will not find themselves embarrassed any more than is absolutely necessary by a great bonded debt, to be paid as bonded debts always have been, out of the pocket of the average citizen. President Wilson has not only seen the necessity of keeping down the bonded debt by levying heavy excess profits, income, luxury, and inheritance taxes; he has acted upon his convictions personally, as well as through Mr. McAdoo.1 It is an open secret that not long ago the President sent word to leaders of both Houses that he would adjourn Congress if they would promise him a revenue bill which would make it possible to divide the year's war cost with approximate equality between taxes and bonds. I believe the percentage mentioned was 40 per cent taxes and 60 per cent bonds. And it is also no secret that the majority of the leaders refused to accede to the President's suggestion-just why, the public would naturally like to know. England, though proverbially conservative in matters of finance, has taken a position considerably more advanced than that of the President, the British chancellor of the exchequer recently predicting that, in order to finance the war, Parliament would have to resort to something beyond taxation; that is to say, to a direct levy on wealth. And certainly, at this time, when so many people are suffering from the lack of good, nourishing food and so many others are dying, or being wounded in the service of their countries, it should not arouse resentment in the well-to-do man, if he finds he is being taxed to the limit of his income and that a part of his capital is drafted as well. It is already becoming recognized as a guiding principle of war finance that when war taxes have been paid citizens of all classes should find that they have made something like an equal sacrifice for the country's common enterprise. And, naturally, this does not mean that all should be obliged to contribute equal sums of money to the Government. On the contrary, it means that our contributions should vary widely. They should be as unequal as are the means of the contributors. Indeed, those who haven't enough money to live on decently should not be taxed at all or merely to a nominal extent. They are already taxed enough by the rise in the cost of living, which has increased considerably faster than the income of the wage-earning and salaried classes. It is true that in some few trades wages have gone up faster than prices; but these are the conspicuous exceptions which prove the general rule that the purchasing power of the average citizen has decreased during this war, just as it did in Civil War days. WHAT IS EQUAL SACRIFICE? Bearing this in mind, let us assume, for the sake of argument, that I have a million dollars, bringing me an income of forty thousand a year net, while my friend has a salary of $30 a week, which is less than he can support his family on comfortably at present prices. It would clearly be more of a sacrifice for my friend to pay a war tax of a few dollars than for me to turn in my whole income and a good slice of my own principal too. For while the few dollars he paid would make him cut down on sheer necessities, my contribution would only cause for me and my family, a lessened consumption of a few pleasant but nonessential luxuries. In contributing hundreds of thousands of dollars, I would really be sacrificing nothing in comparison to my friend, who would be giving some of the health, comfort, and opportunity of his family with every dollar he paid. Either of our sacrifices, however, would be utterly insignificant when compared to that of the man who gives his life. The Federal Trade Commission's report to the Senate, dated June 28, 1918, is an admirable and yet a gravely discouraging document. For it shows that the profiteers have literally been having the time of their lives at the expense of the United States and the Allies. The report closes with a significant quotation from President Wilson's message to Congress: "The profiteering that can not be got at by the restraints of conscience and love of country can be got at by taxation." Congress, however, does not yet seem to have made up its mind to "get at" profiteering by taxation. Or, to be more accurate, the Ways and Means Committee seems to have made up its mind to "get at" profiteering to less than 50 per cent of the extent that Parliament has actually got at it. 1 In the New York Times Annalist of Mar. 5, 1917 (p. 334), is expressed an extreme view, with which I can not agree, because bonds as well as taxation are necessary to our war finance. Therein H. J. Daven port, professor of economics, Cornell University, says: "All that war debts can ever mean is that those who do the present paying out of their current incomes shall have their contributions made good to them later by the taxes that are to be paid by others. This is all that borrowing can mean as over against taxes. In either case those only can do the buying that have the available margins of income. Taxation takes these incomes without promise of indemnity cr of intermediate payments of interest. Borrowing is a way of providing that those who do the paying now shall do it on terms of attractive investment. "The borrowing method merely mortgages future production to pay taxes to present investors. In the main and