|sold to persons of firms who are not,
in turn, subject to sales tax on their sales. Such might
be, for instance, professional men (e.g. dentist buying
equipment), farmer, wholesalers and retailers in general,
transportation agencies (railroads buying freight cars
and locomotives), communication agencies (telegraph
companies buying copper wire), etc.
Three matters are of special importance here:
(1) If the concern is one whose sales price is strictly regulated by Governmental authority, and which is not allowed to pass on to its vendees a tax passed on it by its vendors, should its purchases be allowed to go tax free? If no adjustment in freight or passenger rates is allowed railroads, for example, the tax on the sale of locomotives become in effect a tax on stockholders of railroad companies rather than a widely diffused tax the users of railroad service. Whether or not exemption should be granted to all purchases by railroads depends upon where the Government wishes the burden to fall under a sales tax. The presumption would seem to be that whatever rationale the manufacturers' sales tax possesses demands such exemption. The same problem arises with electric power, gas, and steam companies, if sales by them are no-taxable. If rates could be adjusted upward to take account of the tax burden, no exemption would be needed, but this adjustment would probably not be made, especially if the tax were an emergency one.
(2) If the concern is one that resells the article to a concern subject to the manufacturers' sales tax, exemption must be granted to purchases made by the first firm if double taxation of the second firm is to be avoided. Thus: Manufacturer A sells his products to whole-saler B, who in turn sells part of the products to retailer and the rest to manufacturer C, who uses the product as a component part of the manufactured article on whose sale he must pay manufacturers' sales tax. If all of A's sales to B are taxed, and if B shifts the tax, C is taxed both on (part of) his purchases of materials and on the sale of his finished product. If the law adopted plan (b) as outlined in the section above, allowing no exemptions at all, this situation would cause no difficulty. Under either plan (a) or the conventional plan, however, purchases of materials by a taxed manufacturer are supposed to be exempt and some arrangement would have to be made whereby the sale of manufacturer A to wholesaler B would be tax free with respect at least to those articles that B sells to C. Such an arrangement has been developed in Canada; wholesalers who which to do so may take out a license costing $2 per year, similar to the license required for all manufactures. In terms of the example above, if B takes out a license, all sales to him are exempt. Sales that he in turn makes to unlicensed purchases are taxable; sales to licensed purchasers (e.g. C) are exempt. /1/ The present Federal manufactures' excise provide for these cases without be necessary under a widespread tax is a matter for further consideration by the administrative authorities.
(3) If the purchaser is non-taxable because of a specific provision in the law and not because he falls without general class of taxpayers subject to the law (for instance, a specific exemption granted to manufacturers of food products compared to the non- taxability of wholesalers), it may be deemed advisable to exempt sales to the exempted part in order to make more effective the policy inspiring the original exemption. Indeed, it might be thought desirable to exempt sales to the vendor of the exempted party, and so on bank, were it not for administrative difficulties.
/1/ Revenue Hearings, Committee on Ways and Means, 1932, pp. 251, 253.
END OF FOOTNOTE
Of course, the same reasoning could in certain cases be applied to parties who might be non-taxable because of the general language of the law -- e.g. newspaper publishers purchasing newsprint.
APPENDIX ONE TO MEMORANDUM Q
METHODS OF ESTIMATING TAX BASE FOR SALES TAX
The estimates of yield for a manufactures' sales tax must be based chiefly on data contained in the CENSUS OF MANUFACTURES, and data on import and exports. The latest CENSUS OF MANUFACTURES data showing totals for all industries relate to the year 1931, and the present estimates will, therefore, the valid for a future year roughly comparable to 1931.
DOMESTIC PRODUCTION. -- The total value of products for all industries reported by the 1931 Census is $41.35 billion; this compares with $70.43 billion in 1929, and $43.65billion in 1921.
If finished articles only (including, however, supplies and equipment as distinguished from materials) are taxed, the figure of $41.35 billion must be reduced considerably. The writer has segregated out of the 320 industries listed by the 1931 Census: (a) those industries that from their nature appear to sell only finished articles in the sense just used; (b) those that appear to sell only materials for further manufacture. A balance of indeterminate items was left. The total value for (a) is $22.1 billion; for (b) $2.4 billion; for (c), the indeterminate items, $16.9 billion. The chief among these indeterminate items are shown in the accompanying table.
