The Birmingham age-herald., 1920-02-25
For the Good of
 the Community

IN a very able discussion in an article in \ The Manufacturers Record of the eX- cess profits tax and surtax levied under the federal revenue bill now in effect, A. Merritt Taylor, director of the depart ment of transit of the city of Philadelphia, and during the war head of the housing and transportation division of the emer- gency fleet corporation, attributes the present shortage of houses in the United States to these taxes.
 He asserts, and gives figures to bear out his assertion, that the collection of the ex- cess profits and surtaxes force up the prices of all products to point where, af- ter deducting these taxes, the manufac- turer or producer will still have left what he deems a reasonable net income on his invested capital.
 "A striking example of this fact" he states, is found in the building trade. We are confronted with a nationwide short age of homes and buildings, as result of which prices of homes and buildings and rentals charged therefor have increased to an extent which is imposing untold hardships upon tenants and those who are forced to purchase at inflated prices to avoid eviction"
 
 forced to pay 100 per cent more for ma- terials now than few years ago, and that as most of these rely upon trust and mort gage companies to supply the money Jn- til the buildings are completed and bonds can be sold, these abnormal material and labor prices directly interfere with build ing operations in that trust and mortgage companies are not willing to advance money up to the percentage of the cost of the structure that they formerly did, in view of present inflated prices which may take sudden and sharp decline at any time.
 MT. Taylor briefly analyses the excess profits tax as follows:
 Profits of corporation in excess of specific exemption of S3, 900 and 8 per cent on itsinvested capital (not including borrowed money), which amount to less than 20 per cent on it's invested capital are subject to an excess profits tax of 20 per cent. The remaining profit is subject to excess profits tax of 40 per cent. The entire net income of the corporation remaining after the aforesaid excess exemption tax has been deducted therefrom, excepting specific exemption of $2,- 900, is subject to 10 per cent corporate income tax
 "A large percentage of successful American corporations have small invested capital but ex- cellent credit. They do large volume of busi- ness, mainly on borrowed money with frequent turnover. Such corporations, in producing only moderate percentage of profit on their turnover and output, produce large percentage of profit on their small invested capital and pay the maxi mum rate of excess profits tax namely 40 per cent. They naturally increase the prices of their pro- duets sufficiently to enable them to retain reasonable percentage of profit on their turnover output net or tax free ~
 ''Let us assume that such corporation finds that to offset an excess profits tax in the amount of $20,000 payable to the government and to re- tain it's normal and reasonable profit on it's output it must advance the price of it's product suf- ficiently to yield S20000 additional net or tax free profit An advance of 10000 in price and profit would yield only S10,000 net or tax free profit as follows:
 Less 40 per cent excess profits tax SOOO.00
 $12ooo.oo Less 0 per cent corporate income tax l,2OO.OO Amount remaining available to cor
 poraton ........... S10,8OO.0O To offset S2O, 900 excess profits tax, price
 would have to be increased :! S37 O37.04 Less 40 per cent excess profits tax 14814.82
 S22 2222.22 Less 10 per cent corporate income tax.,.. 2222.22 Amount remaining net tax free available