Evening star., 1942-02-13

If the principle is accepted, 1t is
not being fairly applied. Thus many
a small businessman is being put into
a state Of insolvency by the ration
ing or priority or price situation.
To deprive him of his livelihood
and pay him only his salary, for
example, does not relieve him of
his burden, for this does not enable
him to pay debts or prevent fore
closure Of his properties.
There are other situations far
more devasting as to the number
of persons affected, and the respon-
sibility for some of them Is here
In Washington. One of the most
absurd regulations that causes I'M
employment is being promulgated
by the War and Navy Departments,
and 1t is doubtful whether the heads
of those departments in their busy
careers nowadays ever heard much
about it.
SdiCS SUStS RulCu outs
Without sanction Of law and
purely as an arbitrary ruling, the
Army and Navy bureaus here have
issued regulation, which has been
in effect ever since the defense
program was started, that disallows
as q cost item in a defense con-
tract any sales expenses.
This means that company which
accepts Government defense con-
tracts and confines itself entirely
to such work must disconnect itself
completely from its old markets
and dismiss all its statesmen and
sales management. 1t cannot use
these men to contact old customers
and to maintain relations with
them in competition with those
manufacturers who may not be con-
verted 100 per cent to war work.
1t must abolish the sales department
or pay for it out Of net income,
which, under present day terms,
means that the cost item is almost
double what 1t was before.
The Federal Government thus
virtually confiscates the good will
and customer relationships built up
over years and years Of hard work
and for which a company may have
invested a substantial amount OF
capital. But there is no compensa-
ton for this confiscatory action.
Businesses are not asking for 1T
either, but many Of them at least
would like to be able to maintain
their sales departments and pay for
1t out Of gross income before taxes.
If 1t be thought that this might
be abused, then the regulations
could easily be amended to read
that the total deduction for sales
costs should not exceed the average
of the three years preceding Janu-
ary l, 1912. Thus company would
be permitted to deduct for tax pur-
poses the cost of maintaining
sales department as against the
time when competition suddenly
would be resumed. When that time
arrives, the patriotic manufacturer
who previously had gone over 100
per cent to war work faces again
the competitor who has been able
to keep a substantial part Of his
peacetime business by selling prod
ucts that are used by the civilian
consumer as we'll as by the military
and naval forces.
Burden on Taxpayers.
A vast army of statesmen has been
forced into unemployment by the
war To burden the taxpayers gen.
orally with the payment of unem-
ployment compensation to these
men does not, on the one hand,
serve the public interest, nor does
1t give the statesmen the earnings
so many of them would be retaining
II their employers were permitted
to deduct sales expenses as they do
material expenses.
Indirectly, too, more than sales
men are affected. Many Of the large
automobile concerns, for instance,
would like to keep up their booklets
and circulars addressed to car
owners and thus aid in conserving
autos and tires, but the expense
for such a worthwhile effort can
not be deducted from the gross in
come received for war work. It
must be borne out OF taxable net
income, which means that with the
high excess profits tax rates, every
Al 600 hitherto deductihle as exnenSn