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| IV. ESTIMATES A substantial improvement of the revenue system and an increase in revenue would result if the proposals for the income tax (Section I) and the estate and gift taxes (Section II) were enacted in whole or in part. Similarly, a substantial improvement of the revenue system would result if all or part of the excise taxes (Section III) were eliminated, but this would bring about a substantial loss of revenue. Estimates will be prepared for the fiscal years 1938 and 1939 for those changes proposed in this memorandum which, in your opinion, have sufficient merit to warrant further investigation. EXHIBIT 1 THE CANADIAN INVESTMENT INCOME SURTAX /2/ In the Canadian income tax law earned income and investment income are defined as follows:
" 'Earned income.' - 'Earned income" means salary, wages,
fees, bonuses, pensions, superannuation allowances, retiring
allowances, gratuities, honoraria, and the income from any
office or employment of profit hold by any person, and any
income derived by a person in the carrying on or exercise by
such person of a trade, vocation or calling, either alone or, in
the case of a partnership, as a partner actively engaged in the
conduct of the business thereof, and includes indemnities or
other remuneration paid to members of Dominion, Provincial or
territorial legislative bodies or municipal councils, but shall
not include income derived by way of royalties, or any income,
irrespective of the source or combination of sources from which
it may be derived, in excess of fourteen thousand dollars;
" 'Investment income.' - 'Investment income' includes any
income not defined herein as 'earned income' and also any amount
deemed by this Act to be a dividend and any income from whatever
sources derived in excess of fourteen thousand dollars."
ALTERNATIVE EXEMPTIONS FROM SURTAX The following income shall not be liable to the additional rates of tax on investment income, namely,
(a) All income up to five thousand dollars; or
(b) "Earned income" up to but not exceeding fourteen thousand
dollars; or
(c) Income equal in amount to the sum of the exemption and
allowances for dependents to which the individual is
actually entitled under the provisions relating to
exemptions for purposes of the normal tax, namely, two
thousand dollars for a married person; one thousand dollars
for single persons; and four hundred dollars for each
dependent.
RATES OF INVESTMENT INCOME SURTAX Rates of tax applicable to all persons other than corporations and joint stock companies, in respect of "investment income" as provided for in this Act ----------------------------------------------------------------- On investment income included in any income exceeding $5,000 but not exceeding $10,000 2% On investment income included in any income exceeding $10,000 but not exceeding $14,000 3% On income exceeding $14,000 but not exceeding $20,000 3% On income exceeding $20,000 but not exceeding $30,000 4% On income exceeding $30,000 but not exceeding $50,000 5% On income exceeding $50,000 but not exceeding $75,000 6% On income exceeding $75,000 but not exceeding $100,000 7% On income exceeding $100,000 but not exceeding $150,000 8% On income exceeding $150,000 but not exceeding $200,000 9% On income exceeding $200,000 10% ----------------------------------------------------------------- COMMENT ON CANADIAN INDIVIDUAL INCOME TAX RATES In the Canadian income tax law the normal income tax is graduated from 3 percent on the first $1,000 of net income, or any portion thereof in excess of exemptions, to 56 percent upon net income in excess of $500,000. The Canadian surtax applies only in the case of incomes in excess of $5,000, and for such incomes the surtax is a flat 5 percent of the amount of tax under the graduated normal income tax rates and the surtax rates on investment income. In other words, the tax liability under the normal income tax rate is added to the tax liability under the surtax rates on investment income. The surtax is 5 percent of the combined taxes.
