New-York tribune., 1918-07-11
Drastic Legislation Is Only
Prohteering Cure, He
Declares
Would Aid Producer
Food Administrator Gives
Views on Revenue Bill to
Senator Simmons

20 Ser -v@.- ms, chairman of the
Commttee on Finance of the Senate,
in response TO request for his views
in connection with the excess profits
features of the new war revenue legis-
lation now under consideration, Her
bert c. Hoover, Food Admin .stra; or,
declares that he is convinced that a
large percentage of excess profits
should be appropriated to the public
treasury through taxation.
His letter follows:
because of the cons derable emotion
often introduced into tax discussions.
it seems worth while to distinguish be-
tween the moral and economic phases.
On the moral side the nation is en-
deavoring to draw q distinction be-
tween q profit commensurate with the
effort or capital employed and stimula-
tive 20 enterprise and production, and
the profit that is abnormally large due
to war conditions. The latter, take it.
is what is meant by prohteering. Too
often they are confused in discussion.
Calls Profiteering Hateful
full. That any man takes profit in
greater measure because the goods he
produces are needed for war or be-
cause of the scarcity created by war
is abhorrent to all decent people, and
rightfully So when the youth Of the
nation are being called upon to sacri-
fee all that they have. do not think
it will be denied that our whole pro-
duction and distribution system is
based on earning of profits, and that
it is g primary thing to say that the
distribution system has got to proceed
on this basis, and that, therefore. nor
nal profits are not immoral.
"The government Is, through many
departments, endeavoring to reduce
profiteering through regulation and
trade agreements, and with q great
measure of success. There are, how
ever, certain economic necessities
which must dominate war regulation Of
industry, and which, IN themselves. can
not entirely eliminate protiteering, and
which, in my view, can be accomplished
only if reinforced by taxation on war
profits.
"In The face of shortage-and we are
short of most commodities to- o-day-the
maximum production of that commod-
ity is positively essential. There is,
however, point in profits or price
where the increase in production is not
commensurate. and restraint is needed
lest prices ascend to height where the
people OF the more lmi.-d means car
no longer buy. This is conservation for
the rich and not for the poor On the
other hand. neither the cost nor the
d. profits in any two units of production
will be the same, and while the high
cost producers may be limited to low
margins, the low cost producers under
these conditions Will make profiteering
profits. While am convinced that reg
ulation of the types in practice by many
executive departments are fundamen-
tally essential to prevent runaway mar
kets and vicious speculation, can see
no remedy for the intermediate situa
tions below such regulations. except a
graduated excess profits tax that will
restore that excess Of profits made
from public necessity back to the pub
lie.
Thinks Plan Is Popular
"It is my belief from an intimate
contact with many industries that such
course of enlarged taxation will be
patrlotlcally supported by them. A
good case IN point is sugar. If sugar
were unrestraired by agreements, the
price would, IN the face of this world
shortage, go to 20 cents pound as it
mas In countries where no RESTRAINT eX-
lists. AS the American people consume
elght DlIllon pounds, such a rise in
price would cost the consumers $780,
OUV,UUU. he great majority of pro-
ducers, manufacturers and the public
agree that restraint is essential. In
considering the costs of production we
ma tnat certain level is necessary TO
protect the high cost producers. Yet at
this level minority of the beet fac
tories wlil be earning profits of from
GU to 100 per cent upon their invest
ment. inns minority creates the i'm
preston of pronteerlng. Their profits
are inord!nate.
WI hile the public can receive its
major protection through the measures
TAKEN the correction of this minority
prohteering can be remedied only bv
stronger taxation Of war profits.
mere is an additional phase of the
limitations of profits by regulation
where such regulation needs coordina-
ton with taxation. If a regulation of
rronts or price is placed at so low
ievei as 10 restrain the profits of the
to"-cost producer TO 81 normal profit it
VIII not only cut off hlgA-cost pro-
oucers and increase the shortage. but
sometimes gives to the iow-cost pro-
Queer the entire field and means the
orowdng out of many business con-
Germs. In many instances it means
bigger businesses Will survive and the
smaller businesses Will be extin-
ruished.
Cites Meat Industry
Fhis is typ.cally the case in the
meat packing industry. The five large
concerns together Kill about 40 per
cent of the animals of the country
lrey VIII th4s year produce about l.
ouu,Vu0. 600 .pounus OF meat products
1heN are q regulated as to profits
on animal business ttu fact. on all
business, except foreign holdings and
non-iood business that their earnings
should not exceed one cent pound Of
meat products produced Yet II they
earned thls amount they would earn
s'u,QVo,uuu per anuum. am sure the
Packers themselves wiii agree upon
their prc-war experience that tins
would he an inordnate profit On the
other hand, further drastic lowering
OF pronts woula. in some branches OF
tne business covered 10y tae packers.
orive struggling competition from the
he,d
There is one feature in ali rerula.
ton of profits IN food trndes rar-
tcuiariy That rs aometimes over
locked These trades are nearly all
seasonal, and they are IN the vast ma
Jority dealing witn rershably prod
ucts. Ky taking few months during
the season OF prime operations their
rFohts may appear large but they
must face large y reduced profits or
even losses over The balance Of the
year THIS IS particularly true IN the
a