Show Text of President Roosevelt's Tax Message WASHINGTON ASHINGTON V March 3 UP The Tho text of President Roosevelt's Roosevelt's Roose Roose- velt's tax message to congress follows To the Congress of the United States On January 3 1936 in my annual annual annual an an- nual budget message to congress I pointed out that without the item for relief the budget was in balance Since that time timo an Important Important important Im Im- item of revenue has been eliminated through a decision of the supreme court and an additional additional additional addi addi- annual charge has been placed on tho the treasury through the enactment of the tho adjusted I compensation payment act I said in my budget mes message age The I many legislative I acts creating the tho machinery for recovery were all aU predicated on two interdependent II First the measures measures would immediately cause a great Increase in increase increase In- In crease in the tho annual expenditures of the government many government many of these expenditures however in inthe tho the form of loans loans' which would ultimately return to the tho treasury Spending to Diminish II Second as a result of tho the simultaneous I attack on tho the many fronts I have Indicated the receipts re receipts receipts re- re of the government would riso definitely and sharply during during during dur dur dur- ing the following few years while greatly increased expenditures for forthe forthe the purposes stated coupled with rising values and tho the stopping of losses would over Dyer a a. a period of years diminish the need for work worl relief and thereby reduce federal expenditures The increase in I revenues s would ultimately meet and ands pass the declining cost of re relief re- re lief 4 This p policy adopted in the spring of 1933 has been confirmed in actual practice by the tho treasury figures es of 1934 of 1935 and by bythe bythe bythe the estimates for the fiscal years of 1936 and 1937 There Thero is today no doubt of the fundamental soundness of the policy of 1933 If we proceed along the path we have followed and with the results attained d up to I Ithe the present time we shall continue continue con con- our successful progress durIng during during dur dur- ing the coming years Must Restore ro Revenue If we are are to maintain this cut clear-cut and so sound nd policy it is incumbent upon us to make good I to the tho federal treasury both the tho loss of revenue caus caused d by the supreme court decision and the increase in expenses caused by bythe bythe bythe the adjusted compensation payment payment payment pay pay- ment act I emphasize that adherence adherence adherence ad ad- to consistent policy calls for such action To be specific The supreme court decision adversely affected the budget in an am amount of one billion and seventeen million dollars dollars dollars dol dol- lars during the fiscal year 1936 and tho the fiscal year 1937 This figure is arrived at as follows Deficit to date expenditures chargeable to processing taxes less processing tax taxes s collected in excess of that contemplated in theN the 1937 budget Estimated expenditures to bo be made mado from supplemental approprIation appropriation appropriation approved ed in the tho supplemental supplemental supplemental supple supple- mental appropriation act 1936 Estimated expenditures to bo be made under the e. e soil conservation and domestic allotment act A AAA A A Deficit Cited Total additional deficit 1936 and 1937 duo to supreme court decision and nd adjusted farm program program pro pro- gr gram m For the purposes of clarity I divide the present total additional revenue needs of the thc government Into the permanent an and the temporary temporary tem- tem ones Permanent treasury income of five hundred million dollars is re required required required re- re to offset exp expenditures expenditures' 1 which will be made annually as asa asa 8 a result of the soil conservation and domestic allotment act recently re recently re- re enacted by the congress and approved by me me and an ad additional additional ad ad- sum sum recurring annually for tor nine years will willi bo be required to amortize the total cost of the tho adjusted compensation n payment act acL The tiThe net effect of paying the veterans veterans' bonus in 1936 instead of 1945 is to add an annual charge of one hundred and twenty million million mil mil- lion dollars a year to the one onehundred onehundred onehundred hundred and sixty million dollars already in the budget New Taxes We are called upon therefore therefore therefore there there- fore to raise by some somo form torm of permanent taxation an annual amount of six hundred and twenty twenty twenty ty million dollars It may maybe be said said- truthfully and correctly that five hundred million dollars of this amount represents substitute taxes in place of the old proc processIng processing process process- ss- ss ing taxes and that only one ono hundred hundred hundred hun hun- dred and twenty million dollars represents new taxes not hitherto levied I leave of course to the discretion discretion discretion dis- dis dis dis- of th the congress the formulation formulation for for- of the appropriate taxes for tho the needed permanent reve reve- nue I invite your attention however however how how- ever to a form of tax which would accomplish an important tax reform re reform re- re form remove two major In inequalities qu ties in our tax system and stop leaks in present surtaxes of Extended study of methods metho s improving present taxes on Income in income income In- In come from business warrants the consideration of changes to provide provide provide pro pro- vide a fairer distribution of f the tax load among all the beneficial beneficial- owners of business profits whether er derived from unincorporated enterprises or from incorporated businesses and whether distributed distributed to the real owners as earned or withheld from them Tho The exIsting existing existing ex ex- difference between corporate corpo corporate corporate corpo corpo- rate taxes and those imposed on owners of unincorporated businesses businesses businesses busi busi- nesses renders Incorporation of small smaIl businesses difficult or im Im- Im- Im possible Sees Surplus Problem The he accumulation of surplus in Inc c corporations controlled by taxpayers taxpayers tax taxpayers tax tax- payers with large incomes