The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1936-03-18

ready IN the hands OF the corpora
ton.
The President now proposes to
do away with this Is per cent tax
in the hands of the corporation.
Instead the dividends will be sub
ject to tax IN the hands of the
stakeholder Let us assume the
same dividends are distributed
SIS 100000 plus of course the tax
of $4,000, 900 which the corpora
ton did not have to pay.
HENCE the dividends would be
Il Il $90,000,000 In the hands of
the stockholders this would be SUBJ
ject TO normal tax under the new
plan of per cent or So 100000.
Thus, these dividends would pay
taxes of $3,600,000 in the hands of
the stockholders instead of $15,-
& 100000 in the hands of the corpora
tion-a loss in taxes of $11 400, 900.
OF course the stockholders with
sufficiently large incomes would
have TO pay surtaxes on these
dividends. But this would be true
in both cases so that no COMPARE
son need be made. Of course in one
case S90,000,000 in dividends would
be distributed instead Of $75, 900 900
so that the surfaces would be
slightly larger
But this would be more than off,
set by the losses in taxes because
millions of dollars of these divi-
dends would be paid into the hands
of taxpayers whose actual taxable
income would be so small that they
would pay no taxes.
TAKE the following actual case.
Il The total income is $11,500.
OF this $500 is from United States
and New York City tax-exempt
bonds, leaving only $4,000 IL in
come from stock dividends and a
few corporate bonds.
But this is subject to deductions
for VIE state and city taxes, sales
taxes, etc, and interest or a house
mortgage, so that the actual tax
able income is zero. Hence the
government would get nothing on
stock dividends paid into the hands
of this man, instead of the Is per
cent now collected at the source.
The loss of Sill 100000 in taxes
suffered by the government through
this change would have to be made
up by a tax on the corporations
undivided surplus. The undivided
surplus in this acse is $4,000 900.
1t would therefore have to take
practically half of the surplus in
order to just make good its tax loss.
The corporation could, of course,
defeat this by distributing the
money, in which case the govern
ment would get only 4 per cent
and thus suffer severe tax loss.
THE methods of evasion would
Il be many. Suppose the corpo-
ration wanted to keep S25, 900 900
in surplus. This would be subject
to tax of so per cent. The corpo-
ration could avoid this tax by dis
tributing the $25,000,000 and
then authorizing the issuance of
25,000000 in new stock, limited to
stockholders, which they could
subscribe to and pay for out of
their dividends.
There is another aspect of this
In the last four years the surplus
tax would have brought in to the
government almost nothing, since
few corporations were piling up
SURPRISES. Instead they were pay
ing dividends out of old existing
SURPRISES. These SURPRISES would
not be subject to taxes since they
were already in existence.
But by distributing them, under
the new law. the dividends when
paid to the stockholders would be
subject to taxes This would be
powerful incentive to corporations
not to pay dividends out of exist
ing SURPRISES and thus the meas
ure would defeat one of it's pur-