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. ALTERNATIVE PROCEDURES UNDER THE PLAN

1. EXEMPTION CERTIFICATES - Under the plan, employers would accept the statement of employees as to marital and dependent status. An alternative procedure would be to require employees to apply to the Bureau of Internal Revenue for exemption certificates. /54/

In the application, the employee would set forth (a) the names of all persons claimed as dependents and (b) his social security number. The Bureau of Internal Revenue would prepare exemption and deduction certificate books for each social security account number. The cover of the book and each weekly exemption and deduction certificate would bear the printed social security number. Each book would contain 40 dated certificates stipulating the amount of income exempt from withholding. /55/ Each week the employee would turn over the certificate for that week to the employer. This would authorize the employer to refrain from withholding on the amount indicated on the certificate. If, due to unemployment for a period, the employee could not use any of the certificates, he would be permitted to use them during any subsequent weeks of the taxable year during which he was employed.

This system of providing for allowances would probably insure more accurate reporting of marital status and dependents than the suggested plan. It would also insure that when employment was interrupted during the year, no tax would be withheld when the employee went back to work until full use of the exemption certificates had been made.

The main difficulty of this system of exemptions is its cumbersomeness. Exemption certificate books would need to be issued to almost 40 million workers covered by social security. Each of these books would contain 40 coupons or a total of 1.6 billion coupons a year. Aside from the cost of printing and distribution, a considerable amount of time would be needed to set up such a system. Further the sheer handling of so large a number of coupons would be burdensome to employers and the Government and also to employees insofar as they had to fill in and mail applications for exemption certificates.

Since an end of year return is required, it is doubted that the added accuracy in determining marital and dependent status for withholding purposes merits the added complexity of exemption certificates. If there should be any inaccuracy in withholding which results in collecting at source less than the proper amount, the employee would have less to credit against his total tax liability at the end of year and hence would have a larger amount of tax payable at that time.

2. Salaries and Wages of Persons not Covered by Social Security or Other Federal Retirement Plan, and Business Income -

Under the suggested plan, the tax is not likely to work efficiently with respect to agricultural, domestic and casual workers. The problems involved in attempting to collect a tax at source from such workers were discussed above (page 9). As shown in Table 3, less than 4 percent of agricultural workers earned as much as $600. Wages of domestics were predominantly at a similar level. Failure of the withholding tax to apply is therefore not fatal since only a very small proportion of such employees are likely to have total annual income in excess of the allowances.

With respect to business income, a procedure might be instituted which would collect the tax on such income currently. A tentative tax might be determined quarterly on the basis of one-fourth of the prior year's net income. This tax would be credited against the total tax liability as determined on the basis of an end of year return.

Such a procedure may impose an undue burden on the self-employed and small business man whose income in the current year is less than his income was during the past year. Further, business income represents only 10 percent of total income (Table 4) and is therefore of minor importance from the standpoint of inflation control. Under the suggested plan, business income, like income from all other sources would be subject to tax at the end of the year. It is doubted whether collection of tax on this source of income more currently than on an annual basis is necessary.

3. RETURNS BY EMPLOYERS - Under the suggested plan, no information returns from employers are intended with respect to the withholding tax. It is believed that the system will be self-policing, the employee demanding that he receive stamps from the employer on behalf of tax withheld.

Since such returns are usually required, however, consideration might be given to the possibility of quarterly returns. On these returns employees' names, addresses, social security number (if any), total wages and salaries paid during the quarter, marital and dependent status claimed and tax withheld would be shown. Attention might be given to coordinating this return with the one now required for old-age insurance purposes and which contains some-what similar information.

Whether or not such a return should be required, depends upon the type of tax administration intended. If a record for each employee is to be set up which will take off the information shown on employers' returns and against which will be checked the end of year returns filed by individuals, then employer returns would be valuable. If this degree of check is not found practicable, then, aside from (a) discouraging employers from attempting to defraud employees with respect to tax withheld at source and (b) supplying statistical data, it is not evident that a quarterly return by employers would serve any necessary purpose.

C. RESPONSIBILITIES OF EMPLOYERS, EMPLOYEES AND THE TREASURY UNDER THE SUGGESTED PLAN

1. RESPONSIBILITIES OF EMPLOYERS - Each employer would be supplied with a schedule showing weekly exemption and deductions allowed for purposes of the special withholding tax on salaries and wages. (See Table 20). He would receive from each employee a statement of marital and dependent status. On the basis of such statement, the employer would determine the tax at a flat rate on the amount by which the salaries and wages paid exceeded the weekly allowance. The employer would purchase stamps from post offices or the collectors' offices in such denominations as are needed to give each employee stamps equivalent to the amount of tax withheld. On payday, the employer would turn over to the employee his pay less tax and the equivalent of the tax in stamps.

