The New York herald., 1921-10-15
KAHN SEES IDLENESS
In FAULTY TAXATION
Banker Writes Lenr0Ot of Eff
feet in Checking New
Enterprises.
URGES LOWER sURTAxEs
Capital Flows Increasingly
Into Exempt Securities,
He Asserts.

Faulty taxation is one OF the main
explanations for the present depression
which keeps millions of men idle. Otto
II. Kahn. the banker. asserted in a letter
to Senator Irvine L. Lenroot Of Wis
consin. The letter. made public yester-
day, blamed particularly the higher
brackets Of the surtaxes
Mr.. Kahn wrote the letter to the Re-
publican Senator from Wisconsin follow
ing the publication that Mr.. Lenroot was
opposed to the reduction of the surtaxes
to q maximum of 80 per cent. at adopted
by the House of Representatives.
Permit me to point out. at the out
set, that from the merely selfish stand
point, the man of means nee< have little
quarrel with the existing schedule Of sur
taxes" Mr.. Kahn said. III he chooses
TO avail himself of the lawful oppor-
tunities at hand. he can invest greater
or less portion and, In some cases. all
Of his capital in tax-exempt securities at
an attractive rate of interest and, to the
extent that he does so, the income tax
and surtaxes will cease to trouble him."
ITO the extent that the extreme sur
taxes are collected he says. they
penalize the working capitalist, the man
engaged In enterprise and active busi-
ness. as against the idle capitalist. They
year. According to the last published
figures they produced but one-third ap-
proximately of what they produced In
the first year Of their existence and for
the present year they will unquestion-
ably produce still less. Quite apart from
the simple way of avoidance. through in
yestment in tax exempt securities, they
challenge the ingenuity of those sub
jected to them. to find means Of escape
from their rigor. as every extreme
statute does. It is human nature that
men will resort to any legitimate means
of defence against unreasonable exac-
ton. have personally no doubt that
surtaxes which (including the normal
taxi do not claim more than say, as a
maximum, one-third Of a persons In
come will produce larger revenue than
the present rates which Claim up to
nearly three-quarters of a persons in
COME"
Result Of Faulty Taxation.
The banker shows that it is that rela-
lively small percentage Of the nations
wealth represented by the surplus funds
of corporations and well-to-do indi-
viduais that starts and finances, at a
risk, the new enterprises Of the country
After pointing out the scarcity OF in
vcstment funds, including those for
mortgages and building operations Mr..
Kahn says:
"In faulty taxation must be found one
OF the main explanations for that stag
nation and depression which keeps mill
lions Of men idle. In the all-pervasivc
effects OF faulty taxation must be found
one of the reasons for the maladtust-
mont which causes Unfortunately low
prices for the things the farmer pro-
Guces while at the same time enhanc-
ing the costs OF the things he buys.
II am engaged in the business or
financing enterprise and know from
personal experience how continuously
projects, the execution Of which would
aid in turning the wheels of industry
and creating employment. are running
VI, against the impedinientsfof taxation
and are broken by them and discarded.
'The man of small or moderate meals
is taxed far less in this country than
IN any Of the leading nations OF Europe.
Eut our efderal surtaxes rise to rates
higher than exist In the tax schedules
OF any other nation. and that without
taking into account State income taxes,
winch are unknown in Europe.
The road to the relief Of unemployment
and Of the present plight OF the farmers
les along a system of taxation which
seeks to promote industry rather than to
same and retard it. Mr.. Kahn asserts.
Tax Exempt Securities.
Turning to the part played In the sit
uation by tax exempt securities the
banker says
There are at present over $4,000
100000 Of tax exempt securities avail
able and more are coming out almost
daily. In the first eight months OF this
Year approximately 100000, 900 Of such
securities have come upon the market,
In the month Of August alone $780,
wv. 1000.
There is but one effective way OF
etopping the huge exodus which has
been going on and continues ever In
crcasingly to go on OF capital into the
haven of tax exempt securities. and that
Is so to reduce surtaxes as to remove
the immensity Of the advantage now Of
fered by such securities"
In concluding Mr.. Kahn points out
that the people Judge a party not by
the details but by the results of legisla-
tive enactments. and the matter Of vital
concern to the average man and woman
is the return Of good times and abun-
dant employment. He says:
1T Is my business to keep track of the
currents which determine the trend Of
affairs. and I speak from practical
knowledge when I say that good times
and abundant employment cannot return
as long as enterprise Is famed and the