The Coolidge examiner., 1939-06-22
THE BUSINESS STRANGLER

John Smith is a capitalist At least he regarded
himself number of years ago, when it not only
customary but profitable these possessing surplus funds
seek ways in which their money could be put to work
large part of Smiths is already at work
enough to return him an income of $75,OOO a year
before payment of his income taxes But he also holds
600 cash in the bank, from which he is receiving
nothing which he would like to put to work in
enterprise which promises a reasonable return.
Smith is approached by associate who has develop
ed product for which demonstrated demand Surveys
Of sales potentaIes have been made, engineers have
figured manufacturing COSTS prices that
would be willing t. have been determined Briefly
investment of 100000 there should result $4,000
annual profit Thus figures Smith, he would realize
curn his investment of little than l3 per cent
Hardly exravagant return in view of all of the usual
business risks which be assumed but better than
be obtained from Oonds good grade stocks mortgages
Only one important item remains to be determined
taxes Investigation shows this to be the tax picture First
being located in New York State the firm would have
State franchise amounting to six cent of its profits
$4,000 The annual payroll has been estimated $780,
900 and this there be paid the three per I'm
employment Insurance tax and the percent Social
Security total of $4,000 Then there the Federal
capital stock tax the firms $3O0OOO capitalization
another $500 SO far to &c. 700-leavng $685.
800 but providing only another base which additional
taxes levied The so-called excess profit tax takes
S19S and the Federal income tax (19 per cent? takes
S6,289 Thus Smith would have left S26,813 from which
70 pay himself dividend Well $25 900 dvident is all
that would suppOrt-athOugh the company could then
claim S625 dividend credit (22 per cent of $25000)
making its net inc S27, ,437.
Now then NJ Smith is already paying income taxes
his $4,000 present income: S18,779 to the Federal
Government and $3.50 to the State of New York total
of S24 329, which leaves him of $50671 Assuming
that he did finance the enterprise in mind that he
would be fortunate enough be able declare S25 900
divident each year, he of would Immediately be
boosted t. the income bracket Then the Federal
tax would take S3 469 the State tax $780, and remain
ing would be S5987 In other words from investment
of 100000 he would realize net addition to his income
Of S930a return of 81 per plus the risks of losing
all of his $500 600 commitment if things should
out according to expectations And those risks have grown
by leaps and bounds under an Administration that is
in particular.
The result Smith decides to keep his money in the
bank Cor perhaps he puts into almost riskless bonds
the 100000 annual payroll is not created and employ
ment is net increased; the material that the firm
would remains unpurchased, and all down the line
potential sJpplers and workers are the sufferers
The Smith may be hypothetical, but it is being
duplicated every day in greater less degree and is
eloquent explanation of capitals reluctance the
ordinary channels Of employment Obviously in the final
analysis the capitalist not seriously affected by
redistribution of wealth. tax laws is the humble work
And it will remain this way until reasonable degree
of intelligence replaces misguided social PHILOSOPHERS as
important element in the country's tax polices-The
Financial World
no WE WANT DEMOCRA