New-York tribune., 1918-07-27
Exemption Fixed at $4,000,
Plus 10 Per Cent on
Invested Capital
$4,000, 100000
Levy on Luxuries
Pre-War Comparisons Dis
regarded by House Ways
and Means Committee

WAOdlNG1ON, July Go.-Ihe grad
uated excess profits taxes of from 80
to 80 per cent on net income beyond
exemptions were practically adopted to-
day in final form by the House Ways
and Means Committee, thereby ratify
ing the tentative agreement reached
yesterday. The committee also de-
cided upon the specific exemption of
$4,000, plus 10 per cent on the amount
of invested capital.
Adjournment was taken by the COM
mittee until Monday. when taxation of
Injuries, estimated by the Treasury as
capable of raising 100000, will
be considered.
The committee decided on the annul-
ment of section 200 Of the existing
law, which puts an extra tax of per
cent on portions of earned incomes
above $4,000 a year. This will not
affect unearned incomes. The lost rev.
enue will be covered by an increase in
the individual income supertaXes.
The excess profits tax under the
pending bill will not apply to indi-
viduals and partnerships, but only to
corporations. Individuals and partner
ships will be amply reached through
the normal and surtax provisions of
the income tax law.
Limit Excess Profits Tax
The committee decided to retain sub
stantially the same text of Capital
invested" and other definitions as are
in the present law. There had been
suggestions that invested capital should
include borrowed money and goodwill
and other considerations.
While not definitely deciding it there,
a majority of the committee was favor
able to a provision that in no case
should the excess profits tax exceed
60 per cent of the net income, nor be
less than 10 per cent of the net in
come in the case of corporations with
capital exceeding S2C0000.
Common carriers and public utility
corporations, whose rates arc subject
to regulations by Federal. state or
municipal government, were excepted
from the 10 per cent minimum, because
the committee regarded such rates
already regulated to a low income
basis.
$4,000 900 Additional Expected
Treasury experts reported that the
excess profits plan adopted would pro
duce Approximately $500, 1000 900 more
revenue than derived from the same
sources under the present law. Com
putations were submitted showing that
If the revenue from excess profits
under the present law yields 81 200 OOO,-
900 it would raise under the proposed
plan 81 $50 100000, or if the present law
raised only S1,O00,000,00O from excess
profits, considered by some of the com
mittee members as more nearly correct,
the revenue under the proposed plan
would be correspondingly less.
Several members of the committee
were disposed to favor fiat tax of 80
per cent, the maximum proposed in the
finally adopted plan, but the committee
rejected the proposal as one that would
discourage initiative in industry and
business.
Still Need $1,000, 100000
The committee disregarded altogether
pre-war comparisons for taxation.
There is still discrepancy of almost
$4,000, 900, 900 between the revenue es-
timated to be yielded by the excess
profits and income taxes as proposed,
and the S6,000,0 100000 sought from
those sources under the $4,000, 100000
revenue programme on which the COM
mittee is working
SO far. however no new source of tax
has been considered, but new taxable
sources may be found when luxuries
are considered. Treasury experts have
ADVISED the committee that by doubling
the present tax on liquors, tobacco,
soft drinks, admissions to amusemenrs,
transportation, club dues and excise
tax on such articles as automobiles
ana ana perfumes, the present revenue of
1851 100000 from those sources can be
doubled.
new section may be agreed upon
SO that corporations, whose capital is
OF little significance may construct" a
capital, which would take care of good
Will or similar considerations.