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S I X T H E C O S T O F D E F E N S E A recent study by the T a x Foundation o f N e w Y o r k City, entitled, "S om e Aspects o f D efense Financing,” and published in the A u g u st issue o f T h e T a x R eview , brings out some pertinent facts about w hat is h appening n o w and w h at w e can expect in the future as a result o f our defense effort. W h a t our defense effort really means can be brough t out forceably by a fe w quotations from this study. " A t the end o f M a y , the national defense b ill o f the U n ited States fo r the' fiscal year 1942 w as placed at $15.5 billio n by the Bureau o f the B udget. A fe w days later the D epu ty D irector o f the Office o f Production M anagem ent stated that the U n ited States w ill have to spend at least $100 billio n to match the G erm an w a r machine. T h e same o f ­ficial estimated that a successful consummation o f the w ar effort w o u ld require the allocation o f 25 per cent o f the national income to defense production fo r an indefinite p eriod.” T h e study points out that these figures at best are on ly tem porarily valid, since no one can foresee fo r lo n g w hat w ill really happen in the present w ar. H ow ever, the study uses these official figures to show the effect on our economy. "V ie w e d in the ligh t o f the nation’s experi­ence, the statement that national defense w ill require 25 per cent o f the national income can be best described as staggering. In the first fu ll year o f the defense p rogram — fiscal year 1 9 4 l= -n atio n al defense expenditures o f $6 b il­lion equalled 7 per cent or 8 per cent o f the national income, com pared w ith a figure o f 2.2 per cent fo r the fiscal year 1940. T h e allocation o f 25 per cent o f the na­tional income to defense purposes w o u ld im ply— rou gh ly— • a relative increase o f 200 per cent above the fiscal year 1941. B y w ay o f comparison, in recent years governm ental expen­ditures fo r all purposes have been equivalent to m ore than 25 per cent o f the national income, w h ile tax collections have averaged above 20 per cent o f the national income. "T h e se data suggest that in the immediate future the de­fense effort w ill be a factor in the economy rou gh ly as im portant as all public expenditures p rior to the inception o f the defense pro gram — resulting in an extremely heavy bu rden u pon the economy.” Lest these figures become too alarm ing to people, w e quote further to sh ow the w a r effort bein g put forth by the U n ited K in g d o m and Germ any. " . . . in Decem ber, 1940, the D epartm ent o f Commerce reported that in the U n ited K in g d o m w a r expenditures w ere at a rate equal to 50 per cent o f the national income. In M arch , 1941, the D e p a rt­m ent o f Com m erce reported that in the early m onths o f this year the w a r expenditures o f G erm any w ere ru nning at a rate o f 72 b illio n marks a year, or 72 per cent o f an estimated national income o f 100 billio n marks. It was stated that a com parable rate o f expenditure w o u ld mean annual defense expenditures o f $57.6 billio n fo r the U n ited States. T h e latter figure w as based on an estimated national income o f $80 b illio n .” T h e Departm ent o f Com m erce figure o f $57.6 billio n annual defense expenditures fo r the U n ited States assumes that the U n ited States w o u ld be m atching G erm an y’s w a r expenditures alone, w ithout the U n ited K in gd om , and that 72 per cent o f our national income w o u ld only produce as much w a r m aterial as the 72 per cent o f G erm any’s na­tional income. T h e study points out that the rising national income w ill be an im portant factor in h elpin g to carry this added bu r­den o f governm ental expenditures fo r defense. H o w ev er, it goes on to say that: " I t w o u ld , o f course, be completely erroneous to assume that a defense effort as large as that in which the U n ited States is n ow engaged could be financed w ithout any real sacrifices. In the past year a large sector o f the public has apparently believed that the additional burdens they w ill be asked to bear w ill be relatively small. T o some extent this attitude has been encouraged by those responsible fo r the form ulation o f defense policy. A lth o u g h savings fo r defense purposes are bein g encouraged am ong all groups, the federal tax burden on the lo w er income groups m ay not be m aterially increased.” In com m enting on the current intentions o f the federal governm ent in financing defese and other governm ental expenditures, the study points out that: " W i t h the na­tional income at a h igh level and tending to increase, it is theoretically possible to cover the 1942 tax b ill— federal, state and local— o f $18 billion or m ore and m ake avail­able an additional $10 billion fo r defense purposes on a loan basis. But actual achievement o f this g o a l w ill re­quire careful fiscal plan n in g and continuous reiteration o f the im portance o f saving in the interest o f defense. In particular, it w ill be necessary to abandon the idea that the defense effort can be adequately financed w ithout direct tax contributions and savings on the part o f large segments o f the population. "In tegration o f tax and b o rro w in g program s is essential, if the defense effort is to be carried through w ith a m ini­m um o f friction throughout the economy. D isp rop ortion ­ate tax increases on income brackets that norm ally account fo r a large part o f all savings w o u ld , fo r exam ple, tend to decrease the savings available fo r the purchase o f savings bonds. A w id e as W ell as an equitable distribution o f the additional tax burden w o u ld appear to be necessary in order to insure the complete success o f both the tax and b o rro w ­in g program s.” W H A T T W O C E N T S A D A Y C A N D O A c c o rd in g to an estimate m ade by the Citizens Public Expenditure Survey o f N e w Y o rk , as reported in the June 30 issue o f T h e N e w Y o r k Taxpayer, a two-cent reduction in the daily per capita cost o f state and local governm ent in the U n ited States w o u ld pay the cost o f a year’s training fo r an army o f h a lf a m illion men. Expenditures o f the state and local governm ents in the U n ited States are approxim ately ten billio n dollars a year. T h is amount is equal to 20 cents per day fo r every man, w om an and child in the country. A two-cent reduction in that per capita cost w o u ld , therefore, provide a billion dollars to be used fo r national defense. Take a L o o k at T h is : A cco rd in g to the M ich igan T a x ­payer, the new English budget calls fo r a 50 per cent in­come tax. A m arried Englishm an must n o w lo o k fo rw a rd to bein g taxed on an income as lo w as $560, a single person on $320. T h e 97 Yz P er cent toP surtax rate means that the in d i­vidu al w ith an income o f $264,000 a year w ill really have a net income o f $20,000 a year after taxes. T h is is just an indication o f w hat m ight be ahead fo r Am erica in our all-out defense effort. T h e m ajority o f the consumers, the little business men and the industrialists are w illin g to sacrifice business and liv in g as usual to national defense and to the aid o f Britain in order to assure ou r national safety. Perhaps it is also time fo r us all to look around and see i f w e can’t do without at least some governm ent as usual to help pay the way.