Otto H. Kahn

“ Furthermore, business men, of necessity, have only a limited amount of their capital in liquid or quickly realizable form, and through the absorption by the inheritance tax of a large proportion of such assets, many a business may find itself with insufficient current capital to continue operations after the death of a partner. This effect is not only unfair in itself, but is made doubly so, as being a discrimination in favor of corporations as against private business men and business houses, inasmuch as corporations are, of course, not amenable to inheritance taxation. ”

“ I am—as I have already said—in favor of the highest possible war profits tax and of at least as high a rate of income and inheritance taxation during the war as exist in any other country. But apart from these and a few other items which can naturally support very heavy taxation, such, for instance, as cigars and tobacco, I believe that the maximum of [Pg 42] revenue and the minimum of economic disadvantage and dislocation can be secured not by the very heavy taxation of a relatively limited selection, but by comparatively light taxation distributed over a vast number of items. ”

“ But the fond parent, seeing how strong and sturdy they were and on the whole, how hustling and effective in their work, and how, with all their faults of temper and demeanor, they made themselves so useful around the house that he could not really get along without them, only smiled complacently at their occasional mischief or looked the other way. ”

“ The point of my question is, taking the case of the farmers as an instance, whether in framing our system and method of taxation, the steady aim has been to ascertain impartially what is equitable and wisely productive of revenue and to act accordingly, or whether considerations of the anticipated effect of taxation measures upon the fortunes of individual legislators or of their party, have been permitted unduly to sway their deliberations and conclusions. ”

“ In war time, when the practice of thrift is of more vital importance than ever to the nation, one of the most valuable by-products which taxation should aim to secure is to compel reduction in individual expenditures. ”

“ If all the European nations have stopped during the war at a certain maximum limit of individual income and inheritance [Pg 35] taxation, even after four years of war, the reason is surely not that they love rich men more than we do or that they are all less democratic than we are. ”

“ Whilst in the case of the rich we discourage saving by the very hugeness of our taxation, or make it impossible, we [Pg 38] fail to use the instrument of taxation to promote saving in the case of those with moderate incomes. And the enormous preponderance of saving which could and should be effected does not lie within the possibilities of the relatively small number of people with large means, but of the huge number of people with moderate incomes. ”

“ I advocate consumption and general stamp taxes—such as every other belligerent country without exception has found it well to impose—because of the well attested fact that while productive of very large revenues in the aggregate, they [Pg 41] are easily borne, causing no strain or dislocation, and automatically collected; and because of the further fact that they tend to induce economy than which nothing is more important at this time and which, as far as I can observe, is not being practised by the rank and file of our people to a degree comparable to what it is in England and France. ”

“ But here is a great industry exempt from the excess profit and war profit tax and apparently not effectively reached by the income tax, which is entirely natural, because in this case the income tax can neither be retained at the source nor are the large body of the farmers, many of whom do not keep and cannot be expected to keep books, in a position to determine their taxable income. ”

“ I do not pretend to judge whether in these war times the farmers of the country are bearing an equitable share of taxation in proportion to other callings or not. I certainly recognize that they are entitled to be dealt with liberally, even generously, for I know the rigors of the farmers' life, the ups and downs of their industry's productivity, and fully appreciate that their work lies at the very basis of national existence. Everything that can fairly make for the con [Pg 44] tentment, well being and prosperity of the farmer is to be wholeheartedly welcomed and promoted. ”

“ The same observations hold good in the case of our proposed inheritance taxation (maximum proposed here forty per cent., as against twenty per cent. maximum in England and much less in all other countries) . And again there are to be added to Federal taxation the rates of state legacy and inheritance taxation.
Inheritance taxation, moreover, has that inevitable element of unfairness that it leaves entirely untouched the wastrel who never laid by a cent in his life, and penalizes him who practiced industry, self-denial and thrift. ”

“ The science of taxation consists in raising the largest obtainable amount of needed revenue in the most equitable manner, with the least economic disturbance and, as far as possible, with the effect of promoting thrift.
The House Bill proposes to raise from income, excess or war profit and inheritance taxes $5,686,000,000 out of an estimated total of $8,182,000,000. In other words, almost seventy per cent. of our stupendous total taxation is to come from these few sources. ”

“ As the railroads grew towards man's estate and married and begot other railroads, they gradually sloughed off the roughness and objectionable ways of their early youth, and though they did not sprout wings, and though once in a while they still did shock the community, they were amazingly capable at their work and really rendered service of inestimable value. ”

