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PSF
LEON HENDERSON
X
Subject File
PSF
Box
152
COASSE
1-2
PSF
Henderson
THE WHITE HOUSÉ
WASHINGTON
June 1, 1939.
MEMORANDUM FOR
HON. LEON HENDERSON
I asked the Treasury for in-
formation in regard to relative
per capita tax figures for the
United Kingdom in comparison with
the United States.
I have been given the enclosed
and gravely doubt its accuracy.
In the first place, the data
is taken for different years, and,
in the second place, I an reasonably
certain, though I cannot prove it,
that there is a much greater differ-
ence than the $113.74 per capita
tax here and $117.98 in England.
In regard to the comparison
of financing armament programs,
there is lacking a statement of the
comparative American figures.
Please note on Page 3 that
it is said that in the figures of
local taxes for the United Kingdom
only property taxes are included.
THE WHITE HOUSE
WASHINGTON
-2-
To me this Treasury statement
is rather unsatisfactory. Can you
get someone to get me something
better?
F. D. R.
MHL
THE SECRETARY OF THE TREASURY
WASHINGTON
May 31, 1939
My dear Mr. President:
Last Thursday you asked Hanes
and me for some specific information
and I take pleasure in forwarding it
to you herewith.
If there is any additional in-
formation you would like to have, please
let us know.
Sincerely,
The President,
The White House.
MEMORANDUM
1
June 23, 1939
TO:
The President
FROM:
Leon Henderson
SUBJECT:
Hanes report to Morgenthau, June 13, 1939 on tax bill.
You asked no to give you my slant on the Johnnie Hanes'
report on the tax bill (memorandum to Morgenthau from Hanes, here-
with returned).
I received this but a couple days ago, and since the
tax bill is being rushed along with numerous changes, I will shoot
on the topic generally.
Specifically:-
1. I do not believe it will stimulate, incent or incite
much business. It will help psychologically.
2. I feel that the loss of revenue is much greater
than the Treasury estimates. (The exactness of some of the esti-
mates in the Hanes memorandum is unwarranted.)
3. I "view with alarm" some of the changes being rushed
through without adequate consideration and hearing. This goes
particularly for the "last in - first out" inventory basis. The
Treasury always has opposed this before since it permits corporations
to arrange their values to escape income taxes.
4. I am firmly convinced that the omissions are much
more serious than the changes, since the will to remedy will be
much weaker next year. I raise the question, "when do we deal with
tax exempts and middle income increases." Also, these $100 million
revenue to be gotten by proper depletion allowances for mines and
oil wells.
5. I em especially disappointed that your repeatedly
maintained position on undistributed profits has been completely
ignored.
6. I believe the changes in social security tax burdens
completely overshadow all the present changes as "business stimulants."
We could help by going much further in this direction.
note- Randolph Paul will que me some deas re
your suggestion on stock twidends tax and undertubuted
profits 41
-2-
7. I am scared about rumors of some recent changes
being made by Treasury rulings, particularly on lowering valua-
tions of securities held by large estates. If true, and I be-
lieve you should inquire about this, it runs counter to de-
sirability of increasing estate taxes.
8. I have a firm feeling that the New Deal was out-
maneuvered, that you were put "behind the eight bell" by public
announcements of persons who can not handle the political aspects
of tax revision, that the Treasury tax staff is not sympathetic
to giving you expert help in achieving your aims.
9. I believe revenue could be raised by "vanishing
exemptions."
10. I hope some day we will tax income other than that
received from tax-exempts at the top instead of the bottom. In
other words, if an $105,000 income has $100,000 tax-exempt, the
$5,000 should, in equity, bear the rate of the bracket in which
the total $105,000 income falls.
Loss of Revenue
The Treasury estimates $15.7 net loss of revenue.
I'll bet a hat the loss carry-over will be nearer $100
million than the $23.6 million Treasury estimate.
The "last in - first out" inventory basis and the other
administrative change, allowing deduction for income taxes paid to
foreign countries, will together probably run $50 million.
Administrative Changes
(a) The administrative provision permitting the valuation
of inventories on what is called an "in-and-out" base. This permits
corporations to 80 arrange the value of their inventories as to save
themselvem large sums in income tax. The large corporations, I be-
lieve, have been pressing for this change for some years and it is
my knowledge that the Treasury in former years has been strongly
opposed to this change. The acceptance by the Treasury of this
administrative change is difficult to understand especially at
this time when there is 80 much concern over the size of the deficit.
