Montgomery County sentinel. [volume] (Rockville, Md.) 1855-1974, 1936-09-17

TAX appneS to surplus, to the saw
ings OF business, savings designed
TO meet just such conditions as
those through which we have gone
and which business was able to
meet because heretofore it had been
permitted to pile up reserves TO car
ry it through the rainy day.
Official figures from the Depart
ment OF Commerce show that the
payments for wages, salaries, in
terest and dividends from 1880 to
1884 amounted to $21, 288, 900, 900. In
1885, according to incomplete fig
ures, business paid out 81 500 ,OOO, 900
ior these same purposes, thus max
ing the total for five years approx
mately $23 1000, 1000, 900.
Now, in normal times these fig
ures would not prove exciting. I'm
der present circumstances and
those through which we have been
passing, they border on the sensa-
tlonal. This is true because these
payments have been made, not
from the earnings of the businesses
during the years in which they were
paid, but from earnings of earlier
good years when part of the prof
its were laid aside as protection.
1t would seem therefore that since
business has performed a social
service of this kind under its own
management that it ought to be al
lowed to continue. I am convinced
that it is much safer method than
to have the federal government
mess around through laws such as
the tax on SURPRISES for it must be
remembered that under the law
which I have criticized, no corpora
ton can build up again such sur
plus as has happened in the past.
I might mention further that the
effect of this law is going to be to
prevent small corporations from ev-
er growing large. I mean by that,
If corporation, through careful
management and frugal savings,
was able to expand its plant facili-
ties, increase its production and
thereby increase the number Of
workers it employs, it will be I'M
able to do so. 1t will be unable to
accomplish this for the reason that
the operation of this tax law pre-
vents it from storing its savings.
The law takes such a heavy toll of
any stored-up earnings that no cor.
poration can afford to store them
up. They must be passed out in
dividends during the year they are
earned or else the government puts
its tax hand into the business
treasury.
One might say that such a distri-
button is helpful and undoubtedly
in the cases of some owners of Sc
curities it is helpful. But questions
of this kind must be treated in the
whole and not on the basis of isolat-
ed cases. Consequently, it takes no
stretch of the imagination to see how
a business is forced to distribute
! its earnings, to distribute them in
good times when a comparatively
small number of its security own
erS need the funds-and the result
is obviously shortage of reserve
for that rainy day. In other words,
a corporation is compelled to be a
spendthrift or else pay tax that
is designed as punishment.
There is another phase of these
payments by businesses that de-
serves attention.
ShoU The dividend pay
| wants n foot
many of the earn
ings reports of business lately have
shown a decided up-turn. This cir
cumstance has prompted Democrat
ic Chairman Farley and Attorney
General Cummings to enthuse
somewhat about business recovery.
Each of them insist in recent politi-
cal statements that prosperity &C.
tually is here; that it is not 'just
around the corner" as Mr.. Hoover
once predicted while he was presi-
dent.
But there should be some atten-
ton paid to the meaning of the divi-
dend payments and increased earn
ings. They should be analysed.
It is true that some, industries,
like the automobile industry, for ex-
ample, have increased production
beyond the hope of any students OF
economics and that they have re-
stored to their payrolls a consid-
cradle percentage of the workers
they once employed. Some other
industries likewise have moved for
ward and promise to get on their
feet again in sound fashion. Yet ]
find a number of authorities in the
business world who continue to be
doubtful. They fear that the founda-
ton is not sound.
These facts have not deferred Mr..
Farley and Mr.. Cummings from
shouting from the house-tops that
this is prosperity, resulting from
Roosevelt policies. Their declara'
tons, however, are just as falla'
cious, Just as political as some po-
liticai announcements that l have
heard from the Republican side to
the effect that business is picking up
because of prospects OF electing
Governor Landon as President. All
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