Appendix — BERKOWITZ V. UNITED STATES (No. 73-1175)

-

ACKNOWLEDGMENTS

ONE’S INDEBTEDNESSES in the writing of any

book are inevitably far greater than mere words can properly

acknowledge. That is especially true when the book deals with a

subject as complex. as this one, where the layman’s struggle for

mere understanding of the subject, not to mention technical accu-

.tacy, often leaves him in prostrate dependence at the feet of the

experts, °

None have borne that dependence more stoically, helpfully

and uncomplainingly than Drs. Benjamim Okner, Emil Sunley, Jr.,

and Joseph Pechman, all close <2 wand in Washington and all

unfailingly willing to respond to my seemingly endless stream of

" questions, to which they always seemed to have the answers. So -

great has been my dependence on this trio that, in a just world,

IRS would grant a special ruling permitting each to claim me as

a dependent on his tax return, I am enormously indebted and

grateful to each of them.

In Chapter 20, describing the many obstacles to tax reform, I

mentioned the historic monopoly of tax expertise in the hands of

those pleading for favored tax treatment and the virtual absence

of vocal, mobilized technical know-how on the part of tax reform-

a

430 THE RAPE OF THE TAXPAYER

Analysts and Advocates. In addition to his personal research and

writing, he has alerted and mobilized public-interest tax experts

throughout the country, has opened the way for them to address

themselves promptly to current tax issues, and has seen to it that

their expert views and research were available to those who could

make use of them. The taxpayers in general, and I in particular,

for their help.

I am especially grateful to all of the above-mentioned for their

understanding and tolerance of one of the most idiosyncratic

(eccentric may be more precise) communication systems any mod-

three-voli tax-reform

study prepared by the Treasury Department under his leadership

and cited frequently in this book. But great as was his direct and

personal assistance, it might have been outweighed by the help for

which he was indirectly responsible, for I have drawn enormous

quantities of information, advice end wisdom from smong the

Acknowledgments 431

large number of gifted men who sefved under him during his

eight years in the Treasury Department, learned from him and

came to share his zeal for tax reform. Most of them, now, are in

private practice, but it is clear that they remain among Stanley

Surrey’s steadfastly loyal disciples.

I am indebted in a very special way to Senator Paul Douglas,

in part because it was out of my great good fortune in serving on

his Senate staff that I was first intgoduced to the injustices of the

tax system, but in larger measure because of the example he set for,

and the effect he inevitably had on, those who were privileged to be

associated with him. I have never known, or known of, anyone in

public life to match the combination of intellect, humanity, cour-

age, scrupulous honesty and intolerance for injustice that has

always dwelled within Paul Douglas. I doubt that any nobler man

ever served in the United States Senate.

Book editors seldom get the credit due them; a very great deal

is due Jason Epstein, not only for his counsel but for his friendship,

likelihood, very little remaining

composure on the part of the author. Her gift for rescuing order

from chaos, her toleration of her boss’s idiosyncrasies and vagaries

(as well as vagueries), her patience and good humor under stress

{not to mention ten of the nimblest typing fingers on the East

Coast) made her an indispensable

Mrs. Allen was the Sleuth Extraordinary in tracking

tlusive information and assuring herself of its accuracy. If this

book is factually accurate (as I hope it is) and if the source notes

in the Appendix are helpful, the reader can be grateful for Mrs.

=

432 ~ THE RAPE OF THE TAXPAYER

Allen’s patience, resourcefulness and supreme conscientiousness.

I know I am.

Finally, how does one go about thanking one’s family? There

are so many things to thank them for: their forbearance for a host

of weekends and evenings of absence or abstractedness or sleep-

iness or grouchiness on my part—and so much more that has

little to do with this book and so much to do with the quality of

my life (as I tried to indicate in the Dedication) . Of no one is that

truer than Leni. Her special warmth and wisdom are blessings

which, I’m sure, deserve more thanks than they receive, but not

more than I feel, every day of my life.

Puutir M. STERN

Washington, D.C.

October, 1972

GLOSSARY

“ABC” transaction—This refers to a triangular transaction, per-

mitted prior to 1969 but barred by the 1969 “Tax Reform Act,”

under which oil companies were able, in effect, to borrow money

to purchase new mineral properties or companies, paying back the

say A wished to sell an oil well for $100,000. If B were to put up

$20,000 of his own and borrow the remaining. $80,000 from a

bank, intending to usc the future income from the oil well to repay

the bank, he would have to pay taxes on that income and be able

to use only the diluted, after-tax dollars for the loan payment. But

in an “ABC” transaction, A gets his $100,000 not by having B bor-

row the money from a bank, but by selling the oil well to B for a

$20,000 down: payment and at the same instant (that was a

icquirement under the law) selling (technically, transferring) to

C, for $80,000, the right to $80,000 of the future income from

the well. Under the pre-1969 law, B would fulfill that obligation

by paying C the $80,000 without having to pay any tax on it

himself. That way, B could repay with untaxed dollars rather than

after-tax dollars. If B was a corporation (as was usually the case),

433 os

434 THE RAPE OF THE TAXPAYER

that meant the loan could be repaid with about half as many profit

dollars as would have been the case if 48 percent of the profits

went for taxes, leaving only about half of them to repay the loan.

In 1969, Congress amended the law so as to treat these “ABC”

transactions for what they really were: loan arrangements.

“Ability to pay”—As used in this book, “ability to pay” is a short-

hand name for the basic philosophic concept underlying the grad-

uated income tax (under which higher incomes are subject to

stiffer tax rates than lower incomes) .

This concept is based on the premise that as a person’s income

rises, he is “able to pay” to the government a greater share of each

additional dollar of income. Thus, under 1973 tax rates, a married

man need only pay nineteen cents of hie four thousand and first

- dollar of taxable income, but on his four hundred thousand and

first dollar of taxable income he is deemed “able to pay” seventy

“Adjusted gross income” (AGI)—A taxpayer's income before tak-

ing his exemptions and personal deductions. :

More specifically, it is, generally speaking, his total dollars

received, minus (a) those items he does have to report on his tax

return or include in computing his tax (such as interest on state

and local bonds, Social Security benefits, etc.; (b)his business

expenses; and (c)one-half of all his long-term capital gains (se¢

Capital gains). Note that because of (b)—which can include very —

large deductions for such things as oil deductions or farm losses—

and (c)—which can exclude large amounts of capital gains in

come—“adjusted gross income” can markedly understate a person's

real total income.

Averaging—See Income averaging,

“Bunched income”—Refers, generally, to the uneven receipt of

in some years, valleys in others—in such .a way

that in peak years the taxpayer is pushed into an artificially high

tax

bracket.

Thus, he is obliged to pay more taxes than another taxpayet

i his novel to the movies or,

star who stars in his film).

Only half a person’s capital

income; the other

of capital gains,

But note that in no event is the capital gains rate more than

half as high as the rate on a person’s “ordinary inco pa

436 THE RAPE OF THE TAXPAYER

depletion allowance, wihlsti toate het: Soiren'ell guidenty wit

$100,000 of gross income per year, the depletion deduction would

be $22,000. If, however, the net (after-expense) income from the

property were $40,000, the depletion allowance would be limited

to half that, or $20,000.

Depreciation—An annual tax deduction designed, in general, to

recognize the wearing out of a capital asset such as a machine or

building with the passage of time, and to permit the owner to

recover, tax-free, his original capital investment in that asset over

its “usctul life.” The “useful lives” of various kinds of assets are

suggested by guidelines issued by the Treasury Department.

