The New York herald., 1920-12-07

SalerS collect the taxes from their re-
tail customers in competition with the
shoe manufacturer who did not pay
the tax because he sold his shoes di-
rectly to the public through his own
retail stores?"
There are many other objections to
the principle of a tax on every turn
over put forward on behalf of the bust
ness interests which may be summed
up under these general heads:
/. The inequity of tax on turnover
(where 1t cannot be shifted) as be-
tween a business which turns its cap
ital over once a year and one which
turns It's capital over several times a
year is too great.
O. The administrative difficulties and
cost OF the application of turnover
tax are too great and its application
would tend TO stimulate practices in
consistent with sound business prin-
ciples.
8. No dependable calculations have
been submitted as to the amount of
revenue such a tax would produce.
One objection Explained.
To illustrate the first objection the tax
committee of the National Industrial
Conference Board in its report presents
this supposititious case:
"The manufacturing corporation a,
which employs in its business a capital
Of $1.000,000, makes net profit OF
100000 and has an annual gross IN
come of 100000. The trading corpora
tion B employs the same amount or
capital, makes the same net profit and
has an annual gross income of 100000
turns his capital once In two years, Il
five times In one year. At the rate OF
81
which is half of per cent of the
capital employed. or per cent of It's
net profit. while B would pay $4,000,
which Is per cent. of the capital en-
ployed and so per cent of its net profit.
With regard to the second objection Z
is pointed out that even with the ex-
emption OF street pedlers, bootbiacks
and other small businesses. there woul
be an appalling number of reports. re-
quirinG an enormous force of field and
office auditors to examine and check up.
In addition complicated problems would
arise as to the definition of sale.
Leases, contracts, commission ana
agency arrangements would be stimu-
lated. and the practice of renting or
leasing a product instead Of selling 1t.
such as now holds in cases of machinery
household electrical appliances. &c,
would be largely expanded.
Estimates of the amount to be realized
from the application of the turnover tax
range all the way from $4,000. 900, ,0O0
down to S1,500. 900 900 at 1 per cent. on
all turnovers and down to $750.00O.OOO
at the same rate on commodities alone.
Joseph S. Mccoy, who for many years
has prepared the estimates used by the
Ways and Means Committee of the
House and the Finance Committee of the
Senate. has attempted on estimate. He
finds that a tax of l per cent. on sales
of all kinds by traders manufacturers.
mines and farms should produce about
100, 100000 But this figure might be
materially reduced by the exemptions
Congress would be certain TO allow IL
those permitted under the Canadian
sales tax act may be taken as cri-
terion.
Tax on Final Sales.
The suggestion of a ta> on final sales,
such as Senator Smoot proposes, in
stead of a tax on each turnover is
naturally subject to less criticism from
business and industry and is probably
tho suggestion that will receive the
most consideration. But above the con-
tentions of the retail organizations
throughout the country that such taX
would have to be at least per cent.
instead of l per cent, as the. Senator
suggests. there arises the inevitable con-
troversy as to what constitutes final
sale. For instance, sugar sold 10
householder is probably for final CON
sumption. but sugar sold to tndy
manufactures is part of his raw nate
rial
An automobile tire sold to an owner
is for final use, but when sold % an
automobile manufacturer its full cost
would again be taxed upon the sale OF
the completed car. While coal sold 70
a householder is probably for final con-
sumption. proponents are asked to draw
the line in such cases as;
/. Coal sold to gas company for max p
ing gas.