Albuquerque morning journal. [volume] (Albuquerque, N.M.) 1903-1926, 1918-06-07
Recommends to Chairman
Kitchin That 0ne-third of
Estimated Amount Needed
Come From Heavier Taxes,
INCOMES MAY HAVE TO
BEAR A HEAVY SLICE
Excess Profits Are Scarcely
Touched Now and a Heavier
Toll Should Be ExaCted
From Them, Secretary Says

my MORNING JOURNAL SPECIAL LEASED wiREl
Washington, June 6.--Sccretary
McAdoo today recommended in let
ter to Chairman Kitchin of the house
ways and means committee that the
new revenue bill will be drawn to
raise $4,000, 10000 by taxation, one
third of the estimated $4,000, ,000,-
coo expenditures in the fiscal year
1919.
The suggestions were given in re-
sponse to a letter from Mr.. Kttchin,
and constituted an outline of the
treasury's ideas, not only of taxation
to meet the nations huge war eX-
penses in the future but of preparing
the way for floating of additional BILL
lions of Liberty Bonds. increasing the
rate of normal taxes on incomes, from
which Liberty Bonds are exempt, said
the secretary, will tend to make these
bonds better investm entS and to per-
init them to compete with industrials
and municipal securities bearing high
CT rates of interest.
War Profits Not Touched.
Mr. McAdoo made no attempt to
specify the means of carrying out his
suggestions in revenue legislation and
did not inmate what articles might
be classed as "luxures" for heavier
taxation. He stated, however, that
in many cases the present excess
profit taxes do not reach real war
profits, for instance, where a corpora
ton with big earnings made directly
out of the war has also big over
eap'tally&tiGE, ii Hs Ais6ssss4e ss.I ~
parently low rate of profit.
After pXnlaininp that his rate OF
$4,000, 0,000,000 expenditures in the
fiscal year starting next July 1. is
based on expenditures in the past, and
a calculation Of the rate of increase,
Mr.. McAdoo said it would constitute
unsound financial policy to raise $2O,-
600, 100000 of that sum by flotation of
Liberty loans, to make up the deficit
that would follow, if there were no
increase in the $4,000, 100000 revenue
obtalnable under existing law.
About onethird of the $l2, 500, ,000,-
600, or $4,000 100000 expenditures
this fiscal year ending June 80, will
come from taxation and this ratio, he
suggested, should not be reduced.
Mr.. McAdoo's Recommendations.
IF | may without impropriety. Of
fer suggestion as to the revenue
measure" wrote the secretary, Il
should recommend:
"(D-That one-third of the cash
expenditures to be made during the
fiscal year ending June 80, 1919 be
provided by taxation. According to
my estimates, this would involve rails
ing $S,O0O,000,000 through taxation.
"(2)-That a real war profits tax
at high rate be levied upon all war
profits. This lax should La super-im-
posed upon the existing excess profit
tax in such q way that the taxpayer
would be required to pay whichever
tax is the greater. The existing excess
profits tax should be attended to in
certain important particulars so as to
remove inequalities.
"(3)-That there should be a sub
stantial increase in the amount of
normal tax upon so-called unearned
incomes. Under existing law earned
incomes above certain exemptions are
taxed per cent, making total of
2 per cent while unearned incomes,
derived from securities etc, are taxed
only 4 per cent. The per cent tax
should be reconized at an income tax
and the ratio of 2 per cent a per
cent normal and s per cent excess
profits) should be retained in respect
to earned incomes, while higher
rate than 12 per cent should be i'm
posed on unearned incomes
"(4)-That heavy taxation be i'm
posed upon all luxuries."
To Reach Actual Profits.
Explaining his idea for new tax
to reach actual profits made out of
the war, Mr. McAdoo wrote:
The existing excess profits tax
does not always reach war profits.
The rates of excess profits taxation
are graduated and the maximum is
sixty per cent. In Great Britain there
is a flat rate of per cent on all
war profits. The government depart
ments, under great pressure as they
arc to get necessary war materials
and supplies with the utmost eXpedi-
ton, can not in the nature of things
fix their prices nor guard their con-
tracts in such way so as to avoid
possibility of profiteering. One sure
way is tax away the excess profits
hen they are realized"
The way in which higher normal
Continued on Page Two.)