Evening star., 1940-08-05
Upswing in Profits
Indicates Big Tax
Yield for Treasury
Federal Business Levies
Moy Return Richest
Sum Since 1918 and 1919
BY FREDERICK GARDNER,

BY FREDERICK GARDNER,
Associated Press Financial Writer.
NEW YORK, Aug. 5-Corporate
| reports for the first half of 1910
have shown a sharp upswing in
profits, indicating revised Federal
levies on business earnings may
yield the Treasury the richest har-
vest since 1918 and 1919.
-Four hundred leading industrial
concerns for the first six months
reported combined net profit of
$648928,0O0, compared with S409,-
$4,000 in the initial half of 1889,
a gain of So per cent, according to
a tabulation by the National City
Bank of New York.
Among industries reporting the
greatest recovery in earning power
have been steel, metal mining and
machine making. These are feeling
the stimulus of British war pur-
chases in the United States and
the initial stages of the United
States s10,000,0000 1000 defense spend
ing.
Washington plans to divert much
of war industry's expanded profits
into the Treasury to help pay de-
fense costs were pushed ahead last
week, when details of the proposed
"steeply graded" levy on excess
| earnings were submitted to the
House Ways and Means Com
mittee.
Resigned to Short Profit.
What kind of bill would emerge
from the legislative mill remained
to be seen, but financial circles
were resigned to the prospect Con-
gress, with administration backing,
would act to skim off a substantial
part of the profit gains from a war
industry boom.
Midyear reports revealed many
companies were preparing for the
further hike in Federal taxes by
setting aside special reserves against
current earnings to contribute to
revenue harvests starting next
March.
E. I. du Pont de Nemours & Co.,
for instance, set aside out of second
quarter earnings a reserve of S4,000,-
900, presumably for the anticipated
excess profits levy, in addition to
Sc, ,l65,000 for ordinary taxes. Du
Points regular tax charge for the
period was up from s3,125 900 in the
second quarter last year and ST.
900 900 in the like period of 1898.
Seeks Yield of S2,185 ,000, 900.
The Treasury, Washington re-
ported is aiming at yield of about
$2185 100000 from 1910 corporate
profits, including about s7o0,oO0 900
from the yet-to-be-enacted excess
earnings levy.
That compares with an estimated
81 100, 900 900 for 1899 and with ST.
233,000,000 for 1887, the last big
proflt-making year industry has had
since its tax bills were hoisted during
the depression and under the New
Deal.
For 1918. World War tax schedules
and excess profits returns brought
the Treasury more than $2.500 0000, =
600, not counting 1858 900, 900 from
ordinary Federal income taxes.
May Wait Income Expansion.
Congress at this session has lacked
up taxes all around. But many
Wall Streeters assumed the main
bill for defense costs might net be
presented to taxpayers until the
national income expands further
under stimulus of arms spending.
Taking this view, the New York
Stock Exchange firm of Hirsch
Lilienthal & Co. says in a tax study
I'VE think the administration
may go easy on taxes because %
this is necessary to get industrial
cooperation in the defense pro-
gram, and (2) thus far there is no
tendency toward imitation and hence
no need of heavy taxation as a
restraint on imitation"
The argument was that the ad-
ministration planned to use future
tax boosts as check on rising
prices in event the war industry
upswing went far enough to start
an inf1ationary spiral of prices and
costs. BY elevating taxes, it was
pointed out, the Government could
take enough of the national income
| to reduce consumer spending for
everyday goods.
Security Markets Lag.
Wall Street security markets last
week continued to lag behind the
rise in business indices, although
demand for stocks and bonds in
creased somewhat.
Emphasizing the contrast between
Wall Street markets and activity
at industrial centers was a climb
in the steel operating rate above 80
per cent of capacity. United States
Steel, biggest producer in the in
dustry, reported its activity was
above "a per cent of capacity, the
highest since August, 1929.
In brokerage circles the reluctance
| to buy securities on the improve
ment in business and profits was
ascribed in large part to the higher
taxes and expectation of additional
boosts in later stages of the defense