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Volume 643, June 17 – June 21, 1943
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Volume 643, June 17 – June 21, 1943
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 643
June 17 - 21, 1943
Regraded Unclassified
B I I
Book Page
Board of Economic Warfare
House Appropriations Committee: Milo Perkins'
introductory statement before, on June 1 - 6/17/43
643
134
Senate Appropriations Committee: Wallace statement -
6/29/43: See Book 645, page 313
Business Conditions
Haas memorandum on situation, week ending June 19, 1943 -
6/21/43
265
- C -
Canada
See Lend-Lease
n Revenue Revision
Committee to Coordinate Economic Activities
See Occupied Territories
Correspondence
Mrs. Forbush's mail report - 6/18/43
193
- E -
Economic Activities, Committee to Coordinate
See Occupied Territories
- F -
Financing, Government
War Savings Bonds:
Organization Plans:
Louis, John J.: Directly under Director of Sales
Gamble to be in charge of all publicity and
advertising
a) Order - 6/17/43
7
b) Conference; present: HMJr, Louis, Graves,
and Coyne - 6/17/43
1
Mager, Harold: To be editor of War Finance Special
Bulletin for 48 State chairmen - 6/18/43
189
a) Issue No. 1: Redemptions of Savings Bonds -
6/19/43
224
1) Tables
246,247
(Copy to FDR - 6/22/43: See Book 644, page 54;
copies to Cabinet officers, etc. : Book 645,
page 100)
Fleming, Harold (Christian Science Monitor financial
writer): Series of articles on bond program -
6/17/43
39
Regulations on limitation or bond holdings, etc. -
6/17/43
43,45,57
Weekly report - 6/19/43
227
Fleming, Harold (Christian Science Monitor financial writer)
See Financing, Government: War Savings Bonds
Regraded Unclassified
- L -
Book Page
Latin America
Uruguay: See Post-war Planning (Currency Stabilization)
Lend-Lease
United Kingdom: Federal Reserve Bank of New York
statement showing dollar disbursements, week ending
June 9, 1943 - 6/18/45
643
218
Proposed 3rd Protocol between U.S.S.R., United States,
United Kingdom, and Canada - 6/17/43
147
Executive reports on operations as of May 31, 1943 -
6/18/43
214
Limitation on Bond Holdings, etc., Regulations on
See Financing, Government: War Savings Bonds
Louis, John J.
See Financing, Government: War Savings Bonds
(Organization Plans)
- M -
Mager, Harold
See Financing, Government: War Savings Bonds
(Organization Plans)
- 0 -
Occupied Territories
Committee to Coordinate Economic Activities: White to
represent Treasury - 6/17/43
142
- P -
Perkins, Milo
See Board-of Economic Warfare
Post-war Planning
Currency Stabilization:
Federal Reserve Board insures opportunity for
expression of opinion as plans move forward -
6/17/43
145
Uruguay: Representative to discuss appointed -
6/20/43,
245
- R -
Redemptions of War Savings Bonds
See Financing, Government: War Savings Bonds
Regulations on Limitation of Bond Holdings, etc.
See Financing, Government: War Savings Bonds
Revenue Revision
Pay-as-you-go Income Tax: Publicity for - 6/17/43
61
United Kingdom-United States-Canada tax burden compared -
Paul memorandum - 6/21/43
248
Regraded Unclassified
- T -
Book 643
Taxation
See Revenue Revision
- U - -
U.S.S.R.
See Lend-Lease
United Kingdom
See Lend-Lease
" Revenue Revision
Uruguay
See Latin America
- W -
War Finance Bulletin
See Financing, Government: War Savings Bonds
War Savings Bonds
See Financing, Government
White, Harry D.
See Occupied Territories: Committee to Coordinate
Economic Activities
Regraded Unclassified
1
June 17, 1943
8:45 a. m.
Present: Mr. Graves
Mr. Louis
Mr. Coyne
HM, Jr: This is what Gamble had in mind and what
I had in mind and I don't want it to be here for ten days,
waiting for Gamble to come back, to begin operating.
Mr. Louis is to operate directly under the Director
of Sales, who is to be Mr. Gamble, and he is to have ad-
vertising, radio, press, promotion, contact with Office
of War Information, contact with the War Advertising
Council and the Promotion and Planning Board, etc. In
other words, I want him to have everything that has to
do with advertising and promotion.
You (Mr. Graves) are in charge while Ted is gone.
Fix it up SO he can begin to operate this morning, SO
the people know that anything that has to do with adver-
tising, radio, etc., is his business. Until Ted gets
back, let him look to you (Graves) and see that he gets
going and that nobody gets in his way and that everybody
gives him every support and, if they don't, it's their
bad luck because Mr. Louis and I had an understanding
on what he has come down here for and he has come down
here now to help, so I want him to have every possible
assistance and nobody is to get in his way. Not only
not get in his way, but get behind him.
One of the first things I would like him to do is
to have put on his desk, every damn thing they have in
mind to put across the payroll allotment plan where we
Regraded Unclassified
2
-2-
are going from 10% to 15%. I haven't seen it. They
are right in it and they have me making speeches on it
and going out on the end of a limb and the limb is pretty
shaky. I want Mr. Louis to go into it from any angle
he wants to, SO he can get it.
When I get back, Tuesday, I would like in my
Graph Section a lay-out of everything that has to do
with promotion on the payroll allotment plan. You
(Mr. Louis) can say, "I scrapped this or I added this,
etc., but here it is." If you are going to be responsible
and don't like -- don't let them do to you what they
have done to'me: "It's been in the works since last
Christmas; we can't change it". If you (Mr. Louis)
don't like it, kill it.
Mr. Graves: That's most important.
HM, Jr: I am right out on a limb telling them
we are going up to 15% and twenty-five cents out of
every dollar and all the rest of that stuff, and I have
got to have 8. lot of high promotion to get it and we
have to use every trick in the bag, labor and management.
It may be wonderful. It may be lousy. I don't know.
With Graves' help and Coyne's help, sit down with Houghtel-
ing and with Engelsman. I think that's what we are right
up against.
Mr. Graves: That's right.
HM, Jr: Instead of trying to master the whole job,
if he took that he would very quickly get everything else.
Mr. Graves: That's right.
Mr. Coyne: That's right.
HM,Jr: I would like to know, Tuesday, is it good
or is it bad. As far as I am concerned, let the chips
Regraded Unclassified
3
-3-
fall where they may. If we don't have the right people
in the promotion end, or advertising, it's your (Mr. Louis)
job to say SO and let's get the right people. I am right
out on the end of a limb on the payroll allotment thing.
When I made a speech Saturday and was talking about get-
ting $18 billions, Ted wouldn't let me give it. He
didn't know whether we could get it.
The other thing we were talking about, about get-
ting propaganda on voluntary against compulsory. I would
say that's second.
I would like something in writing -- I will sign
it -- making this assignment.
Mr. Graves: You decided with reference to Gamble
and the rest of us, you wanted to postpone any order un-
til we had
HM, Jr: Well, we could set him up.
Mr. Graves: You would really like to set him up
before we set Gamble up?
HM, Jr: We will just make him responsible to Mr. X,
Director of Sales. "Mr. Louis, under the Director of
Sales".
Mr. Graves: Very good.
HM, Jr: He can't be flopping around here for ten
days. Supposing somebody bucks him, he's got a piece
of paper with my name on it. I don't want to wait.
Mr. Graves: Very good.
HM,Jr: The order can read "Mr. Louis, in charge
of advertising, responsible to the Director of Sales".
Mr. Graves: That's all right.
Regraded Unclassified
4
-4-
HM,Jr: In this whole lay-out, the apple of Ted
Gamble's eye, the motion picture theatre, not even a
panel on the motion picture, so the only deduction I
can draw is the motion picture industry isn't doing
anything. The whole industry, with 16,000 theatres,
if they are doing anything, nothing there -- a blank
spot.
Mr. Coyne: They are leading up to a special
activity in July. That might be the reason for it.
HM,Jr: In this job which we have set for our-
selves, I talk about getting $24 billions from indiv-
iduals, there isn&t any avenue of publicity we can over-
look and certainly 16,000 theatres with whatever they
have -- 100 million people they claim
Mr. Coyne: 80,000,000 a week.
HM,Jr: Here's this vast audience and, as far
as I can tell, it's a blind spot.
HM,Jr: I want to repeat what I am saying: in
this thing we can't overlook a medium of promotion which
claims they reach 80,000,000 people a week. You can't
overlook anybody if we are going to sell every man, woman
and child, and that's what we have got to do. Believe
me, Coyne, the heat is going to be on you people; I am
going to make you sweat blood. No fooling.
Mr. Coyne: You have to sweat blood to get $18
billions from individuals.
HM,Jr: All right! You fellows put it in my
speeches. I did not ask for it. I am just warning you.
Mr. Coyne: We realize what a job it is.
HM, Jr: You can't have any lame ducks around. I am
not accepting the excuses again, like Saturday, I go to
Regraded Unclassified
5
-5-
Kingston -- no audience, doesn't reach the A.P. in
Albany until 7 o'clock. Three men from War Bonds up
there. Those things can't happen again. I talked to
25 boy scouts and there were three men there, Callahan,
Shad and Ramey up there. It's not encouraging for me
to go out and sweat blood
Mr. Coyne: Haven't you got some pretty good
reports on payroll savings?
HM,Jr: No. I will qualify that. I haven't received
any reports. That's another thing. Not only am I not
sold SO I, in turn, can sell the President, but the trouble
always is the important people in War Finance don't know
what's going on and the 48 State Chairmen don't know. If
I don't read this stuff, that's my fault, but if I don't
get the stuff, that's your fault.
Mr. Coyne: Of course, the drive only started on
the 15th. Where it was presented first, in Oklahoma,
it was decided the 15% was not enough.
HM,Jr: I never know when I am going to be attacked
and you can't wait two or three weeks. The people who are
fighting us have lots of smart people and they are on their
toes every minute. So far as I know, it may be wonderful
or it may be terrible. I just don't know, and the place
to exhibit it to me in the chart room because that's where
I go.
You, Louis, can come to me any time and say, "Mr.
thau, sometime today when you have ten minutes, I
want you to go across the hall." If I don't go, it's
my fault, but if you don't invite me and I don't go, that's
your fault.
Mr. Coyne: We can't tell you of its success because
the drive only started on the 15th of the month.
HM,Jr: It's your job, Louis, to keep me sold 80
Regraded Unclassified
6
-6-
I can keep the President and all the people around me
sold.
Now, Harold, please give to this gentleman.
Mr. Graves: Yes, indeed.
o0o-o0o
Regraded Unclassified
7
OFFICE
OF
TREASURY DEPARTMENT
WASHINGTON
THE SECRETARY
CONFIDE INTIAL ORDER
June 17, 1943.
Mr. John J. Louis, under the direction of
the Director of Sales, United States Treasury
War Finance Committee, will hereafter have
general supervision of all publicity and adver-
tising in connection with the sale of Government
securities to the public.
Mintary Secretary of the Treasury.
S1 the
CONFIDENTIAL - NO PUBLICITY PLEASE FOR THE PRESENT.
FORDEFENSE
BUY
UNITED
STATES
SAVINGS
BONDS
Regraded Unclassified
8
Mr. Graves read 6/17/43
9
June 17, 1943
9:24 a. m.
HMJr:
Frank?
Frank
Walker:
Hello.
HMJr:
Frank?
W:
Hello, Henry.
HMJr:
How are you?
W:
All right, sir. How are you?
HMJr:
Okay.
W:
That's good.
HMJr:
I understood from the Chief Clerk over at the
White House - Forster - that you were - objected
to the appointment of Harold Graves as Deputy
Commissioner of Internal Revenue.
W:
No, I haven't done that, Harry - Henry, but I
wanted to tell you some protests that have come
in. I just want to communicate them to you.
HMJr:
Please - well, go ahead.
W:
Uh?
HMJr:
You want - go ahead.
W:
A lot of the fellows complained very thoroughly
about him. I - personally I think he's quite a
fellow...
HMJr:
Well....
W:
....if I were speaking of him.
HMJr:
Where did the complaints come from, Frank?
W:
Well, they said that he's anti-Administration and
that he's right close to Brown....
HMJr:
Uh huh.
W:
when Brown was Postmaster General and - and
that he - the only fellows he gives consideration
(Cont'd.)
Regraded Unclassified
10
- 2 -
W:
to are - are the opposition, and not
(Cont'd.)
HMJr:
Huh.
W:
the Administration fellows.
HMJr:
Well, he wouldn't have been with me for nine
years, if that were 80.
W:
Well, I don't think so either, Henry.
HMJr:
And after all
W:
If I had - if I had a personal protest, I'd tell
you.
HMJr:
...and after all Helvering is a pretty good
politician.
W:
Yeah.
HMJr:
I mean.
W:
But I thought - I thought in view of the fact
that these fellows were complaining that I wanted
to be able to tell them that I'd told you, and that
was the only reason I
HMJr:
Well, when you say "they ", do you mean
W:
Oh, quite a few fellows.
HMJr:
Uh
W:
I'd rather not get them involved.
HMJr:
I see.
W:
I can tell you later, some of them.
HMJ,,
Uh huh. Well
W:
But I don'
HMJr:
The White House is - is holding it up. I - and -
I....
W:
Now that's the reason I tried to get 8. hold of
you and they said you were away.
Regraded Unclassified
11
- 3 -
HMJr:
Yeah.
W:
And I thought in view of the fact they had
protested, it was better to - for me to be in
a position of saying that I had told you.
HMJr:
Well - well, what do you want to do about it,
Frank?
W:
I think it's all right to clear it - Henry -
and I told them that was my personal judgment,
too.
HMJr:
Well, would you tell that to Forster?
W:
I will.
HMJr:
You will.
W:
Yeah.
HMJr:
Thank you.
W:
How is Mrs. Morgenthau?
HMJr:
She's a little bit better now, but she's been
awful sick.
W:
So I understand. I didn't know it until - Mrs.
Walker and I didn't know it until last week.
HMJr:
Oh, she's been terribly sick, but the last - since
Sunday, I think she's taken a turn definitely for
the better.
W:
It's not grave now?
HMJr:
Pardon?
W:
I say it's not grave now.
HMJr:
Not now, no.
W:
Uh huh.
HMJr:
No, I think she's definitely on the road to re-
covery.
Regraded Unclassified
12
- 4 -
W:
Well, give her - - her Mrs. Walker's and my
love. I'm very happy to know that, Henry.
HMJr:
Thank you, Frank.
W:
All right.
Regraded Unclassified
13
June 17, 1943
11:25 a.m.
VOLUNTARY VS. COMPULSORY SAVINGS
Present: Mr. Bell
Mr. Sullivan
Mr. Smith
Mr. Graves
Mr. Haas
Mr. Murphy
Mr. Lindow
Mr. Blough
Mr. Viner
Mr. Louis
Capt. Kades
Mrs. McHugh
(Memorandum handed to the Secretary by Captain Kades,
copy attached.)
H.M.JR: May I read this out loud, or not?
CAPT. KADES: As far as I am concerned.
H.M.JR: This is from Captain Kades to me in answer
to 8. request from me.
(Memorandum read by the Secretary)
H.M.JR: Very good - excellent. For a man with an
open mind it is very good. (Laughter)
MR. HAAS: I suggested & change, Mr. Secretary, as
an alternative ending which I think greatly strengthens
and takes care of some of Chuck's criticisms - not com-
pletely, but--
CAPT. KADES: I gave my criticisms to Mr. Lindow last
evening. I haven't seen the draft since then.
Regraded Unclassified
14
- 2 -
H.M.JR: Go ahead, George.
MR. HAAS: I don't have the letter.
H.M.JR: Well, who has?
(Memorandum addressed to Mr. Byrnes handed to the
Secretary by Mr. Lindow, copy attached.)
MR. BELL: You mean the last paragraph?
MR. HAAS: Yes.
MR. BELL: The last paragraph.
H.M.JR: I say what Kades says is pretty devastating.
MR. BELL: There isn't any doubt but what you are
getting yourself in for a month or two of correspondence
between the Director of Stabilization and the Treasury.
H.M.JR: What are the changes in this letter so I don't
have to read seven pages?
MR. LINDOW: The main change is the ending.
H.M.JR: Let's have the changes.
MR. LINDOW: The first line reads, "It may be helpful
to indicate the grounds" - before we had, "It may be helpful
to submit a statement of the grounds on which I oppose a
forced lending program - certainly at present or in the near
future."
The paragraph numbered two on the first page - the
last part of it reads, "A forced loan program would still
leave a need for a voluntary program. We said yesterday,
"But would greatly handicap us in carrying it out." We
just tried to clarify it. Most of the changes are of that
nature.
H.M.JR: Don't give me that kind.
Regraded Unclassified
15
- 3 -
MR. SULLIVAN: There is an entirely new idea in this
last paragraph. When you are coming out for a spendings
tax as between compulsory tax and spendings tax, the Con-
gress would take the compulsory savings in five minutes.
MR. LINDOW: There is an alternate. We have the pro-
posal of Mr. Haas in the separate two pages, and the first
draft which you have there is without that - is without his
proposal. So if you read the last paragraph of the draft in
your hand now, it will be before his suggestion. Then the
other one will be with it. (Copy of alternate attached.)
MR. PAUL: That paragraph at the top of page seven is the
new material, isn't it?
MR. LINDOW: That is right.
The alternate material adds one whole new paragraph, so
all you need to do is read the last paragraph.
H.M.JR: Does everybody have a copy of this letter?
Doesn't that - you lawyers - it takes six pages to say you
are for the volunteer plan, and then say suddenly, "Well, I
am not quite so sure. Then you throw in the spendings tax
just at the end. Doesn't that weaken the whole thing?
MR. SULLIVAN: I think SO.
Y
MR. VINER: May I say something, Mr. Secretary?
H.M.JR: You are not here just because you are good
looking. (Laughter)
MR. VINER: In addition to that, may I say something?
(Laughter)
I think myself that you ought not to think that that
weakens it, because you ought not to take a position so
strong that that would be a weakening of it. You ought not
to say that never, or that under any circumstances - or that
you can't conceive of the circumstances in which forced savings
would be desirable.
Regraded Unclassified
16
- 4 -
I think the line you ought to take is that just now
you don't think that - or that in the immediate future it
might be necessary to revert to that and that you want a chance
to work out other ways, but you may have to move on to it.
Now, there was something you took out of the letter
yesterday that I would certainly like to see come back. In
other words, you ought not to put yourself in the position that
you have a moral objection to forced savings, that you can't
conceive of circumstances under which you would find it
acceptable, and so on. You ought to regard it as a device
which may conceivably be necessary, but you don't believe it
is necessary now; that if you should become convinced that it
is, you would then be quite prepared to work at it, and then
apply it enthusiastically under the circumstances. That is
the attitude I take. You mustn't take the moral attitude
that there is something evil in forced savings as such, but
you think your position ought to be that you have not yet
exhausted better alternatives or better expedients, or it is
not yet clear that you have.
MR. SULLIVAN: I don't think it is a moral position,
Jake. we are for the voluntary - not only for the moral
aspect of it, but because it gets us money that the com-
pulsory cannot get.
MR. LINDOW: Isn't there--
MR. VINER: But you are using - my point is that - it
may be another argument, but use a number of arguments, and I
would say that I accept that one - I accept it because you
tell me it is 80, Supposing it isn't so; supposing it turns
out not to be SO.
MR. PAUL: It is a well-known form of argument - this
arguendo business.
MR. VINER: You argue one, and then you exhaust that and
move on to another field. The field you ought not to take is
that you are morally commited on other grounds. Supposing
it does become necessary to move to it? It is conceivable.
Regraded Unclassified
17
- 5 -
MR. BELL: Jake, what did we take out last night that
you--
MR. VINER: This was a part of the sentence in the
last - the Secretary said - I don't know that wording, but
nevertheless the Secretary thought it was giving away, that
he was retreating at the end of the letter from the position
taken in the earlier paragraphs. I don't think it was a
retreat. You were realistic; you can't say now what we
may have to do.
MR. LINDOW: The sentence read, "In any event, I feel
strongly that no plan for compulsory lending should be
proposed at least until after the Third War Loan in September."
MR. PAUL: I thought we were going to put that in with
January--
MR. LINDOW: I thought the last word was we were going
to leave this out.
MR. BELL: "After the end of the year."
H.M.JR: I think we said it should read "Not until
after the end of this year."
MR. SULLIVAN: That was your first decision; then you
said, I think, we had better take that - the first decision
was the end of the year. Then you decided to take it all
out.
MR. PAUL: That is right.
MR. BELL: Let's put it back. I think there is some-
thing to that - to Jake's argument, that you can't sew
yourself up here.
MR. LINDOW: Mr. Secretary, the spendings tax is not a
forced lending proposal. The letter argues against forced
lending and then concludes that the spendings tax would be
a desirable way to increase the savings of individuals. It
would be perfectly compatible with the voluntary way of
selling bonds.
Regraded Unclassified
18
- 6 -
H.M.JR: I understand that.
MR. LINDOW: So I don't think that it weakens your
position on the voluntary bond sale program.
H.M.JR: We went through that all originally, the two
things did dovetail into each other.
MR. SULLIVAN: I agree with that, Mr. Secretary, but
you will find that the Congress is so hostile to the
expenditure tax that if they had to choose today between
that and compulsory savings, I don't think they would hesitate
for a minute to take compulsory savings.
MR. PAUL: I don't know whether Congress is SO hostile
to the spendings tax, John. We got four votes out of twelve
on the spendings tax last year with all our friends absent
from the room.
H.M.JR: Well, the point is - the trouble on the
spendings tax is, we went up there and gave it to them cold.
I have always thought that was one of the best things that
we have ever had, where you give the credit to the man for
the volunteer bond and all that. It fits into the thing very,
very well.
MR. VINER: Also, the country was cold. You see, it
was not - it came to them from the Treasury, but the country
hadn't thought about it. Since people are discovering
there was more in it--
H.M.JR: Every person that I have sat down and talked
to in all walks of life, and where I have explained it to
them as I have understood it - "That is wonderful." They
like it.
MR. HAAS: This may be something against it, but even
the Chamber of Commerce has come out for it.
MR. LINDOW: "Fortune" magazine had an article on it.
MR. SULLIVAN: I am familiar with it, and agree; I
am just saying that everybody in Congress who has mentioned
it to me has been against it.
Regraded Unclassified
19
- 7 -
MR. PAUL: I know some that are.
MR. BLOUGH: I think the real question about putting
it in this letter is whether you want to open an all summer's
quarrel in the Administration over spendings tax versus com-
pulsory lending.
MR. VINER: Does this necessarily open it? I think if
the Treasury has any faith in it at all it ought to want it
to be considered, that is all.
MR. SULLIVAN: You have a question of timing here, Jake.
H.M. JR: Could I get this into the letter, carrying out
what Viner says, you see - what I would like to get is this -
we know we can't get - I brought this out in my press con-
ference - we know we can't get any legislation on the books
before the first of January. So any decision at this time -
all it can do is cause public discussions to hurt our campaign
for the volunteer plan. Therefore, let the Administration
give the volunteer plan its full backing for the rest of
this year, and let's see what we can produce.
Now, if we can't produce as much money from the right
people as we think we can during the rest of the year, I
will be the first to admit it, because I am just as interested
as anybody in the Administration to absorb this excess spend-
ing money, and have been for years. Now, that is the way I
feel.
As I say, if we can't get the right amount of money
from the right people, then I am not sold on this thing
forever. But I can't have stuff coming out constantly from
important people which undermines and makes it almost im-
possible for us to attain our goal.
MR. PAUL: May I make a suggestion there?
H.M.JR: If you please.
Regraded Unclassified
20
- 8 -
MR. PAUL: I think there is a good deal in that approach.
I don't think we need this letter at all. I think that is
a totally different approach. We were more or less having
an armistice there, and there wouldn't be any objection to
discussing voluntary savings privately in the room. People
shouldn't make any public statements which would interfere
with the voluntary program.
H.M.JR: Well, what Kades has done - and he has rendered
us a service in doing this thing - this letter gives them a
target to shoot at, and then - I mean, they will immediately
begin to shoot at it just the way Kades did. And if he can
do this - I am being serious now - he, who has no emotion on
this the way Ben Cohen has, what will Ben Cohen do, who
feels this thing emotionally?
Now, on the other hand, you go to 8, fellow like Ben
Cohen and say, "Look, Ben, after all, you can't get anything.
We think we can do so much and get so much money from this
group. Now, in as much as you can't get anything through,
for heaven's sake give us a chance; and if after the first
of January we are wrong, we will say SO. But in the meantime
we would like to sit down and talk with you about a plan
which we think supplements the volunteer plan, namely, the
spendings tax as compared to the compulsory, which would
ruin the volunteer plan.
MR. SULLIVAN: I am all for that.
MR. PAUL: May I ask a question which might affect
timing there? There is a drive September 9 - voluntary
drive. Is there another drive in the calendar year '43?
MR. SULLIVAN: There is very apt to be one in December.
MR. PAUL: That affects your timing.
H.M.JR: We have to have one in December in order to
get the money. There are two schools of thought in the
Treasury. One thinks we should go in before Christmas,
make the appeal, and get the money rather than let them
spend it. The others say, "Wait until the money flows in
Regraded Unclassified
21
- 9 -
and go after it afterwards." I am leaning a little bit
towards before Christmas; make the drive Buy a bond
instead of something in the black market."
MR. PAUL: That has something of an effect on your
timing.
MR. VINER: As to how much leeway you need as to
timing before you have tried your thing out.
H.M.JR: But I mean, after all
MR. BELL: You have to close the third drive before
you undertake anything on the enforced lending publicly.
You won't know whether or not you have reached your goal
until after the next drive - the fourth drive, really.
MR. VINER: You don't think the September test will
be an adequate test?
MR. PAUL: The reason I suggested that, Dan, is that
the next bill might beover with by December, and you would
miss that chance to get compulsory savings in if you were
waiting to see the results of the December drive.
MR. HAAS: Maybe in the interim sell them on the
spendings tax.
MR. PAUL: But the way you phrase it, the ultimate
time is affected by that consideration.
MR. BELL: Would it help this letter any to say that
we should drop enforced savings at this time, at least with
a view to getting a bill on it, but concentrating all of
our efforts on getting a tax bill with as high taxes as we
can get through Congress; and then if we have failed in our
attempts to get the goal, we can then consider enforced
savings the beginning of the next session of Congress?
MR. PAUL: With one amendment, Dan, in the meantime
privately discussing it.
MR. BELL: I mean publicly.
Regraded Unclassified
22
- 10 -
H.M.JR: by inclination is to do what the English do,
come in with a memoir from the British Treasury which they
read; then they say, "Now, this isn't official; we are just
reading this, of course, for your memory. If you would
like to have a copy of what we have said, we would be very
glad to leave it with you." Then they go through this thing
of reading the thing.
Well now, I would be very glad to furnish Mr. Paul, who
would represent the Treasury, with a memoir which he can read
from.
MR. PAUL: I would be glad to read from it, but I wouldn't
leave it there. (Laughter)
H.M.JR: That is all right. You might find Drew Pearson
under the table. (Laughter)
MR. PAUL: That is right, and furthermore, I wouldn't
even have it with me. I would have a little rough summary
in my handwriting - littles notes, to summarize it. I
wouldn't want to have anything that I might be asked to leave.
H.M.JR: The way I feel right now, I would rather give
you a memorandum of the way the group feels here and have you
present that verbally, you see.
MR. PAUL: Wouldn't you rely on me to memorize from a
few notes instead of having that thing in my possession at
the time?
H.M.JR: I said that.
MR. PAUL: I am sorry; I didn't understand you.
H.M.JR: I said that. Then you go over and simply say:
"Mr. Morgenthau feels that if the Administration gets behind
him and stops sniping, he really believes, with his organiza-
tion, he can get the money that you people want from the right
kind of people on the volunteer plan. If he can't get it, he
will be the first to say 80. But during this period he would
like to study jointly with you the spendings tax as an adjunct
to the volunteer plan as opposed to the compulsory savings."
Regraded Unclassified
23
- 11 -
MR. PAUL: I think that is a fine decision.
H.M.JR: But we need the rest of this year. We need
the rest of this year.
Now, I would play for that, you see. Then if they
say, "We will have to get it in the next tax bill," we can
trade a little bit on that, Randolph.
MR. PAUL: Yes, I understand. Remember what Doughton
said the other day, that the Congress - we would bring that
up at the end after we saw what else we could do at the end
of the consideration of the tax bill.
H.M.JR: But I am scared to get this memorandum out.
MR. SMITH: I think SO. I think you would just be
reading the rebuttal in the newspapers two days later with-
out benefit of having turned your argument over.
H.M.JR: Who disagrees? Who would like to improve,
add to, or subtract from what I have just told Paul?
What do you think, Chuck?
CAPT. KADES: I agree with what Dan said originally,
that this will start a controversy and a series of exchange
of letters. I don't know anything about the merits of the
proposal, Mr. Secretary, but it seems to me that that is
the effect it is going to have on anyone who favors forced
lending.
H.M.JR: But I mean - you don't want to comment on the
tentative instructions I have given Mr. Paul - do you want to
comment on that?
CAPT. KADES: Yes, sir, I hope he carries them out.
(Laughter)
MR. PAUL: I must register an objection to that. (Laughter)
H.M.JR: You (Kades) stick around. Isn't this a good
enough battle for you? What do you want to go out on the
front for? (Laughter)
Regraded Unclassified
24
- 12 -
MR. PAUL: That is like Leon Henderson's definition
of coward.
H.M.JR: What was that?
MR. PAUL: A man who leaves an OPA job and joins the
Commandoes. (Laughter) I am not sure Kades isn't that.
MR. SULLIVAN: I think this is a good idea, dispensing
with this letter and having Paul do that. It has the added
advantage of two bites to the apple, because if they are
not willing to go along with Randolph, then you have a chance
to get them all over here and make a purely personal appeal.
MR. BLOUGH: My comment was, I think you possibly would
have somewhat better response over there if instead of mak-
ing it spendings tax versus compulsory savings, that we
discuss alternatives in meeting this program of spendings
tax and compulsory savings and any other alternatives which
may be available.
H.M.JR: That is all right.
MR. BELL: I wouldn't be opposed to discussing an enforced
lending program if they keep it within the family for the
next four or five months.
MR. VINER: Not only that, but I think it would be very
good preparation if a hand was tried at drafting a bill to
see what the real problems would be here in the Treasury
in attacking it.
MR. PAUL: We have drafted a bill, but the more
important part is to outline - we have done that.
H.M.JR: Well, I think I would like to keep it just
the way it is for the moment, I mean, if you don't mind.
But I would say that we have alternative suggestions such
as the spendings tax. Is that all right, noy?
MR. BLOUGH: That is all right.
Regraded Unclassified
25
- 13 -
H.M.JR: All right, don't let's--
MR. PAUL: I want to report to you then - did you tell
him, Dan? I told you that I talked with Ben last night.
H.M.JR: He reported it. Tell the group.
MR. PAUL: I talked to Ben last night. I felt, what is
the use of working on this subsidy message, and what about the
tax message? I said to Ben, "In view of the President's
interview, is there going to be any subsidy message? And in
view of the decision of the meeting yesterday morning" - it
was yesterday, wasn't it - the legislative leaders?
MR. BELL: Tuesday morning.
MR. PAUL: "What is the use of talking about a tax
message now? It would be bad timing."
Ben's general answer was, "I don't know; I don't know
what is going to happen now." He talked along for quite &
while. It was a very amusing conversation. I said, "Your
chin is on the gutter; I am going to talk to you when you
are in a better mood than you are today."
I couldn't get anywhere with him. He was discouraged at
the lack of coordination between you (the Secretary) and
Byrnes - the fact that you two didn't sit down in the same
room and talk it over together. He wasn't blaming you, either.
H.M.JR: He wasn't?
MR. PAUL: Not any more than Byrnes. He felt just as
bad about Byrnes. He felt that the two of you--
H.M.JR: I can't be up in New York at a hospital and
attend a meeting here with Byrnes when I have such an able
representative as Mr. Paul.
MR. PAUL: No, he was not talking of any one meeting
that you--
Regraded Unclassified
26
- 14 -
H.M.JR: Well, we had these meetingsand had everybody
concerned over here and gave them a supper and everything
else. I invited Mr. Byrnes six months ago. Mr. Byrnes
wouldn't come here.
MR. PAUL: Byrnes has been sulking in his tent for
months; Ben recognizes that.
H.M.JR: Mr. Byrnes was to come over here, but he was
too important to come here. Everybody else came.
MR. PAUL: Including Eccles.
H.M.JR: And Harold Smith, and so on.
MR. SULLIVAN: And Leon.
H.M.JR: Everybody came - if he wasn't a stuffed shirt.
I think it was a very good meeting. I am very much pleased.
I am particularly indebted to Captain Kades for bothhis report
and his remarks to Mr. Paul. (Laughter)
MR. PAUL: I will get him later. (Laughter)
MR. BELL: After the war. (Laughter)
We have this subsidy message.
H.M.JR: Oh, gawd, why don't you do that in your room?
MR. BELL: I have--
H.M.JR: Don't let's write any messages.
MR. BELL: I prefer not to write one, but then we have
been asked for our comments, and we have rewritten the draft
that was sent over.
H.M.JR: How long is it?
MR. BELL: How long is it, Roy?
MR. BLOUGH: Five pages.
Regraded Unclassified
27
- 15 -
H.M.JR: I can't do five pages.
MR. BELL: Do you want to leave it to us?
H.M.JR: Yes.
MR. BELL: Paul has to find out what kind of a letter
we can write, anyhow.
H.M.JR: I will leave it to you boys. Let Kades take
this one and be Ben Cohen. (Laughter)
MR. PAUL: I have a good excuse for writing a memo-
randum.
H.M.JR: Seriously, let him "Ben Cohen-ize" this
one.
MR. BELL: This one is all right because when we
send it over it will go into the wastebasket and they
will prepare their own message. (Laughter)
H.M.JR: Take it and go into your own office. I will
leave it with you. I just can't do any more.
Regraded Unclassified
28
THE SECRETARY OF THE TREASURY
WASHINGTON
Dear Mr. Byrnes:
It may be helpful to indicate the grounds on
which I oppose 2. forced lending program -- certainly
at present or in the near future. In my judgment
a proposal at this time for forced lending would
seriously impair both the tax program and the
voluntary lending program.
The chief considerations on which I rest this
judgment are 8.6 follows:
(1) Such a proposal would tend to defeat our
efforts to get the taxes which the Government needs --
and which the country is well able to stand -- by en-
couraging substitution of forced lending for new
taxes, with a great loss of anti-inflationery
effectiveness.
(2) No forced loan program yet offered promises
to raise as much 26 half of the $25 billions we plan
to raise this year from individual citizens by the
voluntary route. A forced loan program would still
leave a need for a voluntary program, but would
greatly handicap us in carrying out that program.
(3) The voluntary way offers the necessary flex-
ibility of adaptation to citizens' varying situations.
A compulsory program could cope with this problem
only by the use of unmanageably complex schedules of
exemptions and rates.
(4) Voluntary lending 28 an expression of war
participation by individuals has morale values which
would be largely sacrificed by making it play second
fiddle to & compulsory program.
FORVICTORY
BUY
UNITED
STATES
WAR
BONDS
AND
STAMPS
Regraded Unclassified
29
- 2 -
The remainder of this letter will take up in
order the four points just made.
(1) Adverse effect of compulsory lending on
prospects for additional taxation.
The present tax revenue, on an annual basis, is
just about one-third of our annual budget. I think
taxes ought to cover something like half of our ex-
penses. The economy 1s well able to stand additional
taxation, including additional income taxation, at
this time. Our estimates indicate that national
income payments, after payment of individual taxes
(including State and local), amounted to $109 bil-
lions in the calendar year 1942, whereas income pay-
ments after individual taxes for the calendar year
1943 will amount to $125 billions. This indicates a
large increase in the capacity to pay taxes.
But I fear very much that a proposal for compul-
sory lending would destroy our chances of getting the
new taxes which we need. Statements have already been
made that the slight increase in taxes payable in
March 1944 and 1945 as a result of the pay-as-you-go
legislation should bar further increases in income
taxation in the near future. The Treasury, of course,
has not made any such statements and rejects this view.
I believe a recommendation for enforced lending at
this time would be widely interpreted 8.8 an abandon-
ment of any intention on the part of the Administration
to get additional income taxes.
Substitution of forced loans for taxes 1e undesir-
able because of the much lower anti-inflationary ef-
ficiency of forced loans. To begin with, B very large
proportion of the funds brought in would be funds al-
ready scheduled for voluntary investment in var bonde.
It is likely that the loans individual citizens would
be required to make under compulsion would, in many in-
stances, be fully offset by cancellations in payroll
allotment and other voluntary savings arrangements.
At best, there would be only a small net gain in the
total loaned to the Government.
Regraded Unclassified
30
- 3 -
Even this small net gain in the total loaned will
overstate the effect of the compulsory program in re-
ducing consumer expenditure; for the oitizens can count
their loans as assets available in the future and will
thus be less inclined to make savings in other forms.
Allowing for the combined effect of the conversion of
voluntary bond purchases and conversion of other sav-
ings, it is plain that a forced loan program would help
much less against inflation than & tax program involv-
ing very much smaller amounts.
(2) Only the voluntary method offers a program
which is big enough to do the job.
The Treasury's program calls for 25 billions of
voluntary sales of securities to individuals this cal-
endar year. The 85.3 billions goal for the January-
April financing period was exceeded. The total goal
of $25 billions for the year compares with 214 billions
for the estimated Federal income tax liability of in-
dividuals this year. This means that the present tax
rates would have to be multiplied almost three times on
the average if we were to get the same total of $39 b11-
lions through taxes and compulsory loans. No program
yet offered for compulsory lending has been anywhere
near this size.
A compulsory lending program which is not large
enough to replace voluntary loans completely could not
be regarded in full as a net addition to the voluntary
lending now in sight. The greater part of the funds
obtained through compulsory loans would be at the ex-
pense of voluntary loans.
The effect of forced lending would certainly be
to interfere very seriously with our payroll savings
plan and other regular purchases of war bonds and our
future drives for funds in large amounts, but it would
not relieve us of the necessity of continuing this steady
solicitation and these periodic drives. The difficulties
of raising funds in both these types of campaigns would
be immeasurably increased by a savings levy which would
create in the mind of the average wage earner the strong
Regraded Unclassified
31
- 4 -
impression that he had done his full duty with respect
to the purchase of Government securities through the
enforced deduction from his pay. I think the same
effect would be observed with respect to other regular
purchasers who are not on the payroll deduction plan.
(3) Greater flexibility and equity of the voluntary
system.
Enforced lending would be levied through the tax
mechanism and of necessity would be subject to the same
limitations as apply in the case of income taxes. This
means that the amount of enforced levies which we could
apply in any income group would be limited by the capac-
1ty to pay of those in that group who are least able to
pay. When it is remembered that the total amount which
we expect to draw from individuals in taxes and the
present voluntary program this year is almost three
times the amount of taxes alone, this limitation
threatens to become a fatel handicap to compulsory lend-
ing. It 1s impossible to raise compulsory levies --
taxes plus compulsory lending -- in the higher brackets
to three times their present level without going over
100 percent, with the result that levies in the lower
brackets would have to be more than three times present
rates on the average.
The application of such rates would be very unfair
to a great many people. Ability to save and to make
savings available to the Government 1s effected not only
by size of income but by a variety of other factors.
At any income level there are many people who have
reason to expect a drop in income after the war and who,
therefore, have stronger reasons to save than people
whose incomes are permanently at that level. This 18
particularly true of families which have more wage
earners than usual, Ability to save 18 affected by the
wide variations in the cost of living between war centers
and other parts of the country, end between large end
small communities -- also in some cases by sheer inability
to spend because of the lack of things to buy. Moreover,
ability to use savings for Government bonds 18 affected
by prior obligations, such as life insurance end the re-
payment of mortgage debt.
Regraded Unclassified
- 5 -
32
The compulsory method does not readily lend itself
to adjustments providing flexibility for these varia-
tions. In principle, most of these elements of dif-
ference could be taken care of by the use of elaborate
schedules for determining compulsory lending quotas;
but the formulation and administration of such schedules
would involve tremendous difficulties. The voluntary
program, on the other hand, offers the necessary flex-
ibility to take care of individuals in different nitua-
tions and with varying obligations.
(4) The morale value of voluntary lending.
The voluntary program has been one of the major
channels of participation in the war effort on the home
front. It is estimated that close to & million people
acted as volunteer workers in the Second War Loan. A
volunteer force of this size, moreover, means that large
numbers of our people are developing an increased sense
of community responsibility which will carry over into
the peace years.
It is not only in the selling effort, however, that
civilian participation 1s involved. The patriotic urge
to help finance the war through buying bonds is an im-
portant factor as well. The adoption of compulsory lend-
ing would seriously affect this sense of participation.
It would, I think, go a long way toward killing the enthusi-
asm and the high morale among workers to which we have been
able to contribute through our voluntary payroll
savings plan for the purchase of war bonds.
In conclusion, it 1s pertinent to note that the
participation by individuals in the voluntary purchase
of Government securities has been increasing substantially.
From January to June 1942, the net purchases of Government
securities by individuals (redemptions deducted) were
4.4 billions. The purchases from July to December 1942
were 5.8 billions. Individual net purchases from January
to May 1943, inclusive, were $6.3 billions, and with the
minimum figure estimated for June of $0.7 billions added,
the total for January to June 1943 will amount to not
less than 87 billions.
Without any increased selling efforts and without
anticipating a continuance of this growth, we could con-
fidently rely on individual sales for the calendar
year 1943 of not less than 814 billions. As a matter
Regraded Unclassified
33
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
June 17, 1943
FROM
Captain Kades
If I were Ben Cohen writing a memorandum to Mr. Byrnes
after reading the draft of letter opposing forced lending,
I would say (but more pungently) something like the following:
"1. The Treasury rests its case against forced lending
on four grounds. Since each ground is based on a funda-
mental misconception, the conclusion of the letter cannot
be justified, unless you reach the same conclusion for
different reasons from those stated in the letter.
"2. The first point of the letter is that forced lending
will defeat new taxes and that 'The economy is well able to
stand additional taxation, including additional income tax-
ation, at this time.'
"No one has seriously proposed that any new income
taxes be made effective until after the first of next year.
Any thought of additional income taxation at this time
flies into the teeth of the realities of the legislative
process. This first point has validity only if you assume
the conclusion which the letter tries to prove; namely
that voluntary savings plus taxes is a better weapon in
the fight against inflation than voluntary savings plus
taxes plus forced savings.
"3. The second point of the Treasury letter is that
forced lending will not raise as much as half of the $25
billion which, according to the letter, 'we plan to raise
this year from individual citizens by the individual route.
"Once before it was glibly stated by the Chief Execu-
tive 'We planned it that way,' much to his later embarrass-
ment.
Regraded Unclassified
34
- 2 -
"Moreover, not a shred of evidence is submitted in
this letter to support the belief that a $25 billion goal
will be achieved. The fact that the money is available is
no proof. It was also available during the Second War Loan
Drive, when, incidentally, the impact of the 20% withholding
tax had not been felt.
"The $25 billion is a laudable goal. But it is an
estimate neither supported by facts nor figures nor cold
logic. And you can be sure that if Secretary Morgenthau
had any substantial basis for this prophecy which would
stand the light of day, he would have used it to forestall
forced lending.
"4. The third point of the Treasury letter is that
forced lending is not sufficiently flexible to meet various
family situations.
"Fifty years ago the Boston lawyer Choate, who argued
to the Supreme Court that the income tax was 'communistic
in its tendencies', used that same reason in opposing any
income tax legislation.
"The additional income taxes the letter urges be im-
posed at this time are open to that same objection. So
are excess profits taxes. So are OPA regulations.
"5. The fourth point of the Treasury letter is that
voluntary lending is of high morale value. Nevertheless,
in the absence of post-war credit provisions, taxes do not
provide a nest egg for the wage earner, as such provisions
make possible for a corporation under the excess profits
tax and for an individual under the Victory tax.
"The letter fails to explain why extensions of this
principle to the income tax would injure the morale of
wage earners more than payment of the higher taxes which
the Treasury fears may not be levied if forced lending is
adopted.'
bhk
Regraded Unclassified
35
- 6 -
of fact, however, we are wholly confident that
the voluntary sales to individuals will far ex-
ceed that sum, We have set a goal for the re-
mainder of the year of $18 billions in voluntary
war bond purchases by individuals. The program
calls for the Third War Loan drive to begin Sep-
tember 9, and a subsequent drive probably in
December, as well as continuing sales, especially
through payroll savings. This program, if achieved,
would give us a total for 1943 of approximately
$25 billions,
There are at this moment 27 million persons
employed in industry, by the Government and in the
armed forces who are participating in the regular
payroll deduction plan of investment in war savings
bonds. The average deduction from the salaries
and wages of all these private and public employees
1s in excess of 9 percent of their total pay. Pay-
roll deduction alone, not including other forms of
regular and occasional voluntary investment,
accounts for $425 millions a month.
We put this payroll savings plan into effect
early last year and in the first six months of
1942 we raised $539 millions by this method. In
the last six months of the year subscriptions
through payroll savings amounted to $1,697 millions.
From January to May 1943, $1,945 millions were
raised and if $425 millions are added as an estimate
for the month of June, the total for the first six
months of 1943 will be $2,370 millions by the
payroll deduction plan alone,
I am confident that we will be able to
achieve the goal we have set down for sales to
individuals under the voluntary program this year.
The organization work for the Third War Loan 1s
now being undertaken. Any official proposals
Regraded Unclassified
36
- 7 -
for a compulsory lending program will confuse the
volunteer workers and the public, and may cause
serious injury to the drive. I trust we will have
the wholehearted support of the Administration
behind us.
Sincerely,
Honorable James F. Byrnes
Director of War Mobilization
The White House
Washington, D.C.
Regraded Unclassified
alternate 37
- 6 -
of fact, however, we are wholly confident that the
voluntary sales to individuals will far exceed that
sum. We have set a goal for the remainder of the
year of $18 billions in voluntary war bond purchases
by individuals. The program calls for the Third War
Loan drive to begin September 9, and a subsequent
drive probably in December, as well as continuing
sales, especially through payroll savings. This pro-
gram, if achieved, would give us a total for 1943 of
approximately 825 billions.
There are at this moment 27 million persons
employed in industry, by the Government and in the
armed forces who are participating in the regular pay-
roll deduction plan of investment in war savings bonds.
The average deduction from the salaries and wages of
all these private and public employees is in excess
of 9 percent of their total pay. Payroll deduction
alone, not including other forms of regular and occasional
voluntary investment, accounts for $425 millions a month.
We put this payroll savings plan into effect early
last year and in the first six months of 1942 we raised
$539 millions by this method. In the last six months
of the year subscriptions through payroll savings
amounted to $1,697 millions. From January to May 1943,
$1,945 millions were raised end if $425 millions are
added as an estimate for the month of June, the total
for the first six months of 1943 will be $2,370 millions
by the payroll deduction olan alone.
I em confident that we will be able to achieve the
goal we have set down for sales to individuals under the
voluntary program this year. The organization work for
the Third War Loan is now being undertaken. Any official
proposals for a compulsory lending program will confuse
the volunteer workers and the public, and may cause
serious injury to the drive. I trust we will have the
wholehearted support of the Administration behind us.
Regraded Unclassified
38
- 7 -
Although I am vigorously opposed to a forced
lending program, I have felt for some time that
there is a real need for legislation which would
encourage additional new savings by individuals.
A graduated spendings tax would be an effective
measure to accomplish this result, and would be
consistent with the voluntary program for sales of
war bonds.
Sincerely,
Honorable James F. Byrnes
Director of War Mobilization
The White House
Washington, D.C.
Regraded Unclassified
39
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 17, 1943
TO
Secretary Morgenthau
FROM
Fred Smith I
Last week we brought Harold Fleming, of the Christian Science Monitor,
to Washington to talk about getting a. financial writer. While he was here
we gave him the story of our new setup. He wrote the three attached stories,
which I believe are quite fair and yet could not be criticized as propaganda
from our side.
Fleming has a great following among conservative bankers and is an
ardent Republican. When he was leaving he said that he agreed entirely
with your new bond setup, and that this is the first time he has seen eye
to eye with the Administration in five years.
Regraded Unclassified
CHRISTIAN SCIENCE MONITOR - June 11, 1943
40
portion runs all the other way, In
reasury Plans on Pay Roll
the April drive anmething tiver
000,000 separate "pieces" or securi-
lier, big and little, were sold, It in
Drives in Future War Loans
very doubtful whether the Victory
Fund people and 500,000 of these,
(Rital of three articles on war Annincing.)
Most of the money they raised name
in extremely large bites. running
By Harold Fleming
sometimes UD into the millions,
Kind
Correspondes!
of
Christmas
Science
Monitor
and even hundreds of millions of
NEW YORK Recent changer
The Victory Fund people, par
dollars.
live Treasury's plans (nr future
licularly in New York City, did
More than that, without abating
une Inan drives are important and
thumping good job. in fact, they
the credit dur In the Victory Fund
overwhelmingly outsnld the war
people for the hard and unpaid
the reason behind them make
a
savings people, - the following
work they pul in, theirs was A
prod story,
figures of sales in that drive indi-
considerably easier selling job per
Most important change is that cate, in millions of dollars,
million dollars of bonds sold. Much
Wall Street Inves the control which
Dec. Vietory
of it could be done over the tele-
Il Was beginning in gain during,
Loan Sales
phone. Most of the customers knew
in advance the details of the secu-
the December and April Inan
Commercial banks
$5,087
drives: the program Is nn Innger
Insurance Companies
1,700
vidies they could buy, and their
in be organized by Federal Re-
Savings banks
620
comparative values. The banks
lerve districts, bin by states: and
Dealers and brokers
769
Avere HO eager to buy that a sharp
the sales to what might be called
Corporations
2,634
limit had to be put in the sales In
professional investors, including
Series "E" (War Savings
them: in fact, they got only 18 per
institutions, are lo be separated
Bonds)
726
cent of the certificates they bid for
from the main part of the Treas-
and 8 per cent of the 2 per cent
Except for the Series F. sales,
ury's selling machinery, which in
bond issue they were allowed to
which were entirely the work of
to concentrate on sales of Series E
buy,
the war savings staff, most of the
war bonds to that part of John
On the other hand. the over.
Public which has unaccustomed
above sales were the work of the
whelming proportion of the actual
money, hardly knows what to do
Victory Fund Committees,
inter work, doorbell pulling.
with it, and at present appears
When the April drive came
speech making, and bench-to-
to be accumulating it in the form
along the Victory Fund people
bench solicitation nf factory pay
of folding money ("money in cire
went to work and beat their own
mill sevings allotment, had
culation"). This means pay-roll
figures very sharply. The war
course In he done hy the war save
drives and "general community'
savings people also outdid them-
mgr people. " was the difference
premotions,
selves, doubling the Series E sales,
between Tiffany and dime-store
Stmv back of the change is some-
BWt still an estimated as per cent
selling.
thing like this,
of the total dollar sales were
The Treasury began offering
claimed by the Victory Fund pen-
"baby bonds" in 1035, In the sum-
ple and nobody seems to dispute
mer of 1941, changing their name
the claim.
le "defense bonds." it sel up a
Ax a result of their success In
growing volunteer selling organi-
December, the Victory Fund peo-
zation which became the "War
ple, including the Federal Reserve
Savings staff."
people, asked for and got a larger
Volunteer Organisation
authority in the April drive, which
was set up largely on the basis of
This was a grass-mots volunteer
federal reserve districts, the now
niganization net up by states, and
traditional map division in the
norrating through employers, labor
Anancial world.
unions post offices, moving picture
And then as a result of the even
hnuses, chain and department
greater success of the April drive,
sinres, radio stations, and so on.
they are said lo have asked the
" gradually gained several hun-
died (housand helpers, and its pur-
Treasury to set the whole thing up
on a Reserve district basis, to sub-
has been to reach the people
ordinate the war savings commit-
with 4 family income up to $5,000
teen lo the Victory Fund and Re-
the Treasury says have
en-eighthe of the country's in-
serve authorities, and to have the
Reserve system as the interme-
today. As some of the Treas-
diary for the entire operation in
people put it, the purpose has
future,
not so much to sell bonds as
ell the war to the American
Difference of Opinion
dens and these Treasury people
Whatever the details of the pro-
that the Treasury's war save
posals, there developed quite a
staff has perhaps done more
difference of opinion Between the
clling the war" In the public
Treasury authorities and the Wall
any other agency.
Street people over how the future
autumn. when the machin-
loan drives should be run-and
was being set un for the first
particularly. by whom,
lary Loan, the financial com-
The upshot was the new ar-
organized the Victory Fund
rangement.
millees. Their task was chiefly
The gist of the Treasury people's
ell "the big stuff." to banks.
arguments seems to have been this.
rations, Insurance companies,
It 12 true that the Victory Fund
ngs banks, estates, trust futide:
comple sold most of the bond-on a
large investors with idle funds
dollar count, But on a count of
habit of buying securities.
number of "pleces" solds
Regraded Unclassified
THE CHRISTIAN SCIENCE MONITOR - June 14, 1943
WarBond Program to Be Set Up
seems to be that this distraction
is not so important " the main
gost of separating off the fund-
On a State-by-State Basis
raising which involves the financial
community from that which
reacher the lower-Income non-in-
(Second of three articles on war Anancing and the Treasury's
vesting brackets.
bond-selling methods.)
A further problem, that of tim-
Ing. in Involved. It is now decided
By Harold Fleming
that sales to banks will not be In-
staff Correspondent n/, The Christian Beience Monitor
cluded In the next drive. And per-
NEW YORK-The previous
District Competition
hape sales to other large Investors
article related how the Treasury's
or course It really is Imaginable
may also be handled separately.
war bond program is being set up
that competition could be devel-
This means that the next Victory
entirely on a state basis and with
oped between Federal Reserve dis-
Loan drive will be simed chiefly at
A. subordinate position assigned to
tricts-so far as bond groups look-
the nonfinancial public, and as a
the Federal Reserve banks and the
ing for the big money are con-
result, the over-all goal will be
Victory Fund Committees, despite
cerned.
sharply smaller, Against the $13,-
the enormous dollar volume of
But the essential point of the
000,006,000 raised in December and
sales the latter made in the De-
whole thing is that the Treasury is
$18,500,000,000 In April, it le pos-
cember and April Victory Loan
chiefly concerned with sales to the
sible that the next goal might be
drives.
small-income people who never
only around $10,000,000,000 or even
The Treasury obviously has no
even heard of federal reserve dis-
less, depending on which types of
intention of dispensing with the
tricls, And its war savings staff,
securities for which types of In-
Victory Fund people. It probably
which in numbers far exceeds the
vestors are included.
couldn't even if it wanted to, If
victory fund staffs, always have
Some students of the matter
they are referred to as the "prima
been organized along state line
think this will not sound so well.
donnas" of the bond selling pro-
as in fact, are most civie, protes-
They feel that it will look like .
gram, it has been truly said that
sharp come-down. But others think
"when you are singing for billions
signal, trade and fraternal organi-
it will be much better, It will make
you have to have prima donnas."
zations, through whom the Treas-
the noninvesting public's part in
Using Old Fund Setup
Ury wants to work,
war financing stand out much more
Getting down to finer points, the
Some members of these com-
sharply. And that is what the
opponents of the state type of or-
mittees have resigned, or threat-
Treasury obviously wants,
ganization have a further criticism.
ened to resign, but the intention is
They say that the federal reserve
(To be continued)
to continue these committees, or at
officials carry more prestige with
least to accept their very valu-
the banks than anyone else, includ-
able services during drives, and
ing commercial bankers them-
the recent meeting of the governors
selves, A word from the Fed, it is
of the Investment Bankers' Asso-
argued, carries more weight than
ciation in New York, attended by
from a banker chairman.
Secretary Morgenthau and a con-
Against this it is argued that, on
siderable number of his hench-
the other hand, the Fed is not so
men, seems to have resulted in a
popular with some commercial
satisfactory concord, with the
bankers, particularly in the middle
brass-Hats of the I. B. A. appar-
west, where many banks are still
ently pledging their full co-opera-
not members of the Federal Re-
tion, though some of the members
serve System, Also it is argued
still grumble privately and off the
that the Fed is too remote from
record that the new setup is not
some states, particularly in the far
a good one.
west, where the San Francisco Fed-
Second to the quite understand-
eral has authority over a district
able complaint that "after having
stretching from San,Diego to Mon-
done a bang-up job" the bankers
tana,
are again being shoved aside by
But a stronger argument Is that
the Treasury," the chief criticism
the choice is not between Federal
of the new arrangement seems to
Reserve officials and commercial
be that It has the makings of an-
bankers; and that while the Fed
other nice political machine for
the next election,
has great prestige among the banks
it might not find it so easy to work
Of course the Treasury people
with, for instance, state labor offi-
can't disprove this, any more than
cials, This again goes back to the
critica can prove it. It is a matter
major goal of the Treasury, which
of opinion. However, there is con-
is to reach the non-financial pub-
siderable argument for the state-
lie,
line organizations, chiefly for psy-
Banks to Be By-Passed
chological reasons.
Many of the outfils through
A number of other policies are
which the campaign must work
also involved in the picture.
are already organized on state
For instance it has been decided
lines, like state labor organiza-
that the Federal will still direct the
tions, women's clubs, state ad-
program so far as it is aimed at
ministrative organizations, etc. It
large investors, including such In-
in probably easier to develop en-
stitutions as banks, Insurance com-
thusiasm for putting Maine or Cali-
panies, and so on.
fornia "over the top" of e drive,
This is criticised on the ground
than for developing emulation and
that sales to commercial banks are
friendly rivalry between the sec-
distinctly inflationary (since they
and and third Federal Reserve
are paid for with additional book-
districts.
credits) while sales to savings
And In fact some 16 states are
banks, life companies, estates, etc.,
split between reserve districts, in-
may be deflationary or at least
cluding Pennsylvania, Illinois,
"anti-inflationary" since they mop
Michigan Kentucky and Tennes-
funds that might otherwise go
elsewhere. But the Treasury
Regraded Unclassified
THE CHRISTIAN SCIENCE MONITOR - June 15, 1943
42
Treasury Struggles to Divert
Treasury in very rouch con
cerned about the war savings bond
program. It figures that the over-
Public's Spare Cash Into Bonds
whitming proportion today of
spare cash which might cause In-
daton is in the hands of families
(Third and last of e series on war financing and the Treasury's
making under $5,000 . year, and
bond-aelling methods.)
particularly of those whose family
incomes has jumped sharply.
