These figures are, of course, average, and could be adjusted to ranges of income within the ranges noted.

In 1916 the total net income of those liable to the income tax was, in round figures, $6,300,000,000, an increase of $1,700,000,000 over the net income in 1915. Assuming, as it is conservative to do, a similar increase for the two years 1917 and 1918, the total net income of those receiving $3,000 and over is about $3,500,000,000 greater in 1918 than in 1916, so that the rate of taxes suggested would have yielded nearly three-fifths more than in 1916, or approximately $1,800,000,000, a total of about $4,840,000 000.

There were about three and a quarter million individual income-tax returns for 1917. Of this number probably at least 175,000 received net incomes of two or three thousand dollars, or approximately a total net income of about $5,000,000. A tax of 8 per cent on this net income would yield roughly $40,000 000, a total from these groups of $4,880,000,000. Obviously, the 19,000,000 families and individuals of the United States who did not make tax returns could pay an income tax of $1,120,000,000, or an average of about $58 per family. This totals $6,000,000,000 from the income tax.

It must be remembered that the exemption in all of our allies is very much lower than in this country, and that the rates in Great Britain on incomes of $100,000 or less are much higher than in the proposed revenue bill. Full data on this point is given by the Ways and Means Committee in their report on the revenue bill of 1918 (No. 767, 65th Cong., 2d sess.).

These figures are admittedly approximate, and necessarily so, because full data is not yet available in the Bureau of Internal Revenue. That six billion dollars can be raised by direct income taxes is, however, self-evident. The base and range of incomes can be determined approximately from the information in possession of the Commissioner of Internal Revenue, and the rates adjusted accordingly.

While it seems drastic to take all incomes in excess of $50,000 from those who have incomes of $100,000 or over, and to tax incomes in excess of $40,000 as heavily as suggested, this is entirely justifiable since, as the figures quoted from the Commissioner of Internal Revenue above show, nearly three-fifths of incomes of over $40,000 come from property; that is, are unearned incomes and therefore may properly be subjected to a very much heavier tax rate than incomes from personal exertion. The huge income from war industries, not all of which can be reached by the war-profits tax, should equally be subjected to such a heavy tax. The rates suggested for the personal income tax will in large measure prevent foolish expenditure. It is true that since earnings are received during the present year and the tax paid next year, people do not have the same incentive to save to pay their income tax, but this objection would lie as well against the taxes on consumption which have been suggested.

The administration might well conduct a nation-wide campaign immediately to make people know that they have got to pay a large proportion of their incomes of over $10,000 as taxes, and with the imposition of the tax rate suggested there will be no difficulty in getting people to subscribe all they can to the liberty loan. To win the war the whole national income has got to be socialized. To the objection raised against such drastic taxation, which is miscalled "confiscation," that it will prevent expansion of industry, and deter men of conspicuous ability from large production during the war, the answer is clearly that there should not be any expansion of business, except that which is necessary for the winning of the war, which will be financed by the War Finance Corporation, and that the gentlemen of conspicuous executive and business or financial ability who decline to cooperate with their Government through rendering the service they are best fitted to render during this emergency put themselves in the class of the unpatriotic.

Strictures on profiteering are not in order at present because those who take the risks of production are entitled to a monetary return immediately which will enable them to protect themselves from any possible loss, and these profits can be adequately covered into the Public Treasury through war profits and income taxes.

The failure to adopt this point of view, as far as the farmer is concerned, has brought about the most serious menace in the whole war situation-the supply of food.

The figures of the yield of the corporation tax, customs tax, and miscellaneous taxes are taken from the Secretary of the Treasury's estimate of the receipts for the fiscal year 1919 under these headings.

It is obviously constitutional for Congress to levy an excise tax upon the privilege of holding land unused or inadequately used. If there were any question on this point it can be resolved in favor of the proposition by reference to the fact that the Congress can pass a law taxing the value of unused and inadequately used land, and provide therein that the Supreme Court shall not have jurisdiction with respect thereto, as provided in the Constitution of the United States. The value of unused or inadequately used land in the United States is conservatively estimated at $25000,000,000.

The value of unused and inadequately used land is, in New York City alone, approximately two and a half billion dollars. A tax of 2 per cent on the value of such land in the United States would yield about $500,000,000, of which New York City would pay between forty-five and fifty million dollars.

By a remarkable oversight the revenue bill proposed by the Ways and Means Committee entirely exempts owners of idle lands held for speculation, and essential to the early and most economic winning of the war, despite the fact that the enormous war expenditures are materially increasing the value of their holdings.

The above outline shows incontrovertibly how twelve and a half billion dollars can be secured for the Federal Government during the present fiscal year.

A tax on advertising under the same scheme is entirely unnecessary if the suggestions above be adopted, and all publishers making money from their advertisings or otherwise, will be compelled to pay their full share of the cost of the war through the few obvious, direct, and honest taxes we recommend. It will be noted that we have suggested an administrative matter of great importance not only from economy of administration but from the point of view of securing revenue, to wit, that there should be a flat tax levied on incomes instead of a series of graded taxes.

