Taxes as Capital Levy Senator Flanders said: "It seems if you have not al- lowed sufficient depreciation you correct the thing too late if you wait until you have installed new equipment. Government taxes in the meantime have been a capital Dec 9, 1948 levy." Both witnesses rejected vonten- tions that new risk capital was difficult to obtain. Mr. Cruickshank declared that NCIAL 55 the volume of new capital raised L by issuing new securities had in- creased steadily from $2,000,000,- 000 in the first nine months of 1946 to $4,200,000,000 in the first LABOR SEES PUBLIC nine months of 1948. "However," he added, "this $4,- 200,000,000 compares with $13,000,- 000,000 spent for new plant and TAXED BY INDUSTRY equipment by American corpora- tions in the first nine months of 1948, and the actual volume of cap- ital obtained from new securities AFL and CIO Aides Assert New this year is only about three- fourths of that of 1929, although Capital Is Obtained Through the amount spent for plant and equipment is almost double that of Prices, Not Borrowing 1929." Mr. Ruttenberg told the com- mittee that "the incentive to in- crease production and expand CALLED MONOPOLY SPUR capacity is considerably curtailed by the present level of corporate profits." "Industry, realizing that it can Objection Is Voiced Before make high levels of profits without expanding or increasing produc Flanders Group to Rises in tion," he continued, "has no drive to meet the ever-in reasing de- Depreciation Charges mand for many American products This is an extremely dangerous del velopment and if we are to main By JOSEPH A. LOFTUS tain a dynamic economy, pro- Special to THE NEW YORK TIMES. duction must be increased and WASHINGTON, Dec. 8-Organ- capacity expanded." ized labor took its turn today at He called it bad practice for in- analyzing corporate profits for the dustry to reinvest its retained joint committee on the Economic earnings in an expanding opera: tion. Report and protested that business was taking its new capital from Practice Called Dangerous consumers through high prices in- "It is dangerous because of the stead of borrowing it from invest- monopolistic tendencies involved," e ors. he asserted. "When retained earn- ings are used, for example, to ex- "This is a kind of taxation by pand capacity, the present owners corporation without representa- of the business continue to be tion," said Nelson Cruikshank of owners of a larger and expanded the American Federation of Labor. business. This means a limited Stanley Ruttenberg, research di- number of people continue to con- rector of the Congress of Indus- trol a larger proportion or a larger trial Organizations, the other wit- share of "that business." ness, objected to suggestions by Senator Joseph C. O'Mahoney, economists that plant and equip- Democrat, of Wyoming, commented ment built in pre-inflation days that such industries sometimes ex- should be carried on the books in panded into unrelated lines. This, terms of current dollars, thereby he said, was even more undesirable. Mr. Ruttenberg declared that the e permitting larger set-asides for depreciation. scarcity of equity capital was a hesitation resulting from the fail- Senator Ralph E. Flanders, com- mittee chairman, asked: ure of the stock market to rise and that the stock market had not "When they come to replace their risen because it was "discounting plant and prices are higher, what the future." then Profits today, he stated, were so Mr. Ruttenberg commented: high they were laying "the seed "They build and get the money germs of the next depression." He the way they have always gotten advocated an excess profits tax and it, and depreciate it on the basis an undistributed profits tax. of these costs." Mr. Cruikshank said the AFL policy had been to seek wage in- creases which could be granted without price increases. But," he added, "in view of the Continued on Page 57, Column 5.