Pay As You Earn

Income taxpayers, sweating in anticipation of new horrors to come, breathed easier this week when the Senate Finance Committee showed increasing interest in Beardsley Ruml's pay-as-you-earn tax plan for the future (TIME, Aug. 10). If the Senate and House approve the idea, the Ruml plan will mean that: 1) all taxes due on 1941 income (payable this year) are "forgiven"; 2) all taxes actually paid this year will be credited to the taxes due on this year's income; 3) henceforth all taxes paid will be on the current year's income (which the taxpayer will pre-estimate), not on last year's actual income.

At year's end taxpayer will settle differences with the Government. If he has paid less than was due on this year's total income he forks up the balance; if more, the Treasury rebates to him. Nobody loses, but men going from high-paying jobs into the armed services, or forced out of work by priorities and the like can get out of the nightmare squirrel cage of paying high taxes for nearly a year more. And come a post-war depression, workers with deflated pay envelopes would benefit too.

The Senate subcommittee's sudden endorsement of Beardsley Ruml's common-sense plan spelled the end of a fancy retouching job that Treasury's Taxpert Randolph Paul proposed: that relief from taxes due on 1941 incomes be granted only on low-income taxes, leaving high bracketeers with the excellent possibility of owing two years' taxes to be paid from one year's income. If the House still wants a withholding tax, whereby employers deduct tax payments before the pay checks go out, the Ruml plan will make that easier too: there will then be no problem of anyone paying two years' taxes on one year's income.

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