LY 17, 1963
THE MICHIGAN DAILY
LY 1 , 1 63 T E ~ C ~ hI A N A I3
FA
FAYS AND MEANS:
Tax Machinery Set To Begin
Soviet, Hungary Talks
May Settle New Policy
By EDMOND LEBRETON
Associated Press News Analyst
WASHINGTON-The off-again,
on-again machinery Congress uses
to write tax legislation starts up
again Monday.
If the House Ways and Means
Committee keeps it turning, the
rest 6f Congress-and the taxpay-
ers-may get a look in about two
weeks at the kind of tax cut the
legislators Will be asked to vote on
somewhat later.
Committee leaders are close-
mouthed. Accordingly a multibil-
lion-dollar guessing game is in
full swing on Capitol Hill. For
those who want to play, here are
some materials:
Tax Target
President John F. Kennedy set
for Congress the target of a tax
reduction amounting ultimately to
somewhat more than $10 million
annually, to be reached in three
steps.
There is reason to believe the
committee is aiming at a gener-
ally similar figure, perhaps a bit
lower and with more of the cut
coming sooner. In any case, it is
Ir- --- -
expected to propose some reduc-
tion effective Jan. 1, 1964.
But the Congressional tax writ-
ers already have shown plainly
they do not intend to follow the
executive blueprint in detail.
Deep Cut
Kennedy proposed a deep cut in
rates. Instead of the present 20-
to-91-per-cent range on individ-
ual incomes, he suggested 14-to-65
per cent, and instead of 52 per
cent on corporations 47 per cent.
This would have meant reducing
revenues b yabout $13.5 billion.
But he proposed also tax revisions
--called by some advocates "re-
forms"-that would have recoup-
ed more than $3 billion of the reve-
nue.
So far the committee has dis-
cussed formally only revisions and
what it has produced does not
greatly resemble Kennedy's plan.
Rather, it appears the recouping
features may add up to something
much closer to $1 billion than $3
billion. The rate reduction would
have to be tailored to fit-con-
ceivably something like 15-70 per
cent for individuals, 48 per cent
for corporations.
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But the committee has made
this much plain: it will not vote on
rates until it has made a firm de-
cision on the revision part of the
bill.
All the decisions it has already
made, during more than two
months of discussions, are subject
to change-and some big ones have
yet to be made.
For example, the committee is
taking another look at the taxa-
tion of dividends. Kennedy wanted
tote boost Treasury receipts $460
million by abolishing the special
treatment of dividend income en-
acted under the previous admin-
istration. The committee is un-
derstood to be closely divided, but
might compromise on recovering
about half this sum. This could
be done by abolishing the present
4 per cent dividend credit, but giv-
ing smaller dividend receivers a
break by increasing from $50 to
$100 a person the amount of divi-
dend income exempt from tax.
The result of the decisions al-
ready made, and whose effect the
Treasury was willing to estimate,
is a pick-up of about $600 million
in revenues. But there are big
imponderables.
Guessing Game
The experts threw up their hands
at guessing the impact on the
Treasury of the committee's pro-
posals on capital gains taxes. It
voted for a reduction in the tax
on gains from the sale of assets
held three years or more.
But it also recommended a new
and tighter rule on gains from the
sale of inherited assets which in-
creased in value during the late
owner's lifetime. At present, this
increase is not taxed when the
heir later sells the property-thus
it escapes tax entirely.
There is a theory in financial
circles that many billions of dol-
lars worth of securities and real
estate are "locked up" because
their elderly owners, who other-
wise might want to rearrange their
investments, are unwilling to sell
them and pay capital gains tax.
If the law is changed so that
the tax burden is less, but at the
same time the tax is made to ap-
ply ultimately, to the heirs if not
to the present owner, there will be
much more incentive to "unlock"
and sell.
The result could be a big, even
though temporary, increase in
capital gains tax collections, if the
theory is sound.
Republicans Call
For Investigation
WASHINGTg9 ()P)-Senate Re-
publicans yesterday called for a
special investigation into the re-
ported disappearance of 24 million
bushels of grain shipped by the
United States to Austria in a
barter deal.
By GEORGE SYVERTSEN
Associated Press News Analyst
MOSCOW-The eyes of the
world are on the conference in
Moscow between the Soviet and
Chinese Communists.
But Soviet Premier Nikita S.
Khrushchev and Hungarian Pre-
mier Janos Kadar are holding
talks in the Kremlin simultan-
eously that could decide the fate
of the fragile Communist experi-
ment in relaxing "hard fist" rule.
The Soviet News Agency Tass
said Khrushchev and Kadar dis-
cussed the "achievements of Hun-
gary's national economy and the
moral ad political unity of the
Hungarian people."
