Volume 577, October 8 – October 9, 1942

DIARY Book 577 October 8 and 9, 1942 Regraded Unclassified - A - Book Page Adair, Tom - Corporal See Financing, Government: War Savings Bonds Airplanes Shipment to British Forces - Hoflich report - 10/8/42.. 577 65 - 0 - Canada See Foreign Funds Control Chiefs of Staff See Joint Security Control China Adler reports on conversation with Kung concerning current economic situation, Sino-American financial relations, work of Stabilization Board - 10/8/42 75 Federal Reserve Bank of New York, as fiscal agent, reports on dollar exchange supply of Central Bank of China - 10/9/42 170 Correspondence Mrs. Forbush's mail report . 10/9/42 157 Costa Rica See Latin America "Country Gentleman" See Financing, Government: War Savings Bonds - D - D - Diplomatic Pouches - immunity of See State Department - I - Economic Stabilization, Office of See Inflation - 7 - Financing, Government $4 Billion Borrowing: Announcement - 2% Treasury Bonds, 1950-52, and an additional amount of 15% Treasury Notes of Series B, 1946 - 10/8/42 1 a) Sproul-HMJr conversations - 10/8-9/42 19,21,106, 1) Eccles told "bond issue not yet sure 120,123 success" - 10/9/42 109,115,126 2) Walter Stewart told of situation at 6:30 P.M. - 10/9/42 131 a) Shall Eccles instruct presidents of Federal Reserve Banks to call larger commercial banks to subscribe or shall Federal Reserve System put in subscriptions for deficit immediately? 3) Eccles told of Stewart's opinion 142,148 b) Bell's report - 10/8/42 25 Sc) Closing of books - 10/9/42 82 Regraded Unclassified - 1 - - (Continued) Book Page Financing, Government War Savings Bonds: State Administrators - proposed meeting: Conference: present: HMJr, Graves, Kuhn, Gamble, and Odegard - 10/8/42 577 9 Tentative agenda - 10/8/42 17 "Country Gentleman" pamphlet criticised by HMJr - 10/9/42 85 Adair and Uhl thanked for songs - 10/9/42 151,152 Payroll Savings Plan - report on - 10/9/42 153 Fiscal and Monetary Advisory Board Letter (not sent) recommending re-establishment discussed by HMJr and White - 10/8/42 30-A Foreign Funds Control Canada: Bank balances of Canadian nationals resident in Canada - Treasury will furnish information to Canadian Legation . - 10/8/42 69 Ship Movements: Investigation of Swiss insurance companies reveals dissemination of vital information in normal course of business operations - 10/9/42 177 Frankfurter, Felix Address at inauguration of president of College of City of New York - 10/8/42 32 - G - Goldman, Nahum "Who's Who" - 10/9/42 156 - I - Inflation Economic Stabilization, Office of: Regulations for $25,000 salary limitation - Byrnes-Treasury correspondence concerning - 10/8/42 28 a) "Sun of salary and bonus in 1942 should not exceed total salary and bonus in 1941 if sum in 1942 exceeds $54,000" - Sullivan memorandum recounting hardships - 11/5/42: See Book 581, page 215 - J - Joint Security Control Membership - 10/8/42 176 - L - Latin America Costa Rica: Ness (Norman D.) available to advise Treasury concerning taxation and general fiscal policy - - 10/8/42 72 Mexico: Railroad equipment used in United States - report on protection of - 10/9/42 219 Regraded Unclassified - L - (Continued) Book Page Lend-Lease U.S.S.R.: Materials available from storage and production, October 1942 - copy sent by HMJr to FDR - 10/8/42 577 48 Over-all report also prepared for FDR - 10/8/42 51 a) Chart: "Time taken to place orders for Lend-Lease industrial supplies for U.S.S.R." 56 United Kingdom: Reconstruction Finance Corporation reports on $425 million loan - British have used $390 million - 10/8/42 58 Federal Reserve Bank of New York statement showing dollar disbursements, week ending September 30, 1942 - 10/8/42 61 - M - Mexico See Latin America Military Reports British operations - 10/8-9/42 77,78,221 Hoflich summary - 10/8/42 80 "The War This Week, October 1-8, 1942" - Office of Strategic Services report 81 Pacific Naval Losses - United States and Japanese: Hoflich report - - 10/9/42 222 Office of War Information report - 10/9/42 227 - N - Ness, Norman D. See Latin America: Costa Rica - R - Railroad Equipment See Latin America: Mexico Revenue Revision Revenue Act of 1942: Congressional proceedings on continuing exemptions - Congressional Record, October 8, 1942 31 - S - Secret Service HMJr's whereabouts not to be revealed by officer stationed at entrance unless HMJr specifically instructs him - 10/9/42 102,104 Security Control, Joint See Joint Security Control Regraded Unclassified - S - (Continued) Book Page Ship Movements See Foreign Funds Control Stabilization Fund Statement for August and September, 1942 - 10/8/42 577 47 State Administrators See Financing, Government: War Savings Bonds State Department Diplomatic Pouches - immunity of: FDR checks with HMJr on success of search - 10/9/42 101-A FDR checks with HMJr before talking to Welles 101-B a) FDR concocts "story" to be used when search is called off 1) Return of pouches in New Orleans described by Gaston 101-D Switzerland For investigation of insurance companies, see Foreign Funds Control: Ship Movements - T - $25,000 Salary Limitation See Inflation: Economic Stabilization, Office of - U - - Uhl, Richard - Sergeant See Financing, Government: War Savings Bonds U.S.S.R. See Lend-Lease United Kingdom See Lend-Lease - V - War Savings Bonds See Financing, Government 10/7/42 1 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Press Service Thursday, October 8, 1942. No. 33-53 10/7/42 Secretary of the Treasury Morgenthau today announced the offering, through the Federal Reserve Banks, for cash subscrip- tion at par and accrued interest of 2 percent Treasury Bonds of 1950-52, and an additional amount of 1-1/2 percent Treasury Notes of Series B-1946. The aggregate amount of both issues will be $4,000,000,000, or thereabouts, and the proportionate amount of bonds and notes to be issued will be determined by the relation between the total subscriptions received for each and the total subscriptions received for both. In order to in- sure widespread participation of banks, corporations and others who may be interested, and for the convenience of investors, the subscription books for each issue will remain open two days, that 1s, through Friday, October 9. There will be no restric- tions as to the basis for subscribing for either the bonds or the notes. The Treasury Bonds of 1950-52, now offered for subscription, will be dated October 19, 1942, and will bear interest from that date at the rate of 2 percent per annum payable semiannually with the first coupon due March 15, 1943, for a fractional period. The bonde will mature March 15, 1952, but may be redeemed, at the option of the United States, on and after March 15, 1950. The bonds will be issued in two forms: bearer bonds with interest coupons attached, and bonds registered both as to principal and interest. Both forms will be issued in denominations of $100, $500, $1,000, $5,000, $10,000 and $100,000. The notes now offered will be an addition to and will form a part of the series of 1-1/2 percent Treasury Notes of Series B-1946, issued pursuant to Department Circular No. 686, dated Regraded Unclassified 2 - 2 - May 25, 1942. They are identical in all respects with such notes with which they will be freely interchangeable. The notes are dated June 5, 1942, and bear interest from that date at the rate of 1-1/2 percent per annum, payable on a semiannual basis on December 15, 1942 and thereafter on June 15 and December 15 in each year until they mature on December 15, 1946. They will not be subject to call for redemption prior to maturity. They will be issued only in bearer form with interest coupons attached, in denominations of $100, #500, $1,000, $5,000, $10,000 and $100,000. Pursuant to the provisions of the Public Debt Act of 1941, interest upon the bonds and notes now offered shall not have any exemptions, as such, under Federal Tax Acts now or hereafter en- acted. The full provisions relating to taxability are set forth in the official circulars released today. Subscriptions will be received at the Federal Reserve Banks and Branches, and at the Treasury Department, Washington. Bank- ing institutions generally may submit subscriptions for account of customers, but only the Federal Reserve Banks and the Treasury Department are authorized to act as official agencies. Sub- scriptions from banks and trust companies for their own account will be received without deposit, but subscriptions from all others must be accompanied by payment of 5 percent of the amount of bonds or notes applied for. Subject to the usual reservations, and within the amounts of the respective offerings, subscriptions for each issue for amounts not exceeding $25,000 from banks which accept demand deposits, and subscriptions in any amount from all other sub- scribers, will be allotted in full; subscriptions for amounts over $25,000 from banks which accept demand deposits will be allotted on an equal percentage basis, to be publicly announced. Payment for any bonds allotted must be made or completed on or before October 19, 1942, or on later allotment. Payment for any notes allotted must be made or completed on or before October 15, 1942, or on later allotment, and must include accrued interest from June 5, 1942. (The amount of accrued interest from June 5 to October 15, 1942 18 about $5.41 per $1,000.) The texts of the official circulars follow: Regraded Unclassified 3 UNITED STATES OF AMERICA 2 PERCENT TREASURY BONDS OF 1950-52 Dated and bearing interest from October 19, 1942 Due March 15, 1952 REDEEMABLE AT THE OPTION OF THE UNITED STATES AT PAR AND ACCRUED INTEREST ON AND AFTER MARCH 15, 1950 Interest payable March 15 and September 15 1942 TREASURY DEPARTMENT, Department Circular No. 698 Office of the Secretary, Washington, October 8, 1942. Fiscal Service Bureau of the Public Debt I. OFFERING OF BONDS 1. The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, as amended, invites subscriptions, at par and accrued interest, from the people of the United States for bonds of the United States, designated 2 percent Treasury Bonds of 1950-52. At the same time the Secretary of the Treasury is inviting subscriptions for an additional amount of Treasury Notes of Series B-1946 under Department Circular No. 699. The aggregate amount of both issues will be $4,000,000,000, or thereabouts. The amount of bonds to be issued hereunder will be determined by the relation which the total subscriptions for the bonds bear to the total subscriptions received for both the bonds and the notes. II. DESCRIPTION OF BONDS 1. The bonds will be dated October 19, 1942, and will bear interest from that date at the rate of 2 percent per annum, payable on a semiannual basis on March 15 and September 15 in each year until the principal amount becomes pay- able. They will mature March 15, 1952, but may be redeemed at the option of the United States on and after March 15, 1950, in whole or in part, at par and accrued interest, on any interest day or days, on 4 months' notice of re- demption given in such manner as the Secretary of the Treasury shall prescribe. In case of partial redemption the bonds to be redeemed will be determined by such method as may be prescribed by the Secretary of the Treasury. From the date of redemption designated in any such notice, interest on the bonds called for redemption shall cease. 2. The income derived from the bonds shall be subject to all Federal taxes, now or hereafter imposed. The bonds shall be subject to ostate, inheritance, gift or other excise taxes, whether Federal or State, but shall be exempt from all taxation now or hereafter imposed on the principal or interest thereof by any State, or any of the possessions of the United States, or by any local taxing authority. Regraded Unclassified 4 - 2 - 3. The bonds will be acceptable to secure deposits of public moneys, but will not bear the circulation privilege and will not be entitled to any privilege of conversion. 4. Bearer bonds with interest coupons attached, and bonds registered as to principal and interest, will be issued in denominations of $100, $500. $1,000, $5,000. $10,000 and $100,000. Provision will be made for the inter- change of bonds of different denominations and of coupon and registered bonds, and for the transfer of registered bonds, under rules and regulations prescribed by the Secretary of the Treasury. 5. The bonds will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing United States bonds. III. SUBSCRIPTION AND ALLOTMENT 1. Subscriptions will be received at the Federal Reserve Banks and Branches and at the Treasury Department, Washington. Subscribers must agree not to sell or otherwise dispose of their subscriptions, or of the securities which may be allotted thereon, prior to the closing of the subscription books. Banking institutions generally may submit subscriptions for account of customers, but only the Federal Reserve Banks and the Treasury Department are authorized to act as official agencies. Others than banking institutions will not be permitted to enter subscriptions except for their own account. Subscriptions from banks and trust companies for their own account will be received without deposit. Subscriptions from all others must be accompanied by payment of 5 percent of the amount of bonds applied for. 2. The Secretary of the Treasury reserves the right to reject any sub- scription, in whole or in part, to allot less than the amount of bonds applied for, and to close the books as to any or all subscriptions at any time without notice; and any action he may take in these respects shall be final. Subject to these reservations, and within the amount of the offering, subscriptions for amounts up to and including $25,000 from banks which accept demand deposits, and subscriptions in any amount from all other subscribers, will be allotted in full; subscriptions for amounts over $25,000 from banks which accept demand deposits will be allotted on an equal percentage basis, to be publicly announced. Allotment notices will be sent out promptly upon allot- ment. IV. PAYMENT 1. Payment at par and accrued interest, if any, for bonds allotted here- under must be made or completed on or before October 19, 1942, or on later allotment. In every case where payment 16 not 80 completed, the payment with application up to 5 percent of the amount of bonds applied for shall, upon declaration made by the Secretary of the Treasury in his discretion, be for- feited to the United States. Any qualified depositary will be permitted to make payment by credit for bonds allotted to it for itself and its customers Regraded Unclassified 5 - 3 - up to any amount for which it shall be qualified in excess of existing de- posits, when 80 notified by the Federal Reserve Bank of its district. V. GENERAL PROVISIONS 1. As fiscal agents of the United States, Federal Reserve Banks are authorized and requested to receive subscriptions, to make allotments on the basis and up to the amounts indicated by the Secretary of the Treasury to the Federal Reserve Banks of the respective districts, to issue allotment notices, to receive payment for bonds allotted, to make delivery of bonds on full-paid subscriptions allotted, and they may issue interim receipts pending delivery of the definitive bonds. 2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering. which will be communicated promptly to the Federal Reserve Banks. HENRY MORGENTHAU, JR., Secretary of the Treasury. Regraded Unclassified 6 UNITED STATES OF AMERICA 1-1/2 PERCENT TREASURY NOTES OF SERIES B-1946 Dated and bearing interest from June 5, 1942 Due December 15, 1946 Interest payable June 15 and December 15 ADDITIONAL ISSUE 1942 Department Circular No. 699 TREASURY DEPARTMENT, Office of the Secretary, Washington, October 8, 1942. Fiscal Service Bureau of the Public Debt I. OFFERING OF NOTES 1. The Secrotary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, as amonded, invites subscriptions, at par and accrued interost, from the people of the United States for notes of the United States, designated 1-1/2 percent Treasury Notos of Sories B-1946. At the same time the Secretary of the Treasury is inviting subscriptions for 2 percent Treasury Bonds of 1950-52 under Department Circular No. 698. The aggregate amount of both issues will be $4,000,000,000, or thereabouts. The amount of notes to be issued hereunder will be determined by the relation which the total sub- scriptions for the notes bear to the total subscriptions received for both the notes and the bonds. II. DESCRIPTION OF NOTES 1. The notes now offored will be an addition to and will form a part of the scries of 1-1/2 percent Treasury Notos of Series B-1946 issued pursuant to Department Circular No. 686, dated May 25, 1942, will be freely inter- changeable therowith, are identical in all respects therowith, and are described in the following quotation from Department Circular No. 686: "1. The notes will be dated June 5, 1942, and will bear interest from that date at the rate of 1-1/2 percent per annum, payable on a semiannual basis on December 15, 1942, and thereafter on June 15 and December 15 in each year until the principal amount becomes payable. They will mature December 15, 1946, and will not be subject to call for redomption prior to maturity. "2. The income derived from the notos shall be subject to all Federal taxes, now or horenftor imposed. Tho notes shall be subject to estate, inheritance, gift or other excise tnxes, whother Federal Regraded Unclassified 7 - 2 - or State, but shall be exempt from all taxation now or horeafter imposed on the principal or interest thoreof by any State, or any of the possossions of the United Statos, or by any local taxing authority. "3. The notos will be accepted at par during such time and undor such rules and regulations ns shall be prescribed or approved by the Secrotary of the Treasury in payment of income and profits taxos pay- ablo at the maturity of the notes. "4" The notos will be acceptable to secure deposits of public monoys, but will not boar the circulation privilogo. "5. Bonror notos with intorost coupons attached will be issuod in denominations of $100, $500, $1,000, $5,000, $10,000 and $100,000. The notes will not be issued in registered form. "6" The notes will be subjoct to the goneral regulations of the Tronsury Department, now or herenfter proscribod, governing Unitod States notes." III. SUBSCRIPTION AND ALLOTMENT 1. Subscriptions will be received at the Federal Roserve Banks and Branches and at the Trensury Department, Washington. Subscribors must agree not to soll or otherwise disposo of their subscriptions, or of the securitics which my bo allottod thoroon, prior to the closing of the subscription books. Banking institutions generally my submit subscriptions for account of cus- tomors, but only the Foderal Reserve Banks and the Treasury Department are authorized to act ns official ngoncies. Othors than banking institutions will not be pernitted to entor subscriptions except for their own account. Sub- scriptions from banks and trust corpanies for their own account will be received without doposit. Subscriptions from all others must be nccompaniod by payment of 5 porcent of the amount of notes applied for. 2. The Secretary of the Treasury reserves the right to reject any subscription, in whole or in part, to allot less than the anount of notes applied for, and to close the books as to any or all subscriptions at any time without notice: and any action he nay take in these respects shall be final. Subject to these reservations, and within the anount of the offering, subscrip- tions for anounts up to and including $25,000 from banks which accept denand deposits, and subscriptions in any anount from all other subscribers, will be allotted in full; subscriptions for anounts over $25,000 from banks which accept denand deposits will be allotted on an equal percontage basis, to be publicly announced. Allotment notices will be sent out promptly upon allotment. IV. PAYMENT 1. Paymont at par and accrued intorest from June 5, 1942, for notos allotted hereunder must be made or completed on or bofore October 15, 1942, or on later allotmont. In every caso where payment is not 80 completed, the Regraded Unclassified 8 - 3 - payment with application up to 5 percent of tho amount of notes appliod for shall, upon doclaration made by the Socretary of the Treasury in his discro- tion, be forfeited to the United States. Any qualified depositary will be permitted to meko payment by credit for notos allotted to it for itself and its customors up to any amount for which it shall be qualified in excess of exist- ing deposits, whon 80 notified by the Federal Reserve Bank of its district. Accrued interest at 1-1/2 percent from June 5, 1942, to October 15, 1942, on $1,000 face amount is $5.41209. V. GENERAL PROVISIONS 1. As fiscal ngents of the United States, Federal Reserve Banks are authorized and requested to receive subscriptions, to make allotments on the basis and up to the anounts indicated by tho Secretary of the Trensury to the Federal Reserve Banks of the respective districts, to issue allotment notices, to receive payment for notes allotted, to make dolivery of notes on full-paid subscriptions allotted, and they may issue intorim receipts pending delivery of the definitive notes. 2. The Secretary of the Treasury nay at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering, which will be communicated promptly to the Fodoral Reserve Banks. HENRY MORGENTHAU, JR., Secretary of the Treasury. 9 October 8, 1942 10:15 a.m. WAR SAVINGS BONDS Present: Mr. Graves Mr. Kuhn Mr. Gamble Mr. Odegard H.M.JR: All right, gentlemen. MR. GRAVES: You remember, we suspended, in the middle of our rush the other day, the proposal of a convention of our people. we would like to have your approval of holding such a meeting in a couple of weeks - probably, if you approved, two weeks from Monday - to consider our program in all of its aspects and to give these people some details of operations that we ought to be carrying on until something happens to us that makes it advisable to change. For instance, we want to go ahead, strongly, with the pay-roll savings. We would like to impress upon people the advisability of concluding this program, if we can, by the end of the year, getting as many of the companies as possible in this thing on the basis of ten percent of gross pay roll. You and I talked over the phone yesterday about the F and G thing - that is another thing we would like to inform these people on, and recruit these insurance fellows that have been offered to us. Those are illustrations of a good many projects that we think would be very beneficial - in fact, necessary for us to talk over with our people if we are going to do a good job. I gave you this list of projects before. (Tentative Agenda of meeting handed to the Secretary, copy attached.) Regraded Unclassified 10 - 2 - H.M.JR: Is it just the same? MR. GRAVES: It is just the same. H.M.JR: Wouldn't the women's program be Miss Elliott? MR. GRAVES: We were not sure what we should do about that. You see, the women have just had a meet- ing of their own, and here I think it would perhaps suffice for us to have & discussion with our people. That would be Mr. Odegard's job - just how the women's activities are to be fitted in. H.M.JR: You mean you wouldn't have Miss Elliott there? MR. GRAVES: We might, or we might not. H.M.JR: We should. I mean, if you are going to expect them - after all, thirty percent of the people in the factories, now, are women. It seems to me that they should be there. They are very definitely and constantly increasing. MR. GRAVES: Yes. H.M.JR: I mean, you can't expect the women to do the work unless you recognize them. MR. GRAVES: We would, of course, recognize them. It was a question of whether we needed to have her. H.M.JR: I would definitely suggest that. MR. GRAVES: Is that your belief, too? MR. ODEGARD: I would agree, yes. I think that Miss Elliott ought to be in the picture - someone from the Women's Division. H.M.JR: I think it should be Miss Elliott. Regraded Unclassified 11 - 3 - MR. ODEGARD: I think it should be Miss Eiliott, yes, if possible. You see, I haven't talked with her about whether she would be so involved with other things in connection with this Women's Week thing. H.M.JR: She should "disinvolve" herself. MR. ODEGARD: Of course, the fact that they had this other conference should not necessarily mean that Miss Elliott ought not to be here, because she ought to present this thing to a different group rather than to their own group. H.M.JR: I think so. After all, you have Myers to do the farm and Houghteling the Negro, and so forth and 60 on. It is all right with me. MR. GRAVES: Fine. We will go ahead, I think, at Kansas City, two weeks from Monday - two days and a half. That is all I have. H.M.JR: Now - that is all you have? MR. GRAVES: Yes. H.M.JR: There is one thing I would like to ask, as long as I have you. I think it was Odegard who told me that you reorganized the advertising section and changed it from an advertising agency, so to speak, to an advisory service. You never said anything more than that. Wouldn't that mean you can get along with a less number of people? We seem to have 8. lot of specialists, and everything, over there with Mahan. MR. ODEGARD: Well, as a matter of fact, what has happened is that in Callahan's shop, to which that advertising operation has been transferred, we not only are getting along with fewer people, but we are shorthanded, now. Regraded Unclassified 12 - 4 - H.M.JR: Did you let anybody go? MR. ODEGARD: Well, we have lost McCarty, for example. H.M.JR: But there were B. lot of - when I studied this thing a month or two ago, there were a lot of people doing copy work, the kind of thing they would do in an agency. MR. ODEGARD: Oh, that - you see, the main people involved are John Legler, who is working with Syd Mahan in writing copy, preparing layouts, and 80 on, and Mr. Legler has gone with Mr. Mahan into the retailers operations. Syd felt very strongly that he needed someone to help him with the retailers operations, and so he has taken all of the people who were in his shop before, they are still working with him. H.M.JR: Do you mind if I come back at you again? If you read the thing which was prepared for me, there were twenty odd people who were trained in advertising. I am not - now, they are not trained in retail things, but they are advertising specialists. Now, if you are going to rely on the agency, I just wonder why you keep these same people - and they are very high-priced people, too. MR. ODEGARD: I don't know how many of those people there are, because we have not taken them over. H.M.JR: There are a flock of them. Mahan had a flock of them. MR. GRAVES: I will go over that with Peter. H.M.JR: These men - when you recommended them, they were there to do advertising work. Now if you need people in the retail business, I would get people skilled in the retail business. Regraded Unclassified 13 - 5 - MR. ODEGARD: Most of those that Mr. Mahan had - Mr. Mahan's orientation had always been 8. retailer's orientation; and most of the people that he had on his staff, even when he was doing the advertising for the War Savings Staff, were people whose orientation was toward retail operations. He has taken those people, for the most part, with him. Isn't that right? MR. GAMBLE: He has taken four people; Mahan's group consists of four people. H.M.JR: How many? MR. GAMBLE: Four people. I think the thing that you are concerned with, Mr. Secretary, is that the grading of our people-- H.M.JR: Do you want to bet me on that? MR. GAMBLE: No, I said Mr. Mahan has taken with him in the retail section, which is my department, four people, including himself. H.M.JR: Do you want to bet on how many people he had who were getting over three thousand a month ago? MR. ODEGARD: If you hire somebody for the War Savings Staff, the way they are classified by the Civil Service is advertising specialists. MR. GAMBLE: That is what I wanted to say. We have people who know nothing about advertising, classified as advertising specialists. H.M.JR: This gives the background on each fellow. I read it twice, because the first time Harold wasn't satisfied. You wrote it three times, didn't you? MR. GRAVES: We did it very fast a couple of times and finally had it done more carefully. Regraded Unclassified 14 - 6 - H.M.JR: The three of you take a look at it. I would be curious to know just what happened. If they are doing an honest day's work, fine, but I just - when you have & reorganization - I just wondered if all of these people were round pegs in a round hole. I have nobody in mind; I couldn't give you & name. MR. GRAVES: There were, as you say, & long list of people. Take, for instance, Duffus' outfit - a lot of these people - we have sent how many of those people to the field? MR. GAMBLE: Nine. MR. GRAVES: They have been sent to the field, out of Washington, where they are working on state organizations. That whole thing has been much im- proved since-- H.M.JR: How is your over-all pay roll in Washington? MR. GRAVES: We have about three hundred and fifty people. It is about the same. H.M.JR: About the same? MR. GRAVES: About the same. We are intending to cut it down somewhat. Our budget estimate, as I remember, was three hundred and thirty-four people, so we are pretty close to our estimate. MR. ODEGARD: As a matter of fact-- MR. GRAVES: We have added to the Farm Division, as you know, and some to the Women's Division, and some to the Educational Division. None of those are included in this figure of about three hundred and fifty. MR. ODEGARD: I was just going to say, as a matter of fact, that in the advertising section, Regraded Unclassified 15 - 7 - this Mr. Mahan had it set up there with not very many actual production people; that is, there were people who were mainly advertising managers and that sort of thing. We had a few like Legler, who was writing copy, and he still is helping Mahan on preparation of retailers copy. We had Sherry King, and I just don't know what we were going to do with Sherry King. I have talked to Vince Callahan about it. Sherry was writing copy. Dun Laney is another. I can give you the names of all the people. H.M.JR: They don't interest me. It is just - I am being & little - should I say-- MR. GRAVES: Economical, that is right. We all try to be. H.M.JR: Pre-Pearl Harbor. MR. GRAVES: That is our slogan - to be economical in this thing. H.M.JR: Every once in a while I still think that money is money. MR. GRAVES: You are thinking maybe of the OWI? H.M.JR: No, no, I just - I mean, we are here. I had it on my mind. Peter said some time he would tell me. He hasn't had an opportunity to, and I just wondered what happened in this reshuffle. MR. GAMBLE: At least ten of the people which you read on that list are no longer on that list. Two of them have been discharged and eight or nine-- H.M.JR: And the advertising thing, now, is all under Callahan? MR. ODEGARD: Yes. MR. KUHN: Tom Lane of Callahan's shop will be the contact man with the Advertising Council. Regraded Unclassified 16 - 8 - H.M.JR: I read your memorandum. It was a good memorandum; if it works like that it will be wonderful. MR. KUHN: That is what we hope it will do. We didn't make any claims. H.M.JR: I say, if it works like that-- MR. KUHN: That was the setup with the Advertis- ing Council - not only on war bonds, but on tax notes, F and G, and so on. H.M.JR: O.K. Peter wants to see me. Regraded Unclassified 17 TENTATIVE AGENDA, PROPOSED MEETING OF STATE ADMINISTRATORS. (Oct. 15 - 17, at either Kansas City or Chicago) I - In General Meeting Opening statement by Mr. Graves (to be prepared in advance and read) (1) Review of progress. (2) Program for the future. (3) Statement of Secretary's policy. (See attached rough outline.) II - In Group Meetings conducted by Messrs. Gamble, Odegard, and Coyne, and participated in by various members of the Staff according to subject. Discussion leaders indicated. (1) Payroll Savings (Engelsman) (a) Objectives: All remaining companies to install plans. 90% employee participation 10% of gross payroll Expedited delivery of bonds (b) Methods of promotion (2) F and G Bond promotion (Gamble) (a) Prospect lists (b) Direct mail and other advertising (o) Canvassers (d) Follow-up (3) Farm Program (Myers, Partain) (4) Women's Program (Odegard) (5) Schools at War (Odegard, Anderson) (6) Labor (Houghteling) (7) Negro Activities (Houghteling) (8) Special Events (Gamble, Duffus, Welch) Regraded Unclassified 18 - 2 - (9) Retailers Activities (Gamble, Mahan) (10) Sales Outlets (Gamble) (11) Advertising, Publicity, and Promotion (Odegard, Callahan, Thomas) (12) Miscellaneous (Odegard, Coyne, Gamble) Regraded Unclassified 19 October 8, 1942 10:32 a.m. Allan Sproul: Good morning. HMJr: How are you, Allan? S: All right. How are you? HMJr: I'm all right. How are things going? 