can't get it by an excess profits tax, without destroying the industries of our nation. No man is going to engage in business and take all the chances of business, when he knows that at the end of every year, if he is successful, seventy-three per cent of it will be taken away from him; particularly so when he knows that he can turn and purchase upon the market at any time that he wants them, tax-exempt securities that will net him a much higher rate, and he runs no chance whatever. He can sit in his office, he can clip coupons, he can buy these securities, receive his profits, and the tax-gatherer shall never take a penny from him.

I want to say this-that there will never be any more legislation, affecting a great mass of the people of this country, extending loans by the Government, or any agency of the Government, where there will ever be one penny of tax imposed upon the interest from such loans. there is only one way to turn, in my opinion, and that is to what may be termed the sales tax.

So

Everywhere that a sales tax has been put into operation it has proved itself a success. Going to Canada upon the north, it was fought there bitterly; yet, I am told by Canadians and I see from the Canadian press, that if the question were left today to the people of Canada to decide, they would never repeal that law; and so it will be in the United States if we are ever successful in passing such a law.

Unfortunately when the announcement was first made that there was to be put forth an effort to pass a sales tax, certain organizations in the District of Columbia met and the laboring man and the farmer were told that they must not support such legislation, for it meant nothing more nor less than the transfer of the burden of taxes from the backs of the rich to the backs of the poor, and that slogan went all over the United States; and they took particular pains to ask every organization-both labor organizations and farmer organizations of the country-to pass resolutions denouncing it, before ever they knew what it was and before they even knew what exemptions were to be had. They never knew whether it was going to be a tax upon the manufacturer, or a sales tax upon the person who ultimately bought the goods. They never knew what amount it would

raise or the rate to be imposed. It was simply a question of protest, without any study whatever. There was not the slightest cause for some of those objections. The only real objection, it seemed to me, was that if it were a tax upon the ultimate purchaser, that perhaps it would fall a little heavy, in proportion to his ability to pay, upon the poor man, who had to spend every dollar to keep himself and his family alive. How can it be avoided?

Canada passed a sales tax bill requiring a collection from two sources, first from the manufacturer and then from the first wholesaler. I proposed a bill for a tax upon the manufacturer, to be collected every thirty days-an amount equal to one billion eight hundred million dollars a year, at a small rate. Canada reports that in over fifty per cent of all sales, the ultimate consumer does not pay the tax and that the tax is absorbed by the manufacturer and by the wholesaler, and particularly would this be so in the case of all goods that are sold at a given price—a twenty-five cent article, or a fifty cent article. There isn't any question but what that is what would happen. But to get around that, I am trying to work out some plan whereby a graduated tax can be imposed. I don't say that I can accomplish it, because the more I get into the subject the more difficulties I find. Briefly it can be explained in this way. Take a pair of shoes, we will say at $3, impose no tax on them at all, but on a pair of shoes at $5 impose a small tax; a pair of shoes at $10 a little larger tax; and if some foolish woman wants to buy a pair of shoes that cost $75 or $150, or a pair of slippers that cost $200, let her pay a higher tax on them. As to automobiles. Take a Ford, I don't care; make them free if desirable; impose no tax on a Ford. The next car, costing $750, impose a slight tax; a $1000 car, a little heavier tax; and if you have got to have a Rolls-Royce or an English made car that sells for ten or fifteen thousand dollars, let that man pay a heavier tax.

Now, if this can be ever worked out in detail, it will eliminate all of the difficulties, and I want to say that if it can be accomplished we shall have a solid basis for future taxation. We shall know every month how much money in taxes the Government of the United States receives and every business man will know, at the close

of the day, how much tax he owes the Government of the United States.

Only tonight, ten minutes before I came into this room, I had a call from two men who live in my own home city. They asked me what relief they could expect from taxes now imposed, which meant to them, if there can be no release, their utter ruin.

