14 



The Florists' Review 



Sbptbmbbb 20, 1917. 



WHAT THE WAR TAX MAY DO TO YOU 



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PROSPEROUS FLORISTS MUST PAY. 



Only Small Earnings Exempt. 



A large number of florists, employing 

 comparatively small capital but by per- 

 sonal effort and ability making fair 

 profits, are due for a jolt when they 

 wake up to what the new war taxes will 

 do to them. 



The original idea of taxing only war 

 profits has been abandoned and the tax 

 has been placed on any profits that are 

 in excess of ten per cent of the capital 

 employed. 



Aimed, perhaps, at the big trusts, the 

 tax will bear hardest on the small busi- 

 ness employing modest capital. Such 

 a business is likely to earn much more 

 than the exempted percentage, whereas 

 the great corporations, with a few ex- 

 ceptions, earn little in excess of ten per 

 cent on their inflated capital. 



How Exemption Applies. 



"When the income tax law went into 

 effect, the article explaining its appli- 

 cation to a typical florist was one of 

 the most highly appreciated and help- 

 ful The Review ever has published; it 

 made the complicated matter plain and 

 perhaps because of that article The Re- 

 view has received several inquiries 

 about the excess profits tax. To show 

 how the proposed new tax will affect 

 many florists, an example is cited here. 



The so-called excess profits tax ap- 

 plies to every business in flowers, plants 

 or seeds earning over $5,000, whether 

 it is conducted by an individual, a 

 partnership or a corporation. If the 

 profits in the years 1911, 1912 and 1913 

 averaged more than six per cent and 

 less than ten per cent on the capital 

 employed, the average profits of those 

 years is the basis of exemption. If the 

 pre-war profits were less than six per 

 cent, six per cent exemption is allowed, 

 but if the pre-war profits were more 

 than ten per cent, ten per cent is the 

 limit of exemption allowed. 



A florists' business using $10,000 of 

 capital thus will be taxed at the grad- 

 uated scale of rates on all profits above 

 $1,000. A business using $25,000 capital 

 will be war-taxed on all its profits above 

 $2,500. But a business with $500,000 

 capital invested will have $50,000 ex- 

 emption; one with a million invested 

 would be exempt up to $100,000 profits. 



It will be seen that the prosperous 

 retail florist or wholesale commission 

 dealer in rented quarters is likely to 

 find the greater part of his profits sub- 

 ject to the war tax, while the concern 

 with capital invested in greenhouses 

 and land will not be nearly so hard hit. 



A Typical Case. 



Take the case of a florists' business 

 that shall be nameless here. It was 

 started as an individual affair, but sev- 

 eral years ago was turned into a corpo- 

 ration to make it easier to provide inter- 

 ests for sons and other employees. The 

 owner retained the real estate, but sold 

 the business to the corporation for 

 $25,000, the total issue of capital stock. 

 Then he gave some of the shares to his 



employees and sold them other shares 

 on the partial payment plan. The busi- 

 ness was and is well managed and pros- 

 perous. On a volume of sales running 

 from $110,000 to $125,000 per year the 

 net earnings have been never less than 

 $11,000 and sometimes over $14,000; the 

 average has been enough over $12,500, 

 which has been disbursed in dividends, 

 so that undivided profits of $5,000 have 

 accumulated. 



Business has not been quite so good 

 as usual this year, but the probabilities 

 are that earnings of $12,500 will be 

 shown after all charges have been made 

 except those of taxes payable to the 

 federal government. The way these will 

 figure out if the Senate draft of the bill 



Effect of the Proposed 



EXCESS PROFITS TAX 



On a Typical Florist. 



This is the case of a corporation 

 employing $30,000 of capital in the 

 florists' business and earning net 

 profits of $12,500 in an average year. 

 The way these profits will be af- 

 fected by the war taxes as adopted 

 by the Senate, and almost certain to 

 become law, is as follows: 



Capital Invested: 



Capital stock paid In $25,000.00 



Surplus and > undivided profits 5,000.00 



Total $30,000.00 



Net income for the year $12,500.00 



Exemption (10% maximum) 3,000.00 



Excess profits subject to tax 9,500.00 



Excess profits tax: 



15% of exempUon, $450@12% $ 54.00 



Difference between : 