8: Well, there's - there's not much doing yet. The reaction in the market is about the same as in our discussions of the issue before it came out. HMJr: Yeah. S: Some think it's fine. Some think it's lousy. HMJr: (Laughs) S: (Laughs) HMJr: That's all right. S: But they're going to work on it. The only re- action on the outstanding market is that some of the one and & half notes and some of the two's of December are beginning to come in for sale, which was to be expected, and we'll be in there taking those up. HMJr: (Laughs) Well, you did a - quite a job yester- day. S: Yeah, we got to work yesterday. HMJr: Right, and I suppose.... S: And I think we'll do some more today. HMJr: Good for you. Well.... S: And we're - we're getting our - both the dealers, the banks here, and also, as far as this district is concerned, our people out through the district to go to work on it. Regraded Unclassified 20 - 2 - HMJr: Well, if anything happens that disturbs you, will you call me yourself? S: I shall. HMJr: I thank you. S: All right. .... 21 October 8, 1942 3:40 p.m. HMJr: Hello. Operator: Mr. Sproul. Go ahead. Allan Sproul: Hello. HMJr: Allan? 8: Yes, Mr. Secretary. HMJr: Well, the bond market looks much healthier today, doesn't it? S: Yes, and I have Mr. Rouse right here. He tells me everything's under control today. HMJr: Good. S: And, of course, it's too early to tell about the subscriptions, but the market is in a good frame of mind about it, I think. HMJr: Well, I suppose that stock market cheered them up a little bit. 8: Yeah. HMJr: And they can't help but be influenced, can they? S: No. HMJr: What? S: No. HMJr: And - well, I - - I - I feel - - I feel all right today. S: So do I. Mr. Rouse can tell you what's happened in the market if you want. HMJr: I would, please. Robert Rouse: Well.... Regraded Unclassified 22 - 2 - HMJr: Hello? R: The - the reception on the two - on the two's, of course, was a little 0001. They'd been hoping for a two and a quarter. HMJr: Yeah. R: The - a number of people, of course, sold to make room.... HMJr: Yeah. R: ....hoping to get that. HMJr: Yeah. R: But they came in to buy them back again today.... HMJr: Yeah. (Laughs) R: ....and with a little help on our part, the quotations for the bonds out beyond the new two' HMJr: Yeah. R: ....are up to eight or nine thirty-seconds better.... HMJr: I see. R: ....in some spots. We've held the two's where we left them last night. HMJr: Yes. R: At the moment we're in process of buying a fair amount just at the close of the market.... HMJr: Yeah. R: ....and the shorter bonds we've got at the same prices or perhaps one better. HMJr: Yeah. Regraded Unclassified 23 - 3 - R: So that the whole atmosphere of the market, net changes in price, will show an increase HMJr: Yeah. R: ....and no declines. There may be one or two with a deoline of one thirty-second. With the exception of the one and a half, a forty-six which closed at five-seven, and they're quoted, of course, par to one now because they can buy all they want of a new issue at par. HMJr: But I - I would say we had a good day. R: Well, it looks like it. HMJr: Yeah, I'd say we had a good day. R: At the moment I think we've spent just under $50 million dollars and I suppose it will take another twenty or twenty-five before we close at four o'clock. HMJr: Well, I would say your - that your vigor was pickin' up. R: (Laughs) HMJr: (Laughs) R: Well, it's all right. I'm taking vitamins now. HMJr: (Laughs) All right. If you run out of them, let me know. R: All right. (Laughs) Allan Sproul: Well, I think you're right. We've had a good day on the market 80 far.... HMJr: Yes. S: and we'll keep watching the subscriptions to see how it comes along. Regraded Unclassified 24 - 4 - HMJr: Fine. Thanks to both of you. Robert Rouse: oh, there's one other thing, Mr. Secretary. HMJr: Please. R: I think the Chase wanted you to know their sub- scription, which was $125 million for each. HMJr: Mr. Bell told me. R: Good. HMJr: And also that message they're ready to take some more. R: Well, I think they'd be - they'd be willing if we need some underwriting, that they'd do more. HMJr: Well, I think that's very handsome. R: Right. HMJr: Thank you. R: Yes, sir. All right. HMJr: Goodbye. Regraded Unclassified 25 October 8, 1942 4:10 p.m. Daniel Bell: Dan. HMJr: Yes. B: The bonds are three thirty-three.... HMJr: Yes. B: ....and the notes, two seventy. HMJr: Good. B: Not up 80 much. They're about two hundred and fifty million behind the September's. HMJr: Well, that's all right. B: I think 80. We ought to close, hadn't we? I mean, send out the usual notices. HMJr: Yes. Do I have to sign that? B: No, it's just that I want your word, that's all. HMJr: My word. B: Okay, thank you. HMJr: Hello? B: Yeah. HMJr: And I won't check up on you tomorrow on this one. B: What do you mean? HMJr: oh, about Fort Dix. Don't you know you said to me when. B: Oh ! (Laughs) Yeah, that's right. HMJr: Don't we always? Regraded Unclassified 26 - 2 - B: Yeah, that's right. HMJr: Well, almost always. (Laughs) B: Almost, yeah, that's right. All right, thanks. Regraded UInclassified 27 October 8, 1942 4:34 p.m. HMJr: Bob? Robert Doughton: All right, Henry. HMJr: Are you going to be busy tomorrow morning? D: No, sir. HMJr: Would eleven o'clock suit you? D: Finest in the world. HMJr: Well, I'll come up and see you. D: All right. Supposing you come to the Ways and Means Committee room over in the Capitol. HMJr: Ways and Means.... D: We won't be bothered there. You know, where we have our conferences sometimes. HMJr: Yeah, Ways and Means at the Capitol. D: Yeah, it's on the second floor. HMJr: Second floor. D: Does that suit you just as well? HMJr: Any place you say. D: Well, all right. HMJr: Ways and Means at the Capitol, second floor. D: At eleven o'olock. HMJr: Right. D: Thank you. HMJr: Thank you. Regraded Unclassified 28 OCT 8- 1942 Dear Mr. Director: I wish to acknowledge your letter of October 6, 1942, requesting recommendations for concrete regulations to effectuate sections 5 and 7 of Title II of the Executive Order of October 3, 1942. In anticipation of your request this Department has already formulated certain tentative recommendations for regulations which we are prepared to discuss with you. However before making final recommendations several decisions on major policy questions will have to be determined. I would appreciate it if representatives of this Department were afforded an opportunity to discuss these questions with you, or such representatives as you may designate. Sincerely yours, (Signed) H. Morgenthau, Jr. Honorable James F. Byrnes, Director, Office of Economic Stabilisation. JLS:kb Regraded Unclassified 29 October 7, 1942 TO: MR. PAUL MR. SULLIVAN FROM: THE SECRETARY Please cooperate on preparing an answer which I would like to have tomorrow morning. Regraded Inclassified 30 EXECUTIVE OFFICE OF THE PRESIDENT OFFICE FOR EMERGENCY MANAGEMENT OFFICE OF ECONOMIC STABILIZATION WASHINGTON, D.C. MES F. BYRNES October 6, 1942 Director Dear Mr. Secretary: The Executive Order of October 3, 1942, provides in Title II, Sections 5 and 7 as follows: Sec. 5. "No increases in salaries now in excess of $5,000 per year (except in instances in which an individual has been assigned to more difficult or responsible work), shall be granted until otherwise determined by the Director." *** Sec. 7. "In order to correct gross inequities, and to provide for greater equality in contributing to the war effort, the Director is authorized to take the necessary action, and to issue the appro- priate regulations, so that, in 80 far as practicable, no salary shall be authorized under Title III, Section 4, to the extent that it exceeds $25,000 after the payment of taxes allocable to the sum in excess of $25,000. Provided, however, that such regulations shall make due allowance for the payment of life insurance premiums on policies here- tofore issued, and required payments on fixed obligations heretofore incurred, and shall make provision to prevent undue hardship." Inasmuch as the administration of these two sections is closely related to the administration of the revenue laws, I should appreciate it if you could recommend to me such concrete regulations as you consider appro- priate to carry into effect these provisions. Section 7 by its terms would appear to affect only salaries as authorized or recognized under Title III, Section 4 of the Executive Order. Inasmuch as the recent emergency legislation seems to authorize a broader and more direct control over salaries, the regulations which you may recom- mend- to carry out the President's objectives, need not be limited to Title III, Section 4 of the Executive Order 80 long as they come within the scope of the powers granted to the President. Sincerely yours AMES F. BYRNES Byoneq PVICTORY BUY Hon. Henry L. Morgenthau, UNITED STATES WAR Secretary of the Treasury. BONDS AND STAMPS Regraded Unclassified 30 Treasury Department Division of Monetary Research Date 194 to: Files 0/8/42 - HDW took to Secretary's office. Letter discussed and Secretary decided not to send. MR. WHITE Branch 2058 - Room 2141 30-B THE SECRETARY OF THE TREASURY WASHINGTON Dear Mr. Eccles: I have felt for some time that it would be highly desirable to establish the informal Fiscal and Monetary Advisory Board again as an active, consultative group. The fiscal and monetary prob- lems confronting our Government now and during the post-war adjustment period are of such magnitude and complexity that we need more than ever to have an effective group responsible for continuous reexamination of our basic policies. For maximum effectiveness I believe that regular meetings of the group should be held every few weeks, and special meetings when necessary. It is my thought that an agenda would be pre- pared in advance of each meeting, so that the members might come to the meeting informed and prepared to discuss the topics on the agenda. I assume that from time to time members will have matters which they will wish to have included in the agenda. The discussions might be particularly fruitful if, in advance of the meetings, members would exchange memoranda on the topics to be discussed. I believe that it will be possible to cover a. good deal of ground during these meetings if we confine ourselves to the larger issues which should appropriately come before an advisory board of this kind. I am calling the first meeting for Wednesday, November 18, to leave ample time for preparation of preliminary memoranda. There is appended an agenda for the discussion at that meeting. As you will observe, the agenda is rather comprehensive. It was our thought that a quite general discussion would be appro- priate to the first meeting of the Board. The range of subsequent meetings will presumably be not quite so wide. FORDEFENSE BUY UNITED STATES SAVINGS BONDS AND TEAMPS not sent Regraded Unclassified 30.C C - 2 - In addition to yourself, I am sending this letter to the following persons: Mr. Jesse Jones, Secretary of Commerce Mr. Paul V. McNutt, Federal Security Administrator Mr. Harold Smith, Director of the Budget Mr. Preston Delano, Chairman of the National Resources Planning Board Mr. Leon Henderson, Price Administrator Mr. James J. Byrnes, Director of Economic Stabilization. I am confident that the interchange of views which might take place at meetings of this kind could be of great service in the formulation of our basic fiscal and monetary policies during the critical years ahead of us. Very truly yours, Secretary of the Treasury. The Honorable Marriner S. Eccles, Chairman, Board of Governors of the Federal Reserve System. Attachment Regraded Unclassified 30-D Agenda for Discussion at Meeting of November 18 1. Tax program for adoption in 1943. 2. A program for compulsory saving. 3. The place of the banks in the Government's borrowing program. 4. Problems of the debt and interest burden resulting from a long war. It is hoped that the technical staffs will prepare memoranda on those parts of the agenda with which their agencies are primarily concerned. These memoranda should be made available to all members of the Committee in advance of the meeting and should serve as a basis for discussion. & Regraded Unclassified 30-E Oct. 5 Dr. White asked that this be re-sumbitted to the Secretary as a possible suggestion. nmc Came Harry in White and see Home me about this 10mL Regraded Unclassified 30-F TREASURY DEPARTMENT All INTER OFFICE COMMUNICATION DATE May 5, 1942 Secretary Morgenthau H. D. White HDW Appended is B. suggested draft of a letter which might be sent to the name) indicated. I am not sure of the first name and the last name on the list, but I think on the whole it would be a wise thing to have them both included. I don't quite see why Mr. Nelson should be included since his work concerns itself exclusively with production and not with either fiscal or monetary problems. However, you may wish him to be included in order to "pack" the committee. The Agenda is carefully designed, first, to give you an opportunity to tell the group about the status of your voluntary saving program and to indicate that you are care- fully watching progress so as to be the first to speak up if it gives evidence of not yielding adequate savings. The last item is to give an opportunity for Mr. Paul--whom you would probably wish to have present--to indicate the progress on the Hill and make the group feel that they are being kept currently informed. Item 2 is to give Smith and Eccles an opportunity to make their suggestions and probably to have memoranda prepared in their shops and in the Treasury on their suggestions. Item 3 raises the question of excess reserves and implies the possibility of putting through a reduction in reserve requirements. It may also serve to put Federal Reserve Board a little on the defensive. The idea was to get a small enough number of items on the Agenda to permit some discussion on each, and yet large enough to avoid spending too much time on any one of them during the first meeting, and also to show that there is plenty to talk about and lots of opportunity for collabora- tion and cooperation. Tyo CX away Regraded Unclassified 30- DRAFT Dear = I have felt for some time that it would be highly desirable to establish the Fiscal and Monetary Advisory Board again as an active, consultative group. The fiscal and monetary problems con- fronting our government now are of such unparalleled magnitude that we need more than ever. the cooperative consideration by the officials most concerned with continuance of our basic fiscal and monetary policies. Moreover, the situation changes 80 rapidly that the consultative group concerned with the reexamination of our basic fiscal and monetary policy should meet quite often. For maximum effectiveness I believe that regular meetings of the Board should be held every two weeks, and special meetings when necessary. It is my thought that an agenda would be prepared in advance of each meeting, 80 that the members might come to the meeting informed concerning the subject of the day, and prepared to discuss it. I assume that from time to time members will have matters which they will wish to have included in the agenda. The discussions might be particularly fruitful if, in advance of the meetings, members would exchange memoranda on any of the topics to be discussed in which they were specially interested. I believe that it will be possible to cover a good deal of ground during those meetings, if we confine ourselves to the larger issues which should appropriately come before a Board of this kind. I am calling the first meeting for Thursday, May 8. There is ap- pended an agenda for the discussion at that meeting. In addition to yourself, I am sending this letter to the following persons: Mr. Jesse Jones, Federal Loan Administrator Mr. Harold Smith, Director of the Budget Mr. Preston Delano, Chairman of the National Resources Planning Board Mr. Leon Henderson, Price Administrator Mr. Lauchlin Currie, Administrative Assistant to the President Mr. Paul V. McNutt, Federal Security Administrator. I am confident that the interchange of views which might take place at meetings of this kind could prove very helpful in formulat- ing programs and policies. Sincerely, Secretary of the Treasury. Regraded Unclassified 30-H Agenda for Discussion 1. Progress of the voluntary saving program. How large a portion of savings bond purchases are reducing consumers' expenditures? When will it be possible to know whether the enlarged program of voluntary sale of war bonds has been a success? 2. Additional fiscal and monetary measures called for by the enlargement of the program of defense expenditures for the fiscal year 1943 from $56 billion to $70 billion. 3. Is the excess reserve position of the banking system appropriate to such a volume of securities as the Government will have to sell to banks during the next six months under the new program of defense expenditures? 4. The legislative status of the revenue program, especially with regard to corporate profit taxation, the withholding provisions of the Revenue Act, and the proposed Social Security taxes. Regraded Unclassified 31 See page 8174 Congressional Record United States of America PROCEEDINGS AND DEBATES OF THE 77th CONGRESS, SECOND SESSION Vol. 88 WASHINGTON, THURSDAY, OCTOBER 8, 1942 No. 172 Senate (Legizlative day of Monday, October 5, 1943) The Senate met at 11 o'clock a. m., on Benate, I desire to give notice, through The VICE PRESIDENT. Ninety Sena- the expiration of the recess. the CONGRESSIONAL RECORD, that I am tors have answered to their names. A Rev. Paul V. Yinger, pastor, Cleveland calling B hearing to consider Senate bill quorum is present. Park Congregational Church, Washing- B. 2768, to authorize the use for war APPRAISAL OF ASSETS AND LIABILITIES ton, D. C., offered the following prayer: purposes of silver held or owned by the OF THE COMMODITY CREDIT CORPO- They that wait upon the Lord shall United States, to be held on Wednesday, RATION renew their strength; they shall mount October 14, 1942, in the Banking and up with wings as eagles; they shall run Currency Committee room. The VICE PRESIDENT Inid before the and not be weary: they shall walk and This notice is given for the convenience Benate & communication from the Prest- not /dint-Isalah 40: 29-31. of interested parties who may desire to dent of the United States, which, with the Let us pray: appear and be heard. accompanying report, was referred to the In Thy presence alone, Father of Life, Committee on Banking and Currency, CALL OF THE ROLL we see the light of truth. Thou art the and the communication was ordered to be Creator and the Life Giver. In Thy Mr. HILL I suggest the absence of 6 printed In the RECORD, as follows: hands are held the fragmento of our quorum. Tax WHITE HOUSE, little days. We need each morning Thy The VICE PRESIDENT. The clerk Washington, October 8, 1942, sustaining strength, and every night Thy will call the roll. My DEAR Mr. PRESIDENT: I have the renewing spirit. The Chief Clerk called the roll, and honor to transmit herewith for the In- Until we see ourselves as Thy creatures the following Senators answered to their formation of the Congress a letter dated our years are as grass. Unless Thy love names: Beptember 4. 1942, from the Secretary of surrounds us, a great dread commands us. Alken Gerry O'Daniel the Treasury transmitting. pursuant to Austin Oillette D'Mahoney Be to us. then, o God, a bulwark in Balley Green Overton the provisions of the act approved times of stress, a source of high-en- Ball Guffey Pepper March 8, 1938 (52 Stat. 107). as amended, cireling courage, at fountain in the heat Bankhead Gurney Redelife an act to maintain unimpaired the cap- Barhour Hatch Baed of the day, and a haven from all false Barkley Hayden Ital of the Commodity Credit Corpora- Reynolds fears, Bilbo Herring Rosier tion at $100,000,000 and for other pur- Keep our minds this day from every Bone Rm Bebwarta poses, an appraisal of all the assets and Brewster Holman partial loyalty. Make us sensitive to Bhipstead liabilities of the said Corporation as of Brooks Johnson, Callf. Smothers every influence of Thy spirit. May the Brown. Johnson, Colo. Smith March 31, 1942. On the basis of such worthy leanings of our hearts find ready Bulow Eligore Spencer appraisal the Commodity Credit Corpo- expression, by Thy grace. Bunker La Follette Stewart ration has deposited In the Treasury the Burton Langer Tafe Hear our words and discern our Butter Lee Thomas, Idaho- sum of $27,815,513.68. thoughts, and give us of Thyself. In Byrd Lodge Thomas, Okis. During the fiscal year 1938, it was nec- Christ's name we pray. Amen. Capper Luess Thomas, Utah essary for the Congress to appropriate Carsway McCarran Trunan THE JOURNAL Chandler McPartand Tunnell $94,285,404.73 to maintain unimpaired Chaves McKellar Tydings the capital of the Commodity Credit On request of Mr. BARKLEY, and by Clark. Idaho McNary Vandenberg Corporation, and It was necessary for the unanimous consent, the reading of the Clark, Mo. Maloney Van Nuys Journal of the proceedings of the calen- Connaily Maybank Wagner Congress to appropriate for the fiscal Danaher Mead Waligren years 1939 and 1941 further amounts of dar day Wednesday, October 7. 1942, Davis Millikin Walsh $119,599,918.05 and $1,637,445.51, respec- was dispensed with, and the Journal was Downey Murdock Wheeler approved. Dozey Murray White Lively. The payment, made by the Cor- Elender Norris Whey poration in the fiscal year 1940, amount- MESSAGE FROM THE PRESIDENT George Nyo Willis Ing to $43,756,731.01. together with the A message in writing from the Presi- Mr. HILL I announce that the Bena- payment for the fiscal year 1942 of $27,- dent of the United States submitting sev- tor from Virginia (Mr. GLASS] and the 815,513.68, results in net expenditures by eral nominations in the Army was com- Senator from Delaware [Mr. HUGHES] are the Congress for the last 5 years municated to the Senate by Mr. Miller, absent from the Benate because of Illness. amounting to $143,950,523.00. one of his secretaries. The Benator from Florida (Mr. AN- The policy adopted by the Congress USE OF GOVERNMENTAL SILVER-NOTICE DREWS], the Senator from New York [Mr. and incorporated in the act approved OF HEARING MEAD), and the Senator from Georgia March 8, 1938, an amended, providing for [Mr. RUSSELL) are necessarily absent. an annual appraisal of the assets of the Mr. MALONEY. Mr. President, as Mr. McNARY. I announce that the Commodity Credit Corporation, makes It chairman of the Subcommittee on Coin- Senstors from New Hampshire (Mr. possible to include in each annual Bud- age and Philippine Currency of the BRIDGES and Mr. TOBRY] are necessarily get the expenditures necessary to sup- Banking and Currency Committee of the absent. port the program which the Corporation 8169 Regraded Unclassified CONGRESSIONAL RECORD-SENATE OCTOBER 8 8174 CONGRESSIONAL RECORD-SENATE 8175 for DL The resain in to give to this body as centa fur each thousand dollars et 1942 REVENUE AOT or 1942 the obligation. the duty. and the high assoned valuation. Only1 Les to - to It MO important of givem- ser of fact. meb. as emotional spped to and which has bein blued off = triffici- The Benate resumed the consideration alder what that means. mest that is being with bere founded on a fallary, 00 enmething which testinal, world affect the financing of privilege of standise here against all the of the tell CH. R. TSTRI to provide neve- other departments of Government to The Benefor's une-half of 1 under the claim of expirative power? - not trans; and If 1 have time to do so. vitim The figures appear to the recerd: nue, and for other purposes. The VICE PRESIDENT. The pending step any each change to the relationship change in the Internet rate Was hand Mind you. Mr. President, that la the way I shall aboe that to be the - Por Ballmare, as of 11,350,000 between the Federal Government and the upon old testimony of 1999 before the Il is presented. The proposenta of the What to true, and what is absoliotaly a. year: for Details, so formale of question is the amendment propoied to special committee on which he and I and propolal do not adk New Twk City to unanswerable, La: she proposition that state 63,500,000 - par; fur Philadelphia, States which world impair the ability of the Begstor from Ohio (Mr. on the Glates to maintain themselves. other Bensters verred. All the expirts consent tu the proposed texation. They with which - - molding $5,200,000 . post: for Jeraty City, ISSO,- page 14. line 1, to strike out "before I use this duty kenly-pertrape more to State and múnicipal finance Was 40- cannot or ad: They do out ext the State here is to the of the - a. year: and An Trenton. $100.000 January 1, 1943", and beginning B line peared before the distinguished Commit- of New Yurk 50 others to 1L They Rate and to the of the - year. 39. per 34, to strike us all down to and beinty to the present circumstances than If We were not in war. and perhaps mure tee on Pinance were agreed, and this closit de 68. They NAMINE signature pulities. The with which we do not want to weary the Members of including line 10 en page 38. Mr. AUSTIN. Mr. President. I shall keenly than I have actuand it at any time who appeared before the House Ware antorità and prem. to that active are mediline to the most important tope- the Benale by cities further figures an dering the long period I have served on nod Mesca Committee to March et this ilure to net essa the mere diffused is- tion they have Without in they exasut this point, bot in the esexideration et reduce what I have to AND so as to be as committems having to de with this precise year sere agreed, that at the Plant feetion et reciperate because we, eter- time and have their betrig: If 54 be maid this mailter 1 know of nothing more im- torief M possible. for my views have been question. know from experiative is the Ume the increase in the cod of local cising our daty - the legislature of the that be are not taking a swar, that 11 partant than to piles down CREMI fact DE - expressed many times in fundamental of Benate that for the duration of the war financing would be 1 persent to the Inter- Indired Government, permit tration. are only reachtos MP os a and uning IN principle and that to that the function position to every attempt to curt what est rate. That la quite different tra We esnaral to a in this VERY bill. in order to get are DEPENDE for the Pad- concerned la & necessary to the we are called upon to centralize in the is claimed to be a supresse power pai- Federal Government powers which in one-half of 1 percent. I: sounds small, 9u, on the me hand we have consent eral Government, etill to le affort to extatence of the States and of the no- used by the Federal Government over time of prace - would net think of re- but ast us that a bond by the Government to tagation bring about a reform. be- micipalities. the several States to inserfere by way of Enquishing. I know that par danger carrier an Interest rale of a percent; of its issues, and on the other hand we casse M the the Federal OcT- In Alexandria, VA. - the nw tazation with the power of the State to from the inside, sur danger in the name what La the practical result? An Increase have Ute evertim by - of supreme entant would be given control If the from Washington, a Incle event decurred maintain its government. This se-called power ta ub swar from the several Pederal Occurrent Impose . tax which policied out the Issue. We are not of successful prosecution et the war, is of 1 percent in the CMM of an Interest reform, which would constitute 5 change that we will not stop in this centralita- States the power to emsent to the un- of que-half of 1 percent as . charge to dealing with polemies; se are not spers- rate of a percent means an Increase of 6 in the very character of our Poderal en- tich the of their term. It La a experiency be added to the cost of Etate and menici- whing relative for Usis matter. We are third in soat. lam, artais, M all sub changes in past history have arimen, upon a tax BEL Mot.- Immediately, the proposal is not MI Let - serume that the increase to the Important lange. Il (no to the depiba put when is mated to do so dealling with known facta, with expire much - question of revenue. We all Internet rate is only coe-half of 1 percral of government. It changes the relation- 15 could impuse & tax of D percent. ence. Alexandria, Va, had pending archa whoe tyracny bas cost them their ship (etween the States and the Methon, The question is a fundamental one of land seue of $750,000 when Becretary heads have caused charges of gunnin- know that that la nos State to be the In that event there would in an Intrease En actual tool ot 10% percent on . bond & change which never Hold over by a right and erong. 1 do tast have to - made his Cleveland speech ment m the search for new of of the adoption of the pro- puesi of the Committee on Pinance. The paying 3 percent, Date set of Congress. The perple should the proposal of the unmilitée fan writing or Jamuary 11, 1842, The hids, already revenue. This Charlo I lost has bead. We are talking almus interest dreatly participate in - fundamental . in order to know that a is prepared in municipal bond were When the Thirteen and the n- paramount danger is the threat to nn a 2-peroum taxis. Ammediately after the form of government. We are Les us regalder the questiro in . light change 43 that titel The constitutionalism which FRAILS de republic of Yermunt, revolted against asked to change something entirely Mr. CONNALLY. Mr. President, will through all tree is involved. the Secretary salued Eng . Phine tax ou which la evere Invorable to the Y/W Which the mother country B was over this very the Smatnr yield for (ast . monent? We cannot maintain & Poderal system of restatanding bonds-s proposal which fundamental I take of this matter, and that subject of taxation-the auch for new Mr. AUSTIN. I yisld. united States If - permit the Central differed from the present che nota in We have maintained our federalism the increased cost would be what BOW revenue. . must which involved the et- of the experta have claimed 16 would De, Mr. CONNALLY. will the Senator Occurrement to upon this funda- principal-the bide juriped 7 points, or tempted exertion of a claimed expreme largely upon the pillare of the Independ- permit the to internet him for shoul & mental function of which las Secretary to - 1. bond. Just think of I low to power. 1 deny the power: sol, if it B- enos of the several States. I venture to namely, 1% percent. What would be the minule in crém to detail . little episode the survival of - States. the city at 852.500 in premiums alone; Inted. I should dmy the etadom of un- say that there is not a single Institution result to the case of a bond which pays which contral some years egy, valative It M the immanity (nam interference $52,500 ogt of Uning JL I shall vota for the amend- under the Constitution which la so etrong only 3 percent Interest? There would be an increase in cost of 43 pervent. How to the matter under discussion? a telh a which has sept - acund. Mr. OVERTON. Mr. President with hent offered by the Breator fram Ohio and powerful . sufeguire to the libertira Mr. Borrow) because for the time being would that affect the financing of clues? Mr. AUSTIN. Yes; 1 should be gind add and stable for SR years. No alber the visid? and the free institutions of this country IL would sum this effort which bar been We know how is would affect 12. so have the Gener do of. porerhment on with is 80 aid in point of Mr. AUSTIN. I your M the degree of independence enjoyed by Mr. CONNALLY. AL the time of the character a to the Government of the Mr. OVERTON, 11 . fallacion ren- made repeatedly sizies 1913 the several States, Certainly, If we de- Mr. CONNALLY. Mr. President, - survive of the episode to which 1 shall United Blates, which great em anross neglion that by timposing the proposed Let ta not forget in passing that - stroy those of State power and the Buster your refet 1 eu . Minber of the House, I the ass regarded in as davaing as an Federal tax to future trind lasse of the under two governments) coe is the extend the authority at the Paderal Clos- The PRESIDING OFFICER (Mr. Government of the Upited States, whose STATIMES in the chair). Dou the Sex- went home, and in traveling about in my experiment in true government To be States and the tax bur- ernment, . ginal Government centralised dising : went to a town of about 1,300 are it to an experiment. Newsr for a den would be borne by the purchasets geographical boundaries se KDOW: the at Washington, we thall be longer have ator from Vermont yield to the Benaler people. A fawyer who lived there TM . moment can ve. a Sensions of the end bolders of suith trade 1 think that other is the government of the States the watchful guardianship of the several from Texas? very close triend of nine; and be said to United Bistes, repard If M belog other- the anythment et the able Ilemster from from which 51 come to this buty. and State to prevint the overesertion of that Mr. AUSTIN, I vieid. Mr. CONNAILY. The Increase would me, "Tvm, why don't you perple at na vis Day after day - but 11. Vermunt, with has cade a VELY close be know that geographically they corupe power at Washington and Its extension of then lax exemptions on securities? Never before have 5 been confirmated study of the tasue, is m luell the emily the same territory as dola the in a eingle standardimid form to localities be not for 1 year buil for the life of the The neh fellows are hiding their by . - serious mitlock that that but before he cancludes his argument I Contained of the United Blatra. In entirely remote has each other, with to- bonds-perhaps 30. 