AN ACT TO PROVIDE REVENUE, EQUALIZE TAXATION, 46932 MARCH 12 TO 15, 1934 Printed for the use of the Committee on Finance UNITED STATES WASHINGTON: 1934 MONDAY, MARCH 12, 1934 UNITED STATES SENATE, The committee met, pursuant to call, at 10 a.m., in room 312, Senate Office Building, Senator Pat Harrison presiding. Present: Senators Harrison (chairman), George, Walsh, Barkley, Connally, Gore, Costigan, Bailey, Clark, McAdoo, Byrd, Lonergan, Reed, Couzens, Keyes, Metcalf, La Follette, and Walcott. The committee had under consideration H.R. 7835. The CHAIRMAN. The committee will come to order. I would like to state to those who appear before the committee that we are going to have three mornings of hearings. There are many witnesses, consequently everyone must be very brief. If you have a brief to file, with a short statement, we will appreciate it. We have copies of the hearings that were conducted before the Ways and Means Committee. We are going back into executive session, your briefs will receive consideration, and I hope the witnesses will cooperate with the committee and make their explanation as short as possible. If there is anyone in the audience now who merely wants to file a brief, you may do that, thus saving your time and the committee's time. GENERAL STATEMENTS Mr. David A. Gaskill, Cleveland, Ohio, representing the Cleveland Chamber of Commerce. STATEMENT OF DAVID A. GASKILL, CLEVELAND, OHIO, REPRESENTING THE CLEVELAND CHAMBER OF COMMERCE Mr. GASKILL. First, as to taxation of gains and losses, sections 117 and 23 (j). The bill as it passed the House contains provisions to the effect that losses may be deducted only to the extent of gains. That, as a revenue producer, should be efficacious, because unquestionably large amounts of losses are deducted, with the resulting decrease in the tax. It is noted, however, that in a case of a sale that is made in December at a loss there may be no benefit from that loss; yet a gain may be realized from the sale in January of the next year, with the result that that gain would be subject to taxation. We make the suggestion that the excess of losses over gains be carried forward to offset gains, if any, in the succeeding years. That would not reduce the income that is applicable to the year 1934. It would affect the income from tax returns filed covering the year 1935. 1: There is also a plan in the bill to tax the amount of gain, or to determine the amount of the gain, by reference to the period during which the property was held. In the case of property that is held 2 years or more, they would tax 60 percent of the gain and allow 60 percent of the loss. Our organization takes the position that that would unduly tax property held just over 2 years and would serve to prevent sales, thereby permitting security prices. We feel that the present plan of making the dividing date 2 years, 122 percent of the gain, when the property is held more than that, is preferable to the plan as contained in the bill as it passed the House. Senator REED. You realize that the present plan gives no relief to the smaller taxpayer, do you not? Mr. GASKILL. No; I don't understand that it gives no relief to him. He gets a benefit from his gain. It is true he does not get as much relief as the more wealthy taxpayer. Second. Personal holding companies, section 102. The bill, as passed by the House, contains a provision to tax the undistributed, adjusted net income of personal holding companies. The CHAIRMAN. I hope the experts will make a note of these objections, so the committee can get the benefit of them. Then we can give them consideration. Senator REED. As to personal holdings? Mr. GASKILL. As to personal holding; yes, sir. Senator REED. What is your point about that? Mr. GASKILL. That while in its endeavor the plan is all right, if personal holding companies are used to escape taxation, some reasonable measure to prevent it is satisfactory, but the provision as passed by the House would seem to place a burden upon companies that I do not think the House ever intended to punish. For example, if a coal-mining company which had leased its property, and therefore had its income from royalties of debts, or a bond issue, it might be subjected to that penalty. The CHAIRMAN. You would not apply that to future loans, would you, but just on past-due obligations? Mr. GASKILL. I think it should be made to apply to past loans, sir. The CHAIRMAN. To past loans? Mr. GASKILL. Yes. An office building which was required to rehabilitate its building, to use earnings for capital repairs or replacements, might be subjected to the provisions of it. A number of companies, I understand, in these times, have debenture issues outstanding, or bond issues, which deprives them of the right to pay out dividends until they have paid their debts. It would make those companies subject to this provision. The CHAIRMAN. I may say to you that the committee is giving that consideration. Those suggestions have already been made. Mr. GASKILL. Thank you, sir. The next, as to exchanges and reorganizations: The bill, as passed by the House, took out the so-called "parenthetical clause ", and limits the definition to statutory mergers and consolidations. We take the position that with that eliminated, the bill is now indefinite. |