24 



HARDWOOD RECORD 



January 10, 1921 



The Federal Taxation Dilemma 



[Continued pom page 1^) 



should have been abcilislifd with thv ohise of the war." Then he 

 continued as follows: 



The whole idea of the excess profits tax was wrong in its conception. 

 This tax never tell heaviest where it was intended to fall, upon the large 

 corporations and upon those concerns who were making huge profits from 

 war contracts. Instead of that, the greatest burden of it fell upon the 

 rank and file of business and industry, putting a wet blanket over the 

 entire fabric of American business, whose utmost efforts were sorely needed 

 as a background for the successful prosecution of the war. The natural 

 result was the shortage in production, the shortage in the necessities of 

 life, and undue increase m the cost of living and prices of all commodities. 

 It was a pernicious and unscientific tax from the very beginning of its 

 passage. The only excuse for it was the necessity for the quick passage 

 of a revenue bill which would produce the money necessary for carrying 

 on the war. There has been absolutely no excuse for the continuation of 

 this excess profits tax beyond the close of the year 1918. 



I have been reading some of the ideas which Senator Fordney has 

 expressed upon this question of Federal taxation, and it seems to me that 

 all of his ideas are sound in principle. Federal taxation should be put 

 on such a simple basis that it would not require a corps of lawyers and 

 expert accountants to enable a business man to figure out how much he 

 owes the Government. I think the income tax should be put on a flat 

 basis, so that each taxpayer would pay in proportion to his income, 

 whether it is large or small. I think the exemption should be lowered 

 so as to place a small tax upon a large number of wage-workers and .small 

 salaried men. My theory is that every voter who derives benefit from our 

 Government should be required to pay some tax, even if very small, to the 

 Government in order to give the voter a more personal and direct interest 

 in the proper expenditure of the Government's revenue. I am in favor 

 of a retail sales tax and opposed to any tax on the privilege of holding land 

 and natural resources. I am confident that such a tax would not have 

 the desired effect, but would simply be passed on to the consumer, and I 

 would consider suth a tax almost as vicious as the excess profits tax. In 

 the new tax legislation I think the only sound basis upon which the new 

 laws should be constructed would be to get away entirely from any idea 

 of taxing one particular class for the benefit of another. The taxes should 

 fall on all alike in proportion to their ability to pay. If any line is drawn 

 anywhere I think it should be so drawn as to encourage work and industry 

 by placing a lighter tax upon those who actually work and earn 

 their income as distinguished from those who acquire it with- 

 out work or effort. Even this distinction, I believe, would lead to endless 

 complications, which should perhaps be avoided. 



I have nothing original to offer in the way of an opinion upon this big 

 subject. I am willing to leave this matter to those who have studied it 

 more deeply. Wliat I am more interested in is the stoppage of waste in 

 ■ Government expenditures, the reorganization of Governmental depart- 

 ments, the cutting off of all lost motion and of all useless, antiquated and 

 obsolete commissions, bureaus and other Governmental creations, whicli 

 are simply kept up to afford meal tickets to political followers of those 

 in high places. 



I believe that there are business men in this country big enough to 

 tackle this job and cut our Government expenditures lialf in two without 

 decreasing in any wa.v the efficiency of any of the necessary functions of 

 the Government. This is a matter which I consider equally as important 

 as the question of taxation, and I believe that public opinion should be 

 aroused to the necessity for a budget system and some means of giving 

 great publicity to the Government expenditures. 



Mr. Anderson Favors Indirect Taxation 



Col. S. B. Anderson of MemphiSj dean of southern hardwood lum- 

 ber manufacturers, a leading southern republican and recent presi- 

 dent of the National Veneer and Panel Mfrs. ' Association, urged 

 the old indirect method of taxation, as embodied in the protective 

 tariff, because of Its being the less onerous method of the always 

 onerous business of raising taxes. He said: 



The question of Federal taxation appears to be the topic uppermost 

 in the American mind. The war has been fought and the war debt con- 

 tracted, which means that larger sums of money must be raised by taxa- 

 tion to pay interest on this immense debt, and to pay the enormous cur- 

 rent expenses of the Government. Unfortunately, with the return of peace 

 did not come return of Governmental economy. A few years ago a billion 

 dollar Congress was a scandal. Now we talk in billions and think in 

 billions, and we, the American people, must pay the bill. The tax col- 

 lector, in any form, is not popular, but he must be endured. The old 

 indirect tax, which all of us helped pay and none of us felt — 'except during 

 a political campaign — was the least onerous of all taxes, and when prac- 

 tical, I believe it should be restored, together with its protective features. 

