Mr. Paul's Ideas

With hearings on huge new taxes staring him in the face, Henry Morgenthau last week got himself a new special assistant: Tax Lawyer Randolph Evernghim Paul. Small (5 ft. 7 in.), middle-aged (51), Expert Paul does not look at all fierce; his coloring is grey, his manner milk-mild. But his views on taxes, which he has expounded in many a book, article and speech, make some taxpayers shudder.

In a two-volume text to be published early next month,* he restates his burning thesis that the entire U.S. economy is doomed if its tax structure remains less dynamic than the rest of it. Prime obstacle to an effective tax structure, says he, is the fact that taxpayers (at least in peacetime) have an insufficient "sense of debt to society and little intelligent interest in the continuation of the conditions which enable satisfactory living." In the winter 1941 Harvard Business Review he was even blunter, attacked "the shopworn notion that taxation is for revenue only. . . . The primary function of consumption taxes should be to control production, not to raise revenue." In his new job, Randy Paul will have little chance to remold the tax system nearer his heart's desire. But his views on taxes, while redirected, still follow his earlier pattern. Their primary direction now: to increase revenue as much as possible, so long as no tax interferes with full production, and to use taxes as an anti-inflation weapon. To his normal conviction that a revenue tax should hit "moderately high" incomes harder than they have, he adds the emergency belief that the chief purpose of consumption taxes in wartime is to hold down inflation.

As to corporate taxes, Paul revealed his ideas in the summer of 1940, when he helped write the Treasury's excess-profits tax bill (spurned by Congress). That bill involved an invested-capital base, with the rate of earnings allowed (not more than 10%) weighted by average earnings.

Tax-wise corporations also recalled Paul's views on the present generous treatment of surplus accumulations, which remind him of "the White Knight, who kept a beehive on his horse because he might some day wish to keep bees." No ivory-towered professor, Randolph Paul is a brilliant technician. While evolving his tax theories, he practiced successfully before the U.S. Board of Tax Appeals--and the courts--on behalf of such clients as Standard Oil Co. of California and Ford Motor Co. His specialty was tax avoidance and tax loopholes. Now his job is to plug holes, not find them.

* Federal Estate and Gift Taxation (Little, Brown & Co.; $20).

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