By Harold Fleming
staff Correspondent et The Christine Science Monitor
Bond Sales Outlook
NEW YORK - Two heavily loaded with early
War bond sales- in May were
articles outlined the issues in- maturities, they consider this un-
,000,000. For the last 11
volved in the recent change in the safe for the Treasury. In a post-
months they have averaged about
war financing program, by which war period of hard times the
the whole organization is to be
Treasury might be deluged with
$1,000,000,000 a month. But the
set up "on a state-by-state basis
demands for redemption.
Treasury is now shooting for far
instead of on the Federal Reserve
Secretary Morgenthau, however,
higher figures: Mr. Morgenthau
System.
has said be is "unalterably op-
says $18,000,000,000 should come
A further question has been
posed" to making the Series E
from individual bond purchases the
raised about the propriety of hay- bonds negotiable. The Treasury
rest of this year, which would be
ing banks use their depositor lists
people keep bringing up the story
nearly $3,000,000,000 a month, and
as means of solicitation of war of how in 1921 Liberty bonds
would probably mean something
bond purchases. It is argued first
dropped to 82 and the records show
round $2,000,000,000 in war bonds
that this in unethical, at leart, if
that very many Indeed of the
of Series E, F. and G. This clicks
the banks put any pressure on
smaller bonds were converted at
fairly well with the figure he has
their depositora or give their
that time into larger pieces, which
mentioned of 25 per cent of family
depositor-lists to other persor.s to
could only mean that they were
income after taxes,
be solicited. It is also argued that
sold by little fellows and bought
National income Is now running
it is unwise, because customers
by bigger ones, and the Treasury
round $10,000,000,000 a month, and
might, under pressure, withdraw
doesn't want it to happen again.
taxes around $2,000,000,000, leav-
their funds and keep them "in the
It doesn't want the "little fellow"
ing $8,000,000,000 after taxes, of
to run that risk once more.
which 25 per cent would be round
old sock," i, e. in the form of
money in circulation."
Against this it is argued first
$2,000,000,000. These figures are
Already the total of "money In
that a bond-buyer always takes
not very reliable, but such big ng-
this kind of risk anyway and if be ures are largely theoretical any-
dirculation," 1. e. of currency
withdrawn from the banks, hab
doesn't know he is taking it be way.
should learn.
It seems Ironical that the Treas-
mounted to staggering proportions,
Also it is pointed out that such Ary has opposed taxes on the little
around $17,000,000,000, and it con-
declines merely reflect a change fellow yet is now so eager to bor-
tinues to grow. The total is now
interest rates: though the answer row from him. The very arguments
around $125 per capita and it
to that is that such niceties off
the Treasury people use for their
seems to mean that wage earners
he money explained to little fellows in a that most of the loose change now-
theory
could
probably
never
war
bond
program-1.
e.,
the
fact
are holding large suma of cash
unspent, The Treasury wants to
bad bond market 50 that they adays is in the hands of the Income
"mop" up this kind of money with
would accept them.
brackets below $5,000 would
war bond sales, and is therefore
Gist of the matter is that If there
seem like a first-class argument for
not Usely to encourage any policy
is . postwar depression or tight
higher taxes on these brackets.
which might drive money out of
money market, either the bond-
There is, however, one partial
the banks,
holder or the Treasury will have to
explanation of the seeming contra-
Status or Beries E Bonds
take the rap. If the bonds are nego-
diction. Some people in these lower
A further difference of opinion
tiable and not cashable on demand
brackets have no spare cash; their
exists over the form of the Series
at the Treasury the bond-holder
incomes are no better than they
were. Others, bowever, are rolling
E bonds. They are now non-nego-
will take it, but if they continue
liable and redeemable on demand.
to be as they now are, the Treas-
in new money. Taxes would cut
Some people object to both these
ury will have to take it. At à mat-
across both the new-rich and those
characteristics, They would like to
ter of fact the best Street guesses
squeezed down by the war; a vol-
seem to be that there will not be
untary system, 1. e., bond sales,
see the bonds negotiable, 1. e.
murketable, 30 that the owner
much change in money rates in fu-
would be more selective,
This, in turn, would seem a good
could borrow money on them, and
ture years.
they would like to see them no
Another postwar depression is
theoretical argument for some kind
hardly likely since all the old rules
of "excess profits" tax on personal,
longer redeemable on demand, be-
are changed and 11 would not only
incomes over those of 1936-1939.
cause that makes them potential
demand obligations of the Treas-
hust the Treasury, the banks. the
The Treasury people have said
this would be administratively too
ury, and as they are already out-
insurance companies, the building
difficult, They do not, however,
standing to a total of nearly $20,-
and loan societies, the real estate
seem to balk at the administrative
900,000,000, and the public debt 14
market, and so on, but would bust
difficulties in the newfangled idea
the political party in power.
of the "spending tax."
Regraded Unclassified
43
Regraded Unclassified
UNITED STATES WAR SAVINGS BONDS
SERIES B
1943
Department Circular No. 653, Revised
TREASURY DEPARTMENT
First Amondment
Office of the Secretary
Wackington, ano 17,2943
Fiscal Service
Bureau of the Public Debt
Sections IV and 1 of Department Circular No. 653, Revised, dated
June 1, 1942, are hereby amended to read as follows:
"IV. ON HOLDINGS
The amount of Mar Savings Bonds of Series = originally issued during
any one calendar year to any one person that may be held by that person
at any one time shall not exceed $5,000, maturity value, computed in 4
cordance with the provisions of the regulations governing United States
Savings Bonds currently in force. Any bonds acquired on original issue
which create an excess should immediately be surrendered for refund of
the issue price as previded in such regulations.
V. REGISTRATION
1. Bonds of Series E may be registered only in the names of natural
persons (that is, individuals), whether adults or minore, in their own
right, as follows: (a) in the name of one person) (b) in the name of
two (but not more than two) persons as coomers; and (e) in the name of
one person payable on death to one (but not more than one) other desig-
nated person. Registration on original issue and authorised reiseue is
restricted to residents of the United States (which for the purposse of
44
- 2 -
this section shall include the territories, insular possessions and the
Canal Zone), citisens of the United States temporarily residing abroad,
and to nonresident aliens employed in the United States by the Federal
government or an agency thereof, whether as owners, coomers or desig-
nated beneficiaries: Provided, however, That on original issues of
bonds, but not on reissues, a nonresident alien (not & citisen of an
energy nation) may be named as coowner or designated beneficiary, and
Previded further, That & nonresident alien, whether owner, coowner or
beneficiary, succeeding to title on death of the owner, or succeeding
to title upon the death of the surviving coowner or beneficiary will
be entitled only to request and receive payment either at or before
maturity.
2. Full information regarding authorised forms of registration
will be found in the regulations currently in force governing United
States Savings Bonds."
H.mmithanh HENRY MORGENTHAU, Jr.,
Secretary of the Treasury
Regraded Unclassified
45
TITIE 31 - MONEY AND FINANCE
CHAPTER IT - FISCAI SERVICE
SUBCHAFT P - ? BURGAU OF THE PUBLIC DEPT
PART 315 - REGULATIONS GOVERNING UNITED STATES SAVI BONDS
1943
Cumulative Amendment to
TREASURY DEPARTMENT,
De. artment Circular No. 530,
Office of the Secretary,
Fifth Revision, dated
Washington, June 17, 1943
June 1, 1942
Fiscal Service
Bureau of the Public Debt
Note: This is a cumulative amendment to Department Circular
No. 530, Fifth Revision. It includes all amendments
now or heretofore made to that revision. Section 315.10,
as amended by the First Amendment, which is now in force
unchanged, is printed herein in order that this cumulative
amendment may be complete,
To Owners of United States Savings Bonds, and Others Concerned:
Sections 315.2, 315.3, 315.20 (b), 315.25, 315.26, 315.27, 315.32, 315.36,
315.37, 315.52 and 315.65 of Department Circular No. 530, Fifth Revision,
dated June 1, 1942 (7 F.R. 5158), are hereby revised to read as hereinafter
set forth; Sections 315.29 and 315.35 of said circular, as amended by the
irst Amendment dated November 23, 1942 (7 F.R. 9772), are hereby further
crended to read as hereinafter set forth:
"Sec. 315.2. General. - United States Savings Bonds will be issued only
registered form. The name and complete post office address of the owner,
well as the name of the coowner or designated beneficiary, if any, and
date as of which the bond is issued will be inscribed thereon at the
Regraded Unclassified
16
- 2 -
time of issue by an authorised issuing agent. The form of registration
used must express the actual ownership of and interest in the bond and,
except as otherwise specifically provided in these regulations, will be
considered as conclusive of such ownership and interest. The Treasury
Department can recognise no notices of adverse claims to savings bonds
and will enter no stoppages or caveats against payment in accordance
with the registration of the bonds. No designation of an attorney,
agent or other representative to request or receive payment on behalf
of the owner, nor any restriction on the right of such owner to receive
payment of the bond, other than as provided in these regulations, may
be made in the registration or otherwise."
"Sec. 315.3. Restrictions.- Only residents (whether individuals or
others) of the United States (which for the purposes of this section
shall include the territories, insular possessions and Canal Zone),
citizens of the United States temporarily residing abroad, and nonresi-
dent aliens employed in the United States by the Federal government or
an agency thereof, may be named as owners, coowners or designated bene-
ficiaries on bonds originally issued on or after April 1, 1940, or on
authorised reissues thereof: Provided, however, That on original issues
of bonds, but not on reissues, a nonresident alien (not & citizen of an
enemy nation) may be named as coowner or designated beneficiary, and
Provided further, That a nonresident alien, whether owner, coowner
1/ The date of maturity is also inscribed on Savings Bonds of
Series A, Series B, and Series D.
Regraded Unclassified
47
- 3 -
or beneficiary succeeding to title on the death of the owner, or succeed-
ing to title upon the death of a surviving coowner or beneficiary, will
be entitled only to request and receive payment either at or before
2/
maturity. 11
"Sec. 315.10 Calculation of amount.- In computing the amount of
savings bonds of any one series issued during any one calendar year
held by any one person at any one time for the purpose of determining
whether the amount is in excess of the authorised limit as set forth
in the next preceding section, the following rules shall govern:
(a) The holdings of each person, as defined in the next preceding
section, individually and in a fiduciary capacity, shall
be computed separately.
(b) In the case of bonds of Series A, B, c, D and E, the compu-
tation shall be based upon maturity values. In the case
of bonds of Series F and G, the computation shall be based
upon issue prices.
(c) There must be taken into account: (1) all bonds originally
issued to and registered in the name of that person alone;
(2) all bonds originally issued to and registered in the
name of that person as a coowner or reissued to add his
name as coowner under the provisions of Section 315.29 (a),
or to designate him as coowner instead of as & beneficiary
2/ Under the terms of Executive Order No. 8389, as amended, and the
regulations issued thereunder, bonds may not be issued or paid to nationals
(as defined in said Order) of blocked countries or to nationals of enemy
countries, whether or not residing in the United States, unless such
nationals are generally or specially licensed under the terms of the
Order.
Regraded Unclassified
48
- 4 -
under the provisions of Section 315.35 hereof: Provided,
however, That with respect to bonds of Series E held in co-
ownership form, the amount thereof may be applied to the
holdings of either of the coowners, but will not be applied
to both, or the amount may be apportioned between them; and
(3) all bonds acquired by him before March 1, 1941, upon the
death of another or the happening of any other event.
(d) There need not be taken into account: (1) bonds of which that
person is merely the designated beneficiary; (2) those in
which his interest is only that of a beneficiary under a
trust; or (3) those to which he is entitled as an heir or
legatee of the deceased registered owner, or by virtue of
the termination of a trust or the happening of any other
event unless he became entitled to any such bonds in his
own right before March 1, 1941.
(e) Nothing herein contained shall be construed to invalidate
any holdings within or, except as provided in subsection (c)
above, to validate any holdings in excess of, the authorised
limits, as computed under the regulations in force at the
time such holdings were acquired.
"Sec. 315.20 (b) Banks, trust companies and branches. - Any officer
of any incorporated bank or trust company or branch thereof,
domestic or foreign, including banks or trust companies in-
corporated in the United States or its organised territories,
those doing business in the organised territories or insular
Regraded Unclassified
49
possessions of the United States and the Commonwealth
of the Philippines under Federal charter or organized
under Federal law, Federal Reserve Banks, Federal Land
Banks, and Federal Home Loan Banks; any employee of
any such bank or trust company expressly authorized by
the corporation to sign on behalf of, or for, any officer
thereof, and wt.o should sign over the title 'Designated
Employee'; and Federal Reserve Agents and Assistant Federal
Reserve Agents, located at the several Federal Reserve Banks.
Certifications by any of these officers or designated employees
should be authenticated by either a legible impression of
the corporate seal of the bank or trust company or, in the
case of banks or trust companies and their branches which
are authorized and duly qualified issuing agents for bonds
of Series E, by a legible imprint of the issuing agent's
dating stamp."
"Sec. 315.25. Payment to legal guardians.- If the form of regis-
tration of a savings bond indicates that the owner is a minor or has
been judicially declared to be incompetent to manage his estate and
that a guardian or similar representative has been appointed for the
estate of such minor or incompetent by a court having jurisdiction or is
Regraded Unclassified
50
- 6 -
otherwise legally qualified, payment will be made only to such guardian
or similar legal representative. In such case the request for payment
appearing on the back of the bond should be signed by the guardian or
other legal representative as such, for example, 'John A. Jones, guardian
(committee) of the estate of Henry W. Smith, a minor (an incompetent)'.
Unless the form of registration gives the name of the representative,
there must be submitted in support of the request a certificate or a
certified copy of the letters of appointment from the court making the
appointment under the seal of the court, establishing that the appoint-
ment is in full force. Such certificate or certification (except in the
case of corporate fiduciaries) should be dated not more than six months
prior to the date of presentation of the bond for payment. See Subpart M
hereof for payment provisions applicable to bonds registered in the names
of guardians and similar fiduciaries. Where the form of registration does
not indicate that the owner is a minor for whose estate a. guardian has been
appointed, a notice that such guardian has been appointed will not be ac-
cepted by the Treasury for the purpose of preventing payment to the minor
or his parent as provided in the two following sections."
"Sec. 315.26. Payment to minors.-Unless the form of registration of
a savings bond indicates that the owner is & minor for whose estate &
guardian or similar legal representative has been appointed or is other-
wise duly qualified, payment will be made direct to such minor, provided
he is, at the time payment is requested, of sufficient competency and
understanding to sign his name to the request and to comprehend the nature
of such act. In general the fact that the request for payment has been
Regraded Unclassified
51
- 7 -
signed by a minor and duly certified in accordance with Subpart H
hereof will be accepted as sufficient proof of such competency and
understanding."
"Sec. 315.27. Payment to parents of minors.- If the owner of a
savings bond is & minor and the form of registration does not indicate
that a guardian or similar legal representative of the estate of such
minor owner has been appointed or is otherwise legally qualified, and
if such minor owner is not of sufficient competency and understanding
to execute the request for payment, payment will be made to either
parent of the minor with whom he resides, or if the minor does not
reside with either parent, then to the person who furnishes his chief
support. The parent or such other person should sign the request for
payment in his own name, on behalf of the minor, in the form "Mrs. Mary
Jones, on behalf of John c. Jones', and should sign a certificate, in
substantially the following form, which may be typed on the back of the
bond:
'I certify that I am the
(relationship) of John C. Jones
and the person with whom he resides. He is
years of age
and is not of sufficient competency and understanding to sign
this request'.
If a person other than a parent signs the request on behalf of the minor
he should also certify that the minor does not reside with either parent
and that he furnishes his chief support. The Treasury Department may
in any particular case require further proof that the minor is not of
sufficient competency and understanding to execute the request for pay-
ment and of the right of the person executing the request to act on
behalf of the minor."
Regraded Unclassified
52
- 8 -
If Sec. 315.29. Reissue for certain purposes.- A savings bond of
any series registered in the name of one person in his own right, or
to which one person is shown to be entitled in his own right under
these regulations, may be reissued upon appropriate request for the
following purposes:
(a) Addition of coowner. Reissue in the name of the owner
with that of another natural person as coowner, provided
that bonds reissued in accordance with this subsection
will be considered for the purposes of computation of
holdings under Subpart D of these regulations as originally
issued in both names and no reissue will be effective
which results in any one person holding bonds in excess
of the established limitation for the series to which the
bonds belong. Requests for reissue under this subsection
should be made on Form PD 1762.
(b) Addition of a beneficiary. Reissue in the name of the
owner with the name of another natural person as designated
beneficiary. Applications for reissue under the provisions
of this subsection should be made on Form PD 1077.
(c) Reissue in living trust.- Reissue in the name of a trustee of
& living trust created by the registered owner for his bene-
fit in whole or in part, during his lifetime whether or not
containing an absolute power of revocation in the grantor;
but such reissue will be allowed only in the case of bonds
of those series which may be originally issued in the name
of a trustee."
Regraded Unclassified
53
"Sec. 315.32. Payment or reissue.-A savings bond registered in
the names of two persons as coomers in the form 'John A. Jones OR
Mrs. Mary C. Jones', will be paid or reissued as follows:
(a) During the lives of both coowners.- During the lives of both
coowners the bond will be paid to either coowner upon his
separate request without requiring the signature of the
other coowner; and upon payment to either coowner the other
person shall cease to have any interest in the bond. The
bond will also be paid to both coowners upon their joint
request, in which case payment will be made by check drawn
to the order of both coowners in the form, for example,
'John A. Jones and Mrs. Mary C. Jones', and the check must
be endorsed by both payees. The bond will not be reissued
in any form during the lives of both coowners except as
specifically provided in these regulations.
(b) After the death of one coowner.- If either coowner dies with-
out having presented and surrendered the bond for payment to
a Federal Reserve Bank or the Treasury Department, the sur-
viving coowner will be recognized as the sole and absolute
owner of the bond, and payment will be made only to him:
Provided, however, That if a coowner dies after he has properly
executed the request for payment and after the bond has actually
been received by a Federal Reserve Bank or the Treasury Depart-
ment, payment of the bond, or check if one has been issued,
will be made to his estate (see Subpart P hereof). Upon proof
of the death of one coowner and appropriate request by the
Regraded Unclassified
54
-10-
surviving coowner (unless a nonresident alien, in which
case see Section 315.3) the bond will be reissued in the
name of such survivor alone, or in his name with another
individual as coowner, or in his name payable on death to
a designated beneficiary.
(c) On death of both coowners in common disaster. - If both co-
owners die in a common disaster under such conditions that
it cannot be established, either by presumption of law or
otherwise, which coowner died first, the bond will be con-
sidered as belonging to the estates of both coowners.
(d) After the death of a surviving coowner. - If a surviving
coowner who became solely entitled to the bond under the
provisions of subsection (b) of this section dies without
having submitted the bond for payment or reissue, the bond
will be paid or reissued as though it were registered in the
name of such last deceased coowner alone. In this case proof
of the death of both coowners and of the order in which they
died will be required."
"Sec. 315.35. Reissue during the lifetime of registered owner. -
A bond registered in the name of one person payable on death to another
may be reissued, on the duly certified request of the registered owner,
to name a beneficiary designated on the bond as coowner subject to the
same restrictions and conditions contained in Section 315.29 (a). A bond
may also be reissued upon the duly certified request of the registered owner,
together with the duly certified consent of the designated beneficiary, to
eliminate such beneficiary or to substitute another person as beneficiary,
Regraded Unclassified
55
- 11 -
or to name another person as coowner. If the beneficiary should pre-
decease the registered owner, upon proof of such death and upon request
of the registered owner the bond may be reissued in his name alone or in
his name with another individual as coowner, or in his name payable on
death to a designated beneficiary. Requests should preferably be made
upon the forms provided for such purpose."
"Sec. 315.36. Payment or reissue to beneficiary.- If the registered
owner dies without having presented and surrendered the bond for payment
or authorised reissue to a Federal Reserve Bank or the Treasury Department,
and is survived by the beneficiary, upon proof of such death and survivor-
ship, the beneficiary will be recognised as the sole and absolute owner
of the bond, and it will be paid only to him at or before maturity, or
(unless such beneficiary be a nonresident alien, in which case see Section
315.3) may be reissued in his name alone, or otherwise reissued in accord-
ance with Subpart J as though it were registered in his name alone: Provided,
however, That if the bond with a properly executed request by the registered
owner for payment or authorised reissue has actually been received by a
Federal Reserve Bank or the Treasury Department, payment of the bond, or
check, if one has been issued, will be made to the estate of the deceased
owner in accordance with Sec. 315.49."
"Sec. 315.37. Payment or reissue after death of the surviving bene-
ficiary.- After the death of a surviving beneficiary who became entitled
under the provisions of this Subpart, the bond will be paid or (except
in the case of a nonresident alien) reissued in accordance with Subpart J
as though it were registered in the name of the surviving beneficiary alone.
In this case proof of the death of both the registered owner and the bene-
ficiary and of the order in which they died will be required."
Regraded Unclassified
56
- 12 -
or beneficiary.-
"Sec. 315.52. Determination of interest as between owner and coowner/
Conflicting claims as to ownership of or interest in & savings bond, as
or the registered owner and a designated beneficiary
between the registered owner and the coowner/may be determined by valid
judicial proceedings, in which case the bond upon surrender by the party
requesting reissue may be reissued in the names of the respective parties
to the extent of their respective interests as determined by such proceed-
ings, but only in authorised denominations. The Treasury can accept no
notices of pending judicial proceedings and cannot undertake to protect
the interests of litigants who do not have possession of the bonds."
"Sec. 315.65. Correspondence, certificates, notices and forms.-
Correspondence in regard to any transactions in United States Savings Bonds
under the provisions of these regulations, certificates of court and other
certificates, as well as notices of intention to redeem, and the like (which
must be in writing), should be addressed to a Federal Reserve Bank or to the
Treasury Department, Bureau of the Public Debt, Merchandise Mart, Chicago,
Illinois. Notices or documents on file with other bureaus of the Depart-
ment will not be recognized. Appropriate forms for use in connection
with transactions may be procured from any Federal Reserve Bank or from
the Division of Loans and Currency."
imputhair R.
P.
HENRY MORGENTHAU, Jr.,
Secretary of the Treasury.
Regraded Unclassified
57
UNITED STATES SAVINGS BONDS
SERIES , AND SERIES G
1943
Department Circular No. 654, Revised
TREASURY DEPARTMENT
Second Amendment
Office of the Secretary
Washington, June 17,31943
Fiscal Service
Bureau of the Public Debt
Section V of Department Circular No. 654, Revised, dated June 1, 1942,
is hereby amended to read as follows:
. V. AUTHORIZED FORMS OF REGISTRATION
1. United States Savings Bonds of Series F and Series G may be regis-
tered as fellows:
(1) In the names of natural persons (that is, individuals) whether
adults or minors, in their own right, as follows:
(a) In the name of one person,
(b) In the names of two (but not more than two) persons as commers, and
(c) In the name of one person payable on death to one (but not more
than one) other designated person;
(2) In the name of an incorporated or unincorporated body, in its
own right (except a commercial bank, which, for this purpose, is defined
as a bank that accepts demand deposits);
(3) In the name of a fiduciary; and
(4) In the name of the owner or custodian of public funds.
Regraded Unclassified
58
- 2 -
2. Restrictions.- Registration on original issue and authorised
reissue is restricted to residents (whether individuals or others) of
the United States (which for the purposes of this paragraph shall in-
clude the territories, insular possessions and the Canal Zone), citisens
of the United States temporarily residing abroad, and to nonresident
aliens employed in the United States by the Federal government or an
agency thereof, whether as owners, coowners or designated beneficiaries:
Provided, however, That on original issues of bonds, but not on reissues,
a nonresident alien (not a citisen of an energy nation) may be named as
coowner or designated beneficiary, and Provided further, That a non-
resident alien, whether owner, coowner or beneficiary, succeeding to
title on death of the owner, or succeeding to title upon the death of
the surviving coowner or beneficiary will be entitled only to request
and receive payment either at or before maturity and will not be en-
titled to reissue.
3. Full information regarding authorized forms of registration
will be found in the regulations currently in force governing United
States Savings Bonds."
Hmmathan HENRY MORGENTHAU, Jr.,
Secretary of the Treasury.
Regraded Unclassified
59
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 17, 1943
TO
Secretary Morgenthau
FROM
Fred Smith
The story back of Crider's New York Times' article is as follows:
A letter to employers was originally prepared for John Sullivan,
and contained a great deal of bond publicity. This is the letter you
saw and didn't like.
We revised that letter, reducing the bond publicity to a paragraph.
A copy of the final form is attached.
Through some slip, a copy of the original letter was used in the
preparation of B. release, which went out yesterday. Incidentally, all
the material we cut out was used in the Crider story.
Regraded Unclassified
60
Page 12
THE SECRETARY OF THE TREASURY
WASHINGTON
June 4, 1943.
TO THE EMPLOYERS OF THE UNITED STATES:
At this time when the method of collecting the Federal Income Tax is undergoing such
a complete change, many of your employees will not understand the new system. In spite
of the very widespread discussion of the withholding feature, many of them will wonder and
may ask why their pay is "short,"
A simple leaflet in their pay envelopes may be helpful. Here is a sample explanation
which, if you care to do so, you can print and enclose in the pay envelope from which the
tax is first withheld.
PAY-AS-YOU-GO INCOME TAX
The new "Pay-As-You-Go" income tax law became effective July 1. 1943. It
requires your employer to withhold a certain proportion of your pay. This amount is
not a new tax, but is in payment of your regular Federal Income and Victory Tax.
Beginning with the pay you are receiving today your employer has withheld this
tax from your wage. Therefore, you have now begun to pay your regular Income and
Victory Tax as you earn the income subject to that tax.
The money withheld is not kept by your employer, but is turned over to the
United States Treasury. It is your money, and stands to your credit as a prepayment
of your Federal Income and Victory Tax.
After the close of the year your employer will give you a receipt showing exactly
how much of your money has gone to the United States Treasury toward the payment
of your taxes. Keep that receipt, It is your evidence of tax paid.
Any Federal income tax payments you made during the first two quarters of this
year (March 15th and June 15th) stand to your credit as payment on this year's
income tax.
With the beginning of withholding some of your employees may be inclined to offset
their apparent loss of income by reducing their regular subscription to War Savings Bonds.
It is vitally important that every effort be made to maintain or even increase the present
rate of War Bond purchases. 1 will appreciate anything you can do to help.
I believe that any additional burden placed upon you as an employer or upon us at the
Treasury will be more than offset by the benefits to be derived. Let me thank you in
advance for your assistance, and assure you that we will do everything possible to promote
the smooth operation of this new Income Tax machinery.
Sincerely yours,
Henry MargenthanJr.
Secretary of the Treasury.
M. . UNIVERSMENT PRINTING OFFICE 1843
10-34850-1
Regraded Unclassified
Page 11
HOW TO USE TABLE B
Married persons claiming half of the exemption (Item I
Employers who use the wage bracket withholding method
of Form W-4) with three dependents.
(Tables A-1 to A-5) for determining the amount of tax to be
Single persons (Item I (3) of Form W-4) with three de-
withheld do not need to refer to the following Table B.
pendents.
For the convenience of employers who do not elect to use the
Married persons claiming all the exemption (Item I (4) of
Form W-4) with one dependent.
wage bracket withholding table, there has been constructed a
table which shows the lowest amounts of wages by family status
Heads of family (Item I (5) of Form W-4) with two de-
and payroll periods at which the family status withholding
pendents.
exemption and the 20 percent rate apply. For wages below
If the weekly wage payments are less than $33.18 for these
these amounts, the Victory Tax withholding exemption and the
classes, the payments are subject to the 3 percent tax on the
3 percent rate apply.
excess of wages over the weekly Victory Tax withholding exemp.
tion of $12.00.
Example:
Thus, it will be observed that before computing the tax to be
If the payroll period is weekly. all wage payments of $33.18
withheld it is possible through the use of the following Table B
and over are subject to the family status withholding exemp-
to divide the wage accounts as between those subject to 20
tion and the 20 percent rate for-
percent on the amount in excess of the family status withholding
Married persons claiming no personal exemption (Item I (1)
exemption and those subject to 3 percent on the amount in excess
of Form W-4) with five dependents.
of the Victory Tax withholding exemption.
TABLE B
20 PERCENT OF WAGES IN EXCESS OF FAMILY STATUS WITHHOLDING EXEMPTION IS APPLICABLE FOR WAGES EQUAL TO OR IN EXCESS
OF THE AMOUNTS SHOWN. 3 PERCENT OF WAGES IN EXCESS OF VICTORY TAX EXEMPTION IS APPLICABLE FOR WAGES LESS THAN
THE AMOUNTS SHOWN.
And, (1) such person is a married person claiming none of personal exemption for withholding and has-
Two
Three
Four
Five
Six
Seven
Eight
Nine
No dependents
One dependent
dependents
dependents
dependents
dependents
dependents
dependents
dependents
dependents
Or, (2) such person is a married person claiming half of personal exemption Inc withholding and has-
No dependents
Two
Three
Fear
Five
Six
Seven
One dependent
dependente
dependents
dependents
dependents
dependents
dependents
Or, (3) such person is a single person and has-
II the payroll period
with respect is an
employee -
No dependents
One dependent
Two
Three
Fair
Five
Six
Seven
dependents
dependents
dependents
dependents
dependents
dependents
Or, (4) such person is a married person claiming all of personal exemption for withhelding and her-
No dependents
One dependent
Two
Three
Feur
Fire
dependents
dependents
dependents
dependents
Or, ($) such person is head of a family and has-
No dependents
Two
Three
or one
Fear
Five
Six
dependent
dependents
dependents
dependents
dependents
dependents
Weekly
6
0
0
$19.06
$26.12
$33.18
$40.24
$47.29
$54.35
$61.41
Biweekly
0
0
0
38.12
52.24
66.35
80.47
94.59
108.71
122.82
Semimonthly
0
0
0
41.29
56.59
71.88
87.18
102.47
117.76
133.06
Monthly
0
0
0
82.59
113.18
143.76
174.35
204.94
235.53
266.12
Quarterly
0
0
0
247.77
339.53
431.30
523.06
614.82
706.59
798.35
Semiannual
0
0
0
495.53
679.06
862.59
1,046.12
1,229.65
1,413.18
1,596.71
Annual
0
0
0
991.06
1,358.12
1,725.18
2,092.24
2,459.29
2,826.35
3,193.41
Daily or miscellaneous
(per day of such
period)
0
0
0
2.70
3.70
4.70
5.70
6.70
7,70
8.70
Regraded
in paint
61
name Sour
read this.
June 17, 1943
MEMORANDUM TO THE SECRETARY:
Jhs
Withholding Tax
The recent completion of the Withholding Tax legislation gave
to Internal Revenue these specific things to accomplish in a very
short time:
1. Informing the public of the continuing obligation to
pay the June 15th income tax installment
2. Informing employees on the details of the new law
3. Informing employers on the details of the new law
4. Urging on employees the importance of filing their
Withholding Exemption Certificates
5. Helping convince the public of the possibility and
necessity of continuing regular purchase of War
Savings Bonds despite withholding
Before releasing publicity to accomplish these purposes, material
was cleared with Mr. Smith, representing you, Mr. Gaston, Mr. Odegard,
for the War Finance Committee, Mr. Schwarz's Division of Public Relations,
and the Bureau of Internal Revenue.
Herewith is a Summary of this concentrated publicity campaign.
Following the Summary are samples of the material sent out. For
easy reference, samples are numbered in conformity with the Summary.
Regraded Unclassified
52
- 2 -
SUMMARY OF "WITHHOLDING TAX" PUBLICITY
1. JUNE 15th INCOME TAX INSTALLMENT
B. RADIO. Two hundred word summary released by OWI to all radio
stations for use as spot news announcement wherever possible
until June 15th.
b. RADIO. Set of "station break" announcements, about twenty to
thirty words, released by OWI to all radio stations.
C. RADIO. Necessity of making June 15th payment was stressed
strongly in two national hook-up broadcasts; one over the
Columbia Network of 121 stations on Thursday, June 10th;
the other over the Blue Network of 158 stations on Sunday,
June 13th.
d. NEWSPAPERS. Mate of newspaper "ears" or boxes, containing
reminders of the June 15th payment were sent out to the list
of daily newspapers.
2. PUBLICITY TO EMPLOYEES
a. LABOR PRESS. A letter from you to editors of labor publica-
tions describing the new Withholding Tax. The article was
written from the point of view of labor union members and
distributed to 552 labor papers. With it went a copy of the
new Withholding Exemption Certificate.
b. GENERAL NEWSPAPERS. Mimeographed sheets of five sets of
questions and answers are released to daily newspapers for
publication one set a day beginning June 21st. These questions
and answers cover the points most likely to arise and to be
misunderstood by the public in connection with the Withholding
Tax. They are phrased in simple, man-on-the-street language.
C. RADIO. Thursday evening, June 10th, Mr. Sullivan, aided by
three professional actors, presented a fifteen minute round
table discussion of the new law. This had spot news value
since announcement had been made only a few hours earlier that
the Bill had been signed. This was over the Columbia Network
of 121 stations. It was well received, drew many favorable
responses. On request, & transcription of the program was
supplied to Station WTOL at Toledo.
Regraded Unclassified
63
- 3 -
Sunday, June 13th, at 3:00 P.M. the Blue Network (158
stations) broadcast on the program, "This is Official", about
eight minutes of questions and answers about the new tax. The
answers were given by Mr. Timothy C. Mooney, Deputy Commissioner
of Internal Revenue.
Two minute brief analysis of the new law was prepared and
is being released through OWI for use on any program show which
will donate the time.
Five Minute Talk on the new law will be broadcast by Mr.
Sullivan on the "Treasury Bondwagon" program Saturday, June 19th.
This same talk is made available to Collectors of Internal
Revenue and Agents in the field as basis of local newspaper
releases over local radio stations.
The Bureau of Internal Revenue has also supplied to its
field forces two other longer talks for similar use,
d. INSTRUCTIVE POSTERS. A poster was prepared to be posted on
bulletin boards in factories, payroll offices and other places
where employees could receive mass instruction in the meaning
and operation of the new law. About eleven million of these
were printed in very fast time and distributed to all employers
through the Collectors' offices.
e. EMPLOYERS INSTRUCTIONS TO LABOR UNIONS. A letter from the
Secretary of the Treasury to the Presidents of all Labor Unions,
saying that in order that their members' questions about With-
holding may be answered authoritatively, copies of the booklet,
"Employers' Duties" were being sent in sufficient number so that
each local Union might have a copy.
This idea and the letter were enthusiastically approved by
Mr. Houghteling. About 35,000 of the booklets were shipped from
the Bureau of Internal Revenue to the central unions for redis-
tribution to their locals.
3. PUBLICITY TO EMPLOYERS
a. INSTRUCTIONS. Five million twelve page booklets were printed and
distributed to employers, describing in detail the duties of
employers under the new law, and giving tables for figuring wage
exemptions and withholdings.
The first page of this booklet carries a summary of Employers'
Duties, expressed in non-technical language and so presented that
any employer may learn in a few minutes what his obligations are
under the new tax.
Regraded Unclassified
64
- 4 -
Pages one to five of the booklet contain fully detailed
instructions for employers covering practically every phase of
the operation of the new lew from their point of view.
The last page of the booklet is another innovation. It
is a letter from the Secretary of the Treasury (1) suggesting
to employers that they enclose with the first "short" payroll
slips explaining to their employees the why and wherefore of
the shortage, (2) giving them suggested copy for this slip,
and (3) asking them to do anything possible to encourage con-
tinued regular War Bond purchase by their employees. This has
received favorable and useful publicity in the news columns of
the newspapers.
b. GENERAL NEWSPAPERS. The Commissioner of Internal Revenue sent
a circular letter to managing editors of daily newspapers, with
which he enclosed copy of the booklet of "Employers' Duties".
He suggested to the daily papers that they could render real
service to the Government by making excerpts from the booklet
which would help instruct employers in their obligations under
the new law.
C. ANTI-WINDFALL PROVISIONS. An article is appearing in the July
issue of the "Commerce Clearing House" magazine setting forth a
"Brief Analysis of the Anti-Windfall Provisions of the Current
Tax Payment Act of 1943". This is of particular interest to
individuals of very high bracket income.
d. OTHER FORMS. Withholding Exemption Certificates, Statements to
Employees of Wages Withheld, Tax Returns to Collectors - forms
aggregating perhaps 500,000,000 in number have been printed and
distributed to employers.
We owe a word of sincere commendation to the Forms Committee
of the Bureau of Internal Revenue for their work in getting these
ready in such short time after the Bill took final form, and to
the Government Printing Office for their truly amazing performance
in producing this vast amount of printing in record time.
e. GENERAL. All publicity over the radio or in the newspapers con-
tained constant reference to the duties of employers under the
new Act and instruction as to how these duties are to be carried
out.
4. FILING "WITHHOLDING EXEMPTION CERTIFICATE"
The importance to the employee of filing this Exemption Certificate
has been stressed in everything we have done newspaper stories,
release to the labor press, radio programs, radio talks and spot
announcements,
Regraded Unclassified
65
- 5 -
The Bureau of Internal Revenue, through the Collectors'
offices, has emphasized to employers the necessity of getting
these Certificates distributed and returned promptly so that the
necessary work of figuring exemptions may be completed by the
time the new withholding goes into effect, on or after July 1st.
The Government Printing Office gave invaluable help by print-
ing and distributing 200,000,000 of these forms in unbelievably
short time.
5. CONTINUING PURCHASE OF WAR SAVINGS BONDS
Wherever pertinent and possible, we have included a message
urging the continued purchase of War Savings Bonds. We have
pointed out very strongly that the new law is not a new tax or
an additional tax; since it does not lay new burdens on most
taxpayers it offers no reason for curtailing the present purchase
of bonds.
This message either expressed or implied, was in the booklet
"Employers' Duties", in the Secretary's letter to Labor Union
Presidents, in the story that went to labor publications, in
newspaper releases and radio programs.
We have kept this message moderate in tone, preferring under-
statement to the danger of over-enthusiastic salesmanship which
might strain credulity and thus defeat its purpose.
John L. Sullivan
Regraded Unclassified
1a
RADIO FLASH FOR RELEASE AS SOON AS THE
NEW ACT BECOMES LAW. RELEASE THROUGH
OFFICE OF WAR INFORMATION
The new pay-as-you-earn Withholding Tax goes into effect with the
first payroll period beginning after July 1, 1943.
Wages earned before that date are not subject to withholding.
The new tax does not change the duty of any person to pay his or
her June 15th income tax installment.
That must still be paid, on or before June 15th, just as if the new
pay-as-you-earn law had never been passed.
The only difference is that this June 15th installment will be credited
against this year's income tax payment instead of last year's.
Congress has agreed to forget most or all of a year's income tax
(1942 or 1943, whichever is smaller). So all tax collections paid this
year, both your March 15th payment and your June 15th payment and all the
tax payments your employers withhold from your wages from July 1 on, will
be current payments against current earnings - real "pay-as-you-go".
So don't fail to make your June 15th payment.
And also, don't fail to fill out and file with your employer, right
away, a copy of the Withholding Exemption Certificate. If you don't file
one of these Certificates, your employer will be required by law to with-
hold 20% from all your pay -- not matter how many dependents you have.
So ask your employer for this certificate NOW - fill it out, sign, and
return it to him promptly. It will cost you money if you don't!
Regraded Unclassified
167
RADIO STATION BREAKS
The new "pay-as-you-go" law does not forgive or cancel any person's
obligation to pay his or her second income tax installment on June 15.
June 15th is income tax payment day as usual. The new "pay-as-you-go"
law does not change that fact.
"Pay-as-you-go" withholding goes into effect July 1. But that does
not change or forgive any person's obligation to make his second
quarterly Income Tax Payment on June 15th.
The new withholding tax does NOT "forgive" your obligation to make
your second Income Tax payment on June 15.
"Pay-as-you-go" withholding goes into effect July 1. That does not
change your obligation to pay your Second Income Tax installment
on June 15.
Nothing in the new tax law "forgives" the necessity of paying
second quarter Income Tax Payment on June 15th.
Regraded Unclassified
68
d
From: Press Section
June 4, 1943
Treasury Department
Washington, D. C.
Note to Editor: There is considerable confusion in the minds of
taxpayers with reference to the new tax bill currently before Congress,
and the present income tax law. It makes no difference what law the
Congress passes, or what percent of tax is forgiven, the second install-
ment of 1942 Income Taxes must be paid June 15th. Publication of
these reminders on page one of your paper daily until June 15th will
materially aid in clearing-up this confusion in the minds of your
readers. Thank you.
INCOME TAX
REMEMBER June 15th
Remember June 15th
INCOME TAX
SECOND PAYMENT
* * IS DUE * *
PAYMENT DUE
INCOME TAX
REMEMBER
2nd Payment
to pay the SECOND
IS DUE
INSTALLMENT on your
* * June 15th * *
INCOME TAX June 15th.
Nothing in the new
REMINDER your
tax law "forgives" the
second quarterly INCOME TAX
necessity of paying 2nd
payment is due June 15th.
quarter INCOME TAX
PAYMENT on June 15th.
Regraded Unclassified
69
Wash. POST. June 14
9
Tomorrow's Tax Installment
Is Last Before Payroll 'Pinch'
Br the Associated Press
The second quarterly installment payer must file a return next March
payment on 1942 Income taxes is
15, remitting whatever he may owe
due tomorrow.
the Government despite his two
This will be the last such quar-
quarterly payments this year and
terly payment made by most tax-
the July 1-December 31 withhold-
⑇
payers. Beginning July 1 the ma-
ing. If all these total more than
his tax obligation, be will receive
i-
jority will pay their income and
a rebate.
o
victory taxes through withholdings
e
from wages or salaries.
The Installment due tomorrow,
T
and that paid March 15 will be
.
applied to either 1942 or 1943
taxes, depending upon the "abate-
ment year" of each taxpayer.
t
The "abatement year" is either
a
1942 or 1943, which ever repre-
t
sents a person's smaller tax pay-
ment, If 1942 Is your abatement
e
year, and your tax for it is $100,
3,
$75 of the amount (75 per cent) will
2.
be abated under the pay-as-you-go
tax bill. You will owe the remain-
1-
ing $25 in equal installments, due
March 15, 1944, and March 15,
II
1945. You also will owe your full
if
1943 tax, and the installments paid
a
March 15 and tomorrow will apply
1-
toward this obligation, as will the
1-
withholdings from your pay be-
tween July 1 and December 31.
:-
The same 75 per cent farmula
t
applies to all whose "abatement
year" taxes total more than $50.
Those with bills of $50 or less re-
ceive 100 per cent "forgiveness"
a
for that year. Those with tax bills
t.
between $50 and $66.75 receive $50
1
abatement and will owe the remain-
B
ing amount in 1944 and 1945 In-
y
stallments.
e
The withholding applies only to
persons receiving wages or salaries.
Such taxpayers as professional men,
receiving fees or other income, will
1 pay their taxes currently on a
a quarterly basis.
+1.
While the quarterly payment will
it' be abolished for most taxpayers,
à
the annual March 15 returns are
not done away with. Every tax-
Regraded Unclassified
70
2a
THE SECRETARY OF THE TREASURY
WASHINGTON
June 10. 1943
To the Editor of the Publication Addressed:
On July 1, the entirely new "Pay-as-You-Go" method of collect-
ing the Victory and Federal Income Tax goes into effect. This is
of the greatest interest to all the people of our Nation, especial-
ly wage earners.
Consequently, we are sending you herewith an article explaining
in brief the workings of this new Withholding Tax, its advantages to
taxpayers, and also the requirements it puts upon them.
It is important that we all do everything possible to emphasize
these two major points:
1. The necessity of each employee's filing with his employer,
as early as possible, a Withholding Exemption Certificate.
2. The new law does not "forgive" or cancel the obligation of
any person to pay his or her second income tax installment
on June 15, 1943.
I hope this will reach you in time to be of use in explaining
the process of withholding to your readers by the time they get
their first pay from which the tax has been withheld.
Any help you can give the wage earners of America to understand
this new law will be deeply appreciated.
Sincerely yours,
Secretary of the Treasury.
POLYICTORY
BUY
SHITED
STATES
WAR
BONDS
ARS
STANDS
Regraded Unclassified
71
Za
TREASURY DEPARTMENT
Washington
"PAY-AS-YOU-GO" INCOME TAX BECOMES LAW
TAXPAYERS PUT ON CURRENT BASIS THROUGH NEW COLLECTION
SYSTEM. TAX WITHHELD FROM WAGES AFTER JULY 1. WORKERS
MUST FILE EXEMPTION CERTIFICATES WITH EMPLOYERS.
WHAT IT IS
On July 1, 1943, a withholding tax on individual incomes goes into
operation. From then on you will, for the most part, pay your Federal Income
Tax bit by bit as you earn, instead of in a lump sum or four installments,
You will pay it through regular deductions from your pay envelope. This
is the same method that has been used to collect your Victory Tax and Social
Security Tax. It is NOT a new tax, NOT an extra tax -- but B. new method of
collecting the Federal Individual Income Tax. It includes the Victory Tax,
the withholding rate for which has been reduced from 5% to 3%.
This new Withholding Tax is at the rate of 20% on wages over and above
exemptions. After exemptions it will actually amount to no tax at all for
some persons, up to not more than 10 or 12 per cent of most people's pay.
It is NOT & gross tax on wages.
HOT IT /ORKS
The very first thing for any employee to do is to fill out, sign and hand
in to his employer a WITHHOLDING EXEMPTION CERTIFICATE. This tells your family
status, whether married or single, how many dependents you have. The greater
your responsibility, the more of your pay is exempt from the 20% withholding.
The law specifically puts upon employees the responsibility for filing
these EXEMPTION CERTIFICATES. If you do not file one with your employer,
he will not be able to give you any exemption, but will be required by law
to deduct 20% from all your pay.
It is of utmost importance that every employee fill out, sign and give to
his or her employer a copy of the Withholding Exemption Certificate -- right
away! Employers will supply blank forms.
If your marital status or the number of your dependents changes, you
must notify your employer within 10 days.
PAY EXEMPT FROM WITHHOLDING
From your Exemption Certificate, the employer determines the amount of
tax to be withheld from your pay. For single persons the amount exempt from
tax is $12 a week, or $624 a year. For married couples, the exemption is
$24 a week, or 81248 H. year. This exemption can be divided between husband
and wife if both are working, or the whele thing taken by either one, in
Regraded Unclassified
72
- 2 -
which case the other spouse cannot claim any of it. For each dependent
thore is an additional exemption of $6 B. week, or $312 & year.
Do not confuse these exemptions with your basic income tax exemption.
They are used only to calculate the amount to be withheld,
Here are three examples of how it works out, John Smith, EL single man,
is making $37 a week, Of that, $12 is exempt. The other $25 is subject to
withholding at 20%. Thus the amount withheld from each week's pay is $5.
George Jones is married, has three children, is earning $50 a week.
His exemptions are $24 for himself and wife, $6 for each of the three children,
& total of $42. Only $8 of his weekly pay in subject to withholding, so Jones'
employer will deduct only $1.60 a week,
James and Sarah Brown are both working. They have 4 dependents at home.
They elect to divido the married couple exemption of $24 equally between them
50 that each has 812 a week free of withholding. Since James furnishes the
chief support for the dependents, he may take $24 a week for dependents,
making his total exemption $36 a week before the 20% is withhold. If James
alone were working, he would claim the entire exemption of $24 and $24 more
for the 4 dependonts, or a total of 848 a week exempt from withholding.
A word of warning here. It is quite possible that the amount withheld
from your pay will not be exactly, to the penny, 20% of your pay above your
thholding examption. You may find that the tax withheld will be a trifle
more, or a trifle less.
Employees should understand that this is because the law allows employers
to withhold the tax in accordance with "Wage Bracket Tables." These tables
set definite amounts to be withheld from each pay. For example, in the case
of married employees with three dependents, whose weekly wage is anywhere be-
twoen fifty and sixty dollars, the employer in authorized to withheld a flat
amount of $2.60 per week, instead of requiring him to figure the exact amount
for each individual employee.
The law grants the employer this "short-cut" method in order to simplify
his job of computing the amount to be withheld for each individual worker.
In any case, where "Wage Bracket Tables" are used, the amount of tax withheld
will be only slightly difforent from an exact computation at 20%.
THAT HAPPENS TO MONEY WITHHELD
Tax money withheld from wages is paid by the employer to the United States
Treasury. The amount withheld from you stands to your crodit at the Treasury
against the amount you owe on Income and Victory Tax. At the end of the year,
or at termination of employment during the year, your employer will give you
A certificate stating the amount of wages he has paid you during the year and
the amount of tax he has withheld. Keep this, It is your tax receipt.
Regraded Unclassified
73
- 3 -
On or before March 15, 1944, you will be required to file, in the usual
manner, your incomo tax return showing your actual income for 1943, and
figuring in the usual deductions and credits. The tax withheld by your employer,
both before and ufter July 1, 1943, the incomo tax installments you paid
March 15 and June 15, und any tax you may have already paid in addition to
the above-mentioned payments will be shown on the roturn as credits. In other
words, you will add up the tax payments you made on March 15 und June 15, 1943,
plus the total amount that has beon already withhold for Victory Tax purposes,
DE well as the amounts withheld from your pay since July 1 by the Withholding
Tax, plus any other amounts you may have paid on September 15 and December 15.
If the total comos to more than your liability, the Government will credit you
with the difference against the next year's tax payments. If it comos to less,
you will pay the difference.
THY YE HAVE THE WITHHOLDING TAX
There is no doubt that the country as a whole welcomes this method of
Income Tax payment, which lots people pay their taxes in small fruquent
installments corresponding to their regular pay periods, and which lets people
pay this year's taxos "as-thoy-go" out of this year's wages. It is easier to
pay this way than to have to save up part of each pay for delayed quarterly or
annual payment,
Withholding brings tax money into the Foderal Treasury faster, now when
it is needed to pay for the war. It should help us in our fight against
inflation.
Members of Organized Labor and wage-earners in general should realize
that the new method of collecting taxes has not increased the tax burden.
It has, however, lightened this burden by distributing it over an entire year.
It cun be reported that "It Takes Both Taxes and Tar Bonds" to fight
and win the war. Enlightened self-interest and the call of patrictism require
the investment of the largest possible percentage of incone in War Bonds through
payroll savings or other systematic savings plans.
President Green of the American Federation of Labor and President Murray
of the CIO have recently issued earnest appeals for a continuation of Payroll
Savings Plans.
-000-
Regraded Unclassified
74
2b
TREASURY DEPARTMENT
Washington
Note to editors: The attached five sets of cuestions
and answers explaining provisions of the Current Tax
Payment Act of 1943 affecting most of your readers are for
release beginning Monday, June 21, 1943, and daily there-
after according to their number.
37-10
Regraded Unclassified
75
No. 1
Facts about
"PAY-AS-YOU-GO"
Q. Is the "withholding tax" a new tax or an additional tax?
A. Neither. It is a new "pay-as-you-go" method of collecting the Federal
Income and Victory Tax. The amount withheld goes toward paying your
regular income tax, including the Victory tax.
Q. Why is it called a Withholding tax?
A. Because it is deducted and withheld by the employer from the wages
paid to his employees.
2. Is this the "pay-as-you-go" tax we've been hearing SO much about?
A. Yes.
Q. Does this include my Victory tax payment, or is that extra?
A. The amount withheld includes the Victory tax.
2. Does it include Employment Taxes, formerly called Social Security
Taxes?
A. The amount withheld does not include Social Security Taxes.
Q. Then does it start?
A. The new "Withholding Tax" takes effect on July 1, 1943, and is
applicable to all wages paid on or after that date except for
wages paid for payroll periods commencing before that date.
2. Does the withholding mean that twenty percent of my pay check will
be taken out each pay day?
A. No. Exemptions bring the amount considerably lower, even for the
single person with no dependents. For instance, in the case of
a married man with two dependents drawing $50 per week, the weekly
percentage of withholding amounts to less than 6 percent. In other
words this man pays approximately $2.80 per week.
Regraded Unclassified
76
No. 1 (Centinued)
Q. Last March I paid one quarter of the income tax levied against 1942
income, $15,80. What happens to that?
A. The first quarter of the income tax levied for 1942 and paid in
March 1943 will be treated as part payment of income tax for 1943.
a. How about the June 15th installment?
A. The June 15th installment will also be treated as part payment of the
1943 tax.
7. How can I maintain my regular purchase of War Bonds through the Payroll
Savings Plan and at the name time pay out the additional withholding
tax?
A. It should be as easy under the withholding tax system as at present,
since this is not an additional tax but merely an installment or
pay-as you-60 methed of paying your regular annual income tax.
Regraded Unclassified
77
No. 2
Facts about
"PAY-AS-YOU-GO"
2. How much will my employer hold out of my pay?
A. There will be withheld from your pay an amount equal to 20 percent of
the excess of your wages over your family status withholding exemption,
or 3 percent of the excess of your wages over the Victory tax withhold-
inc exemption, whichever is greater.
Q. What do you mean by exemption?
A. The amount of your wages which is exempt from the withholding tax.
Q. What does that amount to?
A. On an annual basis, $624.00 for single persons; $1,248.00 for married
persons; and $312.00 for each dependent. On a weekly basis, this is
$12.00 for a single person; $24.00 for a married person; and $6.00 for
each dependent.
2. How does my employer know how much of my wage is exempt from withholding?
A. Because he gives you a slip of paper called WITHHOLDING EXEMPTION
CERTIFICATE. On it you indicate whether you are single or married,
how many dependents you have, and so forth. Then you sign the
Certificate and return it to your employer. From that information
he can tell exactly how much of your pay is exempt from withholding,
and how much bears the 20 percent tax.
2. What if I do not hand in one of these Certificates to my employer?
A. Then he is required by law to withhold the 20 percent tax from all
of your wage without any exemption, So it will save you money to
be sure to turn one in.
Q. Do I turn my Withholding Exemption Certificate in to my foreman, to
the payroll department, or where?
Regraded Unclassified
78
No. 2 (Continued)
A. The Withholding Exemption Certificate must be given to your employer,
or some one designated by him to accept it.
Q. Suppose both my wife and I are employed. How does the exemption work?
A. The personal exemption may be divided and each take one-half, or one
may claim it all. Each has the same Victory tax withholding exemption.
Q. Suppose I am married, have two children, and earn $54.00 a week - how
much pay will I receive after the withholding tax has been deducted?
A. You will receive $50.20 if your employer elects to use the wage bracket
withholding table provided by law, or $50.40 if your employer computes
the tax at 20 percent of your wage less exemptions.
Q. If my husband has filled out an EMPLOYEE'S WITHHOLDING EXEMPTION
CERTIFICATE and has claimed half of the personal exemption and
exemption for one dependent, and after & couple of months is drafted;
can the wife claim the full personal married exemption and the
dependent child's exemption?
A. The Withholding Exemption Certificate filed by the husband can be
changed. Where there is a change of status, a new Certificate
should be furnished the employer, which may take effect, at the
employer's election, with respect to any payment of wages made on
or after the date the Certificate is furnished; but in no event
later than the first payment of wages made on or after the following
first day of July or Junuary which occurs at least 30 days after
the Certificate is furnished to the employer.
Regraded Unclassified
79
No. 3
Facts about
"PAY-AS-YOU-GO"
Q.
What happens if the amount of my "withholding exemption" changes during
the year?
A.
You should furnish your employer a new withholding exemption certificate
within 10 days of such change in order that your employer may give
effect at the earliest date required by law to the change in your
marital status or the number of your dependents.
Q.
Is my employer required to withhold exactly 20 percent of my pay
above my exemption?
A.
No. Your employer may elect to use the "Wage Bracket Tables" provided
by law which vary slightly from exact computations at 20 percent.
These tables set definite amounts to be withheld from each pay. For
example, in the case of married employees with three dependents, whose
weekly wage is anywhere between fifty and sixty dollars, the employer
is authorized to withhold a flat amount of $2.60 per week, instead of
requiring him to figure the exact amount for each individual employee.
The law grants the employer this "short-cut" method in order to
simplify his job of computing the amount to be withheld for each
individual worker. However, cases where "Wage Bracket Tables" are
used, the amount of tax withheld will be only slightly different from
an exact computation at 20 percent.
Q.
Isn't a large part of last year's income tax cancelled or "forgiven"?
A.
Yes, from 75 percent to 100 percent, depending upon the amount of your
taxes for the years 1942 and 1943.
Q.
How about that part which is not cancelled?
A.
The part which is not cancelled you still owe to the Government.
You pay it in equal parts in March 1944 and March 1945.
O.
Since 3/4 of last year's taxes are cancelled and I paid one quarter
this past March, doesn't that clear me up on my 1942 tax?
A,
No. Your quarterly payment of March 15 applies on your 1943 tax.
So does the June 15th payment which must be made, If part of your
1942 tax is "unforgiven" you still owe it to the Government as part
of your 1943 tax liability. Payment of one half of that balance is
due in March 1944, and payment of the other half in March 1945.
Regraded Unclassified
80
No. 3 (Continued)
Q.
Then the payment of 1/4 I made in March, added to the forgiveness
of 3/4 does not free me from paying another quarterly installment
on or before June 15th?
A.
No. You are still required to make that June 15th payment.
Q.
What happens to the money my employer withholds?
