Evening star., 1938-12-04
Incentive Taxation Chief Point
At Issue in Proft>Sharing Quiz
Surprising Amount of Opposition Comes From
Spokesman of Industry Which Probably
Would Be Main Beneficiary
By John C.. Henry.

Appealing In It's simplicity, vision of
American industry indulging in wide
spread sharing of its profits with its em-
ployes currently is engaging the atten-
ton of special Senate committee and
q staff of technical aides.
Established and functioning under a
special resolution. the committee Is di-
recting itself to compiling an authentic
and comprehensive record of past op-
Grafton Of proflt-sharing plans and in
sounding out opinion on the advisability
OF providing incentive through conces-
sions in Federal taxation.
That both the profit-sharing idea and
the thought Of encouraging its applica-
ton through tax adjustments are of dis
puted value has been clearly apparent
IN the two weeks of public hearings thus
far, but the very source and the nature
OF the opposing arguments lend interest
to the problem and make it deserving
OF further exploration.
Staunchest advocate of profit sharing
and its encouragement through incentive
taxation has been Senator Vandenberg,
Michigan Republican, who is author of
the resolution under which the subcom-
mittee of the Senate Finance Committee
Is proceeding. Apparently in substantial
accord with Mr.. Vandenberg is the sub
committee chairman. Senator Herring
Democrat, of Iowa, and the staff of aides
engaged for the present study.
Favored by Industry.
Spokesmen of industry who have thus
Tar appeared before the committee have
spoken for the most part in approval of
making extra awards to their workers.
either through sharing of profits or of
gross income. Spokesman of labor, cor-
ceding that employees should receive
greater part of the wealth they help to
create, but decidedly wary about the
means and motives involved in the Civ
ing, have taken position more against
than in favor of the idea.
On the matter of incentive taxation"
there has been an even more marked d.
vision of opinion with a surprising
amount of the opposition coming from
spokesmen of industry which presumably
would be beneficiary in any tax abate-
ment plan. Labor has been even more
positive in its opposition to making tax
concessions to industry, however worthy
the purpose.
In appraising the conflicting testimony
on these supplementary issues, it is we'll
to give brief attention to the history of
profit sharing plans.
One of the earliest efforts along this
line was attempted by Albert Gallatin,
Secretary of the Treasury under Presi-
dents Jefferson and Madison, who tried
in 1894 to share the profits of his glass
works with his employees. Other isolated
experiments date back almost to that
time, but the effort usually considered
first OF the modern profit-sharing plans
was that of Edme Leclaire, owner of
Paris house-painting firm
Others Followed Example.
Leclaire believed that employe partic-
patton in profits of the business would
stimulate them to greater efficiency,
more economic use OF materials and i'm
proved quality of work.
Other French employers followed the
example of the Partisan house painter.
but the movement never became par
t1cularly robust. In England the move
nent really got under way in 1865 and
by 1880 there were $40 separate plans
IN operation. Although the number of
plans has dropped off since that date,
the number OF employees covered actually
has increased to about quarter of a
million workers. In 1897 the bonuses
paid these British employees averaged
6!4 per cent of their wage earnings.
Students of the idea in this country
consider the first American plans of
any real significance to be those estab-
nshed in the 1905 by Proctor & Gamble
Co. OF Cincinnati, the N. O. Nelson
Manufacturing Co. of st. Louis, the
Ballard g. Ballard Co. of Louisville and
the Pillsbury Flour Mills of Minneapolis.
In scanning development of American
proflt-sharing plans it is evident that
the term has been loosely and errone-
ously applied to cover Christmas
bonuses insurance programs and various
other devices having no true relation
ship to corporate income profits.
It is largely because of this circum-
stance of perversion of the basic idea
Of sharing profits that suspicion and
opposition have been so widespread.
Opposed to Method.
For instance, William Green, president
OF the A. F. of L., told the committee
recently that labor is not opposed to
principles involved in prof1t-sharing, but
It is opposed to the way in which it
has developed and operated"
Repeating the familiar labor charge
that too many of the plans have been
developed mainly as means of thwart-
ing unionization, the federation chieftain
offered the positive proposal that the
whole question be subjected to collective
bargaining with union representatives
to assist in formulating plans for each
specific industry or corporation. In the
course OF such procedure, he suggested,
corporate fiscal records should be avail
able to labors representatives as well as
to management with sales policies and
the question of salaries and dividends
likewise subject to labors scrutiny.
Such an arrangement would, of course,
envision partnership between labor
and capital far more comprehensive than
ever attempted in any but the most
isolated instances.
Labor also has expressed itself criti-
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