A Blow to Expansion

Since 1951, U.S. industry has built some $31 billion worth of new plants and equipment with the aid of the fast tax write-off, a device designed to permit defense businesses to cut their tax bills by amortizing expansion costs faster than normally. But still, industrialists do not think that they have expanded enough.

Steel companies, for example, working almost to capacity, want fast write-off certificates for more than $1 billion more for expansion; aluminum companies want to add $424 million more in new plants.

Last week DDM Chief Arthur Flemming doused their hopes.

Further expansion in most industries, said he, will push capacity beyond the goals set for defense needs. From now on, no more write-off certificates will be given for 26 types of expansion. Among them: aluminum plants, steel-ingot and pig-iron facilities, airports, diesel locomotives and ore carriers. But Flemming increased some other goals. Among them: commercial aircraft, research and development laboratories, copper plants.

The change in the program was made partly at the request of Treasury Secretary Humphrey, who complained that write-off permission was being handed out for facilities designed primarily to meet civilian demand. If the program were continued, said Humphrey, the Government would lose some $3.3 billion in taxes from 1955 through 1959, without getting a compensating amount of defense capacity in return. ODM agreed, found that in some cases write-off certificates, although used for facilities high on the defense list, failed to bring about expansion. Example: railroads used write-off privileges to buy new freight cars to replace older cars rather than expanding the total number of cars. Looking over the expansion goals it had set in 1951, ODM found that aluminum facilities in place, under construction, and planned will bring the yearly capacity to 1,778,000 tons, 32,000 over the goal. Steel-ingot capacity has jumped more than a million tons over its goal of 124,300,000. Steelmen this year tried to get the goal raised to 150 million and got the idea approved by the Business and Defense Services Administration. But the Defense Mobilization Board killed it.

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