2. RESPONSIBILITIES OF EMPLOYEES - Upon entering a new employment, each employee would certify to the employer his marital and dependent status and subsequently, any changes in such status. When the employee received stamps equivalent to amounts of pay withheld, he would countersign them in order to protect himself against theft, and accumulate them until the end of the year. At the end of the year, he would file a return reporting income from all sources and total tax liability. Against the total tax, the tax withheld at source, as evidenced by stamps, would be credited. The return, together with all stamps, would be sent to the Collector of Internal Revenue. If total liability exceeded the amount of stamps available, the difference would be paid in cash; if the amount of stamps exceeded total tax liability, the excess of stamps would be cashed by the Bureau of Internal Revenue and returned to the taxpayer.

3. RESPONSIBILITIES OF THE TREASURY - The Treasury would make available stamps in convenient denominations. These stamps would be placed on sale at offices of the Collectors of Internal Revenue and post offices. When annual returns are filed, the liability shown thereon would be taken as prima facie evidence of the correct liability. Any excess of stamps over total tax liability shown on a return would be cashed promptly and returned to the taxpayer. If, upon audit, additional amounts are found to be due, the present procedure with respect to additional assessments would be followed.

APPENDIX I

Description of income tax payment plan by Dr. Carl Shoup

Dr. Shoup has suggested the following revision for the payment of the income tax /56/:

"Require partial prepayment of personal income tax on 1941incomes, as follows: Every individual who paid a tax on 1940 income (or fiscal year ending in 1941) divides that tax by twelve and pays that amount (one-twelfth of tax on 1940 incomes), as partial prepayment of tax on 1941 incomes, on July 15, 1941, again on August 15, and on September 15 and October 15; and twice that amount (i.e., two-twelfths) on November 15, December 15, 1941, and January 15 and February 15, 1942. On March 15, 1942, the tax on 1941 incomes will be computed as
usual, and from it will be subtracted the prepayments already made. The balance shall be divided into quarterly installments payable March 15, June 15, September 15, and December 15, 1942. If the prepayments exceed the tax--a rare occasion, in view of the increase in rates--a refund shall be given. If the taxpayer's surtax net income for 1940 was more than 50 percent above his 1939 surtax net income, the prepayments shall be computed on the basis of 150 percent of his 1939 surtax net income and normal tax net income. If the taxpayer can show by June 15, 1941, to the satisfaction of the local internal revenue agent, that his 1941 surtax net income will in all probability be less than 40 percent of his 1940 income, but more than $100, the prepayments shall be calculated on the basis of 40 percent of his 1941 surtax net income and normal tax net income."

APPENDIX II

REFUND PROCEDURE

The following steps are involved in making a tax refund:

1. The Collector certifies to the Bureau of Internal Revenue the amount of the refund;

2. The Bureau verifies the Collector's certification, computes the interest on the claim, and draws up a certificate to that effect which is sent, over the signature of the Commissioner, to the Comptroller General;

3. The Comptroller General verifies the claim, checks the claim against the debt file and then certifies the claim and issues a voucher to the disbursing officer;

4. The disbursing officer draws a check for the amount of the claim and sends it to the Collector;

5. The Collector sends the check out to the taxpayer.

This procedure constitutes the minimum for any refund and, according to the Clearing Division of the Bureau of Internal Revenue, involves an administrative cost of from $3 to $4 per refund. The administrative work in making approximately 75,000 refunds annually costs at present almost $200,000. Under present procedure, the same steps are followed for small refunds as for large ones.

The time involved for making a refund depends upon the time of the year when the claim for refund is filed. After certification by the Collector, action on a refund may take from three weeks to several months in the Bureau and an equal amount of time in the Comptroller General's office. If the volume necessitated it, the time could be cut down somewhat.

With respect to the standard of auditing, the Bureau's procedure might be simplified somewhat by omitting the Bureau audit of the Collector's certification and accepting the Collector's claim without further question. It is doubted, however, that anything could be done insofar as the Comptroller General's office was concerned. At present, the Bureau is called upon from time to time to supply the Comptroller General with minute details as respects refunds of even small amounts, and serious question may be raised as to whether the Comptroller General's office would relax any of its standards with respect to auditing each claim individually.

SUMMARY OF STATISTICAL INFORMATION

1. NUMBER OF EMPLOYEES AND EMPLOYERS.

Most recent data indicate that the entire working force numbers between 50.6 and 55.6 million persons. Of these, from 39.9 to 41.6 or over 75 percent are employed in industries covered by the old-age provisions of the Social Security Act or other Federal retirement plans. Of the 10.7 to 14.0 million workers in the uncovered industries, about 3.3 million are agricultural workers, 2.2 million domestic servants and from 1.2 to 3.5 million casual workers. About 5 million are in public employment.

The total number of employers is about 7.5 million. Of these 2.6 million or 35 percent are employers in covered industries and 4.9 million or 65 percent are employers in uncovered industries. Agricultural and domestic workers numbering 5.5 million are employed by from 4.8 to 5.1 million, or almost as many employers as employees. (Tables 2 and 16.)

