Evening Star Newspaper, July 31, 1935, Page 4

HE EV. G _STAR, WASHINGTO A—4 = ) 2 MAJORITY AND MINORITY REPORTS ON “SOAK THE RICH” TAX BILL < RATES EXPLAINED BY COMMITTEE Democratic Members Give | Their Version of Effect of New Imposts. The majority report of the House ‘Ways and Means Committee on the tax bill, submitted to the House yes- terday, was made public this morn- ing. After quoting the President's tax message the report is as follows: The bill as reported consists of four titles. Title I contains certain amend- ments to the revenue act of 1934 and provides for higher surtaxes on surtax net incomes in excess of $50,000; for a graduated income tax on corpora- tions in lieu of the present uniform rate; and for a graduated excess- profits tax on corporations in lieu of the present excess-profits tax of 5 per cent. Title II proposed an in- heritance tax, in addition to the existing estate taxes. Title III pro- poses & gift tax on donees in addi- tion to the existing gift tax on donors. Title IV contains certain general pro- visions. It is hoped that the enact- ment of these titles into law will rem- edy some of the defects of our present tax system, will provide substantial revenue, and will carry out the major policies recommended by the Presi- dent in his message. It is believed that in a full year of operation, under present improving business conditions, the annual additional revenue which will be secured from the enactment of the bill will be as follows: Source of revenue and estimated additional revenue. Increased surtaxes $45,000,000 Graduated corporation tax 15,000,000 Excess-profits tax_.... .. 100,000,000 Inheritance tax.. 86,000,000 Gift tax. 24,000,000 $270,000,000 If business improves further, the provisions in this bill may ultimately bring in as much as 350 to 450 mil- lions of dollars in additional revenue annually. The proposals contained in the bill will now be described separately. Increased Surtaxes. Section 101 of title I of the bill pro- vides for increased surtax rates in the case of surtax net incomes in excess of $50,000. The surtax rates on surtax net incomes up to $50,000 remain un- changed. The following table shows the proposed rates in comparison with the existing rates as well as the total proposed surtaxes and existing sur- taxes completed on the upper limit of each bracket: Revised Surtax Schedule Beginning at $50,000. Proposed Present rate per rate per Surtax net income bracket $50,000 to $56,000-.. 856,000 to $62,000. $200,000 to $250,000. $250,000 to $300,000. $750,000 to $1,000,000.. $1,000,000 to $2,000,000_ £2,000,000 to $5,000,000.. Over $5,000,000 *Computed on upper limit of brac! $62,000 is $11,660, and present surtax on this amount is $11,480. It is to be kept in mind, of course, that in addition to the surtax there is a normal tax of 4 per cent on the net income of an individual, in excess | of certain credits. The credits are the personal exemption, the credit for de- pendents, earned income credit, credit for dividends, and credit for interest exempt from normal tax. The bill proposes no change in this normal tax. ‘The total tax increase is indicated in the above table by the difference be- tween the proposed surtax and the existing surtax. For example, an in- dividual with a surtax net income of $100,000 will pay $2,000 more tax under the proposed rates than under existing law, while an individual with a surtax net income of $1,000,000 will pay $108,000 more tax. It will be noted that in the proposed schedule of rates the graduation is extended to surtax net incomes up to $5,000,000, whereas under present law graduation ceases at $1,000,000. This corrects the defect in this respect pointed out by the President in his message. The number of individuals affected by the proposed surtax increases is not large, as may be seen from the fol- therefore your committee, in section 102 (a) of the bill, is recommending only a very moderate graduation. Under existing law corporations pay a flat tax of 13% per cent on the entire amount of their net income. No relief is given to a corporation, no matter how small its net income may be. Your comimttee is recommending the substitution of the following graduated tax on corporations in lieu of the present uniform rate of tax: 13% per cent on the first $15,000 of the net income and 141, per cent on the remainder. The effect of these graduated rates will be that corporations with net in- comes up to $30,000 will pay less tax than at present, and corporations with net incomes in excess of this amount will pay slightly more tax. While no statistics are available to show the exact effect of these rates, statistics are available to show the effect on corporations having more or less than $25,000 net income. In 1932, 82,646 corporations reported