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Mr. JENKINS. So you might have your statement the way you want it as near as we can under the rules.

Mr. MITCHELL. Thank you, sir.

Mr. JENKINS. Any other questions?

Mr. EBERHARTER. He has been a very good witness.
You make a very strong case here.

Mr. JENKINS. Thank you very much, Mr. Mitchell.
(The documents submitted by Mr. Mitchell follow :)

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SYLVANIA ELECTRIC PRODUCTS,

INC.

COMPARISON OF SYLVANIA'S EFFECTIVE TAX RATE WITH THOSE OF MAJOR TELEVISION MANUFACTURERS

(All Companies With Salea Exceeding $50 Million)

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Source:

Derived from:

Company data;

Moody's Investors Service; Standard & Poor's Corporation.

THE PRESENT EXCESS PROFITS TAX LAW

DISCRIMINATES AGAINST SYLVANIA...

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BUT-IT WAS DENIED USE OF THE GROWTH FORMULA-BECAUSE OF A TECHNICALITY

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THE PRESENT PROVISIONS OF EXCESS-PROFITS-TAX LAW DENYING USE OF GROWTH FORMULA SEVERELY DISCRIMINATES AGAINST SYLVANIA ELECTRIC PRODUCTS, INC.

The excess-profits-tax law severely discriminates against Sylvania Electric Products, Inc., one of the fastest-growing television manufacturers, and places it in a most unfair competitive position in its industry. The case of Sylvania is a glaring example of the inequities caused by the excess-profits-tax law. Sylvania's television competitors are entitled to compute their excess-profits credit under the growth provisions of section 435 (e) (1) (B) of the Internal

Revenue Code. Our company, however, is denied the use of these growth provisions, though its sales of television picture tubes increased almost 4,000 times between 1946 and 1950 (4 times as fast as industry tube sales). This discrimination results because Sylvania is required to consolidate its own experience with that of two subsidiaires which were liquidated in 1950. Such consolidated experience barely misses the growth tests of section 435 (e) (1) (B).

The subsidiaries were liquidated in the early part of 1950 prior to Korea and, of course, prior to any consideration of the excess-profits-tax law. Under the present tax law, as more fully explained below, Sylvania is unable to qualify for the growth provision on the basis of its own experience because it liquidated its subsidiaries prior to the end of 1950, whereas it would have been permitted to qualify for the growth provision if the liquidation had occurred on or after January 1, 1951. The unjutified discrimination caused by this technicality against Sylvania can be removed by an amendment to section 462 (c) of the Internal Revenue Code, permitting Sylvania to determine eligibility on the basis of its own experience from the adequate separate records it maintains. Appendix 2 contains a draft of a proposed code amendment to accomplish this result.

THE PRESENT EXCESS-PROFITS TAX GROSSLY DISCRIMINATES AGAINST SYLVANIA

Without benefit of the growth formula under which other leading firms in the television industry (set manufacturers and their suppliers) compute their excessprofits taxes, Sylvania's effective tax rate exceeds that of any other major television manufacturer. It is greater also than the average effective tax rate of companies operating in other industries. The extent of the disparity between Sylvania's actual tax burden and that of other companies is glaring-whether the comparison is confined to television manufacturers or extends to the average taxpayer in other industries.

The best measure of a company's Federal income (and profits) tax burden is the proportion of income before taxes that these levies absorb. The following table and the attached chart 1 compares Sylvania's 1950 and 1951 experience in this respect with that of (a) 25 other television manufacturers (every television manufacturing company for which financial statements are available) and (b) its major competitor in this field, separately.

Effective tax burden, Sylvania and other television manufacturing companies

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Source: Derived from company data, Moody's Investment Service and Standard & Poor's Corporation.

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SYLVANIA ELECTRIC PRODUCTS, INC.

EFFECTIVE TAX RATES FOR SYLVANIA ELECTRIC PRODUCTS, INC. AND
OTHER TELEVISION MANUFACTURING COMPANIES

1950 AND 1951

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-1950

Source:

-1951

Derived from:
Company Data; Moody's Investment Service;
Standard and Poor's Corporation.

Prepared By
BONI, WATKINS, MOUNTEER & CO.
Incorporated
New York, New York

Consulting Economists

These figures demonstrate dramatically that both in 1950 and 1951 Sylvania's effective tax burden was substantially greater than that of other television manufacturing companies. Indeed, in 1951 the disparity increased, raising Sylvania's effective tax burden to a level some 10 percent higher than the group average and almost a third again higher than that of Radio Corporation of America, the company with the biggest stake in our industry.

In chart 2 Sylvania's effective tax burden in 1950 and 1951 is compared with that of the average tax burden of companies in (a) the electrical machinery group of industries of which Sylvania is also a part, (b) durable goods manufacturing industries, and (c) nondurable goods manufacturing industries. In both years income and profits taxes took a greater proportion of Sylvania's income than they did of corporate income in any of these industry groups. Sylvania paid out, on account of these taxes, over 5 percentage points more of its profits in 1950 than the average of the entire group of companies classified as electrical machinery manufacturers and nearly 4 percentage points more in 1951. Instead of obtaining the allowances accorded other growth companies, Sylvania has seen its profits unfairly taxed away. Consequently it has been deprived in substantial part, of the resources necessary to its continued growth, while its competitors have been enabled to finance continued expansion out of tax savings realized under the growth formula.

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