2. SHIFTING LABOR FORCE.

Between 1.6 and 3.7 million workers, or from 6.0 percent to 12.6 percent of the total workers covered by the old-age provisions of the Social Security Act during the period January 1938 - June 1940, were temporary employees. (Table 1.)

Part-time employment was more frequent in the low-income groups than in the high ones. In 1938, 89 percent of those earning less than $200 during the year worked during one quarter of the year only; 1.3 percent of those working one quarter earned $1,000 or more. (Text, p. 9.) On the other hand, 90 percent or more of the workers earning $1,000 or more were employed during all four quarters of the year and 98 percent or more worked 36 or more weeks out of the year. (Text, p. 29, note 1.)

3. SOURCES OF INCOME.

Salaries and wages constitute the most important source of income. For 1937, this source represented 57.9 percent of total income reported on returns with net income. Dividends constituted 14.4 percent and business profits 10.2 percent. (Table 4.)

(a) SALARIES AND WAGES. Salaries are most important in the low-income classes. For persons with net incomes under $5,000 for 1937, salaries and wages amounted to $10.3 out of a total income of $14.0 billion, or 73.6 percent. For persons with net incomes of $25,000 or over, salaries and wages amounted to $0.8 out of a total income of $3.6 billion, or 21.6 percent. Further, salaries of those with net income under $5,000 amounted to 73.0 percent of the total salaries of $14.1 billion reported for income tax purposes.

Of 5.3 million returns with statutory net income filed for 1936, 2.4 million, or 45 percent, showed salaries and wages only; 3.3 million, or 62 percent, showed salaries and wages and not more than one other source of income; and 4.0 million, or 75 percent, showed salaries and wages alone or in combination with one or more sources of income. (Table 6.)

Where salaries and wages were combined with another source of income, the other source of income, except in the case of business profits, was small. (Table 7.)


--------------------------------------------------
 Source of       Percent of returns showing income
 income in           from specified source of     
 combination                                      
 with salaries      Less than         Less than   
 and                   $100             $500      
 wages                                            

--------------------------------------------------
Interest                79.5%            96.1%    
Dividends               49.3             76.9     
Business profit          4.8             22.7     
Rents                   17.8             72.1     
--------------------------------------------------

(b) BUSINESS INCOME. Business income constituted the only source of income on 370,000 returns and was the only source of income for one-half or more of all persons with total incomes of not over $1,000 in 1936. (Table 8.) As noted above, business income was also a relatively important source of income when combined with salaries and wages, since 75 percent of persons receiving income from this source reported more than $500. (Table 7.) In few cases, however, did business profits exceed salaries in amount for persons receiving income from both sources.

(c) OTHER. Other sources of income did not represent important sources of income either alone or in combination with salaries and wages. (Tables 4, 6, 7, 8.)

4. SIZE OF AGRICULTURAL WORKERS' AND DOMESTICS' INCOME.

The total income of agricultural workers and domestics is generally below the exemption levels of the income tax. A sample study showed that 96 percent of agricultural workers and a like percent of domestics earned less than $600 a year. (Table 3.)

5. SELF-EMPLOYED.

For 1935-1936 there were approximately 8.9 million self-employed. Of these 6.2 million, or 70 percent, were farm operators and 2.7 million, or 30 percent, were self-employed other than farm operators. The family incomes of farm operators were somewhat lower than other self-employed. Seventy-five percent of farm operators had family income of less than $1,500, and 5 percent had $3,000 or more. In the case of other self-employed, the percentages were 45 and 22 respectively. (Tables 9 and 10.)

In the aggregate, unincorporated business represents an important portion of total national income. For 1940, it is estimated that such businesses produced 16.4 percent of total national income. (Text, p. 14.)

(a) FARM PROPRIETORSHIPS AND PARTNERSHIPS. Income tax returns were filed by 54,000 farm proprietorships and 19,000 partnerships for 1936. Analysis of a sample of the returns of farm proprietors shows that about 46 percent reported total receipts of less than $5,000 and 70 percent reported total receipts of less than $10,000. Almost three-fourths of the farmers reporting for income tax purposes showed profit. (Tables 11, 12.) About 83 percent of farm partnerships reported net income. Of these, over three-fourths reported less than $5,000. (Table 15.)

(b) PROPRIETORSHIPS AND PARTNERSHIPS OTHER THAN FARM OPERATORS. About 699,000 proprietorships and 211,000 partnerships other than farm operators filed income tax returns for 1936. Analysis of a sample of the returns of such partnerships shows that about 19 percent reported total receipts of less than $5,000 and 44 percent reported total receipts of less than $10,000. About 90 percent of proprietorships and partnerships other than farm operators reporting for income tax purposes showed net profit from business. (Tables 13, 14.) About 88 percent of partnerships other than farm operators reported net income. Of these, about two-thirds reported less than $5,000. (Table 15.)

6. CONSUMER INCOMES AND EXPENDITURES.

For 1935-1936, total income of single individuals and families amounted to $59.3 billion. Of this amount only $18.3 billion was received by persons with incomes of $3,000 or more and only $11.6 billion, or 20 percent, by persons with incomes of $5,000 or more. (Table 18.)

