New-York tribune., 1918-08-22
Tax Bill Raises
Profits Rates
Despite M,Adoo
Continued from page !

cretionary powers has largely disap-
peared with the elimination of the
classification provision and the fixing
of q definite pre-war optional profits
deduction rate for all corporations.
Acting under instructions from the
committee Mr.. Kitchin and his assist
ants will now proceed to write the final
draft of the corporations war and ex-
cess profits clauses, with alternative
clauses for the latter, one or the other
Of which will be adopted by the COM
mittee when it resumes its sessions
Saturday after two-day recess.
The two excess profits schedules are:
l. Above a specific deduction Of $3,-
900 and per cent up to Is per cent.
35 per cent of the net income on the
invested captal between Is and 20
per cent, 80 per cent tax rate and
over 20 per cent, 10 per cent rate.
2. With deductions the same as in
number l, tax rates of 40 per cent be-
tween the deduction and 20 per cent
profits and 70 per cent on all profits
in excess OF 20 per cent.
"Catch" for Corporations
Mr.. Kitchin said he would favor the
second plan because of it's simplicity.
hut that the first would more likely
prevail. Either plan is much sitter
than the present law, and taken in
conjunction with the war profits alter
native will make the revenues 5000 ,OOO.-
600 or S300,000000 greater than if the
present rates we're followed. Without
the war profits alternative, Mr.. Kitchin
says, either of the new plans would
increase the revenues about $500 900.
600 or $900,00O,0OO.
AS it was found that some corpora-
tions would not be caught under either
the excess profits or the war profits
plan, "catch clause" was introduced
which provides that any corporation
whose capital exceeds $1,OOOOOO shall
pay at least 10 per cent as an excess
profits tax
One of Mr.. McAdoo's objections to
excess profits taxes in principle was
met to degree by the inclusion of a
protective measure for small corpora
tons that make large profits relative
to their capitalization, but in which the
size of the gains is chiefly due to the
brains of its members rather than to
the capital.
Limit on Taxation
This is accomplished by providing
that the cases Of corporations whose
capital does not exceed $4,000 the
limit Of taxation on them under either
the war profits or the excess profits
plan shall not exceed 35 per cent of
their net income.
Corporations of capital over
$4,000 and not more than $4,000 will
have this limit fixed at 40 per cent Of
their net income. 1t is said that 95
per cent Of the corporations whose in
come exceeds SO per cent have less
than $50,000 capital, and almost all
corporations that make 100 per cent or
more have capital Of $4,000 or less.
AS to the war profits measure, the
committee voted to abolish all clas-
sifications and establish fiat pre-war
profits deduction rate of 10 per cent.
Any corporation whose pre-war earn
in9s were less than 10 per cent will
be permitted to apply the 10 per cent
deduction before calculating the 80 per
cent tax, but if its earnings in the
pre-war period-191119 11912-1913-wcrc
more than 10 per cent these earnings
will constitute the amount of the de-
duction from current earnings before
applying the tax.
Corporations that have been created
since the war began will be subject to
the 10 per cent deduction under the
war profits plan.
No discretion Is left to the Treasury