I. C. C. v. Congress

In its 50th annual report to Congress last week, the Interstate Commerce Commission suggested a new law for comprehensive regulation of air transport, asked an extra $1,300,000 for its motor carrier bureau, sought power to regulate minimum water carrier rates within its jurisdiction. At the same time, the I. C. C. took it upon itself to criticize Congress sharply for the most controversial section of the Revenue Act of 1936.

The current corporate tax law is designed to make corporations pass out earnings to stockholders, under penalty of a steeply graded undistributed profits tax. Fortnight ago. the I. C. C. showed what it thought of this phase of the New Deal's tax philosophy when it permitted Greyhound Corp. (busses) to issue a preferred stock dividend, on which holders will have to pay income tax. so as to plow back 1936 earnings without paying a fancy tax penalty. Last week in its report to Congress, I. C. C. amplified its position in the matter.

Gloomily the Commission pointed out that 27.7%. or 70,041 mi., of all U. S. steam railroad mileage was in the hands of the courts. "Poor financial structures and unwise surplus and dividend policies were chiefly responsible for the failure of some of these companies and were contributing factors in the failure of most of them," observed the Commissioners. Many a road could trace its grief to the fact that it was "handicapped from the beginning by financial structures overloaded with funded debt which was not reduced in good times." To assure more provident procedure in the future. I. C. C. had adopted the policy of insisting upon sinking funds in all railroad reorganization plans. By this method the carrier's bonds could be paid off gradually, regularly, out of earnings.

Now, the Commission complained, the undistributed profits tax was destroying I. C. C.'s safe & sane railroad finance policy by discouraging all U. S. corporations from laying surplus profits by for a rainy day or using them to get out of debt.

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