Expenditures were also concentrated in the low-income brackets. Of total expenditures of $50.2 billion, only $5.8 billion, or 12 percent, was spent by persons with incomes of $5,000 or more. (Table 19A.)

For single persons and families combined, expenditures exceeded income in the income classes under $1,000. Those in the income classes below $1,500 spent the greatest proportion of their incomes for food, housing, household operation (fuel, light, etc.) and clothing. Seventy-five percent to 85 percent of the expenditures of these persons was for such items. As incomes increased, expenditures for these items became relatively less important and expenditures for automobiles and other consumer goods increased. Savings were shown by those with incomes over $1,000. Persons in the income class $1,000 - $1,500 saved 6 percent, or less of their total incomes. Savings increased with size of income and amounted to almost half of total income for persons with incomes of $5,000 or more. (Table 19A.)


[Part 1 of 2]

                               Table 1

Estimate of number of part-time employees in industries covered by
the old-age provision of the Social Security Act, January, 1938-June
1940

-----------------------------------------
              Number of employees earning
    Year             Taxable wages       
    and       On last day      Total     
  quarter     or payroll   during year or
              in quarter      quarter    

-----------------------------------------
1938               -         31,200,000  
  Jan.-March  23,000,000     25,100,000  
  Apr.-June   23,000,000     25,100,000  
  July-Sept.  23,800,000     25,900,000  
  Oct.-Dec.   23,600,000     26,700,000  
1939               -         33,600,000  
  Jan.-March  24,300,000     25,900,000  
  Apr.-June   25,300,000     27,300,000  
  July-Sept.  26,000,000     28,100,000  
  Oct.-Dec.   25,700,000     29,400,000  
1940                                     
  Jan.-March  26,700,000     28,400,000  
  Apr.-June   26,600,000     28,900,000  
-----------------------------------------

[Part 2 of 2]

                               Table 1

Estimate of number of part-time employees in industries covered by
the old-age provision of the Social Security Act, January, 1938-June
1940

--------------------------------------------------------------
                 Part-time employees -     Part-time employees
    Year       Difference between number     as a percent of  
    and       employed during quarter and    total number of  
  quarter      on last day or payroll in    employees during  
                        quarter                   year        

--------------------------------------------------------------
1938                       -                        -         
  Jan.-March           2,100,000                   8.4%       
  Apr.-June            2,100,000                   8.4        
  July-Sept.           2,100,000                   8.1        
  Oct.-Dec.            3,100,000                  11.6        
1939                       -                        -         
  Jan.-March           1,600,000                   6.2        
  Apr.-June            2,000,000                   7.3        
  July-Sept.           2,100,000                   7.5        
  Oct.-Dec.            3,700,000                  12.6        
1940                                                          
  Jan.-March           1,700,000                   6.0        
  Apr.-June            2,300,000                   8.0        
--------------------------------------------------------------

Treasury Department, Division of Tax Research.

Source: Social Security Bulletin, November 1940, page 79.


                               Table 2

   Employments not covered by the old-age provisions of the Social
      Security Act or other Federal retirement plan: number of
      workers, amount of earned income and number of employers,
                                1940

--------------------------------------------------------------------
                           Number of       Earned        Number of  
  Type of worker /1/        workers        income        employers  
                          (thousands)    (millions)     (thousands) 

--------------------------------------------------------------------
Agricultural workers         3,300         745 /4/         2,600    

Domestic servants        2,200 - 2,500  1,200 - 1,350  2,200 - 2,500

Employees in public                                                 
  employment /2/         3,300 - 3,800  4,600 - 5,300       160     

Employees of non-profit                                             
  institutions             700 - 900      730 - 840         /5/     

Miscellaneous /3/        1,200 - 3,500   600 - 1,050        /5/     
--------------------------------------------------------------------
                         FOOTNOTES TO TABLE

     Treasury Department, Division of Tax Research

     Source: (1) Number of workers and earned income (except
agricultural workers' earned income) based on informal estimate from
Bureau of Research and Statistics. Social Security Board: (2)
agricultural workers' earned income from Survey of Current Business,
June 1941: (3) number of employers based on 1930 Census of
Agriculture, Municipal Yearbook, 1940 and informal estimates from
Bureau of Research and Statistics, Social Security Board.

     /1/ Excludes employment on work relief programs.

     /2/ Includes employees of State and local governments and their
instrumentalities and those employees of the Federal Government and
its instrumentalities not covered by Federal retirement plans.

     /3/ Primarily casual workers.

     /4/ Includes estimated value of board and room.

     /5/ Not available.

