Evening star. [volume] (Washington, D.C.) 1854-1972, 1940-09-02
BY OLIVER MCKEE.

Ourlng Cne WOTlQ war peTlOQ
excess profits taxes were a big reve-
nue. producer. In 1918 alone they
Melted the Treasury more than So
000,000,000. In enacting these levies
Congress was chiefly interested in
securing more revenue for the Gov
eminent, and was little concerned
with preventing abnormally high
profits, or the creation of war mil
Ionaires.
! In 1913 American corporations
showed profits of between s3,OO0,-
100000 and $4,o0O,00OOOO. In 1916
corporate earnings amounted. to
nearly $4,000 900 900. Following the
outbreak of the European war in
1914. American industry received
large orders from the belligerents
for munitions and other supplies.
The sharp increase in corporate
profits reflected the boom caused by
the war.
Congress passed an excess profits
Tax soon after the United States
entered the war in 1917. This law
used the invested capital yardstick
IN computing the profits of indus
try. Corporations were allowed a
return of from Z to 9 per cent on
their pre-war invested capital
Profits above this were taxed at
rates ranging from 20 to go per
cent, depending on the amount of
the earnings
In 1918 Congress passed a new
profits law, with levies ranging from
80 to IS per cent on taxable income.
The 1917 tax applied to the income
OF individuals and partnerships, as
well as that of corporations. When
the rates on personal income were
stepped up, these incomes were
freed from the profits tax.
Discrimination Cited.
Effective with the end of the tax
year 1921, the wartime excess profits
levies were repealed. Said David
F. Houston in his annual report as
Secretary Of the Treasury for the
year 1920: 1.-THE reasons for the
repeal of the excess profits tax
should be convincing even to those
who, on grounds of theory, or gen.
eral political philosophy, are in favor
OF taxes of this nature. The tax
does not attain in practice the the
oretical aim at which it aims. 1t
discriminates against conservat;vely
financed corporations, and in favor
OF those whose capitalization is exag-
gerated, indeed many overcapitalzed
corporations escape with unduly
small contributions. It is exceed
ingly complex in its applications.
and difficult of administration, de-
spite the fact that it is limited to
but one class of business concerns
corporations.
Though contributing billions OF
dollars in revenue, the World War
profits taxes caused a vast amount
OF litigation between the Govern
ment and taxpaying corporations.
The many lawsuits arising from this
legislation, long after its repeal.
nave been cited as an argument
against the enactment of a new
excess profits law at this time.
Economic conditions in 1917 and
1918 were much different from those
which prevail today. The general
level of profits is lower now than
1t was Is years ago. Last year,
corporate earnings were estimated
at about s9,000,000,0O0, approx
mately the same as in 1916. Ma
tlonal income is higher and the
burden of taxation, both on cor
porations and individuals, is much
heavier. As a revenue producer, the
proposed legislation will yield far
less than the World War levies.
In 1916, according to Treasury De-
partment figures, 341,253 corpora
tons filed income tax returns. OF
these, 206 1892 reported a net income.
In 1887 corporation returns totaled
529, 097. Of these, only 192,O28 re-
ported a net income. CORPORATIONS
with no net income in 1887 reported
an aggregate deficit of So ,280. 900 900.
Anti-Profits Drive Recalled.
twenty-five years ago corporate
stock ownership was less widely diff
fused than it is today. In 1888 it is
estimated that 80 per cent of all
corporate dividends went to persons
reporting net incomes of less than
$4,000 year.
Soon after the return of the
American Expeditionary Forces from
France. adjusted compensation or
bonus bills were introduced in Con-
gress. These bills reflected a grow
Ing demand on the part of the World
War veterans and their friends that
the men who served with the colors
were entitled to an adjustment in
their pay to bring it more nearly on
an equality with that received by
civilians who stayed at home and
worked in munitions and other fac
tories. Along with the demand for
the bonus came the drive for legis-
1ation to take the profits out of any
future war in which the United
States might become involved. The
American Legion has been the
spearhead of this drive.
Congressional committees, at va
AAoco CAiiCo, nave wi lieu UllclT dlUeIl.
ton to the profits made on World
War contracts with the Govern
ment. These investigations, and the
resulting disclosures of the profits
made by certain manufacturers dur
ing the World War period, strength
ened the demand for legislation to
prevent war profiteering if the
United States were again to face q
great national emergency.
AS the administration and Con-
gress launched the defense pro-
gram, involving the expenditure OF
many billions of dollars for NUM-
tions, warships, airplanes, tanks and
other equipment needed by our ex-
panding Army and Navy, consid-
Grafton was early given to the need
for an excess profits tax. Though
conceeding the need for additional
revenue, Congress has placed less
emphasis on revenue than it did
when enacting excess profits 1egisla-
ton in 1917 and 1918. Its main
concern this time is IN prevey,t ev-