as positive relief and a more encouraging atmosphere with a practical theory and practice of taxation can be effected.

Over the period of 1946 to 1952, Federal taxes have taken 50.3 percent of our net earnings, 27.4 percent of earnings have been retained in the business for growth and 22.3 percent paid our stockholders in dividends. The dividends were reduced in 1951 over the dividends paid in 1950 and again further reduced in 1952, in spite of sales more than doubling.

As a further result of this antigrowth tax, the money we had remaining to be retained in the business in 1952 to pay for new plant and equipment was less than that in either 1947 or 1948, 2 years in which the business was less than half that of 1952.

Now let us examine table II with accompanying charts. In these we have made some calculations, assuming that the average of our corporate tax structure had remained at approximately 38 percent and what the net effect would have been in 1951, 1952, and 1953 had all other factors remained equal. In 1951, $70,000 more would appear in paid-in capital and net worth and $70,000 less in debt, so that debt would have been $80,000 instead of $150,000 and would have represented 12 percent of our capital structure. In 1952 with the necessity for still some borrowing for our new building plans, debt would have risen to $161,000 instead of $285,000 and would then have been 19 percent of our capital structure and 1953, proceeding with our growth in a normal manner, our debt would have reached $267,000, completing our new building with new plant facilities and would represent 25 percent of our total capital structure. While this is still a heavy debt, it would be a logical one and a sound one for a rapidly growing organization such as ours. It is quite apparent that our growth has only been possible because of an excellent credit condition that our growth has been financed principally on borrowed money— debt. Debt that could become dangerous in the event of any major change in our economy. Only the future will tell whether we in management have taken too much of a risk for all of our employee stockholders in our firm believe that this antigrowth tax would be allowed to die a natural death on its expiration this month and in our further belief that there would be soon some positive relief on this heavy tax structure.

Our President's program and the administration's program for balancing the budget and reducing taxes for all is certainly a big step in the right direction and an indication that sooner or later relief will come. We understand that it is simply a question of timing, the President urging that this antigrowth tax be extended to the end of the year so that everyone will get a tax reduction at the same time. The growth corporations in the antigrowth tax brackets, however, are not the "favored few." They are the heavily penalized few, penalized because we dare to grow in the American tradition and in the American way. We dare to grow in spite of an antigrowth tax, even if we make this growth on borrowed money.

While the Government should certainly balance its budget and put its house in order, small-growth organizations heavily penalized by this tax have their definite problems too. The corporations not under this tax are now the more favored corporations and removal of the tax would at least equalize the load. I do not believe that this administration should even support the philosophy of this method of taxation by recommending its extension for 6 months, admitting

at the same time that "it is inequitable. It is unjust. It is clumsy, and it is awkward."

I hope that this case history of a typical growth corporation will be of some value to this committee in its deliberations.

TABLE I.-Effect of Federal income tax on capital structure of Milton Roy Co., Milton Roy Co., Inc., in 1946, from partnership of Milton Roy

1 Net worth, total paid in capital, retained profits and additional investment. Excess-profits tax extended through 1953.

TABLE II.-Calculated effect of 38-percent corporate income tax on years 1951-53 on capital structure of Milton Roy Co.