The Washington times., 1936-03-03
CORPORATION
SURPLUS TAX
PROPOSED
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cials said Mr.. Roosevelt regarded
today's tax proposal as q much
needed tax reform.
It was pointed out that spproxi'
mately 81, SOC, 200, 900 Is now lying
idle in the form of corporation sur
pluses, which may not be taxed
The President was represented as
feeling that his proposal, If enact
ed into law, would force this money
into use and distribution.
... Equity Of Burden
Discussing this situation in to
days message, the President said
"The accumulation Of surplus
in corporations controlled BY
taxpayers with large incomes Is
encouraged by the present free
dom Of undistributed corporate
income from surtaxes.
"Since stockholders are the
beneficial owners Of both dis
tributed and undiStributed cor
pOrate income, the aim, as =
matter Of fundamental equity,
should be to seek equality Of tax
burden ON all corporate income
whether distributed or withheld
from the beneficial owners.
"AS the law now stands our
corporate taxes dip too deeply
into the shares Of corporate
earnings going TO stockholders
who need the disbursement Of
dividends; while the share Of
stockholders who can afford to
leave earnings undiStributed eS-
capeS current Surtaxes alto
gether.
AZ BILLION WITHHELD
'ThiS method Of evading ex-
iSting surtaxeS constitutes =
problem as old A. the income
tax law itself. Repeated at
temptS by the Congress to pre-
vent this form Of evasion have
not been successful. The evil
has been . growing one.
"This has now reached dis
turbing proportions from the
standpoint Of the inequality 1t
represents and Of its serious
effects on the Federal revenue.
Thus the Treasury estimates
that, during the calendar year
1886, over $4,5OO, ,OO0, 200 Of cor
pOrate income will be withheld
from stockholders. II this un-
distributed income were dis
tributed, it would be added to
the income Of stockholders and
there taxed as other personal
income. But, aS matters now
stand, it will be withheld from
stockholders by those in control
Of these corporations. In one
year alone, the Government will
be deprived Of revenues amount
ing to over $1,S0O, 100000.
CORRECTIVE PLAN
"A proper tax ON corporate
incomes Including dividends
from other corpOratiOns), which
Is mot distributed as earned,
would correct the serOus two
fold inequality in our taxes on
business profits If accompanied
by . repeal Of the present cor
pOrate income tax, the capital
stock tax, the related excess
profits tax and the present ex.
emptiOn of dividends from the
normal tax on individual in
comes. The rate on undiS-
tributed corporate income should
be graduated and so fixed as
to yield approximately the same
revenue aS would be yielded
II corporate profits were dis
tributed and taxed in the hands
of stockholders"
Although the President did no
-ses any figure. Treasury official
said that this graduated ia!
should average approximatel
80 1.3 per cent.
Simplifying Matters
Income which would be lost b,
repeal under the Presidents Pre-
gram is as follows, according II
Treasury estimates:
Corporation income tax. 1925
coo, 900.
Capital stock tax, $163, 900 900.
Corporation excess profits tai
100000.
The President held that If Cor
gress adopted this reform tn
whole system of tax paymen
would be simplified both as to Co
lection and assessment, in tina
one tax would be levied instead o
three.
Further, he pointed out tina
corporations which distributed
their profits to stockholders a
earned would pay no taxes. Th'
Treasury would collect the none!
through individual income leVie
from the recipients of dividends.