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DECEMBER. 7, 1906.
system of failure to exercise any adeauate non-
trol at all. .Some persons speak as if the exercise
of such governmental control would do away with
the freedom of individual initiative and dwarf
individual effo?t. This is not a fact. It would
be a veritable calamity to fail to put a premium
upon individual initiative, individual capacity and
effort; upon the energy, character, and foresight
which it is so important to encourage in the in
dividual. But as a matter of fact the deadening
and degrading effect of pure soplalism, and espe
cially of its extreme form communism, and the
destruction of individual character which they
would bring about, are in part achieved by the
whblly unregulated competition which results in
a single individual or corporation rising at the
expense of all others until his or its rise effectu
ally checks all competition and reduces former
competitors to a position of utter inferiority and
subordination.
"In enacting and enforcing such legislation
as this congress already- has to its credit, wo are
.working on a coherent plan, with the steady
endeavor to sequre the needed reform by the joint
action of the moderate men, the plain men who
do not wish anything hysterical or dangerous,
but who do intend to deal in resolute common
sense fashion with the real and great evils of the
, present system. The reactionaries and the vio
lent extremists show symptoms of joining hands
against us.. Both assert, for instance, that if
logical, we should go to government ownership
of railroads and the like; the reactionaries, be
cause on such an issue they think the people
would stand with them, while the extremists care
rather to preach discontent and agitation than
to achieve solid results. As a matter of fact,
our position is as remote from that of the Bourbon
reactionary as from that of the impracticable or
sinister visionary. We hold that the government
should not conduct the business of the nation,
but that it should exercise such supervision as
will insure its being conducted in the interest
of the nation. Our aim is, so far as may be, to
secure, for all decent, hard working men, equality
of opportunity and equality, of burden.
"The actual working of our laws has shown
that the effort to prohibit all combination, good
or bad, is noxious where it is not ineffective.
Combination of capital like combination of labor
is a necessary element of our present industrial
system. It is not possible completely to prevent
it; and if it were possible, such complete preven
tion would do damage to the body politic. What
we need is not vainly to try to prevent all com
bination, but to secure such rigorous and adequate
control and supervision of the combinations as
to prevent their injuring the public, or existing
in such form as inevitably to threaten injury
for the mere fact that a combination has se
cured practically complete control of a necessary
of life would under any circumstances show that
such combination was to be presumed to be ad
verse to the public interest. It is unfortunate
that our present laws should forbid all combina
tions, instead of sharply discriminating between
those combinations which do good and those com
binations which do evil. Rebates, for instance,
are as often due to the pressure of big shippers
(as was shown in the investigation of the Stand
ard Oil company and as has been shown since by
the investigation of the tobacco and sugar trusts)
as to the initiative of big railroads. Often rail
rpads would like to combine for the purpose of
preventing a big shipper from maintaining im
proper advantages at the expense of small ship
pers and of the general public Such a combina
tion, instead of being forbidden by law, should
be favored. In other words, it should be permit
ted to railroads to make agreements, provided
these agreements were sanctioned by the inter
state commerce commission and were published.
With these two conditions complied with it is
impossible to see what harm- such a combination
could do to the public at large. It is a public
eyil to have on the statute books a law incapable
of full enforcement because both judges and
juries realize that its full enforcement would
destroy the business of the country; for the
result is to make decent railroad men violators
of the law against their will, and to put a prem
ium on the behavior of the wilful wrongdoers.
Such a result In turn tends to throw the decent
man and the wilful wrongdoer into close asso
ciation, and in the end to drag down the former
to the latter's level; for the man who becomes
a lawbreaker in one way unhappily tends to lose
all respect for law and to be willing to break
it in many ways. No more scathing condemna
tion could be- visited upon a law than is con
tained in the words of the interstate commerce
commission --when, in commenting upon the fact
that the numerous joint traffic associations do
The Commoner.
technically violate tho law, they say 'Tho do
t2mlQJiQ tes' supreme 'courtin the
So imi I"' and th0 Jo,nt Association
case i,as pr0(luce(1 no practlcal ff t
eft E Tr?u?n8 ?f. th0 C0Untry- s a"-
tinln i i act' C,xl8t now M th(jy dl(1 before
Tn 1?J? i8iPn8' ,?nd wIth thc samo General effect.
