Evening star. [volume] (Washington, D.C.) 1854-1972, 1935-06-20


I recommend further the imposition
Of gift taxes suited to this end.
Because of the basis on which
this proposed tax is to be levied
and also because Of the very sound
public policy of encouraging
wider distribution Of wealth, I
strongly urge that the proceeds Of
this tax should be specifically
segregated and applied, as they
: accrue, to the reduction Of the
national debt. BY so doing, we
shall progressively tighten the tax
burden of the average taxpayer,
and, incidentally, assist in our
approach to a balanced budget.
II.
The disturbing effects upon our
national life that come from great
inheritances of wealth and power
can in the future be reduced, not
only through the method I have
just described, but through a
definite increase in the taxes now
levied upon very great individual
net incomes.
To illustrate: The application Of
the principle of a graduated tax
now stops at 81 100000 of annual
income. In other words, while the
rate for a man with q $4,000 income
Is double the rate for one with
$4,000 income, a man having
$4,000 900 annual income pays the
same rate as one whose income is
100000.
Danger to National Life.
Social unrest and q deepening
sense of unfairness are dangers to
our national life which we must
minimize by rigorous methods.
People know that vast personal in
comes come not only through the
effort or ability or luck Of those
who receive them, but also because
of the opportunities for advantage
which Government itself contrib
uteS. Therefore, the duty rests
upon the Government to restrict
such incomes by very high taxes.
III.
In the modern world scientific
invention and mass production
have brought many things within
the reach of the average man
which In an earlier age were avail
able to few. With large scale en-
terprise has come the great cor
poration drawing its resources from
widely diversified activities and
from a numerous group Of investors.
The community has prof1ted in
those cases in which large scale
production has resulted in sub
stantial economies and lower
prices.
The advantages and the protec-
ton conferred upon corporations
by the Government increase in
value as the size of the corporation
increases. Some of these advan-
tages are granted by the State
which conferred a charter upon
the corporation, others are granted
= by other States which, as a matter
Of grace, allow the corporation to
do local business within their Dor
ders. But perhaps the most i'm
portant advantages, such as the
carrying on of business between
two or more States, are derived
through the Federal Government
great corporations are protected
in q considerable measure from
the taxing power and the regula-
tory power Of the States by virtue
Of the interstate character Of their
businesses. AS the profit to such
q corporation increases, so the
value Of its advantages and pro-
tections increases.
Small Enterprise Hit.
Furthermore, the drain of d de-
preston upon the reserves of bust
ness puts disproportionate strain
upon the modestly capitalized small
enterprise. without such small en-
terprises our competitive economic
society would cease. Size begets
monopoly. Moreover, In the aggre-
gate these little businesses furnish
the indispensable local basis for
those Nationwide markets which
alone can insure the success of our
mass production industries. Today
our smaller corporations are fight
ing not only for their own local
well-being but for that fairly dis
tributed national prosperity which
makes large-scale enterprise pos
sible.
It seems only equitable, there
fore, to adjust our tax system In
accordance with economic capacity,
advantage and fact. The smaller
corporations should not carry bur-
denS beyond their powers; the vast
concentrations Of capital should
be ready to carry burdens COM
mensurate with their powers and
their advantages.
We have established the prin-
ciple Of graduated taxation in re-
spect to personal incomes, gifts
and estates. We should apply the
same principle to corporations.
Today the smallest corporation
pays the same rate on its net
profits as the corporation which is
thousand times its size.
I, therefore, recommend the
substitution of q corporation in
come tax graduated according to
the size of corporation income in
place Of the present uniform cor
poration income tax of 13% per
cent. The rate for smaller cor
porations might well be reduced to
10% per cent, and the rates gradu-
ated upward to rate of 16A per
cent on net income in the case Of
the largest corporations, with such
clasSiflcations Of business enter
prises as the public interest may
suggest to the Congress.
Provision Against Evasion.
Provision should, of course, be
made to prevent evasion of such
graduated tax on corporate in
comes through the device Of nu-
merous subsidiaries or aff1liates,
each Of which might technically
qualify as q small concern even
though all were in fact operated