This administrative change makes our tax structure more regressive
and I do not see wherein it can have much stimulative effect upon
business activity.
(b) The second administrative provision relates to the
deducting from income tax paid to the United States any income taxes
paid by American concerns to foreign countries. On the face of it
START
Treas
STONE
Date
-3-
this looks like a substantial loss of revenue inasmuch as
Americans have about $7 billions of direct investments in for-
eign countries. However, the press reports may not be an accurate
description of the administrative revision. Further comment would
require more information on the actual wording of the proposed
change.
The other administrative changes proposed in the House
and Senate committees may also be harmful to our tax structure,
but I can not comment on them intilligently without further in-
formation and study.
In view of the number of administrative changes which
were made within a very brief period without public hearings,
there is serious doubt whether they all received adequate dis-
cussion, if any.
Treasury Ruling
While discussing taxes I should like to mention something
that may not have come to your attention. An important change by
Treasury Decision has been made in the Treasury's handling of es-
tate taxes within the last few months. The rule requiring that
securities in an estate should be valued for estate tax purposes
at the market value was removed 80 that now securities will be
valued presumably at the price they would bring if actually sold
at forced liquidation values. In other words, an estate with
400,000 shares of DuPont would have those shares valued not at the
quoted price on the appropriate date, but on what 1s negotiated as
being the price that such shares would have sold at if they were
dumped on the market that date. It is my understanding that this
change was ordered by Mr. Hanes. A small blook & shares under these
rulings would pay the market value, whereas a large' estate consist-
ing largely of securities could negotiate a lower tax liability per
share. A change of this kind is in direct contradiction to the ex-
press desire of the Treasury to increase income from estate taxes
and violates accepted canons of tax equity.
of
:
/
I's 8 ! "! A be I & /
40 20 order 1 nasol the
5 THE / / TTATE / é z TEST % THE 2 to
alds
-4-
I have the feeling that the administrative changes
being made in both the tax legislation and recent tax regulations
under the guise of removing deterrents and simplifying procedure
are weakening the revenue producing capacity of our tax structure
and are doing 80 without adequate preliminary discussion. However,
I can not make any definite evaluations without more information
and study. The subcommittee hearings are not available to me yet.
Undistributed Profits Tax
You have consistently taken the position that you did
not oppose the repeal of the undistributed profits tax providing
that the abuse it was designed to meet - tax avoidance - was ade-
quately net in other ways. The tax is now being repealed and yet
no attempt at all has been made to prevent tax avoidance. Section
102, for example, remains unchanged, although there are grave
doubts concerning its effectiveness in its present form. Pat
Harrison promised last year to hunt for something adequate.
The exemption from the personal income tax of income
derived from the ownership of property in the form of undis-
tributed profits strikes at the very heart of the principle of
progressive taxation according to ability to pay, to which the
American people are committed. Many of the nation's wealthiest
individuals may now, through the simple device of permitting their
income to be retained by the corporations whose policy they control,
escape their proportionate contribution to the general expenses of
the Government and pay, through the flat corporate income tax, no
higher proportion of their income than the poorest stockholder in
a corporation.
FROM 1923 TO 1929, SOME #32 BILLIONS OF INCOME ACCRUING
TO INDIVIDUALS, AND YET RETAINED BY CORPORATIONS REPORTING NET IN-
COME, ESCAPED THE PERSONAL INCOME TAX. During much of this period
the maximum surtex rate was 20 per cent. It is now 75 per cent and
consequently the incentive to retain earnings is far greater.
