Evening star., 1950-01-23
Text Of Presidents Message Asking Billion More Tax Revenues

, the tax laws. In the case of oil
and mining businesses, however,
the depletion exemption goes on
and on, year after year, even
though the original investment in
the property has already been re-
covered tax free, not once but
: many times over.
: Originally introduced as a mod
crate measure to stimulate essen
tial production in the first World
War. this special treatment has
been extended during later years.
At the present time. these exemp-
tions, together with another pref
erential provision which permits
oil-Well investment costs to be i'm
mediately deducted from income
regardless of source, are allowing
individuals to build up vast for
tunes, with little more than token
contributions to tax revenues.
Attacks Tax LoOphOles.
For example. during the five
years, 1943 to 1947, during which
1t was necessary to collect an in
come tax from people earning less
than $40 week, one oil operator
was able, because of these loop
holes, to develop properties yield
ing nearly $5,000,000 in a single
year without payment of any in
come tax. In addition to escap-
ing the payment of tax on his
large income from oil operations,
he was also able through the use
of his oil tax exemptions, to
escape payment of tax on most of
his income from other sources.
For the five years, his income taxes
totaled less than 100000, al
though his income from non-oil
sources alone averaged almost
100000 each year.
This is a shocking example of
how present tax loopholes permit
a few to gain enormous wealth
without paying their fair share of
taxes.
I am well aware that these tax
privileges are sometimes defended
on the grounds that they encour-
age the production of strategic
minerals. It is true that we wish
to encourage such production. But
the tax bounties distributed under
present law bear only a haphazard
relationship to our real need for
proper incentives to encourage the
exploration, development and con-
servation of our mineral resources.
A forward-looking resources pro-
gram does not require that we
give hundreds of millions of dol
lars annually in tax exemptions
to a favored few at the expense of
the many.
Some tax loopholes have also
been developed through the abuse
OF the tax exemption accorded ed
ucational and charitable organiza-
tions. 1t has properly been the
policy of the Federal Government
since the beginning of the income
tax to encourage the development
OF these organizations. That pol
Icy should not be changed. But
the few glaring abuses of the tax
exemption privilege should be
stopped. vi, -,
= Sees Exemptions Misused. y
! Responsible educational leaders
share in the concern about the
TACT that an exemption intended
st@ protect educational activities
IMs been misused in a.sfew in
Estances to gain competitive ad-
vantage over private enterprise
through the conduct of business
and industrial operations entirely
unrelated to educational activities.
There are also instances where
the exemption accorded charitable
trust funds has been used as
cloak for speculative business
ventures, and the funds intended
for charitable purposes, buttressed
by tax exemption, have been used
to acquire or retain control over
a wide variety of industrial enter
priSes.
These and other unintended
advantages can and should be re-
moved without jeopardizing the
basic purposes of those organi-
cations which should rightly be
aided by tax exemption.
A problem exists also with re-
spect to life insurance companies.
The tax laws have always accord
ed favorable treatment to the
income received by individuals
from life insurance policies and
have made special provision for
the taxation of life insurance com
panies. AS a result of a quirk in
the present law, however, life in
Surance companies have uninten-
tionally been relieved of income
taxes since 1916. This anomalous
situation has meant that neither
the companies nor their policy
holders have paid taxes on more
than 1.5 billion dollars Of invest
ment income per year, derived
from productive assets worth
about go billion dollars.
Urges Tax on Insurance Firms.
I understand that the Com
mittee on Ways and Means of the
House of Representatives has al
ready undertaken to correct this
situation for the past years.
, urge that steps also be taken to
develop a permanent system for
the taxation of life insurance COM
panies which will remove the in
equities Of under-taxation in this
. field without impairing the ability
of individuals to acquire life in
surance protection.
i. In addition to the tax loop
holes I have described. there are
a number of others which also
represent inequities, and should
be closed. Most of these permit
!; individuals, by one device or
another, to take unfair advantage
} of the difference between the tax
rates on ordinary income and the