RELEASE NO. 1080 Columbia Features, Inc. FOR RELEASE ON OR AFTER 36 West 44th Street JULY 7, 1967 New York, N. Y. 10036 by LAWRENCE FERTIG "SOAK THE CORPORATIONS?" In recent weeks Washington sent up some trial balloons to test public reaction to tax increases. Administration leaders "leaked" a proposal to tax cor- porations more heavily than individuals. If the surtax is to be 6% on personal income taxes, it may be 8% or 10% on corporations. On the surface this seems like an easy way for the U. S. Treasury to raise more money. The political fallout wouldn't be too heavy because, as politi- cians say, corporations don't vote. But this clever scheme could be disastrous -- not only to corporations but to every taxpayer and wage-earner. The reason is quite simple. Corporate profits determine the vigor of this industrial economy. They affect employment, income and industrial production. "Soak the corporations" really means soak employment, personal income and the entire economy. The danger is that business is already bearing the brunt of an erosion in profits. Labor costs are now rising over 5% annually and prices for materials and services purchased are going up. Volume is moving sidewise, or rising only slight- ly. Thus profits are being squeezed. Labor costs will rise even more steeply in the year ahead, towards an increased rate of 6% to 7%. To add to this profit squeeze an additional heavy tax load could cripple many small business and vitally affect big ones. It is interesting to note that corporate profits have been declining while personal income has been rising and the Gross National Product has been increasing. In the first quarter this year net corporate profits declined $3.9 billion or approx imately 7% over the similar quarter last year. This profit squeeze occurred while the Gross National Product was rising $42 billion, or 5.8%, and personal disposable income was rising over $33 billion, or 6%. The magnitude and trend of corporate profits influences the judgment of executives on everything from current employment to future expansion. There is little doubt that if this sharp decline is not reversed, the tailspin in profits would be accompanied by a tailspin in other indexes of the economy. Today industry must invest about $25,000 of capital to support each job- holder at the present high pay for American workers. Our labor force is growing at the rate of 1.5 million a year. Substantial profits are necessary to provide a large part of the increased capital required, and to attract additional invest- - more -