Exhibit 2
tax rates under the Revenue Acts of 1918, 1936 and proposal
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Net income Rate (percent) Total surtax
Exceeding: 1918 1936 Proposal
Equaling
(Thousands of Act Act 1918 Act 1936 Act Proposal
dollars)
---------------------------------------------------------------------
0 - 3 - - - - - -
3 - 4 - - 4 - - $ 40
4 - 5 - 4 4 - $ 40 80
5 - 6 1 4 5 $ 10 80 130
6 - 7 2 5 5 30 130 180
7 - 8 2 5 7 50 180 250
8 - 9 3 6 7 80 240 320
9 - 10 3 6 10 110 300 420
10 - 11 4 7 10 150 370 520
11 - 12 4 7 13 190 440 650
12 - 13 5 8 13 240 520 780
13 - 14 5 8 16 290 600 940
14 - 15 6 9 16 350 690 1,100
15 - 16 6 9 19 410 780 1,290
16 - 17 7 11 19 480 890 1,480
17 - 18 7 11 22 550 1,000 1,700
18 - 19 8 13 22 630 1,130 1,920
19 - 20 8 13 26 710 1,260 2,180
20 - 21 9 15 26 800 1,410 2,440
21 - 22 9 15 30 890 1,560 2,740
22 - 24 10 17 30 1,090 1,900 3,340
24 - 26 11 17 34 1,310 2,240 4,020
26 - 28 12 19 34 1,550 2,620 4,700
28 - 30 13 19 38 1,810 3,000 5,460
30 - 32 14 19 38 2,090 3,380 6,220
32 - 34 15 21 38 2,390 3,800 6,980
34 - 36 16 21 42 2,710 4,220 7,820
36 - 38 17 21 42 3,050 4,640 8,660
38 - 40 18 24 42 3,410 5,120 9,500
40 - 42 19 24 46 3,790 5,600 10,420
42 - 44 20 24 46 4,190 6,080 11,340
44 - 46 21 27 46 4,610 6,620 12,260
46 - 48 22 27 46 5,050 7,160 13,180
48 - 50 23 27 49 5,510 7,700 14,160
50 - 52 24 31 49 5,990 8,320 15,140
52 - 54 25 31 49 6,490 8,940 16,120
54 - 56 26 31 49 7,010 9,560 17,100
56 - 58 27 35 52 7,550 10,260 18,140
58 - 60 28 35 52 8,110 10,960 19,180
60 - 62 29 35 52 8,690 11,660 20,220
62 - 64 30 39 52 9,290 12,440 21,260
64 - 66 31 39 54 9,910 13,220 22,340
66 - 68 32 39 54 10,550 14,000 23,420
68 - 70 33 43 54 11,210 14,860 24,500
70 - 72 34 43 54 11,890 15,720 25,580
72 - 74 35 43 56 12,590 16,580 26,700
74 - 76 36 47 56 13,310 17,520 27,820
76 - 78 37 47 56 14,050 18,460 28,940
78 - 80 38 47 56 14,810 19,400 30,060
80 - 82 39 51 57 15,590 20,420 31,200
82 - 84 40 51 57 16,390 21,440 32,340
84 - 86 41 51 57 17,210 22,460 33,480
86 - 88 42 51 57 18,050 23,480 34,620
88 - 90 43 51 57 18,910 24,500 35,760
90 - 92 44 55 58 19,790 25,600 36,920
92 - 94 45 55 58 20,690 26,700 38,080
94 - 96 46 55 58 21,610 27,800 39,240
96 - 98 47 55 58 22,550 28,900 40,400
98 - 100 48 55 58 23,510 30,000 41,560
100 - 150 52 58 59 49,510 59,000 71,060
150 - 200 56 60 60 77,510 89,000 101,060
200 - 250 60 62 61 107,510 120,000 131,560
250 - 300 60 64 62 137,510 152,000 162,560
300 - 400 63 66 63 200,510 218,000 225,560
400 - 500 63 68 64 263,510 286,000 289,560
500 - 750 64 70 65 423,510 461,000 452,060
750 - 1,000 64 72 66 583,510 641,000 617,060
1,000 - 2,000 65 73 67 1,233,510 1,371,000 1,287,060
2,000 - 5,000 65 74 68 3,183,510 3,591,000 3,327,060
5,000 up 65 75 70 - - -
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Exhibit 3
Estate tax rates under the Revenue Act of 1936
and under proposal
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Net estate Rate (percent) Total tax
Exceeding Equaling 1936 Act Proposal 1936 Act Proposal
(Thousands of dollars)
------------------------------------------------------------------
0 $ 5 2 4 $ 100 $ 200
5 10 2 6 200 500
10 20 4 8 600 1,300
20 30 6 10 1,200 2,300
30 40 8 12 2,000 3,500
40 50 10 14 3,000 4,900
50 60 12 16 4,200 6,500
60 70 12 18 5,400 8,300
70 80 14 20 6,800 10,300
80 90 14 22 8,200 12,500
90 100 14 24 9,600 14,900
100 150 17 27 18,100 28,400
