Bureau of Labor Statistics cost of living index, expressed in percentages, is for December of each year, except for July in 1942; the increase from March, 1941, to July, 1942, was 15.5 per cent. National income estimates are in billions of dollars for calendar years. Interest-bearing public debt, in billions of dollars, is as of June 30; the amount for Oct. 17, 1942, was $89.2 billion.

³ This form contains a table showing the tax liability on each income up to $3,000 so that a taxpayer need not make complicated computations, but may see his tax liability at a glance. In general, it allows about 6 per cent for deductions.

⁴ Other restrictions also were imposed. For example, it cannot be used by a nonresident alien, by an individual filing for less than a twelve-month period, or by a married person whose spouse files a return and computes a tax without regard to this small return.

⁵ See Table 2. The “effective” rate on any individual's net income is the percentage arrived at by dividing total tax liability by total net income before subtracting exemptions and credits from net income. The term “effective” rate, in contrast to the bracket rates, has been used more and more by the Treasury Department and the government agencies in recent years, probably partly because it is more “realistic” in some respects and partly because it does not stress the high maximum rates. That is, these high new taxes would appear still higher to most laymen if the bracket rates were referred to as much as formerly, the tendency of taxpayers being to focus attention on maximum bracket rates.

⁷ Cost-plus war contracts appear to be even worse incentives to these abuses than high excess profits taxes. An eminent British economist now in his government's service has stated that Great Britain would reduce waste, increase production, and speed up the war effort greatly by reducing her excess profits tax from 100 per cent to 60 per cent; even 80 per cent is too high, he says, in view of war hazards and disruptions.

⁸ But numerous large-income stockholders in the United States, some of them corporation directors, have avoided high surtaxes on individual incomes when corporations have failed to distribute earnings in dividends to stockholders. This practice is encouraged by disparity of rates on corporations and individuals.

⁹ In essentials, the spendings tax as advocated by the Treasury was very similar to the “Victory” tax, but quantitatively much larger. It was really not greatly different in general effects from an income tax except that it exempted savings (non-inflationary). The tax was in two parts: (1) a 10 per cent tax to be repaid later, based on spending in excess of $2,000; (2) a non-returnable tax graduated from 10 per cent on spending in excess of $2,000 up to 75 per cent on that in excess of $10,000. This highly progressive second part of the Treasury's spending tax was perhaps its most distinctive and controversial feature. It is not a necessary part of a spendings tax, but it is what differentiates the Treasury's proposed spendings tax most distinctly and vitally from the Victory tax of the Act of 1942 and also from most sales tax proposals. It is therefore the crucial issue in controversy between opposing proponents of sales and spendings taxes.

¹⁰ While this article was in press it was reported from Washington that the chairmen of the Senate Finance and the House Ways and Means Committees have stated that taxes on incomes of individuals and corporations are already so high that they should not be raised again in 1943, and that probably other taxes and compulsory loans will have to be considered. It was suggested also that the “Ruml plan” (or something like it) for skipping or postponing federal taxes on 1942 incomes and higher “pay-as-you-earn” taxes on incomes of 1943 and later years will probably be considered.