Evening star., 1948-02-26
Excess Profits Tax
Revival Held Unlikely,
Apt 10 Cause Panic
Threut Of Re-enoctment
Seen Fuvorite Way
Of Needing Business
By David Laurence

AmeI1CAu Du6ltleSS ItOWh1hys - w
threaten to revive the excess pro-
fits tax.
II such q move really had any
support In Congress-which 1t de-
cidedly has not-there would be
panic In the markets Of the coun-
try that would lead directly to .
depression.
The reason Is that . revival Of
the excess profits tax would ruin
most business today and paralyze
the entire economic system. 1t is one
thing to impose an excess profits
tax when there is one customer, like
the Government, spending billions
Of dollars a month in wartime with
no competition between producers
and no problem Of raising capital.
It's quite another to strangle indus
try in the postwar period by put
ting ceiling on profits from which
expansion money and working capi-
tai are derived.
Such proposals for q revival Of the
excess profits tax as are made US
ually ignore the question of what
base Is to be used as normal" II
last year or the year before were
used or If wartime years were to be
considered the base, some 'of the
larger companies would come out
pretty well. Others would suffer. If
the old base of 1936-1939 were used,
the well-entrenched or well-heeled
companies would still pay less per-
centage of taxes than the compan-
les that were growing up in that
period or which operated in the red.
This is believed to be the base plan
ned by the radicals.
Hurts Small Business.
1T Is the small or moderate sized
business, however, which is hurt by
an excess profits-tax law. This hap
pened during World War I and it
has happened again after World
War II. The New Deal certainly
wrote an excess profits law that IA
vored the large companies. Some
ambiguously wcrded clauses were
inserted In the law supposedly to
give relief" to smaller companies,
but these have largely proved un-
workable and the unsettled cases
are numerous.
Anyone who talks about reviving
the excess profits tax without
studying what happened with the
war tax and how the big companies
benefited and the smaller ones
were hurt Is ignoring the economic
facts of life.
II an excess profits tax were i'm
posed in peacetime, however, there
would be collapse of many import
ant businesses because they could
no longer finance the large opera
tions In which they are now
engaged. At the very time when
more working capital than ever is
needed to handle turnover of prod
ucts required to overcome short
ages, the Government would be
stopping production by impairing
capital formation.
Wage Freeze Only Solution.
The trouble with an excess profits
tax or any ceiling on profits is that
1t inevitably must lead to,a freezing
of wages. If profits are squeezed
down and wage rates are permitted
to rise, the end result is bankruptcy
or receiverships and plenty Of un-
employment. -
The worst enemy of the working
man in America is the man who
today proposes q revival of the
excess profits tax without at the
same time providing for o freeze on
wages and prices. In other words,
II. one segment Of the economy Is
uncontrolled and the other segments
are not, q serious maladjustment
results. The worker would be the
chief victim Of such q destructive
policy and the advocates of state
socialism would cry out for Gov
ernment capital and Government
ownership so as to pay deficits and
maintain employment.
Under the free enterprise system
of private ownership, prices are
allowed to find their natural level.
It takes time but under evolution
is essential Monopolies are prose-
cuted under the antitrust laws.
Labor monopolies, however, which
fix industry prices of labor,
are. not subject to the antitrust
laws.
1t is significant that in many
categories prices already are falling.
This is because supply is exceeding
demand. The real crisis will come
when the volume of sales declines
and the profits start downward, too.
The so-called "break even" point In
many businesses is much higher to-
day In respect to volume Of business
done than at any time in our eco
no1nic history. The situation will
not be cured by limiting profits and
demoralizing production.
Fortunately those who talk so
loosely about excess profits know
full we'll there isn't a handful of
votes in Congress in favor of such
q course. !
:. Reproduction Rights Reseryed)
Chub to Hear Nathan |
naks.+ . Nothoo aoo,opoie} will |