“Straight-line” depreciation consists of uniforth deductions

taken during. each year of the asset’s “life.” For example, on a

$100,000 asset with a ten-year “life,” the annual deductions would

be $10,000.

“Accelerated” depreciation may. follow various formulas, but

in essence it permits greater-than-average deductions in the early

years of the asset's life, gradually shrinking until they become

smaller than average in the later years. That is, in the case of the

$100,000, ten-year asset referred to above, the early-year deduc-

tions would be greater than $10,000, the later-year deductions less

than $10,000.

“Double taxation” —This usually refers to the fact that a dollar

of corporate dividends is, subjected to taxation twice: once in the

hands of the corporation and again in the hands of the corporate

shareholder. There are numerous other instances of “double taxa-

ae

already been subject to an income tax.

Pepa! “eipay Okan pat pin ce aba

person’s death. Only amounts above $60,000 are subject to this tax.

Exclusions—Income a taxpayer does not have to include in com

puting his tax.

This would include such items as various government pay-

ments (Social Security, railroad retirement and veterans’ benefits),

interest on state and local bonds, and all money received by gift or

inheritance. ae '

Glossary 437

Gift tax—A tax that may be imposed on the giver when he trans-

fers property to another person during his lif .

Each taxpayer is permitted to give $3,000 per year ($6,000 a

year for married couples) tax-free to as many people as he may

chodse. Over and above that, each taxpayer is permitted to make

* $30,000 of tax-free gifts ($60,000 for married couples) during his «

lifetime.

. Head-of-household—An unmarried person who supports a relative —

as part of his household, or who supports his father or mother even

__ if they are not part of his household, - |

Heads-of-household are taxed according to special tax rates that

lie roughly midway between the rates applicable to unmarried tax-

payers and those applicable to married joint-return filers.

“Imputed” income—Income you receive in some form other than

cash,

For exumple, your bank provides you certain services free, in

lieu of paying you interest on your deposits. The value of those

services is “imputed” income, as is the value of the housing you get

from your owned home, over and above your expenses. Generally

speaking, “imputed” income is not taxed in the United States, but

in some countries the imputed rental income on owner-occupied

homes is or has been taxed to the owner (see page 356).

Income averaging—A means of alleviating the so-called “bunched

income” problem (described elsewhere in Glossary) by permitting

8 taxpayer, in effect, to smooth out the peaks and. valleys of his

income and compute his taxes as if the income had been received

; - More evenly over a period of years.

For example, under the provision of the law enacted in 1964,

anyone whose income has varied more than one-third in a five-

year period could, in effect, lop off his above-average income in

the fifth year and have it taxed as if it had been spread evenly over

the prior four years. ‘

Income-splitting—Refers to various means by which a given

amount of income may be split up into smaller and separately

taxed “bundles,” thus avoiding the high tax rates that would apply

if the income were taxed as a single “bundle.” !

The best-known and most widely used method is the filing of

438 THE RAPE OF THE TAXPAYER

a joint tax return by married couples, which permits the husband's

income to be taxed as if it were two half-sized “bundles.” For an

example of how this operates, see pages 121-22.

“Ordinary income”—Income that is subject to the regular income

tax rate schedules, as distinct from “capital gains,” which are

accorded special rates (see Capital gains) .

Percentage depletion—See Depletion.

Retirement income credit—A provision easing the taxation of

those over sixty-five.

Under this provision, an elderly person’s tax bill may be

reduced by an amount equal to one-fifth of his first $1,200 of pen-

sion, annuity, dividend, interest or royalty income. For example, it

gives a person over sixty-five with $1,000 of pension income a

$200 tax cut. However, the basis for the tax reduction is reduced

by one dollar for every dollar (over $1,200) of either Social

Security benefits or income earned from a job. Those over seventy-

two may earn as much as they like without any reduction of their

tax credit,

“Spin-off”—A device used for transforming a corporate dividend

_payment from “ordinary income” into a capital gain.

capital gains rate.

“Straight-line” depreciation—See Depreciation.

Taxable income—The amount left after a taxpayer

has claimed

all his exemptions and deductions; i.c., amount actually sub-

ject to tax,

Glossary 439

Tax Court—A special court made up of sixteen judges whose func-

tion is to resolve disputes between taxpayers and the Internal

Revenue Service,

Although headquartered in Washington, individual judges hear

cases all around the country. Tax cases may also be considered by

the regular district courts of the United States and by the Court

of Claims. Appeals from decisions of the Tax Court may be taken _

to the appropriate Federal Circuit Court of Appeals.

Tax credit—A subtraction from the amount of tax a person owes.

(this is different from a tax deduction, which is a subtraction

from the amount of a person’s income that is subject to tax.)

A tax credit works this way: Suppose an elderly person has a

$125 retirement income credit (see page 353). He figures up his.

tax bill, which happens to come out to $625, and then subtracts

$125 from that. The tax he owes the government is thus reduced

to $500. Under a tax credit, all taxpayers receive the same dollar

advantages, no matier what their tax bracket—which is not the

case with a tax deduction (see below). Examples of tax credits:

the retirement income credit; the foreign tax credit; the credit for

small political contributions,

Tax deduction—A subtraction that reduces the amount of a per

son’s income that is subject to taxes.

Example: Suppose a taxpayer in the 58 percent tax bracket has

$50,000 of income that would otherwise be taxable. If he takes a

$1,000 medical expense deduction, his taxable income is reduced

to $49,000. If he had not been permitted to deduct the $1,000 (if,

say, he had bought a mink coat with it), $580 of the $1,000 would

go to the government. In this sense, Uncle Sam has paid $580, or

58 percent of the deducted amount. The higher your tax bracket,

the greater portion the government pays. For a person in the 26

percent bracket, for example, the government pays only $260 of a

$1,000 tax-deductible medical bill.

“Tax shelter”—Generally speaking, any device or plan which

shelters a person’s income from the regular income tax rates.

Trusts—A legal—and separately taxable—arrangement with re-

spect to property or wealth in which one or more “trustees” hold

-..

440 THE RAPE OF THE TAXPAYER

title to the property and manage it for the benefit of one or more

beneficiaries.

For example, a father may put property in one trust—or sev-

eral—for his minor son, to be managed by trustees until the son

reaches a certain age. Since each trust is, in most cases, separately

taxable, this offers the possibility of considerable tax savings

through income-splitting (see elsewhere in Glossary).

Value added tax (VAT)—A tax imposed (and passed on) at each

stage of the manufacturing-selling process and ultimately added to

the price of the goods that the consumer pays at retail. To take a

simplified example, under a VAT the manufacturer calculates the

“value added” by him (by subtracting the costs of materials from

the amount he receives from the wholesaler); the wholesaler, in

turn, calculates the “value added” by him (by subtracting what

he paid the manufacturer from what he receives from the retailer) ;

the retailer calculates the “‘value added” by him (by subtracting

what he paid the wholesaler from what he charges the consumer).

At each stage, a tax is computed on the basis of the “value added,”

and that tax is immediately added on—by the manufacturer, in

computing what he has to charge the wholesaler; by the whole-

saler, in reckoning what he has to. charge the retailer; by the

retailer, in fixing the price he charges to the consumer. Thus,

according to most analyses of the VAT, it is the consumer who

ends up bearing the burden of the tax—and the VAT is nothing

but a hidden sales tax. It is hidden in the sense that, unlike the

sales tax, which is separately broken out so that the purchaser is

aware of what he is paying when the cashier rings it up, the VAT

is usually built into the price of the product.

a ala

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NOTES AND SOURCES

EXPLANATION OF ABBREVIATIONS

Budget—The Budget of the United Ststes Government, which sets rect. 2

ptoposed expenditures in various Federal activities as recommended b

President in any given fiscal year (see FY, below). yearn rag gel heed

through the Government Printing Washington, D.C,

Means

Compendium, at page 875.

the

CR—Congressional Record; 100 CR 12312 refers to Volume 100 of the per.

manent, bound Congressional Record at page 12312. The notation “(Daily)”

means the reference comes from the nonpermanent Record, whose page

numbers are different from the permanent Record’s.