 The American market is the best market in the world and should be 

 retained for .\merican products of raw material and manufactured goods, 

 and when it is surrendered it should bring some compensation in the way 

 of revenue for Government expenses. I understand, of course, that this 



old idea is out of date in some quarters — is not idealistic — and is not in 

 line with international and other frills, but it is backed by common sense 

 and it works well, but only a small part of the revenue required by the 

 Government can be procured through this channel. A regular income 

 tax cannot be successfully attacked. We do not like to pay it, but this 

 applies to aiiy form of tax, and, in my judgment, a good per cent of our 

 revenue will come from this source.^ Now whiskey, instead of being a 

 source of revenue, is an item of expense — it costing much more to enforce 

 the prohibition laws than is taken in as a liquor tax. This item will prob- 

 ably become a greater burden as time elapses. If the postofhce pays its own 

 expenses it is all that should be expected. The mail service should never 

 be allowed to become a source of revenue, but its charges should be reduced 

 as earnings increase and improved mail service given to the public at actual 

 cost. 



The larger part of the Government revenue has come from that tax 

 that has no friends nor defenders — the excess profit tax. It is not neces- 

 sary to enumerate its iniquities. We have this discussed on every street 

 corner and in every office, but this method of taxation is efficient — it gets 

 the money. That is, it has up to now, but this, together with its associate, 

 the regular income tax, is a very uncertain proposition. With business 

 prosperous, as it has been for the past two years, these two items of taxa- 

 tion were very prolific, and could be defended, if on no other ground, on 

 the plea that they produced the revenue required. Evidently the treasury 

 department at Washington forgot its own interest in big incomes when it 

 joined the reserve banking system in the propaganda for putting the 

 damper on business and assisted so largel.v in shutting off incomes, which, 

 under the laws, would pay a fair proportion into the United States treas- 

 ury. So, whether or not, the excess profit tax is repealed, which it should 

 be, other sources of revenue must be found. 



Personally, I favor a general sales tax. I favor it for its general 

 applicability and for the cheapness with which it can be collected. One 

 of the great objections to the excess profits tax is the great expense attend- 

 ing its collection, with the army of highly paid "experts" roaming the 

 country "seeking whom they may devour." On the contrary, the sales tax 

 collector can be inexpensive — either through a system of stamps or invoices, 

 which I prefer, or other simple methods of checking up. I recognize the 

 objection to this system. The added cost of goods going into foreign 

 trade, etc., etc., but we must levy some kind of a tax, and any, or all 

 kinds, can but add to the burden of living, and to the cost of goods both 

 for domestic and foreign trade, and it appears that all objections urged 

 against this tax appl.v with equal or greater force against any and all 

 taxes that may be levied, except the old indirect, or tariff tax. 



I notice the suggestion of a general land tax for the use of the Federal 

 Government. I see no objection to this it a law can be enacted that will 

 run the gauntlet of the courts. The extensive land owners, who are hold- 

 ing their lands for an advance, securing no income from them and conse- 

 quently paying on this capital no income tax, should be reached in some 

 way. The fortunes being made for them by their enterprising and operat- 

 ing neighbors should- be made to help pay the burden entailed on the 

 American people by the late war. 



Together with the repeal of the excess profit tax should go a modifica- 

 tion of the surtax, which is simply a scheme through which double taxa- 

 tion may be easily exacted. In its present form and application it is as 

 reprehensible as is the excess profit tax and should be reformed. Auto- 

 mobile taxes, luxury taxes, etc., etc., while producing considerable revenue, 

 are of comparatively minor importance, but should be reformed in the 

 interest of greater revenue returns, while not being unnecessarily burden- 

 some to the people, can be used to help out. 



No system of taxation can be popular, so the thing to figure for is the 

 system that is as fair as any taxing system can be, and that in the final 

 analysis produces the necessary revenue. 



Hines Hopes for Government Economy 



"As ):iusiness men we might as well face the fact that for a num- 

 ber of years we are going to be obliged to pay high taxes in some 

 form, ' ' Edward Hines of Chicago, leader of the great Edward Hines 

 lumber interests, said, as a prelude to the expression of the hope 

 ' ' that the administration of President-elect Harding will do every- 

 thing possible to reduce taxation in the only practical way, that is, 

 by reducing expenditure. We seem to forget that if we spend we 

 must pay, and that the only way that the Government can get the 

 money to pay is through taxation." 



Mr. Hines continued his discussion as follows: 



Like everyone else, I am opposed to the excess profits tax. As at 

 present imposed it is unjust and inequitable and Increases the price of 

 everything that is sold. Personally, I am inclined to favor a sales tax, and 

 ^ave confidence that if a sajes tax is adopted the treasury experts and the 

 members of Congress will be able to work out a method which will meet 

 the very important objections r,aised by Mr. Eahn. I also think it would 

 be a good idea to increase the taxes on luxuries. If we want to consume 

 luxuries let those of us who do it pay for the privilege. 



