Evening journal., 1918-08-17
WAR PROFIT TAX
TO BE 80 PER CENT
House Committee Accepts
Treasury's Suggestion,
But Changes Deductions
EIGHT PER CENT
EXEMPTION GRANTED

WASHINGTON, Aug. i7--The Way.
and Means Committee has accented
fully the Treasury Department plan
for the imposition Of a war profits tax
or 80 per cent Tho only remaining
dlnlculty is in Strengthening out some
or the details. The excess profits tax
is still in process Of modification IN
suit both the committee and the
Treasury.
In the Treasury plan for a war
pronts tax, 1t was provided that the
general pre-war earnings OF various
Kinds OF business in eight classi0ca-
uons was to be the scale Of how much
should be allowed for ordinary earn
ihss before putting the so per cent. tax
on the balance. This did not meet the
full approval Of the committee and
only three classiflcations are desired
The Treasury wished 10 classify busi-
ness generally under manufacturing.
mining, mercantile, financial transpor-
tatlon by l6nd, transportation by wa
ter. public utilities other than trans
portation and miscellaneous.
The Treasury suggested that within
these classiflcations the greatest ner-
centage Of profits in relation 10 capltal
70 be allowed should be 70 per cent
and the least per cent. This varying
scale the committee does not altogether
like either. Instead OF the Treasury
suggestions the committee today tenta-
lively adopted the following plan.
which has been sent 10 the Secretary
Of the Treasury for his approval:
Classification Of business in three
classes as:
I. Mining and businesses generally
where the hazard OF loss Is great
? Miscellaneous, including all sorts
OF business except those classed in I
and g.
B. Financial.
The deduction from net income which
would be allowed before imposing the
80 per cent. war tax on the rest Of
the income IN GLASS 1 by the committee
plan would be ~ per cent. The deduc-
ton in class 2. where the hazard Of
loss is not so great. would be 10 per
cent, and all sorts Of business included
under class 3-flnancial-wOuld be al
lowed a deduction Of only per cent.
Final action on this plan will not be
taken by the committee until it hears
from Secretary McAdoo.
Important changes were made in the
bill yesterday, one Of them at the sug-
gestlon Ct the Treasury. This was 30
change the provisions for instalment
payments Of income taxes. The new
plan IS TO require o payment Of one
third Of the tax when the return Is
made. one-third within two months ar
Ter this. and one-third two months
later. with no deduction for payment
Of the tax in full when the return is
made.
The most important change In the
bill and one which may not remain I'm
the bill was establishing a difrerentlal
between earned and unearned incomes
in regard 10 the income tax. The
present normal tax OF 10 per cent,
with the exemptions and the abate-
ment agreed upon. remains in force
In respect 10 earned incomes. but the
normal tax on unearned incomes was
increased TO 81 per cent.
The vote in the committee on this
motion was very close The exact vote
was not msde public, but it Is under |
stood 90 have carried by only two /
votes. Doubtless some effort will be |
made 20 repeal this provision.
In defining what should be taxed as I
unearned income the committee in /
cluded interest. rentals. royalties and I
similar unearned income but for some /
reason unexplained provided that divi- /
dends from preefrred stock only and I
not common stock should be classed as I
unearned income. One member re- /
served the right TO make a motion on /
The floor Of the House TO have COM [
mon stock dividends included.
The committee accedcd 10 the re- |
quest Of the Bureau Of Internal Rev /
enue and provided s25.OO0,OOO a year ]
an increase Of S7.j00O00. for the better |
collection OF taxes. 10 also provided /
that Commissioner Roper should have /
I've deputies instead Of three.
The committee decided TO provide for |
having the names Of every one who
must make a return under the income
tax posted at the Court House OF each
county seat.
Tn connection with the committees
action in refusing TO accept the Treas
ury suggestions for arriving az the
proper deduction from net income 70
be allowed before imposing the war
profits tax Mr.. Kitchln criticised the
suggestion OF the Treasury Department
10 give business concerns the option
Of a number OF plans under which TO
figure their deductions
Following the suggestions Of the
Treasury Department Mr.. kitchin
said. Il have figured ont would lose
the Government about s75O0OOO in
revenue"
Practically all hope Of reporting the
bill TO the House next week has been
given mp. The best that is hoped for
now is that IT will be ready by the
Monday. August 26.