Evening star., 1921-02-12
CREDIT MEN URGE
: PLAN Of TAXATION
Levy on Undistributed Earn.
ings of Corporations Favor
/ ed by National Body.

A graduated tax on personal in
comes and a tax on the undistributed
earnings of corporations, sufficient to
meet the needs of the budget, pre-
suming that this government will
hereafter be on an annual budget
basis. is strongly advocated by the
National Association of Credit Men
through it's committee on taxation.
There are 33,10O members of the
organization standing united back OF
their committee, offering a solution
for all income tax problems which
they believe will be d complete and
satisfactory substitute for the much
condemned and restrictive excess
profits tax and for the proposed sale
or turnover tax.
The credit mems tax proposition is
based on the principle that the in
dividual ultimately pays the tax. Cor
porations are owned by the individual
shareholders. IF the corporation does
not distribute it's earnings annually
the shareholders lose just that much
from their revenue, although 1t is
generally contemplated that dis
tribution shall be made at some fu-
ture period.
Tax the undistributed earnings and
when they Lre distributed ei'her in
BLUM uiNluSuuS OI Cdssi tIic iuf
vidual owner would not have to ray
theron. individuals should pay in
come tax on all income not exempted
it is recommended Dividends toda y
are free of normal taxation.
Committees Recommendations.
Here are the recommendations of
this committee:
]. Eliminate the excess profits tax.
.. Eliminate the corporation income
tax.
3. Dividends from current earnings
to be subject to the normal tax in the
hands of individuals.
4. Substitution of corporation un-
distributed earnings tax at graduated
rates.
5. Dividends which are paid from
earnings of previous years on which
the corporation has paid the undis-
tributed earnings tax not to be con-
sidered as income to the individual
paid from surplus until earnings for
current year have first been used for
that purpose.
s. Adjustment of rates on taxation
on personal incomes both normal and
surtax. to meet the requirements of
the budget.
Principles of Taxation.
A pamphlet has recently been pub
1tshed by the National Association of
Credit Men. setting forth the various
principles Of taxation. as interpreted
by its committee, criticising the ex-
cess profits tax. now admittedly an
evil. and featuring objections to other
plans while ably supporting its own
plan.
Private corporations are held to be
an association of individuals. permit
ted by law to use common name.
During the past year millions of
undistributed earnings were later dis
fPihnfpd
no income taxes. at least not until the
Intangible shares had been sold by
the individual owner and turned into
cash.
When corporation is taxed it is the
individuals who own the stock of the
corporation that pay the tax-indi-
rect1y.
The committee believes that divi-
dends should be taxed as part of in
come and that corporations should
distribute their earnings. Should pru-
dence invite the accumulation Of a
surplus through undistributed earn
ings. the government should be given
Its share of taxation On the earnings,
$50 that eventually when the earnings
are distributed to the owners. they,
the shareholders would be free of tax
It holds that the principle of tax
Ing in accordance with ability to pay
can be applied successfully only by
taxing directly each individual on
his earnings. whether actually re-
ceived by him or held for him after
being earned. and undistributed to
him."
The committee further enunciate.
some principles Of taxation, as fol-
lows:
Taxes should be certain, not arbi-
trary. The taxpayer should know just
what taxes he has to pay and when
and how he has to pay them.
Taxes should be collected as
cheaply as possible. and should be
50 levied as to interfere as little as
possible with the industrial activi-
ties of the nation.
The people of the nation should
contribute to the support of the gov
eminent as nearly as possible in pro-
portion to their respective ability to
pay taxes.
The principle of progressive in
como taxation is recognized in the
United States and other countries"
Excess Profits Tax Criticised.
The committee urges inequalities in
all proposed sales taxes. and holds
that income taxes. direct on the in
business and individual effort, grad
uated as they are today. If budget
demands require. with corporations
forced to pay on all undistributed
earnings. the individual to pay on the
distributed earnings. would be the
one satisfactory income taxing plan
In equity and justice.
It charges that the excess profits
tax "discrfminates against business of
a hazardous character and in favor of
business of a stable character
TT discriminates against conserva-
lively organized and capitalized busi-
ness in favor of business loosely capi-
talized.
1T discriminates between corpora
tions on one hand and partnerships
and individuals on the other
TT discriminates against the small
shareholder whom it penalties Sc
verely in violation Of the principle of
ability to pay.
TT exercises a repressive effect on
industry. curbs production and dis
courages initiative; makes for infia-
tion and extravaganza and diminishes
productivity"