Evening star., 1936-05-13


the &C a e d
principle" of an undistributed sur
plus tax.
Strictly speaking, the idea of fore
ing surpluses into distribution when
they are retained in holding COM
panies as a means of avoiding tax
has always been embodied in the last
decade of tax legislation and today
the commissioner of internal revenue,
under existing law, can impose PEN
atty tax if an unreasonable" accumu-
lation of surplus occurs beyond the
needs of a business or in any per-
sonal holding company which doesn't
engage actively in business at all but
just clips bond coupons or gathers
dividends.
Way Open to Increases.
Putting the principle" into more
definite form by slightly graduated
tax that doesn't raise the question of
reasonableness or unreasonableness
but simply declares that percentage
of what is retained must be taxed is
going to appease the Treasury some
what because once the principle" is
accepted, the rates can be changed
next year in line with the TugWell
proposal outlined yesterday in these
dispatches.
On Capitol Hill there has been q
suspicion for some time that the
President isn't as keen about the new
tax as some of his Treasury theorists,
and 1t has been significant that
Chairman Harrison of the Senate
Finance Committee and Majority
Leader Robinson have been pretty
confident all along that Congress would
adjourn by June l. Certainly ad-
journment at that date would not be
possible unless a compromise tax plan
Is offered.
Compromises in Wind.
All sorts of compromise plans are
being suggested from the Democratic
side. If a vote were taken in the
Senate Finance Committee, COM
bination of Republicans and conserva-
tive Democrats would reject the bill
passed by the House as well as any
substitute which drastically taxes sur
pluses.
The only chance, therefore, is for
some plan that does not introduce the
surplus tax too violently in the next
year or so and yet permits the Treas
ury to get increased revenues from
the corporation taxes, the rates on
which are going to be raised to per-
hut d,Io fnr
scale, permitting less taxes on smaller
incomes than on the larger earnings
The bill that will be passed by the
Senate probably will not contain any
processing taxes, no matter how in
sistent Secretary Wallace of the De-
partment of Agriculture may be tc
collect them. The political dangers
of the processing tax are well recog-
nized now by the Democrats and they
are not likely to agree to any reviva
unless the President makes it ar
ultimatum. The House of Representa-
tives is lukewarm on the idea, too.
Few Days for Hodge-Podge.
This much Is certain-only about
i3 working days remain of the present
session If June l is the adjournment
date The bill has to be gotten out
of the Senate and into conference Il
It is to be put into real shape at all
At present it is hodge-podge OF
unavoidable provisions to say nothing
of the doubtful constitutionality Of
such things as the processing tax
The measure will not get to confer
ence before May %.
But the Democratic leaders are
, supremely confident they can work il
all out-which means only one thing
the new tax bill will not be as drastic
as first believed and the Treasury viii
not get the revenue needed to NEE
its estimates. But there never wa!
any serious possibility of getting tht
budget balanced by the new tax bill
anyway. And the real pinch in taxa
ton will come after election, no mat.
ter what the outcome of the presi
dental contest. For the camouhagt
about the unbalanced budget and thu
failure to tax cannot be indeflnitel,
maintained.
Copyright. 1850