Letter to the President of the Senate on the Need for Additional Tax Revenue.

My dear Mr. Vice President:

As the Senate begins debate on the 1951 tax legislation, I wish to emphasize the urgency of keeping the Government's finances on a sound basis. In particular, I wish to urge that the tax increases be large enough to meet the need for higher revenues, and that they be distributed fairly among the taxpayers.

Although the Congress has not yet completed action on all appropriation bills, it is already apparent that the costs associated with the defense program will exceed our expectations at the time the budget was prepared for the fiscal year ending June 30, 1952. Only last week, the Senate raised total appropriations for the military functions of the Defense Department by nearly 2 billion dollars over the budget requests. Since the beginning of this fiscal year, the Government's receipts have not kept pace with expenditures. Without new revenue legislation, the deficit for the year will be in the neighborhood of 10 billion dollars.

The prospect of a sizeable deficit under present conditions is cause for grave concern. As I have indicated on several occasions, adequate taxes are necessary to preserve confidence in the integrity of the Government's finances, to distribute the heavy defense costs fairly among our people, and to restrain inflationary pressures.

In the face of an indicated 10 billion dollar deficit, the bill which the Senate is about to consider would produce only 5.2 billion dollars in a full year and only about 2.5 billion dollars in the current fiscal year. It would yield about 1.5 billion dollars less in a full year than the bill passed by the House of Representatives.

I earnestly believe that these amounts are not sufficient. The Government's revenues should be increased by an amount that approaches as nearly as possible the 10 billion dollars I recommended. Toward this end, I suggest that the legislation now before the Senate be strengthened in several respects.

First, the tax yields under the bill from individual income and corporate profits taxes should be increased. Personal incomes and corporate profits are at record levels. The interest of those who receive this income will be best served by paying taxes at this time sufficient to maintain the stability of our economy.

Furthermore, corporation tax increases should be made applicable to all profits for the current year. Postponement of the effective date until April 1, 1951, as provided in the bill before the Senate, would result in the loss of $500 million in revenue.

In addition, the bill now before the Senate contains many changes which would impair the effectiveness of the income and profits taxes. For example, the bill would enlarge the special classes of taxpayers benefiting from the overly generous capital gains tax provisions. It would further widen the tax loopholes benefiting various mining enterprises. It would give certain corporations unwarranted relief from excess profits taxes. At a time of great national need, when everyone's tax load must be increased substantially, I feel strongly that we should not adopt provisions which weaken our tax structure for the benefit of special groups.

The revenue bill which the Committees of Congress have developed after many months of arduous work provides the basis for legislation appropriate to our present requirements. I urge the Congress to build on this foundation by strengthening its revenue yield and bringing it more in accord with the principles of fairness which must underlie our tax laws. A strong revenue system is as vital to the defense of this country as strong military forces.

Very sincerely yours,

HARRY S. TRUMAN

[Honorable Alben W. Barkley, The Vice President of the United States, Washington, D.C.]