Recommendations for tax legislation should be considered not only in the
light of the financial requirements of the ensuing year, but also in the
light of future years' financial requirements and a full consideration of
economic conditions.
Expenditures are estimated at nearly 36 billion dollars in the fiscal year
1947; they can hardly be expected to be reduced to less than 25 billion
dollars in subsequent years. Net receipts in the fiscal year 1947 are
estimated at 31.5 billion dollars.
Included in this estimate are 2 billion dollars of receipts from disposal
and rental of surplus property and 190 million dollars of receipts from
renegotiation of wartime contracts. These sources of receipts will
disappear in future years. Tax collections for the fiscal year 1947 also
will not yet fully reflect the reduction in corporate tax liabilities
provided in the Revenue Act of 1945. If the extraordinary receipts from the
disposal of surplus property and renegotiation of contracts be disregarded,
and if the tax reductions adopted in the Revenue Act of 1945 were fully
effective, present tax rates would yield about 27 billion dollars.
These estimates for the fiscal year 1947 are based on the assumption of
generally favorable business conditions but not on an income reflecting
full employment and the high productivity that we hope to achieve. In
future years the present tax system, in conjunction with a full employment
level of national income, could be expected to yield more than 30 billion
dollars, which is substantially above the anticipated peacetime level of
expenditures.
In view of the still extraordinarily large expenditures in the coming year
and continuing inflationary pressures, I am making no recommendation for
tax reduction at this time.
We have already had a substantial reduction in taxes from wartime peaks.
The Revenue Act of 1945 was a major tax-reduction measure. It decreased the
total tax load by more than one-sixth, an amount substantially in excess of
the reductions proposed by the Secretary of the Treasury to congressional
tax committees in October 1945. These proposed reductions were designed to
encourage reconversion and peacetime business expansion.
The possibility of further tax reductions must depend on the budgetary
situation and the economic situation. The level of anticipated expenditures
for the fiscal year 1947 and the volume of outstanding public debt require
the maintenance of large revenues.
Moreover, inflationary pressures still appear dangerously powerful, and
ill-advised tax reduction would operate to strengthen them still further.
My decision not to recommend additional tax reductions at this time is made
in the light of existing economic conditions and prospects.