1

Schedule for chart IV-Distribution of 241 television companies by effective taz rates, 1950-52, inclusive

1 Excludes 2 companies reporting deficits in 1 or more years.

Source: Derived from: Moody's Investors Service, Moody's Manual of Investments, Industrials. Standard & Poor's Corp., Corporation Records.

APPENDIX 1

RADIO-TELEVISION MANUFACTURERS ASSOCIATION-26 COMPANIES INCLUDED IN THE TELEVISION GROUP

(Whereupon, at 2:30 p. m., the committee recessed, to reconvene at

10 a. m., Saturday, June 13, 1953.)

EXCESS PROFITS TAX EXTENSION

SATURDAY, JUNE 13, 1953

HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,

Washington, D. C.

The committee met at 10 a. m., Hon. Daniel A. Reed (chairman) presiding.

The CHAIRMAN. The committee will come to order.

I am going to present a statement at the start.

At the request of the administration, this committee has been conducting hearings on a proposal to extend the excess-profits tax beyond the expiration date fixed by the Congress. We have heard proponents and opponents of this proposal. Other than the spokesmen for the executive department and representatives of a few such organizations as the CIO, the ADA, and the Committee for Economic Development, we have witnessed a parade of determined opposition to the extension of the excess-profits tax.

In my considered opinion, the administration has failed to make a case. It has taken the position that the excess-profits tax is an uneconomic and undesirable levy but because the tax produces some immediate revenue it should be retained. This contention is based on the false philosophy that the end justifies the means. And it is a shortsighted viewpoint-so narrow, in fact, that it deals with only the 6 months ahead. It fails miserably to fully comprehend the evils inherent in the excess-profits tax. It ignores the indisputable fact that this vicious tax is discriminatory, that it does irreparable harm to small business, and that it possesses a direct threat to our general long-range economic stability.

Tax and economic experts are unanimous in their condemnation of the tax. The sooner it is erased from the statute books the better it will be for our economic health.

The plain, unvarnished truth is that no necessity exists for its continuation, despite administration protests to the contrary. This tax can be permitted to die, and the revenue it will produce in the next 6 months can be made up through other economies effected in our Government operations. The Treasury Department estimates that in that period it will produce $800 million in revenue. That, in my opinion, is entirely too high.

But taking the Department's own figure, we can, by cutting foreign aid an additional $2 billion and by saving another $2 billion as the result of an end to the fighting in Korea, justify the elimination of the excess-profits tax and at the same time permit the passage of an individual income-tax reduction measure now pending before the House Rules Committee. This can be accomplished without impairment of

our financial position and without in any manner reducing our essential defense program.

The administration can no more justify an expenditure of $5.4 billion in the next fiscal year for foreign assistance than it can justify continuation of the excess-profits tax. A grant of $3.4 billion plus the billions in unexpended funds left from past appropriations would be sufficient for the needs of our allies. Certainly it would not buy less cooperation than we have been receiving in recent years, despite the expenditure of more than $45 billion in foreign assistance since the end of World War II.

It is high time, in my opinion-and I know that millions of our citizens share that opinion-that we pay some attention to our own people and the other economic needs of our own country. It is most unfair to expect Americans to play Santa Claus indefinitely to other people throughout the world. There is no reason that I can see why we should finance the coming reduction in British taxes for the citizens of England and completely ignore the crying necessity for tax relief for our own overburdened taxpayers.

The administration will merit the confidence of the people of America only if it fairly represents the best interests of our people. And the best interests of our people demand an immediate individual income-tax reduction and an immediate end to the vicious excessprofits tax.

I was taught at my mother's knee that charity begins at home. Let us, after years of generosity to our neighbors, recognize the fact that our people should be permitted to enjoy more of the fruits of our labor. Let me repeat that this can be done without in any wise impairing our own necessary defense buildup and without danger to our efforts to build a united front against Communist aggression.

Mr. MASON. Mr. Chairman, that is a very, very strong statement, and I want to say I subscribe to every word of it.

The CHAIRMAN. Thank you.

Now I would like to insert at this point a short article that appears in the Herald Tribune dated June 12. Jesse Wolcott, chairman of the great Banking and Currency Committee of the House, made a speech there, in which it appears that Mr. Wolcott advises the dropping of the excess-profits tax. I would like to insert that in the record. I understand he made a very powerful speech.