A.
The money withheld from your wages is paid by your employer to the
United States Treasury. The amount withheld from you stands to your
credit at the Treasury against the amount you owe on Income and
Victory tax.
Q.
Does the employer have the use of my money that he has withheld?
A.
No. The amount of tax withhold from your wages by your employer is
a special fund in trust for the United States.
Q.
What proof have I that I have that much credit against my taxes?
A.
Shortly after the close of the year or termination of your employment
you will be furnished a receipt by your employer showing the amount
of the tax deducted and withheld from your pay.
Q.
Is the withholding tax an additional income tax like the Victory
tax?
A.
No. It's a deduction from your pay which goes toward paying your
regular income tax, including the Victory tax,
Regraded Unclassified
81
No. 4
Facts about
"PAY-AS-YOU-GO"
Q.
Is the withholding tax an additional tax?
A.
No. The withholding tax is merely an easier way of paying your
regular annual income tax on a pre-payment pay-as-you-go basis.
Q.
I am a married man with one child and am now putting 10 percent of
my pay in war bonds and 5 pereent, after subtracting withholding
exemption, for the Victory tax. How ean I pay the additional
twenty-pereent withholding tax on top of that fifteen percent and
still have enough to live on?
A.
In the first place your twenty-percent withholding tax includes your
Victory tax. If you are married and have one child, your exemptions
will bring your tax down to approximately 8 percent, For instance,
if your salary or wage is $50 per week, your withholding tax will be
approximately $4 per week, and instead of paying an annual income
tax of approximately $212 in a lump sum, you are paying it at the
rate of $4 weekly.
Q.
Suppese when I make my return next March I find my employer has
withheld more than enough money to cover my tax. Will the excess
be refunded to me?
A,
It will either be refunded to you or credited against other income
taxes due from you.
O.
Suppose my employer withholds tax from my wages, but does not turn it
over to the Government. What protection have I?
A.
The employer is liable for the payment of the tax and must furnish
the employee with a written statement showing the amount of tax
deducted, Penalties are imposed upon employers for failure to
make and file returns or pay the tax within the time prescribed by
law. The employee is emply protected.
Q.
Do I have to wait until the end of January to know how much of
wages my employer holds out?
À.
Yes, for the official notice or receipt unless your services with your
employer are terminated before the end of the colendar year.
Regraded Unclassified
82
No. 4 (Continued)
Q.
What happens if the receipt the employer gives me gets lost or
destroyed?
A,
You should make application to your employer for a copy of
the receipt.
Q.
Does it make any difference if I change jobs several times during
the year?
A.
No. Each employer is required to withhold the tax from wage
payments made to you.
Q.
What advantages are there to me in this withholding?
A.
You will be paying on your income and Victory tax as you receive
your wages.
Regraded Unclassified
83
No. 5
Facts about
"PAY-AS-YOU-GO"
Q.
Is the withholding tax an additional income tax?
A.
No. The withholding tax is an installment or pay-as-you-go method
of paying your regular annual income tax.
Q.
Does this new tax mean people will not have to pay out money for
income tax on next March 15th, 1944?
A.
Yes, in case the amount of tax withheld from wage payment equals
or exceeds the amount of income tax liability reported on the
annual return.
Q.
Does this mean that I won't have to make out an income tax report
next March?
A.
No. You will be required to file a return on the usual form.
C.
Are there any kinds of workers who are exempt from withholding?
A.
Yes, for certain specified classes which include members of the
armed forces, agricultural labor, domestic servants, and ministers
of the gospel.
Q.
How about people with big wages? Are they going to get by with
only a 20 percent tax?
A.
No. They also have to make quarterly payments of tax in addition
to the amounts withheld.
C.
How about salaries, bonuses and commissions? Is withholding
required?
A.
Yes, since "wages" means all remuneration for services by an
employee.
Regraded Unclassified
84
No. 5 (Continued)
Q.
How about people with income from stocks, bonds, mortgages,
etc.? Who withholds from them?
A.
There is no withholding on income from bonds, mortgages, etc., but
those receiving such income must make a special return and pay the
tax quarterly on such income.
Q.
I am paying all I can over and above living expenses now in
purchase of War Bonds. How can I keep up those payments and pay
the withholding tax?
A.
I'm sure that you have been setting aside a part of your pay to
meet quarterly installments of your income tax. The withholding
tax is merely a "pay-as-you-go, or installment-method of paying
your income tax, instead of in a lump sum. It should make it
easier for you to buy additional War Bonds.
Regraded Unclassified
85
2c,
TREASURY DEPARTI ENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Press Service
Friday, June 11, 1943.
No. 37-0
(The following explanation of the now Current Tax
Payment Act of 1943 by Assistant Secretary of the Treasury
John L. Sullivan, in a discussion with a man and woman
employee and an employer, is scheduled to be broadcast
at 10:30 p.m., Eastern War Timo, Thursday, June 10, 1943,
over the Columbia Breadcasting System and is for release
at that time.)
Announcer:
The new tax bill, popularly known as the "pay-us-you-go"
tax, has just become law. It [005 into effect July 1st,
just three weeks from today. Between now and then nearly
fifty million Americans will have to find out how this
new law affects them -- what they have to do to propare
for it -- what new duties it places upon them -- how
it benefits them individually.
To help answer somo of those questions we are bringing
to you a round toble discussion of the new tax, between
a high official of the Government, the Honorable John L.
Sullivan, Assistant Secretary of the Treasury, and three
typical American taxpayers -- an employee of a business
establishment, a woman war worker, and an employer.
Now to start this discussion rolling, I un going to ask
Mr. Sullivan to tell us what is the outstanding difference
between this new "pay-as-you-go" tax and the old method of
income tax collection.
Sullivan:
I think the first thing to understand is that this is not
a new tax or an additional tax, but a new method of
eollecting the income tax. The new law does not change
the income tax rates. The big change comes in how a person
pays the income tax. Under the old system, he paid a
year late. That is, on Harch 16th he paid, or began paying,
a tax on the money he earned the previous year. Now, under
the new pay-as-you-go method, he will be paying the income
tax on his 1943 income during 1943, bit by bit, pay-day
by pay-day.
Regraded Unclassified
86
- 2 -
Employee:
As I understand it, when you say I will pay that tax bit
by bit, you mean that it will be deducted from my pay
bit by bit.
Sullivan:
That is exactly correct. Your employer will deduct part
of your pay every payday. He will turn that money over
to the collector of internal revenue with his quarterly return,
or if your employer has enough employees to make the aggre-
gate deductions from all employees $100 or more each month,
he will deposit that money monthly in a bank which will
turn it over to the Treasury of the United States. In
either event, this money stands to your credit as pre-
payment of your tax.
Employee:
That's all right, but what's worrying me is how much is my
employer going to hold back. The papers have been talking
about 20 percent. Does that mean I'm going to have 20
percent taken out of my 076 every week? How can I support
a wife and three kids
Sullivan:
Just a moment - the deduction is not 20 percent on all
your pay. It is 20 percent on your pay, less your
exemptions -- and you have a lot of exemptions. Are your
wife or any of your children working?
Employee:
No, sir,
Sullivan,
Then & good part of your pay is exempt from the withholding
tax, Twelve dollars for yourself, another twelve dollars
for your wife - that makes 824, plus six dollars for each
of your three children, makes 318 more. That's a total
of $42 of your weekly pay that's exempt. The amount with-
held is 20 percent of the balance. You said your weekly
pay is 876, didn't you?
Employee:
Yes, sir.
Sullivan:
Then your employer will withhold 20 percent on the difference
between your total pay of 876 and your exemption of $42 -
which amounts to 334.
Employee,
How much then would be taken out of by weekly pay?
Sullivan:
86.80, which means that you will receive just under 870,
instead of 376.
Employee,
....
and the 86.80 I didn't get, is that my income tax?
Regraded Unclassified
87
- 3 -
Sullivan:
Yes, that is your income tax, and it also includes your
Victory tax.
Employer:
May I ask a couple of questions here?
Sullivan:
Certainly.
Employer:
You see, I'm an employer, the fellow who has the job of
withholding this tax. You mean I don't have to make that
5 percent Victory tax withholding any longer?
Sullivan:
Not after your last payroll that begins in June. All payrolls
beginning on or after July 1 are subject to the new law,
and the Victory tax is included in the 20 percent withheld.
Employer:
Well, here's another question. My company has about 250
employees. I don't begin to know which of them are single,
or which married, or how many children they have. How
can I figure their exemptions and the amount I must withhold?
Sullivan:
That's a very important question. You've got to have
that information, and here's how you get it. There is &
special form called a Withholding Exemption Certificate.
The Collector of Internal Revenue in your district will
supply you with as many as you need. It is up to you
to give one to every one of your employees. And it is
up to you others, as employees, to fill out those Certifi-
cates, sign them and then return them promptly to your
employer. On this Exemption Certificate you tell him
whether you are married or single and how many dependents
you have. It gives the employer the information he needs
so that he can exempt the proper amount of your pay from
the 20 percent withholding.
Employee:
What happens if I don't turn in this Certificate?
Sullivan:
Until you hand one in, the law requires your employer to
withhold 20 percent on all your pay - every dollar of it.
In your case, it would mean he would withhold $15.20 each
week instead of $6.40.
Employee,
Believe me, I'll get that Certificate in,
Employer:
And get it in early, because it's going to be a big job for
us employers to get all those exemptions and rates figured
by the first of July. It is going to be especially difficult
for my company, because, due to piece work bonuses, most of
our employees earn odd amounts, like 863.82 or $78.90.
Regraded Unclassified
88
Mr. Sullivan, do I have to figure the exact 20 percent
of each of those amounts above withholding exemptions?
Sullivant
No. Employers may elect.to use the "Wage Bracket Tables"
which are written in the law. These tables set definite
amounts to be withheld from each pay. For example, in
the case of a married employee with three dependents,
whose weekly wage is anywhere between fifty and sixty
dollars, the employer is permitted to withhold a flat
amount of $2.60 per week, instead of requiring him to figure
the exact amount for each individual employee. The law
grants the employer this "short-cut" method in order to
simplify the job of computing the amount to be withheld
from each individual employee. The amount of tax withheld
may be slightly different from an exact computation at
20 percent, but this does not hurt the employee any. If
B. little less than the actual 20 percent is withheld he
may have a small balance to pay when next March 15th comes
around, If a trifle more than the exact 20 percent is
withheld, the employee will have a credit coming to him.
Woman
I was working last year, too, and my income tax figured to
Worker:
about $60. I paid a quarter of it in March this year.
What happens to that 8157
Employer:
That 815 stands to your credit as a payment on your income
tax for this year. Isn't that 50, Mr. Sullivan?
Sullivan:
Yes, that is correct. The 315 you paid in March counts
as a payment on your current 1943 income tax.
Woman
Well, do I have to pay another $15 this month - the June 15th
Worker:
quarterly installment?
Sullivan:
Yes, Nothing in the new law changes any person's obligation
to pay the June 15th installment. It also will be treated
as part payment of your 1943 tax.
Employer:
That applies to everybody? Everybody must pay the June 15th
installment?
Sullivan:
Yes, everybody who has been paying his 1942 tax in quarterly
installment@must make another payment on or before June 15th.
Woman
Well, if we have to make these two quarterly payments, and
Worker:
then have 20 percent taken out of our wages, what is all
this "forgiveness" there was so much talk about?
Regraded Unclassified
89
- 5 -
Sullivan:
You are forgiven all or a large part of a debt which, under
the old law, you owed to your Government. It is true
that you will keep right on paying income tax. You get no
holiday from that. But there are two differences. One
difference is that you are paying your tax a little every
payday, as you earn your money, instead of having to save
it up for three months to make quarterly payments. The
other difference is
Employer:
That you are paying it against this year's income tax debt
instead of last year's -- isn't that right?
Sullivan:
That is exactly right. For the majority of the taxpayers --
that is the people with low or average incomes whose tax
amounts to $50 or less for either 1942 or 1943, the whole
tax for the smaller year will be forgiven.
Employer:
How about the rest of us with higher incomes? I figure that
75 percent of my own personal 1942 tax will be forgiven.
I still owe a quarter of it. Does the quarterly payment
I made last March clear that up?
Sulliven:
No. That quarterly payment, as I have just said, will be
credited against your 1943 tax liability. You still owe
the Government one-fourth of your 1942 tax. Assuming,
of course, that your tax for 1942 is less than for 1943,
as will be the case for the great majority of all taxpayers.
Employer:
When do I pay that?
Sullivan:
You may pay half of it Harch 15th, 1944, and the other half
a year later in Harch, 1945.
Woman
I would like to ask what proof I have that I have made
Torker:
these payments on my income tax through the money held out
of my wages,
Sullivan:
Shortly after the close of the year, or with your last pay
if you stop working before the end of the year, your employer
will give you B. receipt showing the total amount of the tax
deducted and withheld from your pay during the year.
Employee:
What do I do with that receipt?
Sullivan:
You take good care of it. It is your receipt for the taxes
you have prepaid.
Regraded Unclassified
90
- 6 -
Employee:
Suppose the amount withheld during the year amounts to more
than the tax I owe for the year?
Sullivan:
Any overpayment of taxes will be refunded or credited to you.
Employee:
What would happen if my receipt from my employer gets lost
or destroyed?
Sullivan:
You apply to the employer for a copy of the receipt.
Woman
What would happen if my employer withheld the tax from
Worker:
my wages but did not turn it over to the Government?
Sullivan:
You are completely protected. The receipt you get from
your employer is your proof of the fact that you have
paid that much tax.
Woman
Do I have to wait until the end of the year to get a tax
Worker:
receipt for the money my employer has withheld from my
wages?
Sullivan:
Yes, unless you change employment during the year. Then you
get your receipt with your last pay.
Employee:
Suppose I change jobs several times during the year.
Sullivan:
That does not make any difference. Each employer must give
you a receipt showing the amount of tax he withheld.
Employer:
I have heard or read in the papers that some classes of
employees don't have anything withheld from their wages.
Sullivan:
That is correct. There is no withholding from the pay of
the personnel of the armed services. Ministers of the gospel
are also exempt from withholding. So are all persons
engaged in domestic and agricultural service. However,
all those people will be required to pay their income
taxes out of their current income. They do this by filing
a return showing their estimated tax and pay such tax
quarterly.
Announcer:
Our time is almost gone. Before we close, is there anything
you especially want to emphasize, Mr. Sullivan?
Regraded Unclassified
91
- 7 -
Sullivan:
Yes. I wish to mphasize that nothing in the new law
excuses anyone from naking his or her June 15th income
tax payment. That is due next Tuesday. And finally I
want to urge all employers to get those Withholding
Exemption Certificates into the hands of your employees
right away. To all employees I want to say, "Please fill
out and sign those Certificates and return to your employer
immediately."
Regraded Unclassified
2
92
2
MCDONALD:
Tuesday is June 15th and to millions of Americans
that means another Federal income tax payment
is due. This year there is some confusion be-
cause of the new withholding tax plan. Many
listeners have written us asking whether they
must pay next week, or whether they can skip
that payment now. Numerous other questions have
come to us and we decided to ask a tax authority
to sit at our news table today and answer all
queries. He is Timothy C, Mooney, Deputy Com-
missioner of Internal Revenue. Mr. Mooney, I
want you to meet John Q. Public in person. Mr.
Public has a list of questions we made up from
those sent us by our listeners.
MOONEY:
Well, I am happy to meet John Q. Public in per-
son. What's your first question?
PUBLIC:
That's easy. Do I have to pay that second in-
stallment on my income tax due next Tuesday?
MOONEY:
Yes, you most certainly do. It will be accepted
as part payment of your 1943 taxes.
PUBLIC:
All right, what happens to the money I paid in
March - the first installment?
MOONEY:
That also helps pay your 1943 taxes,
PUBLIC:
Well then, how are my 1942 taxes going to get
paid? Or are they what I have heard called
"forgiven."
Regraded Unclassified
93
- 2 -
Not entirely forgiven, but 75% of the tax for the
MOONEY:
year 1942 or 1943, whichever amount is the smaller,
will be cancelled. Furthermore, if the smaller
tax for either one of those years is $50 or less,
then the entire amount is forgiven.
PUBLIC:
Well, if my March and June installments both go
toward paying 1943 taxes, how do I pay the small
part of my 1942 tax that I will owe?
MOONEY:
The part not cancelled may be paid in two install-
ments, one in March 1944 and the other in March
1945.
PUBLIC:
The rest of the money I owe you for 1943, as I
understand it, comes out of this new 20% with-
holding tax plan. Is that right?
MOONEY:
The amount you paid in March this year and your
June 15th payment, together with the 5% Victory
Tax deducted from your pay up to June 30th, as
well as the new 20% withholding tax beginning
July 1st - all of these added together will go
toward payment of your 1943 taxes.
PUBLIC:
Well, suppose we look ahead to next March and I
make out my income tax return for 1943 and I
find out my employer has kept out more money
than I owe the government.
Regraded Unclassified
94
- 3 -
MOONEY:
Mr. John Q. Public, you will got a refund, or
the overpayment may be applied as a credit
against your tax for the year 1944. Incidentally,
your employer won't deduct 20% of your total
salary. He will deduct only on the number of
dollars left after your exemptions are sub-
tracted. Let's make an illustration?
MOONEY:
Are you married?
PUBLIC:
Yes, and I have two children at home both under
18 years of ago.
MOONEY:
What is your weekly salary?
PUBLIC:
I make $56 a week, and I would like to know how
much money I will got in my pay after the tax
has been withheld from it.
MOONEY:
You will receive after the tax has been withhold
$52.00 if your employer makes an exact computa-
tion of 20% of the amount of your pay in excess
of your total exemption. However, if your employer
decides to use "wage bracket tables," which simplify
his mathematical computations, you will get a
slightly greater amount, or $52.20. Therefore,
only $4.00 or $3.80 will be withhold from your pay
each week.
Regraded Unclassified
95
- 4 -
PUBLIC:
How did you arrive at this answer?
MOONEY:
In this way. As a married man $24 of your weekly
pay is exempt from withholding and you are en-
titled to a further weekly exemption of $6 for
each dependent. So in your case, having a wife
and two dependents, you get an exemption of
$24 plus $12 or a total of $36, on which your
employer does not withhold one penny. Your em-
ployer will subtract this $36 from your weekly
wage of $56 which leaves only $20.00 subject to
the tax of 20%. Therefore, $4.00 is deducted from
your weekly pay.
PUBLIC:
That seems simple enough.. Suppose my exemptions
change during the year?
MOONEY:
You mean a new little John Q. in your family?
well, you give your employer a new exemption cer-
tificate, showing the change in your family
status, so that he may increase your weekly
exemption by $6.
Regraded Unclassified
96
- 5 -
PUBLIC:
All right, so far. What happens to the money
the fellow I work for deducts from my pay
each week? Does he pay it to the government?
MOONEY:
He certainly does. It is his duty to pay
monthly to a bank the funds withheld by him
from the pay of his employees. Do not forget
that every penny your employer takes from your
weekly pay stands as a credit to your account
for the amount you owe for Income and Victory
Taxes.
PUBLIC:
Well. now, Mr. Mooney, I'm not ordinarily a
suspicious person, but what proof do I have
that I'm going to get that credit?
MOONEY:
Sometime during January next year you will get
a receipt from your employer showing the amount
of taxes he deducted from your pay in 1943. Or,
if you quit your job during 1943, you will get
a receipt when you receive your last payment of
wages,
PUBLIC:
What if this employer of mine doesn't turn in
to the Treasury the money he holds out on me?
What protection do I have?
MOONEY:
That's a fair enough question. Your employer is
liable for the payment of the tax, and he must
give you the receipt. You, Mr. John Q. Public,
are protected. If your employer doesn't turn in
Regraded Unclassified
97
- 6 -
MOONEY (CONT'D):
the money he and not you, will be dealt with.
Now let me ask you a question, Mr. John Q. Public,
Do you know what the Withholding Exemption Cer-
tificate is?
PUBLIC:
Haven't the faintest idea.
MOONEY:
It's very important to you. This certificate
will show your family status. It is used by
your employer in computing the amount of your
wages exempt from withholding. He'll request
that you fill out that form. If you fail to
do so, he will be obliged to withhold 20% of
the full amount of your pay.
PUBLIC:
Believe me, I certainly will fill out that form.
Now tell me, Mr. Mooney, is this plan the one
I've heard called the "pay-as-you-go plan?"
MOONEY:
Yes. You can see now why it is called just that,
You will be paying a little each week on your
current year's income tax - you will be paying
as you go.
PUBLIC:
I won't have to pay any tax next March, will It
I won't have to make out one of those yearly forms1
MOONEY:
You may not have to pay any tax in March but you
will have to file a return as usual.
PUBLIC:
What about the people with the big salaries?
Do they get by with only this 20% deduction?
Regraded Unclassified
38
- 7 -
PUBLIC (CONT'D):
You know there's a lot of difference between the
tax on my $56 a week and the tax on several hundred
dollars a week.
NOONSY:
The individuals whose wages fall in the higher
income tax brackets will have to make quarterly
payments direct to the Collector of Internal Reve-
nue in addition to the weekly amounts withheld by
their employers.
PUBLIC:
By the way, is anyone exempt from withholding?
MOONEY:
Some people are; for example, members of the armed
forces, ministers of the gospel, agricultural
labor, and domestic help. But do not forget that
although they are exempt from withholding, they
must pay their estimated tax quarterly and cur-
rently. Anything else, Mr. John Q. Public?
PUBLIC:
One final question, Mr. Mooney. Suppose I get
restless and keep moving around?
MOONEY:
It won't make a bit of difference, Mr. John Q.
Public. Every one of your employers will have
to make the deductions just the same. Each em-
ployer for whom you worked during the year is ro-
quired to give you a receipt for the total amount
of money he has withhold from your wages. The
law requires him to do this.
Regraded Unclassified
We've Been Asked:
99
ABOUT COLLECTING THE WITHHOLDING TAX
(Hundred of thousands of employers
the Treasury for all money withheld from
members of the armed services, doctors,
have only a short time to get ready for
workers. The Secretary of the Treasury is
lawyers. ministers, etc. But it does apply
the buge task of putting a withholding tax
expected to authorize banks or trust com-
to salaried officers and executives of com-
system into effect on July 1. Under the
panies which are depositories or financial
panies, Government workers, etc.
withholding plan. these employers will
agents for the Government to receive with-
become tax-edlection agencies, will be re-
holding taxes and to issue receipts to be
What reports are wage earners to make?
sponsible for more records, reports and
considered as payment of the taxes,
financial payments to the Treasury. The
If you are affected by the withholding tax,
delay of Congress in agreeing on the form
Must on employer make on accounting
you are supposed to inform your employer
of the pay-as-you-go tax leaves employers
to his employes on withholdings?
in a signed statement by July 1 of the ex-
less than a month to get set for opera-
emptions from the withholding tax to which
tion of the system. Many are asking how
Yes, If you are an employer, you must
you are entitled. Otherwise, you will be
sollection of the withholding tax will af-
give each employe on or before January
allowed only the minimum exemption.
fect both employers and employes.)
31 a written statement showing the amount
These exemptions are at the weekly rates
of wage or salary paid to him and the
of sie for a single person, 824 for a married
This leads to the question: When does
amount withheld during the preceding
person and 80 more for each additional
the actual withholding from salaries
year. If an employe quits or is discharged,
dependent. You also are supposed to
and wages of employes begin?
he must be given such a written statement
notify your employer within 10 daygeof
on the day he receives his last pay.
any change in your exemption status.
The withholding las applies to the first
You do not have to make these statements
regular pay-roll period that begins on or
after July 1. Thux, if an employe is paid
to regular employes more than once a
How does on employer tell the exact
amount to withhold from pay?
each Saturday for the current week, the
20 per cent withholding will begin at the
The bill passed by Congress has five tables
start of the new week, Sunday, July 4.
designed to help employers to figure how
Again, if he is paid monthly on the fif-
much to withhold from the salary or wage
teenth of the month, the actual 20 per cent
of each employe. These tables are based
withholding will commence on July 16.
upon pay rolls for weekly, biweekly, semi-
On his pay for the first 15 days of July,
monthly, monthly or miscellaneous pe-
only the old Victory tax of 5 per cent of his
riods. They give only the approximate
salary or wage would be withheld. For a
amount of tax that would be owed by an
new employe going to work on or after
employe in each of the pay bands.
July 1. the 20 per cent withholding would
An employer has the option of using these
begin with pay for his first day of work.
approximate tables or of calculating the
exact amount of tax that is due from each
What must employers do before July 1?
of his employes. But, if the employer
chooses to use the tables, a worker will
If you are en employer, you should get
have the amount prescribed by the tables
copies of the various Government forms
taken from his pay. If more than the
that will be needed. Many of these al-
amount of his tax is withheld, he can claim
ready have been printed. They will be dis-
a refund or a tax credit when he files his
tributed by all Commissioners and Deputy
final income tax return for 1945 income
Commissioners of Internal Revenue and
on March 15, 1944.
probably will be available at banks, post
offices, etc, By July 1, you also are sup-
Under the new system, an employer must
posed to get from each employe, in a writ-
Harrie # Ewing
withhold 20 per cent from the pay of an
len form specified by the Commissioner
TIMOTHY MOONEY
employe after deducting from the pay of
of Internal Revenue. a statement as to his
Deputy commissioner, internal revenue
the employe his family status exemptions,
family status. This is needed to show how
but the tax withheld must not be less than
(in charge of income tax)
much of the pay of each employe is ex-
3 per cent of the worker's pay in excess
empted from the withholding tax.
of the Victory tax exemption of 812 a
year. However, some salary earners in the
week. The 20 per cent that is withheld rep-
higher-income brackets and those who re-
What new records do you have to keep?
resents a combination of the net Victory
ceive more than 8100 income a year from
tax of 3 per cent and a 17 per cent with-
As an employer, you must keep a record
other sources and have incomes large
holding for income tax and surtax. These
of the exact amount withheld from the
enough to file returns will have to file esti-
are handled together as one withholding
pay of each of your workers. Government
mates of their 1943 income next Septem-
tax. When an employe files his March 15 in-
forms will be available for these records.
ber 15. At that time, some of them may
come tax return, he can take certain cred-
Many details of procedure are yet to be
request statements on withholdings.
its against the additional 2 per cent Vic-
the announced in the form of regulations by
You do not have to withhold the 20 per
tory tax, withheld between January 1 and
Commissioner of Internal Revenue,
cent of pay from certain types of work-
July 1, 1943, for money spent in buying
but, in general, they will be similar to
ers, such as maids, gardeners, casual work-
War Bonds and in paying debts and life
present rules for withholding the Victory
ers or other domestic servants. Also, the
insurance premiums. He also gets credit
las At certain periods, probably monthly
withholding tax is not collected from farm
against his yearly income tax for install-
or quarterly, =mployers must account to
workers, self-employed men and women,
ments paid on March 15 and June 15, 1943.
10
THE UNITED STATES NE
Regraded Unclassified
100
2c3
Short Talk on "PAY-AS-YOU-GO"
Beginning July 1st most of us Americans will pay our income tax
pay day by pay day. Our employers will withhold 20% of each wage, over
and above our individual withholding exemption, and turn it over to the
United States Treasury. This is payment as we go on our Income and
Victory Tax.
Now instead of being a year behind on taxes, the tax money we pay
this year is on the money we earn this year.
The employer does not withhold 20% of the entire wage. Part of every
person's wage is exempt if the employee files a certificate showing his
family status
312 a week for a single person, $24 a week for a
married person, $6 a week for each dependent. Thus it works out that for
most people the amount withheld is from 5 to 12% of their actual pay.
In order to get taxpayers on a current "pay-as-you-go" basis, Congress
has abated or "forgiven" all or a large part of one year's income tax.
The tax forgiven is for the year 1942 or 1943, whichever is smaller. The
amount forgiven varies. If tax for the smaller year is $50 or less, the
entire amount is forgiven. If tax is between $50 and $66.67, $50 is for-
given. Above that, three-fourths of the tax is forgiven. The other
quarter is still owed to the Government; it may be paid in two equal parts,
on March 15, 1944 and March 15, 1945.
All income tax payments made in 1943 apply on the 1943 tax. The March
and June installments, originally paid on the 1942 income, and 5% Victory
tax withheld since January 1, will be credited as payments on the 1943
tax. For the rest of 1943 you will accumulate further 1943 payment
through the amounts withheld from your pay. You are "paying-as-you-earn."
Regraded Unclassified
205
POB.VICTORY
BUY
-
TREASURY department
STATES
WAR
WASHINGTON 25
STAMPS
OFFICE OF
OMMISSIONER OF INTERNAL REVENUE
ADDRESS REPLY TO
June 12, 1943
COMMISSIONER or INTERNAL REVENUE
AND NEPER TO
IT:P
PERSONAL
The Current Tax Payment Act of 1943 was approved June 10, 1943.
It is not unlikely that collectors of internal revenue and internal
revenue agents in charge will receive requests from civic or business
organizations in their communities asking that they or members of
their staffs give brief talks pertaining to the principal provisions
of the new Act, particularly the withholding provisions which become
effective July 1, 1943.
There are attached two such talks which you are authorized to
use on such occasions. The talk entitled "The New Law Is Compared
With the Old" has also been prepared in a form suitable for an eight
to ten minute radio broadcast, a copy of which is also enclosed.
The other talk entitled "The Advantages of the New Procedure" may
also be similarly reduced in size should you want to prepare it for
radio use.
The attached copy of Field Procedure Memorandum No. 276 sets
forth a brief summary of the provisions of the Current Tax Payment
Act of 1943. This material may likewise be used either for radio
purposes or for making talks relating to the provisions of the new
Act.
Respectfully,
July I.Halving
Commissioner.
4 Enclosures.
Regraded Unclassified
102
2cs
TALK - WITHHOLDING UNDER THE "CURRENT TAX PAYMENT ACT OF 1943"
THE NEW LAW IS COMPARED WITH THE OLD
The Victory tax, which is an additional income tax, became effec-
tive January 1, 1943. It is a wartime income tax on individuals of
5 percent of income in excess of $624 a year. While the return of the
Victory tax for 1943 will not be made until 1944, salary and wage
earners, excepting certain classes such as members of the armed forces,
agricultural workers, and employees engaged in domestic service, have
already made provision for payment of the Victory tax on earnings they
have received in 1943. The employers have deducted the tax from pay-
ments of wages to the employees. The amounts 80 deducted either have
been or soon will be paid to the collectors of internal revenue and the
employees will be entitled to take full credit for the tax deducted when
they file their income and Victory tax returns in 1944 reporting income
received in 1943.
The Congress has now enacted a law designed to place most wage
earners on a pay-as-you-go plan for all their Federal income taxes,
including the Victory tax. This law, known as the "Current Tax Payment
Act of 1943," in general requires withholding by employers at the rate
of 20 percent on wage payments in excess of the family status withhold-
ing exemption. This 20 percent rate includes the withholding of the
Victory tax on which the withholding rate has been reduced from 5
percent to 3 percent. The reduction of this withholding rate does not
alter the rate to be paid by the individual when he files his return
of income. He still computes his Victory tax at 5 percent. Wage pay-
ments made for payroll periods beginning on and after July 1, 1943,
Regraded Unclassified
103
- 2 -
will be subject to the new rate of withholding. The objective of the
new plan is to have the employer withhold from the wages of the
employee and pay to the Government for the account of the employee an
amount which will approximate the liability of the employee for the
normal income tax, the first bracket surtax and the Victory tax.
The Act exempts certain wage payments from withholding. The
classes of wage payments exempt from withholding are in the main the
same as under the withholding provisions of the Victory tax in opera-
tion since the first of the year - such as, payments for services to
members of the armed forces, agricultural laborers, and domestic help.
However, some changes have been made in the classes of wage payments
exempt from withholding. Payments for services performed as a minister
of the gospel are now exempt from withholding. On the other hand, wage
payments to employees of nonresident alien individuals or foreign
partnerships and foreign corporations having offices or agents in the
United States although not engaged in business in the United States
are no longer exempt from withholding. Let me say right here that even
though certain wage payments are exempt from withholding, they are
nevertheless subject to income taxes, including the Victory tax, and
the employees receiving such payments will be required to make a return
of the tax. However, such employees will have no credit to apply
against the liability as in the case of individuals whose wages are
subject to withholding.
Since existing law imposes on a single individual with no de-
pendents a larger income tax than in the case of married person or
the head of a family receiving the same amount of wages, the family
Regraded Unclassified
104
- 3 -
status of the wage earnor is taken into consideration in computing the
amount of tax to be withheld by the employer. The Act requires the
employee to furnish his employer information as to his family status.
The employee will do this by filling out and furnishing his employer a
form which is known as an "Employee's Withholding Exemption Certificate."
That certificate will indicate whether the employee is single or married
and the number of dependents receiving chief support from him. It will
also show in the case of a married person whether the employee is claiming
all, or one-half, or none of the personal exemption for withholding. In
the event of a change in status B. new certificate must be furnished the
employer by the employee not later than ten days after the change occurs.
On the basis of this information the employer will be able to determine
from a table the amount of the family status withholding exemption
appropriate to B. particular employee to be deducted from the wage pay-
ment before applying the 20 percent withholding tax rate. Employees
heretofore were not required to file such certificates with employers
when withholding of the Victory tax went into effect last January for
the reason that the family status of the individual did not affect the
amount of the individual's liability for the Victory tax. The "Employee's
Withholding Exemption Certificate" is & new feature and plays a very
important part under the new withholding provisions. Should the
employee fail to file the certificate with his employer, no family
status withholding exemption will be allowed and 20 percent will be
withheld from the total wages paid to the employee.
Employers may, if they so elect, withhold in accordance with wage
bracket tables as provided in the law. Doubtless most employers have
Regraded Unclassified
104
I I 3
status of the wage earner is taken into consideration in computing the
amount of tax to be withheld by the employer. The Act requires the
employee to furnish his employer information as to his family status.
The employee will do this by filling out and furnishing his employer a
form which is known as an "Employee's Withholding Exemption Certificate."
That certificate will indicate whether the employee is single or married
and the number of dependents receiving chief support from him. It will
also show in the case of e married person whether the employee is claiming
all, or one-half, or none of the personal exemption for withholding. In
the event of a change in status e. new certificate must be furnished the
employer by the employee not later than ten days after the change occurs.
Dr. the basis of this information the employer will 00 able to determine
from a table the amount of the family status withholding exemption
appropriate to e particular employee to be deducted from the vage pay-
nent before applying the 20 percent withholding tax rate. Employees
horetofore were not required to file such contificates with employers
when withholding of the Victory tax wont into affect last January for
the reason that the family status of the individual did not affect the
amount of the individual's liability for the Victory tax. The "Emoloyee's
Withholding Exemption Certificate" is a new feature and plays P yery
important part under the new withholding provisions. should the the
employee fail to file the certificate with his employer, no family
status withholding exemption will be allowed and 20 DO be
withheld from the total vages paid to the amloyee.
Employ se stay to elect, vithheld 11n accordance eccordance JAP new
brackers
Regraded Unclassi
104
- 3 -
status of the wage earner is taken into consideration in computing the
amount of tax to be withheld by the employer. The Act requires the
employee to furnish his employer information as to his family status.
The employee will do this by filling out and furnishing his employer a
form which is known as an "Employee's Withholding Exemption Certificate."
That certificate will indicate whether the employee is single or married
and the number of dependents receiving chief support from him. It will
also show in the case of a married person whether the employee is claiming
all, or one-half, or none of the personal exemption for withholding. In
the event of a change in status a new certificate must be furnished the
employer by the employee not later than ten days after the change occurs.
On the basis of this information the employer will be able to determine
from a table the amount of the family status withholding exemption
appropriate to a-particular employee to be deducted from the wage pay-
ment before applying the 20 percent withholding tax rate. Employees
heretofore were not required to file such certificates with employers
when withholding of the Victory tax went into effect last January for
the reason that the family status of the individual did not affect the
amount of the individual's liability for the Victory tax. The "Employee's
Withholding Exemption Certificate" is a new feature and plays a very
important part under the new withholding provisions. Should the
employee fail to file the certificate with his employer, no family
status withholding excmption will be allowed and 20 percent will be
withheld from the total wages paid to the employee.
Employers may, if they so elect, withhold in accordance with wage
bracket tables as provided in the law. Doubtless most employers have
Regraded Unclassified
105
- 4 -
used the elective wage bracket method in withholding the 5 percent
Victory tax since the first of January. They should therefore
experience little difficulty in adjusting their payrolls to wage bracket
withholding under the new law. This method simplifies withholding for
the employer. To illustrate, take the case of John Smith, an employee
who is married and has two children under eighteen years of age deriv-
ing their chief support from him. He has filed with his employer a
withholding exemption certificate upon which he has checked his status
as a married person claiming all the personal exemption and he has shown
on the certificate that he has two dependents. Assume that his wages
for a weekly payroll period beginning after July 1 amount to $57.25.
The employer, using the wage bracket method, would refer to a table
which would show that the amount to be withheld is $3.80, when the weekly
payment is between $50 and $60 as in this case, and the family status
is as that of John Smith. The employer using the wage bracket method
does not have to ascertain whether the 3 percent of the wage payment
in excess of the Victory tax withholding exemption would produce B.
greater tax for the reason that that factor has been taken into account
in the wage bracket tables. May I make it clear, however, that whether
the actual computation method 1s used or the elective wage bracket
method, there is only one amount to be deducted as the tax. This feature
should simplify accounting adjustments to be made in the transition from
the 5 percent withholding to withholding under the new provisions since
no additional columns on the payroll will be required. Neither does
the amount withheld have to be segregated as 50 much Victory tax and
so much income tax. This is equally applicable to the employee as well
as the employer.
Regraded Unclassified
106
- 5 -
The requirement that the employer must furnish the employee a
written statement showing the amount of tax withheld during the year
is continued under the new Act. The statements for the calendar year
1943 will be furnished the employees in January 1944 and they will
cover the 5 percent tax withheld for January 1 to June 30, as well as
the 20 percent tax withheld from July 1 to December 31. If employment
of a person is terminated, the Act requires the employer to furnish
the statement when the employee receives his last payment of wages
unless an extension of time has been granted by the Commissioner.
Employees are cautioned that they should preserve these statements.
They are the employees' record of the amount of taxes withheld from
their wages which are deductible from their income taxes when they
file their income and Victory tax returns for 1943 in 1944.
Employers have heretofore been required to make payment of the
5 percent withheld taxes to the collector of internal revenue on or
before the last day of the month following the close of each quarter
of the calendar year. Quarterly returns of taxes withheld are also
required under the Current Tax Payment Aot of 1943. Heretofore, the
employers made direct remittance of the tax to the collector of
internal revenue with the return of the taxes withheld. Acceleration
can now be made of the receipt by the Government of the withheld taxes.
It is the duty of employers who withheld more than $100 during the
month to pay within ten days after the close of the calondar month,
all funds withheld during the month to a depositary authorized by the
Secretary of the Treasury to receive deposits of withheld taxes. When
the empleyer files his roturn of taxos withheld with the collector of
internal revenue, payment will be evidenced by depositary receipts
Regraded Unclassified
107
- 6 -
rather than by direct remittances.
I want to emphasize that this pay-as-you-earn plan is & form of
budgeting to meet income tax liabilities and is essentially no dif-
ferent than budgeting for annual interest on a mortgage or for meeting
annual premiums on life insurance. The provident individual has always
set aside out of his weekly or monthly pay an amount to meet fixed
annual expenses - particularly if they are substantial in amount:
otherwise he would be sailing into stormy financial weather. Aside
from the benefit to the Government in accelerating collection of funds
needed for the prosecution of the war, I am convinced that the plan
will be popular with the employees when they fully understand that it
will operate to relieve them of March financial worries. The Bureau
received splendid cooperation from employers throughout the country
who acted as withholding agents for the 5 percent Victory tax. The
experience thus gained by employers will also be invaluable during
the "change-over" period and in functioning under the new withholding
provisions.
Regraded Unclassified
108
2c,
TALK - THE CURRENT TAX PAYMENT ACT OF 1943 -
THE ADVANTAGES OF THE NEW PROCEDURE
For over a year there has been a great deal of discussion about
getting the individual taxpayer current in his income tax payments.
President Roosevelt has felt it particularly important and emphasized
the need for being on a "pay-as-you-go" basis.
The old system of tax payments had many defects. These were not
serious when income tax rates were low and reached only the minority of
the people with relatively larger incomes. But in the past few years
these defects have become greater and greater. With the lowering of the
personal exemptions the tax now reaches many millions of additional tax-
payers - those with small incomes and with practically no experience in
planning or budgeting their income to meet such an expenditure. At the
same time the tax burden has been greatly increased for all taxpayers.
The old method of paying in this year a tax based on'last year's
income was also not very serious as long as the tax burden was relatively
low, the income remained fairly constant, or the taxpayer had saved the
money to pay the tax. But now that taxes have increased and so many
more persons are affected, the problem of the lag in payments has become
very serious. If the individuals' income should decline sharply or cease
entirely, the overhanging tax debt causes real hardship.
Congress gave careful and deliberato consideration to the problem
of getting current and "paying-as-you-go," and enacted a tax bill known
as the "Current Tax Payment Act of 1943,' This Act provides for the
collection of the combined income and Victory taxes at the rate of 20
percent from the wages paid to workers in substantially the same manner
Regraded Unclassified
109
-2-
as the 5 percent Victory tax was withheld from certain employees'
wages since the first of January.
At the same time, Congress by means of this Act has said that a
portion of your income tax for either the year 1942 or 1943 may be dis-
charged and that all payments and collections made in the year 1943 are
not to apply to your 1942 liability, but are to apply against your
liability for income and Victory tax for the current year 1943.
The advantages of this procedure are readily apparent. The over-
whelming majority of the taxpayers throughout the United States will
immediately be made current in their tax debt to the Government. They
will no longer have a tax debt hanging over their heads like the threaten-
ing sword of Damocles.
The minority of taxpayers having substantial income from sources
other than wages or salaries, or their tax liability for the year being
greater than the amounts of tax withheld because of the fact that they
are the higher salaried workers, will also be placed on a current payment
basis. They must file a declaration of their estimated income and tax
with the collector of internal revenue. They will be required to pay the
estimated tax in quarterly installments, allowance being made, of course,
for any tax which will be withheld during the current year.
Many persons have found it difficult to lay aside each pay day, and
keep, sufficient money necessary to pay their taxes when they become due.
A great many have found that money burns a hole in their pockets and
oftentimes they will purchase something not actually needed just because
they have some cash lying around. Then, when it comes time to pay their
taxes, they find they have not the necessary funds. They thus become
Regraded Unclassified
110
-3-
tax delinquenta, or, after borrowing to pay the taxes, they skimp
along for quite some time. Thus by deducting the tax from income as
earned, the Government is providing a means of budgeting income
insofar as tax liabilities are concerned.
This new procedure will operate in the following manner. Beginning
with the first pay period which commences on or after July the first
of this year there will be deducted from the pay of every employee a
combined income and Victory tax of approximately 20 percent of the
amount of their wages over the withholding exemption to which they are
ontitled. A certain amount of wages will be exempt from this withholding
tax, depending upon the family status of the employee and the number of
his dependents. Certain classes of employees will be exempted from this
tax deduction, such as menbers of the armed forces, agricultural labor,
and domestic help. This tax will be deducted not only from payments
made to employees in private industry, but from all civil employees of
the United States Government including the President. It will also
apply to employees of the States, counties, cities, and to the Governors
of these States and the mayors of the cities, as well.
It must be understood that this amount of tax deducted from wages
does not represent an additional tax but merely a means whereby your
current income and Victory tax liability is collected by your Government
as you earn your income. Each individual will receive full credit for
all amounts deducted when he files his tax return after the close of
the year.
The additional work that collection of tax at source will cause
employers and the Government will be more than offset by the convenience
Regraded Unclassified
111
to the taxpayer and his satisfaction in knowing that he is on a "pay-
as-you-go" basis insofar as the tax deducted meets his liability.
While no method of paying taxes can make them painless, collection at
source by deductions from wages is the most nearly painless of any
nethod because the tax is paid in small amounts before the taxpayer
receives his income and spends it. This procedure should be far more
satisfactory to the taxpayer and will be a means of bringing about a
steady flow of revenue into the United States Treasury. Also it should
constitute a very formidable weapon with which to combat inflation.
As a further means of getting tax payments current and to prevent
the necessity for paying two years' taxes in one year, Congress has in
effect discharged 75 percent of the tax for 1942 or 1943 whichever amount
is smaller. The portion not discharged becomes a part of the 1943
income and Victory tax liability. However, if the tax on the income
for 1942 or 1943 is $50 or less, the entire amount is forgiven. The
portion of the tax not discharged becomes due next March 15 and, if
paid at that time, the taxpayer will become fully current in his tax
liability. However, if the taxpayer desires, ho need pay only one-half
of this amount by March 15 and the remaining half may be paid on or
before March 15, 1945.
Other provisions, in the Act which Congress has recently passed,
have been designed to prevent any ono from unduly profiting by roason
of the discharged liability. These are so-called "anti-windfall"
provisions which will affect only a relatively snall number of persons.
They will, however, reduce the 75 percent discharged tax liability in
those cases where the income for the year to which the discharge is
Regraded Unclassified
112
-5-
applicable was substantially more than the highest net income for any one
of the years 1937 to 1940, inclusive.
The advantage of boing current in tax payments is especially felt
when a taxpayer dies. At that time his family is so much better off
because thore is no tax debt of a forner year to be paid.
A further advantage in this new procodure will be the increase in
the curront receipts by the United States Treasury. This increase is
brought about by tho current colloction of tax from wagos, by the col-
lection of tho tax not forgivon, and by the general increase in wages
that prevails in 1943 over that for 1942.
There are, no doubt, many questions in your minds which have not
been answered. The collectors of internal revenue will answer any
questions you ask and will supply employers and employees with circulars
describing this new procedure.
Regraded Unclassified
113
2c7
TALK - WITHHOLDING UNDER THE "CURRENT TAX PAYMENT ACT OF 1943"
THE NEW LAW IS COMPARED WITH THE OLD
The Congress has now enacted a law designed to place most wage earners on
pay-as-you-go plan for all their Federal income taxes, including the Victory
tax. This pay-as-you-go law, requires employers to withhold 20 percent on their
employees' wages in excess of their family status exemptions. This 20 percent
includes the Victory tax on which the rate has been reduced from 5 percent to
3 percent.
Mage deductions under the new law begin with payroll periods starting on
or after July 1, 1943. The net result is that the employer withholds from the
employee, and pays to the Government for his account, an amount which will
approximate the employee's liability for the normal income tax, the first
bracket surtax and the Victory tax.
Certain employees are exempt from withholding: among them ministers,
members of the armed forces, agricultural laborers, and domestic help. But let
me say right here that even though exempt from withholding, these people are
nevertheless subject to income taxes, including the Victory tax, and will be re-
quired to file a return and pay the tax. The difference is that such employees
vill have no credit to apply against the liability as in the case of individuals
whose wages are subject to withholding.
Since existing law imposes on a single individual with no dependents a
larger income tax than in the case of a married person or the head of a family
receiving the same amount of wages, the family status of the wage earner
determines the amount of tax to be withheld by the employer. The employee must
furnish his employer information as to his family status, by filling out an
"Employee's Withholding Exemption Certificate." That certificate tells whether
Regraded Unclassified
114
- 2 -
the employee is single or married, and the number of his dependents. It also
shows in the case of a married person whether the employee is claiming all, or
one-half, or none of the personal exemption for withholding. In the event of a
change in status, a new certificate must be furnished the employer by the employee
not later than ten days.
On the basis of this information the employer determines how much of the
employee's pay is exempt from the 20 percent withholding tax. The "Employee's
Vithholding Exemption Certificate" plays a very important part. Should the
employee fail to file the certificate with his employer, no family status with-
holding exemption will be allowed and 20 percent will be withheld from the total
wages paid to the employee.
Employers may, if they so elect, withhold in accordance with wage bracket
tables as provided in the law. Most employers have used the elective wage
bracket method in withholding the Victory tax and will, therefore, have little
difficulty in adjusting their payrolls to wage bracket withholding under the new
law. This method simplifies withholding for the employer.
1.1
To illustrate, take the case of John Smith, an employee who is married and
has two children under eighteen. His wages amount to $57.25. The employer,
using the wage bracket method, would refer to a table which would show that the
amount to be withheld is $3.80, when the weekly payment is between $50 and $60
as in this case, and the family status is as that of John Smith.
To employers I would like to make it clear, however, that whether the actual
computation method is used or the elective wage bracket method, there is only
one amount to be deducted as the tax. This feature should simplify accounting
adjustments to be made in the transition from the 5 percent withholding to with-
holding under the new provisions since no additional columns on the payroll vill
Regraded Unclassified
115
- 3 -
be required. Neither does the amount withheld have to be segregated as 80
much Victory tax and so much income tax. This is equally applicable to the
employee as well as the employer.
The employer must furnish each employee a written statement showing the
amount of tax withheld during the year. The statements for the calendar year
1943 vill be furnished the employees in January 1944 and they will cover the
5 percent tax withheld for January 1 to June 30, as well as the 20 percent tax
withheld from July 1 to December 31. If employement of a person is terminated,
the Act requires the employer to furnish the statement when the employee receives
his last payment of wages unless an extension of time has been granted by the
Commissioner.
Employees are cautioned that they should preserve these statements. They
are the employees' record of the amount of taxes withheld from their wages which
are deductible from their income taxes when they file their income and Victory
tax returns for 1943 in 1944.
Employers are required to make payment of the withheld taxes to the Collector
of Internal Revenue on or before the last day of the month following the close
of each quarter of the calendar year. Heretofore, employers made direct
remittance of the tax to the collector of Internal Revenue with the return of
the taxes withheld. Now it is the duty of employers who withheld more than
$100 during the month, to pay within ten days after the close of the calendar
month, all funds withheld during the month to a depositary authorized by the
Secretary of the Treasury. When the employer files his quarterly return with
the Collector of Internal Revenue, payment will be evidenced by depositary
receipts rather than by direct remittances.
Regraded Unclassified
116
- 4 -
I vant to emphasize that this pay-as-you-earn plan is a form of budgeting
to meet income tax liabilities, and is essentially no different than budgeting
for annual interest on a mortgage or for meeting annual premiums on life
insurance. The provident individual has always set aside out of his weekly or
monthly pay an amount to meet-fixed annual expenses - particularly if they are
substantial in amount. Otherwise he would be sailing into stormy financial
veather. Aside from the benefit to the Government in accelerating collection
of funds needed for the prosecution of the war, the plan will be popular with
employees when they fully understand that it will operate to relieve them of
March financial worries. The Bureau received splendid cooperation from employers
throughout the country who acted as withholding agents for the 5 percent Victory
tax. The experience thus gained by employers will also be invaluable during
the "change-over" period and in functioning under the new withholding provisions.
Regraded Unclassified
117
EMPLOYEE'S NOTICE WT
2d
WITHHOLDING OF INCOME TAX ON WAGES
NOTICE TO EMPLOYEES
WITHHOLDING OF TAX UNDER THE PROVISIONS OF THE
CURRENT TAX PAYMENT ACT OF 1943
The 5 percent withholding which went into effect on January 1, 1943, is not applicable to payroll periods
beginning after June 30, 1943.
Beginning July 1. 1943, your employer is required to withhold a tax of 20 percent from wages for payroll
perioda beginning on or after July 1, 1943, of every employee whose wages exceed the amount of
certain exemptions. Certain classes of employees are exempt from withholding, such as those engaged in agri-
cultural labor and domestic service.
Wages consist of all payments for services of employees, whether called wages, salaries, commissions, or
bonuses and whether in the form of cash or other property.
Withholding at the rate of 20 percent applies to the amount by which your wage payment exceeds your family
status withholding exemption. The amount of this exemption, which is specified in a schedule contained in the
Act. depends in general upon whether you are married. single, or the head of a family, and upon the number of
your dependents. You are required to advise your employer of your particular status by filling in an Employee's
Withholding Exemption Certificate (Form W-4) which you will file with him. The certificate form may be
obtained from your employer.
If you are married and your spouse is receiving wages subject to withholding, you and your spouse must
decide how much of the withholding exemption each will claim.
If you decide that you will claim the whole exemption and your spouse will claim none, you must, in the
exemption certificate, advise your employer that you are claiming the whole exemption and your spouse is claim-
Chone the applicable box in the exemption certificate, advise your employer that you are claiming half
none. If you decide that you will claim half of the exemption and your spouse will claim half, you will, by
of the exemption and that your spouse is not claiming more than half of the exemption. If you decide that you
will claim none of the exemption and that your spouse will claim the whole exemption, you must place your check
mark in the applicable box on the exemption certificate.
The amount of the exemption which each of you claims for the purpose of withholding does not affect the
manner in which you may divide your married person's exemption on your income tax return. You may still
divide that as you wish.
The withholding exemption for any dependent may be taken only by the spouse who furnishes the chief
support of such dependent.
TF you fail to file an exemption certificate with your employer, no withholding exemption will be allowed.
In certain instances the tax to be withheld under the family status withholding exemption will be less than
the tax nt 3 percent on the amount of wages in excess of the Victory Tax withholding exemption. In that case
the employer is required to withhold at the rate of 3 percent on the wages in excess of the Victory Tax withholding
exemption.
Your employer is required to pay the amount of tax withheld from your wages to the collector of internal revenue,
Your employer is required to give you a receipt for the amount of tax withheld on your wages. Employers
shall furnish these receipts on or before January 31, 1944, for taxes withheld in 1943, except that if employment
ends during the calendar year the receipt shall be given to the employee on the day on which he receives his last
payment of wages. This receipt should be carefully preserved. It is your record of tax withheld from your wages.
The amount withheld from your wages during the year is deductible from the Income Tax and Victory Tax
for which you may be liable for the year 1943. Thus, the amount withheld from your wages will pay your
Income Tax and Victory Tax to the extent of the amount withheld.
Withholding will not affect in any manner your liability to file your annual income tax return for the
calendar year 1943 on or before March 15, 1944. reporting all taxable income, including the wages on which
tax has been withheld, and reporting the allowable deductions,
C
WASHINGTON, JUNE 1943
Commissioner of Internal Recenue.
Copies may be obtained by addressing purpose the nearest collector of internal revenue, requesting Employee's Notice WT.
This notice is issued for the of general information. It does not have the effect of law, regulations. or rulings.
1, GOVERNMENT PRINTING OFFICE
Regraded Unclassified
.18
2e
THE SECRETARY OF THE TREASURY
WASHINGTON
June 11, 1943.
To all Presidents
of International Unions:
On July 1, as you know, the new Withholding Tax method of collect-
ing the Federal Income and Victory Taxes goes into effect.
Probably many of your individual members will not fully understand
the new method of tax collection, and will turn to you for information
concerning the amount withheld from their wages, or for other information
in connection with the new tax system.
To help your Union answer these questions immediately and authori-
tatively, I am sending you & supply of the booklets printed by the Bureau
of Internal Revenue to explain to employers their duties under the law
and the methods of computing the amount of tax to be withheld from each
individual employee's pay.
In view of the very short time before July 1, it is impossible for
us to address these booklets to your individual locals. May I ask you,
therefore, to distribute them by your own means as promptly as possible?
It would also be very helpful, not only to the Treasury, but to
the members of your Union, if you would urge upon them the importance
of filling out and filing immediately their WITHHOLDING EXEMPTION
CERTIFICATES. The law places this responsibility on the individual
employee. Unless he files this Certificate, his employer is required to
withhold 20% from the full amount of his wage, without figuring any
exemption. None of us want that to happen.
I would also like to ask your cooperation in pointing out most
forcefully to your members that this is not a new or additional tax.
Therefore there will be no valid reason for reducing the amount of their
pay allotted to the purchase of War Savings Bonds. You recognize, as
well as I, the vital part that regular purchases of War Savings Bonds
play in the war effort. May I count upon your help in maintaining, or
even increasing, these purchases during this period of transition to
our new method of tax collection?
Sincerely yours,
BUY
UNITED
STATES
WAR
Secretary of the Treasury.
DONDS
AND
STAMPS
Regraded Unclassified
CIRCULAR WT
Page 1
COLLECTION OF INCOME TAX AT SOURCE ON WAGES
EMPLOYER'S DUTIES
Under the
PROVISIONS OF THE CURRENT TAX PAYMENT ACT OF 1943
(SUBCHAPTER D, CHAPTER 9, INTERNAL REVENUE CODE)
ISSUED BY
BUREAU OF INTERNAL REVENUE, U.S. TREASURY DEPARTMENT
SUMMARY
1. Beginning July 1, 1943, employers are required
Each return must be accompanied by the payment of the full
to deduct and withhold a tax upon the wages of
amount of the tax. It will be the duty of employers who with-
their employees. This is a tax of 20 percent of the
held more than $100 during the month to make the payment of
excess of each wage payment over the WITH-
the tax in the following form: (1) depositary receipts for the full
HOLDING EXEMPTION allowable under the
amount of the tax withheld. or (2) depositary receipts for the
schedule shown in Specific Instruction 6.
first two months of the quarterly period, together with a direct
Instead of making an exact computation, employers may elect
remittance for the amount withheld during the last month of
to withhold specified amounts shown in the tables designated
the quarterly period.
A to which approximate the 20 percent.
IV. With the final return for the calendar year,
It is the joint responsibility of the employer and the employee
employers must send to the collector on Form
to see that "Employee's Withholding Exemption Certificate"
W-3 a reconciliation of "Quartorly Returns"
(Form W 4) is made out by the employee and filed with the
(Form W-1) with "Statements" to employees of
employer sufficiently in advance of July lst,
taxes withheld (Form W-2).
11. It will be the duty of employers who withheld
V. Employers must provide each employee an-
more than $100 during the month to pay the
nually with a "Statement of Income Tax With-
amounts withheld to a depositary authorized by
held on Wages."
the Secretary of the Treasury.
This is Form W-2, and must be delivered to employees on or
These payments are to be made within ten days after the
before January 31 of the next year. For employment termi-
close of each ealendar month.
nating during a calendar year, see Specific Instruction 14.
