Sunday Gazette-Mail from Charleston, West Virginia on July 23, 1972 · Page 31
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July 23, 1972

Sunday Gazette-Mail from Charleston, West Virginia · Page 31

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Charleston, West Virginia
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Sunday, July 23, 1972
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Page 31
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RICHARD LEE STROUT Corporations Fatten on U. S. Tax Loopholes WASHlNGTON-Some shocking figures came out here last week about big corporations who pay little or no federal income tax. We all know by now about those 107 individual Americans who received incomes of more than $200 000 apiece last year and escaped taxes by various loopholes. That seemed like a tidy sum at the time -- $25,000,000 tax free · But it's chicken feed to what some of the big corporations are getting. Nine of the 100 largest U.S. corporations, for example, had a pre-tax income of $682 million in 1970 and paid no income taxes, according to testimony to Sen. Proxmire's Senate Joint Economic Committee. In 1971 there were five tax free companies and another six with rates under 10 percent. They were cashing in on subsidies that Congress has scattered around the chicken yard. The biggest chickens, the giant corporations, gobble up most of the feed. Rep. Charles Vanik (D-Ohio) charges that the following five corporations last year paid no taxes, so far as a staff team from Wilbur Mills' Joint Committee on Internal Revenue and Taxation, reinforced by chartered accountants, can dis- cover - Continental Oil, with taxable income of $109 million; McDonnell Douglas (aerospace), $144.6 million; Guif Western Industries (zinc, sugar Paramount Pictures), $51 million- Aluminum Co. of America, $50 million; Signal Companies (oil, gas, aerospace, Mack Truck, real estate), $26.8 million. Spokesmen for the companies cry foul and admittedly the accounting is a tricky business. For example, last April George McGovern charged that International Telephone Telegraph "paid no federal taxes at all" for the past three years, and couldn't back it up. It turned out that some of the ITT's subsidiaries had paid taxes. By taking advantage of tax subsidies, the giant conglomerate had a tax far below the 37 percent that is the average effective tax rate for most U.S. corporations. Now Rep. Vanik's team comes up with new estimates that ITT's effective tax rate back in 1969 was something over 14 percent, in 1970 nothing, and for 1971 (on huge income of $410 million) under 5 percent. Most taxpayers, of course, would be happy to bet away with a 5 percent tax rate. IF MR. NIXON is reelected we shall need more taxes and probably it will be a national sales tax. Trade union leaders will protest but some of them are now supporting his reelection. A national sales tax (value added tax) is a lovely thing (that is, for everybody but the workers) because it is easy to collect, enormously diffused, almost invisible and "gets the most feathers with the least squak." Each 1 percent produces about $5 billion in revenue. The Nixon fiscal crisis is fairly obvious. In four years he will show a deficit each year, the total around $100 billion, and a new Brookings Institution study shows that deficit or not, an additional $17 billion will be needed in the next two years just to meet built-in increases in. federal programs already voted, let alone Secretary Laird's higher defense costs springing from Mr. Nixon's success in negotiating peace agreements with the Russians. Anybody not blinded by partisanship can see that domestic programs aren't going to be sliced (medicare, medicaid, employment retirement benefits, for example) and that after the election we are going to have higher taxes. Democratic vice presidential candidate Eagleton modestly said that on a TV show last week. But you aren't going to hear Mr. Nixon say that, no sir. Mr. Nixon's budget director, Caspar Weinberger, calls higher taxes "the wrong answer.". Maybe Mr. Nixon has a secret plan. But what awes this reporter is how the President can get away with the image of a conservative, responsible leader, with his billowing budget deficits, while calling George McGovern a "radical." The heretical McGovern proposal is to balance the budget by readjusting taxes and ending loopholes, and maybe putting imposts on the rich somewhat above those for the middle class. McGpvern would end the tax sleigh ride of a big corporations. This is certainly an unusual approach. A big corporation to Mr. Nixon is like a flower; he regards it protectively. He helped bail out Lockheed and the Penn Central, and he told a group of oil tycoons and potential campaign contributors at a barbecue at John Connelly's Texas ranch that "rather than moving in the direction of reducing the oil depletion allowance the government should do more to provide incentives " Well, according to the new tax studies by Rep. Vanik, seven out of 17 top oil companies paid less than 10 percent effective tax rate in 1970, and of the eight companies for which data was available last year, an average effective rate of 6.1 percent on an income of two and a half billion. Support of Mr. Nixon by some old guard trade union leaders puts them in an extraordinary position. For example, I. W. Abel of the Steel Workers, who told the Democratic convention that nomination of anybody but Sen. Jackson would bring the party down to "crashing defeat," operates in an industry where U.S. Steel reportedly paid a rate of around 2.1 percent in 1969, got a tax credit in 1970, and paid about 7.6 percent last year. THE LITTLE companies haven't found tax shelters. They are being gobbled up by the giant conglomerates. Vanik's team offers these examples: the eight largest railroads (excluding Penn Central) had an effective tax rate of only 4.9 percent; two giant timber companies, Weyerhaeuser and Georgia Pacific, under the timber capital