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The Commoner.
MAY 1G, 1913
A Remarkable Income Tax Speech
Speech of Hon. Cordell Hull of Tennessee, In
tho house of representatives, Saturday, April
26, 1913. The house In committee of tho wholo
on tho state of the union had under considera
tion the bill (H. R. 3321) to reduce tariff duties
and to provide revenue for tho government, and
for other purposes.
Mr. Hull: Mr. Chairman, for many years
those who believe in justice in taxation have
been striving to secure tho adoption of a na
tional income tax. Tho United States supreme
court first blocked the way by their decision
in the Pollock case. During tho period that fol
lowed this decision, surprising as it was disap
pointing, its friends continued undismayed to
advocate this wholesomo doctrino and watched
every opportunity to secure its enactment into
law in some form. During these dark years of
reverses and failure tho democratic party was
considerato enough of the rights and interests
of the people to write in its quadrennial plat
forms a ringing declaration in favor of this doc
trine. The nation-wide sentiment to this effect,
which was thus kept alive, grew until in 1909 a
republican congress found itself confronted by
the alternative of accepting a comprehensive income-tax
law or a less broad provision limited
to corporations. Being wedded to class taxation,
they chose the latter as the lesser measure of
relief which the country would receive. Tho
friends of this tax also wrung from that unwill
ing congress the submission of an amendment
to the constitution which when ratified would
uproot and overturn tho Pollock decision and
again restore to the people and their represen
tatives in congress every phase of this just
power of taxation.
I congratulate the American people upon the
fact that they ratified that amendment, wiped
out all judicial obstructions, and cleared the
way for comprehensive, honest fiscal legislation.
The people's representatives in congress, no less
alert, no less mindful of tho public welfare, now
propose to write into law the great principle
which the people forever wrote into the consti
tution. The general uprising throughout the
country In behalf of this tax is due to the long
standing dissatisfaction with existing tax con
ditions and to the belief, which long since be
came a conviction, that the masses were being
grossly discriminated against through tho
agency of our tax laws. Every citizen realizes
that the general government is obliged to secure
revenues to defray its necessary expenses, and
that in doing so It takes annually from the prop
erty of the American people in the neighborhood
of $1,000,000,000. This can only be accom
plished by means of taxation of some kind and
in some form. Voluntary contributions, both
to the state and the church, as practiced in the
early colonial days, are no longer made. No
matter how imposed, taxes are never welcomed
except to the extent that they displace a more
undesirable method of taxation. I should say
that there is one exception to this universal rule
of human nature. Our manufacturing friends,
who have been in a tariff partnership with the
government for more than half a century,
strongly favor tho high protective-tariff tax for
revenue only, not government revenue, but
revenue nevertheless.
During recent years there has been a general
agitation and demand in almost every state in
the union and almost every country in the world
for intelligent, fair, and practical reforms and
readjustments of their tax systems, to the end
that every citizen may be required to contribute
to the wants of the state or government in pro
portion to the revenue he enjoys under its pro
tection. To this end tho doctrine of equality of
sacrifice or ability to pay is being universally
invoked. A glance at the fiscal history of all
countries shows a constant struggle on the part
of the wealthy and more powerful classes to
shift the chief weight of government taxation
to the shoulders and backs of those weaker,
poorer, and less able to protect themselves from
the injustice and oppression inflicted by dispro
portionate tax burdens. This conflict has been
and is today being waged in the United States.
All taxes in this country, whether for national
or state and local purposes, fall upon the Ameri
can people; however, the gross inequalities and
injustices resulting from tax evasion by those
most able to pay and the shifting of the tax bur
den to those least able to pay is seen alike in
connection with both national and local taxation.
This is the result of unequal and unjust tax
laws. As stated, the general government must
annually take from tho property of tho people
about $1,000,000,000, whilo tho states and their
subdivisions must annually tako a still larger
amount in taxes. Lot us glanco for a few mo
ments at the effect and operation of our national
and state tax laws. Tho states, as a rule, have
sought to maintain the genoral property tar
system.
