Evening star. [volume] (Washington, D.C.) 1854-1972, 1936-05-06
TAX BILL TERMED
BLOW TORA|LROAD
IN RECEWERSH|P
Chicago-N Northwestern Head
Says Measure Would
Be disastrous"
FIVE-YEAR EXEMPTION
FROM LEVY is URGED
Waiver of Claims on Basis of I'm.
divided Profits Asked After
Reorganization.
BACKGROUND

BACKGROUND
Since February, Congress has
struggled oper presidential request
for tar legislation at this session,
Mr.. Rooseuelt's proposal embracing
revision OF entire corporate tar
structure.
House, after nearly tho months
OF committee consideration, passed
bill last meek, feature being tmpost-
ton OF Levy on undistributed cor
poration profits. Legislation is non
before Senate Finance Committee.
Throughout, business has opposed
plan as dangerous to industry:
fearing depletion OF reserpes.
by the Associated Press.
Fred Sargent. president of the Chi
cago g. Northwestern Railroad, told
the Senate Finance Committee today
the House tax bill would direct a
disastrous blow" at railroads working
out of receivership.
He urged the committee to give rail-
roads a five-year exemption from the
undivided profits tax after a reor-
ganization.
Sargent said the House provision for
is per cent tax rate on companies
in receivership failed to provide relief
for companies going through court re-
organization and fighting to get back
Oh their feet,
He cited his road as an example.
The Chicago g. Northwestern, he said,
is now in trusteeship and must file a
reorganization plan by June q.
Cash Reserve Depleted.
Because of the upward trend in
rail receipts. Sargent said: I'VE have
reason to believe that We can submit
a reorganization plan that will be
reasonable and just"
But he said the company's cash
reserve was depleted and had to be
restored.
Until this is DONE" he said, 'it
would be unwise, and am sure the
eminent men on this committee would
not approve, to distribute earnings as
dividends.
IF our company is to be subjected
to the corporate tax levy proposed
it will make it extremely difficult, if
not impossible, for some time to come,
to reorganize under any plan that
would enable it to promptly re-estab-
lish a cash surplus out of earrings"
The House tax bill would place a
42la per cent tax on the company's
net income If it turned all its earn
ings into surplus.
LAS I see it," Sargent added, this
percentage will be disastrous blow
to those railroads that have not been
able to weather the storm, but could
build themselves back into a sound
and stable position with the return
of reasonably prosperous times"
Five-Year Time Asked.
Sargent asked the committee to
give favorable consideration to the
extension Of the Is per cent provision
for a reasonable period Of time after
reorganization, say, five years"
He said this would "help to remove
an otherwise almost impossible situa-
ton with relation to reorganization"
Before leaving the stand. Sargent
appealed to the committee to permit
small industries to meet their capital
requirements from current earnings.
while some recognition is given to
this principle in the BILL" he said,
yet it seems to me that it is wholly
insufficient to enable the great ma
jority of small industries to built back
their surplus, re-establish their credit
and be prepared to make new and
progressive improvements if they are
to remain in the competitive field"
Chairman Harrison asked If 1t
would be helpful" If new industries
were exempt for five years.
The rail head replied in the affirma-
tive, but said that would not cover
small industries that had exhausted
their reserves and need to build back.
Senator Couzens, Republican, Of
1See TAXES, Page ~