Evening star., 1938-03-02
DEMOCRATS BACK.
ROOSEVELT TAXES
House Committee Majority
Sees Program Stimu|ant
to Business.
By the Associated Press.

House Ways and Means Committee
Democrats said today the administra-
tion's new tax revision bill, by provid
ing q well-balanced tax system. should
bring about "a very substantial stim-
ulation to business"
Backing up proposals to modify un-
distributed profits tax, the Democrats
said some of the complaints made
against it were justified, but that
hardships in many cases seem to have
been exaggerated"
"On the basis of the facts" they
said in formal report to the House,
your committee believes that the
principle of the undistributed profits
tax is sound and should be retained"
The Democrats said they believed
q proposed new surtaX on closely held
corporations will not create any seri-
Gus hardship, and, on the other hand
will protect the revenue"
They expressed hope that modifica-
ton of the capital gains levy would
benefit persons interested in making
long-term investments and will per-
NIT transactions to be made which
are now prevented by the existing tax
system"
Republicans Opposed.
Striking at these three types of taxes
IN separate report last night, the
seven committee Republicans con-
tended that in the penalty" tax on
lafge-lncome corporations owned by
families or by from two to 10 individ-
uals, the administration had forged
political weapon" to purge" the
business structure of some of its does.
They said the measure was vicious"
and ubiquitous" because of the re-
tention of the principle of levies that
have contributed to the Franklin D.
Roosevelt depression"
Joining in the assault on the tax
on closely held companies. two COM
mlttee Democrats, Mr.. Mccormack of
Massachusetts and Mr.. Lamneck of
Ohio, said it violates all sound prin.
ciples of taxation" and its effects
are unfair and discriminatory.
The Democrats summarized the
purposes of the bill in these words:
10 improve our existing revenue
system, to remove ineouities, to
eQualize the tax burden and to stimu-
late business activities, and to ac-
complish' this without reducing the
revenue which would be obtained by
existing law under present conditions"
Consider Levy Necessary.
Asserting that not more than 800 to
600 corporations would be subject to
the tax on closely held corporations.
the Democrats in the majority report
said they considered the levy necessary
since 1t is clear that this class of
corporations, in many cases, has ac-
cumulated unreasonable surpluses
with consequent loss of tax to the
Government from the shareholders"
On the basis of the average return
Of capital employed in business. the
report said, no corporation will be
subject to the tax unless the capital
used is in excess of $1,OCO,000.
Furthermore" it added, no cor
poration will be subject to the pro-
visions of this title unless the percent
age of its earnings which is paid out
In dividends is very considerably less
than the average of dividends paid
out by all corporations in the United
States
The report expressed an opinion that
high taxes on capital gains prevent
transactions and result in loss of
revenue.
"On the other hand" it went on,
"the committee is also of the opinion
that there is no justifca ton for
lower tax on speculator on the stock
market than on an individual receiv-
ing like income from salary or
business"
For the most part, the 70-page re-
port was an explanation of the bill and
the changes which it would make in
existing tax law.
Speaking of excise levies, which orig
1nally were imposed as temporary
taxes, the Democrats said some of
them were undesirable and should be
removed when possible.
Unfortunately," the report con-
tinued, the revenue requirements of
the Government are such that very
little revenue can be spared at this
time"
Republicans Make Report.
The Republicans submitted their re-
port to the House after the Ways and
Means Committee formally approved
the legislation by a party vote of
II to 7.
The Republicans said they had no
reason to doubt that purpose of
the proposed tax on closely-held cor
porations was to provide the admin
istratlon with means of retaliation
against certain corporations-contr
by few individuals who differ
politically with the administration
and who have resisted certain New
Deal policies with which they do
not agree"
The capital gains tax, the Repub-
ncans asserted, should be so limited
rs to increase revenues instead of
preventing capital transactions and
the investment of new funds in pro-
ductive enterprise"
I'VE are of the firm conviction"
they said, that the greatest need of
the hour, and the only thing which
wan WILL Jul IOOUSltpS toward Jne
road to recovery, is continuous, un-
Wavering encouragement to business.
The most important and far-reach-
Ing way in which such encourage
ment can be given is by relieving
business OF the restrictions and i'm
pedlments which this administration
has placed in its way, foremost among
which is the present policy of repres-
sive taxation"
The report declared the mere fact
that the modified undistributed profits
tax in the bill may be less burden
some IN some instances than the pres
ent law "does not beguile us into ap-
proval Of the unsound principle which
1t embodies."
The admonition to choose the lesser
Of two evils, it said, applies only when