Cum. Bull—The Cumulative Bulletin, containing published Treasury De

partment and Internal Revenue Service regulations.

Dugger—Refers to “Oil and Politics,” article by Ronnie Dugger appearing

ee tine Lnnat te theme or teen

Indicators—Monthly statistical publication prepared

President's Council of Economic Advisors sess

441

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442 THE RAPE OF THE TAXPAYER

Eisenstein—Refers to The Ideologies of Taxation by the late tax attorney

Louis Eisenstein (The Ronald Press, 1961).

Engler—Refers to The Politics of Oil: A Study of Private Power and Demo-

cratic Directions by Robert Engler (University of Chicago Press, 1967).

F.2d; F. Supp.—Federal Reports, Second Series; The Federal Supplement.

A series of volumes reporting decisions of Federal courts. 220 F.2d 890, 895

means that the case quoted begins in Volume 220 of the series at page 890,

but that the particular quotation in question appears at page 895.

French—Refers to “Why the Rich Shouldn’t Worry About Tax Reform,”

article by V. O. French in the Washington Monthly, July 1972, pp. 29-36.

FY—Fiscal year, the government’s accounting year, which ends June 30.

FY 1962 refers to the twelve months ending June 30, 1962.

H. Doc.—House Document. These frequently contain Presidential messages,

including veto messages. H. Doc. 43, 80-2 refers to House Document No. 43

of the Eightieth Congress, Second Session.

H.R.—Designates a bill introduced in the House of Representatives. Senate

bills bear the prefix S.

H. Rep.~—House Report: the report accompanying 2 bill issued by the com-

mittee of the U.S. House of Representatives that handled the bill. H. Rep.

491, 81-2 refers to House Report No. 491 of the Eighty-first Congress, Second

IRB—Internal Revenue Bulletin, a publication put out by the Internal

Revenue Service that periodically sets forth IRS rules, regulations or inter-

pretations of the law.

IRC—Internal Revenue Code, the basic tax law of the United States. IRC

Sec. 1237 refers to Section 1237 of the Code.

HWM—House Ways and Means Committee (the committee of the House

of Representatives that deals with all tax legislation). 1969 HWM 456 refers

to general tax hearings held by that committee in 1969, at page 456.

HWM Report—The report issued by the Ways and Means Committee con-

taining the Committee’s general and technical explanation of a given piece

of legislation approved by it. 1969 HWM Report refers to House Report

91-413, Ninety-first Congress, First Session. 1971 HWM Report refers to

House Report 92-533, Ninety-second Congress, First Session.

JCER—Congress’s Joint Committee on the Economic Report. 1955 JCER 412

refers to page 412 of the collection of papers on “Federal Tax Policy for

Economic Growth and Stability,” compiled by the Joint Committee and

issued November 9, 1955. 1955 JCER Hearings refers to panel-discussion

hearings on that same subject, also held in 1955. 1972 JCER Subsidy Papers

refers to “The Economics of Federal Subsidy Programs—A Compendium

of Papers” submitted to the committee and issued in 1972 as Joint Com-

od

-—

Notes and Sources 443

mittee prints. 1972 JCER A og na — refers to ——- held in Janu

ary 1972 on the subject “The Economics of Federal Subsidy Programs.”

Musgrave—Refers to “Tax Preferences to Foreign Investment,” paper by

Peggy B. Musgrave, in Part 2 of the 1972 JCER Subsidy Papers (see J/CER,

above), pp. 176-219.

P. law. Refers to the number given each law that passes Congress

and is signed by the

echman—Refers to writings by J Pechman, Economic

loseph A, Director of

Studies, the Institution, Washington, D.C. Pechman, Federal Tax

Policy refers to his book by that name, published by Brookings in 1966, with

a revised edition in 1971. Pechman, “Rich, Poor” refers to Brookings

Reprint 168, containing Dr. Pechman’s article “The Rich, the Poor and the

Taxes They Pay,” reprinted from The Public Interest, Fall 1969.

13-40, and 230, May 1972,

—Refers to regulations issued by the Treasury Department and the

poe nd nis auiate alanine Pane

Rulings Compendium—“The Public and the Rulings Process,” a 1972 com-

ances! yg gece vc babyy Eels renide war ecned Taxation with

an organization describing themselves as “Tax Experts

Penrureatieg the ba lntaext” and Randomamend ba Arlington, Virginia.

Russkay and Osserman—Refers to Halfway to Tax Reform, by Joseph A,

Russkay and Richard A. Osserman (The Indiana University Press, 1970).

SFC—Senate Finance Committee. 1971 SFC 179 refers to the hearings on a

general tax bill held by that committee in 1971, at page 179.

SFC Report—The report issued by the Finance Committee containing the

Committee’s general and technical explanation of a given piece of legislation

approved by it. 1962 SFC Report refers to Senate Report 1881, Eighty-

seventh Congress, Second Session. 1969 SFC Report refers to Senate Report

91-552, Ninety-first Congress, First Session. 1971 SFC Report refers to Senate

Report 92-437, Ninety-second Congress, First Session.

SOI—“Statistics of Income,” published annually by the Internal Revenue

Service. Unless otherwise stated, reference is to volumes on individual

income tax returns (separate volumes are published for corporations’ and

trust, gift and estate tax returns). 1960 SOI 34 refers to the 1960 “Statistics

of Income” (for individual tax returns) , at page 34.

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444 THE RAPE OF THE TAXPAYER

S. Rep—Senate Report (see H. Rep.). S. Rep. 485, 84-1 refers to Senate

Report No. 485 of the Eighty-fourth Congress, First Session.

Stat.~The General Statutes of the United States. 70 Stat. 43 refers to Vol-

ume 70 of the General Statutes, at page 43.

Sunley—Refers to “The Federal Tax Subsidy of the Timber Industry,” a

. paper by Emil M. Sunley, Jr., appearing in Part 3 of the 1972 JCER Sub-

sidy Papers (see JCER, above), pp. 317-42.

TC, TCM, USTC—Refers to decisions of the Tax Court of the United States.

25 TC 512 refers to Volume 25 of those decisions, at page 512. TCM refers

to memorandum decisions of that court.

Tr.—Refers to “Tax Reform Studies and Proposals, U.S. Treasury Depart-

ment,” the result of extensive studies conducted by that department

1966-68 and published on February 5, 1969, by the House Ways and Means

Committee and the Senate Finance, Committee. Tr. 413 refers to page 413 of

U.S.—The United States Reports, containing decisions of the U.S. Supreme

Court. 215 U.S. 425 refers to Volume 215 of those reports, at page 425.

Westfall—Refers to “Revitalizing the Federal Estate and Gift Taxes” by

David Westfall, Vol. 83, Harvard Law Review, March 1970, pp. 986-1,013.

Note: Figures on revenue losses from particular tax features have been

derived from the Pechman-Okner analysis (see above) ; from the “illustrative

tax expenditure budget” (pages 155-58) ; from a similar listing contained in

a statement to the Joint Economic Committee by Treasury Undersecretary

Edwin S. Cohen, July 21, 1972, Appendix D; and from official and unofficial

estimates.

