House Default

"Step by step," gloomed Representative James W. Wadsworth in the House one day last fortnight, "the House of Representatives is losing its place as an institution. . . . We do not originate much more than the enacting clause of most legislation."

The onetime Senator from New York could not have chosen a better occasion for his strictures on the decline of the U. S. House as a deliberative body. Up for debate in the legislative branch whose constitutional duty is to originate all revenue bills was the most important measure introduced in Congress this session--the Revenue Bill of 1936. Far more significant than an ordinary revenue bill, it proposed a historic change in U. S. tax policy. Of the 150 Representatives who turned out for the start of the first day's debate, only 34 were left by 5 p. m. Throughout the next four days of deliberation, an average of not more than 50 out of the House's 435 members were on the floor.

When the bill was brought up for amendment last week, the reading clerk rattled through it like a train announcer, skipping paragraphs and whole sections, flipping three or four pages at a time. Primed to offer an amendment, Wisconsin's Progressive Harry Sauthoff discovered that the clerk had passed his section, had to raise a point of no quorum three times and finally threaten to demand a careful reading of the whole bill before Democratic leaders would consent to a re-reading of the section. On the quorum calls the presiding officer, North Carolina's Lindsay Warren, glanced at the 40-odd members present, announced counts of 108, 102, 117.* Three perfecting amendments offered by Democratic Ways & Means Committeemen were swiftly adopted, two by the Republican opposition were just as swiftly voted down. Total time for reading and amending the 236-page bill: 2 hr. 46 min. Next day 359 bewildered Representatives appeared to vote, passed the bill by a thumping 267-to-93.

One reason why Representatives shrugged off this major bill with such deplorable apathy was their conviction that Administration leaders would steamroller it to passage, no matter what they thought or said. Another was their belief that, no matter what bill they passed, the Senate would rewrite it. But the chief reason, which applied to Democrats as well as Republicans, was expressed by Speaker Byrns as follows: "I don't think there will be many Republican amendments offered. They can't be expected to offer amendments when they don't understand the bill." The tax proposals which President Roosevelt sent to Congress in March were aimed at two major ends: 1) Radical reform and simplification of the complex U. S. tax system by repeal of existing corporate taxes, substitution of a tax to be paid by corporations on their undistributed incomes, plus normal income tax to be paid by individual stock-holders on their dividends.

2) Raising of about $620,000,000 of annual revenue to pay for AAA's substitute and the Bonus, plus about $173,000,-ooo per year for three years to compensate the Treasury for invalidated processing taxes.

In response to the President's almost impossible request, Democratic members of the House Ways & Means Committee produced a 236-page hodgepodge of new and old law. Observers unanimously agreed that, whatever else it might be, it was certainly no contribution to tax simplicity. The bill encompassed the corpo rate tax reform which the President had suggested, but his clear and simple proposal had been twisted and tangled into an intricate confusion of special terms and exceptions. These appeared in some of the clumsiest legislative jargon ever conceived by a Congressional drafting clerk. Sample passage: If the undistributed net income is a per centage of the adjusted net income which is more than 20 and less than 30 (and such percentage is not shown in the foregoing table) the tax shall be a percentage of the adjusted net income equal to the sum of 3.5, plus four-tenths of the amount by which the percentage which the undistributed net income is of the adjusted net in come exceeds 20.

Finally, the bill failed by more than $300,000,000 of meeting President Roosevelt's temporary tax requirements. The Democratic committeemen flatly rejected the President's suggestion of a temporary revival of politically dangerous processing taxes. They proposed to make up the processing tax loss for one year by an 80% "windfall" tax on uncollected processing taxes ($100,000,000), an extension of the capital stock tax (at half the current rate) and the excess profits tax ($83,000,000).

Provision for the following two years, said the committeemen, should be postponed "until the next session of Congress, which can then act more intelligently in the light of conditions then existing." Well aware of the audacity of raising taxes in a general election year, Chairman Pat Harrison of the Senate Finance Com mittee did not propose to make the situation any worse by falling in with the House plan of still another tax bill next year. Summoning his committee into secret session last fortnight, he set out with evident determination to write a whole new bill. By the time committee sessions were thrown open for public hearings last week, however, that determination had been noticeably cooled by the House's overwhelming vote for its bill.

First committee witness was Secretary of the Treasury Morgenthau, a notable absentee from House committee hearings.

Firmly letting it be known that President Roosevelt had not changed his mind about how much new revenue he wanted, the baldish, lanky gentleman-farmer urged revival of processing taxes to supply the $380,000,000 House deficiency. Prospective Government deficit for fiscal 1936, said he, was $5,966,600,000,-- biggest since 1919. If Congress met the President's tax requests in full, he declared, the 1937 deficit would be only $2,675,700,000.

Secretary Morgenthau gave the bill's principles his hearty blessing, had nothing to say about simplifying its complex rates and schedules. Well did President Roosevelt's Dutchess County neighbor know that Republican committeemen were primed to trip him up with knotty financial questions. He, too, was primed. At the first committee question after he had finished his prepared statement, Secretary Morgenthau dove into a sheaf of papers, came up smiling with the answer. He djd the same on the next query & the next.

Baffled, the Republican Senators allowed the Secretary of the Treasury to be excused.

A few public-spirited business men tried to tell the committee how the bill could be improved in detail. Undismayed by savage criticism of the bill in general from the U. S. Chamber of Commerce (see p. 73), chipper Chairman Harrison cried: "Why, with these few simplifications which we hope to get in the bill, the Senate will pass it without question. I never was more confident of anything in my life."

*House rules require a roll call whenever a point of no quorum is raised, but since the days of "Tsar" Tom Reed strong-willed Speakers have crushed this filibustering tactic by declaring a quorum present no matter how few members were on the floor. Under easy-going Speaker Byrns, however, a quorum point usually brings a roll call. Last week he allowed a handful of Republicans to force seven such calls in one day. Time consumed by a roll call: 40 min. Estimated cost to taxpayers: $2,000.

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