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STATEMENT No. 1-Continued
COMPARATIVE STATEMENT OF RECEIPTS-Continued
Estimated, fiscal Estimated, fiscal
4. Miscellaneous receipts-Continued.
Overhead charges on sales of services or supplies (War and Navy).
Total, sale of services..
(14) Sundry receipts:
Forest reserve fund..
Cache National Forest, Utah
Vintah and Wasatch National Forests, Utah.
Total, sundry receipts..
(15) Return of surplus funds from Government corporations: 1
Federal savings and loan associations...
Purchase of stock of Federal home loan banks.
124, 741, 000.00 175, 000, 000.00
319, 207, 200.00
(16) Repayments of investments:
Collections of loans, Federal Housing Administration.
Repayment of principal on account of farm loans.
Receipts from submarginal land program, Farm Tenant Act (special account).
Total, repayments of investments.
12, 894, 533
13, 768, 333
5,047, 764. 01
(18) Sales of Government property:
Capital equipment, includes trucks, horses, cars, machinery, surniture and fixtures, and other capital equip
Total, sales of Government property
Total miscellaneous receipts.
508, 871, 307.81
-718, 135 33
NARRATIVE SYNOPSIS SUPPORTING REVENUE ESTIMATES
The estimates of the revenues of the Federal Govern- | receipts of the fiscal years 1942 and 1943. Hence the ment are prepared in the Treasury Department in De- estimated current income-tax receipts, both corporation cember of each year for the current fiscal year and for the and individual, for the fiscal year 1942 are made up fiscal year next ensuing.
partly from payments on calendar year 1940 incomes Inasmuch as the tax revenue from practically every and partly from payments on calendar year 1941. incomes. major source is directly dependent, although in varying Similarly, fiscal year 1943 estimates of income-tax receipts degree, upon business conditions during the period in include payments based upon the incomes of each of the respect of which the taxes are levied, it is necessary to calendar years 1941 and 1942. forecast the general business situation for a period ending In presenting the revenue estimates in the foregoing approximately 18 months later. This forecast is based statement an adjustment has been made in total receipts upon the analysis of a wide variety of financial and other to reflect the changes brought about by the 1939 amendeconomic data and includes a forecast of the direction and ments to the Social Security Act. There has been created the magnitude of the movements of industrial production, on the books of the Treasury the “Federal old-age and profits, security and commodity prices, employment, pay survivors insurance trust fund,” to which was transferred rolls, and other components of business activity. In on January 1, 1940, the amount standing to the credit of view of the well-recognized uncertainty involved in fore- the old-age reserve account. For the fiscal year 1941 and casting the various phases of business activity, accentuated cach subsequent fiscal year there is appropriated to the this year by the dislocations of industry and profits caused fund an amount equivalent to 100 percent of the taxes by the shifting from a peacetime to a wartime cconomy received under the Federal Insurance Contributions Act, with its attendant allocations, price, and other control with the proviso that the estimated administrative exmeasures, such forecasts, and the concomitant estimates penses of the Treasury and the Social Security Board with of future revenues, may be revised from time to time to respect to the collection of taxes and the payments from take account of changed conditions.
the fund shall be repaid to the Treasury. In order to Upon these business forecasts depend the estimates of show the amount of revenue applicable to the general the aggregate amounts of corporation and individual expenditures of the Government there has been deducted incomes as well as the distribution of such incomes among from total receipts a sum equivalent to the net appropriavarious income classes, and the volume of consumption of tion to the Federal old-age and survivors insurance trust commodities upon which taxes are levied. Consideration fund. The detailed analysis set forth below is based on must be given to the fact that changes in the various total revenues and receipts and not on the net amount indicators of business activity are not reflected imme- after adjustment. diately or in direct proportion in the various sources of revenue. Thus, in periods of rising business activity
TOTAL REVENUES AND RECEIPTS profits and taxable incomes usually rise more than proportionately to the increase in the volume of business Total revenues and receipts, general and special acbecause of the relative inflexibility of certain costs. In counts, are estimated (on the daily Treasury statement addition, consideration is given to the fact that the in- basis, unrevised) in the amounts of $12,816 millions for crease in the amount of income-tax collections which will the fiscal year 1942 and $17,852 millions for the fiscal result from a given increase in individual incomes is year 1943. The estimated amount of total receipts in accentuated under a progressive-rate schedule because
the fiscal year 1942 represents an increase of $4,548 milnot only is the individual taxpayer's income greater but lions over total receipts of $8.269 millions in the fiscal also the taxpayer pays a larger percentage of the higher year 1941, while the estimated amount of total receipts income as income tax.