Page :

ix - Kenneth Lamott, The Moneymakers (Little, Brown,

1969), pp. 283, 281; Clement Stone's $4 million donation: Wash-

ington Star, Nov. 17, 1972, p. Al.

xvi Judge Learned Hand: i v. Newman, 159 F.2d 848

(1947).

1. Uncle Sam’s Welfare Program—for the Rich

“Tax welfare” amounts: Pechman-Okner, Table A-5, col. 4.

Getty daily income: Esquire, Oct. 1970, p. 146.

Numbers of families, amount of “tax welfare”: Pechman-Okner,

Table 8, col. 1 (numbers of families); Table 6, col. 3 (“tax wel-

wno

Lee i oes a

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Notes and Sources 445

Page

fare”). Note: The figures on numbers of families in various income

groups are based on total family income. They are therefore differ-

ent from the statistics compiled by the IRS from tax returns (and

cited elsewhere in this book), since the IRS figures are based on

“adjusted gross income” (AGI). AGI excludes a number of income

items that are included in the Brookings figures—such- as income

from state and local bonds and half of all capital gains.

9-10 Federal outlays for various programs: Budget, FY 1975, pp. 106,

144, 146, 292.

11 Theoretical versus actual tax burdens: Pechman-Okner. Theoreti-

cal burden may be derived by dividing Table 6, col. 1 by Table 2,

col. 1. Actual burden: Table 2, col. 3.

11 Average yearly income: Pechman-Okner, Table 2, col. 1 divided by

Table 8, col. 1.

13 Capital gains “tax welfare”: Pechman-Okner, Table A-2, col. 2

divided by Table 8, col. 1.

14 Numbers of non-taxpayers: SO. These figures are easily calculated

by comparing the total number of returns in each income group

with the taxable returns, usually in the first table in the given

.“Statistics of Income” publication.

14-15 Examples of rich tax avoiders: Tr. 88-94.

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446 THE RAPE OF THE TAXPAYER

15 Hyper-rich oilman: 109 CR 24399, Dec. 12, 1963.

15 2,200,000 “poverty line” taxpayers: Tr. 3.

15 20 million $100-a-week families: 1969 SOI, Table 1.1, col. 6.

15 Outgoing Treasury Secretary: Statement by Joseph Barr before

Economic

16 Three families with $2,450,000 of dividends: 1970 SOI (Prelim-

inary), p. 36, cols. 11, 12 (comparing all returns with taxable

geturns). d

16 Other zero-tax families: 1970 SOI (Preliminary), p. 24, col. 1.

16 Groups 1, 2, 3: Press release, May 7, 1972, by Rep. Henry Reuss of

‘orporat $

(Daily), July 19, 1972; oil companies: Oil Week, Aug. 21, 1972.

Dividends paid: Moody's Industrial and Utility Manuals, 1971.

18 Decline in corporate tax burden; Goldman Sachs quote: Wall

Street Journal, Aug. 2, 1972, p. 1. ;

18-19 $4-$6 billion dividend and interest reporting gap: The Office of

i: “un-preferenced” taxpayer: 1969 SOI, p. 93, col. 8.

Statistics Social Security, property, state and local taxes:

A. Herriott and Herman P. Miller, “Changes in the Distribu-

of Taxes Among Income Groups, 1962-1968”

American Statistical

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burden figures: Roger A. Herriott and Herman P. Miller,

the Taxes in 1968,” Table 7. Paper published in the

1 Conference Board Record as “Tho Taxes We Pay.”

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Notes and Sources 447

Page ‘

age stock yield of 3.5%, as is assumed wherever such estimates

are .

28 Eisenstein: p. 11.

28 James C. Carter before the Supreme Court: Pollock y. Farmers’

Loan & Trust Co., 157 U.S. 429, 516 (1895).

3. How Would You Like a Special Tax Law, All Your Own?

x $3 million saving for Uniroyal: 118 CR 37635 (Daily), Dec. 8,

1969.

%6 House repeal of investment credit: H.R. 12290 (1969).

36 Background of Uniroyal amendment: 118 CR 37636 (Daily), Dec,

8, 1969; 1969 SFC Report, p. 279, third full para.; Uniroyal sales:

Fortune, May 1972, p. 192.

38 Lockheed, McDonnell Douglas amendments: 118 CR 37635-36

(Daily), Dec. 8, 1969; 1969 SFC Report, p. 244, para. XIII.

38 (Footnote) McDonnell Douglas testimony: Hearings before Senate

Finance Committee on H.R. 12290 (to continue the tax surcharge),

July 8-15, 1969, p. 371.

39 Mobil Oil, Litton, Cafritz amendments: 118 CR 37635-36; see also

1969 SFC Report at p. 235, third full para. (Mobil), p. 124, fourth

full para. (Litton), and p. 43, first full para. (Cafritz) .

0 At least 15 hand-tailored amendments: 118 CR 37635, Dec. 8, 1969.

#0 WWL provision “no coincidence”: Wall Street Journal, May 27,

1970, p. 1. .

ao — Long's sense of humor: Washington Monthly, July 1972,

p. 31.

42-3. Description of Mayer amendment background: Eisenstein, p. 156.

Inner quote from S. Rep. 781, 82-1, p. 50 (1951).

3 — goad for U.S. Chamber of Commerce: 1951 SFC

1451, 1478.

3 Revenue loss “negligible”: S. Rep. 781, 82-1, p: 50 (1951).

43 1954 reenactment of Mayer provision: 1954 SFC 1985, 2002-3;

S. Rep. 1622, 83-2, p. 115 (1954).

3] The “Hollywood Rajah”: Taken from the title of Bosley Crowther’s

book, Hollywood Rajah: The Life and Times of Louis B. Mayer

(Holt, Rinehart & Winston, 1960).

43-4 Alvord amendment: New York Herald Tribune, Jan. 19, 1964,

44-5 Merrill provision: Eisenstein, p. 159.

and provision: Leo Sanders et al. v. Commissioner, 21

TC 1012 (1954); 255 F.2d 629 (1955), cert. denied 350 US. 967

(1956); S. Rep. 1941, 84-2 (1956); 102 CR 7795 (1956); H. Rep,

2253, 84-2 (1956), p. 5; PL 84-269, 70 Stat. 404,

4a tiosay Ree LR. and Lulu McKee v. Commissioner, 18 TC $12

48 Universal Oil Products: Universal Oil Products Co. v. Root Refine

ing Co., 328 U.S. 575 (1946).

@ Clarence Cannon bill: S. Rep. 1283, 84-1 (1955); 101 CR 12655,

1287 (1955).

Fert Wayne Journal-Gazette, OwensCorning Fiberglas Provisions:

5 National Tax Journal 58 (1952).

ce

——

THE RAPE OF THE TAXPAYER

Budd, Sangamo Electric and Bridgeport Brass companies: 98 CR

9072-76 (1952).

No tax on $20 million of income: 1961 HWM 107.

$25 million yearly drain: 118 CR 37635 (Daily), Dec. 8, 1969.

ior DuPont-General Motors: H.R. 8847, 87-1 (1961); PL

ey ey 1269, 85-1, p. 18 (1957); see also 109

CR 4172 (Daily), Mar. 18, 1963.

Twin Cities = provision: 108 CR 17076 (Daily), Aug. 30, 1962.

Previously vetoed bill: H.R. 8652, 87-1; S. Rep. 1101, 87-1; 107

CR 21552 (1961).

Howard F. Knipp provision: Knipp’s Estate v. Commissioner, 25

TC 153 (1955); 244 F.2d 436 (1957); H. Rep. 632, 86-1; ‘S. Rep.

1002, 86-1; 105 CR 8478 (1959).