VALUE OF PRODUCTS, CENSUS OF MANUFACTURERS, 1931, OF INDUSTRIES WHOSE PRODUCTS WERE NOT SEGREGATED AS BEING WHOLLY TAXABLE OR WHOLLY EXEMPT. (A) Whose Value of Products Was above $100,000,000 (In thousands of dollars) Bags, other than paper, not made in textile mills $ 104,991 Cement 148,845 Chemicals not elsewhere classified 533,175 Cotton goods 805,792 Druggists preparations 109,448 Electrical machinery, apparatus and supplies 995,010 Flavoring extracts and flavoring syrups 119,238 Flour and other grain-mill products 598,041 Foundry and machine-shop products n.e.c. 1,266,619 Glass 216,265 Hardware not elsewhere classified 115,900 Lumber and timber products n.e.c. 443,629 Marble, granite, slate and other stone products 119,395 Motor vehicle bodies and motor vehicle parts 945,407 Nonferrous-metal alloys; noferrous-metal products except aluminum n.e.c. 331,439 Paints and varnishes 350,726 Paper 684,971 Paper goods n.e.c. 147,205 Petroleum refining 1,524,285 Planing-mill products (including general millwork) not made in planning mills connected with sawmills $ 235,681 Radio apparatus and phonographs 193,043 Railroad repair shops, steam 678,922 Rayon and allied products 132,632 Rubber goods other than tiers, inner tubes and boots and shoes 160,077 Rubber tires and inner tubes 406,283 Sheet-metal work, not specifically classified 116,443 Silk and rayon goods 422,772 Stamped ware, enameled ware, and metal stampings; enameling, japanning, and lacquering 122,696 Steel works and rolling mill products 1,402,843 Structural and ornamental metal work, not made in plants operated in connection with rolling mills 238,033 Sugar refining, cause 395,303 Tin cans and other tinware n.e.c. 223,634 Wood preserving 106,514 Woolen goods 157,356 Worsted goods 338,887 (B) Whose Value of Products Was above $800,000,000 (In thousands of dollars) Cotton goods $ 805,792 Electrical machinery, apparatus and supplies 995,010 Foundry and machine-shop products n.e.c. 1,266,619 Motor vehicle bodies and motor vehicle parts 945,407 Petroleum refining 1,524,285 Steel works and rolling mill products $1,402,843 __________ Total 6,939,956
If it is assumed that one-half of the $16.9 billion belongs in class (a) (this will thereafter be referred to as the "one-half" assumption), there results a gross domestic tax base of $30.5 billion.
A rough check on this is furnished by the total figure for "value added by manufacture." The total tax base should not be less than this: as explained in a section above, the tax base should equal "value added" plus products of farm, mine, and fishery entering into manufacture. The total "value added" for 1931 is $19.9 billion. Computation of the other elements, to serve as a check, has not been possible for the writer thus far in view of time limitations. However, a reasonable maximum and minimum may be set. Surely at least one-fifth of the $16.9 billion, and no more than four-fifths, belongs in class (a). On these assumptions the minimum tax base is $25.5 billion and the maximum $35.6 billion, compared with the medium, or "one-half" assumption, which gives $30.5 billion. A footnote to table 3 in the summary pamphlet of the 1931 CENSUS OF MANUFACTURERS, apparently based on an estimate made in the 1929 Census, indicates that in the opinion of the Census authorities the figure should approximate two-thirds of $41.35 billion, or $27.6 billion.
Exports, presumably, would be exempt under a sales tax, and some imports would be taxable. If the tax were levied on the conventional plan of taxing only finished articles (including, however, supplies and equipment as distinguished from materials), a considerable proportion of imports would be exempted. In terms of the rough classification used in the COMMERCE YEAR BOOK, most of the "manufactured foodstuffs" and "finished manufacturers" would be taxable, and all other imports exempt. These two categories would likewise be the only ones to be considered among exports, as all other types of goods exported would be exempt even if sold internally.
