Less Money For More Taxes

Stockholders will get less money in dividends this year. That frightening fact was cinched last week when Treasury Secretary Morgenthau asked Congress to crack down on business with taxes running up to 88 3/4%. Thus, just when the 8,500,000 U.S. stockholders would like more money to pay their increased taxes, they will get less. Examples-assuming no change in profits before taxes:

>American Telephone & Telegraph (57% of all shareholders: women) would pay $173,468,000 taxes instead of $106,268,000; profits per share would fall from $10.26 to $6.65, well below the famed $9 dividend.

> U.S. Steel would pay $165,000,000 taxes instead of $119,000,000; per share profits would drop 50% to $5.15 (still above the conservative $4 dividend).

> Net per share of American Can (now making torpedoes), would be cut from $6.45 to $3.28-not enough for the $4 dividend.

>Du Pont earnings would drop from $7.50 to $4.50 a share, far below last year's $7 dividend. Du Pont, like General Motors and Chrysler, has already reduced its dividends.

Faced with profit and dividend cuts like these, many investors dumped stocks overboard as soon as they read Morgenthau's tax bill. Result: the Dow-Jones industrial average plopped 4 1/2 points to 102.1, lowest since March 1938; utility shares hit 12, lowest ever and only one-twelfth of 1929-5 145 peak. Railroad shares fell over a point, despite the 3-to-6% freight-rate increase they had been allowed on Monday (but rail stocks, at 26.3, were still 2 points above last year's low). New York Stock Exchange seats dropped too-one sold for $18,000, a 45-year low.

This week some Wall Streeters were saying that the tax stew was overdone. For one thing, Congressmen seemed to be getting somewhere with their general sales tax (to ease the burden on corporations and the great middle-class). For another, even if dividend rates were cut in half, most stocks would yield 4 to 8%.

An A.F. of L. local acted up like a dog-biting man last week. To speed the war program, the Chicago Brotherhood of Painters, Decorators & Paperhangers agreed to do more work (40 hours a week instead of 30) for less money (a 6% cut in hourly wages to $1.725/2).

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