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The advantages and protections conferred upon corporations by government increase in value as the size of the corporation increases. . . . I, therefore, recommend the substitution of a corporation income tax graduated according to the size of corporation income in place of the present uniform corporation income tax of 13¼%. The rate for smaller corporations might well be reduced to 10¾%, and the rates graduated upward to a rate of 16¼% on net income in the case of the largest corporations, with such classifications of business enterprises as the public interest may suggest to the Congress.
Provisions should, of course, be made to prevent evasion of such graduated tax on corporate incomes through the device of numerous subsidiaries. . . . The most effective method of preventing such evasions would be a tax on dividends received by corporations. . . . Ultimately we should seek through taxation the simplification of our corporate structures through the elimination of unnecessary holding companies in all lines of business.
I renew, at this time, the recommendations made by my predecessors for the submission and ratification of a Constitutional Amendment whereby the Federal Government will be permitted to tax the income on subsequently issued State and local securities and likewise for the taxation by State and local governments of future issues of Federal securities.
Balanced Budget? Save for his suggestion on corporate income taxes, Franklin Roosevelt did not offer any specific tax figures, but word soon got around the Capitol that what he had in mind was a tax on legacies over $10,000,000, higher income taxes on incomes over $1,000,000 a year. Newshawks, overanxious to whip up a good story, blindly jumped at the figure of $1,000,000,000 a year in new taxes. However, an extra billion in taxes would make up less than one-third of the current federal deficit. Moreover, the billion-dollar figure was taken over bodily from an estimate by Senator La Follette from a tax program he advocates—a program which would begin by reducing income tax exemptions from $2,500 to $2,000 for married persons and end by boosting taxes on small as well as large incomes and inheritances.
The number of persons in the U. S. with incomes of $1,000,000 a year and over was 231 in 1926, 46 in 1933. Under the present tax law a person with an income of $1,000,000 already pays $573,000 in normal and surtaxes and 63% of any income over $1,000,000. If the Government could squeeze an extra $250,000 tax out of each million-a-year man it might gain at most an extra $12,000,000 during Depression, and perhaps $60,000,000 in "normal" times. Similarly with estate taxes. Estates of $10,000,000 already pay $4,416,000 tax and 60% of any amount in excess of $10,000,000. If the Government could squeeze an extra $2,500,000 out of each estate, its extra annual revenue would amount to $30,000,000—provided one man with $10,000,000 or more could be counted on to die each month of the year. Even to amateur tax experts it became painfully apparent that the very rich would not balance the New Deal's budget with its four-billion-a-year deficit or pay off much of the U. S.'s 29 billion public debt.
Share the Wealth.