The news scimitar. (Memphis, Tenn.) 1907-1926, 1918-12-10
PROHIBITION To
GREATLY REDUCE
FEDERAL INCOME
Peace Conditions Work Radi-
cal Changes in Taxation.
Income Tax Retained in
New Legislation.

WASHINGTON, nee. l0.-In addition
to the tax reductions due to the fact
that the government o copes with
peace instead Of war conditions, pro-
hibitiaR is expected TO reduce revenue
returns greatly.
Beverage taxes under the house bill
we're estimated TO raise 81, 1877 ,000, 600
during their first ~ months OF opera
ton. and $3.50, O0o, OOO tor their 1919
fiscal year.
AT The present time under changed
cond ltions,' the report states, 1t is
possible 10 count only unoh $500, 600, 900
for l9lS-ls, and 500, 900, O00 for $1,000
from this source"
Analyzing in detail the committees
radical changes, Senator simmons re-
port explained that the revised indiyid-
lal surtaX rates graduated upward one
per cent on each $1,000 over s., 900 are
more equitable than the arbitrary grad
uations OF the house bill.
Retain Income Tax.
The bill retains the house provisions
for income taxation of salaries inClud-
ing those possibly Of the president and
federal Judges. legality OF which, the
report stated, is left to the courts II
the question Is raised. The report, how
ever, says that the house clause for
fedora taxation Of new state and mu-
nicipal bonds was stricken out as "lt
seemed unwise for congress to attempt
TO imposc this tax unon the obligations
OF states and municipalities as long as
the states are not free TO tax in a
similar manner obligations Of the
United States"
The plan OF requiring affiliated cor
poratiOns to make consolidated income
tax returns, the report states, will do
much to prevent tax evasion and the
new tax on life insurance companies
true income from Investments in lieu
Of war excess, income, capital stock
and other taxes Is more equitable.
The war excess profits section, the
report states, has been simplified and
reduced. The house alternative plan
Of levying war and excess profits at
which ever rate would Yield the most
reVcnue, the committee found ohiec-
tiouHhle, beCRU use its COnstitutionaiity is
questioned and its administration
troublesome TO taxpayers
Explains Taxation.
Explaining exclusion of individuals
and partnerships from war excess prof
it's taxation. applicable only to corpora
tions, the report stated;
Individual and partnerships pay the
heavy surfaces upon all net income,
while corporations are relieved from
surfaces upon the portion of their earn
ipKs which Is not distributed, THIS
Inequality Is more than compensated for
by the fact that the corporation is sub
ject to the war excess profits tax. The
situation as between different forms OF
buaincss organizations having thus been
brought into approximate balance, ii
was deemed proper to relieve the corr
poratiop from the six per cent differ
entail income tax provided by the
house bill"
Regarding the tax OF beverages, the
renort says no sound reason was found
for the house proposal for doubling the
present rate Of $3.50 per gallon on non
beverage alcohol, largely used for medi-
clnes and household necessities.
Exemption from bond n other
costs on distilled liquor remaining IN
warehouses after bone dry" prohihi-
ton becomes effective, ext July, the
report states, is to prevent hardship
upon owners,
TO prevent the total loss, owing to
prohibition, of vineyards developed
through many years. the report added
regarding wine, 'it was provided that
under proper regulations wines may DC
produced and existing stocks of wire
may be utilized for the making of non-
beverage spirits and nonalcoholic
driTfi4R -