The Bridgeport times and evening farmer., 1919-09-04

a drastic readjustment in the distri- button of the national income. Noting that the excess profits lax for this year while reduced lis still very sa- were" MT. Kahn assumes the case of a corporation whose excess profits tax amounted under the rates pre- yailing until this year to 40 per Cenl- on profits over and above "an ar hitrarily fixed and, everything cons.G- cred. low return on money actually invested in business
 It was impossible, he points out, for such a business to make one dol lar profit over and above such arbi- trary return without charEiuE b the purchaser something over two dol lars, il being pointed out that earn ings were subjected in addition 10 an income tax of F per cent The Gov crument, the memorandum remarks, takes the difference
 Most articles before reaching the ultimate consumer, the banker con tinues, pass through several inter mediarics, each of whom Is subject to much these same conditions. He concludes this discussion of this Tar- ticular tax with thGsa observations:
 ''The excess profits tax has tended furthermore 10 increase actual cost Of production. inasmuch as costs nat urally are deducted before taxable profits are arrived at, and. therefore. under the operation of the excess profits tax, there is not the same lu- Gucement as under normal circum- stances to keep costs down as much us possible. but in fact rather the re- verse. Nor is there any longer any iuducemeut to employ aCcunulataI I profits in the business without cap italizing them, which of course, makes for lower cost of production. On the contrary there is every in- Gucemenr to capitalize every iustiH- able itcm-and this makes for higher cost.
 'The excess profits tax in peace time must not be confUunded wtth the war profits tax in time of actual warfare. 4 war protfts tax, however heavy, is wholly sound, morally, sO- cially. and economically. and it's etect on prices is largely mItigated throush n circumstances and agencies which are operative when a country is at war.
 The objection to q very heavg excess profits tax in peace time rests not so much on equitable grounds as on the ground that on the one hauL it does not, and cannot, accomplish the social purpose aimed at- and on the other hand it tends to hurt trade discourage enterprise. and burden the public Our excess profits tax cor
 tainly has not stopped but rather has intensified what is commonly
 termed "pronteering."
 "Ir ever the American people should reach the conclusion, almost Incidentally far-reaching in the ram- ifications of it's effects that profits are to be limited to 9 definite maxi mum. they will have to accomplish that purpose by direct statutory en- ] actment. It cannot be accomplished by excess profits taxes"
 Expostulating the income tax, MT Kahn in his memorandum obserTe> that one of the most valuable by- products of wise taxation is the pro motion of thrift, but says tho pres ent tax, by reason of the kind ana manner of it's graduation is a breed CT of extrava gance and thus of higher prices. there being a general scnt ment against saving so long as ''tht | Government takes if away in chunks. ! Moreover. the investor. to recoup hi 1 income tax demands higher return [ from securities, thus enhancing thf i cost of capital and once more raisinz i prices. or else buys tax-exempt mu l nicipal, State or Government bonds