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CHAIRMAN LORD: I will read a telegram addressed to the president of the National Tax Association:


"The Santa Fe chamber of commerce extends to your association its most cordial invitation to hold the next annual convention in this ancient capital. Ample facilities and hotel accommodations will be at the disposal of delegates. Two new modern hotels will soon be open. Please confer with J. E. Saint, chairman of the New Mexico tax commission. Santa Fe is the center of the foremost one hundred miles square in America. The business of the convention having been transacted, it affords to delegates opportunities not found elsewhere."

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DOUGLAS SUTHERLAND of Illinois: While the delegates are assembling for the afternoon session, I should like to suggest for the consideration of the resolutions committee a reference to the appropriate committee having charge of the modification of the mode! tax law, the consideration of this question: Is there a relationship between the tax upon income and the tax by value upon property, other than the relationship which was suggested at the morning session, as to the proportion of revenue raised through income tax, in comparison with the proportion of revenue raised by the general property tax?

I raise that question because we found rather an interesting situation in our Illinois constitutional convention. A school of thought developed that there was a relationship between the two taxes, other than merely the proportion of revenue raised by the income tax, and an attempt was made to write into the constitution a definite ratio between the rate of income tax and the rate of property tax. The rate suggested was that the rate of taxation on income should never be less than fifteen times the current rate of tax on real property. That was aimed at intangibles. It was suggested with all seriousness by some of the delegates. It did not get very far, but there is a vestige of the suggestion left in our constitution as it goes to the people. We provide for one kind of tax on income derived from intangibles, which tax must be real

and substantial. As originally brought in, the language read that this tax should be substantially proportioned to the tax upon real estate; now it simply reads that it shall be real and substantial and a uniform tax. We provide also that there may be a general income tax, with deductions from this tax for the general property tax. I think a law can be worked out under our constitution, but it raises an unusual question.

CHAIRMAN LORD: I would suggest that you write Dr. Bullock, giving him the same suggestion you make here now, so that the committee may have that matter in mind definitely when they meet to review and revise that report.

MR. BURNHAM: In line with the publicity campaign, it seems advisable to offer this resolution.

(Reads resolution)

CHAIRMAN LORD: The resolution will be referred to the committee on resolutions for its consideration. The chairman is not here, and if there is any other member of the committee who is sure to meet with them, I should like to have him take this resolution.

We had the pleasure this morning of listening to a very eminent university professor, Dr. Bullock of Harvard, the oldest university in the country, and I am going to call to the chair this afternoon an eminent teacher from one of the largest institutions of learning in America, Dr. Haig of Columbia University. Dr. Haig has done a great deal of constructive work in the matter of taxation, has made a great many very useful investigations, very valuable investigations indeed. Most of you are acquainted with him, I am sure, by reputation if you have not had the pleasure of meeting him, but in order that you may see him in action I am going to call him to preside at the meeting this afternoon.


CHAIRMAN HAIG: I wish I could persuade my friend Mr. Lord to make that address to the trustees of Columbia University. They might not think it was all true, but it was all right with me I am


The program this afternoon carries two items only, an address by Dr. Adams on how federal taxes are made, and the report of the committee of the association dealing with bank taxation.

I think that the preliminary program that was issued by the secretary of the association carried a much more interesting item with reference to the address that we are about to hear than that which appears on the official program that you have before you. This reads "How federal taxes are made, Thomas S. Adams, Yale University." The preliminary announcement read How federal


taxes are made by Dr. T. S. Adams of Yale University." I don't know which subject is to be discussed this afternoon. I am sure we shall be very much interested in either. I do want to say that I think we have cause to be profoundly grateful for the part which Professor Adams has played in our nation's financial history in the past few years. I think it is of greater significance than many of us realize. We went into this great war unprepared in many ways, but nowhere were we more completely unprepared than on the financial side. It is almost unbelievable to anyone who is familiar with the methods by which great nations regulate and control their finances that there could be the almost complete separation which did exist, between the administrative and the legislative branches of our government at the time the war was declared. In order to solve the problem acceptably it is necessary that there be the most intimate, kindly understanding and cooperation between the two branches. Instead of that, those of us who knew the facts knew that there was suspicion and jealousy and absolute lack of cooperation between the administration, the treasury department and Congress. We also know today that that condition no longer exists.

We have not amended the Constitution. We have made no great change in the formal organization of our government, but nevertheless what amounts to a revolution has actually taken place. The administration is now depended upon to provide a considerable amount of the initiative and a very large portion of the guidance during the course of preparation of financial measures. Now, that is a tremendous change, and that change is due almost entirely to Dr. Adams.

It has been a very fortunate thing for America that when we had to face these very difficult problems, we had a man on the job who had the necessary knowledge and ability and willingness to sacrifice himself, and step into the breach and meet the situation.

