CUT!

The Honorable Harold Knutson, Chairman of the House Ways and Means Committee, declares that one of the first items on the agenda of the special session of Congress will be income tax reductions. He, personally, will see to it. Furthermore, he has just received the report of a citizens advisory group, headed by Roswell Magill, which report advocates lower income taxes together with forty changes in the Federal Revenue Code. This is the report which Drew Pearson charged was prepared on Wall Street. He claimed that if its suggestions were adopted the income tax laws would be shot so full of holes that even a legal novice could prove that the government owes taxes to the corporations.

However, these assertions, even if true, are somewhat beside the point. Tax cuts of any nature are not compatible with either the effective execution of the Marshall Plan or the fight to curb inflation at home. No one knows precisely how much will be required for aid to Europe during the next fiscal year. But in any case the figure will run into several billions. If taxes are cut to the point where expenditures exceed revenue, it will be necessary to reduce the Marshall Plan to a scale which will be ineffective and therefore only a waste of good money or to increase the national debt to finance European aid. In the latter case bank reserves would be hiked by the sale of additional Federal securities with the result that more credit would be available to strain the economic balance of the nation.

Tax reduction would have an even more direct effect. It would immediately increase the amount of money available to be spent on a competitive market. Further price rises could hardly fail to follow the release of additional spending money through tax reductions. At a time when corporation profits are so high that stockholders can hardly believe the figures on their dividend checks, it is difficult to imagine to what heights profits would soar if corporations were relieved of any substantial part of their tax "burden." In view of the present high level of national income the argument that industry needs the additional incentive that can be obtained by tax cuts appears more laughable than logical.

It is paradoxical indeed that the very people who bemoan the size of the national debt and have the greatest fear of the Russian "menace" are the ones who are crying loudest for tax relief. Now is the time, if ever, to pay off some of the public indebtedness. The United States can reduce its debt and support the Marshall Plan only if taxes are maintained at the present level. In fact it might even be a wise move to raise them.