January 10, 1921 



HARDWOOD RECORD 



The Federal Taxation Dilemma 



Some Opinions from Leaders of the Woodworking and Lumber Industries 

 Methods for Mitigating the Burden of National Taxes and 

 Liquidating the Huge War Debt of the Nation 



on 



It became evident shortly after the election of Mr. Harding that 

 the problem of Federal tax revision, or reform, was the dominant 

 national issue, taking precedence over such more or less abstract 

 issues as the League of Nations, because of its more intimate bear- 

 ing upon the immediate daily welfare of every citizen of the coun- 

 try. It was also plain that this problem would dominate the delib- 

 erations of the then approaching short session of Congress, and, 

 as well, the extra session of Congress, which the new president will 

 call after his inauguration in March. The emergency financial 

 arrangements of the war period, hastily enacted and necessarily 

 faulty, were to be corrected, and the Federal revenue system placed 

 upon a sound peace basis, looking to the liquidation of the enormous 

 war debt with the minimum disturbance of the normal processes 

 of commerce, industry and other units of national life, and placing 

 upon the taxpaying citizenship the lightest burden consistent with 

 efficient government. This was to be a huge and heavy task, 

 greater than that succeeding any other of our wars, because our 

 national debt had reached the enormous figure of twenty-four 

 billions of dollars, and we had changed from a billion dollar gov- 

 ernment to a four billion dollar government. Obviously the solu- 

 tion of so vast a problem would engage the attention, not only of 

 the minds of our publicists, journalists and Federal legislators, but 

 the minds of all the men of affairs in the country. 



Actuated by this conception Hardwood Record addressed a 

 letter to a number of the outstanding leaders of the woodworking 

 and lumber industries, inviting them to contribute their opinions 

 to a symposium on Federal tax revision. It was not expected that 

 the.se men would respond with complete systems for the raising of 

 Federal revenues, because taxation is a profound science, demand- 

 ing special study. But it was believed that all of these men, as 

 large ^taxpayers, and leaders of important industrial groups, had 

 given some thought to the great dilemma, and had formed opinions 

 as to methods of revision, equally as sound and as valuable as the 

 opinions of the public men directly intrusted with the jiroblem 

 of solution, aud of worth as part of the great mass of interested 

 American public opinion. 



This belief was confirmed by the replies received, though some 

 of the men invited to express opinions declined to do so because 

 of the fear that they might be encroaching upon the province of 

 expert minds. This was regrettable in that it sontracted the scope 

 of the symposium, and no doubt caused the withholding of some 

 interesting viewpoints. 



The opinions received, however, are not only interesting, but of 

 real constructive value. In one instance, at least, a comprehensive 

 survev of the problem is attempted and corrective measures for- 

 mally set forth. This was in the case of W. H. Stackhouse of 

 Springfield, O., president of the National Implement and Vehicle 

 Association, who made the point, however, that he spoke in his 

 unofScial capacity. Mr. Stackhouse happened to have made an 

 eighteen months' study of the problem, forming therefrom "some 

 positive views on the subject. ' ' The paper which he contributed 

 to H.\RDW00D Record was filed "through the proper channel, in the 

 Lower House of Congress" and will be personally presented to 

 President-elect Harding by its author. Owing to the completeness 

 of this paper, it has been reserved for publication as a separate 

 article in a forthcoming issue. It should make a valuable sequel 

 to the ideas published in this issue. 



All of these views take on extra interest in the light of the 

 debate on Federal tax revision which has already taken place 

 before the Ways and Means Committee of the House and the recent 

 report of the special tax committee of the Chamber of Commerce 



of the United States, which has been submitted to a referendum of 

 the fourteen hundred organizations having membership in the 

 Chamber. 



The National Chamber's Referendum 

 It will be of interest, before taking up the opinions in our own 

 symposium to quote the fifteen propositions upon which the mem- 

 bership of the National Chamber has been asked to vote. These 

 ]iropositions are as follows: 



1. The excess profits tax should be repealed. 



2. Revenues now derived from the excess profits tax should be ob- 

 tained mainly from taxes on incomes. 



3. There should also be excise taxes upon some articles of wide use 

 but not of first necessity. 



■i. Should a sales tax be levied instead of the taxes mentioned in pro- 

 posals two and three above? 



5. Should a sales tax be levied in addition to such taxes as are men- 

 tioned in propositions two and three above? 



6. Members voting in favor of question four or question five are asked 

 to indicate below the type of sales tax they advocate, (a) General turn- 

 over tax; (b) Limited turnover tax; (c) Retail sales tax. 



7. There should be a moderate and graduated undistributed, earnings 

 tax on corporations. 



8. Each individual stockholder of a corporation should pay his own 

 normal tax. 



9. Income from any new issues of securities which may lawfully be 

 made subject to federal tax should be taxable. 



10. -Vmerican citizens resident abroad should be exempt from the 

 .\merican tax upon income derived abroad and not submitted to the 

 United States. 



11. Profits arising from sale of capital assets should be allocated over 

 the period in which earned and taxed at the rates for the several yeiirs 

 in the period. 



12. An exchange of property of a like or similar nature should be 

 considered merely as a replacement. 



13. Xet losses and inventory losses in any taxable year should cause 

 redetermination of taxes on income of the preceding year. 



14. Ascertainment by the government of any tax Itased on income 

 should precede payment. 



15. .\dministration of income taxation should be decentralized. 



In ever.y instance the contributors to this symposium urged the 

 repeal of the excess profits tax. In the majority of cases they also 

 favored the lowering of surtaxes on incomes, and the placing of a 

 minimum flat tax on corporate incomes somewhere around 

 20 per cent in addition to the normal 10 per cent tax, making a 

 total assessment much smaller than the 73 per cent average assess- 

 ment now made on incomes. The enactment of some kind of sales 

 tax as a revenue getter to replace the excess profits tax and the 

 lowered surtaxes on incomes was frequently urged. In general it 

 was conceded that the huge war debt must be liquidated, that the 

 piper must be paid by those who danced the war dance, and, there- 

 fore, there can be no escape from heavy taxation for years to come. 

 But it was urged that the Government institute the most radical 

 economies in all its branches, that early maturing war bonds be 

 refunded and that liquidation of the war debt not be attempted 

 in a single generation as proposed by Secretary Houston, but that 

 liquidation be spread out for two and three generations. Thus 

 would the sacrifice of war, as well as its benefits, be shared by pos- 

 terity. All of the views were broadminded and fair, evidencing a 

 willingness to avoid no legitimate obligation of citizenship and 

 demanding only efficient and equitable taxation. 



Dr. Wilson Compton's Views 



Dr. Wilson Compton, secretary-manager of the National Lumber 

 Manufacturers Association, in urging that the excess profits tax 

 be repealed said that "the opposition of business and industry" lo 

 this tax "is predicated upon the belief that the excess profits tax 

 is, in practice, discriminatory, promotive of uncertainty, discourag- 



