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Form F. II 131




C o r r e s p o n d e n c e


Chairman Bccles


llartin Erost

Date A ^ t

Senate hearings on the
tax bill

I an transmitting a memorandum summarizing
recent hearings before the Senate Finance Committee on the
tax bill.




^-Office C o r r e s p o n d e n c e

ifr, Brn*rh

From RxoMnrA


Date. August 12,191*2
Subject: Hearings on Revenue Bill of
19bZ - Senate Finance Committee
July 29 - August 10

July 29 - The Finance Committee showed increased interest in compulsory
savings and Senator George indicated that, if introduced, these savings
should be combined with income taxation through the investment of a part
of tax receipts in savings bonds. Calimenting on the possibility of an
individual excess profits tax, Senator George pointed to the lack of
success with this tax in the first World War.
July 30 - Mr. C. F. Hotchkiss of Binghamton, Hew York, presented the case of a
small corporation which had to go into heavy indebtedness to the RFC in
order to meet the capital requirements of greatly expanded war output and
now found it impossible to meet both tax and debt payments. As a relief
measure he suggested that additional credit might be granted under excess
profits tax to corporations with greatly increased capital requirements.
Senator George predicted that the Committee would grant relief for debt
amortization to both individuals and corporations.
July 31 - Witnesses protested a provision in the House Bill under which a
limitation would be imposed upon the amount of immediate tax deductions
permitted against payments into pension trust funds. A subcommittee was
appointed to consider the matter with Treasury experts.
August 3 - Mayor LaGuardia, Professor Fairchild, professor Lutz, and others
testified against Federal taxation of state and municipal securities.
Mayor LaGuardia also thought that the proposed tax schedules TOuld leave
little possibility for people to continue investing 10 per cent of their
income in savings bonds.
- Mr. G. A. Witherspoon, President of the National Association of Life
Underwriters, recommended that an exemption be all'owed under the income
tax for payment of insurance premiums and that the specific insurance
exemption of fij0,000 be retained under the estate tax. Senator Taft pointed
out that it would be unfair to discriminate against people who invested
their funds in forms other than life insurance and that if relief was to
be given to policy holders, similar relief would have to be provided to
other investors. Senator George -favored a policy of providing debt relief
and suggested a deduction allowable against either the purchase of bonds,
the payment of life insurance, or the payment of previous debt obligations.




August 5 - Senator George indicated that the Senate Finance Committee did not
plan to suggest any substantial increase in the rates on individual and
corporate income taxes from which sources the Treasury had proposed to
collect an additional 1*2 billion of revenues* This pointed to the need
for a sales tax if the revenue goal of the Treasury was to be reached*
August 6 - The Treasury announced that it was to seek a policy which would
protect corporations against a double burden arising from payment of
excess profits taxes on profits subsequently recaptured by the Government
through renegotiation of war contracts.
Mr* Rm F* Berry suggested a method of administrating source collection
on wages and salaries according to which the employer would purchase stamps
from the Government and pass these on to his employees in place of withheld
wages thus saving himself considerable paper work*
Seven witnesses requested elimination of the fiscal year provision
as imposing an unfair and retroactive burden upon some corporations*
August 7 - Mr. Emile Schram, President of the Kew York Stock Exchange, recommended basic changes in the taxation of capital gains. He suggested
in particular that the holding period be eliminated or that short-term
holdings be defined as holdings of less than six months.
August 10 - The Committee heard several witnesses protesting against the
Treasury1s proposal to limit percentage depletion allowances on mines, oil
and gas well properties* Following an earlier rejection of the Treasury1s
proposal for the taxation of outstanding state and local securities, the
Committee rejected the Treasury1s request for adjusting the treatment of
individue.1 incomes in the eight community property States to that applicable
to other states. It is likely that the limitation on percentage depletion
will be similarly rejected*
It is expected that the hearings will close August 1J, and that the Committee
will begin with the framing of the Bill after a week's recess.