TAXES: The Big Bite

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The complacent observer of high taxes points out that all the money somehow comes back to the people. A fresh-water clam in the well-balanced home aquarium pumps through his voracious valves nine gallons of water a day, yet the fish around it do not starve. Rather, the tank is purified in the redistribution. So the Government pumps it in, and pumps it out for the greatest good of the greatest number. That's the idea.

A suspicion is beginning to grow that there is something wrong with this idea. Down in Australia an eminent economist named Colin Clark has been studying high-tax countries (of which his is one). He finds that the effect of taxes changes when the tax bite rises above 25% of the national income. Taxation has always been considered deflationary, i.e., it saps up "excess purchasing power," and keeps demand from exceeding supply. Beyond 25%, however, Clark thinks that the tax bite is inflationary. The number of dollars in the national income increases faster than the amount of goods. Prices go up. If taxes do not fully cover Government spending, prices go up even faster. At present, the U.S. is taxing more than 25% of the national income, and the Federal Government is running a deficit. Not surprisingly, U.S. prices have nearly doubled since 1939, thus cutting almost in half all dollar savings, all insurance, all pensions. ("Bryan, wouldst thou wert living at this hour.")

When money is left in the hands of the people, part of it is invested in productive improvements that can make more of the things that people use. But money that goes to the Government, especially beyond Clark's 25% limit, adds to the demand for products far faster than it creates the means of making more products. The clam in the aquarium is no longer performing a service; he is eating what the fish need.

But You Gotta. America's 42 million income-taxpaying fish of 1952 are, however, far from the starvation point. They never, they keep telling one another, had it so good. Around March 15, they suspect that they are living in a mirage. This suspicion is confirmed by many economists. A livelier witness is Miss Doreen Gray, no economist but a striptease artist who was performing last week at the Colony Club of Gardena, Calif.

The orchestra pumped out the final bars of St. Louis Blues, whistles and applause filled the club, and Miss Gray hustled offstage wearing two strategically placed bits of red stickum, high-heeled shoes, a silver G-string, and an expression of queenly displeasure. Doreen, a single-minded girl, had been conversing about a thought just before she went on, had kept the thought firmly suspended in her mind during her act, and began conversing about it again just as soon as she was out of sight of the audience.

Doreen was brooding about the economic situation of the U.S. "Take even this G-string," she cried. 'Five years ago, I could get a real nice one like this for $1.50. Now they're up to $2.50. But my taxes have doubled too. I can't understand it. Why don't we tax England instead of sending them all our taxes?"

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