Evening star., 1939-05-27
Tax Revision to Aid Business
And Removal Of '|rritonts'
Advocated by Morgenthou
Balanced Budget
Fundamental Aim,
He Tells Hearing
BACKGROUND

BACKGROUND
Tar repiSion, directed at re-
n1oUing deterrentS to business,
tDaS much discussed last tall, lDith
administration leadership indi-
eating it Mould take Initiative in
matter. As months OF inactivity
enSued. group outside Ne1D Deals
inner circle finally brought Suff-
cient pressure to get program
started. While most of reUiSion
is erpected to deal NTH cor
porate leUieS, indipiduol income
tar rates may be changed also.
By the Associated Press.
Secretary of the Treasury Nor
eenthau directed serious congress
sional attention today toward strik-
ing from the tax laws ANY mani
fest inequities or other defects" in
the interest of promoting lasting
business recovery
Naming a balanced budget as
the fundamental objective of sound
financing" the Secretary told the
House Ways and Means COMMITTEES
tax changes must not reduce Fed
eral revenue.
Included among tax features out
lined for REORGANIZATION" at this
session were the controversial profits
tax, the capital stock and the COM
putation of profits and losses Tor
tax purposes.
In a long, prepared statement,
Secretary Morgenthau urged con-
sideration of the present interna-
tional crisis and its "unmistakaple
implication that we should
give serious consideration to our fu-
ture fiscal position and redouble
our efforts to attain full recovery
Nuisance Tax Extension Urged.
We must demonstrate that a
democratic government has the
power and the fieXibility to survive
a prolonged crisis and chaotic world
conditions with the strength of its
free institutions Inimpaired."
Mr.. Morgenthau confined his spe-
ciflc requests to renewing the ad
ministration' recommendation that
the so-called nuisance" internal
revenue taxes which expire next
month be extended. and that in
terest on all Government securities
hereafter issued be made subject to
Federal and State income tax laws
He also recalled that the Treasury
had recently presented alternative
rate plans for old-age insurance con-
tributions in the next three years.
Emphasizing that we should take
no step which the public may IN
terpret as moving away from the
objective of balanced budget" and
saying comprehensive tax revision
was mot feasible at this time" Sec
retary Morgenthau classed for re
examination three groups of tax
features:
l. Those characterized as likely
to hinder business expansion and
investment" He cited for example
the absence of provision in our in
come tax laws for carrying over net
business losses to be deducted from
business profits of future years"
Psychological Irritant"
In the same group he said, the
questions OF taX-eXempt securities
and surtaX rates in the higher
brackets should be considered to-
gether" so the limited number of
persons with big incomes should
not be discouraged from taking
normal business risks"
z. Tax features referred to as tax
irrltants." Mr. Morgenthau termed
the undlstrlbuted profits tax an ex-
ample because while "unimportant"
and having little effect on business. !"
the levy has acquired prominence
as psychological irritant" largely
because of widespread criticism.
The present capital stock tax was
cited as another levy which operates
"erratically"
3. Problems of tax equity which
the Treasury has been studying and
will continue to survey if Congress
desires, for action at future session.
Discussing the objective of a bal
anced budget, the Secretary asserted
there Is, of course, no good reason
why taxes must exactly balance ex-
pendltureS in each specific year anv
more than in each month, each week
or each day."
FourfOld Objective.
At tie outset, Mr.. Morgenthau
declared preservation of America s
democratic form of government over
q long period of years required a
fiscal program with a fourfold OBJ
Jective:
I'D Promotion of free enterprise
and private investment; (2) Attain
ment of fun business recovery: ,3)
Maintenance Of our public finances
In sound and unassailable position,
and "a A just distribution of tax
burdens and more equitable distri-
button of national income"
The world armament race, the
Secretary said had complicated fiscal
problems. He added:
High national income and a
sound fiscal position are essential
to adequate national defense. 1t is
against this background that we
re-examine our fiscal program"
Discussing the undistributed prof.
- tex, the Secretary said the levy
Continued on Page 2, Column a.