FRIDAY, FEBRUARY 1, 1963 mittimm Behind the News 1111111111111M11111111111111111111111111111111111= 'Need' for Income Tax !Reflected in U.S. History By DAVID G. HAYES Assistant Professor of Economics E The federal personal income 1 - 1 tax, as we know it today, had = its beginnings in the early = years of the War Between the = States. Prior to that time the E• federal government relied upon the tariff as the chief means of = financing the services it pro _ vided. The War of 1812, with its incessant demands for money, did cause many in high places = to advOcate the use of such a = tax. However, budgetary pres = sures abated relative to other = considerations to such an ex tent that continued advocacy = was not maintained. = - The War Between the States, on,the other hand, exerted such = strong and continued budgetary = pressures that in 1861 Congress = passed a bill calling for the tax = ation of income. The constitu tionality of the act was open = to question. The Constitution = requires - that a direct tax be = levied in such a way that the proportion of total revenue to - be collected from the tax be = apportioned among the states = in accordance with each state's - proportion of the total popula r tion. Direct or Indirect Tax? = Was the income tax a direct = or an indirect tax? At the time, = those in high places thought it = was an indirect tax and thus = not subject to -the apportion - = ment constraint. In 1880, eight years after the demise of the = tax, the Supreme Court con = curred in this opinion. _ In its early years, the per = sonal income tax was a pro = gr e s s iv e one. Progressivity = reached its height in 1864 when = the following rates were im posed: INCOME TAX RATE $6OO-5.000 55.000-10,0OG 7.5% Above $lO,OOO 10% At war's end, progression = was abandoned and the tax be = came a proportional one 5 = per cent on income over $l,OOO. In 1872 Congress failed to re new the tax. = During its lifetime, the tax LI was moderately successful- as a = source of revenue. y The maxi = mum yearly amount collected = was $73 million in 1866; over = its lifetime it accounted for about, $376 million, = 'Need' Seen for Equal Income In 1894 a new attempt was = made to impose income taxa = tion. Motivation this time was = not based so much upon the = need for additional revenues as = , it was upon the "need" to = equalize the distributioh of in = come. To be sure, both "needs" = were present, but the latter re = ceived the greatest weight in = the minds of those who sup ported the measure. = The Wilson Tariff Bill, carry = ing the income tax as . a rider, = passed Congress with relative = ease but was soon subjected = to a test of constitutionality. E. - After a very confusing session, = the Supreme - -Court ruled 5-4 = that the entire act was, un constitutional. The tax upon = corporhte income which was = levied in 1909 was found to be = an indirect tax and thus con = stitutional without apportion ment in the test case of 1911. MIIIIIIIIMMIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII THE DAILY COLLEGIAN, UNIVERSITY PARK, PENNSYLVANIA It was also in 1909 that Con gress passed the proposal for the 16th amendment to the Constitution. On Feb. 25, 1913, E:, the'l6th amendment officially became part of the law of the land and on Oct. 11, 1913, the Simmons Tariff Bill, carrying an income tax rider, became part of that same law. Originally conceived as a means of redistributing income, = the income tax has become the most important source of tax revenue. In fiscal year 1940-41, .7. it accounted for 20 per cent E. of all tax revenues. This per centage has increased steadily .7. over time so that by 1956-57 LI it accounted for 51 per cent of all tax revenues and in 1961-62 about 47 per cent of all tax revenues. This tax, as we know it to day, is a progressive one. That = is, the higher one's income, the higher is the percentage of FE-. one's income devoted to the payment of taxes. The pri mary arguments used to defend this scheme are two in num ber: (1) the principle of ability to pay and (2) the belief that = income ought to be distributed more equally than would be E. the case without progression, It is interesting to note that progression is not justified in terms .of other goals our society seems to value highly such as = - (1) the full utilization of re- = I sources, (2) an efficient alloca tion of resources, (3) a high rate E. of growth and (4) a relatively stable price level. In• fact, people have argued • that pro- = gressivity or a "high" degree of progressivity is inconsistent E with at least one of the four = goals just listed the full = utilization of resources. Disadvantages of Progressivity A progressive tax or a "high ly progressive tax," it is argued, E, adversely influences the in centive to work. That is, the = after-tax increases in income expected from extra work are not sufficient to offset the loss = of leisure. Some studies have been made E with respect, to the incentive =_ argument. The results have not been consistent. The incentive argument has been used by President Kennedy as a justifi cation for the proposed reduc tion in the marginal tax rates = applicable to the upper income brackets. These proposals, if carried