We make in conclusion the following specific recommendations:

1. Make it a criminal offense not to give the real equitable ownership of stocks in corporations and business concerns.

2. Compel all corporations and business concerns to declare dividends and prohibit the issuance of stock to conceal earnings.

3. Provide for full publicity as to incomes of over $25,000.

4. Levy flat instead of graded rates.

5. Tax unearned incomes from secure investments more heavily than incomes earned by labor.

6. Initiate a policy of greater reliance upon income taxes rather than upon taxes on corporations, excess, and war profits.

[By Gov. Arthur Capper, chairman Farmers' National Committee on War Finance. Published in the Farmers' Open Forum.]

The financial interests of the country are conducting a wide campaign to defeat the desire of the President and of democratic people of the United States, including farm and labor organizations, to have at least half of the cost of the war financed by current taxation. A press campaign is being conducted to prevent the war from being financed democratically. Papers like the New York Times are trying to make it appear that it would be difficult, if not impossible, to raise even $8,000,000,000 by taxation during the present fiscal year ending June 30, 1919. It would be very much better to have Congress enact the revenue bill before the new loan drive, which is to start, according to the announcement by Secretary McAdoo, on September 28. It is expected that the fourth liberty loan will be for $6,000,000,000, but in its issue of August 1 the New York Times says:

4

"Whether amount (of loan) is to exceed $6.000,000,000 depends on tax bill being prepared. The difficulties encountered in increasing the volume of taxation are recognized to be so great that Congress may decide on an adjustment of the load so as to require a larger bond issue than would otherwise be necessary."

THE FARMERS' NATIONAL COMMITTEE ON WAR FINANCE SHOWS THAT AT LEAST TWELVE BILLIONS CAN BE RAISED BY TAXES.

The Farmers' National Committee on War Finance submitted an elaborate brief to the Ways and Means Committee showing that nearly $12,500,000,000

81608-18- 4

could be raised by current taxes during the present fiscal year without any injustice to any producer or any business. The chief sources of revenue are as follows:

War-profits tax

Income tax--

Corporation tax.
Customs

Miscellaneous

Tax on the value of unused and inadequately used land...

Total.

$3,875, 000, 000

6, 000, 000, 000 555, 000, 000

230, 000, 0001,321, 215, 000 500, 000, 000

12, 481, 215, 000

These estimates of revenue were based upon estimates of war profits and incomes, and were obtained in part from official sources not yet made public and from official documents such as the Secretary of the Treasury's estimate.

WHERE FARMERS AND CITY LABOR STAND.

The National Grange, the Washington State Grange, and the American Federation of Labor in their last annual meetings adopted resolutions which speak for themselves, as follows:

THE NATIONAL GRANGE.

"Therefore be it resolved that we call upon Congress, in the new revenue bill, to increase the tax on war profits to at least 80 per cent of such excess profits; to incease the surtaxes on all large incomes until all incomes over $100,000 are taxed into the Nation's war chest."

THE WASHINGTON STATE GRANGE.

"Therefore be it resolved that we demand that the Congress of the United States insist that equality of financial sacrifice be enforced in paying for this war; that at least two-thirds of the cost of the war be paid by heavy taxes upon excess profits, upon unearned incomes, upon inheritances, and upon land values, and that no additional taxes be laid upon the consumers of the country to pay for this war, but that these taxes be continued until the entire cost of the war has been met."

THE AMERICAN FEDERATION OF LABOR,

"Resolved, That the American Federation of Labor urges Congress to levy taxes on war profits, swollen incomes, and on land values to an extent that during the period of the war will provide by taxation at least 50 per cent of the expenditures of the Government in any one year."

CREDIT MONOPOLY OR DEMOCRATIC TAXATION.

The set which monopoly has made to increase its size and its grip during the war is well illustrated in this campaign,

Monopoly of credit and consolidation of banking facilities have been proceeding very rapidly during the war, not only in America but in England and Germany. Mr. Richard Spillane, in a recent issue of Commerce and Finance, states that while at the close of the year 1916 there were only two banks in the world with deposits in excess of $1,000,000,000, now there are at least four and possibly six, and London has three of them. He states that the London City & Midland Bank has now deposits of $1,392,000,000; Lloyds, $1,200,000,000; Imperial Bank of Germany (reported), $1,167,000,000; the National City Bank, $681,000,000; and the Guaranty Trust Co., of New York, $560,000,000. Both the National City Bank and the Guaranty Trust Co. have increased their deposits largely in the last 18 months.

CONTROL OF MONEY AND CREDIT.

The Pujo Investigating Committee on Control of Money and Credit in its report made five years ago gives the opinion of some big bankers of the country on the concentration of control of money, as then developed. Mr. George McClelland Reynolds, president of the Continental & Commercial National Bank of Chicago, discussing the question, said:

"I am inclined to think that the concentration, having gone to the extent it has, does constitute a menace. I wish again, however, to qualify that by

saying that I do not mean to sit in judgment upon anybody who controls that, because I do not pretend to know whether they have used it fairly or honestly or otherwise."