taxable net in- comes. Out of this number, 76,316 showed taxable net incomes of less than $25,000, and 6,430 corporations showed net incomes in excess of $25,- 000. Therefore, it is obvious that less than 8 per cent of our corporations having taxable net incomes under present conditions will pay an added tax through the imposition of the graduated rate schedule. On the other hand, more than 92 per cent of bur corporations having taxable net incomes will find their taxes some- what reduced by the operation of this schedule. It is equally obvious that if statistics were available at the divid- ing line of $30,000, they would show that the number of corporations whose rates are reduced would be substan- tially more than 92 per cent. In spite of the small amount of graduation and in spite of the slight increase of the tax burden on the corporations with large net incomes, considerable revenue is derived from this graduated tax. This is because of the fact that, while less than 8 per cent of the corporations report net incomes in excess of $25,000, nev- ertheless this same 8 per cent of the corporations have over 90 per cent of the taxable net income. For ex- ample, in 1932 corporations reporting less than $25,000 of net income re- ported a total net income of about $205,000,000, while corporations with net incomes in excess of $25,000 re- | ported net income of $1,947,000,000. Section 102 (b) provides for the rate of tax in the case of railroads filing consolidated returns. Under the revenue act of 1934 only railroads may file consolidated returns and then only under certain conditions. If permitted to file such returns, and if they do so, they pay under | existing law a rate of 15% per cent | instead of 13% per cent. Your com- mittee is of the opinion that it is unnecessary to provide for a graduated | corporation tax on railroads if they | file a consolidated return, and there- Present total sur- tax* $9,500 | 11,480 13,640 15,980 18,500 23,000 28,000 54,000 80,500 107,500 134,500 189,500 245,500 | 388,000 533,000 1,123,000 2,893,000 Proposed total sur- tax* $9.560 11,660 14,000 16,580 19,400 24,500 30,00 59,000 89,000 120,000 152,000 218,000 286,000 461,000 641,000 1,371,000 3,591,000 cent 31 35 39 43 47 51 55 58 60 62 64 66 68 70 2 3 4 5 ket; for example, proposed surtax on cent 30 33 36 39 42 45 50 52 53 54 54 85 56 57 58 59 59 fore it is recommended that, if the railroads file a consolidated return, they be required to pay a flat tax of 15% per cent on their entire net income. Of course, if they do not file the consolidated return, then they will be subject to the graduated rates of 13% and 14% per cent. It will be noted that the rate required on the consolidated return of 15% per cent is still substantially above the maximum rate of 14l per cent re- quired to be paid by corporations not filing consolidated returns. The bill makes no change in the present law as to the exercise of the privilege of filing consolidated returns. Sections 103 and 104 of the bill provide new rates of tax on life in- surance companies and on insurance companies other than life or mutual. The effect of the proposed amend- ments is to require these insurance companies to pay under the graduated schedule of rates instead of under the flat rate of 13% per cent which is at present applicable to them. The President suggested that it might be well to consider imposing a small tax on intercorporate divi- dends in order to prevent the evasion lowing table: Number of Individual Returns Net income class, 450,000 to $100,000. $100,000 to $150,00 $150,000 to $300,000 $300,000 to $500,000. $500,000 to $1,000,000.. $1,000,000 to $2,000,000-. $2,000,000 to $5,000,000- Over $5,000,000. Total number of returns (with over $50,000 of net income each) Under present conditions less than 4,000,000 returns are filed annually by individuals, of which less than 2,000,- 000 are taxable returns. It can be seen from the table last submitted that ‘we now have only about 8,000 returns annually showing net income in excess of $50,000. Thus, the proposed surtax increases will affect’ only two-tenths of 1 per cent of the number of returns filed, and four-tenths of 1 per cent of the number of taxable returns filed. It should be noted that the larger in- creases in surtax occur in the case of surtax net incomes in excess of $1,000,- 000. In 1933 there were only 46 indi- viduals with net incomes in excess of the last-named amount. Since there ‘was only one individual in 1933 who had a net income in excess of $5,000,- 000, it did not appear necessary to your committee to graduate the tax beyond the $5,000,000 point. An income of $50,000 per annum, if from investments at 5 per cent, repre- sents a capital of $1,000,000. Your committee is of the opinion that the surtax rates proposed, starting at $50,000 and graduated to $5,000,000, carry out the general policy expressed in the President’s message. : Graduated Income Tax on Corporations. The President recommended the substitution of a graduated income tax on corporations in fieu of the present income tax imposed at a uniform rate. This is & new principle which has never been used in this country, and A e of the graduated tax by means of a (Net Incomes of Over $50,000). Calendar year. 1929. 