Act of 1934

Last week Congress made up its dual mind on how it was going to tax the country next year and sent to President Roosevelt a bill which his signature would make the Revenue Act of 1934. The new law, it was estimated, would add some $417,000,000 per year to the Treasury's present income. Collections would have been $55,000,000 more if a Senate amendment for a flat 10% addition to all income taxes had not been rejected by the House. Persons with earned incomes of less than $25,000 get a small tax reduction. Corporations, higher incomes, big estates foot the bill for increases. The levies:

Normal Tax. Personal exemptions of $1,000 for single persons, $2,500 for married couples, $400 for dependents (no change). Normal tax: 4% flat (old law: 4% on the first $4,000 and 8% on larger amounts). This deduction in the normal tax is, however, offset by

Surtaxes which begin at 4% on net income (after personal exemptions) of more than $4,000 and grade up to 59% on incomes over $1,000,000. (Old law: surtaxes began at 1% on net income exceeding $6,000 and graded up to 55% on incomes over $1,000,000.) Effect of these changes is to boost taxes on income from dividends which are exempt from the normal tax but not from surtaxes. The surtax brackets are arranged to scale up more steeply so that men with incomes between $25,000 and $1,000,000 will pay more. Increased revenue from normal and surtax changes: $18,000,000.

Capital Gains & Losses are taxed as part of income, with 100% of the gain or loss counting if the asset is held less than one year, 80% if held one to two years, 60% if held two to five years, 40% if held five to ten years, 30% if held over ten years. (Old law: a flat 12% tax on gains.) Capital losses are deductible from capital gains and not more than $2,000 additional from ordinary income. (Old law: no deductions except from capital gains.) Increased revenue: $30,000,000.

Corporate Incomes are taxed a flat 31% (no change) but consolidated returns whereby the losses of one subsidiary offset the profits of another will not be permitted except to railroads. Increased revenue: $35,000,000.

Capital Stock and Excess Profits. A tax of 1/10% on declared value of capital stock and a tax of 5% on corporate earnings in excess of 12% on declared capital. (By the old law these twin taxes would have ended June 30.) Increased revenue: $95,000,000.

Estates & Gifts. Taxes from i% on amounts over $50,000 to 60% on amounts over $10,000,000. (Old law: maximum of 45% on estates over $10,000,000.) Gift taxes of exactly three-quarters of estate taxes on the same amounts. Increased revenue: $96,000,000.

Other sources of revenue: Extra tax on undistributed earnings of personal holding companies: $20,000,000. Limitations on losses of partnerships: $5,000,000. New tax provisions on corporate reorganizations: $10,000,000. New regulations (not a part of the law but promised by the Treasury) on depreciation and depletion allowances: $85,000,000. Vegetable Oils. A new 3-c--a-lb. tax on fish oil; a new 5-c--a-lb. tax on coconut oil (and copra) with the proviso that Philippine coconut oil shall be taxed 3-c- and the amount collected on the Philippine product turned over to the Philippine treasury. This was one of the most controversial features of the tax law. Senator Tydings, Chairman of the Senate Insular Affairs Committee, cried indignantly: "The American Congress should hang its head in shame. In the Independence Bill we already have cut Philippine imports 40%. Now we come along and further curtail them. This is nothing but an attempt of political farmers in Washington to tax one group of the American people--people who are yet under our flag-- for the special benefit of another group. "It's dishonest and unfair; it violates our promise to the Filipino people and reflects dishonor and discredit on Congress. But the lobbies demanded it, and what does honor amount to with Congress when the lobbies make their demands?" President Roosevelt felt much the same way about the coconut oil tax, but still not strongly enough to veto the whole measure because of it. Instead he prepared a special message to Congress urging a change in separate legislation. Tax Publicity. The President was again given the power which he now has of making public personal income tax returns, but rampant progressives won a further point on tax publicity: the Treasury was directed to give the Senate a list of all corporation executives earning over $15,000 per year, and the Commissioner of Internal Revenue was ordered to publish the amount of taxes paid by taxpayers.

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