If one assumed that these two categories fall into class (a) noted above, the tax base must be increased by $0.8 billion to allow for taxable imports and decreased by $1.4 billion to allow for goods exempt because exported. /1/ The difference, $0.6 billion, is so small compared to other more uncertain elements in the tax base that it might be disregarded, but for the sake of consistency in method it is subtracted from the estimates given above, and the results are (i) on the "one-half" assumption, $29.9 billion; (ii) as a minimum, $24.9 billion; (iii) as a maximum, $35.0 billion. Finally, a rough allowance must be made for sales to State and local Governments, necessarily exempt. On the basis of furnished by the Section, the writer has used $1 billion for this deduction throughout these estimates.
/1/ Commerce Year Book, 1932, Vol. I. p. 100.
END OF FOOTNOTE
EXEMPTION OF FOODS. -- If all articles of food are to be exempted (except liquor, chewing gum, feed for animals, patent medicines, and tobacco or its products), the base for class (a) above decreased by $6.5 billion, to $15.6 billion. Details are presented in the accompanying table. Class (b) remains unchanged, and the taxable part of the indeterminate class (c) becomes $3.1, $7.7, or $12.4 billion. The total tax base thus becomes $18.7 billion minimum, $23.4 billion on the "one-half" assumption, and $28.0 billion maximum, before adjustment for imports and exports. Exports of finished manufactures excluding manufactured foodstuffs were $1.1 billion, and imports of the same were $0.5 billion in 1931. /1/ giving a net deduction of $0.6 billion and cutting the estimates above to $18.2 billion, $22.8 billion, and $27.4billion. As before $1 billion may deducted for State and local purchases. /2/
/1/ Commerce Year Book, 1932, p. 100.
/2/ This deduction should of course vary in amount as one passes from one type of tax to another, but this element has such a high degree of uncertainty in any case that the writer did not feel justified in attempting to make such an adjustment.
END OF FOOTNOTES
Value of Products, Food Industries, Census of 1931 (In millions of dollars) (A) Industries almost all of whose output appears to be of finished (taxable) articles Beverages 212.6 Brad and other bakery products 1,190.0 Butter /1/ 463.5 Canned and dried fruits and vegetables; preserves, relies, fruit butter, pickles and sauces 513.0 Canned and preserved fish, crabs, shrimps, oysters and clams 42.4 Cereal preparations 141.6 Cheese 68.1 Chocolate and cocoa products not including confectionery /1/ 87.3 Coffee and spices, roasting and grinding 271.5 Condensed and evaporated milk 148.6 Confectionery 284.2 Food preparation not elsewhere classified 147.5 Ice cream 268.5 Macaroni, spaghetti, vermicelli and noodles 36.2 Meat packing, wholesale 2,180.8 Oleomargarine and other margarines, not made in meat-packing establishments 22.8 Peanuts, walnuts, and other nuts, processed or shelled /1/ 40.6 Poultry killing, dressing, and packing, wholesale 97.6 Rice cleaning and polishing 40.4 FOOTNOTE TO TABLE /1/ Admittedly there is considerable doubt as to whether the items should appear in this section of the table, as they are used to some extent by bakers, confectioners, etc. END OF FOOTNOTE TO TABLE
Salt /1/ 40.4 Sausage, meat puddings, headcheese, etc., and sausage casings, not made in meat packing establishments 84.3 Shortenings (other than lard) vegetable cooking oils, and salad oils 115.3 _____ Total 6,488.2 (B) Industries, a considerable part of whose output appears to be of unfinished (not taxable) articles Baking powder, yeast, and other leavening compounds 47.0 Corn syrup, corn sugar, corn oil, and starch 98.7 Flavoring extracts and flavoring syrups 119.2 Flour and other grain-mill products 598.0 Malt 19.2 Sugar beet 85.7 Sugar cane, not including products of refineries 14.0 Sugar refining, cane 395.3 Vinegar and cider 7.5 _______ Total 1,384.6
/1/ A certain amount of salt is used for non-food purposes.