in the fiscal year 1943 represents an increase of $5,036 Changes in business conditions, in the amounts of millions over the estimated total receipts for the fiscal income, and in the volume of consumption and importa- year 1942, tion of commodities are reflected more immediately in
The following table shows the percentage distribution the receipts from some taxes than from others because of of the classified sources of revenue, of the actual receipts the variation in the method of collection of the taxes. for the fiscal years 1940 and 1941, and of the estimated For example, stamp taxes are collected prior to the ulti-receipts for the fiscal years 1942 and 1943: mate sale of taxed articles while many of the miscellaneous internal-revenue taxes are collected each month on the
Percentage distribution of total revenues and receipts tax liabilities of the previous month. However, collections from taxes such as the estate and gift taxes and the
Estimated, Estimated, tax under the Federal Unemployment Tax Act, formerly title IX of the Social Security Act, are made upon liabilities of a much earlier period and therefore do not respond as promptly to changes in general business conditions.
Employment taxes The lag between the time income is received by taxpavers and the time of receipt of income taxes based upon Railroad Unemployment Insurance Act such incomes is particularly important in its effect upon Miscellaneous revenues and receipts total tax receipts in any given year. Thus, in general, the changes in incomes in the calendar year 1941 will not be reflected in income-tax receipts until the income-tax returns are filed on or before March 15, 1942. Because A comparison of the estimates of receipts from each imof the privilege of making quarterly installment payments portant source of revenue with the actual receipts in the of these tax liabilities, the collections will be received fiscal year 1941 is presented below. The detail of estithroughout the calendar year 1942, thus falling into the I mated receipts in the fiscal years 1942 and 1943 and the
General and special accounts
55.77 30. 14 9. 27
35.87 39.58 14. 06
Total, internal revenue
07 2. 87 1.88
.. OS 4. 74 6. 15
..08 5. 88 4.53
1. 67 1. 59
Total, revenues and receipts
actual receipts in the fiscal year 1941 are shown in State the purpose of simplifying the explanation of results, the ment No. 1, page A3. All year-to-year differences and per- calendar year common to both may be eliminated in centages appearing in the text are based on the figures in comparing receipts of two fiscal years. Thus, in comparthis detailed table.
ing fiscal years 1942 and 1941, the calendar year 1940 may FISCAL YEAR 1942
be disregarded and the increase in receipts of the fiscal
year 1942 over those of the fiscal year 1941 attributed Total receipts in general and special accounts in the
almost entirely to the increase in estimated income levels fiscal year 1942 are estimated at $12,816 millions, an in
in the calendar year 1941 and higher tax rates under the crease of $4,548 millions over actual total receipts of $8,269 millions in the fiscal year 1941. Net receipts
Revenue Act of 1941 as compared with incomes and tax
rates existing in the calendar year 1939. However, only total receipts less the net appropriation for the Federal old
part of the full calendar year 1941 increase in liabilities, age and survivors insurance trust fund-are estimated at $11,944 millions. This is an increase of $4,337 millions or
roughly 50 percent, is reflected in the fiscal year 1942
receipts. 57.0 percent over actual net receipts of the previous fiscal
In the calendar year 1939, corporations with net year.
incomes of over $25,000 were taxed at rates which varied Great expansion of incomes and business activity and
between 16% percent and 19 percent depending on diviextensive tax legislation which resulted in the introduction
dends paid. În 1941, the normal tax rate is 24 percent of new taxes as well as substantial increases in tax rates were responsible for the large increase in receipts of the imposed at 6 percent for the first $25,000 of net income
for this group. In addition, a corporation surtax is fiscal year 1942 over the fiscal year 1941. Collections in the fiscal year 1942 are affected by the two revenue acts of
and 7 percent on the excess. For corporations with net
incomes of $25,000 or less, the graduated rates of 1274 1940 and the Revenue Act of 1941 as well as by other less important revenue legislation. Because of the statutory
percent, 14 percent, and 16 percent existing in 1939 were
increased to 15 percent, 17 percent, and 19 percent in the lag in collection of taxes, receipts in the fiscal year 1942 do not represent the full effect of legislation in the calendar
calendar year 1941 and the corporation surtax added.
The potential effect of the substantially higher tax rates years 1940 and 1941. This is particularly true of current
and income base in 1941 as compared with 1939 is offset income taxes.
to some extent by the 2-year operating loss carry-over The sources of the revenues estimated for the fiscal year
allowed in 1941—none in 1939—and the deduction of the 1942 as compared with actual receipts for the fiscal year 1941 may be broadly summarized as follows:
excess-profits tax in computing normal tax and surtax net
income in 1941. Total receipts by sources of revenue
Corporation excess-profits tax receipts are estimated to
amount to $1,234 millions in the fiscal year 1942 and (In millions of dollars) represent an increase of $1,070 millions or 651.0 percent
As over receipts in the fiscal year 1941 of $164 millions. Estimated, Actual,
excess-profits tax receipts are collected in the same manner as current corporation income taxes, a comparison of calendar years 1939 and 1941 explains in the main the
increase in the fiscal year 1942 receipts over the fiscal Railroad Unemployment Insurance Act.
