Evening star., 1920-01-31
PROFIT TAX
EASIER TO COMPUTE
Elimination of War Gains
Makes Calculation Com
parative|y Simple.
BY WILL p. KENNEDY.

The excess profits tax to be paid
this spring will be much easier to
compute than heretofore. as there
will be no elaborate calculation to
be made. or indeed. an, calculation
whatever with reference to the war
profits. for the amount. of the tax
does not depend at all upon the
amount of the war profits.
Representative William II. Green
of Iowa, ranking republican on the
ways and means committee. who has
been specializing in such computa-
tions, explains that the excess profits
taxes for this year are arranged in
two brackets. The first ievies 20
per cent upon the amount of the net
income in excess OF the excess
profits credit and not in excess OF
20 per cent of the invested capital.
amount of the net income in excess
of 20 per cent of the invested capi-
tai.
Computation Is Simple.
He points out that in most cases
where the net income has once been
determined the computation viii be
very simple. and figures out two i'll
Illustrations. as follows.
/ Illustration IA corporation whose
net profits are 20 per cen: upon It's
capital:
Invested capital for 1919. }1oa 0ro
Net income for 1919. ......... 20.h00
Excess profits deduc-
tions - per cent of
100000 ............ $4,000
Specific exemption. 5000
S11 900
Amount taxable ........... 5000
Tax is 20 per cent of $1,000. 1900
This is less than 2 per cent of the
capital. In other words. in this case
Representative Green figures. the
L., IaFf
on its capital.
An illustration could be given where
the $4,000 exemption was so small
when compared to the capital that il
cut but little figure. and slightly
more than per cent on the capital
would be taken.
Illustration No. ..
Illustration >: a corporation hav-
ing more than 20 per cent net profits.
Assuming that the corporation had
net profits of 30 per cent upon a cap
ital of 100000, then the computa-
ton of the tax in the first bracket
would be made the same as stated in
the first illustration for a corporation
making 20 per cent on the same cap
ital. and the computation would be
continued as follows:
Tax in first bracket. same as above s1.sO0
Second bracket:
Net income for 1919. $50 900
Deductions:
per cent OF s100. 900. 80. 2O. 900
Amount taxable second
bracket. 3O,OoO
4 per cent of taxable
amount in second bracket u 900
Total tax. S13. 500
This still leaves the corporation
the comfortable profit of So per cent
These illustrations, Representative
Green explains, do not include the
corporation income tax.
Under the rates for last year there
were three brackets, the third bracket
being the sum, if any, by which
so per centum of the amount Of the
net income in excess of the war profits
credit exceeds the amount of the tax
computed under the first and second
brackets.
The reduction in the total amount
of the tax collected will be very great
Last year the government received
about ,700.000.000 from the excess
profits tax. This year it is estimated
that the government will receive ST.
l00.000.000. which Representative
Green thinks is a rather high esti-
mate; but even if we should receive
that. he says. the total of the excess
profits tax would be reduced more
than one-third.