The Washington herald., 1918-07-26
EXCESS PROFIT
TAX 80 TO 80
PER CENT, PLAN
Ways and Means Commit
tee Finds Prospect for
Less Than Expected.
EXEMPTION OF $4,000
Probability Of Flat II Per
Cent on Individual
Incomes.
EXEMPTION OF $4,000

Incomes.
Excess profits OF all business will
be taxed from 90 per cent to so per
cent, under a schedule adopted by a
majority of the Ways and Means
committee yesterday. The estimated
yield is s.. .ss0. .0oo. 600. The present law
was expected to yield .s1,40o.00o, 900.
The schedule tentatively agreed
upon would grant a fat exemption of
z, 900 to every business concern and
a further exemption of 10 per cent on
the capital invested Upon all net
income in excess of 10 per cent .ex-
emption and net excess of 20 per cent,
the rate OF tax would be 30 per cent;
on net income between 20 per cent
ynd Is per cent, the rate would be so
per cent; and on all income above 25
per cent. the tax rate would be 50
per cent.
Discouraglpg Conclusion.
Even after agreeing upon these high
rates, and combining them with the
increased rates on individual and cor
porate income. the committee was
forced to te discouraging conclusion
that It would not be possible to real
ize from these three sources the max
imum of $500, 900. 900 which officials of
the Treasury department have de-
manded. The total-will he below this
figure by more than a billion and a
half, and members OF the committee
frankly confessed that they were at
loss to know what to do to make up
the apparant deficit.
The Treasury Department had urged
~ Ecft of
providing for 5000, ,O00.0 900 to be raised
from income and excess profits taxes,
leaving the remaining $2,O00.00 to
be raised by taxes on luxuries, stamp
taxes and the other odds and ends
upon which it is customary to draw
for a portion Of the revenue.
Less Than Expected.
But with the high rates on incomes
which have been tentatively agreed
upon, the committee finds there can
be raised not more than g, $50, 900, 900.
Adding to this the 81 $50, ,O00.OO which
the excess profits taxes agred upon
yesterday are estimated to produce.
and the total Is only $4,34O 900, 900, in
stead Of the $500, ,0OO. zoo which ii was
hoped would be raised from these
sources.
A leading member of the committee
said in explanation of this phase OF
the situation:
1T simply means that with the
highest taxes on incomes and excess
profits we have been able to agree
upon, we are still a billion and a half
short of the amount which everybody
thought would be raised from these
taxes. How we are going to make up
the deficiency, is more than the COM
mittee knows at this time. If the
Treasury insists upon a $500, ,0O0, 900
bill. it simply means that we will have
to look for new things to tax, or will
have to dig into the incomes and ex-
cess profits of business"
Three other Methods.
In addition to the excess profits
schedule favored by a majority of
the committee. consideration was
given to three other proposed
methods of taxing the profits of
business. The first of these propos-
ed a tax of so per cent on all in
come in excess of the fiat exemp-
tion of $4,000. and the 10 per cent
exemption. 1t was estimated that in
normal times this tax would yield
81, 400, 100000 but further consid-
Grafton of the proposal, including
! discussion OF the probable effect of
such a heavy tax on business, and
the consequent loss of revenue
through the suspension of business,
revealed the fact that the actual
revenue derived from such a tax
would be not over s1,40O. 100000. So
this proposed tax was discarded as
impracticable.
The second tax discussed was 40
per cent on all net incomes over the
exemptions up to 20 per cent, and
so per cent on everything above
that. 1t was estimated that this
might yield S1,f50, ,00o, 900. -
The final proposal was modelled
on the English plan. as follows: 60
per cent on the difference between
the average per centum of profits
for the best four Of the six years
syto be selected by the corporation)
1911 to 1916, and the profits for the
taxable year. With 10 per cent de-
duction on the capital put in since
1915. 1t was stated that this plan
did not have many supporters, for
the reason that any selection from
the six years given would neces-
sarily include at least one of the
war years.
The schedule agreed upon differs
from the existing law. not only as to
rates, but as to exemptions as we'll
The present law grants an cxemp-
ton Of 5000 and graduated excmp-
ton Of from to per cent on the
invested capital. The new schedule
Is therefore higher in this respsct in
addition to carrying higher rates.
Several of the members of the conn
mittee, discussing the failure os the
excess profits and income rates to
come up to expectations as revealed
at yesterdays meeting. expressed the
opinion that the committee may find
II necessary to adopt the Treasury,s
suggestion for a Il per cent normal
tax on individual incomes, instead Of
the 10 per cent rate tentatively de-