EXEMPTION OF FOOD AND CLOTHING. -- If both food and clothing are to be exempt, another substantial sum must be subtracted from the original base. The aggregate value of product of clothing industries producing finished goods was $4.2 billion in 1931. The details are shown in the accompanying table. However, certain of these industries, aggregating $0.8 billion, apparently produced some things other than clothing, and unknown part of this $0.8 billion must be excepted in consequence. If one-third is arbitrarily excepted on this account, the amount to be deducted totals $3.9 billion instead of $4.2 billion. Thus the base for class (a) decreases from $15.6 billion (food exempt) to $11.7 billion. (Class (b) remains uncharged. The total of the indeterminate class, as concerns clothing, is $2.0 billion; however, not only are some of the articles in this group sold as class (b) articles, but an indeterminate amount of the total does not represent articles of clothing. Under the one-fifth assumption, only $0.4 billion would be taxable anyway, and, owing to the large but indeterminate amount representing non-clothing, about half of this may arbitrarily be removed, bringing the total to subtract from the tax base down to roughly $0.2 billion. Under the one-half assumption, the deduction becomes roughly, $0.5 billion. Under the four-fifths assumption, the total becomes roughly $0.8 billion. Thus the bases for the indeterminate articles are lowered from (food exempt) $3.1, $7.7, and $12.4 billion to $2.9, $7.2, and $11.6 billion respectively. The total tax base thus becomes $14.6, $18.9, and $23.3 billion. It is not practicable for the writer to make any adjustment for imports and exports of clothing, but the amount involved is doubtless relatively small. As before, adjustment must be made for food, bringing the final bases down to $14.0, $18.3, and $22.7 billion, and another billion should be subtracted for State and local purchases.
VALUE OF PRODUCTS, CLOTHING INDUSTRIES, CENSUS OF 1931 (IN MILLION OF DOLLARS) (A) Industries almost all of whose output appears to be of finished (taxable) articles ( ((P)) indicates that only part of the item appears to represent clothing) Belting, leather (P) 14.5 Boots and shoes, other than rubber 653.9 Boots and shoes, rubber 47.9 Clothing (except work clothing) men's youth's, and boy's n.e.c. 551.4 Clothing women's, n.e.c. 1,292.3 Clothing, work (including sheep-lined and blanket lined coats but not including shirts) men's 88.6 Cloth sponging and refinishing 2.4 Combs and hair pins, not made from metal or rubber 1.9 Corsets and allied garments 71.9 Fur goods (P) 164.7 Furnishing goods, men's, n.e.c. 98.9 Gloves and mittens, cloth or cloth and leather combined, made from purchased fabrics 14.5 Gloves and mittens, leather 28.0 Hair work 1.2 Handkerchiefs 18.8 Hats and caps, except felt and straw, men's 16.9 Hats, fur-felt 59.6 Hats, straw, men's 13.9 Hats, wool-felt 5.4 Knit goods (P) 585.7 Lace goods (P) 19.2 Millinery 144.6 Regalia, robes, vestments, and badges 5.7 Shirts 166.8 Sporting and athletic goods, not including firearms or ammunition (P) 49.3 Surgical and orthopedic appliances and related products 51.0 Suspenders, garters, and other elastic woven goods, made from purchased webbing 17.2 ------- Total $4,186.2 (B) Industries, a considerable part of whose output appears to be of unfinished (not taxable articles. ( (P) indicates that only part the item appears to represent clothing.) Buttons 21.5 Collars, men's 6.7 Cotton goods (P) 805.8 Cotton small wares (P) 42.0 Embroideries (P) 20.2 Leathers, plumes, and manufactures thereof (P) 1.9 Felt goods, wool, hair, or jade (P) 28.2 Hair cloth (P) 2.4 Linen goods (P) 2.4 Rayon and allied products (P) 132.6 Silk and rayon goods (P) 422.8 Woolen goods (P) 157.4 Wool shoddy (P) 6.0 Worsted goods (P) 338.9 --------- Total $1,991.6 TAXATION OF ALL MANUFACTURERS' SALES. -- If all sales by manufacturers were taxed, regardless of whether the articles in question were sole to became a part of another manufactured product, the tax base before adjustment of exports and imports would be the gross figure reported by the CENSUS OF MANUFACTURES for value of products, $41.35 billion in 1931, or roughly $40 billion after subtracting State and local purchases. If food were exempt, the total of $1.4 billion and $6.5 billion, as given above, or $7.9 billion, should be subtracted, after adjusting to $7.8 billion because of the excess of $25 million of exports of manufactured foodstuffs over imports of the same, leaving roughly $32 billion. /1/ If clothing were also exempt, to $3.9 billion plus one-half of $2.0 billion, or $1.0 billion, should be added the clothing items not heretofore included because coming from industries whose entire output was assumed to be of materials for other manufacturers (there were no such items in the food group). This total, as shown by the accompanying table, was roughly $0.6 billion, after allowing for some $171 million arbitrarily estimated as representing leather going for no-clothing uses. The sum of these items ($3.9 plus $1.0 plus $0.6), $5.5 billion, should be subtracted from $32 billion, leaving $26.5 billion as the tax base with food and clothing exempt. /1/ FOOTNOTE /1/ With respect to the treatment of State and local purchases, see Note 2, p. 6 above. END OF FOOTNOTE