The reimposition of a high undistributed profits tax in
conjunction with a reversal of Eisner va. Macomber (exempting
dividends on common stock paid in the form of common stock from
taxable income) if it could be obtained, would, 88 you imply, per-
mit corporations to retain cash and yet enable the Government to
tax income from property according to ability to pay. However, it
may be doubted whether making stock dividends taxable income would
facilitate greatly the reimposition in the near future of the un-
distributed profits tax. Actually corporations can, and, in1936-37,
did pay dividends in non-cumulative preferred stock, which was
taxable income. The real drive for repeal came not from the desire
of oorporations to retain cash but from the desire of individuals
to escape taxes.
batud, THE
any english
" dire FOR
muel see MORROUTOS were 80 Dre ena STOLL
Insure Invoicer SUBSYOT zer on offs by 20 one eved 98108 at I abam one gated
almos hite Date ena jeds
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However, legislation declaring as taxable income the
distribution of corporation earnings in the form of common
stock would offer an opportunity for the Supreme Court to recon-
sider the Eisner VS. Macomber case and, if the legislation were
upheld, make it somewhat easier at some future date to revive the
undistributed profits tax.
Something of a minor order might and should be done to
amend Section 102. It may be possible to delete the words denoting
the intent to avoid taxes and substitute a more objective criterion
as prima facie evidence of excessive retention of earnings than
"the reasonable needs of the business."
Vanishing Exemptions
Increases in revenue could be obtained, without broaden-
ing the base, if exemptions were progressively reduced for higher
incomes. Exemptions are supposed to reserve minimum incomes for
necessitous family expenses. It does not follow that a taxpayer
in the high brackets needs the exemption,- -- so it might be eliminated,
thus providing more tax revenue.
PSF: Henderson
n
August 5, 2939.
Dear Leens-
That is a nighty nice letter of yours
and I have talked with Jerry and he says be will
stay on until January first. That will help both
him and you to carry on with the program and keep
the SEC elicking.
I hope you will get a little vacation
yourself. After I come back from my cruise, I
want to take up a number of things with you.
Always sincerely,
Honorable Leen Henderson,
Securities and Exchange Commission,
Washington, D. 0.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON
LEON HENDERSON
COMMISSIONER
August 2, 1939
Dear Mr. President:
When I came to SEC, at my request
you asked Jerome Frank to become Chairman until October
first, 1939, with the expectation that I should succed him.
I believe the interests of the SEC
and the New Deal would be better served if Jerome continued
on, and I sincerely hope you will ask him to stay at least
another year. He has always insisted that he could not
afford to stay later than January first, 1940, and I'm sure
his financial drains are very heavy. Even three more
months would be well worth while.
Jerry has handled himself splendidly
as Chairman, and my admiration for his brilliance and
high capacity is constantly on the increase. We have a
tremendosly important schedule ahead,- we are breaking new
ground in utilities, reorganization, and with brokerage
bank proposals for customers protection. We are just
starting on the new Maloney over-the-counter regulation,
and have the new Barkley trust indenture to set up, as well
as to draft investment trust legislation for the next session.
In my opinion, the SEC is really
clicking, and I want it to keep on. Jerry is going away
on his vacation today, and I understand he is coming in to
see you for a minute. I hope you can mention the matter
to him today,- otherwise he might use his vacation for some
plans after October first.
Sincerely,
PSF: Henderson
Subject File
filendential
THE ADVISORY COMMISSION TO THE COUNCIL OF NATIONAL DEFENSE
FEDERAL RESERVE BUILDING
WASHINGTON, D. C.
September 26, 1940
MEMORANDUM:
To:
The President
From: Leon Henderson
This is to inform - not to bother you.
After meeting with you today, the Commission will hold
an important meeting on organization difficulties - at the
urgent suggestion of Nelson, Hillman, Chester Davis and myself,
particularly. The prospective meeting may not be mentioned in
our conference with you, but I thought a little outline for
you might be helpful - just in case
You know from Chester Davis, who is handling my interest
in chemicals also, of the attempt to ignore TVA in the build-
ing of increased ammonia facilities. The present system of
clearing contracts through Knudsen, without adequate reference
to other Commissioners, is partially responsible for this. You
asked Knudsen to clear for the Commission, but this was before
we had Nelson and the functions of a Coordinator of Purchases
were outlined.
Nelson has thought - so have Stettinius, Davis, Hillman
and myself - that clearances should logically be in his baili-
wick. Everything Nelson handles he carefully checks with the
other Commissioners, so that all designated responsibilities
can be met. Knudsen's people - and to a lesser extent Stettinius -
are less careful, and many things get by without proper atten-
tion. Examples, in addition to the ammonia plant case, are:
(1) lumber for the cantonments, which runs prices up tremendous-
ly. Knudsen's men (and to a lesser extent Stettinius' expert)
tried to handle, and Nelson has had to salvage the situation;
(a) location of plants between the Rockies and the Mississippi.
