The watchman and southron. [volume] (Sumter, S.C.) 1881-1930, 1918-06-12
new REVENUE MEASURE.
SECRETARY M'ADOO SUGGESTS
HIGH WAR PROFITS TAX.
Letter TO Chairman Kitchin Gives
Outline of Treasury Departments
Idea of Taxation to Meet Nations
Huge War Expenditures I'm Future.

washington, June 6.--Secretary NC
Adoo today recommended in letter
to Chairman Kitchin OF the house
ways and means committee. that the
new revenue bill be drawn to raise
$s.000.000.000 by taxation, one-third
Of the estimated $4,000. 100000 ex-
penditures In the fiscal year 1919.
He also recommended that war
profit tax be established at a high
rate to be superimposed upon existing
excess profits taxes; that the normal
income tax on unearned incomes be
raised; and that heavy taxation be
imposed on luxuries.
The suggestions were given in re-
sponse to a letter from Mr.. Kitchin,
and constituted an outline Of the
treasury's ideas not only Of taxation
to meet the nations huge war ex-
penditures in the future but Of pre-
pairing the way for floating of addi-
tional billions Of Liberty bonds. In
crease Of tax on incomes from which
Liberty bonds are exempt, said the
secretary. will tend to make these
bonds better investments.
Mr.. McAdoo made no attempt to
specify the means Of carrying out his
suggestions in revenue legislation and
did not intimate what articles might
be classed as "luxuries" for heavier
taxation. He stated, however. that in
many cases the present excess profits
taxes do not reach real war profits
for instance, where a corporation with
big earnings made directly out OF the
war has also a big over capitalization
and therefore, an apparently low rate
Of profit.
After explaining that his estimate
OF $24.000.000,000 expeditures in the
fiscal year starting next July 1 is
based on expenses in the past, and a
calculation Of the rate of increase Mr.
McAdoo said 1t would constitute un-
sound financial policy to raise $780,
600, 100000 Of that sum by floating
Of Liberty loans, to make up the de-
felt that would follow II there was no
increase in the $4,000. 900. 900 revenue
obtainable under existing law.
About one-third Of $12.500, ,O0O, 900
or $4,000. 900. 900 expenditures this
fiscal year will come from taxation.
IF I may. without impropriety. Of
fer a suggestion as to the proposed
revenue measure" wrote the secretary,
II should recommend:
"A-(). 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 estimate this would involve
raising $4,000. 100000 through taxa
ton.
"2-That a real war profits tax at
a high rate be levied upon all war
profits. This tax should be superim-
posed upon the existing excess profits
tax In such a way that the tax payer
should be required to paw whichever
tax Is the greater. The existing ex-
cess profits tax should be amended in
certain important particulars so as to
remove inequalities.
"3-That there should be sub
stantial increase In the amount OF
normal income tax upon s0-called un-
earned incomes. Under existing law
earned incomes above certain exemp-
tions are taxed per cent as an in
come tax and s per cent. as an ex-
cess profits tax. making q total Of 12
per cent. while unearned incomes.
derived from securities. ETC.. are tax
ed only per cent.
THE s per cent. tax should be rec
ognized as an income tax and the rate
of IL per cent. q per cent normal
and 8 per cent. excess prOfits) should
De retained In respect TO earned in
come. while a higher rate than ~ per
cent. should be imposed en- unearned
incomes
"4-That heavy taxation be impos-
cd upon all luxuries."
Explaining his ideas for a 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
and the maximum is 60 per
cent. In Great Britain there is q flat
rate on all war profits. The gov
ernment departments can not in the
nature of things fix their prices nor
guard their contracts i'm such a way
ao IN ouniI tho noooibiIit,, ~ ,,.Ctno~