Sen. naming 15 provisions: 118 CR 37633-9 (Daily), Dec.

8, 1969; . 37633.

Kennedy and Long interchange: p.

Father Jolley testimony: 1969 SFC 1099-1109, Sept. 12, 1969.

Sen. Kennedy quote: 118 CR 37635-6 <6 (ail), Dec. 8, 1969; Sen.

Long quote: 118 CR 37637 (Daily), Dec. 8, 1969.

(Footnote) Sen. Williams quote; 118 x 37637 (Daily), Dec. 8,

Bug eR RRR B BB BEB : zi

ae

“It has been observed”: Harvard Law Review, May 1957, p. . Vii.

ne a (1955); 1955 ACER

4. The Mightily-Privileged Few

of taxpayers in income groups: 1969 SOI, p. 9, col. 7.

J. Watson stock options: IBM Proxy Statements, 1 1966-72.

i Pechman-Okner

ii

Notes and Sources 44J

Page :

66 Federal revenue loss twice to states; subsidy proposal by

67

67

3S Ss

gain

Sen. Nelson: 118 CR S4288 (Daily), Mar. 21, 1972.

(Footnote) States would pick uj $180 million: Ott and Meltzer,

“Federal Tax Treatment of State and Local Securities” (bruokings

Institution, 1963), p. 7; 1 Compendium 726. Stute per-capita debt:

118 CR S14683 (Daily), Sept. 12, 1972.

Joseph Barr: See note, p. 15, above; number of taxless fumilies:

SOI for each year cited (see note, p. 15, above).

(Footnote to table) Examples of rich taxpayers: Tr. 94, 92.

Number of taxless jamilies in 1970: 1970 SO1 (Preliminary), p. 24,

col. 1 (comparing <I returns with taxable returns); also preys

release of Rep. Henry Reuss of Wisconsin, May 7, 1972.

Three taxless families: 1970 SOI (Preliminary), p. 24, col. 1;

dividend information at p. 32, cols. 32, 33 (comparing all returns

with taxable returns).

Senatorial pronunciamento: 1969 SFC Report, p. 112.

ao ia, 3: Press sclease by Rep: Hemry Rows’ of Wuccasin,

jay 7, 1972.

Ralph Senters: Washington Post, May 1, 1972, p .1.

Amount of “tax-Javored” income: Reuss press release, May 7, 1972

(see p. 69, above). Reuss differentiated between “non-favored”

income (such as corporate dividends) and “tax-favored” income

(such as from capital gains, or from oil ventures qualifying for

deductions, etc.). According to Reuss, families

averaged

Report, p. 112.

$30,000 exemption from “minimum tax”: IRC, Sec. 56(a) (1).

Exemption for capi on charitable gifts: IRC, Sec. 170(e);

Herold Geneen : Gallagher President's Report,

Average salary of 215 executi : Lent and Menge, “The Impor-

of dnt ts Mecteabee ion”

IBM stock options: 1962 IBM 0;

thee Bi Proxy Statement, p. 10; 1971 IBM

Harchd Common coos eT main WET

9386 (1950).

p. 30, col. 33.

Xerox; Ford: Dun’s, June 1971,

SOI (Preliminary),

5. The Great Capital Gains Trial

Martin: 96 CR 9238,

Stock Option Hearings, p. 96.

on an egg: Jacksonville, Fla., Sept. 2, 1952;

Connor;

5, 1962.

Joseph

1970: 1970

THE RAPE OF THE TAXPAYER

gains “tax welfare”: Pechman-Okner, Table A-3, col, 2

£7 Table 6, col. 1.

SOI, p. 40, col. 3

6.

from capital gains: 1369 SOI, p. 40, col. 4; p.

$9 million income: 1

gains:

gains on

receiving

capital gains: 1969"

: 1969 SOI, p. 40,

loss:

Dec. 24, 1971

CQuarieriy

, on table, p.

the

and what

pay

cn ry"

wealth: Fortune, May 1968, p. 156.

billion :

col. 2.

I

SFC

32%:

Notes and Sources ; 451

P, ‘

103 Situation No. 1: Compare IRC Sec. 1221(3) with IRC Sec. 1235.

*In pM oo ee ere er ered whose =

comes “spurts” to average out several years’ income,

, they are still denied treatment of that income.

103 Congress's reasons jor capital gains for inventors: S. Rep. 2375,

81-2, p. 44-(1950).

105 of Ford: William T. Gossett; from Fortune, Dec.

1958, p. 202.

107 Tax code on “collapsibles”: IRC Sec. 341

would come to $24,970—$12,830 than his tax would have

been without the gain. The additional $12,830 of tax is 51.3% of

the $25,000 capital gain.

114 Three Harvard Business School professors: Walter W. Heller, at

‘ 1955 JCER 389, summarizing findings of Butters, Thompson and

Bollinger, Effects of Taxation: Investments by Individuals (Harvard

115 Joseph Pechman on effects of 1969 capital gains tax increase: New

116 Corporations derived only 1.5% of capital from stock issues: Eco-

ep ear teeter haw ey A op “ Gubee

. derived billion out

Sillion of cngtidl ieee vied. ore

118 Brandeis quote: By Merie Miller at 1958 HWM 2321.

"119-20 Figures of wife’s worth: Calculated in accordance with the method

on of

18% of income (which is the approximate actual average) on in-

comes greater than $25,000. For the sake of simplicity and clarity,

the calculations omit the effect’ of the added ‘$750 exemption the

pe Ye 1970 SOI, p. 24,

. new bride would

Page

125

124

125

125

127 -

130

131

13

132

132

ang

133

ery

THE RAPE OF THE TAXPAYER

Ludwig 8. Hellborn: 1951 National Tax Proceedings 310-14.

Table of “ux bliss”: figure refers to percent by which

single person’s tax is reduced by virtue of his marriage.

Democrats of the day: H. Rep. 1274, 80-2, p. 67

41.

Nixon Administration and value added tax: New York Times, Feb.

1, 1972, p. 1.

Distribution of income-splitting benefits: Pechman-Okner, Table

A-l.

Paysoff Tinkof/: Tinkoff y. Commissioner, 120 F.2d 564 (1941).

Stanback Brothers: T. M. Stanback et al. v. Commissioner, 183

F.2d 889 (1950). ‘

Growth in partnership tax returns: 96 CR 14106 (1950).

Company: Redd v.

Questions re LaSalle Livestock

5 TCM 528 (1946), Transcript, p. 63.

Pre- and post-1951 rules on family partnerships: Commissioner v.

337 US. 733 (1949); 96 CR 19677-8 (1950).

father must receive a

needa Doil : Sklarsky Phan 796 (1957).

pak Walberg v. 142 F. Supp.

| @r A Dollat Lost Is a Dollar Spent

:

La

i Hi THe

: Te Hl

| 2 1

p agtdopgead pag?

tean

iit

Ba

» Pp. 326-40.

reasury,

for political contributions: IRC Secs. 41

of the Secretary of the T:

Annual Report

Tax credits and deductions

(deduction).

use political tax credit: State-

and 642(a) (3) (tax credit) and Sec. 218

men of Sly rey, 1972 JERS

tg “2 HEH tT 4

a te Tea jul

Ni etl ie

fig, esate

Bet ule jeeaeteatlh

| : faith attitite

ete eubaliie

Fh nau petit

ie Sianeli!

=

454 IHE RAPE OF THE TAXPAYER

Fore: weeataneeendesprengnechameetdiaeal

151 Postion of lowndusamne hewing bails io lanes oy: Robe SS acm,

quoted by Associated Press, Oct. 25, | cage

152 ee wp nota, ~ air id 1969 Congressional

152 Builder-developers making profit: Associated Press series of

articles, Oct. 25, 1971, citing “ figures.”

