The New Load

After nine months of argument, the new tax bill was finally agreed upon last week by House & Senate conferees. Congress is expected to push it through. The major provisions:

P: Personal income taxes are boosted 11 3/4%, effective Nov. 1, when withholdings will rise from 18% of wages & salaries (after exemptions) to 20%. Thus, on 1951 income, the hike will be only about 2%. Sample increase: a married couple with two dependents, earning $8,000, will pay $1,285.60 v. $1,152 under the old law.

P: Corporate income taxes are increased from 25% on the first $25,000 to 30%, from 47% to 52% on the remainder. P: The excess-profits tax is boosted by lowering the "normal" earnings (exempt from the tax) to 83% of the 1946-49 base period instead of the current 85%. P: Whiskey taxes are raised 24-c- to 30-c- per fifth, beer $1 per barrel, cigarettes 1-c- per package, gasoline 1/2-c- per gallon, autos $50 for a light sedan. A new 10% excise tax is placed on power lawnmowers, home movie projectors, electric dishwashers.

The Senate tax-writers managed to knock out some measures which the House had approved (a 10% withholding tax on dividends, a boost in long-term capital-gains taxes), and inserted others which the House had omitted. Most important Senate change: corporate taxes will be levied on undistributed earnings of farm cooperatives, mutual savings banks and building & loan associations, which are now tax free.

Taxpayers also got a few windfalls: 1) no capital-gains tax will be charged on profits from selling a home if the funds are used within a year to buy a higher-priced house; 2) single taxpayers who are heads of households will be entitled to half of the joint-return benefits provided for married couples; 3) the tax on telegrams is cut from 25% to 15%, and the tax on baby lotions is removed.

The revised bill is expected to yield $5.7 billion, v. the $10 billion asked by the Treasury to put rearmament on a pay-as-you-go basis. It will bring the total annual tax hike since Korea to $15.7 billion.

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