Evening journal., 1918-08-15
M'ADOO ASKS 50 Pc.
TAX ON PROFITS
Only Way to Raise Justly
the $8,000,000 Re-
quired, He Says
WOULD CHANGE
THE EXCESS TAX

the Ways anu htdho c54'i''i't
Congress to provide for a war-prc IS
fax Of so per cent, with the existing
excess-pro0ts tax as an alternative, IN
writing the new revenue bill.
He asserted the immediate enactment |
of fhe new revenue law Is imperative, |
declaring that because OF the November |
elections the fourth. Liberty loan cam |
naipn must be postponed from Septem-
her % the tentative date set by the
Treasury Department until the middle
Of November. II the bill Is not passed
nv Congress within the next six weeks.
In urging the necessity for the war
rroflts tax 20 be superimpOsed upon
The existing eXcess-proflts tax, Mr.. Nc
Adoo declared that the eXcess-prohts
fax Is not only unfair 90 business, but
that Il fails 10 reach the war prohteers.
The Secretary also advocated a great
" increased normal tax on individual
incones. and urged the committee TO
adopt a new schedule for these taxes
that will place a heavier burden upon
unearned incomes than upon those
that are earned.
He also advocated a heavy tax on all
iuxurles, not only as a source OF rev
enue. but also as a method OF enforc-
ing thrift by leyying a tax upon eX-
Secretary McAdoo said that the ses-
sion had been very friendly.
"We did not try to bayonet each
other" he remarked.
Mr.. Kitchin said that when the bill
IS reported to the House on Monday
ut will be in such shape as will tend
10 facilitate its early passage IN both
houses"
In his statement before the commit
tee. Mr.. McAdoo said:
In May / called the attention OF the
President and congressional leaders 10
the urgent need Of additional taxes ana
prompt action TO impose them ana IN
dicated the sources from which tnese
taxes should thought. be raised. Inc
President addressed the Congress on
Nav 27 and asked the Congress 70 re-
main In session for this purpose ana IN
dicated his expectation that the Con
cross would turn to war profits and
Incomes and luXuries for the addl-
tional taxes .......,.
Mr.. McAdoo asserted that ssOO000000O
Is the minimum amount that must be
raised by taxation during the coming
year
"When was obliged TO leave Wash
ineton early In June 1 wrote your
chairman a letter dated June ,, In which
I outlined in some detail the urgency
for immediate tax legislation when the
Treasury would suggest.
81 then estimated on the basis rather
than OF the growth Of the expenditures
IN the past than on the basis OF the
appropriations and indicated approprla-
tion that the expenditures for the fiscal
wear ending June 30. 1912 would
amount IN the aggregate 20 S2i,OJOOUJ,-
COO I anticipated there having been
very large increase in eXpeditures Tor
Nav. expendltures for June would he
about the same, and that If the expendl-
iures should continue 70 mount az the
rate Of si.iiO,OOOOOO a month FOR next
six months, or until December, 1918,
and thereafter remains stationary, this
total would be reached. or, putting it
another way, II the average monthly
May. 1918, by 80 i-3 per cent. we should
spend q total OF S2i,0O00OO,OOO for the
fiscal year 1919.
81 am apprehensive not that have
overestimated the expenditures for the
current fiscal year, but, on the con-
trarv that have underestimate them
in assuming that the progressive aver
age monthly increase OF SlOOUOOOJO,
which has continued since we entered
the war, VIII cease as soon as January,
1919"
McAdoO Explains War Profits.
Discussing the excess profits and war
profts taxes. Secretary McAdOO said*
"The existing cxcess-proflts and war
profits tax does not always reach war
pro0ts. The rates Of excess-prOfts taxa
tion are graduated. the maximum IS GO
per cent. In Great Britain there IS fiat
rate OF so per cent on all war profits.
The government departments, under
great pressure as they are TO get neces-
sary war materials and supplies with
the utmost expedlence. cannot in the
nature Of things fix their prices nor
guard their contracts in such a way as
TO avoid the possibility Of prOtlteering.
The one sure way is to tax away the
excessive profits when they have been
realized.
u do not say this in a spirit Of criti-
cism Of the corporations or business
men Of the country who have for the
most part Loyalty supported the gov
ernment. In entering into war con-
tracts they are taking grave risks. They
are called upon 20 make vast eXpendi-
lures OF capital for purposes which
may prove unproductiye after the war
They are not 20 be blamed in these cir
cumstances for asking for prices and
terms which cover those risks.
ION the other hand, when the risk has
been liquidated by proper allowances
and the contract has proved profitable
the government should take back IN
taxes and profits above o reasonable re
ward. Under existing 'law THAT does
not happen because the tax rates are
not high enough and cannot safely be
made high enough since the test now
is not how much Of the profits are duo
TO the war; but what relation The profits
bear 10 the capital invested. \ com
pany with a swollen capital and huge
war profits escapes.
Secretary McAdoo and his tax adj
Nisers passed four hours In an effort
10 persuade the Ways and Means Com
miitee. which is drafting the new S.
OO0OO0.O00 revenue bill 10 accept th'
departments plan for a war-prollts ta'
OF so per cent, with an alternative ta'
on excess profits ranging from 20 tC
GO per cent, as they are under the pres
ent law.
No satisfactory agreement was reach
ed between the secretary and the com
mittee, which wants to increase tn
excess profits tax to a scale ranging
from 30 TO so per cent as the alterna
tive for a war profits tax OF so per cent
The conference Will be resumed to
da1 After Yesterdays session bOti