The new budget provides for a lower level of taxation than has prevailed in
preceding years. Six days ago individual income taxes were reduced and the
excess profits tax expired. These tax reductions are justified only because
of the substantial reductions we already have made and are making in
governmental expenditures. As additional reductions in expenditures are
brought gradually but surely into sight, further reductions in taxes can
and will be made. When budget savings and sound governmental financing are
assured, tax burdens should be reduced so that taxpayers may spend their
own money in their own way.
While we are moving toward lower levels of taxation we must thoroughly
revise our whole tax system. The groundwork for this revision has already
been laid by the Committee on Ways and Means of the House of
Representatives, in close consultation with the Department of the Treasury.
We should now remove the more glaring tax inequities, particularly on small
taxpayers; reduce restraints on the growth of small business; and make
other changes that will encourage initiative, enterprise and production.
Twenty-five recommendations toward these ends will be contained in my
budget message.
Without attempting to summarize these manifold reforms, I can here
illustrate their tendency. For example, we propose more liberal tax
treatment for dependent children who work, for widows or widowers with
dependent children, and for medical expenses. For the business that wants
to expand or modernize its plant, we propose liberalized tax treatment of
depreciation, research and development expenses, and retained earnings.
Because of the present need for revenue the corporation income tax should
be kept at the current rate of 52% for another year, and the excise taxes
scheduled to be reduced on April first, including those on liquor, tobacco,
gasoline and automobiles, should be continued at present rates.
Immediate extension of the Renegotiation Act of 1951 is also needed to
eliminate excessive profits and to prevent waste of public funds in the
purchase of defense materials.