Mr. Jacob H. Schiff, of Kuhn, Loeb & Co., made it clear that he was so near the top of the credit pile that concentration of money control did not worry him, as the following excerpts from his testimony show:

“Q. Now, confining yourself to the question of actual practical control of the management of these great moneyed corporations, you have observed, have you not, a growing concentration of control?

Q. And has it been a subject of concern to you?

'Mr. SCHIFF. No; it has not.

Mr. George Fisher Baker, president of the First National Bank of New York, testified as follows:

“Q. I suppose you would see no harm, would you, in having the control of credit as represented by the control of banks and trust companies still further concentrated? Do you think that would be dangerous?

“Mr. BAKER. I think it has gone about far enough.
"Q. You think it would be dangerous to go further?

"Mr. BAKER. It might not be dangerous, but still it has gone about far enough. In good hands I do not see that it would do any harm. If it got into bad hands it would be very bad.

“Q. If it got into bad hands, it would wreck the country?

“Mr. BAKER. Yes; but I do not believe it could get into bad hands.”

The Pujo Investigating Committee made the following statement:

"The resources of Morgan & Co. are unknown. Its deposits are one hundred and sixty-three million.”

The committee showed, however, that the resources of the banks directly connected with Morgan & Co. are $1,600,000,000, "aside from the vast individual resources of Messrs. Morgan, Baker, and Stillman," to which must be added the resources of the Equitable Life Assurance Society, controlled through stock ownership of J. P. Morgan & Co., amounting to $504,000,000. This makes a grand total of $2,104,000,000, nearly $100,000,000 more than the actual money in circulation in the United States three years ago, and close to one-thirtieth of the total national income now. These figures, it must be remembered, are nearly six years old. No one knows what the financial resources and grip of these big banking concerns is to-day. It is noteworthy, however, that the National City Bank has just given a good character to the packers!

SHALL THE MONEY CONTROL, OR THE PRESIDENT AND THE PEOPLE OF THIS UNITED STATES DETERMINE OUR POLICY FOR FINANCING THE WAR?

The issue has been so clearly joined that he who runs may read. The following table of the national debt and percentage of the national wealth of the larger belligerents is very significant:

It will be noted that, excluding Japan, the national debt of the United States is the smallest per cent of national wealth. It is only about one-sixth as large a proportion of the national wealth as that of Italy and less than one-eighth as large a proportion as that of Great Britain. Selfish financial interests ignore the fact that the settlement of national debts after this war presens a problem more difficult than beating the Kaiser. This latter is assured. We are going to do it. A big 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. What will be the answer of the farmers of America? They must make it heard promptly and unmistakably.

The CHAIRMAN. The committee will now hear from Mr. John H. Dieckman.

BROKERS.

STATEMENT OF MR. JOHN H. DIECKMAN, PRESIDENT OF THE ST. LOUIS STOCK EXCHANGE.

Mr. DIECKMAN. Mr. Chairman and gentlemen, my associates are here from New Orleans and Cincinnati. The gentleman from Cincinnati had to go back home last night, but asked me to introduce. his remarks. We want to thank you for giving us this hearing this morning.

You are familiar with this clause in the bill. You had some testimony on that score, I believe, yesterday morning. We should have been here, and we were here, but a little bit late. We were two or three hours late coming in on the Pennsylvania. I do not know whether that is due to the new railroad management or not, but we were late just the same.

Speaking in behalf of the St. Louis Stock Exchange, I wish to state that the clause in this bill that fixes a license on each broker of $100 and an additional tax if he is a member of a stock exchange, we feel, so far as the St. Louis Stock Exchange is concerned, that it is scarcely just in comparison with the schedule in this clause affecting other exchanges, such as New York, Boston, Chicago, and Philadelphia.

The total number of shares handled in St. Louis last year was one hundred and twenty-seven and odd thousand dollars-that is, for the entire year-on the floor of the St. Louis Stock Exchange. They handled more than that on the New York Stock Exchange in 10 minutes. The amount of bonds handled on our St. Louis Stock Exchange last year was one million six hundred and odd thousand dollars. You know what they handle in New York.

Senator SMOOT. How much in stock?

Mr. DIECKMAN. 127,000 shares of stock, all told. I will leave some figures with you. I have the printed pamphlet of our regular records. Here is the record for last year gotten up by the exchange: Total number of shares, 128.478, the market value of which was $3.862,263.99. The total amount of bonds sold was 1,656,240, the value of the same being $1,127.601.80; total bonds and stocks, $6.989.865.79.

Now, you can very easily see, gentlemen, that under those conditions under the limited number of transactions, both in number of shares and bonds-our market value, traded in our floor, when you tax us practically the same as they do the larger exchanges, it is altogether out of line. In fact, it is so much out of line, so far as it affects the St. Louis Stock Exchange and the New Orleans Stock Exchange, that it is prohibitive, as we look at it. It will, without any doubt, drive a number of the members of the St. Louis Stock Exchange and the majority of the other exchanges I have mentioned Cincinnati and New Orleans-out of business, and may result absolutely in closing the exchanges.

Senator JONES. How many members have you?

Mr. DIECKMAN. We have in St. Louis a limited membership of 50.