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Senator SMOOT. That is not the cost of the war.

Mr. MARSH. Well, now you raise a point which I did not want to go into, but I shall be glad to do so, and here I can not speak officially for the farmers. Many of them express the belief that some of the allies may not be able to pay their loans, and at the conclusion of the war we may want to pay them ourselves as a gift to the allies. I think it is safe to write down the loans as a cost of the war. None of us would want to fight the allies to compel them to pay the loans we have advanced.

Senator SMITH. The bulk of the loans will certainly come back without any war.

Mr. MARSH. Yes; but we may want to give it to them.

Senator SMITH. That is absurd. I think the idea of our giving Great Britain the money we loan to her is a proposition that the British Government would really consider an insult.

Mr. MARSII. How about Belgium and Russia?

Senator SMITH. That is very much similar.

Mr. MARSH. How about France?

Senator SMITH. Well, France can take care of herself. The French are the most resourceful people in the world.

Mr. MARSH. All right; I do not enter into a discussion of that; but I suggest this, then, as the farmers' position: We ought to pay all we can of the cost of the war as we go along, at least 50 per cent or 60 per cent or 80 per cent. We ought not to pile up enormous debts. I am sure you gentlemen will all take time to read this article by Gov. Capper, but may I just quote a little section which bears directly on our position?

Senator JONES. I would like to interpolate that a resolution was introduced in the Senate some time ago by the Senator from Iowa, Mr. Kenyon, donating to France all the money which we have advanced to that country.

Senator SMOOт. Congress will have something to say about that and France will also.

Senator SMITH. It has not passed?

Senator JONES. No; it has not passed.

Mr. MARSH. Let me interpolate this question: Would it not be a tremendous encouragement to the French soldiers and the people who have made these great sacrifices if there were an indication that America would not mind doing it? Here is what Gov. Capper says:

Selfish financial interests ignore the fact that the settlement of national debts after this war presents a problem more difficult than beating the Kaiser. This latter is assured. We are going to do it. And the national debt is a dead weight on a nation's progress and will rest in chief measure upon the farmers of the country who must pay the larger part of it. This is clearly the intention of the undemocratic selfish financial group of this country which seek to-day as ever to dominate not only the domestic but the foreign policy of the United States.

The farmers hold that no patriot will ask for an income of over $100,000 during the year and that no one but a patriot should be considered during the war. A very important member of the Ways and Means Committee said to me, "You can not leave any man with an income of over $100,000 during this war. You have to take it either in taxes or in loans." Therefore it resolves itself into this question-and this is where the battle of democracy is being fought

out in America, by reasoning and by argument, as it has to be fought. out by physical force in France and elsewhere-Are you going to leave John D. Rockefeller and the other people with big incomes a lot of their income and borrow it from them at 4 or 4 per cent or are you going to take everything over $100,000 in taxes?

I have been advised that what I might say might be construed as a criticism of the impending fourth liberty loan. It is not a criticism in the slightest degree. We are now discussing the ratio between bonds and loans. The farmers will not, I think I can say, readily forgive Congress if they do not pass this revenue bill before they call for another liberty loan, for we want to see what sincerity there is in the statement that we are going to devote all our resources to the winning of the war. There is not a farmer or laboring man earning fair wages who ought not to contribute heavily toward the liberty loan. I want to see the working people loan to the Government and men of enormous wealth taxed. I want to see the rich people put their money into the war, not as a loan but through taxation. The question is not, however, how much you or I give; it is how much we have left. Now, I take these rates of income taxes. From an income on $5,000,000 it is proposed to take $3,527,000, leaving that individual very nearly a million and a half income during the war.

Senator SMOOT. If we take 80 per cent by our war profits, there will not be very much left.

Mr. MARSH. This has nothing to do with the war-profits tax.
Senator SMOOT. That is why I speak of it.

Senator LODGE. That is where the income comes from.

Mr. MARSH. After a man has paid his war-profits tax, whether it is 80 per cent or 90 per cent, he is then taxed on his net income. We want 90 per cent of the war profits. We do not want to penalize anybody, but we let slip about a couple of billion dollars in war profits last year. It has somewhere gone into recouping the people who built the plants. When a man constructs a plant the productiveness of which ceases after the termination of the war there is no intention of asking that he be taxed so that he will lose after the war, but we have had two or three years to get in shape and want to point out how you can raise easily $12,000,000,000 or $12,500,000,000 by taxation for the present fiscal year, and we urge very strongly that you will do it.

