Evening star., 1922-12-10
BY I. A. FLEMING.

plus. it pays the tax.
Under the previous revenue act the
excess profits tax also provided for
practically every dollar of profit being
taxed, and as the dollars mounted up
numerically the tax scared also, this
being called the excess profits tax.
When a corporation distributed a
dollar to its shareholders as their
share of the years profits. that dol
lar was free of normal tax, for the
excellent reason that the corporation
had paid it on the money earned
But II the shareholder receiving
the dollar dividend receives many
more from other corporations. and il
he has interest and salary income.
bringing him to the point where he
must pay Surtaxes, even dividends be-
come taxable again.
A corporations surplus may be in
almost anything, depending largely
on the line of business In which the
corporation is engaged.
To illustrate: The Washington Gas
Light Company has Il large surplus,
but 1t is not in cash. although some
small part Of it may be, but il ls
chiefly in meters. in pipes in the
Banks have their surpluses, like
wise. in furniture and fixtures, in
buildings and part in cash.
No well managed corporation would
pay out all its earnings to the share
holders. the policy Of building for the
of a surplus against exigencies. the
sure-to-come rainy day, but 1t pays
on all its earnings.
That part of the surplus which is
invested in the tools of the business
cannot be distributed.
George H. Roberts, commenting on
taxation. has this to say: "A tax
levied upon surplus would be retro
active, reaching far back into what
was left from taxation of all pre-
vious years. 1t does not seem possi-
BILE that Congress will seriously con-
not a few members Of the next Con-
gress are considering it"
1t is the fear of the possibility Of
such action that IS influencing cor
porations to capitalize their sur
pluses: that is leading to the nu-
dends. aggregating probably $780,
100000 this year.
Few of these stock dividends have
meant anything more than that the
surplus has been capitalized and is
now a part OF the capital.
If A corporation after paying stock
dividend is able to keep up the same
rate OF dividend on the added stock
that il did before the stock dividend
was declared, the dividend will be
more valuable than if it simply meant
more stock and reduced dividends.
"A stock dividend" said Mr.. Rob
erts. "is usually preparatory to the
larger distribution of earnings in the
future. The distribution may not be-
gin at once. sometimes the rate of
dividend is reduced and the share
holder does not receive any more
money than before. Whenever the
actual payment of earnings to the
shareholder begins the payments are
taxed under the present law
Reduction Of par value of stock
from 500 to SIS is frequently made
TO facilitate investment and trading
in the shares.
BY decision of the Supreme Court
stock dividends are not taxable. but
sooner or later every stock dividend
becomes taxable.
Just the minute the new shares be-
gin paying dividends the latter are
subject to the income tax. In Wash
ington the holders of the new shares
will also pay the annual intangible
tax on the shares.
And soone'ri or later the stock OBJ
tained via the stock dividend distri-
button will be sold by its owner; it
may be in an estate. it may be held
and passed along even through gen.
erations, but eventually some one will
want the money and the stock will
be sold. and the full income tax will
be collected on the value Of the shares
when sold.
But the corporation paid one in
come tax when the profit was made
The Farmers and Mechanics Bank.
If William Marbury. who was presi-
dent of the Farmers and Mechanics
National Bank of Georgetown from
1914 to 1917. could have revisited the
scene OF one-time activities Friday
evening and called upon Harry V.
Haynes. president of the same in
stitution today. he would. no doubt.
have tainted at the outward signs of
home of the bank.
Having been duly revived. he would
have needed an explanation as to the
reason for and the character of the
vast floral display.
Incidentally he might have asked
for the total amount of deposits, and
when informed that they were close
to $3.000,000 he would. no doubt, have
taken credit for the far-sighted
perspicacity that had led to the
foundation Of the bank in George
town.
Finally he would have asked to be
shown the cashiers rooms. for in the
good old days the cashier was housed
in the bank. as part pay, and Mr..
Haynes would have taken him to the
directors room. larger than the
original bank building, cashiers
rooms and all.
And then, speechless. Mr. Marbury
would have been led. gaping. around
the room, neither knowing nor being
known by any one of the hundreds
of guests. but when the power of
speech was recovered. he would have
patted his successor on the shoulder,
and taken his departure back to the
shades, saying as his farewell. We'll
done, Mr.. Haynes, It's all right; George
town needs second big bank on this
corner, and I wish you WE'LL
At least practically every one who
called on Friday night said the same
thing to Mr.. Haynes and his fellow
directors. who were smiling all over
with their keen satisfaction.
was president: Clement Smith sue
ceeded him and held on to 1889. and
John Kurtz from 1889 to 1857. when
Robert Reed took up the burden and
held it to 1862. followed by George
Shoemaker. 1862 to 1865.
Henry NJ. Sweeney made the record
for term of office. 1865 to 1896. with
u
down to 1913, when William King held
sway until Mr.. Haynes election in
1919.
Mr.. Sweeney held sway for thirty
one years. If Mr.. Haynes makes a
new record he will be doing business
at the old stand in 1850. Fine!
Credit the building committee,
George L. Nicholson. Robert D.
Weaver, J. E. Dyer. William King and
J. NJ. Berry, with a bouquet to
w. P. Lipscomb, the builder
January Disbursements.
January disbursements will be very