Evening star., 1917-09-19

eral business interests, aside from those
concerned with furnishing munitions
and war supplies, that the proposed
method of taxing profits will work dis
elimination and injustice against many
lines Of small industries and general
business enterprises.
Oppose Basis of Exemptions.
The gravamen of complaint is direct
ed against the basis of~eXemptlon, to
be calculated upon capital. which Is de-
fined to include all cash and Its ac-
cumulations. but only the cost OF tan
gible property, good will. etc. and to
exclude the latter unless acquired py
cash or tangible property.
BY way of illustration, it is pointed
out that a concern which cost originally
100000. but has been built up to
value now of 100000. will receive an
exemption of only per cent, or $4,000;
while another concern, which had re-
Gently been acquired at cost OF
$1,000. 600, would be given exemption
to the extent of $4,000. The man VINO
has built up his business from small
beginning is penalized, while the man
capes.
Moreover, it is contended that. while
assuming to tax war profts. the DILL as
amended. will apply multiple taxation
to excess peace profits of every busi-
ness. small and large. even if in no way
benefited by the acceleration OF indus
tries growing out of the war.
House Bill Preferred.
H. r. bill 42S0, as reported from the
Senate committee. provided. it is claimed,
a clear way of ascertaining the war profits
of corporations and business generally. 1t
required that the average net profts for
the years 1871. 1s1. and 1918 should be
ascertained, and being deducted from the
net earnings for the year 1917. would
show the war profits, This message was
business, whether large or small. Dur
ing debate in the Senate. in order to
reach certain large corporations wnich
normally made immense pronts out whlcn
1917, the following amendment was added
to paragraph A. section 203: But such
deduction shall not be an amount less
than or more than 10 per centum OF
the actual invested capital for the taxaoie
year.
claimed. would be disastrous TO the small
eoftt<Atiosss. yeonarfnersna1s ana alnaiy,as
those that are rAiAtlEelF sula1 IieA
comperQd with thk immeIsBe muntti0n 4asd.
other var material corporations. Parec-s
uiariy is this 80 where labor and service
are much more important than the money
or commodities invested in the enterprise
Capital Always Nominal"
There are innumerable businesses. it is
pointed out, where the capital is always
nominal, and where the profit is due al
most entirely to personal labor. These
are the classes of business where no goods
are sold or dealt in in the usually un
derstood way. An example is cited OF
a going business where the total invest
ment is S500.0o0, and where during the
pre-war period an annual profit of $50. 900
was made, while this same business in
the year 1917 would be expected to make
100000 At ao Elanoe. noe this would sho"
II the rule of the amendment referred
to is applied. the deduction permitted
would be only 10 per cent OF the $50o. .o0o
capital. or 50.000.. and not the $15O.Oo0
normal profit actually made. This would
indicate a seeming war profit Of $780,
600. Figuring the tax on this $150,000
(not including the per cent normal tax
on all corporations) by the complicated
bracket system provided in the bill. it will
be found that the tax will be s53,575. or
something over 107 per cent, which would
entirely wipe out the actual excess war
profits. which were $4,000. and encroach
$3,575 upon the earnings of normal years.
Ii this same business were figured on
the basis Of the deduction which was to
be permitted before the amendment was
added, the government tax upon $50. 900,
the actual war profits would have been
81, 500, or slight over Is per cent. OF
course, when the normal tax of per cent
upon all earnings is added to the above
figures the percentages are increased
greatly.
Voted Down by Senate.
The largest tax which has been so
far mentioned as being proper has not
exceeded so per cent of the war profits.
and this percentage did not find favor
in the Senate and was voted down by a
large majority. While it is probably
true that with the billion dollar cor
porations a profit of 10 per cent would
be regarded as quite large. 1T is not SO
with small business, it is urged. wheth-
er conducted under a corporation. CO.
partnership or an individual.
There seems to be very general mis-
apprehension in the minds of most peo-
pie. it is contended. as to what war
profits are. Many think them only the
profits made by those who manufacture
supplies of a military or war nature.
Such is not the case, it is insisted, and
every business in the land comes under
the designation If it has made, or does
make, in this year 1917, anything in
excess of its normal, average profit of
the three past war years, modified by the