Evening star., 1942-04-23


he intends 20 apply the principle at
home, as wen as on the battlefield.
The first organizatio since Pearl
Harbor to come out for the princi-
pie OF survival profits was the
National Association OF Manufac-
turers, but the question Of what
formula should be used to deter
mine survival" has never been sat-
isfactorily outlined either by the
Government or by private organ
kations.
Any horizontal yardstick that cuts
across all business without regard
to the variety of conditions that
exist will tend TO create confusion
and disruption and may have such
q devastating effect on the national
economy as to retard the war effort.
Example of inequality.
Thus one company with a large
capitalization If permitted TO earn
8 per cent on that capital while SO
per cent of the remainder is taken
In taxes by the Government. as
is reported 10 be the administra-
ton plan. might earn much more
than competitor which has
no large capital structure. Many
American businesses have grown up
by plowing back each years earn
lngs into the business without issu-
ing new capital stock for every 500
40 invested. Unless such companies
are permitted to recapitalize on the
basis of their present worth in re-
istion to the same types of business
with which they compete, there is
bound to be inequity and hardship.
During the last war. Congress
gave the Treasury Department flex-
ible authority out of which was de-
veloped for excess profits purposes
what were known then as artificial
capital bases. The amount of money
invested in developing business
over long period of years was set
up as capital on a formula where
by a comparative system of valua-
ton with competitors was used.
Something of the same kind will
have TO be established this time If
fantastic results are not to be forced
on some businesses, with the posi-
bility that companies in debt may
have to refault on bonded issues or
on bank loans unless they are al
lowed TO pay of debt out of earn
inss.
May Spread to Wages.
Some plan whereby a normal
amortization of debt may first be
deducted and then a limitation
placed on all profits probably would
save many businesses from dissolu-
ton or bankruptcy
Broadly speaking, the idea of
limiting profits and confiscating all
above a certain fixed percentage is
gaining ground in Congress. The
idea of taking all profits above the
survival level may prove to be the
very leverage with public opinion
that the administration may feel
II needs in subsequently putting a
ceiling on wages and putting an
end to the agitation for higher
wages. II business is put on a sur
vival basis so must eventually labor
be placed on an analogous footing
It may well be that the President
has not felt that he could tackle the
wage problem until he disposed OF
the high salary or high profit oues-
ton. Certainly, once such a drastic
limitation is imposed, labor politi-
clans will no longer be able to argue
persussively that wages need not be
held down because profits are sky
rocketing
It is said that $50 companies in
the United States have $S5.0O0,00O.-
900 Of war contracts. Doubtless
many Of these contracts are farmed
out through subcontraCtors. But it
is probable that any rule intended
10 recapture profits in these war
business cases will do extensive dam
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