Show LV oJ SMOOT BILL FRAMED TO CLARIFY WAR TAX lams jr Floor How Measure Would ff Utah Senator Fp Explains Explain x on Consolidate Revenue ue Statutes Providing 8 Understandable Understand Understand- I able Law Latu and arid Equitable Basis of Taxation Herald n l-n laI I Jan Senator l 12 Senator WASHINGTON Reed need Smoot a member J of or the finance committee in Introducing a abill abill abill bill last st Saturday to recast the Income and war wal profits taxes of ot the war wal revenue revenue rev rev- act net alms to clarify them so soS as S asto asto Sto to make them easier caster of ot interpretation end a administration and to remove the Injustices and discriminations which lie declares the present act to contain Tho amendment lm retains the normal Income tax at 2 per cent as ns under theold the the- theold old ld law with certain exemptions but consolidates tes the tho surtax Another r proposed pro pro- posed change chane contemplates usIng tho the five o years ear 1909 to 1913 In- In L L. L prewar r 1 CIU elusive IV as the ino baste for lor u lIb ng the tho normal profits profit Instead of ot tho three thice years cars 1811 1911 1912 and 1913 The tax on corporation Incomes I Is made S P per percent percent T cent above o 2000 estimated to raise or more than the similar taxation In the present act The Tho war profits tax on corporations I runs Tuns from 10 to 80 SO per c cent nt on a scale and Is estimated to raise revenue which Is an Increase of over o the estimated revenue re from tho ho present law Repeals Art tt of or October 3 The amendment alpo alro Includes the re repeal repeal repeal re- re peal of the provisions of at the revenue net act of oC October 3 1917 creating a zone rono system and Increasing the postal rates I on on n second class matter Senator tol Smoots Smoot's explanation of ot his amendment me m on the floor of or the tho Senate and ond the interrogations are shown inthe Inthe in inthe the following in transcript Mr 11 President I desire delre to make mako a 8 short statement explaining the provisions provisions pro pro- visions of this amendment I I 1 have ha yet to discuss discus the revenue act of uC October 3 1917 i. i with a person who understands just what the act means and ta taken cn In connection with the act of or September S S. S 1916 and the act of March 3 3 1917 it is he useless to I think that a uniform tax taC return b by In Individuals Individuals ln- ln I partnerships or corporations can be made 1 I have havo yet e to find any two persons professional lonal or otherwise who interpret the revenue acts nets alike nUke I am positive there are aro but few fow who will twill not freely freel a admit that tho act of 01 October 3 3 HI 1917 should be amended Not only la is It o. o but the taxes imposed are arc unscientific and discriminatory dis tory My I proposed proponed am amendment repeals title 1 of ot the act of ot September 8 E 1916 1918 the Income tax tl title 3 of ot the vamo samo act manufacturers' manufacturers tax title 2 of the the- act of 01 March 3 1917 the the- excess profits tax title 1 of ot tho act net of 01 October October Oc Oc- Oe- Oe tober 3 1917 the war Income tax title o nf f fl thA the Fame mn act art time t war nr o ells prof- prof o it Its Ita tax t title i 12 o of th the same a e act act the tho Income tax amendments amendment and sections 1101 to 1106 Inclusive of ot the tho same act the provisions creating a zone system and increasing ln po postal ta rates on second class cl mall ma matter Hill BUI IU Is b The amendment provides a ta taxing ordinary business man manor manor manor system that nn any or Individual can understand nd and will have no trouble In making ln out a tax return Every Ever In Individual whether in business as such euch or as a member of ot ofa a 11 partnership Is treated alike Every Ever corporation Is taxed upon the same arne basis and tho the questions of capital invested watered stoc stock and bonded Indebtedness do eto not enter Into the que question of ot tho the amount of ot tax to be bo Imposed Subnormal businesses during during- the prewar period are arc treated on the same basis as al normal businesses es of like and similar character If H th the amendment becomes a law Jaw there thele will be no need of or an 11 advisory board hoan to prepare preparo treasury decisions such as Is the case toda today In the treas trel treasury treasury treas- treas ur ury department nine of such decisions having already been bern rendered r n and ap approved approved approved ap- ap proved by the secretary of oC the treasury Treasury Treasur decision 2602 CO shows the treatment treatment treat treat- ment under section 01 of tho the act of ot October 3 1917 of ot the deductions au authorized authorized au- au I b by sections 03 1 0 05 Oj or 10 Such a decision Is nothing more nor norI less el than Ic legislating by Interpretation I b by an nn advIsory board boar appointed by the secretary of tho treasury treasur an and In Instructing Instructing Instruct Instruct- in ing the commissioner of 01 Internal revenue rev rev- nue to enforce the interpretation given b by the board as against the law passed b by Con Congress les In this thin I am not finding fault with the wisdom of oC the advisory boards board's conclusions but I call attention to this new