Evening star., 1950-09-12
Spenders Seen BEHIND
Drive for Passage Of
Excess Profits Tax
Pressure for Measure
Also Based on Theory
OF Rapid Wage Rises
By DGsid Laurence

O1 bAAG C01ICA1 cCSoAOn Va SOAASA coo
is the momentum behind the drive
to get an excess profits tax bill
passed right away.
Il took all the influence of the
administration, and particularly
Of the Treasury Department, and
all the power of a Republican
Democratic coalition to shelve the
proposed bill in the Senate. But
this doesn't explain why the pres
sure was exerted there and in the
House to get such a measure writ
ten hastily into law.
The basic reason, of course, is
that an excess profits tax will
lead to an excess of spending and
to q wage imitation. A company
that considers it will have to pay
as much as 70 to 80 cents out of
q proft-dollar to the Government
becomes less interested in what it
spends than in what it saves.
Labor Unions See Benefit.
Labor unions have had the idea
that they would benefit immedi-
ately even from the application of
an excess profits tax law retro
actively to 1850 earnings. The
theory seems to have prevailed
that companies would suddenly
increase their pay levels because
they would have to give the bulk
Of their earnings to Uncle Sam
anyway. There are other avenues
for extravagant expenditure, and
the general impression has been,
based on wartime experience,
that, since nearly every business
expense is deductible for tax pur-
poses, there would be plenty of
spending. The spenders were be-
hind the drive to get the bill
enacted right away.
But this presupposed. Of course,
that. while the Government would
control profits and prices. it would
not control wages. Recalling the
slow-nioving experience on this
factor during the last war, labor
unions felt that they could move
up their wage scales during the
last quarter Of 1850 and pave the
way for further increases in 1851
before the wage-stabilization ma
chinery would get going.
On the surface, the proponents
Of the excess profits tax have
talked lot about stopping "prof-
iteering." They frequently refer
to the blood being spilled in Ko-
rea and how important it is to
make sacrifices on the dollar side.
But the truth is that there are
various kinds of profiteering be-
sides increases in prices or earn
tngs. The profiteering In wage
scales has already begun. Though
the cost Of living has dropped
since the boarding panic reached
Its peak. the demand from the
major labor unions Is for increas-
ing wages, anyway. Even con-
tracts that did not permit reopen
ing during the year 1850 were
forced open by threats of strikes
or so-eaIled unauthorized walk
outs. 81
Only the other day William
Green. president Of the AFI4. said
publicly that it would not be right
to put on wage freezes or stabili-
xation until wages catch up with
the recent rises in living costs.
What Is stabilization really for
except to prevent such upward
spirals2
Big Profits Unlikely.
There are not, moreover, going
to be any such profit margins for
companies in 1850 or 1851 as there
were In the war years. The ap-
preparations by Congress for de-
fense equipment and construction
are far behind the actual expendi-
tures. 1t is doubtful whether very
much money, relatively speaking,
will be spent on the war program
in the year 1850 anyhow. In fact,
the latest figures indicate that,
because Of the lag In spending,
there may actually be a balanced
Federal budget In the fiscal year
ending June 80 next. 1t is in the
Ascal year ending June 80, 1852,
that there will be a deficit, and
even this will not be much larger
than the budget deficit for the
year which ended June 30, 1850,
unless. Of course, large-scale war
breaks out.
The increase in straight cor
poration tax rates already applic-
able to part Of the year 1850 will
bring in q stable revenue. Dis
bursements by the Government
also viii not be as big in the first
half OF 1881 as the headlines about
spending may have indicated.
AS for writing an excess profits
tax bill. that is a real job for tech
nical experts. The large COM
panies, with big profits to use in
computing their new rate on the
base years 1946 to 1949, will come
out very well, whereas the strug-
Cling smaller companies will come
out with heavy penalties. This
happened before. The so-called
Hardship" clauses of the law
which are supposed to alleviate
the troubles of the smaller busi-
nesSes are not worth the paper
they are written on. The big COM
panies certainly have an oppor-
tunity to lengthen their lead over
smaller competitors, and the ex-
cess profits tax does that trick
for them.
The enactment, therefore, of an
excess profits tax law to apply to
1850 earnings has occasioned
most Of the opposition in business
circles. Large business enterprises
will OrOmptlv adiuSt fhayoc