Evening journal., 1921-10-15
A Letter TO a Senator
BY OTTO II. KAHN

flIStf money III tilc ndnuS OF the gov
crnment cannot possibly be any
where near as productive and frucu-
flying and active as in the hands of
individuals. There are many reasons
for this all too well attested fact.
one Of them being that, unlike the
Individual, government is not stimu-
lated by the expectation of reward,
nor deferred by the penalty of fall
ure. Secondly, money Is an instru-
ment merely. IL produces different
results according to how and by
whom it is used. Much the largest
part of the nations liquid capital Is
owned 10y those of small and mod
crate means, either in tho shape OF
direct investments or through de-
posits in savings banks or with life
insurance and kindred Institutions.
But the funds so held are not, gen.
orally speaking, and ought not 10 be,
available for starting and financing
new and untried enterprises. The
man of small means ought not, and
Ias a general rule will not, and saw
lngs banks and life insurance con-
Germs, etc, do not, and indeed under
The law must not, place funds other
wise than i'm seasoned investments.
rhe capital which can AFFORD to take,
has an incentive 20 take, ought TO
take and heretofore has taken, the
risk of starting and financing new
enterprise and doing the pioneer work
OF the country, is that relatively
small percentage of the nations
total capital which Is represented by
the surplus funds of corporations
and of well-to-do individuals. That
Is a most valuable function for the
nation, and that function has been
wOefully crippled by the existing
surtaxcs, both because they have
prevented the accumulation of capi-
tai and because they have taken
away the incentive to venturing and
risk stalking. The source of the sup
ply OF funds for pioneering and for
developing the country has run dry
under the withering action of those
taxes. IL will so continue until sur
taxes are reduced 20 an adequate
extent.
Damaging Application of Plausible
Formula.
4. The formula taxation accord
ing to ability to pay" has close
spiritual relationship TO the Wilson
ian formula OF self-determination.
Both are right in theory. but both
must be applied within the rule Of
reason and with that discrimination
which takes account Of practical ef-
fects and consequences. else they are
bound to become mischievous and
breeders of great harm. as indeed
they have become. / can think Of
few greater dis-services rendered to
those who were meant to be bene-
hted, than our taxation policy based
upon the doctrine OF ability TO
pay" The common man may have
been saved a few dollars a year in
taxes, ostensibiy, but he has been
| disadvantaged by many times a few
dollars in the way OF taxes passed
on to him in added costs and in the
way of bad times and unemployment
In faulty taxation and its result
In throwing the economic equilibrium
of the country out OF gear and put
ting barriers across the old-estab.
lished routes of trade and industry
must be found one of the main eN-
plantations for that stagnation and
depression which keeps millions OF
men idle. In the all-pervasive ef-
fects of faulty taxation must be
found one of the reasons for the
maladjustment which caues inor-
dinately low prices for the things the
farmer produces while at the same
time enhancing the costs of the
things he buys
am engaged i'm the business of
financing enterprise and know from
personal experience how continuous.
ly projects, the execution of which
would aid In turning the wheels Of
industry and creating employment
are running up against the impedi-
ments OF taxation and are broken by
them and discarded.
Our Surtaxcs Highest i'm the World.
3. The man OF small or moderate
means is taxed far less in this coun.
try than in any OF the leading nations
of Europe. That is as IL should be be
cause the sum total 10 be raised by
taxation for our governmental need,
is moderate, I'm comparison with wha
IL Is I'm the principal European coun.
tries, relative to our wealth and
population and theirs. But our fed.
cral surtaxcs rise 90 rates higher
than exist in the tax schedules OF
any other nation, and that without
taking into account State Income
taxes, which arc unknown In Europe
II cannot be supposed that European
q Il.
for rich men, any more than we
have. or that IN the extremity oi
their needs they would hesitate tC
90 the limit in exacting contribu-
tions from wealth But these ma
tions have larger and longer expert
ence In these matters OF govern.
mental economies than We have anc
they shave learned that there Is a
( limit beyond which direct taxation
cannot go without consequences
both damaging TO national revenu,
and dangerous 10 national well-be
ing Even IL our highest surtax-rat,
Is reduced 10 32ec, Il will stiI be II
excess OF the highest surtax rate IN
most European countries. (The tax
alton about TO be introduced in Ger
many, defeated and under a stagger
ing burden OF reparation, is, o
course, not one with which compari
son can be made for purposes o.
ordinary and orderly revenue-rais
] ing. Moreover, even in that unpre
cedented scheme OF taxation, ther,
Is no such degree OF differentiation
between the moderately weli-to-d
and those in possession OF large in
T comes. as exists under o,,r scbo oa,,t