IF BUSINESS taxation is to be lightened after the war, some other element in the tax system must be given a more important role. The principal candidates for this role are personal taxes (personal income and death taxes) and indirect consumption (sales) taxes. Of these, the author strongly prefers personal taxation as the major source of revenue in the postwar federal tax system. The personal income tax is a logical substitute for the corporate income tax, since abandonment or deemphasis of the corporate tax is recommended on the premise that it should be integrated with the personal tax. The burden of the personal-income tax can be determined (very little shifting); the features of the tax can be readily adapted to requirements of postwar markets; and, if its graduation is not excessive and due allowance is made for investment losses, the tax should prove compatible with adequate business incentives. Regressive taxes at state and local levels are probably inevitable; but the federal government, with more adequate fiscal powers, should avoid these taxes, in the main, and confine them to special excises on nonessential consumption.
If the personal income tax is to serve as the mainstay of federal taxation in the postwar period when there will be high revenue requirements, it must be a broadly based tax. Otherwise we shall head straight for inflation or a system of heavy____________________