Every evening, Wilmington daily commercial., 1922-12-11

operate laundries, creameries, grain
elevators, retail stores. small fac
tories and other concerns in which
it is desired to have many persons
interested in the business.
We repeat that there is no good
reason why the persons desiring
to conduct any business, whether
large or small, under the corporate
form of ownership, should be
placed by policies Of the Govern
ment under any burden or disad-
vantage as compared with indi-
vidual proprietors or partnerships.
They are entitled to like consider
alton and similar treatment.
Personal and Corporate Taxation
As we have seen, individual pro-
prietors and partnerships arc taxed
upon their profits once for all, and
afterward may leave them in the
business or take them out, as they
please. Their taxable incomes Tin
excess Of personal exemption for
normal tax) TO the extent of $4,000
per year are taxed 4 per cent, and
above $4,000 bear a normal tax of
@ per cent, and the regular sur
taxes. The corporation is taxed
l2h per cent upon its taxable in
come, and any distribution of that
income to its individual stockhold-
ers is taxed again upon the same
basis, for surtax, as the income OF
individual proprictors and partner
ships. In other words the effect is
this; parties doing business as a
corporation pay l2H per cent tax
on the net earnings of the business
instead of the per cent or per
cent normal tax which individual
proprietors and partnerships pay,
and the same surtsxes as the latter.
upon all their income from the
corporation dividends.
Although il is argued that a cor
poration is an entity, and as such
properly subject 10 taxation indie
pendent of its stockholders, it is
evident that all taxes paid by a cor
poration come out of earnings that
are destined for the stockholders,
and while moderate taxes may be
justified as compensation for cor
porate privileges. il is evident that
they involve double taxation, and
10 that extent pcnalize the use of
the corporate organization More
over. heavy taxation OF corpora
ton earnings are inconsistent with
the whole scheme of graduated
taxation for they fall at the same
rate upon stockholders with small
incomes as upon stockholders with
large incomes. The present l2L,
per cent tax on corporation in
comes is a heavier tax than many
shareholders would have 10 pay il
they received their portion of the
earnings from partnership in
stead of from a corporation, and
that discrimination will be made
greater If corporate taxes are in
creased.
The surplus, or undistribu,ed
profits OF corporations. equitabl,
belongs in due proportions TO III,
small and large stockholders &C
cording 10 their holdings. The III
dividual proprietor or member OF :
partnership withdraws profits from
the business or not, as suits IN,
case, but has paid the surtaxes q
which he is subject. The corpora
ton pays l2Js per cent, but no sur
taxes, for the reason ALREADY
shown, i. C.. the imposition OF grad
usted surtsNes upon corporation
would be manifestly unfair 10 tn
small stockholder or the stookhold
er OF small income. There ar
many stockholders in the Unitet
States Steel Corporation and ever,
large corporation whose total in
comes do no, make them subjec
10 surfaces. II the graduate
scheme of taxation is right. heav
taxes upon corporation earnings o
surplus are all wrong. The profit
OF corporations should be taxed a
they are distributed to the stock
holders, according TO the total in
comes of the several stockholder.
The Law Regarding Surplus
The argument for the taxation {
corporation surplus is that If cot
porations were permitted 10 acct
mulate earnings in their treasure,
indefinitely, or 10 invest them ou
side OF the business. the stockholC
erS subject 20 surtaxes would oscar
the payment OF them so long +;
this policy -sEs followed. Wkcr
! ssu.' IA distribution VI corpose,