The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1936-04-02


hurting business.
The first question raised by corporation execu-
tives whether adequate reserves for lean years
could be built up under the proposed heavy tax on
earnings retained in surplus. Concern over this
problem is manifest in the various methods suggest
ed to encourage cushions"
Immediately it was pointed out in many quar-
tiers that SURPRISES built up by corporations in pros
porous times had not only kept some from bank
ruptcy but had allowed many to continue paying
dividends out of surplus. The American Telephone
g. Telegraph Co.. for instance, has continued to pay
It's So dividend though the company has not earned
it since $780,
Col. Leonard P Ayres of the Cleveland Trust Co.
said recently that business savings had contributed
$4,000 5000 to emergency relief during five de-
preston years contrasted with Federal expendi-
lures of sl2,5oo,ooO,oOo.
william j. Cameron of Ford Motor Co. estimated
recently thas American business, from 1880 to 1894
had spent SGT 900 over and above its income
to help the work Of economic recovery He said Ford
Co.'S surplus had enabled it to spend $3300000o in
wage increases at the outset of the depression and in
another year, to pay out s68ooOoOo than it re-
ceived in order to keep operating its plants.
Administration experts, the other hand, con-
tend that depressions might be averted at least
made less severe if corporations were forced to pay
out dividends and thus maintain steady flow of
money and buying power.
TT is argued that corporations helped to cause the
depression by retaining their earnings and ex-
pandng their plants with surplus funds to bring
about excess production which could not be abb
sorbed. Surplus funds poured into the stock market
boom also helped to initiate the speculative bubble,
they say.
Robert H. Jackson, assistant attorney general in
charge of tax cases. and of the sponsors of the
proposed plan, scouts fear that it would discourage
the laying aside of adequate for the rany
day"
Those who are honestly fearful of that effect"
he said, Should remember that those profts-as
well as all others-are now taxed. Also that under
the proposed law any corporation which intends to
distribute two-thirds of it's earnings will have
larger tax to pay than under the present system
ut may. at the same cost as now, lay aside one
third of its earnings for the rainy day.
Those who favor conservative and prudent cor
poration management-and I am one of them-will
find this law threat. 1t does not penalize reas-
enable reserves-it repeats as much burden as it i'm
poses upon reasonable management
Some experts agree with Mr.. jackson as far as
big corporations which distribute large pro-
portion of their earnings are concerned but, they
ask, what about the smaller corporations and new
businesses that have not had time to build up re-
serves? They contend the tax would hamper the
development of new industries.
Thus, they argue, it would tend to make the big
established corporations stronger and more power
full, although one objective of the proposed law as
outlined by MIR. jackson is to check the growth of
monopoly.
The House Ways and Means Committee is NOV
ing along the line of special treatment for small
corporations.