The war profits subject to taxation during this year are estimated to be approximately $4,305,000,000. May I add that we would be glad to submit to the committee later a copy of a long report submitted to the Ways and Means Committee on this point of war finance, which you may like to look over. Some officials in the Treasury Department were good enough to give me some estimates. The war profits subject to taxation during the present year are $4.305,000,000. A tax of 90 per cent on these profits will yield $3.875,000,000, or $675,000,000 more than the House bill estimates. At least $6,000,000,000 can be raised by the direct income tax, or $4,582,000,000 more than the House bill estimates.

In 1918 it is estimated that approximately $14,000,000,000 will be received by people making income-tax returns, from which $3,500.000.000 should be deducted as dividends. This averages about $4,600 per family.

We propose taking all incomes over $50,000. They have figured it out that most folks can get along on $50,000 a year during the war. They can cut down all around. No one has a right to start any industry during the war that is not approved by the Government. We ought to stop a lot of these nonessential industries. We ought not to let people consume luxuries.

Senator SMITH. What do you mean by their not having the right to do it? They can do so if they want to.

Mr. MARSH. I mean to say that the sanctions of patriotism ought to prevent their doing so, and if the sanctions of patriotism do not prevent them they should be treated just exactly as the I. W. W. were treated.

Senator SMITH. You mean that it would not be right for them to do so.

Mr. MARSH. It would not be right for them to do so, and I think the Government should say they can not.

The CHAIRMAN. You mean that the Rules Committee would not give its approval?

Mr. MARSH. Certainly, and they ought not to be allowed to go out in the market and compete for capital. We are out to win this war and not to enable a few people to get rich during the war. It is perfectly legitimate to take in taxes at least all of a man's income over $100,000.

Senator LODGE. How much would it yield if that were done?
Mr. MARSH. Just taking that would not yield very much.
Senator LODGE. How much would it yield in taxes if you did it?
Mr. MARSH. I can not give you the exact figures.

Senator LODGE. That is rather important in making up a tax bill.
Mr. MARSH. I have the figures in my brief in black and white.
Senator LODGE. Are they Treasury Department figures?

Mr. MARSH. They are Treasury Department figures so far as the amounts are concerned, taking, of course, the average, because, unfortunately, they do not have publicity as to incomes over $25,000 or $50,000. I think you also ought to go further down. I am going to say to you gentlemen exactly what I said to the Ways and Means Committee, and I am speaking for the farmers. My wife and I both work and work very hard. There is no eight-hour day for us. We will have a joint income this year of about $4,300. I said to the committee: "I want to pay $300 or $400 in taxes this year. I can not look the soldier boys in the face if I do not." I have been talking to the soldiers at Camp Meade on the economic issues we have here, and I am going to talk to others. I can not look those men in the eyesI have a lot of dependents, too-if we stay over here and object to paying $300, or $400, or $500 tax, my wife and I together, out of our income. I put it up to a lot of farmers from as far west as the Pacific coast recently in half a dozen big farming States. I said, "What do you men think about this?" They said, "If Congress should take all incomes over $100,000 we would not object." Simply taking all over $100,000 would not raise over a few hundred millions extra.

I have suggested here rates on incomes down to $3.000 or $4,000; 10 per cent on the net income of those receiving from $3,000 to $4000; 20 per cent on the net incomes of those receiving from $5,000 to

$10,000; 35 per cent on the net incomes of those receiving from $10,000 to $20,000, and so forth. I do not try to exclude anybody. We have to admit the fact that there is a tendency during this period of large wages on the part of some working people to spend luxuriously, and furiously, I was going to say; and the knowledge that they will have to pay heavy taxes would be a great help to economy. As Gov. Capper points out, if we know we have to pay a tax, we are going to save money. Now, we have to save money, but it is perfectly ridiculous, gentlemen, to say, is it not, that with a national income estimated very conservatively during this year at $72,000,000,000—and I take the figures of men like Prof. B. M. Anderson, jr.The CHAIRMAN. Do you mean the net income?

Mr. MARSH. No; a gross national income received of $72,000,000,000.

The CHAIRMAN. That does not help us much. What we want to know is the net income. Gross income might not take two-thirds of it, and there would have to be deductions before you would get to the net.

