Aftermath. Thomas E. Hall

Чтение книги онлайн.

СКАЧАТЬ and campaign contributions to their representatives and senators. Such an arrangement is less likely to occur if tax rates are low because income earners have a smaller incentive to avoid taxes.

      When World War II broke out in Europe in 1939, President Roosevelt was concerned that the conflict would eventually engulf the United States. So he pushed for additional taxes to fund a military buildup. Rates were raised again in 1940, and that year the exempt amount for a married couple was lowered to $2,000. Then in 1941, the married exemption was lowered to $1,500, and the bottom tax rate was raised from 4 percent to 10 percent. The middle class was now paying federal income taxes.

       World War II

      Funding the enormous U.S. military effort during World War II led to a major expansion of the income tax. Just days after the December 7, 1941, Japanese attack on Pearl Harbor, the United States was formally at war with Japan, Germany, and Italy. And it was painfully clear to Americans that carrying out military operations in both Europe and the Pacific would require an enormous amount of physical and financial resources. There was considerable discussion about how this undertaking would be financed, and the Roosevelt administration decided that taxes would play an important role.

      The income tax law was altered in 1942 to capture even more income earners. The marriage exemption was lowered to $1,200; for single earners, the amount was $624. Tax rates were raised again, the bottom rate to 19 percent and the top rate to 88 percent (on incomes above $200,000). This huge tax increase was initiated to help support the war effort: more income earners would now pay taxes, and those already paying would be subject to substantially higher rates. President Roosevelt hailed the new law as “the greatest tax bill in American history.”¹⁵ The following year, payroll withholding was instituted; this is the system under which income taxes are withheld from paychecks throughout the year. Previously, taxpayers paid their entire tax bill when filing their returns.

      As was the case during World War I—only this time on a much larger scale—the combination of the lower income exemption, the higher tax rates, and the booming war economy caused both the number of taxpayers and taxes paid to soar. During fiscal year 1939, 7.5 million income tax returns were filed and $890 million was collected in taxes. In 1945, 49.9 million returns were filed and $17 billion in income taxes were collected (U.S. Bureau of the Census 1975, 1110). Corporate income taxes (including the tax on “excess profits”) also soared by a similar order of magnitude, from $1.2 billion in 1939 to $14.9 billion in 1944 (U.S. Bureau of the Census 1975, 1109). However, despite this surge in revenue, it was not enough to keep pace with wartime expenditures. From 1942 to 1945, the federal government incurred budget deficits totaling $184 billion (Council of Economic Advisers 1962, 207, 272).¹⁶ During World War II, tax revenue funded about 45 percent of U.S. federal expenditures (R. A. Gordon 1974, 85).¹⁷

       The Postwar Era and the Cold War

      At the conclusion of prior U.S. military conflicts, the federal government reduced defense spending and lowered tax rates. This process took place after World War II, but to a lesser extent than had been the case before. Beginning in 1945, the federal government downsized but remained larger than it had been just before the war, and much larger than before the Great Depression. This expanded government was partly because the New Deal had created several permanent federal spending programs and regulatory agencies. The other major cause was change on the international political scene.

      When World War II ended, the Soviet Union’s Red Army occupied Eastern Europe. As a counterweight to the communist threat, the United States maintained military bases in Western and Southern Europe. The United States also maintained a presence in the Pacific, with bases in various locations, including Japan and Okinawa. U.S. concerns over communist aggression proved correct when in 1949 the Soviets cut off West Berlin from West Germany, which precipitated the Berlin Airlift. Also that year, the communists won the Chinese civil war. The following year, the North Korean communists attacked South Korea, which ignited the Korean War. The Cold War was on, and it would require a permanently large U.S. military.

      Table 2.1 contains data on federal employment, both total employees and the number of federal workers employed in national defense. In 1929, the U.S. federal government employed 579,500 workers, and during the Great Depression, the number expanded because of the New Deal programs. Defense employment grew slightly faster than overall federal employment, rising from 18 to 21 percent of federal employment. World War II caused a surge in the number of federal employees, largely for defense. At the war’s end in 1945, the federal government had 2.6 million defense workers, the vast majority of them in uniform, which constituted 69 percent of all federal employees. The military was then reduced, but by 1949 it still accounted for 42 percent of federal employment. During the Korean War (1950–1953), defense employment expanded to about 50 percent of federal workers, then remained above 40 percent during the ensuing Cold War era.

Table 2.1 FEDERAL EMPLOYMENT IN SELECTED YEARS, 1929–1964 (THOUSANDS OF PAID EMPLOYEES)

СКАЧАТЬ

---

Year	Federal Employment	Federal Defense Employment	Defense as % of Total
1929	579.5	103.1	18
1933	603.6	101.2	17
New Deal
1934	698.6	133.1	19
1939	953.9	196.0	21
World War II
1941	1,437.7	556.1	39
1942	2,296.4	1,291.1	56
1945	3,816.3	2,634.6	69
Post WWII
1949	2,102.1	879.9	42
Korean War
1951	2,482.7	1,235.5	50
1953	2,558.4	1,332.1	52
Post Korean War to Pre-Vietnam War
1958	2,382.5	1,097.1	46
1960	2,398.7	1,047.1	44
1964	2,500.5	1,029.8	41