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From Fourth International, Vol.6 No.11, November 1945, pp.330-332.
Transcribed, marked up & formatted by Ted Crawford & David Walters in 2008 for ETOL.
Through two important actions in the past two months Congress has exposed itself as the venal tool of the capitalist masters of the United States. In September the Democrats and Republicans combined to kill all unemployment compensation legislation. This brutal refusal to vote a single additional penny for relief to the millions of discharged war-workers was directly instigated by Wall Street which aims to keep unemployment compensation at starvation levels as part of its plans to depress workers’ wages and living standards.
In October, Congress showed how differently it proceeds when it comes to providing “relief” for the rich. No sooner had Congress delivered a body blow to the workers than it rushed through the legislative mill a new tax bill tailored to suit the most exorbitant demands of Big Business. This tax bill is without question one of the most outrageous instances in American history of Treasury looting by the capitalist plunderbund. Thanks to their political deputies at Washington, the robber barons of Wall Street, already overloaded with war profits, are going to heap up more billions at the public expense.
The new tax schedule – the first general tax-cutting measure in 16 years – calls for total tax reductions of $5,920,000,000 in the next year. This is about a billion more than the generous reductions proposed by the Treasury Department. The major slice is accounted for by the repeal of the excess profits tax which will enrich stockholders of the big corporations by the sum of $2,555,000,000. In addition Congress handed out two smaller bonuses to Big Business by slashing corporate surtaxes $347,000,000 and removing the $234,000,000 capital stock and declared value excess profits tax. These gifts made a grand total of no less than $3,136,000,000.
The two houses of Congress vied with each other to see which could contribute the greater gratuities to business. When the Senate insisted upon immediate and complete abolition of the excess profits tax, the House, not to be outdone, demanded that corporate taxpayers outside the excess profits brackets also receive substantial reductions. As Chairman Robert L. Doughton of the House Ways and Means Committee put it: “We felt that if you were going to knock out the excess profits tax you had to do something for the corporate taxpayers not subject to that tax.” Whereupon the Congressional conferees promptly agreed to reduce normal and surtax rates on corporations without “excess profits” to the tune of $347,000,000. This thoughtful gesture enabled all corporations, large or small, earning normal or excess profits, to get their snouts into the Treasury trough.
This outrageous piece of legislation, approved and signed by President Truman, guarantees unheard of peacetime profits for Big Business. “Treasury experts put corporation income in 1946 (before taxes) above $18 billion in preparing revenue estimates in Vinson’s tax plan,” wrote Business Week on October 6. “If the excess profits tax is repealed as expected, corporations would take home more than $11 billion, higher even than this department’s prediction that the figure would top $10 billion.”
The sweeping elimination of these taxes upon the corporations has sent the Stock Market shooting upward. The investment sharks are licking their chops at the prospects of lush pickings ahead. Here is an example of what is taking place: there has been a spectacular rise in the stock of the outstanding distilling companies. Schenley for instance has doubled its price in the past period and the other liquor corporations are not lagging far behind.
The reason is obvious. Schenley has been paying around $20 per share in excess profits taxes. Now that this tax has been wiped out Schenley can continue to collect this amount from the consuming public for its stockholders instead of the government. No one expects this corporation to reduce the price of its whiskies. It is in business for profit, not philanthropy. Whiskey is scarce and in great demand. Schenley is out to grab all it can while the grabbing’s good.
All the other corporations are going to do the same thing. Thus the repeal of the excess profits tax does not mean the wiping out of excess profits. Quite the contrary. Its abolition bestows upon business an extended period of super-profits. Is it any wonder stocks are booming in 1928 fashion?
But that is not the whole story behind the current boom. Even those corporations whose profits fall below wartime standards have been well cared for under previous tax legislation passed by Congress. Through the carry-back provisions of the present tax laws business can collect huge refunds from the government on excess profits taxes they paid during wartime. Corporations are guaranteed a refund of 10 per cent of all excess profits taxes. If, during the five years following the war, their profits fall below pre-war average, or if losses are sustained, the government will refund additional excess profits taxes to cover the deficit. If the corporations lost money before the war, a “normal” profit is computed and guaranteed.
Under these conditions the corporations cannot lose. If they earn excess profits next year, they can thumb their noses “at the Treasury and keep all they rake in above the normal 35 per cent tax. If they don’t have any “excess profits,” they can claim a refund on the excess profits taxes paid during the war. If they actually lose money, they can collect refunds not only out of excess profits taxes but also on normal wartime taxes. They can recoup up to 85 per cent of their losses out of the US Treasury!
