New-York tribune., 1918-08-18
Still at Odds on
Three Phases of
War Profits Tax
BY Theodore M. Knappen

ment In the administration OF the law.
Third-As to the grouping Of indus
tries with respect to the determination
Of the percentage Of profits to be de-
Quoted as representing the war profits
in the application of the 80 per cent
war profits tax.
The Ways and Means Committee has
made to the Treasury a proposition
regarding the first and third points
which, if accepted by the latter. will
probably end the controversy and re-
suit in a draft that both will support.
AS to the second point, the Treasury
Will probably accept whatever tho
Ways and Means Committee Is willing
to grant t.
On tho first subject at issue the
Ways and Means Committee feels that
having granted the Treasury a war
protlts tax alternative, as requested,
the latter should concede stiff rates in
the excess profits paragraph. The
Ways and Means Committees sugges-
ton TO the Treasury is that with
deduction of per cent in addition to
a specific deduction of $4,000, the rates
OF taxation shall be 40 per cent on
proflts between the amount Of the de-
duct,on and 20 per cent on the invested
capital, and 60 per cent on all profits
exceeding 20 per cent
Much More Bnrdensome
These rates are much moro BURDEN
some than those Of the tentative draft
on this subject. The latter permits a
deduction from profits before applying
the tax Of an amount equal to 10 per
cent of the invested capital. Between
the deduction and 20 per cent, the rate
Of taxation is 30 per cent; between 20
and Is per cent, profits are taxed so
per cent, and over 25 per cent they pay
80 per cent The 30 per cent Of the
tentative draft sounds large, but hardly
any corporations would fall within it's
provisions, whereas the limits within
which most OF them would como are in
creased from 80 to 30 per cent, and
from 80 to 60 per cent is the compro-
misc plan.
In place Of the Treasury scheme of
grouping all corporations for purposes
of war profits tax into eight classes,
with an optional pre-war profit per-
centage determined for each, the COM
promise offer names only three CLASH
ficatlons and the optional pre-war per-
centage deduction is fixed and not left
to administrative discretion within a
minimum of per cent and maximum
These three classes with the fixed
optional deductions for each are:
Financial and transportation corpo-
rations, 8 per cent.
Manufacturing, farming and general
business, 10 per cent
Mining and kindred hazardous busi-
nesses, II per cent.
Any corporation making return
under the proposed compromise will
be permitted to deduct its actual pre-
war profits or the percentage named
tor the class within which it falls. as
1T pleases. The original Treasury plan
was to have Congress give it authority
to name these optional percentage de-
ductlons tor each Of the eight class-
hcations of business that it contem-
plated, with the provision that in no
class might they be less than eight or
more than IL per cent. This would
have made a far more elastic and
adaptable law than the one the COM
mittee now favors.
Kitchin Tells Views
Mr.. Kitchin indicated TODAY that ~
the Treasury Department did not de-
eide by Monday to accept the com
mittee's compromise, the classification
scheme would likely be dropped al
together
After pointing out that the COM
mlttee Is now standing for heavier
termlneu on before it decided to adopt
Inc oO per cent war profits alternative
pan as we'll as being still heavier
than IN the existing law, Mr.. Kitchin
made 1t plain that the committee had
not yet settled the excess profits or
even the details of the war profits
provisions, but had merely offered the
treasury compromise plan, which the
committee would adopt if the Treasury
should accept it.
AS pure excess profits measure I"
said Mr. kitchin, "the now pronosed
excess profits rates would raise $500
ooo,ooO more than with the war profits
alternative and $500, 100000 more as
compared with the existing law. Nine
Centns OF the corporations will fall un
ger the war profits alternative, With
these suggested rates and the excess
ppronts alternative we will raise about
SooV,VOo,000 more than we would under
.ne existing excess profits rates with
ene war profits alternative. Properly
enforced. the plan now offered will
raise at least $4,000, 100000, and possi.
bly S3,4O0 900, 900, thus taking US IN To
or past the total $S,O00,O00, 900 revenue
goal" 'SA"0
=, DIR. Kitchin has thus put up to the
Areasury compromise plan that does
not accord we'll with the principles of
taxation laid down by Mr.. McAdoo. for
!! promises to exact $30O,O00,O0 addi
tlonal revenue from source from,
which Mr.. McAdoo, as an abstract
proposition, would take nothing and
practically would take only a comnara.
lively small amount.