Target

The U. S. Constitution gives the House of Representatives sole power to originate bills raising revenue. House rules give the sole power to prepare tax bills to the Ways & Means Committee. Last week, therefore, the full Ways & Means Committee sat down to do its constitutional duty. But neither buzzard-bald Chairman Robert L. Doughton nor any of his colleagues were fooled by these solemn delegations of power. They knew that whatever bill they recommended and the House passed would, as always, be rewritten by a captious Senate. This relieved North Carolina's Doughton of much responsibility, more brain work. His chief job was not to make a tax bill but to make haste.

To expedite matters Chairman Doughton last week personally undertook to weed out and allot time to those representatives of the tax-paying public who wanted to air their views before the Ways & Means Committee. Growled Republican Committeeman Allen Treadway of Massachusetts: "Any attempt to prevent the general public being heard to the fullest extent is certain to meet with severe condemnation." But the hearings went ahead with one main objective: to report a tax bill to the House by April 15.

As a target for preliminary tax argument the witnesses appearing this week have a set of recommendations whacked together by a Ways & Means subcommittee. All their prayers and protests, all their facts and fancies will probably fail to change the following prime provisions of the House bill:

1) Present corporation income taxes would be repealed and for them substituted a new corporate income tax based on the proportion of a firm's income which it fails to distribute as dividends. Two scales of tax are proposed. A corporation whose net income is less than $10,000 would be taxed from 1% if it retained 10% or less of its net income to 29.7% if it retained 70.3%. About 45% of its net income could be retained at a tax of 16%, the present average corporation tax. A corporation whose net income exceeds $10,000 would be taxed from 4% if it retained 10% or less of its net income to 42 1/2% if it retained 57 1/2% or more of its net income. Such a corporation could withhold about 31% of its net income without paying a higher tax than at present.

2) Banks, insurance companies and corporations in receivership would be taxed a flat 15% of net income.

3) All inter-corporate dividends would be fully taxed as corporate income instead of 90%, exempt as at present.

4) Individuals would pay the full normal tax on dividends which are now exempt.

5) Corporation capital stock and excess profits taxes would be repealed, but not before Jan. 1, 1937.

6) A 90% "windfall" tax to recover impounded or unpaid processing taxes would be imposed on "unjust enrichment accruing to any person from shifting to others the burden of Federal excise taxes."

The proposed changes relating to the corporation tax system were estimated to yield eventually $616,000,000 a year, virtually the amount asked by President Roosevelt. Of the $500,000,000 which he hoped to collect during the next three years by temporary taxes, only a part was provided: an estimated $100,000,000 from the "windfall" tax and $83,000,000 by postponing for a year repeal of capital stock and excess profits taxes. New processing taxes which he suggested were quietly ignored.

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