essentially it is a mortgage of the masses to the classes. * ** * Out of our own productive power we must obtain our own supplies. If they can suffice by borrowing, they may equally well be made to suffice by taxation. In either case it is merely a question of diverting, by consent or through compulsion, the incomes which individuals have to spare to the needs of the public emergency." But still I am certain that Congress will have the whole-hearted support of the public, if it follows President Wilson's recommendations, however pitifully a few of our more unregenerate profiteers and their newspapers may howl to heaven. Even last year the people were convinced that the stand now taken by Mr. Wilson was right; and they went on record to that effect whenever there was an opportunity, though the profiteers were then much bolder in their efforts to prevent large war taxes than they are now. As you may remember, a year ago last spring, a committee was formed in New York City to urge income and excess profits taxes on something like the English scale. We appeared before your committee and asked that war expenses should be divided between bonds and taxes on a fifty-fifty basis. Immediately, although our committee was small and in command of comparatively slender funds, a powerful backfire was started throughout the country by the financial slacker group. We were singled out as the individuals mainly responsible for the anarchistic idea of conscripting incomes and profits for war use, and treated accordingly. PROFITEER TACTICS. The committee was made up of men of undoubted loyalty and high standing; most of them had been fighting for democracy for years before we entered the war. Our loyalty to America needed no indorsement. But our proposals were promptly labeled by profiteer-controlled papers as "attempts to make the war unpopular, as "thinly veiled pro-German propaganda," etc. Speeches were editorially commented on, though never made, in which we were alleged to have favored a peace which would leave Germany in possession of northern France. Our motives were privately as well as publicly attacked. In various social organizations movements were initiated to force our resignations. And, in some instances, officers of these organizations, who believed themselves to be, and no doubt were, moved by friendly feelings, came to us secretly and advised us to resign in order to escape expulsion. Nevertheless, the propositions of our committee, which appeared before your committee as well as before the Senate Finance Committee, received very wide public indorsement. Some four million people in different sections representing all classes, from business men's clubs to church conventions, labor unions and farmers' associations, at once passed resolutions indorsing our recommendations. Thousands of letters, many of them containing contributions, flooded the committee's headquarters, and literally hundreds of patriotic newspapers published our briefs and advertisements without charge.1 Very much the same thing happened in the case of the Farmers' Non-Partisan League. It will be remembered that Mr. Townley, and other leaders of that organization advocated conscription of wealth, from the very moment the war began. Later on, they started an organized movement against the packer and miller profiteers of the North and Central West. Although the Non-Partisan League was absolutely patriotic, although its members bought liberty bonds, enlisted in the Army and Navy far above the average, and offered to sell their grain and stock at a profit so small that the packers and millers were horrified at the idea of themselves being obliged to conform to such low rates of return, they were accused of all kinds of iniquity. Some of their organizers were mobbed and beaten by masked men. Many leaders were arrested, and in some cases indicted for sedition. Their houses were painted yellow, their business integrity was generally attacked; and a real doubt was injected into the minds of many readers of metropolitan newspapers as to whether the Non-Partisan League was better than a nest of anarchists and traitors. But the main body of the public was not deceived by these tactics. The NonPartisan League, instead of being decimated by profiteer drum fire, steadily grew in membership and influence; and it is to-day the dominant social as well as political force in the agricultural districts where it is organized. And now the report of the Federal Trade Commission on "Meat Packing" and "Flour" quite justifies the public in its previously formed opinion that the assault on the Non-Partisan League's loyalty was engineered by people who were trying to stave off uncomfortable expo sures as to their own. GIVE THE PROFITEER A CHANCE. But to return to Mr. Wilson's words, "The profiteering that can not be got at by the restraints of conscience and love of country can be got at by taxation." Why not make an effort to get at it both ways? However, before discussing this proposal Last September the writer drew up a statement on taxation, in the form of a letter to the Conference Committee of the Ways and Means and Senate Finance Committees. It had little merit beyond the fact that it exposed some of the grosser forms of profiteering and demanded an 80 per cent excess profits tax. It was about 7,000 