Evening star., 1933-12-24

ment, cooperation will be alienated,
administration made increasingly diff
cult, the revenue meantime reduced and
the tax eventually discredited.
Urges Avoiding New Burdens.
an view of the dependence which
has been placed upon it, the breakdown
of the income tax would be disastrous
to the Government from "a revenue
standpoint. In the interest of both the
Government and the taxpayers, changes
in the income tax laws, especially,
should contemplate elimination of harsh
and discriminatory features, and the
avoidance of large new burdens and in
equities.
Provisions that are designed to
eliminate loopholes in the tax laws and
thus to provide additional revenues
must be considered in the light Of these
conditions.
Business is willing to pay its full
share Of taxes. but in view Of the large
and increasing proportion Of the total
Federal taxation which it bears it Is
particularly Important that all changes
in the revenu. structure should be fair
and equitable, with no discrimination,
no overdue distractions OF normal
business processes nor penalties on
legitimate forms of doing business"
ClauSen made specific recommenda-
tions as follows:
changes in the revenue laws should be
designed to eliminate known inequities;
a schedule of income tax rates which
would place additional taxes on div1-
dends already heavily taxed at their
source would result in discriminatory
taxation and increase existing dupllca-
ton and inequalities.
Fears Tax on Capital.
Depreciation and depletion-as an
elemental principle, actual depreciation
and depletion should be allowed for tax
purposes in the year in which they oc-
cur; denial of such allowances would
result in a tax on a fictitious non-ex-
istent income and levy on capital. 1t
also is obvious that purely arbitrary,
uniform reduction In depreciation and
depletion allowances Is simply an in
crease in tax rates on an unsound basis,
if there are any instances Of taxpayers
being allowed too much depreciation
they should be corrected through ad-
ministrative action for which provision
already exists.
Exchanges and reorganizationS-no
tax should be imposed on exchanges or
business reorganizations unless there Is
a clearly realized capital gain. The
present law is based upon this principle
and the exchange and reorganization
provisions, taken as whole, are sound.
Capital gains-if it is not deemed
practical at present to ignore capital
gains and losses for income tax pur-
poses, then the rate should be reduced,
thus minimizing the fluctuations in rev.
enueS, ]eSsening the undesirable eco
nomic effects Of the present system and
giving relief to the small as well as to
the large taxpayer. Such reduction
would tend to increase Government rev.
enueS.
Should Retain Tax Credit.
Credit for taxes paid abroad-In
the interest Of economic recovery IN
general and in foreign trade in par
ticular, the right to receive credit for
taxes paid abroad should be retained
and should be subjected at most to no
more restrictions than those found In
existing law.
Dividends out of pre-March, 1918,
earning-CongresS did not have conSti-
tutional power to tax pre-March, 1913,
earnings when they were accumulated
and should not attempt to tax them
now; such a tax would result in dis
elimination as between industries and
as between individual enterprises Of the
same industry.
Taxation of partnerships it is
important to define more adequately
the taxable status Of partnerships, laws
and regulations governing the taxation
of partnership incomes should be con-
sistent and without discrimination.
Harsh provisions resulting in excessive
taxation would place an onerous bur-
den on large number of small part
nerships throughout the country.
Unjust Penalty Seen.
Personal holding companies-1I is
recognized that considerable tax avoid
ton and manipulation of personal hold
Ing companies, and that q satisfactory
method should be sought to prevent
such such E practices; It @ is 6elisVsd ed howeyGr. t1e
committee Of the Ways and Means
Committee for dealing with this matter
viduals and legitimate business enter
priSes falling within the proposed def
milton Of personal holding company.
IL WOuIQ appeal POSS1DAC W pei
Sonal holding companies IN manner
that would avoid this difficulty. In
addition, 1t is believed that carefully
drafted provisions applicable to trans
actions between the stockholder and his
personal holding company should ef-
fectively prevent any devices adopted
to avoid tax liabilities.
statutory time limit-In the inter-
est of both the taxpayer and the Gov
eminent, taxes should be determined
and collected in the minimum of time;
IN view of the long experience in ad-
ministering the income tax, two years
should be sufficient and an extension
Of time will result in additional burdens
on the taxpayer and probably slower
collections.
Except in cases of fraud, the period
within which a tax liability can be i'm
r1nsad should he definitely limited by