VALUE OF PRODUCTS, CLOTHING INDUSTRIES, 1931 WHOSE OUTPUT APPEARS TO BE ALMOST ENTIRELY OF SEMI-FINISHED Nature (In Millions of Dollars) Boot and shoe cut stock, not made in boot and shoe factories 79.7 Boot and shoe findings 37.4 Clothing, men's buttonholes 0.3 Dyeing and finishing textiles 322.3 Furs, dressed 37.9 Hat and cap materials, men's 11.0 Leather: Tanned, curried, and finished (P) 271.1 Wool pulling 7.4 Wool scouring 4.6 ------- Total 771.6 TAXATION RESTRICTED TO SALES BY MANUFACTURERS TO NON- MANUFACTURERS. -- The writer has recommended that, if a manufacturer's sales tax is imposed, there be exempt from taxation, not only sales to manufacturers of the material that enter as component parts into their taxed products, but also of machinery, equipment, and supplies that likewise "enter into" the finished product in an economic sense though not in a physical sense. The remaining items entering into the product in an economic sense are presumably outside the scope of a manufacturers' sales tax, and there would be no tax on sale of them to the manufacturer, i.e., labor, fuel, power, real estate, and raw materials. The principle involve may perhaps be seen more clearly by use of a hypothetical example.
"A", one who is not reported as a manufacturer in the Census of Manufactures,sells Raw materials for $100 to "B", a "manufacturer", who adds Labor costing $700 and sells the resulting products Semi-manufactured goods ("materials") for $300 and equipment for $500 to "C", also a "manufacturer", who adds Labor costing $400 and sells the resulting product Finished consumers good for $1,200 to "D", a wholesaler. If the conventional plan is followed, B is taxed on his sale of the equipment ($500). and C is taxed on his sale ($1,200), giving a total tax base of $1.700 If the plan suggested by the writer is adopted, the only tax is upon C's sale, giving a total tax base of $1.200 The tax base for the conventional plan can be estimated by taking the "value added" figure, as defined by the census (value of product, less cost of material, containers, fuel, and purchased electric energy), and adding the raw materials value. The "value added by B is $700; by C, $900; the raw material cost $100; total $1,700 The same tax base can be obtained by taking the value of product of all manufacturers (B, $800; C, $1,200; total $2,000),and subtracting therefrom the value of all semi-manufactured goods reported ($300); total $1,700 The tax base for the plan favored by the writer can be computed by taking the "value added" by all manufacturers (1,600), adding the raw materials value ($100), and subtracting the "Value of product" of sales by manufacturers to other manufacturers of everything whose value enters as part of the "value added" by the purchasing manufacturer (equipment sold by B to C, $500); total $1,200 That is, the "value added" figure of the Census does in fact include an element of cost representing sales by other manufacturers to the manufacturer in question, and to this extent the total "value added" figure for all manufacturers does not represent elimination of all double counting of manufactured products. Stating the proposition in a more generalized form, the tax base here advocated is the sum of labor, services, materials, real estate, and everything else, by "non-manufacturers" to "manufacturers." Building up the estimate in this way, we might (a) take that part of the "value added" figure that represents cost other than costs incurred by purchasing or carrying manufacturing products that are included in Census figures of "value of product," and (b) add thereto the cost of "raw materials" sold to all manufacturers (i.e. cost of all purchases by manufacturers of things that are NOT included in the manufactures census figures and that do NOT enter as part of "value added"). This opens the way for a minimum estimate. For (a) above, one may take wages, which totaled $7.19 billion in 1931. The other chief items in (a), are depreciation and interest