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David Coolidge

Tax Dodgers Want a 10% Sales Tax –

(31 August 1942)

From Labor Action, Vol. 6 No. 35, 31 August 1942, p. 3.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The National Association of Manufacturers has climaxed its underground campaign against “union security” and for a national sales tax by coming out into the open with the demand for a 10 per cent sales tax.

The NAM is the union of the bosses, big and small. It is dominated of course by the big bosses. The little bosses are in there looking for hints and ideas on, how to become big bosses. While the NAM is busy trying to see to it that the workers and the poor get squeezed, by increased taxes, they have nothing to say on a little matter of tax dodging that was the subject of some remarks by the Secretary of the Treasury before a joint congressional committee on internal revenue.

The reason of course, is clear: the tax dodgers are members or potential members of the NAM; that is, they are bosses and exploiters. If the government can get larger sums from the workers then the Treasury Department might not become so nosey in connection with tax dodging by the bosses.

Uses Various Methods

Secretary Morgenthau testified that “the method used by the taxpayer was to inflate expenses with the evident purpose of avoiding normal and excess profits taxes on corporation earnings. The devices used include the payment of excessive salaries, the distribution of unearned bonuses and the payment of unreasonable sums for the purported services to persons closely connected with the management of the companies involved.” He cited seven cases without revealing the names of the companies. He said that Congress should decide the question of revealing the names. The seven cases cited by the Secretary follow:

”Company A makes an important airplane part. This corporation is owned by one man, who hired himself as its sales representative. His compensation in 1941 was $1,656,000. By consolidating these earnings with those of the corporation, we have blocked this obvious attempt to divert profits and we have increased the corporation’s income tax by $1,117,000.

“Company B makes steel. All stock in this corporation is held by three families. Excessive salaries, were paid to officers who were also stockholders. The revenue agent has recommended disallowance of $82,000 in salaries, and the company has already agreed to a disallowance of $58,000.

Company C makes vital equipment for airplane pilots. This corporation paid $31,104 in rent in one year to the wife of the president for using property which had cost her $45,412. A brother of the principal stockholder, without special training or ability, drew a salary of $15,000 a year and a son and daughter, just out of school, got $7,500 a year each.

“Company D makes tools and dies. This company is owned by two brothers and their wives. It paid dividends of $40,000 in 1940 and $100,000 in 1941, while salaries totaling $128,000 were paid in 1941 to the president, his wife and his brother.

Company E makes forgings. The stock is owned by three families. From 1938 to 1941 the salaries of employees who were stockholders and relatives of stockholders increased 523 per cent. Excessive salaries for 1941 have been disallowed to the amount of $568,000.

“Company F makes equipment for airplanes. Three principal officers of this corporation took salaries of $100,000 each and the corporation claimed it had set aside over $575,000 in bonuses. Salary and bonus payments totaling $516,000 were found to be excessive. Other disallowed deductions included $16,000 paid for watches given to employees, $14,000 for banquets and picnics, $4,000 for photographs taken at banquets and picnics, and $1,900 for tickets to football games. Other important deficiencies were found in the tax return.

“Company G makes a device important to aviation. This corporation is owned almost entirely by one man, his wife and his brother. The two men increased their salaries from $12,000 and $15,000 in 1939 to $72,000 and $90,000 in 1941. The royalty rate on the patent jointly held by them, was increased, with the result that with, expanded sales for war purposes the royalties paid to them increased from $87,000 in 1939 to $1,179,000 in 1941.”

Typical of the Whole Boss Class

It would be interesting but it is not especially important that we know the names of these companies. It is significant, however, that Congress does not make public the names of the “pay-triots.” It is net especially important to know their names because they are only typical of the whole boss class. Furthermore, the instances cited are all probably comparatively little fellows who are only aping the big boys like Standard Oil, General Electric and U.S. Steel. Right at the time when they are making a drive against the workers, their liberties and living standards, the bosses feather their own nests and the nests of their relatives and closest stooges.

It is literally true that the bosses look on the CIO, slogan of “equality of sacrifice” as having nothing to do with them. For them it means equality of misery and want for the workers, and equality of opportunity to increase profits, dividends and salaries for the bosses.

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Last updated: 31.12.2013