116 MASS. EXPERIMENT STATION BULLETIN 235 



These figures include Federal corporation tax payments and are compar- 

 able with the 26 per cent of net income which business corporations paid as 

 taxes. The high percentages of income going to taxes for gas and electric 

 companies are due partly to the large number of companies sliowing either no 

 profits or small profits. Companies declaring dividends averaged about 10 

 per cent on outstanding stock. Figures compiled from reports of nine of the 

 larger gas and electric companies in good financial condition, indicate that 

 taxes took 35.5 per cent of the net income before deducting taxes in 1925. 

 Both steam and electric transportation companies improved their earnings in 

 1925 with a consequent reduction of the percentage of earnings paid for taxes. 



There is objection to comparing the preceding figures witii those for farms, 

 due to differences in accounting methods. Corporation data are Ijased on 

 accurate cost accounts while farm figures are rough estimates and make no 

 allowance for wages of the farmer. All available information indicates that, 

 if the same accounting methods were used in both cases, at least 50 per cent 

 of the net income from the farm is required to pay the yearly taxes. 



Taxation of Farm Corporations. (7) 



A comparison of farming corporations with other business corporations is a 

 better measure of the comparative tax burdens. Reports of the Bureau of 

 Internal Revenue show the relation between net profits as defined for purposes 

 of Federal taxation and taxes paid. Net profits as used here are not compar- 

 able with net income in the previous discussion. Taxes have been added to net 

 profits in order to obtain a figure for net profits before taxes were paid. Fig- 

 ures are not available for Massachusetts, but on the above basis farming cor- 

 porations of the United States paid over 65 per cent of net profits for state 

 and local taxes in 1922, as compared with 20 per cent for non-agricultural cor- 

 porations.' On the same basis, over 85 per cent of net profits of farming cor- 

 porations was required to pay total Federal, state and local taxes. Recent 

 information' shows that agricultural corporations were taxed more heavily 

 than other corporations in 1924, both as to the ratio of total taxes to net 

 profits and the ratio of local taxes to net profits. Total taxes required 98 per 

 cent of net profits of agricultural corporations in 1924. The average for all 

 other corporations was less than 30 per cent. One reason for the wide dif- 

 ference is that the agricultural corporation has most of its capital invested 

 in real estate, and hence taxes do not fluctuate with income. Taxes paid by 

 mining corjiorations take a large percentage of net profits for the same 

 reason. 



Farm Taxes and Net Profits. 



The relation between taxes and net profits as defined above for the indi- 



* United States Department of Agriculture Yearbook, 1924, p. 269, based on Internal 



Revenue returns. 

 ' Press release of the Michigan Agricultural Experiment Station, November 11, 1926. 



Based on Statistics of Income, U. S. Bureau of Internal Revenue. 



