Milford chronicle., 1937-01-22
STATE BAR GROUP.
HITS FRANCHISE.
TAX PROGRAM
Continued from First PageJ
Marvel, Jr.
School Tax Cited

School Tax Cited
Recognizing probability of short
age In school funds by early 1885
and the necessity of keeping up I
sound school system, the committe,
pointed to the possibility of revenu
from a special school tax and declar
ed there appears to be no goo,
reason why the State should lool
solely to outside capital for addi
tional sums of money necessary Il
maintain the schools"
Another study by a bar associa
tion committee, this one to deter
mine alternative plans for raising
the funds. is recommended by tht
committee.
Denying that the proposed plar
would tax Delaware-chartered cor
porations on the basis of ability tC
pay" the committee reported II
would bring a burst of false pros.
perity in the school fund followed
by sad and increasingly severe de-
preston"
Danger OF Removals Seen
This would result, after the first
year or two of the new taxes, the
report says. because the inflow OF
new companies seeking incorpora-
tion under the liberal Delaware laws
would drop. and many already here
would move to more hospitable
states"
Law Offices throughout the coun-
try which send Delaware it's corpor-
alton business, the committee said,
will fear that Delaware, having got
all these corporations in hand. is
now in mood to squeeze them"
I'm six months the States repu-
tation for fair dealing and moderate
taxes. built up in 81 years, will be
irreparably damaged"
The committee also says the plan
may be held unconstitutional as
being discriminatory against certain
corporation, that 1t is unworkable
in practice, that II leaves a loop
hole for corporations to cut taxes
by a simple method, that the pro-
posed tax increases range from 80
pei CCut VII 6OAlC COf POi dliOnc
to 10000 per cent on others.
The franchise taxes are the main
support of Delaware's school fund.
They are levied on a sliding scale
from SIS to $50 on the basis of au-
thcrized capital In brackets UP to
s1,OOO,0OO with s25 for each addi-
tional $1,000.000. mo par" shares
are taxed the same as $10O per
shares. but low par" of those in
between no par and 800 each. can
be Jumped into units of 800 each.
each unit being taxed as $100 per
share. Lately corporations have re-
duced their taxes by changing from
no par or 800 par to low par.
Proposed Formula
To correct this, the State Tax De-
partment proposes to treat all
shares alike, eliminating the lump
ing feature. To avoid too. heavy
taxes on corporations with large !
amounts of authorized low par |
shares. but with small actual assets,
the departments plan provides that
he corporation may elect to pay the
lax under a formula In which the
AK would be paid equal to the COM
Dany's assets, divided by its issued
shares, the quotient multiplied by
is total authorized shares, divided
~ 100000, the result multiplied by
100.
This proposed method is entirely
lovel," the bar committee says In
Is letter, adding that ut Is not bas-
ID on any correct and logical no.
ion of the true nature of fran
tise tax" and "the tax first to be
ssessed against the low par COM
anies under the changed law would
e an unbearabiy heavy burden"
The committee said the proposed
Drmula for reducing taxes on ap- ,
cal is artificial and illogical" and
the taxes. as so adjusted on appeal. ,
ear no relation to the par value of ,
ne authorized or issued stock" nor 4
, "the actual value of the stock" Z
Denies Proper Proportloning {
An abnormal result" of the for
lula, the committee finds, "is that e
lie more the authorized stock Is is e
led. this is to say. the more the :
)rporation makes use of its fran r
Use to, issue stock, the less tax it
ays." n
The committee also denied the as !,
.rtion of the State Tax Depart q
ent that the proposed tax is prop
'ly proportioned to the assets of 4.
e taxed corporation" :
In a series of general considera- =
1ns on the present tax, the COM =
ittee points out that "even the :
esent reduced annual income from =
operations approximates s3,000.- .
o." an income which NOW may be :,
irly capitalized at close to $780, =
O,O00." and that the income is 80 - :,
r cent of the States entire reve- .
Ie and II per cent OF the school y
nd. :,
The present income of $2,700,000. n,
en- after six years of depression.
ceeds the income for 1880 and "the :.
eat increases In 1881 and 1882 re- .,
cted the abnormal conditions of a, a.
3 great boom In the years pre- - -
ling" the report says. adding that :.
creased revenue can be expected =.
tn returning prosperity II conf -
nee In the law is not destroyed. N
Constant Flow Held Vital re
Pointing out the average life of W,
'porations is only three years. the Sc
,ort says a constant inflow of new tic
IS is necessary. to keep up the