Ruml Reasoning

Big, bulbous Beardsley Ruml, chairman of the New York Federal Reserve Bank, rolled up his sleeves last week for another heave to get his pay-as-you-go idea across for the benefit of groggy U.S. income-tax payers. Up to now practically everyone from the President down has gone on record for pay-as-you-go "in principle"--always with a "Yes, but --."

Beardsley Ruml set out to crowbar the biggest stumbling block now in the way of his plan: the plausible-sounding objection that the Treasury would "lose" a year's income if a year's taxes were "forgiven." Not so, said Businessman-Banker Ruml in a letter to Kansas Congressman Frank Carlson: the Treasury would, if anything, collect more money with pay-as-you-go than without it. The Ruml reasoning:

> This year's aggregate income is bound to be more than 1942's. Even without any increase in tax rates, if this year's taxes are paid on this year's income the Treasury would be bound to collect more than if it were receiving payments on 1942 income--as it would be under the present tax-law.

> Over the long term, national production--and hence national income--will probably increase. Under that assumption the happy situation outlined for 1943 will continue, with cyclical variations. Come Judgment Day, no one would owe the

Treasury anything, whereas under the present system Judgment Day would find Mr. Morgenthau's successor with a year's unpaid taxes still due.

For the benefit of doubters, Banker Ruml took the precaution of checking his assertions with impeccable outside sources: his letter was attested by 16 members of eight leading Manhattan accounting firms. Meanwhile, Congress and the Treasury continued to hem & haw over a proposition that seemed self-evident to many a master of sixth-grade arithmetic. For if the Treasury collects one year's taxes every year the Treasury cannot lose a year's revenue even if the taxes are collected against this year's instead of last year's income. Meantime the danger is growing that if taxation experts do not soon snap out of their fog several million new taxpayers may reach March 15 under the impression that the lose-a-year's-taxes talk means that they need not pay anything at all this year.

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