The New York herald. [volume] (New York, N.Y.) 1920-1924, 1920-12-09
In dealing with the surtax question t


report says:
at is important that methods OF taxa
ton should in all cases penalize saving
and Investment as little as possible. Our
rresent surtaxes offend greatly in this
respect. We attempt to levy surtaxes.
rising to 65 per cent. upon ordinary In
come. while there are thousands OF mill
lions Of tax free securities In the mar
ket the income from which Is practical
ly exempt from all taxation. The re-
suit is to make investment by weather.
taxpayers In the expansion Of Industry
or foreign trade unattractive and un-
profitable"
The report then continues:
1.-THE remedy which most commends
itself to my Judgment at the present
time is to reduce te. g.. by one-fourth)
surtaxes attributable TO the part Of the
net income which Is saved and REIN
vested In business or property yielding
taxable income, and at the same time
TO limit the total amount of such re-
duced surfaces to the same percentage
e. r., 20 per cent? of the reinvested in
come as the rate imposed upon the I'M
distributed profits of corporations. The
maximum tax upon such saved income
would thus be approximately the same.
whether reinvested by the individual. the
partnership or the corporation. and
WhetneF TtluNeSteu personally Dy inc
stockholders of a corporation or by such
corporation for its stockholders. IL at
any later date the profits OF corpora
ton which had paid the undistributed
profits tax came to be distributed, a
credit equal 10 the tax already paid by
the corporation could II II were thought
wise. be easily granted 20 the stock
holders"
Against Fronts Tax.
In recommending tho resembling Of the
excess profits tax Secretary Houston
said the tax does not actually attain
the theoretical end at which It aims II
discriminates against conservatlvely
financed corporations and in favor OF
those whose capitalization Is exagger-
ated. II Is complex In application. he
ravs. and difficult OF administration.
Above ALL II Is "rapidly losing it's pro-
ductivity." The invested capital OF the
average corporation earning prohts high
enough to subject II 10 the excess profits
tax, is now estimated to be increasing
Mt the rate OF ~ per cent. n year. while
it's income declines at the same rate.
For the present fiscal year the tax Is
expected 20 yield about $3.50 900. 600
and for Ito fiscal year 1922 about $500
600. 600. Only \ little over half estimates.
After saying that the excess profits tax
should be re-laced, Mr.. Houston says:
"One partial substitute for the excess
profits tax would be tax on the undis-
tributed profits OF corporations as nearly
as possible equal 70 the surtnx imposed
upon the eaved income OF the individual
IL individuals doing business in partner
ship pay 20 per cent on undlstributed
pfofits, individuals doing business
through the medium of the corporation
should pay 90 per cent. This plan could
be applied IN many different ways
Cd The distributed profits OF tho cor.
pUrurfon could be substituted for the so
called excess profits credit OF the exces.
profits tax and the remaining or taxable
profits be taxed at 20 per cent. or CD a
~ per cent. tax on undistributed profits
could be applied az n corporation surtax
under Title III. OF the revenue act or
(s) corporations could In form be sub
tected TO the same progressive surfaces
az Individuals proposal which would
prove very advantageous TO all corpora
toy with small incomes--with q pro-