Backlog from Canada

Turning to Canada, the House Ways & Means Committee last week borrowed a big backlog for its new revenue bill. Rolled in for the committee's private inspection was a 2% tax on manufacturers' sales which, it was estimated, would net the Treasury an extra $600,000,000 per year. Before this piece of tax timber could be put officially into the bill, certain exemptions had to be whittled out and administrative provisions chopped in. But committeemen, Republicans and Democrats alike, were so enthusiastic about this imported levy, even in the rough, that they declared it was a "sure thing." The committee was faced with this fiscal problem: to balance the 1933 budget about $1,250,000.000 had to be raised by new taxes. Upping rates on estates and incomes, individual and corporate, to the 1924 level provided $450,000,000. Increased excise taxes recommended by the Treasury might bring in another $400,000,000. But there would still be left a $400,000,000 gap to fill. How? Where? Canada's lucrative sales tax seemed to be the only practical answer in sight. When the Ways & Means Committee began warming up to the idea of this levy, the Treasury asked the Dominion Government to send down George William Jones, Special Auditor of Excise Taxes in the Department of National Revenue at Ottawa. An expert advocate of the Canadian sales tax who had addressed William Randolph Hearst's junketeers last year on the subject (TIME, Nov. 30), Mr. Jones traveled to Washington. There he was seen to be a lean, vigorous-looking individual with hair like Bernarr Macfadden's, features like Henry Ford's. To the Ways & Means Committee he last week explained the smooth and successful workings of Canada's 4% manufacturers' tax. The public, he said, hardly noticed it. By licensing manufacturers it was easy to administer. If it had any one fault, it was that its exemptions were too many.

Secretary of the Treasury Mills and his advisers did not give their official sanction to a sales tax but neither did they oppose it. Their position was rather one of muted gratitude for any and all tax money, regardless of how it was raised. House adoption of the manufacturers' sales tax was clinched when Speaker Garner declared for it.

Under the general plan each & every manufacturer doing an annual business of $10,000 or more would pay the Treasury 2% of the wholesale price of his product. Undoubtedly this tax would be passed along indirectly to the retail consumer. To make the tax as broad and impartial as possible, the Ways & Means Committee talked of exempting from its provisions only raw or unprocessed food, bread, milk, farm seeds, fertilizer, perhaps the cheapest kind of clothing. The great merit of such a tax. it was argued, was that it bore down on all industries alike. Unlike the excise taxes proposed for automobiles, phonographs, radios, telephones, et al., it did not squeeze just a few large enterprises. It also represented a nice legislative compromise between those who objected to a general retail sales tax because that would hit the people directly, and those who believed that all the people should directly bear the cost of government.

But even with a manufacturers' sales tax as the backlog of the forthcoming bill, the Ways & Means Committee still had to find $200,000,000 in the field of special excise taxes. Suggested was a 1% gasoline tax. When its foes argued that such taxation belonged to the States, its friends retorted that the States had invaded the Federal tobacco tax field and, anyway, the U. S. contributes millions of dollars toward State highway construction. Exposed in the Congressional Record was a propaganda campaign against a Federal gas tax inaugurated by the American Petroleum Institute.

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