Evening star., 1950-09-17

:, which may be questioned, these
S by the trainers of the Constitution
red that they would always be used
: 1876, 900; in 1912 it was 1881 ,814,-
600, in 1943 $11,291 ,483 900, in
1914 $10,431, ,762, 900 and in 1945
$6.557,0o6.O 900.
). Under the Connally-O 'Mahoney
!, amendment, because of the ILL
, conceived base which this i'm
proviSed amendment provided, not
more than 10000 of these 383 200
proflt-earning corporations would
have been compelled to pay an
excesS-profits tax. Since the large
automobile industry, as well as the
mammoth steel industry, have en-
joyed abnormal profits during the
base-period 1946-1949 stipulated in
this amendment, corporations op-
Grating in these industries would
have been called upon to pay only
very small amount had this
amendment been adopted. Most
revenue produced by it would have
come from medium sized and
small corporations, and from in
dustries which have not prospered
during the postwar period.
In the course of the debates in
the Senate on this Connally-
O'Mahoney amendment, Senator
George, chairman of the Senate
Finance Committee, told the Sen
ate that an excess-prof1ts tax law
could not be intelltgently written
until hearings on it were held.
There is no one capable of writ
ing an excess-prof1ts tax law with
out hearings" he said. It simply
cannot be done. It is impossible to
impose on the structure of the
exceSs-prof1tS tax act Of World
War II, or World War I, for that
matter, a new excess profits tax
act when conditions are not only
different but when they are &C
tually completely opposite to the
conditions which existed when we
formulated the Excess-Profits Act
for World War II. -.
THE difficulty about an excess
profits tax is this: An excess
profits tax which is no more than
the changing of a base period,
with an attempt to fit into an act
which was passed at the begin
ming of World War II, is wholly
imapplicable, because none of the
relief proposals will fit into it, and
the average credit formulas will
not fit into it. Without relief
provisions in an excess-profits tax,
the result is one of the most
harmful forms of taxation that
could possibly be devised"
Great Political Value
1t is generally believed-espe-
cially by many of those whose
sons are called upon to face the
enemy in battle-that an excess
profits tax must be imposed dur
ing wartime in order to stop
wicked" prof1teers. And since
such policy is loudly applauded.
it has great political value. But
an excess-prof1ts tax cannot stop
wartime profiteering. The real
way to curb "excess profits" Chat
is, proflteering on war contracts)
is through the device known as a
contract negotiation, which is
provision in all agreements with
the Government under which all
contracts for war materials carry
a drastic stipulation giving the
Government the right to reprice
products contracted for.
Another popular view is that
an excess-prof1tS tax is defation-
ary. This, too, is a great fallacy.
AS a matter of fact. such a tax is
perhaps the most inf1ationary
type of tax that can be devised.
1t encourages corporations to be
waSteful and extravagant. It
causes them to spend money
simply on the grounds that if they
do not somehow spend it, the
Government will take it from
them in taxes. Moreover, it Gre
ateS its own inf1ationary money
with which to pay the tax. Only
insofar as it provides money which
the Government would otherwise
be compelled to raise through
deficit financing is it a check on
initiation. In every other respect
it is inf1ationary.
However. such tax has great
psychological value during war
time. It also is a means of pro-
viding revenue. II think" Sen
ator George said. that If military
preparations continue on a large
scale we will need it, both for
psychological effect and primarily
to get revenues"
Although there are many other
and perhaps better methods Of
raising revenue (such as boosting
corporate and individual tax above
the presently proposed levels; OF
by boosting the excise tax, which
the interim bill now before Con-
gress originally proposed reduc-
ing; or maybe through imposi-
ton of a general sales tax, ar
excess-prof1ts levy will be enacted
early next year. It may even be
effective retroactive to October /;
maybe to July /, 1850. Indeed, ar
excess-prof1ts tax is unacceptable
if for no other reason than or
, psychological grounds.
Warning that we face vastly
more taxes, Senator Millikin
Republican, of Colorado said
that no one is going to find ar
umbrella under which to shelter
himself. Whether they are paic