Businessmen on Taxes

After this week there will be no doubting the fact that a big segment of U. S. Business has more courage than Congress in facing the economic problems of defense. Last summer Congress broadened the income tax base, imposed a 10% income tax surcharge (to raise about $123,000,000 this year) and a corporate excess-profits tax (to raise about $106,000,000). With a Federal deficit estimated at $6,289,000,000 this year and $9,310,000,000 next year, these were timid gestures.

In FORTUNE'S fourth Forum of Executive Opinion--a panel of 16,000 of business management's top men--U. S. business executives whose enterprises and stockholders will have to pay a large part of any taxation increase (and might be thought even less eager than Congress to face it) this week have their say on the problem. Most important finding of the Forum is that 66.7% of Business favors higher taxes at once. If Congress was afraid to pour out the bad medicine, its No. 1 tax patient was asking for it.

Ending tax exemption on Federal bonds (which would hit wealthy pocketbooks hardest) was approved by 77.9%; and 66.3% wanted to drop tax exemption on Federal bonds without waiting for abolition of tax exemption on State and local bonds. Additional luxury and excise taxes were favored by 53%. But if taxes are going to be higher, Business wants them brought out in the open, for citizens both great & small to see. A nearly unanimous vote of 94.2% was cast for broadening the income tax base still further. Reason (as given by 92.9%); to "make more voters conscious of the fact that Government expenditures have to be paid for." A Federal sales tax (repeatedly thumbed down by President Roosevelt) was approved by 63.7%, of whom 88.9% liked the idea because the tax would be visible.

The previous FORTUNE Forum termed the New Deal tax policy one of the two principal deterrents to lasting business recovery. This week the Forum had a chance to tell why. Chief criticism vis that the Administration lacked courage in facing the tax problem: 80.7% believed the New Deal was afraid to let voters think about tax costs, thus was trying to raise too much revenue through hidden taxes and soaking the rich. Another big criticism of the present policy: it is penalizing business initiative by taxing speculative and expanding businesses more heavily than conservative investments 171%.

Out of six particular proposals for incentive taxation to encourage production, the executives gave three substantial votes of approval: revise the excess-profits tax to exempt profits up to 5% of a company's gross, apply a sliding scale thereafter (favored by 43.3%); tax land improvements at a lower rate than land itself (40.1%); tax income from bond interest more than income from dividends (33.9%). Altogether 78% voted for at least one of the five incentive taxation proposals, more than 50% voted for two or more. If Business was willing to swallow more & bigger taxes, it also wanted a new conception of what taxes are all about.

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