Evening star., 1944-03-26

lOI new JOUS OpeilcQ up Dy lcW lucas,
nor will the new ideas themselves be
forthcoming. We are not satisfied with
the past. We want better future.
Individual brains and courage and
ability must make this future. AL OF
us can see this clearly"
Urges Clause for Business.
There is no precise commitment here,
it is true, to an incentive taxation plan.
but so far as the principle of the state
ment goes, it might have been written
by Eric Johnston.
Stuart Chase-who has often scourged
ousiness-writes in mis- latest book: Help
businessmen, technically and financially,
to reconvert their plants. Encourage
them to take as much responsibility for
employment as they can. Tax allow
ances may be in order. Offer smaller
firms a chance to buy some of the Gov
eminent plants now operated by large
corporations"
The Baruch- Hancock report, in calling
for the reduction of tax rates after the
war, says that nothing will do more
to make for monopoly or to deter the
creation oil new enterprise than excess
sively high taxes"
Beardley Ruml, author of the "Ruml
plan" says in his recently proposed
nine-point fiscal program that rates
should be lowered to point where they
will balance the budget at az sgrsed
level of high employment. I'VE do not"
he says, want a deflationary tax pro-
gram at times of less than standard
high employment. Taxes should be re-
duced where they will do the most good
in creating demand and encouraging
private enterprise"
WILKES Views.
The case for incentive taxation was
well stated by Wendell Willkie in his
February address on postwar fiscal
policy: To-day, in war, our incentives
are provided for us in our relentless
pursuit of the enemy; whereas, tomor-
row, in peace, We must create our in
cenrives from the energies and aspira-
tlons of our citizens. $ 4" We must de-
wise ways and means of encouraging
venture capital TO flow into new enter
prises and this means that we must
find practical way of relieving new
enterprises from crippling taxation for a
reasonable period"
what, concretely, is being proposed?
Two widely supported suggestions are
| Cd that tax exemptions-or at least
concessions-be allowed new ENTERPRISES
Tor five-year period and 90 that the
present double taxation Of corporate
dividends be ended.
The argument for concessions TO new
business ventures has been persuasive
ly put by Eric Johnston, president of
the United States Chamber of Com
merce: The Gfeblood of competitive
capitalism is risk capital Free enter
| prise cannot exist without it. Risk capi-
tai is the propellant that keeps the Job
ball rolling so that it grows bigger and
bigger. Risk capital will be avail
able for investment in new enterprises
II 1t has sufficient incentive. The post
war problem of employment will be
solved on more permanent basis and
without sacrifice of American principles
II private industry rather than the Gov
| SOCo tliC JOD.
| We have it in our power to lisa
taxation as tool for creative economic
achievements. 1t can be deliberately
planned to make jobs, to coax savings
and other capital into the active stream
OF productive investment, to help small
business to remain afloat and to extend
its operations.
| Procedure Basically Valid.
| What is often called incentive taxa
ton can be misused to give undue
privileges to this or that group. But
baslcally it is a valid procedure. To
brush it aside because it lends itself
to excess would be like forbidding medi-
clnes because an overdose may be harm
! full"
Getting down to cases, Johnston
urges special tax concessions for new
enterprise for limited number of years
the period of dangerous infant NOR
tality in business-and special tax treat
ment for capital invested in plant ex-
pansion and other job-making efforts"
In this connection, Sumner H. Slich-.
ter professor of business economies at
Harvard, has urged tax concessions to
business enterprises which over a five
year period spend all their depreciation
allowances Tor new plant and equip
ment, the expenditure in each year of
the five to be not less than 80 per cent
OF the allowance for the year.
suggestion No. 2-to end the double
tax on dividends-has been frequently
made. Wendell Willkie advanced il
forcefully in the speech referred to. Az
matters now stand, he pointed out, divi-
oends are taxed in the hands of the
corporation and again in the hands of
the individuals to whom they are dis
trlouted. Interest payable on bonds, on
tne other hand is deductible item in
the corporation income statement. The
eHect OF this arrangement is to en-
courage fixed-debt financing, and such
financing, said Willkie, has evil results
because it tends to build UP large debt
structure which greatly aggravates de-
presslons and increases the danger of
bankruptcy; also it discourages new
venture capital"
Eccles Repeats Argument.
Precisely the same argument is made
oy Mariner S. Ecles, chairman of the
Board OF Governors of the Federal Re-
serve System, whose ideas on taxation
| have often run counter to those of
business.
Eccles says that incentive taxation is
no panacea, and that too often the