Evening star., 1941-06-20
Proposed Surtaxes
Would Cover Group
Normal Levy Misses
10 Pct. Earned Income
Credit Won't Be Allowed
Under House Plan
BY tire Associated Press.


Uncounted thousands Of persons
who won't have to pay the normal
Federal tax on their l941 incomes
will have to dig down anyhow, in
formed legislators said today. and
pay surtaxes under the new revenue
program just tentatively approved
BY the House Ways and Means
Committee.
This paradoxica1 situation results
from the fact that the 10 per cent
earned income credit allowed in the
computation of normal income taxes
cannot. under the committees plan,
be deducted in figuring surtaxes.
Thus. married couple with two
dependents and $1,000 Of net in
come would not pay any normal in
come tax, but would be subject TO
a surtax Of S11.
Committee officials said no esti-
mate had been made of the num-
Der of such new taxpayers, but as
serted the total would be substan-
tial.
Would Double 1910 Payments.
The committee gave tentative ap-
proval yesterday to the major pro-
visions of the new tax bill. The two
big points were the imposition of
graduated system of individual in
come surtaxes which would more
than double the 1910 payments of
all individuals, and drastically in
creased corporations excess profits
levy.
The individual surtaxes were
counted on to produce pproximately
s1,055, ,700,0 of the $500 000, 900 in
new revenue sought under the tenta-
tive program.
The Surtaxes would start at per
cent on the first dollar of taxable in
come-that is, after all deductions
and personal exemptions except the
earned income credit-and rise
gradually to the present maximum of
rs per cent on incomes of s5,000.000
and over. The present defense
supertax of 10 per cent was left un-
changed and would apply to both
normal and surtaxes.
StiffeSt in History.
This tax schedule, representing
the stif1est imposts on personal in
come in the Nations history, was
considerably less drastic, however,
than that originally proposed by the
Treasury which would have started
at IL per cent.
The committee recommended that
corporations be required to con-
tribute an additional 1855 200 900 in
Federal revenue through higher ex-
cess profits taxes and by a revision
of the method of computing such
profits.
The excess profits tax rates which
now range from 25 per cent to SO
per cent would be boosted to 35 per
cent and so per cent and in figuring
such profits, business firms would
not be allowed to reduce their reg
ular income taxes and surtaXes, as
heretofore. However, in estimating
their regular taxes, the firms would
be permitted to take credit for their
excess profits taxes.
New corporation surtaxes of
per cent would be imposed on surtax
net incomes of $25 900 or less and of
per cent on any amount in excess
Of that figure.
Invested Capital Credit.
Corporations would be allowed an
invested capital credit of 8 per cent
on the first $1,000 900 of capital and
Of 7 per cent on anything higher.
At present they are allowed a
straight per cent credit. In other
words. they do not have to pay ex-
cess profits taxes on profits up to 8
per cent of their invested capital.
A so-called "anti-war-millionaire"
tax of 10 per cent on the excess
profits of certain corporations also
won the committees tentative ap-
proval. Members said this levy was
designed to reach the profits of GER
tain firms which had been benefit
ting under the defense program but
which still would escape excess
profits taxes under the balance of
the program.
Informed sources said it would
hit chiefly steel companies and air.
craft manufacturers.
The committee still has to decide
on how much to increase Inherit
ance and gift taxes and a wide
variety of excise levieS to produce
the balance Of the desired total of
So 500 900 900 or approximately ST.
019, 100000. These decisions. how
ever, were deferred at least until
next week.