                          END OF FOOTNOTES

                               Table 3

      Employments not covered by the old-age provisions of the
        Social Security Act or other Federal retirement plan:
                  frequency distributions of income

A. Agricultural workers: total annual income from all sources, 1936

----------------------------------
                     Workers      
 Total annual           Percent of
income classes  Number            
                          total   

----------------------------------
Under 200          878      45.8  
200 - 400          791      41.3  
400 - 600          177       9.2  
600 and over        69       3.7  
     Total       1,915     100.0  
----------------------------------

Treasury Department, Division of Tax Research


Source:   Survey of Agricultural Labor Conditions conducted by the
          Works Progress Administration during 1936 in the following
          counties: Wayne, Pa.: Archuleta, Col.: Livingston,
          Illinois; Hamilton, Iowa: Pawnee, Kan.: Todd, Ky.:
          Concordia Parish, La.: Lac Qui Parle, Minn.: and Karnes,
          Texas. Prepared under the direction of the U.S. Department
          of Agriculture, 1937.

                               Table 3
                             (Continued)

      Employments not covered by the old-age provisions of the
        Social Security Act or other Federal retirement plan:
           frequency distributions of income - (Continued)

B. Domestic servants: cash wages


                          I. Monthly Wages

--------------------------------
Monthly wage       Servants     
  classes     Number  Percent of
                        total   

--------------------------------
Under 15          27        3.4 
 15 - 25         235       29.5 
 25 - 35         310       38.9 
 35 - 45         139       17.4 
 45 - 60          73        9.2 
 60 and over      13        1.6 

       Total     797      100.0 
--------------------------------

                          II. Weekly Wages

----------------------------------
 Weekly wage         Servants     
   classes      Number  Percent of
                          total   

----------------------------------
   Under 3.50      25       2.9   
 3.50 -  7.50     326      38.3   
 7.50 - 11.50     198      23.3   
11.50 - 15.50     235      27.6   
15.50 and over     67       7.9   

    Total         851     100.0   
----------------------------------

Treasury Department, Division of Tax Research


Source:   For sample based on monthly wages, "Household Employment in
          Seattle" prepared by the Advisory Committee on Social
          Security to the Board of County Commissioners, King County,
          Washington, 1937 and study of Household Employees in Los
          Angeles, prepared by the YWCA, 1939; for sample based on
          weekly wages, "Household Employment in Hartford, Waterbury
          and Litchfield, Connecticut" published by the Connecticut
          Department of Labor in cooperation with the YWCA of
          Hartford, 1936.

                               Table 4

   Individual returns with net income, 1937 /1/: Selected sources
        of income, frequency of each source, and percent each
                      source is of total income

                  (Amounts in thousands of dollars)

---------------------------------------------------------------------
                                     Number                          
       Sources of income               of          Amount     Percent
                                     returns                         

---------------------------------------------------------------------
Salaries, wages, commissions,                                        
fees, etc.                        5,120,168      $14,148,510     57.9
Dividends                         1,694,281        3,514,293     14.4
Taxable interest                  1,745,293          910,304      3.7
Partnership profit                  242,410        1,139,301      4.6
Rents and royalties                 681,455          758,444      3.1
Business profit                     787,712        2,493,426     10.2
Other income /2/                       /3/         1,489,821      6.1
    Total income                  6,350,148 /1/  $24,454,099    100.0
---------------------------------------------------------------------
                         FOOTNOTES TO TABLE

     Treasury Department, Division of Tax Research

     /1/ 6,350,148 returns with net income were filed for 1937.

     /2/ Includes income from fiduciaries, net capital gain and other
income not separately shown.

     /3/ Not available.

                          END OF FOOTNOTES

[Part 1 of 2]

                               Table 5

Individual returns with net income, 1937 /1/, by net income classes:
Selected sources of income, frequency of each source, and percent
each source is of total income

      (Net income classes and amounts in thousands of dollars)

-------------------------------------------------------------------
                                              Net income classes   
      Sources of income           Total                            
                                            Under 5 /2/  5 under 10

-------------------------------------------------------------------
Salaries, wages, commissions,                                      
 fees, etc.:                                                       
  Number of returns              5,120,168    4,663,873     309,550
  Amount                       $14,148,510  $10,328,531  $1,849,041
  Percent                            100.0         73.0        13.1
Dividends:                                                         
  Number of returns              1,694,281    1,246,946     261,469
  Amount                        $3,514,293     $733,763    $479,600
  Percent                            100.0         20.9        13.7
Taxable interest:                                                  
  Number of returns              1,745,293    1,361,145     218,587
  Amount                          $910,304     $430,426    $162,253
  Percent                            100.0         47.3        17.8
Partnership profit:                                                
  Number of returns                242,410      149,673      55,318
  Amount                        $1,139,301     $312,243    $276,943
  Percent                            100.0         27.4        24.3
Rents and royalties:                                               
  Number of returns                681,455      525,383      97,515
  Amount                          $758,444     $433,575    $134,930
  Percent                            100.0         57.2        17.8
Business profit:                                                   
  Number of returns                787,712      651,904      99,615
  Amount                        $2,493,426   $1,430,551    $565,498
  Percent                            100.0         57.4        22.7
Other income /3/:                                                  
  Amount                        $1,489,821     $368,700    $235,348
  Percent                            100.0         24.8        15.8