30, un 40 years. Il in anful and you should glop R" which se taxe at the present amot whis be weuld moke R. very clear that other words, " have two and Unity different and distinct needs in the Mr. AUSTIN. I thank the Sension I suid, "Wall 9 Are you , Can - win this the If en destroy the the burden world not be trapent on the VI have been able to maintain practically administrativo of thair local affairs. from Texas tor has observation. He M member of the school heard best ability and right of the avent purchasers and boldens of the und R- (be same lera of government for 150 Mr. President, this sistement might be exactly ourrect. I was about to call at- "Yes" he said Buies to dissance highways and other curities, test would Le butte by the tas- years because me were trically and th- prolonged; I do 00% Intend to prolong n: tention to what that means in dollars. "Yes month built - are school- public works proventy for the health of payers upon whom taxis are inied in tellectually comptient to adhere to both but I destre to emphasise that I am more The increased interest cont involved house did you Dat?" the dvillan communities? When we under to pay for the bands and the Inter- legalting at the same time. concerned about this so-ralled reform la this preporal to which the Benalot Be said, "Yes" omader the usually fur maintenance est B them. One of the Instrumentalities by which and more appretivative of the funds- frum Michigan referred M infollesimal Then I asked him, "How ench de It of training caps and for carina for the we have preventad either mental consequences of returning the po- in its effect upon the financing of New beith of our trueps. are must arrive Mr. AUSTIN. Mr. President. the mere sont?" anettion of that claim to the VA), by the Rain upen the Central Om- sition which this country has beld for 150 York City would eventually amount to He replied, "640,000." the omerision that the several Blates are Bensinn from Louisions is, to me, all this erniment, and by the Central Government years in maintaining the Federal system approximately $30,000,000 . year. This "Ditd you pay for II with boads!" as much a factor M is the Federal On- upon the State, bas been the Senste of Instrud of . soviet that I en about the is conservative, Because I have figured is "Yes" he and ernest in maintaining the facilities to is for I of bis experiment the United States Our very character question of obtaining revenue. 00 the basta of I-perrent increase in the protect the health and and not and study of these matters, and 1 Loow Then I expisized to him that scent- involves the obligation and the high duty How can or know that this enactment municipal Interest rate, eberes Comp- los to by New, and according to the talking abril morale, I so referring to that be is well qualified to expires that en - part to sland for freedom by would be serious enrugh in practical The troller McOoldrisk of New York - Insiment in the House, the interest rate mirsis-and the training of our opinion. means of mistaining the position of the salta to Interfere with, Impede, and af- mates the actual Increased CRAF at 1% un the bunde would be Increased I per- that are to do buttle fat us. Thersfore. I take what he 5439 to be the I several States of the Union. fest industrials the exercise of gerero- percent, which would reflect an increased that le the fairt. What 1 n- Is B not impingior apon the we effort am thoroughly convinced of If thre- Let us nel forget our importance in Lhis mens by the several States? We have interest cost. of $45,000.000 a year. D whed explaining to him that bis 40-year to bygin use this novel thing, this a. over, not only would the added cat of immidiate situation. The people of this plenty of evidence of a We should not that infinitestmal? bonds probably would bear ane-half per- Mein new thing. of breaking drwn Mar obtaining funds for municipalities fall courtry may change the Constitution by be to doubt for & moment. The endrore Let us net forget, in passing. that we cost or 1 pervant butned Interest over experation between too gevernmente that directly upon the landowners who list new the and prographical location? the burden of taxes in the several Sam emendment adopted by a two-thirds vote is in the Recoss. are wing this fact M n bests upon be the period, be and "My God: don't do of Organ and retified by three-founte I listened attentively lo the debate yes- Importance of this reform upon the font> Unit, 1 did nel understand the thing. We - completely anaib . government and municipalities, but something Klan of the several States. But D&D we take tenday. I noted une of the datas made Nona of government of the dir. Marif I aid not understand about it" by mrsts of the power of lasation, might result which in Itself would to out- AWAY the representation et any State on by the distingulshed Benster from Michi- LeGuardia testified that had Fuderal AUSTIN. Yes; IL la quile different, Time la notime equal to II except (c)- finient reason for as to support the that beauf Can we reduce the repre- ENE Mr. Baows), who is sponsoring this taxes been imposed upon the bond - The attentional appeal which bas been vasion. amendment offered by the Junist Bin- -sentation of any Bate in this body by an particular reform. He clied the example of the city of New York # could port used In this - to trequently employed la Unle maller important? is this & stor from Oñlo (Mr. It la that of the Constitution in that of New York City and aid that ao far M have europleted Its recent $300,000.000 when we face . (undamental terrier function which affects the very extence this proposed additional burden might way? Ah. no. That representation can obtaining revenue to conduct the afteirs subway unification plan. It could perie which can be surmotized only by recep- of the municipalities? prevent or sup activities in by chalged only by the vote of every of the die is ung the pupie off their Lant by of There are in the record some figures behalf of the in countiels CMEE- have financed the BLUM in the Union There ill a reason appealing to their emotions As . DATE showing bow the proposed increase in muntilles throughout this great land. com of averuzient would amount to only tunnal, Regraded Unclassified CONGRESSIONAL RECORD-SENATE OCTOBER 8 1942 CONGRESSIONAL RECORD-SENATE 5177 8176 consent-and by this proposal it Priduce muri necessarily be ins. than that leviel States, nounties, and cities at will-vith Mr. MALONEY World the Benater I my "might result." The resord of thom two ficates approved? Oh. no: the sommittee reformed IL and word a few to give It-on the other hand, the Bister by the Pederal Government, beause If full power, supreme power, as the Sma- be willing to admit that the proposal a words isle the an that would make the in the future are to be completely ид- the sale correquided with the rate levied for has Est the nearloss a full evidence that a would in effect to pay a subsidy by the Federal 9 result. and IL to the Bond proof in the intered on the DOW bonds tasable. Then to the taxing power af the Friend by ID# Federal Government, there would Mr. AUSTIN. The power bar le be Government? world that the additional burden of n. what happened? Immediately my Government les the exertion of the 50- be nothing MR. suppreme an that theory advenced, Mr. AUSTIN. A. submidy? No. Mr. people at home said lo eve, "Do not allow preme authority, That la not require. Mr. AUSTIN. I thank the Benatot for Mr. McKELLAR Giving such power nancine would fall upon the inhabitants President, I vice It from the other end. that bill to pass. We will renalinue to its. In order to have reciprecity, she his suggestion. There is no element of would be the gratest blue to our dual of the community. If that burden hap- The States extited before the Pederal pens to be the supplise of their public par the old rule of interest and todo this vis-&-vis must unt together and recipendity to this programi; there la no cystem of government our undertakin, Government ww crested. The Poteral activities, such as the maintenance of their schools, the support of their high- innual benefit rather than to permis this There must be the of Mi- quidi pro que last la worthy of oon- and esight destroy it. Government has nothing except what the ways, and all the other necessary public reform of Government to take place uver nent by one la order that MADADS may be Mr. AUSTIN. I Chank the Senator States gave to It, either expressly or by our heads or with our consent." 1 have granted by the other. There is no Fuct- sideration. Mr. CONNALLY. If there could to from Tennessee. If I had the opper- Implination. The States news institutions, the inhabitants must bear procity if this Bill with this prvienti in would If not result in the tamily and power to try to destroy the dered to the Pederal Government the that burden in more than one way. The objected to the consideration of that bill it is crammed down the throate of the Treasury having to pay higher rates on United States at . Federal system, I power to the their domustic Issues, or the record, I say, is full of proof. of the se- ever since, and when it comes up I give notice I want to be present. I lurpe that people of the United State: Federal bonds start words choose nothing more quiridy than Insume from them. cursey of my statement. Consider Professor Schimmel's lesti- the good sense of the Benate will prevent It will not make any difference bow Mr. AUSTIN I believe It would. I the power to tax the revenuses of the Bo I my that the Bilaten would net its passage through Unle body with that much the Federal Government offers is Unink that would De the immediate effect, several States. get a. abidy from The Federal Crvim- As or what might happen If changes WITH If # is admitted for a airment that the may. Professor Schimmel has not been them by our of waiving its immunity, ment. If the Pederal Government now called a paid witness: Professor dehimmel provision in is. That to not & massideration which is as- made to State statutes to an their tax taxation of the interest on the bonds of says by 9ay of an Invitation, or at levil la voiched for by the distinguished Ben- Mr. President. I have speken longer gottaled and ascepted by the Inhabi. rate, I esnout speciate, but what I my, and of the erroral Blates . sclation, "We will Et you ins EUR ater from Michigan. No reflactions have then I had entended and certainly trei and what I think the Benstor from Texas to an added burden upon the taxes of the bonds," that is not . subsidy: st LA la the long DD this one subject. I commend to ania, without which there cán be no rysi- inno cast upon him What os be MS the attention of the who will follow me procity. telleves, is that even If It were reciprocal, States, then the whole case to admitted. nature of something elne which 1 did about the effect of this -reform in our There would not be redencity - the = would be fully. If ve as Benatore had If - undertake to B7 that the Govern- not characterize Government? Oc page 1962 of the bear- the remainder of the testimony of this eomomie theory, there are 14 the change to MT. "My State agrees to ment CAD do that by the exertion of su- Mr. MALONEY Mr. President, will loga before the Wast and Means Com- great et Le what bas happened in States of the Union which do DM have this," on the hasts of wisdom It would be preme power, theo the Ocvernment bar. the Beaster rield mittles of the House of Representatives be Michagan in the attempt to finance or refleative activities of the sponicipalities ans Income-tas law. What narthis - entirity wrong to do B1, because time- in principle-or Inck of principle-es- Mr. AUSTIN. TM. tays: of that great Commonwealth It la all would It be to then for the Federal Gev- diately we world hreat the not Impor- active the name power to reach in and Mr. MALONEY Dues not the Bone I - to past e you that WE siready me way. Either the burden. was M- erament to "You can tax the Income tant line separation between the two gov. take the revenues, all sources of life, of to believe that the rights of the States, ban # Mingo thise in tear personable on our bonds"? To them B would the 1 eroments. which should be well and the several States. to which be has Inst enformed. were of the (ast of of municipal number with fold knowledge that it. - as sero benefit economically and in word - clearly Identified in order the maintain What was n that Lenin sudit He pren to the Poteral Government by the ends additional cold which the taxpayer must at the comi of all they have to pay L' Units this Poderal system. es no have main- should be - good grade. Ba know hav States themselves under the pay, or they held up their hands and asid, tained it for 150 years, with all its to make . Soviet. Lenin estd: Merely the far of is article out of a continue to provide financially for their ammont of the Consition? spench, but a of a reponditie - "We will start, WE will not go ahoud: we OWN Institutions and their own sovern- strength and with all its beneficiare and Give - the power to entri error and I Mr. AUSTIN Oh, no, Mr. President ear of the Government of the United esenet Brance," and they sald that on & with all use opportunities to the youth of was emirat government. 1 entirely disagree with that. I will States. Re anys further: mere threat. While I have belo speak- ment. truge telegrama have been coming S me. Mr. BARKLEY. Mr. President- America. Lenin proved it. That M what se 050- discuss that question presently. Lan can ww will developed in The PRESIDING OFFICER (Mr. Yes Mr. BARELEY. Will the Benefor from consciously or not. ! do not Ad- Mr. McKELLAR Mr. President, will the sity-of Reyal DAR . returning program One of them la from David M. Wood, of Num in the chair). Does the Senater yield for another question? case any Member of this body of wanting the Becator yirld? for $6,000.00 of bonds. which would have New York, and it reads: from Vermunt yirld to the Becator from Mr AUSTIN. T yield. Mr. BARRIET. Onice a little fur- la change our furm of government into & Mr. AUSTIN, 1 girld, request the must eate - of that Supplementing earlier WITH, I and Enturky? seriet, but I do MP that OD# of the evil M:. M:KELLAR. 1 wanted NO ank Use membership by 45 um our-half of persont. following refunding operations Mr. AUSTIN. I yield. the than when I Intermested the Ben- Mr. BARELEY. Then is the question stor . (we moments ago in regard to the expects of this propost is that it "lakes Benaler a qualition on that was pount, Mr. President. the debs of the com- will the previnted by pending MIL the most important step toward wiping sod, if be will permis m/, I du FO para, Pa. 8141,000,000 Rochmier, H. Y, munity falls directly on the inhabitants, of reciprocity between . State which, ability of political instructions of States out the line of reparation between BOY- at this time, in onle that be CIAY refut 000.000; N. Y. $18,000,000; Tookers, and DD ane pays a except the poor fellow through the legislature, might levy . tax to any tazes upon informes from Pederal N. T. serveral million which EXCEL within the name to It later in this spoech, 11. who pays taxes no his farm or bis home bends, I think ne sure will question the I have had similar inlegrages from upon the Indome from Federal bonds. that they excunt do II, Not geographical boundaries and upon whose FM argued by the distinguised Benstor or as other property which happens to and the Federal Government, in the e- existence freedom depends from Michigan (Mr. Bacwel that under be taxed according to the system in effect other placet, notably from = own city of joyment of a reciprocal right to lever 6 can they, M I understand. Invy so ed Mr. MALONEY. Mr. President, will the sixtenth amendment the Federal in every State. Burlington, VL, and also from the attor- tax upon Etate bonds. How does a si- valorim tax upen - bond which any tax- the Senator steid? Government bar the full power to tax así When the vas made by the ner general of Vermont. Mr. President, I with to lesse this point feet bonds of political subdivisions Inc. payer may hold within n. rounty in a State We all know the methods of M- Mr. AUSTIN. I yield. incomes, citing the words at the amend- Treasury Department accoming the than . Blate, nome of which, so tar M 1 Mr. MALONEY. Did I correctly - ment statacter it minimpsi bonde that shole refunding pro- and you on to something else What I am assistment. The county tax assessor or the city tax MISSANT comes around CODE deritand the Benaler to mr that by the derived." If we carry that doctrime un gram - abandoand- trying to do is to clear the decis for the know, levies an income tax? Mr. AUSTIN. I thank the smindment of the committee is is pro- Be legitimate end, if that language would main Issue. I have tried to meet the con- a year and takes a list of all our prop- "Abandened"- tention to which I listened all day yester- He suggeste so excellent thought T my, including real estate and personal pased that we tax State revenues? give the power to the obligations of the with the resit that en July - the sest had IL in mind, but is exaged - for Mr. ADETIN. No. The Benator min- States, counties, and cities, by the serve day that the additional burden placed property, esupon COR in Regal OAR than city upon the Inhabilante of this country the moment. In the taking of esch a that for taxatino understood me. token. and by the use of the name words, will DATE to pay all Issurt one-ball of 1. persons - than might have been part " the n- Every municipality, every countr. Mr. MALONEY. I am sorry. That is the Pederal Govetnment would bave the word be infiniterimal I have under- he cannot indiude Federal bonds. So which is form than a State is jurisdiction the understanding 1 bed from what the power to tax the Income of States, coun- Inding poges bad not beed distuted by taken to show that in dollars and centa, there is tert only no insome we upon the far fair of of minicipal is is of great magnitude, and in conse- and authority, is disabled to tax the ID- Income from them which secrues to 6. Benatur said, ties, und cities. come of Federal bonds, an matter how monty, or a State, of e action? district Mr. AUSTIN. I any that once the have Mr. AUSTIN. Yes Now, let ine testify. There LA ACTOR upon the administration of got- emintent it as fatal The efforts to finance magnanimous the Federal Government which bas lawsed bonde in order in birth admitted, by unr usenting to this prope- Mr. McKELLAR. or course, If - Lake Champlain a tiridge which was bellt by one of the ourporations which is which I have pointed en failed because might be in to offer. Bo that In addition a modern schoolhouse, truit such subdi- sition. that there is a power to the Ped- words in question mean all the income of the threat involved in the pending bill. to the 14 States which are disabled to visions cannet levy any ad valorem tax on eral Government to tax the moome from without regard to where it somes from. within the scope of the proposal la this enjoy reciprecity sconomically. all or the value of Federal bonds. Am I DOC- musicipal benda and State less, we when the Builes, counties, and cities ob- MI. n la a municipal corporation in What are we to do? 1 say that when there an issue such as this involv- countries and municipalities and in Be rich? have gone the while length, In principle; tain their income through Laxation, the every serve, except that the members are Ing a change in the form of our Govern- same group. Mr. AUBTIN. I believe that to to true. - have admitted the supreme character Federal Covernment-simply to carry the inhabitanta of the State of New York Mr. OVERTON Mr. President, will Mr. BARKLEY. This a my impres- of the power to tax an that the Federal out the application of that doctrine- en one end of the bridge and of the State ment by the more exertion of the power of Segistiation, we are here, as Senatora the Segator yield? tion, 1 would nel wish to be desmatic Government could step in and take the rouid imprase . tax an all the Income of of Vermont - the other end These two representing our several States, to assure Mr. AUSTIN. In & moment 1 dall be about it without looking Into IN a muste revenues directly, all distal countra, and cities, States entered into & compart, as we always supposed States bad A right to them absolutely that it shall not para glvd to have the Details furtine, but my impression to that they Why do I say that? T way it Incause Mr. AUSTIN, Tes: that is true. Lat- There mas another claim made here to the States which have cannot lery an ad valores tax upon the the function et obtaining revenue for the If I shall ani have with Brastors out, do, subject to the approval top the yesterday which relates to retigroelty, Inwa, all save une tax at & rate a outh Tage value of the bonds which have been maintenance of State and municipal pov- I shall discuss the question of the NEW - Ouversment, for a refinancing of the so-called. What a fallacy! There la no less than the rate at which the Federal Issued by the Ouvernment of the United eramente is indispensable and teenth amendment and what e means) bond by which that bridge was built Government taxes that the belance States, and maintained . reflasning scheme reciprocity proposed in the pending bill. n makes very Tittle difference where и I realize that there is grest dissgreemente I am well aware of bolls planse in the would be TNT seriously against IM N° Mr. AUSTIN. I believe that to be comes from, or what the fourse of the among 125 about what II means, and 1 do which world reduce the anotal cost of bill where the question of taxation of nomic interest of the States. if " d' true: I en nnt certain s/bost IL revente may be In principle the effect not think I am more nearly correct than maintenance DE a. towering of the interest rate 00 the bond use. The compact Pederal securities and State and mil- tered into with a pentprocal am Mr. McKELLAR. Mr. President, will of removing that power, or the intrusion anyone etse, DUS I believe I have 6 right ment M has been suggested. 1 yult the Benater you!d? Upon that power by some other govern- to stand on my convictions should IL and vas sent in Cregres. and what do we nicipal securities occurs, and I am fa- miller with the terms. I say # is not a to the Benator from Leuislans. Mr. AUSTIN I yield. ment, such as the CO# to Weshington, that is what I shall present. I do not find) n was referred to a committee which bas a penchant upon the subject. Mr. OVERTON. The Benalle has - Mr. MEKELLAR, To our mind, pro- to to take, not by consent, bed to take by presume bi try to convince anyone else reciprecal proposition at all, and it can- ered the argument I was about to main Dº riding an estering wedge for the Ns- control, the very lide of the State et The Members of use tody, u I observed of the reform of the Government in this not be made is Necessarily the rate of taxacien a and tional Ordernment to tax pencrities of municipality. when I first came to the Brate, are In- regard. and when IN came out of that While the Pvderal Government may committee. was the compact between not be taxed by the States without la come in a State is very much - No. III-1 Regraded Unclassified CONGRESSIONAL RECORD-SENATE OCTOBER 8 8178 1942 CONGRESSIONAL RECORD-SENATE 8179 that together they amounted to 15 per- the loophele . gift. If " dividuals of fine background, excellent are opposed to that, Mr. Preddent, let timited income and no opportunity said that this - not . tax on & musici- hand the Pederal Occurrement an to training and high character, and when cent of the total us net create that relative disparity be- statement to enette the gifta which are pality to . pobile bidy, but retire . tax the States, I will tate." The States 65 they have perictions I doubt the taped- Mr. AUSTIN. Oh, eliboal doubt. 1 twem future bonda and old com. The greater than with on the individual aut my to the Prieral Government, To By et 802008 to change them. Indeed, late another that to resd also For estates less than $1,000,000. total- unessand Internet will be math in- Mr. BONZ Date the Signator object Time is both true and untrue The may take; Rd give TWO permimico to created If we adopt the proposal of the la Interruptions? Benster from Otio Mr. Burren! later tabe" I thought when I first came here that ting $23,000,000,000, the following was Mr. AUSTIN. Certaintr nel. read BG. extract from an opinion of Mr. BONE. We have DO State fassene is would be for these os Indi- vidualista so RETER on any ligislation. the ration-we are dealing with stocks committee to tax future larada and Item ouistanding bonds untaxed Is not that Mr. BONE I et information. Justice Hughes which I think more clear- tax to my State, so 14 la protable that Mr. President there is one other thing and bonds, and net with real estate and clear? Mr. BROWN. Mr. President, will the by state the legal unre involved. If - tru State, M a State, could not, through about which I wish to speak before I other properties: Suppose we should DOVER the whole list. Benatur yirld to me M that may cosses tax with bonds the result to an the tocome tax, much the Increase Don Wholly exempt Federal bonds, 1.00 per- the quistion of the Benalor from Wash- in the Md perire en the interest rate bends. osme the the of the alxteenth amendment, and that is argument made omt; partially exempt Federal londa What would WY tare drive? Would we have ltfted up any poor fellow who M Inglan? That to immediately refected back in BD Mr. AUSTIN 1 have streety pointed with respect to "luipholes.". Really the 2.46 percent: State and local bonds, $.61 Mr. AUSTIN. I yold. additional burden. which the people of that out. There Mr 14 such States "Joophole argument" is the part persent: taxable corporate boods, 6.48 nuw already middled with taxis which are extremely difficult fur him to DATE MP. BROWN. The Dgurse which the the city, county, or State must pay. To Mr. BONE Many manicipal and of this claim, The Idea that is M in the percent; corporation capital stocks, 50.14 Would be get ARE of MT Not . cant. On Broator make are to the statement which that extent I believe It la & burden. I State Insues are seld in the State of public Interest to destrop the baldings the contrary, be would get the conse- I made yesterday. Roughly, there are do not know whether libert to an argament Washington, x preszo the NATIVE thing perment. Let me read the the of the average about $26,500,000,000 of rush securities or not, but it. ourstainly as . fact applies to other States. The polot which by men and Institutions of Guvernment tends and disperse them like the acida for all estates-end this COVER them all quancie of the lack of markst for mu- outstanding, I think the oured figure Mr. AUSTIN. It to as argument has always beithered me is White do over a period of 11 years-and then see micipal and State securities, and he would of the milkwed and so advance that ides la are to which sende to prove that we surv deating there Instres got to they - held by in support of . reform in our system of If this in 5 big toophole, if this la . loop- pur through the nom, If las would. Be the hands of individuals. $2,100,000,000 with en essential function of Ordern- the people of the State of Washington, would supply the defetency with Use ment- that world be one thing. Government strikes me - flimar as milk- hole which eakes is necessary to retarm are in the hunds of Institunce compension. the Oovernment, to change the relation- levied upon his farm. Be would be lbs $5,700,000.00 are in the hands of banks. Mr. BONE I Date talked with many I believe that many of such Insure weed, Mr. President, the facts. bowever, do ships between the Prodera) Government une who would loss. In elbet words, we $500,000,000 are in the bands of ordinary lawyors who are dispassimnate about this come to report in the perifolion of In- not justify the claim that there la # toop- and the several States in ander to plus would indeed share the poverty, aprisd industrial corporations, and there are al- subject and who have no Diustons. They with as the Benater from Ver- the Exp. without regard to the benefits ft, and increase a. We would am Delp hole there. No one has risen in all these most £3,000,000,000 in the bands of 807- du not care very much how who raise our moms mentioned. They 00 Into banks which the inhabitants of the Unlied matters by this affort to tear down the ements emiras, these in the hands money. They believe that WE mast raise and are sold to Investors will over Vita years in the discuimion of this question States enjoy through the surning et this existing strustion. We would not spirmed of governments would not be tecrable. II, but they regard this particular pro- country The light and power bonds of to drug, and probably no one will in Unite discussion denor, that on the average the money toto public schools, the bonds around smoke the port. We Mr. HONE Does the Bension mass reduce as washing DOB hand with the my Blate were taken up by enstern and churches, and all the educational and world spriad on them the added bundee haldings of municipal and State of local that governments have beatht back their other, I believe that in the expression esites, and 1 could not true one in Besttle benevolent Institutions of this country. of increased net of municipal financies eren which some of Unes have used. It la Ske or Teroma. I think they went to the bonds by estates over a period of 10 years Mr. DONE. Mr. President, will the Mr. BROWN Yes taking money out of con pocket and put- East. Even If the propased arrangement is more than 6 percent of all the boldings This La the average for all estates: Pull exempt Federal bonds, 1.00 per- Sensior yield? Mr. AUSTIN Many of Utem are non- time a into the other. The Government were wholty reciprocal, him much and of such estates which were examined by cent: partially exempt Prderal bonds. Mr. AUGIN. I yield to the Bensior taxable because they are in the hands of bas unlimited power to tax. can clamp would to do? the experts. The estates are classified as having above $80,000 In meta DUE 2.03 persent: Bale and Ineal bonds, 5.63 from Washington slermonynary institutions an Income tax - the people of my State Mr. AUSTIN. On that point, a. atudy percent We have called IL I would as Mr. BONE. The Benator - reading Mr. BONE 1 do not wish to interrupt and obtain all n wishes Error them by an of the Treasury Department's own - the classification is broken down again to passing, 5 perment. Many an expert some interesting Agures from the records. the gental Renator from Vermant If he means tax. tate-tax menands throughnet the period and again, so that to the record there are has testified before several different com- I wonder If his figures show where the objecta to interraptions, I am wrestling with this problem to my from 1028 to 1939, includive, shows that three different classifications. An examination of all the estate-tax mittees which considered this matter. hugar part of the municipal Mr. AUSTIN I welcome them. own mind, and wondering if the pending only e persent of the capital In all estates that If was about f persent, and I pre- are baid? I think most Benators are Mr. BONK. I recall an experience to proposal is not a variant of the income over $54,000-and that represents 6. large returns filed with the Treasury Depart- sume that figure is about contrat. interested in learning where they uni- DEF Rate name time MD: and I try to tax. As a money raiser 1 believe that the class-bas Invested in State and ment in the calender years 1927 to 1937. Mr. BROWN. Mr. President, will the malely come to repose. keep that experitures and others in mind benefits of che proposal to tax the income local trenda. Think of N. We are really includive, reveals sumewhat startling fig- Benator yield again? Mr. AUSTIN. This particular date- to en endowver to vote sorrectly on this from entericipal securities are more ep- stratcing ourselves to bring atomit & ares. These are not selected estates, ner Mr. AUSTIN Yes. ment dou not shew, but 1 know that proposal. I do and with to rato munici- parent than real. I do not know that momenious change. a sampling, but are all the estates re- Mr. BROWN. I did not quite under- eiber statements contain Information palities or individuals by my vote If 1 can is would serve the parpose which those Mr. BONE. In any opinion. the failure partet for tax perposes during those 11 stand to what years the figures apply. along that line. I cannot lay my hand on and It who believe in II think 10 would serve of the argument of the Genter from years. During the period noted there Mr. AUSTIN. They represent the them at the morent but by recollection A few months ago my diy made an Mr. AUSTIN. In the first place, I be- Oklahoma T.Mr. Lesl. yesterday, when be were 3048 estates having a net worth of $1,000,000 er more. There were 100.499 average for the 11 years 1827 to 1937. 