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exceeds $3,700). The proposal is that the Treasury pay any family who falls below a certain income a fraction of the shortfall. The idea has sometimes been called a negative income tax.

The payment would be a matter of right, like an income tax refund. Individuals expecting to be entitled to payments from the Government during the year could receive them in periodic installments by making a declaration of expected income and expected tax withholdings. But there would be a final settlement between the individual and the Government based on a "tax" return after the year was over, just as there is now for taxpayers on April 15.

A family with no other income at all would receive a basic allowance scaled to the number of persons in the family. For a concrete example, take the basic allowance to be $400 per year per person. It might be desirable and equitable, however, to reduce the additional basic allowance for children after, say, the fourth. Once sufficient effort is being made to disseminate birth control knowledge and technique, the scale of allowances by family size certainly should provide some disincentive to the creation of large families.

A family's allowance would be reduced by a certain fraction of every dollar of other income it receives. For concreteness, take this fraction to be one-third. This means that the family has considerable incentive to earn income, because its total income including allowances will be increased by two-thirds of whatever it earns. In contrast, the means test connected with present public assist. ance is a 100-percent "tax" on earnings. With a one-third "tax" a family will be on the receiving end of the allowance and income tax system until its regular income equals three times its basic allowance.

Families above this break-even point would be taxpayers. But the less well off among them would pay less taxes than they do now. The first dollars of income in excess of this break-even point would be taxed at the same rate as below, one-third in the example. At some income level, the tax liability so computed would be the same as the tax under the present income tax law. From that point up, the present law would take over; taxpayers with incomes above this point would not be affected by the plan.

The best way to summarize the proposal is to give a concrete graphical illustration. On the horizontal axis of figure 1 is measured family income from wages and salaries, interest, dividends, rents, and so forth-"adjusted gross income" for the Internal Revenue Service. On the vertical axis is measured the corresponding “disposable income," that is, income after Federal taxes and allow. ances. If the family neither paid taxes nor received allowance, disposable income would be equal to family income; in the diagram this equality would be shown by the 45° line from the origin. Disposable income above this 45°. line means the family receives allowances; disposable income below this line means the family pays taxes. The broken line OAB describes the present income tax law for a married couple with three children, allowing the standard deductions. The line CD is the revision which the proposed allowance system would make for incomes below $7,963. For incomes above $7,963, the old tax schedule applies.

Beneficiaries under Federal old-age survivors and disability insurance would not be eligible for the new allowances. Congress should make sure that minimum benefits under QASDI are at least as high as the allowances. Some Government payments, especially those for categorical public assistance, would eventually be replaced by basic allowances. Others, like unemployment insurance and veterans pensions, are intended to be rights earned by past services regardless of current need. It would therefore be wrong to withhold allowances from the beneficiaries of these payments, but it would be reasonable to count them as income in determining the size of allowances, even though they are not subject to tax.

Although the numbers used above are illustrative, they are indicative of what is needed for an effective program. It would be expensive to the Federal budget; perhaps in the order of $15 billion a year. Partially offsetting this budgetary cost are the savings in public assistance, on which governments now spend $5.6 billion a year, of which $3.2 billion are Federal funds. In addition, savings are possible in a host of other income maintenance programs, notably in agriculture,

15 Adjusting the size of a Government benefit to the amount of other income is not without precedent. Recipients of old age, survivors, and disability insurance benefits under the age of 72 lose și of benefits and only $1 for every $2 of earned income above $1,200 but below $1,700 a year.

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The program is expensive, but it need not be introduced all at once. The size of allowances can be gradually increased as room in the budget becomes available. This is likely to happen fairly rapidly. First of all, there is room right now. The budget, and the budget deficit, can and should be larger in order to create a tight labor market. Second, the normal growth of the economy increases Federal revenues from existing tax rates by some $6 to $7 billion a Fear. This is a drag on the economy, threatening stagnation and rising unemployment unless it is matched by a similar rise in Federal spending or avoided by cutting taxes. With defense spending stable or declining, there is room both for increases in civilian spending, as in the war on poverty, and for further tax cuts. Indeed, periodic tax reduction is official administration policy, and President Johnson agrees that the next turn belongs to low-income families. Gradually building an allowance system into the Federal income tax would be the best way to lower the net yield of the tax-fairer and more far reaching than further cuts in tax rates.

