New-York tribune., 1918-08-15

porations involved He also asked that
"'ce dlscretlon in the application of
Both kinds of taxes be given the in
| ternal revenue commissioners.
Inc Secretary takes the stand that a
graduated profits tax, such as the pres
ent excess profits tax, is not defen-
slble on grounds of equality or justice,
! whereas a war profits tax rests on the
firm ground that no one should profit
largely by the war Nevertheless, Mr..
McAdoo concludes that the demand for
revenue is such that both the proper
! and the improper method must be re-
verted to in the war emergency.
The application Of the two forms of
taxation arc illustrated by many actual
cases, the names of the companies
not being made public. Emphasis is
laid on the necessity Of large admins
trativc discretion
The statement of the secretary of the
committee begins with an explanation
that there is every indication that the
Treasury forecast early in June of
$24 ,OO0,0 100000 expenditures in 1918 VIII
be borne out by the facts, if not ex-
ceeded. 1t then continues:
III shall not trouble you to review
the reasons which led me to urge the
enactment Of a revenue measure which
would produce not less than one-third
of these estimated expenditures, or $8,-
OOO,OOO,C0O, because | understand that
view has met with acceptance by your
committee. 1t is sufficient for me to
say that in the light of such informa-
ton as | have obtained in the interval
$S ,000,000 900 seems to me to be a min
imum amount.
Profits Tax Chief Difficulty
Turning now to the conside Grafton of
the general recommendation as to the
character Of the revenue act, the most
important and, l am sorry to say, the
most controversial is that in relation
to the war profits tax and excess profits
tax. In my letter of June 8 said:
The existing excess profits tax does
not always reach war profits. The rates
of excess profits taxation are gradual
ed and the maximum is so per cent. In
Great Britain there is fiat rate of 80
per cent on all war profits The gov
ernment departments, under great
pressure as they are to get necessary
war materials and supplies with the
utmost expedition, cannot in the nature
of things fix their prices nor guard
their contracts in such way as to
avoid the possibility of profiteering
The one sure way is to tax away the
excessive profits when they have been
realized.
4 do not say this in a spirit of crit
lclsm of the corporations or business
men of the country, who have for the
most part Loyalty supported the govern
ment. In entering into war contracts
they take grave risks. They are called
upon to make vast expenditures of cap
ltal for purposes which may prove un-
productive after the war. They are not
to be blamed in these circumstances for
asking for prices and terms which cover
those risks. On the other hand, when
allowances, and the contract has proved
profitable, the government should take
back in taxes all profits above reason.
able reward.
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 due to the
war, but what relation the profits have
to the capital invested company
with swollen capital and huge war
profits escapes
"And again:
"'(2) That real war profits tax at
high rate be levied upon all wal
profits. This tax should be superim-
posed upon the existing excess profits
tax in such a way that the taxpayer
should be required to pay whichever
tax is the greater. The existing ex-
cess profits tax should be amended in
certain important particulars so as to
remove inequalities
"A war profits tax finds it's sanction
IN the conviction of all patriotic men,
of whatever economic or political
school, that no one should profit large
/ ly by the war. The excess profits tax
must rest upon the wholly indefensible
notion that it is function of taxa
tlon to bring all profits down to one
level with relation to the amount of
capital invested, and to deprive in
dnstry, foresight and sagacity of their
| fruits.
"Thc excess profits tax exempts
capital and burdens brains, ability
and energy The excess profits tax
falls less heavily on big business than
on small business, because big busi-
ness is generally overcapitalized and
small businesses are often undercapi
! talized
The war profits tax would tax ali
war profits at one high rate; the cx-
cess profits tax does, and for safety
must, tax all excess profits at lower
and graduated rates Any graduated
tax upon corporations is indefensiblc
IN theory, for corporations are only ag-
gregations of individuals, and by such
tax the numerous small stockholders
or great corporation may be taxed al
lfrhn