Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1922-12-19

| Oil Company OF New Jersey for its
recent conversion of surplus into
capital was that it has adopted a
plan for inviting a participation
of it's employees in the ownership.
Many companies, including the one
last named, have reduced the par
value of their stocks to SIS for
this purpose. They are more read
lily purchased by persons of mod
crate incomes. The stocks of low
book values sell relatively higher
than those of high book values,
and announcement of changes in
this respect affect market prices.
No Evasion of Taxation
It will be seen that there is moth
ing in the accumulation of legiti-
mate corporation surplus, or in the
declaration of a stock dividend
that is in evasion of the law or
that accomplishes any permanent
escape from taxation. Upon all
corporation profits above the ex-
emption of 5000 when profits do
not exceed 25,O0Ono exemption
above-an income tax of 12H per
cent is now paid, whether they
are retained or distributed. and
whenever any actual distribution to
stockholders takes place the latter
must pay the income surtaxes to
which they are subject. If the
earnings of corporations are re-
tanned for use in the business, they
will accumulate and yield more
taxes whenever distribution oc-
ours. They are practically money
at interest for the government. for
they are bound to become subject
to the personal taxes sooner or
later, if the stockholders or their
heirs ever get anything from them.
The Standard Oil Company of
New Jersey and the Ford Motor
Company afford the most striking
illustrations of great businesses
built up by reinvesting and COM
pounding their earnings. In both
cases the results have become
largely due to the phenomenal
growth of the public demand for
their products, and to a great ex-
tent it has been a closely related
expansion, for the growth of the
automobile industry has been de-
pendent upon the development of
the oil industry, and the oil in
dutry has been enormously stimu-
lated by the development of the
automobile. In the last twenty
years they have developed to-
gether, and to accomplish that de-
velopment, by the reinvestment of
earnings, either by oil companies
or automobile companies, has not
been a policy harmful to the public.
Neither company could have played
the part that it has in the ex-
pansion of the industry, or paid
the taxes that it has, if it had not
been allowed to accumulate and
capitalize earnings. And the prop
critics that have been built up in
each case are certain to be great
revenue-producers to the Govern
ment for years to come.
The Popular Error
The popular error which is re-
sponsible for the demand for the
distribution of corporation sur
pluses, as in all the schemes for
leveling society, is in thinking OF
these accumulations as not only
privately owned but devoted to
private purposes. They are pri-
vately owned. but so long as they
remain as they are they are de-
voted to public purposes-the pro-
duction of things wanted by the
public. An organization produc-
ing goods or services Cor the pub
lie market, which never distributed
any profits to its owners. but used
all its earnings to provide capacity
for satisfying an increasing public
demand, could not serve the public
more completely if it was owned
by the Government-and judging
BY all experience probably would
not serve it nearly SO well.
If the Government had taken
over the automobile and oil indus
tries twenty years ago, and the
Government officials had been
clever enough to have accomplished
the same development that these
proprietors have accomplished, they
would have had to raise practi-
cally the same amount of new capt.
tai that the private proprietors
have found and invested. The lat