1930. 1932. 24073 13645 5,902 6376 3,111 995 5310 2,071 595 1,641 552 140 1924. 15,816 3,065 1,876 457 of 12 per cent and not in ex- cess of 16 per cen’ of the adjusted declared value..... Portion of net income ia cxcess of 16 per cent and not in ex- cess of 25 per cent of the adjusted declared valuc..... Portion of net income in excess of 25 per cent of the adjusted declared value The adjusted declared value of the capital stock of a corporation has already been provided for under the revenue act of 1934. In the first in- stance, the corporation was permitted to declare any value for its stock which it saw fit. Having declared such a value on 1ts capital stock, the value may be increased or dimin- ished only on account of bona fide additions to or subtractions from its capital. The present combination capital stock and excess profits tax was first imposed by the national in- dustrial recovery act of 1933. The taxes were reimposed by the revenue act of 1934 and a new declared value allowed. Your committee does not provide in this bill for another origi- nal declared value, being of the opin- ion that since the corpurations have already had two opportunities to set a proper value on their capital stock it would be unnecessary from an equitable standpoint to provide an- other original declaration. The excess profits tax is a sound tax and it is belleved that in future years it will be productive of very considerable revenue. The excess profits and war profits taxes imposed during the war period were similar in character and produced the following revenues in addition to the normal income tax on corporations: 1917 $1,638,748,000 1918 2,505,566,000 1919 1,431,806,000 1920 988,726,000 1921 335,132,000 Your committee believes that the proposed excess profits tax at the moderate rates suggested will in each full year of operation under improv- ing business conditions bring in about $100,000,000 of additiona! revenue. Effective Date of Amendments in Title 1. Section 106 of title 1 of the bill sets forth the taxable years which will first be affected by all the amend- ments made in this title. The increased surtax will apply only to taxable years beginning after De- cember 31, 1935. In other words the increase in tax is entirely prospective and no 1935 income will be subject to the increased rates. In the case of the graduated cor- poratoin tax, a similar policy is pur- sued and no 1935 income will be sub- Jject to tax at the new rates. this will apply to income-tax taxable years ending after June 30, 1936. The great majority of corporations file on the calendar-year basis, and in this case they will pay the new graduated excess-profits tax only on their cal- endar-year 1936 profits. In the case of fiscal years ending on or after July 31, 1936, and on or before November 30, 1936, it is possible that the new rates will apply to that portion of the 1935 income accruing after July 31. Inheritance Tax. Title 2 of the bill provides for an inheritance tax in addition to existing Federal estate taxes. The inheritance tax is imposed upon the net value of the beneficial interests transferred by reason of the death of a decedent law to each beneficiary at the rates shown in the following table: Inheritance Tax Rates and Amounts. Total net value of Rateof Amount inheritance* tax. “of tax.t (Per cent.) $0 to $10,000____ 4 $400 $10,000 to $20,00f 1,200 2400 15.600 27,600 55,600 103,600 211,600 331,600 551,600 791,600 1,311,600 1,871,600 2,471,600 3,111,600 4,471,600 5,911,600 $100,000 to $150,000... $150,000 to $250,000 $250,000 to $400,000 $400,000 to $700,000. $700,000 to $1,000,000-. $1,000,000 to $1,500,000. $1,500,000 to $2,000,000.. $2,000,000 to $3,000,000- $3,000,000 to $4,000,000. $4,000,000 to $5,000,000. $5,000,000 to $6,000,000.. $6,000,000 to $8,000,000- $8,000,000 to $10,000,000 Over $10,000,000 mption_to spouse and near 00. ~ Specific 5 exemption to all others. $10.000 After deduction of specific exemption. Computed o upper Hmit of bracket: for, sxample, inheritance tax on $10,000 as that which is subject to the exist- ing estate taxes. However, dower and curtesy interests, estates in liev there- of, or an equivalent amount of prop- erty elected by the surviving spouse after death in lieu of such interests are not subject to the inheritance tax. The inheritance tax is imposed with respect to all property received from a citizen or resident decedent, except real property located abroad. If the beneficiary inherits thé property from 2 non-resident decedent, the transfer is taxable only if the property is sit- uated within the United States. The bill exempts from the tax transfers to certain charitable or other organiza- tions, as well as transfers to or for the use of the United States or the States for exclusively public purposes. 