Abstract
MY SUBJECT deals broadly with the relation of Federal personal income taxes to business enterprise. Two of the specific questions suggested in this regard will be considered together: (1) How does the personal income tax affect initiative and investment? (2) What principles should be followed in personal income taxation? These questions must necessarily be discussed in the light of past experience with the income tax. The first assumes, as a premise, that the personal income tax does affect initiative and investment. I am in accord with this assumption and will proceed directly to a consideration of how such taxes hinder initiative and obstruct the formation of venture capital. Current income tax rates applicable to individuals are still on a war basis, despite the fact that the transition period from a war to a peace economy is now in its last stages. Although a token tax reduction was enacted in 1947 and the split-income provision of husband and wife was adopted in 1948, with certain credits for percentage deductions from the tax, the rates remain excessively high-with a maximum effective rate of 77 per cent.
Published Version
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