Taxation of Excess Profits

Report Outline
Progress of American Recovery from the Depression
Excess Profits Taxes During the World War
Repeal of American Excess Profits Tax
Excess Profits Tax of the National Recovery Act
Special Focus

Progress of American Recovery from the Depression

Advances Since March in Prices and Business Activity

From the beginning of March to the middle of July, 1933, wholesale commodity prices, in terms of United States dollars, advanced from an index number of 59.6 to an index number of 68.9, a rise of 15.6 per cent. The New York Times index of business activity rose from 60.0 per cent of normal in the middle of March to 86.4 per cent of normal for the week ended July 15, 1933. The combined advance of prices and of business activity shown by these indexes was the swiftest of any four-month period in the history of the United States. It was followed by a sharp reaction of prices during the third week of July in speculative markets, but business activity continued to improve, and during the fourth week in July prices appeared again to be on the upgrade.

The break in prices on the stock, grain and cotton markets occured on July 19. On July 20 President Roosevelt issued his blanket code for voluntary acceptance by all employers. In a statement explaining the purpose of this code, Hugh S. Johnson, National Recovery Administrator, said: “A rapid rise in prices and mass production is going on. Mass purchasing power must rise as fast.” The blanket code was devoted principally to a setting out of rules designed to shorten hours of work, thus spreading employment, and to bring about increases in wages. Article 9 of the code embodies an agreement:

Not to increase the prices of any merchandise sold after the date hereof over the price on July 1, 1933, by more than is made necessary by actual increases in production, replacement, or invoice costs of merchandise since July 1, 1933, or by taxes or other costs resulting from action taken pursuant to the Agricultural Adjustment Act, and in setting such price increases, to give full weight to probable increases in sales volume and to refrain from taking profiteering advantage of the consuming public.