242 50 22 976 318 86 357 110 15 118 32 5 38 8 21,531 38,889 19,847 7738 7.974 multiplicity of corporations. In view of the moderate graduation provided for in this bill, your committee does not believe that such a tax is neces- sary to prevent evasion, but it pro- poses at a later date to consider the proposition on its merits in connec- tion with discouraging chains of hold- ing companies. Excess Profits Tax. Section 105 of title I of the bill proposes a revision of our existing excess profits tax by substituting grad- uated rates for a uniform 5 per cent rate. This tax was not specifically mentioned by the President, but your committee feels that it is in line with his general policy to tax those with ability to pay, whether they be indi- viduals or corporations. Moreover, & large amount of revenue may be equitably obtained from the imposi- tion of such a tax. ‘The excess profits tax is based on the ratio of the net income of the corporation to the adjusted declared value of its capital stock as provided for under section 701 of revenue act of 1934. The graduated rates now proposed are as follows: . Q Per cent. Net incomes not in e: 8 per cent of the adjusted de- Portion of net income in eXcess of 8 per cent and not in ex- adjusted de Portion of net income in excess [ The value of the beneficial interests transferred to each beneficiary is de- termined as of the date of the dece- dent’s death. To prevent any undue hardship arising from & decline in value after the date of death, a spe- cial deduction is allowed for net shrinkage, based upon the difference between the value of assets on the date of death and one year thereafter (or the date of sale or axchange in the case of assets sold or exchanged during such period). Your committee has given recogni- tion to the principle of consanguinity by allowing as & deduction the follow- ing specific exemptions: (1) $50,000 in the case of an inheritance passing to a surviving spouse, child (including a child legally adopted before it at- tained the age of 21), father, mother, brother or sister (including a brother or sister of the half-blood), grand- child, grandfather or grandmother; and (2) $10,000 in the case of an in- heritance passing to any other person. In determining the net value of the beneficial interests, certain deductions are allowed for funeral expenses, ad- ministration , etc. In general, these deductions are the same as those allowed for the purpose of the Federal estate taxes. However, amounts actually paid on account of estate, succession, legacy or inheritance taxes imposed by any State, Territory ok the District of Columbia are also allowed as a deduction as well as amounts paid taxes. In the case of the excess-profits tax, ! dying after the bill is enacted into | The property ‘subject to the in-| heritance tax is, in general, the same | <& hold the tax in abeyance is not filed, the tax is computed and collected at the maximum rate. If the bond is filed the tax with respect to the contingent interest is held in abey- ance until the contingency has oc- curred. In such a case, & special return is required which must be currence of the contingency. entire tax is recomputed and the bal- ance of the tax due to the contingent interest is collected. Inheritance-tax returns are re- quired to be filed by the executor and the tax paid within 18 months after the death of the decedent. However, the commissioner is given authority to extend the time for payment of the tax, not to exceed 10 years from the aue date. Interest is collected at the rate of 3 per cent per annum for the of six months after the due date of the tax, and then at the rate of 6 per cent per annum to the date of | expiration of the period of the exten- sion. Thereafter, interest is collected at the rate of 12 per cent per annum. The period for assessment of the tax is 10 years after the return was filed, and the period for collection is six years after the date of assessment. Special rules apply in the case of false or no returns and contingent inter- ests. The tax is collected by the executor | from each beneficiary or deducted and { withheld from any property in the | executor’s possession or control which | is transferred to such beneficiary. To {evoid the hardship of a forced sale, | each beneficiary may at his option pay the tax outright instead of