Program for Growth

President Eisenhower's budget message was full of tax changes and reforms, to encourage business expansion. "The recommendations," said the President, "will promote investment, which provides new and better methods of production, and creates additional payrolls and more jobs."

The most important recommendation dealt with faster amortization of new plant and machinery, a device that sped the growth of defense industries during the war and postwar period. Eisenhower now proposes this change for all industry. A day later, the plan was approved by the House Ways and Means Committee. The change would double depreciation rates allowed during the first year, with a gradual decline in depreciation allowance thereafter. For example, a $10,000 machine expected to last ten years can be depreciated at $1,000 a year under present law ("straight line" method); under the new method, the same machine could be depreciated $2,000 (or 20%) the first year, and 20% of the balance every year thereafter ("declining balance" system) until the final year, when the remainder could be written off.

This would recognize the rapid decline in the value of equipment in the early years and would encourage replacement of machinery before it becomes obsolete. Estimated cost to the Government in fiscal 1954: $375 million. But this cost would probably be more than made up in later years, as expanded business increases the tax take.

Among Eisenhower's other proposals:

P: Spur research by allowing full deduction of research expense in the year that it is undertaken, a practice already followed by many large companies with their own research laboratories. But most small companies must now add the costs of their one-shot research programs to their capital structure, pay it off over a period of years.

P: Encourage investment by lightening the present double taxation of dividends (once when the corporation pays, once when the individual pays). In the first year, dividends up to $50 would be taxexempt, and taxes would be reduced by 5% of any additional dividends; after three years, the exemption would go up to $100 and the tax reduction to 15% (TIME, Jan. 25). Saving to taxpayers in fiscal 1954: $240 million.

P:Extend the carryback of losses for tax purposes from one year to two, to "benefit established companies which become distressed," while retaining the present provision permitting losses to be carried forward five years.

P:Allow farmers to deduct full cost of conservation practices (up to 25% of their gross income), instead of present limited deductions.

P:Put corporations on a partia pay-as-you-go tax basis by having them pay part of their estimated taxes during the last half of the calendar year (the first half of the Government's fiscal year). thus simplifying the Treasury's debt management. Corporations now pay their whole tax bill the year after it is earned.

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