The Waterbury Democrat. [volume] (Waterbury, Conn.) 1917-1946, 1944-04-14


this kind of tax law was the as
sumption that the postwar period
would create many extra financial
problems for industry, involving
possibly severance pay for employees
laid off, reconVersion, delayed main
tenance and that industry was
therefore entitled to relief via tax
refunds.
When It comes to figuring how
these tax refunds will be made, the
system Of carTybacks and carryoVers
couldn't have been made much more
complicated II the lawmakers had
tried, but perhaps IL can be made
understandable by reducing 1t To a
set of OVeT-Simplified figures from
the statements Of one company -
say the U. s. Steel Corporation.
First thing To do is TO determine
the corporations excess profit cred
it'--that Is, the amount of money
II Is allowed TO consider as normal
profits before excess profit tax rates
are applied There are two ways;
first by a percentage of capitaliza-
SApAAg tS@NpAAAL Wy hfSI uBtAIB RIo
fits OF the pre-War years 1869
The formula for determination OF
the credit as q percentage OF capt.
talization Is too complicated to go
into here, but anyway, for the steel
corporation 1t comes TO approx
mately l20,OO0,O00. BY the alternate
calculation of AN average of the
four pre-war years, profits, the fig
ure would be as, DOC, 900, after taxes
Naturally, the corporation would
choose TO Use the larger credit.
NOW CONSIDER WAR
YEAR PROFITS
Now look at the corporations wal
year profits, before reserves and
before federal income taxes, but
after state and other taxes are de-
Quoted for 1912, these profits were
$249, 900 900; for 1913, SIT, 900, 900.
But supposing the war ends sud
denly this year, the corporation has
lot of expenses properly charge
able to the war, and the corpora
ton ends up 1914 just breaking even,
with no profit at all In this case
the corporation would be permitted
TO caIryback its 1914 credit of $780,
900, 900 to the two preceding war
years. 49,
This credit must be applied first
TO the year 1912, when the com
pany had profits Of $249, 600, 900 On
the first $l20, 900, 600 of income 1t
paid 40 Per cent normal taxes or
$48, 000, 900. On the remaining
$l29 900. 600 Of income above the
$l20 900, 900 credit, the corporation
had to pay excess profits taxes OF
81 per cent or $lO4 100000. Total
federal taxes for 1912 were thus
1852 10000
A PROFIT
Is FIGURED
But after the war, by means of
the carryback. this l842 tax would
be recalculated so that the corpora
ton would have TO pay normal
taxes Of 40 per cent on $24O, 600 900
the $l20,000,0OO credit plus the
$40. 900, 600 carryback. This would
amount TO 500 900 600. Excess pro-
FITS taxes OF 81 per cent would be
calculated on the $249 ,000, 900 less
the $40, 100000, or on $4,000, 900.
This would amount TO $1,000, 900
which, with the 100000 normal
tax, would make the new figure for
1912 taxes total sos, 100000
This new tax figure being $49,-
100000 less than the 1852 900, 900 al
ready paid, 1t would be up to the
u. y. Treasury to pay $4,000. 00C
back To u. s.. Steel. In other words,
instead OF just breaking even In
1914, the corporation would show
proht of $4,000, 900, or approx
mately $4.000,O00 more than the
average net profits after taxes In
the four pre-War years.
This isn't the whole story, but IL
Is enough to give you the drift. II
Is out OF such refunds as these that
Murray figures the steel companies
have been financed by the govern
ment SO that they can afford sever
anee pay vacation pay, wage in
creases, guaranteed weekly income