gains tax subsidy which Congress passed over Franklin Roosevelt's veto (who called it designed "for the greedy, not the needy") had an average tax rate of 14 percent; shipping billionaire Daniel Ludwig's tankers are tax free because he registers them under "flags of convenience" (i.e., Panama or Liberia); the giant New York Consolidate Edison p o u r e d out tax-free dividends to stockholders for several years after manipulating tax law procedures to show accounting "losses." Some allowance may be made for exaggeration in these charges. But the trend to monopoly encouraged by the great federal subsidy engine can't be denied. Ponder this fact: 260 cor* porations now own two-thirds of all the nation's manufacturing assets. It's socialism for the rich, free enterprise for the poor. These corporate giants run their own foreign affairs, ITT wants in- vervention in Chile; Occidental Petroleum does a $3 billion deal with Russia. The taxes they save are paid by the little man, or come out as Federal red ink. 'COLORED Two South Africans Find Cruelty Of Being Nonwhite Under Apartheid By Kenneth L, Whiting JOHANNESBURG, South A f r i c a -- W i -- J a n e A n n e Pepler a n d Lawrence J. Pinkey are shocked to discover what it means to be something other than white in segregated South Africa. The adjustment probably would not be as great or painful had Miss Pepler and Pinkey spent their lives under apartheid as Africans, Indians or "coloreds," the official name for those of mixed ancestry. They might then have developed psychological thick nonwhite skins. But Pinkey, 56, was generally regarded as white until the Supreme Court ruled that he was not entitled to be classified as a genuine white. Miss Pepler, 17, is still officially certified white, but her skin has turned black after surgery. IT'S DIFFICULT to determine who is more u n f o r t u n a t e under apartheid. Medical treatment may or may not help her. He has exhausted his last legal hope. They view themselves as outcasts in a society which reserves the best of everything for the privileged white minority. "I feel the same as I did when I was white," said Miss Pepler. "But it is terribly humiliating to even go into the street and know that I am no longer accepted as white. I have not given up hope that I will be white again soon." She is a high school student at Benoni, an i n d u s t r i a l city 15 miles east of Johannesburg. Family, friends and fellow students have become accustomed to her new pigmentation. But stares from curious and sometimes hostile strangers in public places make her cringe. "This is a tragic thing to happen to anyone anywhere in the world, but in South Africa it is heartbreakingly cruel," said her mother, Anna Snyman. Doctors have tentatively diagnosed her difficulty as glandular imbalance. Jan Pepler and Lawrence Pinkey have lived their lives as whites. Now they're nonwhite-Pinkey through a court-ruling, Miss Pepler because of surgery and a glandular imbalance. It would require guite an adjustment anywhere in the world, "but in South Africa it is heartbreakingly cruel." Julv23, 1972 3C children remain classified white, was horrified. "You just can't begin to imagine what I have been through. All my hopes have been dashed. I have been virtually banished to exile and it has cost me a fortune. "I anticipate that the next step is expulsion from the white area where I am staying. My friends, all white, have been 'very sympathetic, but I am afraid that they, too, will be forced to turn away from me." Pinkey's troubles originated with the Population Registration Act of 1950. Until then there was no law enforcing rigid classification by race. In the 1951 census and the population register of 1955 Pinkey listed himself as Chinese because his half-Chinese, half- French father had been born in Canton. Pinkey's mother was white. SOUTH AFRICA CALLS LAWRENCE PINKEY COLORED Barred From Living With Wife Except as Servant Ralph Nader Wholesalers vs. Public whole body was covered," said Mrs. Snyman. "It is heartbreaking to see Jane Anne being spurned by people who think she is colored. Only close friends and family who knew her before the operation know that she is white. Her only proof that she is European are her features and long flowing hair, but even that has turned dark brown. "It is particularly embarrassing for us . .. We believe in white supremacy." Mrs. Snyman says her daughter has no future in South Africa unless a miracle happens. Meantime, they have sold Jane Anne's personal story to a magazine for Rands 500 ($665). JANE ANNE'S troubles followed an operation in December 1970 to remove two adrenal glands believed to be causing- obesity. The surgery was regarded as successful, but a few months later large dark blemishes appeared on her neck. "They increased and spread until her THE SUPREME COURT'S appellate division ended Lawrence Pinkey's 11-year legal battle to be white. The court decided that he had confirmed in evidence that his father was half-French and half-Chinese. "These statements clearly relate to descent and amount to admissions that Mr. Pinkey's father was colored," said the verdict which was approved by five judges. Pinkey, whose wife Minnie and five HE DECIDED to clarify matters in 1961 by seeking reclassification as a white because his immediate family and friends in Port Elizabeth were officially white and he was accepted as one. The Race Classification Board told Pinkey to consider himself colored. He went to court five times before his last appeal was rejected last month. He suffered a stroke three years ago which he attributed to personal race tension. "The doctor accepted me as white and I was treated at the provincial hospital in a general ward with whites." The appellate court ordered him to pay all costs and the long fight has left him little money. His health is poor. As a nonwhite he is legally barred from living under the same roof or in the same neighborhood with his white family except as a servant. "I