Evening star. [volume] (Washington, D.C.) 1854-1972, 1962-08-01
Tax Cut Version Voted
Goes to Senate Auq. II

Goes to Sen
The Senate Finance Com
mittee has approved a much
amended version of the Ken
nedy administrations tax re-
vision bill.
Senate action on the measure
probably will be delayed until
September, to give the Presi-
dent time to decide whether to
propose an emergency tax cut
to stimulate the economy.
The committee cleared the
bill yesterday. go, and ordered
it reported formally August IL.
On the basis of tentative
committee estimates, the bill
would cost the Treasury about
$3.50 million of revenue in its
first full year. A Treasury
spokesman said the revenue loss
probably would be somewhat
less than that.
Committee Chairman Harry
F. Byrd, Democrat of Virginia,
said he will try O. the Senate
floor to eliminate the bills
main provision, a Sill billion
subsidy for business. This pro-
vision an investment tax
credit would allow businesses
to subtract up to Z per cent
of the cost of investments from
tax payments.
lf-Hearted Changes
President Kennedy proposed
a more generous tax credit to
encourage investment in mod
ern machinery and equipment.
Only a perfunctory effort is
planned on the Senate floor
to revive another key provision
of the Presidents program,
which calls for withholding
taxes on income from dividends
and interest. The House bill
includes withholding.
Senator Byrd led the fight to
kill this provision and to re-
Quire instead that banks report
to the Government all interest
payments of $40 or more per
year. Corporations already re-
port dividend payments of $40
or more.
The Treasury maintains that
this reporting requirement
would do a much less effective
job than withholding in COL
lecting taxes evaded by re-
cipientS of dividends and in
tereSt.
The committees bill would
tighten taxation Of income
earned abroad by American
controlled companies, but these
provisions are much looSer
than the Presidents proposals
and the House bill. i
But the committee yesterday
did make some concessions to
the administration on foreign
income and on tax deductions
for business entertainment ex-
penses. /
The House bill would allow
expense deductions only for
entertainment directly re-
lated" to business. The Senate
Committee originally eliminated
this requirement and proposed
to allow deductions for ex-
penses that a prudent man"
might incur.
This prudent man" rule
raised a Juror. The committee
yesterday back-tracked, accept
ing a middle-of-the-r o a d +
amendment by vote of Is to l.
This amendment would allow a
for entertainment T
expenses either directly re- t
lated" or directly associated"
with business. '
1t was explained that this
modification of the House bill
was designed to make sure that I
businessmen can deduct ex-
penses for good will" enter S
tanning.
Senator Douglas. Democrat
of Illinois, was the dissenter {
on the vote adopting the sub
stitute for the prudent man" |
rule. His motion to adopt the
House provision on entertain
ment was rejected 1871. /.
On a 1915 vote, the COM
mittee yesterday restored in
part a House provision to re- 4
quire American companies to
"gross-up" taxable income re-
ceived from foreign subsidiaries.
The "gross-up" procedure is
tend ii contains ample safe
guards against monopoliStic
control by any one or more
designed to eliminate a double
allowance for taxes paid by the
subsidiaries to foreign coun-
tries. The Senate Committee
had eliminated the "gross-up"
requirement, but yesterday
voted to apply it only to in
come from subsidiaries in in
dustrialiZed countries. The
House bill also would apply the
requirement to subsidiaries in
under developed countries.
Voting to approve the bill
were Democrats Kerr of Okla
homa. Long of Louisiana,
Smathers of Florida, Anderson