Employers may get from any bank the name and address of
VI. Employers may obtain all forms mentioned
authorized depositaries.
above from the collector of internal revenue for
III. Employers must make quarterly returns on
their district.
Form W-1 to their collectors of internal revenue,
showing the aggregate amount of taxes withheld
VII. Employers will discontinue the 5 percent
during the quarter.
Victory Tax withholding when the 20 percent with-
Returns must be made on or before the last day of the month
holding begins.
following the close of each quarter.
(See Specific Instruction 1.)
SPECIFIC INSTRUCTIONS
1. EFFECTIVE DATE
includes also organizations which are themselves exempt from
income tax. Among these are religious, charitable and educa-
The 5 percent Victory Tax withholding does not apply with
tional institutions, clubs, societies, and social organizations.
respect to wages paid after June 30, 1943, unless the wages are
"Employer" includes the Government of the United States, the
paid los a payrull period beginning on or before June 30, 1943.
States, Territories, and the District of Columbia, including
Every employer is required to deduct and withhold the tax
their agencies, instrumentalities, and political subdivisions,
under the Current Tax Payment Act of 1943 from the wages
of his employees paid for payroll periods beginning on or after
3. WHO ARE EMPLOYEES
July 1. 1943, Every employer is also required to deduct and
Every individual is an employee if the relationship between
withhold that tax from all wages paid on or after July 1, 1943,
him and the person for whom he performs services is the legal
if paid without regard to a payroll period.
relationship of employer and employee. The term "employee"
These if wages are paid on July 3, 1943, with respect to a
includes an officer, employee, or elected official of the United
workly (uyrell period beginning on June 28, 1943, the 5 percent,
States, a State, Territory, or any political subdivision thereof, or
valuer than the 20 percent. withholding is applicable. If wages
the District of Columbia, or any agency or instrumentality of
fire paid with respect to a weekly payroll period beginning on
July 5, 1997, the 20 percent withholding applies. If on July I,
any one or more of the foregoing.
Generally, such relationship exists when the person for whom
1941 regis are paid without regard to a payroll period, 20 per-
services are performed has the right to control and direct the
cent. retires than 5 percent, withholding applies.
individual who performs the services, not only as to the result
However, if wages for a payroll period which begins prior to
July 1, 1943, are paid after the close of 1943, 20 percent, rather
to be accomplished by the work but also as to the details and
than 3 percent, withholding is applicable.
means by which that result is accomplished. That is, an em-
ployee is subject to the will and control of the employer not
2. WHO ARE EMPLOYERS
only as to what shall be done but how it shall be done. In this
The term "employer" includes any person or corporation for
connection, it is not necessary that the employer actually direct
when an individual performs any service as an employee. It
or control the manner in which the services are performed: it is
This circular is issued for the of general information. It does not have the effect of law, regulations, or rulings.
Copies may be obtained by addressing purpose the nearest collector of internal revenue, requesting Circular WT.
Regraded Unclassified
Pape 2
which of la has No night to do NO. The right to discharge is
also se important indicating that the person possessing
that right is au employer. Other factors characteristic of an
States for a foreign government or for the government of
(c) For services by a citizen or resident of the United
Page 3
the Comminwealth of the Philippines,
employer is required to request a withholding exemption certifi-
lun - present in every case, are the
(/) For services performed by a nonresident alim
alt irom each employee, but if the employee fails to comply
lowed for a weekly payrell period. For example. in the second
of uoh, and the furnishing of 4 place tn work, to the
who performe In emeral, if an individual
enters and leaves the United States at frequent intervals,
dividual, other than a resident of a contigueus Country who in
with such request, he shall be considered, for withholding pur-
illustration in the preceding paragraph, the employer, if 4X-
part or 4 married person claiming none of the personal
thorized to do so by the Commissioner. may withhold the tax
la the OF -divitive of another merely as to the
(i) For such services, performed by a nonresident
for withholding and having DO dependents. Forms of
on the excess of $36.00 over the werkly exemption of $12.00
mult Lie las - hy the work and not as to the means
individual who is à resident of . contiguous country and the
(Form W-4) will be supplied employers upon request
applicable in the case of a single person,
end unter line complete the result, he is an independent
individual perferming services as an independent
entera and leaves the United States at frequent intervals, who
(if de cullectar for the district. In lieu of the prescribed form
This weekly exemption rule may be used by an employer in
is nut as in such services an employee.
missioner with the approval of the Secretary,
may be designated by regulations prescribed by the Co. as
of ortificate employers may prepare and use a form which
the calendar werk.
the case of an employee who works only for such employer during
acholes contents identical with the prescribed form. The
Summally, lawyers, dentists, veterinarians, con-
(h) For services for an employer performed by a united
must be retained by the employer as a supporting
11. BONUSES AND COMMISSIONS
transfer, parblie stenographers, suctionsers, end
others miler fillive au independent trade, business, or profession,
States if the major part of the services for nuch
or resident of the United States while outside the United
und of the withholding exemption allowed.
of a change of status, a. new certificate la furnished
Generally, where an employer's remuneration consists of
in wirsh they affer their error to the public, are independent
during the calendar year is to be performed misside the
by the employee to the employer, it will take effect, at the elec-
wager paid for a payroll period and such employee is alos paid
and not employees.
United States,
tim of the employer. with respect to any payment of wages
a lamus or ominission, the bonus or commission and the wage
the of employer and employee exista will in
made on OF after the date the certificate is furnished. In no
payment shall be aggregated for the purpose of withholding
destrict No determined upon un esumination of the particular
(i) For services performed as a minister of the papel @
either under the wage table method or the exact computation
S Au fees (but not salaries) to a public official
event, however, shall is take effect later than the first pay-
method For example, if en individual is employed as soleman
47 - care,
*Withholding is required in the case of wages pud to
ment el wages made on or after the following first day of July or
at . monthly salary of $100 plus commissions upon made
Is the relationship 41 employer and employer esists, the
leasury which Decurs at least thirty days after the certificate in
designation MF almeription of the relationship by the parties as
resident alient, resident of a contiguous country, who no.
during the month, such employee, il single, - le entitled to 4
(unished the employer.
and leave the United States at frequent intervals, excrpt may such
withholding exemption of 852 against each such payment of
anything than that al imployer and employee is immaterial
In all other instances, the certificate will take effect with
eliena who in the performance of their duties in transportation
salary and commissions considered as à ingle one payment
The if and relationships it in of no ennsequence that the
respect to the first payment of wages made on or after the date
service between points in the United States and points in
Hewever, as the election of the employer. the mage payment
- designated par a partiner, consiventurer. agent, or
as which it is furnished the employer.
frequent intervals,
contiguous country, enter and leave the United States at .
and the becaus (If payment need nie. be Regregated.
endependent confractor.
K. PERIOD NOT A PAYROLL PERIOD
Under this election the employer wing the exact compulation
The minuurement, method, en designation of compersation is
6. WITHHOLDING EXEMPTION
Il weges are paid for a period which is not a payroll period,
method may withhold nn the amount embunt of the tinnas or
also instructional if the relationship el employer and employee in
the exemption allowable shall be the exemption allowed for a
commission payment, The employer who utes the table
fart exists
In the computation of the amount of tax to be withheld from
paying period containing the same number of
method may, under this election apply that method fe the regu-
No distinction in reade between classes un grades of employees,
wage payments an exemption is allowable against the wagra paid
lar wage payment. and with respect to the bonus or commission
This, managers, and other suggerier employees
days (including Sundays and holidays) as the period for which
Inr each payroll period determined in accordance with the
payment may either (1) apply the mart computation method be
mish wages are paid. Thus, in the case of a single person not
are remployers. An officer of A corporation in an employee of the
schedules below.
the grows amount, or (2) use the enlumn in the table applicable
corporation Trut A. director as such is mit. A director may be an
paid - the basis of a regular payroll period, the withholding
Family Wabbalding Exemption Schedule
complion allowable for a period of 10 days is 10 times $1.70, or
to a married person claiming none of the personal exemption for
employee of the corporation, however, a le performs services for
withholding and having no dependents.
the imporation when than those required hy attendance al and
$17.00. (Sec Specific Instruction TO for the rules in case of a
Married
12. WITHHOLDING ON BASIS OF AVERAGE WAGES
perticipation in rentings of the board of directors.
person
Married
period of less than one week.)
Merial
Eudo -
chinging
person
-
whole
-
I
1. NO PAYROLL PERIOD OR OTHER PERIOD
Upon application to the Comminioner, accompanied by
4. WHAT ARE WAGES
Sengle
-
elter -
provided
bell M
- -
The lest
evidence establishing the need for the - of such method the
-
personal
personal
[
in any case in which wages are paid by an employer without
The herm "wers" all remuneration Cetter than noted
for -
Commitaioner may authorize an employer to withhold the tas
I
-
- -
halding -
for
for -
- the hand
regard in any payroll period or any other period. the exemption
in Speciale Instruction 5x. whether di cash or goods, from error
on the of the employer's avimage estimated wages, with
fund of
belding
belding
a family
family
allowable shall be the exemption allowed for a miscellaneous
necessary adjustments, for any quarter.
performed Lay en employer for two employer, Is does not
pagrull period containing the number of days equal to the
a the be designated os wages salary. com-
number of days (including Sundays and bulidays) which have
13. COMPUTATION OF TAX TO BE WITHHELD
Wenkly
- MP Included in "weges" is the each value of
$12
Bineckle
$24
$12
P
a
24
45
dipind lince the date of the last payment of such wager by
At the optim of the employer, the 1.11. to be withheld may be
ell in - medium other than cash.
24
@
II
26
Monthly
or
26
Amounts paid - silvance on reimbursements made, to em-
@
11
one): employer during the calendar year, or the date of com-
determined either by the use of - -sgr bracket withholding
52
264
ID
0
29
el employment with such employer during such
table or the application of the prescribed persontage rate to the
players De traveling or other bona fide onlinery
ES4
Servicement
312
150
0
29
you, w January I of such year, whithever is the later. For
amount of the wages in escess of the withholding exemption.
and Recommery experience insured or reasonably expected to be
312
Amount
624
212
e
19
624
1,248
esample, a lingle individual employed on il commission basis,
To illustrate the two methods, the following CASE is assumest.
the withholding. Am importion of such expenses from
Insured - the of the employee DE nic subject to
Daily ar
624
è
312
communicon to be paid upon consummation of als without
An employee has indicated on Form W-4, Employee's With-
(per
day
norb
equipment one sheck indicating Chrican the amount therent an
- mal will be acceptable M For example, where
Deried)
need to my period of time. commenced employment on Detem-
holding Exemption Certificate, by checking Item I (4) that be
1.70
3.40
1.70
.
ber 15, 1942, and received payments of commissions on March
is a married person living with husband or wile and claiming all
15, and July 15, 1943, The amount of the withholding exemp-
of the personal exemption: and in Item 11 that be has two de-
which weges and the amount which represents
In ne event shall the tax to be withheld be less than? pm
lan Allowable with respect to the commissions paid July 15 is
pendents. The payroll period is weekly and the wage results
VM - -parate check for the expension.
centum of the creas of each wage payment over an excepted
$207 ($1.70: 122). since 122 days have elapsed since the date
of the employer show that for the payroll period the employee
5. EXEMPT WAGE PAYMENTS
determined in accordance with the following schedule:
of the last payment,
earned $44.63,
Cortain clamm of TOME and calory payments are escropt from
- review
Vistory Tax Withholding Exemption Schedule
IS. PERIOD LESS THAN ONE WEEK
The steps la lie taken by the employer using the wage bracket
Weekle
-
such payments are nut required la withhold the tax with respect types to
and company employers making such di
The gml rule applicable in case the payroll period, other
withholding table are as follows:
Brookly
Servimenthip
21.09
priod, or time described in Spocific Instruction 9. is less than une
(I) Find the table applicable to the payroll period used. In
consist payments. of remuneration l'agimente paid) which are vacenpt Times withholding
Monthly
DM
work, is the Name as the rule applicable under Specific Instruc-
this case it is Table A-1, accompanying these instructions,
51.00
Ean (7) 9. For example, if a single person is paid daily a wage of
designed for weekly payroll period,
naval (ii) For Services performent as . member of the military or
Setional
$7.00 PO day, withholding applies on the excess of that wage
(2) Locate in the table the subheading descriptive of the em-
Annual
Le
playoe, in this case, "Or (4) such person is a. married person claim-
retired of the United States where than inmisions and
CLA
Daily or Miscellaments - day of much period)
ver the daily exemption of $1.70, that is, the tax is to be with-
(9
hid for un $5.90 Again, if it single person is paid a vage of $36.00
ing all of personal exemption for withholding and has and
(#) For - later,
pay includible in grom income,
See accompanying Table B for use in determining with the
then locate the applicable column under this subheading, in
(r) or For lived domestic arrivice in a. private time local college
3 percent limitation applies.
4 days vork, withholding applies on the excess of the aggre-
this case, "Two dependents."
plu that tinges over the exemption allowed for a period of 4 days,
7. WITHHOLDING EXEMPTION CERTIFICATE
is, $6.80 ($1.70 x 4). In that case, therefore, the tax is to
(3) Next locate in the first two columns at the extreme left
(d) her Charges ad a college Deternity or
to withheld on $29.20,
these amounts between which the weekly wage falls. The wages
Frade -
or Cread Balan half in the the of the security, employer's
ing exemption certificate, on Form W-4, relating to his -
Every employee shall furnish his employer a signed without
However, the Act authorizes the Commissioner, under
are $44.63, 50 in this case they fall in the line for "At least $40.00
expitions procribed by him, to permit an employer, in comput-
hut less than $50.00," Reading across on this line to the minth
for the purpose of computing the withholding exemption. The
the of the tax to be withheld, to use the excess of the aggregate of
colum, the (mount of tax to be withheld is shown as $1.30.
The steps to be taken by the employer using the percention
Wagra paid during a caleridar werk over the exemption al-
method are as follows:
Regraded Unclassified
Page 4
Page 5
(1) The rule require that a tax be withheld at the rate of 20
usereding you; or. if the employment ende before the cluse of
Any errors made by employers, either in the withholding or
20. FORM 1099 INFORMATION RETURNS
proved on wage - MEMB el the family status withholding
the year, nn the day on which the last payment of Mags is made
exemption. ve of the rate of 5 persons ID vigo in com of the
In the case of intermittent employment. when at the end of
payment di the tax. for any quarter of the calendar year. may be
The making of information returns, Form 1009, will nnt he
Valuez Tex whicherer rate produces the
any terms of employment it is nut espetal that the
exected is any subsequent quarter of the same year.
Criminal and civil penalties are prescribed for the willful
required with respect to wage payments from which the tax has
guato Les. The employer must determine which withholding
will he reemployed, then a statement must be hereibed him for
been withheld, provided that duplicates of the statements
to allive and which TMP lo ure, It is m/t recemary
the amount of tax withheld from payments made during the
buile of any employer to furnish statements to the employer
(Form W-2 and Form V-2) are furnished with the last return
18 rempute the tax (in bills lesses le disermine which produces
period of employment.
come the information required under the Act or regulations
(Form W-1) for the year.
the grain 133, inre the peoper haris can he apportained by
With respect to the calender year 1943, only one is
- pursuant (tereto, or for furnishing a false or fraudulent
The criminal penalty is a fine of not more than
la the accompanying Table B. This table shows that
required. It should tover the 5 percent Victory Tax withheld
21. OTHER RECORDS TO BE KEPT
- workly wagns in come of $40.24 paid to married persons
beginning January 1, and the 20 percent las withheld beganing
$1,000 DE imprisonment for not more than I year. or both. in
iddition la . civil poulty of not more than $50 for each such
Every employer required to withhold tax is further required to
claiming all the and wish two dependents, tive 20
July 1.
While the luve of statement is prescribed by the Commis.
wive Employers are also subject to penalties for failure to
keep such records and to render under noth such u
pervice withholding me MD amounts in ENVENT of the family
sime of loternal Revenue statements prepared en substantially
main and file : timely return of tax withheld, and failure to pay
the Commissioner of Internal Revenue may require unles
status withhulding exemption will produce é higher tax than 3
the (X) on time-
lations prescribed by him with the approval of the Secretary of
percent of wages in nirclé of the Victory Tax withlelding exemp-
like form and size (but in no case larger than 8 by 3% inches) will
the Treasury, No sujm of records to le maintained by the
tim.
be acceptable.
19. PAYMENT OF TAX
ployer bas been prescribed, por is It esotemplated that any
(2) The reployer funds from the Family Status Withholding
15, DUPLICATE OF STATEMENT REQUIRED
li will le the duty of every employer who withheld more than
particular form of resord will be prescribed. Such receids
Extraption Schedule shown in Specific Industion 6. shot .
$100 doing the month to pay, within 10 days after the close of
should be maintained however, as will indiate the number of
marrinl employer having a weekly payroll period and claiming
Employers must transmit to the collector a duplicate of each
ach calendar month, to a depositary and financial agent
persons employed during the year payments to whom are mile
all the personal exemption in entitled to an eximption di $24.00
statement in employees (W-2) with their final return (W-1) for
by the Secretary of the Treasury to receive deposits
ject to the withholding provisions. the periods of employment,
and ano additional allower el $0.00 Im rach of his two deposit-
the fourth quarter of the calendar year. li the employer dis.
el withheld taxes, persuant to section 1631 of the Internal
and the Amounts and dates of payment
ents which in this inslance make e total examption of $16.00
sentimes business or ceases to be an employer, be will file will
Revenue Cale or added by the Current Tax Payment Act of
Sure the - poid are the for must be computed at
his final return displicates of all statements (W-2 and V-2).
(04), all funds withheld as tases during that calendar month
22. INFORMATION TO BE FURNISHED EMPLOYEES
20 of the come over the family datio withholding
Where the number of such duplicate statements is large, they
insured by the Federal Deposit Insurance Corporation
la EN desirable that replayers acquaint employers fully with
remption railer than , persont of the rues evit the Victory
may be forwarded in arporate packages, properly identified by
an diginis to qualify All depositaries and financial agents.) On
the provisions of the Act with respect to the withholding of
Tax withholding
ideress to the return. Employers with number establish-
in before the last day of the month following the close of each
income tax Irons wage payments. Fax this purpose, cropirs of All
(3) The employee One exemption el 136.00 from
menta (If payrulla should assemble the duplicates by establish
quoter of each calendar year, every employer shall make eretum
official nution "Withholding of Locame Tax un Wagra Nature
the weekly wege of $4.61 and oltrim $8.63 or the Amnumi of
ment or by payroll.
40 Form W-1 to the collector of his district, covering the aggre-
to Employees," in pater form, AMT available for puting by the
wigo subject to the 20 percont withholding tax.
16. RETURN OF INCOME TAX WITHHELD ON WAGES
cale of taxes withheld during that quarter, and attach
employers an the premises of establishments Employers des
(4) The employer computer 20. gereens al $8.63 end arrive at
is each return. as payment Enr the taxes shown thereon, receipta
Every employer required to withhold the tax on wages is
siring such notices should address A. request to the of
a TAX to be withheld of $1.71
et the form approved by the Secretary of the Treasury, issued
internal revenue for the district stating the number el
Annume that the wiges in the foregring resule are $19.50
required to make a returns and pay such tax (see Specific Instruc-
by the authorized depositary and financial agent. evidencing
desired. specifying "Wahlwiding of Inme Tax ou Wages
work rather than $44.63 and the percentage mothod la used.
Kim 19) on or before the last day of the month following the
in payment of funds withheld as taxes; provided however, that
Notice WT." and such repuesta will be filled as realy as
Under these circumitances, reforme le Table IS indicates that
close of each quartes of each calendar year. U the United
for withheld during the last month of the quarter the
States, a State, Territory, DE political subdivision, or the District
practicable.
the 3 percent rate in excess of the Victory Tax withhilding exempt
employer pay, at his election, in lieu of this method of payment,
tion should he used as this produces a poster bill than 20 per-
of Columbia, or any agency or instrumentality of any the of
include with his return direct remittance tu the enllector for
cent on wages in creem el the family status withholding cromp-
mure of the Inregoing is the employer, the return of the tax may
the a of the taxes withheld during such last month of the
time. The Vicge in this CASE Inllaw:
be mide by the officer or employee having control of the payment
quarter The employer may obtain from his local bank the
(1) The employer finds from the Varimy Tes Withhelding
of wages or other officer or employee appropriately designsted
- und locations of the nearby depositaries and financial
Exemption Schodule, shown in Specific Instruction 6, that the
for that purpose,
egents willorized to receive deposits of withheld taxo, A Fist
Commissions + land -
exrreption las a weekly paymell period for all presions regarding
The first return, covering tos withheld during the queito
of and financial agents will be furnished each
of family stedio is $12.00
ended September 30, 1943, must be made not later than October
bank by the Federal Reserve Bank of the District
WASHINGTON. NINE HC.
(2) The employer this comption of $12.00 from the
31, 1043. la the case of most employers on the Victory Tex
workly now of $ 71.50 and ditains $27.50 or the amount of
mailing fists of the cullectors of internal revenue, return Form
wears and yest le the present withholding DL
W-1 will be reserved through the mail. Employers nút nn who
(1) The employee sumputes à prient of $27.50 and arrives
mailing lists, or who da not rereive return forms in due mutie,
at - tax la be withheld of $0.00 This is the and amount of
should address the collector of internal revenue for the discrict,
tax to in withheld because the application in the FSM of the
requesting Form W-1, Return of Income Tax Withheld en Wagra.
20 persont rate to the eage its recess of the family states with
eximptive would result in - tax of mils sil 20.
17. RECONCILIATION FORM
in any pur in BP port computativo of the - in
The return of income tax withheld no wages for the forsh
be withheld M made. live traged HMY Le remuled nut to the
quarter of the year Cue final return if employer disreptinum
dollar,
have fif ISSIN in last an employer) must be accompanied by the
lo the case of the - banks withholding table there D no
duplicates of all (W and V-1) issued for MS with-
med to to the withholding cirimp-
held during the your, together with a reconcilistion (on Form
Time and rates - the table too to give diret
W-3) of the returns with the statements furnished employees.
in the , persont willdwiding rais when (la) rate should live used
With Form W-1 employers shmild funnish a Eist in the farm of an
will the 20 print Hast ISAE should be used.
adding machine tape or in enme other convenient form sheering
If the wegle the highest page Tracket in any table, in
the items of tax withhold as reflected on Form W-2 Where
computing the amount of las to he withheld line might may, at
the number of duplicate statements is large. they may be for
the ilection of the employers, be rounded Let the ment dollar,
worded in a separate package, properly identified by reference
to the return. In such case, Form W-3 should accompany the
14. STATEMENT TO BE FURNISHED EMPLOYEE
diaplicate statements, rather than the return form.
Employers must Turniah IN sub employer linca where was
they withhuld Isars a written (W 2x drowing the
18. LIABILITY OF EMPLOYER
wages paid and the amount of les withheld during the calevilar
Every employer required to withhold tax is made liable for
sear. This en extension of time has been
the payment of the tax required to be withhold and is refirred
previously manied by the Commissioner of Internal Revenue)
of liability to any other person far the assount of such payment.
shell be even to the employer nn or before January 31 of the
The account of any tax withheld by an employer is . special
fund in trust for the United States,
Regraded
TABLE A-1
Page ,
Page 7
IF THE PAYROLL PERIOD WITH RESPECT TO AN EMPLOYEE IS WEEKLY
TABLE A-2
4d, (1) seib person la . notied - deining - of personal le withhelding and las-
- the MPH -
IF THE PAYROLL PERIOD WITH KESPECT TO AN EMPLOYEE IS BIWEEKLY
No dependents
- dependent
Top
These
Fase
érgandents
Five
dependants
a
dependent,
dependents
J
dependents
dependents
Tigle
-
No.
and (1) - - la . married deleing - of personal - for withholding - has
/
M de - -
o, (1) such person la . - person claiming hall of personal - la withholding end has-
No dependents
Gase dependent
Tax
Three
Few
dependents
Firs
dependente
le
dependents
Seven
dependents
Fight
Now
dependents
depending
dependents
No dependents
-
Tes
Three
dependents
Fee
dependents
Fine
dependents
dependents
a
dependents
J
Dr. (7) 1 person - . mented person claiming - of personal - for withholding and las
-
Dr. (i) will person a single prom and -
No dependents
the dependent
Two
Three
Few
dependents
Fine
a
dependents
dependents
dependents
dependence
- dependent
Tmp
Three
Fax
dependents
Fing
deparations
dependents
#
-
Serve
(4) such is - and -
dependents
as - -
No dependents
One dependes
Two
Three
Dr. in teb - is # married - daining all of email Ninglis for - end -
Fee
dependents
Five
dependents
a
dependents
dependente
dependents
dependents
One depended
Tax
Three
Fee
five
-
a for the
dependence
a (in - - . - --- claiming all of personal - for witholding and has
dependents
No dependents
One dependent
Too
Dr.(5) 1 I is last al . feady inf be-
Three
Feur
dependents
Time
dependents
dependente
dependent
- dependents
- -
Two
Three
For
Fire
Os, (3) - person - hand of family and has
important
dependents
a
dependents
No dependents
-
Tes
Three
Tour
The - of las to be - shill M-
Fine
dependents
Six
dependent
dependents
dependents
dependents
si
the
$1.00
to
as
ZGN
15
$1.30
The - at the the to withheld dull -
M
$1.10
Lie
a
2.30
in
Lit
LSB
25
130
$0.28
$0.70
2.10
10.29
90
10.20
$0.20
50
$20
$2.00
20
5.50
4.30
31
38
$0.26
to
48
1.18
1.90
38
Na
39
20
30
5.00
$2.60
to
Le
TO
30
$9.25
7m
4.00
30
50
3
3,40
50
39
43
R
7.00
50
4.60
2.29
2.20
$0.30
1.00
$0.50
$0.30
$0.30
$1.30
$0.30
se
t.st
6.60
L0)
TO
3a
.70
@
5.0
50
60
9.00
$0.39
3.00
TO
6.60
4.29
line
(2)
1.50
TO
7.43
1,80
a
40
60
M
9
A9
40
en
1.00
60
11.00
so
8.00
8.60
5.20
3.80
13.00
1.40
.90
99
.90
70
ILM
BO
4.20
5.00
1.00
3.88
LA
9.48
2.60
@
80
so
14.00
50
-
L00
11.60
0.20
6.50
ILM
ELS
A20
7.0
LM
L10
2.00
1.40
1.40
NO
no
12.60
5.81
as
100
3,48
4.60
18.00
1.40
15.60
11.20
10.50
17.00
8,46
6.00
1.68
9d
15.00
11,40
10.20
1.00
3,10
ELG
7.80
&
100
2.00
2.00
2.00
-
too
17.0
12,48
12.28
5.68
120
11.90
5.40
22.00
19.60
17.20
45
14.99
12.48
10.00
7.60
5.20
IS
z.sa
2.68
110
21.00
16.60
5.12
100
26.00
23.60
21.20
15.00
DM
15.00
14.20
5.60
11.00
1.41
6.9
16.40
14.00
11.60
9.20
110
to
2100
18.80
17.40
16.20
11.50
10.60
149
4.80
160
4.00
30.00
9.00
27.60
25.20
15.00
1.21
22.50
28.40
18.00
15.60
11.29
126
21a
10.80
8.40
20.00
-
139
189
$4.00
25.00
31.60
29.20
21.00
19.10
22.68
18.20
De
12.60
17.00
11.46
as
28.80
24.00
22.00
19.60
RM
14.80
LM
THE
15.80
Lei
12.40/
27.10
21.40
14,50
200
19.98
13.40
38.00
35.60
33.20
100
20.28
09
30.80
28.00
28.00
2160
21.20
25.00
18.80
200
16.00
150
25,09
Exas
27.00
27.01
220
24,66
22.39
17.89
16.00
15.00
42.00
21.00
ILS
39.60
37,20
34,80
32.40
30.00
27.60
25.20
22.80
229
26,46
158
ase
31.00
25,40
19.50
18.60
240
17.40
46.00
43.60
10.00
41,20
24.20
78.80
36.40
34.00
51.60
29,20
26.80
34.50
160
22.50
170
25.60
27.40
21.00
21.80
200
31.00
CLIB
20.60
200
TM
30.60
26.20
25.00
19.40
50.00
is
47.60
45.20
42.80
40.40
38.00
35.62
31.28
30.80
23,48
1991
25,48
21.80
22.40
28
200
54.00
$1.40
49.20
46.80
44.40
42.00
39.00
37.28
34.50
32.49
120
11.99
1%
12.60
28.28
17.58
33,40
27,00
21,46
as
25.50
280
24.60
300
in
33.00
31.60
39.29
23,40
un
58.00
$5.60
53.20
50.00
68.40
66.00
GM
43.68
41.26
38.80
35.40
700
31.48
25.91
27.50
39
3730
26,59
22.70
31.00
25.60
328
25.40
62.00
$9.60
57.20
34.58
52.40
50.00
47,68
45.20
42.50
45.00
5.p
21.10
20
28.60
34a
24.20
27.40
N.M
65.00
63.60
61.20
58.80
56.40
Sete
sue
49.26
45.85
41.40
21.00
31.80
249
30,50
36)
29.49
as
70.00
67.60
65.20
0.80
60,45
51,00
55.60
53.20
50.80
48.10
29
....
200
74.00
71.60
09.20
64.80
$4.40
62.00
59.60
57.20
54.80
52.16
IN
400
7K90
20% of the excess pres $2.00 plus
75.60
12.20
20.00
68.60
60.00
63.60
41.20
$8.80
56.10
$0.00
pm of
10.9
$5.60
*** of the - - $400 -
$35.00
115.20
il
the
-
-
$32.60
$31.00
$30.40
san
are the the Nome The - - M - The le - of - dependents - Paisa of le in then a - of down the - reduced number by $1.30 of dispendence For dependent shown. the amount of fas he withheld applicable shall -
$10.00
$77.60
$75.20
$72.50
$70.46
$68.00
$65.60
$63.29
$40.80
$58.40
The of Application the of - the above of the formate, - which 112, computed, - in the the - in case of the such median - Mage la not in - the missiple the byacket larguar of in member so which la is, to shown, the the wages nearest except shall fall multiple the should be that if in the - of N.I. wages
& If the number of dependents la In - of the largest number of dependents down, the amount of tax la be wishheld shall - that applicable -
paid
the the of the largest Number of dependents shown reduced by 12.40 for each dependent over the (prgest number shown, entegt that In ne event that
due rach la the Tables A. I las A 5 (except für differences in same in
heading, (4) above), namely, $4.20, minus $1.20 for exch depend-
- - in in be withheld be less then 1 par centure of the - of the median mage - the brachet in which the wagns fall for if the magne paid ...
- if the excess of the vages) over 124, computed, in case - amount is net - misliple of M.II, la the nearest multiple of se.10.
Iraled by the varyung lengths vill the paynell periods) amounts be
pericd following mample applicable to a werkly may payroll illus-
the subtraction will be $2.40 (2 x $1.20), leaving $1.80 as
5, ent the in excess of 5. Since there are 2 dependents in ptni di
-
however, the employer is in no event to withhold less than 3
tentative amount to be withheld. Under the formula,
full Date exemption a withledding exemption entificate with
John employer Smith cares a mage of $75 per week. He has filed
of to the wages paid fall, computed to the wage nearest multiple
in percent which of the excess of $12 over the median in the bracket
amount determines that the amount to be footnote,
the employer lo the formula wotained in the above depend.
ents. According allowed a martied person, and showing claiming 7 the
Excess (being the wage half-way between $70 and $80) and the
$75 cents, The median wage in the applicable bracket is
largest number applicable in the case of 5 dependents withheld is the
$63 is of this median wage over $12 is $63. Three percent of
di dependents shown in the applicable (which in sub- the
$1.50 Hence, because of the minimum withholding require
$1.89, and the multiple of 10 cents nearest this amount is
ment, the amount to be withheld is $1.50, rather than $1.80
Regraded Unclassified
TABLE A-3
Page ,
Page 9
TABLE A-4
IF THE PAYHOLL PERIOD WITH RESPECT TO AN EMPLOYEE IS SEMIMONTHLY
IF THE PAYROLL PERIOD WITH RESPECT TO AN EMPLOYEE is MONTHLY
And the -
dad, (1) sub persons la # - deining - of print - be withholding and ha-
And, (1) such provide la . married proven claiming - of - la withholding and No
No
Bar depended
Tea
Theye
dependents
Fear
dependents
Fine
dependents
Six
dependents
dependents
Since
disendence
Eyle
del as - -
/
the dispendent
Two
depending
No dependents
Three
Fee
dependente
Fire
J
Sim
dependents
Ente
dependents
Nine
/
depending
dependents
Ga, (1) work - " . - person delming belf of provided unpla for villaiding - has
On (1) such persons la . minied M of - la - et has
No dependents
Use dependent
Tes
Three
dependents
For
dependents
Fine
dependents
dependents
%
No dependents
One depended
Tes
The
dependents
less
For
Time
the
dependents
-
dependents
dependente
dependents
dependents
demodents
Di, (3) serb la . single piress and best
G. (1) - passes . sinde - and best-
No
Date
Too
Three
dependents
Fax
dependents
depositing
Fine
a
Two
dependents
These
in
No dependento
Das dependent
For
The
a
Sites
dependent
dependents
dependents
dependate
to Miss that
dependents
Poll) winth person minied perma di el product - la - end in-
blad
- less the
Or, (4) each la servid - delivery all of personal far et -
No dépendents
Des dependent
Two
The
dependents
dependents
Fegr
dependate
i
Ne dependente
Das dependent
Tax
The
Fee
Fire
dependente
dependents
a m and - - had of . lamily et by
Dr. (1) - - in Mail of - family and No-
-----
Too
Three
dependents
For
The
No dependents
No
Tea
---
There
Fee
Fine
Sie
depending
-
dependent
dependents
dependents
dependents
dependents
dependents
The - of tax be witholf - -
B
the
becoment of las la be withheld
$2.00
a
"
E
5.00
P.S.
es
7,50
19
4.40
$1.50
se
$40
$4.00
20
NSE
0.10
$1.33
5
3.43
$2.53
$1.38
$0.30
#
50
9.00
$3.50
H
e
JLN
5.49
1.30
5.00
40
49
$0.30
$0.30
.00
113
58
60
11.00
5.60
$0.60
$0.10
$0.10
$0.10
$0.10
$0.10
All
1.70
$0.10
$0.19
M
Itm
11.49
-50
100
0.28
39
M
A
a
W
TO
13.00
T.N
2.60
40
40
40
40
.40
49
.40
lus
15.80
15.10
3.60
31
1:00
1.30
50
1.30
90
a
a
85
15.00
5.80
4.00
its
30
TO
20
70
TO
F:
22,00
20.00
70
19.18
T.4g
1.30
130
(6)
28.00
15.60
H2
5.00
1.30
2,40
LA
и
300
18.00
12.80
7.60
2.40
L10
1.18
3.10
1.15
1.10
1.39
-
tie
25.00
ILea
5.00
1.90
20.mg
1.91
LM
100
120
4.00
22.00
14.89
11.60
6.40
1.70
1.70
1.70
1.30
1.70
10.50
1,78
to
30.00
180
21.18
15.00
11.00
3.80
2.30
30,40
19
120
140
26.00
20.69
15.60
10.40
5.20
2.38
2.30
2.39
2.18
TM
24.50
31,48
22,79
2.30
200
zus
D.S0
like
T.sa
5.20
IN
to
14.40
160
30.00
24.80
19.60
14.40
9.20
4.00
2.90
2.90
2.99
2,00
30.00
25.19
26,19
FEE
23.60
11.99
9,29
160
200
279
21.00
18.40
LM
36.00
30.50
25.60
20.40
15.20
58.00
4.88
1.88
3.00
18
AM
CM
30,20
Im
34.50
27.60
25.00
15.80
13.20
24,29
22.40
no
290
240
44.00
38.50
33.60
28.43
23.20
$8.00
12.50
7.60
5.00
5.00
200
time
31.60
19.19
250
0.00
$0.19
29.00
17.29
200
76.40
DR
280
52.00
46,80
41,68
36.00
11.20
25.00
20.00
15.60
10.40
6.59
29
5000
2%
47,10
38.23
44,00
35.00
33.56
21.00
21.26
He
280
320
30.49
60.00
54,50
49,69
$6.40
33.20
34.00
28,50
23.60
18.00
na
2/0
St.00
42.20
27.80
sea
St.10
45.80
23.60
37.00
25.20
no
120
34.40
360
68,00
42.50
57,00
52.40
47.20
42.00
36,80
31.60
26,00
21.20
55.00
55,40
06.20
300
52.80
43,60
120
41.00
31.80
29.20
25.07
200
IN
76.00
71,50
65.60
60,10
55,20
50.00
44.80
39.60
14,10
29,20
62,00
99.63
50.20
47,60
38.40
-
SALAM
15.00
35.68
33.29
no
406
440
$1.60
42.40
440
$4.20
84.00
75.80
73.60
68,40
63.20
53.00
52.00
47.60
37,29
140
6.88
63,40
39.50
300
70.00
60,88
58.20
45.60
37.20
sua
46
488
92.00
86.80
81.60
76,40
71.20
65,00
60.00
55.60
50.40
45.20
142
30
67,40
55.60
46.40
64.80
53.00
43.80
41.20
458
529
71.63
62.28
50,40
100.00
94.50
89.60
84.40
79.20
74.00
68.58
63,60
58.49
5120
IM
74.00
400
58.60
47.69
45.20
en
59
500
102.80
92.40
K7.20
82.00
76,88
11.00
61.20
75.00
61,80
0.3
57.00
73.40
72.80
63.60
51,40
108.00
97.60
€1.50
51.80
49,29
no
Sea
a
20.24
58.40
116.00
110.80
105.60
100.40
95,20
90.00
84.90
79.68
TLAC
63.29
67.00
45,00
55.80
53.79
50.00
Mid
EN
62.40
124.00
118.80
113.60
THL46
103.20
98.00
v2.30
87.60
82,10
77.20
$400 new
50,80
57.20
3199
40
(s)
132.00
126.80
121.60
116.40
111.20
106.00
100.80
95.60
90.40
85.20
es
720
140.00
134.80
129.60
124.40
119.20
114.00
105.80
$63.60
98.10
91.20
21% of the ever - $400 plus
T29
760
148.00
142.80
137.60
132.40
127.20
122.00
116.50
111.60
106.00
111.20
THE
100
156.00
850.80
145.60
140.40
135.20
130.00
124.80
113.63
114.49
108.29
$30.00
$74.50
"
the
$95.60
$000 the the - - - - of number the la of be largest the withheld of From dependents number if be the loss of ****) le dependents their in - a per 116, of within abown the largest al the number la - by case R.g. of with of Five the dependents mach - madian dependent is wage shown, mat in . - multiple the the $57.00 America the branket Increase of $0.10, in - which $64.60 sex Number to her the the be shown, meaned withheld wages $61.50 except fall multiple whall for that if be $59,20 the of chart in $0.16 wages no applicable exemit and 15447 chall all in
the the
20% el the user $800 plus
$160.00
$154.30
$149.00
$144.40
$139.20
$134.00
$128.40
$123.60
$118.40
$118.29
% II the of dependents la In - of the Targest number of dependents down, the amount of ter to be withheld shall be that applicable -
- be withheld la less then 3 per centum of the excess of the median wage la the bracket in which the - guid tall for M the ----- paid
- the ul to the largest number of dependents shown reduced by $5.76 for each dependent over the largest number chown, that in - shall the are
- - of the excess of the wages) - (12, computed. in case such amount is and . multiple of $6.10, to the nearest miltiple of $9.18
-
Regraded Unclassified
Page is
Page 11
TABLE A-5
IF THE PATROLL PERIOD WITH RESPECT TO AN EMPLOYEE IS A DAILY PAYROLL PERIOD OK A MISCELLANEOUS PATROLL PERIOD
FOW TO USE TABLE B
Married persons claiming half of the exemption (Item I (2)
Employers ho use the wage bracket withholding method
of Form W-4) with three dependents.
Ind. (II 1 - . . mind person rhinting - of personal - las withholding and -
(Tables A-1 EM A-5) for determining the amount of tax to be
- the non divided -
whhheld do not need to refer to the following Table B.
pendents. Single persons (Item I (3) of Form W-4) with three de.
de - el fajo ja -
private -
No dependents
Das dependent
Tex
Time
Toy
Fire
A
dependents
Seree
Eigle
For the convence of employers who do not elect to use the
Married persons claiming all the exemption (Item I (4) of
dependents
Rependents
dependents
/
- breck withholding table. there has been constructed a
Form W-4) with one dependent.
dependints
dependents
a (7) mb - la . married prrsent claiming will of provided for withholding and No-
table - the lowest amounts of wages by family status
Heads of family (Item I (5) of Form W 4) with two de-
and paymill provide at which the family status withholding
pendents.
Das depended
exemption and the 20 percent rate apply. For wages below
If the weekly wage payments are less than $33.18 for these
No dispendante
Tvs
Three
For
dependenta
Dependents
Fine
dependents
à
dependents
-
-
there amounts the Victory Tax withholding exemption and the
classes, the payments are subject to the 3 percent tax no the
-
procent opply.
excess of wages over the weekly Victory Tas withholding exemp-
tion of $12.00.
O:, (1) wish priva is . elegible person - has
Example
Thus, it will be observed that before computing the tax to be
lie dependents
the dependent
Tep
Three
For
11 - paymell period is weekly. all wage payments of $33.18
withheld it is possible through the use of the following Table B
-
dependents
Fine
depresents
Site
dependents
dependents
/
and BIT are subject to the family status withholding exemp-
to divide the wage accounts as between those subject in 20
dependent
tion and the 20 percent rate for-
IN -
percent on the amount in excess of the family status withholding
4v be the
A. (#) such - is matried person claiming all of personal - For - and
Married persons claiming no personal exemption (Item I (1)
exemption and those subject En 3 precent on the amount in excess
of Form W 4) with five dependents.
of the Victory Tax withholding exemption.
N. dependanta
Das dependent
Two
There
Ampendants
Faw
dependents
Fine
TABLE B
n. (5) works - is head of . family and have
29 PERCENT UF WAGES IN EXCESS OF FAMILY STATUS WITHHOLDING EXEMPTION IS APPLICABLE FOR WAGES EQUAL TO OR IN EXCESS
- -
The
Time
dependente
Few
dependints
Five
OF an AMOUNTS SHOWN. 3 PERCENT OF WAGES IN EXCESS OF VICTORY TAX EXEMPTION IS APPLICABLE FOR WAGES LESS THAN
dependints
34
depending
THE AMOUNTS SHOWN.
The - of for la be withold shall be the fallowing misled by the - al dara in 1 period
And, (1) - prove is a - person claiming - el mind - for withholding and las
10
H
service
1
No dependents
One dependent
Too
Three
Inc
Fire
/
Figle
-
7
IN
$1.15
dependents
dependents
dependents
dependents
la
1
34
35
:
AB
4
at
is
4
5
35
33
$0.26
75
$0.05
$0.05
$0.05
Dr, (2) with person is . - june less 3 el provide emple for witholding un Les
S
55
Al
28
$8.05
&
$0.05
1.10
.10
95
%
is
AD
.H
6
7
4d
10
Je
1.30
is
a
1.15
N
10
Tes
Three
For
Fine
F
Tel
IS
,10
Ja
38
No dependents
the dependent
-
8
150
1.35
sa
e
LIS
AS
dependento
dependento
dependents
dependents
dependents
La
LA)
.30
dependente
.
30
IS
15
IS
.65
1
LS
un
50
,
1.00
38
10
15
1.93
15
85
5
,76
50
& ER and - - . right - et be
is
I!
LSS
2.29
1.0
1.29
35
12
205
11
LAS
LOS
a
1.78
90
150
TO
ss
1.35
is
- 1 : I
2.60
if
2.65
2.25
1.20
1.00
- 19 -
Tax
Them
for
the
la
-
is
2.10
LM
is
de
3.80
"
2.15
2.65
1.75
14
2,10
2.50
1.60
E
No dependints
One depositent
2.30
1.40
15
16
dependede
dependents
dependents
If
1,75
X
185
215
2.00
1.80
1.63
LE
1.0
2.50
16
2.70
16
255
a
4.3)
1.31
2.40
72
3.36
2.20
2.05
LAS
4.65
295
a (6) H and persian all personal - - - tax
22
24
3.85
12
2.80
1.31
2.60
2.45
15
4.68
"
LG
us
335
M
us
3.20
1.91
3.00
2.82
26
5.00
4.85
4.65
3.75
Too
There
ter
Time
If
1.5)
3.60
3.40
3,25
16
No
28
dependents
the depositos
5.00
4.30
4.15
Importent
dependent
depresents
dependante
23
5,25
to
5.05
4.50
4.60
5.65
4.70
3.80
5.30
3.65
10
$.45
5.29
4.55
4.40
5.10
4.20
4.05
16
4.95
4.80
4.60
4,45
45
a sais personsive and el - Mo
Do erem
No dependate
2% of the Free $3) plus
Two
The
Fear
The
%
or -
dependents
dependents
dependents
dependents
Rependents
depended
$6,00
$5.85
$5.65
$5.50
$5.30
$5,12
$5.00
Feeldo
If
$4.50
$4.62
$4.45
0
e
e
$13.06
$26.12
$23.18
$40.24
$17.29
$51.35
$63.41
the
number
of
66.15
60,47
94.59
NATI
122.53
the
dependents
la
in
8
e
0
35.12
52.24
-----
of
1
9
6
e
41.19
56.59
71.61
87.38
102.47
117,75
133.00
number the case - - of of date the la largest be in withheld in the Case number period with be for less of amount if dependents than the is - 1 per shown paid consum the are largest redoced of 138 the ember or by - over, 10.15 of of of for the dependents the each product dependent thown, of the - the median amount the largest was of in las number the to be shows, withheld - shall that five that as medicant applicable all and that the in
Monthly
0
e
e
82.59
113.19
14356
174.15
201.94
27553
260.12
period, net # mailiple of $0.05 10 the - their multiple of the wages) of 10.05. over the product breaket of $1.70 in and which the number the of due is the
0
#
0
247.77
13153
GLIP
523.06
614.52
286,59
711.15
I
0
e
0
495.53
679.00
162.59
1,045.12
1,229.65
1,413.00
-
0
.
a
991.06
1,355.12
1,725.18
2,002.24
2,459.29
2,676.35
2.193,49
-
Tully - -
Four do et meh
-
o
a
o
270
1N
4.70
5%
6.70
7.70
H.70
-
Regraded Unclassified
120
3a
Page a
THE SECRETARY OF THE TREASURY
Treasury Suggests Tax Notice
WASHINGTON
To Be Put in Pay Envelopes
June 4, 1943.
The Treasury su quested today and victory tax as you earn the
that employers have the following
income subject to that tax,
or similar notices printed for in-
"The money withheld is not
sertion in pay envelopes or inclu-
kept by your employer, but is
turned over to the United States
1.
TO THE EMPLOYERS OF THE UNITED STATES:
sion with pay checks when the
Treasury. It is your money and
D
At this time when the method of cullecting the Federal Income Tax is undergoing such
first 20 per cent salary deduction
stands to your credit All a pre
la
a complete change, many of your employers will not understand the new system. in spite
is made after July 1 under the
payment of your Federal Income
a)
and victory tax.
new income tax laws:
uf the very widespread discussion of the withholding feature, many of them will wonder and
"The new DRY-MA-YOU income
"After the (tome of the year
di
may ask why their pay n "short"
the law became effective July 1.
your employer will give you . n-
DI
cript showing exactly how much
1968 11 requires your employer
A simple leaflet in their pay envelope> may he helpful. Here is a sample explanation
of your money has gone to the
"
to withhold a certain portion of
United States Treasury toward the
0
which, il you care to de so, you can print and enclose in the pay envelope from which the
your pay This amount is not a.
payment of your taxes. Keep that
h
tax is fint withheld
new tax, but is in payment of your
receipt. It is your evidence of
1.
regular Federal income and vic-
lax paid,
tory tax
"Any Federal income tax pay.
"Beatoning with the pay you
ments you made during the first
PAY-AS-YOU-GO INCOME TAX
are receiving today, your employer
two quarters of this year March
has withheld this TAX from your
13th and June (Mh) stand to
The NEW income las law became effective July 1. 1943, It
wage. Therefore. you have now
your nredit an this year's income
requires your employer to withhold a certain proportion of your pay- This amount is
begun to pay your regular income tax."
net a new las, but is in payment of your regular Federal Income and Victory Tax,
Beginning with the pay you are reserving today your employer has withheld this
145 from your wage Therefore, you have now begun to pay your regular Income and
Wash Times Heralt, June
11
Victory Tax 44 you earn the income subject to that tax,
The money withheld is oot kept by your employer, but is turned over to the
of your Federal Income and Victory Tax.
United States Transury, It es your monty. and stands to your credit as a prepayment
how much of your money has giving to the United States Treasury toward the payment
After the close of the year your employer will give you a receipt showing exactly
of your lasm, Keep Chat receipt. Is is your evidence of tax paid.
Any Federal income tax payments you made during the first two quarters of this
income the
year (March 15th and June 15th) stand to your créit as payment on this year's
their in appoint loss of income by reducing their regular subscription to War Savings Bends.
Wall the beginning of withholding sume of your employees may be inclined to offset
vale of War Bind purchases. I will appreciate anything you can do to help.
It vitally important that every effort las made to maintain OF even increase the present
Treasury will the name than offert by the benefits to be derived. Let me upon thank us in
believe that any additional burden placed upon you as an employer or at the
the advatice for your natistance, and assure you that WF will do everything possible to promote you
smooth operation el this tire Incame Tax machinery,
Sincerely yours,
Henry MargenthanJ.
Sectery of the Treasury.
Regraded Unclassified
121
3b
PORVICTORY
BUY
VOIDED
TREASURY DEPARTMENT
WAR
BONDS
WASHINGTON 25
OFFICE OF
MISSIONER OF INTERNAL REVENUE
June 9, 1943.
Address REPLY TU
COMMISSIONER nº INTERNAL REVENUE
AND REFER TO
Managing Editor,
Dear Sir:
The law providing for & withholding tax on wages and salaries
will go into effect on July 1, 1943. To acquaint employers of
their responsibilities under this Act the Bureau of Internal Revenue
has prepared detailed instructions outlining the employer's duties
under the provisions of the Current Tax Payment Act of 1943.
Since the time in which to acquaint employers of their respon-
sibilities is very limited it is my thought that the daily papers
throughout the country can render a real service to the Government
by informing them of the provisions of this new law. There is
enclosed a copy of the Withholding Tax Circular, not with the idea
that it will be reproduced in full, unless you so desire. but that
it may serve as a basis for special articles and editorials.
The splendid cooperation of the press at all times in acquaint-
ing the public with the provisions of the tax laws is sincerely
appreciated and it is felt that any publicity given to this new
method of collecting revenue will be a direct contribution to the
war effort.
Very truly yours,
(Personal Signature)
Enclosure
Commissioner.
Regraded Unclassified
3c22
(75)
BRIEF ANALYSIS OF THE ANTI-WINDFALL PROVISIONS
OF THE CURRENT TAX PAYMENT ACT OF 1943
The Current Tax Payment Act contains anti-windfall provisionsl re-
lating to the problem of transition to the system of current collection
of tax liabilities. Their effect is, generally. to limit the abatement²
of individual tox liabilities to 75 percent3 of the 1942 or 1943 tax,
whichever is the smaller, and, occasionally. to reduce or further limit
the amount of that abatement.
The general limitation may be called the normal abatement. It can
never be more than 75 percent of the tax for 1942 or 1943 whichever is
the smaller. The logislative objective of the further limitation was to
lower the ceiling or to limit the abetement to a lesser amount in some
cases. The individuals, who may be subject to this further limitation,
are those whose net income for the year which controls the amount of the
normal abatement (1942 or 1943 whichever was smaller) was greater by
$20,000.00 or more than the highest net income for any one of the years
1937 to 1940, inclusive. The highest income year from 1937 to 1940, in-
clusive, has been termed the "base year."
THE PROBLEM OF MEASURING
THE HEIGHT OF THE CEILING
To determine if the second limitation is applicable, a tax is com-
puted on the income of the base year selected after increasing the in-
come of such base year by $20,000.00. This tax is computed at the
rates for either the year 1942 or 1943, whichever of such year's tax
TAS the smaller. If the tax so computed is less than the normal abate-
ment of 75 percent, the ceiling is lowered and the tax so computed is
the amount of the abatement and not the 75 percent normal abatement. If.
however, the tax 80 computed is greater than the normal abatement of 75
percent, such normal abatement is not disturbed or reduced. In such
latter instances the ceiling has not been lowered but remains at the same
height, that is, 75 percent abatement.
¹Séction 6, Current Tax Payment Act of 1943.
2The words discharge, forgiveness, cancellation, or remission
could be substituted for the term "abatement."
Where the total liability is $50.00 or less, the abatement is
100 percent, and notch provision prevents inequity to persons whose
tax liability is only slightly over $50.00.
Regraded Unclassified
123
- 2 -
EXAMPLE NO. 1
THE 1942 TAX IS SMALLER THAN THE 1943
TAX AND THE CEILING IS LOWERED
The net income for the year 1942 is $142,310.59, on which the tax
is $100,000.00⁴. The 1943 tax is $120,000.00. The 1942 tax being lese
than the 1943 tax, the normal abatement is $75,000.00 (75 percent of
$100,000.00). The highest net income for any one of the years 1937 to
1940, inclusive, is $50,000.00 for the year 1938. The net income for
the year 1942 is $20,000.00 or more greater than the income for such
"base year." The tax on a not income of $70,000.00 (net income for the
year 1938 of $50,000.00 plus $20,000.00) computed at 1942 rates is
$40,940.005. This amount is less than the $75,000.00 which ie the nor-
mel abstement. The amount of the abatement to be allowed is, therefore,
$40,940.00 and not $75,000.00. The normal abatement of $75,000.00 has
thus boon roducod by $34,060.00 ($75,000.00 minus $40,940.00 equals
$34,060.00). This amount of $34,060.00 becomes a liability for the year
1943, which may, howover, be paid by the texpayer in four equal annual
installments, the first of which may commence on March 15, 1945.
REVISED 1943 TAX SUMMARIZED
(1) The tax for 1943 not disturbed by the abatemont pro-
visions of the Current Tex Payment Act
$120,000.00
(2) The 25 percent unabated portion of the 1942 tax
remaining efter the application of the 75 percent
normal abatement provisions of the Act
25,000.00⁶
(3) The reduction of the amount of the normal abato-
mont by reason of the ceiling having been lowored
to $40,940.00 ($75,000.00 minus $40,940.00 equals
$34,060.00)
34,060.007
Total liability for the year 1943
$179,060.00
4Mrrried person with no dependents claiming entire amount of por-
sonel exemption and ontitled to maximum carned income credit.
SComputed 18 if $70,000.00 constituted both the surtax net income
for 1942 and the not income for such year after ellowance of all credits
against net income. (Section 6(c) (1) of Current Tax Payment Act of 1943.)
6Payable on March 15, 1944, but taxpayer may elect under regulations
to pay one helf on March 15, 1944, and remaining half on March 15, 1945.
(Section 6(c) (1) of the Current Tax Payment Act of 1943.)
Payable on March 15, 1944, but taxpayer may elect under regulations
to pay such portion in four equal annual installments from March 15. 1945,
to March 15, 1948, with interest at the rate of 4 percent. (Section 6(c) (2)
of the Current Tax Payment Act of 1943.)
Regraded Unclassified
124
- 3 -
EXAMPLE NO. 2
THE 1943 TAX BEING SMALLER THAN THE 1942
TAX AND THE CEILING IS LOWERED
The net income for the year 1943 is $132,433.27, on which the tax
is $96,000.004. The 1942 tax is $120,000.00. The 1943 tax being less
than the 1942 tax, the normal abatement is $72,000.00 (75 percent of
$96,000.00 equals $72,000.00). The highest net income for any one of
the years 1937 to 1940, inclusive, is $80,000.00 for the year 1940.
The net income for the year 1943 is $20,000.00 or more greater than
the income for the "base year" 1940. The tax on a net income of
$100,000.00 ($80,000.00 net income for the year 1940 plus $20,000.00)
commuted at the 1943 rates is $70,140.00. This amount is less than
the $72,000.00 which is the normal abatement. The amount to be abated
is, therefore, $70,140.00 and not $72,000.00. The normal abatement has
thus been reduced by $1,860.00 ($72,000.00 minus $70,140.00 equale
$1,860.00). This amount of $1,860.00 becomes a liability for the year
1943 which may, however, be paid by the taxpayer in four equal annual
installments, the first of which may commence on March 15, 1945.
REVISED 1943 TAX SUMMARIZED
(1) The tax for the year 1943 not disturbed
by the abatement provisions of the Current
Tax Payment Act
$ 96,000.00
(2) The amount by which the 1942 tax is greater
than the 1943 tax ($120,000.00 minus
$96,000.00 equals $24,000.00)
24,000.00
(3) The 25 percent portion of the 1943 tax
remaining after the application of the 75 per-
cent normal abatement (25 percent of $96,000.00
24,000.00⁶
equals $24,000.00)
(4) The reduction of the amount of the normal
abatement by reason of the coiling having
been lowered to $70,140.00 ($72,000.00
minue $70,140.00 equals $1,860.00)
1,860.007
Total liability for the year 1943
$145,860.00
Regraded Unclassified
125
- 4 -
EXAMPLE NO. 3
THE 1942 TAX BEING SMALLER THAN THE 1943
TAX BUT THE CEILING IS NOT LOWERED
The net income for the year 1942 is $142,310.59, on which the tax
is $100,000.00⁴. The 1943 tax is $120,000.00. The 1942 tax being less
than the 1943 tax, the normal abatement is $75,000.00 (75 percent of
$100,000.00). The highest net income for any ono of the years 1937 to
1940, inclusive, is $100,000.00 for the year 1938. The net income for
the year 1942 18 $20,000.00 or more greater than the income for the
"base year" 1938. The tax on the net income of $120,000.00 (net income
for the year 1938 of $100,000.00 plus $20,000.00) computed at 1942
rates is $82,140.00. This amount being greater than the $75,000.00 nor-
mal abatement (75 percent of $100,000.00), the amount to be abated is
the normal abatement of $75,000.00. It will be noted that in this in-
stance the tax on the net income of the "base year" plus $20,000.00 ex-
ceeds the 75 percent normal abatement. The normal abatement is, there-
fore, not reduced or disturbed. The application of the principles of
the second limitation in the windfall provisions of the Current Tax
Payment Act have no effect upon the liability of the taxpayer in this
instance. This is 80 even though the net income for the year 1942 was
$42,310.59 in excess of the net income of $100,000.00 for the "base
year" 1938.