33 that municipal securities are largets offer of light and power bonds of the you- lieve that the proposal before un would was quoting . Supreme Court Justice, Bes estates of less than $1,000,000 net. or Mr. BROWN. The Sensior from Yer- held by elsemonymary institutions and code variety, with which the Senaire not now produre revenue of any 20000- in the Tast that If we have to pay mont will concede that whatever evü trusia. Dote the Benalor's question - from Vermont is familiar, They repre- In the Ima run, say 20 years Interest - mm State. and the estates above $1,000,000. training over there may be-1 em ant arking him in late to where they are held geographi- sent a common type of security In that tram now, when events will have not- local brinds, which are Issued for sewer ean and ene-half billien dollars. the fel- concide that there is any eril in It be- only? action af the aduntry-and I appose the Belendir changed the situation BO that projects, to increase the fire department, lowing were the percentages of Invest- Mr. BONE. I 132 not referring to list name practice obtains in uther place- there will be a larger volume of income to or to take care of sume other public menta: cause he probubly would not-the bene- E much as to the type( people of in- when bonds are tendered the bid leon the MAS, I believe that even them there will function, I, of e private eltisen. have to Whelty exempt Peteral tends. a 69 per- nt which the holder of wich honds te- cent. 1 repent that percent. celves la greating Instrused by the a- situitions bolding them. intered nile, the hends being sold at par. le no benefits to the States und separate pay more taxes to order to carry the Mr. AUSTIN. The principal holders The city obtained . bid of I.T4. or an communities. to fact, 1 believe shere added Interest rate. I do not happen to Partially exempt Pederal boods. 1.12 per- treme rise in Income taxather since 1937 and 1938. shep the figures were given. are tellsts, Bome are held by individuals interest rate of 1.74 percent. Air I resal), will be . greater loss then than there in can any of such bnnds. cent. State and local bonds, percent. Taxable curporate bonds, 4.80 percent. Mr. AUSTIN. Mr. President, I do net who no longer care to make the adres- that is Iwa than the interest rate no and pow. Mr. AUSTIN. It is a burden. Corporation capital stocks, 55.22 percent. turn of life. We code had a man in (be Government security of lens maturity, Mr. BONE 1 sticilid like to refer to Mr. BONE. It la 1 burden on me, agree with the theory of tak the rich Emate who fall that as * matter of good It vas an Ideal bid. and the dir sold another angle. If the Beneur does ant whether I own any of the bonds or not Mr. BROWN. Mr. President, will the and diapene the poveriy. 1 do not te- long to that school st all. feith to the Government of the Drive $4,000,000 worth of light and power tonds wish to have the interrupt him, 1 shall I think there is - great advantase in Benater vield? States be ought net to De engaged # B that Insit. They were streight me- not do 30. cities having as small a trurden se poe- Mr. AUSTIN Yes. The other two items in that table are: Mr. AUSTIN. I um very pleased to Mr. BROWN. That adds up to about Taxable corporate bends, 7.27 percent, threash the ownership of - que bonds sible to carry to the interest rate, 10 percent für tax-exempt Inmés in the reon stude and equities. He voluntaria Auhrequently the au anded mom have the denator's emiribution. Threatore a becomes important to know and corporate capital stocks, 43.35 per- hands of the bolders to which Be Bens- cent, ENTR up the right to profit by being be miney in the development of the munid- Mr. BONE. I think perhape this die- h/w much the Government pal power enter and If made a further comico will be helpful to all of - A the refurn. Mr. President let ⑉ owner et equities and exercistat might realize from the proposal and CYPE the management of business and after of $4,000,000. in the ID- number of men have talled to a about whether there la enough compensation in Mr. AUSTIN. Does # makes any dif- eritig it In the light not favorable 10 forence to the Genstor that that is 007 the this la a be loop- put the principal part et his in terim there had tem sbout this angle. Perhaga Beneturs may be a II to junify it. Mr. BROWN. Yes; I think that shows Government honds. He was pot typical the municipal acurities. Nothing Bttle onfised about 18. because of lack hale, and that because If la 5. loophole - Mr. AUSTIN, The claim and the evi- aboutd make the reform, and that we of the average private cluars. Bo your was done, but these 9M and date- of précise knowledge. a substantial part of the property ts be dence Indicate about $3,000,000 to begin M - than has energy be does not vul the proliminary to this character of in this bill there to a melprocal 60- In tax-exempt bunds. should DUE tax future issues of bonds of with. to retire to bis rocking chair, H) sill Tegislation. rangement, under which the States not Mr. AUSTIN. Bo far sit know Chere and States, what would an Mr. BONE Three million dollars a. It is intervating to note the change in tax Government sesurities are eiher stama which should be included have dobe for the public welfare? Put put his money in ventures Be will buy equities. Be will buy edminim glocks in the heat bid. The M e the second Mr. AUSTIN. It is not recipneal. I year? Mr. BROWN. I simely wanted to it into effect. and what will we have large quantities to enable bim $4,000,000 WM cade in the light. of the do not believe the Senator bas heard ml Mr. AUFTIN. Yes. With a ISTEF laz bring done? We will have esaggerated that Mr. AUSTIN, There are not Included which the Benafor from Michigan 0671 to exert some power over the policies of impending It wered, of legis- argument a the question has such as the pending une. of equire. the institutions in which be tal invested Intim of this kind, and that bid use 22 Mr. BONE, I have not. I do not we that is à relatively small account. real estate and other times which go into is an evil. Thereby We will have Efted 50 long of be believes that be be the Instead of 174. to argue the quistion. because. frankly, However, SE 1 said at the crutaet, the the total the value of all those old stocks and Mr. BROWN. I wanted to be sure that bonds, their competition with these new physical energy and intelligeone te junits Testerday I bard some of the en- 1 un not sufficiently well Informed about amount of money which the Federal Gov- his remaining in business, be will HAF El turota. The Emaix the Oklahoma the technical arperta. ernment would obtain If the provided the Benate knew that there vers Ivd. unes will be to remarkably advantagents, lbst instantly - para this measure we business. He will not retire and lovest Mr. Les) engled is denition of the Bu- Mr. AUSTIN. It is not redprocal, be- were interporated to the MD makes no erai-tax exempta. State-lax exempts, and bis environ in public JASONA, shich at prime Cours to which are of the Justices cause there is DO agreement. On the - difference to my conviction that the pr partially tax exempla in that list, and lay in the laps of thom who Regraded Unclassified CONGRESSIONAL RECORD-SENATE OCTOBER 8 8180 1942 CONGRESSIONAL RECORD-SENATE 8181 argument EM really the cause of the be- ant their numes there, & 80 without, Ipalities, countles, and States to the Pel- from It any Bian of min. any man nise that there is nothing that bas more posed step la shabilitely the WHITE CDP to take from a governmental point of ginning of the movement-is the porest and be depetived of their public White enti Government in the matter of impos- who is not a blind that be cannat BE, probative force in the construction of - surt of an emotional argument. The up- their schoolhnicses, their hospitals, their view. I think It is wrong to principle. 10g. collecting. and distributing thair must observe that the highest authority omstitutions) provides than the current plication of the committee's proposal and their other democrance terms? Por that reason, I think Use. there is on questions of constitutionality, Interpretation made of it be a althers Mr. BONE or course, when even BE would not benefit anyone, but would add Institutions: Uney would tin locater be while it revolves anound - proposal that the Supreme Court of the Duiled Blates, and by those who first por # into effect. allow recipional taxation we get into & mad race: and it involves what I know to the burdens of the poor man the man Independent and enropetent to take care does not mean any great additional ITVO- which was created particularly and and certainly by the estirta which have has boen regarded rather exitiously by who owns his bottle, the man who owne of themasives. but would have la little case, IN does involve M. problem which to uniquely for the purpose of construing passed upon it ever size is was ratified. so equity in a. farm, and everyone else to the supresse power, and ask for lbs extremely vital to the operation of mir the Constitution of the United fistes, Blue 1913, wiven the sixternth amend- many lawyers in times past, letting down who would have to SCARES for the added nonseary money. Government. I compliment all the Ben- has repeatedly and continuously held that mest val retified. Omgress bei year the bara and letting gévernments tax one burden of the cost of government of a Mr. ROSTER Mr. President, will the alamy who have taken part in the de- the airteenth amendment did not give after year and session after vir- another. 2t. might lead to & very pe- enllar struction. I rannel soatze 11. to DIRE. He la the man who would have to Benater yield? bate, which : have Collowed with grest any authority or extended Mope of tax- tually refterated the principle that the ta ultimate conclusion to milt myself or bear the burden. The PRESIDING OFFICER (Mr. atlim. No new power whatever ww COD- Who would receive any benefit trom 169 Interest Mr. AUSTIN. Mr. President, E now United States may not lax State or WALLONEN in the chair) Done the Bena- sidered: none was granted. Up to the transcipal securities, and pus na MM of to lense what the correct answer la: but The Pederal Government? Well. al the tar from Vermont steid to the Benater wish to advert to the question at the time when the sixteenth amendment vas approval on the principle by repeatably I have had some misgivings about taxing present time $3,000,000 la a very enall from West Virginia? Benefor trum Connecticut regarding the adopted, Congrem had just the same and expressly providing, in (YE) tax bill. municipal bend landes. I think there are misglvings in the minds of many of the amount Mr. AUSTIN. I yield. effect of the sixternth amendment. As 1 powers as the statementh amendment that the income tre such securities people of the country. Not long salo 1 Mr. BONE. We have been foreing Mr. ROSTER 3. am not a Maleman resalt, no saltint me LE did not think that sought 13 confer, but when Congram tried should be exempt from taxation. So We down Interest rates 50 rapidly In recent I have simply treist M student I have the people of the enveral States and of to exercise them with respect to . tax have the highest authorities 05 earth, we heard a radio broadcast which left the years that I wender whether We shall be been HTS much interested in the debate the United States served that the Fed- which was not apportioned among the have the Congress of the United States. impression that ao astronemical amount erst Government could Invade the States several States # Bumped Into trinible, and we have the Biprime Court of the of with securities is outstanding. or able to float sectorities very freely if no- I think it is & curious circumatance that ductions to interest reser continue. 1 do the greatest debate on the the ben should and tax the Income of municipal bonds and is vas to nesse that difficulty that United States, unveryingly, without . course, I know that . man receiving enly not know; perhage there la . great desl be about a matter which will not prochss and State bonda and ether securities: the exterpth ammodient was adopted. single break from 1918. when Arüde 1% percent interest on bonds would have any revenue. (Laughter.) and I said "No." The emphasis should be on the "without to have B great many of them to order to of vale money. and perhaps men would XVI of the smitiments - ratified, rather have # tied up. Mr. AUSTIN. That ta because exme- I wish so may. - e preface. that if the apportionment" claime of the statemith down to the present time, respecting and receive from them - large income. If be Let me stagest a problem: A Щим thise other than taken in Involved Constitution did not ant up 6. system by amendant, wholly and entirely, for that consolidating the positions d the Ind $1,000,000 of them. be would receive a little over $17.000 . year at interest. town wants to build . sewir. It is not Mr. ROBIER. Those out in the ecun- which the States could be distdnet and Is the meaning as held by the Supreme States of the Union in respect of the by would think that when Benators were arganste having the need Court repeatediz. a very wealthy town, and the only was to mset important and Decemary [unttion A con would have to have a tremen- get the month to by canada of a. bond discuming the as MII they would be of exparate souree of revenue fur their 1 like to use the National Life Insur- of government. namely. the raising if dously large estate in order to resolve a term. 11 cannet tax the people enough devply involved In some phase of it which existement and the problem was confront- ance Do. case because the National Life revenues for lis extatence. large income the bonde bearing such would tripose & large tax on someone the us here today of creating a govern- Insurance Co. is a Vermunt corporation, Mr. LUCAS. I am not sure that I a rate of interest. to obtain the cash with which to pay for Mr. AUBTIN. I think that the loop- the gewer. It has to sell bonds Under DT raise 5 great desi of maney: but we ment. I would any that on the grinned and I have personal acquaintance with made sywit clear. Yesterday with the the committee proposal. the buyer of the have bad almost a days' debate about . of policy, if ⑉ no other. we ought to pro- the men. who handled the case. They Genator from Michagan TMx. Brown hole argument in the most ridiculous one which 1 been advanced in support of bood would not know what he would be phane of the bill which all serve would vide me from Envision of the were triends of mine, and I was familiar was debating this very important Ivve- liable to be taxed in years to comp: be not produce very much money for years Bistes toor the Federal Government and with It when It - being tried. In that nue cussure be made . statement in the proposal. One of the who to come from Invanted of the Federal Govern- case the declaion egain asserted-and I favored the proposent's view of the met- would not know what the rate would be which be suid. as I resail. that at are ter. Professor Williamson, has recently in years to come. Therefore, be would be Bar, the Intriguing thing about the mest by the States with respect to this quote this lisse: time in the history of this Nation trate- written that the extent of evasion by the while discussion, to me, is the principle visal Eunersion et the maintanance of the The United States may not tax Brate BE lation was esacted by which conscipal templed to bid up the interest rate m bank of it. There la be question that . argurate governments through sevenans municipal emupities securities were teared. That M who I rich through tax exemption has boro a the boods, If they were sold as they are add to my Blate great Issue lies back of all the debute: collected by Lbem. or borrowed to them. Could anything be stainer than that? was referring to primarib. 1 true - inserved In all events, I any that the wo consequences of the proposal MC fur ned 1 desire to compliment the Benatore or citrated in any way for which they Mr. CONNALLY. Mr. President, with setty what Das bitto done since the siz- Mr. AUSTIN. That la the point. to outwaigh the controversial latter as to who have participated in it. 1 think the sould to obtained. In other words. what the tienster yield there? teenth smendment was retified, and I other words, it would be upon the credit Semator from Obio (Mr. Benton) showed 1 em to DOLLVER la that upon elbical how large & touptime may be involved, Mr. AUBTIN. I your be the Benefor agree with everything the able Benater power of the governing body a burden that as has frequently ben add, It which would fall inform the extraise of that be had given great study and grounds, tiging common sense, expires po- from Texas from Vermant has and 1 did DUE have thought to the question, and the Sension littral prounds, I am eppowed to the wate- amounts to a recommendation to burn. Mr. CONNAILY. The Blate of Ver- on opportunity in question the Sepatim libe power. as the Supreme Court bas held in a string of cases since 1913. from Michigan [Mr. Brown vertainle Ing of this Immunity from taxation by mont or the State of Texas or any uther from Michigan upon that point, and I down Be here In order to tatch a few enice, as the imm Ohio mid Mr. BONE or course. the buyers presented a masterly argument on DU each other, which, througheat the life State in under to function as . State, am wondering whether or not the Sma- yesterday. side of the question. Now the Benater of our country, has always extated on world want to hadge against the future: must have . State expited busiding, must ter trom Vermont la familiar with the from Vermont la presenting B very able the para of the States and - the part and therefore the mail town would gne IS not? sistement that was made. and familiar 1 believe that the tricel. completent study argument. To me, as a student. the of the Federal Government "sturk" If I may use a vulgarism, with Mr. President, I shall not weary the Mr. AUSTIN. Ves. indeed. with the ligitation referred la, If there which has yes been made of the heldings et Etate and municipal boods la that taxes that would be in the future. The question is intensely inferesting and 1 Mr. COMMALLY. If. however, the was any Benate by reviewing пошегов cases and made D) Carl H. Chatters, executive di- man who would buy the bonds would be have Reterned attentively. or *era efforts to provide the building Mr. AUSTIN. Mr. Presidenti, the The tasue back of the argument la the disclasing what they hold and the lan- rector of the Municipal Pleanor Officers mus result in the instruction of bonds, and question being asked me in that form, 1 uncertain u to what he would have to Association, in the Annels of the Amiri- relation between the taxing power of Dage in which the holding was owebed. pay: to he would bodge, take our some the Federal Government and the taxing This work has tresn beautifully done If the bende are taxed DP the Federal should not feel like answering # directly can Academy of Political and Social Scl- instrance. and bid up the interest rate Government, Le not the Federal Govern- because 1 certainly do net know of the power of the States and the various already by the Benator from Oñlo, But ence in March 1941, in which be MM- before be would buy the bund. 11 all ment then taxing a supprised enverviso history to which reference is made. 1 do and this is directly on the polot mide by oremunities of the States. That BE à I ask anyone who is sufficiently inter- purchasers were in that frame of mind, ested in that element of the diseasion for the right EM exter? know that settlen 32 (5) (4) of the the Senator from Washington: the communities would have to pay 5 vital thing. to turn to the table of leading cases in Mr. AUSTIN Il is, and is is Taying A Revenue Code has tm all the years a- America NO my are individuals great desi mure Interest. and, under the Take my State. for example: & fre the content table of the views of the Intrden upon the endit of the avversign empted from taxation the Income from with summal Incomes of 80,000 - non on circumstances I have mentioned, the pur- years ND. under à tax-Umitalion State before the credit power to exer- brode of States and pollical subdivisions $1,500,000.00 et Base and boute chasers of the bonds would manage to amendment to our constitution. the me minarity, submitted by me se Report. cired, That is one of the réasins why 18. of States. I do know that that u the bell No. 2144, part n, Seventy-sixth Congress, If We assume an average rate of inter- par B to the community the edidad nicipalities of the State found themselves thing amium, Special Committee on Tax- is an (DVASION of A fuaction which is a evidence of the view of the Congress of AND of 3 percent DD the bonds, that means cont. That is why I think that, after all, practically unable to raine funds to CATTY stion of Government Benarities and clusively that of the State and one that Is the Delled Blates of the of arti- that the total amount of Income which 14 la a matter of easting one band with on their monicipal activities We set up Balaries created by Benate Resolution 203 absolitely to the existence de 16 of the amendments to the Promi conselvanly may be considered la $105,- the other. If all the money come to 8 State liquir eyetem. Back in the aid of the Berenty-6fth Congress, Mr. LUCAS. Mr. Product- Constitution. 000,000 # year. This the total individual repow in the Treasury of the United days the minicipalities used to nie a omarderable portion of their made Ind There practically on one page-there The PRESIDING OFFICER (Mr. Mr. BARKLEY Mr. President, will Income subject to tax which is in dispute Blates no one is helped very much, but (7) four cases cited on the nest page- Business in the chairi. Does the Benater the Benster rield? here as a possible loophole amounts to the little communicities will have had to license, but who the Blate liquor are listed CAMES and by the Bts- from Vermont yield to the Benster from Mr. AUSTIN. I yield. only three-quarters of 1 percent of the pay a little there interest tem was sel up the State lack all the profits, The communities and had preme Court el the United States which fillnots? Mr. BARKLEY I think Lie Benatri national Income, bued - . national ID- Mr. AUFTIN. I do net low whether come of $120,000,000,000. a a handr or dirtying them. to maintain order and take care of all Include déclitima rendered after the Mr. AUSTIN I yirld. from Illinois and the Benster from Vet- the drunks, but the Blate unk all the adoption of the statementh amendment Mr. LUCAS Can the able Sensior mont will find that during the Civil War Be, was we nome to take a practical Mr. BONE I & not how the money derived by 11/ of profits true & and continuing down to the time the re- from Vermont tell me whether or net the there was Inied a general trime IAS, rise and enclose Into the matter, we Benator anders to characterise il, port was submitted. There to also for Congress in the past has over attempted for THE purposes, which included 4 tak and Chet the toophole anpanent, which Mr. AUSTIN, I have the feiling which fiquor butness. In our diate legislature compretence, art. forth in a line or two, to levy or tiss levied . tax on municipal on the Income from mitricipal a that some person are estaping tax- the Securitor from Wirl Virginia Mr. - have bad . Acht for the (M² to - a catch phrase from each of the taser issues? It vas subsequently repaired. and. as E time by of ownership el Roses) stated an will yellenday when siona as to whether the MAM should is which shows what it held bearing on this Mr. AUSTIN. Ym, and the question renail, never ent into the courts at all, copt. incurities, and which la the argu- he said that what local governments are compelled to make a refund till (IM nº point, From the report a will not take brings me to state the proof as to how tax be passed upon by the Supreme Court ment relied upio as the mist important confronting if we continue la follow this picipalities out of the profits pollecial (6) 5 minutes la en & bird's-eye view of the the stxteenth amendment has been n- of the United States. But such is tax of sil-in fact, from the special studies leadership and tread la such a condition the sale of befor history of the Interprodence the the terpirated in actual practice. Good Iswyer was devied for = Dew years, as I reall, which the special committe made, I as that they will have to come un broded The principle involved in this Streeth amendment was adopted, and that be Is, the Gunstor from THEOE- beginning durine the Ciril War. received the impression that the loughole kneer le the Government and is, What shall be the relation of - Regraded Unclassified CONGRESSIONAL RECORD-SENATE OCTOBER 8 1942 CONGRESSIONAL RECORD-SENATE 8183 8182 Mr. BURTON. There - no questing cansuage of the Bupreme Court of the Mr. EROWN. to the first glace, the Mr. AUSTIN. I thank the Benstor I thank the Sensior for allowing me and make the argummia which The makes - make this brief statement. about the Polluck cases There any two Dalled Rates. 1 am reading from paar Drawn our WM are which very strangly here in TATUE of this type of reform in from Bentucky. I have ulserved that of them. The declation la on all fours. It 25 of the minarity report to which I TE- supports the position taken to the Ben- Mr. BORTON. Mr. President, will the government, There la not BOX doubs of Into la one of the phenomical things about him, and be is . mso whose It was recognized repeatedly In Code, terred before. I read from the case of star from Michigan tratted of that taken this language In the National Life Insure Senator yirld? James v. Dravo Contracting Co. (202 by the Senstar tram Ohio CMr. Burrow) Mr. AUSTIN I yield. The court gone to great leagth to point spor Co. tase: capacity and character 1 greatly admire D. & 124) the following language: and the Senater trum Verment Mr. BURTON. It - to me that the out that they were not at that Una the Is - withing destrice Mos directly to be for other reasons also. There LA - meterable lagte which máin in this respect- Mr. BARRLEY I thank the Renstor statement the Senator trum Illinois made ruling the former decision, or the from secorities signate to - upon the Issue now being declared. the gatrits of immunity with repect - Mr. LOCAS. Mr. President. I am too et the from Vermont. will in the nature of . suggestive that Mr. LUCAS The decision in the Pel. Oursument burde applicable to Lie earnings stmply an incoment trander trying to perhaps the consistinionality of taking of - independent outrandor mudering - sacartain the facta. There a - breach between the word Mr. LUCAS. As was stated for the Senator from Rectucky, that law was income from municipal bonds had not lock CAME was handed down to tax. That - to the Covernment. That docume Mr. BROWN. The controversy there and what ! now rhad- been passed upon by the Supreme Court. was . great many years 480, and - have the direct effect of & tax which was over a tax Imposed by the State et Also Chat the United Blates cap not passed during the Civil War or time- distaly following the CIVIL War, and was IN has expiraly been passed upon. The been programsing altrica that time, and I "would operate on the para to borrow be- time it is approised" (Follark 1. furned Weit Virginia upon the gross receipts of Blate on truntelpal chilgations. primarily and for war purposes. taxation of Enternal - such bonds has take It that the proproments of the IFD- Mr. BARELEY. Yes. betn held to be unconstructional, and I posal now before tax are hoping Une the Loan 4 on supes) - which a contractor having & Government ren- MY revolisction is that in the National world unity affect the Devertments dall- tract to build Life Insurance Co. case the Court passed believe the clearest way to bring that into Expreme Crurt will overtura the Mr. LUCAB. After the war wise OVER gatons ⑉ a entinding security. VIAL - Mr. AUSTIN. 1a the Benator speak- directly upon the question of the power and the purpose had been served, the the is to quota briefly from an of 1895. I de not know whethir that addressions are Date involved reperting the ing about the Pollock care? to tax Beate or municipal securities. Congress of the United mains reposied optninn delivered by Chief Justice argument than been made upon this Boor, persmetint indations of the Government TM Mr. BROWN. No: the Drave case. Same of the bonds in the portfollo of the Hugber, In the case of Willouts against but apparently. If the Benator was Dir- - is the securities and to ability to the law before the Supreme Court had The case involved the right of the State National Life Insurance Ca. were of this Bann, in 1981. In that CRM be referred reck in quiting the langtage, BE I know be The which and had en opportunity to pass upon the of West Virginia to tax the grow renaipts character. briefly to the matter nuw under discus- was, 11. is apparent that the Supreme are not found to with metrada validity of the legislation. sten. Hr first referred to . case in which made Due time 5 - for the services et obtained from the Pederal Government Mr. LUCAS. Mr. Predent, la what Mr. BARKLEY. I think that M the Court will have to reverse Buelf in the event the proposed legislation M adopted independed contractors. by a contractor who, under a contract year was that THM decided? fact. a State tisd attempted un THE Federal with the War Department, buils rertain Mr. AUSTIN. = la the EMAIL of Ng- sersities wherein It had been beld by and finally resches the Supreme Court Reflect for . moment upon what the Mr. LUCAS Assumine that to be dams and Indes in a river in West Vir- tional Ente Insurance Co. 9. United States Chirf Justine Marshalt that such action Mr. BURTON, That is ultar, it will Court said in 1889. Returmber I have one, the provision now propoled to and ginis. By - 5-10-4 declaion the Court cast D. a. BOBY, decided in 1918. to be enacted for any war purpue, bed was an intrusion of the Etate government have to reverse Itself, and the Coort in bird reading from - deciden in 1837. I beld that notwithstanding the Enet that In Evans sentest Gore, . taxe to within = to B. principle which those on the Prideral Government. Chief Jus- several cases-and I dare any the G/p- DON turn back the plans to 1882. The the cost to the Government of the United Mr. Justice Vandevahler rendered the time Marshall had sald: ator from Vermunt en call attenued to Cuitt this held: it are attempting to enset et States was increased by reason of the opinion holding that the solary of a Pid- which will remain upon the statute Kreits The right to tax the sentract to any a- them-has directly minimented on the It may be admitted that the reserved rights State tax upon the gross receipts of the tral Judge usuld net be taxed for the gent. when made, - upon the fact et the tite, meh as the right to pass laws, for all time, at lest until is is repaired. contractor, it was nevertheless & valid reason that 18. would be a. diminution of power a borrew, before is - and Mr. AUSTIN. Mr. President, I - th give stiert to laws through statutive up until it is passed upon by the Supreme tax. The Benater from Vermont cannot his salary, the decision was based on an- have A emable influence - the emtrart. ferred to many of the declares, though to administer justice through the Court of the United States and held not the extent of this depende - the crurts, and to empiry all DECEMERY agencies find MY are not any-since other ground, as Remators can me; bed ha to be entititutional In elber words. 