There are legislators in this country of a certain class, who are perfectly willing to pass any kind of an appropriation and for any amount, giving as an excuse that we can meet them from the payment of the debts we collect from England and foreign countries. I want to call the attention of the American people, and I think they ought to know it, to the fact that there is an obligation on the part of the Government to the bond subscribers, and that in justice to them, every dollar of that money collected shall be paid upon the obligations of the Government, and if Congress takes one dollar of that money for any purpose other than to redeem the obligations of the Government, it is breaking faith with the people who loaned the money to the Government during the war period.

I

In an article that I wrote last March for Trade Winds I called attention to this, and I was in hopes that the papers of the country would take it up. I will read a few words from that article. want all the American people to know the facts. In the act providing for the settlement of the British debt to the United States I find these words:

"That the Secretary of the Treasury, under such terms and conditions as he may prescribe, is hereby authorized to receive on or before maturity, payment for any obligation purchased on behalf of the United States, and to sell at not less than the purchase price any of such obligations, and to apply the proceeds thereof and any payments made by foreign governments on account of their said obligations to the redemption or purchase at not more than par and accrued interest of any bonds of the United States issued under authority of this act; and if such bonds are not available for this purpose, the Secretary of the Treasury shall redeem or purchase any other outstanding interest bearing obligations of the United States which may at such time be subject to call or which may be purchased at not more than par and accrued interest."

We saw senators upon the floor of the Senate offering amendments to the bonus bill, and pledging the interest as well as

the payment of the obligations of foreign countries to meet the payments that would be required under the bonus bill.

I don't know how much more money we can get from foreign countries. I don't. expect to get any, from most of them. In fact, it will be a long time before we get a settlement with them. Our settlement with England was a marvelous one. I am perfectly willing to admit, and I admitted upon the floor of the Senate, that the terms imposed upon England were somewhat burdensome. England thinks just as much of her commercial honor as she does of her life. When we take into consideration the fact that before she pays the four billion six hundred million dollars principal that she owes us, upon which a settlement was made, she will have paid to the Goernment of the United States twelve billion, one hundred eighty-three millions of dollars. We think we are burdened with taxation. We think our taxes are high. They are small compared with the taxes of England. As I said at Logan the other day, in speaking to the bankers' association, the taxes imposed upon every man, woman and child of England amount on an average to $102 per annum. Our taxes, of every name and nature, amount to about $73 per capita. The taxes of France are nominal. Why, the war was nearly over before France imposed an income tax, and then only ten per cent. I asked Mr. Parmentier why the Foreign War Debt Commission didn't impose greater taxes when they submitted their budget for the year 1923, together with a statement of their income for the same period, showing that there was a deficit for that year of five billion, five hundred million francs, also showing at the time that there was an appropriation in that budget of five billion, six hundred million francs for the army alone. And when he refused positively to recommend to his government a settlement with the United States we asked him why he took that position; why they didn't reduce the budget for the army and why they didn't impose taxes like the English-speaking people of the world were imposing taxes upon their citizens. He answered, "No administration would last thirty days that undertook to do it." I doubt whether we will get very much foreign money to relieve our situation for some time to come.

You have heard a great deal about inflation. If you have not, we have in the Senate, for every day for months and months Mr. Hefflin, of Alabama, repeated and repeated his speech on the wickedness of the Federal Reserve Board in inflating the currency and then deflating it all at once. He denounced everybody from P. G. Harding, the then chairman of the board, to the least one that was connected with that great institution. When Hefflin would start to speak Senators would leave the chamber. One watchman was left. I told Mr. Hefflin one day that he reminded me of the time when I was a boy living in Provo. There was an old man in Provo by the name of William Nelson, and he had a son by the name of Will Nelson, about my age. He lived right on the brow of the hill, where the Rio Grande and the

Union Pacific run out of Provo towards Springville. We boys used to run down there at night to play on the brow of the hill. William Nelson was known to the people of Provo, and I guess to everybody else who knew him, as the longest prayer of any man in the world. About half-past seven o'clock the old man would come out to the door and call, "William, come in to prayers." William would go into the house to prayers; but just as soon as the old man got started to praying, William would leave to join his playmates. would play about one hour and a half, as near as we could judge, and William would go back to the house, put his ear to the window and listen until the old man began to pray for the Red Man of the Forest. Just as soon as that point was reached in the prayer he would come back to us and say, Boys, I have a half hour yet to play before I have to go in."

