Evening star., 1938-03-27
BY JOHN G. HENRY.

Commerce last night called upon Con-
gress not only to make fundamental
| changes in the form of taxation, but
to reduce excessive" tax rates.
The demand was interpreted as
indicating something less than full
| satisfaction with the action of the
Senate Finance Committee last Thurs
day in striking out of the pending
revenue legislation the undistributed
corporate profits tax principle, but
substituting therefor a new high
corporate income tax rate of 18 per
cent.
| In support of their pronouncement
that 1T is equally as important TO
cut obstructive rates as it Is to repeal
the undivided profits tax" the chamber
cited the following Startling" facts
about the Nations tax load:
1T has gone up 80 per cent in the
last two years and is still rising.
In the current fiscal year, the
countrys tax collectors - Federal,
State and local-will dip into the
national purse to the extent of sl3.-
| O0,0O0,000. This years stag
gering tax burden is more than the
| entire Nations bill. = 1t repre-
sents at least one-fifth of the national
income. The mounting tax
burden contributed Importantly
to the current slump.
Six Revenue Laws.
Since 1882 there have been enacted
six general revenue laws, boosting
taxes in three directions-new taxes,
higher rates and lower deductions and
allowances. Punitive taxes To
enforce social and economic changes"
During recent hearings in both
House and Senate on the pending bill,
representatives of the chamber sug-
gested imposition of fiat Is per cent
income tax rate on corporations in
place OF the present graduated scale
against corporate income and the sur
tax against the undistributed portion.
Chamber spokesmen estimated that
the stimulation of the lower rate would
bring sufficiently increased volume to
yield as much revenue as the sug-
gested l8 per cent.
At the same time, representatives
of the chamber asked simplification of
the treatment of capital gains and
losses with such gains taxable at dat
| rate of 1912 per cent. The Finance
Committee went part way on this prop
osition also, devising a simplified
formula for computing the taxable
capital gains, but setting the rate at
is per cent.
Tighten Up Provision.
With prospects considered bright for
acceptance of their notifications IN
the Senate, the committee majority
spent most of 3la-hour session yes
terday on tightening provision of the
present law which would strengthen
| their position in eventual bargaining
with conferees from the House. The
provision is that of Section 102. levying
surtax of 25 or 35 per cent on the
undistributed net income of corpora
tions improperly accommodating sur
pluses. Such improper accumulation"
ordinarily is for the purpose OF pre-
venting imposition Of heavy surtax
rates on individual stockholders.
Effective operation of this section
would discourage tax avoidance through
failure to distribute income principal
objective of the undistributed corpo-
rate profits tax.
Trouble with enforcement has oc-
CURED, however, in the difficulty OF
proving that retention Of income was
for the purpose of avoiding taxes on
stockholders.
If effectiveness OF the section Gould
be assured through any or all Of
several suggestions considered by the
committee yesterday, the committee
majority would be in position to
argue that no further need exists
for the undistributed profits tax.
Chairman Harrison, Democrat, of
Mississippi said yesterday that he ex-
pected way would be found to i'm
prove Section l02, but all those con-
cerned with the task admit its diff
Guilty. 1t will be one Of the issues
discussed again when the committee
resumes executive sessions on Mon
day.
Facing the committee on Monday
also is the problem of modifying the
taxes applicable on dissolution of per-
sonal holding companies and the
question of lowered individual income
exemptions and surtax rates.
1t has been charged by severn
witnesses before the committee thai
the heavy rates which apply during
dissolution of personal holding COM
panies have discouraged such dis
solution and served to keep as much
as $4,000, 900 900 out of reinvestment
For Bargaining Power.
AS for the broader income tax base
and lowered surtaxes, prospects OF
their enactment this year are con.
sldered virtually nil. The strategists
however. are aware of the fact that
their inclusion in the Senate bill
would be a provision which might h
bargained away to advantage in con.
ference with the House. With it.
full membership facing elections thi.
fall. the House undoubtedly woulo
refuse to indorse a broader incom.
tax base and would be willing ts
make other concessions 70 eliminate
such q provision.
Senator La Toilette, Progressive, oi
Wisconsin, is principal sponsor of the
plan to broaden the income tax base
but he said yesterday he had not de.
cided whether to submit his propose
in connection with the pending bill
Ironically, Senate approval of hi
plan would be turned to his disad'
vantage in conference since he Is oni
of the four Finance Committee mem
bers desirous of retaining the undis'
tributed profits tax. He would thu
be in a position of furnishing
weapon which might be used to dis.
suade the House from its support o.
the corporate levy.
In its session yesterday, the Senate
committee decided against increas.
ing deduction allowances for chari.
table purposes, either by corporation.
or individuals.
| Senator Davis Republican O