Evening star., 1936-05-05
NEW COMPROMISE
MAY SOLVE TAXES
Suggested Plan Tempers
Change-HeId Equal
.- Revenue Raiser.
Ry DAVID LAWRENCE.

Does it do any good to offer con-
structive criticism to the Roosevelt
administration? A test is shortly to
be made which may give an answer
10 that question.
The New York Times, an indepeno-
ent Democratic newspaper, which mas
been uniformly friendly to the New
Deal and only occasionally critical,
cannot swallow the tax bill passed by
the House, but instead OF conflning
itself entirely to a negative criticism,
now has set forth in comprehen-
sive editorial article substitute which
is offered for the consideration OF the
/ Senate.
Senator King Of Utah, Democrat.
has taken up the plan and many OF
its provisions doubtless will be voted
upon by the Senate and then 1t will
be interesting to see whether the
administration, which controls the Sit
uation, will permit the conferees OF
. both houses to adopt the new pro-
, posal.
Flat Tax Proposed.
Briefly, the Times plan comedies
that the House was right in dropping
the capital stock and excess profits
/ taxes because they have not been pro-
ductive and suggests instead that a
fiat Is per cent tax on corporations
be levied which would mean yield
, of 1864, ,O0O, 900. If any graduation Is
Imposed. the suggestion is that maybe
. the rate might scale up from l21a
per cent to Is per cent for corpora
tions earning less than $4,000 a year.
Then the plan provides for tax
8 of 4 per cent on dividends paid to
! individuals which the Treasury has
estimated would alone yield $500 ,oo0,-
600. On top of this, tax OF 4 per
cent on undistributed corporation
. profits without exception would yield
, about s180,000.000. Altogether the
effect on dividend policies of corpora
tions would then be negligible but the
Treasury would on the whole be near
er its desired revenue goal than it
can be under the present conjectures
and speculative risks involved in a
revolutionary change in dividend pay
Ing policies of American businesses.
Would Facilitate Expansion.
The proposed substitute points out
that mo surplus tax should be i'm
posed on earnings explicitly retained
for the purchase of new machinery,
the building of added plants or the
creation of tangible facilities for en-
larging the productivity of a COM
pany or the employment that it will
provide"
=. The idea is also advanced that with
> these exceptions made surtax might
be imposed on other earnings undis-
tributed. The plan is thus stated:
IF the corporations income Is di-
vided for tax purposes into f1fths, and
the first fifth, retained as surplus,
, bears only the per cent tax, the
four succeeding fifths might be SUBJ
. jected to surtaxes Of certainly not
more than S, 10, Is and 20 per cent.
Certainly such plan would raise
, as much income as the proposed bill.
1t might not be an ideal measure; the
4 burden 1t placed on corporations might
still be excessive, but 1t would satisfy
those who insist on the principle of an
undistributed profits tax, and 1t would
give opportunity for studying the
effects of that tax without working
too sudden and dangerous a revolu-
ton In our tax structure"
Advisers May Protest.
The big query is whether the Times
plan would satisfy the reformers in
side the Roosevelt administration who
have been trying to convince Mr..
Roosevelt that the taxing power af-
fords an excellent opportunity to try
various experiments with the Ameri-
can economic system. Mr.. Roosevelt
has thus far given heed to this type
of advice. The Senate is inclined to
toss the House bill overheard, but
this might seem to be q reflection on
the Treasury, which has championed
the plan obediently passed by the
House of Representatives. In politics,
face saving is important. The substi-
tute plan Is of a sort which would
enable the administration to retain the
principle" of the House plan without
infiicting on the business world the
severe penalties which the new rates
are certain to bring about. Politically
there is always the possibility that a
bill like that which passed the House
may actually create unemployment
through inducing adverse business
conditions. With only a few weeks
to adjournment, the substitute plan
may therefore offer an opportunity for
compromise.