1 do not belline to all There have bwn will et a distinct government. T- ans extent. nar Ingitimate purpose of State government, the Pullock case, e case which will, to my also peased super the question which we as I follow the trend of the debate, there abytt 20 decisions rendered since 1013 howerer IS a a ob the MTT net proper subjena of the tasing power judgment, be clearly overruled. and which are discussing, and said, after carefory in very Bitle to be gained, from the Mand- operations of The tax holding uniformly the seme way, that W Cogres. I think is overtome by the sixternth, examining the sixteenth amendment point of raising revenue, by taxibe the IN Government stock is thought by - Court, this la vital and that the Pd- Mr. LUCAB. will the Denator repeat amendment. statein the question of the that the situation was not remedied by income from musicipal lusues. but the to be a tas or the contract, - Me on the power eral Government mas not tax State and the last paragraph? right of the Government to tab bonds of the words "from whatever active & effort is nos to fasten . provide net en mana on the smáll of the titulat municipal bonds. The application eu Mr. AUSTIN. Yes. & manicipality or & State was submitted rived." no new poser being grantes by herefotme envated into to Date ADÉ TO be regugnent made the case of James against Drave to the Supreme Court of the United the amendment is the Constitution Contracting Ci: in 197. It pay be adminer that the name rights stand for all limit to name. States. The question never has beso There is no way et arguing around of the State, noch - the right to livi, Mr. AUSTIN The Benater u correct That decision held that a. tax by & State Mr. BROWN. Mr. President. will the a pre effect to laws through excutive so- submitted since the Pollrek case. because that That was the remocing of the Mr. LUCAS. To my mind there to . upon Federal stock was inconstitutional. Benator yleid? tion, to patie through the there has been no opporticity to do NO. Court, and If reason does not appeal to NOT serious question as to what should Chief Justice Busber this continued, Mr. AUSTIN I yield. and to employ all number agracies to ligi- We have never attempted to tax such us, what la the use of debating the be done. I have attempted, in my Uni- reading from page 22Y. volume 232. of the Mr. BROWN. De the Benater from mais purposes et State prement, am est bonds, question. Itad way, la follow the debares on the Datted States Reputs, ao fallows: Ohle and the Benefor from Vermint pour nájeria of the tasing power of City, Mr. AUSTIN. Yes Mr. President, that The optnion in the Willeuts case, to subject, and I seriainly de nut sani to This language esta applied by the court - state that the Supreme Court tas, unre 7 is the turn which this sort of logic takes. which the Senstor from Obto reterred, do anything by me vote which not Til- Pullick F, Parners' Love é Trust Ce. mora the decision in the Pollack CARE, puud Mr. President, from that day to this the The Court has not passed upon that point was written by Chief Justice Hugher. Ba mult in en entroachment upon the pow- LIST U.S. at = to boiling invalid 7xd- en the question of whather or nut incime Supreme Court har unequivonally upheld as the only or the direct taxe necessary distinguished between taxation of . mo- ets of the Blates. eval wasten - the Internet." tran eusici- from esucicipal trunds la taxable by the the doctrine of State immunity in DO les in order to decide the case. Those who nicipal bond and taxalion of the Mr. AURITN. taubmit that me should pas escurities Government? If so, bay did than 34 decisions extending dive to and present such so argument can get away income, and approved the Poliors CMIL esen nutrelves to project the Rates. That was a deten ren- the question atten? including the most recently decided CMBL efth that all right, tall they cannot get What is the DAR of arguing that the Mr. LUCAB. I are inclined in agree dered by the Supreme Court in 1895, and Mr. AUSTIN Mr. President- The 14 cases are listed in the trief sub- away true the will-considered reasoning Pollock case was decided before the Kix- with the Senator that THE should do ID. it stands unchanged to this day. Mr. BROWN. There la only one in- milled to Congress by the attorneys gin- of the Court which held time after time, teenth amendment vas adopted, and On the other hand, I desre to make 11 It has bern the law of the United States, over which the Benster can make, and tral of the Blates entitled "Constitutional In spite of the fact that It was nnt nices- therefore dons not apply. when declaione clear that E do not want to do , single at Interpreted by the Supreme Cours, that it is no. It never has passed upon the Immunity of State and Muncipal Securi- sary to & declainti of the tase, that the which were rendered after the alstemin thing in odenection with any propoied the Constitution predicts probibite & question. USA Legal Drime of the Continued Paderal Government could not tax the amendment was adopted refer to the regislation eceing before the statute such as the age now Detra pro- Mr. AUSTIN I think 1 strait have 1a Internity et the Powers of the States." Inome on the securities of States and Pollock decision and give IS stability and of the United States that will theart the reed socue cases to (be Benale и Uw pages 60 ta ez. prood by the Committee on Finance, municipalities. active force? Is there no power at all in war effort sere lota, and I know that the Mr. AUSTIN, Was the Settator read- Senäter from Michigan asserta that the Mr. LUCAS. Mr. President, will the Mr. BROWN. Mr. President, will the reason? Benater from Vermont dres not want to the from the Dravo caust Supreme Court has not pased on this Detains yuid? Sensior yield? Mr. BURTON. Mr. President, will the do that either. Mr. AURTIN I yield. Mr. BURTON, No. I WM reading trom question since the Púllock card, 1et DE Mr. AUSTIN I yirld. Benater yield? Mr. AUSTIN, or - nini. read a few cases. and then let MBP Sen- Mr. LUCAE. As [ understand. when the case of Willcuta Hunn. Mr. BROWN. The Bension will re- Mr. AUSTIN 1 steld. Mr. LOCAS. That in senstantly in Mr. AUSTIN. That la a later EAM than stor from Michiesn make has DWO area- that decision was written there was DO mumber that in Evans against Gare, the Mr. BURTON. I have before - the my mind es I attempt to make e deti- ment The Benstor made that states Institution upon the statuse books affect- the Drave case, la It not? Bügreme Court of the United States held the the texasten of municipal securities. uptaice in the Willeta case. 1 rest non upon the very important question yesterday. I was asternded then and that the salary of a Pederal judge could one explence from (De opteim by Crast before un. If I thought for une Mr. BURTON. The decision in the case am astounded now Etat the Sension Mr. AUSTIN, In 18697 I de not know. pot be taxed. The Senator will reall that the proposed ameriment would which I have read was rendered in 1930. should Emply what be does imply. 1. and Mr. LUCAS I was wondering how the Justice Hughes, en pays 207. After die- that very recently the Supreme Court wid the wat start, and at the time 1 thank the Dravo case NM decided in D&M got before the Court, and what tinguishing the case before the Codrt. be leave If to the Court, and read the us- reversed the decision in Brans against sald: not seriously cripple the 1937. suage of the Court. Then the caused the Court to make the deniston in any way, I would on hestale for A Mr. AUSTIN, Top Drave our Iss later which It made. Date in the light of 6 much more reason- But BA dose - follow: become - last de may do what the pleaser with the tax- mapest 50 vote for the amindment DESP. I shall later call attention to the Mr. AUSTIN. I have dignited that able basis et reasoning, in my judgment, the Internet payable on State and guage when be couses to respond. sumewhere, but I cannot immediately and beld that the salary of 6. Pederal himile la . tax - the Domite word thankfore That question is hanging in the balance language In the Drawn case It is very Mr. BROWN. win the Sension per- find It. judge could be taxed. Prectarly the name forbidden, that the Congress esnnot Impose at the prevent Urs. 1 seriously duutit, applicable to the point the Sensior from resenting stands back of the power of the . marias tax upon the mst me from what I have heard-from both the Illinois raiard in The question. Mr. AUSTIN. I yorld. Mr. LUCAS, I ask the questing timply Federal Government to tax the Insure profits derived trom the wills of wish bode. proposents snd the opponents of the Mr. LUCAS, I vant 5 take Ule upper- Mr. BBOWN. How could the Comm in View of what the Omatce from Michi- on municipal bonds funity of thanking the Bepater trom Otain par on the question when no attempt be SMD and a moment ago. In the case before the crurt, Chief proposed legidation, that the benefits Mr. AUSTIN. Mr. President = cannot Justice Hugine said that profits derived which We would derive, from the stand- fer quoting the decision in the Willcuts been made to impose the the signe SEGAT Mr. BROWN, Mr. President, will the understand how the Benster from Michi- point of revenue to help in the was effort. Mr. AUSTIN I will read the tanguage Ennator Field to me for . montroty from the sale of ruch bonds might be case. As I listened to IL a account to be san can face the language of the Bu- would be sufficient tu justify overturning Mr. AUSTIN, I yield. taxed, but to reaching the cenclusion be on all fours with the bolding to the Pci- of the Court Ikrine of no better answer preme Court in declaton after decision asid: the great principle involved. lack case. to the Smaler from Michigan than the Regraded Unclassified 8184 CONGRESSIONAL RECORD-SENATE OCTOBER 8 But It does not follow, because & tax on amendment-repeated every year since Sec. 134. Credit for dividends paid on certain the interest payable on State and municipal that amendment was adopted in 1913- preferred stock. bonds is . tax on the bonds and therefore and now do away with the immunity forbidden- end thereof the following new subsection: Bection 96 in amended by inserting at the which the States and municipalities en- It seems to me that the opinion of the Joy by virtue of constitutionallsm-an preferred stock- "(h) Credit for dividends paid no certain Chief Justice is clear. He thought that Immunity not expressed directly in the the Pollock case was in effect, and that Constitution but expressed in the lives of "(1) Amount of credit: In the case or public utility, the amount of dividends paid a such A tax was forbidden. our people as represented by the Con- during the taxable year on Its preferred stock Mr. AUSTIN. That is what he said gress of the United States and the Bu- The credit provided in this subsection shall be about IL I take his word for it. I think preme Court of the United States. In subtracted from the baste surtax credit pro- he said what he meant, and meant what time of-war are we to stand for freedom vided in section 27. by maintaining freedom's bastions, or "(2) Definitions: As used in this subsec- he said, no matter what this debate may tion and section 15 (a)- provoke. are we to vote against it by opening the door to further centralization of power "(A) Public utility: The term public Mr. BROWN. Mr. President, will the utility' means . corporation engaged in the Senator yield? and removal of the protection which the furnishing of telephone service or in the male Mr. AUSTIN. I yield. States have enjoyed against encroach- of electric energy. gas, or water. If the rates Mr. BROWN. The question in the ment upon a function which is abso- for quch furnishing or sale, as the case may Willcuts case did not involve the interest lutely essential to their existence? For be, have been established or approved by an on bonds at all. my part, I shall support the amendment agency or instrumentality of the United States of the Senator from Ohio. or by a public utility or public service com- Mr. AUSTIN. No. That Ls plain. We understand that. Mr. THOMAS of Utah obtained the mission or other similar body of the Distries of Columbia or of any State or political sub- Mr. BROWN. A man had some mu- floor. division thereof. nicipal bonds, which be sold at a pront Mr. GEORGE. Mr. President, will the "(B) Preferred stock: The term "preferred of some $760. The question was whether Senator from Utah permit me to dispose stock' means stock Issued prior to September the profit was taxable. The Supreme of one brief matter and then suggest the 1. 1942, which on September 1, 1943, and dur- Court held that it was taxable. absence of a quorum? tog the whole of the taxable year was non- Mr. AUSTIN. At the same time, It Mr. THOMAS of Utah. I yield. voting stock the dividends - respect of which were cumulative, limited to the same amount, held that the Income was not taxable. Mr. GEORGE, Mr. President, the next and payable in preference to the payment of Mr. BROWN. The Court went on to amendment passed over is on page 91, dividends on other stock." say. as it has said on a number of DC- after line 13, under the heading "Credit casions, that in Its judgment the rule In for dividends paid on certain preferred The PRESIDING OFFICER Is there the Pollock case still applied. I have stock." The Senator from Maine [Mr. objection to the present consideration of never contended anything else; but the BREWSTER], the Senator from Alabama the amendment? The Chair hears none, Senator from Vermont and the Senator (Mr. BANKHEAD], and other Senators have Mr. GEORGE. Mr. President, I offer from Ohio are too good lawyers not to brought the situation to the attention of an amendment to the amendment on know that It is a cardinal principle that the committee, and after conference with page 92. line 15, after the word "was", to a court speaks not through Its opinions, the staff and with the Treasury repre- strike out "nonvoting." but through Its decisions. Since 1896, sentative, we are of the opinion that the The PRESIDING OFFICER. The when the Pollock case was decided, it has proposed amendment to the committee question is on agreeing to the amend- not decided a case involving the power amendment ought to be adopted. The ment offered by the Senator from of the Pederal Government to tax a amendment to the amendment would Georgia to the amendment reported by municipal bond. simply strike out the word "nonvoting" the committee. Mr. AUSTIN. Mr. President, I take in the committee amendment. It has The amendment to the amendment issue with that last statement of ab- been discovered that under the constitu- was agreed to. solutiam regarding the decisions of the tions and laws of some of the States a The amendment as amended was Court, I say that when the Court refers strictly preferred stock is given certain agreed to. to the Pollock case and reaffirms it In a voting privileges. Moreover, the Securi- subsequent case, It adda to the strength Mr. GEORGE I now suggest the ab- ties and Exchange Commission has re- and the moral authority of the prin- sence of a quorum. before the Senator ciples of the Pollock case, and shows that quired the Insertion of a limited voting from Utah [Mr. THOMAS] begins his those principles are in effect today, after privilege in the Issuance of some pre- address. ferred stocks. the adoption of the sixteenth amend- The PRESIDING OFFICER The ment, even though the Pollock case was If that is the only feature of this par- clerk will call the roll. decided before the sixteenth amend- ticular amendment which caused It to be ment was adopted. That is the value of passed over, I am ready, with the consent The Chief Clerk called the roll, and of the Senate, to accept the amendment the following Senators answered to their those cases. I now Invite attention to another case, to the amendment, and let It go to con- names: ference. Is that agreeable to the Senator Alken Gerry O'Daniel that of Helvering V. Mountain Producers' Austin Gillette O'Malioner Corporation (303 U. 8. 376). This case from Michigan? Bailey Green Overtou was decided In 1938. The Chief Justice Mr. BROWN. Mr. President, I am very Ball Guffey Pepper Bankhead Gurney Radellife rendered the opinion. In that case he happy to learn that the Senator has ác- Barbour Hatch Reed took up the Pollock case. The Immunity cepted the amendment to the amend- Barkley Hayden Reynolds from taxation of such bonds was dis- ment, because the situation In Michigan Bilbo Herring Roster tinguished, and the Pollock case was re- la similar to that in Alabama, Maine, and Bone Hill Behwartz Brewiter Holman Shipstead affirmed. other States. I think the amendment to Brooks Johnson, Calif. Smathers How far are we going with this? We the amendment would add very much to Brown Johnson, Colo. Bmith are about to make a decision of the great- the provision, and would carry out my Bulow Kligore Spencer Bunker Stewart est Importance. By our vote on the own original idea in presenting It to the LA Follette Burton Langer Taft amendment of the Senator from Ohio Finance Committee, Butler Lee Thomas, Idaho we are to say, after full consideration Mr. GEORGE. Mr. President, I ask Byrd Lodge Thomas, Okla. and debate, whether we now stand for Capper Lucas Thomas, Utab unanimous consent for the present con- Caraway McCarran Truman freedom, as our predecessors have stood sideration of the committee amendment Chandler McPariand Tunnell for 150 years, or whether we are to break on page 91, after line 13, which has pre- Chavez McKellar Tydings down one of its most essential protectors Clark, Idaho McNary Vandenberg viously been passed over. and bastions. Clark, Mo. Maloney Van Nuys The PRESIDING OFFICER. The Connally Maybank Wagner We are now about to decide by our vote amendment will be stated for the infor- Danaber Mead Wallgren whether we think we are wise enough to Davis Millikin Walsh mation of the Benate. Downey Murdock Wheeler overrule the repeated decisions of the The CHIRP CLERK, On page 91, after Doxey Murray White Congress relating to the sixteenth line 13, It is proposed to insert: Ellender Norris Wiley George Nye wills Regraded Unclassified 1942 CONGRESSIONAL RECORD-SENATE 8185 The PRESIDING OFFICER Ninety We are, of course, no longer concerned Justice Blone had stated in the O'Kecte opin- Senators having answered to their names, with the power or the Federal Government 10n, page 486, that there WM DO basta "for to las the Income of State officers and em- the assumption that any tangible n quorum is present. ployees. The declaion of the Supreme or certain economic burden 18 imposed on the Mr. BROWN. Mr. President, will the Court in Grapes v. N. Y. es ref. O'Keefe (306 Government concerned as would justify" & Senator yield? U. 5. 466). and the enactment of the Public decision that the tax upon the employee's Mr. THOMAS of Utah. I yield. Balary Tax Act of 1989, have removed that salary was invalid. Mr. BROWN. Mr. President, I ask un- problem from the field of controversy. Taxa- Ou the other hand, It is no doubt true animous consent that at this point in the tion by both State and Federal Governments that the Issuing government would bear B. RECORD there be printed the opinion of of the salaries of public employees is now part of the economic burden of an income an acceptad Incident of our fiscal system. tax imposed upon the bundholder. Never- the Department of Justice on the con- The only remaining question le whether the theless, this Department did not attach 16 stitutionality of the Issue now before the income received from State and municipal the statement of Mr. Justice Stone the eigh Senate-the right of the Federal Govern- obligations may be subjected to Federal nificance urged for it by those who have ment under our Income-tax laws to tax trantion. In our view, the answer la as clear opposed the legislation now suggested. The the income from bond issues of State and and certain as the solution of any legal recent decision in Alabama against King & municipal governments. problem can ever be prior to & Onal dater- Boozer confirms our view, It is now clearly For the benefit of the Members of the mination of the precise Issue by the Bupreme established that the validity of a tax upon Court. It la our considered opinion that the Senate I desire to emphasize the con- bond interest will not be affected by the Congress does have the power to tax such increased likelthood that the economic bur- clusions reached by the Department: Income. den will in some measure be passed on to the The foregoing and an abundance of similar It is, of course, true that the Supreme Government. evidence permitted the conclusion to be Court concluded in Pollock V. Farmers' Loan The question in the Alabama cause was reached in our study that the preponderant & Trust Co. (157 U. B. 439, 158 U. B. 601) whether an Alabama sojes tax, which was understanding of the States at the time of that a Federal tax could not validly be im- to be collected from the buyer, was un- the ratification of the statesoth amendment posed upon Income derived from municipal constitutional In its application to pur- was that Its adoption would in all prob- obligations. That decision was based upon chases made by a contractor engaged by the ability earry with It the power to tax the the theory that a tax on income was a. tax United States under B income from State and municipal bonds. upon the source from which the Income was contract. It was quite clear, of course, that We should like to reiterate, however. that derived. Thus, a tax on the income from the entire burden of the tax would be borne the constitutionality of the proposed legis- municipal bonds was the equivalent of B. tax by the Government. In fact, the Govern- lation does not depend exclusively upon the upon the bonds themselves, and, therefore, ment had agreed with the contractor that acceptance of our construction of the six- an unconstitutional burden upon the power State taxes, If valid, would constitute part teenth amendment, namely, that the words to borrow. However, this reasoning has been of the cost of the project and would be no- "from whatever source derived" mean ex- completely discredited in later opinions of eumed and borne by the Government. Hence actly what they say, and as 60 Interpreted the Supreme Court, With the destruction there vas DO uncertainty as to the economic clearly embrace income from Government of the premise of the Pollock case, its con- effect of the tax D.B. in the earlier case of securities. With full confidence, the validity clusion must also fall. James V. Dravo Contracting Co. (302 U. B. of our conclusion may rest upon the basic "The theory, which once won 6 qualified 134), which involved a lump-sum contract proposition previously discussed that DO im- approval, that a Fax on Income ta legally or The Supreme Court novertheless sustained plied constitutional immunity from Federal economically & tax on Its source, is no longer the State exaction. In the course of its taxation attaches to Interest received from tenable "," said the Supreme Court optnion the Court made the following ob- State and municipal obligations. in March 1939. in Groups N. Y. et ref. O'Keeje servation (pp. 0-9): (306 U. B. 480). Less than a year earlier in "So far as such a nondiscriminatory State There being no objection. the opinion Helvering V. Gerhardt (304 U. 6. 405), the tax upon the contractor enters into the cost was ordered to be printed In the RECORD, Court had sustained a Federal tax upon the of the materials to the Government, that is as follows: salaries received by employees of the Port but a normal incident of the organization DEPARTMENT OF JOSTICE, of New York Authority. The claimed im- within the same territory of two independent Washington, April 14, 1042. munity, If allowed, would in the Court's taxing sovereignties. The asserted right of Hon. RANDOLFH E. PAUL, opinion (p. 424) have imposed "to an inad- the one to be free of taxation by the other Tar Adviser to the Secretary of missible extent a restriction upon the taxing does not spell immunity from paying the the Treasury, Washington, D. C. power which the Constitution has granted to added costs, attributable to the taxation of DEAR Ms. PAUL: On June 24, 1938, Hon, the Federal Government." The imposition of those who furnish supplies to the Govern- James W. Morris, Assistant Attorney General & State tax upon the salary of a Federal en- ment and who have been granted no tax in charge of the Tax Division of the Depart- ployee was similarly held in the O'Keefe case immunity." ment of Justice, transmitted to the Honor- not to place an unconstitutional burden upon Thus, the Supreme Court Onally tald to able Herman Oliphant, general counsel of the employing sovereign. Collector V. Day rest the theory that an economic burden the Treasury Department, a comprehensive (11 Wall. 113), another landmark decision in terms of increased governmental costs study of the constitutional expects of the like the Pollock case, was thus overruled. invalidates a tax. The earlier opinions in taxation of Government bondholders and The express dental in the O/Koefe case that Panhandle Oil Co. V. Evior (277 U. B. 218), employees. Copies of this study were also a tax on income was the equivalent of a tax and Graves v. Texas Co. (298 U. 8. 393). were made available to the appropriate congres- upon the source represented no new thought held untenable so far as they supported the sional committees. but was rather a reiteration of 5. principle contrary conclusion. You have requested our opinion on the which had been applied in the court's prior A decision which supports State taxation constitutionality of the proposal by your declaion in New York en rel. Cohn V. Graves of Federal cost-plus-s-Axed-fee contractors Department to subject to Federal income (000 U. 8. 308), and in Hale V. State Board would operate at least equally to sustain tax the interest received hereafter on out- (302 95). There, too, it had been recog- Federal tar imposed upon State bondholders standing and future issues of State and nimed that "Income is pot necemartly clothed Both relationships rest upon contract; one municipal bonds, with special emphasis on with the tax Immunity enjoyed by its source." Involves the furnishing of supplies and Norv- legal developments subsequent to the pub- The opponents of the pending proposal loss, the other money. The tax to each lication of our etudy. We are pleased to urge that it would produce en unconstitu- instance would increase the cost of govern- comply with your request and submit the tional "interference" with State governments. mental operation: In the case of the State following views. Translated into practical terms, the interfer- tax on the Federal contractor, to the full In our earlier study We expressed the fol- ence complained of to merely the increased extent of the tax exacted: in the caso of the lowing conclusion: cost of future public borrowing which might State bondholders. to some extent which in "It is believed that there C&O DO longer be occasioned by the tax. It is significant difficult of precise ascertainment. Paraphras- be found in the declatons of the Supreme that this Increased cost involves no discrimi- Ing the language of the Supreme Court in Court any rule of continuing authority which natory burden. Rather, It represents the the Alabama case, we may therefore conclude would raise & constitutional prohibition effect of placing Income from private and that 80 fur as a nondiscriminatory Federal against applying the Federal Income tax to public upon the same plane of income Lax upon & holder of a State obliga- State "bondholders, officers, and employees." equality. The absence of any element of dis- tion enters into the cost of borrowing, that You are no doubt aware that eince that crimination would be helpful in sustaining la but a normal Incident of the organization time the decisions of the Supreme Court on the constitutionality of the proposed tax. within the same territory of two independent the question of constitutional tax immunity Until the Supreme Court handed down its taxing anvereigns. have all served to reinforce and confirm that decision in Alabama v. King & Booser on What has been said thus far as to the conclusion, The trend toward a limitation November 10, 1041 (314 U. 8. 1), there was power of the Federal Government to impose, of such immunity, which had developed room for the view that, despito the declaions 6. tax upon Income received from State oblis when we published our study in 1938, has affecting public employees a constitutional gations applies with equal force to all interest continued without Interruption to the immunity from tasation might possibly be hereafter received whether upon future lasues present date. accorded to Government bondbolders. Mr. or upon outstanding obligations. No con- No. 172-3 Regraded Unclassified. 8186 CONGRESSIONAL RECORD-SENATE OCTOBER 8 attutional question as to the validity of a opiciusion that Irrespective of the weakened vitality of the Pollock case and Collector V. first been denied, and that that power, retroactive tax is involved. (See United States v. Hudson (200 U. S. 4011), and cases Day. there to sound basis for a construction granted under the authority of the Con- cited therein.) The proposed tax reaches only of the sixteenth amendment which would atitution, through the amending power, future income. and 10 therefore entirely pro- remove the immunity of the State bond- was meant for universal application in spective in operation. It passesses the same holder and officer. We there examined at the ordinary sense in which I use that constitutional validity n.s the income tax im- length the history of the ratification of the term. I do not mean that something posed by the Public Salary Tax Act of 1939 amendment and presented as exhibite the from which no tax returns can be gained upon the income reseived after 1938 by all evidence which would support that conclu- should be taxed merely in order to make Federal judges, irrespective of the date of sion. Accordingly, we refrain from entering taxes universal. I think It is perfectly their appointment to office. into that phase of the problem in datail. proper and in keeping with the income- The assumption, which was formerly prev- One brief observation, however, seems appro- alent that interest received upon State se- priate, tax tions. theory to permit the ordinary exemp- curities was Immune from Federal taxation, At the bearings last month before the la analogous to the assumption of many Committee on Ways and Means of the House However, certainly the words "from years standing that under Boans V. Gore (253 of Representatives reference was made to the whatever source derived" meant some- D. 8. 245). an Income tax upon the salaries fears expressed in 1910 by then Governor thing. I have been told that every word of Federal judges would be unconstitutional Hughes, of New York, that the proposed in our Constitution is important, and as A diminution of their compensation. The sixteenth amendment would authorise the especially important to constitutional salaries of some Federal judges were made taxation of interest received from State and lawgers, and that cometimes the weight subject to the income-tax laws by the Reve- municipal obligations. Reference was also of each word le equal to that of all other nue Act of 1932, which required that all made to the subsequent assurances of Bon- words. Of course, that is E fallacious compensation received by judges taking office ator Root and Senstor Borah leading to the after June 6, 1932. the effective date of the statement, and no one would argue It. emoclusion that the amendment was adepted act, be included in gross income. Judges by the legislatures of all the States with the However, we all know that an income who had taken office prior to June 6. 1932. views of the latter two in mind. The state- tax had been attempted and had been were thus given a statutory tax immunity menta of Governer Hughes and of Senstors denied by the High Court on constitu- In the case of the bundholder, express statu- Root and Borah, and of many others, were tional grounds; that the sixteenth tory exemption was included in the act of gathered and commented upon in our study. amendment was adopted order to over- October 8. 