Otto H. Kahn

“ It does this at a time when it is more than ever necessary that energy, enterprise, efficiency, the commercial and financial brain and work-power of the nation, be stimulated to their utmost in order to make good, as far as possible, the waste and destruction which go with war.
Any scheme of taxation which imposes an unnecessary burden upon commercial enterprise and thereby handicaps the nation in its business activities—especially in world competition with other nations—is unsound and bound to be gravely detrimental, both to the business men and still more to the wage-worker ”

“ There would ensue, as a natural consequence and without any conscious determination, a nation-wide strike of constructive activity and enterprise in commerce and finance, because men will not look upon it as a "square deal" if they are to take all the risk and responsibility, all the hard work and ceaseless strain and care of business effort, whilst the Government would needlessly take from them an unduly large share of the fruit of their labor, let alone all of it except an arbitrarily fixed sum. ”

“ But, of course, everyone knows that nothing remotely approaching such drastic taxation is required in this country at this time.
It is absolutely right to proclaim and to enforce by legislation that no man, as far as it is possible to prevent it, shall make money out of a war in which his country is engaged, but there is all the difference in the world between that just and moral doctrine and between the doctrine that no man shall be permitted to have more than an arbitrarily fixed income during a war. ”

“ A single year's war taxation will take out of the pockets of capitalists a great deal more than they could possibly have lost through depreciation in value of such amount of Allied bonds or loans as they may hold. ”

“ I believe an income tax greatly increased over the rates heretofore prevailing, yet keeping within the bounds of moderation, would produce at least as large a total revenue as an exceedingly high one. And the consequences of the economic error of placing too vast a burden direct upon incomes would be more serious, I think, to the people in general than to the individuals directly concerned. The question of the individual is not the principal one. The essential thing is that no undue strain be placed upon that great fund of capital as a whole which is derived from incomes of all kinds. ”

“ Democratic England under two Prime Ministers belonging to the Liberal party has shown how huge amounts of increased revenue—much greater relatively and greater even absolutely than are required in this country during the first year of the war—can be obtained by taxation without undue dislocation of the existing economic structure and without banefully affecting the country's prosperity. While it would not do for us to follow the English method of taxation in all respects, it would seem the part of wisdom for us to profit from her successful experience. ”

“ If state and municipal issues to be made during war time retain the feature of being free from taxation, can the Federal Government afford to make its war loans taxable, and thereby place itself in a position where it would have to borrow under conditions which would put it and its credit at a disadvantage as compared to state and municipal issues? ”

“ I greatly regret if what I said on the subject of Canada being free from income tax gave the impression of being a suggestion for the evasion by wealthy men of taxation during the war. The fact that capital is not subject to income tax in Canada was, of course, well known to men of wealth. ”

“ It must not be forgotten that taxation must necessarily by that much diminish the surplus income fund of the individual and that both theoretically and actually the spending of money by the government cannot and does not have the same effect upon the country's prosperity and enterprise as productive use of his surplus funds by the individual. ”

“ There can be little question that if our income taxation is fixed at unduly and unnecessarily high rates, whilst Canada has no or only a very moderate income tax, men of enterprise will seek that country and there will be a large outflow to it of capital in course of time—a development which cannot be without effect upon our own prosperity, resources and economic power. ”

“ It is worth noting that England, the conduct of whose finances, based upon the experience of many generations as the leading financial power, has always been a model for other nations to follow, has imposed an excess profit tax on business during the war merely to the extent that such profits are attributable to the war, i.e., to the extent that they exceed the profits of normal years. ”

“ P.S.—That you or any one else should even for a moment attach credence to the monstrous suggestion that capitalists fomented America's entrance into the war because they feared that otherwise the amounts loaned by them to the Allies might be jeopardized or lost, is a truly distressing manifestation of the willingness of some of our people—I trust not many—to believe evil of men simply because they have been materially successful. ”

“ The policy of raising a large portion of war expenditures by taxation is wise and sound. But to be iconoclastic in applying that policy, to make that portion so large as to chill the spirit and lame the enterprise of the country is neither good politics nor good economics.
The present has its rights as well as the future. Sacrifices should be reasonably averaged. An annual sinking fund of 5 per cent. would extinguish the war debt in fifteen years. ”

“ In principle, direct taxation of business activities should be avoided as much as possible, apart from a war profit excess tax.
Care should be taken lest the wealthy man least entitled to preferential consideration, i.e., he who neither works nor takes business risks or business responsibilities, be favored as against the man who puts his brains, his capacities and his money to constructive use in active business. ”

