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Foreign aid under fire
'Tm asking you to put aside partisan politics this election year!'
The Agency for International Development (AID)
was created by executive order of the President of the
United States in November of 1961. Since then AID
has taken administrative control of all foreign aid in
the form of loans, technical assistance, grants and
other subsidies.
When American foreign aid began in 1949 upon
the initiation of the Marshall Plan, it amounted to
1 1.5 per cent of the total national budget. In 1970,
AID's prgram represented only 0.9 per cent of the
federal budget.
Since the beginning of the Marshall Plan a total of
five Presidents and twelve Congresses have reaffirmed
the American commitment to economically aid
developing countries. According to a recent State
Department bulletin, foreign aid is in the self interest
of the U.S. because the "aid helps the U.S. achieve
security, well-being and continued progress by
helping other nations achieve the same goals."
Soon after the unseating of Nationalist China in
the United Nations Congress rejected a foreign
appropriations bill. In recent years AID has come
under considerable fire from many directions,
including Congress.
AID is arguing that three out of five adults cannot
read, and millions of children are maimed by
malnutrition even in the world today. Furthermore,
with only rare exception, all foreign aid
appropriations are expended in the U. S., grants to
educational institutions for research and technical
assistnee, loans provided to developing countries with
the condition that the money be spent in the U.S.
and other forms of expenditures also contribute to
the balance of payments since they are spent here.
It is also stressed that the U.S. now receives more
money in net inflow than goes out of the country in
the form of interest payments and capital repayments
on loans made in the past.
However, criticism leveled against the AID
program is certainly valid. As long as problems of
domestic nature remain, why not give them the most
immediate attention. Hunger, poverty and technical
ignorance still contribute to the plight of many
disadvantaged Americans.
liven with the measured success of the State
Department's foreign aid policy, Americans deserve
to bo highly critical of AID and the large amount of
money it dispenses, at least until our domestic
problems are solved.
Income tax form 1040. If you haven't
received it yet, it's only inches away-one
of the unpleasant strings attached to
graduation, independence and entering
the real world.
Whether you receive form 1040 now
or five years from now, chances are you
will find yourself mentally bankrupt
about the system you are forcibly
entering.
No other field of public policy is less
understood or more personally significant
to every American that the Internal
Revenue Code. If knowledge is power,
then the few who understand and
influence income tax legislation are
power titans.
Most people associate income tax with
one or two dim recollections: the
monotonous generalities of a high school
civics class and the occasional news
reports of wealthy people legally avoiding
taxes. The latter are usually chalked up as
annoying exceptions to the rule.
But the plain fact is that such reports
are the rule; and not the except ion-thc
graduated income tax is more myth than
reality.
The maximum effective rate of
taxation for any income class is 34 per
cent, although the highest incomes are
officially taxed up to 70 per cent. '
For various reasons, income tax
legislation is laced with loopholes for
those in high income brackets.
Authorities estimate that between SIS
and S20 billion is lost annually through
these legal loopholes.
Fifteen billion dollars is 60 per cent of
the 1971 national deficit; it is about 10
per cent of the total 1971 national
budget, $167 billion.
Fifteen billion dollars could pay for
over half of total Health, Education and
Welfare expenditures. It could finance the
combined amounts spent on foreign
relations, commerce, labor, agriculture
and natural resources.
Although tax reforms were nude in
1964 and 1969, the widest loopholes arc
yet unclosed.
Perhaps the greatest single failing of
the income tax system is that it does not
cover a form of unearned income called
"capital appreciation." Capital
appreciation is the simple increase in
value of owned property.
There is $500 billion worth of
individually-owned corporate stock in
America. About 85 per cent of the
appreciation on this stock is untaxed. The
remaining 1 5 per cent is taxed at less than
half of ordinary rates.
To make things worse, 80 per cent of
the corporate stock mentioned is owned
by one per cent of the population.
The greatest chunk of "Rich Folks"
money is not earned but received from
property-primarily coporate securities
and real estate.
If corporate stock appreciation had
been taxed at the rate that earned income
was, an average year in the 60's would
have yielded an additional $25 billion
according to statistics in the Harvard
Business Review and the Yale Law
Review.
Economist Joseph Ruskay points out
that the mild reforms of 1969 were far
outweighed by tax cuts legislated in favor
of the wealthy. Congressman Henry
Reuss called the resulting revenue loss a
"time bomb." The Treasury estimates this
loss will reach $8 billion a year by 1975.
Loopholes still available to the rich
man are: tax exempt interest on state and
local bonds, depletion allowances for oil.
gas and mineral investors, favored
treatment of capital gains in securities
and other investments, the use of trusts
to reduce or entirely avoid estate taxes,
and the exemption from capital gains
taxation of gains realized by heirs or
other beneficiaries of property received at
death or by gift.
Even if loopholes are overlooked, the
income tax scale itself is inequitable. Tax
brackets are narrower and rate increases
are greater at the bottom end of the scale
than at the top.
If Congressman Rcuss is right about
the fiscal time bomb, where are the
needed revenues going to come from?
The low-middle and middle income
groups are overburdened as it is; the best
way for government to secure needed
revenues is through tax reform.
Disappointingly, tax reform is not a
visible issue in this election year.
Congressmen are unlikely to legislate
reform without public prodding; many of
them have vested interests in present tax
loopholes..
Like many neglected public concerns,
income tax. reform has become the
responsibility of the unequipped and
reluctant citizen.
Unlike most current issues, however,
tax reform could relieve both
conservative and liberal concerns.
Domestic welfare programs could be
financed by tax payments from the
formerly tax-sheltered wealthy, and tax
burdens made more bearable.
Income tax reform has the potential to
unite young and old, liberal and
conservative, student and laborer, on an
issue ot vital common interest.
PAGE 4
THE DAILY NEBRASKAN
WEDNESDAY, FEBRUARY 2, 1972