Thrift, Hope & Charity

Last week as the Treasury was spending approximately $17,000,000 per day more than it was earning, the House of Representatives settled down to consider a tax bill which would produce just about enough revenue for the Government to break even for 16 consecutive days.

Not President Roosevelt, not Secretary Morgenthau, not Senate Finance Committee Chairman Pat Harrison, not Share-the-Wealther Huey Long, in fact hardly anyone except the rawboned, 6 ft.-2 in. North Carolina mountaineer who is Chairman of the House Ways & Means Committee had a good word to say in public for the measure. Against Chairman Doughton's loyal but half-hearted defense rose the critical outcry of thousands of Republicans, businessmen, plain citizens. Declared Republican Ways & Means Committeemen in their minority report:

"If this bill serves no other purpose, it will at least demonstrate to the country that the extravagant and wasteful expenditures of the Democratic Administration cannot be met merely by 'soaking the rich.' ... It falls $3,305,000,000 short of meeting the deficit for the last fiscal year. Even as a redistribution of wealth measure, it would provide but $2.25 for each of our 120,000,000 people. . . .

". . . The fact is that the Democratic Administration does not have the courage to present a comprehensive tax program."

The 58. President Roosevelt's reply to such attacks was not a defense of the bill, but a new, headline-making slap at the rich. Centring a sheaf of penciled notes on his knickknack-littered desk, he announced to newshawks that he had been making a personal study of the tax returns of 58 people who in 1932 had incomes of $1,000,000 or more per year. These, he declared with a broad grin and an obvious dig at William Randolph Hearst, whose newspapers had taken to calling the tax bill a "soak the thrifty" measure, were 58 of "the thriftiest people in the U. S." By buying tax-exempt Federal, State and Municipal securities they had managed to avoid paying any taxes whatever on 37% of their income.

Tax avoidance, the President cheerily defined, was what tax evasion became when a rich man hired a $250,000 lawyer to change the word. One way to avoid taxes, and one which cost the Government a lot of money, was to form family trust funds. One U. S. family, he declared, had its fortune split up into 197 such funds.

At this point alert Correspondent Harold Brayman of the Philadelphia Public Ledger broke in to ask: "Does your bill touch family trusts?''

The President conceded that it did not, passed on to gift taxes.

Goodwill. At a press conference the week before. President Roosevelt's target had been corporation gifts to charity. What right had corporations, he demanded, to buy goodwill by giving away their stockholders' money? In wide circulation last week was the following response by Preston S. Arkwright, president of Georgia Power Co.:

"At Mr. Roosevelt's invitation, I called on him at Warm Springs [in 1930] to discuss with him the matter of electric service at the Foundation. Mr. Roosevelt stated that the Foundation was a charitable organization . . . and asked if we would not give the Foundation a special rate on its electricity. ... I told him we could not do this, that our rates were required by law to be uniform to all customers.

"We then discussed the matter of putting in order the electric distribution system at the Foundation. It was in bad condition, and it was estimated that about $6,000 would be required to rehabilitate it. I told Mr. Roosevelt that ... we would donate the amount necessary to put the distribution system in order. . . . Mr. Roosevelt did not accept the outright donation. Instead ... he deeded the Foundation's electric distribution system to our company without cost. As a result, the company stood the expense of rehabilitation and, in addition, the Foundation was saved the loss it had previously incurred in operating the distribution system.

"These circumstances . . . provide an illustration of worthy causes to which many of our contributions have been made. They also, in light of Mr. Roosevelt's statements, provide an illustration of the fact that, quite often, goodwill is not gained by our efforts to assist worth while agencies." Silent Secretary. In four prime respects the House Ways & Means Commit tee went wide of the specifications laid down by President Roosevelt. Instead of grading up surtaxes only on individual in comes of $1,000,000 or more, it began with middling $50,000 incomes. Instead of a corporation income tax grading up from 10 3/4|% to 16 3/4% according to size of income, it closed the gap to an insignificant 1% -- 13 1/4% to 14 1/4%. As a substitute for the President's proposal, it wrote in an excess profits tax, 5% to 20% on profits over 8% of 1934 declared capital value. Corporations were authorized to deduct on their tax returns all gifts to charity up to 5% of their net income.

Two days after talking taxes with President Roosevelt at a White House conference. Secretary Morgenthau last week appeared, cool, aloof and immaculate, before the Senate Finance Committee.

"In your opinion," asked Chairman Harrison, "do the provisions of the House Bill conform to the President's suggestions?" Secretary Morgenthau reflected, finally replied: "You place me in a very embarrassing position when you ask me about a bill already introduced in the House. . . .

I hope you will not ask me that question." "I have no intention," shot back Chairman Harrison, "of trying to embarrass you but, if possible, to remove our own embarrassment. ... It is apparent to me that this House Bill has been based on the Treasury's recommendations. . . .

Do you approve the changes made in the House Bill from the proposals of the President in his message?" "I don't think it is up to me as an executive officer to approve or disapprove of any legislative measure," parried Secretary Morgenthau.

"Is it your opinion as Secretary of the Treasury that we would get more revenue from a graduated corporation tax ranging from 10 3/4% to 16 3/4% without an excess profits tax than from a tax of 13 1/4% to 14 1/4% and the added excess profits tax?" "I consider that a technical question that my training does not qualify me to answer." Thoroughly exasperated, Chairman Harrison burst out: "You're the first Secretary of the Treasury that hasn't been willing to state his views to the Finance Committee of the Senate." Secretary Morgenthau was unmoved.

"It may be," said he, "that I differ in many ways from preceding Secretaries of the Treasury. The Treasury as long as I am Secretary is not going to have any opinions on a revenue measure." Played Out. Since the War no tax bill has been written & passed by Congress in less than four months. Last week Chairman Doughton proposed that the House be allowed eight hours of general debate on the current bill.

"The members are played out," objected Pennsylvania's Patrick Boland, Democratic whip. "We have been waiting for this bill for three weeks. The House is ready to vote on it now." A rule allowing six hours of debate was adopted. Only a handful of spectators and some 50 Representatives stayed around for the six hours of partisan wrangling.

When it was over radical members began popping amendments. Some wanted to take up to 99 1/2% of rich men's incomes, but California's Hoeppel topped them all by proposing a surtax which would have required U. S. citizens living abroad to hand the treasury 112 1/2% of their incomes.

"What kind of arithmetic is that?" cried a colleague.

"We should worry about that," bawled Representative Hoeppel. "We'll take it all."

The House passed the bill without any change, 282-to-96, sent it to the Senate.

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