Is there objection?

The Chair hears none.

(The matter submitted for the record is as follows:)

WOLCOTT ADVISES "DROP PROFITS TAX"

ATLANTIC CITY, June 12.-Dropping of the excess-profits tax after the June 30 expiration date was advocated today by Representative Jesse P. Wolcott, Republican, of Michigan, chairman of the House Committee on Banking and Currency, as a means of increasing productivity and other revenues. Representative Wolcott addressed the 35th annual convention of the District of Columbia Bankers' Association. "If the bill for an extension of 6 months does reach the floor of Congress, it will pass by a very small majority," Representative Wolcott predicted. "When taxes are reduced even slightly, more money is made available for investment. Business and agriculture get expansion capital from profits.

"I am not sure we shouldn't take the calculated risk of allowing the tax to expire and see if production won't increase. It will mean larger returns in other types of taxation."

The CHAIRMAN. Also, without objection, I would like to incorporate in the record a statement from the Great Central Insurance Co., of Peoria, Ill.; a letter from Mr. L. D. Fedderman, president of the Interstate Engineering Corp., of El Segundo, Calif.; and a letter from Mr. Floyd F. Beechwood, president of the Mid-Western Machinery Co., of Joplin, Mo.; a letter from the Charles L. Rumrill & Co., of Rochester, Ñ. Y., originally scheduled to appear but offering a statement in lieu of appearance, the statement to be furnished the members at this time; and a statement from Mr. J. T. Lewis, Jr., president of the Lewis Welding & Engineering Corp., of Bedford, Ohio, in lieu of a personal appearance.

(The matters above referred to are as follows:)

CHICAGO, ILL., June 13, 1953.

Re Proposed amendment to section 439 (b) (2) of the Excess-Profits Tax Act

of 1950

Mr. GORDON GRAND, Jr.,

Clerk, House of Representatives Ways and Means Committee,
United States Congress, Washington, D. C.

DEAR SIR: We sent you the following telegram on June 11, 1953:

"Request permission to insert in record of hearings on excess-profits tax objection of Great Central Insurance Co., Peoria, Ill., to any extension of tax law. If Congress should deem such extension advisable, Great Central Insurance Co. desires to submit an amendment permitting an insurance company to annualize its premiums collected other than annually in determining its pro rata unearned premiums under the law. Will have memorandum to you by June 15 or 16. Regret inability to do so earlier."

This letter supplements the telegram and presents our proposed amendment to the Excess-Profits Tax Act on behalf of Great Central Insurance Co., Peoria, Ill. We regret that we were unable to have the comptroller of the company available to testify at the hearings, but he was unavailable because of business on the west coast.

We propose the following amendment to section 439 (b) (2), the new material being indicated by italics:

"(2) In the case of an insurance company, an amount equal to 66% per centum of the mean of the amount of the pro rata unearned portion of premiums written on an annual basis or annualized if written other than annually, determined at the beginning and end of the taxable year, plus"

The purpose of this amendment is to correct inequities in the present law between insurance companies writing on an annual premium basis and those writing on a monthly, quarterly or semiannual premium basis. The unearned premium reserves on policies written for less than a year are proportionately lower than the reserves on policies written on an annual basis. If all companies are permitted to calculate their unearned premiums on an annual basis, i. e., annualized, they would then have the same unearned premium reserve credit under the Excess-Profits Tax Act on a given annual volume of business.

Our amendment involves a request for relief arising from the failure of the Excess-Profits Tax Act of 1950, to authorize an insurance company collecting premiums on the semiannual, quarterly or monthly payment basis to annualize its unearned premiums in arriving at the borrowed capital credit and thus obtain the same degree of credit afforded annual premium companies. The act does not prohibit such action, but in the absence of permissive language, a semiannual, quarterly or monthly premium company calculating its borrowed capital credit on the same basis as an annual premium company might well be assessed substantial tax deficiencies plus penalties.

As now constituted, excess-profits taxes are computed as an additional tax over and above the other corporate income tax and with minor adjustments, the taxable net income, or profit dollar, of the corporation serves as the base for both the income and the excess-profits tax.

In the case of excess-profits taxes, however, a credit equivalent to that portion of the corporation's net taxable income considered to be normal, is allowed the taxpayer before applying the additional or excess-profits tax rate to such profit dollar. This credit is the standard prescribed for determining what portion of