Industry is so well protected by the carry-back refunds that many companies are assured of high profits no matter how little they produce. Bethlehem Steel Corporation, for example, reported a deficit of $27,218,333 for the quarter ending September 30. Yet, thanks to tax refund credits of $34,980,000 from the government, Bethlehem paid out a $2.05 per share dividend to its stockholders. US Steel received a Federal tax credit of $2,000,000 for the same period. The tax laws have been so rigged that the corporations can play a pleasant game of “heads I win, tails you lose” with the US Treasury at the expense of the people.
And, in addition to all the bounties showered upon the corporations, Congress did not forget to assure the individual wealthy taxpayers of a nice fat reduction in their income taxes for next year amounting to $563,000,000. By adding a 5 per cent across-the-board tax reduction for individual income taxpayers on top of other reductions, Congress saved million-dollar taxpayers $44,218 each while cutting the small taxpayers an extra $1 each. The reductions finally approved grant the very rich a 60 per cent increase in income after taxes.
| |
Now what did Congress do for the vast mass of taxpayers in the lower income groups? It exempted 12,000,000 low-income taxpayers who don’t make enough to pay regular income taxes, or even enough to live on. Of course, that was the minimum Congress could do in order to push through its “relief for the greedy” tax bill. Congress however provided the biggest tax cuts for the 4 million taxpayers in the bigger income brackets, running up to 4 percentage points for millionaires. The 32 million taxpayers in the lower brackets got far smaller reductions.
A single person without dependents making as little as $1,000 a year or less than $20 a week, will still have to pay almost ten per cent of his income to the tax collector. A married person without dependents earning $2,000 a year is liable for $190 in taxes. The excessively burdensome wartime taxes on wages have been cut only 3 percentage points after exemptions plus an additional 5 per cent on the total amount. This means that the personal income taxes which soared to undreamed-of heights and slashed so deeply into the paychecks of the workers during the war years are to be maintained at excessively steep levels. The average rates of reduction still leave income taxes far above pre-war years. Here, for example, is how the 1946 tax on the income of a married man without dependents making $5,000 a year compares with taxes in previous key years.
|
Year |
|
$ |
|---|---|---|
|
1913 |
10.00 |
|
|
1918 |
180.00 |
|
|
1929 |
5.62 |
|
|
1941 |
110.00 |
|
|
1943 |
894.00 |
|
|
1945 |
975.00 |
|
|
1946 |
798.00 |
Observe that 1946 taxes will be seven times higher than five years ago! This gigantic tax jump is closely connected with a parallel increase in the national debt which has also multiplied sevenfold during the same period.
 |
The income tax was originally imposed to limit the rich man’s wealth. That was supposed to be its purpose. Now it has been progressively extended until today it is paid in large part by the lower-income wage earners. Six years ago some 3,000,000 persons paid personal income taxes totaling about $1 billion. The number of payments rose to 20,000,000 by 1942 and 42,000,000 by 1943. Whereas in 1941 the government took only 2.2 per cent of the $5,000 a year income of the married man cited above, by 1945 it was taking 19.5 per cent.
The costs of militarism have inflicted these back-breaking taxes and have made them a permanent scourge on the American people. In a Labor Day speech at Peoria, Secretary of the Treasury Vinson declared that the tax load must remain “relatively high” because of the $5.5 billion annual carrying charges on the national debt. This along with other “necessary expenditures” including the upkeep of the world’s greatest military machine would require “for a long time to come” a Federal budget of at least $25 billion a year.
Congress is also keeping in force the system of deducting income taxes directly from the workers’ paycheck which was introduced under the pretext of wartime necessity. This vicious system of withholding taxes converts every employer into a tax-collector for the government. While businessmen and coupon-clippers are permitted to compute and pay their taxes on an annual basis with plenty of loopholes for evasion, the workers are compelled to pay their taxes by the week. This class discrimination further enables employers to use these tax funds for their own benefit before they are transmitted to the Treasury.
Congress displayed its callousness toward the masses in still another instance by refusing to repeal the wartime sales taxes, even although their elimination was recommended by the Treasury and approved by the House. Only in a bid for the servicemen’s vote, did Congress give a few minor concessions by remitting taxes on the service pay of non-commissioned officers and enlisted men and permitting officers to amortize their taxes over a three year period without interest.
To sum up: from top to bottom the present system of taxation favors the rich at the expense of the poor. During reconversion the corporations are entitled to receive billions in tax refunds but the millions of wage workers who have lost their jobs and income through the cancellation of war contracts have no such privileges or protection. The workers have no right to apply for rebates on the extortionate taxes deducted from their pay envelopes during wartime to tide them over their difficulties. Congress, as we stated, even refused to vote them adequate unemployment relief.
