Message Urging Anti-Inflationary Tax Legislation.

I understand that the Secretary of the Treasury recently consulted with you and other Congressional leaders about the inflation problem and the urgency of prompt tax legislation to counteract the inflationary pressures arising from the defense program. It seems clear that if we are to prevent a further sharp increase in the cost of living and in the cost of the defense program itself, we must take immediate steps to absorb a large amount of purchasing power through additional taxes, and incidentally to pay cash for a greater part of our defense production. We must remember that taxation is a necessary complement of price control legislation because the continuing effectiveness of price control is largely dependent upon the restriction of the demand for goods.

If these taxes are to restrain inflation they should be directed mainly at that part of the national income which is being devoted to the purchase of civilian goods, and should be of a character that will not increase the cost of these goods. Purchasing power so far exceeds actual and potential production of civilian goods that vigorous steps must be taken to reduce purchasing power more nearly to the level of production capacity.

Inflation is itself a most inequitable type of taxation. It grants no exemptions and recognizes no hardships—though a well drafted tax bill can do both. I very much fear that unless we start within two or three months to withdraw through taxes a larger part of the current national income an even greater part may evaporate through inflation, and the upward spiral may gain such momentum that it will be difficult to regulate, despite all efforts through price control and similar measures. I do hope you will be able to help us with this problem now.

Honorable Robert L. Doughton,

Chairman, House Committee on Ways and Means