out, would . reduce the. = progressive nature of the tax. Such a reduction, however, is inconsistent with the desire to bring about a more equal dis tribution of income. The main hope of President E. Kennedy and his advisers is not =_ to bring about the full utiliza- = tion of resources and a higher rate of growth' through a re- = duction in the progressivity of the tax but rather through a = reduction in the rates appli cable to all income brackets. = More Spending Encouraged The consequent increase in E. disposable income, it is hoped, will encourage an increase in = expenditures for c ons um e r goods and an expansion of out- = put in the consumer goods in- dustries to be accomplished by an increase in the employment = of labor services. It is further hoped that the initial reduc tion in tax revenues attribu table to the decrease in all tax = rates will, eventually, be off- set. by. an increase in the num ber of people filing returns'. = 11111111111111M111:1111111111111111111111111Ir Swedish Resolution Proposes South Africa End Apartheid By MEL AXILBUND Delegates to the Model United Nations Assembly have been asked to urge the Union of South Africa to abandon its "apartheid" policy. The request is contained in a draft resolution prepared by the Swedish delegation for consider ation by the model assembly's trusteeship committee. The com mittee will meet at 10 tonight in 302 Engineering A to begin con sideration of the issue. Apartheid is the practice of strict segregation and discrimina tion against . the native Negroes and other colored peoples as prac ticed by the government of the Union of South Africa. THE SWEDISH resolution also recommends that a plan for the development and eventual self rule of South West Africa be adopted by the U.N. On thd agenda of the Special Political Committee on_ the ques tion of Cuba, Mexico and the United Arab Republic which will meet at 10 tonight in the Hetzel Union Assembly hall, in separate resolutiOns each call for the So viet Union to dismantle its offen sive missile bases in that Carib bean hot spot. The UAR resolution calls also on the United States to remove its "offensive bases" in Turkey and asks both eastern and west ern nuclear powers to remove the threat of holacost by speedily re solving the crisis. In the Mexican resolution,. the U.S. is urged to cooperate in re solving the crisis "by ensuring that its resources will not be used THE NITTANY LION INN ge E • 2 C I P I - / 1 4/21 I F t Sunday Buffet Dinner 12:30-2:30 P.M. 6 P.M.-8 P.M. featuring Our Famous Steamship Roast of . Beef Every Sunday from Feb. 3 Ihru March 31 $2.50 per person Children under 12 yrs. $l.OO AWS Applications for Elected Executive Offices are available at the HUB Desk Executive Officers are: President, Ist Vice President 2nd Vice President Secretary and Treasurer 2.5 Average necessary Previous Senate experience is - required of President and Ist Vice President aspirants Deadline : Noon , Saturday, February 9 If there are any questions, please call UN 5-4459 to promote civil war and/or in vasion of Cuba." In the final resolution released by the Secretariat, India and Poland recommend enactment of a United Nations Capital Develop ment Fund "to extend financial aid to emergent nations." The two states also suggest that U.N. member nations devote their foreign aid monies to the proposed fund. . The resolution grew out of a report released Sept. 27, 1961, which noted that less developed nations will continue to have a balance of trade deficit unless they can increase their earning capacity by manufacturing addi tional export goods. Contributions to the proposed fund would be in the form of International Program Planned World-wide songs and dances by natives of several countries will be demonstrated at a pro gram sponsored by the Under graduate Student Government's Committee for International Stu dent Affairs at 8 p.m. tomorrow in the Hetzel Union ballroom. The program is "molded into the scope of the Model Unit ed Nations" which will be held on campus this weekend, James Fetter, vice-president of the Cos mopolitan Club, said yesterday. Korea, the Philippines, Latin America and England will share the spotlight for the international show. In addition; the Slavic Chorus will sing selections from four year pledges, unless the con stitution of a nation required a shorter period, Loans from the fund, which would be for a term of 50 years, could be repayed either in local or hard currency. OTHER BUSINESS to be trans acted this weekend includes se= lection of next year's Model U.N. officers. At tonight's full session, a pres ident, vice president and treas urer of the General Assembly will be nominated. Election is scheduled for Sunday. The executive committee of the Model U.N. tonight will an nounce the names of the secre tary-general and assistant secre tary-general for next year. the several slavic countries in Europe. The folk dancers from Inter landia, Schulplattlers and Hillel Israeli groups will each give a short exhibition of their dances. The dancing groups will lead any interested me in hers of the audience in an informal danc ing session following the pro gram. PAGE FIVE
Significant historical Pennsylvania newspapers