Evening star., 1939-03-17

tual case showing what the pay roll
taxes are doing to moderate sized
business. 1t is told in the words of
the treasurer of the concern, who
writes me as follows:
I'VE give you brief statement of
facts. We were founded 35 years
ago. We have grown by returning
profits into the business until today
we have the largest and most mod
ern plant of our type of business in
New York.
1--WE have 200 employees of which
135 are union journeymen CA. F. OF
L., with an average pay of $82 per
week for IS or less hours. Seventy
five per cent of our total cost OF
production is in wages or salaries
subject to unemployment and social
security taxes, thereby placing an
undue burden on us for maintaining
high standards of wages and a large
ratio of wages to material costs.
"On a net sales volume in 1898 Of
$865 .057 this company showed def
cit of $32,780.
This condition was largely due
to unemployment and social security
taxes, which amounted to $25,510.
Total Tax Is S30,977.
''This together with compensation,
capital stock. State franchise and
city occupancy taxes made a total
operating tax of $30977. Is it any
wonder we have ceased thinking OF
expansion or the investment of more
capital in business? We operate a
large plant in a modern building,
paying top rent under long-term
lease entered into long before the
advent of social security taxes. Our
rent amounts to s26,59O per year.
"Our social security and unem-
ployment taxes of S25,510 alone are
four times the cost of our light and
power and IL times the cost of our
water and gas"
The foregoing example relates to
q company which does not pay any
income taxes or corporation profits
taxes of any kind because it is IN
the red, but nevertheless it must pay
social security taxes, not out OF an
nual earnings but out of reserve cap
ital or borrowings, as unhealthy
condition as could possibly be dis
covered.
In the business in question the
labor is highly paid and there is no
problem of treating labor fairly be-
cause three-quarters of the net sales
revenue goes to the workers.
Just how long can businesses of
this kind stand the gaff? Notwith-
standing the talk here about revis-
ing taxes. this particular concern
and all other companies in America
face an increase in pay roll taxes on
January l next. Few people realize
that the pay roll taxes today amount
to per cent Of the pay roll, and
that another l per cent will be add
ed next January, making total of
per cent, and that the present law
calls for gradual increases up to 9
per cent by 1948,
Says Workers Deprived.
These pay roll taxes not only have
not been digested by business since
they began to be imposed in large
amount two years ago. but they de-
prive workers of purchasing power
This impact of social security pay
roll taxes on the economic system
without corresponding increase in
net income or business volume is one
Of the major causes of present busi-
ness recession and the failure Of the
Nation to get started on substan-
tial recovery.
Yet Congress is giving virtually
no attention to the problem of the
effect Of these pay roll taxes. The
emphasis has been entirely on cor
poration income taxes.
Little attention has been given to
the deterrents and lack of incen-
tives for the movement of idle cap
ital. 1t is generally agreed that
small businesses need capital if not
long term credit, though when
large business floats loan in the
bond market, the terms capital"
and long term credit" seems to be
synonymous. The banks usually say
that what the small businessman
should do is to 60 find some one to
invest with him on a capital basis
But the "some one" of yesteryears
has vanished because most men of
wealth prefer not to take risks
when there is so little in it for them.
Uncle Sam, in effect, sends a tax
collector nowadays who says to the
man of means:
II want to be your partner. I'll
put up none of the capital, furnish
none of the ideas and do none of
the work. But I want rs per cent
OF the profits.
"You, of course, will put up all
E EICEKHAA1C Z