Evening star., 1936-11-24

ing power can
be used as stimulant-that Is, II
ways of avoiding tax payments by
conforming to the Federal Govern
ment's desires are related to unem-
ployment, the plan may have more
far-reaching effects than even the
authors OF the tax on surpluses ever
dreamed.
Thus one plan calls for a tax ex-
emption or credit for any corporation
which increases its total pay rolls by
q certain per cent, the increase to be
In number of persons employed as
well as total pay roll. If a company
learned that instead Of paying huge
taxes to the Federal Government 1t
can be exempted or credited with a
certain proportion and thus increase
It's production at the same time the
impetus to unemployment might be-
come as natural as the recent trend
toward dividend distribution.
Would Aid Budget.
Also, If unemployment were begun
by industry on a wide scale, there
would be less relief expenditure
needed from the Federal Treasury
and this in turn would cut down the
requirements of the Federal budget.
At any rate. so the theory goes, and
while the idea has been discussed
from time to time, no real attention
was paid to it until the dividends and
wage increases began coming from
the large and small corporations in
the last few weeks as a method Of
legitimate tax avoidance.
In fact, the whole idea of using the
taxing power to achieve indirect OBJ
jectives Is coming back into legisla-
tive vogue after 20 years of enforced
neglect due to an 8-to-l Supreme
Court decision in the second child
labor case in which an attempt had
been made to penalize by a tax the
distribution in interstate commerce Of
goods made by child labor.
Reverse Of A. A. A. Case.
It is true the Supreme Court held
by to 3 in the A. A. A. case that a
processing tax even for a beneficial
purpose, such as improvement of farm
income, was not within accepted con-
stitutional principle as laid down be-
fore by the courts decisions, but would
the court say the same thing about q
reverse Of this process. namely, the
exemption from taxation of groups
which performed in a certain man
her?
Thus for many years tax exemptions
have been granted more or less arbi-
trarily not only to individuals Of diff
ferent sized incomes, but to different
kinds of corporations, extending all
the way from personal service COM
panies in which more or less capital
Is used down to co-operatives. If the
Congress has the power to make tax
exempt q certain class it probably has
the power to define what are the char
acteristics or qualifications of that |
particular class. Thus all CORPORA
tions which increase pay rolls and en-
ployes by 10 per cent in q given year |
would occupy a particular status. and
corporations which increased 20 per
cent might occupy another.
Two-Edged Sword.
Congress might justify the proposal
on the broad ground also Of trying to
get sufficient tax money to balance
its budget. For, if expenses for I'M
employment relief are cut down by the
use of the exemption privilege to GER
tain corporations, then it is but an
other way of improving the revenues
Of the Treasury as a whole.
It will promptly be asked how anv
company can increase its pay roll
and produce more goods than it sees
ahead a market wherein such goods
would find buyers. The answer is that
some businesses with non -perishable
articles might actually find that the
money saving on taxes enabled them
to produce and store goods for future
markets. Also, not all companies are
distributing dividends, but the sum