Atlanta tri-weekly journal. [volume] (Atlanta, Ga.) 1920-19??, 1920-03-20
TAX SITUATION
MEANS TROUBLE
FOR REPUBLICANS
BY DAVID LAWRENCE
(Copyrnght, 1920, for The Atlanta
Journal.)

(CopyrnSht, 192O, Tor The Atlanta
Journal)
WASHINGTON, d. c., March IS
Taxation may not be as ineligible
to the average man as the stories of
extravagant expenditure and incom-
petence during the war, whicv have
heaped up a big debt, but the Re
publican majority in congress is face
to face with the most troublesome
turn of luck that ever hit a political
party in a campaign year. For the
decision of the supreme court of the
United States IN stock dividends has
not only subtracted from the reve-
nue. that had been expected, but, I'M
less remedied by act of congress,
hundreds of millions of dollars will
be lost and the eagerly looked for
day when taxes can be reduced VIII
have been postponed.
The ways and means committee
knows it-ReLublicans as we'll as
Democrats. The long and highly tech
meal letter from Secretary Houston,
of the treasury department. ELECTED
by congress, suggests several RENE
dies, none of which is particularly
palatable to the group of taxpayers
who would be affected by amend
ments to the present law. Every sug-
eestion, from a fiat tax that would
virtually compel business concerns
TO distribute their profits instead of
holding such profits together as ''un-
distributed or in the form of stock
dividends" to the novel idea of l
ne, cent tax on sales of all kinds in
every day business has been made.
Some of the proposals, backed by
business organizations of many kinds,
are nebulous as to their applications.
Some favor a per cent tax on every
article sold, whether by the whole
saler or the retailer or the middle
man. This might mean 1 per cent
tax all along the line, and it is de-
Tended on the ground that even IT
collected four or five times 1T would
still be less Of a burden on inttia-
tive than the present excess profits
tax.
Must Recoup Losses
But congress is compelled to do
something to recoup the loss by the
stock dividend decision. Chairman
Fordney, Republican leader. openly
promised action in reply to an in
curry from Representative Champ
Clark, the Democratic leader. l
asked Representative Cordell Hull,
of Tennessee, who wrote the original
income tax law, to give his view OF
the situation. He said: 1.-The Demo-
Gratis foresaw demand for reduction
of taxes and promptly cut down ST.
600, 100000 in possible revenue. This
was done over the protest of the Re-
publicans in 1918, for they would
have liked to do it themselves when
they came in power. The Democrats,
moreover, reduced the expenditures
from about $15,000,0 200 to $4,000,
100000, as soon as the war was over.
Now the Republicans have actu-
ally cut down the expenditures by
$1,000, 100000, but, with a $1,000.0O0,-
600 cut in revenue made by the Dem
ocrats, they are still confronted with
the necessity Of cutting down expen-
ditures another $1,000, 100000 before
there can be any reduction in taxes.
AS matter of fact, whether it had
been political year or not, the reduc-
ton in taxes should have been made
at exactly the time that it was.
Nevertheless, with the increased loss
Of revenue which results from the su-
preme courts decision, it puts the
Republicans right up against It."
Such view, even though ex-
pressed by a Democratic member Of
the ways and means committee, is
concurred in privately by many Re
publicans, except that they natural
ly argue that the debt created by
the war is something which might
never have accumulated under com
petent management, all of which
will be difficult to settle even on
the political stump. For the fact is
the country can expect no reduc-
ton in taxes for three years unless
some amendments are made to the
present tax law which will bring in
more revenue, and estimates are ap-
probably cut. They already have
been ruthlessly reduced.
The Democrats. of course. are pre-
pairing to go to the country with the
record of President Wilson's mes
sages urging a repeal of excess prof
its taxes and a more scientific
arrangement of taxes with the vari-
Gus recommendations of Secretary
McAdoo and Secretary Glass as
proof of Democratic activity on the
subject. And they will point to the
| inaction Of the Republican congress
as the responsible cause of the
| continued inequities Of taxation.
. On the other hand, the Republi-
cans may surprise their Democratic
4 friends by tackling the tax Ques'
ton anyway, figuring that they will
be able to capture the next con-
: gress on other counts in the Demo
cratic record, and considering, more
over, that a revision of the tax laws
would please business men, Which
ever way they approach the sub.
ject, there is trouble in store.
But it begins to look as if con
" gress will pass some amendment
d which will get at the "stock divi-
: dend' decision. England is having
!; her troubles with the same phase
= of her income tax law and it is esti
It mated that billions Of dollars have
,: been lost and will be lost by the in
e vasion accomplished in failing tt
= distribute actual cash on earnings
Il and putting them in the form OF
!, stock dividends that can be held fol
g decade or so until taxation bur
4 den are eased off and then sold at G
st handsome profit.
y The solution which many members
% Of congress seem to be aiming a.
L. is one that would put a tax on &
le corporation as a unit if it failed
" to distribute it's profits. 1t still
would be optional with the corpora
is ton whether it distributed or no
20 but the business would have to pay
u virtually a penalty for that method
ii of handling it's profits. The penalty
y might be fifteen per cent one year
3 ten per cent the next, five per cen
!r the third year and so on with thu
i, result that corporations and othe1
e. businesses which didn't distribute
Ii their profits would pay a highc'
to tax for the privilege Of withholdin,
y the distribution than if they actual
is ly paid their dividends in cash. Thu