Exit and Entrance

In Washington's Naval Hospital, death from heart disease came suddenly last week to Herman Oliphant, 54, grey-locked, hollow-eyed general counsel of the Treasury Department. It left the Treasury bereft of the most earnest economic experimenter remaining there since the withdrawal of the late Professor George F. ("Rubber Dollar") Warren. Herman Oliphant, a law scholar before he was a financier and a liberal before he was a lawyer, was the prime advocate of the Undistributed Profits Tax, written into the tax law of 1936. All but the bare principle of that tax, which Franklin Roosevelt loved for its neat theory,* was killed by the last Congress in the 1938 tax bill, which brought a blast from Franklin Roosevelt and became law without his signature.

The passing of Oliphant coincided with other equally important changes in the Treasury. Taxation for revenue is now Franklin Roosevelt's urgent need and last week the Senate confirmed the nomination of the man who will have to plan it, a newer, younger friend of Henry Morgenthau Jr.

John Wesley Hanes, 46, is a well-dressed, fun-loving North Carolina squire. The Haneses of Winston-Salem, N. C. are many and substantial. John Wesley is one who, after Yale (1915), made really good in Wall Street as a leading partner of C. D. Barney & Co. He cashed in on marketing Winston-Salem's R. J. Reynolds Tobacco Co. (Camel) stock. Relatively, he survived the 1929 crash better than most Wall Streeters. He kept in touch with North Carolina politics and his old friend Democrat Max Gardner (Governor 1929-33).

Just a year ago John Hanes bobbed up as "Wall Street's man" on the Securities & Exchange Commission. The Senate confirmed him last week as Under Secretary of the Treasury, the job given him last fall by Secretary Morgenthau. With Mr. Morgenthau resting in Florida, John Hanes became, after less than a year of Government service, the Treasury's acting head. Mr. Morgenthau was well content, for as two men of property, probity and conservative tastes, he and John Hanes understand each other well. They agree, for instance, that if the Budget is not balanced some day soon, the country will surely go to hell.

Under Secretary Hanes's search for revenue is leading him to consider taxing State and local salaries and securities (now tax-exempt). Here he will collide with a host of State and municipal officials, who are unwilling to play Franklin Roosevelt's proposed game of tit-for-tat wherein States would levy income taxes against the salaries of Federal employes. John Hanes's understanding of the scarcity and paucity of new tax avenues, and of the woes of taxpayers--for whom he often personally holds court--makes him a darling of the Garner-Harrison economy bloc in the new Congress, a group which had no love for Mr. Oliphant. He should be able to wheedle more revenue-raising taxes from them than any social experimenter.

* The theory: to increase the velocity of business by forcing corporate profits into circulation.

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