have nothing in common with the Chinese, the mulattos or the nonwhites. I have mixed with whites all my life. This will leave me friendless. I will be forced to move and my five children will also suffer. "You just can't appreciate the utter h u m i l i a t i o n t h a t f a c e s m e . " ' WASHINGTON-Should schools, colleges, hospitals and other recipients of federal grants be allowed to purchase or use needed equipment from the federal government's property supplies, or should they be required to buy these items on the market at much higher prices? This is the question that has pitted the Nixon Administration and a powerful coalition of wholesalers and distributors, with annual sales of $300 billion, against an unorganized group of federal grant recipients inthe educational, health, research and local governmental fields. It all started in 1967 when the Johnson Adminstration initiated a policy permitting the General Services Administration, the government's buying agent, to open its supply sources in fulfillment of grant programs. Also, GSA excess property could be borrowed by these recipients, under the 1967 regulation.The idea was to stretch the federal grant dollar. Professor Fairfax Leary claims it is saving taxpayers about $400 million a year. There are other advantages to the GSA policy, which the White House has now demanded be revoked. For example, a southern city's department of education says the policy saves on inventory tie-ups and paperwork and permits quicker purchases at about 25 per cent savings. Another state department of education notes, not only sa^ngs of almost 44 percent, but more realistic, competitive bids from private suppliers. Rigged bids, collusion, and outright monopolies have long been associated with state and local government procurement practices. Private hospitals and other research and educational institutions which have to purchase diagnostic, therapeutic and scientific instruments have had similar experiences. The comparatively tiny GSA regular and surplus supply outlet helps keep corporate price gougers less greedy and a little more competitive. ITEMS PURCHASED by federal grantees from GSA surplus are not frivolous: they include office supplies, school l a b o r a t o r y items, c l e a n i n g materials and other essentials. From spark plugs to garbage cans, some purchase prices have been as much as 50 to 65 per cent lower. The National Association of Wholesalers, and its allied trade groups, have been lobbying strenuously for the past five years to overturn government attempts to devise government procurement policies that save taxpayers' money. In 1969 they succeeded, also through the White House, in blocking GSA from coordinating purchases with state and local governments. GSA buys directly from the manufacturers. Most state and local governments buy from wholesalers, paying over $6 billion a year in markups and commissions. This inefficient procurement pattern often benefits campaign contributors and corrupts state and local politics. So powerful was the lobbying effort of the NAW coalition on Congress and the White House that the GSA dropped its plan in 1969, just as it is now about to .implement a White House directive to close its doors to federal grant recipients. In recent weeks, some of these recipients, such as junior colleges, are mounting a protest from all over the nation. They are ' demanding a public hearing so that all the : facts can be considered openly and not in ' closed-door exchanges between Budget Director, Caspar Weinberger, and trade association representatives. Financially hard-pressed local governments and vocational schools want to state their case ' and show how they have been able to · purchase or use needed equipment that: they otherwise could not have afforded. ; Their chief supporter in Congress has been Senator Walter Mondale of Minnesota. Mr. Weinberger likes to talk about economy in government, but he practices waste and distorts the GSA program with misleading alarums about minor abuses Instead of seeing that abuses are stopped, he wants to throw out the entire program. : In an election year, a booming $300 billion wholesale and distribution lobby is ob- · viously worth more to the White House than a paltry $400 million saving to the : taxpayer and better equipped schools and hospitals. U.S. France to Study Ocean Rock Formation STILL CERTIFIED WHITE, SHE FEFLS 'COLORED' SHADOW Jane Anne Pepler in 1970 (Left) and After Operation Turned Her Skin By Walter Sullivan * New York Times Service NEW YORK - In one of the bolder ventures of modern science. French and .merican specialists are to descend some two miles into midocean canyons in the Atlantic in deep-submergence craft and see what is going on there. A total of 16 vessels, including one A m e r i c a n a n d t w o F r e n c h deep- submergence craft, have been assigned to the three-year project. At least 40 dives are planned, divided equally between the two countries. They will seek out manifestations of the volcanic activity that injects new rock into the midocean ridges forcing the sea floor aside and thus generating the movements of the earth's crust that have shaped the world's surface. IT IS KNOWN that shallow earthquakes occur frequently beneath the r i f t valleys that bisect those ridges. Cameras lowered to the bottom, and sampling of the sea floor rock, have confirmed that freshly erupted lava is to be found there. Along the rift that follows . the centerline of the Red Sea there are pools of extremely hot water, rich in dissolved metals, that are laying down sediments on the sea floor. Such deposits m a y become o f m a j o r economic importance. Examination of the canyon walls may confirm a growing suspicion that the continents are, to a large extent, born of rocks first laid down in the deep sea. Such rocks are found in mountains that now lie as far inland as the Ura!: that mark the European-Asian boundary.

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