Evening journal., 1921-10-15
The Effect Of Iar Reuision on Prosperity
81 William Street,
New York, n. Y.

Washington, .. c.
Dear Senator Lenroot;
Among the influences which are
primarily responsible for the pre-
vailing unprosperity and unemploy-
ment in this country, one OF the
principal ones is the faultiness of
our taxation system.
l am most reluctant to attribute
uncomfortable motives to those
from whom / differ. but 1t is diff
hcult TO resist the conclusion that
even at a time when widespread
distress makes so loud and urgent an
appeal for the remedy of statesman
ship, the matter of tax revision Is
being approached by some legisla-
tors in the spirit of narrow PARTISAN
ship and with prejudices unattenu-
ated by the all too irrefutable les
sons of the past four years.
To such II would be useless TO
address arguments But you, have
long held IN high respect for your
ability. your motives and your moral
courage, and, therefore, seeing from
published reports that you are op-
posed to the reduction of the sur
taxes to a maximum OF 32%, as
adopted by the House. l make free
to ask your consideration of the fol-
lowing observations.
Permit me TO point out, at the
outset, that from the merely selfish
standpoint, the man of means need
have little quarrel with the existing
schedule of surtaxes. If he chooses
TO avail himself of the lawful op
portunities at hand, he can invest n
greater or less portion and, i'm some
cases. all of his capital in tax-cxempt
securities at an attractive rate of in
tercst, and, to the extent that he
does so, the income tax and sur
taxes win cease 10 trouble him.
In making free to addres to you
the following observations, 1 am act
uated by the conviction that an ade-
quate reduction OF our extreme sur
taxes is among the things indis-
pensably requisite to restore the eco
nomic equilibrium and the prosper
ity OF our country.
Working Capital Is Pcnalized
1. The higher brackets of the SUR
taxes have ceased to be productive.
They have, in fact, largely abolish
cd themselves, but in the wrong way.
To the extent that they arc collected,
they penalize the working capitalist,
the man engaged in enterprise and
active business as against the idle
capitalist. They have produced less
and less, year by year. According
to the last published figures, they
produced but one-third approximate
ly OF what they produced in the first
year Of their existence, and for the
present year they viii unquestionably
produce still less. Quite apart from
the simple way Of avoidance, through
investment in tax exempt securities
they challenge the ingenuity Of those
subjected to them. 10 find means OF
escape from their rigor, as every ex-
treme statute does. 1t is human
nature that men will resort to am
legitimate means Of defense agains
unreasonable eXaction. have per
sonally no doubt that surtaNcs whicl
(incIuding the normal taxi do no
claim more than, say, as a maximum
one-third of persons income, vii
produce larger revenue than TN
present rates which claim up 10 near
~ three-quarters of n persons I'm
come. Our extreme surtaxes hav'
all the in effect OF a measure whicl
hampers and deters enterprise, drive
d. funds into tax-exempt securities o.
into hiding and interferes with thi
free fiow OF capital, without ever
having the advantage OF producing
lanything like commensurate revenue
They are one OF the most perfec
demonstrations OF the pervers'
workings Of an unwise and eco
nomically unsound law.
Why No Money Available Fo
Enterprise
2. Why is Il that In the face o
Unprecedented gold reserves and o
a long-continued process Of CONNER
cial liquidation, which should hav'
brought about a commensurate cas-
ing I'm the price OF capital, invest
ment funds can only be obtained q
rates without a parallel In a gen
Grafton and longer? 60 Why
there no money available for mort
cages and building operations? Why
with the proverbiai energy and pusl
OF our people, has new enterpris
come 10 a standstill2 Why IS tn
man who asks for funds for IN
financing of n proposition, In itsel
! attractive and sound and promising
met with the response: mot now2
p Why does America, coming out o
the war with her strength PRACTICAL
undiminished and her relative posi-
ton among the nations greatly en-
HANGED, fail TO exploit the oppor
tunities al her hand7
] The principal direct single cause
, clumsy and destructive taxation
which has violently interfered wit
the normal now OF capital, has pre-
q vented the accumulation Of fund
necessary for industry and enter
G prise, has appropriated tho cas-
, reserves needed for the conduct q
business and has largely remove
e the stimulus Of reward. II the rule
{ OF a game are that one party take
upon itself all the risk OF loss, a
the care, worry, venturing and ei
fort and the other party takes IN
hulk OF eventual winnings, in III
r shane OF surtaxes excess prohi
taxes and inheritance taxes, the In
evitable result will be that the foi
rner party will az least reach III
, conclusion that the odds are to
d heavy against It and wiz abstai
from playing.
n why Extreme Tax Rates Ki
. Prosperity
3. i have heard II said. in r.
snonse 10 arguments on the lines