Evening star., 1941-08-03
Correspondence Changes Asked by President in New AK Bill

ury qualification. 1t was against
extending special earned income
relief to family in which both
spouses contributed to the in
come. L would be surprised if
any one would be in favor of
penalizing the family in which
the husband is the sole bread
winner in favor of the family
where the wife also draws
salary. Yet this is exactly what
the Treasury qualification would
have accomplished if we had
permitted it to be incorporated
in our bill.
The mandatory joint return
proposal of the pending bill will
not only remove the inequities
and close some of the most glar-
ing income tax loopholes of ex-
isting law which are especially
pronounced in the community
property States, but It will also
result in the Government secur-
ing additional revenue of more
than 100000, 900, which in our
Judgment could not be raised
from any source with so little
burden or hardship.
Question Thoroughly Discussed.
Referring to the excess profits
tax proposal of your letter, our
committee recognized that there
are differences of opinion as to
the proper base for measuring
excess profits. This question was
thoroughly discussed before the
excess profits tax was enacted
last year by the Committee on
Ways and Means, the Commit
tee on Finance, and the Con-
gress. 1t was again fully dis
cuSsed this year, when the Treas
ury urged the same proposal,
which the Congress had deci-
sively rejected in 1910, and ex-
tensive hearings were again held
on this subject.
Following the hearings, our
committee again refused to adopt
this proposal of the Treasury.
AS result Of your recent confer
ence with Mr.. Cooper and my
self, I again brought the mat
ter before the committee. After
carefully reviewing the subject
in the light of our discussion
with you, which was fully re-
ported by us to our colleagues,
the committee again overwhelm-
ingly rejected the Treasury pro-
posal
While corporations return on
invested capital may seem large
in some instances, and this is
especially true in the case of q
business which has grown from
a humble beginning, it does not
follow that such a corporation
has realized excess profits. The
difficulty Is that experience has
shown that invested capital is not
a proper base for measuring ex-
cess profits in many cases.
Provision Held Undesirable.
Our studies and the over
whelming testimony of witnesses
before our committee have con-
vinced us of the undesirability
and inequity of measuring excess
profits by the sole standard of in
vested capital. The experience
of this method in the last World
War and its abandonment by for
eign countries show that it does
not determine the excessiveness
Of profits even reasonably well.
The major objections to this
form of taxation are set forth on
pages % and "a of our committee
report.
I feel that no one would be
inclined to favor the corporation
which had retained its earnings
over a long period of time, as
against the corporation which
distributed it's earnings and
thereby permitted the Govern
ment to secure the individual
normal and surtaxes on such
earnings. Or to favor the COM
pany which by chance was in
corpcrated in a year of high
values, as compared with a COM
pany organized in a year of low
values. Or to conclude that the
present shareholders of a cor
poration have realized an excess