Evening star., 1942-03-24

however, tnere must, OF course, be
some taxation, and a tax on cor
porate profits is the easiest way to
do 1t. The only way to recapture
excess profits resulting from the war
is in the business, before they get to
the stockholder. and I have stated
why I think this tax ought to be 80
per cent. Furthermore, as a prac-
tical matter. corporations do not
distribute all of their earnings. A
certain amount, from 20 per cent to
80 per cent Of income after taxes In
recent years, is retained in the busi-
ness to help build up the business,
and while 1t may improve the stock
holders values, he does not pay in
come tax on it. The tax on normal
profits this year has been 81 per
cent, and even that seems unreason-
able on any equitable basis on top
of high taxes on dividends. The
Treasury, however, now proposes to
increase 1t for corporations Of any
considerable size to IS per cent,
leaving them only IS per cent OF the
profits which they earned in normal
times, besides taking IS per cent OF
the excess profits.
AS I see it, the result will be that
corporations must cut In hall the
normal dividends which they paid IN
pre-war years. This would clearly be
double taxation and a gross dis
crimination against people who re-
ceive dividends from common stocks.
particularly the common stocks OF
conservatively- operated companies.
Compare a man who has retired, or
his widow, who has an income OF
500 a month from dividends, with
another man who has an income OF
500 a month from wages, or salary,
or interest on bonds. The man with
dividends would have his income cut
in half to $50 a month. The man
with 500 month from other
sources would pay only $6 month
tax If unmarried, nothing II married.
One trouble is that the word
profits" is misunderstood. Ine
profits Of a corporation, to the ex-
tent that they are merely normal
peacetime profits. are simply re-
turn on past savings OF people VINO
have invested their money in stocks.
OF course, excess profits are very
different thing. but there seems no
reason why one who has saved his
money all his life and invested in
stocks should be treated any more
drastically with regard to his normal
income than any other man who
has saved. The size Of the corpora
ton has nothing to do with II,
for many poor people have invested
in stocks Of large corporations, and
many older people and widows are
living on the dividends received from
these stocks. The Treasury seems
to be inspired with a hatred OF any
return on any money invested in
q corporation, but its proposal Is so
clearly double taxation that 1t de-
parts entirely from the general
principle of taxing people In propor-
ton to their ability to pay. 1t Is
grossly inequitable, not necessarily
to the corporation, which Is only an
imaginary person anyway, but to
its thousands OF stockholders. many
with limited means. whose income
comes from dividends.
To correct this situation, believe
that the excess profits tax should
be increased from IS per cent to 80
per cent, and that there should be
little If any increase in the tax on
normal corporation profits. The
total increase for corporations would
probably be about the same.
Program Raises Too Little.
The Morgenthau program pro-
poses increased taxes Of $500 .0o0,-
900. Icriticize it with some hesita-
ton at the present time because we
have not completed our hearings.
but 1t does not seem to me to be
the all-out program which Is nee
essary to meet the present situation.
We know now about what we can
spend in wartime. We ought to
provide the money by taxation to
meet at least half of that expense.
NV first criticism, therefore, Is that
the Morgenthau program does not
raise enough money. The reason is
fairly obvious. 1t proposes total
increase Of $1,000 100000. OF this
about $500, 900 900 comes from in
dividual income taxes, corporation
taxes and estate taxes. These in
creases fall entirely on incomes over
81 500 q year. and almost entirely on
incomes over 5000 a year. These
incomes already provide most Of
the taxes. Out of . total estimated
income Of $s2 2,00o, ,0o0, 900 in 1s4l.
these taxes would come entirely
from $2s 600 ,o0o, 900 Of income. and
would not touch the other $65, ,0O0,-
100000 of income. For the most
part they would come from one
nth Of the income Of the country,
and leave the other four-fifths al
most untouched.
The Morgenthau program includes
81 $40, 900 900 in excise taxes. almost
entirely on drinks, cigarettes and
gasoline. While I approve Of the
principle of these taxes. there Is a
serious question whether these
articles are not already so heavily
taxed that we will fail to realize
any increase in income by increas-
ing the rates. I believe the Secre-
tary's estimate of return from all