A few instances will sufficiently disclose tho
inefficiency and unfairness arising therefrom
and tho consequent falluro and virtual breaking
down of these systems. Tho stato tax commis
sion of Massachusetts, according to its pub
lished report, recently estimated tho valuo of
personal property, in Massachusetts that is sub
ject to taxation at over $5,600,000,000, of which
less than one-fifth is taxed. Tho commission
also found that tho greater part of this remain
der, viz, $4,646,265,000, is intangible per
sonalty subject to taxation, but which is not
taxed, because its disclosure has never been com
pelled. By the United States census inquiry of
1904, New York had $5,500,000,000 of por
sonalty, whereas by tho tax returns sho had
only $1,500,000,000. According to tho pub
lished report of tho special tax commission of
that stato In 1907, in which tho disparity be
tween the assessed and real valuo of personalty
was placed at much wider figures, tho following,
among other, conclusions wero reported:
1. That tho richer a person grows tho less ho
pays in relation to his property or Income.
2. Experience has shown that .under the
present system personal property practically
escapes taxation for either local or state pur
poses. The comptroller general of South Carolina, in
his recent report for 1912, Indicates that tho
small property holders pay tho bulk of the taxes
of the state. One real estate firm of Columbia,
according to this report, published at the close
of 1912 that their real estate sales during the
year In that city aggregated over $4,000,000,
whereas its assessed valuation was $400,000, or
10 per cent of tho price it brought, whilo Uia
assessed valuation of all property, both in that
city and county, was only $10,685,000, although
tax assessors assumed to assess it at 50 per cent
of its actual value.
According to the recent report of tho Ken
tucky tax commission, tho amount of deposits
in the banks of tho state on the 1st of January,
1912, was given In for assessment by the tax
payers at $12,847,868, whereas, according to tho
reports of the banks to the state commission
and to the comptroller of currency at Washing
ton, the amount of deposits on that day was, in
fact, $133,339,871.
Tho mayor of Philadelphia' recently stated in
the press that the undervaluation of property
in that city is more tlian $300,000,000.
To further illustrato our stato and local tax
systems by an individual instance, the published
reports shows that Mr. Andrew "Carnegie for
many years only paid taxes upon a personal
assessment of something over $5,000000, al
though it has recently been raised to ten million.
It may bo safely said that with a few notablo
exceptions, the conditions I havo described exist
in the state and local tax systems in relative
proportion throughout tho union. Tho small
property owner, who can not hide his property
nor shift his tax burdens, constantly feels the
crushing weight of taxation, while tho rich In
vestor in securities, tho money lender, and tho
wealthy business and professional men cover up
most of their taxable property, as well as much
of their city realty, when tho assessor comes
around. Intangible personalty, including stocks,
bonds, and other securities, almost entirely
escape taxation everywhere. A report of tho
census office shows that in the year 1904, while
the true valuo of all property was $107,104,
192,410, the ad valorem assessment of this
property was only $38,963,381,000; that tho
true value of personalty was $44,762,719,000,
while it was only assessed at $8,873,562,000,
and tho assessment of realty was less than 50
per cent of its truo value.
Turning to our present system of national
taxes, we find a still worse condition with re
spect to our customhouse taxation. Our internal-revenue
taxes offer no special ground for
criticism. Under this system Illinois paid $51,
600,000 to tho government for tlie year ending
June 30, 1912; Kentucky, $31,177,000; Indiana,
$30,000,000; Missouri, $12,000,000; New York,
$43,800,000, Pennsylvania, $25,600,000; and
other states likewiso paid in smaller amounts.