S,i f, 1 u ? a,1Lpart,0S' we 0UBht Pbably to
add that it is difficult to see how our Interstate
railways could bo operated with duo regard to
the interest of the shipper and the railway with
out concerted action of the kind afforded through
these associations.'
"This means that the law as construed by tho
supreme court is such that the business of the
country can not be conducted without breaking it.
I recommend that you give careful and early con
sideration to this subject, and if you find the opin
ion, of the interstate commerce commission justi
fied, that you amend the law so as to obviate tho
evil disclosed."
Referring to inheritance and income tax the
president says: "The question of taxation is
difficult in any country, but it Is especially diffi
cult in ours with its federal system of govern
ment. Some taxes should on every ground be
levied in a small district for use in that district.
Thus the taxation of real estate is peculiarly
one for the immediate locality in which the real
estate is found. Again, there is no more legiti
mate tax for any state than a tax on the fran
chises conferred by that state upon street rail
roads and similar corporations which operate
wholly within the state boundaries, sometimes in
one and sometimes in several municipalities or
other minor divisions of the state. But there are
many kinds of taxes which can only be levied
by the general government so as to produce the
best results, because among other reasons, the
attempt to impose them in one particular state
too often results merely in driving the corpora
tion or individual affected to some other locality
or other state. The national government has long
derived its chief revenue from a tariff on im
ports and from an internal or excise tax. In addi
tion to these there is every reason why, when
next our system of taxation is revised, the na
tional government should impose a graduated
inheritance tax, and, if possible, a graduated in
come tax. The man of great wealth owes a
peculiar obligation to the state, because he de
rives special advantages from the mere exist
ence of government. Not only should he recog
nize this obligation in the way he leads his daily
life and in the way he earns and spends his
money, but it should also be recognized by tho
way in which he pays for tho protection the
state gives him. On the one hand, it Is de
sirable that he should assume his full and proper
share of the burden of taxation; on the other
hand, it is quite as necessary that in this kind
of taxation, where the men who vote the tax
pay but little of it, there should be clear recog
nition of the danger of inaugurating any such
system save in a spirit of entire justice and mod
eration. Whenever we, as a people, undertake
to remodel our taxation system along the lines
suggested, we must make it clear beyond perad
venture that our aim is to distribute tho burden
of supporting the government more equitably
than at present; that we intend to treat rich man
and poor man on a basis of absolute equality,
and that we regard it as equally fatal to true
democracy to do or permit injustice to the one
as to do or permit injustice to the other.
"I am- well aware that such a subject as this
needs long and careful study in order that the
people may become familiar with what is pro
posed to be done, may clearly see the necessity
of proceeding with wisdom and self-restraint and
may make up their minds just how far they are
willing to go in the matter; while only trained
legislators can work out the project in necessary
detail. But I feel that in the near future our
national legislators should enact a law providing
for a graduated inheritance tax by which a stead
ily increasing rate of duty should be put upon
all moneys or other valuables coming by gift,
bequest, or devise to any individual or corpora
tion. It may be well to make the tax heavy In
proportion as the individual benefited is remote
of kin. In any event, in my judgment, the pro
rata of the tax should increase very heavily with
the increase of the amount left to any one in
dividual after a certain point has been reached.
It is most desirable to encourage thrift and am
bition, and a potent source of thrift and ambition
"is the desire on the part of the breadwinner to
leave his children well off. This object can be
attained by making the tax very small on moder
ate amounts of property left; because the pime
object should be 'to put a constantly increasing
burden on the inheritance of those swollen for-
9
tunes which it is certainly of no bonoflt to this
country to perpetuate.
