EXCESS PROFITS TAX.

The present generation of taxpayers not only has practically all the forms of taxation known to the ancients but have to deal with new and spectacular taxes designed to produce the revenue necessary to carry on the greatest activities ever undertaken by any government. War and defense expenditures have required the imposition of taxes of dramatic proportions. The most important of these war-developed taxes has been the excess profits tax. This tax was used during the First World War and existed from 1917 to 1920. When peace returned to the country it was promptly repealed as an unnecessary peacetime tax and remained off the statute books until the imminence of war in 1940 brought it back. It remained apart of the U.S. Internal Revenue Code throughout the years 1940 to 1945. When peace again returned to the nation it was promptly repealed. The important principle of the excess profits tax is the exemption from excess profits taxation of the earning capacity of the corporation prior to the advent of the national emergency. It does not attempt to tax any profit, abnormal though it may be, so long as the profit is not due to the expanded economy as a result of the national defense effort.