Evening star., 1942-06-25

more to remove hardships and in
equities than any other tax measure
In quarter of century. In fact,
beneflting by experience with the
tax laws Of the first World War, the
proposed bill is a much fairer and
more equitable measure than any of
its predecessors.
The new bill does not cover relief
10 debt-ridden corporations nor does
1t permit deductions for life insur-
ance premiums-both of which sub
jects will be taken up by the Senate
Finance Committee-but it does
straighten out many of the perplexi-
ties growing out of the excess profits
taxes.
Thus existing rates have had the
effect of helping the well-capitalized
companies, armed with cash, while
ut the same time taxing the weaker
competitors. Likewise businesses
which encountered abnormal cir
cumstances have had to pay the
penalty for them, while more for
tunate competitors have been able
to retain proportionately more out
of their profits.
Special Relief Division.
The new bill, according to all Off
eial statement from the House Ways
and Means Committee, will make it
possible to set up "a constructive
excess profits income which reflects
the normal earnings of such tax
payers under the general circum-
stances prevailing during the years
Of the base period" Also the COM
mittee says that each case shall be
judged on its own merits although
consideration may be given to the
earnings of comparable firms in the
same class of business during the
base period in determining the
normal profits of new businesses"
While the Bureau of Internal
Revenue will determine the amount
of relief, appeal can be had to the
Zoard of Tax Appeals, where a
special relief division will be estab-
lished. This is virtually the same
arrangement that was so success
fully utilized during and after the
first World War in dealing with
the complicated excess profits ques-
ton.
All sorts of tests will be used to
determine whether relief shall be
granted, such as interruptions of
production during the 1886 to 1889
base period, temporary economic
circumstances. depression due to abb
normal cycles in certain lines of
business, fundamental changes in
character of operations during the
base period. and the nature of busi-
ness operations in which capital is
not an important income producing
factor, such as personal service
firms and companies, as we'll as
other businesses in which for rea-
sons peculiar to the business con-
cerned, the invested capital happens
to be low.
The Ways and Means Committee
neither advocated nor rejected the
idea Of relief for debt-ridden cor
porations or the proposal to permit
deductions for premiums on life in
surance. Treasury experts, how
ever, have issued a statement op-
posing the suggestion that life in
surance premiums be deducted.
Answer to Loss Claim.
The reasons given by the Treas
ury spokesmen seem to have been
based on the theory that the pro-
vision would permit considerable tax
avoidance and loss Of revenue. But
there is a simple answer to this.
The life insurance companies them
selves do not allow more than a
fixed amount of life insurance for
any individual and anybody who
can afford the maximum usually has
to have an income several times the
premium charge, so 1t is difficult to
see how any considerable sum of
revenue would be involved. Yet,
on the other hand, there are many
persons with smaller incomes who
want to keep up their life insurance
premiums and may not be able to
do 80 because the new legislation
Is cutting their incomes down so
drastically as to imperil the contin-
uar1ce of life insurance.
Most inequitable, however. is the
Treasury's attitude toward term
insurance which is by ruling-not
by law-prevented from being con-