words long and uncopyrighted. As evidence of the public's keen interest in the subject of profiteering, this statement, not withstanding the high cost of paper and the flood of war uws, was printed substantially in full by magazines and newspapers (the latter mostly small) which eave it an unpaid-for circulation of from 700,000 to 1,000,000. more widely, let me say, at this point, that I do not want to be understood as implying that all corporations shown in the lists as having made big war profits are consciously "profiteers," or that all the men who control them are wilfully disloyal, in that they have sanctioned huge earnings at a time when war conditions give the Government and the public the right to buy necessaries at the lowest price consistent with sound business. For I am convinced that many, perhaps most, of the individuals responsible for profitee ing are well intentioned. There is, I believe, nothing consciously un-American, or pro-German, about the vast majority of our profiteers, the explanation of their conduct probably lying in the fact that, till now, they have failed to realize the new obligations of citizenship raised by the war, and have proceeded on the old ante-bellum plan of charging as much as the traffic would bear. The average profiteer unquestionably feels the call of patriotism; he wants to be a good American, help the war and back up the boys at the front. But he also wants to make a lot of money out of the war, and lay it aside against a rainy day. In short, he is torn by two conflicting and perfectly irreconcilable desires. Before April, 1917, the word "patriotism" did not have its present content of inconvenient sacrifice. In the old days, being patriotic only demanded from the man of property an enthu siastic conviction that the United States was the best country on earth, and an occasional attendance at functions where the sentiments of revered, but very dead, persons were repeated in a parrot-like manner which stirred up no social obligations and was highly satisfactory to all present. Now, however, patriotism has undergone alarming transformations-transformations so new, so confusing and so truly unbusinesslike, that the profiteer's mind has not yet been able to adjust itself to them. Moreover, we must remember that the profiteer's two conflicting wishes (the one to be patriotic and not exploit his country in war time, and the other to make money as fast as possible) are apt to be unequal in strength because they are unequal in age. His wish to be patriotic, in the sense demanded of good war-time citizenship, is newly formed and comparatively immature; it has grown too fast to be sturdy, and is still in a state of spindling adolescence. But he The older wish, however-that of improving one's economic status by every means that is not prohibited by statute or in open violation of common decency-has been in existence a long time. It is strong with the strength of habit and vital in proportion to its very human motivation of acquiring that which gives immunity from the common lot. The profiteer may know mentally, because a few unbusinesslike persons have told him so, that he ought not to want to make money out of the war. knows instinctively, and with the cumulative certainty of fixed purpose, that he does want to make money out of it. And we need none of us feel surprised or shocked if, when the conflict between these two antagonistic forces within the profiteer is over, the older of the two is found in possession of the field and in control of the man's conduct. And yet I believe that, if the profiteer were directly appealed to by persons of authority as, for instance, the gentlemen forming your committee, he might, in many instances, be persuaded to act like a good loyal citizen. Such an appeal, of course, would not obviate the necessity of a drastic revenue bill; but it would, I think, give the war a stronger moral support in business circles, clarify the atmosphere as to the obligations of wealth in war time, and make proper revenue legislation a comparatively easy matter. A RESOLUTION. Supposing, for instance, your committee, or, for that matter, Congress itself, should pass a resolution something as follows, and mail a copy to the president of every important company, with the request that he should send copies to all stockholders and employees, and post it conspicuously about the offices or plants: "In view of the fact that the United States is at war with Germany--a war in which it is imperative that our Government should have vast sums to expend for military purposes, and equally imperative that our fighting and producing classes should be free from economic exploitation; be it Resolved, That the Ways and Means Committee of the House of Representatives (or the Congress of the United States, as the case may be) hereby earnestly requests that, until the war's end, your company will turn over to the Government for said war purposes all earnings in excess of what is needed by you (1) to pay reasonable dividends to your stockholders, (2) to pay your employees a fair family living wage, and (3) to set aside a proper sum with which to amortize expenditures incurred in plant extensions, etc., which are likely to be worthless after the war is over; and be it further "Resolved, That this body hereby goes