Evening star., 1938-03-13
Killing of Profits Levy as
One Move to Prosperity
Urged by Senator.
SLIDING SCALE is HIT;
FLAT RATE PROPOSED
Broadening of Base to Bring in
New Taxpayers Mentioned
as Possibility.

DeStgned 0y supporters 10 be q
"pery substantial stimulation to
business" the tar revision bill
passed the House Friday, changing
the entire corporate and capital
gains tar structures, boosting hard
liquor leuy by Is cents gallon,
but omitting previously recon-
mended ne1o surtar on closely held
corporations. Present leuies on nn-
distributed corporate profits and
capital gains Uere modified.
By the Associated Press.
Chairman Harrison Of the Senate
Finance Committee proposed yester-
day that tax relief to encourage new
investments and melt much frozen
credit" go far beyond the administra-
tion-approved provisions of the House
tax bill.
In a statement issued while his
committee arranged to begin study of
the House measure tomorrow, Senator
Harrison declared the undistributed
profits tax should be killed in is en-
tirety.
While the House retained only the
skeleton of the undistributed profits
tax" he said. "the remains will haunt
business, and its complete removal
and return to sufficient fiat COR
poratlon tax is preferable. It Is
simpler and more understandable"
Favors Flat Rate.
The Mississippi Senator declared
also that the capital gains provisions
of the bill which the House approved
Friday should be revamped to substi-
tute fat rate for the present sliding
scale.
Administration leaders were ex-
pected generally to fight abandon
ment of the principle of the undistrib-
uted profits tax, which many business
spokesmen have blamed for the cur
rent economic slump. The House bill
which must be acted on by the Senate
before it can become law, would mod
ify this levy substantially. but retain
its principle for corporations making
net incomes in excess Of S25 1000 q
year.
Senator Harrison also mentioned
the possibility of broadening the tax
base to bring new taxpayers under the
income levy. and of cutting some OF
the surtax rates on higher bracket in
dividual incomes.
Wants Confidence Restored.
IF interpret the sentiment OF the
Senate correctly" he said. 'it desires
to do justice and give announcement
to business in every provision of the
pending tax bill, within Government
revenue requirements. I know that
is the sentiment of the Finance Com
mlttee. So far as I am concerned,
whatever influence I may possess, as
chairman of the committee. I shall
exert toward raising the required rev.
enue, removing some complicated
provisions. and, as far as possible, re-
storing confidence to business.
If you can improve the capital
gains provisions of the House bill by
taking capital gains out of the gen.
~ a. AlSOillC pIONloIOllS dllu apply
fiat rate of about Is per cent on all
capital gains from sales of property
held over one or two years. it will. in
my opinion, encourage new investment
and melt much frozen credit.
The undistributed profits tax, beau
tiful in theory, has not worked Busi-
ness does not like it, and would pre-
fer fiat rate While the House re-
tained only the skeleton of the un-
distributed profits tax, the remains
will haunt business, and its complete
removal and return to a sufficient
fiat corporation tax is preferable It
is simpler and more understandable.
Penalty for Evasion.
Il shall make an effort to strengthen
section l02 of the present law, impos-
ing penalty upon the unreasonable
accumulation of reserves for the pur-
pose of evading taxation.
Il do not know whether it Is pcs
sible to be done, and I can give no
one any encouragement that it will
be done, but if could write the tax
bill at this time would reduce some
Of the high surtax rates. Tax laws
should be written for revenue pur-
poses, and when the surtaxes are as
high as they are now the Treasury
observes diminishing returns and real
ICES less revenue. I have come to the
conclusion that if We are forced to
continue an exceptional spending pol
icy, that the income tax base should
be broader, resulting in an increased
tax consciousness upon the part OF
the people. have a conviction, if
there is a sit-down strike upon the
part of capital because OF fear or the
uncertainties of investment, that we
should break it up, if possible, and
that effective work should be done
toward removing some of the barriers
that are checking the flow of capital