Evening star., 1937-11-21
BY JOHN c. HENRY.

~ RESSURE for modification of
- the undistributed corporate
profits tax and the capital
4 gains and losses tax is reach
ing point where administration ef-
forts at graceful retreat from pres
ent unpopular provisions may be
turned into rout before the special
session is over.
Building itself on the unstable
sands OF disturbing slackening in
business activity, the drive for chang
Ing the two taxes gathered speed
rapidly during the week or two just
preceding the opening of Congress
last Monday. Finally, as a strate-
gical maneuver probably calculated to
minimize the chances of administra-
ton embarrassment in the contro-
versy, a special Subcommittee of
the House Ways and Means Commit
tee abandoned its secrecy about re-
viewing the tax problem and let it
be known that it would take the
leadership in submitting some pro-
posed cures for the two major COM
plants.
President Roosevelt followed by tell
ing Congress on its opening day that
unjust provisions should be re-
moved"
Thus far, however, administration
leaders on the Hill have attempted
to make the tax revision an order
OF business for the regular session in
January, but strong support within
their own ranks for more immediate
action is now expected to force the
issue to settlement during the next
six weeks.
Concessions to Business.
Curiously enough. both the apparent
willingness to amend the much-crit-
tcized tax provisions and the insist
ence that no revenue be sacrificed in
the process are concessions by the ad-
ministratlon to buSiness-and to the
weakness of business rather than to its
strength.
It was the lag in business, for in
stance, which led some of those close
to administration circles to admit that
notifications of the two tax provi-
eions might be advisable. And it is
partly in difference to the insistence
Of business that the Nations budget
should be balanced that the admin
1stration seems finally determined to
allow no new deviations from this
course.
Thus it is that business, by turning
weak, Is apparently wringing more
consideration out of the New Deal
than it could muster in the previous
years of its reviving health.
Subject of most heated controversy
whenever taxes are discussed is the
present system of taxing the profits of
a corporation that are not distributed
to stockholders during the year in
which they are earned. In espousing
the plan nearly two years ago, admin
istration spokesmen explained that its
substitution for the then prevailing
methods of corporate taxation would:
% Prevent avoidance of surtax by
individuals through the accumulation
of income by corporations. co remove
serious inequities and inequalities be-
tween corporate, partnership and in
dividual forms of business organiza-
ton. and 90 remove the inequity as
between large and small shareholders
resulting from the prevailing fat cor
porate rates.
The rates set up for taxing the
profits retained by corporations ranged
from Z per cers on that part of the
net undistributed net income that is
not in excess of the first 10 per cent
of the net income, up to 27 per cent
on that part in excess of go per cent
of the net income. Under such scale,
of course. most corporations preferred
to distribute their profits to stock
holders. where they were subject to
the individual income tax rates.
Bill of Is Complaints.
Critical from the beginning, the
United States Chamber of Commerce
has prepared a bill of IS complaints
against the operation Of the tax, baseu
upon findings since it went into effect.
Principal among the complaints is that
1t prevents maintenance of adequate
reserves for expansion, prevents main
eCAAnAASC VI dAC4AoVC AVcSA SSo AoA PC
riods of depression, handicaps efforts
at debt retirement, weakens financial
structure through compulsion Of pay
ing excessive dividends, and bears with
undue weight upon the corporations
least able to stand the strain.
Other organizations whose motives
are less open to charges of selfish in
terest likewise have condemned the
program, among them the Twentieth
Century Fund, which has distinguished
itself on several economic studies.
So convincingly, in fact, has the case
been presented by opponents of the
levy that there seems well-founded
opinion that an increasingly militant
Congress would amend the legislation
over presidential opposition, if neces-
sary. In the Senate, for instance, an
unoficial poll of the 20-man Finance
Committee already shows a majority,
including Chairman Harrison, favor
ing amendment, with more than a few
ready to vote for outright repeal. 1t
Is expected, however, that the eventual
action will be the addition Of number
of cushions" in the law, rather than
reneal