on record as believing that war profiteeringi. e., using war conditions as an opportunity to make and keep extraordinary profits is unpatriotic and prejudicial to American military success; that it is pro-German in effect, in that it weakens the morale of the fighting and producing classes, decreases their efficiency by increasing the cost of the ordinary necessaries of life; and, finally that it is a blow at our military power, in that this power is dependent on industrial production; and maximum industrial production is impossible while labor feels itself exploited by employers, whose immense profits frankly invite the wage earner to strike. Needless to say such a resolution would have to be accompanied by some kind of enabling legislation, especially in order to permit the Government to receive voluntary contributions, or else a nominal consideration would have to be established similar to the $1 salary paid to men who are to-day donating their services to the Government for war work. Such a resolution would, I believe, result in affirmative patriotic action by many corporations whose directors and stockholders would be ready to accept their war-time responsibilities to their country, if only they were clearly outlined to them. It is my belief, too, that, purely as a business policy, compliance with such a resolution would be far from unwise. For it would prevent strikes, stabilize production, and give the corporations that came under it a standing and degree of good will that might serve them in good stead in the crisis which reconstruction days, after the war, will unquestionably usher in. As to fixing what is a proper sum to be retained for dividends, wages, and amoritzation funds, a company could under oath submit its figures to the Federal Trade Commission or some similar body, and get a decision as to what it was reasonably entitled to. And one advantage of this method of procedure would be that the earnings, approved by the Government body consulted, could be governed by the actual condition of the company, and its needs and peculiar trade position. Naturally, exact justice could not be done. But at all events such a plan would furnish a much fairer adjustment than is now being made by income and excess profits taxes, and by Government price fixing, where a uniform price for both low and high cost producers is tending to drive the small concern out of business and establish a monopoly for the large combination. Corporations which did not choose to come under the resolution would be subject to profits taxes. A UNITED STATES BUSINESS ADMINISTRATION. It might also be advisable to form a United States business administration (similar in form to the present United States Food Administration, but without vested power), which could be a voluntary association of employers and employees, organized for the purpose of conserving American war power by freeing the Government and the public from the evils of profiteering. Particular functions of this organization would be to urge corporations to comply with the requests embodied in your resolution; to furnish Congress, the Federal Trade Commission, and various departments of the Government with information in regard to profiteering (to be considered confidential at the option of the person furnishing it); and to cooperate in the broadest spirit with the purposes of the resolution. CONCENTRATED WEALTH VERSUS DEMOCRACY. The other day I saw a letter from an American lad in the trenches. His friend had written him inquiring what the soldiers at the front were thinking about. He replied, and I quote only from memory; "We are wondering whether you people back home are doing your part; we are wondering what you are doing for democracy back home while we are fighting for it over here.' This thought, I learn from many sources, is running through the armies everywhere. The soldiers of America, of France, of England, and of Italy, who are facing death on the firing line, that the world may become a better place to live in, want to know how we stay-at-homes are helping. They believe that, if this war for freedom is truly to result in freedom it must be fought by the civilian at home as well as by the soldier at the front. They feel that, by the time they get back, they will have earned a right to a new world in which there will be a new richness of opportunity and a new birth of justice for all men. The struggle for freedom, as Edmund Burke reminds us, is waged as often on the battle field of taxation as on that of war. For by taxation, more than any other function of society, is determined whether the wealth, that is, the power in a modern nation, shall be equitably divided among the people or concentrated in the hands of a master class. The story of a nation's liberties is generally written in its tax laws; give me the power to tax, and I can enslave or free any class of the population, from the millionaire to the humblest worker in the mine. The importance of the duties of your committee at this time can not be exaggerated. Out of the great revenue bills that now come before you will emerge in no unreal sense the measure of the democracy that America, at the dawn of peace, will offer to those who have fought and toiled through the long night of war. Very truly, yours, 138524-19-VOL 1-28 AMOS PINCHOT. |