Tax Toll

Everybody had known that the excess-profits tax, and the retroactive boost in the new tax bill, would nip profits. But few realized how deep the bite would be until G.E.'s President Ralph Cordiner last week provided the first blue-chip example. G.E., which had set aside $38.5 million for taxes in last year's third quarter, this year had to set aside $59 million to take care of a retroactive boost to Jan. i. As a result, in spite of a $36 million gain in sales, G.E.'s net ($15.6 million) was less than half igso's $35.4 million. Earnings per share (for the quarter) dropped from $1.23 to 54-c-.

Cordiner lashed out at Congress' "deplorable practice ... of imposing progressively higher tax rates on a retroactive basis." He whacked OPS for stalling on new price ceilings, refusing to permit "corporations to obtain the price relief to which they legally are entitled under the Capehart [price formula] Amendment." As a result, said he, "certain revenues to which corporations were legally entitled have been lost irretrievably."

Misery Has Company. Cordiner had plenty of company. Many another earnings report made no better reading than his own. Even the "growth" industries, such as chemicals, were taking a licking. Du Font's nine-month net after taxes fell 28% despite a 24% gain in sales; Dow Chemical's third-quarter net fell 25% despite a 33% sales gain. Smaller chemical companies managed to boost their nets.

The booming aircraft industry felt the tax bite; Consolidated Vultee's after-tax net dropped from $3,200,000 to $1,700,-ooo, Douglas' from $2,200,000 to $1,500,-ooo. Other notable declines: Libbey-Owens-Ford's nine-month net fell from $22 million to $12.8 million; R.H. Macy's yearly net fell from $6,400,000 to $5,200,-ooo (in spite of a $29 million rise in sales); Western Union's eight-month net dropped from $4,800,000 to $3,600,000.

Bucking the Trend. Some companies succeeded in bucking the downward trend. In spite of building cutbacks, big Johns-Manville managed to boost its third-quarter net from $5,700,000 to $6,700,000. The container industry made a notable showing: Continental Can's nine-month net rose from $10.4 million to $12.2 million, Container Corp.'s from $7,300,000 to $11.2 million. Oils, with their favorable depletion allowance for taxes, were still gaining; Atlantic Refining's nine-month net rose from $27.8 million to $31.9 million. Big price rises in newsprint enabled St. Regis Paper to boost its nine-month net from $7,000,000 to a whopping $12.8 million. Utilities, which have succeeded in getting numerous rate increases, were also gaining: A.T. & T.'s third-quarter net rose from $73.8 million to $79.7 million. And there were comebacks among ailing industries, notably theaters; United Paramount's third-quarter net rose from $2,-300.000 to $4,600,000.

Nevertheless, the future pattern was plain. From now on, U.S. industry would have to run a whole lot faster merely to stand still.

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