150 200 17 31 26,600 43,900
200 250 20 36 36,600 61,900
250 300 20 42 46,600 82,900
300 400 20 47 66,600 129,900
400 500 23 51 89,600 180,900
500 600 23 54 112,600 234,900
600 750 26 54 151,600 315,900
750 800 26 56 164,600 343,900
800 1,000 29 56 222,600 455,900
1,000 1,500 32 57 382,600 740,900
1,500 2,000 35 57 557,600 1,025,900
2,000 2,500 38 57 747,600 1,310,900
2,500 3,000 41 57 952,600 1,595,900
3,000 3,500 44 58 1,172,600 1,885,900
3,500 4,000 47 58 1,407,600 2,175,900
4,000 4,500 50 58 1,657,600 2,465,900
4,500 5,000 53 58 1,922,600 2,755,900
5,000 6,000 56 58 2,482,600 3,335,900
6,000 7,000 59 59 3,072,600 3,925,900
7,000 8,000 61 59 3,682,600 4,515,900
8,000 9,000 63 59 4,312,600 5,105,900
9,000 10,000 65 59 4,962,600 5,695,900
10,000 20,000 67 60 11,662,600 11,695,900
20,000 50,000 69 60 32,362,600 29,695,900
50,000 up 70 60 - -
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[Part 1 of 2]
Exhibit 4
Miscellaneous excise taxes ranked in the order in which they
should be eliminated, showing legal citation, measure and basis
of tax and rate
Group A - Taxes weighted against the general public and which
should be eliminated first.
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Tax and legal citation Measure and basis of tax
---------------------------------------------------------------------
a. Toilet preparations Sale of toothpastes, dentrifices,
(items subject to toilet soaps, etc., by manufacturer,
5% tax only). producer or importer.
Section 603 of
the Revenue Act
of 1932.
a. Matches Sale of matches by manufacturer,
Section 612 of the producer or importer.
Revenue Act of
1932, as amended.
a. Electrical energy Sale of electrical energy furnished
Section 616 of the for domestic or commercial
Revenue Act of consumption
1932, as amended.
c. Admissions Total amount paid for admission to
Section 500(a) (1) any place except as specifically
of the Revenue Act exempted, when charge exceeds
of 1926, as amended. 40 cents.
b. Automobile trucks Sale or lease of automobile truck
Section 606(a) of chassis and bodies by manufacturer,
the Revenue Act producer or importer.
of 1932.
a. Lubricating oils Sale or use of lubricating oils by
Section 601(c)(1) manufacturer, producer or importer.
of the Revenue
Act of 1932,
as amended.
a. Lubricating oils, imports Importation of lubricating oils.
Section 601(c)(4) of
the Revenue Act
of 1932.
a. Telephone, telegraph, Use of telephone, telegraph, radio,
radio, cable facilities. cable facilities.
Section 701 of
the Revenue Act
of 1932.
c. Issues of capital stock. Each original issue, whether on
Schedule A, Title organization or reorganization of
VIII of the Revenue shares or certificates of stock,
Act of 1926, profits, interest in property or
as amended. accumulations.
c. Issue of bonds Issues of bonds, debentures, or
Schedule A, Title certificates of indebtedness, etc.,
VIII of the Revenue by any corporation and corporate
Act of 1926, securities with interest coupons
as amended. or in registered form.
d. Processing of certain oils Coconut oils produced wholly in the
Section 602-1/2 of Philippine Islands or any possession
the Revenue Act of of the United States, or wholly from
1934, as amended. materials grown or produced in such
possessions or imported before
June 10, 1934, or purchased under a
bona fide contract entered into prior
to April 26, 1934, or produced from
materials so purchased.
Coconut oils not produced as
listed above.