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Mr. MARSH. I think not in the way I use the word "gross." mean to say, with the income received from dividends, from wages, the income which we have to live upon; not gross. I mean to say the total. Your point was quite correct, and I thank you. I should have said the total. The toal national income is estimated at about $72,000,000,000. We can surely raise one-sixth of that by taxation, and I hope we will not rely to any such extent as Mr. Kitchin suggested yesterday on a $16,000,000,000 bond issue. Gentlemen, we have no right to saddle a profiteer upon the neck of every soldier who comes back from the war, and that is what is contemplated by the pending revenue bill. You know and I know that if this war lasts three years-two years more

The CHAIRMAN. You say, you know and we know. know that.

We do not

Mr. MARSH. I say, if it lasts two or three years more it is going to cost us $75,000,000,000 to $100,000,000,000. Then, demobilization may cost $10,000,000,000 or $15,000,000,000. We are up against an enormous expenditure. It is true that we have the lowest national debt in proportion to national wealth of any of the countries at war. The figures Gov. Capper quotes here, but they have been rising very rapidly ever since he wrote this article two or three weeks ago. Our ratio is changing very remarkably. And the farmers know that a big national debt is an awful burden on the industry of the country. We do not object to taxes on luxuries, but we suggest that you have overlooked one thing, one class of property almost absolutely exempt, and that is the value of lands held idle, or practically idle, for speculative purposes. A large number of farmers will pay an income tax with a $2,000 exemption. They will pay an income tax, and they are glad to do it; but they think that you should raise at least $500,000,000-half a billion-by taxing the value of unused and inadequately used land held for speculation, together with these other taxes.

Senator SMITH. You would treat it all as held for speculation, would you, if it were unused and unprofitable?

Mr. MARSH. I think so because it is increasing in value very rapidly. For instance, the land in New York City is worth as much as land in 20 agricultural States of the Union; and rents are going up tremendously in New York City. That is my voting residence. I have been there for 11 years and I know the situation pretty well. You gentlemen may know that the land in every American city and farm land every where is largely monopolized in a few hands. We should take 80 to 90 percent of war profits and all incomes from over $50,000 to $100,000. But, as I am informed by officials here, many people to escape taxation for this war are putting their money in vacant land and being advised to do so by lawyers. There is no income from vacant land. It lies still and increases in value.

Now, you will notice, gentlemen, that our proposal will make it unnecessary for you to adopt the position of those who hold that booze will win the war. There are such people. There are people who hold that booze will win the war by creating a billion dollars in revenue and increasing the efficiency and happiness of workers. Of course, there is that point of view, but you will notice that the British labor party are unequivocally out for war-time prohibition. I am not arguing that, but we do point out to you the fact that if you will adopt the system of taxation which we suggest, it will not be necessary to have recourse to that position, and add booze to the factors which are going to win the war. You will not have to rely upon that for revenue and efficiency, certainly not for revenue.

We ask that you take into consideration the position and attitude of the men who are actually doing the fighting. Gentlemen, the Ways and Means Committee has been several months figuring out how to be tender with the dollars of America, and in less than two weeks you enacted the necessary and commendable bill to provide the adequate man power. What impression does that produce upon the average soldier or sailor? With the President coming up and asking Congress to pass this revenue bill promptly you leave, under the terms of this bill, some men in America incomes of $3,000,000 or $4,000,000 from utterly unearned sources, and one $20,000,000 from the monopoly of oil-pipe lines, and so forth.

Senator JONES. If it will not interrupt you, let me ask you a question to get your idea as to how we would tax this unused land. How would you do that?

Mr. MARSH. I will answer briefly, if I may, and then submit a bill later that has been prepared covering this matter. In most .States there is now a classification of assessed property. This bill provides that the value of all lands shall be obtained, the existing records being used where necessary.

Senator JONES. If I understand you, your argument is based on this idea that there is an unearned increment there, that the lands are increasing in value, and that that increased value is actually income, and it is that which you seek to reach. Am I correct?

Mr. MARSH. The increase in value of land is not in the hands of the individual, necessarily, unless he attempts to sell it or rent, and then if you have ever bought land you know that it is a very actual fact, that increase in the value of land. It is not debatable, is it? The value of land is increasing constantly.

Senator LODGE. All land?

Mr. MARSH. No; but land in the aggregate.

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