having it deducted from the property trans- ferred to him. If the will or other in- strument of transfer provides for the payment of the tax out of specific | property, the executor may so pay it without affecting the rights of the United States. The bill provides for a lien upon the property for.a period of 14 years from the cate of the death of the decedent. An exception is made in the case of property which is used for the payment of charges against the | estate and expenses of its administra- risdiction thereof. If the commissioner | been fuily discharged or provided for, he is authorized under regulations ap- proved by the Secretary to issue a | certificate releasing the lien. The administrative provisions of he bill in general foilow those which | are now applied to the estate and gift taxes imposed under existing law, To prevent avoidance of the inheri- | tance tax through the use of corpora- | tions, a special rate is provided for in | case the corporation is formed or availed of for the purpose of avoiding the tax or any part thereof. The bur- | cen of proving that the corporatlor | was formed or availed of for that pur- pose is upon the commissioner, except | that, if 50 per cent or more of the in- terest or control of the corporation exists in any one or more persons bearing the relationship to the dece- dent of spouse, child, father, mother. brother or sister, grandchild. grand- fsther or grandmother, then the bur- ¢ to show that it was not formed or availed of for the purpose of avoiding | the inheritance tax. Gift Tax on Donees. Title III of the bill imposes & gift tax upon the right to receive property by gift. This is & companion tax to the inheritance tax and is designed to prevent avoidance of that tax by taxing gifts made during lifetime. Unlike the present gift tax, which is imposed upon all gifts made by the | donees is imposed separately with re- | spect to gifts made by each donor to each donee. Like the present gift tax, 0 | the gift tax on donees is levied with | respect to all gifts made after the enactment of the act, but for a more | effective administration and to secure | prompt collection of the revenues the tax is computed and collected annu- | ally, beginning with the calendar vear | 1935. Gifts made prior to the effec- tive date of the act are not subpect | to tax. | The computation of the tax payable namely: (1) a computation of the tax at graduated rates on all gifts (with certain express exceptions) made after the enactment of the act, including gifts made in the current calendar year; (2) a computation of the tax at graduated rates on the gifts made in the prior year or years, and (3) the subtraction of the result of the sec- ond computation from that of the first, This computation results in a tax imposed on a cumulative basis. In short, the design is to impose a tax which measurably approaches the in- heritance tax which would have been payable if the donee had received the property by inheritance. However, the rates of the gift tax are one-fourth less than those of the inheritance tax. This follows the same principle as is applied to the gift tax on donors, the rates of tax upon the gift tax on donors being one-fourth less than the estate tax rates. This gives some in- centive to the making of gifts and at the same time gives the Government an opportunity to secure revenue at an earlier date. The following is a table showing gift tax rates and amounts of tax: Gift Tax Rates and Amounts, (Per cent.) $0 to $10,000._. 3 $10,000 to $20,000.. $20,000 to 30,000 $30,000 to $50,00 $50,000 to $100,000--.. $100,000 to $150,000.- $150,000 to $250,000.. $250,000 to $400,000.-. $400,000 to $700,000-. $700,000 to $1,000,000. $1,000,000 to $1,500,000 $1,500,000 to $2,000,000. $2,000,000 to $3,000,000. $3,000,000 to $4,000,000- $4,000,000 to $5,000,000.. $5,000,000 to $6,000,000. $6,000,000 to $8,000,000- $8,000,000 to $10,000,000 Over $10,000,000 e Ry "R Sxermption to other, $10.000. ;AU deguctin ot epecttc geemtion for example. sift tax on $10,000 i $300. The principle of consanguinity, which is recognized in the inheritance tax, is also reflected in the donee’s An exemption is allowed on net gifts of $50,000 in the case of a , child (including a child legally adopted before it attains the age of 21), father, mother, brother or sister (including a brother or sister of $300 900 1,800 4,200 11.700 20,700 41,700 77,700 158,700 248,700 413,700 593,700 filed within one year after the oc-| Charges Face-Saving Politics in Bill Contends Rates Show Rich Alone Can- not Pay Spending Regime Cost. Upon | the happening of the contingency the | first three years from the expiration | tion allowed by any court having ju- | is satisfied that the tax liability has | den of proof is upon the corporation | donor to all