Evening star., 1933-12-15
MORG[NTHAUsASKS.
SINGLE TAX RATE.
Acting Treasury Head Pro-
posed Higher Surtaxes
in Upper Brackets. j
Continued From First Page.)

sought to avoid in this manner amount
ed to over $1,000 000."
Morgenthau then explained that all
his recommendations were directed at
eliminating "any loopholes" and to see
that legitimate business should not
be impeded.
He agreed with the committee plan
OF fixing a single normal income tax
rate and adjusting surtaxes accord
ingly, but pointed out the committee
rates for this change would put the
heaviest burden on taxpayers with in
comes from $4,000 to $4,000
Morgenthau recommended the elm
ination of depreciation and depletion
reductions.
Capital Loss Restriction.
He said the Treasury wanted to re-
tain the income tax on capital gains
losses should be allowed, but added:
1T is essential, however, that restric-
tions be imposed upon the deduction
of capital losses from ordinary income
since our experience indicates that no
method of tax avoidance is more
widely employed than this. In the
opinion of the Treasury, it Is fair to
provide that capital losses may be. de-
Quoted only from capital gains. with
perhaps the qualification that any
capital net loss may be carried for
ward for one year and applied against
capital gain in such year.
I'm the alternative, perhaps an arbi-
trary limitation Of the deduction of
capital losses to an amount of not
more than so per cent of the capital
gains would be desirable"
Morgenthau approved the policy of
taxing undistributed income of personal
holding companies at a higher rate
than that of other corporations, but
indicated his preference of continuing
present provisions for taxing holding
companies with possibly some minor
changes.
Morgenthau favored continuation of
consolidated returns for corporations
and added that "the committee may
wish to discuss as well other forms of
taxation on large-scale businesses, such
as the excess profits tax. Recommended
tlons as to these are beyond the scope
OF this statement"
Partnership Changes.
He said the Treasury hopes to rec
ommend at an early date a complete
revision of the partnership provisions of
the income tax law, saying:
so long as the partner must report
all partnership income, he should be
permitted to deduct the corresponding
partnership losses'
The Treasury head opposed the COM
mittee plan to eliminate credit for for
elgn tax payments.
In the judgment of the depart
ment," he said, the present arrange
ment seems fair and should be con-
tlnued. If it is not continued Ameri-
can taxpayers doing business abroad
Will have an additional incentive to or
ganize foreign corporations to take
over their foreign business. with re-
suitant loss OF both business and reve-
nue. therefrom.
1T is quite clear that the elimina-
tion of the foreign tax credit will not
increase the revenues to the extent of
the taxes which American taxpayers
now save by virtue of it,
On Property Exchange.
Concerning provisions for exchanging
property and reorganizing businesses,
Morgenthau said they needed complete
redrafting, and added:
The Treasury believes that it would
be unwiSe to eliminate completely the
exchange and reorganization provisions
at this time. The department now is
working upon substitute for the
present provisions. which will be COM
pleted as soon as possible
Morgenthau said he agreed that
olVldendS out OF earnings snd profits
accumulated or the increase in value
OF property accrued before March !,
1918, should be subject to surtax.
In discussing the capital gains and
loss provisions, the Acting Secretary
suggested two approaches:
The first would be to provide for
tax at fiat rate on capital net gains
and permit the deduction of capital
losses totally from the capital gains of
the same year or the succeeding year
This provision Is similar to that in the
1882 law. but imposes a further re-
strlction upon the deduction of losses
Losses Restricted.
THE proposed plan has the virtue of
placing further and yet equitable re-
strlction upon the deduction of losses,
and of taxing accumulative gains at
reasonable. non-progressive rate.
THE second possible plan would be
to segregate capital gains and losses
as before and to provide that capital
losses shall only be deductible from
capital gains of the same or the sue
ceeding year"
Magill suggested beginning the pro-
posed new surtax rate at $500 in
stead of $4,000 as the subcommittee
recommended.
He contended the subcommittee's sur
taxes, which lower existing brackets
and increase the rate to offset the
proposed reduction in. normal tax
through the single rate OF per cent.
would give the wealthy man the ad-
vantage.
He said persons with net incomes
from $4,000 to $4,000 would be hit
hardest under the proposed schedule
% 17-100 per cent increase-but
after that the increases would go down.
Crowther Objects.
AS Magill discussed rates, Repre-
sentative Crowther, Republican, of New
York, objected, asking if the Ways and
Means Committee was going to have
anything to do or If the Treasury is
going to write the whole bill"
This drew a hot retort from Repre-
sentative Lewis, Democrat, of Missouri,
who observed the Treasury had made |
thorough study of the problem and
was well qualified to speak wisely.
After an hour of questioning. the |
committee recessed until pm. to |
permit members to study the volumi- |
nous Treasury statement.
Representative Vinson, Democrat, Of
KentucsJ suggested the recess, where /
upon Representative Treadway, Repub- |
lican, of Massachusetts, said 1t was clear
the Democrats wanted "a special !
session"
mot at ALL" Vinson replied.
Lewis replied to Treadway that if the |
Republicans had held some special
sessions "the Treasury probably wouldn't
be in the red.'
WILL BUY CHEESE