Evening star., 1918-08-11
1926 N. Y. Ave. fHosa ssse-ssai a

income as is not distributed to share
holders.
In an EFFORT to determine what
the effect of such a tax would be. We
have made rough estimates fer thir-
teen representative companies using
a IS per cent rate and including
per cent additional income tax Ae-
cording to our figures, this basis
12S,o0O in 1917 up to s147, ,7o1 GOO or
an increase of 123 per cent.
The United States Steel Corpora
tion would apparently have to pay
considerably more than its $685. 49,
435 of 1917, though not nearly SO
group which we selected, composed
of two steel companies. one copper
producer, one equipment company,
one leather company. one motor car
manufacturer. one electrical goods
manufacturer, one nickel company
and five miscellaneous companies.
Would Produce a Huge Sum.
That such a tax would produce
huge sum at first is clear. but
whether or not it could be borne
without producing serious results h8s
been questioned. We must renemcfy
that large profits do not usually mesU
corresponding cash balances in the4D
times. Cash is tied up in inventories
and in additions to facilities, making
the payment of enormous lump sums
over to the government a dimcult mat
ter to arrange. Where a corpora
tion must resort to borrowing to meet
its taxes, imitation is increased. the
strain on the banks becomes that
much greater, and the financial posi-
tion of the company is impaired
The imposition of such tax is not
by any means a physical impossible
ity. however, as has been proved by
the experience of England. We be-
lieve it desirable that taxes should be
as high as can safely be borne. but
there is a dividing line. somewhere.
between merely drastic and disas-
trous figures. To closely approach the
latter. without overstepping it, re-
Quires- some very careful and much
more scientific attention than has
been our former policy in revenue
matters.
A Second Tax Proposition.
"A second form of tax. much less
severe than the foregoing. which now
appears to be receiving favorable at
tention, is based upon invested capi-
tai instead of pre-war profits. BY this
plan $4,000 plus profits up to 10 per
cent of invested capital are exempt;
Upon the following 10 per cent 30
per cent tax is levied: on the next
per cent of profits the rate is SO per
cent, and on profits over rs per cent
an so per cent rate is imposed.
We have tried to determine the
effect of this tax upon the same thir-
teen corporations. In every case it
appears to work out well below that
under the British plan, and. in fact.
not greatly above, the 1917 figures
OF course. there are plenty of in
stances where this tax would prove
the higher. but they are generally in
smaller concerns in which invest
ed capital plays but a minor part.
Where invested capital is really
negligible factor. it is not planned n
impose a tax on this basis, but thkfs
are companies just on the hazy bordAs
line in this regard, and they wov3A
probably have to pay heavily. As-
cording to our figures, the thfrtesn
eompanifs would pay sss:ss<sso.
Under this tax, an increase of - ~
cent over those Of 1917"
The Local Situation. -
The features Of the last week were
the action Of the Washington Railway
and Electric Company in asking
higher fares of the Public UulirE
Commission; the abandonment Of the
company's position against tne reeSs-
sion granted by the utilities commits
sion and the Capital Issues Commit
tee for the issuance Of ~. 100000 de-
bentures to provide for the needed
expansion Of the corporation In car
ing for its large clientele. e
Foresight on the part Of the offciais
did not permit increased need of cur
rent to wait for the authorization Of
the debentures before steps were tax
en- to get needed equipment ready.
Washington bankers made the neces-
sary loan to permit Of placing and
completing payment for material.
Stock transactions have been light;
prices show, small change =,
The, Lanstop directors made good
the promise of ]. Maury Dow. pseei-
dent Of the corporation. thst -