Evening star., 1945-10-20
Congress Tax Action
Called Hit-or-Miss
Incentive for Business Expansion
Killed by Levies, Says Writer
By David Laurence

By David Laurence
The Nation is being given significant
demonstration of the hit-o miss method
by which tax legislation is adopted by
Congress.
First the Secretary of the Treasury
presents program. Then the House OF
Representatives passes different pro-
gram, and now the Senate is writing
still another.
No scientific survey of how taxes
should be modified SO as to produce the
maximum amount of incentive to busi-
ness and revenue to the Treasury was
made. Businesses will not be able to
do any overall planning. For the new
tax bill Is to be followed next year by
another.
Theoretically there will be tax reduc-
ton. Actually the tax rates that are
TO be levied have no relationship to the
reconversion program or the expansion
OF business. The Treasury figured out
approximately 5000. 100000 as the SUNG
that could be spared, but nobody in
authority suggests how much larger the
total revenue collections could be if the
rates were lowered and business were
permitted to expand
Basic Principle Forgotten.
There used to be time when it was
considered unwise to reduce corporation
taxes because of political effects, but
nowadays a reduction of the corpora
ton taxes means very little, because the
Treasury-and Congress concurs in the
step-retains the high rates on individ-
uals. 1t doesn't matter so much to the
Treasury what the corporation rates are,
for the Government collects high per-
centages anyway out of the dividends
paid.
The basic principle on which America
was builyw was the employment of equity
money. With high tax rates the indi-
vidual doesn't keep much of his income
and even the so-called high-salaried in
dividuals or wealthy stockholders get
very little out of their income, and, even
with the slight reduction In individual
rates embodied in the new tax bill, they
will not have money for investment
purposes unless they already had 1t be-
fore the war.
Businesses will have money to invest
but this will be used to make existing
organizations bigger. The role of the
underdog in business will become hard
er and the so-called monopolies will be-
come more instead Of less firmly in
trenched
The political cry of the age is to
preserve the free enterprise system,
which means competition and particu-
larly chance for the small business
man to get larger slice of the volume
in his industry But the taxation for
mula adopted in the last 10 years is
one that materially assists the big busi-
nesses and holds back the progress of
the little fellow
Larger Firms Benefit.
It is, Of course, good thing the ex-
cess-proflts tax is to be repealed as of
next January but during the war years
it served to aid the big businesses of
the country who actually paid lower
percentages than the newcomers To
see big corporation pay in taxes 66
cents out of 100 cents earned, while
the smaller competitor pays 80 cents
because he didn't happen to have been
successful in the base years of 1886 to
1899, on which excess profits were COM
puted-will seem unfair to the average
observer. But a Democratic Congress
wrote the law. 1t prevented many a
small business from accumulating capi-
tai during the war.
There were supposed to be relief pro-
visions to take care of such inequities.
but it is well known among tag experts
that no such relief is being granted
by the Treasury and largely because
OF the way Congress wrote the tax faw.
The New Deal used to be attacked
for bounding big business, but when it
came to writing tax laws on corpora
tions, the larger companies usually
benefited in comparison with their
smaller competitors.
Some day there will be a survey Of
how the tax system can be used to en-
courage competition and produce in
centive. No tax subsidy for any busi-
ness is needed, but all corporations
should have been taxed the same during
the war when profits were large. Then
the postwar period would have seen
the rise of many competitors instead of
the certain expansion Of companies
which already have a considerable share
OF the volume in their respective in
dustries.