The Excess Profits Tax and Defense Financing

Abstract

The Second Revenue Act of 1940,1 signed by the President on October 8, 1940, placed on the statute books an excess profits tax on corporations designed to help finance the national defense program and to prevent war millionnaires.2 This act was amended on March 7, 1941, to prevent unfair application of the tax in abnormal cases and to provide additional easing provisions.3 The purpose of this article is to examine this new animal, to point out the more important implications of this tax to business and to national defense financing, and its relation to economic and social policy. In this article, it will be possible to cover only the most important aspects of the problem. In general, an excess profits tax is a tax on profits which are in excess of some standard. There are several standards which