form Corm of f legislation which I consider a vcr very unwise procedure What hat the courts will have to Ra say regarding ic- ic garding this administrative legislation I 1 have no doubt but I do know that there will follow cn endless litigation atlon for forthe forthe forthe the government Jo and the people Consolidates er Surtax II The amendment makes no change Inthe in inthe inthe the normal rate of or 2 per cent upon all allnet allnet allnet net incomes of 01 In individuals l but It consolidates consolidates con con- the surtax Burta tales rates imposed b bythe by bythe the acts of September 3 S 1916 and October October October Octo Octo- ber 3 3 1917 It does away with the two different amounts of exemptions on indivIdual individual in individual in- in net Incomes Income as provided under exl existing laws low and allows the sum o ot of 1000 exemption plus 1000 additional If It tho the person making the return bo the head of or a n family or a married man with witha a wife living with him or plus tho sum aum of 01 1000 additional If 11 the tho person making the tho return be bo a married woman woman wo wo- man with a n husband living with her and also provides that If tr the person making th the return Is 18 tho the head of ot a Jt family there thero shall be an a additional exemption of or OO for tor each child dependent de- de pendent upon such mch person If It under 18 13 years cars of or age or if IC Incapable of oC self self- support because mentally or 01 physically detective defective but this provision lon shall operate operate op- op erate only In tho the case of ot one parent in the same family It Il also ad adds s a provision provision pro pro- vision Islon allowing a a. deduction for amounts paid to Individual partners as re reasonable reasonable reason reason- on- on able salaries or compensation atlon for tor personal personal per per- Ional services actually rendered during tho the taxable year but in no case shall such salaries or compensation ho bo in excess of or tho the salaries or compensation atlon customarily paid for similar services cervices under uHler like responsibilities b by corporations corpora corpora- engaged in like or similar trades I or businesses It does not provide a higher rato of or taxation upon unearned I incomes than upon earned Incomes asI as ns I do not think It wise to Inject this I question Into the legislation at this time as the amendment ought to be I passed at as early n a date as possible and could bo ho e passed before beCore the end of this month if It tho the administration would approve it I believe belleve In the principle of or taxing unearned Incomes at a n higher rate than earned Incomes Corporation leT 8 B Per Pcr Cent Instead of tho different normal taxes Imposed under existing revenue acts amounting to 6 pe per cent upon the tho total net Income of ot all corporations the amendment levies les a straight ht tax of oC S Sper Sper Sper per cent upon the net income of or all nil corporations except those whose net Income 11 Is less than thO-n 2000 This Thle 8 E Stier per percent percent cent tax is not imposed upon individuals individuals or partnerships thus equalizing tho the Income tax re required to bo be paid by byan byan byan an Individual or an Individual partner engaged in business as compared with the Income tax imposed upon the stockholders of a corporation This S 8 Sper Sper per cent rate on corporations will raise over and above o the tho amount that tho the 6 per pOl cent rate under existing laws lawI will yield or or-In or In other words tho the amendment will provide n revenue to tho the government of il on corporation cor cor- corporation incomes In place of or under existing laws The greater changes provided for Cor In Inthe Inthe inthe the amendment to the existing laws la will be found in title 2 designated In Inthe inthe the thc act of October 3 1917 as war excess profits tax and In m my amendment amendment amend amend- ment Under this as a 31 war profits tax title tille the amendment only taxes the war profits and at nt graduated d rates that I w will Ihl hereafter name Under inder this title tithe the prewar period moans the throe three years cars of or the calendar years eaTS H 1009 09 1910 1911 1912 an and 1913 remaining after the tIle exclusion of th the tw two calenda years in which the net Income of ot the I trade or bu business was was- respectively ety the greatest and the least The These e five tho years ears cart taken laken a as the prewar period will result In a n much fairer normal Income of all at classes of or business than titan the three years 1911 years 1911 In 1912 and 1913 1 provided 1913 provided ro ld d dIn In existing laws Taking in the five rt years year as provided In the amendment wHIt will t eliminate practically all If 11 not all claims cl of ot discrimination against subI subnormal subnormal sub sub- normal businesses and It certainly will Trill I prevent a 0 just jut claim of ot discrimination being made that the Income from an any anyone anyone one class of or business during the five years was subnormal as proved pro to be bethe bethe bethe the case case In a n few tew classes of oC bu business taking the normal earnings of or the three prewar years ears provided in the act of 01 October 3 1917 Certain Exempted d. f Again