Askov American. [volume] (Askov, Pine County, Minn.) 1914-current, 1935-12-19
Corporate Excess
is Fair, Just Tax

1888 appropriated $4,000 for the,
State Tax Commission to investigate
tax evasions, there has been much
discussion pro and con with respect
to the corporate excess tax law. The
law, which is a fair tax on corpora
tions and would be paid only where
the earnings warrant it. has been
on the statute books of the state
since Minnesota was admitted to the
the territorial days and was revised
with other tax laws in 1873. There
is absolutely no legitimate reason for
not enforcing the collection of the
corporate excess tax.
The proposed law provides for the
deduction of real estate, tangible per-
sonal property, moneys and credits
and tax exempt securities from the
aggregate value Of the capital stock
issued and outstanding plus the value
of the amount of bonded debt.
An example is given herewith. The
corporation may have real estate to
the value of $4,000; personal prop
erty, $4,000: moneys and credits,
$4,000; tax exempt property, such
as federal, state, municipal or other
bonds, to the extent of $4,000 The
total amount Of this property upon
which taxes are paid or tax exempt
aggregates $4,000.
The earnings Of said corporation
may be $4,000. That would estab-
lish the corporations worth at $780,
600. To that is added bonded indebt-
edness to banks and others, which
may be $4,000, making the corpora
tons total worth $4,000.
From the corporations total worth
of $4,000 is deducted the value of
property upon which taxes are paid
and tax exempt property. which In
this case is $4,000. leaving a net
corporate excess Of $4,000.
1t is only natural that a corpora
tons worth is arrived at through
knowing its earnings. The earnings
are not based on one single year, but
the average earnings of the past five
OF the corporate excess may be ascer-
tanned
For instance, If a piece of property
draws rent Of $1,000 annually, OF
the average rent over period of five
years is $1,000 per year. that property
should be worth $4,000.
Corporation earnings represent be-
tween 5 per cent and 90 per cent
OF the corporations worth, depending
on whether it is stable or temporary
concern.
When farmer, home owner. oil
business man. has $4,000 mortgage
on $4,000 property. he nevertheless:
pays taxes on the full value of $40.
600. That is TIE reason for addins
the bonded Indebtedness to the cor
poration's worth in arriving at The
corporate excess. The courts have
repeatedly held that it is only fail
and just to add the bonded indebted
ness. Others would not loan none!
to or invest in the corporation If the!
did not deem it good investment.
II n corporations stock is sold OIL
the open market. that NATURAL.
brings out the corporations worth
as the price Of stock fluctuates ii
accordance with earnings. Inasmucl
as the stock of less than five per cen
of all corporations in the state o
Minnesota is sold on the open market
it therefore becomes necessary to as
certain the earnings of the compan
in another way. by going over thei
books. for il is the earnings and no
the capital stock upon which the cor
porate excess tax is based.
Under the present law. the $500
corporate excess as pictured in tn
above example would be assessed a
40 per cent of full and true value
which would leave taxable valu
of $4,000 TIE local mill rate |
the taxing district is applied to tina
The average mill rate in the state
Minnesota being 10. the tax woul
amount to $3.50,
A tax of $3.50 on earnings {
$4,000 should not hamper any col
poration from going on in the bus
ness world and there would still /
very good dividends left to pay OF
to the stockholders.
Specific examples could be cite
as for instance. the Northern State