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. REP. 80-103, S. Rep. N.1013, 80TH Cong., 2ND Sess. 1948, 1948
U.S.C.C.A.N. 1163, 198 WL 1690 (eg.Hst.)
*1163 P.L. 80-471, REVENUE ACT OF 1948
Senate Repot No. 80-1013, Mach 16, 1948(To accompany H.R. 4790)
House Report No. 801274, Jan. 27, 194 (To accompany H.R. 4790)
(CONSULT NOTE OLLOWING TXT FOR INFORMATIONABOUT OMITTED MATERIAL. EACH
COMMITTEE REPORT I A SEPARAT DOCUMENT.)
enate Report No. 80-1013
March 16, 1948
The Cmmittee on inance, to whom as referred the bill (H.R. 4790) to
reduce inividual tax payments, and for oher purposes, having ha the same
under conideration, report favorably thereonwith amendment and recommend
that the bill, as amended,do pass.
I. GENERL STATEMENT
Your committee's bill is designed to provde a stimulus to labor,
management and venture capital; an adjustment forthe increase in the cost
of living;and the geographical qualization of the brden of the income,
estate, nd gift taxes.
The havy individual income-tx rates now in effect consttute a serious
restrictionupon new investment,inhibit the incentives of management, and
preventthe normal increase in roductivity of labor. Thee rates impede the
prodction which is so necessar in the immediate futue in order to
stabilize our conomy and which in the lng run is essntial to an increase
in the America standard of living. Yor committee'sbill is a step toward
the developmnt of a tax-rate schedule wich is consistnt with the
maintenance of a healthyAmerican economy.
Adjustment for the resent high cost of living is madeby an increase in
eemptions under he individual income tax. This relief is heavily
concentrted mong taxpayersin the low-income brackets. Such tax-payers
also recive preferntial treatment in the percentage tax reductions made by
ths bil. Additionalrelief is granted to persons 65 or over and to the
blind
qualization is povided for the tax burdens of married couples incommon-law ad community-proerty States. The bill corrects existing
inequalties underthe estate and gft taxes, as well as the individual
income tax.
The reducion in tax labilities provided by your committee's bill aounts
to $4.8 billin in a year f full operation, or about $2 billion less than
the House ill. Tis decreasewas deemed advisable in order to place tax
reduction on a ore cnservtive basis, and to provide additional assurance
of ample supluses for dbt eduction and contingencies in the current year
and i years to come.
*114 TABLE I-A comparison of the effective individual icome-tax rate
under prsent law,under the House bill, and the Senate Finance Committee
bill
TABULAR OR GRAPIC MATERIAL SET FORTH AT THIS POINT ISNOT DISPLAYABL
Source: Staff of he Joint Committee on Internal Revenue Taxtion.
II. UMMARY OF CHANGES N EXISTING LAW
H.R. 4790, as amended, i both a tax-reducion and tax-equaliation bill.
The tax-reduction feaures apply solely to th individual incometax. They
include a general increae in exemptions, a reducton in all tax rates, ut
with the larger part of the relief in the lower-incme brackets, and secialexemptions for those over 65 and the blind. The tax-eqalization featres of
he bill apply to the individual *1165 income tax and the estate an gift
taxs. They are designed to produce uiform treatment for residents f
common- lw and community-property States
A comparison of the effectiv individual icome-tax rates under your
comittee's bill, under the bill as pased by he House and under present
law s shown in Table I. The changes in the rats and exemptions of the
individualincme tax under this bill ar effective January 1, 1948. The
changes in wihhoding rates will become effective on May 1, 1948.
Overwithholdig durig th first 4 months of 1948, which is not offset by
decreased pyment on estimaed taxes or final returns, will of course be
refunded to thetxpayers. Thechanges in the estate and gift tax become law
on the date o nactment of thi bill. A brief description of the changes
provided by you comittee's bill isgiven below.
A. INDIVIDUAL INCOME TAXES
1. Person and dependency exeptions are increased from $500 per capita to
$600 per apita.
2. Prcentage tax reuctions ranging from 12.6 percent to 5 perent,
according to te size of the ncome, are provided for all taxpayers. able
II comparesthese percenage reductions with those in the bill as pased by
the Hose.
While the prcentage reductions from present law taxare carried outto one
decimal placein two instances, the reductions in tntative tax are in ven
percentages as fr as the bulk of the taxpayers are concerned. Sincethese
reductions are the percentages which ppear on thetax form, your committee
believed that it was important to hae the rductons in tentative tax
expressed as even percentages in the lower racket. Morover, your
committee's reductions are made in a form whih avoids the ecessty of
using the 'notch' rate of $67 appearing in the House ill. Thisis
accomlished by making the reduction in the lowest bracket availble to ll
txpayers with corresponding adjustment in the reductions allowed wi
respct to additional income. This change removes the only serious
administaive problem raised bythe Commissioner of Internal Revenue at
your commttees hearings.
he percentage reductions in your committee's bill are as fllow:
(a) Persos with incomes of $2,000 or less after deductions are exemions
[FN1 receive a 12.6-percent reduction in their tax.
(b) Personswith incomes f $2,000 to about $136,700 after deductions and
exemtions reeive a reducton of 12.6 percent of the tax on the first
$2,00 of theirnet incomes after exemptions and a reduction of 7.4 percet
of he balance of heir tax.
(c) Persons with incomes in excess of abot $136,70 receive a reuction of
12.6 percent of the tax on the first $2000 oftheir incomes ater
deductions and exemptions, a reduction of 7.4 percent of he tax on the ext
$134,700, and a reduction of 5 percentof the balanc of their tax.
*1166 TABLE II.-Percenage reductions in inividual income taes provided
under your committee'sbill ad under the bill as passed by the Hose
TABULAR OR GRAPHIC MATERIA SET FORTH AT THIS POINT IS NOT DISPLAYABLE
.. REDUCTIONS UNDER YOUR COMMIEE'S BILL
TABULAR OR GRAPHIC MATERIAL SET ORTH AT THIS POINT IS NOT DISPLYALE
B. REDUCTIONS UNDER THE HOUSE BILL
TABUAR OR GRAPHIC MATERIAL SETFORT AT THIS POINT IS NOT DISPLAYABLE
3. Husbandsand wives are permitted o slit their income for tax purposes.
Those whoavail themselves of ths oportunity file joint returns, divide
their net income and exemptions by tw, cmpute their tx on this basis, and
multiply the result by two. Since n thi change te maximum standard
deduction for married couples is increaed to $1,000, the aximum standard
deduction for single persons is also ireased to $1,000. [FN2]
4. An additional exemption is granted to taxayers ho are 65 or over. Ifboth husband and wife have attained the age of 65 the$600 exemptionis
granted to each spouse.
5. An additional $600 exemtin is granted to txpayers who are blind. If
both husband and wife are blin,the $600 exemption is granted to each
spouse. A blind person 65 or over maclim this exemption in addition to
that based on age.
*1167 B. ETATE ANDIFT TAXES
1. The 1942 amendments to the estate and gift taxs which proviedspecial
rules in the case of community property are repeale for persons dyng nd
as to gifts made after the dat
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