15 and 25% of exempt'n $ 300(9163^ ^8.00 



25 and 50% of exempt'n 750@20jki£l|0.00 



50 and 75% of exempt'n 750#2S%^^M.50 



75 and 100% of exempt'n 7i50980» '^I'Sa.OO 



100 and 150% of exempt'n l,500SU%K.&fl|».00 



150 and 200% of exempt'n 1,500@40% ^-000.00 



200 and 250% of exempt'n 1,500@45% 675.00 



250 and 300% of exempt'n 1,500@50% 750.00 



Exceed'g 300% of exemp'n 500@60% 300.00 



$9,500 $3,614.50 



Net income subject to corporation tax. . ..$8,985.50 



Corporation tax at i% 539.13 



Total U. S. Ux 4,053.63 



Available for dividends 8.446.37 



While the illustration is the case 

 of a corporation, the excess profits 

 law will apply in the same way to 

 partnerships and individuals. In- 

 stead of the corporation tax of six 

 per cent, individuals will have to 

 pay the graduated scale of income 

 taxes on incomes exceeding $2,000 

 per year. 



becomes law, as now seems likely, is as 

 follows: 



Taxes Over Thirty Per Cent. 



The exemption in this case is $3,000. 

 It will leave $9,500 subject to the grad- 

 uated scale of taxes. A sum equal to 

 fifteen per cent of the amount exempt, 

 which in this case will be $450, is taxed 

 twelve per cent. Then a sum equal to 

 the difference between fifteen per cent 

 and twenty-five per cent of the exemp- 

 tion (not the capital, mind you) is 

 taxed sixteen per cent. And so on up 

 until, in this case, all the earnings 

 above $12,000 are taxed sixty per cent. 

 The scale, and how it applies, is shown 

 in the accompanying boxed table. 



Then there is the corporation tax of 

 six per cent, four per cent added to the 

 previous rate of two per cent, to be 

 figured off after the excess profits tax is 

 computed. 



So it will be apparent that this florist 

 will pay in war taxes over thirty per 

 cent of his average profits and if his 

 profits prove to be better than the 

 average he will pay to the government 

 60 cents out of every extra dollar h« 

 earns. 



Instead of the corporation tax, part- 

 ners and individuals carrying on busi- 

 ness will pay the greatly increased in- 

 come taxes. 



Short Time to Write. 



If any florist should make extra 

 money out of the war he no doubt would 

 be willing to pay a considerable part 

 of it to the government as his contribu- 

 tion toward carrying on the war, but 

 to some, at least, it appears that the 

 proposed taxes take rather too large a 

 part of the regular earnings of business 

 in no way benefited by the war. The 

 Review has been aBked who should be 

 written to in protest. The time is short. 

 The bill has been passed by both, 

 branches of Congress. It now is in the 

 hands of a conference committee as 

 follows: 



Address care United States Senate, Washing- 

 ton, D, C: 



Hon. Henry Cabot Ix>dge. 



Hon. Boies Penrose. 



Hon. Wm. J. Stone. , 



Hon. John Sharp Williams. 



Hon. F. M. Simmons. 



Address care House of Representatives, Wash- 

 ington, D. C: 



Hon. Claude Eitchin. 



Hon. Lincoln Dixon. 



Hon. Joseph W. Fordnex* 



Hon. Henry T. Rainey*. ' 



Hon. J. Hampton Moore. 



The probabilities are the bill will be 

 reported within a week and passed 

 promptly by both houses, when it will 

 be up to President Wilson, whose signa- 

 ture will make it law. 



TIME TO SOW SOUTHERN PEAS. 



When is the proper time to sow Spen- 

 cer winter-flowering sweet peas in the 

 south to have blooms at Christmas! 

 Which is the better method to sow the 

 peas, in pots or directly in the bedst 

 Which varieties do you especially rec- 

 ommend? F. B. — Ala. 



As far south as Birmingham, if sweet 

 pea seeds are sown about September 1, 

 the flowers will be in time for the holi- 

 days. I always find it best to plant di- 

 rectly in the beds. The best varieties 

 in their colors I have found to be Tar- 

 rawa, pink; Orchid Lavender and Or- 

 chid White. L. 



Tuxedo, N. Y. — The annual meeting 

 of the Dutchess County Horticulture 

 Society was held at Tuxedo September 

 12, the dinner being attended by al- 

 most every superintendent of the large 

 estates along the Hudson river. Ben- 

 jamin Hammond, of Beacon, N. Y., in 

 an informal talk, complimented those in 

 charge of Tuxedo park, which was look- 

 ing its best. 