REVISED 1943 TAX SUMMARIZED
(1) The tax for the year 1943 not disturbed by the
nbatement provisions of the Current Tax Payment Act
$120,000.00
(2) The 25 percent unabated portion of the 1942 tax
remaining after the application of the 75 percent
normal abatement (25 percent of $100,000.00)
25,000.006
(3) Reduction of the amount of the normal abatement by
reason of the ceiling not having been lowered
None
$145,000.00
Total liability for the year 1943
The last example illustrates that an increase of $20,000.00 or more for
in net income for the year 1942 or 1943 over the highest net income
any one of the years 1937 to 1940, inclusive, does not necessarily re-
sult in an increase in tax liability for the year 1943. The amount of
net income a may have in the current year (1942 or 1943) in the ex-
cess of that person in the highest "base year," without being subject to
second anti-windfall provision of the Current Tax Payment Act, will vary the
and increase in direct proportion to the size of the net income for
current year.
Regraded Unclassified
126
- 5 -
A married person with no dependents whose highest net income in the
base year was $10,000.00 may have $28,210.00 more net income in the cur-
rent year than in the base year, and yet receive full benefit of the 75
percent normal abatement. A person with the same family status whose
highest net income for the base year vas $30,000.00 could have
$33,375.00 more net income in the current year than in the base year with-
out disturbing the normal abatement allowance. Example No. 3 reflects
the results applicable to a person with net income of $100,000.00 in the
highest "base year." The married man with net income in the base year
of $980,000.00 could increase that net income in the current year by
$345,211.00 without having his ceiling lowered or suffering any reduction
in his normal 75 percent abatement allowance.
Regraded Unclassified
3
3d
STATEMENT OF INCOME TAX WITHHELD ON WAGES
Calendar Year27
TREASURY DEPARTMENT
TREASURY DEPARTMENT TREASURY DEPARTMENT
By Employer
(EMPLOYEE'S RECEIPT)
1943
EMPLOYEE
¡CTIONS TO EMPLOYER
TO WHOM
this form in duplicate for
PAID
Impare employee from whom a tax has to
withheld. Furnish original
Forward duplicate with
(Print full name of employee. home address, and social security number, if any. If employee la . married woman,
am Form W-1. for the fourth
of Income Tax Withheld on
name of husband should also be furnished)
- of the year (or with the em-
EMPLOYER
pro rift tool return. if filed at an
in date). (See Circular WT.)
BY WHOM
PAID
TRUCTIONS TO EMPLOYEE
(Name and address of employer)
This is your receipt for In-
Tax (including Victory
STATEMENT OF INCOME TAX WITHHELD ON WAGES
x) be withheld. You should
ID it for use in preparing
if Income and Victory Tax
Wages paid during the calendar year 1943
$
turn for 1943, and as evi-
ace of tax withheld.
Amount of income tax withheld
$
(OVER)
Regraded Unclassified
128
FORM W-4
U. & TREASURY repartment
EMPLOYEE'S WITHHOLDING EXEMPTION CERTIFICATE
4
INTERNAL REVENUE SERVICE
(Collection of Income Tax at Source on Wages)
Name
(Print full name)
Social
dress
(Print home address)
Security
No.
1. Check the box in the line below which applies to you on the date this form is filled in:
Married person living with husband or wife but claiming none of the personal exemption
(1)
Married person living with husband or wife but claiming half of the personal exemption
(2)
Single person (not head of a family) or married person not living with husband or wife (not head of a family)
(3)
Married person living with husband or wife and claiming all of the personal exemption (spouse claiming
none of the exemption)
(4)
Head of a family (a single person or married person not living with husband or wife who exercises family
control and supports closely connected dependent relative(s) in one household)
(5)
II. Number of dependents receiving chief support from you who are either under 18 years of age or incapable of self
support because mentally or physically defective
I declare that the entries made herein are a true and complete statement as of the data indicated, pursuant to the Internal
Revenue Code and the regulations issued under authority thereof.
Date
, 194
10-04596-1
(Signature)
Regraded Unclassified
129
Tuesday, June 15, 1943
Withholding Tax
Some taxpayers doubtless / will suffer
(vere headaches trying to figure out the
amount of unpaid obligations owing by them
a refunds due them before they get the
linng of the new pay-as-you-go system. Once
the difficulties of the transition period are
ever, the taxpayers' tribulations will be miti-
ented, though there is no denying that the
new system of collection-at-source is much
more complicated, from the taxpayers' view-
point, than the accustomed method of mak-
tag a declaration and paying the amount
due. For computations of taxes on the
basis of income yet to be earned are neces-
sarily tentative, so that frequent adjustments
have to be made to allow for over- or under-
payments.
However, for the time being the wage
earner or salaried employe subject to the
withholding tax does not need to worry.
His employer is the man who has to struggle
with the extra clerical work involved in
computing the new withholding taxes. All
the employe has to de is to 611 out a brief
statement to show the amount of exemp-
tions to which be is entitled under the
income tax laws. After July 1 the employer
will simply deduct 20 per emt from the
amount payable to employes after allowing
for exemptions. Next September those tax-
payers whose liabilities are not fully covered
by these deductions will have to make
supplementary declarations, and pay any
excess amounts due. For the great majority
of wage earners, however, the 20 per cent
withholding levy will take care of the next
two quarterly installments of their income
tax obligations. And for everybody the sys-
tem of deducting a limited amount regularly
at the source provides protection against
involuntary defanlts and assures to the
Government a more even and a more certain
inflow of revenue.
It should again be emphasized that the
withholding tax does not add anything to
the amount of taxes payable, though it does
bring into the tax system a little sooner
some individuals who were not taxable on
1942 Incomes. It is, in short, a method of
collecting taxes that WE have to pay anyhow.
It the Government by inadvertence gets
more than it is estitled to, the taxpayer is
credited with the excess. Only the 25 per
cent tax of "unforgiven" taxes payable by
all but a mitority of taxpayers is in effect
a tax increase. But these additional taxes,
which are payable in two installments, are
not due until the spring of 1944 and 1945.
Regraded Unclassified
130
FIELD PROCEDURE MEMORANDUM 10. 276
June 11, 1943
TO INTERNAL REVENUE AGENTS IN CHARGE OF FIELD DIVISIONS:
BRIEF SUMMARY OF THE PROVISIONS OF
THE CURRENT TAX PAYMENT ACT OF 1943
The Act applies only to individuals. It changes the system of
tax payment but does not change rates or exemptions. It provides for
collection at source from wages and salaries at a rate of 20 percent
above the withholding exemptions and for current payment of liabilities
not collected at source on the basis of quarterly declarations. The
Act cancels three-quarters of the 1942 tax or the 1943 tax, whichever
is the smaller, subject to certain limiting provisions. The speeding
up of payments by one year and the amortization of the uncancelled
part of the tax (the one-fourth not cancelled) will, for the great
majority of taxpayers, increase the amount of taxes payable during
calendar years 1943, 1944, and 1945. It is estimated that the Act
vill increase individual income tax collections for the fiscal year
1944 alone by $3 billion, bringing the total to $16 billion.
I, System of Current Payment
A. Collection at Source of Tax on Vages
Beginning July 1, 1943, 20 percent of wages and solaries in
excess of the family status withholding exemption will be with-
held to apply on current income and Victory taxes. This with-
holding rate is designed to collect the Victory tax, plus the
normal tax and the surtax at the first bracket rate. Wages of
service men, domestic servants, clergymen, agricultural labor,
and certain other classes are exempt from withholding but not
from tax. The annual withholding exemptions are $624 for a single
person, $1,248 for a married person, and $312 for each dependent.
In order to insure withholding of the Victory tax, the amount with-
held shall in no case be loss than 3 percent of the excess of the
wage above $624, which is the Victory tax withholding exemption
for all individuals. The rate of the Victory tax withholding is
set at 3 percent instead of the present 5 percent in order to
approximate more closely the actual not Victory tax liability
after post-war credits.
To enable employers to withhold the proper amount, employees
are required to certify to the employer their marital status and
the number of their dependents.
(over)
Regraded Unclassified
-2-
Field Procedure Memorandum No. 276
Employers can determine the amount to be withheld either
by exact computation or by the use of simplified tables. The
tables set forth the amount to be deducted according to the
family status of the taxpayer, the wage bracket into which his
wago falls, and the length of his payroll period. Employers will
file quarterly returns but under projected regulations will remit
the withheld taxes monthly. Copies of a statement of wages paid
and tax withheld for each employee are submitted to the employee
and the Bureau of Internal Revonue at the end of the year.
Employees are required to file income and Victory tax returns
even if their entire tax is collected at source.
B.
Current Payment of Liability not Collected at Source
Withholding applies only to wages and salaries and does not
currently discharge the tax liability in excess of the first
surtex bracket. Taxpayers with more than a nominal amount of
income from non-wage sources and taxpayers whose wages fall in
higher surtax brackets must make a declaration of estimated tax
on or before March 15th each year. Payments of estimated tax
(consisting of estimated income and Victory tax liability, less
estimated amounts withheld at source) are made quarterly, and
estimates may be revised each quarter. Penalties are applied if
current tax payments during the year, including both amounts
withheld and amounts paid quarterly by the taxpayer, fall short
of 80 percent of the actual total tax liability. Final returns
are due each year, as at present, by March 15th.
A special rule permits farmers to file their declarations
of estimated tax at any time on or before December 15th and
applies penalties only if the estimated tax falls short of two-
thirds of the actual tax.
0. Tax Payments Durine 1943
Taxpayers are required to pay their March and June, 1943,
installments, as under present law, but such payments are applied
to the 1943 tax. Taxpayers whose current liabilities are not
fully discharged by collection at source will file a declaration
on September 15, 1943, estimating their 1943 tax and subtracting
income and Victory tax withheld at source for the The
therefrom the amounts paid in March and June, plus the estimated
balance, if any, will be payable one-half by September year. 15 and
one-half by December 15, 1943. The final return for 1943 will be
filed by March 15, 1944, at which time any underpayments or over-
payments during 1943 will be adjusted.
Regraded Unclassified
131
- 3 -
Field Procedure Memorandum No. 276
II. Cancellation of Tax
L. Cancellation of 75 percent of One Year's Tax
To provide for transition to current collection without com-
plete doubling up of payments, the Act cancels 75 percent of
either the 1942 or 1943 tax, whichever is the lesser. However,
if the liability for the lesser year is $50 or less, the entire
liability for that year is cancelled. A notch provision prevents
inequity to persons whose tax liability is only slightly over $50.
The unforgiven 25 percent may be paid in two equal installments
due not later than March 15, 1944, and March 15, 1945.
If the 1942 tax is smaller than the 1943 tax, the taxpayer
pays only his 1943 tax during 1943. If the 1942 tax is larger,
the taxpayer pays during 1943 his 1943 tax plus the excess of his
1942 tax over his 1943 tax.
B. Special Provision to Limit Amount of Cancellation
A further limitation is made in addition to the limitations
of cancellation to the tax for the lesser year and then only to
the extent of 75 percent of that tax. This limitation provides
that where the surtax net income for the cancelled year exceeds
by more than $20,000 the highest surtax net income of any one
of the base years 1937, 1938, 1939 or 1940, cancellation is
limited to the amount of tax which would result if the surtax
net income for the highest base year plus $20,000 were treated
as the surtax net income for the cancelled year. The effect of
this provision is to limit cancellation where the wartime income
of the forgiven year exceeds the income of a normal base year by
more than $20,000. The resulting additional amount added to the
1943 tax is payable on or before March 15, 1944, or, at the elec-
tion of the taxpayer, in four equal annual installmente beginning
March 15, 1945.
III. Special Provisions for Military and Navy Personnel
A. Exclusion of Service Income
All members of the armed forces (including officers) of the
United States or of any of the other United Nations are permitted
to exclude $1,500 of service pay from their taxable income for
1943 and subsequent years. This exclusion is in addition to
the personal exemption and credit for dependents.
B. Cancellation at Death
If a person in the armed forces of the United States or any
of the other United Nations dies while in active service on or
(over)
Regraded Unclassified
Field Procedure Memorandum No. 276
After December 7, 1941, any income tax unpaid at the time of
death is cancelled. If paid after death, such tax shall be
refunded.
C. Special Rule on Tax Cancellation
The provisions requiring that any excess of the 1942 tax
over the 1943 tax be added to the tax for the lattor year are
modified insofar as thoy affoct porsons in active service as
members of tho armod forcos of tho United States or any of
the other United Nations at any timo during 1942 or 1943.
In cases of such service men, to tho oxtont that tho excoss
of the 1942 tax over the 1943 tax is attributable to earned
net income (as defined for the purposes of the earned income
credit), the excess need not be added to the 1943 tax. This
has the effect of cancelling tho tax on 1942 carnod not incomo
where the 1942 tax oxcoods the 1943 tax.
TIMOTHY C. MOONEY,
Doputy Commissionor.
Regraded Unclassified
132
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
June 17, 1943
FROM Frances McCathran
CONTROVERSIAL ISSUES BEFORE CONGRESS
1. Food Subsidies - Hottest single issue before Congress is the
vestion of the Administration's food subsidy and price
rollback program. Yesterday the Senate Banking and Currency
Committee, now considering attaching a subsidy restriction
to a bill extending the life of the CCC, heard Price Adminis-
trator Brown claim that, without subsidies to roll back
@gricultural prices, it would be imoossible to carry out the
Price Stabilization Act of October 2, 1942. The committee,
however, challenged Brown's estimate of what such a subsidy
program would cost since his figures were one billion dollars
under the lowest estimate given by President Roosevelt at
his press conference Tuesday. The committee expects to make
P final decision on whether to attach the subsidy restric-
tion to the 000 measure next Tuesday. On the same day a
similar bill with an amendment prohibiting subsidies is slated
for House consideration. House Appropriations Committee's
recommendation that OPA funds be cut some 12 million dollars
is another action bearing directly on the subsidy program
Lince Price Administrator Brown planned to use some of the
apply for enforcement measures against black markets. The
Bouse is expected to begin discussion on the War Agencies
Bill, in which this cut is recommended, today. The committee
in its recort, however, praised OPA and said it did not wish
to hamper its price control or rationing programs, which
viewpoint, of course, will not preclude more drastic action
in the House, where OPA has been very much "on the spot."
Meanwhile the House Agriculture Committee has before it a
suggestion to give Food Administrator Chester Davis all
OPA's power over the prices and rationing of food. Presi-
dent Roosevelt, on the other hand, announced very strongly
nt his press conference Tuesday that an over-all Food Czar
would not be feasible and that the Administration still
gives its whole-hearted support to the subsidy program.
Taxes - The House Ways and Means Committee meets in Executive
mession at 10:30 this morning for preliminary discussion of
Regraded Unclassified
133
the next revenue bill. Yesterday the committee reportedly
discussed the complete tax picture with OES Vinson, but left
the decision of when to begin its hearings on a revenue
measure until today.
Regraded Unclassified
134
AGENDA
FOR THE BOARD OF ECONOMIC WARFARE MEETING
TO BE HELD JUNE 17, 1943, AT 10:00 A. M.
IN ROOM 201 SENATE OFFICE BUILDING
Discussion of report of the Executive Director to the
House Appropriation Committee. Attached is the
Introductory statement by Milo Perkins, Executive
Director of the Board of Economic Warfare, before
the House Appropriations Committee on June 1, 1943.
1003 ЭЛИ IS bW I 28
OL IBEVENBA
OELICE
Regraded Unclassified
135
BOARD OF ECONOMIC WARFARE
Washington, D. C.
Introductory statement by Milo Perkins, Executive Director of the
Board of Economic Warfare, before the House Appropriations Committee
on June 1, 1943
With your permission, I want to review the general background
of our operations on the economic warfare front as we take stock some
seventeen months after Pearl Harbor.
The plain fact is that Germany and Japan got a long jump on us
in the world-wide economic battle that preceded the war itself. For
years before they launched their military attacks, these countries had
been conducting a shrewd and ruthless war of economic aggression
through such measures as the building of ersatz industries and the
heavy stockpiling of strategic materials. They were building ahead
for the economic as well as the military showdown that they knew was
coming. We on the other hand, not having planned a war of aggression,
were caught relatively flat-footed.
We are catching up now, however. There is a long way to CO,
but the United Nations are definitely not losing the economic war.
Our economic strength is still rising while both Germany and Japan
are beginning to show the first signs of economic strain.
As the war is intensified--particulorly as it swings further
into definite offensives--the economic side will become a bigger and a
tougher job. Steadily increasing production of weapons calls for
steadily increasing raw material supplies, including those from foreign
Regraded Unclassified
- 2 -
- 3 -
136
sources to offset the drain on our own stockpiles and resources.
of other foreign commodities that for people ever heard of were needed
Tightening supply and shipping situations throughout the United Nations
in quantity and needed quickly.
call for greater selectivity in meeting the essential export minimins
Not many weeks after Pearl Harbor, we lost the vast raw materials
to the countries with whom we are doing business. Offensive strategy,
resources of the Far East. Japanese invasion cut off more than 60 per-
replacing the defensive phoses of the mr, calls for more exact infor-
cent of our normal tin supplies, 95 percent of our quinine, 60 percent
nation, about enemy economic strengths and weaknesses--to guide block-
of our hard fibre, and practically all of our rubber. Vie lost valuable
ado policy and help determine strategic objectives which will be high
sources of various fats and oils. Soon the Burma Road was closed, stop-
on the priority list for destruction.
ping not only the flow of supplies into China but also stopping the flow
The Board of Economic Warfare works on the general economic
"in reverse" of tungsten, hog bristles, tin, silk and other vital supplies
warfare front through three administrative Offices-Imports, Exports
that had been coming to us out over the Road. All this happened at
and Economic Warfare Analysis. Each drives toward objectives in its
exactly the time when the speed-up in our war industries demanded more
own particular field of operations.
raw materials-not less,
IMPORTS
Many of the lost supplies could not be produced at all in the
The Office of Importe is responsible primarily for the job of
United States; others could not be turned out in sufficient quantity.
scouring the four corners of the world to locate strategic commodities
We were face to face with the tremendous proble> of finding substitute
needed in the anr effort, and then programing the necessary develop-
resources in those foreign areas of the world still open to us. This
ment and procurement operations to get then for the United States.
was a year ago, Today we can report that what had to be done has been
No in the United States have rather proudly referred to our
done. Utilizing the services of existing Government agencies, such as
country no the richest ras muterials nation in the world, This was
the Commodity Credit Corporation and various subsidiaries of the Recon-
perfectly true, and it therefore came no a shock to many of us to rea-
struction inance Corporation, and in close cooperation with the Depart-
line that we were for from self-cufficient in anny of the basic raw
ment of State, we have been able to bring in adequate supplies of the
matorials needed to meet our war commitments. The rubber shortage was
commodities which the War Production Board designated as strategic, and
quickly understood by the public L'ecature we all use tires. Shortages
directed us to go after.
in quarts crystals, various insecticides, mahogany, kalsa wood and cer-
There were maddéning delays, and reserves were dangerously low
tain strategic grades of nica were equally critical, however. Dozens
at times, but the really vital needs have been net. In some cases, com-
modities have been flownin from half around the world to meet supply
deadlines. The Army Air Transport Command and the Naw HE Unclassified
- 4 -
137
- 5 -
Service have used their returning transport planes to bring in tungsten
sources of balsa wood for gliders, cinchona bark for quinine, fibre mub-
from China, nica from India, quartz crystals from Brazil, and dozens
stitutes to replace lort hemp and a long list of vital ainorals and netals
of other highly strategic materials from supply points which would have
without which technological war'are would be impossible.
been boyond immediate reach without air service to bring then to our
A lot of side factors must be kept constantly in mind as these
war plants on time. The goods have come in; war industry whools have
import overations are carried out. Transportation problems must 50 not;
kept. turning.
special area programs must be developed, with Oill consideration for re-
The Office of Imports is directing more than 200 purchase pro-
lated economies within the areas; price levels must be planned to influce
grams in 40 different countries or areas. Nearly 600 individual items
maximum production, and yet not disrupt the domestic economy of the
are included in this list of programs. They are grouped roughly intor
country involved; new producing unita must be found and developed no
minorals and netals, foodstuffs, textiles and fibres, miscellaneous con-
older sources roach maximum capacity: often special equipment must be
modities. The volume of development and procurement operations for in-
exported to take possible these increases in imports. The jot can be
ports vill nin to about a billion and a half dollars during the present
done, and it will be done, but it will take a lot more ingenuity and
fiscal year. For next year the total will be above two billion.
drive in the year ahead of us than is took in the one behind us.
As the search for raw naterials grows more intense, 8 for greater
In all import operations, the interests of United States commercial
degree of development work will he necessary to produce the things me
importers must always be considered, If coffee in to be broughtin, coffee
must buy and bring out of other countries. It 1s becoming nore and nore
importers handle the job, as agents of the responsible Government corpo-
necessary to program the preliminary steps thoroughly so as to be sure
ration. If fata and oils are needed, all United States oil importers
of the increased production we need. In very few cases is our import
are invited to join a special association to handle import operations.
operation a simple matter of tuying what we want. Today we must go out
And so it goes through the long list of imported commodities. It's
and fight just as hard to develop the goods we want to buy as we used to
good business to une the mi:11 and experience of these men now, and it's
fight for the chance to sell goods heck in the days when over-production
good husiness to help them weather the storrs of this war economy so
made solling the nost aggressive challenge to every business firm.
they'll still be in business when the war is over.
This part of the job gets tougher as we need more materials and
must reach farther out into now and undeveloped fields to find them.
EXPORTS
Circumstances have forced our non to become economic commandos, --liter-
The original duties of the Office of Exports centered largely
ally penetrating new tarritory in the jungles of the world, to find new
around the job of export licensing to see that scarce strategic materials
Regraded Unclassified
- 6 -
138
. 7 -
did not leave the United States, and that no shipments wont to Axis
Briefly, the export job must be handled an as to got the greatest
powers through sympathetic "ldacklist" concerns in neutral countries.
possible strength and solidarity on the Allied economic front. Exports
The whole function has now grom to include the more positive job of
must be kapt from going to the wrong places; they smat & to the right
directing available exports to keep up the. domestic and war economies
places at the right time and they must go within available supuly and
of friendly countries, and to make possible the development and trans-
shipping limitations. First things must come first. If country & needs
portation of the materials we must import for our own war effort.
sose rolling stock to keep hir basic Industries in operation, she must
The 'ad States finds itself today not only the military arsenal
get that rolling stock. If sining equipment is needed in country B, to
for the United l'ations but also gretty nearly the only remaining supply
get out tin or nica or tungston needed by our war industries, country El
house for comercial goods needed vitally by many of our Allios. Latin
mist get that nining equipment.
America, which used to got a lot of its imports from Europe, must now
Roalistic steps have been taken her our Office of Emorts in re-
look to us almost entirely. The same thing is true for other arons, to
cent wooks to see that the limited exports ve can spare hit the neil on
a grenter or less extent,
the head in the country to which they "re sent. At the capital of each
No have got to keep the basic economies of these countries going.
Latin American country, representatives of our Department of State and
They are with us in the war effort, and they are turning out trenendous
BEN sit dorm around a table with an agency representing the government
quantities of strategic materials me must have which we formerly pot
of that country. with supply and shipping cards face up, this group
elsewhere. It in obvious that we must try to meet their most essential
makes E preliminary determination of the nost vital import needs of the
needs.
country in question. This determination becones the first blueprint
In the face of this demand, we are nore and more up against the
for our export shipments, subject to later changes made necessary by
fact that we are forced to ration scarci'ies for export. No can't poste
the availability of supplies and of s'ipping space.
enough from our own stockpiles to mest the full wants, and there aren't
For countries which are represented by purchasing commissions in
ships enough to haul all the exports other nations would like to buy
the United States, a quarterly program plan was recently put into effect
even If " could spare the goods.
which will serve the same general purpose. Lost essential needs of each
The answer is obvious: available goods and available chipping
country for both lend-lease and comercial imports will be determined
space must be carefullyrationed. This adda treaendously to the export
definitely in advance, and chipmentawill be directed within these
control Job. It neans nore careful screening all down the line, to
quotas.
give a very high degree of solectivity. The job of dividing a deficit
of goods in no easier on the foreign front than it is at home.
Regraded Unclassified
- 8 -
139
- 9 -
Export control in an increasingly tough and exacting job as sup-
plies become tighter. Every time a new commodity is rationed in the
United States, tighter controls are necessary in export operations. Ad-
neans that the Government export control machinery must perform a lot
ditional noves must te made by BEW to adjust export operations to the
of service functions in addition to merely licensing exports. It must
donestic picture. In 1942, we examined about a million and a quarter
help get the goods produced, moved to the seaboard, and actually shipped.
export license applications, of which something over half were granted.
HEW, as a claimant agency for comorcial exports, goes before the War
with the nore exact study of transactions now required, me expect to have
Production Board to prosent the case for the minimum of strategic exports
to handle about two million export documents in 1943. That's between
considered essential in our joint Allied economy. It has working arrange-
6,000 and 7,000 every working day and the work to be done on each smill-
ments with the Office of Defense Transportation and War Shipping Adminis-
cation is becoming nore exacting.
tration, to assist exporters in getting the goods noved. The exporters
The scope of the export job is staggering. A total of 2,500 com-
themselves have organized several committees to help us with our work.
codition and-compodity groups are subject to export control. These
One special Job carried out by the BEW Export Office is the use
commodities flow from approximately 16,000 United States export concerns
of requisitioning authority to break loose goods which have been frozen
to note than 140 different country destinations, and there are thousands
at ports or in warehouses ns & result of var developments. liore than
of individual consimees. The control machinery must operate to see
$73,000,000 worth of such natarial, renging all the way from rubber to
that no shipments fall into the hands of an importer who is known to
trucks and airplanes, has been located through this machinery and chan-
be re-exporting to the enemy, stockpiling in warehouses, speculating
nelod into constructive use by the United Nations. Luch of it was
at the expense of the good name of United States private enterprise,
originally held by business firms located in countries now dominated by
or aho in in any other way unfriendly to the cause of the United Nations.
the Axis.
iia must also be sure that noss of the materials in short supply here
ECONOMIC WARFARE ANALYSIS
at home are used for any nonessential activity in the country of
destination.
The Office of Economic Warfare Analysis must gather all possible
information about the industrial economy of each of our enemies. It
The whole job in complicated by the need to protect United Statos
commercial exporters, just as far as it is physically possible to do
must gather complete information on the economies of European neutruls
DO in a war economy. This is especially true of the smaller exporters.
in connection with its blockade work. It needssimilar information re-
Just no in the case of importers, we noed the trained services of con-
garding other nations in the world for the use of our other two Offices
mercial exporters now; we shall undoubtedly need then much more to spour-
as well as for that of the Armed Services. With these facts in hand,
hoad United States commital activities abroad when the war in over. This
Regraded Unclassified
- 10 -
- 11 -
140
its business analysts, its engineers and other technicians mist then
At the request of the Army, our nen keep a running balance sheet
map out the nost effective economic warfare program which it in possible
of enery production. It is always necessary to know how well or how
to carry out,
poorly the enemy is doing in order to measure our own production require-
AS the United intions go all-out on the offensive, and start pinch-
mints. To some extent, the enemy's economic doture revenls his hand
ing in on the Axis, more comprehensive and exact information is needed
so far as strategy is concerned. Will lack of oil compel the Nazia to
about the enemy economy. Weak spote must be found, strengths must be
launch another desperate offensive in the Caucasus? Will the shortage
offset, oconomic strategy must be accurately anticipated.
of locomotives force curtailment of tank production? Will Germany's
The success of economic marfare analysis in obviously measured
need for rubber and Japan's need for critical machine tools lead to
prim rily in proportion to the excellence of our information about the
large scale blockede running? What are the limiting factors on submarine
enemy. Information--a piece here, a scrap there-comes from many sources.
production? These and countless other answers must be known for successful
Often the action based on such information is thrilling and dranatic, but
prosecution of the war, and BEW fills in the picture on the industrial
the job of collecting and piecing together these scraps into a useful
and economic side.
whole moans tedious, poinstaling affort. Among the scurces available
Blockade measures stem from basic economic sarfare analysis. The
to us are various intercepts, the files of American offices of foreign
job here is to stop the leaks through neutral countries adjacent to the
firms like Mitoubishi of Japan, records and experience of American
Axis, but in order to stop the leaks we must have accurate information.
engineers who have worked in foreign lands, refugees and foreign
When #9 know the enemy shortages, and the bottlenecks in his economy,
travelers, captured enemy aquipment, and even the secret sources of the
tre are forewarned on what he may try to do to get supplies. Examination
Underground. There in a close and continuing interchange of informa-
of the cargo of & blockade runner, for example, is quite revealing.
tion with the British Ministry of Economic Carfare.
For what naterials is Germany willing to run the risk of blockade
Sticking to the oconomic side--the business and industrial aspects
running? BEN has joint representation with the British on the Block-
--DEW gothers this matorial as a great backlog from which to reach the
ade Committee in London, Decisions are reached by mitual agreement.
allswers for Many vital war operations. working very lergely under the
An effective "blacklist" system in nn essential part of blockade
orders of the appropriate branches of the Army and Navy, BEW analysts
work. Information gained from nany sources makes it possible for the
prepare literally hundreds of dotailed reports on all phases of the
Department of State to keep the blacklist current. When a drug house
world economic picture. The information is of no value unloss It is
in Latin America orders a large chirment of steel I-beans, we nake an
kept current and up-to-the minute,
imediate investigation. When we learn that RAF bombs have destroyed
the plant of the only German manufacturer of a certain Regraded Unclassified
- 12 -
- 13 -
141
we watch the liscensing of needles to neutral countries. And so it goes
offensive lines. Then the full story can be told, it will be one of
through en almost endless list of checks.
the most fascinating chapters of the war record,
Preclusive buying, that interesting and necessarily secret operation,
Sketchily and triefly, this is the broad front on which BEW is
which locks up naterials in neutral countries to keep then from reaching
trying to carry out its part in the winning of this war. It in not a
the enemy, is also dependent on reliable information. We can't afford
static or frozen program. Constant adjustments and changes mint be made
to waste time or money buying up supplies which are not really vital
to neet a constantly shifting war situation.
to the Axis, or which couldn't reach it anyway. Much of what we buy
lle have operated from the beginning on the thec., that we should
preclusively is of great value to our own war effort, of course.
work with and through other agencies wherever that is the most efficient
It is quite obvious that even such military action as determining
course to follow; several of them receive direct allocations from our
hombing objectives depends portly upon sound economic intelligence and
appropriation for strictly wartine functions they are performing for us,
analysis. Working with the British !!inistry of Economic Warfare and
We are going ahend on the conviction that any economic program
our own military intelligence men, we are able to supply information
which will help to shorten this war by a month, a week or even a day is
which is of value to the oilitary in aaking final decisions. BEN does
worth any reasonable price. Measured in lives, and remembering the men
not select the targets, and, of course, it does not make any of the
who died that last morning before the Armistice VOS signed in 1918, all
military decisions, but it in able to point out vulnerable spots from
of us would agree that it. is worth any price to shorten this war by a
an economic and industrial point of viez, Where are the bottlenecks
single hour.
in enemy production? Is it Passembly plant, the machine shop,
An you proceed with your consideration or our budget, I shall be
the railmy terminal, the power plant, or the steel mill?
very happy to try to answer any questions you night have--on the rocord
Much of this activity on the economic warfare analysis front is,
whenever possible; off the record if 1 may, when military secrecy in
of course, very secret. By agreement with the Armed Services we have
involved,
the nost stringent regulations to protect the security of information
available to us. You might as well tip off the location of your fleet
na to give hints about your economic strategy or knowledge of the
enemy position. This Economic Warfare Analysis job is vital, it is
directed one hundred percent toward helping to win the war, and it
becomes more complicated and demanding as the war develops along positive
Regraded Unclassified
142
Treasury Department
Division of Monetary Research
Date June 16, 1943
19
To:
Miss Chauncey
This is the newly formed committee on occupation
problems that the President and Budget Bureau have set
up. It asks that the Treasury appoint a member to the
Economic Policy Committee.
I presume that the Secretary would wish me to
be the member, inasmuch as I have been given the
responsibility for occupation affairs. I have, there-
fore, drafted a letter accordingly.
H.D.W.
writpan
NW Bells
} pee
MR. WHITE
Branch 2058 - Room 2141
Regraded Unclassified
143
JUN 17 1943
My dear Mr. Secretary:
This is in reply to your letter of Ime 11,
1943, asking that I designate a representative
from this Department to cerve as a nember of the
interdeparimental Condittee for Economic Policy
in Liberated Areas.
I - designating Mr. Harry D. White to serve
as Treasury representative on that Connittee.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
The Honorable,
The Secretary of State.
Ordg. File ret'd to White's
office by im - Photo. file in
Diary.
Del. by Mess (Sturgis) 4:35 6/17
6/16/43
Regraded Unclassified
not
I
E
-
STATE
THE
di
DEPARTMENT OF STATE
WASHINGTON
June 11, 1943
In rep refer to
A-S
My dear Mr. Secretary:
In accordance with the plan for coordinating the
economic activities of the United States civilian agencies
in liberated areas, a copy of which I understand you have
received from the President, I have designated Mr. Dean
Acheson as the Assistant Secretary to perform the duties
set forth under paragraph 3 of the plan and to act as
Chairman of the interdepartmental Committee for Economic
Policy in Liberated Areas and of the Coordinating Committee
set up under the plan. I have also designated the Political
Adviser, Mr. James C. Dunn as a member of the Policy Com-
mittee in accordance with paragraph 2 of the plan.
I should appreciate it if you would designate a
representative from your department to serve 88 a member
of the Policy Committee the duties of which are defined
in paragraph 2 of the plan. The departments and agencies
to be represented on this Committee in addition to the
State Department are the following:
Treasury Department
War Department
Navy Department
Board of Economic Warfare
Office of Lend-Lease Administration
Office of Foreign Relief and Rehabilitation
Operations
Sincerely yours,
The Honorable
VICE
Henry Morgenthau, Jr.,
Secretary of the Treasury.
Regraded Unclassified
JUN 17 1943
Dear Ronald,
This is in reply to your letter of
June 15, 1943, relating to the status of the
discussions among the technical staffs of the
various agencies of this Government working on
tentative proposals for post-war aonstary
stabilization.
There will, of course, be ample oppor-
tunity for the Board to present suggestions
for changes or modifications before any offi-
cial proposal is submitted. After we have
been able to ascertain the general views of
the technical experts of the various countries
and their reaction to the tentative proposals
thus far submitted for consideration, including
those suggested by the technical staff of the
Board, we shall want to discuss the matter with
you and with the heads of other participating
departments and agencies with a view to form -
lating the proposal that seems most feasible.
Sincerely yours,
(Signed) 8. Morgenthad, ji²
Secretary of the Treasury.
Mr. Ronald Ranson, Vice Chairman,
Board of Governors of the Federal
Reserve system,
Washington, D. C.
Oris. File ret'd to White's office
by IM - Photo. filed in Diary
HDW dah 6/17/43.
By Number Sturgisass
Regraded Unclassified
1 Frunt
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
OFFICE OF THE VICE CHAIRMAN
June 15, 1943
Dear Henry:
As you know, discussions Have been had between
the Treasury staff, the Board staff, and others in our
Government on the matter of the proposed Stabilization
Fund Plan. Some differences of view obtain between our
staffs. Meanwhile, meetings, which are still at the staff
level, have been inaugurated among groups of technical
representatives of the United Nations. The Board has
instructed its staff that during these discussions they
should if possible avoid disclosing any differences of
view on the part of representatives of this Government.
I am sending you this informal note merely to
make sure that this instruction to our staff will not be
regarded as precluding the Board from expressing its own
views when it may be appropriate to do SO.
Sincerely yours,
American Bonald Ransom
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Regraded Unclassified
147
20
June 17, 1943.
My dear General Spalding:
For the Secretary I am acknowledging
your letter of June 14, which transmitted
a copy of the Proposed Third Protocol
Between The Union of Seviet Socialist
Republics and The United States, United
Kingdom and Canada. Mr. Morgenthau very
such appreciated receiving this material,
and you may be sure it will be held in
confidence.
Sincerely yours,
(Signed) H. S. Klotz
I. 8. Klote,
Private Secretary.
Brigadier General 8. P. Spelding,
United States Army,
Assistant Executive, The President's
Soviet Protocol Committee,
Washington, D. c.
GEF/dbs
Regraded Unclassified
148
THE PRESIDENT'S SOVIET PROTOCOL COMMITTEE
SECRET
WASHINGTON
14 June 1943
My dear Mr. Secretary:
There is forwarded herewith for your information
copy of the Proposed Third Protocol Between The Union of
Soviet Socialist Republics and The United States, United
Kingdom and Canada Covering the Period July 1, 1943 to
June 30, 1944. as presented to the Soviet Charge d'Affaires
on 9 June 1943.
Sincerely yours,
S.P.Spality S. P. SPALDING
Brig. General, U.S. Army
Asst. Executive
Enclosure
The Honorable,
The Secretary of the Treasury.
SECRET
Regraded Unclassified
149
U.S. SECRET
BRITISH MOST SECRET
PROPOSED THIRD PROTOCOL
BETWEEN
THE UNION OF SOVIET SOCIALIST REPUBLICS
AND
THE UNITED STATES, UNITED KINGDOM AND CANADA
COVERING THE PERIOD
JULY 1, 1943 TO JUNE 30, 1944
The Government of the United States, the Government of the
United Kingdom and the Government of Canada, recognizing the
outstanding contribution of the Union of Soviet Socialist Re-
publics in the prosecution of the war against the common enemy,
and desiring to continue to provide the Government of the Union
of Soviet Socialist Republics with the maximum assistance
possible in the form of military supplies, raw materials,
industrial equipment and food, and the Government of the
Union of Soviet Socialist Republics desiring to assist the
Governments of the United States, the United Kingdom and
Canada in meeting their war needs for raw materials and other
supplies, have agreed as follows:
ARTICLE I
The Governments of the United States, the United Kingdom,
and Canada undertake to make available for dispatch to the
Government of the Union of Soviet Socialist Republics, during
the period July 1, 1943 to June 30, 1944, the supplies mentioned
in the schedules annexed hereto under the conditions stated
therein.
ARTICLE II
The Governments of the United States and the United Kingdom
will aid in the movement of the supplies offered, by furnishing
shipping as set forth in the schedules annexed hereto, it being
understood that these commitments as to shipping may be reduced
if shipping losses, lack of escorts, deficiencies in the antici-
pated capacity of the available routes, the necessities of other
operations, or the exigencies of the situation, render their
fulfillment impracticable.
- 1 -
Regraded Unclassified
150
U.S. SECRET
BRITISH MOST SECRET
ARTICLE III
The Government of the Union of Soviet Socialist Republics
undertakes to make available for dispatch to the Governments of
the United States, the United Kingdom, and Canada, within the
period covered by the present protocol, such raw materials and
other supplies as may be available and as are desired by said
governments in the prosecution of the war.
ARTICLE IV
The financial arrangements concluded between the Government
of the Union of Soviet Socialist Republics on the one hand and
the Governments of the United States and the United Kingdom
respectively, on the other in connection with the supplies fur-
nished in pursuance of the protocol signed between the parties
in Washington on October 6, 1942 shall continue to govern the
provision of supplies furnished by the Governments of the United
States and the United Kingdom in pursuance of the present proto-
col.
Any financial arrangements between the Government of the
Union of Soviet Socialist Republics on the one hand and the
Government of Canada on the other in connection with the supplies
to be furnished by the Government of Canada in pursuance of
the present protocol shall be the subject of & separate agreement
to be concluded between the Government of Canada and the Govern-
ment of the Union of Soviet Socialist Republics.
ARTICLE V
The lists of supplies in the schedules annexed hereto shall
be subject to reallocation between the three supplying countries
as they may decide between themselves in order to meet strategic,
supply or shipping exigencies. They shall too be liable to
variation to meet unforeseen developments in the war situation.
If shipping losses, production failures, or the necessities of
other operations render their fulfillment prohibitive, it may
be necessary to reduce them. On the other hand, if conditions
permit, the Governments of the United States, the United Kingdom
and Canada will be glad to review the schedules from time to
time for the purpose of increasing the quantities to be provided
and delivered.
- 2 -
Regraded Unclassifie
151
SECRET
UNITED STATES SCHEDULE OF SUPPLIES AND SHIPMENTS
FOR THE THIRD SOVIET PROTOCOL
The United States Government undertakes to make available
for shipment during the protocol period to the Union of Soviet
Socialist Republics a total of 4,500,000 short tons of stores,
of which approximately 2,700,000 short tons will be for ship-
ment in Soviet flag vessels and 1,800,000 short tons for
shipment in United States flag vessels. The foregoing avail-
ability will be reduced to the extent that offerings of other
parties to the protocol are carried in the shipping referred
to hereinafter.
The United States will supply the shipping tonnage which)
with the Soviet tonnage presently employed, vill lift 225,000
short tons per month via the Pacific route, on the understanding
that the turn-around is to be of 75 days' duration and that the
United States will lend every assistance to the Union 0" Soviet
Socialist Republics in order that this may be achieved, and on
the further understanding that should any untoward events close
the Pacific route to the Union of Soviet Socialist Republica or
restrict its use, United States tonnage transferred to the
Soviet flag for employment on this route will be used on other
available routes to the Union of Soviet Socialist Republics
for lifting protocol supplies, for the shipment of which the
United States is responsible.
The United States will undertake to lift by either the
Northern route or the Persian Gulf route, whichever in the
light of changing conditions proves from time to time to be
more efficient a total of 150,000 short tons a month.
The foregoing commitments as to shipping will include
the movement of supplies selected from Canadian offerings
and from United Kingdom offerings of vool and lead originating
in Australia and New Zealand, and such supplies originating in
North America, as, by agreement between the Governments of the
United States and United Kingdom, are to continue to be carried
- 3 -
152
SECRET
in United States vessels, as well as shipments from such sources
as may become necessary in meeting the commitments of the United
States. All shipping commitments are subject to the provisions
of Article II of this protocol.
The Government of the United States offers the following
schedule of supplies, aggregating some 7,080,000 short tons,
from which it will be necessary for the Soviet Government to
select as promptly as practicable, a program of particular
supplies for dispatch which does not exceed the shipping limi-
tations outlined above, 1.0., 4,500,000 short tons, exclusive
of fly-away airplanes, to which may be added 500,000 short tona
for stockpile and carryover, or & total of 5,000,000 short tons.
This program should include all cargo to be transported in the
shipping referred to above from the United States, or from other
sources, after July 1, 1943, including protocol and non-protocol
items on hand, on order or to be ordered, Protocol and non-
protocol material delivered but not exported as of June 30, 1943
will be available for selection within the limitations ns to
tonnage.
It is appreciated that reasonable stockpiles of stores
must be maintained in the United States so that the Union of
Soviet Socialist Republics can, from month to month, select
cargo for shipment that is most needed to meet the everchanging
requirements of war. However, the United States reserves the
right to limit the size of such individual stockpiles, either
by control of production or diversion of product, or both,
when in its judgment such action is in the best interest of
the common cause. In taking such action, due consideration
will be given to the expressed needs of the Union of Soviet
Socialist Republics.
When production is curtailed or material is diverted, the
arrearages in the various items involved will be given all
possible consideration in conformity with future realistic
shipping programs, Soviet desires, other urgent war require-
ments and reasonable production schedules.
- 4 -
Regraded Unclassified
153
SECRET
The offerings made in the United States' schedule of
supplies are subject to specifications which shall be in
accord with current United States' consorvation and pro-
duction practices and practicable and specific material
scheduling.
The United States stands ready, through appropriate
officials, to discuss with Soviet representatives in
Washington all detailed questions portaining to the schedule
of stores and services and any reasonable adjustments that
may be desired.
A supplementary request has been submitted by the Union
of Soviet Socialist Republics. The offerings in this schedule-
include responses to this request for cortain of the itoms.
The remainder are under investigation, and information regard-
ing the possibility of supply will be furnished as soon as
practicable.
Above all, the United States desiros again to assure
the Union of Soviet Socialist Republics that it has a full
understanding of the vital importance of the Soviet front
and the urgent necessities of moving supplies to it in the
highest possible volume and in the shortest spaco of time.
Regraded Unclassified
153
SECRET
ARMAMENT AND MILITARY EQUIPMENT
(All Weights in Short Tons)
(Except 88 otherwise specified, amounts are to be provided
in equal monthly installments as nearly 86 practicable.)
AIRPLANES
Requested: 8,160
Airplenes:
6,000 pursuit planes "Aircobra"
1,200 light bombers, Type A-20
600 medium bombers, Type B-25
360 transport planea, Type 0-46; C-47
Spare Parts:
Spare engines
30 percent of number of planed
Spare propellers
30 percent of number of planes
Airplane spare parts
20 percent of value of plane
Engine spare parts
15 percent of value of plane
Propeller spare parts 15 percent of value of propeller
Offered:
2,784 (Supplied with equipment and ammunition 16
accordance with United States Standards.)
The offer vill be reexamined at the earliest
practicable opportunity for the purpose of
determining whether in the light of operational
requirements and production it is possible
to increase the number of airplanes.
Airplanes:
1,200 fighters, 1-engine, Type P-39
1,200 light bombers, Type A-20
144 medium bombers, Type B-25
240 medium transport planes, Type C-47
In addition, in accordance with a previous agreement
made with the United Kingdom, involving interchange
of certain airplanes, the United States 1s to supply
for the United Kingdom's account 150 P-39 fighter
airplanes per month for the period ending December 33
1943.
Spare Parts:
To be supplied in accordance with United States
Standards which are equal to or in excess of amount
requested. (Joint Aircraft Committee Case 1850,
Revision B.)
TANKS
Requested: None
Offered:
2,000 medium tanks, M4A2, with ammunition and
spare parta. Also 1,000 additional tanks to
be placed in production for delivery July 1,
1944 to December 31, 1944.
- 6 -
154
SECRET
ARMAMENT AND MILITARY EQUIPMENT, CONTINUED
TRUCKS
Requested: 144,000
Spare parts, 20 percent of value of trucks
Offered:
132,000
Shipping Weight: 643,800
Dolivery:
10,000 for each of first six months
12,000 for each of second six months
Trucks to be supplied with spare parts according
to United States Standards which are in excess
of amount requested.
SCOUT CARS (Jeeps)
Requested: 24,000
Spare parts at 20 por cent of value of a 180p
Offered:
24,000 to ton 4 X 4 trucks
Shipping Weight: 117,700
Spare parts according to United States Stand-
ards which are in excess of amount requested.
Additional itoms offered ustimated to to un-
delivered on June 30, 1943 under Second
Protocol: 4,500 Scout Cars M3A1
Shipping Weight: 31,050
PRIME MOVERS FOR ARTILLERY
Requested: 3,000
1,680 tractors, medium
720 tractors, hoavy
600 armoured half-trucks
Spare parts, 20 per cont of value of
item
Offered:
3,000
Shipping Weight: 62,000
1,680 tractors, modium Ml
720 tractors, heavy M1
600 cars half-track M9 (Supplied with oquip
mont and ammunition in accordance with
United States Standards)
Spare parts in accordance with United
States Standards which are in excess of
amount requested
MOTORCYCLES
Requested:
12,000 Spare parts, 20 per cent of value of motor-
cycle
Offered:
Shipping Weight: 9,900
12,000 Spare parta in accordance with United States
Standards which are in excess of amount re-
quested
7
Regraded Unclassified
155
SECRET
ARMAMENT AND MILITARY EQUIPMENT, CONTINUED
POWDER
Requested: 67,200 tons
Offered:
72,700 tons
Shipping Weight: 75,300
Delivery:
5,600 tons in first month
6,100 tons in each of remaining months
TOLUOL
Requested: 40,320 tons
Offered:
40,320 tons
Shipping Weight: 44,400
Delivory:
6,720 tons in first quarter
11,200 tons in each of last three quartors
T N T
Requested: 26,880 tons
Offered:
26,880 tons
Shipping Weight: 50,600
RADIO STATIONS, RADIO LOCATORS
Requested: 15,700 Units and other radio equipment
Offored:
14,010 Units and other radio equipment
Shipping Weight: 14,800
In addition 430 units ostimated to be
undelivered on June 30, 1943 under
Second Protocol
Breakdown
A. Radio Stations, Output more than 1 KW
Requested: 60
Offered: 61
Shipping Weight: 910
Delivery:
1 - 50 KW short wave station in last quarter
20 - 10 to 15 KW transmitting and receiving seta
10 in each of last 2 quarters
39 - 2 to 3 KW transmitting and receiving sets
9 in second quarter
15 in each of last 2 quarters
1 - RCA ET4331 in second quarter
- 8 -
Regraded Unclassified
156
SECRET
ARMAMENT AND MILITARY EQUIPMENT, CONTINUED
B. Redio Stations, Output less than 1 KW
Requested: 12,000
Offered:
11,800
Shipping Woight: 11,850
Delivery:
1000 - SCR - 299
350 in first 6 months
650 in second 6 months
6000 - SCR - 284
2000 in first 6 months
4000 in second 6 months
800 - sot #19 British in first 6 months
4000 - Pilot V-100
3000 in first 6 months
1000 in second 6 months
Within the total offering of 11,800, the U.S.S.R. may
select the whole or part of the following items as
substitutes for those listed above:
95 SCR177B
Delivery:
40 in first quarter
55 in second quarter
560 SCR274
Delivery:
400 in first quarter
160 in sucond quarter
400 SCR511
Delivery:
150 in first quartor
250 in second quarter
4800 SCR610
Delivery:
2400 in each of first two quarters
C. Radio Receivers
Requested: 2,000
Offered:
2,000
Shipping Weight: 160
Dolivery:
500 in second quartor
750 in each of last 2 quarters
Additional itoms offored ostimated to bo undelivered on
Juno 30, 1943 under Socond Protocol: 430
Shipping Weight: 6
Delivery:
20 Hallicraftor in 2nd quarter
10 RME-43 receivers in 2nd quarter
200 Bondix transmitters 2A-12B in first quarter
200 Bondix roceivors in third quarter
- 9 -
Regraded Unclassified
157
SECRET
ARMAMENT AND MILITARY EQUIPMENT, CONTINUED
D. Aircraft Radio Locators
Requested: 500
Offered:
(Under consideration)
E. Ground Radio Locators
Roquested: 240
Offered:
(Under consideration)
F. Radio Altimeters
Requested: 500
Offered:
(Undor consideration)
G. Radio Boacons
Requested: 250
Offored:
(Under consideration)
H. Radio Direction Finding Sots
Requested: 150
Offered:
150 SCR-551
Shipping Weight: 830
Delivery:
50 in each of last throo quarters
I. Radio Tubes
:
Requested: 2,400,000
Offered:
2,400,000
Shipping Weight: 520
Delivery:
450,000 Metal Tubes in each of first two
quarters
475,000 Motal Tubos in each of second two
quarters
137,500 Glass Tubes in each quartor
J. Radio Monsuring Equipment and Radio Parts
Requested: $3,000,000
Offered:
$3,000,000
Shipping Weight: 350
(Estimated)
FIELD TELEPHONES
Requested: 100,000 Units
Offered:
100,000 Units EE-8A Shipping Weight: 600
- 10 .
Regraded
Unclassif
158
SECRET
ARMAMENT AND MILITARY EQUIPMENT, CONTINUED
TELETYPE APPARATUS
Requested: 500 Units
Offored: None
FIELD TELEPHONE AND TELEGRAPH CABLES
Requested: 186,000 miles
Offored:
186,000 milos (Field telephone wire typo 110-B)
Shipping Weight: 7,720
Dolivery:
75,000 milos in each of first two quartors
18,000 miles in each of second two quarters
FIELD BATTERY CHARGING STATIONS
Requested: 4,000 Units
Offered:
4,000 - 11 KW stations
Shipping Weight: 1,260
Dolivery:
1,500 in each of first two quartors
500 in each of second two quarters
SUBMARINE CABLE
Requested: 1500 Km
Offerod:
600 Km
Shipping Weight: 2,630
MARINE CABLE
Requested: 1200 Km
Offered:
1200 Km
Shipping Weight: 2,620
QUARTERMASTER GOODS
SOLE LEATHER
Requested: 20,160 Tons
Offerud:
18,000 Tons
Shipping Woight: 18,000
ARMY BOOTS
Requested: 3,600,000 Pairs
Offered:
3,600,000 Pairs
Shipping Woight: 9,000
- 11 -
Regraded Unclassified
159
SECRET
QUARTERMASTER GOODS, CONTINUED
WOOLEN CLOTH
Requested: 18,000,000 Yards
Offered:
18,000,000 Yards
Shipping Weight: 16,300
COTTON CLOTH
Requested: 25,000,000 Yards
Offored:
25,000,000 Yards
Shipping Weight: 7,000
Additional offer of 1,045,000 yards
estimated to be undelivered on June 30,
1943 under Second Protocol.
TARPAULINE
Requested: 3,000,000 Yards
Offered:
3,000,000 Yards
Shipping Weight: 2,300
WEBBING
Requested:
6,000,000 Yards
Offered:
6,000,000 Yards
Shipping Weight: 1,200
Additional offor of 6,000,000 yards
estimated to be undelivered on June 30,
1943 under Second Protocol.
MEDICAL SUPPLIES
MEDICAL SUPPLIES
Requested: $12,000,000
Offered: $12,000,000
Shipping Weight: 1,200
Regraded Unclassified
160
SECRET
LOCOMOTIVES AND FLAT CARS
LOCOMOTIVES
Requested: 2,000 to
3,000
Offered:
500 Minimum
Shipping Weight: 94,000
(Up to 700 if possible)
Delivery:
To begin in third quartor.
RAILROAD FLAT CARS
Requested: 10,000
Offered:
10,000
Shipping Weight: 150,000
Dolivery:
2,400 in socond quarter
3,800 in each of last two quarters.
Regraded Unclassified
161
SECRET
NAVAL STORES
(All Weights in Short Tons)
(Except as otherwise specified, amounts are to be provided in
equal monthly installments as nearly as practicable.)
(Quantities offered are in addition to prior protocol commit-
ments to U.S.S.R. undelivered on June 30, 1943. See page 20.)
MINESWEEPERS
Requested: 22
Offered:
None
(See additional offers below)
SUBMARINE CHASERS (110 feet)
Requested: 12
Offered:
None
(12 are being produced on non-protocol Soviet
Requisition with delivery scheduled for the
last quarter of 1943)
SEA-GOING TUGS
Requested: 20
Offered:
None
(15 are being produced on non-protocol Soviet
Requisition for export after June 30, 1943)
5"/38 CALIBER DOUBLE PURPOSE DECK GUNS
Requested: 110
Offered:
None
(It is estimated that 65 of 150 being produced
under non-protocol Soviet Requisition will
remain undelivered on June 30, 1943)
3"/50 CALIBER DOUBLE PURPOSE DECK GUNS
Requested: 200
Offered:
200
Shipping Weight: 870
Delivery in second 6 months
20 mm OERLIKON GUNS
Requested: 500
Offered:
500
Shipping Weight: 440
Delivery in second 6 months
- 14 -
Regraded Unclassified
162
SECRET
NAVAL STORES, CONTINUED
50 CALIBER TWIN MACHINE GUNS
Requested: 900
Offered:
900 together
Shipping Weight: 5,000
with ammunition according to United States
Standards
Delivery
150 in each of first 2 quarters
300 in each of last 2 quarters
5"/30 CALIBER AMMUNITION
Requested: 61,600
Offerei:
None
(Ammunition is being furnished for 150 guna
being produced under non-protocol Soviet
Requisition)
3' 150 CALIBER AMMUNITION
Requested: 199,000
Offered:
199,000
Shipping Weight: 2,490
20 mm AMMUNITION
Requested: 2,500,000
Offerel:
2,500,000
Shipping Weight:
880
MARINE ENGINES AND GENERATORS
Requested: 2,562
Offered:
606
Shipping Weight: 2,100
(See additional offers below)
Breakdown
A. Marine Diesel Engines 1600 HP
Requested: 12 Units
Offered:
6 Units
Shipping Weight:
150
(4 are to be produced on non-protocol
Soviet Requisition for export after
June 30, 1943)
B. Marine Diesel Engines 1200 HP
Requested: 100 Units
Offered:
50 Units
Shipping Weight: 1,200
Delivery in second 6 months
- 15 -
Regraded Unclassified
163
SECRET
NAVAL STORES, CONTINUED
C. Marine Diesel Engines 30 - 100 HP
Requested: 350 Units
Offered:
200 Units
Shipping Weight:
400
Delivery in second 6 months
(500 are to be produced on non-protocol
Soviet Requisition for export after
June 30, 1943)
(See additional offers below)
D. "Packard" Gas Engines 1200 HP
Requested: 400 Units
Offered:
None
(500 are to be produced on non-protocol
Soviet Requisition for export after
June 30, 1943)
E. Marine Wooden Gas Engines 30- 50 HP
Complete with gas products
Requested: 800 Sets
Offered:
None
(Experimental model boing produced unier
non-protocol Soviet Requisition)
F. Diesel Generators and Diesel Generator
Compressors from 9 to 120 KW
Requested: 600 Units
Offered:
50 Units
Shipping Veight:
250
Maximum of 15 to be over 100 KW Capacity)
(200 are to be produced on non-protocol
Soviet Requisition export after
June 30, 1943)
(See additional offers bolow)
C. Generators - 1.5 4 KW
Diusel or Gasoline
Requested: 300 Units
Offered:
300 Units
Shipping Weight:
100
(Gasoline) (Commercial types)
SALVAGE EQUIPMENT
Requested: 3,071 Units
Offered:
805 Units
Shipping Weight: 1,550
(See additional offers below)
. 16 -
Regraded Unclassified
164
SECRET
NAVAL STORES, CONTINUED
Breakdown
A. Salvage Stations
Requested: 256 Units
Offered:
40 Units
Shipping Weight: 100
(Depth not exceeding 200 feet; re-
compression chambers excluded)
Delivery in second 6 months
(43 are to be produced on non-protocol
Soviet Requisition for export after
June 30, 1943)
B. Portable Air Compressors, Complete with Engines
Requested: 180 Units
Offered:
60 Units
Shipping Weight: 300
Delivery 10 each month in second 6 months
C. Pontoons (Capacity 5 to 200 Tons)
Requested: 600
Offered:
None
(Construction in U.S.S.R. recommended be-
cause of difficulties of export due to
size and weight)
D. Portable Water Pumps, Complete with Engines
Requested: 1,000 Units
Offered:
425 Units
Shipping Weight: 720
(3 to 10 inch pumps)
Delivery in second 6 months
E. Underwater Electric Water Pumps
Requested: 100 Units
Offered:
100 Units
Shipping Weight:
8
(Capacity not to exceed 200 G.P.M.)
