New-York tribune., 1918-12-17
Senate Accepts
Net Loss Section
OF Revenue Bill
Sixteen Members Voting No
Looked Upon as Forming
New Radical Group; MIR.
SmOOt Forecasts Changes
By Theodore NJ. Knappen

BY Theodore M. Knappen
WASHINGTON, Dec. 16.~-Braving
the emphatically voiced apprehensions
of Senator Lenroot, that it might cost
the country billion dollars, the SEN
ate this afternoon sustained the FL
nance Committee in the first rollcall
on the net loss section of the revenue
bill, which is feature entirely new
to American fiscal legislation.
The vote stood 36 to 16, and was en-
tirely without partisan significance, but
some observers professed to see in the
composition of the minority the begin
nlngs of the crystillization Of q cross
party of radicals.
Those voting against the section
We're Senators Borah, Frelinghuyscn,
Harding, King. Gronna, Jones, Of
Washington; Kenyon, Kirby, La Fol
dexter, Stirling, Vardaman and Nu
gent. Not all Of these men could be
called radicals by any stretch Of the
imagination, but all the radicals in the
Senate who were present voted aginst
the amendment.
The net loss section provides, first,
that if any taxpayer had a net loss in
His. business in 1917 or 1918 it may
be applied as d deduction in computing
his taxable income for the following
year; and, second, that if in any tax
able year after 1918 a taxpayer sus-
tanned net loss it may be deducted
ing year in readjusting his tax pay
ment; or, if the net loss is greater
than the income for the preceding
year the excess may be carried forward
as deduction in determining net tax
able income for the following taxable
year.
Two Bad Years, One Good
The first provision merely makes
retroactive the new principle of
treating the taxation Of business as
a continuous proposition instead of
taking the full amount of the taxes
in single successful year. The
subject was first brought to the at.
tention of the Finance Committee by
q presentation of the sad experiences
of the cattle men and farmers Of parts
Of the Southwest, who. after two
years of losses have had one good
year. but as it takes all the profits
of this good year to pay off their
losses, they have no means of paying
taxes except by borrowing again
Under the amendment the good and
bad years are pooled and a business
that is just getting on its feet, after
losses. will not be staggered by the
size of the taxes it has to meet in it's
first prosperous year.
Senator Lenroot's argument was that
If there should come q period of panic
and stagnation, such as began in 1893,
the tax collectors would have nothing
but losses to deal with, and that the
government would be at its wits ends
TO-, to raise money. not only to pay its
bills but to refund taxes previously
collected.
The debate on this subject was
chiefly between Messrs. Lenroot, Hitch
cock and Gronna. on the one hand,
and Mcssrs. Smoot and Jones on the
other. 1t was stated that it was cal
culated that the amendment would
probably cost the government $780,
100000 in 1918 taxes.
Senator Jones praised the amend
ment as one of the expressions of the
principle running all through the bill
that taxes should be levied according
to the ability to pay.
Says Some One Must Pay
To this Mr.. Lenroot replied that ex-
else and special taxes were collected
regardless of whether there was
profit, and that it was quite possible
tnat IN series of panje years the re-
bates the government would have to
pay in applying this principle would
nave to come from additional taxes i'm
posed without regard to ability to pay.
Senator Lenroot also thought that the
net loss provisions simply placed a
premium on failure and incompetence
in business.
The days work on the revenue bill
began with a continuation by Senator
Smoot OF his general speech. In the
course OF his remarks he declared that
S350,O0O,OOO or S400000,00O might be
raised from the tariff on imports in
stead of the present $16O,0OO,0O.
Senator Simmons inquired whether
senator Smoot considered this time of
daily changing conditions an oppor-
tune one for the enactment Of a new
tariff law. The answer was that it was
opportune for some changes in the law.
This led to tilt as to what the Re-
publicans would do in a special ses-
sion Of the next Congress, and Senator
Smoot declared that if there were
special session there would be radical
changes in the tariff, and that unless
such changes were made labor would
not long remain employed. The Amer
ical lHdIheC was Jne DeSC market IN the
world, he added, and when conditions
became normal again there would be
the most intense competition among
the nations to avail themselves of it.
Senator Smoot spoke in defence of
his plan of a sales tax, either for reve-
nue. for current expenditures or as
means of creating sinking fund. He
condemned the inheritance tax, which,
he said, invaded domain of taxation
that should be left to the states.