Agarn if Ie a a. corporation or partnership partnership partnership partner partner- ship was not In existence or an Individual individual In- In was not engaged In trade or orI I business during the whole of each of 01 t i j s such uch fl five calendar years hut but was aft In InI I existence 01 or on engaged in trade or business business busi busi- I ness luring during the whole of oC four tour of ot such calendar years the term means the two I j of such four years remaining after arter a alike alike like exclusion and If It a corporation or 01 orI I partnership was not In existence or an ani i Individual was not engaged in trade or business during the tho whole of each j i o of four Cour of ot such calendar years ears the I I term means as many o of such calendar i I years during the whole of which the corporation or partnership n w was s s In ex exI existence ex- ex or the Individual was engaged I In trade or business I The profits war tax lax as provided in InI j I the time amendment does not apply to corI cor- cor I which are exempt from InI income income in- in CO come taxes These he are areITI are are- I I Labor First ITI ct hn agricultural 0 tl lr ll lr 1 n or M tf u ur t izu i u c-u cultural 1 organizations s r I Second Second Mutual Mutual savings bank not noti 1 I having ha a capital stock represented b by r shares i i i Third Third Fraternal Fraternal beneficiary t tv ty order or association op operating under under uner un un- der er th the lodge e system or for tor tho the exclusive exclusive excl t RI sive 4 bene benefit fit of ot the men men hers of f a fraternity fra tra- Itself operating under the lodge system and providing for the payment I of ot life lite sick accident or other benefits I to the members of such society order or association or their dependents 1 Fourth Fourth Domestic Domestic building and loan loani association and operative co-operative banks hanks i without without capital stock or organized and andi i I operated for tor mutual purposes and without without without with with- out profit j I Fifth Cemetery company compan own owned d and i operated exclusively el for tor the benefit of Its members I Sixth SIxth Corporation Corporation or association or organized organized organized or- or and operated exclusively for tor religious charitable scientific or edu- edu i purposes no part of ot the net netI I Income of ot which Inures mutes to the benefit of 01 any n private stockholder or Individual I ual Seventh Seventh Business Business league chamber of oC commerce commerce- or om board of trade not organized organized organized or or- I for profit and no part of ot thenet thenet the tho net Income of ot which inures to tho the benefit benefit benefit bene bene- fit of ot an any private stockholder or Indi I vidual vidual I Welfare Not fiot Taxed cI Eighth Civic Eighth Civic league or or organization not or organized for profit but hut operated exclusively for tor tho the promotion of oC social welfare Ninth Ninth Club or organized and operated exclusively Tor p pleasure asure recreation and other purposes no part of oC the tho net income of which h inures to the benefit benet or of an any private stockholder or member Tenth Tenth Farmers Farmers Farmers' or other mutual hall hail cyclone or fire insurance company mutual ditch litch or irrigation company mutual or operative co-operative telephone company company com com- pall pany or like Inc organization of or a pun purely h local character the income of ot which consists solely of assessments dues and fees collected from members for forthe forthe forthe I the sole sale purpose of meeting meeting- Its ex expenses expenses ex- ex I Eleventh Eleventh Farmers Farmers Farmers' or like association organized and operated operated oper oper- as a sales agent for tor the purpose of oC marketing the products of ot Its members members mem mem- bers and turning back to them the proceeds of sales less the necessary selling selling- expenses expense on the lime basis of or the quantity of produce furnished by them Twelfth Twelfth Corporation Corporation or association organized for Cor the exclusive purpose of at holding title to property collecting income In- In como come and md turning over o tho the entire amount thereof less expenses to an organization which itself Is exempt exempt ex ex- empt empl from the tax Imposed by this ti title title title ti- ti tle or Thirteenth Federal Thirteenth Federal land banks and national farm Carm loan associations as provided pro pro- 10 vided in section 26 2 of the act approved July 17 1916 entitled An act to provide pro pio- vide vido capital for agricultural development develop develop- ment to create standard forms torms of In Investment Investment investment In- In vestment ba based cd upon farm mortgage to equalize rates of ot interest upon farm tIm loans to furnish a market marcet for United States bonds to create creato government go de elf elf- and financial n agents for tor the United States and for tor other purposes States States' Incomes Income Exempted Fourteenth Fourteenth stock stock Joint land banks banka an s to income derived from bonds bond or debentures of other stock Joint land lanel banks or any federal land bank belonging belonging belong belong- ing to such stock Joint-stock land bank b There shall |