“ The ability of corporations to find a ready market for their securities is a prerequisite for the continuance of business prosperity or, indeed, of adequate business activity. I need not elaborate the effect which the comparison of the income yield from tax-exempt securities as against taxable securities under an excessively high income tax schedule—even if confined to larger incomes—must necessarily have upon the eligibility of corporate securities for investment purposes. ”

“ In theory, it seems to me, there can be little doubt that the balance of arguments is against the tax-exemption of Government loans. As an abstract proposition little can be said, I think, in favor of a policy the effect of which gives an advantage to the rich and well-to-do, militates against the widest possible distribution of Government issues amongst the people, tends to facilitate Governmental extravagance by concealing the true cost and establishes a fictitious basis of national credit. ”

“ Does not the attitude of all the leading countries plainly indicate their recognition of the fact that the action and reaction of excessive income taxation create a vicious circle from which the governments of all belligerent nations even in their extremity have shrunk? ”

“ The flood of securities which would be coming for sale in order to escape extreme income taxation would create a grave condition of demoralization in the investment markets of the country, with the resulting inevitable effect upon the country's general business, and upon its capacity to absorb Government loans.
IV
The tax recently enacted by Congress imposing a burden of 8 per cent. on business profits over and above 8 per cent. on the capital employed, regardless of whether such profits have any relation to war conditions or not, is unscientific and unsound. ”

“ We know that man and beast are capable of carrying far heavier weights if the strain is gradually increased than if the whole of the burden is dumped on their backs at once. The same holds good of economic strain.
Is it not plain that if the unprecedentedly high income taxation of the House Bill—exceeding as it does any rates ever imposed by any of the leading nations of the world—is enacted into law, the Government will find itself crippled in respect of taxable resources during the second year of the war ”

“ Capital is proverbially timid. It will not take risks, except in the expectation of commensurate reward, and if it sees the danger of its reward being unduly infringed upon by excessively rigorous income taxation, it will anticipate that menace by withdrawing from the field of constructive investment to the greatest extent possible. ”

“ It is to the credit of our rich men that, though fully realizing the extent of the monetary loss and sacrifices which war between this country and Germany must necessarily bring to them, there were but very few of them who supported the Peace-at-any-Price Party or favored the avoidance of America entering into the war when it had become plain that our participation in that war could not be avoided with honor and with due regard for our duty to our own country, or to the cause of right and liberty throughout the world. ”

“ In determining upon the scheme and detail of taxation, it should be borne in mind that the intent of the proceedings is not punitive, neither is it to apply practical Socialism under the guise of war finance.
Taxation is a problem in mathematics and national economics. It cannot be tackled successfully by hit or miss methods, or upon the impulse of the moment. ”

“ Too violent a financial dislocation would be caused, unless taxation is most judiciously and scientifically apportioned."
The desire to place the financial burden incident to war preponderantly upon the wealthy is just and right, but even in doing things from entirely praiseworthy motives, it is well to remember the old French saying, that virtue is apt to be more dangerous than vice, because it is not subject to the restraint of conscience. ”

“ They must be willing not only to surrender such part of their income, indeed of their fortune, as the necessities of the country require, they must be ready not only to relinquish their affairs and to put their time, their energies, capacities and experience at the disposal of the Government in time of war, but they must be prepared to offer their very lives if the country calls for them. ”

“ Even in Great Britain, whose financial burden is the heaviest of all, whose debt is many times the total of ours and who has loaned about $5,000,000,000 to her Allies, the highest income tax rate, the maximum percentage in the graduated scale of taxation, is to-day no more than approximately forty per cent. ”

“ It would seem advisable that such portion of a person's income as is devoted to charitable and kindred purposes should be, if not entirely free from income tax, at least subject to a reduced tax only, so as to counteract the tendency which experience has shown to follow in the wake of heavy taxation, of greatly diminishing charitable contributions. ”

“ It is trite to say that inequality of endowment and therefore inequality of results in human beings, as well as in inanimate things, is a law of nature. The capacity for creating, organizing, leading, etc., in short, the possession of those qualities of brain and disposition which beget success, is rare.
It is in the interest of the community, whilst carefully guarding and fostering the rights, the opportunities and the well-being of all of its members, to give liberal incentives to men possessing those gifts to put them to active and intensive use. ”

“ The financial dislocation, the discouragement and the apprehension caused by unduly heavy taxation of incomes will not only act as a drag on enterprise and constructive activity, but will make it exceedingly difficult, if not impossible, for corporations to sell securities in sufficient volume and thus to obtain adequate funds to conduct their business—especially also as investors will be fearful that high rates of taxation once established will not easily be reduced to normal levels, even when the present emergency is passed. ”