The Treasury Department has consistently opposed general sales taxes. From every viewpoint except administration, the retail sales tax is the least objectionable, and if there is to be a sales tax, the Treasury thinks it would be at the retail level.

The opposition of the Treasury Department to the general retail sales tax does not stem from any inborn objection to collecting taxes from retailers. It arises from the fact that all of sales taxes with which we are familiar are regressive in character and particularly so on the lowest income coups who are already at or bell the minimum for dent living and for productive efficiency.

The types of exemptions which you have proposed to eliminate this do not satisfactorily meet the problem. The exemption of food, for example, which greatly decreases the yield of a sales tax would diminish regressivity but it would still leave a very substantial proportion of the sales tax burden upon the last income groups.

The suggestions for the provision of exemption coupons does not appear to be practicable. If the exemptions were shall enough to fit the tallest expenditures, it would have relatively little exempting effect on other low incomes. If, on the other hand, the exemptions were large enough to provide the desired relief for all income taxpayers the revenue would be greatly decreased and families with expenditures below the exemption level sell exemption coupons. The effect would be the same as a cash subsidy out of the Federal Treasury.

The Treasury Department, moreover, has no inborn objection to using the sales tax method of imposing a tax on spendings. Here again, the problem is one of working out a practicable plan for handling the compulsory savings in an equitable manner. In addition to the defects of the sales tax just mentioned is the problem of the transfer of stamps among individuals in such a manner as to negative the purpose of the proposal and to set up an engine of speculation.

Members of the Treasury staff have worked and are working on problem of eliminating these difficulties from the sales tax and of its use as a compulsory savings measures. Their acceptable solution would throw a different light on the desirability of using this method of taxation for wartime purposes.