Our system of high protective-tariff taxation
violates every canon of taxation and is out
rageous in its operation and effects. It Is con
ceived upon tho ldoa that tho peoplo should bo
taxed, not according to tholr ability to pay,
but according to their needs and, practically,
their poverty. No civilized or humano peoplo
can longer tolorato this systorn of diabolical ex
tortion. In contributing three hundred millions
to tho federal treasury the American consumer
is compelled at tho samo tlmo to hand ovor at
least $1,500,000,000 as a bonus to thoso select
individuals givon special favors by tho high
protective-tariff tax. During rccont generations
our high tariff taxes havo degenerated Into a
system of special privilege, such as has never
beforo been revealed In tho annals of our fiscal
history. It Is no longer Justified either In law
or morals. Tho public conscience revolts against
it and modorn civilization turns away from it.
This doctrine of taxation, the plain and palpable
effect of which requires ono cltizon to bostow
as a gift .portions of his hard earnings upon
another citizen, has becomo Insupportable hero
and everywhere, and whatovor may bo tho fii
ture developments of tho economic policy of tho
United States, tho period of high protection has
roached Its end. (Applause on tho democratic
side.)
The present average protective-tariff rates
appear to bo in tho neighborhood of 40 per cent,
but in fact, when wo consider tho innumerable
rates that aro absolutely prohibitive, tho averago
rate must be near 60 per cent.
The temptation to discuss at length tho evils
and unfairnoBB of our high tariff taxes, and tho
splendid reductions carried in tho present bill is
very groat, but I shall forego this for tho
present, in order to consider other phases of our
proposed tax systorn. Tho American peoplo
havo completely learned that they aro not being
taxed either fairly or honestly; they aro demand
ing that tho Inequalities, abuses, and injusticefl
of our presont system of high tariff taxation
shall bo eliminated, and that a new system of
taxes', fair and equitable, embracing a strictly
revenuo tariff and an incomo tax, shall bo de
vised. Tho experience of all countries with re
spect to evory form of taxation has resulted in
tho universal conclusion that tho fairest and
most just of all taxes is that which Is levied
upon tho citizen according to ability to pay, and
that this result can best bo accomplished by
imposing a tax on net incomes.
Fifty-two countries and states havo taken this
step, and wherever given a reasonablo trial this
form of tax has never been repealed, save in
tho United States.
England, the seven states of Australasia, and
most of tho other English colonies, Prussia, and
tho numerous other Gorman states, Switzerland,
Spain, Italy, Norway, Sweden, Holland, Hun
gary, Greece, Japan, Denmark, Austria, and
numerous other Important countries havo this
tax In operation, while Franco Is on the verge of
adopting a comprehensive income-tax law in
lieu of numerous other taxes. In many or
most cases other countries have adopted and
maintained this tax for the twofold purpose of
securing revenuo and equalizing the burdens of
taxation.
In no other way could tho burdens bo
equalized and tho rising tide of unrest, discon
tent, and socialism bo so successfully met. By
this method alone could every citizen see and
know that taxes are being imposed equitably
and according to ability to pay.
Tho very fact that this is a just tax means
that it will meet with opposition; the benefi
ciaries of unjust taxation and many who havo
measurably escaped all taxation will always bo
found opposing an honest and fair tax upon
selfish grounds. Under tho present high tariff
tax system a poor man with a largo family pays
more taxes than a rich man with a small family.
Hence the man of wealth who is too selfish and
too unpatriotic to pay taxes will vigorously op
pose the imposition of any just tax, as will anj
creature of class or privilege taxation.
Tho pending measure has already met witfc
the specious suggestion that It Is class legisla
tion, and makes a distinction between citizen!
of large means and those without particular
means. It may be replied that the very pur
pose of the measure is to reach for taxatioi
those who have escaped taxes and who are most
able to bear the same. Suppose the bill in
chief measure exempted this class of citizens, as
other laws have done and now do; the tax would
continue to be paid, as heretofore, by the middle
and poorer classes. The very purpose of a
combination of just tax laws is to reach every
citizen in fair proportion. The masses of tho
people are now paying most of our $312,000,-
a