"There can bo no question of the ethical
propriety of tho government thus determining tho
conditions upon which any gift or inherltanco
should be received. Exactly how far tho Inherit
ance tax would, as an Incident, havo tho offoct
of limiting tho transmission by dovlse or gift of
the enormous fortunes In question it is not neces
sary at present to discuss. It Is wlao that pro
gress in this direction should bo gradual. At first
a pcrmnnont national Inheritance tax, while It
might bo more suhstantlal tlinn any such tax has
hitherto been, need not approximate, cither In
amount or In tho extent of the increase by Rrad
nation, to what such a tax should ultimately be.
This species of tax has ngaln and again
been Imposed, although only temporarily by the
national government. It was first imposed by the'
act of July G, 1797, when tho makers of tho con
stitutlon were alive and at tho bond of affairs.
It was a graduated tax; though small In amount,
the rate was increased with tho amount left to
any Individual, exceptions being rcndo in the caso
of certain close kin. A similar tax won again
imposed by the act of July 1, 1802; a minimum
sum of $1,000 In personal property being oxcopt
ed from taxation, tho tax then becoming pro
gressive according to thc romotonoss of kin. The
war revenue act of June 13, 1808, provided for
an inheritance tax on any sum exceeding tho
value of ?1 0,000, tho rate of the tax Increasing
both In accordance with tho amounts left and In
accordance with tho legatee's remoteness of lln.
The supreme court hns held that tho succession
tax imposed at the time of the civil war was
not a direct tax but an Impost or excise which
was both constitutional and valid. More recently
the court, in an opinion delivered by Mr. Justice
White, which contained an exceedingly able and
elaborate discussion of the powers of the con
gress to impose death duties, sustained the con
stitutionality of the Inheritance tax feature of the
war revenue act of 1898.
"In its incidents, and apart from the main
purpose of raising revenue, an Income tax stands
on an entirely different footing from an Inherit
ance tax; because It involves no question of tho
perpetuation of fortunes swollen to an unhealthy
size. The question is in its essence a question
of the proper adjustment of burdens to benefits.
As the law now stands it is undoubtedly .IJflcuJC
to devise a national Income tax which shall ho
constitutional. But whether It Is absolutely Im
possible Is another question; and If possible It
is most certainly desirable. The first purely In
come tax law was passed by congress In 18,01,
but the most Important law dealing with the sub
ject was that of 1894. This tho court held to be
unconstitutional.
"The question Is undoubtedly very Intricate,
delicate, and troublesome. The decision of thc
court was only reached by one majority. It Is
tho law of the land, and of course is accepted as
such and loyally obeyed by all good citizens.
Nevertheless, the hesitation evidently felt by
the court as a whole In corning to a conclusion,
when considered together with tho previous de
cisions on the subject, may perhaps indicate tho
possibility of devising a constitutional income tax
law which 'shall substantially accomplish the re
sults aimed at. The difficulty of amending the
constitution is so great that only real necessity
can justify a resort thereto. Every effort should
be made in dealing with this subject, as with the
subject of the proper control by the national gov
ernment over the use of corporate wealth In In
terstate business, to devise legislation which with
out such action shall attain the desired end; but
if this fails, there will ultimately be no alterna
tive to a constitutional amendment."
The president emphasizes the importance of
a technical and industrial training and points
with pride to tho good work done by the Insti
tute of technology, schools of mines, etc. He
pays a high tribute to the department of agri
culture and to the great good accomplished
through the work of irrigation and forest preser
vation. The president approves the suggestion that
a memorial amphitheatre be erected at Arlington
cemetery.
The president devotes some space to mar
riage and divorce. He says: "The whole ques
tion of marriage and divorce should be relegated
to the authority of the national congress."
The president directs attention to the Impor
tance of American shipping and plainly advocates
tho ship subsidy. He adds: "If it prove imprac
ticable to enact a law for the encouragement of
shipping generally, then at least provision should
be made for better communication with . Sbutb
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