New-York tribune., 1918-06-07
Wants Congress to Pass
$4,000, 600, 900 Rev.
enue Bill
Would Hit Luxuries
AndUnearned Incomes
Secretary Estimates 'Expen-
ditures for 1919 at
$24,0OO,0O0,000

McAdoo to-day recommended in let
ter TO Chairman Kitchin of the House
Ways and Means Committee that the
new revenue bill be drawn to raise
$4,000, 100000 by taxation, one-third of
the estimated $24,0oo,OOO,oOO expen-
diturcs in the fiscal year 1919.
He also recommended that a war
profits tax be established at 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 i'm
posed on luxuries.
The suggestions we're given in re-
sponse to letter from Mr.. Kitchin
and constituted an outline of the
Treasury's ideas not only Of taxation
to meet the nations huge war expenses
in the future, but Of preparing the way
for floating of additional billions 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 investments and to per-
NIT them to compete with industrial
and municipal securities bearing
higher rates Of interest.
Would Double Present Revenue
Mr.. McAdoo made no attempt to
specify the means of carrying out his
suggestions, and did not intimate what
articles might be classed as "luxuries"
for heavier taxation. He stated. how
ever, that in many cases the present
excess profits taxes do not reach real
war profts-for instance, where cor
poration with big earnings made d.
rectly out Of the war has also big
overcapitalization, and therefore an ap-
parently low rate of profit.
After explaining that his estimate OF
s24 900, 100000 expenditures in the
fiscal year starting next July / is based
on expenses in the past and calcula-
ton of the rate of increase, Mr. Nc.
Adeo said it would constitute unsound
financial policy to raise $4,000 ,000, 900
of that sum by fotation of Liberty
loans, to make up the deficit that
would follow, if there were no increase
in the $4,000,000,000 revenue obtain
able under existing law.
One-third by Taxation
About one third of the $12,60O,0 ,000,-
900 or $13, ,OOO,O 100000 expenditures this
fiscal wear ending June 80 will come
from taxation, and this ratio, he sug-
pested, should not be reduced.
"If l may, without impropriety, offer
q suggestion as to the revenue meas
ure," wrote the Secretary, II should
recommend:
" "a That one-third of the cash ex-
penditures to be made during the fis-
cal year ending June 80. 1919. be pro-
vided by taxation. According to my es-
Inmates, this would involve raising
Sc. 900, 100000 through taxation
"(2) That real war profit tax at a
high rate be levied upon all war profits.
This tax should be superimposed on
the existing excess profits tax in such
way that the taxpayer would be re-
ouired to pay whichever tax is the
greater. The existing excess profits
tax should be amended in certain i'm
portant particulars so as to remove in
equalities.
Would Hit Unearned Incomes
"(3) That there should be a sub
stantial increase in the amount OF nor
NAL income tax upon socalled un-
earned incomes above certain exemp-
tions are taxed 4 per cent as an income
tax and 8 per cent IS an excess protts
tax. making total, of IL per cent, while
unearned incomes, derived from securl-
ties. etc. are taxed only per cent
The per cent tax should be recognized
as an income tax and the rate of IL
per cent a per cent normal and 3
per cent excess profits) should be re-
tained in respect to earned income
while a higher rate than IL per cent
should be imposed on unearned in
comes.
"(4) That heavy taxation should be
imposed upon all luxurles."
Explaining his ideas for new. tax
to reach actual profits made out OF the
war, Mr.. McAdoo wrote:
"The existing excess profits tax does
rates of excess profits taxation are
graduated and the maximum is GO pei
cent. In Great Britain there is fiat
rate of so per cent on all war profits
The government departments, under
great pressure as they are to get nee
essary war materials and supplies with
the utmost expedition, cannot in the
nature of things fix their prices MOI
Guard their contracts in such way
es to avoid the possibility of profiiteer
ING. The one sure way is to tax away
the excessive profits when they have
| been realized. a..
"I do not say this in spirit o
criticism of the corporations or bust
nsss men of the country, who have fol
the most part loyalty supported tn,
Government. In entering into war con
I.J "a, Drnr Ho3,,,n., 2