20 



HARDWOOD RECORD 



Febniary 10, 1'.121 < 



Revision of Federal Taxation 



By W. H. Stackhouse 



In nnuuiisc tu your coiiiti-nus letter of the ith inst. (Dec. 4, 1920). 

 just received and noted, permit mc to state mu personal views relative 

 to revision of our Federal Taxation Latcs, and the improving of the gov- 

 ernment's fiscal policy, as follows : 



FIRST: SUBSTANTIALLY REDUCE TAXES. Of foremost 

 attention by the incoming administration, it would seem impera- 

 tive that the Sixty-seventh Congress be called into extraordinary 

 session early next Spring, to consider comprehensively a revision 

 of the Federal taxes downward. 



The reasons prompting tliis statement are, in my opinion, tliat 

 there is no greater contributing factor to the artificial basis which 

 this country has been operating on, largely since the signing of 

 the armistice, than the enormous war taxes which we are obliged 

 to pay annually to the Federal Government, together with tlic 

 exceedingly extravagant expenditure thereof; furthermore, we are 

 certainly pursuing a most unsound and shortsiglited policy in 

 attempting to have the present generation, within a period of 

 about thirty years, liquidate our enormous war debt, (approxi- 

 mating . $24,000,000,000 including .$2,347,000,000 floating indebted- 

 ness) the annual interest thereon exceeding our country 's total pro- 

 war debt. 



Again, inasmuch as tlie business element of tliis great commer- 

 cial country is bearing botli directly and indirectly the heavy 

 burden of this tremendous indebtedness, in addition to facing the 

 numerous and extremely intricate other problems of reconstruc- 

 tion confronting it for solution, I feel exceedingly clear that indus- 

 try in this country cannot survive and prosper, to say nothing of 

 the present business depression becoming unnecessarily aggravated 

 and prolonged, unless it is appreciably relieved of a portion of this 

 heavy burden of taxation. 



During the post-war period of tlie past two years, the government 

 has been collecting, through taxation, exclusive of occasional 

 deficits, annually, amounts closely approximating $6,000,000,000 

 (the collections for the last fiscal year ending June .30, 1920, 

 aggregating $5,408,000,000) of which industry has had to furnish a 

 disproportionately large share, tlie result of which cannot help, in 

 my opinion, but be as destructive to business as the amounts men- 

 tioned are staggering in their significance. 



It therefore seems to be self-evident that in the interests of an 

 intelligent and sound economic fiscal policy. Congress pass the 

 requisite corrective legislation in the following order: 



(a) CREATE A BUDGET SYSTEM: 



Promptly substitute for the "hit or miss" }ilan wliicli lias liere 

 tofore characterized governmental financing, the enactment of a 

 law creating a Budget Sy,stem, witliout wliich it is as impossible 

 for the Government to pursue either a sound or economic fiscal 

 system, as it would be for a private corporation. 



(b) REFUND WAR DEBT: 



Refunding at least the existing bonded war debt, and eventually 

 the greater portion of the country's floating indebtedness, botlL 

 above mentioned, by issuing new bonds covering same, maturing 

 serially during a period from fifty to seventy-five years after their 

 issue, thereby enabling three generations to contribute to the 

 payment of the expense of our participation in the recent war, 

 which was fought for their benefit as well as ours. 



The exchange of these new bonds for outstanding ones, could 

 be effected without involving the expenditure of one dollar upon 

 the part of the general public; such exchange of securities, how- 



* Plan prepared liy president of Sational Implement & Vehicle Associa- 

 tion in response to Hardwood Record's rcguest for views on rerision of 

 the Federal scheme of taxation in the direction of efflcirncy and equity. 

 .1 symposium of the views of other leaders of the liimier and woodwork- 

 inri industries i««,s published in the Jan. 10 i.s.«Me of Hardwood Record. 

 — Editor's Note. 



ever, would obviously have to be ijermissive only upon the part 

 of tlie owners of the present outstaudiug bonds, but no dflticulty 

 whatever would be encountered from tliat quarter, provided a 

 proper rate of interest equitable to all concerned, was stipulated 

 in the new bond issue, which would likewise have the most desir- 

 able and reassuring effect of greatl.y stabilizing the market value 

 of such government securities in contradistinction to the existing 

 ones, which are now selling at varying rates of discount; a further 

 advantage would be the consequent practical elimination of the 

 speculative element in the present outstanding bonds. 



Tills proposed method of refunding the counfry's enormous 

 recent war debt, would appear to be exceedingly reasonable, when 

 we consider the fact that it required a period of practically fift.y 

 years to liquidate the country's Civil War indebtedness, amounting 

 to only $4,000,000,000. 



Amortize the Funded Indebtedness 

 The foregoing suggostion to refund the luition's war debt, is 

 made upon the hypothesis that Congress will provide a legal 

 requirement, upon the part of the Treasury Department, for the 

 observance of a sound amortization plan, insuring adequate pro- 

 vision being made for the retirement of the government's obliga- 

 tions as they mature; the amortization fund either in whole or in 

 part, could periodically be invested in safe, interest-bearing securi- 

 ties, thereby producing a considerable revenue which the govern- 

 ment could use in partially off-setting its ;niiui;il interest pa.v- 

 ments. 



The failure of the government to provide and observe so prudent 

 a method as to amortize its funded debt, would naturally impair 

 as seriously, what should otherwise be, its sound fiscal polic.y, as in 

 the case of a private corporation which overlooked creating an 

 aderjuate reserve in anticipation of its deferred obligation.s. 

 Second: Repeal Excess Profits Tax 

 The un-American excess profits tax feature of the income tax, 

 averaging about $1,000,000,000 annually, should be entirely 

 repealed, as it improperly penalizes excellence and superiority in 

 such matters as business acumen, mechanical ingenuity, etc., in all 

 lines of commercial endeavor, and has a tendency to standardize 

 the net returns of all corporations, firms, etc., to a fixed percentage 

 of pi'ofits, which is .just as unsound in principle and destructive, as 

 would he the standardizing of men, insofar as personal reiiiuiiera- 

 tion is coiicerned. 



Third: Reduce Surtaxes on Personal Incomes 

 In order to encourage the promotion to the maximum of fuiiimer- 

 cial and industrial development in this greatest of commercial 

 countries, Congress shouW, in addition to materially reducing 

 taxes as herein above suggested, substantially reduce the existing 

 wide margin between the normal tax rate and the maximum surtax 

 on personal incomes. 



The present normal rate being 4% up to $4,000 income, and over 

 that amount 8% with surtaxes ranging from 1% to 65%, thus 

 making the maximum rate on individual incomes, 73%, is relativelv 

 as confiscatory as the enormous burden of war taxes imposed upon 

 business during times of peace, complained of in section 1 lioreof. 

 The maximum surtax could unquestionably be reduced to, if not 

 below, 20%, to the material advantage of the country's welfnre, 

 including its business element. 



Fourth: Impose 1% Tax on All Gross Sales 



The loss of revenues incidental to repealing the excess profits 



tax and radically reducing surtaxes on personal incomes as above 



suggested, could be readily off-set b.v imposing a tax of 1% upon 



the gross sale of all commodities by all eorporatioms. firms, or 



