Evening star., 1948-11-26
Move TO Tax Profits
OF Corporations Held
Step Toward Crash
Bankers Figures Cited
To Show Earnings Of
Stockholders Are Low
By David Laurence

L. D@Nt~ 1<@S%f S"SS
Someone ought to write a book
entitled How to Bring on the Worst
Depression In American History.
It wouldn't take long to write. The
speeches Of the CIO leaders and
lately a few Democratic Party poll
ticians would furnish all the text
necessary.
One Of the principal chapters
could be How to Destroy the Profit
system" and still another How to
Weaken Americas 1ndustria,
Strength in the Next World War
Unfortunately these titles are not
as fantastic as they may seem. Inc
indifference of the average Ameri-
can who has not taken the trouble
to analyze the recent wave OF So
called popular sentiment on the
subject of taxing away corporation
profits may be responsible for the
sabotaging Of the American econo-
mic system.
Congress Inquiry Worthwhile.
Thus there has been banded
about for months now the fact that
American corporations will make a
record high of 100000 600 OF
profits in 1948. Labor unions say II
iustifies q fourth round" OF wage
increases. President Truman in q
misguided moment during the cam
paign called it "swag." Now the
argument runs that an "excess
profits" tax must be adopted by
Congress to take large part Of
this money for tax revenues.
But what is the truth about those
CORPORATION profits? Who has got
ten them? What have they beer
used for? Senator Flanders Of Yer
mont, a liberal Republican, has
wisely started a congressional In
yestigation to bring out the facts
It's the most worthwhile inquiry
that has emerged on Capitol Hill
in years.
Certain questions can be answered
bv the investigation. Have the
profits been used to rebuild and re-
pair plant and equipment? Have
they been used merely to give STOCK
holders more dividends? Have they
been used to finance expansion and
Improvement of facilities? For
thanks to the New Deals short
sightedness and the fears OF more
curtailment In the future. there is
no such thing any more as raising
capital in the so-called equity mar
kets. Investors are too scared and
II they make any gains they are
taxed away. No more certain way
exists to bring on state socialism
than to deprive businesses, old and
new. Of any means Of raising risk
capital. For then the Government
has to provide capital and this
means Government personnel In the
MANAGEMENT and finally totalitar-
ian regime in which government is
the master and not the servant OF
the people.
Sees Facts Overlooked.
Every time some Of the radicals
make speeches. about excess-profits
taxes and the high profits of indus
trv there are certain facts that they
overlook:
l. During the last three years
business spent about 10000, 900. 900
for rehabilitation and expansion OF
plant and equipment and to &C
quire inventories Of goods.
2. Internal financing-the use OF
"profit" money rather than outside
money-furnished about $42, ,000, ,000.-
900 Of the sum spent for the above
purposes. The balance was obtained
through increases in bank loans
and some new issues Of securities.
3. Thus $4,000, 900. 900 of profits
per year would not be enough to
meet the above average Of more than
$4,000 100000 of expenditures even
assuming that all the profits could
be so used and stockholders were
to get no dividends to pay them for
the use Of their savings.
4. Expenditures for new plant and
equipment alone amounted to s12,-
000,000000 in 1946. about $16.000,-
100000 in 1947 and will amount to
more than $4,000. 100000 in 194S.
Now are the stockholders getting
all the profits or is America get
ting them in the form Of improved
plant and equipment to meet the
demands Of growing country and
Of our new programs Of world help?
Here is the answer:
In the postwar period, less than
one-half Of net earnings has been
disbursed to stockholders in divi-
dends as contrasted with three
fourths in 1899 and two-thirds in
1929. Conservative dividend policy
has been prompted by a desire to
avoid borrowing and to avoid seek
ing equity capital in markets where
the investors are plainly discour-
aged and reluctant to invest because
they fear dividends will not be
forthcoming under policies of con-
fiscation of private enterprise by
Government.
Aiur1cn F1guFeS C1ted.
The above statistics and explana-
ton Of their background can be
found in a speech delivered this
week by Winthrop Aldrich, chair
man of the board of the Chase
National Bank. But with a little
digging even more facts Of that
kind are readily available to news
papers, magazines, radio and to pro-
fessors Of economics in the colleges.
Yet 1t Is strange how little one
hears about what happened to the
record high of $4,000, 900 900 OF
profits earned this year or last by
corporations-the soundest phase OF
recent economic development, the
real cushion against depression, and
the greatest barrier this country
has devised to beat imitation through
high production. Lower prices. and
even higher wages are possible but
not II capital formation Is stifed
by destructive taxation.
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