The Waterbury Democrat., 1937-10-28

greSs. The air is filled with or, will not be proposed.
 Actually no one, except few Treasury executives and the Presi- dent, knows what is ir the works. The secret tax deliberations are as closely guarded as the govern mentis $5,000, ,000, 900 gold hoard at Fort Knox, Ky.
 Chief interest centers on what changes, if any, will be suggest cd in the capital gains and un- divided profits taxes.
 Both have been under heavy fire from business and financial interests since their enactment. There is also strong inner admin istration sentiment for their re- peal or modification. Joseph Kennedy, able, outspoken, chair man of the U. s. Maritime Com mission, has repeatedly advocated such action. In a recent speech REC Chairman Jeses Jones voiced similar views.
 One thing Is certain:s If Roosevelt recommends changes in the two taxes, Congress will approve them with 3 whoOp. ''Why Pay Taxes i:
 While White House policy on the issue is a state secret, defin- 1te information Is available on the line of reasoning the Presi- dent and. his advisers are follow ing. It can be found on pages S7 to. 89, and 108 to III of A pocket-sized book just published by David Cushman Coyle entitled, Why Pay Taxes,
 The volume is 8 most pentrat- ing and readable. study of federal taxes. Furthermore, it is genuine inside stuff. Scholarly and self-effacing, Coyle even in Washington is little known outside of small circle. Off, ficially he Is an economist on the staff of the National Resources Board. Actually, he is the New Deals most brilliant and articu- late economic theorist. His views are listened to with the greatest respect by Roosevelt and other Administration chiefs.
 This is What Coyle says in his book about the capital gains tax:
 The arguments for abolishing the capital gains tax are not as compelling as you might sup- pose from reading the financial columns. There is, however, one reasonable argument against crediting capital losses. ., Losses of earning power, caused by unemployment, may save one from paying any tax in 8 cer- tain, year, but the damage to professional or business stand ing may be serious, without ap- bearing as a credit against other income.
 It seems reasonable to argue, therefore, that so long as we have no way to cusJion the blow for those who lose in other ways, there is no justice in say ing those who speculate unsuc- cessfully in stocks or real es- tate.
 Old Financial Games
 As to the undivided prof1ts tax, Coyle says:
 The tax restricts some of the old high financial games, and will of course be heavily at- tackled. There is no reason for giving any ground on the main issues, but the tax should be amended in several details.
 1. A commission, including experts in accounting, should work out 6 system of accounts for tax purposes that would show real profit and loss in a proper relation to interest and dividends, and that would dis- tinguish working capital items from fixed capital. Corporate coamplexity should be penahzed.
 2. Losses and gains should be spread over e period of years.
 3. Upkeep should be distin- guished iron. expansion, and the tax should rest only on profits used for expansion.
 1. Bond retirements or sink ing funds should represent as nearly as possible actual depre- citation or obSolescence.
 s. Dividends to avoid the tax should be allowed during a req sonable period after the close of the fiscal year, to allow time for 1iinal accounting.
 G.. Dividends in stock or other paper of the company should be taxed as not having been actual ly distributed. .. 2. Net. earnings up to, say 415,OO0 should be exempt from the u1distributed profits tax.
 6. A reasonable cash surplus should be exempted, if deposit Cd with some authority in cash nEH TfSR UErnDn E