New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1920-08-14
II. S. Ills Caused
By Tax System,
Says Otto Kahn
Banker Attributes Lack of
Housing and Subnormal
Production to Surtax That
4. Injuries Investment Funds
Wants Small Profits Lew
Opposes Plan of Mortgage
Exemption; Favors State
Loans to Construct Homes

High rents. insufficient housing, lack
of transportation and subnormal pro-
Guction in industries were declared by
Otto H. Kahn yesterday to be caused
by the country's taxation system. Mr..
Kahn appeared before the Senate Com
mittee on Reconstruction and Produc-
ton at a hearing held at % West
Thirty-ninth Street. He described the
taxation system as grossly at fault"
and "as harmful as any other single
factor now affecting the prosperity and
wellbeing of the people, and especially
people of small means"
Various remedies were suggested by
Mr.. Kahn. He said although he did
not consider it sound economics he
favored the lending of money by the
city or the state to relieve the housing
situation. He declared he opposed a
plan sponsored by Walter Stabler.
comptroller of the Metropolitan Life
Insurance Company that certain mort
gage investments should be exempted
from taxation in order to stimulate
building.
Mr. Kahn pointed out that prominent
men were reluctant about discussing
the present taxation system because
they feared that their criticism might
be considered "thc squeal of rich men
against heavy taxes" But, he added,
rich men arc not bothered, because all
they have to do is to convert their
capital into taX-free securities.
Wants Profits Tax Modified
Remedies suggested by Mr.. Kahn
were:
THE excess profit tax should be
abolished or essentially modified. and
some other method devised to tax cor
porate profits. At the same .ime the
extreme scale of surtaNes, which ac-
tualy defeats its own purpose, should
be revised downward.
The principle of progressive in
dvidual income tax and of a tax on
corporate profits should be retained,
but it should be applied not vindictive-
ly or recklessly, but according to the
rule of reason and experience SurtaXes
must not be so extreme that they Grip
pie production, discourage or prevent
normal enterprise, and preclude that
accumulation of business and invest
ment funds which is an indispensable
prosperity.
Careful investigation should be
made of the question whether means
should not and could not be found to
prevent further issues of tax-exempt
securities, or at least to limit such
exemptions, say, for instance to the
normal Federal and state taxes.
.Favors Small Tax on Sales
"MucA can be said for small tax on
sales. say one dollar for each hundred
dollars Whether that should be a tax
on comm odities only whether it
should include other objects and also
services; whether 1t should be a tax on
gross turnover (and, spondingly,
where that is not applicable, on gross
income) or whether it should be tax
confined to sales to the ultimate con-
sumer in which case it might we'll be
made progressive according to the
value OF the article purchased), or in
what other form it should be imposed,
is a debatable question on which | am
not yet prepared TO express d fixed
opinion.
"lnheritance taxation by the Federal
government should be made to cease
as som as conditions permit and that
source of revenue left for the use of
the states, which are now hard pressed
taxation should be imposed not on the
estate. but en- the individual recipient.
Under the present Federal system an
estate bequeathed to one descendant is
taxed at the same rate as an estate
divided among say six descendants.
That is manifestly unfair and socially
Undesirable.
Consideration should be given to
the question whether there should not
be revision of the theory of taxation,
in the sense of basing it not merely on
income but also on the social use made
OF income. If man has an income OF
say 5000, 900 and spends $4,000 for his
own and his famiiy's living and other
expenses, and saves the remaining
$4,000, he ought to be subject to a
lesser tax than the man equally in pos
session of an income of 100000 who
spends the whole OIL larger part of that
sum on eXtravagant living
Clyd- B. Aitchison, a member Of the
Interstate Commerce Commission, fur
nished the committee with technical
data concerning the movem ent Of
freight cars. The committee, &C which
Senator William NJ. Calder is chairman,
will resume its hearings next week.