Family Split

It now seemed certain that the new G.O.P. tax bill, whenever it came, would extend to all U.S. taxpayers the benefits now enjoyed only by the citizens of thirteen "community-property" states* and Hawaii.

In these states, husband & wife legally constitute a fiscal partnership, in which each owns half their combined income, even though the husband may earn all of it. By splitting their income and filing separate returns, they can pay taxes in a lower income bracket at a considerable saving. For example, a couple with two children and a net income of $25,000 pays a federal tax of $6,100 in New Mexico, a tax of $8,520 in New York.

Spanish Heritage. The concept of a wife sharing equally in her husband's earnings is a legal heritage from the Spanish and French settlers of the Southwest. The rest of the country followed the English common law, which holds that the husband is the lord and master, and as such owns all family property. But in recent years, common-law states have seen many of their prosperous citizens move to community-property states. In the last year, Pennsylvania, Michigan, Nebraska and Oregon have switched in self-defense to the community-property concept.

Equalization posed many a legal problem. The method most likely to be adopted by Congress: permit all married couples to split their income for federal tax purposes, even in states where such division has no authority in state law.

Such a provision would have political drawbacks. The only real beneficiaries would be fewer than two million--married taxpayers with a taxable income of more than $5,000 a year. And they would have to be content with less tax relief, percentagewise, than in the tax bill passed last July by Congress but vetoed by President Truman.

The Republican campaign for an income-tax cut, noisily led by Minnesota's Harold Knutson (who insisted that taxes should be the No. 1 business at the special session), got unexpected support last week from a distinguished scholar. Speaking in Boston, Harvard's President James B. Conant reminded the U.S. people that taxes are a powerful tool in shaping the U.S. social and political structure.

The unique quality of U.S. democracy, said Conant, is its belief in equality of opportunity in a fluid society. High inheritance taxes "reflect the American belief in a fluid society without a hereditary privileged class. . . . High taxes on earned incomes have the reverse effect ... on the fluidity of our society. Therefore, insofar as the national expenditures permit, the case for keeping income taxes low is overwhelming, both in terms of social ideals and incentives." The present system of taxation, Conant warned, "is having a profound effect on the incentives which thus far in our history have contributed to the taking of risks and the seizing of opportunities."

"There is considerable reason to believe," Conant added, "that the absence of this idea [of equal opportunity] in France and Italy, for example, has in no small measure been responsible for the large inroads of Communistic philosophy."

* Texas, Louisiana, New Mexico, Arizona, California, Nevada, Oregon, Washington, Idaho, Nebraska, Michigan, Pennsylvania and Oklahoma.

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