New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-10-14
Excess Profits Tax

The excess profits tax applies to in
dividuals in trade and professions. TO
partnerships and to corporations. 1t
applies to corporations in addition TO
the old and still operative corporation
ncome tax.
This excess profits tax may be
imagined by some to affect important
ly only those large corporations whose
profits run into large figures. But In
asmuch as small incorporated compa-
MES are as likely 10 make high net
income percentage on the small capital
invested as are the large companies to
make high percentages on the large
capital invested, this tax reaches many
individuals in moderate circumstances.
The burden is very largely dis
tributed. Thousands of small traders
and prosperous doctors, lawyers,
brokers, etc, are thus given a stake in
the war.
As an illustration, let us take small
COTpOIdliOU operating bANNNA' SNN-N
with $4,000 capital and making an an
nual net income Of $4,000. This places
it in the 90 per cent profit class. This
business is allowed an exemption of
SO 900, and an additional exemption of
s per cent Of its capital, which latter
would amount TO 1000, making total
deduction Of $4,000, and leaving a tax
able income of $1,000.
The government proceeds to tax this
$5,400 of taxable income according TO
this table Of progressive percentages:
Rate
Net income in excess of deduction.
and not in excess of is per cent
of capital .................... 20 per cent
Net income between IS and 20 per
cent of capital .............'..E 20 per cent
Net income between 20 and rs per
cent of capital ................3 IS per cent
Net income between rs and 80 per
cent Of capital ................45 per cent
Net income over SO per cent OF
capitaI Observation-Disclosures. so per cent
In the case Of the grocery store Sc
lected, inasmuch as the exemption OF
$4,000 is itself greater than the 10 per
cent of income in the first classified
ton. obviously there is nothing TO be
taxed at 20 per cent. The next classi-
fcation attacks the income in excess
of IL per cent of the capital Gin this
case what is in excess of $4,000 and
not over 90 per cent of the capital Gin
this case not over $4,000, yielding
$1,000 to be taxed at 25 per cent. For
under the second classification and
rate the exemption does not obtain.
We therefore have this result:
Capital invested ..........''''''''' e<V'ooV
Net income ................s.... lV,VVV
Exemption allowed ................. $500
Taxable amounts Ia progression:
5000 Us per cent of capital, which.
being less than $500 exemption.
leaves nothing 10 be taxed at the 20
per cent rate. ACKNOWLEDGEMENTS. None
s., 900 between is and 20 per cent Of
capitsD to be taxed at 25 per cent. $3.50
81. 900 between 20 and IS per cent Of
capitaD 10 be taxed at IS per cent. $50
$500 between rs and SO per cent Of
capitaD TO be taxed at IS per cent 40
50, 400 lover SO per cent Of oapitaD 10
be taxed at 90 per cent ............ 1000
Total tax .................. ''... sS'SoO
Let US suppose that instead OF an
incorporated company it was an indi-
vidual who owned this grocery store,
with the same capital and the same net
profits. He would be allowed an ex-
emption Of $4,000, as against the ex-
emption OF $4,000 allowed the incor-
porsted company. But as both their
exemption would be free OF the first
rate, the 20 per cent tax, and as neither
Of them would be free Of the other
rates. the taxes of the individual owner
and Of the incorporated owner would