We

I told Hefflin that he must not take offense because everybody went out to avoid hearing his daily tirades against the Federal Reserve Board, "but," I said, "we keep a watchman on hand and when you swing in at the foot of Wall Street we

know that we have one more hour to work, rest or play."

But, do you know that I am very thankful indeed that there has been a check put upon the runaway stock market. We were going too fast. The recovery was too quick and I am mighty thankful that there was a little check to it. Failures in business do not occur in hard times. The failures are made in prosperous times and the result of the failure comes in hard times.

I don't know, my friends, but what I should say that it is your duty, and it is the duty of every conservative man in the United States, to let the American people know your views. I have observed that some of the greatest speeches ever delivered in the Senate have been passed unnoticed by the press of the country, with the exception of the mere announcement that the speeches were made; while at the same time the papers have given page after page, day after day, of notices to the blatherskite who curses and denounces all men who try to build up the industries of this country. The American people ought to be informed as to the burdens carried by American industries and the object of your labors. I think that many of your associates now located in Washington have come to that conclusion. Better for you and better for the country when the day is here.

I thought perhaps I would close in this way:

Our principal business should be improvement. Let our age be the age of improvement. In a day of peace let us advance the arts of peace and the works of peace. Let us develop the resources of our land, call forth its power, build up its institutions and promote its great interests. Let our object be-our country, our whole country, and nothing but our country. One heart, one hand, one flag, one land, one country.

INTERSTATE COMMERCE.-A partnership located in a city in Iowa engaged in the business of selling to merchants plans and premiums for popularity contests, made a sale and delivery of goods to a storekeeper in Kentucky and sent a representative there to organize a contest. Subsequently suit was brought for a breach of contract. The defense relied upon was the fact of non-compliance by the partnership with the provisions of a Kentucky statute, requiring statement of the true names of persons transacting business to be filed in the office of the clerk of county in which persons intend to conduct such business.

The court held that the transaction here involved was purely an interstate one, and that a failure to comply with the provisions of the regulatory statute relied on was not an available defense, following the decision in the case of York Manufacturing Co. v. Colley, 247 U. S. 21, which involved the selling and subsequent installation of an ice plant, the court holding that the transaction was one in purely interstate commerce, although the erecting of the plant, composed of the parts sold, was an act done locally.

The court held in this case that it was extremely doubtful whether the regulatory statute above referred to applied to the doing of a single transaction such as the one here involved.-Pratt v. York, 248 S. W. 492.

INTERSTATE COMMERCE. In a Kentucky case the court held that a contract made by a foreign corporation engaged in the business of selling coal for the purchase of the entire output of a mine in Kentucky, with the view of selling the coal and shipping it to its customers without the state, was a transaction of interstate commerce, and that therefore the foreign corporation was relieved from compliance with a Kentucky statute regarding the appointment of an agent upon whom service of process could be made, notwithstanding a small part of the coal so purchased was resold within the state

and never became the subject of interstate shipment.-Logan-Pocahontas Fuel Co. v. Camp, 246 S. W. 433.

INTERSTATE COMMERCE.-An agent of a foreign corporation, residing in Minnesota, contracted for the sale of a machine in Wisconsin and on the day following brought the machine into the state and delivered the same to the customer. In an action to recover the selling price of the machine, the defense was interposed that as the foreign corporation had not obtained authority to do business in the state, the contract was void. The court allowed a recovery on the ground that the transaction constituted interstate commerce.American Slicing Machine Co. v. Jaworski, 192 N. W. 50.