153 aoe write-offs for antipollution facilities: IRC Sec.

= dare medical schools: Sen. Bill No. 3418, Dec, 26, 1970.

155-8 “I Tax Expenditure Budget”: 1972 JCER Subsidy Hear-

‘Tovts) Fl

158 ) First “Tax Expenditure Budget”: 1968 Secretary of the

Treasury Annual Report, pp. 326-40.

171 Prof. Charles Davenport: Letter to the author.

173 Profit above “book value” taxed at regular rates: This occurs be-

cause of a feature of the tax law, initially enacted

i

[

:

i

|

z

ae

i

it

i

Hi

appears more

167 (e) and 1250(a).

174 Architectural Forum: “The Role of Depreciation,” Apr. 1955, cited

at 1962 SFC 354.

174 One real-estate expert: Mark H. Johnson, 1961 HWM 1247.

176 Manuel D. Mayerson: 47 TC 340 (1966).

Notes and Sources 455

Page

176-7 on borrowed element

Secs. 1012. 1016; see Crane v. Commissioner, 331 U.S, 1 (1947)

177 estate: See Woodsan v

for Ocean Towers, Ltd.

Treatment as partnership,

‘corporate advantages: Rev. Der tose 7213 (lata Ine, p. 26) aot heen

Skirting of bank lending restrictions: ee a rt

v. F. & R. Lazarus & Co., 308 U.S, 252 (1939) and Paul W.

22 TCM 1391 (1963).

Dan Throop Smith: Federal Tax Reform, p. 157, quoted at Tr.

446n.

ae eee

Taxpayer K:

Hy pha hy le

- Cattle eligible for investment credit: IRC 48(a) (6).

Top-bracket notables: Rodgers, Marx, Harriman, ‘all

yore mens hs ies ogy 0 nee hemerate a 1968.

yar np ape ei 8 link fence manufacturer: 1963 HWM

Pamphlet in —_ Western lingo: Prentice-Hall Executives’ Tax

Report, Feb. 4,

Blak Wich Fame: Wall Street Journal, Sept. 21, 1970, and Apr.

1969, 1970 rules re citrus and almond groves: IRC'278 (citrus)

PL 91-680 (almond groves). : ‘

Cash accounting for farmers: Regs. Sec. 1.614 (as exception to

Regs. Sec. 1.446-1(c) (2) (i), -providing that, as a general rule,

just where keeps

(Footnote)

72-13, 1972-2 IRB, p. 26.

New Yorker account: Oct. 17, 1970.

ae

~~

THE RAPE OF THE TAXPAYER

Fast write-off for railroad cars: IRC Sec. 184,

— oo _ & Co. pamphlet: “Tax Sheltered Investments,”

1970, p. 28.

~ Rudolph and Schoen: The Washingtonian, Dec. 1971,

p.1 *

10.“Tax Welfare” for the Corporate Giants

$300 million in 1962-69 “gift”: This was the estimated benefit to

Motors from the investment tax credit when it was in

effect during those years. 1971 SFC 197.

$250 million “new gift’: Estimated 10-year tax saving to GM from

ADR. For assumptions underlying this estimate, see note for p. 220.

Sen. Nelson on corporate tax cut: 118 CR S4287 (Daily), Mar. 21,

1972.

Coiinion Sache anciyste Wel Bivens Jeusnd, Dag, 2 1972, p. 1.

Reduction in corporate tax burden: Pechman, F: Tax Policy,

. 118.

Decline in share of Federal reverses from corporations: Economic

Report of the President, Jan. 1972, p. 270.

100 largest corporations paid less than smaller firms: 118 CR H6707

ipl fp 1972.

taxes

BBE gS

Dividends-paid figures are from Moody's Industrial Manual and

Moody's Public Utility Manual.

Business Week re Western Union: Apr. 15, 1972.

million corporations: Washington Daily News,

210 ITT taxes: Figures

Report submitted to the Securities and Exchange Commission for

fiscal year ended Dec. 31, 1971. -

210 Texaco taxes: Oil Week, Aug. 21, 1972.

211 — Electric Power Co.: 118 CR H6715 (Daily), July 19,

212 Consolidated Edison: 118 CR H6715 (Daily), July 19, 1972.

212 Rep. Vanik on “wedding clothes” v. “rags”: 118 CR H6708

(Daily), July 19, 1972. ‘

212-13 Difference between “tax” and “book” profits: 1966 Corporate

457

Notes and Sources -

iether te

cite Hi a i fed iH Pt

ahd id by fis ef 2 pad ed

rill ae Ht HH Hilfe fe eae

yaa id tc) Ge Ae

| Fesateye ageted tHe e gieetell Heatlife

bin ela deiupaiaus

iene Ban eb atte

5

Bese nd seesisese 2 asa wh a r

—

458 THE RAPE OF THE TAXPAYER

g

and Alexander (formerly Nixon, Mudge, Rose, etc.). The Connally

law partner was Marvin K. Collie, of the firm of Vinson, Eklins,

Searls and Connally of Houston, Texas.

:

Hi

i

:

fi

Ee

R

Eisner of University, Apr. 12, 1971; pow Boris

1. Bittker, Yale University. Released by Taxation with Represen-

tation, Actingion, V

SaeErp Seneteny Osten Press conference, Jan. 11,

171, quoted by Prd. Eisner. 5

Prof. Robert Eisner: Letter to IRS Commissioner, Apr. 12, 1971,

p. 7 (released by Taxation with Representation, Arlington, Va.).

11. Ah, To Be an Oilman

i fo SE ES Pee Sale ores Does Set, HON

228

22 Jean Paul Getty income: Esquire, Oct. 1970, p. 146.

= Getty re Saye iB an i oh Cx . p. 48,

229-30

Eee

ib

zy

yl

;

Preliminary Corporation

1968, p. 16, col. 1. Excludes depletion deductions listed for timber

industry, which are almost entirely cost rather than percentage

Holiday, Feb. 1957, p. 55.

Murchison, Richardson, Young: Holiday, Feb. 1957, p. 56.

Dr. Martin Miller, Michael Benedum: Fortune, Nov. = p. 176.

F

BEEeE a8

EL CATE Ges emma as

Tn ee

Hee te i an

ty dane ¢ iy go Enetegsy Suxh ay Je

Weg fata LE Wy a

ea

B§- 2g upa Ho PEEE maT it g Hie

: diet Hee reat ali Hi ‘La lat

agé eth diel. Lay sional

She ge RRR Ak Reeeeeee x2 2 eeeees

THE RAPE OF THE TAXPAYER

Page

4

VERE LECCE aan

Aba aie an

pee u ets Pe hy

TEL REE

Se bite

Et

ae é rf z fe

- aF que

it te eae

- 5% > Sprtys

Heceeican cet

e Ra Ba ants

» Pe

ba *Gug

us

finial fi

One and Two: » pp. 187, 192.

lootnote) 95% ownership of four-fifths of overseas assets: Mus

wre, Table 7, p. 199.

= of choosing world-wide method of calculation: IRC Sec.

a).

Estimated

International Tax Aff:

F

i

BREE RF

3338 8

88

/

46

Pro; Sec. 309 of H.R. 11058,

by wef Ap ey Callforsiae 117 CR H9212, Oct. 5,

1971.

lammond Organ Co.: Hammond Organ Western Export Corp.,

(Footnote) Fortune

ution” escape hatch: Fortune, Feb. 1969, p. 96.

into and

Arrangement “ ps”

Sec. 963 (c) (2); Regs. 1.963 1(a) (1).