donees, the gift tax on | Charging that enactment of the administration tax measure will “re- distribute poverty” rather than wealth, that it is entirely a political gesture and that hearings on it were a farce, Republican members of the House Ways and Means Committee last night filed & 2,000-word report in bitter de- nunciation of the bill as introduced in the House yesterday. Some extras from the report fol- low: “If this bill serves no other purpose, it will at least demonstrate to the country that the extravagant and wasteful expenditures of the Demo- cratic administration cannot be met merely by ‘soaking the rich.” Al- thought it imposes rates of taxation which border on the point of actual confiscation, its proponents estimate | that it will produce only $270,000,000 of revenue. This amount would pay the running expenses of the Govern- | ment for less than two weeks, and it falls $3,305,000,000 short of meeting | the deficit for the last fiscal year. Even as a redistribution of wealth | measure, it would provide but $2.25 for each of our 120,000,000 people. “The bill makes it perfectly ob- | vious to the great masses of our peo- ple that in the last analysis they, and not the rich, are going to be required | to assume the greater portion of the | cost of the administration’s profligate | expenditures.” 1 * x ¥k *x ‘ “We have said that this is a po- litical gesture. By that we mean | | 1t was intended to catch votes. Only | last January, in his budget message, | the President said that he did not| ‘consider it advisable at this time to | propose any new or additional taxes | for the fiscal year 1936 What caused | the President to change his mind be- tween January 7, when he presented the budget, and June 19, the date of his so-called ‘share the wealth’ tax message? | “The Secretary of the Treasury was asked this direct question during his | brief but unilluminating appearance before the Ways and Means Commit- | tee, but under the protection of the Democratic members he avoided an | answer. The fact is that the Presi- | dent’s tax message came at a time when the administration’s popularity and prestige were rapidly on the de- cline, and it served to divert public attention from the criticisms which | were being leveled at the President | and his policies. It doubtless had a secondary purpose of undermining the increasing political strength of the two chief exponents of the ‘share the wealth’ and ‘soak the rich’ philosophy | by making a bid for the support of | | their large army of followers.” ¥ | “It is generally known that Demo- cratic members of the committee were | not only indifferent, but actually nostile to his proposals. That the bill l now comes before the House with their approval is further evidence of the fact that the majority are not guided | by their convictions, but by the orders | “they receive from the White House.” * 5 %% 8 “The Democratic majority, in order | to avoid a direct slap at their own administration with a presidential election in the offing, have reluctantly tried to pull the President’s political chestnuts from the fire. Their effort bears all the earmarks of being a mere face-saving gesture. They will undoubtedly make every effort to Justify the bill as a revenue measure, but a casual reading of the President’s | message clearly indicates that it was not so intended, and it certainly was /not so interpreted by the country. | | The Secretary of the Treasury, in his statement before the committee, in- | 's ‘pri each year involves three opentions,'m“m toae the TToasrys ey interest’ in the legislation was in the revenue which it might raise, and the | majority members tried to infer from | this statement that revenue was its | primary ‘purpose.’ The references in | the President’s message to the ‘very sound public policy of encouraging a wider distribution of wealth’ and the | duty of Government to restrict large | incomes ‘by very high taxes’ prevent | any such purpose being ascribed.” | * ok * x | “We cannot criticize too vehe- mently the procedure by which this | bill has been proposed, considered and | is now being rushed to passage. Brief hearings were conducted by the com- | mittee, with nothing before it but the President's message. As his pro- | posals were rather nebulous, and as | no tentative draft or outline of a bill | had been prepared, the hearings were | more or less of a farce. Unlike his | predecessors in office, the Secretary of the Treasury failed to make any defi- | nite suggestions for carrying out the President’s proposals, or even indicate how much revenue the bill should raise.” * %k % “In this connection it is interesting to note the observations of a former Democratic Secretary of the Treasury, Carter Glass, upon the effect of ex- cessive surtaxes. In his annual report