Delivery in May and June 1944
F. Electric Welding and Cutting Apparatus
Requested: 120 Sets
Offered:
60 Sets
Shipping Weight: 120
Delivery 10 sets each month in second 6
months
G. Electric and Pneumatic Underwater Tools
Requested: 400 Sets
Offered:
60 Sets
Shipping Weight: 300
(Pneumatic)
Delivery 10 sets each month
in second 6 months
- 17 -
Regraded Unclassified
165
SECRET
NAVAL STORES, CONTINUED
H. Portalle Electric Stations Underwater Lighting
Requested: 240 Sets
Offered:
60 Sets
Shipping Weight:
60
(5 KW Generator and 5 Underwater Lights)
Delivery 10 sets each month in second 6
months
I. Gas Cutting Apparatus
Requested: 120
Offered:
None
(Same as item F above)
J. Metal Detectors
Requested: 55
Offered:
None
ELECTRICAL EQUIPMENT
Requested: 1,965 Units and other electrical material
Offered:
1,040 Units and other electrical material
Breakdown
A. Generators with Controllers 1.5 to 25 KW
Requested: 500
Offered:
295
Shipping Weight:
300
(Not more than 20% to be of greater
capacity than 15 KW)
B. Generators with Controllers 25 to 100 KW
Requested: 250
Offered:
100
Shipping Weight:
180
(Not more than 25% to be of 75 KW capacity
or greater)
C. Motor Generators with Controllers 1 to 10 KW
Requested: 100
Offered:
100
Shipping Weight:
70
D. Motor Generators with Controllers 10 to 75 KW
Requested: 25
Offered:
25
Shipping Weight:
50
(Not more than 10 units to be of 50 KW
capacity or greater)
- 18 -
Regraded Unclassified
166
SECRET
NAVAL STORES, CONTINUED
E. Electric Motor with Controllers 5 to 25 HP
Requested: 1,000
Offered:
500
Shipping Weight: 300
(Not more than 20% to be of 15 HP capacity
or greater)
F. Electric Motors with Controllers 25 to 100 HP
Requested: 25
Offered: 20
Shipping Weight:
25
(Not more than 25% to be of 75 HP or
greater)
G. Storage Batteries for Submarines
Requested: 65
Offered:
0
(See additional offers below)
(In addition 65 are to be produced on non-
protocol Soviet Requisition)
H. Electric Instruments and Fixtures
Requested: $1,000,000
Offered:
$ 100,000
Shipping Weight:
25
Regraded Unclassified
167
SECRET
ADDITIONAL OFFER OF ESTIMATED UNDELIVERED BALANCES AS
OF JUNE 30, 1943, IN SECOND PROTOCOL
(Offerings to be reduced by the amounts that are
exported prior to June 30, 1943)
WEIGHT IN
ITEM
NUMBER
SHORT TONS
1. Minesveepers
10
2. Marine Diesel Engines and Spares
(170-1100 HP)
254
3,048
3. Marine Diesel Engines and Spares
(30-100 HP)
263
1,315
4. Marine Diesel Generators
(25-300 KW)
800
13,560
5. Marine Gasoline Engines and Spares
90
270
6. Marine Pumps and Spares
(95-230 V)
257
257
7. Electric Motors and Spares
(110-220 V)
1,210
605
8. Turbo Generators (230 V)
10
42
9. Storage Batteries for Submarines
15
1,350
10. Electric Ventilating Sets
649
195
11. Scripps Engines
66
436
12. Air Tanks
15
15
13. Rotary and Changeover Switches
3,000
2
14. Potassium Tetraoxide
41,100 lbs.
20
15. Turbo Ventilators for Engine Room
8
8
16. Windlasses with motors
5
30
17. Auxiliary Equipment for Ships
10
20
18. Vertical Steam Boiler
10
10
19, Water Tight Junction Boxes
240
1
20. Jetting Equipment for Salvage Operations
20
130
21. Submarine Rescue Chamber
1
9
22. Towing Winches (220 v)
10
20
TOTAL
21,343
- 20 -
Regraded Unclassified
168
SECRET
SHIPPING WEIGHT OF NON-PROTOCOL ITEMS BEING
PROCURED ON SOVIET REQUISITIONS
(All Weights in Short Tons)
MISCELLANEOUS NAVAL STORES
Shipping Weight: 17,100
Regraded Unclassified
169
SECRET
METALS, CHEMICALS AND OTHER PRODUCTS
(All Weights in Short Tons)
(Except as othervise specified, amounts to be provided in equal
monthly installments as nearly as practicable.)
(The amounts offered below include quantities to be delivered
during the Third Protocol Period against new orders and old
orders undelivered June 30, 1943.)
DURALUMINUM AND ALUMINUM INGOTS
Requested: 30,640 tons
Offered:
35,760 tons
Shipping Weight: 38,620
18,000 tons to be supplied by other parties
to the Protocol
MAGNESIUM METAL
Requested: 4,032 tons
Offered:
4,032 tons
Shipping Weight: 4,070
NICKEL
Requested: 9,408 tons
Offered:
6,600 tons
Shipping Weight: 4,200
3,600 tons in pig nickel
600 tons in monel scrap
2,400 tons maximum contained in steel
and various non-ferrous products
1,800 tons in pig nickel to be supplied
by other parties to the Protocol
MOLYBDENUM CONCENTRATES
Requested: 4,480 tons
Offered:
4,000 tons
Shipping Weight: 4,480
COPPER ELECTROLYTIC
Requested: 134,400 tons
Offered:
134,400 tons maximum
Copper in copper base
alloys
75,264 tons maximum
Copper in timetal
2,226 tons maximum
Copper in copper brace
mill products
15,000 tons maximum
Copper in copper cable
and vire
20,000 tons maximum
Copper in submarine cable
50 tons maximum
Copper in power and
related cable
21,395 tons maximum
Copper in marine cable
465 tons maximum
- 22 -
Regraded Unclassified
170
SECRET
METALS, CHEMICALS AND OTHER PRODUCTS, CONTINUED
ZINC (Slabs)
Requested: 13,440 tons
Offered:
13,440 tons
Shipping Weight: 13,440
COBALT
Requested: 161 tons
Offered:
80.5 tons
Shipping Weight: 115
To be provided in first six months
Other parties to the Protocol will supply
the balance of the request.
CADMIUM
Requested: 224 tons
Offered:
To be supplied by other parties to the
Protocol
COPPER BASE ALLOYS (Brass and Bronze)
Requested: 107,520 tons
Offered: 107,520 tons
Shipping Weight: 139,000
COPPER GOODS AND TUBES (Copper brass mill)
Requested: 16,128 tons
Offered:
15,000 tons
Shipping Weight: 16,900
COPPER CABLE AND WIRE
Requested: 33,600 tons (Uninsulated copper wire)
Offered:
20,000 tons
Shipping Weight: 25,000
FERRO-ALLOYS
Requested: 21,504 tons
Offered:
14,784 tons
Shipping Weight: 16,100
Ferrosilicon
9,403
Ferrochrome
5,376
Other parties to the Protocol will
supply the balance of the request,
such supplies to include existing
seaboard stocks available on June 30, 1943.
NICHROME WIRE
Requested: 538 tons
Offered:
538 tons
Shipping Weight: 640
- 23 -
Regraded Unclassified
171
SECRET
METALS, CHEMICALS AND OTHER PRODUCTS, CONTINUED
SPECIAL ALLOYS WIRE
Requested: 269 tons
Offered:
269 tons
Shipping Weight: 315
Other than steel and alloys)
Subject to specifications as to types,
quantities and delivery schedules)
STEEL AND STEEL PRODUCTS
Requested: 849,730 tons
Offered:
*710,000 tons
Shipping Weight: 786,700
Breaklown
A. Carbon Steel
Requested: 735,127 tons
Offered:
595,397 tone
470,270 tons including rails and accessories
and Arctic and fishing programs.
(Subject to the condition that present
steel stocks heli on U.S.S.R. account in
the United States will be reduced to
250,000 tons end subject to the further
condition that adequate production facil1-
ties are available.)
11,120 tons copper clai strip
6,807 tons plain carbon tool steel
and drill rod
11,200 tons bullet core, plain carbon
60,000 tons tin plate
36,000 tons miscelleneous carbon steel
including nails, bolts and nuts
3. Alloy Steel
Requestel: 114,603 tons
Offered:
*114,603 tons
141 tons trill rods
96 tons high speed
45 tons alloy
10,674 tons tool steel
4,480 tons h1, h speed
672 tons alloy X12
672 tons alloy X12M
3,382 tons other alloys
1,468 tons die blocks
16,898 tons cold irawn alloy bars
1,120 tons steel grade 40XO
1,120 tons steel ,rade 20X3
1,008 tons steel grade 4134
560 tons steel grade 27CG
1,680 tons steel grade SAE 5140
930 tons steel grade SAE 4140
4,480 tons steel grade SAE 52100
- 24 -
Regraded Unclassified
172
SECRET
METALS, CHEMICALS AND OTHER PRODUCTS, CONTINUED
3. Alloy Steel, Continued
67,569 tons hot rolled aircraft bars
515 tons steel grade EJ160
1,344 tons steel grade EJ161
2,688 tons steel grade 30CX10MA
11,200 tons steel grade 52100
3,360 tons steel grade SAE 9260
5,600 tons steel grade 40XC
8,960 tons steel grade SAE 5140
8,960 tons steel grade 20X3
15,680 tons steel grade 38XMJUA
302 tons steel grade CXB
3,360 tons steel grade EJ 69 or
SAE 5700
5,600 tons steel grade SAE 5130
2,671 tons stainless sheets
336 tons stainless strip
756 tons stainless bars
6,563 tons bold wire
470 tons steel grade BBX6
370 tons steel grade BBX9
504 tons steel grade BBX15
1,344 tons chrome vanadium wire
(ASTM 232)
1,344 tons chrome moly wire (SAE4140)
1,747 tons stainless wire
784 tons alloy wire (silicon
manganese)
14,995 tons tubing
-
994 tons stainless tubing
8,625 tons 4-6% chrome tubing
*5,376 tons hot rolled ball bearing
tubing
*Plus undelivered balances 58 of
June 30, 1943 of stainless tubing
and hot rolled ball bearing tubing.
OTHER MATERIALS INCLUDING METALS AND THEIR PRODUCTS
Requested: $10,000,000
Offered:
$ 5,000,000
Shipping Weight:
(Subject to specifications as to types,
quantities, and delivery schedules.)
PETROLEUM PRODUCTS
Requested: 964,480 tons
Offered:
564,480 tons
Shipping Weight: 564,480
(Dependent upon ability to provide
type of product requested)
PHENOL
Requested: 13,440 tons
Offared:
12,000 tons
Shipping Waight: 12,960
- 25 -
Regraded Unclassified
173
SECRET
METALS, CHEMICALS AND OTHER PRODUCTS, CONTINUED
ETHYLENE GLYCOL
Requested: 3,360 tons
Offered:
3,360 tons
Shipping Weight: 3,700
METHANOL
Requested: 6,720 tons
Offered:
6,720 tons
Shipping Weight: 7,700
UROTROPINE
Requested: 6,720 tons
Offered:
6,720 tons
Shipping Weight: 7,600
GLYCERINE
Requested: 6,720 tons
Offered:
6,720 tons
Shipping Weight: 3,700
3,360 in first six months
3,360 tentative in second six months
CAUSTIC SODA
Requested: 40,320 tons
Offered:
40,320 tons
Shipping Weight: 41,300
ETHYL ALCOHOL
Requested: 107,520 tons
Offered:
107,520 tons
Shipping Weight: 122,600
ACETONE
Requested: 6,720 tons
Offered:
6,720 tons
Shipping Weight: 7,900
OTHER CHEMICALS
Requested: 12,096 tons
Offered:
12,096 tons
Shipping Weight: 13,400
(Other than items specifically mentioned
and subject to specifications as to types,
quantities, and delivery schedules.)
- 26 -
Regraded Unclassified
174
SECRET
METALS, CHEMICALS AND OTHER PRODUCTS, CONTINUED
TIRES, TUBES AND OTHER RUBBER PRODUCTS (Containing 36,000
tons of rubber)
Requested: 40,320 tons
Offered:
40,320 tons
Shipping Weight: 15,100
(Rubber or its equivalent)
(In addition to rubber and rubber products
supplied with planes and other military
vehicles)
20,160 tons in first six months
20,160 tons tentative in second six months
Regraded Unclassified
175
SECRET
INDUSTRIAL EQUIPMENT
(All Weights in Short Tons)
Shipping Weight: 300,000
Requests of the U.S.S.R. for industrial equipment, as
listed below, total approximately $700,000,000. Those réquests
are in excess of quantities of previously approved orders ro-
maining undelivered from factories on June 30, 1943 estimated
at $373,000,000. The amounts "offored" below, totaling approxi-
mately $442,000,000 represent the total amounts of both old and
new orders to be delivered from factories during the Third
Protocol period providing new orders placed by the U.S.S.R.
contain specifications, dolivery schedules, and supplies ac-
ceptable to the United States.
In addition to the offerings listed bolow there will
remain available to the U.S.S.R. delivered from factories but
unexported as of June 30, 1943, equipment ostimated at
$78,000,000.
In order to insure the constant flow of industrial equip-
mont required for the U.S.S.R. war program, the United States
will consider the approval of orders totaling not in excess of
$300,000,000 for delivery after June 30, 1944. These orders
will be considered in addition to the quantities specified for
delivery during the Third Protocol period provided that lists
of all equipment and projects be submitted to the United States
for review and consideration and provided that, after review,
it is found possible to incorporate such equipment and projects
into United States production schedules.
HARD ALLOYS, CUTTING AND MEASURING TOOLS
Requested: $21,000,000
$ 3,000,000 Hard Alloys and Cutting Tools
$18,000,000 Cutting and Measuring Tools
Offored:
$21,000,000
$ 3,000,000 Comented Carbido Tips and Blanks
$2,444,000 Now Orders
$
556,000 Old Orders undelivered on
June 30, 1943. (Estimated)
$15,000,000 Cutting Tools
$13,200,000 New Orders
$ 1,800,000 Old Orders undelivered on
June 30, 1943. (Estimated)
$ 3,000,000 Measuring Tools
$1,700,000 New Orders
$1,300,000 Old Ordors undolivered on
Juno 30, 1943. (Estimated)
ABRASIVES
Requested: 6,136 Tons
Offered:
4,000 Tons Abrasive Grain
3,600 Tons New Orders
400 Tons Old Orders undelivered on
June 30, 1943. (Estimated)
$4,000,000 Abrasive Products
$2,300,000 New Orders
$1,700,000 Old Orders undolivered on
June 30, 1943. (Estimated)
- 28 -
Regraded Unclassified
176
SECRET
INDUSTRIAL EQUIPMENT, CONTINUED
GRAPHITE ELECTRODES AND OTHER GRAPHITE PRODUCTS
Requested: 7,448 Tons
offored:
8,568 Tons
5,757 Tons Graphite Electrodes New Orders
1,691 Tons Other Graphito Goods
1,409 Tons New Orders (subject to
specifications ns to types,
quantities and delivery
schedules)
282 Tons Old Orders undelivered on
June 30, 1943. (Estimated)
1,120 Tons Graphite Powder New Orders
REARINGS, BALLS AND ROLLS
Requested: 33,000,000 pieces
5,000,000 Bearings
28,000,000 Balls and Rolls
Offered:
$15,000,000 anti-friction bearings, including
balls and rolls, to be supplied
from old orders undelivored on
June 30, 1943.
MACHINE TOOLS
Requested:
$228,621,550 (24,000 units)
Offered:
$120,000,000
$ 10,000,000 New Ordors
$110,000,000 Old Orders undelivered on
Juno 30, 1943. (Estimated)
PRESSES, FORGING AND ROLLING MILL EQUIPMENT
-
Requested:
$82,000,000
Offored:
$48,000,000
$16,000,000 Rolling Mills and Equipment
$11,000,000 Now Orders production of which
will begin in 3rd quarter.
$ 5,000,000 Old Orders undelivered on
June 30, 1943. (Estimated)
$30,000,000 Pronuos, Forgos, Hammers, and
Related Equipment to be supplied
from old orders undelivered on
Juno 30, 1943. (Estimated)
$ 2,000,000 Wire Drawing Equipment
$1,000,000 New Orders
$1,000,000 Old Orders undolivered on
June 30, 1943. (Estimated)
ELECTRIC PURNACES
Requested:
$12,000,000 (600 unite)
Offered:
$12,000,000
$10,000,000 Now Orders
$ 2,000,000 Old Orders undelivered on
June 30, 1943. (Estimated)
- - 29 -
Regraded Unclassified
177
SECRET
INDUSTRIAL EQUIPMENT, CONTINUED
VARIOUS INDUSTRIAL EQUIPMENT
Requested:
$120,000,000
Offored:
$120,000,000
$12,500,000 Excavators to be supplied
from old orders undelivered
June 30, 1943.
$ 2,000,000
Truck and Tractor Cranes
$20,000,000 Other Cranes, including portal,
locomotive, floating, over..ead
and gantry cranes, trolloys for
overhead crunos, monorail sys-
toma, etc.
Supply of the above two offorings for
cranes will consist of $7,600,000 new
orders and $14,400,000 old orders un-
delivered on Juno 30, 1943. (Estimated)
$ 9,000,000 Compressors, gas blowers, ex-
hausters, and fans.
$3,500,000 New Orders
$5,500,000 Old Orders undelivered on
June 30, 1943, (Estimated)
$ 8,000,000 Pumps
$4,000,000 New Orders
$4,000,000 Old Ordors undelivered on
June 30, 1943. (Estimated)
$10,000,000 Mining Equipment, Oro Drussing
Handling and Transporting Equip-
ment to be supplied from old
orders undelivored on Juno 30,
1943. (Estimated)
$10,000,000 Equipment for Blast, Hearth
and Coke Furnaces.
$2,700,000 NOW Orders
$7,300,000 Old Orders undelivered on
June 30, 1943. (Estimated)
à 4,000,000 Wolding Equipment
$1,200,000 Now Orders
$2,800,000 Old Orders undolivered on
Juno 30, 1943. (Estimated)
$ 3,000,000 Valver and Fittings
$ $2,800,000 Old Orders undelivored on
200,000 Now Orders
June 30, 1943. (Estimated)
$ 5,000,000 Pneumatic Tools
$4,100,000 New Orders
$
900,000 Old Orders undelivered on
June 30, 1943. (Estimatod)
$36,500,000 Auxiliary Industrial Equipment
to be supplied from Old Orders
undelivered on June 30, 1943.
In Addition to the above offer
for auxiliary industrial equip-
mont there will remain undo-
livered on old orders on
Juno 30, 1943 quantities usti-
mated at $89,000,000. It 13
requested that those orders be
examined carefully in order that
those no longer urgontly nooded
may be cancelled. Such orders
as are uncancelled will be
allowed to remain in production
under present priority ratings
and will be made available when
completed.
- 30 -
Regraded Unclassified
178
SECRET
INDUSTRIAL EQUIPMENT, CONTINUED
POWER EQUIPMENT
Requested: $135,000,000
Offered:
$ 75,000,000
$57,000,000 New Orders
$18,000,000 Old Orders undelivered on
June 30, 1943. (Estimated)
CONTROL INSTRUMENTS AND TESTING MACHINES
(Precision Measuring and Testing Machines and Instruments)
Requested: $ 2,000,000
Offered:
$ 1,700,000
$840,000 New Orders
$860,000 Old Orders undelivered on
June 30, 1943. (Estimated)
EMERGENCY EQUIPMENT
Requested: $ 60,000,000
Offered:
$ 25,000,000 urgent emergency equipment
Regraded Unclassified
179
SECRET
STOCKPILES
(All Weights in Short Tons)
It is estimated that there will remain unexported as of
June 30, 1943 the following:
Metals, Chemicals and Other Products
Stockpile: 617,000 tons
Shipping Weight: 662,000
Industrial Equipment
Stockpile: 107,000 tons
Shipping Weight: 108,000
Regraded Unclassified
180
SECRET
FOOD PRODUCTS
(Equal Monthly Installments)
(All Weights in Short Tons)
(The amounts offered below include quantities to be delivered
during the Third Protocol Period)
WHEAT, FLOUR, CEREALS, RICE AND BEANS
Requested: 1,680,000 tons
Offered:
*1,180,000 tons
Shipping Weight: 1,192,600
*473,280 tons wheat
293,440 tons flour
179,200 tons cereals
49,280 tons rice
151,200 tons beans
33,600 tons peas
*Other parties to the protocol will supply the
balance of the request.
SUGAR
Requested:
436,800 tons
Offered:
436,800 tons
Shipping Weight:
441,170
112,000 tons United States Mainland
324,800 tons other sources
CANNED MEATS
Requested:
470,400 tons
Offered:
224,000 tons
Shipping Weight:
268,000
MEAT PRODUCTS (CURED AND SMOKED MEATS)
Requested: o
Offered:
84,000 tons
Shipping Weight:
105,000
ANIMAL FATS AND FAT CUTS
Requested: 246,400 tons
Offered:
263,200 tons
Shipping Weight:
315,840
112,000 tons animal fats
112,000 tons fat cuts
39,200 tons butter
VEGETABLE OIL AND PRODUCTS INCLUDING SHORTENING AND MARGARINE
Requested: 280,000 tons
Offered:
Shipping Weight:
175,200
168,000 tons
- 33 -
Regraded Unclassified
181
SECRET
FOOD PRODUCTS, CONTINUED
CONCENTRATES
Requested: 178,080 tons
Offered:
252,000 tons
Shipping Weight: 277,200
17,920 tons dry skim milk
8,960 tons dry whole milk
39,200 tons dried eggs
13,440 tons sweetened condensed milk
28,000 tons dehydrated vegetables
26,880 tons dehydrated soups and cereals
89,600 tons soya products
16,800 tons cheese
5,600 tons tomato paste
5,600 tons concentrated juices
30AP
Requested:
22,400 tons
Offered:
11,200 tons
Shipping Weight:
11,870
Regraded Unclassified
182
SECRET
CANADIAN SCHEDULE OF SUPPLIES
FOR THE THIRD SOVIET PROTOCOL
Subject to the provisions of the Protocol, the Canadian
Government undertakes to make available at Canadian Ports of
exit during the period July 1st, 1943, to June 30th, 1944,
for shipment to the Union of Soviet Socialist Republics the
supplies set out below. The items in this schedule of
supplies are offered subject to the ability of Canada to
meet the specifications requested by the Union of Soviet
Socialist Republics.
It is appreciated that reasonable stockpiles of stores
must be maintained, so that the Union of Soviet Socialist
Republics can select cargo for shipment that is most needed
to meet the ever changing requirements of war. However,
Canada reserves the right to limit the size of such individual
stockpiles either by control of production or diversion of
product, or both, when in its judgment such action is in
the best interest of the common cause. In taking such action
due consideration will be given to the expressed needs of
the Union of Soviet Socialist Republics.
Regraded Unclassified
183
SECRET
(1) POWDER
1,000 tons per month of Stick Propellant
100 tons per month Rifle Powder N/C
500 tons per month Cannon Powder N/C
(2) MACHINE TOOLS
$4,000,000
(3) MEDICAL SUPPLIES
Canada can make available some medical
supplies, including Surgical Instru-
ments. Available inventory will be
submitted.
(4) ALUMIKUM INGOTS
1,500 short tons per month
(5) NICKEL
150 short tons per month
(6) CADMIUM
224 short tons in equal monthly instal-
ments, excluding 100 tons agreed to be
supplied by the United Kingdom, or any
portion thereof not exported before
July 1, 1943.
(7) FERROSILICON
336 short tons per month
(8) FERROCHROME
224 short tons per month
(9) WHEAT AND WHEAT FLOUR 500,000 tons of wheat --- to be included
in the above quantity up to 200,000 tons
of wheat flour. The tonnage of flour
included depending upon production pos-
sibilities in Canada and of firm ship-
ment commitment from the U.S.S.R. It
is understood that any wheat shipments
will be first charged against the unused
balance in the Wheat Credit arrangements
entered into between the Governments of
the U.S.S.R. and Canada in the year 1942.
Regraded Unclassified
184
MOST SECRET
UNITED KINGDOM SCHEDULE OF SUPPLIES AND SHIPMENTS
The Government of the United Kingdom undertakes, subject
to the provisions of the Protocol and to the marginal comments
in respect of particular items, to make available for despatch
to the Government of the Union of Soviet Socialist Republics
during the period July 1st, 1943 to June 30th, 1944 the supplies
set out below.
The Government of the United Kingdom undertakes, subject
to the provisions of Article II of the Protocol, to provide
the shipping tonnage necessary to augment such Soviet flag
shipping 88 1s available to lift the supplies set out below,
save that such undertaking will not apply to lead and wool
originating in Australia and New Zealand, nor to supplies
originating in North America, which, by agreement between
the Governments of the United States and United Kingdom, are
to continue to be carried in United States ships.
Except where otherwise stated the amounts offered include
any outstanding balances of items agreed to be supplied under
the Second Protocol which were not shipped or booked for ship-
ment on B. named vessel before July 1st, 1943, as well as any.
quantities of such items which have been lost in transit to
the Union of Soviet Socialist Republics before July 1st, 1943,
where agreement to replace such losses has not been communicated
to the Soviet authorities before the said date.
It is appreciated that reasonable stockpiles of stores must
be maintained 80 that the Union of Soviet Socialist Republics
can, as shipping opportunities occur, select cargo for shipment
that is most needed to meet the ever changing requirements of
war. However, the United Kingdom reserves the right to limit
the size of such individual stockpiles, either by control of
production or diversion of product, or both, when in its judgment
such action is in the best interest of the common cause. In
taking such action due consideration will be given to the
expressed needs of the Union of Soviet Socialist Republics.
- 37 -
Regraded Unclassified
185
MOST SECRET
Programme of Supplies from United Kingdom to
Union of Soviet Socialist Republics during
period July 1st, 1943 to June 30, 1944
(All weights in long tons.)
GROUP I ARMAMENTS AND MILITARY EQUIPMENT.
1. Aircraft
150 Airacobres per month for first
6 months, in accordance with a
previous agreement made with the
United States Government involving
an exchange of certain aircraft
from United Kingdom production;
and 50 Hurricanes per month for
first 6 months. Arrangements for
second 6 months to be subject of
further discussions.
2. Tanks
Request for 3000 tanks will be met
by U.K. and U.S. between them,
subject to agreement as to types.
In regard to tanks supplied by U.K.,
maintenance spares for 12 months
will be supplied both for tanks and
for their guns, in accordance with
a generous comprehensive spare parts
schedule based upon experience of
the normal replacement requirements
of parts concerned.
3. Propellant
200 tons R.S. type per month for
first six months, in addition to
any balance of R.S. type or W.M.
017 agreed to be supplied from
the U.K. and unshipped before July
1st, 1943.
GROUP II VARIOUS MATERIALS
1. Tin.
6000 tons, less any amounts over
6000 tons received by U.S.S.R.
from China.
2. Lead
12,000 tons from Australia
3. Silver Steel
60 tons (subject to specification).
4. Cobalt
72 tons in second 6 months.
5. Industrial
Diamonds
$2,400,000 (subject to specification)
6. Rubber.
12,000 tons for first 6 months, from
Ceylon so long as that source 18
open, in addition to any balance
of supplies under Second Protocol
not shipped from Ceylon before
July 1st, 1943. Subsequent supply
to be reconsidered.
7. Jute
36,000 tons to be provided in whole
or in part as articles made of jute
so far as manufacturing capacity in
India permits production of the
articles desired by the U.S.S.R.
Dependent upon Indian conditions.
- 38 -
Regraded Unclassified
186
MOST SECRET
8. Sisal.
6000 tons for second half of 1943,
of which whole or part may be
taken in manufactured goods subject
to specifications being agreed, in-
cluding 1720 long tons already agreed
to be aupplied but excluding any
part of 1000 short tons of Mexican
Henequin which is being supplied by
U.S.
9. Shellac.
2,400 tons. Dependent upon Indian
conditions.
10. Wool.
24,000 tons.
11. Graphite.
1,200 tons. Dependent upon condi-
tions in Ceylon.
GROUP III. INDUSTRIAL EQUIPMENT.
1. Machine Tools
3,000
(in number)
2. Electric Stations
No commitment can be made in
3. Steam Power Plants
terms of money or kilowett
4. Mobile Electric
capacity. Specifications vill
5. Turbo-Generators
be examined & U.K. will supply,
6. Steam Armature.
those items for which manu-
7. Pumps.
facturing capacity, materials &
8. Compressors.
manpower can be found for com-
9. Electrical Equipment
pleting before March 31, 1945.
10. Mining Equipment
Orders for other items will 18
11. Hydro Electric Plants
appropriate be accepted and
detailed specifications worked
out but without starting pro-
duction until progress of war
enables materials & manpower
to be released.
The provisions of para. 3 of the preamble to this
schedule do not apply to items in this group.
GROUP V MEDICAL SUPPLIES.
The detailed list of Soviet re-
quirements attached hereto will be
examined. No overall commitment
in terms of money can however be
given.
- 39 -
Regraded Unclassified
187
MOST SECRET
FOOD SUPPLIES
To be delivered in quantities to
be agreed upon between the re-
spective parties in accordance
with shipping space and supply
available.
Regraded Unclassified
188
NOT TO BE RE-TRANSMITTED
COPY NO. 13
BRITISH MOST SECRET
U.S. SECRET
OPTEL NO. 197
Information received up to 7 a.m., 17th June, 1943.
1. NAVAL
One of H.M. Submarines sank 6 Caiques while on patrol in the
AEGEAN. An Allied Motor Gunboat and a Water Carrier were sunk by air attack
off PANTELLERIA on 14th.
2. MILITARY
On 13th/14th, 40 enemy parachutists were dropped at BENGHAZI,
on the following morning 19, mostly Italians, were captured. Later reports
state that a further 100 parachutists may have been dropped between the BENGHAZI
and TOBRUK areas. 21 Italian parachutists were dropped in the ORAN area 20
of them have been captured.
3. AIR OPERATIONS
WESTERN FRONT. 16th. Fighters damaged 9 trains in the PAS DE
CALAIS Area. 16th/17th. Aircraft despatched COLOGNE - 212 (14 missing), 1
crashed in United Kingdom); BERLIN - 3; Intruders - 16; Leaflets - 4. At
COLOGNE a bland bombing attack was made through cloud.
OFFICE
SECRETARE.OF TRE UR TREASURE
1943 JUN AM 26 1126
SURMA. 15th. Escorted light Bombers attacked MAUNGDAW, AKYAB
objectives in the MAYU River.
REASURY
Regraded Unclassified
189
TREASURY DEPARTMENT
HT
INTER OFFICE COMMUNICATION
DATE June 18, 1943
TO
Secretary Morgenthau
FROM Fred Smith
Progress report:
Harold Mager has been installed as editor of the "War Finance
Special Bulletin", which will go to the 48 State chairmen, and anyone
else advisable, giving them background and philosophy. The bulletin will
not be regularly scheduled, but will be prepared whenever something is
called for by developments in the press, at the Treasury, or otherwise.
Mager will also be responsible for receiving and disposing of
suggestions from the State chairmen, such as the idea developed by Burgess.
The bulletin will be prepared by Mager, checked by anyone necessary in
the Treasury, and will be printed by Chic Schwarz, which will guarantee
that he is informed. The printed bulletins will then be sent to Coyne for
distribution to the field.
I called Gamble and cleared this entire operation with him so that we
won't upset any of his people. I took over the responsibility of organis-
ing this from Jack Louis, with his enthusiastic blessing, because he wants
more freedom of time to learn what the bond business is all about. When
the operation is set up and working, I will deliver it back to Louis to
maintain. I assume you have no objection to this procedure.
Much the same thing as Mager's operation is to be set up for the
financial editors of the country. Mr. Prenosil, who was with Buffington,
is now at liberty, and is undertaking to set up a background bulletin
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service to all financial editors. In this he will not attempt to promote
bonds, but will only endeavor to create understanding among people who are
writing financial news. His bulletin will be augmented by personal calle
on financial editors, or by getting financial editors to come to Washington
for a personal look-see. He is enthusiastic about the idea, and is now in
the process of preparing 2 bulletins -- one having to do with the background
on compulsory savings, explaining that comment about compulsory savings at
this time cannot possibly produce any results, and will only serve to upset
the voluntary system. We will, of course, have an opportunity to check
this bulletin very carefully before it is released. The second bulletin
has to do with financial plans for the remainder of the year, most of which
has already been said, but not in financial terminology.
I will also watch this until it gets under way, and then it can be
turned over to Jack Louis' department.
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191
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 18, 1943
TO
Secretary Morgenthau
FROM Jacob Viner
Re: Forced Investment of Frozen Funds in Governments.
I agree with Mr. Pehle's memorandum on the subject. While I have
nothing of importance to add to what he has written, I will try here to
put the case against such forced investment in my own language.
(1) Since these balances are "frozen" or immobilized, they are
already prevented from having any inflationary effect. Investing them
in governments would make as much contribution to inflation as would
investment of any other "idle" balances or as would investments by banks
themselves,
(2) As far as concerns making the Treasury's task of financing
easier, they have only a minor contribution to make. Since very nearly
all of these balances are in New York banks which have almost no excess
reserves and since their investment in government securities would
result very quickly in a drain on the New York banks not much less in
size, the banks would be forced to meet this drain by an almost
corresponding reduction in their own investments in governments. If
the excess reserves were to be increased by Federal Reserve open market
operations, it would seem preferable to do so in a way which would
provide increased revenue for the banks rather than for the owners of
the foreign balances.
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Secretary Morgenthau - Page 2
(3) If this is not already permitted, I see no reason why the
non-enemy owners of frozen balances should not be permitted to invest
their balances in governments if they wish. To force them to do so
would raise questions of international equity, and also would make
eventual unfreezing difficult because it would tend to result in a
sudden throwing of governments on the market - possibly at a very
inexpedient moment from the point of view of the Treasury.
Jacob Viner
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193
MEMORANDUM FOR THE SECRETARY.
June 18, 1943.
Mail Report
Mail receipts increased the first two days of
the week, and were then fairly light, the proportion
of comment and criticism remaining about the same as
that of last week.
On the subject of taxes, the withholding tax
circular sent out by the Bureau of Internal Revenue
to employers of the United States brought many specific
questions as to the new law, a number of letters of
thanks and approval, and a few grumbles about the tax
situation in general, and the increasing burden upon
private industry. Letters unfavorable to the with-
holding tax outnumbered those approving it by 3 to 1;
while for every letter of comment, there were 10 just
asking questions. Higher taxes in general were widely
opposed. The spending tax was disapproved in several
letters and approved in only one, and the car use
stamp tax brought protests but no word of support.
There were 10 requests for a sales tax. Three corre-
spondents sent the editorial from the Philadelphia
Record entitled, "We Can't Call Randolph So We Cry
Uncle". There were 2 requests for jobs on the new
income tax staff. Many banks asked to be designated
as tax depositories. There were 3 letters objecting
to the phrase, "Demand is made" on income tax notices,
and a few poorly written but obviously sincere letters
from very new taxpayers explaining that they found
they just could not pay the June installment but would
try to do better a little later in the year.
Bond mail has slacked up, though there is some
interest in the announcement of the September drive.
Protests centered largely around the statement that
25% of income should be invested in Bonds. There were
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Memorandum for the Secretary.
June 18, 1943.
the usual budgets and narratives of personal diffi-
culties in support of these protests. Drew Pearson's
article of June 13, describing the Secretary's opposi-
tion to negotiable War Bonds, drew a very favorable
group of replies, 11 endorsing this stand heartily,
only 1 suggesting greater possible liberality in regard
to borrowing on Bonds, and 1 urging 8 smaller non-
interest bearing Bond for even readier cashing, if
necessary. The number of Bonds sent the Secretary to
be cashed increased -- 92 were received, 36 of these
from Patchogue, Long Island. Complaints about delays
were also slightly up, with 58 of the total of 75
being of War Department responsibility.
General mail included opposition to the new
pennies; scattered comments on instances of waste in
local projects; and a few economy letters.
Gabulle E. Tabush
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.95
General Comments
The First National Bank of Mandan, Mandan, N. Dakota.
(Night Letter) North Dakota Bankers at a loss to
understand your decision to call wheat loans made
last fall July 1st unless interest rate reduced to
1%. In light of prior losses of loans through Govern-
ment competition, and in view of all-out efforts on
part of bank toward war program, our bank desires to
enter 8 vigorous protest at this unwarranted and un-
fair action.
Frank T. Chestnut, Secretary, Ajax Electrothermic
Corporation, Trenton, N.J. I have just received
your Special Regulation No. 1 requiring reports on
TFR-500. This regulation covers five pages of small
print and appears to me to be & complete duplication
of the requirements for the old Form TFR-300. As you
will recall, filing TFR-300 took many, many man hours
to prepare. Can you not advise us in what way TFR-
500 differs from TFR-300, and whether or not, in the
case of the associated Ajax Companies we cannot merely
duplicate the information on TFR-300 on the new TFR-
500 forms? If on review of our TFR-300 forms, you
believe it will be unnecessary to file the new TFR-
500 forms, we would be forever grateful to you if you
would advise us of the fact. On the other hand, if
we must file again, please send us about fifty copies
of Form TFR-500.
herewith a self-explanatory letter received from Mr.
Congressman Milton H. West (Texas). I am enclosing
and Mrs. Harman Straub, relative to the purchase of
Mrs. Straub's inquiry. (The following are comments
appreciate your advising me along the lines of Mr. and
typewriters in connection with the war effort. I shall
contained in the letter addressed to Congressman West
by Mr. and Mrs. Straub, President and Principal of the
Harlingen Business College, Harlingen, Tex.) Because
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of war conditions, we have been forced to close our
school for the summer, and perhaps for the duration.
# # * The great demand for office workers, both in the
Government service and private business, young people
with a high school education and some with elementary
business training, have very little difficulty in
getting positions without having a thorough business
training by reputable business schools. # # # When we
closed the school on June 5, we had 8 number of type-
writers in first-class condition, the market price of
which today is close to $100.00. The War Production
Board, through a representative, asserts that if we
decide to sell those machines, we can only sell them
to the Government at the ridiculously low price of
$29.00, which would entail a loss to us of around $70.00
per machine. This difference in the War Production
Board's established price and the market price today
spells confiscation of 8. citizen's property, and such
action by the War Production Board, we believe, is
illegal and would not stand B. Constitutional Court
test. We are not complaining, and by no means making
an unpatriotic stand. We would gladly give these
machines to the Army, Navy, or the Marine Corps, but
what we are objecting to is to be compelled to suffer
this loss when we feel that most of the machines, and
perhaps all of them will be dished out to nonessential
officers in Washington, and other localities that are
now over-run by thousands of draft dodgers, who are
living at the public feed trough. * * 4 Daily the War
Production Board is broadcasting appeals for the owners
of cameras to sell them to the Government. This is al-
most the exact wording of the offer: "If you have a
camera that you are willing to sell to the Government,
notify this office at once, giving a description, the
price you want for it, and your name and address." +
Is it fair, or lawful, for the Government to let the
owner of a camera set the price for sale to the Govern-
ment, and not permit the owner of B. typewriter to do
the same thing? # # #
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197
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Favorable Comments on Bonds
George M. Craig, President, Merchants National Bank,
Port Arthur, Tex. I note 8 recent publication in
which you are quoted as favoring nonnegotiable War
Bonds, in order to prevent them being sold except
to the Government, thus avoiding a repetition of
what happened in the early twenties when 4% Bonds
were sold around 82₫ on the dollar. I note a great
many of the purchasers of such Bonds are cashing their
Bonds through the Federal Reserve Bank. They fre-
quently only want 8. few dollars and prefer to borrow
the money rather than sell their Bonds. A. great
number of these people tell us they do not want to
sell the Bonds, but would like to put up the Bonds as
security for 8. loan to be paid in monthly installments.
Am wondering if money loaners were permitted to make
loans on such security if it might not help prevent
many sales back to the Government. You should know
more about this than I do. I only mention it for
what it is worth.
Frank H. Johnson, President, Federal Home Loan Bank of
Portland, Portland, Oregon. I read with more than
ordinary interest the comments on the front page of
the American Banker relating to the consolidation of
the War Savings Staff and the Victory Fund Committee.
I am not entirely posted on the reasons which brought
this about, but I am writing to tell you that we have
absolute confidence in the planning which is being
developed under your direction, and we will do every-
thing we possibly can to cooperate. # * * You are doing
a splendid job, and the American people appreciate your
fine sense of responsibility and the total absence of
politics in the planning which you have done. I realize
that you are busy and it is not necessary for you to
acknowledge this letter, but place it in your file,
knowing that your friends are many and that the con-
fidence which you have given the American people is
the biggest effort of the Treasury Department at this
time.
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198
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S. G. Devey, Assistant Treasurer, Westinghouse Air
Brake Company, Pittsburgh, Pa. Several days ago there
passed over my desk pamphlet entitled, "The Story of
America's Greatest War Loan - A Report by H. Morgen-
thau, Jr., Secretary of the Treasury", issued under
date of May 25, 1943. It occurs to us that copies
of this Report might well be distributed to members
of our War Service Committee (through which Committee
War Bond campaigns, etc., are centered), and others,
and if entirely consistent, we would appreciate re-
ceiving 75 to 100 copies for this purpose.
L. P. Lindelof, General President, Brotherhood of
Painters, Decorators, and Paperhangers of America,
Lafayette, Ind. This is to inform you, in answer to
your letter of June 11, that we are pleased to assure
you we will fully cooperate by urging our membership,
as you suggest, to fill out and file immediately their
withholding exemption certificates, and at the same
time point out to them that this is not B. new or an
additional tax; therefore, there will be no valid
reason for reducing the amount of their pay allotted
to the purchase of War Savings Bonds and Stamps. With
renewed assurances in behalf of our entire membership,
and myself, of every cooperation to the end that
Victory will bring peace to each Allied Nation.
Thomas J. Dickey, (Lumber), Miami Beach, Fla. I wish
to register my voice in favor of your position as to
the right to trading in U. S. Bonds, especially the
series sold to the common people. I, for one, was a
victim of the World War I Bond business, the common
as will recall. # I sold some for less
people purchased until it "hurt" -- this was the than slogan,
80% you of face value. Then, as this article stated, after to
they were purchased by the wealthy, they went back the
par Bonds can be transferred to the Government after sixty
and above. For God's sake, hold the fort,
days, and no penalty, so keep it this way, as for once
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.99
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I would like to see some one try and protect the common
people from being fleeced -- this has been going ever
since I can remember, and it would be nice for once to
see our Government try and protect them.
Wallace G. Imhoff, President, The Wallace G. Imhoff Co.,
Consultants in Zinc Coating, Vineland, N.J. I have
clipped (re keeping Bonds nonnegotiable) from today's
Sunday paper an item by Drew Pearson. May I commend
you most heartily for your stand on this issue. The
hatred of the public for the bankers has somewhat sub-
sided after two brutal beatings they gave the public --
the World War. I War Bonds, and depression of 1921, and
the wholesale pillaging and robbing of the public by
the bankers in 1929. As an investor in Liberty Bonds,
and 8 soldier (Lt. in the Air Service) in the last war,
I was one of the people who got $82.00 - almost one-
fifth less than I paid for the Bonds. At the present
time I have 33 War Bonds ranging in $100 and $500 Bonds,
and B. number of less value. The very day that these
Bonds are made negotiable, (as Marriner Eccles wants
them to be), I will get out from under immediately, and
then not buy any more Bonds. Being a sucker for these
rascals once is enough for me.
***
Martin Hirsch, Philadelphia, Pa. I have just read the
article written by Drew Pearson in the Philadelphia
Record on Sunday, June 13, 1943. It is gratifying to
note that this subject has been made public and that
you are opposed to the manipulation of War Savings
Bonds. I, as an individual, have been investing to the
limit of my earnings, and feel that this is the patriotic
thing to do. I feel, and I think that the general public
also feels, that this alarming bit of news will cause
people to cash in what Bonds they have, and would also
hinder the future sales of War Savings Bonds. I think
that 8. further public airing of this matter would help
to allay the fears of the people and would obviously
help the war effort.
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200
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O. J. Beyfuss, San Francisco, Calif. From many years
of experience with ships and shipping, I give you a
suggestion for the sale of Bonds. Many of our ships
are now manned by very young men who are receiving
literally thousands of dollars, and little opportunity
of investing it saiely. If you could arrange to let
the masters, or some one on board ship, actually have
Bonds which could be made out and handed to these men,
or if the facilities were available, immediately upon
their arrival in a foreign or United States port, it
is my considered opinion that a large quantity of other-
wise ill-spent money would go into Bonds. ###
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201
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Unfavorable Comments on Bonds
P. G. Sackenreuther, Houston, Texas. # # # On April
30th of this year I purchased from the Bond Committee,
through the First National Bank in Houston, one $500
21%, 1964-69 Treasury Bond. Up to this time I have
not received the Bond, and upon inquiries, with the
First National Bank here, I learn they are waiting
for the Federal Reserve Bank to deliver it to them.
This Bond was purchased and paid for more than 47
days ago, and I still do not have it. I learn through
the grapevine that one of the Federal Reserve Banks
has lost some $20,000 worth of Bonds. Probably mine
is among that lot. I now demand the delivery of that
Bond or the return of my money. If this had been 8.
transaction with some stock broker, we would have been
entitled to raise all kinds of hell. This is no way
to treat your Bond buyers and is no encouragement for
them to buy more, now or later.
#
Mrs. Minnie Qualey, Cincinnati, Ohio. # My brother,
Chatham Mizell, died at Navy Hospital, Philadelphia,
Pa., July 3, 1942. A Bond in his name and mine could
not be found, and must have been stolen. I wrote to
your Chicago office. They sent me a paper to have
filled out before a. Notary. This I did last February,
and I also sent them the death certificate which was
sent to me by the Administrator of my brother's estate.
The estate has now been settled, and the Chicago office
claims they haven't the February letter with the death
certificate, or the paper filled out by the Notary.
Now they want another paper notarized, and B. death
certificate. I am a widow and have to work for B. liv-
ing, and I am only asking for what belongs to me. After
a life of hard work and honest living, I am still a
poor woman, and don't have money to keep going to a
Notary. Could you please tell me why they don't give
me 8. duplicate Bond? # I have been buying all the
Bonds I can afford out of my earning, and I do hope
that no one else will have all the trouble about mine,
should I die. As for my sending any more death
certificates or notarized papers filled out, I have
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sent them enough. # * # I have done what was right
about this Bond, and I hope your Chicago office will
do the same.
F. B. Heath, President, Dakota National Bank and Trust
Company, Bismarck, N. D. We acknowledge receipt of
your telegram pertaining to the new organization for
future loan drives. We are heartily in accord with
this change, and you can depend on the officers and
personnel of this bank cooperating 100%. I am sure
this will eliminate much duplication of effort. Do
you think that 8. telegram of two hundred sixty-eight
words was necessary in order to advise us of this
change in organization? It seems to us, that with
telegraphic lines and operators carrying a capacity
load, they might have been spared this additional
burden. We feel that it is essential that every un-
necessary expense and duplication of effort be elim-
inated. This is possible only through the cooperation
of every Department of the Government, as well as the
individual citizens.
Wayne Coy, Assistant Director, Bureau of the Budget,
forwards letter he has received from David Liggett,
Campaign Secretary, War Chest, of Minneapolis, Minn.
The latest information which we have sets the War Bond
Drive from September 20 to October 9. October and
November were set aside as the two months for the
National War Fund campaign with its related local
Community War Chest drives. The conflict between
these two money-raising efforts is obvious and from
our angle, as 8. typical community, it looks in prospect
nothing short of disastrous. The same crowd that
raised money locally here and in St. Paul also, are the
main wheel-horses in the War Chest campaign. Our man-
power is already seriously depleted, of course, about
which we can't complain, but we do think we have 8.
justifiable kick coming in Mr. Morgenthau's setting 8
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203
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Bond drive when he has set it. We think, along with
other communities, that the two months previously
agreed upon should be observed. In addition, there
is an enormous national publicity campaign planned
in connection with the National War Fund, all of
which will be thrown seriously out of gear. ***
The overlapping of these two dates naturally is going
to hurt both campaigns. In St. Paul, for instance,
the War Bond organization took over the entire War
Chest setup. Nearly the same thing has happened here.
The Twin City situation is probably typical all over
the country. I gather that numerous people have sat
up with Mr. Morgenthau trying to point out the hazards
of his contemplated schedule, but I gather too that
they haven't gotten anywhere. With the President's
100% endorsement of the National War Fund, and with
his pending participation as the launching leader of
this national effort, I can't conceive of anything
short of considerable embarrassment on his part in
having Mr. Morgenthau's campaign come off as a con-
flicting effort. ***
0. A. Schollander, Fargo, N.D. (Encloses clipping on
waste of spare tires being allowed to rot.) I believe
the records will show that North Dakota over-subscribed
its Bond quota substantially, and that the North Dakota
school children purchased "jeeps" far in excess of the
school children in any other State in the Union. North
Dakota has been favored with two good crops and there
cannot be any charge against their loyalty and will-
ingness to labor long hours to aid the war effort.
However, being loyal doesn't mean being dumb. When we
learn of certain branches of the administration being
arbitrary and pig-headed, as indicated by the enclosed
newspaper story, you cannot blame the citizens of this
state from being resentful. Most of the tires in this
citizens, and for months they have been lying here in
stock pile were taken away from the North Dakota
storage notwithstanding that we needed them. Now they
are being shipped out without excuse or explanation.
I am not giving you these facts because I think you
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204
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are at fault, but I notice you intend to inaugurate a
third War Loan Drive in September, and I want to remind
you that these patient people cannot be kicked around
without limit. They may decide to show their resent-
ment by coolness to your Loan Drive.
S. B. Gavitt, President, The Lyons National Bank,
Lyons, N.Y. In the last War Loan Drive, it seems to
me there was one bit of propaganda or method of approach
to the prospective Bond-buyer that was entirely in
error. I refer to the appeal to buy Bonds as a means
of saving for the purchase of things wanted after the
close of the War. # # * With such ideas constantly put
before the public, I can see a great rush on the part
of Bond-holders to unload their Bonds which they have
accumulated for the very purpose I have stated. I can
feel this in the air right now.
#
*
#
To
forestall,
at
least to a degree, any such tendencies as I have out-
lined, I suggest that in all future appeals, some
methods be employed to impress the Bond-buyer, either
through patriotic stress or otherwise, to retain his
Bonds to their maturity. The above is merely the humble
opinion of & poor country banker, but in all seriousness
is worthy of some consideration from our financial
advisers.
Vincent Williams-Hermida, Tenafly, N.J. Yours truly
is one of those "little fellows" with two school
children - boy, 16; girl, 20; and both attend school -
of course also a better half. Salary about $2,300
yearly. Until the war, I was employed at the large
wage of $1,500, so you see I am plenty "behind" on
debt payments, medical attention, etc. In fact, to
date, I have been unable to purchase my 10% quota of
War Bonds. As a former bank clerk, I know what a good
investment they are, and 8.5 a former World War I man,
know my duty to my beloved U.S.A. But brother, how
you can ever up the anti for buying 25% of those War
Bonds -- for the average worker, and that is your little
fellow. # My wife and me have not bought new clothes
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205
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for three years. The children get the little there
is. No movies ever, no car for the past three years,
no telephone for over three years. No dentist for ten
years. The physician is a noble man and he "holds his
breath" for his money. *** Brother Henry, you simply
daze me with your cock-eyed plans. And for your in-
formation, I was for our beloved F.D.R. before Chicago,
and I still admire the hombre, even though I have never
received 8. piece of that NEW DEAL. But he at least
placed labor in a good light, and this was a needed
blessing to the U.S.A. We white-collar workers are
too soft to fight for our "rights". You in Washington
could help us, but you do not. And after F.D.R. is gone
back to Hyde Park, no one will even think of us. ***
Letter addressed to the President by Mrs. Lela B.
Collins, Dayton, Ohio, and forwarded to the Treasury
by the White House. Does the Government want people
to buy War Bonds, or is that just 80 much "hooey" be-
cause it is supposed to sound good to the ear? Planes,
bombs, tanks, etc., are tied up by the thousands in un-
refunded deposits. Why? Nine months have passed since
the last deduction was made, and no refund has been paid
either in cash or Defense Stamps, to me or thousands of
others. What kind of bookkeeping is that? In industry,
Bonds are issued with the pay-checks, no waiting. If
the employee leaves, cash deposits are refunded on the
amount. Retirement deductions have not been refunded
either. We employees paid for that bookkeeping at B.
high rate; still the money remains unrefunded -- more
planes, bombs, etc., available, but left idle in times
like these. *** Written inquiries to the chiefs con-
cerned only bring forth mimeographed excuses for delay.
I'd like to have my Bond money IN BONDS - firing bullets
at the enemy. I'd like to have my "retirement" money in
Bonds too - I can retire after the war and peace are won.
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206
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Wallace E. Rushing, Chief Electrical Foreman, Daniel
Field Air Base, Augusta, Georgia. I take the liberty
of writing you as I believe it is the duty of a good
Democrat to let you know how the Bond drive is coming
along at this particular station, and why it may lag
unless you know of conditions. Nearly fourteen months
ago I made payroll reservation of approximately 10% of
my salary. I have nothing to show for it, not even the
first Bond, but I estimate that around $200.00 was de-
ducted before it was explained that things were bogged
down in Washington, and that in the future, Bonds would
be issued from District Office in Savannah. Since that
time, issuing office has been changed again and Bonds
have been coming in more or less promptly. What seems
to be worrying every one is what has become of the money
that was sent to Washington in the beginning of the
drive. # We used to laugh at trains being 8. week
late in the U.S.S.R. -- what will the G.O.P. publicity
department say about the voters' Bonds being fourteen
months late? I have earnestly supported the Bond drive,
and my family has well exceeded the 10% goal. I have
tried to explain that eventually we would all receive
an accounting, but some of my men have recently cancelled
their payroll reservations and others are threatening to.
Arthur Petrusch, Vice Chairman, United Farm Equipment
and Metal Workers of America, Cedar Rapids, Iowa. The
members of Local 116 U.E.F. & M.W. of À. hereby protest
the gross misconduct and flagrant violation of common
decency and Navy regulations, and the disparaging re-
marks made by Storekeeper 2nd Class, Andrew Paulis, of
Akron, Ohio, within the factory of LaPlant Choate Mfg.
Co., Inc., Cedar Rapids, Iowa, on June 11, 1943, at which
time he was making a tour of several defense plants
within the city, with two fellow Navy men. # # * Paulis
made mention of our wages in comparison with his, and
the amount of Bonds he was buying, and so insinuated
that we were not supporting the war effort, despite our
10% flag. He made the statement that the men should
work harder and not loaf so much; a statement upon which
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207
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he, an outsider, could not possibly have any authentic
information. He also stated that this country did not
want 8. dictator, that he saw several C.I.O. shop caps
in the crowd, and that we could guess whom he meant.
*** Paulis' talk has been 8. grave error, inasmuch as
it was of such great length that it cost two hundred
man hours of production, and has created a great deal
of unrest and unharmonious attitude within the plant.
It is especially harmful at this time of so much labor
unrest throughout the country, and at the present time
of writing, we are awaiting the WLB Conciliation Service
for interpretation of our contract.
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208
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Favorable Comments on Taxation
L. E. Hagenow, Chicago, Ill. I have been reading in
the papers all the arguments "pro and con" regarding
additional need for spending or sales taxes. The taint
of politics in connection with these tax issues, in my
humble opinion, "smells to high heaven" -- and I mean
that on both sides of the House -- Democrats and
Republicans alike. When, oh when, will all the people
realize that this war we're fighting costs money, more
money than any of us ever dreamed of, and that this
money must come from the individual -- now preferably
while we're alive? # 42 Any American, worthy of the
name, should be glad to do his part by paying taxes
consistent with the rate needed to avoid a breakdown
of our fiscal system. I am definitely against any
sales or spending tax which represents a loan on the
part of the citizen to his Government, which they feel
should be repaid later. If any individual wants that,
let him buy Bonds. I am, however, definitely in favor
of a general sales tax for all the people, to start as
quickly as possible, if additional revenue is needed by
the Treasury beyond that now set up in the new pay-as-
you-earn individual tax program. # # * Of course this
will hurt, but it will hurt and be shared by every one
of us, and all Americans should proudly share it as it
is everybody's war -- not just part of our citizenry.
