The New York herald., 1920-12-03
MERCHANTS BACKED
BY BANKERS ON TAX
Investment Association Favors
Applying 1920 Losses to
Reduce 1919 Levy.
ONLY JUSTICE, 1T is SAID
Emergency Measure to Afford
Relief Will Get Active
Support Of Organization.

The Investment Bankers Association
of America yesterday indorsed the plea
by mercantile interests for an emer.
gency act permitting 1920 inventory res
ductions and net losses to be applied to
the reduction of 1919 taxes. A state
ment was given out by the association
through its attorneys. Reed, Dougherty
s. Hoyt. In publishing the statement
Robert r. Reed of this firm said:
I'm accordance with it's established
policy. the association has considered
this subject from the viewpoint of the
general interest. of governmental needs
and of business conditions. It's members,
because of the nature of their business,
have more general interest in the sound
conditions of Government finances and
in the stability of active business than
in the incidence of the tax on investment
banking houses as SUCH"
The statement is as follows:
'"The Investment Bankers Association
of America has canvassed the situation
and decided to indorse the plea made by
| mercantile interests and association for
an emergency act permitting 1920 in
| ventory reductions and net losses to he
| applied to the reduction of 1919 taxes,
| the last instalment of which falls due on
December 15.
"Of the plain Justice of the proposal
there can be and is no question. A busi-
ness income computed on the valuation
! of inventories at the end of tax period
which largely disappears before realiza-
| tion in the succeeding period SHOULD be
| recomputed to accord with the fskt that
the estimated values have failed of
! realization and that the estimated in
| come was erroneous.
"The underlying error of basing high
| graduated taxes on the varying yearly
| book profits of an active business should
| also be corrected, at least to the extent
OF permitting business profits to be aver
aged over period of years. The rates.
| both of the excess profits tax and the
surtaxes, are predicated on the assump-
tion of a high return or income for a
yearly period, but the accidents of busi-
ness are such that large profit appear
ing on the 1919 books may disappear In
1890
"A corporation showing 80 per cent.
fer 1919 and per cent for 1920 is really
earning at the rate of 1s per cent, not
Of 80 per cent. A business earning $780,
900 in 1919 and $4,000 in 1920 is really
earning at rate of $4,000 year. not
800. 900.
1.-THE rate of tax should rest on an
averaging of two or three years. But
this Is matter that looks to the future.
"The association will actively support
an emergency measure to give the neces-
sary immediate relief to businesses
whose 1919 book profits have disap-
peared in the heavy recession Of values
during 1920. Both houses OF Congress
have in fact approved the relief now de-
sired. II was covered In the Senate bill
that went to conference early in 1919.
and the lower house at the last session
passed the necessary amendment. but the
Senate was unable to act upon 1t before
adjournment.
"There is no question of the ability OF
Congress to grant this relief and there
should, we believe, be no question of its
willingness to grant 1t. II this Is done,
the matter Of the extension of the De-
cember 15 tax payments may take care
of itself in the case OF concerns entitled
to relief under the proposed emergency
act. Any such act will no doubt permit
claims for abatement or refund based on
a recomputation Of the 1919. tax"