The San Francisco call., 1910-10-27
BANKERS OPPOSE
ONE PER CENT TAX
Rate Proposed in Amendment,
1t Is Claimed, Will Retard
State Industries
Circular Issued by Clearing
Houses Says Burden Will
Be Borne by People

The clearing house associations Of
San Francisco and Los Angeles have
issued the following circular statement
concerning constitutional amendment
No. i
To tbe Ranks Of the State Of California: :
Constitutional amendment No. l. to be voted upon
ri the election of November, 1910. has been
changed so as 10 tax banks at the rate OF per
The legislature originally drafted the amend
neut with this rate Of ] per cent. but upon
fhe showing made by the representatives OF
the banks before the legislative committees at
Sacrsm mento the rate reduced 10 six-tenths
Of j per cent Recently II was discovered tnaI
the amendment was defective in some detail OF
ifs verbal expression. and special session OF
Tie legislature was called to remedy that de-
feet without notice 10 the banks any hear
ing Of their side. the amendment was also
changed 10 raise the bank taxation to ] per
cent II now remains 10 appeal 10 the voters
rs man 10 man through their respective bankers
The objection 10 this rate is based upon the
relation OF the banks 10 thelr custonler @
business community OF the state-wno IN any
event must pay through their banking trans
actions Tor The cost OF DONG the business II
can not be TOO strongly affirmed that the banks
are in favor Of fair taxation and are ready 10
bear their Just share Of the public burdens. The
whole question is discussed on It's general merits
IN address (of which copy is inclosedl made
by The chairman Of the San Francisco clearing
house committee on taxation before the legis-
the rate Of six-tenths Of 1 per cent as
fixed until now. in the amendment would have
banks and would have placed them materially
beyond those Of certain other forms of invested
capital. Nevertheless, the banks were willing
70 submit 10 this heavy tax In the hope that
the experiment whole in new tax methods
might avoid former evils and prove TO be step
IN the right direction.
But the / per cent rate is practically pro-
hibiriTe- According to the report Of the comp
troller Of the currency for 1905. il would be
equivalent 70 $50 per cent Of gross earnings,
OF 1915 per cent Of net earnings. or 50 SO per
cent Of dividends or ~ per cent of excess earn
profits.
in order 10 pay such tax the banks would
either have TO reduce their dividends. deplete
their reserves for losses or rsise interest rates
% borrowers. As their dividends now amount to
less than . per cent per ennum on invested
funds. reduction there would evidently result
the supply available for loans. would under well
known economic law increase the rate for its
use. II II were sought 10 avoid excessive taxa
Don through reducing provision for losses taddi-
lions TO surplus and undivided prohts) the same
result would follow. since failure to prepare
for future losses would amount TO a withdrawal
viii necessarily be paid through the transae-
tioDs Of the hauks-that is Will be shifted upon
state demands that he not required TO raise
Interest rates. as that would tend TO throttle
enterprise OF every kind. putting our merchants.
manufacturers and farmers at a disadvantage in
competition with those Of other states.
These matters are commended 10 your care
ful consideration. Estimate the effect upon the
growth and development Of yOur own district, Of
decrease in the amount Of Ioanable funds or
an Increase in the rates paid by borrowers. Then
take the necessary steps in your vicinity TO see
mat your customers and the public generally
realize what the amendment wonld mean. Bring
II home 10 your voters. Have them understand
that change in laws. which by discours ging
bank capital strikes ar the root of the states
Development Is detrimental to every interest in
the state and should be opposed. If the present
amendment carries it viii mean heavy blow
TO all the industries Of state.
We can furnish you with such copies Of the
anclosed address as You may require
THE san FRANCISCO CLEARING HOUSE
ASSOCIATION.
The Los ANGELES CLEARING HOUSE
ASSOCIATION.