969 i: to curb use of fictional depletion allowance: IRC

Fi plaints ’ Post,

July 4,-1972; also “Daily Executives’ Report” of Bureau of Na-

After-the-fact adjustment [rote siiccation: Toeamny

let, “Dist: A Handboot! lor Exporters,” Jan. 24, 1972, p. 25.

and in 1972 Officials were on the circuit, “sell-

ing” the DISC t0 buloes noon, “pm

with “tax shelter” who an 8% commission for

Prediction of concentration of DISC benefits: 117 CR $5377

@aily), Apr. 22, 1971.

Wall Street Journal labels DISC a “gimmick”: Editorial, Sept. 30,

Shopng company profits entirely “untainted”: IRC Sec. 955

Shipping companies exempt from U.S. taxes plying Ameri-

Findneial wera tan Os “Tax oh: Foreign Flag

saga : a

Shipping Company,” Prentice-Hall Report No. 9, July 6,

: rab pu gid Cpe BEE

ah de : HE ed a Hb

2 {| fas JHE | i in, J fl nis I; eeey ge

fj all tlie aia fide e gg Eh an

sy te Rely eee hae 2 ip

at ai ave aT Lae aden

eee aa tule Ba] ii

GEE BRNO all aoe 2 rl

oe BR ee eo

—

Notes and Sources 463

Page

289 Incrone Of five companies’ share from 51.3% to 57.3%: Sunley,

289 (Footnote) Senator Barkley’s complaint: 90 CR 1950 (1944).

290 Timber losses fully deductible: IRC Sec. 1231(b) (2). The same

“one-way street” provision applies to coal and iron ore royalties

as well.

291 SomPined effects of timber preferences on taxes, rates of return:

292 ‘Timber valuation For of see

Polson Logging Co., 12 TCM 664 (1953); Cascade Co. v.

1963 court on depletion jor water: Marvin Shurbet v. US.,

1969 Tax Court on underground steam: Wall Street Journal,

6, 1969, quoted in Russkay and Osserman, p. 123. See A. E.

52 TC 700; Rowan, 28 TCM 797. “

539.

re “just as good a claim”: 11811-2 (1951).

of Sand and Gravel Association: 1954 SFC

Kay and .

Sen. George on “chicken amendment”: 97 CR 12336-7 (1951).

Capital gains for coal royalties: Revenue Act of 1951, Sec. 325; S.

8 & S888 8 Ss B82 8 Be yess B ee ge

|

?

a

$

00h eT ay ey apa

Tee ie ee

a be Sal ty debby oHitalie :

Hee ea i

apa Ge ahaa ag

SER lata nH tna

ian, zs sin] le a Hee Eu nia ik

eae fi niet eg inital

Paaai ao aang 2

312

312

313

313-14

314 -

314

314

315

315

315

315

;

,

i

3

|

|

!

7

:

|

i

ache

i

F

F

i

Fg

gs

RS

gf

if

|

é

th

£

ast

ti

i

ing (see above), p. 124.

ag IRS attorneys convinced in 1961: Acting IRS Commis-

letter

arding

after full study of the [judicial] decisions

deduction f. -

tax for proper

tion of the law. Antitrust Hearing (see above), p. 124, ;

(Footnote) Examples of IRS litigation on smaller questions: on

elm disease damage—see Appleman v. US., 338 F.2d 729 (1964) ;

aa Denton v. Bingler, 63-2 USTC, para. 9731 |

IRS directive to publish all of “general interest”: Letter

from IRS Commissioner Dunlap 28, 1952, cited at Rulings

Compendium, p. 72-117. wi

Only 480 rulings published a year: Rulings Compendium, pp. 72-118.

attorneys: George B. mana, Bowens G. Krane

Compendium, pp. 138-40.

; reporting services that summarize

unpublished rulings: “Shop Taik” in the Journal of Taxation and

“Tidbits” in Tax Management.

Enactment of Freedom

required

—

' 466 THE RAPE OF THE TAXPAYER

Estate tax rates unchanged; personal exemption and income tax

rates changed since 1941: Pechman, Federal Tax Peticy, Tables

Theodore Roosevelt

Roosevelt (Memorial Edition), pp. 504-5.

reer tht Roosevelt on “lnherlied economic power”: H. Rep. 1681,

74-1, Part 2, p. 643 (1935). .

Herbert Hoover on “thawing frozen capital”: 3 Memoirs 35-6.

and Garrard 8. Wirston:

People’s ee p. 119; 1925 National Tax Association

133,944 estate tax returns filed; 30% of wealth excluded: Prelit

nary SOI, Estate Tax Returns, 1969, p. 32, cols. 1, 2.

Eisenstein characterization: 1955 JCER 838.

? deduction:

Tr. 119, 351-84.

Treasury on “smaller estates”: Tr. 111, cited at Westfall, p. 995.

Treasury 1957-59 survey of generation-skipping: Tr. 117, Table 9.

Trust company president in 1957: Fortune, Nov. 1957, p. 238.

eaggy SEE ERS S BER RE OE EE

total tax of about million—$14 million less than he otherwise

would have paid. | :

332 Journal of Accountancy example: Mr. A, his lifetime, gives

Treasury findings on lifetime gifts v. bequests: Tr. 115, Table 7.

Case of Oliver Johnson: Estate of Oliver Johnson v. Commissioner,

000 gift-tax exemption: H. Rep.

+ P. 29; S. Rep. 665, 72-1, p. 41 (1931).

‘ein estimate: 195° JCER 812; see also 94 CR 7908

a

fi

:

f

f

§

proposal by yy Daily) J 9, 1972

I: i ( » Jan. 19, .

the Younger: Schultz, The Taxation of Inheritance (1926),

na

‘ohn Stuart Mill: Mill, Princi Political , Book 2,

I - iples of Economy,

Nora Payne Hill: Nora © > Hill v. Commissioner, 13 TC 291

(1949) ; 181 F.2d 906 (

67% “tax” on welfare is: 30% “tax” on food-stamp users:

“Why Is Welfare So Hard « orm?” by Henry Aaron (prelim-

se$8 #888 88282 88 & fa # g 8

THE RAPE OF THE TAXPAYER

“4,

Income tax “can’t provide a shirt for the naked”: Groves, Federal

Tax Treatment of the Family (Brookings Institution, 1963), p. 115

(preliminary manuscript). ~

$13 billion cost of nontaxation of government benefit payments:

Pechman-Okner, A-3, col. 6.

(Footnote) British

mist, Apr. 6, 1953, p. 71.

“Tax expenditures” for housing six times direct outlays: See note

re p. 144, above.

Home ownership up 50% since 1940: Richard Goode, “Imputed

Rent of Owner-Occupied Dwellings Under the Income Tax”

Economic Research), p. 169n.

Value of pavenel datuetions, 2000-28 WE eee

analy propel jue entak os pmmal ater 1963

1969 cutback in interest deductions: IRC 163(4).

Cat Lovers, hey 9 Association, Genealogical Society as ap-

tax-deductible gifts: IRS

_ Organizations, Dec. 31, 1970, pp. 28, 315, 242, respectively.

deduction in 1942:

—

Notes and Sources 469

Page

369 Two oilmen who zero to

eae. income) and B ($2,271,723 income). 109 CR 24399-

371 posal to make fallout shelter expenses deductible: H.R. 104,

88-1 (1963).

371 1972 Presidential credits

tion: Nixon: Washington Post, Oct. 26, 1972; McGovern: “Aid to

of Children in Parochial Fide Public Schools,”

Statement in Chicago, Ill., Sept. 19, 1972.

c t.

