Evening star., 1924-05-25
ANALYSIS OF TAX BILL
CHANGES AGREED UPON

A detailed analysis of the changes
made in the existing revenue law by
the bill as agreed to In conference
and approved by the Senate yester-
day afternoon has been made by Sem
ator Walsh OF Massachusetts, a men,
ber of the Senate finance committee,
which handled this bill The bill is
it was approved by the Senate yes
terday.
Senator Walsh points out the fol-
lowing changes in the existing law:
1. The bill contains Il provision for
a reduction of % per cent In the tax
fSss. '' " ' INC '''"''S ''
:. The tax upon corporations re-
mains as under the present law--to
wit. a fiat tax of l2ia per cent upon
the net tacome of corporations. The
present capital stock tax Is retained.
s. The rates OF the estate tax. which
In the existing law range from / per
cent of the amount of the net estate
not In excess of $4,000 to 25 per cent
of the amount by which the net es-
tate exceeds S10.000,000 have been al
tered to range from ! per cent OF the
net estate not In excess OF $50, ,000 to
40 per cent of the amount by which
the net estate exceeds $10,000.000.
4. For the calendar year 1924 and
each calendar year thereafter a tax
is imposed upon transfers by gifts of
any property whether made directly
or Indirectly. The rate of the gift
TAX ranges from ! per cent OF the
amount of taxable gifts not In excess
OF $4,000, to 40 per cent of the
amount of which the net estate ex-
ceeds s10.00O.OO0
>. The existing law provides for a
normal tax upon the first $4,000 of
net income of 4 per cent, and upon
"a N % ln 9
per cent. The bill provides for a
normal tax rate of % 2 per cent
upon the first $4,000 of net income
% per cent upon the next $4,000
of net income, and CD 6 per cent
upon the amount of net income in
excess of the amounts taxed under
% and CD.
8. The surtaX rates are reduced so
as TO begin at ! per cent on the net
income from $4,000 to $4,000 and
reach a maximum of 40 per cent of
the amount of the net income in eX-
cess of 100000. The existing law
provides for surtaXes beginning at l
per cent upon the net income between
maximum of so per cent of the
amount by which the net income ex-
ceeds 100000.
I. In the case of an individual the
tax is to be credited with 25 per
cent of the amount of the tax which
would be payable If his earned net
income constituted his entire net in
come, but not in excess of % per cent
of his normal tax. Earned income is
defined as wages. salaries, profess
Sional fees and other amounts re-
ceived as compensation for personal
services actually rendered, including
In the case of Il taxpayer engaged
in trade or business in which both
personal services and capital are ma
terial income producing factors. a
reasonable allowance as compensa-
tion for personal services, not in ex-
cess of 20 per cent of the taxpayer S
share of the net proceeds Of the
trade or business. It is provided
shall be considered as earned, and
that at least $1,000 of net incomes In
excess of that amount shall be con-
sidered as earned. 1t is further pro
vided that the amount of the net in
come shall not be considered to be IN
excess of $4,000.
s. 1t is provided that the amount
by which the tax is reduced on ac-
tai assets shall not exceed 122 per
cent of the loss. There is no such
limit in the present law.
9. The principle contained in the
revenue act of 1918 that liQuidating
dividends constitute sale of the
earnings. has been restored. This
puts liquidating dividends within the
capital gains section of the bill and
recognizes the real effect of such
dividends.
10. The section with reference to re-
organization Of corporations has been
rewritten to eliminate existing un-
certaintieS in the present act and to
include other usual forms of cor
porate reorganization in aid of busi-
ness, such as the splitting of one
corporation into two or more corpora
tions.
IL. Provisions have been inserted
to prevent the use of the reorganiza-
tion section to escape proper taxa
ton by increasing the basis for de-
probation Or depletion or by increas-
ing the basis of gain or loss from the