Everyone knows that federal tax laws are not entirely satisfactory, but I think that in this case we can reverse the statement that often appears in a preface, where an author says that any merits that the volume may possess are due to the excellent suggestions of his critics, and all errors are due to his own lack of foresight and judgment. In this case anything that is bad in federal laws is there over the protest of Dr. Adams, and much of what is good is there due to the fact that he has been present at Washington.Dr. Adams.

DR. THOMAS S. ADAMS: I don't know whether I should begin a serious discussion with a story, but Professor Haig's very kindly introduction makes me feel like the very belligerent gentleman who got religion on one occasion. He had a feud of long standing with an ancient enemy, and the day after he got religion he met

him on the street and said: "Jim, I got religion last night, and I feel so darned humble this morning I would shake hands with a dog." He says, "Shake". I feel somewhat in that mood.

A certain traveler, according to a recent story, being examined by an immigration official or passport officer, when asked about himself, described himself as a realist, a pragmatist and an optimist. I want to approach this subject somewhat from that viewpoint. I hope I shall approach it realistically, with a recognition of the real difficulties and real problems, and I want to approach it pragmatically in the sense of finding something that will help a little, and I believe, in accordance with my experience at least, it may be approached optimistically; that it is capable of some improvement.

It is hardly necessary before this audience to describe in any detail the actual processes and machinery of federal tax-making. I don't expect to go through with any such description. As I think over the way federal tax laws are made, a very marked sin of omission comes first to my mind. I think there could have been a great improvement if we could have had in recent years a thoroughgoing preliminary examination of these subjects by a legislative commission. The best tax laws that have been made by the states in recent years have been preceded by, and in a large sense are due to, thoroughgoing studies by commission in advance-legislative commissions or mixed commissions. That has been almost entirely absent in the making of federal tax laws and its omission or absence has been, I think, a serious error.

One understands the pessimism of Congress about commissions. I tried particularly hard to get the appointment of such a commission at the last session, in which important revenue legislation was adopted. The members of Congress were not hostile but they were blasé; they said, "We will not get anything out of a congressional commission that is worth while." I think that is hardly true. Most of our congressional commissions have perhaps fizzled. but there are some notable exceptions. A very great and enduring result followed from the Aldrich commission, which investigated banking and currency; representative Anderson's commission on agricultural inquiry, turned in a report which will have very real effect; and I believe at the particular juncture a congressional commission would have greatly improved the situation. However, it was not authorized.

Speaking about the mechanics and the processes, there has been far too much haste in federal tax-making; not so much as a mere matter of actual time, but in the mental attitude. The recent bills have stayed in committees five and six months or more, but from the very beginning, considering the magnitude of the task and the almost infinitude of the detail involved, it has been a question of

drive and haste. The attitude of the average member of Congress has been-" We must get by with this some way." That has been unfortunate.

Looking to the mechanical processes involved, I have no particular criticisms to offer. In recent years the treasury department has honestly and industriously attempted to collect advice, criticisms. and suggestions of the men in this country who were seriously enough interested to make constructive suggestions. These have been studied and absorbed. Whether all the wisdom that they had was utilized is another question, but they have not been neglected, and a serious effort has been made to get from people who think effectively and constructively on these matters real suggestions.

The federal department has gone out-particularly in the construction of the last tax bill-and has sought earnestly the advice of those people who make a serious study of these questions. As Professor Haig said, in recent years the suggestions of the treasury department, put in concrete, definite form-that is to say, in the form of proposed legislation, with the details worked out - have had the most sympathetic, serious attention of the committees of Congress. That situation I think could hardly be improved. The ways and means committee obviously does not take its tax measures from the treasury department. It exercises its own independent judgment, as it must, as it should; but it does sympathetically and seriously consider the suggestions which the department has to make.

In the practical formulation of the bills the various committees have had expert assistance of what seems to me the highest order. The two legislative draftsmen—Mr. John E. Walker in the senate and Mr. Middleton Beaman in the house are two men who I know could not be improved upon; they are highly qualified to work in this kind of work, and that work is important. The revenue bills have been formulated by the legislative draftsmen of the two houses, working together and dividing the work. So far as the actual technical legislative drafting is concerned, I don't know how that could be greatly improved upon.

So much then for a part of the work which in my opinion you are either familiar with or can by imagination, by reason of your familiarity with state legislative processes, easily appreciate and understand. The legislative treatment of these tax bills has been much as you would expect. In many ways Congress has shown in recent years a rather unusual and striking desire-in my opinion, an intent, a spirit-to deal soundly, fairly, equitably, and in accordance with statesmanlike ideas. I think if you took the revenue act, for instance, of 1921, and took its provisions one by one and compared them with earlier acts, you could mark a very striking progress in what might be called the legislative attitude, which has

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