Regraded Unclassified
209
- 15 -
Unfavorable Comments on Taxation
Senator Ellison D. Smith forwards the following letter
he has received from Mr. H. A. J. Evans, President of
the Kingston Manufacturing Company, Inc., Conway, South
Carolina: We note with considerable alarm the suggestion
advanced by the Treasury that increased taxes be levied
next year on corporations. In 8. number of cases corpo-
rate taxes are already entirely too high and make it
impossible for small or medium sized concerns to grow
any larger, particularly where they are fairly new con-
cerns and did not have a good earnings record in the
base period. The present taxes also make it impossible
to form new corporations as there is practically no return
on the investment. # * * We are unable to set up any
reserves for post-war purposes and to cushion the concern
against the inevitable economic shocks which will develop
upon or shortly after the cessation of hostilities. We
have no objections whatsoever to the excess profits tax
but feel that some provision should have been made for
the smaller concerns so as to enable private enterprise
to develop larger concerns where the ability is avail-
able. Under the present tax system there could have been
no Ford Motor Company or Chrysler Corporation. When it
comes to talk of increasing these tax burdens, we con-
sider that the Treasury is crossing the borderline of
the maximum burden which corporations can sustain.
F. P. Seymour, (Wholesale and Retail Office Supplies),
Chicago, Ill. If it should develop that the sales of
Treasury Tax Anticipation Notes decline, then the follow-
ing experience may, in part, be 8. reason and of interest
to you. My wife and I have paid a rather liberal amount
of income taxes since their inception. We have always
paid them by check to the Internal Revenue Collector.
Yesterday, because I had purchased my full quota of
A Notes, I went to the Federal Building and stood in
line for one hour, waiting to pay my June 15th install-
ment. One hour's time was rather serious to me with the
help shortage and the endeavor, es an officer of our
company, to keep our business going through these diffi-
cult times. The comments that I heard in the waiting
Regraded Unclassified
210
- 16 -
line of people, some of whom I knew and some large
taxpayers, were that they would never again buy Tax
Notes. My quarterly installment was $4,000 even.
I had $5,000 worth of A Notes, upon which I paid an
extra premium of $14, last December, for accumu lated
interest. The accumulated interest yesterday on $4,000
of these Notes was $56.70. I was advised that no cash
refunds of interest would be made; therefore, I had to
make an overpayment of $56.70, which I did not want to
do, at least until I understand the new pay-as-you-go
tax plan. I must say that I em very far from under-
standing the new plan as yet. # # *
Mrs. L. J. Ferry, (Wife of the Minister of Westminster
Presbyterian Church), Milwaukee, Wis, I appeal to you
for justice in regard to my income tax. # # # A year
ago last March I paid my income tax twice, by mistake.
I immediately reported it to the Collector here, who
verified my statement, and assured me that I would soon
get 8. refund from Washington, as it was then out of the
hands of the local workers. I have still heard not one
word, and its a year and more. People who made mistakes
and paid too little this year are already hearing about
it from you, so it does seem that you could do something
when the mistake is in the taxpayer's favor. I am per-
fectly willing to pay all I am expected to pay, but I
don't like this injustice. # * * Both checks were sent
through the Milwaukee office for collection of Internal
Revenue, and cashed. They agree that I should get
$53.95 back. May I hear about this soon?
William F. Low, N.Y.C. Am writing you as the head of
the one Department in Washington that not only answers
my letters but sometimes starts the correspondence.
Just two months ago I walked out of B. useless and non-
essential job. You see I had been reading about man-
power shortage, and being a trusting soul, believed it.
What they forgot to say was under 50. Dr. Oslo used to
say 60, but the Adj. General, State Department, etc.,
how can I answer your last letter asking for June 15th
say 50, and thanks for the patriotic, etc., etc. Now
remittance?
Regraded Unclassified
211
- 17 -
Wm. H. Stanley, Larchmont, N.Y. I see in the papers
that we are expected to buy a $5.00 car use stamp by
June 30th. I have an A ration gasoline book, my car
stands in the garage unused. Am I to understand that
when the Government tells me that I cannot use my car,
I am still commanded to pay $5.00 for its nonuse?
Am I further to understand that if later the ban is
lifted, I am still expected to pay for a full year's
stamp when I shall have used the car for only part of
the year? I would appreciate your reply.
J. H. Cockroft, Richland Center, Wis. * One year
ago now the Government took my home from me at Madison,
Wis., for the Truax School. At that time they required
me to pay the full 1942 taxes, basing them on the 1941
taxes, plus twenty percent, and they told me at that
time that in case there was a refund, that it would be
mailed me early in January of 1943. Now I have taken
this matter up with the Treasurer of that town and
found that there is better than forty dollars due me.
It is now June, nearly six months later than the Govern-
ment promised to mail me my refund. Will you kindly
give this matter your attention, and let me know by
return mail just why this is being held up?
A. F. Hunt, Cleveland, Ohio. I work for the Strong-
Corsyle Hammond Company and they have been deducting
from my pay the 5% Victory tax each week. I did not
say this might be done and wish you to refund me the
money. I only make approximately $28.00 8. week and
need every penny I can get to support my wife and 5
children, ranging from 11 years of age to 18, and now
that you contemplate another withholding tax of 20%
or more, with compulsory savings, how do you expect
us to live? * * * Then you contemplate more deductions
for Social Security, which is all right normally, but
with insurance deductions, group insurance, and all
other deductions, as well as the high cost of living,
it will put us away in the hole.
Regraded Unclassified
212
- 18 -
Anonymous - "A Taxpayer For Twenty-one Years" - post-
marked Philadelphia, Pa.
#
*
I wonder if you have
given due thought to the certain problems of the thou-
sands of professional people in the country - the
dentists, doctors, lawyers, engineers, salesmen,
technical men, office managers, and the like - indivi-
duals whose incomes today are pegged at what they were
in 1940 and 1941 - yes, and in many cases, less than
what they were during the past few years. This middle-
class group have seen their real income drop, yet they
still must keep up their life insurance, payments on
their homes, and the many other items that do not
plague those in either the higher or lower brackets
of income to the same degree. No doubt we can and will
be able to take care of the 20% tax as of July 1, 1943,
but if you pyramid another 10% tax on it, "Bang" goes
some of our homes, part of our life insurance, and most
of charities, to say nothing of our Series E Bonds.* #
Major W. G. Stanton, Ord. Sec., Hq. S.O.S., A.P.O. 871,
New York, New York. (V Mail Letter) Dear Mr. Secretary:
For months I have been corresponding with the Collector's
Office in Baltimore about my 1941 tax, on which they dis-
allowed a deduction of $100 for furnace repairs. I have
been trying to get the case reviewed but the same clerk
(one Bertha Magruder) keeps writing and reiterating her
view that a new firebox is capital expenditures. Now
I would like to have the review by a competent examiner,
since the house had 8. furnace and nothing was done
except repair damage wrought by rust and corrosion --
this is no more 8. capital expenditure than a new coat
of paint or wallpaper. Being overseas in the armed
forces handicaps me greatly in dealing with this matter.
I could afford the $9.00, but the principle is wrong.
Your good offices in causing an investigation will be
appreciated.
Russell C. Graef, N.Y.C. I just left the office of
the Internal Revenue Department, Whitehall Street, New
York City, where I presented tax notes in payment of
my second quarterly tax obligation due June 15. My
Regraded Unclassified
213
- 19 -
tax obligation for the second quarter amounted to
$164.23. I presented tax bonds totaling $178.48,
which included accrued interest. I requested a due
bill for $14.25 (not cash) in change for the overpay-
ment of the second quarterly tax installment due,
which was refused. I proposed to use the due bill
as change in paying my last quarter of 1942 tax when
due. * # # During the year 1942 I conscientiously
saved and purchased these bonds to be used for my tax
obligation, and when I presented sufficient bonds,
I felt that I should not have to withhold 8. certificate
and reimburse the department with the difference in
cash in order to pay the exact amount, as the Federal
Reserve also has refused to cash B. bond, plus accrued
interest to date. As the Government already has my cash
for the entire 1942 tax, and I have bonds remaining
which can only be used for taxes, how am I to dispose
of same without losing any interest when the 20% with-
holding tax goes into effect July 1, 1943? I am enclos-
ing said bonds to you for an official opinion as how
to use the bonds in payment of my second quarterly tax
obligation, which was refused because the department
evidently was not properly equipped to equitably accept
the bonds for the exact amount due.
Regraded Unclassified
214
OFFICE OF LEND-LEASE ADMINISTRATION
FIVE-FIFTEEN 22d STREET NW.
WASHINGTON, D.C.
CR. STETTINIUS, JR.
June 19, 1943
/.JMINISTRATOR
MEMORANDUM
To:
The Honorable Henry Morgenthau
From:
E. R. Stottinius, Jr.
Subject: Executive Reports
Transmitted herewith, for your information,
are copies of the Exocutivo Reports on lond-leaso
operations, as of May 31, 1943.
Attachmonts
Regraded Unclassified
15
CONFIDENTIAL
Executive Report No. I
Office of Lend-Lease Administration
ALLOCATIONS, OBLIGATIONS AND EXPENDITURES
FUNDS APPROPRIATED TO THE PRESIDENT
Monthly Report as of May 31, 1943
( Thousands of Dollars)
Appropriation Category
Adjusted
Cumulative to May 31, 1943
Appropriations
Allocations
Obligations
Expenditures
Ordnance and Ordnance Stores
2,026,400
1,689,131
1,514,956
1,129,690
Aircraft and Aero. Material
2,667,125
2,663,916
2,591,273
1,850,800
Tanks and Other Vehicles
769,273
672,726
636,254
505,359
Vessels and Other Watercraft
2,417,544
2,257,769
1,881,208
1,403,415
Misc. Military Equipment
353,288
353,280
304,798
212,023
Production Facilities
1,104,688
1,104,688
1,054,820
832,598
Agric. and Indust. Commodities
7,707,212
7,632,014
5,900,538
4,832,587
Servicing, Repair of Ships, etc.
531,470
516,462
398,201
380,530
Services and Expenses
800,000
453,324
266,129
217,272
Administrative Expenses
20,000
19,960
19,605
19,405
Total
18,397,000
17,373,270
14,567,782
11,383,679
Procuring Agency
Allocations
Obligations
Expenditures
War Department
5,689,681
5,429,939
4,206,313
Navy Department
2,991,784
2,321,714
1,553,703
Maritime Commission and Har Shipping Admin.
1,980,532
1,638,009
1,501,359
Treasury Department
3,154,636
2,448,672
1,589,898
Department of Agriculture
3,544,345
2,718,943
2,522,852
12,292
10,506
9,554
Other
Total
17,373,270
14,567,783
11,383,679
8-0634
Regraded Unclassified
16
CONFIDENTIAL
Executive Report No. 2
Office of Land-Lease Administration
STATEMENT OF LEND-LEASE AID
Monthly Report 05 of
May 31, 1943
(Thousands of Dollars)
Cumulative to
Month of
Type of Aid
May 31, 1943
April 30, 1943
May
April
Goods Transferred
9,929,937
9,214,238
715,699
720,103
Servicing, Repair of Ships, etc.
290,847
281,009
9,838
18,874
Rental of Ships,
1,021,976
961,697
60,279
31,915
Ferrying of Aircraft, etc
Production Facilities in U. S.
582,022
580,563
1,459
7,667
Miscellaneous Expenses
67,873
64,965.
2,908
4,395
Total Services
1,962,718
1,888,234
74,484
62,851
Total Goods and Services
11,892,655
11,102,472
790,183
782,954
Data on Goods Transferred include value of goods procured from lend-lease appropriations
to the President and to the Army and Navy.
Cumulative to May 31, 1943
Type of Aid
Br. Empire
China
U.S.S.R.
Other
Total
Goods Transferred
7,649,307
133,598
1,978,441
168,591
9,929,937
Servicing, Repair of Ships, etc.
216,418
1,556
45,655
27,218
290,847
Rental of Ships,
818,388
13,162
161,563
28,863
1,021,976
Ferrying of Aircraft, etc.
-
-
582,022
Production Facilities in U. S.
-
-
Miscellaneous Expenses
43,697
1,099
1,629
21,448
67,873
-
-
11,892,655
-
Total Goods and Services
I
Regraded Unclassified
217
CONFIDENTIAL
Executive Report No. 3
Office of Lend-Leose Administration
DETAIL OF ARTICLES TRANSFERRED
Monthly Report 05 of May 31, 1943
Thousands of Dollars )
Cumulative to May 31, 1943
Br. Empire
China
U.S.S.R.
Other
Total
Ordnance (Excl. Ammunition)
365,717
15,536
51,428
46,400
479,081
Ammunition and Components
863,115
22,194
219,787
16,336
1,121,432
Aircraft
721,141
39,132
405,033
30,091
1,195,397
Aircraft Engines, Parts, etc.
415,007
3,859
14,572
2,483
435,921
Combat Vehicles
779,279
923
221,089
18,918
1,020,209
Non-Combat Vehicles
254,017
25,452
246,500
9,964
535,933
Watercraft and Parts
757,803
447
71,294
9,419
838,963
Agric. Products (Foodstuffs)
1,212,261
-
190,531
3,124
1,405,916
Agric. Products (Excl. Food)
309,926
41
3,697
71
313,735
Machinery
305,960
4,069
150,302
1,559
461,890
Metala
477,643
9,065
188,199
1,138
676,045
Petroleum Products
453,272
2,415
21,589
62
477,338
Miscellaneous Material
and Manufactures
734,166
10,465
194,420
29,026
968,077
Total
7,649,307
133,598
1,978,441
168,591
9,929,937
0-0134
Regraded Unclassified
18
TREASURY DEPARTMENT
OFFICE OF THE SECRETARY
June 18, 1943
CONFIDENTIAL
Received this date from the Federal Reserve
Bank of New York, for the confidential informa-
tion of the Secretary of the Treasury, compila-
tion for the week ended June 9. 1943. showing
dollar disbursements out of the British Empire
and French accounts at the Federal Reserve Bank
of Nev York and the means by which these expendi-
tures vere financed.
Inc. E.MB
Regraded Unclassified
C
-19
0
P
Y
FEDERAL RESERVE BANK
OF NEW YORK
June 17, 1943
CONFIDENTIAL
Dear Mr. Secretary:
Attention: Mr. H. D. White
I am enclosing our compilation for the week ended
June 9. 1943, showing dollar disbursements out of the British
Empire and French accounts at this bank and the means by which
these expenditures were financed.
Faithfully yours,
/s/ Robert G. Rouse,
Robert G. Rouse,
Vice President.
The Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Enclosure
Regraded Unclassified
ANALYSIS OF CANADIAN AND AUSTRALIAN ACCOUNTS
Strictly
(In Millions of Dollars)
Week Ended June 9, 1943
Confidential
BANK
OF
CANADA (and Canadian Government)
COMMONWEALTH BANK OF AUSTRALIA CREDITS (and Australian Government)
DEBITS
CREDITS
DEBITS
Transfers
Transfers from Official
Transfers
to
Proceeds
Net Incr.
to
Proceeds
Net Incr.
British A/C
of
(+) or
Official
of
(+) or
Official
Total
British
Others
Total
Gold
For Own
For French
Other
Decr.(-)
Total
British
Other
Total
Gold
Other
Dec. (-)
PERIOD
Credits
Sales
Credits
in Funds(d)
Debite
A/C
Debita
Credite
Sales
A/C
A/C
Credits
in $ Punde(d)
Debits
A/C
Debits
year of war 0
323.0
16.6
306.4
504.7
412.7
20.9
38.7
32.4
+ 161.7
31.2
3,9
27.3
36.1
30.0
6.1
+ 4.9
TP period through
1940
477.2
16.6
460.6
707.4
534.8
20,9
110,7
41,0
+ 230,2
57.9
14.5
43.4
62.4
50,1
12.3
+ 6.5
POST. of war(b)
660.4
-
460.4
462.0
246.2
3.6
123.9
88.5
+ 1,6
72.2
16.7
55.5
81.2
62.9
18.3
+ 9.0
bird year of war (c)
525.8
0,3
525.5
566.3
198.6
7.7
-
360.0
+ 40.5
107,2
57.4
49.8
112,2
17.2
95.0
- 5.0
1932
46.3
46.3
53.6
13,2
40.4
+ 7.3
28,0
20.5
7.5
18,1
-
18,1
- 9.9
-
-
Sept. 3- Sept. 30
-
at 1 - Oct, 28
44.9
-
44.9
51.5
16,6
-
-
36.9
+ 6.6
14.3
12.0
2.3
14.6
,
14.6
+ 0.3
56.5
56,5
80,8
14.4
-
66.4
+ 24.3
10,2
4.7
9.4
-
9,4
- 0.6
5.5
Oct, 29 Dec: 2
-
-
2,9
41.0
- 4.3
14.1
8.0
6.1
11.7
-
11.7
- 2.4
Dec. 3- Dec. 30
48.2
-
48.2
43.9
-
-
1943
52.5
217.1
-
125,0
-
92.1
8.0
8.2
17.3
-
17.3
+ 1.1
+ 164.6
16,2
Date 31 - Fab. 3
52.5
-
37.2
-
63.5
+ 66,1
15,9
15.0
0,9
16.0
-
16.0
+ 0.1
6- Mar, 3
35.1
-
35.1
101.2
-
51.6
+ 15.4
7.1
5.0
2.1
6.7
-
6.7
- 0.6
-
4 Mar. n
36.2
-
36.2
51.6
-
-
29.0
-
39.6
+ 10.6
16.4
15.1
1.3
19,3
-
19.3
+ 2.9
39.6
-
e
Apr. 1 - Apr. 28
29.0
E
95.8
-
95.8
+ 15.9
21.8
19.0
2.8
20.1
W
20.1
- 1.7
Apr. 29 - June 2
79.9
-
79.9
E
THE KEEP:
12.8
12.8
+ 0.8
12.0
-
12.3°
- 44-2
12.0
-
-
May 12
56.5
-
56.5
12,3
-
-
-
24.8
+ 18.2
3.0
3.0
3.5
-
3.5
+ 0.5
-
6.6
-
19
6.6
-
24.8
-
-
17.0
-
-
0.1
1
(L)
+ 0.1
2.3
-
19.3
-
26
2.3
19.3
-
0.8
0.4
0.4
- 3.4
-
-
16.6
+ 8.8
3.8
3.0
-
-
7.8
16.6
-
7.8
-
June 2
35.8(c)
+ 28.2
15.0
15.0
18.3(k)
.
18.3
+ 3.3
-
9
7.6(m)
-
7.6
35.8(m)
-
-
-
6.2 million.
(a) For monthly breakdown see tabulations prior to April 23, 1941,
8.9 million.
(b) For monthly breakdown see tabulations prior to October 8, 1941.
10.1 million.
(c) For monthly breakdown see tabulations prior to October 14, 1942.
8.8 million.
(d) Reflects changes in all dollar holdings payable on demand or maturing in one year.
(e) Dose not reflect transactions in short term U. S. securities.
($) belaha
pplics, Ltd.
(g) Includes
8. Treasurer ONE ageo Undessified
held
ANALYSIS OF BRITESH FRENCH ACCOUNTS
Strictly
(In Millions of Dollars)
Week Ended June 9. 1943
Confidential
BANK OF ENGLAND (BRITISH GOVERNMENT)
BANK OF FRANCE
DEBITS
CREDITS
PERIOD
Gov't
Transfers to
Net Incr 4)
Not Incr. (+)
Proceeds of
Transfero
Expendi-
Official
Sales of
from Offi-
Other
or Decr.(-)
Total
Total
or Decr. (-)
Total
tures
Canadian
Other
Total
Securities
cial Aus-
(Official)
tralian
Credits
in $ Funds
Debits
Credite
in $ Funds
Debits
(a)
Account
Debits
Credits
Gold
b)
Account
(c)
(d)
(e)
(e)
(d)
First year of war (g)
1,793.2
603.6
20,9
1,166.7
1,828.2
1,356.1
52,0
3.9
416.2
+ 35.0
866,3(f)
1,095.3(f)
+299.0
War period through
December, 1940
2,782.3
1,425.6
20.9
1,335.8
2,793.1
2,109.5
108.0
14.5
561.1
+ 10.8
878.3
1,098.4
+220.1
Second year of war (h)
2,203.0
1,792.2
3.4
407.4
2,189.8
1,193.7
274.0
16.7
705.4
- 13.2
38.9
6.8
- 30.1
Third year of war (1)
1,235.6
904.8
7.7
223,1
1,361.5
21,8
5.5
57.4
1,276.8
+125.9
18.5
4.4
- 14.1
1942
Sept. 3- 3 - Sept. 30
56,1
37.1
-
19.0
81.6
-
0.5
20.5
60.6
+ 25,51
10,1
0.4
- 9.7
Oct, 1- Oct, 28
46.7
27.4
-
19.3
57.5
-
-
12.0
45.5
+ 10.8
-
0.3
+ 0.3
Oct. 29 Dec. 2
96.6
35.5
-
61.1
83.7
-
-
5.5
78.2
- 12.9
0,2
0,3
+ 0.1
Dec, 3 Dec, 30
30,4
13.3
-
17.1
51.9
-
-
8.0
43.9
+ 21.5
-
-
-
Dec. 31- 1943 Feb. 3
168.6
20,9
125.0
22.7
58.9
-
-
8.0
50.9
-109.7
-
-
-
Feb. 4 - Mar. 3
87.2
17.8
37.7
31,7
120.8
-
-
15.0
105.8
+ 33.6
-
-
-
Par. 4 Har. 31
35.3
12.9
-
22,4
64.4
.
-
5.0
59.4
+ 29,1
-
-
-
Apr. 1 - Apr. 28
37.0
16.3
-
20.7
87.4
-
-
15.1
72.3
+ 50.4
-
-
.
Apr. 29 - June 2
90.4
74.3
-
16.1
103.4
-
-
19.0
84.4
+ 13.0
-
-
-
WEEK ENDED:
65.0
5.3
24.8
-
-
12.0
12.8
-
-
-
Key 12
59.7
- 40.2
-
19
8.4
3.4
-
5.0
33.5
-
-
3.0
30.5
+ 25.1
-
-
-
26
5.2
4.1
-
1.1
15.0
-
.
-
15.0
+ 9.8
-
-
-
2.6
3.0
9.3
+ 7.3
-
-
-
June 2
5.0
2.4
-
12.3
-
-
9
12.4
3.0
-
9.4
41.2
-
15.0(j) 26.2
+ 28.8
-
-
-
-
Average Weekly Expenditures Since Outbreak of War
See attached sheet for footnotes.
France (through June 19, 1940) $19.6 million
19, 1940) $27.6 million
1942) $54.9 million
22.6 million
Regraded Unclassified
(a) Includes payments for account of British Ministry of Supply Mission, British Supply Board, Ministry of Supply Timber
Control, and Ministry of Shipping,
(b) Estimated figures based on transfers from the New York Agency of the Bank of Montreal, which apparently represent the
proceeds of official British sales of American securities, including those effected through direct negotiation. In addition
to the official selling, substantial liquidation of securities for private British account occurred, particularly during the
early months of the war, although the receipt of the proceeds at this Bank cannot be identified with any accuracy. According
to data supplied by Lhe British Treasury and released by Secretary Morgenthau, total official and private British liquidation
of our securities through December, 1940 amounted to $334 million.
(c) Includes about $85 million received during October, 1939 from the accounts of British authorized banks with New York banks,
presumably reflecting the requisitioning of private dollar balances. Other large transfers from such accounts since October,
1939 apparently represent current acquisitions of proceeds of exports from the sterling area and other accruing dollar
receipts.
(d) Reflects net change in all dollar holdings payable on demand or maturing in one year.
(e) For breakdown by types of debits and credits see tabulations prior to March 10, 1943.
(r) Adjusted to climinate the effect of $20 million paid out on June 26, 1940 and returned the following day.
(g) For monthly breakdown see tabulations prior to April 23, 1941.
(h) For monthly breakdown see tabulations prior to October 8, 1941.
(i) For monthly breakdown see tabulations prior to October 14, 1942,
(J) or which $4.8 million represente current and accumulated dollar proceeds of sterling area services and mrchandise exports
and $16.0 million received from U. S. Treasury to be held for credit of U. S. Army.
Regraded Unclassified
223
29
ARY OF TREASURY
I
OFFICE
PM
CALORY DEPARTMENT
NOT TO BE RE-TRANSMITTED
9
COPY NO.
13
N
BRITISH HEST SEGRET
U.S. SECRET
OPTEL NO. 198
Information received up to 7 a.m., 18th June, 1943,
1, NAVAL
On the 4th, one of the French Submarines torpedoed a six
thousand ton ship at mchor off the North-east Coast of SARDINIA. The vessel
was seen aground on the 8th. One of H.M. Submarines torpedoed a fifteen
thousand ton Northbound Tanker off South-east ITALY on the 5th. On the 4th,
another of H.M. Submarines sank a U-boat North-east of the FAEROES. On the
16th, a Hudson Aircraft sank an enemy submarines South of CYPRUS. Survivors
were seen in the water.
2, MILITARY
NORTH AFRICA. The French Military Police report the capture
of 5 parties of 10 parachutists each, one near AFFREVILLE, one near CONSTANTINE, BISKRA
two South-west of ORAN, one near BOU SAADA and single parachutists at
and DJEZIA.
3. AIR OPERATIONS
WESTERN FRONT. 16th/17th. COLOGNE. 656 tons dropped
including clear visibility above. Bombing somewhat scattered especially at
153 four thousand pound H.E. in 23 minutes, Almost complete first cloud
but but better concentration later. Not yet possible to estimate success of attack.
Night fighters active.
Coast. Fighters made sweeps over the Low Countries. Enemy casualties - 9, 3, 8,
17th. Fighter bombers damaged 5 small ships off the Dutch
Allied - 3 missing.
17th/18th. Aircraft despatched: BERLIN - 4, North-west flow
GERMANY Intruders 26, One Typhoon missing. 4 Enemy aircraft bomb caused
over Southern ENGLAND, Mount Pleasant Post Office. The parcel section killed. was
- 3, - 1 penetrating to Central LONDON where a burnt
a cut serious but much fire of at the mail was saved. Casualties 50 far reported 2
fields. 15th. 556 SICILY. Bomber and Fighter Sorties flown against airfields. Enemy
14th/15th. Wellingtons dropped 74 tons on air-
casualties in air - 13, 2, 13. Allied - 5, 0, 16.
14th/15th. 7 Beaufighters intercepted 39
MEDITERRANEAN. miles North of BONE and destroyed 4 Bombers. On severely 15th and
16th, enemy aircraft Beaufighters 100 attacked 9 Caiques in the AEGEAN, sinking 3 and
damaging the others.
Regraded Unclassified
224
WAR FINANCE BULLETIN
Office of the Secretary of the Treasury
Issue No. I
June 19, 1943
Redempt'ons of Savings Bonds
A lot of loose, uninformed talk on the subject of Sav-
ings Bonds redemptions has crept into the news. The effect
has been to create in some quarters an impression that re-
demptions have become & menace to the success of the volun-
tary savings campaign. Nothing could be farther from the
truth. Here are the facts.
Between May 1, 1941, when United States Savings Bonds
Series E, F and G were first issued, and May 31, 1943,
cash receipts from the sale of these issues have exceeded
$171 billions. Cumulative redemptions for this period
amounted to $700 millions -- or only 4 percent of sales.
In other words, about 96 percent of the funds invested in
these securities since they were first offered for sale is
still invested in them.
The record on Series E -- the people's bond -- is al-
most as good -- 8. notable achievement indeed when one
takes into consideration the kind of money these bonds in
large part represent. Between May 1, 1941 and May 31,
1943, sales of Series E bonds amounted to $11.3 billions.
Information Service for State War Finance Committees
Regraded Unclassified
525
- 2 -
Cumulative redemptions have amounted to $623 millions --
or only 5.5 percent of sales. About 94.5 percent of the
funds received from the sale of E bonds, therefore, is
still invested in those securities.
The figures for monthly redemptions are even more
heartening, and indicate there is no substance to the talk
about the growing magnitude of the redemption problem
Last March redemptions for E,F and G bonds taken together
amounted to 87/100 of 1 percent of the securities outstand-
ing; in April they amounted to 61/100 of 1 percent; and
in May to only 58/100 of 1 percent. The figures speak for
themselves.
There will be an appreciable increase in redemptions
in June, but the reason will be the same as for the in-
crease in March -- i.e., the necessity of making a payment
on the 1942 Income tax.
Redemptions of War Bonds for the first 5 months of
1943 have increased over those for the corresponding period
of 1942. But this is to be expected. Most of the increase
has been due to the larger volume of securities outstand-
ing. It has not been due to 8. growing widespread desire
to cash in Savings Bonds.
Regraded Unclassified
226
- 3 -
With Pay-as-you-go in effect starting July 1, there
will be less need to cash in Savings Bonds to meet quar-
terly Income tax payments. The vast majority of taxpayers
will soon be current. Others will have smaller quarterly
instalments to pay. This should result in reducing con-
siderably the number of redemptions for tax payment pur-
poses.
The fear has been e X pressed in some quarters that
Pay-as-you-go will cut into bond purchases and increase
the number of redemptions. This should be 8. temporary
phenomenon and should pass as soon as individuals become
accustomed to the new tax-paying system. The new With-
holding tax is not really a new tax at all. It is not B.
tax in addition to existing taxes. It is simply a change
in the mechanism of collecting taxes. The ability to fore-
go saving for taxes from now on should make it all the more
easier to save for other things -- War Bonds, for instance.
Harold Mager
Technical Assistant
Office of the Secretary
-o0o-
Regraded Unclassified
227
June 19, 1943
Dhe. Gamble
TO:
HAROLD N. GRAVES
SUBJECT:
WEEKLY REPORT FROM WAR SAVINGS STAFF
Riole
RADIO, PRESS AND ADVERTISING DIVISION
Advertising Section
The attached folder illustrates the designs which
will be used in the 24-sheet panels which will be sponsored
by The Seven-Up Company of St. Louis, Missouri, in October,
November, and December, in continuation of the War Bond
campaign they began in January. (Attachment (1)
Attached are two cooperative 24-sheet designs, one
sponsored by Anheuser-Busch, and the other by the Belmont
Radio Corporation of Chicago, both tied up with themes
utilized in official Treasury outdoor advertising. (Attachment (2)
milt 6/19/45
Regraded Unclassified
- 2 -
228
RADIO, PRESS AND ADVERTISING DIVISION
Advertising Section (Continued)
Also attached is a 24-sheet design entitled "For
Victory Buy Bonds, For Refreshment Drink Barq's," which will
CO to 152 Barq franchised bottlers for posting throughout
30 states. (Attachment #3)
Attached are two miniatures of 24-sheet posters, the
first of those to be issued within the next six months in the
current Treasury-approved outdoor advertising campaign.
(Attachment (4) The theme, "Buy War Bonds For Fighting Power
Today And Buying Power Tomorrow!" will be sustained throughout
the poster campaign.
A special 24-sheet will be issued for the Third War
Loan in September.
Two full-page advertisements will be issued per week
for the Third War Loan, supplemented with smaller adaptations.
This is in response to hundreds of newspaper requests for more
official advertisements than were issued in the Second War Loan,
when one full-page advertisement per week was released along w1 th
smaller adaptations.
Additional national magazines requesting advertising
material for early issues are REDBOOK, McCALL'S, NATION'S BUSINESS,
VOGUE, HOUSE & GARDEN, AMERICAN LEGION, BUSINESS, and THE GRADE
TEACHER.
During the week of June 7th we received 110 War Bond
mentions and six complete ads in the leading seven national
Regraded Unclassified
229
- 3 -
RADIO, PRESS AND ADVERTISING DIVISION
Advertising Section (Continued)
weeklies. Attached is a list of the sponsoring companies and
magazines in which the advertisements appeared. (Attachment #5)
Radio Section
In cooperation with the Retail Section's July campaign,
"Buy An Extra War Stamp to Build the Mystery Ship 'Shangri-La'",
the Radio Section has prepared an all-star fifteen-minute recorded
program featuring Mrs. James Doolittle, star singers Grace Moore
and Barry Wood, newspaper columnist and radio commentator Edwin C.
Hill, and David Broekman's Orchestra and Chorus. This program
is designed for sponsorship by retail merchants.
Excerpts from this material have been transcribed on
a five-minute phonograph record available to retail merchants
for use over loud-speaker systems.
Ten one-minute "Shangri-La" announcements have been
transcribed and-are available for sponsorship.
Dramatized one-minute spots will be recorded and broadcast
twice weekly during the last three weeks in July by every radio
station in the country - for a total of 9,000 "Shangri-La" announce-
ments.
"Shangri-La" announcements will be made during July by
Tommy Dorsey, Guy Lombardo, and Horace Heidt on their regular
Treasury broadcasts, and the "Saturday Night Bondwagon" will promote
the campaign on July 10th and 24th.
Regraded Unclassified
230
- 4 -
RADIO, PRESS AND ADVERTISING DIVISION
Radio Section (Continued)
Arturo Toscanini will conduct the NBC Symphony
Orchestra in four Treasury Concerts - June 20, July 18, July 25,
and September 19 - over the NBC network 5:00 - 6:00 P.M., EWT.
John L. Sullivan, Assistant Secretary of the Treasury,
will appear on "The Saturday Night Bondwagon" June 19th,
10:15 - 10:45 P.M., EWT, over the Mutual System. Marjorie Riordan
will be featured in a scene from the picture, "Stage Door Canteen".
Evelyn Case, lyric soprano, will also be heard.
"Truth or Consequences" ended its 14-week tour
June 12th in California, by selling $1,210,000 in War Bonds. This
brought the program's Bond sales to a final total of $188,481,082.
Press Section
Attached is the July Press Book released to company
publications. (Attachment (6)
Attached is a copy of the latest issue of "Comic
Cavalcade", which includes another episode in the War Sond serial,
"The Minute Man Goes to har", and an endorsement of War Savings
Stamps by Captain Eddy llickenbacker. (Attachment #7)
Attached is the latest "stars in Service" released to
mat-using dailies and weeklies. (Attachment (/8)
United Features is devoting a cartoon release to the
recent baseball players' War Bond auction. An advance proof is
attached. (Attachment (9)
Regraded Unclassified
- 5 -
231
RADIO, PRESS AND ADVERTISING DIVISION
Press Section (Continued)
Recent issues of twenty pulp magazines, tear sheets of
which are attached, contain 37 War Bond mentions in editorial
pages and cover seals. (Attachment #10)
Attached are a few samples of the Flag Covers of
Standard Publications pulp magazines. Approximately 40 of
their publications with a circulation of 2,500,000 will carry
the Flag and war Savings copy on their covers during July.
(Attachment )/11)
Attached are July Flag Covers of WOMEN'S DAY, HOUSE
BEAUTIFUL, HARPER'S, and AMERICAN FORESTS, all of which carry
War Bond copy. (Attachment #12)
Attached is the cover of a Popular Publications magazine
devoted to the purchase of War Savings Stamps. (Attachment #13)
NATIONAL ORGANIZATIONS DIVISION
Labor Section
A representative of this Section spoke on June 9th,
in Cleveland, to a group of 10 regional field men of the American
Federation of Labor on the subject of union-sponsored war material
drives.
The Automobile Workers (CIO) report that their 979,267
members are buying War Bonds on an average of 10.9% of earnings,
or $507,000,000 worth per year.
Regraded Unclassified
232
- 6 -
NATIONAL ORGANIZATIONS DIVISION
Labor Section (Continued)
A three weeks' tour on the Chicago, Burlington and
Quincy Railroad was completed by a member of this Section on
June 9th. During the tour 69 meetings were held, attended by
15,000 employees, or over half the personnel. Representatives
of the railroad, including President Budd, and of 10 railway labor
unions took part in this tour, which was marked by the most complete
cooperation between labor and management.
There will be a War Bond tour on the Chicago-Great Western
:ailroad from June 20 to 28.
On the Great Northern and Northern Pacific Railroads'
tour 6,000 employees have already been contacted.
Business and Trade Association Section
Attached are lists and graphs showing the payroll
deductions of 32 major industries. One form of this list is
confidential and the other is for use among trade association
executives. (Attachment (14)
out of the 25,000 unionized employees of the hosiery
industry, between 85% and 90 are buying Mar Bonds to the extent of
approximately 82% of the aggregate company payroll, or roughly, 10%
of the payroll of those participating.
Foreign Origin Section
Promotional letters on organization-sponsored war material
campaigns are being sent to national organizations of foreign origin.
Regraded Unclassified
- 7 -
233
NATIONAL ORGANIZATIONS DIVISION
Foreign Origin Section (Continued)
A $50,000,000 War Bond campaign will be inaugurated
this month by the Polish groups in the United States. Mr. Anthony
J. Stonina has been appointed as national chairman of the campaign.
Fraternal Section
Incomplete returns from the War Bond campaign of
District Grand Lodge #6 of B'nai B'rith indicate 11,000,000
worth of War Bonds sold. The original goal was 10,000,000.
The 175 lodges of the Ohio State Fraternal Order of
Eagles will sponsor a War Bond campaign during September.
The National Jewish War Veterans Association is planning
a Bond drive.
Inter-Racial Section
The 1,000,000 War Bond campaign sponsored by the Negroes
of New York went 200,000 over the goal.
A War Bond drive in Pittsburgh, Pennsylvania, is to be
sponsored by the Negro Women's Committee.
Two members of this Section, Dr. Pickens and Mr. Thomas,
have sponsored and directed a great National Baptist Sunday School
Convention and War Savings School at Dallas, Texas, on June 10 - 14.
FIELD DIVISION
Special Activities Section
On June 8th at a luncheon in New York 37 selected
baseball players from the Giants, Yankees, and Dodgers were auctioned
Regraded Unclassified
- 8 -
234
FIELD DIVISION
Special Activities Section (Continued)
off to sponsors who bid for them in War Bonds. Pledges and sales
of $123,000,000 in War Bonds resulted. In addition, the "owner"
of a player is pledged to buy set amounts of War Bonds for each hit,
run, put-out, strike-out, etc., made by his protege. The Sports
Writers' Association, which originated the idea and staged the
luncheon, estimates that War Bond sales of about $300,000 each
playing day during the season may be anticipated.
The Strand Theatre in Skowhegan, Maine, weekly puts up
in lights the name of a different local boy in foreign service. A
lobby board carries his picture, the local newspaper prints his
biography and picture, and friends, relatives, and patriotic townsmen
then do their part by buying War Bonds during "his week". Each boy
receives & list of the amount of Bond purchases and the names of all
purchasers.
The Phi Delta Epsilon Medical Fraternity, with a membership
of 8,000 doctors, 2,000 of whom are in the armed forces, celebrated
the purchase of its second bomber during the week of June 7th by
pledging to purchase a heavy bomber every month for the duration of
the war.
The women of Virginia assumed responsibility for the 12,000,000
May War Bond quota for their state, and attained sales of 16,332,725,
or 36.1; over the goal for "Women's Month".
Regraded Unclassified
- 9 -
235
FIELD DIVISION (Continued)
Agricultural Section
Latest returns from Georgia 4-H Club members show they
have more than doubled their goal in their "Name A Liberty Ship"
campaign, the first completed in the nation. The goal was $1,950,000.
Each of the 1,887 Oklahoma 4-H clubs is being encouraged
to sponsor at least one special event to sell Bonds this summer.
In several counties, county 4-H organizations already have campaigns
under way to raise the 400,000 price of a bomber.
At the invitation of the American Bankers' Association,
three members of the Agricultural Section attended a meeting of
the Association's Agricultural Committee in New York this week to
discuss material for a leaflet on War Savings to be used as the
basis of a War Bond project to be carried out by country bankers
in cooperation with the War Savings Staff. The leaflet will be
distributed by the /merican Bankers Association through its
country banks.
A purebred Hereford calf recently was auctioned for
535,000 in Bonds at Spencer, West Virginia.
The Minnesota Electric Cooperative is the first state
organization of its kind to launch & statewide "suy a Bomber"
campaign, following arrangements made by the Agricultural Section
with the National Rural Electric Cooperative Association. The
Minnesota cooperative has mailed a mineographed letter and supplies
of a pledge blank to each of the managers of REA Cooperatives in that
state.
Regraded Unclassified
- 10 -
236
FIELD DIVISION (Continued)
Retail Section
Parades, rallies, auctions and house-to-house canvasses
are being planned for the July "Shangri-La" campaign. A radio
program to be commercially sponsored by retailers has been prepared.
Sears, Roebuck and Company reports sale of Bonds and
Stamps from March 27 to April 23 of 631,436,82.
F. W. Woolworth Company reports a May sale of Bonds end
Stamps of 3,016,172.55. A copy of its report for April and May
is attached. (Attachment (15)
Wellan's Department Store, Alexandria, Louisiana, ran a
War Bond sale last month as its five-day anniversary event, aiming
at a Coal of 100,000. The store sold almost double its quotà.
Motion Pictures and Special Events Section
The "Truth or Consequences" War Bond broadcast from
Oakland, California, on Saturday, June 12th, resulted in the sale
of 1,210,000 worth of War Bonds. This brought the total for the
14-week - coast-to-coast tour to ,188,481,082.
On June 14th, Flag Day, there was a mass raising of
Treasury Department Minute-Man Flags on all New York motion picture
theatres on Broadway between 42nd and 52nd Streets.
A poster is being displayed in all Loew's Theatres,
indicating the theatre's Bond sales to date and also the circuit's.
(Attachment #16)
Regraded Unclassified
- 11 -
237
FIELD DIVISION (Continued)
Motion Pictures and Special Events Section
The Special Events Section supplied the Army Band from
Camp Stewart, West Point, to appear with Secretary Morgenthau at
the War Bond Rally and NBC coast-to-coast broadcast on Saturday,
June 12th, from Kingston, New York.
Barry Wood was booked by Special Events Section to appear
at a city-wide Payroll Savings Rally at Toledo, Ohio, on June 14th.
The series of paintings by Charles Long, Jr., entitled
"America Attacks", has been booked into the leading department
stores throughout the country. A booklet showing these paintings
is attached. (Attachment #17)
The Jap sub last week visited Dunkirk and Jamestown, New
York, and Erie, Meadville, Sharon, New Castle, Franklin, Warren,
Bradford, Kane, Ridgeway, DuBois, Clearfield, Altoona, Johnstown,
Latrobe, and McKeesport, Pennsylvania.
Payroll Savings Section
The 19 state and national Payroll Savings meetings for
the current drive have been completed and every state has been covered.
These meetings reached over 2,000 state and local Payroll Savings
chairmen. By July 1 these chairmen will in turn have fully prepared
30,000 Payroll Savings workers for their part in the current
drive. Early returns on two trial Payroll Savings drives indicate
full success for the "Figure It Out Yourself" theme and the promotion
suggestions set forth in the "Dollars and Cents" Manual.
Regraded Unclassified
- 12 -
238
FIELD DIVISION
Payroll Savings Section (Continued)
The first of these drives, conducted at the Douglass
Aircraft Assembly Plant in Oklahoma City, more than doubled
the Payroll Savings participation, increasing it 148%. As a
result of the drive, 82% of the workers are purchasing one or
more Bonds per month.
A Washington representative of this section was on hand
to cooperate in conducting the trial campaign at the New
England Shipbuilding Corporation in South Portland, Maine.
Before the drive began last week, weekly payroll participation
amounted to $27,000. After a management-labor committee had
launched the "Figure It Out Yourself" drive, a preliminary
count on only 65% of the pledge cards gave a total weekly
Payroll Savings participation of $190,000. Projected to a 100%
basis, this amounts to $285,000 per week.
The acceptance of the promotional material dealing
with the "Figure It Out Yourself" campaign has been such that
after supplying the 27,000,000 employee booklets and the 100,000
sales manuals, it was necessary to have a second and third
printing to meet the additional demand.
The attached Payroll Savings letter from President
Roosevelt is receiving the widest press and radio publicity.
(Attachment #17-A)
The companies on the attached list are among those to
report during the last week as having achieved the 10% goal.
(Attachment #18)
Regraded Unclassified
- 13 -
239
FIELD DIVISION
Payroll Savings Section (Continued)
The analysis of exposure to Payroll Savings through
June 5, 1943, is attached. (Attachment #19)
Education Section
On Monday, June 14th, 39,535 jeeps were officially
presented to the War Department by the children of America who have
purchased nearly $36,000,000 in War Stamps and Bonds during the
Spring Jeep Campaign. Paramount, M-G-M News of The Day, Fox
Movietone, Pathe News, an Army Public Relations cameraman, an
Associated Press cameraman, and the Richmond staff office cameraman
covered the presentation at the Pentagon Building in Arlington.
Betty Turner, 6, of the Henry Clay School of Arlington, Virginia,
made the presentation to Lieutenant General Brehon Somervell, in
command of the Army Service Forces, accompanied by Major General
LeRoy Lutes, Chief of Operations ASF, and Major General L. H.
Campbell, Jr., Chief of Ordnance, ASF. Presentation ceremonies
and newsreel coverage were planned by the Special Events Section.
The presentation is attached. (Attachment (20)
Members of the Education Section will represent the
Treasury Department at fourteen summer school sessions at which the
Federal Education War Council will sponsor wartime workshops for
teachers and school administrators. Seven other federal agencies
will also cooperate in presenting wartime problems and programs. The
conference circuit is attached. (Attachment #21)
The Indiana War Savings Staff has completed a transcription
Regraded Unclassified
- 14 -
240
FIELD DIVISION
Education Section (Continued)
to accompany the filmstrip "Hilly Dollar", giving the narrative
music and sound effects. The discs are sent out with the filmstrip
supplied by the national office.
Women's Section
Six regional women's conferences will be held during July
at Atlanta, Dallas, San Francisco, Denver, Cleveland and Boston.
A conference was held with representatives of the American
Federation of Labor in regard to the women's part of a radio program
to be devoted to War Savings, on the Labor for Victory hour.
Issue #9 of Women's Club News Service for June has been
prepared for distribution to editors of women's club publications.
Proof of a letterhead is included with the suggestion it be used
in reproducing "Letter From Washington", a regular feature of the
News Service.
Fifty colleges have between them reported investments
of over 2,000,000 in War Bonds for the past college year.
Recont Memoranda
Recent memoranda sent to the field include numbers 630,
631, 633, 634 and 635. (Attachment #22)
OFFICE OF THE EXECUTIVE DIRECTOR
Promotional Research Section
Attached is the analysis of newspaper carrier sales as
of June 17, 1943. (Attachment (23)
Attached is the resume of War Savings Stamps sales for
April, 1943. (Attachment #24)
Regraded Unclassified
241
NOT TO BE RE-TRANSMITTED
MOST SECRET
COPY NO. 13
OPTEL NO. 199
Information received up to 7 A.M. 19 June.
1.
NAVAL. One of H.M. Submarines sank a schooner and
damaged the escort vessel by gun fire off Bari on 12th and
torpedoed a 7600 ton ship Aff Corfu on 14th.
2.
AIR OPERATIONS.
Western Front. 18th. Mustangs damaged 5 armed
trawlers off the Dutch coast. Photographs of Dusseldorf
taken 7 A.M. 18th show that as result of the attack on 11th/12th
over 1000 acres of residential and commercial buildings are
more than 80 per cent burned out, some fires are still
smouldering.
Italy. 16th/17th. Wellingtons dropped 37 tons on
Naples.
Sicily. 17th. Escorted Liberators dropped 116 tons
on Comiso and Biscari airfields.
Regraded Unclassified
0. TO R.- ID/ED
242
COPY NO.
13
BRITISH MOST SECRET
U.6. SECRET
OPT L No. 202
Following is supplementary resume of operational events
covering the period 12th to 19th June, 1943.
1, NAVAL
The passage of navel units to and from spitzbergen and
North RUSSIA in connection with rlief of personne) and transport of
stores was carried out without incident under cover of Home fleet. No
enemy ships sighted and no interference by aircraft or U-5025.
German Cruiser LEIPZIG reported 32 LIBAU 5th.
MEDITERRANEAN. H.M. and Allied submarines Corpodoed 2
tankers (one of 15,000 tons) and 2 medium sized morchanemen and sant
one merchantman, one Schooner and 6 Caiques. Pirct westbound through
convoy has passed safely through MEDITERRANEAN.
SUBMARINE WARFARE. Week ending 13:5 ocean convoys ar-
rived without loss. of about 90 U-boats estimated cating in Atlant
and Indian Oceans, about " are on U.S. to CASA Scate.
Week ending 6th. In all theatres 37 ttacks on U-boats
of which 21 by aircraft. Of 11 promising attacks A were by Carrier-
borne aircraft, 2 by U.S. ships, 3 by H.M. ships and 4 by Coastal
Command. Operations by latter again hampered by bad weather. Never-
theless during week ending 16th, 560 sorties flown involving 4,809
flying hours on anti-submarine sweeps and convoy escorts. 36 U-boats
sighted and 16 attacked, 4 with promising results. In almost every
U-boats fought back with cannon and machine gun fire. U-boats
have case, been sighted proceeding on surface in small groups up to 5 in
number,
SHIPPING CASUALTIES. During the week 12th to 18th, 7 ship
were reported torpedoed and sunk, One large U.S. tanker off South
Carolina, a Greek ship north of ASCENSION ISLAND, one British, one
Dutch and one unnamed ship in the MEDITERRANEAN, one U.S. ship of: CORSU
of ARABIA and another U.S. ship south of BRISBANE. A British ship was
slightly damaged by aircraft off CAPE ST. VINCENT and a small ICELAND
ship was bombed off ICELAND but reached port in tow,
TRADE. Sailings of blockade runners to and from FAR EAST
appear to have been held up for the time being. Imports in convoy into
U.K. week ending 12th - 691,000 tons including 266,000 oil.
2, MILITARY
lofence most of them in permanent emplacements and 70 light V3
PANTELLERIA. Defence included 110 heavy A/A and coast
was, Prisoners guns, taken approximately 12,000 Italians and 78 Gormany,
MIGDAV to BUTHIDAUNG line in ARAKAN, and 3 miles east of FORT
BURMA. Patrol activity only. Japanese are digging
,1 CHIN HILLS. Intention doubtless to hold these positions during
soons,
3 AIR OPERATIONS
THE WESTERN successful. About 1500 acres of city devastated week
FRONT. Night. The latest attack on DUSSELDORF and
hardly extremely left standing in mile long Oststrasse. This attache
both -,173 reckoned sorties moderately successful. From COLOGNE no great EX-
a building - 58 aircraft missing- BOCHUM and OBERHAUSEN results
pected.
BREMEN Day. R.A.F. Two Coastal Commend attacked convoy
principal operations by 8th U.S. Air off Force Hook again of
Holland. and Other KIEL. R.A.F. attacks on coastal shipping, locomotives,
Northern France, etc.
Regraded Unclassified
243
- 2 -
ENEMY. About 55 aircraft operated against U.K. 7 were
destroyed.
SICILY. Heavy attacks maintained on airfields, enemy oppo-
sition slight. In mediterranean Theatre total of 9,560 Allied sor-
ties flown during week ending 15th for loss of 15 aircraft from
heavy action.
RUSSIA. Lull in military operations of the Russian Front
not repeat not reflected in the air. Since beginning of June, both
German and Russian Air Forces have operated DO increasing scale The
most significant feature of German activity 14 yelp long range
Bomber forces hitherto used on the Russian 30.00t tirst exclusively
in direct support of military operations has DD ng the acst two
eeks operated as a strategic air force attacking town Industrial
targets in the rear unrelated to operations on the grown These
raids have been sustained and on considerable acale. THE inotical
close support forces continue to be engageò in arrassing operations
on considerable scale immediately behind the Pursian line from
OREL southwards.
4, EXTRACTS FROM PHOTOGRAPHIC AND INTELLIGANCE OK RESULTS
ALLIED AIR ATTACKS
DORTMUND. Final interpretation of
confirms
damage to war industry as follows: Hoesch and
vaste) Steel
Works, also three subsidiaries of former como engineers
boiler works, iron works, railway wagon works, acceptios, many
warehouses and dook mullings, main railway including goods
sheds and repair shops, power station, gas workshy tolograph office,
and main fire station. Town itself was unaffected 37 floods from uams
FLENSBURG. U.S. raid 19th May. Direct hits on lectricity
works and 3 barracks where heavy service casualties. 2 U-boats dam-
aged. No water or electricity for 3 days and fires allowed to buen
themselves out. Town probably without gas for about 6 months. Great
effect on morale.
MUNSTER. R.A.F. raid 11th/12th. Following destroyed 0%
damaged: Gas works, main railway station, goods station, barracks
for motorised troops.
JENA. Mosquito attack 27th May. At Zeiss Works one yang
producing aircraft instruments heavily damaged and another on fiel?
glasses and stereo telescope damaged. 65 operatives killed,
5. HOME SECURITY
Estimated civilian casualties week ending 16th - killed 101,
Seriously wounded 191, including 65 killed and 110 seriously wounded
at GRIMSBY.
EASURY DEPARTMENT
61 zi Wd be NOP
SECRETARY OF TREASURY
Regraded Unclassified
244
NOT TO BE RE-TRANSMITTED
COPY NO. 13
BRITISH LOST SECRET
U.S. SECRET
Information received up to 7 a.m., 20th June, 1943.
1. NAVAL
One of H.M. Submarines sank a 2,000 ton vessel carrying M.T.
and cased petrol for East SARDINIA on 10th. Now known that enemy submarine
sunk by aircraft south of CYPRUS 16th was U-97. 2 officers and 18 ratings
captured. Reference Optel No. 198.
2. MILITARY
The Parachutists dropped at BENGHAZI on 13th/14th succeeded
in destroying 5 aircraft on 17th/18th.
3. AIR OPERATIONS
WESTERN FRONT. 19th. 44 Sorties were flown by fighters
and fighter bombers against enemy transport targets. 2 aircraft missing.
Mosquitoes destroyed 2 enemy aircraft over the BAY OF BISCAY. Hampdens
off South-west point of NORWAY torpedoed 2 ships and probably a 3rd.
19th/20th. Aircraft despatched LE CREUSOT SCHNEIDER WORKS - 290 (2 missing)
Neighbouring Power Station at MONT CHANIN - 26, RUHR - 6, Sea-mining - 12
(1 missing), Intruders - 25. Two enemy aircraft destroyed.
Preliminary reports indicate very successful attack on the main objective.
2 Fighter Bombers operated over KENT and SURREY, One of them penetrating
to Contral LONDON. 16 more made brief incursion over the DOVER Area. 1
F.W. 190 landed at R.A.F. Airfield in KENT.
4. HOME SECURITY
17th/18th. PORTSMOUTH. Now reported 25 casualties at Naval
Shore establishment FAREHAM. 19th/20th. LONDOM. a bomb dropped at POPLAR
caused 3 fatal casualties. Late News. British 8,000 ton vessel in convoy
carrying about 1,670 troops sunk by U-boat off TOBRUK. 17th. 1,353 survivors
so far reported.
Regraded Unclassified
245
EMBAJADA DEL URUGUAY
Washington, D. C.
Montevideo
June 20, 1943
Excellency:
I had the honor of receiving your Note dated March 4th, as well
as the prospective project relative to creating an "International
Stabilization Fund", which contains the preliminary ideas on what the
institution might be, the structure of which is being studied, at the
present time, in the United States.
In accordance with the terms expressed in your kind Note, I have
studied all the details of the prospective project and consulted with
the President of the Republic, as well as with other officials of the
Administration who have the capacity to interpret the problem.
Accepting the suggestion contained in your note, the Uruguayan
Government has chosen to appoint Mr. Pedro Cosio as envoy in order
that he may express to you our point of view and discuss, in detail, the
various questions which the subject might set forth.
Please accept, Excellency, the assurances of my highest consideration,
/s/ Ricardo Cosio
The Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
United States of America
M. F. Guicci
Primer Secretario
COPY
Regraded Unclassified
246
Sales and Redemptions of Savings Bonds
(In millions of dollars)
:
:
:
March
June
:
:
:
Change
:
1-19
:
1-19
:
Sales
E bonds
415.7
376.6
-39.1
F and G bonds
132.0
90.8
-41.2
Total
547.7
467.4
-80.3
Redemptions
All series
91.8
94.4
+2.6
Amount outstanding
All series (beginning
of month)
17,067
20,507
+3,440
Lork
Redemptions as a percent
of outstanding
.54%
.46%
-.0%
Office of the Secretary of the Treasury,
June 21, 1943.
Division of Research and Statistics.
Regraded Unclassified
Analysis of Redemptions of Savings Bonds
December 1942 to Date
(All series - Dollars are millions)
:
1942
:
1943
December
January
February
.....
March
April
May
:
:
.....
June
:
I. Amount of savings bonds out-
standing at end of month
$15,050
$16,246
$17,067
$17,891
$19,267
$20,507
$21,250 1/
$66.5
$94.4
kept see that this not
Treasury Secret. 1m2
II. Redemptions by the 19th of
the month:
Amount
$35.6
$40.5
$53.5
$91.8
$68.6
Percent of outstanding
0.24%
0.25%
0.31%
0.51%
0.36%
0.32%
III. Redemptions by the end of
the month:
Loold.and 0.44% please
Amount
$54.7
$63.0
$76.4
$131.2
$102.8
$104.0
Percent of outstanding
0.36%
0.39%
0.45%
0.73%
0.53%
0.51%
Office of the Secretary of the Treasury, Division of Research and Statistics.
June 21, 1943
Partly estimated.
248
MEMORANDUM FOR THE SECRETARY
June 21, 1943
From: Mr. Paul
Attached is & brief statement comparing the tax burden
in this country with the burden in the United Kingdom and
Canada.
The breakdown of the tax burden by income classes is
shown only for the direct taxes -- the individual income
tax and the employee contributions to social security.
Work is in process on the breakdown of the other taxes
by income classes. It is difficult to show the burden of
the indirect taxes by income classes. To do so, it is
necessary to make a number of questionable assumptions.
The results will correspondingly be much less reliable
than those for direct taxes.
