Guns v. Automobiles?

To Congress, staggered by Secretary Morgenthau's demand for a $12,600,000,000 tax bill, last week went two Government officials proposing not only different taxes than the Treasury suggested, but a whole new theory of taxation. The men who made these new proposals were two of the Administration's fiscal bigshots: the Federal Reserve System's Chairman Marriner Eccles and Price Administrator Henderson.

The Treasury nad recommended new and higher surtaxes on personal and corporate incomes (TIME, May 5), higher gift and estate taxes, increased excises on many such commodities as cigarets, liquor, gasoline. On the last point Messrs. Eccles and Henderson plainly told openmouthed Congressmen on the Ways and Means Committee that they differed.

Objecting to general boosts in excise taxes as much as to a general sales tax, they recommended whopping "selective" sales taxes on such commodities as automobiles (up to 20%), refrigerators, washing machines, which compete with defense industries for materials and workmen and machine tools. This would tend to build up a backlog of consumer needs for the years after the war. Meantime they proposed to let the lower-income group--its wages raised by the defense boom--have its fill of food and other goods which do not compete with defense products.

Eccles also proposed broadening the individual income-tax base, lowering the married persons' exemption to $1,500 and credit for dependents to $300. But he would tax middle-income groups, "living on relatively fixed incomes," less drastically than Morgenthau advised. Henderson and Eccles both proposed to plug loopholes and boost gift and inheritance taxes.

The probable net yield for their plan: well over the $12,600,000,000.

In effect, they denied that the choice before the U.S. was between guns and butter. All that was needed, they insisted, was a choice between guns and automobiles.

Dazed by the Eccles-Henderson thesis, the Ways and Means Committee extended hearings, settled down to figuring out not only what taxes would hurt the least, but what would do the most good.

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