Evening star., 1938-03-31
REVISED TAX BILL.
READYFORS SENATE.
TO ADD $1,0)O,0)D.
Harrison Says Plan Will
Reach Floor Monday.
House Yield Raised.
MOVE TO BROADEN BASE
is VOTED DOWN, 9 TO 8
Revenue to Be About $23, ,000, 900
More Than Lower Body's
Draft Provided.
By JOHN C, HENRY,

BY JOHN c. HENRY.
The Senate Finance Committee this
afternoon completed its rewriting Of
the House-approved tax modification
bill
AS finally approved. the measure
would yield an estimated $23,000,000
more than the House draft and about
81 100000 more than the present law.
Roughly, the Treasury has asked legis-
lation to provide about $500, 900 900
in revenue.
Chairman Harrison announced the
measure is expected back from the
legislative craftsmen by Monday. at
which time it would receive flnal
stamp OF approval of the committee
and be reported to the Senate.
Completing its consideration in a
four hour session, the committees last
action was to vote down by 9-to-8
count combination proposal Of Sem
ator La Toilette, Progressive, OF Wis
consin to lower individual income tax
exemptions and increase the surtax
rates in the middle income classif-
cation.
Had Passed Surtax.
The combination plan would have
raised an estimated added income Of
S283, 600, 900 and brought millions OF
new taxpayers under the income levy
Just before this narrow vote on the
double-barreled plan, the committee
had given tentative approval to the
proposed increase of surtax rates, but
had refused to support the lowered
exemption plan.
On the first. Chairman Harrison
said, the Wisconsin Senator had sug-
gested starting surtaxes at $4,000 net
income. rather than $4,000, as at pres
ent. and making some increases in the
surtax rates between the first surtax
bracket and the $4,000 net bracket
These changes would have netted an
extra s2l3.000 900, it was estimated.
In the l0-to-7 vote in favor, Chair
man Harrison said he cast his ballot
in approval contingent on subsequent
approval of the lowered exemption
plan.
On presentation of this proposal,
however. the vote was reversed to
defeat it by l0-to-7 count. Esti-
mated to be worth 100000 more,
this would have decreased the exemp-
tions of single persons from 1000 to
$500 and of married couples from
$4,000 to $4,000.
Surtax Rejected
With the lowered exemption scheme
defeated. revote was called on the
higher surtax schedule. and this was
then rejected by to 7. The combi-
nation of the two plans next was
proposed, with the 9-to-8 defeat result
ing.
One of the most important changes
voted by the committee today was
rewriting of part of section 102 which
imposes a penalty tax on corporations
accumulating surpluses for the pur-
pose OF tax avoidance by shareholders.
Inserted in the section was the fol-
lowing provision:
THE fact that the earnings or
profits of corporation are permitted
to accumulate beyond the reasonable
needs of the business shall be deter
minative of the purpose to avoid sur
tax unless the corporation by the clear
preponderance of the evidence shall
prove to the contrary"
In effect, the provision would shift
the burden of proof as to intent in
acc,1roulofipo c,,rplueos fro,~, ~. ->,,
ernment to the corporation. Effective
operation of this section would ac-
complish much of what was desired
through the undistributed corporate
profits tax. The Government thus
far has claimed inability to prove con-
sistently that accumulations of sur
pluses have been for tax avoidance,
but the Senate provision would shift
the burden to require the corpora
uons to prove such accumulations are
not for tax avoidance.
Excise Levies Cut.
Earlier in the session, the COM
mittee reduced present excise taxes
on tires and tubes by about one-third
OF the current rate. The changes,
which would cause an estimated loss
OF revenue of s13.000,0o0, would re-
duce the tax on tires from "a cents
to u cents per pound and would cut
the levy from cents to TX cents per
pound on tubes.
The committee rejected the House
provision relating to security or PROP
erty contributions to charitable and
educational institutions to restore the
present law. The present law allows
deduction by the contributor of the
market value of such contribution at
the time made. The House provision
would have allowed such deduction
only in the amount paid by the con-
tributor in acquiring the properties or
securities thus contributed.
Supported by a combination of
farm and labor groups, broad tariff
amendment to the tax modification
legislation earlier circulated among
members of the Senate with a view to
stirring up fight on its behalf when
the bill reaches the floor.
In its simplest form, the proposal
would call for the imposition Of an
equalization tax on all imports of
competitive and comparable prod
(see TAXES, Page A-3.)
NEW Dill ER TAkEC 0uER