No excess-profits tax as the term is now used Miscellaneous revenues and receipts.
applied in 1939. The excess-profits tax effective in the calendar year 1941 was instituted by the Second Revenue
Act of 1940 and was revised by the excess-profits tax Income taxes.--Total income taxes in the fiscal year 1942 amendments of 1941 and by the Revenue Act of 1941. are estimated at $7,147 millions. If this amount is At present corporations are subject to excess-profits tax realized, the fiscal year 1942 receipts will exceed by a con rates varying from 35 percent on adjusted excess-profits siderable margin the collections of any previous fiscal net income of $20,000 or less to 60 percent on adjusted year, being $3,202 millions or 81.2 percent greater than excess-profits net income in excess of $500,000. Adjusted receipts of the previous record year, the fiscal year 1920. excess-profits net income is determined by the difference No detailed break-down of income-tax receipts is available between earnings in the taxable year and the excess-profits for all fiscal years. However, such data as are available credit computed under either the average earnings or the indicate that record-breaking levels should be reached in invested capital methods. Under the former, corporations receipts for the fiscal year 1942 for both the current cor are allowed a credit of 95 percent of the average net income poration and individual income taxes.
of the base period 1936-1939, inclusive. Under the invested Total income tax receipts estimated for the fiscal year capital method, the credit is 8 percent on invested capital 1942 exceed actual collections of the previous year, which not in excess of $5 millions and 7 percent on the excess amounted to $3,470 millions, by $3,677 millions or 106.0 over $5 millions.
Under either method a specific exemppercent. This is attributable to an increase in income tion of $5,000 and a 2-year carry-over of unused excesslevels, a broadening of the income-tax base by legislation, profits credit of previous years are allowed. Under the and to upward revision in tax rates.
1941 Revenue Act, the excess-profits tax is computed first Current corporation income-tax collections, normal tax and allowed as a deduction for normal tax and surtax. and surtax, are estimated to amount to $2,509 millions in Except for the excess-profits liability itself, the net income the fiscal year 1942, and represent an increase of $860 bases of the excess-profits tax and the normal tax are essenmillions or 52.2 percent over actual fiscal year 1941 tially the same although significant differences are possible receipts of $1,649 millions. Receipts in the fiscal year under certain circumstances. 1942 represent liabilities of the calendar years 1940 and The declared value excess-profits tax has been in effect 1941, whereas the fiscal year 1941 receipts reflect liabilities since 1933, but prior to 1940 was known as the excessof the calendar years 1939 and 1940. While collections of
While collections of profits tax. Receipts from this source are estimated at calendar-year liabilities are not divided evenly between the $24 millions, a decrease of $4 millions or 14.5 percent as two fiscal years affected, the proportions are such that for compared with the fiscal year 1941, despite the increase
General and special accounts
240.9 12,816. 1
3. 469. 6
508. 2 8, 268.5
in rates and higher income levels of the calendar year tax of the Revenue Act of 1940. The defense tax as such 1941 as compared with the calendar year 1939.
was eliminated by the Revenue Act of 1941 and was For the declared value excess-profits tax, taxable excess integrated into the surtax rate structure. The combined profits are those earnings in excess of 10 percent of the effect of reduced personal exemptions, the elimination of capital-stock valuation which is declared by corporations exempted surtax net income, and the increase in surtax in filing their capital-stock-tax returns. Ordinarily capi- rates results in increases in tax liabilities of all classes. tal-stock returns must be filed on July 31. However, the Because of the great increase in the calendar year 1941 Revenue Act of 1941, which increased the capital-stock- liabilities it is expected that the percent of total liabilities tax rate from $1.10 to $1.25 for each $1,000 of such valua- which has been received in full in March of previous coltion, was not approved until September 20, 1941, and cor- lection years will be decreased in March 1942 The effect porations were allowed to defer the filing date for capital of increased calendar year 1941 liabilities on fiscal year stock returns to October 29. In 1941, corporations, in 1942 collections is therefore somewhat less than would be setting capital-stock value so as to avoid declared value
true if the full-paid proportion were unchanged. excess-profits tax liabilities for the calendar year 1941
Total back corporation and individual income tax reearnings, had 3 months more known earnings than would
ceipts, which are not affected by most recent changes in have been the case without the extension in the time of
incomes and tax rates, are estimated at $305 millions in filing the capital-stock returns. The consequent increase
the fiscal year 1942. in accuracy of net income estimates, despite a substantial
Miscellaneous internal revenue.—Miscellaneous internal increase in income levels in 1941, should reduce the declared value excess-profits tax liability in 1941 as compared millions, an increase of $896 millions over receipts of the
revenue in the fiscal year 1942 is estimated at $3,863 with 1939 when the capital-stock returns had to be filed August 31.