Not since the days of Harding and Coolidge have the moguls of vested wealth manipulated so shamelessly the public exchequer for their selfish aggrandizement. Wall Street is solidly ensconced in the Treasury Department and dictating the financial policies of the administration. The big business press acclaims Vinson as the greatest Secretary of the Treasury since Andrew Mellon gave the keys of the public funds to his fellow millionaires in the 1920s. “No Secretary of the Treasury has demonstrated more tenaciously the courage of his convictions in respect to the welfare of the nation’s business, than has Secretary Vinson in the matter of the prompt elimination of the excess profits tax,” exclaimed Godfrey N. Nelson, the enraptured tax expert of the New York Times on October 28.
Indeed Truman’s man Vinson has already made Harding’s Secretary of the Treasury Mellon look like a slow-coach and piker. After World War I the Wall Street freebooters had to wait three years before ridding themselves of the excess profits tax. This time Truman and his Democratic Congress scrapped it within three months of the war’s end. Under Mellon’s regime the corporation stockholders saved $1.5 billion. Vinson has just doubled that. Where the Republican Mellon ladled out public funds to the corporations through tax remissions and deductions, the Democratic Vinson is now scooping them out with steam shovels. Thus “progress” can be recorded all along the line!
* * *
The capitalist government is impudently continuing in peacetime the same policy of pampering the profiteers that gave the corporations record earnings during the war. Between 1939 and 1944 corporate profits more than doubled after taxes. The monopolists piled up another $26 billion in undistributed profits. If post-war profits should happen to drop below 1936-1939 levels, carry-back credits assure the corporations another $30 billion.
A recent OPA report estimates that industrial profits next year should reach the highest point ever attained in the country’s history – $11 billion. The manufacturing industries alone would coin $7.5 billion, or several times what they realized prior to the war.
Compare these colossal profits with the wage cuts coming to the workers. The average worker in the manufacturing industries faces an annual average wage of $33.96 a week. Allowing for the increases in prices, but not in taxes, this provides three per cent less purchasing power than the average wage of $26.64 in 1941, according to the CIO figures.
The situation in the steel industry, as pictured by the United Steelworkers of America in a recent pamphlet, is typical:
Never before have the steel companies been so rich. For five years of war production the steel industry has charged the American people over two billion dollars in open and concealed profits. About one billion of these war profits have been kept by the industry – added to its total financial resources, while other millions have been concealed. $765 million additional dollars – more than three-quarters of a billion – have been paid out to stockholders.
Contrast this with the financial position of America’s 475,000 Steelworkers in five years of war work they have accumulated only a total of $285million in savings, or $600 a worker.
For every dollar the steel workers have been able to save after meeting the high cost of living, the steel industry has accumulated almost four dollars after meeting the high wartime rates of taxation. In addition, the steel companies will receive over $200 million dollars in statutory refunds of excess profits taxes. And they can obtain refunds from the Treasury if their operations drop to the break-even point, and even larger refunds if they suffer operating losses – refunds that are very much greater than the $115 million dollars in net profits after taxes they averaged before the war.
These facts and figures prove conclusively, of course, that industry is well able to pay sizeable wage increases to the workers, and still maintain big profits. But they also show that the employers occupy extremely powerful fortified positions in their present campaign to repulse the demands of labor for higher wages. The CIO has correctly charged that industry is engaged in a “sit-down strike” against collective bargaining. Many companies are holding up expanded production until 1946 so that they can get the full benefit of the tax cuts. The radio industry trade papers openly admit that parts manufacturers are waiting to extort higher prices from the OPA. The big corporations are able and willing to delay reconversion and sabotage production because they are guaranteed profits regardless of the rate of production.
Murray and the other trade union officials complain bitterly about this state of affairs. But all this whining doesn’t mean much nor count for much. The present administration and Congress which enriched the corporations and placed the Treasury at their disposal so that they could fight labor without financial loss to themselves was elected with the support of Murray and the rest of the top trade union officialdom. This Congress however contemptuously brushed aside the protests of CIO representatives against the new tax grab. The voice of organized labor, numbering 14 million members and their families, counted for less in the halls of Congress than the dictates of the selfish minority of profiteers, stock-market speculators, and parasitic coupon-clippers.
Could there be a more graphic illustration of the utter bankruptcy of the official union policy of relying upon capitalist “friends of labor” to safeguard the interests of the working class against the depredations of Big Business? The multi-millioned” labor movement did not have a single representative of its own to resist this bare-faced looting of the public funds. This is the result of the failure of the unions to organize their own independent labor party which can fight for the worker’s paychecks as energetically as the Democrats and Republicans protect the fortune of the plutocrats.
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Last updated on 12.9.2008