1913, and this provision WM TO- It is significant that a large number of public pasted in later acts. With the realization come a decision of the Supreme Court; nfficials (acme agreeing and others disagree- that tax immunity of judges who had taken and that with the adeption of the six- Ing with the construction placed upon the office prior to June 8, 1932, was not A con- teenth amendment there was a change amendment by Governor Hughes) urged that stitutional requirement, the Congress, by the if the Bughes construction was correct, It and & development of the American tax- Public Balary Tax Act of 1939, took the final furnished an additional ground for the adop- ing powers. step to remove 11. The present proposal to tion of the amendment. Among these was The pending but provides for a reduc- tax future income of all State securities in Prederick M. Davenport, to whom Senater tion of the exemptions 50 as to make It therefore consistent with the procedure and Root's letter had been addressed, and Senator possible for the Federal Government to objective of the Public Salary Tax Act of Brown, of Nebreska, who wes the father of 1930. A further Illustration of the applica- bring about taxation of income from mu- Non of the income-tax laws to future Income the joint resolution submitting the amend- nicipal bonds and securities. It provides arising out of transactions which were closed ment to the States. It in also significant for a tax on gross income-a tax which, before the purticular taxing provision was that the New York Legislature rejected the amendment in 1910 after the message of as I view the subject, is the most just adopted may be found In Burnet V. Wells Governor Bughes, but ratified It subse- of all tames, because It is levied uni- (280 U. 5. 670). The granter of an irrevo- quently under the administration of Gov. versally, without deductions, and without cable trust was there held constitutionally taxable upon the trust Income although the John A. Dix, who vigorously championed the preferences. I hope and trust that this trust had been created before the enactment broadest interpretation of the amendment. new proposal will become law. and that of the statute Imposing the tas, The foregoing and an strundance of sim- it may become 19. fundamental part of There is no constitutional basis for con- Har evidence permitted the conclusion to be our income-tax procedure as time goes tanding that income hereafter received upon reached in our study that the preponderant on. I say that, not as a constitutional outstanding State bonds must be free from understanding of the States at the time of lawyer, for I am not & constitutional law- Federal taxation because the obligations were the ratification of the sixteenth amendment was that its adoption would in all probability yer, but as a matter of ordinary fairness Issued and purchased on that Implied or ex- carry with it the power to tax the Income as between individuals. pressed understanding. The Federal Gov. ernment was not B party to such contracts from State and municipal bonds. The sixteenth amendment WBS no and the power of the Congress to enact 6 We should like to relterate, however, that sooner adopted than immediately the tax- revenue measure is not fettered by any agree- the constitutionality of the proposed legisla- Ing power given Congress under the ment between Individuals or between en in- tion does not depend exclusively upon the amendment started to be narrowed. and dividual and a State. There 8,70 many Illue- acceptance of our construction of the six- we soon learned that we could tax income trations of this proposition. Thus, in Louis- teenth amendment, hamely, that the words from whatever source derived except ville & Nashville R. R. V. Mottley (219 U. 8. "from whatever source derived" mean exactly 467), an act of Congreee which probibited the what they say, and M 60 interpreted clearly judges' salaries; that we could tax income enforcement of certain contracts for trans- embrace income from Government securities. from whatever source derived unless It portation was upheld, although applied to a With full confidence, the validity of our con- happened to be salaries of State officials preexisting contract. In New York V. United clusion may rest upon the baste proposition or those receiving their money from State States (257 U. B. 501), an order or the Inter- previously disoussed that no implied consil- taxes; that we could tax income from state Commerce Commission which increased tutional immunity from Federal tasation whatever source derived unless It hap- an intrastate ratiroad rate was upheld even attaches to interest received from State and pened to be from a bond or security though the State charter had provided that municipal obligations. a lesser rate should be charged by the enm- Very truly yours, issued by & State or by 8. subdivision of a pany, Bee also Norman V. B. & O. R. Co. (294 SAMUEL O. CLARK, St., State. Gradually, through litigation. D. 5. 240). Assistant Attorney General through contest, the words "from what- Et accordingly appears that no objection on ever source derived" were modified by constitutional grounds can be successfully Mr. THOMAS of Utah. Mr. President, condition after condition. Of course, if raleed against the proposal to tax the income there are times in the history of our coun- the fundamental theory in a democracy hereafter received upon outstanding State try which become epochal in relation to that people and things should be treated obligations. Indeed, the assistant secretary various things which the Government has on the basis of equality is not accepted, of the Conference on State Defense has ad- done. I deem the action of the Senate then the narrowing of the taxing range mitted that If Federal taration of income Finance Committee in reporting two arising out of future tarties of State bonds la soems logical to the man who Ukes special propositions almost epochal insofar us constitutional, "there remains no constitu- privilege: It seems logical to a person who tional bar to Federal taxation of the income they will affect, and affect for the better, believes that some should give and others received from the bonds now outstanding." the taxing habits of our Government. should not: ft seems logical to those who (Tax Immunity and the Revenue Bond, by Despite what has just now been said by entertain the theory of taxation that Daniel B. Goldberg, a printed memorandum the Senator from Vermont, I have felt, there should be those who should not pay distributed by the Conference on State De- and I think others have felt with me, that their just share of the burden. fense, March 1940.) when the people spoke for the sixteenth Even when I was a beneficiary of 133 The Department's study of 1988, reforred to above, reached a second and alternative amendment they asked for and they re- Interpretations I could never understand celved a power which Congress had at why my pay should not be taxed when Regraded Unclassifie 1942 CONGRESSIONAL RECORD-SENATE 8187 the pay of a fellow professor in a neigh- the Income tax who will never and Benstor ernment stepped in and built a road in & boring institution was taxed. Root's argument, and who ought not to be State without the State's consent. Of I cannot even now understand the basis troubled with 12, their own interpretation of the language being the very thing in quas- course, It got the State's consent. on which certain deductions are allowed. Mon. To argue that some sources of Income What would have become of our auto- I cannot understand why-and this, per- will not be taxable because they ought not mobile industry, indeed, would we have haps, is an argument in favor of a tax on to be texable, or because they have not had any automobile industry, if It had gross income-If I give a dime to some- been taxable before, is beside the point. not been for the statesmanship of those body who needs se badly. I cannot be Mr. THOMAS of Utah I thank the men who resolved an impossible altua- allowed a deduction in computing my tax. Senator, and I appreciate his reading tion? Some States could not build roads. but if I give the dime to an intermediate from the editorial. I know that that is How, in the wide world, could the State agency, then I can be allowed the deduc- the way It looks to the man in the street, of Nevada, with its meager population tion, although the person who is to be I do not for a moment discount the type and wealth, build a road connecting Call- the beneficiary will probably receive only of deduction made by the man in the fornia and Utah, for example, without 9 percent of the dime. That la one of the some kind of Federal assistance? Who street, because our Government operates simple things to which, of course, great as & result of the deductions of its citi- would use the road that went across courts, and especially great lawyers who zens. Men do not go to the ballot box Nevada, would It be merely the people read decisions over and over again, never and weigh every argument in favor of of Nevada? No. Roads are built for this man or that man. They vote in in- all the people. pay attention. Mr. BROWN. Mr. President, will the vor of the man who they think better Mr. President, the American Union Senator permit an interruption there, to represents their Ideas of the American cannot be destroyed by uniting the allow me to interpolate a quotation from system of government. people. That is physically Impossible. an editorial in the New York Times which I said in the beginning of my remarks I stand for these two proposals ad- says almost the same thing the Senator that, either consclously of unconsclously, vanced by the Finance Committee be- is now saying? we have done remarkable things which cause they are a step forward in the Mr. THOMAS of Utah. I should be have produced the real evolution in the taxing process. glad to have the Senator do so, but I did development of our constitutional We were told by President Buchan not read the editorial. scheme. Those things have been done that the Federal Government could not Mr. BROWN. It to so close to what the as the result of certain stimuli. I think help the States in their educational pro- Senator has stated that I think It but- that the two recommendations of the grams, and he veloed the Federal land- tresses and supports his argument. This Finance Committee, which I am now dis- grant act; but & greater statesman took was said at the time the sixteenth amend- cussing, come as the result of long study the place of President Buchanan and ment was under consideration. Would and because that committee has con- signed the measure which brought Into the Senator mind If I read it? sistently tried to make the income tax a existence the Federal land-grant colleges. Mr. THOMAS of Utah. I should be fair and a just tax, and these two addi- Was the Union destroyed because some glad to have It read. tions will make It a fair tax and a more new States and new Territories were Mr. BROWN, The New York Times allowed to educate their people on the just tax. in an editorial published on March 2, The arguments, Mr. President, about same basis with the richer communities? our Federal system, about the destruc- What would our Government have been, 1910. sald: The question regarding the constitutional tion of sovereignty, about destroying the what would have become of this Federal amendment enabling the Federal Govern- rights of our cities and of our States by organization which, it is said, is now ment to lay a tax on incomes "from what- going to be destroyed again because the ever source derived" la not a question regard- taxing & person's Income which is re- ing the conflict of laws, or for the construc- ceived from a State bond, does not appeal Congress of the United States suggests that John Doe, who owns a city bond. tion of an obscure statute, involving dim- strongly to me. We sometimes say we cult question of principle. It in & question are taxing State bonds; but there la no shall pay an income tax on the interest tax on the bond itself: the tax is on the he derives from the bond, just as he addressed to the man in the street regarding the adoption of a new policy as to which his individual income derived from the bond. pays an income tax upon the dividend views should and will prevail. It to a ques- There is a difference, and we should of some corporation situated in the same tion without roota In the past and looking not allow our words to be confused in city which Issues the bond? wholly to the future. The Supreme Court How is the Federal system to be de- that manner. perhape might listen patiently to such an It has been stated so many times that stroyed in that way? What is our Ped- argument as Benator Root's, but the men in our Government would be destroyed by eral system? In It 6 loosely knit organi- the street will pay DO attention to it. and some act that 1 marvel that it la able to gation made up of 48 separate States should not. It is not a question for the Supreme Court. exist at all. Consider what has been like 48 blocks which can be picked up One man La theoretically BS competent as done within the last 5 or 6 years in merely and divided and thrown around? That another under universal suffrage to say getting rid of various exemptions. In is not a reasonable conception of the whether the proposed constitutional enable- each instance the same argument was Federal Government. mont of the taxation of incomes from all used that is now presented: yet the Fed- I think no man understands better sources means that incomes from some eral Government has not been destroyed, than I do the contribution to the science sources are not included, because they were not included when the Constitution was the powers of the State legislatures have of government and the art of politics worded differently. The votes and the in- not been disturbed, and the power of made by the master minds who framed Congress has not been greatly developed: our Federal system, and the great theory télligence of the common people will and should settle this question. Indisputably but there is more Justice in the land and there should be one government dealing they think and have a right to think that there is a better understanding in re- with those affairs which were common to the proposition to that Congress may tax gard to the fundamentals of our consti- all the people, and 8 separate govern- all Incomes The four words mean the tutional system. Every time the Federal ment dealing with those affairs which same after the 4,000 words of Benstor Root's Government has stepped forward with were common to just B. few people. That argument are digested M before, and CBD- some great act which has made the con- Is the essence of the Federal system. One not be made to mean anything different, EX- cept by technicalities which can only prevail tinuous development of our country pos- division as dependent upon the other, at the cost of defesting the people's will. sible, we have been met with the same When the fourteenth amendment to sort of argument. Lincoln thought that the Constitution of the United States was It is only necessary to find the meaning if we could fight to save the Union surely written. what a wonderful epoch was of a few easy words, and they are to be we could spend a little money to build begun by bringing into existence a defini- Understood with the same freedom of natural a railway in order to keep the country Uon of American citizenship. The four- and spontaneous Interpretation as would be knit together. Some contended that was teenth amendment is generally looked used in the case of private and personal unconstitutional. Consider the road upon as an amendment which gave us B. interest. Only trouble can be made by sub- etituting other words assumed to be equiv- program; think of the argument back in false doctrine in regard to persons, but alent. and arguing no though they were in Jackson's time, think of the argument in It is an amendment which makes It pos- the act, or that the meaning is otherwise Wilson's time, that such a program was sible ultimately for the poorer persons in because it ought to be otherwise. Millions unconstitutional and that the States the poorer and the weaker States who will, through their Representatives, vote on would be destroyed if the Federal Gov- are underprivileged because of the places Regraded Unclassified 8188 CONGRESSIONAL RECORD-SENATE OCTOBER 8 where they live, to share as American To ancourage investment to productive enterprise. the tax-exampt privileges of fu- cerned, I intend to carry out the pledge citizens should share rights and privi- ture Federal, State, and local bonds should be I amendment. made to my people and vote against the leges equally because of their citizenship. removed. Probably the definition of citizenship Mr. BURTON. Mr. President, will the was quite accidental. because those who I read It again: Senator from Utah yield? wrote the amendment were thinking of To encourage Investment in productive Mr. THOMAS of Utah. I yield. other things; but It is the most states- enterprise, the tax-exempt privileges of ru- Mr. BURTON. I should like to com- manlike, most forward looking notion, so ture Federal, State, and local bonds should ment briefly upon the statement which far as the science of government is con- be removed. has just been made by the Senator from cerned, that can be found in any of the The distinguished Senator from Ver- North Dakuta in connection with what constitutional schemes of the world, be- mont (Mr. AUSTIN) said this morning be read from the Democratic platform. cause It gives us a key to something which that people had not voted OD this ques- I assume be will not regard me ME being Webster thought could not be done and tion. Mind you, the Republican Party bound by that platform. which Calhoun thought could not be did not have any plank like this at all. Mr. LANGER. I stated that it was not done. Both those men in this very body They had no plank dealing with the sub- in the Republican platform. I under- debated with the same logic. That sov- ject. But the people of the United stand the Senator from Ohio Is a Re- ereignty is indivisible, and that It must States-and I, myself, heard It mentioned publican. be one, and therefore must be in the na- from the platforms during the cam- Mr. BURTON. That is correct In tional government. was contended by palgn-depended upon this plank, and interpreting the Democratic platform, I Webster. That sovereignty is indivisible, thought that at last the income from believe that the-members of the Demo- and must be one, therefore must be in the the $18,000,000,000 of bonds was going to cratie Party intend to abide by the Con- States, was contended by Calhoun. We be taxed. Yet, with amazement, I Us- stitution of the United States, and, there- know both statements to be fallacious. tened yesterday, as I have this morning, fore, even though they may have placed It la possible to divide soverelgnty on a to Democratic Senstors arguing against that plank in their platform, not fully cooperative basis, and the fourteenth taxing such income, when, as B matter appreciating at the time Its effect upon amendment says that "All persons of Inct, they were elected upon this very local governments, I think It may be born or naturalized in the United States, plank. properly assumed that they expect and subject to the jurisdiction thereof, In my judgment, if the Senator will to proceed in a constitutional manner, are citizens of the United States and"- give me 1 more minute, It is exactly on and, under the decistuns of the Supreme and here duality comes into our scheme- a parallel with what happened here some Court, the amendment presented by the "and of the State wherein they reside." months ago, when Wendell Willkie was committee is unconstitutional. If they Mr. President, we have now, through before the Committee on Foreign Rela- wished to proceed in the manner Indi- these great mediums set up by the Ameri- tions and was interrogated, as all will cated in their platform, then they would can Government, a key to governmental remember, by the distinguished Senator proceed by was of proposing a constitu- organization as large as we want to make from Missouri (Mr. CLARK], and was tional amendment, it without in any sense destroying the asked about the various speeches he had Mr. LANGER. I agree to that. They individual or without in any sense de- made. It will be remembered that he can do It either way. If they adopt the stroying the community. That is the said, "It was just campaign oratory." amendment here and the Supreme Court genesis of the American Constitution, Mr. BALL. Mr. President, will the holds It to be unconstitutional, then cer- and that Is what has come as a result of Senator from Utah yield? tainly they would go ahead and submit B growth in the American Constitution. That is what Is In the American Consti- Mr. THOMAS of Utah. I yield. constitutional amendment. Mr. BALL. I have heard the state- Mr. BROWN. Mr. President, will the tution, because the fathers in writing the Constitution established, as Marshall ment Just made by the Senator from Senator yield? North Dakota repeated ao many times Mr. THOMAS of Utah. I yield. proclaimed, a document which was to last through the ages, not to last so Iron- that I am tired of hearing it. I was Mr. BROWN. I call attention to the bound that It would destroy itself, not In the committee hearing when Mr. Will- fact that, as I stated yesterday, although even to grow under the Idea which be- kie was questioned, and what the Sena- I did not have the exact language at tor has repeated Is not a correct quota- hand, the Republican program commit- came dominant after we got away from Newton's balance theory and accepted as tion. tee, headed by the late Dr. Glenn Frank, Mr. LANGER. I will say to the dia- in Its report to the Republican National our great fundamental Darwin's theory of growth. We want to go even further tinguished Senator from Minnesota that Convention used the following language: than that, and we can go even further before I rose on the floor today, I con- We favor elimination of all tax exemptions than that, because In the philosophy of sulted the distinguished Senator from of future issues of Federal, State, and mu- citizenship enunciated by the fourteenth Missouri [Mr. CLARK], who, I am sorry nicipal securities. amendment we have 8 new Idea about to note, is not present. I particularly Mr. BURTON. Mr. President, will the politics and B new ideal of government, inquired of him as to exactly what had Senator yield? government which can expand Itself and been said, and he replied that Mr. Will- Mr. THOMAS of Utah. I yield. take care of any evolution which may kie not only said, in response to his in. Mr. BURTON. The report to which come. terrogation, what I have quoted, but that the Senator from Michigan referred was Mr. LANGER. Mr. President, will the when the Senator from North Dakota B report of & committee to the conven- Senator yield? [Mr. NYR) repeated the question, Mr. tion. The convention did not adopt that Mr. THOMAS of Utah. I am glad to Willkle made the same statement. I was report on that point, but even that com- yield. not a member of the committee, but my mittee, I think, in its report. advocated Mr. LANGER. I noted the distin- information on the subject was received only procedure by a constitutional guished Senator just mentioned politics. from the Senator from Missouri [Mr. amendment. The committee, of which Yesterday the statement was made on CLARK] only a few moments ago. the Senator from Michigan was chair- the floor of the Senate that both the Mr. President, It does not make any man, which made an investigation some Democratic Party and the Republican difference to me. I am neither a Repub- time ago of this matter, reported to the Party in 1940 had planks in their plat- lican nor a Democrat. However, I am Senate a measure providing for taxation forms declaring In favor of taxing the Interested In the amendment under con- of State tax-exempt securities. I believe Income from State and municipal bonds. I therefore secured copies of the plat- sideration. The Republican Party of the Benator said, by a vote of 4 to 2. but forms, and have before me both the Re- North Dakota had in Its State platform when the measure came before the Sen- publican and the Democratic platforms. almost Identically the same language ate, the Senate Itself voted against such After reading the plank in the Demo- that is in the Democratic national plat- taxation by a vote of 34 to 20. eratic platform I do not see how any form, and I, for one, believe In living up Mr. THOMAS of Utah. Mr. President, Democratic Senator can help voting to the platforms we run on. I believe the I am ging the Benator from Ohio brought against the Burton amendment. This is people have 8. right to depend on the up the constitutional question. not be- the plank: platforms which the various political cause I propose to answer It, but because parties adopt, and, 80 far as I am con- I desire to tell of an Incident. I think Regraded Unclassified 1942 CONGRESSIONAL RECORD-SENATE 8189 the Senator will grant that If we are not-because Marshall away back In the tem of government? That is my ques- acting unconstitutionally today, we prob- McCulloch case said: tion. ably acted unconstitutionally when we The power to tax la the power to destroy. Mr. THOMAS of Utah. Mr. President. did away with other exemptions, actions No, Mr. President, be did not my that. all I have said up to the present time which have been sustained by the courts He said: has been on argument which could be by reversals or at least by an evolution The power to tax involves the power to used in answering the Senator from of the Court's Idea of the Federal system. destroy. North Carolina. I will not repeat what In 1937 I had B discussion with the I have heretofore said. I am glad the chairman of the Senate Judiciary Com- Now we have changed all those things Senator calls It simply an Indirect tax mittee. He had Introduced an amend- without destroying the soverelgnty of the instead of a 'direct tax. ment to the Constitution providing for States. We have provided for the taxa- Mr. BAILEY. I should like to make the tion of State salaries without destroying overcoming the various exemptions in re- record straight on that point. All Fed- gard to bonds. I took the stand that a the power of the States. The only thing eral taxes are indirect. We will make no constitutional amendment was not neces- left is the taxing of the Income on tax- progress by making a distinction. If we sary. I do not believe that & constitu- exempt bonds. levied a direct tax it would have to be Urnal amendment is ever necessary to Mr. President, what municipality in appórtioned among the States under the oversome B. decision of the Supreme the United States is going to be destroyed Constitution. For that reason there are Coul. Since its creation the Supreme if we start taxing John Doe because he no direct taxes levied by the Federal Gov- Court has heard and considered only receives some money from a municipal ernment. bond? Name the town, name the city, Mr. THOMAS of Utah. Mr. President, real causes. name the State, & stretch of the Through its whole history It has re- If I had B. share of bank stock which paid Imagination one can assume, I suppose, me a dividend, and my State took some fused to go into the field of advisory that all States and all cities are operated opinion. Every decision handed down of the dividend money In taxation, that entirely on borrowed money; but they would not be a tax upon the bank. by the Supreme Court is a decision déal- are not. Taxation of such income does Mr. BAILEY. Does the Senator d/2 ing with a particular case. It is true not Interfere with the taxing power of that the dicta and the words of the pute the fact that a tax upon the income the local taxing units. It does not inter- of a city security or a State security is a judges in arguing the decisions have be- fere with the taxing power of the citles. tax which is a taking by & Federal act come the dominating thought, but those The argument is fallacious, Just as falla- from the city or the State, as the case dicta have not become the dominating clous as it has always been, when it has may be? law of our land. If they had we would have had confusion worse confounded. been put forth to stop some kind of tm- Mr. THOMAS of Utah. It is taking and It would be impossible for any court provement on the score that the power State money, I grant, but we tax salaries of the States would be destroyed. of State officials, and that money comes to overcome a previous decision, because Mr. President, in the past 4 or 5 years out of taxes imposed by the State. It would flnd Itself engaged in such con- we have gone forward with a type of co- Mr. BAILEY. But the State la not fliet of logic that It would forget the operation between the States and the under necessity In that case. It does not cause before it. Federal Government which may be have to raise the salaries. That in a Mr. President, we all revere Justice spoken of as a system of borrowing money matter of discretion with the State, The Marshall, who wrote the opinion in the from the Federal Government instead of State Issues bonds of necessity. They are McCulloch versus Maryland case, but In from private concerns. At any rate, Issued for necessary purposes. The city that case he happened to make a state- most of the pubilc-works-program of the Issues bonds of necessity. It does not do ment which has been made the founds- last several years has been built upon & so by choice; It la because of necessity, by tion for more false argument than prob- cooperative system. There is no doubt reason of the growth of the city, for the ably anything else that Marshall ever that that system will be continued, first. construction of water works, and 80 on. said, He handed down a truism, a tru- because it represents an evolutionary Mr. THOMAS of Utah. I cannot un- Ism soon misquoted. & truism which la notion. derstand the logic of the Senator. Surely valid only to a certain extent, a truism Mr. BAILEY. Mr. President, will the It is just as necessary to pay the salary which is utterly invalid in the experience Senator yield? of the governor of the State. His salary of the United States. Mr. THOMAS of Utah. I yield. may be paid with money raised from the The power to tax- Mr. BAILEY. I should like the Sen- sale of bonds, but I hope no State does so. He said- ator to discuss the proposition that tax- Mr. BAILEY. I know that the Senator involves the power to destroy, ation of income derived from State or is a very able scholar and a thoroughly municipal securities is taxation of the reasonable man. He draws B distinction Soon politicians and judges were quot- State or the municipality. I waive the between taxing the income from & bond ing Marshall's words as- question of the power to tax being the Issued by a State and taxing the salary The power to tax is the power to destroy. power to destroy. Is not the taxation of the Governor of a State. We take We know that taxation has been used of such Income taxation of the city? I nothing from the State when we levy 8. in our own Government to destroy. But will give the Senator an illustration. A tax on the salary of the Governor, If If, as argued, American liberty and the city Issues its bonds, which are nontax- the salary 16 $10,000 and we take $4,000, American federal system, the sovereignty able, and sells them at a premium or at the State continues to pay $10,000 for of the free States, had depended upon a & very low rate of Interest. But let us the services of the Governor, But when truism which is valid only to & certain say the city issues its bonds and that the State issues a bond, If the bond is extent, our Government would have hung the income from them is taxable. The subject to taxation, every purchaser by a thread so thin and so narrow that purchaser will not pay the premium, or knows It. The State must then sell the it would have disintegrated long ago, else the interest rate is increased. In bond for less or pay & greater rate of If the power to tax is the power to de- either event the people of the city or the interest. It is IL case of necessity. stroy, the States would have been de- people of the State issuing the securities Mr. THOMAS of Utah. Granted; but stroyed time and time again. are required to pay higher tases in order I have sold bonds, and I have carried in Back in the last war I happened to be to pay the increased interest on the bonds the same portfolio bonds of this district on E. State pay roll. I would buy a rall- or the difference on the principal If the and bonds of that city, I was pot able road ticket and would not have to pay a bond is sold below par. What strikes me to sell them on an equality. Let us take tax. I would buy gasoline for a State car is that we are dealing here with an In- the State of Utah and compare It with and did not have to pay the gasoline tax. direct tax on the cities, the counties, and the great State of Virginia, for example. I would buy tires for the State car and the States of this country. That is not Under the Senator's theory, in Utah we did not have to pay & tax on the tires. the power to destroy, but where is It in must pay more for money raised from There were exemptions, exemptions, ex- accord with our system of dual govern- the sale of bonds because, in theory, the ment. If we do have - dual government? man to whom the bonds are sold- emptions, simply because someone-not a court-but someone made a ruling that There are some vestiges of It left. How