Davis, Nelson, Budd, Hillman and myself are trying to carry out
THE
- 2 -
your ideas, but frequently the Army and Navy want to give us
only a few minutes to approve a site already negotiated - - in which
negotiation Knudsen's man has participated.
Knudsen also wishes to control priorities, which you assigned
to Nelson in your order setting up the Coordinator of Purchases.
Knudsen and Nelson have talked about this conflict - in a friendly
way - but the issue is not resolved.
The issues involved are quite important - - I believe we can
handle them, but there's a little dynamite in the situation.
Leon
PSF
of
THE WHITE HOUSE
WASHINGTON
Anduce
derson
September 28, 1940.
MEMORANDUM FOR
THE PRESIDENT
Leon Henderson telephoned last
evening to call your attention to
the attached story which appeared
in the Washington News last night.
He said he and Nelson Rockefeller
have been convinced that some of the
Republicans are working on Knudsen -
particularly Sloan, who came out for
Willkie last week.
Leon said that the chief op-
position has come from Morgenthau,
and that they have had difficulty
with the Treasury. The other day
they gave Knudsen a ruling and in
it they went out of their way to
attack the policy of lending which
the Commission has been working out.
Knudsen told Foley that if he had
any more of it he was going to quit.
Leon thought you should know
this before Knudsen comes in on
Monday or Tuesday.
our
7014
eve
come
51147
BOA
2519
THE WASHINGTON DAILY NEWS, FRIDAY, SEPTEMBER 27, 1940
Page 19
Defense Group May
set-up calculated to inspire public con-
thereafter are virtually certain.
fidence that rearmament was In com-
Chief opposition has come from
6 Priests a 'Family,'
petent hands.
Treasury Secretary Morgenthaut, Illus-
ATTITUDE CHANGE
trative of this was the difference be-
Ask Showdown Soon
In early months, they went "all out"
tween commission and Treasury on
Zoning Board Decides
to co-operate with the Industrial
excess profits tax bill section dealing
Reversing a ruling by the Acting
leaders, But in more recent weeks a
with amortization of new factories
Inspector of Buildings, the District
By CHARLES T. LUCEY
change of attitude is reported-about
built for defense work. The Senate
Board of Zoning Adjustment held yes-
The National Defense Advisory Commission, blocked
the time New Dealers began talking
saw # the commission's way.
terday that six priesta of the Con-
repeatedly in speeding the nation's rearmament program
about Mr. Roosevelt's re-election being
SHIPMENTS ABROAD
gregation of the Holy Ghost and of
"In the bag."
Some commission members also feel
the Immaculate Heart of Mary, Inc.
by the opposition-direct and undercover-of inner New
the President should make a clear
at 1615 Manchester Lane nw, consti-
Priction developed points to the need
Deal officials, may appeal to President Roosevelt soon for
tuted a "single family" within the 2011-
for & fint declaration of policy by the
statement of his policy, for the com-
Lng regulations.
a showdown.
President himself on the commission's
mission's benefit on furnishing planes
The Board Instructed Building In-
Ing of these conflicts. Resignations of
authority. If obstructionist tacties
and munitions to England,
spector Orhmann to issue a certificate
Some of the Industrial leaders
brought here to put the multi-billion-
some of the outstanding men with the
persist, It is said, there probably will
In Congress there Is growing criticism
of occupancy for them to conduct &
commission are possible.
be executives now serving without pay,
of shipment of arms and equipment
school there. Nearby residents had pro-
dollar defense drive in high gear so far
who will find It convenient to return
at a time when many believe the
tested that the granting of the cert -
have refrained from anything like an
New Dealers at first seemed to ap-
open break out of & sense of fairness
to private businesses which, In many
country's own armed forces are fat
ficate would affect real estate prices.
preciate that & Defense Commission
to the President in time of an election
headed by such well-known business
cases, they have reluctantly neglected.
from adequately equipped. Unless the
issue is clarified, the commission
campaign.
men as Messrs. Knudsen, Stettinius
RESIGNATION SURE
Helps hay fever
rather than the President who is held
But alleged persistent sniping at the
and Budd constitute a valuable politi-
runny nose
Even if no break comes before the
to be rightfully responsible, may be
cal asset for the President. It was &
election, some resignations Immediately
in the line of fire on Capitol Hill.
