THE IMPACT OF FEDERAL TAXES

byRoswell Magill '16. Columbia UniversityPress, 1943, 218 pages. $3.00.

The transfer of billions of dollars in taxes from the pockets of taxpayers to the government produces diverse effects upon our economic and social institutions. Professor Magill presents in this readable and stimulating book some of these broader effects—economic and legal—which should be of general interest. He discusses the effects of corporation taxes upon business incentive and corporate practices and of estate and gift taxes upon the forms of family settlements.

The tax system as a whole is measured by the time-tested criteria of fiscal adequacy, simplicity and economy of administration, and justice. Measured by these yardsticks, he concludes that federal taxes are inadequate in amount, that they are.neither simple nor economic to administer, and that they leave much to be desired from the standpoint of equity. The point—oft forgotten—is stressed that adequate war taxes must mean a general decrease in our living standards.

Lawyers will find helpful suggestions in his discussion of the legal effects of federal income, estate and gift taxes upon family and business arrangements, especially upon different types of trusts some of which are encouraged while others are discouraged by tax laws and court decisions. College alumni should be interested in his statement that a single person with $100,000 net income can give $10,000 to his college and have the gift cost him only about $425 because of reduction in income and subsequent estate taxes.

Business men will sympathize with his vigorous attack upon existing corporation taxes which he regards as unduly heavy, fundamentally defective, "badly designed and needlessly complex." The corporate income tax, he says, is "grossly unfair" because dividends are taxed both as income to the corporation and as part of the income in the hands of shareholders, whereas salaries and interest are deducted by corporations and therefore are taxed only once. Moreover, these laws favor corporate financing by the use of bonds rather than by equity capital, although borrowing is discouraged by the S.E.C. In spite of the popular belief that the excess profits tax is fair because it will prevent a crop of "war millionaires" he regards it as complicated, unfair and justified less as a tax than as a regulatory device aimed to prevent excessive returns during war time.