Total income:                                                      
  Amount                       $24,454,099  $14,037,789  $3,703,613
  Percent                            100.0         57.4        15.2
-------------------------------------------------------------------

[Part 2 of 2]

                               Table 5

Individual returns with net income, 1937 /1/, by net income classes:
Selected sources of income, frequency of each source, and percent
each source is of total income

      (Net income classes and amounts in thousands of dollars)

-------------------------------------------------------
                                  Net income classes   
      Sources of income                                
                               10 under 25  25 and over

-------------------------------------------------------
Salaries, wages, commissions,                          
 fees, etc.:                                           
  Number of returns                113,452       33,293
  Amount                        $1,192,217     $778,721
  Percent                              8.4          5.5
Dividends:                                             
  Number of returns                135,979       49,887
  Amount                          $721,875   $1,579,055
  Percent                             20.5         44.9
Taxable interest:                                      
  Number of returns                116,220       49,341
  Amount                          $165,078     $152,547
  Percent                             18.1         16.8
Partnership profit:                                    
  Number of returns                 27,636        9,783
  Amount                          $279,487     $270,628
  Percent                             24.5         23.8
Rents and royalties:                                   
  Number of returns                 43,466       15,091
  Amount                          $103,385      $86,554
  Percent                             13.6         11.4
Business profit:                                       
  Number of returns                 30,342        5,851
  Amount                          $337,600     $159,777
  Percent                             13.5          6.4
Other income /3/:                                      
  Amount                          $308,729     $577,044
  Percent                             20.7         38.7

Total income:                                          
  Amount                        $3,108,371   $3,604,326
  Percent                             12.7         14.7
-------------------------------------------------------
                         FOOTNOTES TO TABLE

     Treasury Department, Division of Tax Research

     /1/ 6,350,148 returns with net income were filed for 1937.

     /2/ Estimated.

     /3/ Includes income from fiduciaries, net capital gain and other
income not separately shown.

                          END OF FOOTNOTES

[Part 1 of 4]

                               Table 6

Individual income tax returns with statutory net income, Forms 1040
and 1040A, for 1936: Number of returns showing only one or two
sources of income with salaries and wages as a source of income,
classified by size of salaries and wages and by source of income /1/

---------------------------------------------
                      Total number of returns
        Size           showing not more than 
         of            two sources of income 
 salaries and wages   with salaries and wages
                       as one of the sources 

---------------------------------------------

   Under $       500                25,020   
 $   500 -       800                23,862   
     800 -     1,000                26,706   
   1,000 -     1,500             1,085,140   
   1,500 -     2,000               552,773   
   2,000 -     2,500               278,980   
   2,500 -     3,500               739,040   
   3,500 -     5,000               333,883   
   5,000 -     7,000               121,797   
   7,000 -    10,000                52,372   
  10,000 -    25,000                34,931   
  25,000 -    50,000                 2,777   
  50,000 -   100,000                   356   
 100,000 - 1,000,000                    50   
1,000,000 and over                       2   

        Total                    3,277,689   

    Under $      500                 100.0%  
    $ 500 -      800                 100.0   
      800 -    1,000                 100.0   
    1,000 -    1,500                 100.0   
    1,500 -    2,000                 100.0   
    2,000 -    2,500                 100.0   
    2,500 -    3,500                 100.0   
    3,500 -    5,000                 100.0   
    5,000 -    7,000                 100.0   
    7,000 -   10,000                 100.0   
   10,000 -   25,000                 100.0   
   25,000 -   50,000                 100.0   
   50,000 -  100,000                 100.0   
 100,000 - 1,000,000                 100.0   
  1,000,000 and over                 100.0   

               Total                 100.0   
---------------------------------------------

[Part 2 of 4]

                               Table 6

Individual income tax returns with statutory net income, Forms 1040
and 1040A, for 1936: Number of returns showing only one or two
sources of income with salaries and wages as a source of income,
classified by size of salaries and wages and by source of income /1/

--------------------------------------------
                         Returns showing    
        Size                                
         of            Salaries    Salaries 
 salaries and wages      only        and    
                                  dividends 

--------------------------------------------
                        Number of returns   
   Under $       500      4,646       1,888 
 $   500 -       800      7,901       1,928 
     800 -     1,000     12,086       2,391 
   1,000 -     1,500    904,135      42,783 
   1,500 -     2,000    427,659      28,815 
   2,000 -     2,500    192,232      24,207 
   2,500 -     3,500    526,645      70,483 
   3,500 -     5,000    215,706      51,145 
   5,000 -     7,000     69,319      27,892 
   7,000 -    10,000     26,784      15,568 
  10,000 -    25,000     14,024      14,258 
  25,000 -    50,000        764       1,500 
  50,000 -   100,000        108         176 
 100,000 - 1,000,000         18          24 
1,000,000 and over            -           1 