“ Moreover, while the rich, in consequence of taxation, limitation of profits, etc., have become less able to spend freely since our entrance into the war, workingmen and farmers, through increased wages, steadier employment and higher prices of crops, respectively, have become able to spend more freely. ”

“ But I am acquainted with hundreds of business men who bemoan their gray hair and their responsibilities, which prevent them from having the privilege of fighting our foe arms in hand.
And I know no American business man worthy of the name, who would not willingly give his life and all his possessions if the country's safety and honor required that sacrifice. ”

“ The function, responsibility and obligation of the railroads as a whole are primarily to serve the interests and economic requirements of the nation. The disjointed operation of the railroads, each one considering merely its own system (and being under the law practically prevented from doing otherwise) will, I am sure, not be permitted again. ”

“ And it cannot be too often said that the encouragement of thrift and enterprise is of the utmost desirability under the circumstances in which the world finds itself, because it is [Pg 37] only by the intensified creation of wealth through savings and production that the world can be re-established on an even keel after the ravages and the waste of the war. ”

“ Is it conceivable that the politicians who are so rigorous in their watchfulness [Pg 46] that no business profit shall escape the tax-gatherer, would not devise means to lay an effective tax if the same situation existed in a business industry? ”

“ And, it seems to me, one of the duties of business men is to inform themselves accurately and carefully on this subject, so as to be ready to take their due and legitimate part in shaping public opinion, and indeed to start on that task now, before public opinion, one-sidedly informed and fed of set purpose with adroitly colored statements of half truths, crystallizes into definite judgment. ”

“ And it should not be forgotten that both theoretically and actually the spending of money by the Government cannot and does not have the same effect on the prosperity of the country as productive use of his funds by the individual. ”

“ Yet, we cannot avoid noticing that the average value of farm lands in this country is estimated to have increased between 1900 and 1918 more than 200 per cent., that the value of farm products has been vastly enhanced, but that according to the latest published details of income tax returns, the farmer contributes but a very small percentage to the total income tax collected. Of twenty-two selected occupations the farmers' class contributes the least in the aggregate, although it is numerically the largest class in the country. ”

“ Individual enterprise has given us what is admittedly the most efficient railroad system in the world. It has done so whilst making our average capitalization per mile of road less, the scale of wages higher, the average rates lower, the service and conveniences offered to the shipper and the traveler greater than in any other of the principal countries. ”

“ My advocacy of consumption and similar taxes, such as stamp taxes of many kinds, is not actuated by any desire to relieve those with large incomes from the maximum of contribution which may wisely and fairly be imposed on them. ”

“ Taxation should be as widely diffused as possible, at however small a rate the minimum contribution may be fixed, if only to give the greatest possible number of citizens an interest to watch governmental expenditure, and an incentive to curb governmental extravagance. ”

“ Whilst the House Bill imposes luxury and semi-luxury taxes, it fails—as I have mentioned before—to resort to consumption taxes of a general kind—a deliberate but, in my opinion, unwarrantable omission. ”

“ One's motives are liable to be misunderstood or misinterpreted and he is very apt to have it scornfully pointed out to him how small relatively is the sacrifice asked of him, compared with the sacrifice of position, prospects, and life itself, so willingly and proudly offered by the young manhood of the land. ”

“ There must further be added what to all intents and purposes is, though a voluntary act, yet in effect for all right-minded citizens tantamount to taxation, namely, a man's habitual expenditures for charity and his contributions to the Red Cross and other war relief works. ”

“ Moreover, conditions in America and England are not quite identical and I believe it to be a justifiable statement that British industry is better able to stand so high a tax than American industry, for reasons inherent in the respective business situations and methods. ”

“ The theory of governmental regulation and supervision was entirely right. No fair-minded man would quarrel with that. [Pg 12] The railroads had exercised great, and in certain respects undoubtedly excessive power for a long time, and all power tends to breed abuses and requires limitations and restraints. ”

“ Personally I believe that in its underlying principle, the system gradually evolved in America but never as yet given a fair chance for adequate translation into practical execution, is an almost ideal one. ”

“ A carefully compiled statement issued by the Bankers Trust Company of New York estimates the total individual incomes of the nation for the fiscal year ending June 30, 1919, at about $53,000,000,000, and calculates that families with incomes of $15,000 or less receive $48,250,000 of that total ”