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Susan Green

Truman Tax Plan Vote Bait for ’48

(26 January 1948)

From Labor Action, Vol. 12 No. 4, 24 January 1948, pp. 1 & 4.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Would President Truman have come out with his $40 cost-of-living tax adjustment recommendation if Henry Wallace had not organized his third, party? Would the President have made this recommendation if his own party dominated Congress instead of the Republicans, whom he wants to put on the spot before November? Politics being what they are, everybody knows the answers.

At any rate, this tax adjustment was one of the few concrete recommendations in the President’s State of the Union message which, because of its avowed intention to fix everything and its vagueness as to how, has been properly described as the 1948 election platform of the Democratic Party. The Truman tax plan is simple enough. Each taxpayer, no matter of what income level, is to take $40 off his tax for himself and $40 for each of his dependents. Thus a family of four would get a cut of $160. This, the President avers, will be a cost-of-living bonus for the low income groups.

But Mr. Truman has a twofold problem. Not only does he want to make a bid for the votes of the working people. As chief executive of the capitalist-imperialist government, he is reluctant about cutting the federal revenue by the $3.2 billion his $40 bonus would entail. So, with another grandiose gesture toward the working people, he proposed to pass on the $3.2 billion to the corporations whose yearly profits make new highs. Thus Mr. Truman seemingly sponsors the “revolutionary” idea of “soaking the rich” to “benefit the poor.”

What excellent electioneering this is becomes clear when we contrast Mr. Truman’s proposal with the tax ideas of the Republicans. Last spring the Republicans tried to pass the Knutson bill but could not muster the strength to override the presidential veto. That bill was obviously written to benefit income groups of $10,000 to $100,000, not only by reducing income taxes by 10 to 30 per cent but also by allowing separate returns by husband and wife. The Republicans still support the Knutson bill, with some amendments. That bill makes a bow to the low income groups by raising personal exemptions from $500 to $600, simply re-reducing taxable income by that $100 – a mere nothing. As to federal revenue, the Knutson bill would slash it by $5.6 billion, which the Republicans would seek to balance off with cuts in the budget – not in corporation profits.

Aside from Republican Representative Halleck’s wisecrack: “What, no mule?” – referring .to the bid of the carpet-baggers of “forty acres and a mule” to get slaves back to the South after the Civil War – the Republicans have countered the President’s “revolutionary” proposal with two stock-in-trade reactionary arguments. First, prices would go up and inflation would increase if $3.2 billion more purchasing power were put into the hands of the people. As always, money in the hands of the people is dangerous, but in the hands of the corporations and the rich it is benign. The New York Times expressed this point of view best: “... the President’s plan would call for the transfer of $3.2 billion from retaining corporate earnings, the area in which it is furthest removed from the consumer goods spending stream, to an area where it would make its optimum contribution to mounting prices and living costs.” Which does not solve the working people’s problem of how to get along without more money.

The other argument was voiced by by Senator Taft and Knutson. Said the Republican Taft, referring to the President’s remark that industry should invest about $50 billion in the next few years: “How does the President expect business to make this great investment if taxes take away the profits and make it unprofitable for new money to go into business?” Mr. Taft knows, of course, that 1948 profits after taxes at present rates will skyrocket to above $18 billion; that even if $3.2 billion more should be deducted in taxes that still leaves a profit package of $15 billion that would be well above the $12.5 billion of 1946 and mountains above pre-war profits. However, that is not sufficient incentive for private enterprise, or in the words of Representative Knutson, the Truman plan would fail to “INCREASE the incentive to save, invest and assume managerial responsibilities.” In a word, the Republicans have made an open rededication to a higher standard of profits and a lower standard of living.

The absolutely detestable position of the Republicans from the working people’s point of view, does not in the least make the position of the President and the Democratic Party more acceptable. In passing, it is well to make clear that the Truman tax plan is not necessarily that of his party. When he delivered his message before Congress there was no applause for his plan from Democratic benches. Of course, we all know where the Southern Democrats stand. However, even Democrats close to the President don’t go along. A case in point is John W. Snyder, Secretary of the Treasury, whose job it will be to put up the Congressional fight for the Truman proposal even though Mr. Snyder is definitely opposed to the $40 bonus. The Truman tax plan is a false front for the Democrats.

The plan in itself, moreover, is full of holes and is nothing but campaign material. In essence, Mr. Truman has come up with a “solution” for the high cost of living”. Yet how much actual help would the $40 bonus give the working class family? The rise in the cost of living has been put to us in many different ways. Perhaps the concrete figure of the economists of the Electrical Workers Union is the best. They simply state that the inflation has meant a loss of $13.03 a week in purchasing power since 1945. Even should Mr. Truman’s plan go into effect, which it won’t, a family of four would benefit by about $3.00 a week. Stated differently, the President’s $160 reduction in taxes must be posited against a $677.56 loss in purchasing power. This is tossing a meatless bone to a hungry dog.

Neither is the “soak the rich” angle of the President’s recommendation sincere. Should an additional $3.2 billion tax levy be passed on to the corporations, conditions being what they are, the corporations would lose no time in making the consumer pay that bill. This is traditional capitalist conduct, certified to by the New York Times as follows: “First, Mr. Truman’s reasoning rests upon the naive assumption that corporations as a whole are incapable of shifting the incidence of taxes from their own shoulders to those of the consumer.”

What is necessary for relief for the working people is actually anathema to Truman. If Truman were concerned about declining real wages compared with unprecedented profits, he would have to call for the end of the withholding tax on wages, and for the shifting of taxes to the rich by way of stiffer corporation taxes, increased income taxes and also capital levies. And to prevent the transference of the tax burden back to the working people by the corporations’ boosting prices, there would have to be complete price control, not the timid, tenderfoot and inadequate points made by the President in his message. A comprehensive price-control program must include price rollbacks to a reasonable level, price fixing, rationing of scarce commodities – and above all the administering of such a program by people’s committees to prevent black market racketeering and other evasions.

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