WHAT PEACE CAN MEAN TO AMERICAN FARMERS 7 



incomes of all major groups — agriculture, business, and labor. It is 

 with this general goal in mind that possibilities for action in the 

 remaining five fields are discussed. The critical aspect of this prob- 

 lem of "balance" is that of maintaining the purchasing power of all 

 low-income groups, both rural and urban. 



Revision of Tax Laws 



Traditionally, the Federal Government has levied taxes primarily 

 for the same reason as State and local governments — to raise revenue 

 for meeting the costs of government. But the raising of revenue and 

 the spending of money by the Federal Government can have a variety 

 of economic effects, depending upon the way in which the taxes are 

 levied and the purposes for which the revenue is spent. The decision 

 as to what are the best types of taxes, therefore, should never be based 

 upon any one consideration alone. Taxes should be selected with due 

 regard for the collateral economic effects they may have, as well as 

 for the amount of revenue they will produce, and the equity with 

 which their burden falls upon different types of taxpayers. For 

 example, will they have greater or less tendency to restrict produc- 

 tion and employment? 



Assuming that one of the purposes of national policy is the main- 

 tenance of full employment, mainly by private enterprise, tax policy 

 should be guided by two sets of considerations : ( 1 ) The volume of 

 revenue collected should be geared to the level of private activity in 

 such a way that taxes will be relatively high when the national income 

 is high and has prospects of rising, and relatively low when the 

 national income is low or falling; (2) the types of taxes levied should 

 remove impediments to, or penalties on, private expenditures for 

 current consumption and new investment when the national income is 

 likely to decline ; and conversely, they should restrict private expendi- 

 tures when the economy has reached full productive capacity and is 

 threatened with inflation. 



The first of these two sets of considerations is closely related to the 

 whole question of the proper timing of taxation, borrowing, and 

 spending by the Federal Government. If, for example, private ex- 

 penditures after the war are to expand sufficiently to take the place of 

 war expenditures now being made by the Federal Government (and 

 unlikely to continue after the war) it is obvious that the wartime 

 tax policy which had as one of its objectives the discouragement of 

 inflated prices for civilian goods would need to be replaced by one 

 aimed at stimulating greater production of such goods. On this point 

 there seems to be little disagreement. The problem arises in connec- 

 tion with the second set of considerations — deciding what types of 

 taxes should be eliminated or reduced. 



To stimulate current consumption and new investment, first atten- 

 tion should be given to removing or reducing the tax impediments to 

 these two types of private expenditure. The principal types of taxes 

 which represent fairly direct levies on consumption are sales, motor- 

 vehicle, and pay-roll taxes — as well as customs duties and certain mis- 

 cellaneous licenses and excise taxes. It is impossible to segregate ac- 

 curately direct taxes on consumption from other related types but, 

 on the basis of available data, it is probable that they represented 

 almost one-fourth of all Federal revenue in 1943, and well over two- 



