Eagle River review. [volume] (Eagle River, Wis.) 1890-1927, 1906-11-23
GIVE PEOPLE HALF
OIL KINGS WEALTH.
HOUSER FOR FIFTY PER CENT. IN
HERITANCE TAX ON ROCKE-
TELLER MILLIONS.
DRASTIC LAWS NEEDED
Great Corporations Deceiving Public by
Floating Enormous Issues of Watered
Stocks, Says Secretary of State.

MADISON, Wis, Nov. 19.-[Spe-
cial. lin the letter to Gov Davidson
submitting the biennial report of the
department of state. Secretary Walter
L. Houser, recommended, in a general
way, more stringent regulations for cor
porations doing business in Wisconsin.
He commended the Inheritance tax law,
offering some suggestions for its I'M
provement.
Regarding the Inheritance tax law,
Mr.. Houser said today:
1.-THE law is. good but it needs to be
amended in many minor details. L favor
a larger tax on great estates. In my
opinion that the maximum tax in Wis
consin should be raised Immediately
from 3 to 10 per cent. Estates like the
Pabst and Wells estates should be sub
jected to this increase. 1t is a menace
to business at large to have these vast
fortunes handed down from one genera
ton to another. Take for instance the
Marshall Field estate. 1t IS held III
trust for fifty years. In the course OF
that time it will accumulate beyond any
legitimate proportions. All inheritance
such as Rockefeller will leave should be
taxed fully so per cent. The INHERITANCE
tax is the only good means OF winch l
know to get a portion of these vast for
tunes into general circulation without
causing injury to anyone.
Drastic Action Necessary
When asked as to definite means for
regulation of corporations, Mr.. Houser
said that it was necessary that some
method be devised, either through a
commission or otherwise. so that the
state would know that stock, when is
ssued, represented it's true value i'll actu-
al property, or whether it was fictitious.
'These Suggestions may sound dras-
- nfIN fn
his remarks, ''but we have to say some
drastic things at times when we speak
the truth. If they are drastic. they are
just, and that is sufficient reason for
their enactment into law.
Stock Watering Wrong
''The first and most important change
that should be made in our corporation
laws, is an act that will prevent the
watering of stock. No corporation
should be allowed to incorporate in this
state unless it can show that the amount
for which it Incorporates is represented
by actual property value. The state
mission created especially for that ptr-
pose, or by giving some department,
now in existence, power to investigate
with the view of ascertaining the real
value of corporation property. A few
days ago the Chicago & North-W estern
fdllIOdu increased It's capital SLOck IRON
S1OO,OOO,O0O to 00,C00,OO0. All we know
in this department is that the stock was
increased. We do not know for what
purpose the increase was made. We do
not know that the railroad added a
single dollar of value to its possessions,
either in property or currency. On this
increase the railroad paid the state
100000 corporation tax.
State Should Know All.
"Some time ago the Chicago, Milwau-
kee & St. Paul railroad increased it's
stock by S25,OOO,O0O, and the Pullman
company added several millions to it's
capitalization. Under the present law
the board of directors of a company may
increase the capital stock by certifying
that 20 per cent. of the increase repre-
sents value, but the state has no means
cent. has been paid in. 1t may be paid
either in cash, or bonds, or property or
promssory notes, often the notes of the
board of directors.
"a corporation is an artificial person,
created by the state. and the state
should know all about its transactions.
1t should know the actual value Of all
the property that each corporation Owls.
AT present the relation of the state
to corporations is simply clerical. We
do as the law requires, and that IS all.
We have no power to investigates, nor
our judgment and knowledge tells us
that fraudulent representations are made
and fictitious values claimed.
Wisconsin Has Advanced
"In the past four years there has been
q great advance made by the state along
the lines of corporation control
''This seems to be an era for the in
crease of capital stock. | can explain it
ONLY on one basis, and that is that the
ontjpina TING tbp strict
lation of the issue of capital stock that
is bound to come, are taking advantage
of the present loose laws.
Watering Is Deception.
'9The purpose of watering the stock IS
to deceive the public. 1t would not
look well for a railroad or other corpora
ton to pay a dividend OF say 20 per
cent. People would then begin to de-
mand commodities at a cheaper price.
So the directors simply increase the cap
ital stock and distribute the dividends
over the original as well as the in
creased issue. For example, the North
Western railroad paid last year diyi-
dend of 20 per cent. If this kept up
there would be a demand for lower
freight rates. The st. Paul road paid
II per cent. Both these roads have in
creased their capital stock so that it
will appear that their earnings are not
extraordinary. In some cases a corpora
ton has elected to suspend doing bust
ness in Wisconsin rather than give the
publicity which the statute requires 4
large Chicago grocery firm threw up its
Wisconsin business this year for this
reason.
THE corpora ton method presents
many advantages in doing large bust
ness, but it is known that men will do
things in the name of a corporation
that they could not be induced to do an
individual or in a co-partnership. There
fore there is need of the closest regula
ton and inspection by the state"