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amended as to permit the states to tax national banks or the shares thereof or the income therefrom, according to such systems as they may consider desirable, provided that such taxation shall not be at a greater rate nor impose a heavier burden than is assessed or imposed upon capital invested in

general banking business and the income derived therefrom." The Kellogg bill seeks only to promote equality in taxation and to undo and remove special privilege and advantage. It is calculated to make persons and institutions equal before the law, with proportionately equal burdens and responsibilities for the common good. It affords ample and adequate protection and security to the banking interests and it will preserve to the local communities sums already paid in taxes, which have been received, given and expended in entire good faith, according to a system which was time-honored and acceptable to all and for the repayment of which sums no just or equitable reason has been given.

Walter W. Law, JR.,

State Tax Commission of New York,

Formerly Chairman Wisconsin Tax

Deputy Commissioner, Department of

Taxation of Massachusetts

Minnesota Tax Commission
H. A. Millis,

University of Chicago

United States Tariff Commission

Attorney General of Mississippi

CHAIRMAN Haig: Before recognizing any speakers, I should like to give the secretary of the conference an opportunity to read a resolution.

SECRETARY HOLcomB: The committee on inheritance tax has been working industriously, as you perhaps have noticed, for several days, and it is only fair that we should have the results of their deliberations as to resolutions, and therefore they wish to submit this series of resolutions. Under the rules they should be read, and unless the reading is to be dispensed with, I will read them.

Voice: Read them.
(Resolutions read by Mr. Holcomb)

CHAIRMAN Hair: The resolutions will be referred to the committee on resolutions. If it is the pleasure of the meeting we shall then proced to a discussion of the report of the committee on bank taxation, under the five-minute rule, and the further rule that one person shall speak once on the subject but not until all have had an opportunity to be heard, shall he be heard again. I wish also that speakers would kindly mention their name and state

Philip ZOERCHER of Indiana : Yesterday evening in the resolutions committee, when this matter in reference to this question came up, the delegate from the District of Columbia apparently was on the other side. I think before we take up the discussion, if he is present, we ought to let him give his opinion and then take up the discussion.

CHAIRMAN Hair: Last year at the Bretton Woods meeting we were fortunate in having a representative of the American bankers' association present. I am not sure that there are any representatives present today. There are, however, here, I think, some gentiemen who have been associated with the banking interests, in connection with the litigation, and I think it would be a mark of courtesy and better procedure from every point of view, to give an opportunity first to any who desire to express an opinion contrary to the general conclusions of the committee.

CHARLES J. Tobin: I don't believe it is possible to adequately present anything in opposition to the report of the committee in five minutes. I have given some attention to the question of the taxation of banks, and I have before me or with me here a copy of the report of Senator Davenport's committee, of New York. which took up the subject of bank taxation, and they made quite an exhaustive study of the subject. There are certain facts and figures contained in this report that I should like to present.

C. P. LINK: Mr. Chairman, I am a strict adherent of the fiveminute rule, as a general proposition, but I think there is a good deal of merit in the gentleman's point, and I move you that the five-minute rule in this extreme case be dispensed with, and that we give Mr. Tobin ten minutes; not to exceed fifteen minutes.

(Motion seconded)

CHAIRMAN HAIG: All in favor of extending the time of Mr. Tobin to ten minutes, or not to exceed fifteen, signify by saying aye.

(Ayes and noes) (Motion carried)

CHAIRMAN Haig: May I say, Mr. Tobin-you may not know itthat the report that you mention has been distributed to all the members of the conference, so that perhaps you may be able to save some time.

Mr. Tobin: I am only going to refer to parts of it. Through the kindness of Senator Law, I was permitted to read the report of the committee on Tuesday of this week. I regret, as a member of the association, and also as a delegate to the conference, that the taxpayers, as I might classify them, were not represented on this committee. It may have been impracticable; I don't know; I shall not answer that question; yet I notice that in the make-up of most of the committees the taxpayer has had some representation.

The report is signed by Senator Law, who is chairman of the state tax commission of New York; by Mr. Haugen, who was formerly chairman of the Wisconsin commission; by Mr. Holmes, who is the deputy commissioner of taxes of Massachusetts; by Senator Lord, who is a member of the Minnesota commission, and by Mr. Roberson, who is the attorney general of Mississippi-all representatives of these respective states. A reading of the report indicates that it is in large part the proponents' brief which was presented to the two committees of Congress, on legislation pending there on bank taxation. In fact, I believe that Senator Law made the statement in his opening remark, that it was to a large extent built upon the brief that they had presented to Congress.