        Total         2,402,027     283,059 

                      Percent distribution  
                           of returns       
    Under $      500       18.6%        7.5%
    $ 500 -      800       33.1         8.1 
      800 -    1,000       45.2         9.0 
    1,000 -    1,500       83.3         3.9 
    1,500 -    2,000       77.4         5.2 
    2,000 -    2,500       68.9         8.7 
    2,500 -    3,500       71.3         9.5 
    3,500 -    5,000       64.6        15.3 
    5,000 -    7,000       56.9        22.9 
    7,000 -   10,000       51.2        29.8 
   10,000 -   25,000       40.1        40.8 
   25,000 -   50,000       27.5        54.0 
   50,000 -  100,000       30.3        49.5 
 100,000 - 1,000,000       36.0        48.0 
  1,000,000 and over          -        50.0 

               Total       73.3         8.6 
--------------------------------------------

[Part 3 of 4]

                               Table 6

Individual income tax returns with statutory net income, Forms 1040
and 1040A, for 1936: Number of returns showing only one or two
sources of income with salaries and wages as a source of income,
classified by size of salaries and wages and by source of income /1/

----------------------------------------
                       Returns showing  
        Size                            
         of           Salaries  Salaries
 salaries and wages     and       and   
                      interest   rents  

----------------------------------------
                      Number of returns 
   Under $       500    1,598     1,911 
 $   500 -       800    2,021     1,792 
     800 -     1,000    3,338     1,927 
   1,000 -     1,500   92,919    13,688 
   1,500 -     2,000   57,783    13,016 
   2,000 -     2,500   30,967    13,020 
   2,500 -     3,500   75,504    32,448 
   3,500 -     5,000   34,930    14,772 
   5,000 -     7,000   11,761     5,409 
   7,000 -    10,000    4,354     2,152 
  10,000 -    25,000    2,847     1,293 
  25,000 -    50,000      232        71 
  50,000 -   100,000       31         9 
 100,000 - 1,000,000        5         - 
1,000,000 and over          1         - 

        Total         318,291   101,508 

                           Percent      
                       distribution of  
                           returns      
    Under $      500      6.4%      7.6%
    $ 500 -      800      8.5       7.5 
      800 -    1,000     12.5       7.2 
    1,000 -    1,500      8.6       1.3 
    1,500 -    2,000     10.4       2.4 
    2,000 -    2,500     11.1       4.7 
    2,500 -    3,500     10.2       4.4 
    3,500 -    5,000     10.5       4.4 
    5,000 -    7,000      9.7       4.5 
    7,000 -   10,000      8.3       4.1 
   10,000 -   25,000      8.2       3.7 
   25,000 -   50,000      8.4       2.6 
   50,000 -  100,000      8.7       2.5 
 100,000 - 1,000,000     10.0         - 
  1,000,000 and over     50.0         - 

               Total      9.7       3.1 
----------------------------------------

[Part 4 of 4]

                               Table 6

Individual income tax returns with statutory net income, Forms 1040
and 1040A, for 1936: Number of returns showing only one or two
sources of income with salaries and wages as a source of income,
classified by size of salaries and wages and by source of income /1/

--------------------------------------------------------------
                                  Returns showing             
        Size          Salaries     Salaries       Salaries    
         of              and         and        and all other 
 salaries and wages   business   partnership   types of income
                       income       income           /2/      

--------------------------------------------------------------
                                 Number of returns            
   Under $       500    10,195         2,928           1,854  
 $   500 -       800     6,333         2,208           1,679  
     800 -     1,000     3,799         1,362           1,803  
   1,000 -     1,500    10,099         4,021          17,495  
   1,500 -     2,000     8,096         3,890          13,514  
   2,000 -     2,500     5,619         2,939           9,996  
   2,500 -     3,500     6,330         3,965          23,665  
   3,500 -     5,000     2,757         2,416          12,157  
   5,000 -     7,000     1,269         1,351           4,796  
   7,000 -    10,000       533           705           2,276  
  10,000 -    25,000       296           544           1,669  
  25,000 -    50,000        17            43             150  
  50,000 -   100,000         1            10              21  
 100,000 - 1,000,000         -             1               2  
1,000,000 and over           -             -               -  

        Total           55,344        26,383          91,077  

                          Percent distribution of returns     
    Under $      500      40.8%         11.7%            7.4% 
    $ 500 -      800      26.5           9.3             7.0  
      800 -    1,000      14.2           5.1             6.8  
    1,000 -    1,500        .9            .4             1.6  
    1,500 -    2,000       1.5            .7             2.4  
    2,000 -    2,500       2.0           1.0             3.6  
    2,500 -    3,500        .9            .5             3.2  
    3,500 -    5,000        .8            .7             3.7  
    5,000 -    7,000       1.0           1.1             3.9  
    7,000 -   10,000       1.0           1.3             4.3  
   10,000 -   25,000        .8           1.6             4.8  
   25,000 -   50,000        .6           1.5             5.4  
   50,000 -  100,000        .3           2.8             5.9  
 100,000 - 1,000,000         -           2.0             4.0  
  1,000,000 and over         -             -               -  

               Total       1.7            .8             2.8  
--------------------------------------------------------------
Treasury Department, Division of Tax Research

     Source: U. S. Treasury Department, Division of Tax Research,
Statistics of Income Supplement Compiled from Federal Income Tax
Returns for 1936, "Individual Incomes," Section III, Tables 1 and 2.
FOOTNOTES TO TABLE
 
/1/ Only positive items of income included. Deductible expenses directly relating to each source of income have been subtracted from the gross amount. Losses in income items have been treated as deductions although they commonly appear as effects against income in arriving at total income.