Mr. BAILEY. My very able friend sees We dare not get into that field-we dare do we reconcile that policy with our sys- the difference, without reflecting on Regraded Unclassified 8190 CONGRESSIONAL RECORD-SENATE OCTOBER 8 State, between & man with good security Mr. BAILEY. of course, there are other things; but once we enact the poration and taxing the securities of and a man with none. I do not think the Senator's analogy will go very far. proposed legislation, this factor will be which is infinitely more than a corpors. city, which to in corporate form, bur & Mr. THOMAS of Utah. But It holds In constant, Mr. THOMAS of Utah. Mr. President, tion. The Benator will agree with the practice. Whenever a Senator says that without wishing to prolong the argu- that there is involved to a city all that la when a State sells its bonds at a lower price than the price at which some other ment, let me say that If this year I buy & involved in the concept of government; State sella bonds, that Le B. tax upon the $100 bond which pays 5 percent, and but to & corporation there is involved people of that community, then I think next year buy one which pays only 3 per- merely the concept of managing a a clal interest. my logic is Just M valid as his. It is not cent, I realize that there is a difference. We are talking about different things. Mr. THOMAS of Utah. However, a tax. It is because the bond is not worth as much. Incidentally, I did not say a word about corporations. through legal definition most cities are Mr. BAILEY. I will not detain the taxing the rich, and I never do so, be- Mr. BAILEY. Cities are incorporated, Senator Jonger in his argument; but 1 cause my theory of the income tax is should like to say that it does not appeal that it ought to be universal. That is but tione. that does not make them corpora- to me as being valid. Take the case of one of the arguments which I put for- Mr. THOMAS of Utah. I agree with a man who has very little credit. Even ward. That is why I favor the gross In- the Senator. I should go very much in the District of Columbia, under the come tax. It is fair. I think of the per- further and say that no two city corpo- operations of a system devised by what son who is taxed. All the logic to the rations are organized exactly alike, They we call the Sage Foundation, men pay world cannot remove the fact that the are complex corporations; and therefore ILS much as 32 percent for money. That income tax is on the person who receives a rule about taxation may work in one la perfectly oppressive, hopeless, and out- the income, and not upon the bond, re- community and may not work In another, rageous. I do not approve it. Another gardless of the consequences upon the because of the very complexity of the man, a very able man, whose credit Le bond. make-up. In one city there may be a good with everybody, obtains money at Let us suppose that I own a $100 mu- city waterworks, a city streetcar system, 1 or 2 percent. There is a difference nicipal bond, and & $100 bond of B cor- and various other facilities owned by the in condition. There la no element of poration within that municipality, each city, which makes all the difference In taxation. There is no element of com- of them paying me 5 percent interest. the world. pulsion. That is one of the unfortunate On the one I pay & Federal tax. and on Mr. HAILEY. There is a difference be- things due to differences in the condi- the other I pay DO Federal tax. If we tween imposing a burden on a corpora- tions of men. change the illustration and consider two Non or business and imposing a burden Consider the whole body of State, mu- persons, one of whom owns the munici- upon a unit of government. We are deal- nicipal, and county securities. There are pal bond, and the other the bond of the Ing with a proposed action which is others to come, There are schools to be corporation, we have one person who is tuntamount to a tax on another unit of built-and we have not gone as far in exempt from taxation. Each receives government. It strikes me that that la that direction as we must go-Water lines exactly the same amount, the hurdle which we must all get over. to be laid. sewers to be built, and sanitary As I understand the sixteenth amend- Mr. THOMAS of Utah. I will help the Incilities to be established. They are ment-not as a great jurist would see it, Senator over It by asking a question. Of comprised In the whole social fabric of probably, and not as a Judge would see course, I know that the Benator from municipal and State government. I have it in handing down a particular opin- North Carolina does not want to be COD- always thought that the States have a ion-the theory was to permit the Fed- vinced. far greater social function than has the eral Government to tax the Income of Mr. BAILEY. Let me say that I want Federal Government. That is my doc- persons everywhere, from whatever to be convinced. I voted for the section. trine: and that was the doctrine of this source derived. That is the way I read I have had a great deal of trouble in my country until Pelham against Massachu- the sixteenth amendment. mind about it. I have run into this very setts, in 1922. Mr. BAILEY. That may be the cur- obstacle. Suppose we should authorise the levy- rent view, but It is not the view to which Bo I say to the Senator that he mis- ing of the proposed tax. Immediately we have all been accustomed. The six- understands me. I should like to be con- every State and every city would Increase teenth amendment says that the Con- vinced. I should like to walk out of this Its Interest rate, or reduce the premium, gress shall have the power to tax in- chamber with a clear mind that I have In any event, the effect would be a tax upon the State or the city, What is pro- comes from whatever source derived; but done right. Bo if the Senator will con- I have previously contended-and the vince me, I should like to have him do 50. posed by the bill is a taking by act of Congress. That troubles me very greatly. contention Is satisfactory to me-that Mr. THOMAS of Utah. Mr. President, I do not like to see people escape taxa- that amendment must be read In con- I realize that 1 cannot convince the Ben- tion. The wealthy man who buys the nection with the whole Constitution. I ator. I realize, from the laughter all bond of my city of Raleigh does not there- think It can be contended with reason around me by my associates in the Senste by escape Federal taxation. The city of and force that It was never Intended that that I have been put in a box, and that Raleigh gets the benefit of it, and the we should tax the securities of cities, I cannot move out of It. counties, or States as though they were I believe that If the Senator from people of the city of Raleigh are the people of the U. 8. to that extent. corporations. I think the Senator is un- North Carolina thinks about the matter The argument about favoring the rich fortunate In undertaking to put them In he will realize that by agreeing to the will not hold water. All We do Is to per- the same category. The United States committee amendment the Congress of mit the States, cities, and counties of Steel Corporation la a corporation en- the United States would not be the Im- gaged in an Industry. However, a State poser of B direct burden upon the munici- the country to finance themselves: and the people of those States, cities, and Is a body corporate engaged in govern- palities. Any man who handles munici- counties get the benefit of it. It Is uni- ment. That is the great difference. I pal bonds and who goes from bank to versal in Its application, have heard many & man say that a city bank trying to find the high bidder, and That, to my mind, is the nub of the should be conducted like a corporation; who finally geta & bid that is 2 pereent trouble. If the Senator can clear It up, that a city Is a corporation, and all the less, realizes that he does not get the 1 shall not contend with him beyond the citizens are stockholders. That la A very bid which is 2 percent less as B result of point where be convinces me. superficial view. It may make an Illus- any act of the Congress of the United Mr. THOMAS of Utah. Mr. President, trative appeal to an audience; but a cor- States or of the Government of the I cannot be clear as to what le in any poration is one thing and a government United States. The burden which is Im- is another. posed upon the texpayer who buys the man's mind, especially after listening to the arguments of the Senator from North I do not believe the Senator la safe bonds Is imposed by the banker or by Carolina, However, other factors enter In undertaking to proceed on the Idea the buyer of the bonds himself. and not Into the prices of bonds, and into the that there is an analogy in the matter by any act of the Government. interest rates. of taxation, at any rate, between tax. If, for Instance, we assume that we ing income from the securities of a cor- shall be able to sell the bonds at a some- Regraded Unclassifie 1942 CONGRESSIONAL RECORD-SENATE 8191 what lower price, as we do. because the thereby secure taxes. Mr. Mellon was the standpoint of the growth and do- Federal Government says that the In- an able financier. I understand that be velopment of the taxing process, the Pl- come from the bond Issued by the Instru- made $100,000,000 or $200,000,000. Of nance Committee has done & femarkable mentality will not be taxed, of course course, I do not profess to be in any such thing by recommending & gross income that la valid. The purchaser pays more class. tax. money for the bond because be can sell However, I think he was mistaken. I I started to tell of an incident of which It for more money, and no on, and 80 do not think we are proposing to take I WM reminded by the Senator from Ohio forth. However, the Federal Govern- money from wealthy men by way of tax- when he asked whether the Congress ment Is not in the least responsible for ation. I do think that we are proposing should proceed constitutionally or not. that situation, and historically It is not to necessitate additional burdens of tax- Of course, the Congress should proceed, legally responsible. It would be respon- ation upon the people who would have constitutionally; that la the only way in sible for abolishing that advantage, and to bear them-the people of the cities, which It can proceed; but Congress does It is its abolition which I think is just. the counties, and the States. things in a different way today than they Mr. BAILEY. Mr. President, let us That is the point which struck me; but were done before, and the Supreme Court consider a bond which yields 2½ per- I assure the Senator that if he can con- has changed its view as to the constitu- cent net, Let us say It is & city bond. vince me, I hope he will do so. I am open tionality of questions time and time If we were to impose 8 tax upon It, 60 to conviction. I should dislike to think again. I have never held that It took 8 that It would yield 2½ percent or 2 per- that my mind was closed. constitutional amendment to overcome a cent or 1% percent, according to the Mr. THOMAS of Utah. No one can decision of the Supreme Court. income of the purchaser, because we convince the Senator If he accepts his We have adopted constitutional have graduated rates, immediately the logic in regard to the imposition of B amendments to overcome such decisions, purchaser would bid less for the bond burden; but I do not accept the logic and the Sixteenth Amendment is one of unless the city raised the rate. There in regard to the imposition of & bur- them, but I believe that, as a theory of is the act of Imposition. The starting den BO far as one being imposed by the government, 0.5 a theory of logic, such point there is what the Federal Govern- Congress of the United States in con- procedure la sometimes unnecesses ment did. The Benator will agree with cerned. Therefore, In 1937, after the argument of me that the bond might sell at 2½ per- Mr. BAILEY, I beg the Senator's par- the chairman of the Judiciary Commit- cent; the rate of return might vary with don. If I lay 8 tax on United States tee, who said that the only way we could the war news, Steel It can pass on the burden to the overcome various exemptions would be by However, here 15 the constant factor: purchasers of steel. If 1 lay a tax on constitutional amendment, I said If we If, as soon as the proposed tax is Im- a city bond the city must pass on the could get another review of the question posed upon the Income from It, It sells burden to the people of the city, I by the court we could overcome the ex- at 2½ percent, at once the number of think it 1a the Imposition of a burden. emptions by decision, because the court buyers in the market Is reduced. At I assure the Senator that I shall not as then constituted would not stand by once we reduce the number of such further interrupt him. the Evans case and some of the other buyers, and at once we reduce the par Mr. THOMAS of Utah. I thank the cases. I, therefore, submitted an amend- value. That is reflected either in sell- Senator most heartily. ment to the tax act of 1937, providing for ing at a premium or in selling below Mr. President, I have somewhat lost B tax on gross Incomes. I jokingly told the trend of my thought, because I was the Members of the Benate who were par. I think that situation is what actu- referring to only two points, and I had no members of the Judiciary Committee that ated the committee in heretofore ex- Idea that I should speak at such length. I was going to write into the law the empting the Income from bonds pre- I have commended the Senate Finance Constitution of the United States, and viously issued. The banks and Insurance Committee for reporting the two propo- I quoted in my amendment the provision companies are filled with them. They sitions; I have done so on the simple that there should be levied upon all In- have been the great purchasers of such basis that the trend of the taxing habits comes, from whatever source derived, bonds. If we take the Income from past of the United States In regard to In- and before any deductions were made issues of bonds, we imperil the capital of come taxes has been to narrow the exemp- one-half of one percent. thousands of banks and we injure & great tions. I continue that line of discus- Of course, no one supported the many Insurance companies. However, sion on the theory that the more uni- amendment. To me It sounded like a that is behind us. versal the tax the better the tax from simple amendment, Mr. President, but Now we go forward and run directly in- a democratic standpoint: the fewer the after the amendment was offered and to the proposition that any tax which exemptions the better the tax from a was sent to the legislative counsel, when may be levied under the authority of the democratic standpoint: the fewer the it came back it covered 29 full printed bill which is before us will be reflected in exemptions the lesa opportunity for spe- pages. That is how complex our taxing an increased burden upon the city, the cial privilege, special consideration, and system has become; that is how disin- county, or the State, and that will be a special write-offs. tegration has been setting in, and that burden upon the people of the city, the The problem, about which the Senstor is. in a little way, what is actually hap- county. or the State, and by no means from North Carolina has been talking is pening. a burden upon any wealthy man who buys a problem, not in law, but in simple Since the adoption of the sixteents the bond. government. It is a governmental proc- amendment we have undertaken to tax Mr. THOMAS of Utah. I am sorry ess: Shall we maintain a taxing system income from whatever source derived, that the Senator used that last sen- which in theory is supposed to be equal except in the case of the salaries of tence if he was answering me, because I and universal-with a graduated scale, Judges, and of State employees, and made no argument about what the of course-but which in fact is not? except in the case of bonds of certain wealthy man would make. That Ls the question. The tax Is Imposed kinds, The tendency of those exemp- Mr. BAILEY. I was responding to the upon the individual, the receiver of the tions was to narrow the taxing field. general argument: I did not hear the income. I still stand by the theory of The first requirement of any govern- Senator from Utah say anything about the amendment "from whatever source ment, If it is to grow and to build itself It, That is the general argument. derived." I think It La valid; I think it up, is to widen the taxing field constantly I shall not interrupt the Senator an- is proper. and everlastingly. It is an old truism other time: but now I should like to say It is because of the exemptions which that government must not tax that which that I think It was the Secretary of the have been made, It is because of the produces but that which Is produced, Treasury, Mr. Andrew Mellon, who first write-offs, it is because of the various because when the capital structure is recommended such & tax. I have not amounts which can be subtracted from taxed ultimately the ability to pay taxes seen the report, but it was before the this man's income but which cannot be is destroyed. committee. He made a report, as alleged, subtracted from that man's income, that Mr. BONE. Mr. President- that It would be unfortunate for the I have always maintained that & fair, The PRESIDING OFFICER (Mr. Federal Government to stand by and to square, and just income tax la one levied SPENCER in the chair). Does the Senator permit & great body of tax-free securities upon gross Income. Therefore, I repeat from Utah yield to the Senator from to be outstanding for people to buy and what I said in the beginning. that, from Washington? Regraded Unclassified 8192 CONGRESSIONAL RECORD-SENATE OCTOBER 8 Mr. THOMAS of Utah. I am glad to Mr. BROWN. Very recently the case of Evans against Gore was overruled in their State approved the amendment is yield. Mr. BONE. Since we adopted the O'Malley V. Woodrough (307 U. 8. 272; gave the Congress the right to tax In. income-tex amendment to the Constitu- 1939)-directly overruled and stated by comes In this country from whatever source derived. tion-the sixteenth amendment-has the the court to be overruled. Mr. BONE It seems to me, in the That was the overwhelming view, that Supreme Court of the United States at- tempted to interpret the words "from light of the clearly demonstrated view- was the belief people honestly cherished whatever source derived" to afford a basts point of the Supreme Court as presently about It, and it came with a great shock for the argument that the Federal Gov- constituted, that the court would never be taxed. to find that some Incomes were not to ernment cannot tax, for example, Income hold that we could not tax the salary of anyone. We are not certainly diminish- Mr. THOMAS of Utah. It the Sens- from certain securities, or was that decl- tor will read the statement of the Gov- sion prior to the enactment of the pres- Ing any man's salary by taxing it after It ernor of my State to the legislature in ent Income tax law? I do not recall at comes into his possession: we have not recommending that the amendment be the moment. lowered his salary, but merely made him not ratified, be will find that be argued Mr. THOMAS of Utah. I cannot an- contribute the expense of running the in Just the way the Benator has argued, swer that question because I am not Government and conducting the war. that the levying of an Income tax should familiar with the decisions, but in decid- As to the principle of taxing income from be reserved BA B system of taxation by the Ing the Evans case I am sure that the municipal securities, I know a great many States; that the retification of the Court brought in other parts of the Con- very persuasive arguments may be made amendment would take away certain stitution Instead of the sixteenth amend- on both sides of the question, and I powers from the States which they then ment, and I am sure that the practice listened with a great deal of interest to had; and that If income from whatever which grew up after the last war, when the argument of our friend the Senator source derived were taxed by the Fed- the income tax became important, was from Vermont [Mr. AUSTIN], who prob- eral Government, the States would never developed entirely upon the fallacious In- ably presented as forcefully as anyone be able to impose a State income tax, terpretation of the decision in the Pollock could the viewpoint that has been ex- Mr. BONE. That argument is ad- case. pressed many times by attorneys for vanced now. Mr. BONE. I never could follow the municipal corporations, who have Mr. THOMAS of Utah. It did not de- reasoning of the Court. It seems to have doubted the wisdom of such a tax for stroy the Onlon-although Utah voted proceeded on some theory of contract, reasons apparent to every lawyer, but I against the amendment, I am sorry to because the constitutional provision was think It is time to lay at rest the question say. too plain for words, that Income, from of whether or not we can tax income from Mr. NORRIS. Mr. President whatever source derived. might be taxed. any source derived which Is now exempt The PRESIDING OFFICER Does the That does not require any interpretation, under the law. it seems to me. The people adopted that Senator from Utah yield to the Senator Mr. THOMAS of Utah. I should like from Nebraska? constitutional provision. So I have never to see It laid at rest, because I know Mr. THOMAS of Utah. I am glad to been able to see the weight of the argu- what was in the minds of the American yield. ment which has been advanced, that we people when they adopted the have no inherent power to tax income. Mr. NORRIS. Suppose one were go- amendment. ing to write an amendment which would I think It Is a matter of policy rather Mr. BONE. That is correct. than of power. give the authority to tax as is proposed Mr. THOMAS of Utah. Debating soci- in the committee amendment, I wish the I have not heard all the Senator's ar- eties have talked about the income tax Senator would tell the Senate what lan- gument, but I assume It to be that Con- and discussed the great Injustice which guage be could use which would be gress has the power by legislation to tax Income from whatever source derived. had been done to our Government be- plainer, In the effort to bring about that It seems to me there can be no question cause of the Supreme Court decision. result, than the language of the sixteenth about that, and I should like to see that We know the various theories in regard amendment Itself, "from whatever source particular principle of law laid at rest to the Income tax which were brought derived." Could the Benator think of for once and for all, for I think that the into the argument in that case. It was anything that would be more compre- theory which has been advanced that stated that the tax would destroy our hensive? Is there a possibility of any under the sixteenth amendment we can- Government, destroy the Federal system, man framing words in the English lan- not tax income from any source is fal- destroy everything that was good. We guage so as better to express the Idea lacious. know of the argument made before the that power was given to tax all Instru- Mr. THOMAS of Utah. I think the Supreme Court of the United States by mentalities, than by the language of the Benator from Michigan has a better an- B great jurist wherein be used words sixteenth amendment itself? swer to the Senator's question than I which shook the Nation, that the income Mr. THOMAS of Utah. The Implica- have, and I will ask him to reply to the tax was a communistic device and would tion in the question of the Senator from Senator. bring about & change In the American Nebraska cannot be answered. There is Mr. BROWN. The case of Evans V. standard of Uving for which the people no way of describing any source in lan- Gore (253 U. S, 245, 1920) was a case In- would not stand. Such arguments make guage broader than "whatever source." volving the salary of B. Federal judge. In one laugh today. and yet the same argu- Mr. NORRIS. Then It follows that It that case the sixteenth amendment was ment is being advanced against the last cannot be done, and If the Senators who referred to incidentally, but the basis of step in the effort to overcome the ex- say we have no right to impose that kind the decision in the Gore case was that tremely great injustice In regard to the of & tax are correct, It la Impossible to the salary of a judge, under the consti- sprc-) of taxation. frame an amendment which would give tutional provision, may not be dimin- Mr. BONE. Mr. President, will the us that right. ished during the term for which he was Senator yield further? Mr. THOMAS of Utah. It would mean appointed. The court held-1 think er- Mr. THOMAS of Utah. I am glad to It would be useless to reduce laws to roneously-that the taxing of the salary yield. writing. of the Judge was A diminishment. Mr. BONE. 1 do not believe that I Mr. NORRIS. Certainly. Mr. BONE. That was a refinement of reasoning. It did not lower his salary; am overstating the attitude of mind of Mr. THOMAS of Utah. It would It merely taxed It after It came into his the average man, but from my recollec- mean, further, that If we interpreted It possession. tion of the argument advanced at the loosely, even as It has been Interpreted Mr. BROWN. It taxed It Just as the time the legislatures of the various States by the courts, the Constitution would of the Union voted on the income-tax salaries of all other citizens are taxed. become meaningless. Mr. THOMAS of Utah. As R result of amendment which was proposed to them, Mr. NORRIS. Absolutely. the decision, the average man on the I think I am only stating the truth, when Mr. THOMAS of Utah. And the Con- street said that the Judges were taking I say that 999 out of every 1,000 human stitution becomes purposeless if, for ex- care of themselves. beings who read about It and talked ample, we decided every constitutional about It believed sincerely that when question according to the last decision, Regraded Unclassified 1942 CONGRESSIONAL RECORD-SENATE 8193 instead of going back to the original I think you have already discussed your question about what Mr. Willkie mid. document itself. present views on that soore, Mr. WILLIAM. Yes, str. and if the Senator from Minnetota was Mr. President, just one more word. Senstor Nrz. One more amertion of yours, present and failed to hear It, I am sure Appeal has been made for the preserva- that of October 20: he was the only one In the large company tion of freedom and for the preservation "On the basis of his-" which was present at the hearing who of our Federal system. I do not know That is, Rocervelt's- did fall to hear it. Not only that but it how to answer that kind of an argument. "past performance with pledges to the people, was quoted the next day in every news- 1 have been reading the history of the you may expect we will be at war by April paper in the United States and was made 1961. If he is alected." United States covering the last 150 years, the subject of considerable editorial Mr. WILLSTE. You asked the whether or not and each time our Government has I said that? comment througout the country. moved forward in an expansion of Its Benator NTE. Do you still agree that that I had nothing to do with Injecting this constitutional powers, the destruction of might be the case? question Into the discussion here today. liberty has been predicted, and the de- Mr. WILLING. It might be. It was a bit of but I take this opportunity to call atten- struction of the Federal Government has compaign cratory. tion to the fact that on the same day, In been prophested. Yet we all know that, I submit, Mr. President, that that part the same hearing, on numerous occasions man for man, the American citizen to- of the Democratic platform which was Mr. Willkle made B statement which was day Is much ahead of the citizen of the adopted in 1940, on the 15th day of July, diametrically opposed to the statements United States 150 years ago. in which It was said to the people of which he has been making recently con- We know that, State for State, each America: cerning a second front, when he pre- dicted and asserted that a second front State to stronger than It was then, even To encourage Investment in productive en- in B comparative sense. We know that terpirise, the tax-exempt privilleges of future would not be necessary, that If we would the scheme of our constitution has BO Federal, State, and local bonde should be merely send a few medium and heavy progressed that today the people of the removed- bombers, Germany could be bombed into United States realize that the constitu- submission in very short order, without was a definite pledge made by the Demo- tion is the companion of the American any expeditionary force whatever being cratic Party to the people of America. people in accomplishing their political necessary. Mr. THOMAS of Utah. Mr. President, Mr. GEORGE. Mr. President, If there and social ends. may I ask the Senator from North Da- is a question of what Mr. Wilkie said, Mr. LANGER, Mr. President. will the kots, since he has brought political par- the Senator from Missouri is within his Senator yield? ties into the debate, if there is any party rights to have the RECORD speak the Mr. THOMAS of Utah. I yield. in any State, or in the Nation, that would facts, but I believe that the passage of the Mr. LANGER, During the course of put into B. platform a pledge that they pending tax bill la more Important than the Senator's remarks I asked him a expected to maintain this exemption and what Mr. Willkie said during the last question and made & statement which expect to get anywhere with the Amer- campaign. or what be is saying at the was disputed by the junior Benator from Ican people? present time. I am sure of one thing, Minnesota (Mr. BALL], in regard to what Mr. LANGER. They did, and they that Mr. Willkie furnishes 50 much text Mr. Wendell Willkle said during a hear- were elected. They were elected on the that If we undertake to debate it here ing before the Committee on Foreign pledge which they made in their platform we will not finish before the next Presi- Relations of the United States Senate. that they would take away the privilege dential election. Because of the fact that there has arisen of tax exemption from the rich. Mr. WALSH. Mr. President, I ask to & question of veracity between the Sena- Mr. THOMAS of Utah. Yes, and the have Inserted in the RECORD a few of the tor from Missouri [Mr. CLARK] and the Republican Party would have said the many messages I have received from junior Senator from Minursota (Mr. same thing, but It remained silent on the officials of the State of Massachusetts. BALL], I have secured a copy of the re- subject, It did not dare say the opposite, including the commissioner of corpora- port of the hearing to which I have re- did it? Is there any party in the United tions and taxation, representing the Gov- ferred, and will quote from II. States that would go before the people ernor, and the mayor of Boston, in oppo- Under date of February 11. 