Evening star., 1920-01-14
GIVES THREE CHIEF
FACTORS IN UPSET
|. Of OUR ECONOMICS
Otto H. Kahn, N. Y. Banker.
Urges Tax Law Revision
Within Moderation.

NEW YORK. January 14.-Revision
of the federal income tax law. to
bring the levy within the bounds of
moderation and afford relief 'in the
present era of economic disturbance"
was urged in an address here last
night by Otto H. Kahn, New York
banker.
Speaking before the council on for
eign relations, Mr.. Kahn declared the
three chief factors in upsett1ng pres
ent-day economics were the Worlds
demand for Americas raw materials
and manufactured articles. lnnatlon
and faulty taxation. The WORLDS de-
mand for American materials and
services will slacken gradually, he
said: the cure for imitation is a SLOW
process: but the remedy for fauity
taxation can be secured at once "hen
ever it pleases Congress and the al,
apply it"
Cites Extreme Instance:
Citing an extreme instance in which
a person in the highest taxable class
would have to make nearly II per
cent with a corporate security or IN
his business to get the same return
he would receive by investing IN a
tax-free municipal. state or federal
bond, Mr. Kahn reached these con-
ciuSionS:
NO bond-foreign or domestic-can
compete with the attractiveness OF
tax-exempt bonds to those in posse
sionS of incomes of any conslderaoie
size.
.sThe owners of mediums sized or
large incomes have gone on strike. as
far as investing in corporate secull-
ties is concerned. thus greatly dlmln-
ishing the quantity of funds availapfe
for private enterprise.
Investment Market Destroyed.
.'The American investment market
destroyed: the shrinkage in the value
OF existing corporate bonds. Wh!ch
is to the largest extent attributable
to the income tax, amounts to bll-
lions of dollars. The free flow of cap
ital and the normal working of the
investment market are absolutely
basic elements for every Kind OF
trade and industry, and we cannot
have a return to normal conditions
of trade prices, etc. until our IN
vestment market will have come
within measurable distance, at least,
of normal conditions. which is impos-
sible as long as our present income
tax remains in force
Warning by y. A. Vnnderlip.
Frank A Vanderlip> expressed
warning that the financial situation
in Europe was even more critical than
when he issued his report upon the
seriousness of financial and political
before he retired from the presidency
of the National City Bank upon the
completion of his visit to Europe.
He added that a dangerous situation"
also had arisen in the expansion of
credits in this country. and that its
time to wake up"
Under no circumstances should We
grant additional government credit
| to Europe" said Mr.. Vanderlip; that
felt all the time. We must go di-
rectly to the investors for this money.
| In the last nine months we have dis
| sipated our own ability to grant
credits. We have blown our own
credit situation to such a point that
we cannot grant credits as we could
| last spring even in the present dan
ger of political chaos"
! Sir George Pafsh's Views.
One of the suggestions advanced
| by Sir George Paish for the relief of
| Europe was the floating of bonds by
| the league of nations. security to be
| protected by the collective credit of
! the members of the league.
| The question that demands an
swer." he said. "is how the American
people will finance the sale of the
| great quantities of produce they ex-
pect to sell in Europe in 1920 and
which Europe needs for her preserva-
tion. If the American people con-
| tinue to rely upon normal CONNER
down of the exchanges of commerce
and trade is already within sight.
IF, however. credit is organized
| and obtained from the investors of
| the United States, then it will be pos
sible for the American people to sell
all the produce and all the goods
| they can produce, and it will be possi-
| BILE for Europe to purchase the food
and material upon the acquisition of
| which the salvation of her peoples SO
| completely depends"
| Send Goods, Says Senator Edge.
In finishing his speech Senator
Edge turned to Sir George and said:
"We can't send Europe any more
cash. Well send goods We can't
send cash because to do that we
twould have to tax all the PEOPLE"
"Only extraordinary measures will
! enable this country I" prevent the
ser ious consequences Of the hurri-
cane from extending to ,ts Shores"
said Mr.. Cravath. Unfortunately
the need of finding Ca2Ita! i'll this
country to meet the greatest fnan-
.ial crisis tn, wo:! ID has ever seen
GENES at tins when the conditions
resulting from the war make it more
difficult thar. eyer before to assem-
BILE private capital.
1.-The capacity Of the hanks to meet
the crisis is approaching exhaustion.
Almost all the relief wh;cn their ma
chinery can furnish las already been