The Washington times., 1922-10-13
OIL LMELONCUT :.
NOW ASSA|LED
0NLAWPO|NT
View In Washington 10 That
Federal Tax Statute Has
T. Been Violated.

Been vioiateo.
Belief prevails in some quarters
in Washington that tho stock
dividend Of 400 per cent which
the Standard Oil Company of New
Jersey Is about to declare, and
which will convert upward of
$500, 100000 from surplus to
capital, ID due In part to fear that
the Government might take part
of the surplus in heavy additional
taxes, the Baltimore Sun says
today.
Law In the Matter.
There Is q section In the internal
revenue law which has never been
invoked, but which gives the Com.
missioner Of Internal Revenue dis
cretion to impose an additional tax
Of Is per cent annually upon the
net income of concerns that &C.
cumulate profits. instead of dividing
them, in order THAI the regular sur
taxes on income may be evaded.
This section, No. go, reads a. fol-
lows:
"That II any corporation. how.
ever created or organized, In formed
or availed Of for the purpose Of pre-.
venting the imposition Of the suftax
upon it's stockholders or members
through the medium Of permitting It's
gains and profits to accumulate In,
stead OF being uivided or distributed,
there shall be levied. collected and
paid for each taxable year upon the
net income Of such corporation a
tax equal to 25 per centum OF the
amount thereof. which shall be In
addition to the tax imposed by Sec.
ton ESQ Of this title. and shall be
computed. collected and paid upon
the same basis and In the same
manner and subject to the same
provisions of law. including penalties.
as that tax"
Huge Surplus Piled Up.
The facts are. as is web known,
that the Standard Oil Company Of
New Jersey. with a common stock
capitalization Of $4,000. 600 and
with cash dividend payments Of 20
per cent since 1911. has accumulated
surplus Of $592, ,000.0 900. nearly six
times the total amount Of It's com.
mon stock. For years the company's
policy has been TO reinvest a con.
siderable part OF its earnings, until
in late years there has been an ex.
traordinary disproportion between its
common stock and it's surplus.
The issuance Of about ,$4O0. .000. 900
Of common stock as dividends VIII
change that condition. It viii make
the surplus look modest In com.
parison with the outstanding stock.
Were 1t not changed the company
might have been made q horrible
example" in Washington this winter.
Strong Feeling In Congress.
There is bitter feeling In Congress
as It is over the repeal Of the excess
profits taxes, and the charges that
all Of the tax relief given under the
revenue revision law went to the cor
porations and the rich. II anything,
II appears that the opposition to the
repeal of the excess profits taxes and
TO the scaling of the surtaxes Is
greater now than when the revenue
revision act was passed.
And in the next Congress that SEN
tlment may be even stronger. Sena-
critics of the repeal provisions OF the
revenue revision act, is coming back
to the Senate with the backing OF an
enormous majority in the primary
and probably larger one in the gen.
eral election. Other radicals in Con-
gress are coming back, and there are
signs that there will be accessories
to their ranks, 50 that the total. Re-
publicans and Democrats, may be n
much larger percentage Of the men,
bership OF Congress than at present.
Deficit Of $3.50, ,O00, 900.
Meantime, the Administration 10
facing a certain deficit In the current
fiscal year, which will end on June
80 next, that may run close to $780,
000, 900. The Administration is max.
Ing desperate efforts to- hold the
deficit In check and to reduce L., and
President Harding has thrown the
weight Of his influence behind these
efforts In personal way. But there
Is little hope that the prospective
deficit can be escaped or held down
to negligible figure. no matter what
Is done.
That fact. 1t Is thought, may DO
taken by the radicals in Congress
during the winter. as a basis for a
movement to restore some Of the
heavy taxes on the corporations q I'D
the very rich, and involved In such a
movement might easily be a demand
that the Commissioner Of Internal
Revenue apply the provisions of
section 220 to concerns having such
enormous surpluses as the Standard
OIL Of New Jersey now has. In fact.
II is possible II not probable that the
Administration in It's need for money.