Evening star., 1933-12-06
TAX CHANGES
TO BLOCK EVASION
Thirty Changes, Bringing in
$35, 900, 1000 More a Year,
Proposed by House Group.
Continued From First Page }

extent that they represent income
should not be postponed as permitted by
present law. Annuity receipts are now
taxed, but not until the total amounts
received exceed the total amount paid
for the annuity.
Interest paid on deposits invested IN
tax-exempt securities should be disal-
lowed as q deduction for income-tax
purposes
Disallowance for income purposes
of deductions for estate, inheritance
legacy, succession and gift taxes.
Disallowance of deductions attributa-
BILE to tax-exempt income. such as in
terest on State securities, salaries re-
ceived by State employees and income
from leases of State school lands
Meanwhile President Roosevelt's proc
lamation of repeal ended taxes which
the Treasury figured would bring In
around $4,000, 900 a year.
These, however. are to be replaced
by special taxes on now legalised liquor.
The new levies will be decided upon
after joint hearings shortly by the
House Ways and Means and Senate
Finance Committees.
Liquor Rates to Be Changed.
Various liquor taxes and duties have
been proposed. The law now calls for
payment Of $l.l0 on each gallon Of
hard liquor. That will be raised to
somewhere around $2.20 to So. Indi-
vidual rates for the numerous grades
OF other beverages will be changed.
The announced objective for all the
liquor taxes will be to make them high
enough to bring needed revenue. but not
so high that liquor can continue to be
bootlegged without paying the tax.
The repealed taxes were included in
the recovery act for unemployment and
relief financing. The act specified that,
when the President proclaimed repeal,
or that the Federal income exceeded ex-
penditures. the taxes should end on
specified dates.
Thus, on January l, the Federal gas
oline tax will be reduced from ~ to
cent gallon: the levy of per cent as
sessed the recipient of dividends will not
apply to dividends he receives after jan
uary /; after July l, 1884. domestic cor
porations no longer will be required to
pay 81 tax on every 81 900 of the ad-
justed declared value of their capital
stock; corporations will cease to be re-
qllred to pay 5 per cent excess-in-
come levy on net income over 1872 per
cent of the adjusted declared value of
their capital stock
The last suspension becomes effective
at the end of the present tax-year of
the individual corporation.
Would Prevent Evasion.
Had the revenue recommendations
made by the House subcommittee yes
terday been in effect, J. P. Morgan.
Otto H. Kahn and others probably
would have paid substantial income
to~~
The disclosure that Morgan. head Of
J. P. Morgan. and Kahn. Of the bank
ing firm of Kuhn. Loeb g. Co. paid no
income taxes in 1890. 1881 and 1892
was one of the reasons the committee
began a thorough scrutiny of the rev.
enue laws.
The Senate Banking Committee also
was told that the l9 other partners OF
Morgan. and members of Kuhn. Loeb
paid little into the Treasury during tn.
past three years.
One reason. experts said. was that
the partners in the two banking firms
were allowed to deduct from their
ordinary income losses sustained by the
partnership
The House subcommittee report
said this should not be permitted. and
estimated the change would increase
Treasury revenue by about $1,000. 900.
Holding Companies Hit.
The severest criticism Of present reg
ulations by the committee was directed
at personal holding companies which 1t
called the scheme of the incorporated
pocketbook
Testimony before the Senate Com
mittee showed Albert H. Wiggin. former
chairman of the Chase National Bank,
made huge profits by setting up per-
sonaI corporations which traded in
bank stock and other securities
Wiggin also set up companies in
payment of income taxes, and, through
sale Of stock at opportune times, saved
a levy of S440, 900 in 1929 alone
The committee said wealthy individ-
uals established personal corporations
and exchanged stocks. bonds and other
income producing property for the cor
poration's stock.
BY this means" the committee re-
port said. "the income from the prop
erty pays corporation tax. but no sur
tax is paid by the individual II the in
come is not distributed"
Group Cites Example.
For example. the committee said,
person with 81 ,00O, 900 income from tax
able bonds would owe $571 900 ordi-
narily, but through use Of the personal
corporation he would pay only $4,000
in income taxes so long as he did not
distribute the corporations dividends.
The committee proposed tax Of IS
per cent on the "undistributed adjusted
net income" of personal holding COM
panies to remedy the present situation.
1t estimated the added return annually
To the Government would be $25 ,000, 900.