Evening star. [volume] (Washington, D.C.) 1854-1972, 1918-09-08
F1NANc1ALALocAL AND OTHERWISE

support Secretary McAdoo's position
in favor of an effective war pronts
tax and against an increase IN Sn
rates of the alternative excess pronts
tax In stating the position OF the -,
ISOLATION, its attorney, Robert B. Reed
yesterday said:
saYhe excess profits and war profits
provisions Of the House bill demon
strate anew the impossibility OF the
foundation for q so-called conhgcatory.
profits tax as applied to corporations
the stocks of which have been bought
and sold for years on their Demon
strated earning value ana represent
both the cost and capital value TO the
stockhoIders Of their present invest
ment.
TT may be possible to ignore this
fact in a relatively light graduated
tax. but it cannot be safely ignored
in a 20 per cent or so per cent TAX.
Cases have arisen and there are no
doubt very many Of them, where prac-
tically all the stock has been bought
just prior to the taxable year at .
value several tirnes the invested
capital allowed under the act. And.
Of course, individual stockholders in
all large corporations have purchased
at the going value Of recent years.
"A 20 per cent to 80 per cent tag
on the excess over. say 10 per cent
in such cases practically condscates
the income over 2 per cent to per
| cent on the actual investment Of tho
stockholders.
This is the fundamental. far-reach-
ing objection to the bill from the
viewpoint OF business and justice.
which is or should be just now that.
| OF the government. But on the reve.
nue. standard alone there Is an equal.
| ~ serious objection. affecting a DIFF.
ferent class of corporations. The bill
practically gives q watered stock the
presumptive value of full paid fnvest-
ed capital, and specifically denies to-
| ultra-conservatively capitalized con-
Germs even the actual values invested
| in the property. Unless 1 misread the
BILL invested capital includes tangible
! property paid in for stock at its ac-
| tual value when acquired. not exceed
ing the par value OF the stock. Al
/ company which issued 100000 in
stock for a going plant in 1910 and
has earned say on an average $4,000
cost value of 100000 for the plant
Although the plant was probably;
! worth about 100000 in cash, no one
| can prove the actual value and tho
record valuation would be accepted
The company would have a practical
exemption today from the excess
profits tax.
There are hundreds Of such over
| capitalized concerns. large and SMALL
which will enjoy relative immunity
from this tax. Many of them will not,
| be caught under the war profits tax.
| ''On the other hand. had the plant
in the case supposed been under,
valued and 100000 stock Issued fer,
| it, the corporation would be taxed
| say. 60 per cent to so per cent ON
everything over 100000 a year.
ued nf BY same tine treasury HU itself a at 5000
600 for the purpose Of the capital
stock tax and at 100000 on its
invested capital" under the excess
profits tax.
erations have been in the minds OF
] Secretary MoAdoo and his aids and.
/ we hope, the Senate committee, which
1 last year was unsuccessful in it's ef-
| forts to secure q war profits tax, will
| this year have the support of the
| country and of the administration in
| working out and putting through a
productive profits tax that will get all
| the revenue estimated for the House
bill without penalizing conservative
| financing and granting immunity to
/ watered capital"
No Other F1otations.
| During the three weeks Of the fourth
i liberty loan campaign other flotations
! will not be undertaken. The capital
issues committee has announced that
it will not hear applications for fiota-
| tions Of any character. while bond
houses generally will close shop for
all business except the selling Of lib
/ erty loan bonds. to which all en-
ployes' efforts will be devoted.
Street Car Matters.
Ocular evidence Of the wonderful
| increase in passenger traffic in the
District Of Columbia is really SO strik-
! ing that many investors are wonder
ing if there is not a chance for in.
! creased dividends on stocks.
j Carloads are loads such as our cars
never carried before, but that does
! not insure a percentage OF profit
! greater than heretofore.
/ A merger of the two companies, de-
sired by many as means of better
ing the travel conditions, does not
! seem near at hand, and yet it may
not be SO very far distant.
A. working agreement, by which
the service of all cars might be di-
from an order of the utilities commits
| sion.
The increased cost Of everything
and especially Of fla labor, in competition ao1
| is a serious matter for the railroads,
no less than all other corporations,
and this is cutting deep into the prof
its. Upkeep is also serious propo-
sition and the difficulty in obtaining
new equipment is disappointing to the
officials. who are plainly worried at
the arduous task Of handling the city's
traffic.
Then, too, labors unrest is always
| threatening.
| The general market showed small
| change during the week, with some
| trading in bonds. and very little
stock business. Prices were without
| important change.