In my view the taxpayer should be heard. This conference is deemed to be an open forum. We seek the taxpayer as well as the tax official and the economist, and as the taxpayer is not represented, I desire at this time to make reference to some parts of the report of the special joint committee on taxation retrenchment of New York, submitted to the legislature on March 1, 1922. If I may be permitted I shall read those parts. It will not take very long, but the subject was gone into in a very thorough manner. I might preface that by stating that the committee had as its secretary Professor Haig who is presiding over this conference at this time, Professor Mills, Mr. Luther Gulick, Fred Rogers Fairchild, and Miss Mabel Newcomer and Donald A. Davenport. Professor Fairchild, as I understand it, did not take any part in the report as concerns bank taxation, but he did sit in on all the conferences. The report at page 78 reads as follows: :-(The conclusions of the New York committee, referred to by Mr. Tobin, are as follows.-Ed.)

CONCLUSIONS. The Committee has found that the old method of taxing banks and financial institutions, which has been in force for many years, produces very unequal results. It recommends:

(1) That, in case the necessary amendment to section 5219 of the Revised Statutes is granted by Congress, national banks, state banks, trust companies, and Morris Plan banks be subjected to a business tax on their net income levied at the same rate as that applied to the net income of mercantile and manufacturing companies;

(2) That, because of the difficulty of defining the net income of savings banks, it is recommended that the tax on such institutions be continued in the form of a franchise tax based on some such measure as that provided in the present law;

(3) That the class of investment companies be abandoned as a separate category for tax purposes, Morris Plan banks being taxed as suggested in (1) above and all other organizations now included in this class being subjected to the regular franchise tax on the income of business corporations (Section 90).

The adoption of these recommendations will result in more exact fairness in the treatment of financial institutions as compared with other businesses and will correct the discrimination against the smaller banks of certain classes which the statistical study has revealed.

The adoption of the Committee's recommendation for an income tax upon banks and financial institutions presupposes that a portion of the yield from the taxes will be returned to the localities at least equal to the amount which they now derive from the tax upon shares of stock in state and national banks.

To avoid excessive fluctuations in revenues it is suggested that the principle of averages may well be utilized; that is, instead of basing the assessment upon the net income of a single year, the average of the net incomes of three or five years preceding be used. This method could be adopted gradually by starting with this year's income and incorporating the income of succeeding years as a part of the base as time proceeds. The adoption of this plan in this period of depression and of small profits would work no hardship and should arouse little antagonism.

However, the adoption of the recommendations outlined above must await Congressional action upon the proposed amendment to section 5219 of the Revised Statutes. If a reasonable amendment is blocked through the short-sighted opposition of a small section of the financial community, the Committee proposes a plan to prevent the evasion by the national banks of their fair share of the governmental burden, through a return to the taxation of such moneyed capital as competes with national banks, at the same rata as that imposed upon national bank shares. The Committee regards this as a very undesirable alternative but a necessary one in the contingency described.

CHAIRMAN Haig: The gentleman's time has about expired.

MR. LINK: Mr. Chairman, in thinking this over, I feel that I was a little arbitrary. If there is no objection, I suggest that we allow Mr. Tobin to conclude his argument within the judgment of the chair.

CHAIRMAN Hair: The chair hesitates to accept this responsibility.

MR. LINK: I move you the time be again extended, within the judgment of the chairman.

MR. TOBIN: My only purpose in bringing out these facts is that there is a problem here, that has not been answered in the report of the committee; that it was found in New York, through this statistical study, that there is something more to be done, and that is to know whether the banks are on a par today in the payment of their taxes with other business in the state.

Mr. Link: It is an unusual situation; I know that it has always been our policy to have taxpayers of the class of property interested on a committee. I don't know why that was not done—very likely it was an oversight in this case. The rest of the conference are, I take it, practically a unit for this amendment, but we have just a few delegates—Mr. Tobin being one-who see this from the contrary side. I feel we ought to be fairly generous.

Oscar LESER: I move we give him ten minutes more. (Motion seconded)

MR. LINK: It is a big handicap for a man handling a big subject, and I insist that we leave it to the discretion of the chair.

CHAIRMAN Hair: If there is no objection, Mr. Tobin will continue in the discretion of the chair. Since we limit the regular papers to twenty minutes, fifteen minutes should be the maximum for discussion.

MR. TOBIN: Perhaps I may be permitted to hand in something, so as to make the record complete, which is my only purpose in speaking on the subject. If we can save time in that way, I would just as soon do it. I believe the record ought to be complete in some way on the other side.

It is plain that the taxpayers were not represented. As I say, it may have been impracticable to include them on the committee, but there is a larger task before us than the mere taxation of banks, in this particular issue, and that is whether this conference is going to enter upon the job of legislating. The report of the committee as submitted carries with it legislating on the part of this conference. I feel that we should reaffirm our resolution of last yearthe resolution passed at Bretton Woods—but desist from legislating in the premises.

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