The finances of the Government are in sound condition.  I shall submit the detailed evidences and the usual recommendations in the special Budget message.  I may, however, summarize our position.  The public debt on June 30 this year stood at $16,931,000,000, compared to the maximum in August, 1919, of $26,596,000,000.  Since June 30 it has been reduced by a further $238,000,000.  In the Budget to be submitted the total appropriations recommended for the fiscal year 1931 are $3,830,445,231, as compared to $3,976,141,651 for the present fiscal year.  The present fiscal year, however, includes $150,000,000 for the Federal Farm Board, as to which no estimate can as yet be determined for 1931.

Owing to the many necessary burdens assumed by Congress in previous years which now require large outlays, it is with extreme difficulty that we shall be able to keep the expenditures for the next fiscal year within the bounds of the present year.  Economies in many directions have permitted some accommodation of pressing needs, the net result being an increase, as shown above, of about one-tenth of 1 per cent above the present fiscal year.  We can not fail to recognize the obligations of the Government in support of the public welfare but we must coincidentally bear in mind the burden of taxes and strive to find relief through some tax reduction.  Every dollar so returned fertilizes the soil of prosperity.

TAX REDUCTION

The estimate submitted to me by the Secretary of the Treasury and the Budget Director indicates that the Government will close the fiscal year 1930 with a surplus of about $225,000,000 and the fiscal year 1931 with a surplus of about $123,000,000.  Owing to unusual circumstances, it has been extremely difficult to estimate future revenues with accuracy.

I believe, however, that the Congress will be fully justified in giving the benefits of the prospective surpluses to the taxpayers, particularly as ample provision for debt reduction has been made in both years through the form of debt retirement from ordinary revenues.  In view of the uncertainty in respect of future revenues and the comparatively small size of the indicated surplus in 1931, relief should take the form of a provisional revision of tax rates.

I recommend that the normal income tax rates applicable to the incomes of individuals for the calendar year 1929 be reduced from 5, 3, and 1 1/2; per cent, to 4, 2, and 1/2; per cent, and that the tax on the income of corporations for the calendar year 1929 be reduced from 12 to 11 per cent.  It is estimated that this will result in a reduction of $160,000,000 in income taxes to be collected during the calendar year 1930.  The loss in revenue will be divided approximately equally between the fiscal years 1930 and 1931.  Such a program will give a measure of tax relief to the maximum number of taxpayers, with relatively larger benefits to taxpayers with small or moderate incomes.