374 Roche: GM Proxy Statement, Apr. 13, 1972.

374 Seas Seep meio oan Sarde 1969 SFC Report, p. 333.

; :

all applicants for Social Security order to curb fraudulent

acquisition of cards by illegal immigrants snd welfare cheaters,”

quoted Sen. as follows: “We would only require finger-

prints in ‘high * cases, like a person who was over 30 and still

doesn’t have a card. If we ask

gerprints on file, but I don’t think we should require it at age 6.”

376 Sen. Long on welfare recipients’ “filthy” neighborhoods: Washing-

u

I

i:

‘

#

8

376

See note re p. 346, above.

380 General Motors’

H6713 (Daily), July 19, 1972.

>

f-billion-dollar profit: 118 CR

20. Why the Wealthy Few Win Out over the Un-Rich Many

o a bac meng Fog Potions rgd yyhoed

exemption: » Pp. 22, 3

million taxable returns filed in 1970. r

381 SEO Rene, benchited {rom 50% sop rate on salary income: 1969

381 Only 1 in 10 got any capital gains: 1970 SOI (Preliminary), p.

9 million retu Fition

7:

THE RAPB UF THE TAXPAYER

a

ue

#8

3

Hy

:

'

3

-

:

!

;

& 8

i

g

R

3

i

t

f

rE

2

=e

i

|

:

:

Times, Oct. 14, 1971. ;

Hlareey jemily generosity. to, Democratic Perey Spee eer pL

larvey

Contributions from the oil industry: Alexander (see above), p. 184;

Congressional Quarterly, Sept. 18, 1970, p. 2292; Washington Post,

Jan. 31, 1971, p. A25.

Richard Harris in The New Yorker: Aug. 7, 1971, pp. 52-3.

Sen. Long speech re “monetary bread cast upon the water”:

Quoted in Harris New Yorker account (see above), p. 53.

V. O. French on flexibility of seniority system re Finance Com

mittee membership: French, p.

Secrecy Congressional tax-writing committees: French, 33.

Secrecy of Contreae sections of the Insernal Revenue Code: IRC

ee ¥ $8 8 8 BF eee eee 8 E

Superlawyers, p. 309.

21. What Should Be Done About Our Tax System?

sé 8

q

i

:

than $3,000 a year: 1970 SOI (Pre-

013,966 taxable returns filed in

1970

Gen-

4714

no-loophole system: Pechman-

divided by Table 8, col. 1.

2 and 1 are

"

ail i

| ites g

E35

tt

i

;

3

eA

li)

i

He

Sooper

“Who P.:

(S. 1039) introduced by Sen. George McGovern,

before-tax

iid

Ey

Hl

&

3

. 1, 1971 (117 CR 4

meses

te

vr

‘i fi

=

ESyz

S

y

3

$ £38

&

embodied in a bill

ha

SEN ata INE Tid

~

414-16 Plan for Federal financing of election campaigns: This plan is

So

-_

7 7

414

417

THE RAPE OF THE TAXPAYER

, 516 (1895).

‘ Quoted in Scripps-Howard news-

307.

: Pollack v.

eet ee

pon tapers een

seh Pout re "waning

"6, Carter befor the

Trust Co., 157 US. 4

RE : g q ree

Het ot dl SHALE

elec, Maid

tlle in Hi

Siu | 11

ac til ic

: au taaeaitaall

: Lane alee nk

THE RAPE OF THE TAXPAYER

474

le aL

nay ee eure aac Fe il

blast Bled ty Hedi ia is Ht hii fy 1 F

anil Teen ttiN ou il! NT; eal

Or EM, asia

ste a rf err il it Ni he

eas, Hn {E ‘wail fells ist

Lillian uly htt cali

ad

o, @9

07

Committee of $ingle Taxpayers

( x2

“community property” laws, 123, 328

“community property” states, 123,

328

(of Con-

gress) , 391-2

conference committees

Connally, John B., 149, 224, 226

i . 309, 312

iT

ih

aarktt

tH

apet

i Ef

pres

bi!

3H

ru

;

|

: i

ist

THE RAPE OF THE TAXPAYER

76

§

> a

EE

tle

Hine

(il

il:

ee

bit

he

har met i ”

at { ae raid

a Hillis fit qi fe rie Le HY

ete atin lt

Ht it it a Ree

tT Hh sik ‘tit

:

att

weet

‘a ith alll HG

meee 15,61-2

|

b fase

ail : 5 : ae slegie ile 4 ave

i sil roel 1

risiegs Ha te afi 1:

fariee , be | it He if Le or ad |

hal ifitia i vutsHdE de i lent Ht

He it i iil

itil ie ih ai wei

it ‘fl ial | fie oie ya

ee {5 3 1a said ah e

iyi ree I vlads: ay Lf

daub; rife i |

ei ;

i]

wile

it ei

iat i

Mies il 4% r

1 ick

,

i Me tf

ITT (see International Telephone &

Telegraph)

th

-_

THE RAPE OF THE TAXPAYER

of Federal in-

a 2

Pe

ie das

ie i clea

aif ial tie i lea abt

eee |

mpi ay

ica, 416-20; effect

in,

478

a a itis ity: imu f Hen

4 Ae satihagil a rite is !

IEE Laat ii a fe

! PE eMiiine wale eater

d a3 AeA lis el eied

al aa HL

mA wT Uy cet Ui

tlt i! HHL hs fi alli ali i Hegel iene

)a

‘

THE RAPE OF THE TAXPAYER

480

Mee

aut Life IAT

Ait il Fay! He ie

i qf! nti! pei iv alti

: ¥ a} 2

1 fil li “eh

i ae Hi iu He an

Fi i Hh Iai wee il eat |

1

481

:

rare Bey ged fd afess

Peep:

i lll Me jell 22d] ial

I Ht HT ia ery delat ps (sar ll

ill fli cali te BIO dlp

eset BEER EH Ui Ae |

rte sia i ifs ia gg PEs

‘lel ttl eel ull Lt

eae RT

Li a

Ht Het ‘7 ia a ai

lial at eae

Berk

a ‘lil.

a i di pee “an ia

Ww + al ii i ial iat ioe

ies iit la i : lanes i i

Lillie le it Ais fait sliliiiis

eee |

pi Pasoncia OF THE TAXPAYER

482

_—

Index

gr oe (antitrust)

of, 310, 311

Truman, Pres. Harry S., 124, 328

Tung, C. K.,

§ , 287-8

US. Steel, 18, 209, 252, 253, 311,

313, 373

Fy

a

mafest

Lv

4 th

's of, 346;

ra discouragement

ABOUT THE AUTHOR

Puitip M. Stern is a Phi Beta Kappa grad-

uate of Harvard with varied experience in government,

r

ia ECONOMICS

Z

& How you helped pay for a $14 million

tax saving for Lockheed, via a

special tax law passed just for

Lockheed.

_ ¥ How ITT paid $139 million in taxes

i to foreign governments — but just

$5 million to our own government.

* How auto heiress Mrs. Horace

Dodge could have an income of

$5 million, and not even have to

file a tax return.

* How an oil and gas operator sold at

least $50 million worth of oil over

a twelve-year period, at times had

an annual income of more than

$5,500,000, and yet paid no income

tax for the entire twelve years.

* How loopholes cost you and all the

other taxpayers $77 billion every

year, or $367 for every man,

woman and child in America.

_. %*® How tax rates could be cut nearly in

2 half — by getting rid of the

loopholes.

Oe Mgt eS NO ay ge Sant 5S

a PAO PBS.

ee \ “ss

am