previous fiscal year. Except for receipts from the capital
stock tax, estate tax, and gift tax, which are estimated to Some portion of the decrease in the fiscal year 1942 receipts is attributable to the suspension of the profit derived from levies incident to the sales of goods or services.
aggregate $742 millions, miscellaneous internal revenue is limiting provisions of the Vinson Act and of certain pro- Ordinarily receipts from these sources are principally devisions of the Merchant Marine Act, 1936, during the applicable period of the excess-profits tax.' Collections pendent upon consumer purchasing power. However, in from these sources are included as part of the declared
the fiscal year 1942, curtailment of production of goods for value excess profits.
civilian consumption is necessitated by defense and war Unjust enrichment taxes, which are back taxes princi- increase less than the estimated income levels of the fiscal
activity. Receipts of certain taxes are expected either to pally based on liabilities incurred in the calendar year 1936, are estimated to decrease from $9 millions in the
year 1942 warrant, or to decrease. This is particularly fiscal year 1941 to $5 millions as the outstanding claims
true of taxes based on the sale of durable consumer's for these taxes have been decreased by collections.
goods. Nevertheless, because of the increases in receipts Current individual income-tax receipts for the fiscal
from taxes unaffected by military production, because of year 1942, estimated at $3,070 millions, are $1,756 mil
increases in tax rates, and because of the introduction of lions or 133.6 percent in excess of actual fiscal year 1941
new taxes, miscellaneous internal revenue other than colreceipts amounting to $1,314 millions. As is true for cor
lections from the capital stock, estate, and gift taxes is poration income taxes, individual income tax receipts
estimated to increase from $2,381 millions in the fiscal the fiscal year 1942 arise from liabilities of the calendar year 1941 to $3,121 millions in the fiscal year 1942. This years 1940 and 1941, while the fiscal year 1941 receipts
is an increase of $740 millions, or 31.1 percent. reflect the calendar years 1939 and 1940. In comparing
Capital-stock tax receipts are estimated at $232 millions individual income-tax receipts by fiscal years, the elimi- in the fiscal year 1942 as compared with $167 millions in nation of the yield from the common year 1940 from the the fiscal year 1941. The increase of $65 millions or 39.2 explanation of results is not as valid as it is for corpora-percent results from the increase in tax rate from $1.10 tion income-tax receipts because of the much greater pro
to $1.25 per $1,000 of valuation and the higher income portion of full-paid individual as compared with corpora
levels of the calendar year 1941 as compared with the tion income-tax liabilities in March of the near fiscal calendar year 1940 and to the fact that the capital-stock Year. Nevertheless, the oversimplification of the ex- declaration made in the fiscal year 1942 had to be made planation is substantially correct as the greater propor- large enough to cover insurance against the declared value tion of the increase in the fiscal year 1942 over the fiscal excess-profits tax for 3 years following the capital-stock Fear 1941 is due to higher income levels and tax rates and valuation. broader tax base in the calendar year 1941 as compared Estate-tax receipts are estimated at $360 millions, an with the calendar year 1939.
increase of $5 millions over actual receipts of the fiscal The 1939 personal exemptions of $2,500 for married in- year 1941. This increase is small, in spite of the 10 dividuals and $1,000 for single persons were reduced to percent tax rate increase of the Revenue Act of 1940, $1,500 and $750, respectively, in 1941. The dependent which is partially reflected in the fiscal year 1942 receipts, credit of $400 for the first dependent was eliminated for because the fiscal year 1941 receipts included the taxes on persons who are made heads of families only because of two exceptionally large estates. The rate increases of the such dependents. Surtax rates were increased through- Revenue Act of 1941 are substantially ineffective with out the entire schedule, the greatest increase being made respect to the fiscal year 1942 collections because of the in the low and middle income groups. Not only were the 15-month statutory lag permissible in the filing of estatesurtax rates increased but the exemption therefrom of the tax returns. first $4,000 of surtax net income was eliminated. A Gift-tax receipts, estimated in the fiscal year 1942 at simplified income-tax form was adopted for persons with $150 millions, are $98 millions or 189.2 percent in excess of gross income of $3,000 or less wholly from certain speci-actual receipts of the preceding year. Although the fied sources, the use of such abbreviated form or the regu- higher estate-tax rates contained in the Revenue Act of lar income-tax form being optional with the taxpayer. 1941 became applicable to the estates of decedents dying In effect, the normal tax was increased by the defense after September 20, 1941, the increase in the gift-tax rates