Evening star., 1938-02-27
BY w. B. RAGSDALE,
Associated Press Stan Writer,

might conclude that in the long run
even these taxes are paid by the man
who buys goods or services. The cor
porations and stockholders pay these
taxes out of profits which they have
made from their sales or trades with
these consumers. But that is a matter
having to do with sources of income,
not channels of outgo.
Most Of those who know their way
through the tax jungles say that the
corporation income tax cannot we'll be
figured out in advance and divided
among the customers of corporations
IN the form of slightly increased
prices. They say that competition
takes care Of this.
Underselling Question.
All sorts of corporations do business,
some rich. some poor. Some of them
make enough to pay income taxes,
some do not. The corporation that
pays income taxes has to compete with
corporations that do not. Therefore,
say the tax experts. the corporation
paying tax cannot add the tax to its
prices because its competitor, with
profits too small to pay taxes, would
undersell
Nor can the capital gains taxes be
passed along to any one else. They
are a direct tax laid upon the person
whose money went out and worked for
him. The amount Of the tax depends
upon the amount it earned.
These are the two taxes with which
business is chiefly concerned. The
first is q direct tax upon the profits
that business makes. The second is a
tax upon the men and women who
supply the money with which busi-
ness operates. The undistributed
profits tax. against which loud CON-
plants have been heard, is an off,
shoot Of the corporation income tax.
And those hit by the capital gains tax
are making their plant heard, too.
Fourth of Total Revenue.
These roll up one and a fifth bill
lions OF revenue annually, fourth Of
the total, tax paid by business or its
owners and not parceled out among
its customers. The sales, excises and
wide group of miscellaneous taxes
which are wrapped up in the packages
buyers take home with them make up
another third of the revenues. The
other flve-twelfths is brought in by
the individual income and social taxes.
But even most Of the social taxes are
passed along to the customers.
All Of which combines to make it
fairly certain that the man who goes
out to buy anything from a pair of
shoes to a package of razor blades
will come home with somewhere be-
tween one and half a dozen Fed
eral taxes wrapped up with his goods.
facturers have gathered moss in pass
ing through wholesale and retail
channels until the article the con-
sunler buys is pretty we'll coated with
them. Another thick layer has been
added by State and local taxes. And
If it be luxury. subject to separate
taxes OF its own, a good share of what
some one else got.
Between one-half and two-thirds
Of the Federal revenues come from
these unseen taxes which hover over
the shelves of the Nations stores. BY
and large, they represent only small
fraction Of the price of the articles
involved. though there are some ex-
ceptions such as liquor and tobacco
Here they add considerably to the
price. Two dollars Of the price the
consumer pays for each gallon Of
liquor goes for Federal tax Six cents
OF what tho smoker pays for a pack
age Of 20 cigarettes goes for Federal
tax. Almost invariably, the States
add their bit to the taxes on these
Have Affect on Business.
These are not taxes paid by busi-
ness, yet they have an affect on busi-
ness. A tax laid on one product and
not laid on competing product will
drive consumers from the taxed ar
ticle to one which is priced lower be-
cause it is tax free. High taxes on
liquor and alcohol, for instance, COM
pletely barred their use by several in
dustrles during and after the Civil
War. Some OF the industries de-
veloped substitutes for alcohol and
never returned to its use.
Few protests have risen against the
hidden taxes. They are spread wide
". bear lightly on many instead of
neavily upon a few. and are fairly
well buried. Though changes are
being worked out for some of them
IN the revenue bill which the Ways
ana Means Committee is working over
now, the strongest complaints have
been lodged against the profits and
gains taxes.
The undistributed profits tax was
imposed in 1886. 1t is a levy on the
profits Of corporation that are not
given to the stockholders in the wear
u which they are earned. The rates
climb upward from 7 per cent to q
per cent, according to how much of
the income of the corporation Is
withheld.
Equal Income Tax Basis.
Advocates Of the tax argued when
It was enacted that it would tend to
put the stockholders OF corporations
on an equal income tax basis with
those who ran individual business
concerns or partnerships. This in
addition to the revenue it would pro-
duce. A partner pays a tax on his
entire share of the partnerships
earnings. So does the man who runs
a business of his own. But the
stockholder in corporation paid only
on the dividends that came to him
from the earnings of the corporation.
II these earnings were not distributed,
he did not pay
In practice. the law did not pro-
duce nearly as much revenue as had
been estimated. Business men worked
up 10-point indictment of the tax
after 1t had been put into effect and
they had = chance to study its oper-
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