for the fiscal year 1919 Secretary Glass said: emption is contained in the existing gift tax on donors. The bill exempts from the tax gifts to certain charitable or other organ- izations, as well as gifts to or for the use of the United States or States for exclusively public purposes. While the gift tax is imposed on the donee, the donor is required to withhold from the gift, or collect from the donee, the amount of the tax on such gift, computed as if such gift were the last gift made by the donor to the donee during the calendar year. If the tax is not paid by the donor the donee is made liable for the tax. In other respects the administrative provisions of the gift tax, in general, follow those of the existing gift tax on donors. The tax is a lien for 10 years from provided for, he is authorized to issue & certificate releasing any or all of the property from the lien. To prevent avoidance of the tax Minority Brands Tax Measure Plan to Redistribute Poverty ““The upmost brackets of the sur- tax have already passed the point of productivity and the only consequence of any further increase would be to drive possessors of these great in- comes more and more to place their wealth in the billions of dollars of wholly exempt securities heretofore issued and still being issued by States and municipalities, as well as those heretofore issued by the United States. ‘This process not only destroys a source of revenue to the Federal Government, but tends to withdraw -the capital of very rich men from the development of new enterprises and place it at the disposal of State and municipal gov- ernments upon terms so easy to them (the cost of exemptions from taxation falling more heavily upon the Federal Government) as to stimulate wasteful | and non-productive expenditure by State and municipal governments.’” “The following year, another Demo- cratic Secretary of the Treasury, David F. Houston, who succeeded Secretary Glass to that office, also commented on the adverse affects of the higher surtax brackets, and said: “‘It seems idle to speculate in the abstract as to whether or not a progressive income tax schedule ris- ing to rates in excess of 70 per cent is justifiable. We are confronted with a condition, not a theory. The fact is that such rates cannot be suc- cessfully collected.’ “Since, as Secretary Houston has said, excessive surtaxes ‘cannot be suc- cessfully collected” and since their ten- dency is to drive investments from the channels of trade and industry into tax-exempt securities, the re-| sult of their imposition actually will be to decrease, rather than increase, revenue, and necessitate the imposi- tion of additional burdens on the less well-to-do. Thus, the ‘soak-the-rich’ proposal of the President will in the end result in unloading an increased tax burden on those of small earn- ings. “We believe that the fallacy of the theory that exorbitantly high income taxes put the burden of taxation on the rich and relieve the poor has been clearly demonstrated. We com- mend to the large masses of people to whom this bill is intended to ap- peal the wise words of the present occupant of the White House when he was & candidate for the presidency, which evidently he has since forgot- ten. Speaking at Pittsburgh on Octo- ber 19, 1932, Mr. Roosevelt said: “Taxes are paid in the sweat of increased cost of what they buy, or as now, in broad cessation of | employment. “There is not an unemployed man—- | there is not a struggling farmer— whose interest in this subject is not direct and vital.” * ok K K “We deem it a mistake not to have provided an exemption from the cor- poration income tax on gifts made by corperations Yo community chests and other charities. It is the announced | policy of the administration to throw the burden of caring for unemploy- ables back on the States and local communities. When this occurs there | are only two ways they can be pro- | vided for. One is by direct taxation on the people of the local communities | through taxation of homes, farms and | other real estate; the other is through private charity. If corporations are public spirited enough to make con«i tributions to charities, we believe their | contributions for such purposes should be exempt from taxation exactly as is done in the case of individuals.” | R | “The adverse effect of such a tax | in the case of an estate such as that | of a certain well-known automobile | manufacturer is quite evident. This gentleman has plants in various parts | of the country employing thousands | of people and indirectly giving em- | ployment to thousands of others. His | wealth consists almost exclusively of physical properties. Assuming for the sake of argument that their value was $100,000,000, and of course they are worth many times this amount, the present