on real estates, and the manufacturer's own profit. The chief items under (b) are purchases by manufacturers of electrical energy and raw products of forest, farm, mine (including raw fuel), and fishery. Another way of arriving at an estimate for the plan advocated by the writer is to start with a figure known to be to high and to work downward. In terms of the illustration above, one starts with the base for the conventional plan and subtracts all parts of the "value added" item represent articles contained in the Census total of "value of products" -- i.e., from $1,700 subtract $500, giving $1,200. Data at hand as this is written are not sufficient to permit of an estimate of the base under this plan. However, it would be surprising to the writer if the base were more than 15 to 20 percent lower than under the conventional plan. GENERAL SALES TAX. -- If all sales at all stages were subject to taxation with virtually no exemptions, the tax base would be greatly expanded. With no attempt at refinement, the following extremely rough estimates are submitted as giving a general idea of the approximate size of such a tax base. To a minimum of $40 billion for manufactures should be added some $30 billion of retail sales. No data on retail sales are available for 1931, but the estimate for 1933 as made by Census Bureau (release of August 7, 1934) is $25.75 billion compared with $49 billion in 1929, so that a conservative guess for 1931 may be $30 billion. Wholesale trade should be added; the 1933 estimate for wholesale trade from the same source (release of August 3, 1934) is $30.5 billion. Although not so stated, it appears from comparison with detailed 1929 figures (showing a total of $69 billion) that such of this odes not represent true sales be independent wholesalers. Of the $69.3 billion 1929 total, $24.7 billion, or 36 per cent, represents sales by such wholesalers. /1/ Applying this percentage to the 1933 estimate of $30.5 billion, one obtains an estimate of $11.0 billion for the wholesale base. To reach a 1931 basis, perhaps $2 billion may be added, giving $13 billion. Additions may be made for agriculture, /2/ $6.1 billion (6.9 less 0.8 exports); coal, $0.6 billion, /3/ petroleum, $1 billion; /4/ FOOTNOTES /1/ Census of Distribution, 1930, Vol. II, p.4. /2/ Commerce Yearbook, 1932, pp. 123, 124. /3/ Derived from data ibid., p. 225. /4/ Derived from data ibid., p. 241. END OF FOOTNOTES natural gas and gasoline, $0.5 billion; /1/ non-ferrous metals mined, $1 billion. /2/ Altogether, a grand total of approximately $90 billion /3/ is obtained as a tax base for a year such as 1931. The true amount may easily be some $10 billion more or less, but the range $80 to $100 billion gives the general order of magnitude. A 1 per cent tax should thus give at least $800,000,000 in a year such as 1931. FOOTNOTES /1/ Derived from data in commerce Yearbook, 1932, p. 257. /2/ Derived from ibid., pp. 322 ff. /3/ The exact sum of the above items is $92.2 billion. Inclusion of electric power might increase the base about $1 billion. END OF FOOTNOTES APPENDIX TWO TO MEMORANDUM Q METHOD OF DRIVING ESTIMATES OF VARIABILITY IN YIELD OF SEVERAL IMPORTANT TAXES To measure the effect of the present business depression on tax yields in such a manner as to make the results comparable with what would have occurred under a sales tax, it is necessary to place the figures on a calendar year basis, since the only data for estimating the yield of a sales tax relate to business done in the calendar years 1929 and 1931 (and, to a restricted extent, 1933). Thus we must estimate what tax was collected on corporation income earned in these calendar years, or individual income received in the same period, etc. The effect of rate changes and changes in the scope of the law must be eliminated so far as possible. Other factors tending to invalidate the comparison (e.g. such increase in legal ingenuity as would have occurred without the depression) are probably negligible and anyway must be ignored owing to lack of data. CORPORATION INCOME TAX. -- The corporation tax yield for the calendar year 1930, as given in the reports of the Commissioner of Internal Revenue, was $1,242.6 million. On the assumption (partly invalid) that all of this represents tax paid on income earned in the calendar year 1929, the applicable tax rate was 11 percent, and the yield per 1 per cent of tax was #113.0 million. If instead one wishes to employ the data in STATISTICS OF INCOME, which show (1931, p. 46) that $1,193.4 million tax was paid on "1929 calendar year income" (including a considerable number of incomes reported on a non- calendar year basis), the yield per 1 