New-York tribune., 1918-10-30
individuals and
Partners Put i'm
Corporation Class
Must Pay Excess Profits
Tax, Is Plan of Senate
Committee
Much Figuring Needed
Detailed Plan Laid Down
Whereby Amount Is La
boriously Arrived At
(Speclnl Dtspctch to The Tribune\

Especial Dispatch to The Tribune>
WASHINGTON, Oct. 29.-Individuals
and partnerships engaged in business
on the same basis as corporations will
be subject to the war excess profits tax,
if the tentative decision arrived at by
the Senate Finance Committee to-day is
permitted to stand. Such unincorpo-
rated businesses. and also corporations
will escape the excess tax altogether,
II their business consists merely OF rem
dcring personal service; but the cor
poration that is thus classcd must, for
income taxation purposes, treat all of
ITS net earnings as distributed to the
individuals composing the corporation.
The committee. after the fashion of
lawmakers, took roundabout way to
arrive at taxation of partnerships and
individuals engaged in business with
capital. To the three brackets already
used to determine war excess prohts
taxes of corporations, it adds a fourth
that is to apply, along with the three
others, to non-corporate businesses
only. This fourth bracket provides for
an additional tax of IL per cent to
offset the 10 per cent normal tax that
corporations have to pay.
May Credit Against Incomes
The sum of the taxes arrived at by
computations through the four brack-
cts constitutes sum which individuals
and partnerships may credit against
the total of their personal income
taxes, including the surtaXes.
In consequence of these changes a
private individual in business is put
on precisely the same basis as share
holder in a corporation, except that
the dividends the corporation distrb-
utes to its shareholders are subject to
the surtax if they are sufficiently large
TO be included within the limits of
that tax.
The following is the process the-non-
corporate business will have TO so
through to determine what its income
taxes will be:
First-Its owner will figure out what
Is 80 per cent of the net income in
excess of the per cent deduction and
not in excess Of 20 per cent.
Second-He will figure what is the
sum that represents 60 per cent of the
net income in excess of 20 per cent Of
the invested capital.
Third, he will add to the sum of the
preceding amounts the sum by which,
If any, so per cent Of the amount Of
the net income in eXcess of the war
profits credit (whatever that may be-
exceeds the amount of the tax com
puted under the third and fourth
brackets.
Fourth, he Will add to the foregoing
sum or sums sum equal to 12 per
cent of the amount of his net income
in excess Of $1,000 plus that grand
sum.
Finishing This, He Begins
By this time he will have obtained
fCt. al
profits on himself as business. After
that he will rest awhile and figure his
personal income tax plus surtaxes, if
any, as he would ordinarily. Then he
will subtract whichever way the sub
traction would so, the one from the
other. IF the sum Of the four bracket
computation IS greater than the other,
that is his tax. If it is less than the
personal tax computation, the latter
Is his payable tax. This, however, is
not an alternative method. because in
stead of referring to the tinal deter
mination as such the tentative amend
ment merely declares that the sum
reached by the four steps is a credit
against the business mans total in
como tax
In the case of partnership, the
partners divide the total amount of the
war excess profits tax among them.
according to their respective interests,
and then credit their portions against
their personal income taxes.
After he has done all this an indi~
vldual Will find that the Finance Com
m1ttec, III pursuance of it's laudable de-
sire to put the individual business man
on par with corporations, has over
looked the parity between the business
man who gets into harness and works
with his dollars and the man of leisure
who lets his dollars work without his
assistance, and limits his activities to
coupon cutting. There is no excess
prohts or war profits tax for the lat
ter and he is not subject to any differ
ential which makes the tax burden
heavier on the dollar earned by dollars
plus brains than on the dollar earned
by dollars only.
Insurance Companies Status
insurance companies were to day ac-
corded the honor of new part Of the
income title of the revenue bill. Part
IN winch they are elected to paw an
income tax of ~ per cent of their not
incomes. For taxation purposes the
net income of life insurance company
is defined to be the gross income less
l. An amount equal to per cent of
,ne mean OF the reserve fund required
by law and held during the taxable
Soai' wv hoV leSS than the amount of
interest received during the taxahle
year. which under paragraph 4 of sun
division OBJ of Section 213 is exempt
from taxation under this title.
Z. investment expenses paid during
the taxable year, not exceeding one
fourth of l per centum Of the mean
invested assets.
3. Taxes and other expenses paid
during the taxable year exclusively
IN connection with real estate owned by
the company, not including taxes as
sessed against local benefits or anv
amount paid out for new buildings or
Tor permanent improvements or better
mehts made to increase the value of
any property.
a. In the case Of domestic life in
surance company, $4,000.
Gross income" in this connection is
defined as the gross income received
during the taxable year from interest.
HfvidopAo ~' ~''f