/2/ Includes all sources of income other than those shown.

Note: A total of 4,049,305 returns reported salaries and wages
as a source of income. These returns were distributed as follows:
Returns with one source of income, 2,402,027; with two sources of
income, 875,662: with three sources of income, 475,225; with four or
more sources of income, 296,391.

 
[Part 1 of 2]

                               Table 7

Individual income tax returns with statutory net income Forms 1040
and 1040A, for 1936: number of returns showing salaries and wages,
and one other source of income of less than (A) $100 and (B) $500

------------------------------------------------------
                       Source of income reported in   
                      combination with salaries and   
                                  wages               
                        Interest         Dividends    
  Size of wages     Number   Percent  Number   Percent
   and salaries                                       
                      of       of       of       of   
                    returns   total   returns   total 

------------------------------------------------------
                            A. Less than $100         

       Under $800     1,135     31.4      679     17.8
     800 -   1,000    1,418     23.5      709     29.7
   1,000 -   1,500   80,224     86.3   32,282     75.5
   1,500 -   2,500   71,316     80.4   29,386     55.4
   2,500 -   5,000   87,063     78.8   62,342     51.3
   5,000 -  10,000   10,327     64.1   12,125     27.9
  10,000 -  25,000    1,370     48.1    1,976     73.5
  25,000 -  50,000       75     32.3      116      7.7
  50,000 - 100,000       12     38.7       20     11.4
 100,000 and over         2     33.3        3     12.5

      Total         252,942     79.5  139,638     49.3

                            B. Less than $500         

        Under $800    2,157     59.6    1,368     35.8
     800 -   1,000    2,867     85.9    1,567     65.5
   1,000 -   1,500   91,251     98.2   39,717     92.8
   1,500 -   2,500   85,675     96.5   44,213     83.4
   2,500 -   5,000  106,749     96.7   99,776     82.0
   5,000 -  10,000   14,683     91.1   25,723     59.2
  10,000 -  25,000    2,303     80.9    4,845     34.0
  25,000 -  50,000      167     72.0      321     21.4
  50,000 - 100,000       22     71.0       46     26.1
  100,000 and over        5     83.3        4     16.0

      Total         305,879     96.1  217,580     76.9
------------------------------------------------------

[Part 2 of 2]

                               Table 7

Individual income tax returns with statutory net income Forms 1040
and 1040A, for 1936: number of returns showing salaries and wages,
and one other source of income of less than (A) $100 and (B) $500

------------------------------------------------------
                       Source of income reported in   
                      combination with salaries and   
                                  wages               
                    Business profit        Rents      
  Size of wages     Number   Percent  Number   Percent
   and salaries                                       
                      of       of       of       of   
                    returns   total   returns   total 

------------------------------------------------------
                            A. Less than $100         

       Under $800       239      1.4      193      5.2
     800 -   1,000       97      2.6      172      8.9
   1,000 -   1,500      514      5.1    2,924     21.4
   1,500 -   2,500      721      5.3    4,098     15.7
   2,500 -   5,000      885      9.7    8,742     18.5
   5,000 -  10,000      162      9.0    1,628     21.5
  10,000 -  25,000       27      9.1      263     20.3
  25,000 -  50,000        2     11.8       14     19.7
  50,000 - 100,000        1    100.0        2     22.2
 100,000 and over         -                 -         

      Total           2,648      4.8   18,036     17.8

                            B. Less than $500         

        Under $800    1,678     10.2    1,084     29.3
     800 -   1,000      682     18.0    1,054     54.7
   1,000 -   1,500    2,176     21.5   10,371     75.8
   1,500 -   2,500    3,613     26.3   17,726     68.1
   2,500 -   5,000    3,735     41.1   36,913     78.2
   5,000 -  10,000      583     32.4    5,266     69.6
  10,000 -  25,000       82     27.7      766     59.2
  25,000 -  50,000        4     23.5       29     40.8
  50,000 - 100,000        1    100.0        5     55.6
  100,000 and over        -        -        -        -

      Total          12,554     22.7   73,214     72.1
------------------------------------------------------

Treasury Department, Division of Tax Research

Source: U. S. Treasury Department, Division of Tax Research, Statistics of Income Supplement, 1936 "Individual Incomes", Section III, Table 5.

 
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