Evening star., 1935-07-26

has affected the so-called well-to-do
and middle class. Out Of $500, los re-
turns filed in 1895, only 1,73l,116
showed taxable income; more than
81 per cent Of the persons Of work.
ing age In the United States did not
pay any income tax in 1888. Political
considerations have actuated exemp-
tions for as many as possible at the
lower end Of the scale. II we fixed
$50,000 income as the dividing mark
between moderate wealth and extreme
wealth. we find that this group above
$4,000 income paid about o1e-third
Of its income in taxes. Moreover, this
group represents about 81 per cent or
more than one-half of the total in
come tax paid by the individuals. Per-
sons with income under $1,000 paid
about II per cent of the total taxes;
those with incomes between $4,000 and
$4,000 paid 8 per cent of the total
taxes; those between $4,000 and $685.
600 paid IA per cent of the total taxes.
These figures indicate that while per-
sons with incomes at $4,000 a year or
over will, of course, find the amount
they have to pay substantially in
creased, 1t will not yield enough money
to balance the Federal budget even
if all the incomes of these classes were
conflscated.
The alternative is naturally going
to be, sooner or later, to start crying
heavier taxes right down the line from
$4,000 to the lower incomes-some-
thing which will produce consider
able protest when the pinch comes.
If the present rate of spending con-
tinues, or If business is not quickly
put on its feet, the needed tax reve-
nues cannot be obtained without Sc
we're and painful taxation for every
body, including meny of the "a per
cent of persons of working age who
today pay no taxes at all to the Fed
eral Government on their incomes.
Rich Don't Have the Funds.
Income tax reform, if we are to
have 1t, must and will ultimately start
at this end of the scale, for addi-
tional tax revenue, If it is to be OBJ
tanned in any substantial amount.
must come by increases in the middle
and lower brackets. The claims that
we can spend billions of dollars for
relief of the unemployed, for gigantic
public works, for homesteads and
housing and blitation-and that
after borrowing the money row. we
can get the cash later on, to pay the
huge debt, out of the pockets of the
rich, however much desirable. Is a
snare and a delusion, for the money
is not there.
The President also recommends, in
view of the fact that we have estab-
lished the principle of graduated tax
alton in respect to personal incomes,
gifts and estates, that we apply the
same principle to corporate incomes.
This proposal. at first blush. appears
reasonable, yet II may work serious in
equalities. 1t ignores the fact that a
corporation income is in reality merely
a joint and combined income of the
stockholders in the enterprise-merely
a percentage Of their individual in
nus, ia d fCIJ OOA
poration the total income in dollars
may be very large, yet represents a
very low rate Of return on the capital
invested. Conversely. small corpora
ton may earn very high rate of re-
turn, even though the total income
in dollars is not large. A business
corporation with a total capital of
$4,000 might show profit of $4,000
in single year-100 per cent profit.
Yet the tax on this corporation, ac-
cording to the plan proposed would be
a lower rate than the tax upon the
income of large corporation whose
net profits were exceedingly small.
The present method of taxing the
incomes of corporations is uniform
corporation tax of 13& per cent Of
net profits. The President proposes a
graduated scale. ranging from 10A
per cent to 1864 per cent. Experts of
the Government state that this change
will not yield any increased tax rev.
enue 1t merely shifts the burden Of
the tax. The big corporation, having
a large net income although repre-
senting a small percentage Of return
to its stockholders, will be taxed much
higher than the small corporation with
a net income of much larger per-
centage Of profit. This injustice I be-
lieve could be removed by uniform
tax levied upon the net income of all
corporations, as at present. and adding
to it a graduated excess profit tax
levied upon the theory that corpora
tions should be taxed in proportion
to their profit. In other words. this
would compel corporations which en-
joy excessive profits to pay a higher
tax than those making a moderate
profit. No man can reasonably object
to such a plan. A plan of graduated
tax which disregards the element of
profit and only considers "bigness" is
not equitable.
Tax Legislation Lags.
Just what sort of a tax bill this
present Congress will enact is as yet
problematical. There has been q
manifest reluctance to undertake any