Evening star. [volume] (Washington, D.C.) 1854-1972, 1935-06-20
more PROFIT NEED
-
in NEW TAX PLANS
! Money Making Encourage
% ment Held Necessary to
Make Levy Productive.
Az DAVID LAWRENCE.

S~~
ified another issue comparable In I'M
portance only TO his recent proposal
for a centralized Government to con-
troll business and industry. 1t is his
decision to recommend program OF
increased taxes. .-
For nearly two and half years
the New Deal has been borrowing
huge sums to meet current deficits,
but now at last it is to seek rev.
enueS from drastic taxation.
This is a vital move, because 1t
raises promptly two questions: What
is the Federal Government doing with
the money it now is spending? And
what is the Federal Government do
ing or planning to dc to encourage
the making of profits by business and
industry so that the new tax rates
will be productive of the revenues
sought?
Mr.. Roosevelt rightly says our tax
system has been based on capacity
to pay, but with 1t now goes new
corollary-that the tax rates shall
derive from business and individual
incomes a sufficient sum to meet Gov
eminent expenses without at the same
time discouraging incentive and de-
Inoralizing the profit structure alto
.gether.
Government Industry Partner.
Government under the income tax
system is virtually a partner in pri-
svate industry. There are instances,
especially in the higher brackets,
where the Treasury gets 80 per cent
and the individual 20 per cent. Such
an 1920 division is hardly likely to
cause the individual to take risks or
to furnish capital for new enterprises.
Rather it drives the rich man into
tax-exempt securities or into low
interest investments that yield little
return either to the Government or
to him, but involve no risks. And
risk is the heart of a profit-and-loss
system.
The Presidents message would be
very encouraging news If business and
industry were far along on the road
to recovery to be able to stand heavy
taxation. But the truth is the tax load
Is not going to help recovery II
actually will retard progress because
it will make more difficult the replace
ment of capital in enterprises that
need new Equity" money as common
and preferred stocks are usually
termed.
g. On the one hand the administration
is putting every conceivable kind OF
restriction on business, seeking by
Federal commissions and regulation;
of various kinds ostensibly to prevent
economic strength from being con-
1centrated in the hands of the few, but
really, on the other hand, making II
difficult for the whole business mech
anisnn to function in a manner that
will bring those corporate and in
.dividual profits from which the Gov
eminent hopes to get its proper share
Just Cause for Complaint,
Until now the tax issue has been
In the background. Whenever an ad-
ministration starts to tax, it meets
serious opposition from those who feel
they are unjustly taxed. Businessmen
who have been clamoring for a
balanced budget, however, can hardly
complain now when Mr.. Roosevelt pro-
poses q method of taxation, but they
have Just cause for complaint when
they point out that the new tax rates
will never get the revenues needed I'M
less the Government gives its partner
American business chance to
make profits.
With a drastic tax system must go
some expansion of the profit system.
And the New Deal from the beginning
has insisted on the theory of limiting
profits or discouraging them altogether
by Government intruSions and Gov
eminent competition.
Congress may not act at this session
on the new tax proposals, but Mr..
Roosevelt has thought it wise to lay
his program before the country so that
everybody may begin to adjust himself
or herself to the idea Of heavier taxes
next year. What the administration
may discover, however, is that the
step will result in q more searching
scrutiny of Government expenditures,
q more thorough examination of how
the tax burden is distributed, and what
the effect of unscientiflc taxation is
going to be on an economic system
in which incentive Is the prime req
uisite for progress.
Copyright, 1880