I referred to programs which make up for lack of earning capacity as stopgaps, but that is not entirely fair. Poverty itself saps earning capacity. The welfare way of life, on the edge of subsistence, does not provide motivation or use ful work experience either to parents or to children. A better system, one which enables people to retain their self-respect and initiative, would in itself help to break the vicious circle.

The proposed allowance system is of course not the only thing which needs to be done. Without attempting to be exhaustive, I will mention three other measures for the assistance of families without adequate earning capacity.

It hardly needs emphasizing that the large size of Negro families or nonfamilies is one of the principal causes of Negro poverty. There are too many mouths to feed per breadwinner, and frequently the care of children keeps the mother, the only possible breadwinner, at home. A program of day care and preschool education for children 5 and under could meet several objectives at once enriching the experience of the children and freeing the mother for training or for work.

The quality of the medical care of Negroes is a disagrace in itself and contributes to their other economic handicaps. Even so the financing of the care of “the medically indigent” is inadequate and chaotic. Sooner or later we will extend the principle of medicare to citizens under 65. Why not sooner?

As mentioned above, much Negro poverty in the South reflects the inability of Negroes to make a livelihood in agriculture. So far as the traditional cash crop, cotton, is concerned, mechanization and the competition of larger scale units in the Southwest are undermining the plantation and sharecropping system of the Southeast. The Negro subsistence farmer has too little land, equip ment, and know-how to make a decent income. Current Government agricultural programs, expensive as they are to the taxpayer, do very little to help the sharecropper or subsistence farmer. Our whole agricultural policy needs to be recast, to give income support to people rather than price support to crops and to take people off the land rather than to take land out of cultivation. The effects on the social system of the South may be revolutionary, but they can only be salutary. But obviously there will be a tremendous burden on educational and training facilities to fit people for urban and industrial life. And I must emphasize again that substantial migration from agriculture is only possible, without disaster in the cities, in a booming economy with a tight labor market.

8. CONCLUSION

By far the most powerful factor determining the economic status of Negroes is the overall state of the U.S. economy. A vigorously expanding economy with a steadily tight labor market will rapidly raise the position of the Negro, both absolutely and relatively. Favored by such a climate the host of specific measures to eliminate discrimination, improve education and training, provide housing, and strengthen the family can yield substantial additional results. In a less beneficent economic climate, where jobs are short rather than men, the wars against racial inequality and poverty will be uphill battles, and some highly touted weapons may turn out to be dangerously futile.

The forces of the marketplace, the incentives of private self-interest, the pressures of supply and demand-these can be powerful allies or stubborn opponents. Properly harnessed, they quietly and impersonally accomplish objectives which may elude detailed legislation and administration. To harness them to the cause of the American Negro is entirely possible. It requires simply that the Federal Government dedicate its fiscal and monetary policies more wholeheartedly and singlemindedly to achieving and maintaining genuinely full employment. The obstacles are not technical or economic. One obstacle is a general lack of understanding that unemployment and related evils are remediable by national fiscal and monetary measures. The other is the high priority now given to competing financial objectives.

In this area, as in others, the administration has disarmed its conservative opposition by meeting it halfway, and no influential political voices challenge the tacit compromise from the "left." Negro rights movements have so far taken no interest in national fiscal and monetary policy. No doubt gold, the Federal budget, and the actions of the Federal Reserve System seem remote from the day-to-day firing line of the movements. Direct local actions to redress specific grievances and to battle visible enemies are absorbing and dramatic. They bave concrete observable results. But the use of national political influence on behalf of the goals of the Employment Act of 1946 is just as important. It would fill a political vacuum, and its potential longrun payoff is very high.

The goal of racial equality suggests that the Federal Government should provide more stimulus to the economy. Fortunately, it also suggests constructive ways to give the stimulus. We can kill two birds with one stone. The economy needs additional spending in general; the wars on poverty and racial inequality need additional spending of particular kinds. The needed spending falls into two categories: Government programs to diminish economic inequalities by building up the earning capacities of the poor and their children, and humane public assistance to citizens who temporarily or permanently lack the capacity to earn a decent living for themselves and their families. In both categories the Nation, its conscience aroused by the plight of the Negro, has the chance to make reforms which will benefit the whole society.

