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Q THE OMAHA GUIDE Q
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X James H. Williams, James E. Seay, Linotype X
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X Entered as 2nd Class Matter March 15, 1927 A
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Q Act of Congress of March 3, 1879. ^
MURDERING CAPITAL
As the Providence, Rhode Island,
Journal points out, it has long been
' contended by economists that exces
sively high income-tax rates defeat
their own purpose. This contention is
throughly supported by a mass of evi
dence derived from the actual experi
ence of the United States Government.
In 1916, for instance, the maxi
mum tax surtax rate on incomes was
13 per cent. Yet the tax derived from
incomes in the $300,000 class was al
most as much as it was five years
later, when the miximum rate had
stepped up to 65 per cent. A 500 per
cent increase in the tax collected only
4 per cent more money.
Further, ss|ys the Journal, “There
can be no doubt that this small gain
was offset many times over the virtu
ally forced diversion of funds from
active industry into tax-exempt secur
ities. In short, the loss of potential in
come for the Treasury under the ex
tremely high maximum rate of 1921—
it is even higher nowr—is incalcuable.
And the loss to the country as a whole,
through expenditure of tax-gathered
funds by a political agency for non
productive purposes, was immeasura
bly greater.”
It is becoming constantly clearer
that much of the responsibility for
prolonged depression must be laid at
the door of our suicidal policy of tax
ing capital and income—both individ
ual and corporate—to the point where
money is literally driven out of cir
culation. It is now proposed that Con
gress call a convention to amend the
Constitution so that the maximum
rate on income, inheritance and gifts
would be 25 per cent. Both branches
of the Wyoming legislature have ap
proved this proposal, as has one branch
each of the Rhode Island and Iowa
legislatures. If that Constitutional
provision were put into effect, indus
try would be encouraged and wTe would
have taken a long step forward toward
ending our ten-year old depression.
THE LJNSOLVED PUZZLE
All of us are searching for “an
answer prevailing in a land of teem
ing plenty,” as the Cornell Law Quar
terly phrases it. And the Quarterly
lobserves that it not inconceivable that
the answer might be provided by “the
removal of the present prohibitory
bans on those commercial ventures
which have made the greatest strides
in solving the problems of distribu
tion.”
It is certianly reasonable to argue
that steady reductions in the cost at
which goods of all kinds are sold to the
consumer, must inevitably result in
greater consumption—with its corol
laries of a rising standard of living
for all, increased industrial expansion
more opportunity for investor and
and worker, and stimulated product
ive employment. That has always been
true in the past. Progfress made in
farm and factory has resulted in ama
zing cuts in the cost of many commo
dities, both in the luxury and necessi
ty classifications. And similar pro
gress in the machinery of distribution
has been a vital factor in helping pass
these savings on the consumer.
A large number of states prevent
open, honest competition, by the im
postibn of co-caHed fair trade acts
which permit the manufacturer of
many articles to stipulate the mini
mum price at which they may be sold,
and thus prevent the low-cost store
from cutting prices below the level
of the high cost, wasteful store. Some
states levy punitive taxes against cer
tain kinds of retail outlets, thus hold
ing prices at artificially high levels.
Other states use other means—but all
come to the same thing in the end. All
boost the cost of living, penalize the
efficient merchant, and hold down con
sumption.
There is any amount of ev'dence in
support of the view that the public
at large would favor elimination of
these strictures on fair competition.
More and more of these laws have been
beaten, both in voters’ referendums
and in legislative sessions, in recent
years. Most of the existing law§ were
placed on the bodks some years ago,
and since then public opinion has had
a chance to changs. They should be
repealed—so that retail business want
ed still more to pass on “teeming plen
ty” to all.
-0O0
SOCIALISM TAKES HOLD
A bill recently introduced in the
Senate for the purpose of establishing
a permanent Public Works Agency,
could very accurately be given this ti
tle. “A measure to establish and ex
tend socialism in the United States.”
For several years, the federal gov
ernment has been making loans to lo
cal unites of government with which
to build publicly-owned electric plants
the great bulk of which are completely
unnecessary, and simply duplicate ade
quate existing private facilities. The
amount of the federal gift was 30 per
cent at first and has since been raised
to 45 per cent. This astonishing policy
of subsidizing towns with tax money
so that they might destroy private en
terprise, was justified as creating “e
mergency” employment.
Nowr, under the bill recently intro
duced, this so-called “emergency” poli
cy would be made permanent. And the
amount which the government might
“give” to borrowing towns and power
districts would be increased to 66 and
two-thirds per cent.
bo hero is another body blow to
private investment and private em
ployment—and it comes squarely on
the heels of high-sounding political
pledges of cooperation with industry.
The utilities, given a fair break, could
very possibly spend more money for
expansion and betterment than any
other single industry. And it takes no
economist to understand that the spec
ter of subsidized, tax-free government
competition has made capital avoid
this industry like a plague. A single
set of figures tells the story. In the ten
years ending with 1932, the average
annual new capital put into the indus
try by the public amounted to $638,000
000. The six-year average from 1933 to
1938, delusive, dropped to a measly
$35,000,000. The policy of the govern
ment was beyond all doubt the domin
ating factor in that stupendous de
cline.
And now it is proposed by suppos
edly responsible lawmakers that the
policy of spending the money of all the
citizens to build unnecessary duplicate
power facilities for a few chosen areas
be made a permanent thing! It is any
wonder that industry views the future
with growing alarm—and simply sha
kes its head in wonder and uncertainty
when periodic pledgee of political co
operation with private capital appear
in the headlines
-oOo
ELIMINATING FAVORTISM
Writing in Manufacturers News,
E. E. Laxman goes thoroughly into
the problem of transportation. And he
comes to the conclusion reached by
many another expert—that the only
way is to bring an end to public favor
itism of certain carriers, as expressed
through subsidies.