is encouraged encouraged encouraged en en- by the tho present freedom of ot undistributed corporate income from irom surtaxes Since stockholders ers era are the beneficial owners of both distributed and ed corporate income tho the aim as asa asa asa a matter of fundamental equity should be to seek equality of ot tax b burden on all corporate income whether distributed or withheld from the beneficial owners As liAs tho the law now stands our corporate taxes dip too deeply into the shares of corporate earnIngs earnings earnings earn earn- ings going to stockholders who need the tho disbursement of dividends dividends dividends divi divi- while the tho shares of stockholders stockholders stock stock- holders who can afford to leave earnings undistributed escape current surtaxes altogether This method of evading exIsting existing existing ex ex- surtaxes surtaxes surtaxes' constitutes a problem as old as the income tax itself Repeated Rep attempts by the congress to prevent this form of evasion have not been successful The evil has has' been a growing one It has now reached disturbing proportions from the standpoint of the inequality it represents and of its serious effect on the federal revenue I Thus the treasury treasury treas treas- ury estimates that during the calendar year 1936 over four and one-half one billion bUllon dollars of ot corporate corporate corporate corpo corpo- rate income will be withheld ho-withheld from stockholders On Corporate Taxes If It this undistributed income were distributed lt would be added added add added ed to the income of stockholders and there taxed as is other pers per's personal personal per per- s 's nal income But as M matters now stand it will be withheld from rom stockholders by those in control of these corporations In ono one y year ar alone the government will wiIl be deprived of ot revenues amounting to over one billion three hundred million dollars doUar A UA proper tax on corporate In Income Income In In- come come including dividends from other corporations which is not distributed as 3 earned earned would correct cor- cor c cor correct r- r the serious two-fold two inequality ity in our taxes on business profIts profits prof prof- its if accompanied by a repeal of ot the pr present s nt corporate income tax the tho capital s stock tax the related I excess profits tax and the present exemption of dividends from the normal tax on individual in In- In comes The rate on undistributed ed corporate income should by b graduated and so fixed as to yield approximately the same revenue as would bo be yielded if corporate profits were distributed and taxed in the hands of stock stock- holders Sees Simplification Such a revision of our corporate corporate corporate corpo corpo- rate taxes would effect great simplification in tax procedure in corporate accounting and in inthe inthe inthe the understanding of the whole subject by t the e citizens of the na na- na- na tion It would constitute distinct progress in In tax reform The treasury department will willbe willbe be glad to submit its estimates s sto to the congress showing that this simplification and removal of in inequalities inequalities In- In equalities can can without unfairness unfairness unfairness unfair unfair- ness be put into practice so as to yield the full amount of six hundred hundred hundred hun hun- dred and twenty mUll million on dollars the tho tho amount I have indicated above as being necessary necessary Turning to the temporary revenue needs of f the gover government ment there is the item of ot five hundred i and seventeen million dollars which affects principally the current current cur cur- rent fiscal year This amount must in in some way be restored to the treasury even though the process of ot restoration might be spread over two years or three C years In uIn this case also the formulation formulation formulation formula formula- tion of taxes lies wholly in the discretion of the congress I venture venture venture ven ven- ture however to call your attention attention attention atten atten- tion to two suggestions Makes l Suggestions The first first relates to the taxation taxation taxation taxa taxa- tion of ot what may well be termed a a windfall ll received by certain taxpayers who shifted to others the burden of processing taxes which were impounded and re returned returned returned re- re turned to them thorn or which otherwise otherwiSe otherwise other other- wise have remained unpaid In unequal position is that vast number of ot other taxpayers who did not resort to such court action action action ac ac- ac- ac tion and have paid their taxes to the government By far the greater part of the processing taxes was in the main either passed on to consumers or taken out of the price paid producers The congress recognized this fact last August and provided in section of the agricultural adjustment act that inthe event of ot of or the processIng process process- pr processing cess cess- ing taxes only those processors who Had borne th the burden of at these taxes should be permitted to receive refunds The return of the imp impounded funds and failure failure fail faU- ure to pay taxes that were ere passed on result in unjust enri enrichment contrary to the spirit of that enactment A CIA tax on the beneficiaries beneficiaries' unfairly unfairly un un- fairly enriched enriched enriched-by d by that return or nonpayment nonpayment- of this federal excise excise excise ex ex- ex- ex cise would take a a m major jor part of this windfall income for the tho benefit benefit bene bene- fit of the public Much of this revenue w would uld accrue to to the treasury during the fiscal years yeara of 1936 and 1937 Temporary Tax The other suggestion relates to a temporary tax to yield the portion of five hundred and sev seventeen enteen inot covered by the windfall U ti tax x S Such h a tax could be sp spread ead over two tV years or three years An excise on the I processing of certain agricultural products is worth considering By increasing the tho number of commodities com com- so taxed by greatly by-greatly greatly lowering lowering low low- ering the rates of the process old ing tax and by spreading the tax over two or three years only a relatively light burden would be imp imposed sed on the producers consumers consumers con con- I sumers sumers or processors Signed Franklin D. D Roosevelt The White House l March 3 1936 |