16 See the statistics summarized by Rashi Fein elsewhere in this volume.

THE INGALLS SHIPBUILDING CORP.,

Pascagoula, Miss., September 10, 1965. Mr. WILLIAM C. SMITH, Counsel, Subcommittee on Employment and Manpower of the Committee on

Labor and Public Welfare, U.8. Senate, Washington, D.C. DEAR MR. SMITH: Please consider this letter a statement in favor of S. 2343, to extend the 1962 7-percent tax credit on investments in new machinery and equipment to investment in manpower training. We respectfully request that this statement be filed with the Senate Employment Manpower Subcommittee.

Although Ingalls Shipbuilding Corp. already has an extensive training program, we see a tremendous need for manpower training in companies which at present have no such program or which should expand their present programs.

Evidence of this is the extreme shortage of people who are qualified in the skills needed by the shipbuilding industry. We also know that this same shortage of skills is being experienced by other types of industry.

Manpower training by industry has positive beneficial effect in addition to filling the immediate needs for skilled manpower. The impact on the community of an upgrading of skills through manpower training is evidenced by an increase in living standards of industrial employees through increased wage-earning capacity.

We definitely feel that industry-oriented manpower training provides the most immediate and effective means of remedying the skill shortage.

For these reasons we urge passage of S. 2343. Certainly if we are willing to encourage investment in new machinery and equipment through the 7-percenttax credit, we should be no less willing to encourage industry to invest in an effective training program for the Nation's manpower. Sincerely,

E. R. HAMMETT, Senior Vice President.

MAJOR CHEVROLET, INC.,

Long Island City, N.Y., August 31, 1965. Senator CLARK, Employment and Manporrer Subcommittee, New Senate Office Building, Washington, D.C.

DEAR SENATOR CLARK: Incentive training incentives would be a boon not only to the automobile industry but to the economy of the entire country.

We have for many years had an apprentice program. This is a costly proposition, but a necessary one since there is a dearth of good mechanics. Because of the cost, our program has not been as extensive as it should be.

General Motors has recently instituted 7- and 9-week training programs for the real notice. We cannot carry the total payroll cost involved by ourselves. A tax incentive would enable us to increase our present program by at least 50 percent. It would encourage others to start programs who, today, have none of any kind.

There cannot be any question but that governmental financial help in whatever form would encourage the start and expansion of many apprentice traiuing programs. There cannot be any doubt that these trainees are needed and would be absorbed by industry, there cannot be any doubt that the end result would be a tremendous boost to the Nation's economy.

This is a perfect tie-in with all that President Johnson has been asking for, a perfect complement to the many bills already passed by Congress to relieve depressed areas, cut unemployment rolls and provide “the better life" for all. Very truly yours,

JORDAN DUBROW, Executive Vice President.

LOCAL 685, UNITED AUTOMOBILE, AEROSPACE, AGRICULTURAL

IMPLEMENT WORKERS OF AMERICA (UAW)

Kokomo, Ind., September 2, 1965. Hon. VANCE HARTKE, U.S. Senator of Indiana, Senate Office Building, Washington, D.C.

DEAR SENATOR: We would like to call your attention, and enlist your support of, a proposal by Senator John Sparkman for a partial tax credit for industries which spend time and money on tool and die training programs.

We feel that this is a fine idea, but also feel that it should be broadened to include the three following, vital factors :

1. Tax credits should be offered to industries which train apprentices in all the apprenticeable trades. Example-machine repair, pipefitters, electricians, millwrights, etc.

2. Tax credits should be offered only to those industries whose apprentice curriculums, in the trades, are in conformance with recognized standards of training in the Bureau of Apprenticeship.

3. The standard of training in the Bureau of Apprenticeship should be reviewed and approved by representatives of our international union and other international skilled unions.

4. We feel certain that this would benefit our union journeymen and apprentices in that they would then not be paid from the same pocket of industries budget.

This would definitely help the situation of apprentices not obtaining proper training, not only for their future but for the future of our great country. We will greatly appreciate your attention and assistance in this matter. Sincerely,

RICHARD A. WIEBUSCH,

Skilled Trades Committeeman. O

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