Federal and State death taxes would amount to a little less than $60,000,000. Assuming, further, that an only son were the sole bene- ficiary of the estate, the $40,000,000 which he would be entitled to receive | would be taxed a little less than $30,- 000,000, leaving a balance of approxi- | | mately $10,000,000 out of the $100,- 1 000,000 estate. How the $90,000.000 | tax could be paid without the Fed- eral Government taking over the plants is problematical. This tax pol- icy followed over a period of years | would automatically take us into socialism.” “The expediency of making so radi- | cal a change In the present excess | profits tax, even if a redeclaration of | | value were allowed, is at least ques- tionable. Businesses have been oper- ating at a loss for many years. The losses which they have suffered in past years are not deductible in com- | puting thir taxable income in current years. Hence, it would seem unfair | to make chem pay so great an excess | profits tax on-these earnings at this | time in addition to the regular cor- | poration income tax. The time to, impose an excess profits tax is when | | on estates and inheritances. industry is struggling to get on its feet. What the country needs is not more tax on income, but more income to tax. “In response to the President’s de- mand for a ‘wider distribution of wealth, there has been included in the bill a proposed new tax on in- heritances, to be levied in addition to the present Federal and State taxes Tae ex« isting death taxes take as much as 60 per cent of an estate before dis- tribution, and the pending bill pre- poses to take up to 75 per cent of what is left when distributed to the beneficiaries.” * ok ok ox “Any tax which practically confis- cates private capital is fundamentally wrong, unless we are to adopt the communistic system. It is private capital that makes up the national wealth. It is private capital that gives employment to labor. If this capital is to be consumed in paying the running expenses of the Govern- ment, then the pending tax measure becomes not a bill to redistribute wealth, but s bill to redistribute poverty.” STRIKE ON MEAT PRICES BROADENS Mayor of Detroit Suburb Backs Housewives in Boycott to Gain Lower Rates. By the Associated Press DETROIT, July 31.—The house- wives' strike against meat prices, which started a week ago amidst tur- bulent street scenes in Hamtramck, spread yesterday to Highland Park. At the busiest intersection in the suburbs, a committee of women set up headquarters to launch a boycott on meat purchases with the active ap- proval of Mayor Jasper M. Howard, a meat market proprietor, and Police Chief Charles H. Barker. The mayor was the first to sign a pledge to support the boycott. He de- clared that the campaign was serving a good purpose, and that he could not sell pork chops and other cuts of meat in quantity until the prices were reduced. Spokesmen for meat packers in De- troit interviewed by housewives' com- mittee from the week-old meat strike sector in Hamtramck have blamed the status of prices on the A. A. A, processing taxes. In the suburb of Lincoln Park an- other meat boycott was under way. However, the meat price campaigns in Highland and Lincoln Parks differ from the campaign in Hamtramck in that there is no disorder and no picketing of meat shops. ——— Alcohol Used as Fuel Use of alcohol as a motar fuel is de- every man who labors because they conditions are prosperous, not when clared to be a success 1a Germany. & S > ~N - - | New Low Prices in Our Once-a-Season Clearance TROPICAL WORSTED SUITS The fitting features and neatness of regular weight clothing with exceptional Summer comfort. ° Furnishings Reduced Neckwear Formerly $1.00 . $1.50 o $2.50 and $2. . $3.5 Now $1.15 .$1.45 .$1.95 Pajamas $2.00.........8145 $3 and $2.50. ..81.85 $350,........8245 DOBBS STRAW HATS $4.00 .........82.65 $5.00 .........$3.55 Panamas, 1/3 LESS Leghorns, et ..o Fancy Neglige SHIRTS Formerly Now $195.........81.56 (3 for $4.50) (3 for $5.50) $3.50 ...0.....8245 $5.00 .. ... .$2.95 ekl $5.00 and 5395 Beach $7) 95 Robes ........ 2 Wl Fancy Half Hose BOC s Seasids s 308 (3 for $1) $100 .nscs: 0008 (3 for $1.75) Saturday Hours 9:15 a.m. to 1:00 p.m. Ll e ———— 2-Pc. Tropical Formerly $25 sl 9.75 P $35 Tropicals—3 Pcs. . ... .. $20° $55 Fruhauf Tropicals—3 Pcs. *42° SPECIAL GROUP: 3-Piece Fruhauf Tropical Worsted 22227 % Z 3-Pc. Tropical Formerly $30 e % (Size range broken) 20 Formerly $45 T wo-Piece Linen Suits . S - 3 st $16.50and 325 Sport Coats . . . . . $|375 W hite—T an and W hite—Black and W hite SPORT OXFORDS { Were 56 to $8.50 { $535 Not every size in every style, but a good selection. See them! Quality You Can Depend Upon—Prices That Are Authentically Reduced SIDNEY WEST, nc Eugene C. Gott, President 14th & G STS.