Evening star., 1918-06-07

Suggestion that the new revenue Dill
should raise $4,000. 100000 by taxation.
one-third Of the estimated $24.ooo,-
600. 900 expenditures in the fiscal year
1919. was given by Secretary McAdoo
in a letter to Chairman Kitchin Of the
ways and means committee yesterday.
Imposition of a new war profits tax
at high rates upon existing excess
profits taxes. increase Of tho normal
income tax on unearned incomes and
heavy taxation Of all luxuries were
also recommended.
Secretary McAdoo made these sug-
gestions in response to a request from
Chairman Kitchin. They constitute
an outline of the Treasury Depart
ment'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 bill
lions 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.
&AAAho a. wi pOA dIAOAo.
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. whore corporation with
big earnings made directly out of the
war has also big oyercapitaliza-
tion. and, therefore, an apparently
low rate Of profit.
After explaining that his estimate
of $4,000. 900. 900 expenditures 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 s20..
000. 100000 Of that sum by notation OF
liberty loans. to make up the deficit
| that would follow il there were no in
crease In the s4.0O0.000,0o0 revenue
obtainable under existing law.
About one-third of the $12,500. .000,-
900. or $13,0O0,000.000 expenditures
| this fiscal year, ending June 80, will
suggested, should not be reduced.
Mr.. McAdoo's Suggestions.
IF I may, without Improperly
offer suggestion as to the proposed
tary. IT should recommend:
"d) That one-third Of the cash ex-
pendftures to be made during the f1s-
cal year ending June 30. 1919, be pro-
vided by taxation. According to my
estimates. this would involve raising
$4,000, 100000 through taxation.
'(2) That a real war profits tax at
high rate be levied upon all war
profits. This tax should be super
imposed upon the existing excess
taxpayer should be required to pay
whichever tax is the greater. The
| existing excess profits tax should be
amended in certain important par
ticulars so as to remove inequalities
"(s) That there should be sub.
normal income tax upon so-called un-
earned incomes. Under existing law
earned incomes above certain exemp-
tions are taxed per cent as an in
come tax and per cent as an excess
profits tax, making a total of IL per
rived from securities. ETC., are taxed
only per cent. The per cent tax
should be recognized as an income
tax and tho rate Of IL per cent
excess profits) should be retained in
respect to earned incomes. while q
higher rate than 12 per cent should
| be imposed on unearned incomes.
"(4) That heavy taxation be i'm.
posed upon all luxuries."
How to Reach Profits.
Explaining his ideas for a new ia,
| to reach actual profits made out Of
| the war, Mr.. McAdoo wrote:
"The existing excess profits tar
does not always reach war profits
| The rates of excess profits taxation
are graduated. and the maximum /:
so per cent. In Great Britain there
is fiat rate of 80 per cent on al
| war profits. The government depart.
ments. under great pressure as they
are to get necessary war materials
and supplies with the utmost expedk
tion. cannot in the nature of things
fix their prices nor guard their con.
tracts in such a way as to avoid the
possibility Of profiteering. The one
| profits when they have been realized
II do not say this is a spirit OF
criticism of the corporations or bust
ness men OF the country, who have
| for the most part loyalty supported the
| government. In entering into wal
contracts they take grave risks.
"They are called upon to make vast
which may provo unproductive after
| the war. They are not to be blamed
in these circumstances for asking fol
prices and terms which cover these
risks. On the other hand. when thu
risk has been liquidated by proper al.
] lowances, and the contract has proved
I profitable, the government should take
back in taxes all profits above a rea.
sonable reward.