Evening star., 1938-03-25
BY JOHN c. HENRY.

BY JOHN c. HENRY.
The Senate Finance Committee to-
DAY rejected House changes in estate
and gift taxes and restored provisions
OF the present law to the pending tax
modification measure.
In effect, the Senate decision re-
tains for the States an average credit
of 25 per cent on death duties paw
able to the Federal Government in
stead OF l6l2 per cent proposed by the
House
Inc action was taken in the wake
OF sweeping criticism by Gov. Herbert
II. Lehman of New York and other
State officials of proposed changes in
Federal death taxes by which further
revenue from this source would be di-
Verted from the State treasures to
the Federal Treasury.
As Chairman Harrison announced
The Finance Committee action todav
ne also released estimates from the
Treasury Department that the COM
mittee decision of yesterday afternoon
on treatment of capital gains and
3S,ZU
IN revenue for the calendar year
1888. The House program for such
gains and losses was calculated to
raise $42 100000 this year while the
Senate program of yesterday Is esti-
mated at S45 400 0O0
To Relieve Insolvent Banks.
The committee also decided TODAY to
accept a proposal of Senator Brown.
democrat. OF Michigan, to relieve in
solvent banks of Federal income taxes
during the period of their insolvency.
II 1t Is found that the institutions are
able to pay 100 cents on each dollar of
oollgations, however, the income levy
could then be applied.
second amending proposal an
proved was offered by Senator Clark,
democrat. of Missouri to permit cor
poratlons to continue liquidation of
subsidiary companies under rules es-
taoilshed in 1885 if such liquidation
hao been started under those rules.
The rules were changed in 1886. Only
ABOUT flve corporations would be af-
iected by today's relief, it was said.
Win regard to the estate tax
changes, the notifications included in
the House bill were calculated to sim
pllty the present complex structure.
Acknowledging this meritorious theory.
chairman Harrison pointed out TODAY
mat the House proposal not only
would affect the revenues which States
1alrly expect from their death taxes,
out would force a number of States
10 change their own laws and would
DC an added item of controversy in
seeking speedy Senate enactment of
the pending bill He admitted that
.ne criticism of Gov. Lehman had
f1ao great influence on the committee.
Computed Under Two Laws.
onoer the present system, Federal
estate taxes are computed under two
different laws, one of 1926 and ono of
1882. Wiz Va
In brief, the 1926 statute allows OK.
emptlon of 100000 and graduates
rates up to 20 per cent. The 1893 law
allows $4,000 exemption and runs the
rates up to 10 per cent.
In practice, the taxpayers must first
compute a tentative tax under the
1882 law He then computes the tax
unoer the 1926 law and subtracts this
from his tentative figure under the
1882 formula. The remainder is the
Federal estate tax payable.
In the computation of the 1926 ta,.
credit is allowed up to 80 per cent of
the tax paid the State but no credit
IS given for State payments in the
1882 schedule. In its operation, such
a structure gives estate taxpayers of
the State OF New York, for example, an
actual credit of about Is per cent.
Under the House bill, the double
computation now in effect would be
abandoned by enactment Of a single
rate schedule and credit of 16l5 per
cent would be allowed on account of
death duties paid the States.
In the gift tax provisions, the House
bill would have cut the exemption from
per donee per year $4,000 to $4,000.
The Senate Committee restored the
exemption to its present $4,000 level.
No roll call votes were taken this
morning.
Rally Strength for Plan.
Encouraged by the ease with which
they rallied an overwhelming major
ity of their committee colleagues yes
terday to support major tax modifica-
tions in a direction calculated to en-
courage business revival, leaders of
the committee we're combining the
task of further revisions in committee
with that of lining up strength to
maintain their position when the bill
reaches the floor
Around the nucleus of II Democrats
and Republicans who approved yes
terday's most significant decision, that
Of eliminating the principle Of taxing
undistributed profits of corporations,
there appeared almost certain support
from about % other Senate members.
With Majority Leader Barkley Of Ken
lucky expected to hold some 40 others
in line in favor of restoring the ad-
ministration's own tax theories, there
remains group Of nearly 20 whose
position is undetermined.
The ultimate decision of a dozen of
this bordering group will decide the