The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-03-06
SEES Big SHORTAGE
| In REVENUE TAXES
DIR. Joseph j. Klein Asserts
4 Falling Off May Reach
S2,OOO,OOO,OOO.
NATIONS ASSETS SHRINK
Economist Says Basic Com
modities and General Mer-
chandise Have Declined.

I
Failure of the new Internal revenue
law to raise $4,000, 900 to meet
WAR costs was predicted by DR.. Joseph
~ Klein, political economist, in lee
ture last night under the auspices of
the College OF the City Of New York.
lin the Commerce Building, Twenty-third
street and Lexington avenue.
. Basing his conclusion upon intimate
contact with industry in all parts OF
tho country, personal knowledge OF the
merchandise market in general and con-
ferences with leading bankers and
economists he said that tho new rev.
senue bill would be unable to raise more
than s4,ooo.ooo.oo or $500, 100000
At the most.
Factors apparently not taken into
consideration by the trainers OF the
bill, he said, were the decline in gen.
'eral merchandise and basic commodity
values since the signing of the armis-
tice; the loss In revenue due to the
provision Of the law which permits de-
auctions from gross income for losses
outside the taxpayers regular trade or
business. and the elimination of So
called war profits in the latter part
Of 1918. He predicted additional Vic
tory loans IL the Government Is to
make up the revenue deficit.
No Time for Socialism.
5s American industry may be safely re-
lied upon to resume the normal activi-
ties Of peace times II the shackles of
governmental interference, embargoes
ana control are eliminated and ~ assur-
ances OF economic freedom are evil
sdent," said DR.. Klein. The need for
governmental economy was never more
patent than just now. II times were
ever inopportune for socialistic expert
mentations these are the times"
A deficit of a billion dollars Is looked
for by DR.. Klein In the receipts from the
income tax and war excess profits tax.
He predicted that not more than So, 000.-
100000 would be raised by the former,
although the drafters expected to raise
fSz.207, 900, while the deficit of the
excess profits tax he placed at at least
a billion dollars less than the contem-
plated $4,000, 900. 900.
}r of course. the Treasury Department
cannot be blamed for this failure of es-
tiniated revenue TO result in actual rev.
senue,' he said TT may safely be pre-
dicted that the Commissioner of Internal
Revenue will employ all the forces at
his command to the end that all legiti.
smately taxable income shall be reported.
Inventories will receive close scrutiny,
and taxpayers are advised to have avail
Z able for the use Of the revenue officer full
details not alone with respect to num-
Der of units and description but also In
relation to the factors which governed
price fixing
- 1nequity in Tax Law.
DR.. Klein presented n number of ex-
amples showing the inequity In the tax
law. based solely and exclusively upon
differences In ownership. Three equal
partners in firm having an invested
capital Of 100000 and a net profit of
100000 would be subject to an aggre-
gate tax OF about $320.000. A corpora
ton with the same capital and profits
would be subject TO a tax of s35O.O0O
The members of the same partnership II
it's invested capital were only $500, 900
would he subject to the same aggregate
tax. but the corporation would be sub
ject to a tax of $375.00O.
a. Attention was directed to Section 22O
OF the revenue bill. which provides that
III corporations undivided profits are
deemed by the commissioner TO be be
yond the reasonable needs of the busi-
ness" that fact shall constitute prima
facie evidence of purpose to escape the
surtax TO which stockholders would be
subject upon distribution of such prof
its in the form of dividends. The penalty
is that the total net income of such a
corporation shall be subject to excess
and war profits taxes and the stockhold-
ers shall be subject to the surtaxes on
the profits, which il shall be assumed
they received. The speaker pointed out
numerous other unfair provisions in the
bill.