Evening star., 1941-09-28
BY GOULD LINCOLN.

BY GOULD LINCOLN.
Chairman George of the powerful
Senate Finance Committee declared
that the country and
Congress would not accept Secre-
tary of the Treasury MorgenthauS
that a ceiling" Of per
cent profit on all capital invested in
be written into a new
tax law.
The finance chairman said the
committees of Congress are ready
to impose high rates on true excess
profits" He added that first fair
yardstick must be laid down for
determining such excess profits.
Last year and again this year"
Senator George said, the Treasury
Department advocated an excess
profits tax based solely on invested
capital. The Congress has twice
rejected the proposal 1t will GER
tainly do so again if the country
truly understands its consequences.
To restrict all business profits TO
6 per cent of the invested capital
would result in incalculable hard
ship to legitimate business, disrupt
production vital to national defense,
and confiscate normal profits essen
tial to the survival of free enter
prise. 1t would crush and kill small
business.
Says Fair Return Varies.
Certainly Secretary Morgenthau
does not mean that invested capital.
the dollar, is the only source of busi-
ness profits. On the contrary, char
acter, skill and courage constitute
the base of the free enterprise sys-
tenn and are truly more important
factors. Business risks vary from en-
terprise to enterprise, from the
small farmer up. from year to year.
A fair return on capital measured by
the risk involved is a fair test of
normal profits for certain types of
business. Average earnings of the
pre-war period certainly constitute
a fair test of normal profits for
others. Special consideration must
be given to exceptional cases in all
excess profits tax.
The committees of Congress
stand ready to impose high rates on
true excess profits. First. lay down
a fair yardstick for measuring nor
NAL profits and then recapture all
excess profits if necessary during the
present emergency.
1T would be wise to let the ink
dry on the tax bill recently signed
by the President before upsetting
every one with objectives which the
country cannot and will not accept"
Battle Royal Forecast.
Senator Georges statement was
accepted as a clear indication that,
should the administration intend to
back up the Secretary of the Treas
ury's proposal for 100 per cent taxa
ton of all profits over and above s
per cent on invested capital there
would be battle royal on Capitol
Hill.
No one at the Capitol appeared
to know whether Mr.. Morgenthau's
proposal was his own brain child or
had been discussed with the Presi-
dent in advance of its submission by
the Treasury Secretary. Mr.. Nor
genthau offered the plan during his
testimony last Wednesday on the
administrations price control bill
before the House Banking Commit
tee. He departed from his prepared
statement to interject the profit CELL
ing proposal. Until the President
himself clears up the matter, it is
unlikely that the attitude of the ad-
ministration will be known.
In some quarters it was suggested
that corollary to the Morgenthau
profit ceiling of per cent would be
a guarantee that every corporation
should earn each year at least 6
per cent. Many corporations, it was
pointed out, make no profit some
years-and even lose-and make
more than per cent profit in other
years to offset the lean years.
Plea for Delay.
Senator Georges recommendation
that the country and business be
allowed time in which to digest the
new three billion and half increased
tax burden under the law recently
enacted was a definite plea that the
administration abandon talk of new
and further taxes at this time. That
the administration, however, was al
ready considering another tax law
was asserted by Representative
Treadway of Massachusetts,, ranking
Republican member of the House
Ways and Means Committee, during
House debate on the recently enacted
law.
The new law imposes tax rang
ing from IS to so per cent on that
portion of a corporations earnings
found to be "excess profits" Profits
become excess profits" if they ex-
ceed 95 per cent of the corporations
average earnings during a base
period, 1886 to 1899, or if they ex-
ceed 8 per cent of the corporations
invested capital up to s5,000,0O0 of
such capital and 7 per cent of the
excess over S5,000,000 The corpora
tion may choose between these two
methods of arriving at the tax.