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Gertrude Shaw

Are You Dry? – Here’s Why!

(13 December 1943)

From Labor Action, Vol. 7 No. 50, 13 December 1943, p. 3.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Here is a story of war profiteering, of Wall Street speculation, of corporations gypping on taxes, of soaping the consumer – a story that is only one of hundreds about the “self-sacrificing” pay-triotism of big business.

Between good liquor and the consumer there is today many a slip, as the saying goes – first because of the extreme shortage and second because of the fantastic prices.

Supplies of liquor have suddenly disappeared from the market for a very simple reason. The distilleries are holding back their reserves.

American Distilling Co. is keeping 245,000 barrels of rye and bourbon whisky off the general market. Instead of releasing its inventory, it is letting its stockholders have this huge supply at cost. The Tom Moore Distillery Co. has pursued a slightly different course. It declared a dividend in bourbon whisky to its stockholders. Other tremendous stocks of liquor are being withheld from the public by similar methods.

With OPA ceilings on a barrel of rye of bourbon at a peak of around $62, why are these corporations not eager to sell? Believe me, there’s plenty of profit to be made at that price. For the cost of whisky to American Distilling Co. – according to its own unrestricted figuring – is $32 a barrel. In a word, the OPA deiling price allows nearly one hundred per cent profit. Not bad, what? A burden of one hundred per cent profit should be easy to bear.

But strangely enough, American Distilling Co., Tom Moore Distillery Co. and the rest of them are riot anxious to collect this pretty penny of profit – at least, not just now. And thereby hangs a tale of taxes.

The distilling concerns, along with all of big business, have been booming with wartime orders, For them, as for the others, 1943 was already a banner year many weeks ago. Weeks ago profits were already sky-high. It has ever been the aim of capitalists to pass as little as possible of their profits on to the government – even though the job of the government is to protect the class interests of these very tax dodgers.

How They Work It

Taking the case of American Distilling Co. as an example, if it were to sell those 245,000 barrels of liquor to the public before the end of 1943, it would have to report around eight million dollars of profit on the sale in the income tax return of a year of exceptional profits. That would mean that the eight million dollars of profit to be realized at OPA prices would be subject to the ninety per cent corporate excess profits tax.

Ah, but if the company sells the stuff to its stockholders at cost, the result quite different. There is technically no profit to report. Therefore, there is no tax to be paid by the corporation on the 245,000 barrels. And the stockholders get a nice dividend of eight million dollars – the difference between what they will pay for the liquor and what it is worth at OPA prices.

A nice bit of tax dodging!

It is estimated that such and similar maneuvers by the distillery companies will deprive the U.S. Treasury of up to twenty million dollars this year. But when Tom, Dick or Harry buys a bottle – if he can get it somehow – he can’t evade the sales tax on it.

Imagine what will happen during the coming holiday season when nearly everyone wants a little liquor around the house! Already dealers are hoarding their supplies for higher prices. With the holiday demand, there’ll be no holds on the prices. Good liquor will cost its weight in gold. Only stockholders of distillery companies and the well-to-do will be able to celebrate in style. Other mortals will be offered foul stuff at shameless prices – and will be lucky if they don’t die from it.

But this is only half of the story. For the rest of it, the scene shifts to Wall Street.

Stock market prices of distillery stocks have risen spectacularly during 1943. American Distilling Co. shares went from a low of 15 to a high of 111½ and now sell at 108. That represents a mint of unearned wealth for the insiders.

Some of this jump in stock prices is due to so-called natural causes, that is, to the wartime boost in business and profits. But that which took place , in recent weeks is due to unadulterated, old-time Wall Street finagling.

The big fellows laid their hands on as much stock as they could grab at low prices. Then rumors were set afloat that things were going to happen in distillery stocks. There were whispers of the distribution of barrels of whisky to stockholders, and there were counter-rumors. There were predictions of mergers and liquidations and what not. The result was wild speculation, with the usual “sucker” rush to get his fingers burned. Of course, the big fellows in the know padded their pockets with profits both going and coming.

When – after six or seven weeks of this frenzy – the company officially announced its scheme to sell its whisky to its stockholders at cost, the stock leaped from 78 to 111½ in one market day. On a smaller scale, the same kind of speculation goes on in all other liquor stocks.

Thus in the troubled waters of war do the capitalists fish for – and catch – bigger and better profits. Such stories of this – of OPA prices set at one hundred per cent above cost, of tax dodging by the wealthy, of Wall Street finagling – can be fully savored only in contrast to the wage freeze, the job freeze, the undodgeable tax burdens, the profiteering prices and the other hardships piled on the backs of the working people of the country.

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