The Logical Step

Federal excise taxes have usually been temporary measures, mostly during war time, and they have ebbed and flowed many times since they were widely introduced during the Civil War. They have been so persistent for many years, however, that less than half the U.S. population remember a time when they did not have to pay such taxes on scores of everyday goods and services, from autos to leases on safe-deposit boxes. Now the biggest excise-tax cut in U.S. history is speeding through Congress.

In a mere three days after Lyndon Johnson asked Congress to cut these taxes by $4 billion, the tax-writing House Ways and Means Committee last week not only approved all but one minor reduction that the President asked, but deepened the cuts by another $900 million -- chiefly by voting to phase out the 10% manufacturer's tax on auto mobiles entirely by Jan. 1, 1969 instead of shrinking it to a permanent 5% two years earlier. House leaders figure on a floor vote in the first week of June, a date that would leave the Senate plenty of time to act before July 1, when the President wants most of the changes to go into effect.

Good Timing. As it stands now, the bill would end excise taxes completely on more than 1,000 items, among them the 10% retail levies on jewelry, furs, cosmetics, luggage and handbags, as well as manufacturer's taxes at varying rates on everything from business machines to cameras, radios and playing cards. The 10% tax on telephone and Teletype service would fall to 3% next Jan. 1, be repealed in stages over the following three years. Levies on stock and bond sales, property conveyance, light bulbs and auto parts would also die Jan. 1.

Though $1.3 billion of the President's proposed $4 billion tax trim involved taxes that were due to expire June 30 anyway (such as the tax on air tickets), businessmen cheered the cut's timing. It will not only help raise sales of some items at their seasonal bottom (TV sets, furs, phonographs), but also prevent a slump in peak-time sales of autos and air conditioners by making their cuts retroactive to May 15. Automen, anticipating sales of 250,000 more cars this year as a result of the cut, promised prompt excise refunds (direct from Detroit) on cars bought between now and July 1, and most air-conditioner makers made arrangements to do the same. The President urged businessmen to pass on the full amount of the tax cut to consumers--and most of them seemed ready to do so. Montgomery Ward and several other big stores said that they would make tax refunds on big appliances bought between now and July 1, even if Congress does not make the cuts retroactive. Said Chicago Discounter Sol Polk, who will go even further and cut prices immediately by the amount of the excise slash: "Business has been good. Now it can be really good."

Implacable Foe. The architect of this pleasant package is a limelight-shunning lawyer named Stanley Sterling Surrey, who was drafted from a professorship at Harvard in 1961 by John Kennedy to become Assistant Secretary of the Treasury for Tax Policy. Surrey, 54, earns his $27,000 a year by putting in ten hours a day, six days a week at his paper-strewn desk, lugs a briefcase stuffed with documents to his Georgetown home most nights, rarely takes a vacation. Surrey has a grasp of taxation that has impressed Congressmen and Presidents alike, but he is such an articulate advocate of tax reform and such an implacable foe of tax loopholes that oil, mining and banking interests tried to block his nomination. He helped shape the $1.5 billion depreciation reform of 1962 and the $11.5 billion income tax cut of 1964, regards excise taxes as "a haphazard and discriminatory jumble which was the next logical step in reforming the tax system."

Many economists disagree about the timing of the excise-tax cut, some feeling that the reductions would be more valuable next year when the economy may need a strong push. For businessmen and consumers, nonetheless, the cut was a boon that will surely help out just when there are some faint signs of a downturn in consumer interest. The Ways and Means Committee even threw in a bit of extra, early seasonal cheer: it advanced repeal of the 10% tax on cabarets and theater tickets from next Jan. 1 to noon on New Year's Eve.

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