Imperial Valley press., 1939-03-08
THE PROPOSED STATE
FRANCHISE TAX
(LOS Angeles News

Before the state legislature at Sacra-
mento now, and apparently sponsored
by some of the highest officials within
the Olson administration, is one of the
most amazing bills ever offered for ser
ious consideration as a law.
UNLESS citizens turn full publicity ON
the measure Immediately and kill the
legislation aborning. the state will wake
up some morning to find tax officials
holding the power to destroy corporate
enterprise and wreck the entire economic
machine of California.
Assembly bill 1862 appears innocent
enough to casual observers, and has been
passed over generally as seeking only
a minor change in levying corporation
franchise taxes. State officials appear
ing before taxpayers groups have dellb-
erately encouraged that mlSconcepuon
Or else official publication of the pro
posed law contains fatal typographlcal
error.
"Spokesmen for the state government
have explained the measure as proposing
a minimum franchise tax amounting to
either S25 or one-twentieth of l per cent
of the value of a corporations assets
at the beginning of each year. But that
is not the way the bill is written Assem-
blv bill 1862 contains the following:
THE present law for flat minimum
Of S25 for a corporate franchise would
be changed to call for a minimum OF
S25, or an amount equal to one-tWen-
tieth Of the value at the beginning OF
the year of its (the corporation s. assets
located in the state, whichever is greater
There, in words plain enough to offer
no chance of miSinterpretatlon, is pro
vision under which the state would charge
a corporation a sum equal to per cent
of its total worth every year for the
privilege Of engaging in business. That
phrase, if enacted into law, would mean
quick and complete destruction of thou
sands of business concerns. 1t would
mean the only enterprises hoping to sur
vive such confiscatory tactics would be
those able to gain monopolies in their
respective fields, with costs passed along
to the pubic in prices so high that the
masses would be forced down to stand
ard of abject poverty
Under the present competitive system
of business, there is not a single enter
prise that could stand a levy OF per
cent of the value of its total assets in
the state each year before it could even
operate
statistics for 1886, just made public
reveal J1dI 4lO,OOl dCllhe COI f)Ol e,ClOllf
filed income tax returns IN that year
Out of % major classifications of busi-
ness only eight groups showed major
ity operating at a profit.
But most important, the average ne'
income of all enterprises amounted tC
only A per cent on the companies tota
assets.
Nov 1886 was prosperous year
Judged by the standards of the last dec
ade and yet in that year the average ne
income of American corporations was les
than the 5 per cent levy on assets pro
posed by the state of California as tal
to be paid each year before a compan,
can engage in business. 1t is self eviden
that such taxation would drive buslnes
out of existence in short order.
Put it another way: A company will
total assets of 100000 is a small enter
prise, indeed. Rarely can such conceri
show net income of 5 per cent or $500
a year Yet the state franchise tax Woul'
cost $4,000 year, and the corporation
could not earn a dime. Suppose a com
pany with 100000 worth of assets show
ed a loss of $4,000 for the year. The cor
poration would have to pay the stat
$4,000 for the privilege of losing an ider
tical amount Of money"