The Waterbury Democrat. [volume] (Waterbury, Conn.) 1917-1946, 1942-02-05
HIGHER EXCESS
PROFITS TAXES
Two Senators Recommend
That in Place of Flat
Profits Limitation
BY GEORGE e. REEDY, JR.
limited pra~~ SfaW Cr~-r~~uov,d ant

ID 0EOhGE 4. hEEDI, in.
UNITED Press StaK Correspondent
washington, Feb. s (UP0 -
Two members of the Senate COM
mittee investigating national de-
Tense recommended today higher ex-
cess profits taxes instead of a fiat
profits limitation to prevent "out
rageous, and uncomfortable" pro-
Ats in the war program.
While the objective of both plans
would be to limit corporations to
reasonable profits, the method of
imposing the taxes differs radically.
Chairman Harry s. Truman, D.,
Mo-, and Senator Ralph O. Brwester,
r., Me-, of the investigating commit
tee said In interviews that to put a
limit on profits from war contracts
would not accomplish the objective.
They contended that only by taxa
ton would all firms receive equal
treatment.
II would be In favor Of finding q
fair method to determine normal
corporations profits and then taking
away 30 per cent Of everything
above that" Brewster said. THAT
way, they could make money and
the government could take away
enough to see that profits are rea-
sonable."
Truman said a fiat profit nmita-
ton Of six per cent Of the cost OF
each contract" as proposed by
Chairman David I. Walsh, D., Mass.
Of the senate naval affairs commit
tee, would permit some firm to
make more meny than they should
and would drive others to the wall.
s Percent Profit Bad
A six per cent profit on a $780,
00O, 900 contract would amount to
5000, 900. But the same percentage
Of small contract would yield lit
tie profit and In some cases might
represent a loss, Truman said.
Brewster cited the testimony of j
E. Barnes, Washington, representa-
tive Of the Todd Shipbuilding Corp
grafton, before the Senate Naval
Affairs Committee yesterday.
Barnes said his organization would
have an estimated 5000, 00O, 900
worth of repair contracts this year
and would be permitted maximum
profit Of 10 per cent, or 10000, 900
The Todd Corporation has invest
ed $40, 100000 in its repair yards,
Brewster said, and consequently the
$40, 000, 900 profit would amount to
so per cent Of its invested capital.
$50 the 10 per cent profit very
quickly becomes so per cent pro-
ft," he said.
Both Barnes and Walsh were
talking about profits in terms of a
percentage Of the amount received
for performing the contract, not In
terms Of annual net earnings by the
company on its capital or its stock.
They also were speaking of limi-
tation on profits before the payment
Of income and excess profits taxes.
Cost-Plus Fixed-Fee
Barnes, who frankly admitted that
his corporation had made "outra-
geous" profits, testified that its work
was done on a cost-plus-f1xed-fee
basis. Under this type of contract,
the government pays labor charges,
rental for equipment, overhead ex-
penses and depreciation.
II believe that profits limitations
will be fruitless unless we base them
upon the investment that a corpo-
ration has in its facilities" Brew
ster said.
Barnes told the committee that his
organization would endorse a pro-
fits limitation of seven-eights of one
per cent on a contract. He caution
ed, however, that smaller firms
would find difficulty existing on this
amount.
The Justice department, mean
while, created war frauds" unit to
study contracts granted by defense
agencies. The new unit will be head
ed by Fowler Hamilton and will be
under the jurisdiction Of the anti
trust and criminal divisions.