Some common carriers, notably the
waterways and commercial motor car
riers, have been subsidized, directly or
indirectly, to an amazing extent with
tax dollars. The current annual report
of the Interstate Commerce Commis
sion goes into the subject in great de
tail. For example, it says; "Private
capital and enterprise have been re
sponsible only in part for this trans
portation revolution. The extraordin
ary development of highway transpor
tation could not have been accomplish
ed, save for the expenditures of billions
of dollars of federal funds. Public
funds have likewise been responsible
for the building of the Panama Canal
and for the construction or improve
ment of mar(y inland waterways, har
bors, and docks. Similar aid has been
given to air transportation. The vast
increase in the supply of transporta
tion facilities this accomplished wTas
made without any general plans, pre
vision of results, or attempt to shape
or control them on the part of the gov
ernment. In considering a sound trans
portation policy for the naton for the
future, the importance of this subject
(tax subsidies) is manifest, particular
ly in view of the rapid growth of pri
vate transportation.”
What has been the result of our
chaotic policies? In Mr. Laxman’s
words, “We have an unintegrated set
of transportation facilities, expanded
beyorid our natural necessities, re
ceiving markedly different treatment
at the hands of the pubic, and compet
ing on a dog-eat-dog basis for a
diminished total volume of traf
fic, to the economic disadvantage not
only of the transportation industry but
of the nation as well.”
Here, then, is the problem. The cure
obviously lies in a sweeping overhaul
of our obsolete, unintegrated transpor
tation policy to the end that all carri
ers shall be treated alike, that none
shall be favored or penalized, and that
each type of carrier shall be allowed,
on a fair competitive basis, to serve the
public to the maximum of its abilities.
—-uvv-—
TVA INVESTIGATION —
The Congressional Committee
which investigated the Tennessee Val
ley Authority has finally brought in
two reports—a majority and a minor
ity opinion. As political observers
point out, opinion divided almost strict
ly along partisan lines. The majority
report very largely favors TVA poli
cies and acts, while the minority report
strongly criticizes many of them. Both
reports, however, find much to criti
cize in TVA’s past accounting meth
ods.
A reading of the reports reveals
the fact that comparatively little at
tention is paid to basic issues. It was
found, for instance, that TVA offici
als were not guilty of dishonesty or
fraud—which is what was expected.
There is a good deal of talk concerning
the so-called TVA yardstick, but most
of it is vague and indecisive. As the
Newark Evening News points out,
“Basic questions underlying the whole
scheme of flood and navigation control
and power production, as embodied in
the TVA, remain without satisfying
determination."
After all, an exhaustive report on
the character of individual officers of
the T V A or any other body, may be in
teresting, but it is hardly of epochal
importance. What is of importance is
the fact that, as ^Norman Thomas, the
socialist leader, long ago observed, the
TV A is practically pure socialism.
What is of importance is TVA’s ad
verse influence on private investment,
private* industrial expansion and pri
vate empl((yment. What is of impor
tance is TVA’s often ruthless methods
in dealing with private businesses it
wished to purchase* at sacrifiee-sale
prices.
And these are precisely the points
which ''the congressional reports say
very little* about. There seems to be
some sentiment in Congress now for
continuing the investigation, in order
to get at the root of the matter. There
certainly is room for it, in the light of
the past Committee’s general failure
to even touch the great issues which
TV A presents. Such bodies as the TVA
are natural enemies of private enter
prise—and all the vague reports in the
World can’t get away from that fact.
-——0O0
WANTED—ACTION
All of us have heard about the rail
road problem. But most of us haven’t
heard as much as we should of what
this vital problem means to the towns,
cities and school districts of this coun
try.
No other common carrier contri
butes so much in taxes, to government
as the railroads. And no other carrier,
according to the most exhaustive sur
veys, actually pays its own way 100
per cent. The rest of the carriers are
subsidized by the taxpayers—some di
rectly, some indirectly.
What is true in this county is true
to a greater or lesser extent in thou
sands of other counties, scattered thr
oughout the 48 states. We take the rail
roads lor granted. We are confident
that they will continue to give us im
proving service, and will continue to
pay a very high proportion of the costs
of our local governments. What we
don’t realize is that an industry which
is penalized while its competitors are
favored, and wrhich has been forced to
pay higher costs of all kinds while re
fused increased charges for its service,
cannot exist long. And if the railroads
go broke, a great many of us are go
ing broke with them.
--0O0
FOR THE COMMON GOOD
One, of the recent developments
in agriculture is the increased number
ot farm marketing cooperatives that
have !>een organized in the New York
milk shed in the face of the difficulties
of the dairy industry in that area.
A second development is the man
ner in which these many small cooper
atives from every section are cooper
ating with each other for the common
good and to get a living price for milk.
The heart of their whole program is
to retain control by producers of milk
in excess of the fluid requirments of
their area, thus allowing the farmers
to process it instead of permitting dis
tributors to beat them out of it at a
starvation fluid milk price.
A third development is that the
business men in small towns have como
to a realization of how closely their
prosperity is linked with the producers
and they are cooperating with the
farm organizations as never before to
stabilize production, distribution and
price. * 4
A fourth development is the man
ner in which the local newspapers 9Fe
backing up the farmer in his struggle
to maintain agricultural activities on
a profitable business basis.
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