Evening star., 1945-10-26
Congress Seen Fronk
On Big Business Aid
Senate Groups Report Admits
Discrimination, Says Writer
BY Dapid Laurence


By Dapid Laurence
It isn't often that Congress frankly
comedies that 1t has helped big business
or the monopolists in business and that
1t has Disseminated against weaker
competitors. But such an admission is
to be found In the Senate Finance
Committees report on the pending tax
bill as 1t denounces the present excess
profits law.
The tax" says the Senate Com
mittee's report "tends to favor old
and well-established businesses since
many OF them have invested capital
which has long ago ceased to contribute
toward earnings, although it is included
in the credit used to determine the ex-
cess profits tax. New businesses without
such credits based on inflated capital
bases are thus penalized by the tax"
Yet, despite this admission that the
excess profits tax tended to help big
business as against competitors, the
record shows that Congress originally
wrote provisions into the excess profits
law which, though proclaimed to be
relief from hardship, actually deprived
smaller business of such relief.
Thousands Of Gases.
The Treasury Department has before
1t many thousands of cases in which
small businesses are required to pay
higher tax rate than the larger busi-
nesses. On close reading of the law, it
will be discovered that it was not the
Internal Revenue Bureau, but the
writer's OF the law itself in Congress
who brought about the discrimination,
No businessman likes to pay 80 cents
out of each dollar Of his net income
while some one else in exactly the same
line OF business pays as little as so
cents. The same problem was up dur
ing the World War, but Congress at
that time gave the Internal Revenue
Bureau discretionary powers so that q
taxpayer could get equal consideration
with his competitor. There has been
talk of amending the present law to
remove the discrimination as it applies
to l945 and previous years, but no
action appears to be in sight. Mean
while the Treasury is turning down
claims right along and smaller busi-
nesses are being compelled to pay higher
taxes than the bigger ones. This is
hardly the way to break down monopoly
or encourage competition.
1t is apparent that hardly ANYBODY
now faVors the excess profits tax-not
even the Treasury Department which
has proposed complete repeal. The ad-
mlnlstrative side of the problem has
proven even more burdensome than 1t
was after the World War It may be
as much as five to ten years before all
tax returns for the war years are
audited and settled, and this Is largely
due to the ambiguity of the phraseology
in the existing law.
The longer the excess profits tax is
retained" the Senate Finance Commit
tee report continues, "the less the in
come of the 1s36-1s39 base period Is q
proper measure of excessive profits.
Poor Measure of Earnings.
This base period will be particularly
poor measure OF earnings in the post
war period when many corporations will
be entering new fields of enterprise or
expanding their businesses"
But the same objection was valid
from 1s41 to l945, namely, that busi-
nesses which had lost money from 1886
to 1899 could not get any relief under
the law if they happened to be success
full from 1910 onward. The present law
says that to get relief they must prove
that some fundamental change in their
business occurred during 1888 or earlier,
and, even so. they must prove that they
could have put their businesses into
profits within two years from the date
OF such change in order to merit relief
Few small businesses can show such
progress
Many business winch was unsuc-
cessful in the base period, began, as
result Of effort made prior to 1940 to
climb the hill to profits and to compets
with larger enterprises only to be
stif1ed by the excess profits law which
insisted on taking a larger slice out OF
the growing business than out of the
Well-established business. Such new
competitors were prevented from ac-
cumulating surpluses so that they could
compete with the bigger fellows in post
war years. The Democratic party in
Congress certainly took care of the
/ bigger business enterprises despite all
OF its professions of interest in the
underdog in business competition.
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