Future Plans
It said they also spoke of plans
for the further economic and
cultural progress of the country."
The Tass report hinted that the
ideological dispute between the
Soviet Union and Red China also
figured in the talks.
But the attention of western ob-
servers was drawn to the refer-
ences to "the moral and political
unity" and the "cultural progress"
of Hungary.
Plead Case
Kadar is believed to have come
to Moscow to plead the case for
his liberalization policies aimed
at winning support from the non-
Communist majority of the Hun-
garian people.
The campaign began last year
when most of East Europe's So-
viet satellites plunged into the
destalinization orgy ordered by
Khrushchev at the 22nd Congress
in late 1961.
Of the East European Com-
munist chieftains, Kadar alone
seemed genuinely intent on push-
ing the campaign-to erase the
stigma attached to his govern-
ment since Russian bayonets in-
stalled it after putting down the
1956 Hungarian revolution.
Past Year
In the past year, Kadar has:
1) Kicked notorious Stalinist
out of top jobs in the party and
government;
2) Loosened. the tight rein on
Hungary's sullen intellectuals and
artists;
3) Negotiated with the Vatican
for a thaw in relations with the
Catholic Church and for the re-
lease of Joseph Cardinal Minds-
zenty;
Grant Amnesty
4) Granted amnesty to about
10,000 freedom fighters of 1956
and political prisoners; and
5) Warmed up frozen relations
with the United States.
Kadar last week entertained
United Nations Secretary-General
U Thant in Budapest and ap-
parently won his approval of the
liberalized regime.
Proper Outlook
In a speech during Thant's visit,
Kadar said his government had
restored "the proper political and
ideological outlook in the coun-
try."
"We will continue to fight tc
maintain it," he said.
.Kadar made these remarks a
few days after returning from the
East Berlin meeting of East Euro-
pean Communist leaders with
Khrushchev. The meeting presum-
ably was called to discuss the ri-
ing storm over Red Ihina's chal-
lenge to Khrushchev's leadership
of the world Iommunist movement.I
Alleged Tightening1
The Soviet allies are believed
to have decided to brace their re-c
gimes against the Chinese on-4
slaught by sharply tightening do-i
mestic ideological and political
to one of the bloc's havens of
tolerance for Western influences
and easygoing sophistication to-
ward Marvist theory.
Polish Communist L e a d e r
Wladyslaw Gomulka returned from
Berlin, and Roman Zambrowsky
-a key figure in his liberalized
regime since 1956-dropped out
of the party's politburo.
Important Victory
Zambrowsky's exit appeared to
mark an important victory for the
Polish party's conservative wing
that has been gaining ground
steadily in recent years.
The Poles then held a meeting
of the central party committee
that turned out the toughest
ideological and political line seen
in their country since before it
won limited independence from
Moscow in 1956.
The rigid line was a carbon copy
of the one the Kremlin laid down
in apparent response to Chinese
protests of "revisionism" and
western influence in the Soviet
bloc.
Drop Program
Ex-Stalinist chiefs in other East
European countries appeared to
have dropped their half-hearted
destalinization programs.
The key slogan in the new anti-
Western campaign is "no peace-
ful coexistence between ideolo-
gies."
But Kadar said during U
Thant's visit-"We shall not wage
war against people because of their
beliefs."
It is believed he came to Mos-
cow seeking a special dispensation
to pursue his domestic course as
recognition of his unflinching sup-
port of Khrushchev against the
Chinese.
World News
Roundup
By The Associated Press
WASHINGTON-The State De-
partment has refused a Spanish
request for an exemption from the
United States restriction against
shipping to Cuba, a spokesman said
yesterday.
UNITED NATIONS - The UN
Security Council will open a high
level debate Monday on demands
from newly independent African
countries that South Africa be
penalized for failure to abandon
its racial segregation policies.
South African Prime Minister Eric
Louw has announced that South
Africa will not participate in the
meeting of the UN Security Coun-
cil when charges against the re-
public are discussed.
* * *
DAMASCUS - Syrian Premier
Salah Bitar flew to Baghdad, Iraq,
yesterday for talks about a three-
way union of Syria; Iraq and
Egypt.
* * *
BRUSSELS-President John F.
Kennedy's chief trade negotiator,
Christian Herter, began talks yes-
terday on United States trade re-
lations with the European Com-
mon Market.
*. * *
NEW YORK-A cautious stock
market had its fears realized yes-
terday when the Federal Reserve
Board announced a boost in the
discount rate after the market had
closed. Dow-Jones averages re-
ported 30 industrials down 1.16;
20 railroads down .33; 15 utilities
down .53; and 65 combined stocks
down .54.
OPEN MONDAY TILL 8:30 I
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