Second, despite the substantial loss of revenue in the coming fiscal year, resulting from tax reductions now in effect and tax adjustments which I shall propose, our reduced spending will move the new budget closer to a balance.

Third, by keeping new appropriation requests below estimated revenues, we continue to reduce the tremendous accumulation of unfinanced obligations incurred by the Government under past appropriations.

Fourth, until those claims on our Government’s revenues are further reduced, the growth in the public debt cannot be entirely stopped.  Because of this—­because the government’s bills have to be paid every month, while the tax money to pay them comes in with great unevenness within the fiscal year—­and because of the need for flexibility to manage this enormous debt, I find it necessary to renew my request for an increase in the statutory debt limit.

TAXES

The new budget provides for a lower level of taxation than has prevailed in preceding years.  Six days ago individual income taxes were reduced and the excess profits tax expired.  These tax reductions are justified only because of the substantial reductions we already have made and are making in governmental expenditures.  As additional reductions in expenditures are brought gradually but surely into sight, further reductions in taxes can and will be made.  When budget savings and sound governmental financing are assured, tax burdens should be reduced so that taxpayers may spend their own money in their own way.

While we are moving toward lower levels of taxation we must thoroughly revise our whole tax system.  The groundwork for this revision has already been laid by the Committee on Ways and Means of the House of Representatives, in close consultation with the Department of the Treasury.  We should now remove the more glaring tax inequities, particularly on small taxpayers; reduce restraints on the growth of small business; and make other changes that will encourage initiative, enterprise and production.  Twenty-five recommendations toward these ends will be contained in my budget message.

Without attempting to summarize these manifold reforms, I can here illustrate their tendency.  For example, we propose more liberal tax treatment for dependent children who work, for widows or widowers with dependent children, and for medical expenses.  For the business that wants to expand or modernize its plant, we propose liberalized tax treatment of depreciation, research and development expenses, and retained earnings.

Because of the present need for revenue the corporation income tax should be kept at the current rate of 52% for another year, and the excise taxes scheduled to be reduced on April first, including those on liquor, tobacco, gasoline and automobiles, should be continued at present rates.

Immediate extension of the Renegotiation Act of 1951 is also needed to eliminate excessive profits and to prevent waste of public funds in the purchase of defense materials.