PENETRO
NOSE
commission's efforts may force an air-
DROPS
PSF: Henderson you Newdwor
UNSIGNED
AIDE-MEMOIRE (Perhaps from Leon Henderson thru T. Corcoraan)
RE-Stating that the Securities and Exchange Commission
has been asked whether it would accept the trusteeship
of Associated Gas and Electric Company if Trusteeship
were tendered by the Court.
Memo came to file in Feb-1940
See:T. Corcoran folder-Drawer 2-1940
PSF: toble
3-41
THE WHITE HOUSE
WASHINGTON
August 2, 1941
CONFIDENTIAL
MEMORANDUM FOR
HOM. LEON HENDERSON
I tried to reach you by phone
but no luok. The President told no
to tell you that he told both Knudsen
and Hillman just what he told you --
to keep the ball in play until he
gets back!
The President also suggested
that you might get in touch with
San Rosenman when he comes down here
next week.
GRACE G. TULLY
THE
E
know
7
/ STATE THE /
THE WHITE HOUSE
WASHINGTON
August 1, 1941.
MEMORANDUM FOR
THE PRESIDENT
Leon Henderson wants to
know if you want to tell him
anything to guide him as a result
of your conference with Knudsen
and Hillman yesterday.
G.
PSF Leon Henderson Folder
November 5. 1941
Personal and Confidertial
Dear Meary:
This morning I talked with Leen Henderson about the
changes made by your Committee in our Price Centrol Bill. Some
of the changes struck me as being very serious.
The provision governing agriculture prices is on-
tirely unsupportable and unaccoptable. Some time ago when nd
O'Neal was is to 800 no with Claude wiekard, I told Ed that I
would accept 110% as a meximum but only for the purpose of help-
ing to secure an average of 100% of perity the year round. I
also told Ed and Claude that they could say that I would vete
any bill which wast beyond what we agreed upon. If the Price
Centrol Bill comos up to no with a limitation on farm prices
substantially higher than 110% of parity I will net be able to
accept 18.
The license provision, I understand, was completely
stricken out by the Committee. This should be restored because
I don't ... how retail prices can be controlled in any other
menner. The way the sost of living is going up now we will be
under increasing pressure to do something substantial about it.
As I remember, Reever and Cerfield used licenses to centrol feed
and fuel prices in the last war.
I an sorry the Committee weskened the Bill by other
actions, but of these the one which concerns me most is the limi-
tation on the buying and selling authority. It seems to me that
you can't have effective price control without something like
the original provision in the Bill.
I was very happy to be told by the legislative leaders
this morning that the House will take up the Price Bill immedi-
ately after the Neutrality Bill is disposed of.
Very sincerely yours,
Remorable Heary B. Stengall
Banking and Currency Committee
Rouse of Representatives
Complete file in Congress Folder.
ben Goorer: H
PSF: Henderson
3-43
THE WHITE HOUSE
WASHINGTON
October 15, 1943.
MEMORANDUM FOR
ADMIRAL BROWN
I wish you would look into
this personally.
If the Navy is afraid of a
scandal in regard to this man,
even though Admiral Robinson
asked for his services, the
Havy should equally avoid a
scandal caused by their turning
his down on the ground that his
parents were born in Russia.
F. D. R.
Meno dated Oct. 13, 1943, to
Morris Ernst from Leon Henderson
re Wathan L. Halpern's application
for a commission in the Havy.
272
October 13, 1943
Morris Ernst:
+ told you several times & whole stratum of young New Dealers felt
they were barred from commissions and transfers to certain departments because
they have worked for the Administration.
Here is a case I know about personally.
leon
Leon
PSF Henderson
THE WHITE HOUSE
WASHINGTON
file.
8/22
FOR THE PRESIDENT
From Leon Henderson
The Defense Commission has an
understanding with Bob Jackson about the
oil cases. The Commission asked me to
handle its part.
Thurman Arnold has told Ed
Stettinius that you have, in effect,
overruled both Bob and the Commission
and told him to proceed with the suits.
This is so serious I believe
Bob Jackson ought to be here for your
discussion with us.
Leon.