We have tried to get figures on the bonds taken by
individuals in relation to income payments in the three
countries, for the purpose of comparing the showing which
individuals are making on bond purchases. So far, some con-
fidential data have been obtained for Canada but Canadian
authorities indicate that they are not suitable for release.
Corresponding data for the United Kingdom have been requested
by cable. No data are available on bond purchases by income
classes.
And
Regraded Unclassified
249
Comparison of tax burden in the United States,
United Kingdom and Canada
International comparison of tax burdens is among the
most controversial subjects. It is easy to question the
validity of the best comparisons which can be prepared be-
cause economic conditions, standards of living, income
distributions, purchasing power of money, and other factors
vary markedly from one country to another. For example,
when we ask: What income in the United Kingdom corresponds
to a $4,000 income in the United States? the answer ordi-
narily given, based on the current exchange rate, is £1,000.
But some persons familiar with the situation in both countries
contest this conclusion. They contend that £1,000 in the
United Kingdom is not the equivalent of $4,000 here. It is
not equivalent if we compare the place of £1,000 in the scale
of United Kingdom incomes with the place of $4,000 in the
scale of United States incomes, or if we compare what £1,000
will buy in the United Kingdom with what $4,000 will buy here,
or if we compare the prestige attached to an income of £1,000
in the United Kingdom with that attached to one of $4,000 here.
These points are mentioned to illustrate the weakness of the
data on international comparisons of tax burdens. The follow-
ing comparisons, accordingly, must be used with care.
Comparison of the total tax burden in different coun-
tries is frequently made on 8. per capita basis and also in
terms of the percentage which total taxes are of national
income.
1. Total taxes for the United States, United Kingdom
and Canada, including Federal, State and local for the
fiscal years 1943-1944 and 1942-1943 are in billions of
dollars 88 follows:
Central
State and
government
local
Total
taxes
taxes 1/
taxes
1943-44 : 1942-43
1943-44:1942- 43
United States
$37.8
$23.8
$9.6
$47.3
$33.4
United Kingdom
13.2
11.6
.9
14.1
12.5
Canada
2.6
2.2
.5
3.1
2.7
Latest data available. See table 4B.
Regraded Unclassified
250
-2 -
The central government collects a substantially larger
percent of the total taxes in the United Kingdom and in
Canada than in the United States. The 1943-44 estimates
are 93.7 and 84.6 percent respectively as against 79.8 per-
cent for the United States.
The 1943-44 income and profits taxes in the United States
are estimated to account for 66.6 percent of total taxes com-
pared to 49.8 percent in the United Kingdom and 58.1 percent
in Canada. (For details see table 4 attached).
2. The figures on total taxes for the three countries
when put on & per capita basis are as follows:
Total Federal, State and
local taxes per capita
1943-44
:
1942-43
United States
$345
$246
United Kingdom
294
262
Canada
262
228
Figures on per capita taxes do not accurately reflect
differences in tax burden for several reasons. In a poor
country even a very low per capita tax may be 8. very severe
burden -- more of a burden than 8. higher per capita tax in
a wealthy country. In addition, goods and services are
supplied through government operations to 8. greater extent
in some countries than others. The taxes needed to finance
the greater participation of government in the economy of a
country will increase its per capita taxes without necessarily
involving a higher burden.
3. A more accurate comparison of total tax burden in
two countries is the relation of total taxes to national
income. The ratios of total taxes to national income for
the three countries in 1942-43 are as follows: (Official
national income estimates for 1944 are not available.)
Regraded Unclassified
251
- 3 -
Total
Percent
Federal,
total taxes
State, and
National
of national
local taxes
income 1/
income
(In billions of dollars)
United States
$33.4
$135.0
United Kingdom
24.7%
12.5
Canada
29.5
42.5
2.7
7.5
35.6
Official figures.
United States national income includes interest on Federal
debt and social security contributions of employers, which
British estimates exclude. British figures include imputed
rent of owner occupied houses and amount of profits paid in
profite taxes, which American estimates exclude. Putting
American figures on British basis would give roughly
$1431 billion, making the percentage 23.3 percent instead
of 24.7 percent.
3/ British taxes for 1942-43 (12 months ending March 31, 1943)
are compared in the table with income for the calendar year
1942. Taxes for calendar year 1942, on B. comparable basis,
are $11,584 million. On this basis the percentage would
be 39.3 percent instead of 42.5 percent.
4. In each of the countries part of the taxes, like the
individual income tax and employee contributions for social
security, are imposed directly on individuals and can be re-
lated to their incomes. The remaining taxes are imposed on
corporations or are imposed on some persons but are intended
to be shifted in whole or part and to be finally borne by
others. Excise taxes, sales taxes, property taxes, are ex-
amples of this latter group of taxes which cannot with cer-
tainty be related to the incomes of the people who finally
bear them.
The 1943-44 amounts and proportions of the two groups of
taxes - those that can and those that cannot definitely be
related to the incomes of the people who finally bear them --
are shown for the three countries in the following table
(derived from the more detailed table 4 attached):
Regraded Unclassified
252
- 4 -
Individual
incomes and
employee
contributions
to social
security 1/
Other taxes
:Percent
: Percent
Total
Amount : of
Amount : of
taxes
: total
: total
2/
(In billions of dollars)
1943-44
United States
$17.2
36.4%
$30.1
63.6%
$47.3
United Kingdom
5.3
37.4
8.8
62.6
14.1
Canada
1.0
31.6
2.1
68.4
3.1
1942-43
United States
8.7
26.1
24.7
73.9
33.4
United Kingdom
4.6
36.5
8.0
63.5
12.5
Canada
.6
22.3
2.1
77.7
2.7
Taxes which can definitely be related to incomes of
individuals who finally bear them.
2/
Due to rounding, figures may not add to totals.
5. The following table derived from the accompanying
table 3 gives the combined individual income tax and employee
social security contributions in the three countries for a
married person with no dependents at a few selected income
levels.
Regraded Unclassified
253
- 5 -
:
Net income
Total income tax and employee contributions
before
:
for social security
:
Amounts
personal
:
Effective rates
:
United : United :
exemptions
Canada
: United : United :
:
States
:
Kingdom:
: States : Kingdom:
Canada
$ 1,000
$
35
$
130
$
16
3.5%
13.0%
1.6%
2,500
367
749
651
14.7
29.9
26.0
5,000
1,061
1,855
1,878
21.2
37.1
37.6
10,000
2,851
4,505
4,762
28.5
45.1
47.6
100,000
70,453
84,080
78,987
70.5
84.1
79.0
Non-refundable part of individual income tax
Amounts
:
Effective rates
United : United :
Canada
: United : United :
States : Kingdom:
: States : Kingdom:
Canada
$ 1,000
$
15
$
50
-
1.5%
5.0%
-
2,500
297
587
$
401
11.9
23.5
16.0%
5,000
932
1,628
1,378
18.6
32.6
27.6
10,000
2,611
4,245
3,762
26.1
42.5
37.6
100,000
69,423
83,820
77,987
69.4
83.8
78.0
Refundable part of the individual income tax
Amounts
:
Effective rates
United : United :
: United : United :
Canada
Canada
States : Kingdom:
: States : Kingdom:
$ 1,000
$
10
$
61
$
-
1.0%
6.1%
-
2,500
43
143
250
1.7
5.7
10.0%
5,000
99
227
500
2.0
4.5
10.0
10,000
210
260
1,000
2.1
2.6
10.0
100,000
1,000
260
1,000
1.0
0.3
1.0
Employee contributions for social security
Amounts
:
Effective rates
United
:
United
:
: United : United :
Canada
Canada
States
:
Kingdom:
: States : Kingdom:
$ 1,000
$11.11
$19.07
$15.60
1.11%
1.91%
1.56%
2,500
27.78
19.07
-
1.11
.76
-
5,000
30.00
-
-
.60
-
-
10,000
30.00
-
-
.30
-
-
100,000
30.00
-
-
.03
-
-
Regraded Unclassified
254
- 6 -
Except at the lowest levels where the Victory tax
affects the situation, the combined income tax and the
employee social security contributions are higher at all
levels of income in the United Kingdom and Canada than they
are in the United States. The employee contributions to
social security are higher at the lowest levels of income
in the United Kingdom and Canada than they are in the United
States. The maximum contributions are, however, lower in
both the United Kingdom and Canada than in the United States,
$19.07 and $18.72 as against $30.00 in the United States.
Furthermore, individuals with substantial incomes are not
covered in either the United Kingdom or Canada and con-
sequently make no contributions for social insurance, where-
as in this country all levels of income are covered and are
required to make contributions based on amounts of income
up to $3,000. The individual income tax burdens are shown
in detail by income classes in the accompanying tables 1
and 1A; the employee contributions for social security are
shown in tables 2 and 2A; and the combined figures for the
two taxes are shown in tables 3 and 3A.
Treasury Department, Division of Tax Research
June 21, 1943
Regraded Unclassified
255
Table 1
Individual income tax: Amounts of tax liability at selected levels of income
under laws of the United States, United Kingdom, and Canada
Married person - no dependents
:
:
United States
:
United Kingdom 2/
:
Canada
Net
:
:Total tax:Post-war: Net tax :
:
:
:
:
:
income :
:liability:
credit
:liability:
Total
:
Post-
:Net tax: Total
:
Post-
:Net tax
before
:
Gross
:including:
on
:including:
tax
lia-:
war
:liabil-:tax lia-:
war
:liabil-
personal
:
income
:New York :Victory
:New York
:
bility
:
credit
: ity
:bility
:
credit
:
ity
exemption:
State tax:
tax
: State :
:
:
:
:
:
:
:
:
:
tax
:
:
:
:
:
:
$
800
$
889
$
13
$
5
$
8
$
52
$ 52
-
I
-
-
1,000
1,111
24
10
15
111
61
$ 50
-
-
1
1,500
1,667
100
21
79
280
94
186
$ 200
$ 100
$ 100
2,000
2,222
220
32
188
505
127
378
431
200
231
2,500
2,778
340
43
297
730
143
587
651
250
401
3,000
3.333
466
54
411
955
160
795
884
300
584
4,000
4,444
744
76
667
1,405
193
1,212
1,364
400
964
5,000
5,556
1,031
99
932
1,855
227
1,628
1,878
500
1,378
6,000
6,667
1,350
121
1,229
2,305
260
2,045
2,415
600
1,815
8,000
8,889
2,043
165
1,878
3,305
260
3,045
3.555
800
2,755
10,000
11,111
2,821
210
2,611
4,505
260
4,245
4,762
1,000
3,762
20,000
22,222
7,883
432
7,451
11,230
260
10,970
11,279
1,000
10,279
100,000
111,111
70,423
1,000
69,423
84,080
260
83,820
78,987
1,000
77,987
Treasury Department, Division of Tax Research
June 19, 1943
Note: Because of rounding, differences may not check precisely.
1/ For the United States and United Kingdom, maximum earned net income is assumed. For Canada, all
income in excess of $30,000 is assumed to be investment income. For United States Victory tax
computation, Victory tax net income is assumed to be ten-ninths of net income.
Pound converted at $4.00
Regraded Unclassified
15)
Table 1A
Individual income tax: Effective rates of tax at selected levels of income
under laws of the United States, United Kingdom, and Canada
Married person - no dependents
:
:
United States
:
United Kingdom 2/
:
Canada
Net
:
:Total tax:Post-war: Net tax :
:
i
:
pr
:
:
:
income
:
Gross
:liability: credit :liability:
:
:
:
before
:
income
:including:
Total
:including:
Post-
on
Net tax
Total
Post-
Net tax
:
personal
:
:New York :Victory
:New York
tax lia-
war
liabil-
tax lia-
war
liabil-
exemption:
State tax:
tax
:
State
bility
credit
:
ity
:
:
bility
credit
ity
:
:
:
:
:
tax
:
:
:
:
:
:
$
800
$
889
1.6%
0.6%
1.0%
6.5%
6.5%
-
-
I
-
1,000
1,111
2.4
1.0
1.5
11.1
6.1
5.0%
-
-
-
1,500
1,667
6.7
1.4
5.3
18.7
6.3
12.4
13.3%
6.7%
6.7%
2,000
2,222
11.0
1,6
9.4
25.3
6.4
18.9
21.6
10.0
11.6
2,500
2,778
13.6
1.7
11.9
29.2
5.7
23.5
26.0
10.0
16.0
3,000
3,333
15.5
1.8
13.7
31.8
5.3
26.5
29.5
10.0
19.5
4,000
4,444
18.6
1.9
16.7
35.1
4.8
30.3
34.1
10.0
24.1
5,000
5,556
20.6
2.0
18.6
37.1
4.5
32.6
37.6
10,0
27.6
6,000
6,667
22.5
2.0
20.5
38.4
4.3
34.1
40.3
10,0
30.3
8,000
8,889
25.5
2.1
23.5
41.3
3.3
38.1
44.4
10.0
34.4
10,000
11,111
28.2
2.1
26.1
45.1
2.6
42.5
47.6
10,0
37.6
20,000
22,222
39.4
2.2
37.3
56.2
1.3
54.9
56.4
5.0
51.4
100,000
111,111
70.4
1.0
69.4
84.1
0.3
83.8
79.0
1.0
78.0
Treasury Department, Division of Tax Research
June 19, 1943
Note: Because of rounding, differences may not check precisely.
For the United States and United Kingdom, maximum earned net income is assumed. For Canada, all
income in excess of $30,000 is assumed to be investment income. For United States Victory tax
computation, Victory tax net income is assumed to be ten-ninths of net income.
Pound converted at $4.00
Regraded Unclassified
257
Table 2
Employee social insurance contributions in the United States,
United Kingdom, and Canada, 1943
Net income :
:
:
:
before
:
Gross
:
United
: United
:
Canada
personal
:
income
:
States
: Kingdom
:
exemption
:
I
:
:
$
800
$
889
$ 8.89
$19.07
$12.48
1,000
1,111
11.11
19.07
15.60
1,500
1,667
16.67
19.07
18.72
2,000
2,222
22.22
19.07
-
2,500
2,778
27.78
19.07
-
3,000
3.333
30.00
-
3/
-
4,000
4,444
30.00
-
-
5,000
5,556
30.00
-
-
6,000
6,667
30.00
-
-
8,000
8,889
30.00
-
-
10,000
11,111
30.00
-
-
20,000
22,222
30.00
-
-
100,000
111,111
30.00
-
-
Treasury Department, Division of Tax Research
June 19, 1943
Covers old-age and survivors' insurance; under the provisions of
the present law the contributions for the years 1944 and 1945 will
be double the amounts shown for 1943.
Assumes a male worker aged 21 to 65; covers unemployment, health
and old-age insurance. The contributions rate is a flat $.37 per
week. Pound converted on basis of $4.00.
Non-manual workers paid at a rate exceeding approximately $1,680
are excluded from coverage. In this table individuals with net
incomes of $3,000 or more are assumed to be non-manual workers.
Covers unemployment compensation. The weekly rate of contributions
ranges from $.12 in the case of employees earning $5.40 to $7.49
per week to $.36 in the case of employees earning $26.00 to $38.49
per week. Those earning less than $5.40 per week make no contri-
butions and receive no benefit payments but they do acquire certain
benefit rights. Old-age pensions are administered by the provinces,
but these are on a non-contributory basis,
Source: Social Insurance & Allied Services, Beveridge, P. 227.
The Canada Yearbook, 1942, P. 687.
Internal Revenue Code, as amended, Sec. 1400.
Regraded Unclassified
258
Table 2A
Employee social insurance contributions as a percent of net
income in the United States, United Kingdom, and Canada, 1943
Net income :
:
:
:
before
:
Gross
:
United
:
United
:
personal
:
income
:
States
:
Kingdom
Canada
:
exemption
:
:
:
:
$
800
$
889
1.11%
2.38%
1.56%
1,000
1,111
1.11
1.91
1.56
1,500
1,667
1.11
1.27
1.25
2,000
2,222
1.11
.95
-
2,500
2,778
1.11
.76
-
3,000
3.333
1.00
-
3/
-
4,000
4,444
.75
-
-
5,000
5.556
.60
-
-
6,000
6,667
.50
-
-
8,000
8,889
.38
-
-
10,000
11,111
.30
-
-
20,000
22,222
.15
-
-
100,000
111,111
.03
-
-
Treasury Department, Division of Tax Research
June 19, 1943
Covers old-age and survivors' insurance; under the provisions of
the present law the contributions for the years 1944 and 1945 will
be double the percentages shown for 1943.
Assumes a male worker aged 21 to 65; covers unemployment, health
and old-age insurance. The contributions rate is a flat $.37 per
week. Pound converted on basis of $4.00.
Non-manual workers paid at a rate exceeding approximately $1,680
are excluded from coverage. In this table individuals with net
incomes of $3,000 or more are assumed to be non-manual workers.
Covers unemployment compensation. The weekly rate of contributions
ranges from $.12 in the case of employees earning $5.40 to $7.49
per week to $.36 in the case of employees earning $26.00 to $38.49
per week, Those earning less than $5.40 per week make no contri-
butions and receive no benefit payments but they do acquire certain
benefit rights. Old-age pensions are administered by the provinces,
but these are on a non-contributory basis.
Source: Social Insurance & Allied Services, Beveridge, P. 227.
The Canada Yearbook, 1942, P. 687.
Internal Revenue Code, as amended, Sec. 1400.
Regraded Unclassified
Table 3
Combined income tax and employee social security contributions in the
United States, United Kingdom, and Canada, 1943
Married person - no dependents
:
Net income
United States
:
:
United Kingdom
Canada
before
:
:
:
: Refund-
:
personal
Non-
:
:
Refund-:
Non-
:
: Refund- :
Non-
:
Total
:
able
exemptions
:refundable:
Total
:
able
:refundable:
Total
:
able
:refundable
:
:
part
3/
:
part 4/
:
: part 3/: part 4/
:
: part 3/ : part 4/
$
800
$
22
$
14
$
8
$
71
$ 71
-
$
12
$
12
-
1,000
35
21
15
130
80
$
50
16
16
-
1,500
117
38
79
299
113
186
219
119
$ 100
2,000
242
54
188
524
146
378
431
200
231
2,500
367
71
297
749
162
587
651
250
401
3,000
496
84
411
955
160
795
884
300
584
4,000
774
106
667
1,405
193
1,212
1,364
400
964
5,000
1,061
129
932
1,855
227
1,628
1,878
500
1,378
6,000
1,380
151
1,229
2,305
260
2,045
2,415
600
1,815
8,000
2,073
195
1,878
3,305
260
3,045
3,555
800
2,755
10,000
2,851
240
2,611
4,505
260
4,245
4,762
1,000
3,762
20,000
7,913
462
7,451
11,230
260
10,970
11,279
1,000
10,279
100,000
70,453
1,030
69,423
84,080
260
83,820
78.987
1,000
77,987
Treasury Department, Division of Tax Research
June 19, 1943
Note: Because of : unding, differences may not check precisely.
For details respecting income tax, see Table 1. For details respecting social security
contributions, see Table 2.
Pound converted at $4.00.
3/
Social security contributions plus post-war income-tax credits.
Net income-tax liability, including for the United States net Victory tax and New York State
income tax.
Regraded Unclassified
260
Table 3A
Effective rates of combined income tax and employee social security contributions
in the United States, United Kingdom, and Canada, 1943
Married person - no dependents
Net income
:
United States
:
:
:
United Kingdom
:
Canada
before
:
:
personal
: Refund- : Non-
:
: Refund-
:
Non-
:
= Refund-
:
Non-
exemptions
:
Total : able
:refundable:
Total
:
able
:refundable:
Total
: able
:refundable
:
: part 3/
:
part 4/
:
: part 3/-
:
part 4/
:
: part 31
:
part 4/
$
800
2.8%
1.8%
1.0%
8.9%
8.9%
-
1.6%
1.6%
-
1,000
3.5
2.1
1.5
13.0
8.0
5.0%
1.6
1.6
-
1,500
7.8
2.5
5.3
19.9
7.6
12.4
14.6
7-9
6.7%
2,000
12.1
2.7
9.4
26.2
7.3
18.9
21.6
10.0
11.6
2,500
14.7
2.8
11.9
29.9
6.5
23.5
26.0
10.0
16.0
3,000
16.5
2.8
13.7
31.8
5.3
26.5
29.5
10.0
19.5
4,000
19.3
2.7
16.7
35.1
4.8
30.3
34.1
10.0
24.1
5,000
21.2
2.6
18.6
37.1
4.5
32.6
37.6
10.0
27.6
6,000
23.0
2.5
20.5
38.4
4.3
34.1
40.3
10.0
30.3
8,000
25.9
2.4
23.5
41.3
3.3
38.1
44.4
10.0
34.4
10,000
28.5
2.4
26.1
45.1
2.6
42.5
47.6
10.0
37.6
20,000
39.6
2.3
37.3
56.2
1.3
54.9
56.4
5.0
51.4
100,000
70.5
1.0
69.4
84.1
0.3
83.8
79.0
1.0
78.0
Treasury Department, Division of Tax Research
June 19, 1943
Note: Because of rounding, differences may not check precisely.
For details respecting income tax, see Table LA. For details respecting social security
contributions, see Table 2A.
Pound converted at $4.00.
Social security contributions plus post-war income-tax credits.
Net income-tax liability, including for the United States net Victory tax and New York State
income tax.
Regraded Unclassified
261
Table 4
Comparison of total central and non-central government tax revenues in the United States, United
Kingdom, and Canada for fiscal years 1942-43 and 1943-44
(In millions of dollars)
Source of revenue
:
United States
:
United Kingdom
:
Canada
2
1942-43
:
1943-44
:
1942-43
:
1943-44
:
1942-43
:
1943-44
Taxes directly allocable by
income levels
Individual income tax
8,043.9
16,340.0
4,328.0
5,020.0
568.0
956.0
Social Security (payable by
employees)
657.1
900.2
253.4
253.4
27.5
27.5
Total taxes directly allecable
by income levels
8,701.0
17,240.2
4,581.4
5,273.4
595.5
983.5
Taxes not directly allocable by
income levels
Corporation income and
profits taxes
10,349.4
15,194.4
1,510.0
2,000.0
805.0
850.0
Social Security (payable by
employers)
1,899.4
2,166.2
253.4
253.4
27.5
27.5
Death and gift taxes
655.7
778.1
373.2
400.0
39.1
43.1
Sales tax
692.4
692.4
441.8
360.0
251.4
246.4
Excise taxes
5,328.0
5,565.3
1,438.4
1,612.7
475.4
504.6
Customs
252.6
204.3
1,838.0
2,101.3
118.0
100.0
Property tax
4,485.7
4,485.7
875.2
875.2
246.3
246.3
Licenses, fees and permite
852.9
852.9
12.8
12.8
38.2
38.2
Miscellaneous taxes
151.6
151.6
1,212.0
1,212.0
74.4
69.4
Total taxes not directly alle-
cable by income levels
24,667.7
30,090.9
7,954.8
8,827.4
2,075.3
2,125.5
Total central and non-central
government taxes
33,368.7
47,331.1
12,536.2
14,100.8
2,670.8
3,109.0
Treasury Department, Division of Tax Research
June 22, 1943
Central government data for fiscal years 1942-43 and 1943-44; United States State and local for fiscal years
1942 and 1941, respectively; non-central taxes in United Kingdom and Canada for fiscal year 1941-42. For
details see tables 4A and 4B.
Regraded Unclassified
262
Table 4d
Comparison of central government tax revennes in the United States, United Kingdom, and Canada
for fiscal years 1942-43 and 1943-44
(In millions of dellars)
:
United States
:
United Kingdom 1/
:
Canada 2/
Source of revenue
:
1942-43
:
1943-44
:
1942-43
:
1943-44
:
1942-43
:
1943-44
Taxes directly allocable by
income levels
Individual income tax
7,797.1
16,093.2
4,328.0
5,020.0
568.0
956.0
Social Security (payable by
employees)
657.1
900.2
253.4
253.4
27.5
27.5
Total taxes directly alle-
cable by income levels
8,454.2
16,993.4
4,581.4
5,273.4
595.5
983.5
Taxes not directly allocable
by income levels
Corporation income and
profits taxes
10,070.0
14,915.0
1,510.0 10/
2,000.0 10/
805.0
850.0 11
Social Security (payable by
employers)
815.2
1,082.0
253.4
253.4
27.5
27.5
Death and gift taxes
541.4
663.8
373.2 12/
400.0 12/
14.0
18.0
Sales tax
-
-
441.8
360.0
230.0
225.0
Excise taxes
3,678.1
3,915.4
1,438.4
1,612.7
389.0 13, /
418.2 13/
Customs
252.6
204.3
1,838.0
2,101.3
118,0
100.0
Miscellaneous taxes
-
-
1,212.0 14/
1,212.0 14/
12.0
7.0
⑇
Total taxes net directly
allocable by income levels 15,357.3
20,780.5
7,066.8
7,939.4
1,595.5
1,645.7
Total central government
taxes
23,811.5
37,773.9
11,648.2
13,212.8
2,191.0
2,629.2
Treasury Department, Division of Tax Research
June 21, 1943
Source and footnotes continued on following page.
Regraded Unclassified
263
Table LA - continued
Comparison of central government tax revenues in the United States, United Kingdom, and Canada
for fiscal years 1942-43 and 1943-44 - continued
Pound converted at $4.
In terms of Canadian dollars.
Includes Victory tax.
Includes Victory tax and an increase of $3,006.4 million due to the current payment income tax law
estimated by the Division of Research and Statistics, Treasury Department. Excludes postwar credit
claimed currently.
Includes income tax pestwar credit and income tax borne by corporations.
Includes postwar credit, gift tax, national defence tax and tax on interest and dividends.
Includes postwar credit, gift tax and tax on interest and dividends.
Social insurance contributions by employee and employer are normally divided into two equal parts.
United Kingdom data on unemployment insurance for fiscal year 1942, data on health insurance for calendar
1941 and contributions for pensions for fiscal year 1941. Canadian data are for calendar year 1942. See
Social Insurance and Allied Services, Report by Sir William Beveridge, 1942, P. 207, and The Canada Year
Book, 1942, P. 687.
Includes capital stock tax. Excludes postwar credit for excess profits tax claimed currently.
10/ Includes national de ence contributions and excess profits tax, before postwar credit.
11/ Before postwar credit for excess profits tax,
12/ Includes death taxes only. No gift taxes are imposed in United Kingdom.
13/
Includes war exchange tax.
14/ Includes compulsory contributions under the War Damage Act and Commodity and Marine War Risk Insurance.
See Shirras and Restas, The Burden of British Taxation, 1943, P. 16, citing Cmd. 6347, 1942, Table 1 (13),
p.9.
Source: United States Budget for 1944; United Kingdom, Financial Statement, 1943-44; Canada, House of Commons
Debates, March 2, 1943; Labour Gazette, March 1943.
Regraded Unclassified
264
Table 48
Comparison of non-central government tax revenues in the United States, United Kingdom, and Canada
for fiscal year 1941-42
(In millions of dollars)
Source of revenue
:
United States ;United Kingdom 2/ : Canada 3
:
1941-42
:
1941-42
:
1941-42
Taxes directly allocable by income levels
Individual income tax
246.8
-
-
Total taxes directly allocable by income levels
246.8
-
-
Taxes not directly allecable by income levels
Cerporation taxes
279.4
-
-
Social Security (payable by employer)
1,084.2
-
-
Death and gift taxes
114.3
I
25.1
Sales tax
692.4
-
21.4
Excise taxes
1,649.9
I
86.4
Preperty tax
4,485.7
875.2
246.3
Licenses, fees and permits
852.9
12.8
38.2
Miscellaneous taxes
151.6
-
62.4
Total taxes not directly allocable by income
levels
9,310.4
888.0
479.8
Total non-central government taxes
9,557.2
888.0
479.8
Treasury Department, Division of Tax Research
June 21, 1943
Source: United States, Bureau of the Census, Financing Federal, State and Local Governments, 1941; State
Finances, 1942, October 20, 1942; United Kingdom, Shirras and Restas, The Burden of British Taxation,
1943, pp. 16, 21; Canada, Statistical Summary, Bank of Canada, October-November, 1942.
1/
Local tax revenues for fiscal year 1941.
2/
Pound converted at $4.
3/ In terms of Canadian dollars.
Regraded Unclassified
265
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
CONFIDENTIAL
DATE June 21, 1943
TO
Secretary Mongenthau
FROM
Ir. Hand
Subject: The Business Situation,
Week ending June 19, 1943.
Summary
Doct of living: Living costs continue to rice, with the BLS
index advancing 0.8 percent from mid-April to mid-May,
largely due to E. further sharp rise in food prices. The
index her advanced 22 percent over a two-year period. In
contrast, the United Kingdom cost-of-living index has
remained practically unchanged during these two years.
The Canadian index, although rising 8 percent during this
period, has maintained & considerable degree of stability
since 4/. program for general price control was announced
in October 1941.
Subsidy developments: Labor demands and Presidential support
have spurred Price Administrator Drown to reiterate his
intention to roll baok the cost of living to the September
1948 level by use of subsidies. Congressional opposition
to subsidies continues strong, as Was indicated by & vote
of the House last week to bar OPA participation in subsidy
programs after July 1.
Commodity prices: Commodity prices moved generally lower last
week due to uncertainty over the subsidy program and to
peace musors. The BLS index of 20 basic commedities,
however, has shown little change since the President's
hold-the-line order.
Mage control: In rejecting the demends of the coal miners,
the WLB pointed out last week that the miners streight-
time hourly wage rate has increased 18.2 percent since
January 1, 1941, and their average weekly earnings in
March were 65.3 percent above January 1941 levels.
Retail trade: Despite earlier predictions of goods shortages,
retail sales in the aggregate continue to run well above 1942
levels, partly because of higher prices. Stimulated by
heavy buying of shoes, department store sales in the week
ended June 12 jumped 28 percent above the corresponding
week last year.
Regraded Unclassified
266
- 2 -
Cost of living continues rise
Difficulties in placating labor demands for a cost-
of-living rollback have been accentuated by a further rise
in living costs during May, which has carried the BLS cost-
of-living index 0.8 percent above the April figure. The
index has risen 7.8 percent in the past year.
A continued shorp rise in food prices has been chiefly
responsible for the extended rise in the cost-of-living index.
(See Chart 1.) Food prices rose 1.7 percent in May, chiefly
because of a further sharp increase in prices of fresh
fruite and vegetables. The more important price increases
were: sweet potatoes, 40.9 percent; apples, 21.7 percent;
potatoes, 16.1 percent; grapefruit, 8.3 percent; oranges,
5.8 percent; carrots, 3.8 percent; end lettuce, 3.1 percent.
Although the increases in fruit prices have been largely of
a seasonal nature, the late spring has retarded the growth
of vegetables and has undoubtedly contributed to the sharp
rise in prices of these products. Aside from food, the
principal increases in the index components were in the
cost of services, particularly medical care and barber and
beauty shop services, none of which are under ceilings.
Because the sharp rise in fresh fruit and vegetable
prices was a Cominant factor in the advance of the cost-of-
living index earlier in the year, temporary ceilings were
imposed in February on some of the more important fresh
vegetables. Moreover, CPA is now reported to be working on
a regulation to reduce the prices of these products. Never-
theless, great difficulties are encountered in devising and
administering satisfactory ceiling prices for such products.
The large seasonal variation in fresh fruit and vegetable
prices precludes the establishment of permanent stable price
ceilings. Moreover, the lack of uniformity in quality and
size of the product complicates price control. Finally,
any method of price control must take into consideration the
important factor of spoilage of fresh fruits and vegetables.
British and Canadian living costs steadier than U. 8.
In contrast to the recent substantial increases in the
BLS cost-of-living index, the United Kingdom index has
continued its sidewise movement and the Canadian index has
risen only slightly in the past few months. (Bee Chart 2,
upper section.) Thus, while the BLS cost-of-living index
rose 3.4 percent in the three months ending in May, the
United Kingdom index during the same period showed no increase,
and the Canadian index rose only 1 percent.
Regraded Unclassified
267
- 3 -
The United Kingdom cost-of-living index has shown a
remarkably stable tendency in the past two years, and in
May 1943 was at about the same level as in May 1941. On
the other hand, the BLS index has advanced almost 22 per-
cent during that period, and has as yet shown no indications
of leveling out. Although the Canadian index has risen 8 per-
cent in the same two-year period, the index has maintained &
considerable degree of stability since October 1941, when the
details of a general price control program were announced.
The divergent trends in the cost-of-living indexes of
the three countries have been largely the result of differences
in the effectiveness of control of retail food prices. Whereas
food prices in the United States have registered a continuous
rapid rise, amounting to 40 percent in the two years ending
in May 1943, the United Kingdom retail food index actually
declined about 3 percent in the two years ending April (the
latest figure available). Although the Canadian food index
increased 18 percent from May 1941 to May 1943, the index
leveled out in July 1942 and 18 now slightly below that month.
(See Chart 2, lower section.)
Notwithstanding the success of the British in stabilizing
the cost-of-living index, their task has been simplified to
some extent by the construction of the index. Only 14 food
products (beef, mutton, bacon, fish, flour, bread, tea, sugar,
potatoes, milk, butter, cheese, margarine, and eggs) are
included in the food component, which has a weight of 60 per-
cent in the general cost-of-living index, and the demand for
10 of these 14 foods is controlled by rationing. Thus by
subsidizing 12 of the 14 foods, the British have been able to
stabilize over half of the cost-of-living index. (Only two
fooûs outside of the index have been subsidized: carrots and
oatmeal.) The limited number of food items included, however,
undoubtedly reduces the value of the index as a guide to
actual living costs. It has been estimated that the actual
rise in living costs in the United Kingdom since the outbreak
of war to October 1942 was about 40 percent, as compared with
2% percent recorded by the index. Nevertheless, despite the
failure of the index to reflect adequately the rise in the
cost of living, the stability of the index has contributed
materially to moderating wage demands in Britain.
Subsidy developments
Under the stimulus of labor demande, and bolstered by
Presidential support, Price Administrator Brown reiterated
last week his determination to subsidize a rollback of retail
prices to the level of September 15, 1942. The present subsidy
Regraded Unclassified
268
rollback of butter, meat, and coffee prices, which is
estimated to lower the cost of living 1.1 percent, is the
only specific subsidy program contemplated at the present
time, Mr. Brown told the Senate Banking Committee. He
hopes to achieve a further reduction of 3 percent in
retail prices by the abatement of black markets through
more effective enforcement of prices. Moreover, the
regulation now being prepared to reduce fresh vegetable
prices 1s expected to lower the cost of living one-half
of one percent. Thus the present subsidy and enforcement
program envisages B. 4.6 percent reduction in the cost of
living.
Full rollback seems doubtful
It seems doubtful that the present subsidy and enforce-
ment program can reduce the BLS cost-of-living index to the
level of September 1942. In the first place, it is improbable
that the index adequately reflects black market orices;
consequently, little reduction in the index could be attained
by the elimination of black markets. Furthermore, rising
costs of production are likely to be reflected in further
orice increases unless offset by additional subsidies.
Hr. Brown indicated last week that, because of rising costs,
It might be necessary to spend the 31.5 to 2.0 billion for
subsidies suggested by the President, in order to roll back
the cost of living to the September level.
The increase in the BLS cost-of-living index from
September 15 to May 15 (the lotest date for which figures
are available) WELG 6.2 percent, and retail food prices have
risen 13.0 percent during that period. The most outstanding
price advance was made by fresh fruits end vegetables, which
rose 57.9 percent between September 15 and May 15. (See
Chart 3.) Other substantial price increases in that period
were: dairy products, 7.2 percent; canned fruits and vegetables,
6:0 percent; meats, 5.9 percent; and fate and oile, 4.6 percent.
250 prices, however, registered & sensonal decline of 8.9 per-
cent. In attempting to reduce the cost of living to September
1942 levels, it 1s obvious that the OPA does not intend to
roll back all food prices that have increased, but instead
will limit its efforts to those foods for which it 16
relatively easy to administer a subsidy.
Misher bread prices may follow increase in wheat loan
Because of the higher Government loan rate on wheat
announced recently, an increase in bread prices or the use
of a subsidy may be necessary to prevent flour millers from
being squeezed. The lovernment loan rate averages 1.22 per
bushel, S cents higher than the rate in effect for the 1942
Regraded Unclassified
269
- 5 -
crop and the same as the price upon which millers' flour
ceilings are based. Since the loan rate will tend to act
as a floor under wheat prices, it 18 likely that prices will
remain above that level and thus squeeze millers' margins.
The loan rate was the lowest that could be legally set
(85 percent of parity).
The strength of Congressional opposition to the use of
subsidies was manifest last week by the House passage of
an amendment to the OPA appropriation bill barring any OPA
participation in subsidy programs after July 1. The Senate
appears to be less violently opposed to subsidies, but an
attempt will probably be made to limit the extension of
subsidies. At a national conference last week, retailers
and wholesalers objected to the use of subsidies at any
level of distribution. Moreover, the president of the
American Farm Bureau Federation told the Senate Banking
Committee last week that the demande of organized labor
for subsidy payments to finance price rollbacks represented
a "finely disguised effort to secure another unwarranted
increase in wages.
Commodity prices ease
Uncertainty over the subsidy program and peace rumors
had an unsettling effect on the commodity markets last week
and prices tended to move generally lower. The BLS index of
28 basic commodities was off slightly. (See Chart 4.) This
index has shown very little change since the President's hold-
the-line order issued early in April.
Wheat, hog, and steer prices declined noticeably and
the price of hoge at the end of the week was only 15 conts
per hundredweight above the Government support level of
13.75. The decline in h06 and steer prices VES attributed
to a lowering of packers' bids because of fear of losses
occurring in the rollback of meat prices. Prices of cotton
and rosin were off somewhat. On the other hand, barley prices
rose substantially for the fourth consecutive week. OPA was
reported to be preparing regulations for imposing a price
ceiling on barley, but since the present price of barley is
still considerably below parity, no price ceiling can be
imposed at present.
The BLS all-commodity index advanced slightly to peak
levels in the week ending June 12, offsetting the fractional
decline of the previous week. At 104.0 the index 1: 38.7 per-
cent above the pre-war level of August 1939. Further sharp
increases in fruit and vegetable prices, and advances in
Regraded Unclassified
270
- 6 -
grain prices, particularly oats, were largely responsible
for the rise in the index. The food component of the index
now stands at the highest point since November 1920.
WLB adamant on wage stabilization policy
Although the WLB rejected the United Mine Workers'
portal-to-portal wage demands on legal grounds, it also
took the occasion to reiterate that it would be impossible
to approve any such increase E.B 2 per day under the
national wage stabilization policy. In this connection
the Board pointed out that the mine workers have already
received an average straight-time hourly wage increase of
18.2 percent since January 1, 1941, and granting of the
2 per day increase would carry the gain up to 46.9 percent.
In contrast, the "Little Steel" formula contemplates a
maximum increase since January 1, 1941 of only 15 percent.
Aside from the gain in hourly earnings, it W&B also
pointed out that the miners have received en even sharper
increase in average weekly earnings. Thus as a result of
the longer work week, average weekly earnings had risen to
42.97 by March 1943, or 65.3 percent above January 1941
levels. On the assumption that the longer work week will
continue throughout 1943, the Board estimated that the
nine workers' average income for the current year will run
over 2150. This would be nearly 24 percent higher than
last year and 77 percent higher than in 1940.
Large railroad wave decisions pending
The outcome of the coal wage controversy may have some
bearing on the final disposition of pending reilroad wage
cases. Near the end of last month an emergency board of the
National Railway Labor Panel recommended an increase of 8 cents
an hour in the wages of more than a million non-operating
vailroad employees. This award will 8° into effect and be
retroactive to February 1 unless disapproved within the next
few days by the Economic Stabilization Director. After the
Emergency Board's issuance of the above recommendation,
President Roosevelt asked the railroads and labor unions to
confer with a view to granting non-operating employees time
and a half for hours worked in excess of 110 hours, weekly.
In addition, hearings are now going on in connection with
demands of operating employees for a 30 percent wage increase.
Telegraph company payrolls have been boosted substantially
recently as a result of WLB awards for wage increases. In
the case of the Postal Telegraph Company retroactive pay-
ments alone will amount to $2,200,000, and the company
Regraded Unclassified
271
- 7 -
stated last week that it hoped to borrow funds for the
vage increases from the Reconstruction Finance Corporation.
Retail trade volume still heavy
Despite earlier predictions of the adverse effects
of goods shortages on retail trade during the current year,
sales volume in the aggregate continues to run well above
year-earlier levels. Increased prices have doubtless been
B. factor. Sales of independent retailers in 34 states during
May ran 16 percent above May 1942, with only filling stations,
hardware, lumber and building material dealers reporting
declines. The largest gains were shown by jewelry and
apparel stores, with increases of 47 percent and 28 percent,
respectively. In the mail order field, Sears, Roebuck and
Company sales during May fell 2 percent below 1942 levels,
but Montgomery Ward and Company during the same period
showed & gain of 7 percent.
Department store sales boosted by shoe buying
Although department store sales last month declined
more than seasonally, they still ran 13 percent above the
corresponding month in 1942. Moreover, sales in the week
ended June 12 jumped 28 percent above last year's levels
under the stimulus of exceptionally heavy shoe buying just
prior to the expiration date of the shoe ration coupon.
(See Chart 5.) Sales gains ranged from 18 percent in the
Chicago district to 81 percent in the Dallas district. This
last-mentioned area has consistently paced department store
sales gains during 1943, and for the year to date shows a
gain of 40 percent over year-earlier levels 88 compared with
A nation-wide increase of only 13 percent.
Corporate profits gein in first quarter of 1943
Corporation profits before provision for Federal income
and excess profits taxes in the first quarter of 1943 are
reported by the Department of Commerce to have run 19 percent
above the corresponding period last year. Estimated profits
after taxes during the quarter are reported by the Department
at 18 percent above year-earlier levels. This figure is higher
than private compilations have shown, as the Department of
Commerce figures include special contingency and post-war
reserves which are not allowed as deductions for tax purposes
by the Bureau of Internal Revenue.
On the basis indicated, manufacturing profits after
taxes in the first quarter of 1943 were 18 percent above 1942
levels, while wholesale and retail trade showed a gain of
Regraded Unclassified
272
- 8 -
14 percent. Due to unusually wide gains in railroad
earnings, profits of the transportation industry made
the strongest showing, with an increase in profits after
taxes of 63 percent. The poorest showing among the major
industrial groups occurred in the mining and power and
gas industries, where profits after taxes were only
3 percent above last year's levels.
Regraded Unclassified
COST OF LIVING AND SELECTED ITEMS
June 1939-100
1939
1940
1941
1942
1943
J
$
D
M
J
SONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJF
PERCENT
PERCENT
170
170
160
160
150
150
140
140
Food
130
130
Clothing
120
120
Combined Index
12
110
Rent, Light,
110
and Heat
100
100
Household Furnishings
Chart 1
and Miscellaneous
90
90
J.
S
D
M
J
SONDJFMAMJJASON D J F M A M J J A S o N D J F M A M J J A 5 o N D J F M
1939
1940
1941
1942
1943
1944
Office of the Secretary of the Treasury
Source B L S
Devision of Research and Statistics
C-413-B
273
Regraded Unclassified
Chart 2
274
COST OF LIVING, U.S., U.K. AND CANADA
August 1939 . 100
1939
1940
1941
1942
1943
PERCENT
PERCENT
Cost of Living
135
135
U.K.
(Min. of Labor)
130
130
125
125
120
120
115
115
Canada
(Dam for of Stat)
110
110
U.S.
(BLS)
105
105
100
100
95
95
1939
1940
1941
1942
1943
1944
PERCENT
PERCENT
Foods, Retail
145
145
140
140
135
135
130
130
U.K.
(Min. of Labor)
125
125
Canada
(Dam. Bur. of Stat.)
120
120
U.S.
GIBLS)
115
115
110
110
105
105
100
100
95
95
1942
1943
1944
1939
1940
1941
C-486
I
Regraded Unclassified
Chart 3 275
RETAIL FOOD PRICES BY MAJOR GROUPS
Percentage Change September 15, 1942 to. May 15, 1943
PER
CENT
FRESH FRUITS
AND VEGETABLES
+50
+40
+30
+20
ALL FOODS
DAIRY PRODUCTS
+10
CANNED FRUITS
AND VEGETABLES
MEATS
FATS AND OILS
CEREALS AND
BAKERY PRODUCTS
0
Correc, ETC.
SUGAR, ETC.
EGGS
-10
MAY 15
SEPT. 15
1943
1942
SOURCE: B.L.S
Office of the Secretary of the Treasury
Division of Research and Statistics
P-265
Regraded Unclassified
MOVEMENT OF BASIC COMMODITY PRICES
1942
1943
1944
PERCENT
PERCENT
AUGUST 1939-100
220
220
210
210
200
200
9 Uncontrolled Commodities
190
190
180
28 Commodities
180
170
170
19 Controlled Commodities
160
160
OCT.
DEC.
FEB
APR.
JUNE
AUG.
OCT
DEC
FEB.
1942
1943
1944
PERCENTAGE CHANGE DEC 6, 1941 TO JUNE IL AND JUNE 18, 1943
PERCENT
PERCENT
19 Controlled
9 Uncontrolled
Flaxseed 6462
Commodities
Commodities
+60
+60
+50
.50
Carn 44.6%
276
+40
.40
Barley 3962
Nage J7 32
Butter 33.32
+30
Lard 28.8%
+30
Steen 2552
Shallac 1232
Regin 226%
Lood IIIX
Wheat 214%
.20
Print Cloth 7.8.Z
+20
Cotton 2112
Sugar 69%
Cottonseed Oil 59%
Wool Tope 50%
Zine 3 2
+10
0,3 Change
.10
Mides.
Tin, Rubber,
Coffee. Copper,
St Screptom,
o
o
St Screp.exp
Cocoa -8%
Tollow 4./2
Burlep 4.3.2
10
-10
Dec 6
June II
June if
Dec 6
June II
June 18
1941
1943
1943
1941
1943
1943
20 Controlled / Uncomtrolled previous le June 26, 1942
Office of the Secretary of "M Treasury
of - and seen
P-244-A
Regraded Unclassified
Chart 5 277
DEPARTMENT STORE SALES
1935 - '39 - 100, Unadjusted
JAN.
FEB
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
PERCENT
PERCENT
Weekly
280
280
260
260
240
240
220
220
200
200
180
180
160
160
1943
1941
140
140
120
120
100
100
1942
80
80
60
60
FEB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
JAN.
Office of the Secretary of the Treasury
C-390-B
- - - -
Regraded Unclassified
278
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
June 21, 1943
FROM
Captain Kades
1. It has been recommended that a Presidential
Committee be appointed to advise "on all aspects of
the war refugee problem which are not the direct
responsibility of the State Department," and also to
carry on a public campaign for contributions to the
United States "for the relief and resettlement of
all war refugees." The publicity and other methods
used in raising funds would be subject to the approval
of the Secretary of the Treasury. It is suggested
that the authority of the Secretary to accept gifts
under The Second War Powers Act, 1942, be utilized
for this purpose.
2. If such a Committee is appointed, it is
recommended that the Treasury should refrain from
participating in its operations and should disapprove
plans for any drive for donations to the Government
for the resettlement of refugees.
Title XI of The Second War Powers Act, 1942,
was intended to enable patriotic citizens who wished
to bear more than their share of the war costs to
make voluntary contributions to the Treasury for
particular war purposes, such as the purchase of
planes, tanks, guns, and other war material. It
was contemplated that the money accepted by the
Secretary of the Treasury would be allocated to
appropriations available for the purchase of war
material and the furtherance of the war program.
It was not contemplated (1) that any gifts of
money would be used for charitable purposes for which
there were no appropriations by the Congress, however
Regraded Unclassified
279
- 2 -
worthy the cause, or (2) that the Treasury would act
as patron of any campaign to raise money for any pur-
pose whatever. On the contrary, the Treasury and the
Congressional Committees which considered the subject
were well aware that pressures for such action would
probably be forthcoming. In recommending passage of
this part of the Act, the House Judiciary Committee
specifically called attention to the fact that:
"The Treasury has not and states that
it will not authorize private persons or
agencies to conduct special campaigns to
raise funds from the public for this purpose.
Private persons and agencies, of course, are
and will be at liberty to conduct such cam-
paigns on their own initiative, but it is
felt that any coercive or high-pressure
solicitation by any private person or agency
of gifts to the United States should be
definitely discouraged.'
The policy expressed in the Committee Report against
such campaigns conducted by private agencies applies
equally to any solicitation by a quasi-public committee
on behalf of the Government.
3. Whether any such Presidential Committee should
even be appointed atthis time is open to grave doubt.
The details of the program formulated at the Bermuda
Conference for the transportation and resettlement of
refugees in Axis-dominated countries, have not been
made public, but it is known that certain measures of
a financial nature to cover necessary expenses were
recommended. Obviously, however, the problem is of
such great delicacy that a promotional committee and
public' advertisements might do more harm than good.
4. So far as victims of the war in liberated
countries are concerned either the President's War
Relief Control Board, of which the Chairman is Joseph
Regraded Unclassified
280
- 3 -
E. Davies, or the Office of Foreign Relief and Re-
habilitation would seem to be the proper agency to
assume this function.
By a letter dated March 19, 1943, the President
authorized Governor Lehman as Director of that Office
to "arrange for the administration of this Govern-
ment's activities for the relief of victims of war
in areas liberated from Axis control" and to "utilize
the facilities of such private organizations and
individuals as you may find helpful in your work."
Moreover, only ten days ago a draft agreement
for a United Nations Relief and Rehabilitation Admin-
istration was placed by the State Department before
the Governments of the United Nations and other nations
associated with them in the war. When established,
that Administration will have the responsibility for
the relief and rehabilitation of all the victims of
war, and Governor Lehman's organization will be the
United States component.
liLK
Regraded Unclassified
281
L
TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE SECRET
WASHINGTON 25
June 21, 1943
MEMORANDUM TO THE SECRETARY:
Supplementing report to you of June 14, 1943,
the purchases against the African Program from
June 14, 1943, to June 20, 1943, totaled $1,387,415.91
or a total of purchases for the program thus far of
$45,739,028.92.
Attached is report giving status of shipping
against these purchases.
your Director of Procurement
Cliffon-E. Mack
VICTORY
BUY
AND
STAMPS
(37861)
Regraded Unclassified
282
SHIPPING REPORT AS OF JUNE 19, 1943
Tonnage
Tonnage
Tonnage
Tonnage
Shipped to Date
Under Load
On Hand at Port
En Route
Commodity
SECRETARY
From U. S. À.
At Port
Waiting Vessels
To Port
Aluminum sulphate
14.5
Asbestos sheet packing
2
Boiler tubes
19
Bone glue
20.5
37
Books & booklets
2
Brass rods & sheets
62.23
63.82
91.33
Babbitt metal
53.85
Brick
129
40
Calcium carbide
909.1
536.47
384.79
1,105.7
Cement
47
Cement, rubber
32.27
Chemicals
2,145.16
4.4
1,679.73
161
Coal cutters
12
Copper, tubing, sheets, rods,
cable, and wire
60.96
25.54
184.27
73.1
Corrugated boards
90
34.4
22
Clothing
2,282.58
137.68
123
13.3
Copper sulphate
5,697.7
Cotton thread
75.65
23.6
Cordage & twine
241.55
22.95
26.5
Drugs
16.08
10.92
12.5
2
Electrodes
15.41
3.59
1.03
3.3
Envelopes
.94
15.56
12.68
Files, steel
15
15
.4
Fullers earth
72
Gelatin
1
1
Glass, window
23,6
76
21
24.3
Glass, lamp chimneys
17
Glycerine
12.75
Horse shoes & nails
168.99
29.91
58.39
10.72
Hosiery
31.56
21
Regraded Unclassified
283
-2-
Tonnage
Tonnage
Tonnage
Tonnage
Shipped to Date
Under Load
On Hand at Port
En Route
Commodity
From U. S. A.
At Port
Waiting Vessels
To Port
Jute bags
356.19
428.55
555
Light bulbs & sockets
3.26
3.5
15.5
Lithopone
10.2
Lumnite
30
Mach. finished book paper.
2
Matches
394.38
16.9
62.35
Newsprint
937.47
131
144,66
28
Nipples, bottles, eye cups
9
Paper products
718.27
172.03
481.47
Paper bags
83.9
190.6
11.42
Paint pigments
26.5
33.5
13.2
1
Piece goods, textiles
11,729.22
189.5
1,327.8
1,044.05
Pig iron
65
432
121
Pig tin
64
Powdered milk
119
Printers ink & supplies
.27
12
Raw sugar
1,545
Refined sugar
4,196.5
Shoe tacks
14.5
9
Spare parts for autos, tractors
& harvesters
838.29
3.6
=
729.72
256.25
Storage batteries & flashlights
66.7
17.72
25.8
Steel, pipe, bars, angles, wire
1,156.88
1,155.97
4,936.92
1,550.22
Shoes, boots & soling
274.25
113.75
226.5
168.68
Sulphur commercial flour
2,363
554.2
3,373
Tin plate
845
Tires, tubes & tape
269.64
85
132.3
366.94
Tools
84.64
40.9
517.13
682
Tooth brushes
.75
Tea
171.75
Regraded Unclassified
284
-3-
SECRET.
Tonnage
Tonnage
Tonnage
Tonnage
Shipped to Date
Under Load
On Hand at Port
En Route
Commodity
From U. S. A.
At Port
Waiting Vessels
To Port
Typewriter ribbons
.5
Wire nails
100.5
Wire rope
88.5
17
7
X-Ray film
1
18
Blasting caps
1.4
Transformers
6
Wire cloth
6.95
Padlocks
2.5
Hooks, eyes, buttons, needles
17
6.5
Electric motors
4.8
4.5
Spark plugs
4.5
5
.2
Trucks
174.8
185
78.5
Ball Bearings
1
.1
.02
Spiegeleisen
161
Belts
5.5
Oil, insulating
9.5
Grass hooks
1.2
Lamps
5.18
Cable insulation winding machine
4.5
Totals
36,399.22
6,468.91
12,483.67
9,682.90
Regraded Unclassified
284 A
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
JUN 211943
TO
Secretary Morgenthau
FROM
Randolph Paul
Strictly confidential
In view of Lauchlin Currie's request for
information of this character, I recommend that the
attached letter be sent to him over your signature.
Arr
Please
Poaradod
284-B
Secretary did not want to send
this letter to Mr. Currie.
Regraded Unclassified
284-C
THE SECRETARY OF THE TREASURY
WASHINGTON
Strictly Confidential
My dear Mr. Currie:
The following is for your information.
The Foreign Funds Control reports that
during 1943 $867,000 was transferred from funds of
the Chinese government to the bank accounts of Ling
Kai Kung, son of Dr. H. H. Kung, and of Dr. F. C. Wu,
representative of the Central Trust Company of China
and a member of Madame Chiang's party. Some of these
transfers were made directly through Madame Chiang
and others apparently were for her account. During
the month of May, 1943, $675,000 in cash was with-
drawn from the accounts of Ling Kai Kung and Dr. F. C.
Wu. No information is available as to the disposition
of such funds.
Very truly yours,
Secretary of the Treasury.
Mr. Lauchlin Currie,
Administrative Assistant
to the President,
The White House.
FORDEFENSE
BUY
UNITED
STATES
SAVINGS
BONDS
AND TAMPS
Regraded Unclassified
285
PHRASE OF TELEGRAM RECEIVED
FROM: American Embessy, Chungking, China
DATE: June 21, 1943, 3 D.M.
NO.: 988
This is message 17-133 for the Secretary of the
Treasury only from Mr. Adler.
On Saturday I called on Dr. Kung at his request. He
wanted to know if I and received any reply to the question
submitted to you in telegram TF-128. When I told him I
had not received an answer, he said that fairly prompt
receipt of Treasury's response would be appreciated,
since the agreement would expire at the end of this
month unless some action is taken.
ATCHESON
Regraded Unclassified
286
OFFICE
SECRETARY OF TREASURY
1943 JUN 22 PM I 19
NOT TO BE RE-TRANSMITTED
EASURY DEPARTMENT
COPY NO.
13
BRITISH MOST SECRET
U.S. SECRET
OPTEL No. 201
Information received up to 7 A.M., 21 June, 1943.
1. AIR OPERATIONS
WESTERN FRONT. 19th/20th.
LE CREUSOT. 737 tons dropped of which 690 H.E. Cloudless weather,
bright moonlight, works easily recognised at first, but somewhat obscured
later by smoke. Smoke screen may have been operating. Attack seems to have
been concentrated although estimates vary as to degree of success. Ground
defences slight and little fighter opposition.
MONTCHANIN. 129 tons dropped. Visibility excellent. All crews
could identify objective, several direct hits reported, defences negligible.
20th. Escorted Bostons attacked POIX airfield. Fighters and
fighter bombers damaged 6 small ships off The Hague. 2 Mosquitoes attacked
the seaplane base at LAKE BISCAROSSE 50 miles southwest of BORDEAUX. 4 enemy
sea planes were destroyed, a hangar set on fire and a minesweeper damaged.
20th/21st. Aircraft despatched - FRIEDRICHSHAVEN 60 Lancasters,
BERLIN - 4, DUSSELDORF - 1, Sea mining - 15, leaflets - 3, Intrudors - 15.
Principal objectives at FRIEDRICHSHAVEN were the Zeppelin Motal Casting Works
and the Maybach Aero Engino Works. No results yet reported.
SARDINIA. 18th. Escorted medium bombers dropped 158 tons at OLBIA
and COLFOFRANCI. 1 large ship was hit and exploded and 1 large and several
small ships were set on fire. Enemy casualties in the air - 34, 9, 9. Allied
5 missing.
SICILY. 18th. Fortrossed dropped 152 tons on MESSINA and fighter
bombers made 2 attacks on MILO Mirfield at TRAPANI.
ITALY. 19th. Heavy bomburs dropped 109 tons on REGGIO and SAN
GIOVANNI.
Regraded Unclassified