Evening star., 1937-09-26
PROOF OF SURTAX
|NEQU|T|ES CITED
C. of c. Furnishes Treasury
With Results of
Survey.

SuI VCJs
As the result of exhaustive survey
made in an effort to assay the op-
Grafton of surtax on undistributed
corporate earnings imposed by the rev.
enue act of 1886, the United States
Chamber Of Commerce has been able
to furnish the Treasury Department
with what chamber officials believe
to be proof that the tax seriously
hampers the expansion of business
and industry. adversely affects en-
ployment and imposes difficulties on
financing"
The detailed report embodying con-
crete examples of the inequities and
hardships imposed by the tax has been
laid before the Treasury for considera-
ton in connection with the general
tax study under way The weight of
the evidence adduced from representa-
tive corporations in all parts of the
country and covering a wide range Of
industry and commerce, officials of
the Chamber of Commerce are GER
tain, must be felt in any scheme of
tax revision to be attempted at the
next session of Congress.
Restricts Business.
In making public the results Of the
survey yesterday George H. Davis.
president of the chamber. declared
that practical experience with the sur
tax has fully demonstrated the validity
OF the objections made by the chamber
when the tax was under congressional
consideration. .
Our study shows" Mr.. Davis stated.
that the surtax in actual operation
is one of the most important factors
now retarding an increase in employ
ment, because it restricts normal bus
iness development at the same time it
produces great unevenness in taxa
ton.
If the tax is to be retained, the
next Congress should give. attention
to alleviating the outstanding hard
ships and inequities which have been
SHOWN to exist. The chamber has al
ready proposed corrective changes and
Will be prepared to present further rec
concentrations for consideration of the
next session of Congress"
The most common complaint against
the surtax tax lodged by the reporting
corporations, the Chamber of Com
merce notes, is that 1t "straneles-
business growth by freezing" the
status quo and discouraging attempts
either Of small and financially weak
corporations or new corporations to 20
ahead.
Cite Effect on Employment.
The reports also frequently en-
phasizes the effect of the tax on en-
ployment which, to a considerable ex-
tent, is the logical consequence of the
curtailment of expansion or inability
to undertake expansion The adverse
effect on employment is manifest in
two ways: First, loss of work for those
who would build or install the physi-
cal improvements, and second, the loss
of employment opportunities by those
who might be engaged as an addi-
tional work force for the enlarged
plant. The reports further imply that
this effect will be particularly severe
whenever business recession occurs.
Complaints most frequently reported
to the Chamber Of Commerce are
summarized in survey as follows:
Corporations with impaired capital:
The surtax works exceptional hard
ships and inequities on corporations
which, because of impaired capital. are
prohibited by State laws from dis
tributing earnings.
Corporations with indebtedness:
Relief provisions of the statute ARE
inadequate and are illiberally inter-
preted, with the result that most
corporations having contracts which.
in fact, restrict dividend payments
cannot qualify for relief; debt retire
ment becomes impossible or can be
accomplished only with great diff
Guilty and excessive cost.
Increases Cost Of Capital.
Difficulty of building up from earn
| ings working capital essential to in
crease business. AS business increases.
working capital must also be in
creased; on earnings retained to build
up necessary working capital, the sur
tax must be paid; this increases the
cost of such capital and may make
Improbable the use of current earn
| ings for such purpose.
| Pi1cinAce 1v~o~~;1,