he should be taxed. I am not saying he should not. We are trying to be objective in the presentation of this minimum level to which we address the attention of this committee.
The CHAIRMAN. We thank you for your appearance before the committee and the information you have given us.
Mr. Nixon. Thank you, sir.
(The formal statement follows:) STATEMENT of Russ Nixon, UNITED ELECTRICAL, RADIO AND MACHINE
WORKERS OF AMERICA, WASHINGTON REPRESENTATIVE, BEFORE House Ways AND MEANS COMMITTEE, ON 1951 Tax PROPOSALS, FEBRUARY 20, 1951
This statement is presented on behalf of the 300,000 wo ers represented by the UERMWA in 1,000 electrical, radio, and machine plants where UE is the bargaining agent. This UE position on tax policy reflects widespread discussion and deliberation amongst our members, in the UE national convention, UE district conferences and UE local union meetings. The basic UE tax principle is simply stated:
1. No taxes should be levied on American families whose income is not large enough to maintain living standards at minimum adequacy levels of health and efficiency. Existing taxes reducing incomes below such a level should be repealed. No taxes should be placed on family incomes already below a living wage.
2. The revenue lost by not taxing family incomes below living wage levelsestimated at 7 billion dollars-can be replaced to the extent necessary, without causing real hardship, from sources of large income and wealth now
escaping adequate taxation. The UE realizes that our proposal is opposed by a major propaganda and pressure campaign of large industrial and financial interests to put the burden of increased taxes on low-income families and to minimize the burden of taxes on corporate profits, large individual incomes, and wealthy estates. This campaign, led by the Chamber of Commerce and the National Association of Manufacturers, is echoed in the press generally. It aims at a Federal sales tax, the lowering of
individual income tax exemptions, and further increases in income tax rates on low incomes. These proposals would aggravate existing poverty for the 45 percent of low and middle income families now receiving less than a living wage. They would drive millions of middle income families now on the borderline down into substandard existence. What is a living wage?
In spelling out the UE proposal, the first consideration is: how much does a family need to have a minimum adequate living standard? Fortunately, Government sources furnish roughly adequate objective answers to this question.
The Treasury Department has assembled the basic information on this question in a study called Individual Income Tax Exemptions. It was published in December 1947 but has received little attention and no emphasis by the Treasury Department itself. The Treasury study indicates that American families need the following amounts of income-at December 1950 prices—to provide a “necessary minimum” of goods and services for health and efficiency: Single person.
$1, 630 Married couple
2, 330 Married couple with 1 child.
2, 980 Married couple with 2 children.
3, 550 Married couple with 3 children..
4, 050 Married couple with 4 children.
530 These estimates are based on the Bureau of Labor Statistics City Workers' Family Budget, adjusted by the Treasury Department for different sizes of family and adjusted to December 1950 price levels by means of the BLS Consumer Price Index. The budget amounts estimated above do not include any allowance for Federal income tax.
This "minimum adequacy" budget is not a "luxury" budget. It is far below what we consider "the American standard of living. It is approximately $150 (for a four-person family) less than the budget estimated by the Heller Committee for Research in Social Economics, University of California, as necessary for a "healthful and reasonably comfortable living."
In important respects, it is even lower than average consumption in the depression, especially of foods.
BLS food budget versus United States per capita consumption
1 U.S. Department of Agriculture. National Food Situation. July to September 1950.
In this car,
There is nothing luxurious about the clothing budget. The man of the house could buy one overcoat every 674 years, one topcoat every 10 years. He could buy 5 shirts a year, and 2 pairs of shoes. His wife could buy one cotton street dress a year; her wool dress would have to last her 5 years.
In the medical care department, the family could each go three times a year to the doctor, and each could receive one visit from the doctor at home.
The family could buy one low-priced car every 15 or 16 years. they could drive to 19 movies during the year and to 4 baseball games (or other sports events, plays or concerts).
This family would be allowed one newspaper a day. It could buy a magazine once a week for 32 weeks of the year. For serious reading, it would have to go to the public library: the budget allows only one book per year, It would have to get along with the same radio for 9 years.
This family could not have a telephone in its home, but would be allowed to make 3 local phone calls & week. It could write one letter a week. It could have such standard appliances as a cook stove, refrigerator, washing machine, iron, sewing machine, vacuum cleaner, etc., if it could find a way to finance them