The Washington herald., 1918-08-07
WAR
PROFITS HARD
NUT TO CRACK
Treasury and Lawmakers
Disagree on What
Would Be Fair.
M'ADoo MAY DECIDE
Should Burden Be Based
on Excess Gained
Through War.
M'AD00 MAY DECIDE

The controversy between the Treas
ury Department and the Ways and
Means Committee as to the most
effective method of taxing war profits
remained unesttled after another long
wrangie in the committee session yes
terday. Secretary McAdoo probably
will be appealed to by both sides to
settle the question and to give the
final word as to whether a war profits
tax or q high excess profits tax shall
be written into the revenue bill.
Chairman Kitchin announced that
the committee expects to hear from
Secretary McAdoo as soon as he ar
rives In the city. The arguments OF
two experts Of the excess profits di-
vision OF the Treasury Department
have failed to convince the commit
tee that its schedule OF proposed ex-
cess profits taxes is too high or that
a tax on distinctly war profits would
be more productive OF revenue
Mr.. Kitchin declared that the coun-
by the plan proposed by the Treas
ury.
Might Drive Ceaeerns ost.
The Treasury contends that the
committee plan OF a high rate on ex-
cess profits would drive many con-
Germs out Of business and would un-
justly tax corporations which are
making legitimate profits.
Here are the two plans. in brief.
over which. the COMMITTEES and the
Treasury Department are at logger
heads:
L, The COMMITTEES wants the excess
profits tax tentatively agreed upon.
running from % TO 80 and 50 per cent
OF corporation net income. 1t il will
ing TO provide as an alternative a war
profits tax Of 80 per cent. as demand
ed by the Treasury. so that the Treas
ury could exercise its option in apply
ing the method of taxation which will
produce the most revenue.
2 The Treasury asks for q straight
tax Of 50 per cent on all war profits.
and. as an alternative. the excess
profits tax left just as il is in the ex-
isting law, which is from 20 TO 90 per
cent.
Chairman Kitchin and a majority OF
the committee support the first plan.
Their contention is that many Of the
larger corporations will get of too
easily IL the excess profits rates are
left the same as they are in the pres
ent law.
Standard OIL and Henry Ford.
1t was stated that the reports in
possession Of the committee show such
corporations as the Standard Oil,
American Tobacco, Liggett & Myers
Tobacco Company. Utah Copper Com
pany, Henry Ford and other large
manufacturers OF automobiles to be
in the latter classification.
DR.. T. s. Adams. chief of the excess
pTofits advisory board OF the Treasury
Department took issue with the COM
mittee on the point that $500, 900. 600
would be lost by the Treasury plan,
and contended that the committees
plan would cost far more by driving
out OF business corporations. whose
profits are only indirectly due TO the
war.
Mr.. Kitchin gave as examples of the
manner in which the two systems
would work the following:
Take a S1o0, 600 corporation which
made 5000 before the war and now
makes s25. 200, under the Treasury's
war pan. tne corporation
would be taxed $500 while under
the existing excess profits rates il
would be taxed $500
Would EauaIise Burden.
Another s1Oo,Ge0 corporation which
made $4,000 before the war and IL
making 5000 now would pay nothing
under the Treasury's war profits tax.
and would be taxed only $500. the
same as the other corporation. In
other words the corporation which
has enjoyed for years a steady in
come of $4,000 would pay only $500
and the other which has a sudden
increase due to the war will pay more
than $4,000. The committees schedule
of excess profits taxes would compel
the second corporation to pay at
least $500 instead of $500. We would
equalize the burden at least to that
extent
The committee has still to decide
four important questions as TO the
manner in which the taxes are to be
applied. These deal with three classes
Of corporations, as follows: Those
which made no profit before the war,
those which have been incorporated
since the war. those which increased
their capital since the war. The other
question is how to determine the profit
earned by eah class of corporation.
The committee intends to devote to-
days sessions to revision Of the in