Palm oil, palm-kernel oil, and
combinations
or mixtures thereof.
a. Paraffin, petroleum Importation of paraffin, petroleum
wax products wax products.
Section 601(c)(4) of
the Revenue Act
of 1932.
a. Coal, coke, etc. Importation of coal, coke, etc.
Section 601(c)(5) of
the Revenue Act
of 1932
a. Lumber Importation of lumber except flooring
Section 601(c)(6) of made of maple (except Japanese
the Revenue Act maple) birch and beech.
of 1932.
a. Copper and copper Importation of copper, copper
concentrates concentrates, articles containing
Section 601(c)(7) of 4% or more of copper by weight.
the Revenue Act Importation of articles in which
of 1932. copper is component material of
chief value.
Importation of copper ore, and
certain articles enumerated in the
Tariff Act of 1930.
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[Part 2 of 2]
Exhibit 4
Miscellaneous excise taxes ranked in the order in which they
should be eliminated, showing legal citation, measure and basis
of tax and rate
Group A - Taxes weighted against the general public and which
should be eliminated first.
----------------------------------------------------------------
Tax and legal citation Rate
----------------------------------------------------------------
a. Toilet preparations 5% of sale prices.
(items subject to
5% tax only).
Section 603 of
the Revenue Act
of 1932.
a. Matches Paper matches in books,
Section 612 of the per M --- 1/2 of 1 cent.
Revenue Act of Fancy wooden matches or wooden
1932, as amended. matches having dyed stems,
per M --- 5 cents.
Other matches, per M --- 2 ***
a. Electrical energy 3% of sale price.
Section 616 of the
Revenue Act of
1932, as amended.
c. Admissions 1 cent for every 10 cents or ***
Section 500(a) (1) tion thereof.
of the Revenue Act
of 1926, as amended.
b. Automobile trucks 2% of sale price.
Section 606(a) of
the Revenue Act
of 1932.
a. Lubricating oils 4 cents per gallon.
Section 601(c)(1)
of the Revenue
Act of 1932,
as amended.
a. Lubricating oils, imports 4 cents per gallon.
Section 601(c)(4) of
the Revenue Act
of 1932.
a. Telephone, telegraph, Telephone conversations:
radio, cable facilities. Charge 50 cents and less than
Section 701 of --- 10 cents.
the Revenue Act Charge $1 and less than $2 ***
of 1932. Charge $2 or more --- 20 ***
Telegrams - 5% of amount of ***
Cable and radio messages - ***
per message.
Leased wires, etc. - 5% of ***
c. Issues of capital stock. With face value, on each $10 ***
Schedule A, Title fraction thereof --- 10 cent
VIII of the Revenue Without face value:
Act of 1926, (a) Actual value less than ***
as amended. 2 cents on each $20 ***
thereof.
(b) Actual value more than ***
10 cents on each $100
tion thereof.
c. Issue of bonds 10 cents on each $100 of ***
Schedule A, Title or fraction thereof.
VIII of the Revenue
Act of 1926,
as amended.
d. Processing of certain oils
Section 602-1/2 of
the Revenue Act of
1934, as amended.
3 cents per pound.
5 cents per pound.
3 cents per pound.
a. Paraffin, petroleum 1 cent per pound.
wax products
Section 601(c)(4) of
the Revenue Act
of 1932.
a. Coal, coke, etc. 10 cents per 100 pounds.
Section 601(c)(5) of
the Revenue Act
of 1932
a. Lumber $3 per M feet.
Section 601(c)(6) of
the Revenue Act
of 1932.
a. Copper and copper 3% ad *** or 3/4 of 1 cent,
concentrates whichever is lower.
Section 601(c)(7) of
the Revenue Act 3 cents per pound.
of 1932.
4 cents per pound of copper
content.
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FOOTNOTES TO TABLE
a. Expires on June 30, 1937.
b. Expires on July 31, 1937.
c. Important changes in rate or base become effective after June
30, 1937.
d. Enacted by Revenue Act of 1932 or subsequent acts, and is
without expiration date.
END OF FOOTNOTES
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