The sun. [volume] (New York [N.Y.]) 1916-1920, 1918-09-10
KITCHENS TAX IDEAS
RIDDLED IN DEBATE
Fordney Flags Penalizing of
Business IL Money Is Kept
for Expansion.
GREAT WASTE IS CHARGED
Moore Cites Revenue POssibili-
ties That We're Rejected or
Killed in Committee.
speciai DsspatcA 10 The srN

Special Despafch 10 The srN.
WASHINGTON. Sept 9.--1nstead OF the
entire Ways and Means Committee be-
ing In perfect accord in regard 10 tn.
So. 100000 tax bill. as Chairman
Kitchin tried to make the House he.
lieve, Il developed in the course Of to-
days debate that there are wide divery.
ences OF opinion.
Two Republicans. Representatives Ford.
ney tMich.) and Moore tPs). left no
doubt to-day of their opposition to Ger.
tain features of the bill, chiefly to the
penalizing OF business for Withholding
the proper amount Of earnings as a fac
tor Of safety for future operations
six per cent. is the penalty for keep.
ing money in business for expansion and
Improvement" said Mr.. Fordney. 1T is
a serious condition to compel a corpora
ton to put out all its earnings this year
and keep none at all to do business with
1t must borrow to do business. with in
fated prices and the higher cost OF raw
material and labor, II it pays out all OF
its earnings in dividends. / say this :
per cent. penalty is the most serou,
proposition in the bill, II It becomes a
law as we have written It, and 7 Think
It ought to be repealed"
Fault was also found by Mr.. Fordney
with the definition Of capital Il do no,
believe" he said, "the definition OF CAPT
tai in the bill is correct. The bill pro-
vides that for the purpose Of deduction
you can only deduct your s or 10 per
cent. Of the capital originally invested.
People who engaged in business twenty
or thirty years ago and have built VI
great institution ought to have the
benefit Of the advanced value of their
property.
Inconsistencies in the Bill.
Borrowed capital ought to be capital
Let me give an illustration. Suppose
there Is a body of rich men who organize
a company with 100000 and put in
the cash and take their stock for it ami
do business. You and 1 can organize
company in the same business. but
We are poor and can only put $500, 00n
In it. and have to borrow the other
100000. We put that 100000 in the
business. but 1t is not counted as capita.
As result we pay more taxes than the
men who had the cash to put in the
business. That is not right In every
instance the firm that borrows money
pays more excess profits taxes and war
profits taxes than the firm which has
the money to put in and does not have
to borrow"
Turning to expenditures, Mr. Fordney
declared that there Is too great extrava-
gance and waste. He said: II belieNe
we are spending large sums Of none
unnecessarily. We are spending none.
that Is almost a waste. But have no,
raised my voice against these thing
The responsibility Is not upon me no
upon the Republican party at this time
Mr.. Fordney particularized. cts
Hog Island as an example. The Go
eminent let cost plus contract n r.
firm. turned the shipyard over to tho
firm free Of cost, and this firm. 4,
remember. had n capital of $1,000 r.
has taken sls7.000,000 in contracts from
the Government and got the shipyad
free of charge. 1t is to receive 8 vcr
cent. on the cost of building the shHs
1t was stated last year that the carr
ings would be S1l.000,000 on the 81 ,uo
capital"
Mr.. Fordney was asked by Rcpreser-
tative Smith (Mich) whether the mon
berg of the firm holding this contra,
added their income taxes to the cost ~
construction.
Contractors Exempt From Taxes.
II am glad you asked that ques'ln,
for this reason: the information Wa
brought to the committee that cortrac's
were being made by the Government IL.
which the Government agreed to pa
taxes as imposed by Congress on IT,"
profits OF those contracts. We obtaiuel
copies of contracts wherein II Is stated
that they are exempt from Governme, =
taxes The man who made that con
tract for the Government ought to b."
prosecuted"
Mr.. Fordney declared that the Urtsl
States depended upon taxation to nav
its war bills far more than any o.Av~
belligerent nation. OF the actual er-
penditures, he said, under the new bin A.
per cent. Of the war expenses viii bc
paid by taxes. In Great Britain thtt
percentage Is IS, in Canada IS, In France
IL and in Italy only ..
Mr. Fordney predicted an era o, pros.
perity after the end of the war.
Representative Moore, opening his Il
cussi0n of the bill. fastened upon ( 2 T."
short title OF the Kitchin bill" VI
Moore declared that Republican 49,.
jorty would have offered a substantial
different tax bill IL the q. o. L. wa =
power in the House. He wanted tho ~
equalities in the existing tax laws e
justed and eliminated as far as posS,D
and showed that IS per cent. of the
come and corporation taxes were 'a-
ceIved from New York, Penrsylva a.
Illinois. Ohio, Massachusetts, New ,'o--
sey, Michigan, Connecticut, DeiaV1-e
and California.
Omissions in Taxable List.
Touching upon the omissions /. -