l-'.'hriiiiiv 1(1, 1921 



HARDWOOD RECORD 



21 



iujividuals >.o engaged, wliether manufacturers, iiiereliaiits, 

 farmers, or others, exclusive of persons engaged in professions, or 

 all others whose services would be purely personal in character. 



This form of tax, taking as a basis the average estimates 

 indulged in by statisticians, would doubtless produce, throughout 

 the country, about $3,000,000,000 annually, in addition to possess- 

 ing, as compared with the existing income tax law, the rare virtue 

 of simplicity, to sucli an extent that the amount of tax due by 

 anyone, either monthly, (juarterly, semi-annually, or for any other 

 period, could be instantly and accurately ascertained. 



Theoretical Objections Which Have Been Raised 

 to This Form of Tax 



One group of taxation students has raised two objections to 

 imposing any tax whatsoever upon gross sales, such tax herein 

 suggested being 1%, their objections being as follows: 



(a) "Such tax would be pyramided and shifted to tin' ultimate 

 consumer. ' ' 



(b) "In certain hypothetical as well as actual instances, and 

 particularly in the cases of certain jobbers and brokers, who trans- 

 act a large volume of business on a comparatively small capital, 

 tlie proposed 1% tax on gross sales, would constitute a tax ranging 

 from 33Va% to 50% of their net income." 



With reference to objection "a" just cited, a moment's serious 

 consideration will instantly convince one that it is the product 

 of the impractical mind of the doctrinaire, it being a well-known 

 fact to any practical student of sound commercial practice, that 

 any and all taxes imposed upon business are, generally speaking, 

 and neccssaril.y so, included in the over-head of such business, 

 added to the price of the conunodity involved, and shifted to the 

 ultimate consumer, as otherwise business could not survive and 

 prosper. 



This is just as true of the present income and excess profits taxes, 

 and other Federal and State taxes imposed on business, as it would 

 be in the case of the proposed General Sales tax. 



Tlic present taxes imposed upon business are not only shifted 

 to the ultimate consumer, but furthermore during such process of 

 transmission, are excessively pyramided, which latter practice is 

 of course unfair, and one of the great advantages of tlie imposi- 

 tion of a general sales tax, which I strongly urge, is that in every 

 instance, it fixes a speMfic amount, which anyone can instanth' 

 determine as the tax, and white it would be passed along to the 

 ultimate consumer, as are our present taxes, it would not be nearly 

 so susceptilile to improper pyramiding. 



Objection "b" — The fallacies contained in objection "b" 

 would seem to be entirely and cleai'ly disposed of in the foregoing 

 answer to objection "a," for, as above explained, the well-known 

 fact that all taxes imposed upon business are necessarily trans- 

 mitted to the ultimate consumer, would also dispose of all theoreti- 

 cal discussion as to the imposition of such tax working more or 

 less inequitably in certain cases, with reference to net income, as 

 a continuation of the observance of the practice which has invari- 

 ably prevailed of passing the tax on to the ultimate consumer, 

 will in no wise affect the net income of any business, provided, of 

 course, the tax rate is moderate and the taxation measure is reason- 

 ably equitable; it being manifestly impossible for any aggrega- 

 tion of human minds to devise a comprehensive taxation measure 

 that will operate absolutely equitably to all concerned, a most 

 notable illustration of that fact being our present taxation laws. 



S!iou!d This Tax Be Limited to Ultimate Sales? 



Some objection has been voiced to imposing the 1% tax upon all 

 gross sales, acc(impanied by the alternative suggestion that such 

 tax be limited to ultimate sales. 



In opposition to this suggestion, there would seem to be two 

 convincingly sound objections, viz: 



(a) The alternative suggested would produce a relatively small 

 amount of revenue, and far inadequate to the government's needs. 



(h) Inasmuch as one of the principal causes for the wide spread 

 antagonism to our present form of Federal taxation, is its numer- 

 ous coipplexities and :niil>iguities which arc exceedingly irritating 



to tax payers, with the result that in most instances they find it 

 impossible to personally make accurate tax returns, and which 

 i-eturns, even with the assistance of high salaried public account- 

 ants, are more often than otherwise rejected as inaccurate by the 

 internal revenue bureau at Washington, it is therefore unques- 

 tionably highly desirable that any changes in our method of taxa- 

 tion be unmistakably in the direction of simplicity. 



This apparently would be impossible, by limiting the 1% tax to 

 ultimate sales, when, upon reflection, we realize that in order to 

 insure both the spirit and the letter of such a method being faith- 

 fully observed, the Government would have to employ several times 

 its present army of tax officials to supervise the observance of 

 such a tax, and trace, in every instance, each item of raw material 

 through its numerous intermediate transactions, and establish the 

 fact when it really passed into the possession of the ultimate con- 

 sumer, and the tax was due. 



This method would likewise necessitate all business institutions 

 keeping more elaborate and accurate records, showing not only the 

 origin of all materials purchased, but also the disposal by them 

 of all goods or commodities manufactured or sold, and to whom, 

 indicating what portion of such commodities were sold to middle 

 men, and what exact jjortion to ultimate consumers, with the self- 

 evident result that our present intricate difficulties in connection 

 with Federal taxation, would be aggravated rather than simplified. 



Summary 



The above suggested refunding scheme, including the recom- 

 mended amortization plan, whereby the nation's funded debt would 

 be retired on an average of about si.xty years, makes it self-appar- 

 ent that the government's annual deposit in the redemption fund 

 would be only about one-half the amount that would be necessary 

 under the present situation, which contemplates retiring such obli- 

 gations as they mature, on an average of about thirty years hence, 

 and would consecjuently prove conducive to a most substantial 

 reduction in taxation, which, if combined with real practical 

 economy upon the part of the various governmental departments 

 in the matter of expenditures, should readily net our citizenship 

 an annual saving in taxation, of upwards of $2,000,000,000, in addi- 

 tion to releasing a corresponding amount for the requisite develop- 

 ment of our country's industries. 



It seems entirely clear to me that the enactment of a law em- 

 bodying the fundamental features hereinabove outlined, which 

 in my jiulgment, would make it operative upon a sound, scientific 

 basis, would not only effect a substantial economy, but also correct 

 numerous existing evils in the government's fiscal policy, includ- 

 ing the jiresent necessity of the Treasury Department, with great 

 frequency, negotiating short time loans, upon Treasury Certificates, 

 in anticipation of tax collections. 



You of course understand that the proposed, or any other tax 

 legislation, would in no wise affect the proposition of the unequal 

 number of middle men existing in our various industries, as that 

 inequitable situation, appertaining solely to commercial economics, 

 would continue to exist under any new taxation legislation identi- 

 cally as at present. 



Michigan Manufacturers Endorse Advertising 

 Assessment 



Members of the Michigan Hardwood Manufacturers' Association 

 met in Chicago on Wednesday, January 26. The greater part of 

 the meeting was given over to the routine association affairs. The 

 meeting unanimously voted, an assessment of two cents per thou- 

 sand feet of 1920 cut to provide its quota of funds for the adver- 

 tising campaign to be launched by the National Lumber Manu- 

 facturers' Association. 



It was reported in the meeting that there is a prospective cut 

 for 1921 among the membership of 80,000,000 feet less lumber than 

 was cut in 1920. In addition stocks on hand now show 50,000,000 

 feet less hardwoods and 20,000,000 feet less hemlock than a 

 year ago. 



