Word: excessive
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Dates: during 1950-1959
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...World War II, companies could compute their excess profits taxes by either of two methods: 1) choose a "normal" average profit during the base period years of 1936-39 and pay up to 95% tax, minus a 10% rebate, on all profits in excess of the average, or 2) take a "fair return" on their total capital investment. But use of the 1936-39 base discriminated against industries which were on the downswing of their particular business cycle in the base period, or had poured money into expansion and so had less than normal profits. Use of the investment base...
Down the Rathole. In practice, an excess profits tax spurs wasteful spending. In World War II, when 85? of every "excess" profit dollar "went to the Treasury anyway," no one paid much attention to padded expense accounts, high costs and wild spending on all kinds of hare-brained projects. "In effect," recalled U.S. Plywood's President Lawrence Ottinger, "the Government promised to throw $6 down any rathole where you threw...
With its other faults, the excess profits tax is also inefficient as a revenue raiser. Though it is five years since World War II's tax ended, a 25-man board is still considering thousands of claims for rebates. As a result, the apparent $40 billion yield of World War II's tax may ultimately dwindle to half-without counting other hidden billions "thrown away" in padded costs. The proposed new tax of Wyoming's Senator Joe O'Mahoney (an 85% levy on all profits above a 1946-49 base) is touted to yield $2.7 billion...
Needed: Statesmanship. Since higher corporate taxes tend to build themselves into the permanent tax structure, many businessmen probably prefer an excess profits tax which would end with the emergency. But the emergency which the U.S. now faces, as Harvard's Sumner H. Slichter pointed out, may last for a decade or more. During that time the U.S. must expand all of its resources in a production race with Russia. "We must see that our productive capacity grows rapidly," says Slichter. "An excess profits tax which discourages the growth of productive capacity ... could help us lose the contest. An excess...
Most economists feel that the U.S. may need higher taxes, both corporate and personal, to help pay for the full-scale rearmament that faces the U.S. (see BACKGROUND FOR WAR). But they think that it would be far better for the Government to shelve an excess profits tax in favor of a boost in the regular corporate tax, and a system of tax incentives (e.g., a more favorable rate on profits put into new capacity) to encourage plant expansion...