Evening star. [volume] (Washington, D.C.) 1854-1972, 1940-08-27
Tax and Amortization
Are Included in Bill
Reported 70 House
Excess Profits Levy Will
Range for 20 to so Pct.
Under Provisions
~ the Associated Press.

A combination excess profits tax
and amortization bill-long urged
as essential for accelerating defense
preparations-waS reported to the
House today with the unanimous
approval of its Ways and Means
Committee.
After protracted deadlock over
some of the measures provisions
the committee reached agreement
late yesterday and leaders were
hopeful that the House would pass
The proposed bill contains these
main provisions:
/. 1t would impose on corporations
an excess profits tax of from 20 to
80 per cent, with the object of pre-
venting war millionaires."
2. 1t would permit defense indus
tries to deduct from taxable income
and profits over a flve-year period
the full cost of expansion necessary
to handle defense orders.
8. 1t would suspend the present
7 and 8 per cent limitation imposed
on the profits a manufacturer can
make on Government orders for air
craft and warships.
Expect 3O0,0O0,O0O Yield.
Unofficial estimates placed the
1910 yield from the excess profits
levy at about $30O,OO0,0OO, as COM
pared with the $190,0O0,000 that
would have been realized under the
original tax schedules proposed be-
fore the bill was revised.
President Roosevelt has been
urging excess profits legislation as
necessary and quick congressional
approval was asked by Defense
Commissioner William S. KnudSen.
Mr.. Knudsen declared that letting
of defense contracts had been re-
tarded because manufacturers first
wanted tax credits for their plant
expansions and they also desired to
know how much excess profits tax
they would have to pay.
Debate on the measure is sched-
uled to start Thursday, with passage
expected by Friday night.
The final draft incorporated many
concessions to both Democratic and
Republican committee members who
had complained that the original
tax schedule recommended by a
subcommittee would fall hardest on
those least able to pay.
Committee Revamps Bill.
The full committee, therefore, re-
vamped the bill to increase the tax
on high earning corporations and to
lower 1t for low earning companies.
Two methods of excess tax COM
putation were provided.
Under the average earnings"
method, a corporations profits
would be 'excess" and taxable if
they exceeded the average of its
earnings for the four years, 1886 to
1889, inclusive.
Under the Invested capital"
method, a firm would be allowed
from minimum credit of 7 per
cent to a maximum of 10 per cent
on its invested capital during the,
6-1939 base years, depending on
the percentage of earnings of the
company on its invested capital
QuIlIlg uIlOSe years.
Because high earning corporations
were expected to elect the average
earnings" method of computing their
tax, the range of rates for that
method were fixed at from Is to sc
per cent.
A 20 to As per cent range was
provided for corporations using the
invested capital" method, which
was designed for the less prosperous
concerns
Income Tax Rate Boosted.
In addition to this excess profits
tax differential, the committee voted
to increase the normal income tax
rate for corporations. using the
average earnings method from the
present 209 per cent to Is per cent.
In another move to shift the tax
burden away from corporations
earning less than 10 per cent on
their invested capital, the formula
was modified to increase their I'M
taxed credits.
These alterations followed nearly
a week of controversy among COM
mlttee members over alleged IN
equities in the subcommittee plan.
AS recommended by the subcom-
mittee, however, all corporations
would be allowed a fiat $4,000 ex-
emption, provision expected to
remove from the bills range some
400, 0O0-odd little concerns.
How Scale Works.
The 7 to 10 per cent sliding scale
of credit under the invested capital
method of tax computation would
work as follows:
A credit amounting to 10 per cent
of a corporations invested capital
would be allowed if the corporation
earned 10 per cent or more on its
investment during the 1869 base
period.
A concern which earned per cent