per cent of tax was $108.5 million. The calendar year 1932 yield was $464.2 million, and on an assumption similar to that above, the applicable rate being 12 per cent, the yield per 1 per cent of tax on 1931 earnings was $38.7 million. If STATISTICS OF INCOME data are used, as above, the total is $399.0 million, and the yield per 1 per cent of tax was $33.2 million. Amounts due on 1933 calendar year earnings have not yet all been received. If it is assumed that the collections in the last six months of 1934 will equal those of the last six months of 1933, the fiscal year 1934 yield, $397.5 million, may be taken. Probably the figure should be somewhat higher, although the rate for all these periods was the same -- 13-3/4 per cent, plus 3/4 of 1 per cent on consolidated returns. If the average rate is taken as 14 per cent, the yield per 1 per cent of tax is $28.4 million. This figure is too high for comparison with 1929 and 1931, because the 1932 law enlarged the tax base by restricting deductions of losses from sales of non- capital assets and restricting the carry-over of business losses. (The carry-over privilege was abolished in the N.I.R. Act.) These factors are probably offset to some degree by the use of the fiscal year 1934 tax yield, as indicated above, so as a rough approximation the figure $28.4 million may be used. INDIVIDUAL INCOME TAX. -- The individual income tax yield for the calendar year 1930 was $1,090.4 million. Assuming that this represents tax paid on 1929 calendar year incomes, the applicable normal rates were 1/2 of 1 per cent of the first $4,000, 2 per cent on the next $4,000, and 4 per cent on the amount in excess of $8,000. The STATISTICS OF INCOME figure for tax paid on "1929 income" (including a few non-calendar year returns) is $1,001.9 million. The yield for the calendar year 1932 was $320.4 million; the normal rates applicable, assuming this figure represents tax on 1931 calendar year earnings, were 1-1/2, 3, and 5 per cent on the same brackets as above. The STATISTICS OF INCOME figure is $246.1 million. Surtax rates were the same in each period. STATISTICS OF INCOME for 1929 indicate that about 14 per cent of total tax, or $145 million, was due to normal tax rates. /1/ The total tax was, as noted above, $1,002 million. In 1931, about $70 million of the total $246 million was due to normal rates. /2/ The increase in normal tax rates in the interval may be considered roughly 30 per cent. /3/ If the rates had remained unchanged, normal tax yields would have dropped from $45 million to $54 million, instead of to $70 million. The 1931 figure for total tax yield is therefore $16 million too high (70 minus 54) for comparison with 1929, and must be reduced from $246 million to $230 million if one uses STATISTICS OF INCOME data on total yield. The same percentage reduction (6.5 per cent) may be applied to the Internal Revenue Report figure of $320 million, bringing it down to $300 million. FOOTNOTES /1/ Normal tax before credits was $162.3 million; earned income credit was $22.1 million. Most of this credit was dependent on the normal tax rate, and $17.3 million of it was arbitrarily assigned thereto by the writer. Total tax was $1,001.9 million. /2/ Normal tax before credit was $82.3 million. Earned income credit was $17.5 million, whereof $12.3 assumed dependent on normal rate. /3/ It was 200 per cent (1/2 of 1 per cent to 1-1/2 per cent) on the first $4,000, 50 per cent (2 per cent to 3 per cent) on the next $4,000 and 25 per cent (4 per cent to 5 per cent) on the remainder. Weighting by amounts of income could be done if this refinement was justified for the purpose in hand. END OF FOOTNOTES TOBACCO TAX. -- The yield of the tobacco taxes for the 12 months February 1929 to January 1930, from the Report of the Commissioner of Internal Revenue, was $449.1 million. For the 12 months February 1931 to January 1932 the yield was $422.8 million. These periods have been chosen, thus allowing a lag of one month, because this appeared the best rough way of allowing the tax yield to reflect the conditions of the calendar years 1929 and 1931. Monthly data for the latter part of the 1933-34 period are not at hand as this is written. However, from February 1933 to June 1933 inclusive, the yield was $178.0 million. For the two periods above, the ratio of the yield during the same five months to the year was 41 per cent for the 1929-30 period, and 44 per cent for the 1931-32 period. If 41 per cent be chosen (the latter part of 1933 was more active than the earlier part), the calendar year figure for 1933 is $434.2 million. There was no change in rate or scope of tax during the period 1929-1933.