GROSS RECEIPTS INTERSTATE COMMERCE-PIPE LINES. Suit was brought by the State of Texas against a pipe line company for the purpose of collecting an occupation tax on the company's gross receipts derived from its earnings in transporting petroleum oil through its said pipe line. The statute in question provided that each pipe line company whose lines were wholly within the state should pay an occupation tax of 2% of its gross receipts; that if the line was partly within and partly without the state, the company should pay a tax equal to 2% of such proportion of its gross receipts as the length of its line within the state bore to the whole length of its line. No distinction was made as to the nature of the business, whether interstate or intrastate, the law assessing the tax against earnings from both sources. The tax was in addition to advalorem taxes levied against the property of the company in the state.

The court held that the act in question, in so far as it attempted to levy a tax on the gross receipts of the company from every source whatever, including earnings from interstate commerce, was in violation of the commerce clause of the Constitution of the United States. The court also

held that as the act levied a tax upon both interstate and intrastate commerce, and as it was impossible under the terms of the act to separate the interstate business from the intrastate business, it was invalid as to both.-State v. Humble Pipe Line Co., 247 U. S. 1082.

CORPORATION INCOME, STATE-SUBJECT OF TAX STATUTORY NET INCOME-RELIEF AND REVIEW. A decision which draws the net a little closer about the questions arising under income tax laws is that by the United States Supreme Court in interpreting the North Carolina act, as applied to railroad corporations. The act defines the net income to be the "net operating income" as defined in the accounting system prescribed by the Interstate Commerce Commission, less certain specified deductions. Certain interstate railroad companies sought to enjoin enforcement of the tax, alleging violation of the federal and state constitutions. It was conceded by the railroads that taxation of net income from interstate commerce did not violate the commerce clause and that classification of public service corporations for taxation did not violate the Fourteenth Amendment. It was conceded by the state that taxation of gross receipts would be void as burdening interstate commerce and that an arbitrary classification would be obnoxious to the Fourteenth Amendment.

The contentions of the railroads were that the statute in fact taxed interstate gross income and that the classification was unreasonable. Specifically the first claim was based upon the contention that "net income" under the statute was not in fact such but was an arbitrary sum which, in the case of a typical road produced net income, whereas, after considering non-operating income and also capital charges interest, rents, etc. - that road showed in reality a net loss or deficit.

Thus the statutory net income treated the tax as imposed upon the operating results from the property in the state, while the railroads' claim was that the entitythe railroad-was the subject of the tax and that the state's proportion of the total net income of the entity was the subject of a constitutional income tax. The difference in contention arose from the difference in concept of the basis of income taxation, the state's concept being a prop

erty basis, that of the railroads being the corporation as an entity.

The court upheld squarely the state's contention, observing that a state might consistently with the federal Constitution impose a tax upon the net income from property as distinguished from the net income of the owner of the property (Shaffer v. Carter, 252 U. S. 37, 44, 52).

To the railroads' contention that the state was without power to depart from the definition of net income adopted by the Interstate Commerce Commission the court replied that the statutory definition adopted the commission's definition of that which it taxedi. e. the property — and that the items not allowed as deductions were all capital charges, as distinguished from operating charges; that entry into the intricacies of railroad accounting was not necessary in order to determine the application of the commerce clause, as that clause was not violated unless interstate commerce was directly burdened or discriminated against, neither of which resulted from the act in question.

The technical objection was made that net income as defined by the interstate commerce commission was binding upon the state, as it had purported to follow the form of accounts prescribed by that commission. The court replied that that commission's function was not related to the determination of whether a tax burdened interstate commerce.

The claim resting upon the Fourteenth Amendment was based upon the contention that the definition of net income was arbitrary because other classes of corporations and individuals were allowed deduction of interest, rentals, etc. The court observed that this difference resulted from the difference in the subject of the tax above referred to, and that in any event the state might have subjected only public service corporations to the tax or might have subjected them to a higher income tax than others, just as it laid a higher franchise tax upon them than upon other corporations (So. Ry. Co. v. Watts, 260 U. S. 519).

The claim based upon the state constitution was rested upon the contention that the tax was not upon the net income. The court repeated its observation that net income of the property was the subject of the tax and not net income of the company,