1941, Mr. on A platform making the opposite decla- sition to taxing the Income from State Willkie appeared before the committee, ration? and municipal bonds, which telegrams and a colloquy took place, from which I Mr. LANGER. I do not know about express my views on the pending ques- will cite the part that is material to the that. I know the Republican Party was tion. present discussion: stlent on the subject. There being no objection. the com- Mr. WILLING You said be would not get us Mr. CLARK of Missouri. Mr. Presi- munications were ordered to be printed into war. dent, will the Senator yield? in the RECORD. as follows: Senator CLARE of Missouri. No: I made no Mr. THOMAS of Utah. I yield. BOSTON, MASS., August 5, 1942. such promise for the President. Mr. CLARK of Missouri. I have been Hon. DAVID I. WALSH, Mr. WILLIRIE As to the statement about informed that a few moments ago, while United States Senator, the President, in the course of the campaign I was temporarily absent from the Foor, Washington, D. C.: I made a great many statements about him. the Senator from Minnesota IMr. BALL] I strenuously urge your opposition to DIX He was my opponent, you know. denied that Wendell Willkle had made & on municipal bonds. Such a tux would have Senator CLARK of Missouri. You would statement before the Committee on For- serious effect on Boston's financial condition. not have hald anything about your opponent Boston's views have been made known to eign Relations of the Senate when it had you did not think WILL true, would you? Benate committee through Charles J. Fox. under consideration the lease-lend Mr. WILLRIE Oh, no; but occasionally In- city autlitor. bill MAURICE J. TOBIN, moments of orstory in campaigns we all ex- pand a little bit. Mr. CONNALLY. What difference Mayor of Boston. does It make whether Willkle said it or A short time later the Senator from not? BOSTON, MASS, July 27, 1942. North Dakota (Mr. NYE) interposed. Mr. CLARK of Missouri, It makes Hon. DAVID I. WALSH: The following colloquy ensued, which some difference. The Senator from Your attention LS respectfully directed to appears on page 905 of the printed fact that Massachusetts, in fact all New Eng- Minnesota undertook to question the volume of hearings: land, will be very seriously handicapped If statement of fact, particularly & state- proposal to tax income from State and mu- Seuator Nra. In the name vein, at about ment In which I understand I was quoted. nicipal securities is permitted to be made a the same time you remarked: Mr. President, the fact of the matter part of Federal revenue bill. The structure "I believe we should keep out of war at all harards." is that Mr. Willkie made the statement of financing both because of constitutional Mr. WILLICE. Yes; and I think this bill pro- which has been attributed to him, not as well as statutory limitations prevents many vides the method of keeping out of war. once, but twice, in the Committee on municipalities from borrowing without ad- vantage of tax exemption, and in many In- Benator NTE. You stated further: Foreign Relations, once in answer to a stancas even though borrowing could be had We are being edged toward war by an ad- question by me, and some time later in Increased cost for the money because of abo- ministration which La alike careless in speech answer to a question by the Senator from lition of tax exemption would cause commu- and in action." North Dakota (Mr. NYE). There is no nitice of Mussachusetts to auffer much by way No. 173-4 Regraded Unclassified 8194 CONGRESSIONAL RECORD-SENATE OCTOBER 8 of increased expenditures, and a sum far in from this Commonwealth and urges, because tpalities in other sections of the country do eacess of what Federal Government possibly the situation la important enough to pass & not face. could gain for authority to tax. Examination resolution, that every possible step be taken Another Itam of borrowing peculiar to Mas. of inheritance-tax returns here to Massachu- to defeat the enactment of such legislation sachuretts is that in connection with relief setta demonstrates in so-called large estates to the end that there will be no change to the payments. Under current statutory Dron- there la practically no volume of tax-esempt policy which has proven wise through the sions municipalities are required to provide securities carrying out suggestion that st years and which has been of extreme help to in their current budgets amounts equal le least so far as Massachusetts is concerned the continuity of activities by the cities and a Exed permentage of the prior year's welling rich do not go to the purchase of tax-exempt towns. expenditures. When this requirement has securities. There is indication however in Respectfully submitted by order of the been satisfied they are privileged to borrow respect to borrowing. which have been can- Massachusetts Collectors and Treasurers' M- the balance of their estimated relief expendi- celed and the places to which interest on sociation representing the treasurers and col- tures. In 1039 borrowings of this character the bonds are forwarded that tendency in lectors of the 351 cities and towns of Massa- were slightly in excess of $14,000,000. Masmchusetts is for the institutions-edu- chusetts. Treasury officials have claimed that the cational, charitable, and religious-to gather NATHANIEL M. NICHOLA, taxation of future issues will place no (Teat in municipal and State bonds and not Indi- Secretary. Immediate burden on municipalities effice viduals or corporations of great wealth or for the duration of the war municipal bor- Influence. In my opinion It would be very CITY OF WORCENTER, MASS., rowings for capital Improvements will be definitely of injury to Massachusetts If such AUDITING DEPARTMENT, necessarily curtailed. This argument entirely a proposal as that of taxing State and mu- September 21, 1942. overlooks the two pecultar types of borrow. nicipal securities was made B part of Federal Hon DAVID I. WALSH, Ing already pointed out and makes no allow- revenue program. It is urged that you oppose United States Senate, ance for the problems which will be faced by such enactment in interest of Massachusette. Weshington, municipalities at the close of the war. If HENEY E. LONG, DEAR SENATOR WALSH: I are greatly dis- our cities and towns are to participate in the Commissioner of Corporation appointed to learn that the Senate Finance post-war program of public works they should and Taration, Committee has again voted to Include the not be faced with the added interest burden taxation of future justies of municipal and which everyone agrees will develop at the to- MASSACHUSETTS COLLECTORS State bonds In the current revenue bill DCW come from municipal securities in to be sub- AND TREASURERS' ASSOCIATION, being prepared for presentation to the Sen- ject to Federal Income tax. It la a matter September 17, 1942. ate as a whole. of record that the tax rates of Massachusetts The Massachusetts Collectors' and Treas- It la deplorable that a government that is municipalities are among the highest in the tirers' Association, organized some 35 years attempting to raise eight billions in the pro- country. In the Interest of the owners of ago and representing the treasurers and col- posed tax bill to support a war for freedom in real and personal property in this State I lectore of the 351 municipalities in Mas- all its phases, Including constitutional rights, trust you will see your way clear to appose sachusetta, in regular meeting assembled on should Include In the bill taxation that di- the proposal to tax municipal securities this, the 17th day of September 1912, unani- rectly violates those rights. when it reaches the floor of the Benate and mously went on record as opposed to any Moreover. the Federal tax gain as A result thus prevent the imposition of an added tax congressional enactment which will make of taxing bonds may be fifty millions, ap- burden on our local taxpayers. possible the taxing by the Federal Govern- proximately only one-half of 1 percent of Sincerely yours, ment of the interest from securities issued total, certainly a pleayune revenue to at- CHARLES J. Fox, or to be Issued by the State or its political tempt to recover in deflance of certain fun- City Auditor, subdivisions. damental principles of our democracy. Such enactment will add to the cost of Mr. SMITH. Mr. President, I do not The secretary of the association, who at- taches bis signature bereto, was specifically local government without providing any sub- wish to detain the Senate, but I feel it instructed to call to the attention of the stantial compensation revenues for the Ped- my duty to express my appreciation of Members of the House of Representatives eral Government. The fiscal freedom of the speech made by the Senator from and the Senate of the United States the State and local government la in great Vermont IMr. AUSTIN]. opposition of the association and its mem- danger: also, a probable failure of govern- I am surprised that the argument con- bers to the passage of such legislation. In ment to survive the additional burden of cerning the power of the Federal Gov- their opinion such an act would be detri- increased taxes. mental to the well-being of Massachusetts Massachusetts oncupies an outstanding ernment to tax incomes derived from and Its cities and towns and would disre- position among the other States in her sound bonds Issued by municipalities and gard that which has made It possible for financial structure, and that of her cities States has revolved around the question Massachusetts and its cities and towns to and towns, and I believe the proposed legis- of the money involved. That does not give to its Inhsbitants through the years lation would do more to endanger her stand- concern me. I think the powers of the a form of benefit which has not been ex- Ing than any other possible act of the Gov- sovereign States, which are coordinate ceeded by any State in the Union. The ernment, with the Federal Government in our dual inability of many municipalities to borrow, As 8 financial official of the second largest the extra cost to them, and the certainty city in Massachusetts, I earnestly 6sk you form of government, should be kept in- to vote against the Inclusion of taxation violate. The State governments have that many things which should be con- structed after the war cannot be under- of municipal and State bonde. the right to pass laws and levy taxes, and taken If such a restriction is Imposed upon I hope I shall hear from you with the they feel that they are entities of the them la more serious in the minds of the assurance that you will vote against a viola- Government, and have B right to issue amoociation than can be expressed in words tion of State right. bonds, and to carry on their business M an Massachusetts and its political subdivi- Sincerely yours, they see fit. stone are strongly of opinion that, just an HENRT A. ALLEN, City Audttor. taking away their ability to tax, to affect Mr. President, I have observed with 5 in any way the borrowing of the State or great deal of uneasiness the gradual en- Its political subdivisions is comparable to CITY OF BOSTOM, croachments of the Central Government destroying the soverelgnty which they are AUDITING DEPARTMENT, upon the States. Every move we make anxious to maintain as well as the ability City Hell, September 15, 1942. is along that line. I am glad the Set- to furnish through their credit the very best Hon. DAVID 1. WALSE, ator from Vermont made the speech be by way of benefits to the individual In- Senate Chamber, habitants of Massachusetts whether expressed Washington, D. C. did today upholding the rights of the through State expenditure or through that States, the countles, and the municipali- DEAR BENATUR WALSM: The proposal to levy of the cities and towns. a tax on the income from future Insues of ties, which have developed so wonder- It is the opinion of the treasurers and ecl- municipal securities will place & heavier bur- fully in our country. I would rather risk lectors of Massachusetts that a vote to permit den on cities and towns within this Com- the chance of having the country kept on the taxing of interest from State and politi- monwealth than on any other municipalities an even keel through the continuance est subdivision securities will be a direct within the country, This is due to the fact of the power reserved in the 48 States, in attack on the ability of the State and its po- that since taxes are not due and payable their sovereign capacity, than having litical subdivisions to function as they have until November 1, our cities and towns for in the past and that such action is an unwar- this body undertake to keep the Govern- 10 months of the year must finance ordl- ranted and unneeded as it is unwise and ment on an even keel. Our people have undestrable. nary maintenance requirements by the Issu- ance of revenue anticipation loans, Accord- elected us to this body. and are looking Because of the seriousness of this situation, Ing to the latest "Statistics of Municipal to us to interpret the Constitution, and the Massachusetts Collectors and Treasurers' Finances" issued by Mr. Waddell the 39 to deal fairly with them. Do we lake Association addresses this, Its first resolution of this kind in the whole period of ite 35 cities of the Commonwealth in the year 1939 into consideration the powers reserved lasued roughly $125,000,000 temporary notes, in the States? I doubt very seriously years existence, to the Members of Congress This is en Item of borrowing which munic- whether B. great percentage of the mem- Regraded Unclassified 1942 CONGRESSIONAL RECORD-SENATE 8195 bership of this body has seriously studied joint resolution which later resulted In little enlored boy sitting on the fence the Constitution and the decisions of the the adoption of the sixtemth amend- nearby and he called htm. Supreme Court with respect to that twi- ment. Of course it seared the little fellow at light none which lies between the re- The House passed the legislation by a first, and he turned a few shades lighter, served and the delegated powers. vote of 310 to 14. Then the sixteenth but finally ha climbed down off the fence Mr. President, I consider the commit- amendment was referred to the States for and came to the platform on which the tee amendment, which would grant to the ratification, the firta States ratifying It in debaters sat. The preacher invited him Federal Government the power to las se- 1909 and the last States ratifying It in to come to the platform, which he did, curities of States which are now tax ex- 1913. All but 3 of the 48 States in the and said to the boy, "Now sit down and empt, to involve one of the mòst serious Union ratified the sixteenth amendment. listen." 80 the preacher read this past questions to come before the Senate. It The sixteenth amendment to the sage of the Bcripture to him. Then he is not a question of dollars and cents. It minds of the people in the streets, to the read It to him again, and said. "Now son, is a question of exercising what the minds of the people on the farms, carried in your mind who was It that was bap- people of the States consider to be their only one meaning, and that is the mean- tized?" The little boy answered back rights and their powers. To impose & Ing contained in the language of the without hesitation, "Well, I do not know, tax on their instrumentalities of course amendment Itself, which is one of the sir, but I think It was the man who curtafls their power. I shall never vote short amendments. The language is: wanted to be." to permit the Government of the United The Congress shell have power to lay I use that to illustrate the simplicity States to exerclee such power, to usurp and collect taxes on incomes. from what- ever source derived, without apportionment of language when one wants to under- the power over the States. I felt particularly uplifted when the among the surveral States, and without regard stand It, and the people wanted to un- to any censue or entimeration. derstand the sixteenth amendment when argument in favor of States rights was It said: made today by the Senator from Ver- That Tanguage is so plain that the mont I used to believe that we had The Oungress shall have power to lay and people of the country understood It to collect taxes ou incrunes, from what three coordinate branches of govern- mean that if the amendment were source derived. ment, the legislative, the judicial, and the adopted Congress would have power to executive. It seems to me that the power lay and collect taxes on incomes from It has been argued in this debate that of government has been narrowed down whatever source derived. There was no when we lay & tax on a man's income, now almost to one branch, and I shall quibble over the meaning of the language simply because it comes from a local or not be a party to contributing to such at that time. The people of the States State bond, we are taxing the local gov- narrowing of power. sent their Representatives and Senators ernment or taxing the State. Has it ever I am amazed that Senators should to the State legislatures with instructions been argued, by the same token, that stand on the floor of the Senate and to vote for that amendment, believing when we tax the income of the farmer- argue over the words of the sixteenth that they would thereby stop up the last If any poor farmer ever had enough in- amendment, "from whatever source de- loophole which permitted tax dodging. come to reach up into the Income-tax rived." We can argue that language to The people understood the language, brackets-we are laying a tax on the a reductio ad absurdum. It was only after the lawyers got hold of farm? If we are, It is unconstitutional, Mr. President, 1 stand here today try- it and began to split hairs over it that because such a tax is an ad valorem tax, ing to keep inviointe, so far BE it is in my it began to have several faces and several and the Federal Government has no power to do 50, the right of the States to different meanings. power to levy B tax on a man's farm. exercise the power they have beretofore Mr. President, I wish to illustrate my Has It ever been argued that when we had, the power held by them up to the point. In my section of the country the tax a lawyer's Income we are levying & present time, to attend to their own af- preschers representing different denomi- tax on the practice of law? Has it ever fairs and not be overlorded by a great nations sometimes have denominational been argued that when we tax the income central government. I believe in State debates, which are sometimes called re- of a merchant we are laying a tax on the rights. I believe in individualism. I can- ligious debates, and those debates wax merchant's grocery business? It has not. not understand why Senators, for the warm. One time they were having B When he receives an income, It is identi- sake of obtaining a little tax revenue, debate on the subject of baptism. The fied as his. He puts it in the bank, and will endeavor to destroy the very essence debate took place under a brush arbor he is taxed according to that income. of our dual form of government. State and great crowds were gathered. The It is argued that by this amendment legislatures are rapidly becoming more discussion was about a preacher named we are trying to lay a burden on the com- nominal adjuncts to Washington. The Philip who was hitchhiking his way along munities and States. No such thing in people of the States are not paying much the road. He saw B eunuch of great au-" true. We are merely trying to withdraw attention to their legialatures any more. thority riding along in a chariot. Philip & special exemption, because as things They are more and more looking to thumbed a ride and the eunuch picked stand today the States and communities Washington. In Washington we have him up. Philip noticed the eunuch was are the only authorities which can issue handed out benefits to the tune of several reading in the Bible from Isalah. After bonds which are tax exempt. billion dollars. I do not know whether some discussion the eunuch decided he Mr. CONNALLY, Mr. President, will that action is constitutional or not. How- wanted to be baptixed, and this is the the Senator yield? ever, the Constitution of the United language describing what occurred: Mr. LEE. I yield. States now seems to be obsolete, Every And as they want on their way they came Mr. CONNALLY. Under the Senator's move we make is a move to discredit It. unto a certain water and the eunuch said, construction of the sixteenth amendment, I am greatly concerned about the trend Boe, here is water: what doth hinder me to does be contend that the language "from" which the argument in the Benate has be baptized? And Philip said, If thou believest with all whatever source derived" includes any taken, that in order to obtain certain taxes the spiendid system of State gov- thine beart, thou mayest. And be answered income from any source? ernment shall be destroyed. and said, I believe that Jasus Christ Le the Mr. LEE. That is what It says. I hope we can vote on the Senate com- Bon of God. Mr. CONNALLY, Is that what the Sen- And he commanded the chariot to stand mittee amendment today, and that 11 ator construes it to mean? still: and they went down both into the will be rejected and that the amendment water, both Philip and the eunuch: and be Mr. LEE. That is what It says. Of of the Senator from Ohio (Mr. BURTON] baptized him. course I do. will be adopted, Mr. CONNALLY. Does the Senator Mr. LEE. Mr. President, I rise to The point of debate was who baptised contend that under that language the who. One of the debaters raised the speak for a few minutes in opposition to Government could tax a township in the Burton amendment, or rather, I shall question that by the language of the Oklahoma which receives $100,000 in Scripture one could not tell who baptized speak in support of the committee taxes from the people? That is income to who, because the Scripture says- amendment, which proposes to withdraw the township. Could the Federal Govern- the special privilege of tax exemption And he baptimed him. ment tax that income, or income received from local and State bonds. In 1909 the Another debuter, who wanted to prove in the form of taxes by a drainage dis- Senate, by a vote of 72 to 0, passed a that Philip baptized the eunuch, saw & trict, a school district, or a road district? Regraded Unclassified 8196 CONGRESSIONAL RECORD-SENATE OCTOBER 8 The sixteenth amendment says "from does not have enough income to get into eral, State, and local, have operated whatever source derived." the income-tax brackets has his farm Mr. LEE. It says that Congress shall taken away from him because he cannot surtage. Indeed, I think It la tair to the fair or effective collection of progressive have power to lay the tax. If Congress pay the taxes on It, when there are others should lay the tax, I suppose It would in the same community with him who of the tax law staelf by actually giving greater that these exemptions have violated the apirts my enjoy the special privilege of exemption. advantages to those with large incomes than have the right to collect It: but I do not those with small incomes, think Congress would lay such a tax. I have heard two Senators make the statement that "I am not one who pro- He later said: Mr. CONNALLY. Why not, if the Ben- ator wants to tax everything? poses to soak the rich." I am not either: Mr. LEE. I do not want to tax every- but neither do I propose to give the rich that effective action be promptly taken to I therefore recommend to the Congress thing. Would the Senator vote to lay & special exemption. I submit that this future. terminate these tax exemptions for the such a tax? Such a measure would offers the rich a special exemption. Did first have to pass through the Congress. any Senator ever hear of a poor man That was the request of the President Mr. CONNALLY. Of course. The buying an issue of community bonds, of the United States in 1938. We still Senator says that the Federal Govern- school bonds, State bonds, water bonds, have not complied with It. In my opin- ment could tax the annual taxes ratsed or sewer bonds? Did any Senator ever lon, here is the chance, the last chance In a township or city, Would he favor hear of A day laborer buying such bonds? we shall have, to comply with his re- such a tax? Have we ever heard of any poor people quest and to terminate the tax exemp- Mr. LEE. No. buying such bonds? tions, In this crisis, when We are to Mr. President, I believe in equality. Suppose a man has an Income of $5,000, badly in need of additional revenues, One of the things which made the tax and he buys some 3-percent tax-exempt when we are 50 desperately seeking every collector in ancient history very unpopu- bonds. To him the exemption privilege reservoir from which we might raise In- lar was the Inequity of taxation. The is worth two-tenths of 1 percent. The come with which to pay for this war, I people are willing to pay taxes If they Senator from Michigan pointed out yes- am amazed and surprised to find In the know that the taxes are levied in all terday that to n. man with an income of Senate opposition to taxing a man's In- fairness. $100,000 a tax-exempt bond bearing 3 come regardless of Its source. percent Interest is worth more than a tax- Let me illustrate the situation as It is This Is our last opportunity, in my able bond bearing 20 percent. Yet we today. I made a few computations with opinion, to close this one loophole, to are told that the exemption privilege is respect to Oklahoma. A married man stop this last inequity, to remove this not worth anything to the rich. I ask special privilege to a special class. living in Oklahoma who operates a store Senators to answer that argument. and has an Income of $5,000 has to pay The argument has been advanced that Mr. President, from 1909 to 1913 the Income taxes amounting to $146.22. A there is nothing of a reciprocal agree- people approved a fair and equitable tax- man living beside him who has an income ment BS between the local communities Ing plan for taxing the people according of $5,000 from tax-exempt securities, and the Federal Government, that there State or local bonds, does not pay a thin to their Incomes and their ability to pay. la no reciprocity, However, let me re- Congress passed the bill. The House dime. Is that fair? Do the people ap- mind the Members of the Senate that passed it by a vote of 318 to 14, and the prove that? I do not think 50. the local communities can tax the prop- Senate by a vote of 77 to 0. Forty-five Again, if & married man living in erty in those communities, and that the of the 48 States approved It, and It Oklahoma has an income of $10,000 from Federal Government does not try to tax became law. Then it was nullified by the rental of apartment houses and other the property in those communities. judicial decision. The court said that It With respect to the States, the Federal properties after he has paid his property did not mean what it said. Those who and paving tax, he pays an income tax of Government has offered, and is willing today are opposing the withdrawal of this $737.85: but If B man living next to him to have, reciprocity of taxation. special privilege believe that the court has an income of $10,000 from school The Identity of the source of the In- then was right, but 8 later court, acting bonds which he has purchased, he does come is lost when the individual receives upon a case involving the salary of an not pay a thin dime. Do the people ap- the income. Does the individual have employee of the Home Owners' Loan prove that? I think not. I know they three or four different bank accounts, Corporation, reversed that decision, giv- do not. and when he places the money in the ing the Congress the power to lay taxes Again, If & married man living in Okla- bank does he say, "The money in this upon Income from the Federal Govern- homa has an income of $50,000 derived account came from bonds, the money in ment and from States. from the oll business in my State, he pays that account came from labor, the money As has been pointed out, our Demo- in the other account came from invest- an income tax amounting to $11,132.41. cratic Party said In Its 1940 platform: If right beside him there lives a man who ments"? No. Indeed. He has one ac- To encourage investment in productive has an Income of $50,000 from State count, in which he deposits all his In- enterprise the tax-exempt privileges of future bonds, he does not pay a thin dime. Federal, State, and local bonds should be come; and on that Income he is subject, Does any Senator think that the people removed, by all the laws of equity and fairness. approve that? Did not the people have to pay the same tax that I pay and that I do not see how any member of the that situation in mind when they sent John Q. Citizen pays and that all others Democratic Party can repudiate that their State representatives to the State pay. The people expect us to levy the legislatures to vote for the sixteenth plank in the platform, that pledge and tax accordingly, and certainly 50 now, promise to the people. when we are in need of revenue with amendment to give Congress the power to lay and collect taxes on incomes from Furthermore, President Roosevelt, In which to pay for the war. whatever source derived? I think they his "message to Congress on April 25, The PRESIDING OFFICER. The 1938, said: had exactly that in mind. question is on agreeing to the amendment Whatever advantages this reciprocal Immu- Take another example. We say we do of the Senator from Ohio [Mr. BURTON). nity may have had in the early days of this not have & capital levy, but I maintain Mr. AUSTIN. Mr. President, I artse Nation have long ago disappeared, Today It that an ad valorem tax is B capital levy. has created a vast reservoir of tax-exempt to request unanimous consent that I be- If a farmer does not make enough from securities in the hands of the very persons allowed to have a certain matter printed his farm to pay the ad valorem tax, what who equitably should not be relieved of taxes in the RECORD. During my remarks an happerís? The tax assessments accumu- on their incomes, interrogatory was propounded by the late until be loses his farm. His farm is Senator from Illinois which I was unable He thereby recognized that the rich taken. His capital la levied upon and have a special advantage. to answer. but which the distinguished taken: yet, as was pointed out by the majority leader, the Senator from Ken- Both the States and the Nation are de- Senator from Michigan [Mr. BROWN] a tucky, was able to answer, showing that prived of revenues which could be raised man in the same community may have from those best able to supply them. In 1861 the Congress levied a direct tax an income of several million dollars, 44 upon the Income of the citizens of the percent of which is from tax-exempt se- Later in his message President Roose- several States. velt said: curities, on which he does not pay a dime The secretary of the minority has of tax. However, the poor farmer who Tax exemptions through the ownership of brought to my attention an important Government securities of many kinds, Fed- statute which seems to me to have a bear- Regraded Unclassifie 1942 CONGRESSIONAL RECORD-SENATE 8197 ing upon the conscience of the Congress money hereby appropriated shall 15 paid out tor tages to any State under the laws de- with respect to the matter, and perhaps by the governor of any State or Territory or acribed to the first section of this set la etoes indicating the vigilance of the States in any other person to any attorney or sgent of the tax samed thereon shall be paid to under any contract for services now existing the owners of the land so bid to and resold, en respect to it. It is Twenty-six United or heretofore made between the representative to their legal being or representatives. States Statutes at Large, page 022, chap- of any State or Territory and any attorney or Approved. March 2. 1891. ter 496, an net to credit and pay to the agent. All claims under the trust bereby several States and Territories and the created shall be filed with the governor of Mr. O'MAHONEY. Mr. President, it District of Columbia all moneys collected such State or Territory and the Commission- is my purpose to support the amendment under the direct tax levied by the net of era of the District of Columbia, respectively, offered by the Senator from Ohio Mr. Congress approved August 5, 1861. I ask within six years nest after the passage of this BORTON), and I desire very briefly to act; and all claims not so filed shall be for- unanimous consent to have a copy of the state to the Senate my reasons for 80 ever barred, and the money attributable statute printed in the RECORD, because It doing. thereto shall belong to such State, Territory, includes not merely the States, the Terri- or the District of Columbia, respectively, as As I view the question, it is not at all tories, and the District of Columbia, but the case may be. a question of constitutionality, I have also the inhabitants who paid the tax, Bac. 4. That it shall be the duty of the no personal doubt at all that the Con- when they could be ascertained. Secretary of the Treasury to pay to such per- gress has the power to tax incomes from I see that the Senator from Illinois is sons as shall in each case apply therefor, and whatever source derived, and that such in the Chamber. I am glad be is here, BO furnish antisfactory evidence that such sp- power includes the power to tax income plicant was at the time of the mines herein- that be will know about this act of Con- derived from State, municipal, and coun- after mentioned the legal owner, or is the gress passed in 1891 recognizing the ty bonds. heir at law or the devisee of the legal owner principle of Immunity, and restoring what of such lands se were sold in the parishes of As I see It, Mr. President, the question had been collected by the tax law of B1. Rolena and St. Luke's in the State Is purely a realistic one: Are we now to 1851. of South Carolina, under the said note of levy a tax for the purpose of raising Mr. President, I renew my request to Congress, the value of said lands in the money with which to win the war and have the statute printed in the RECORD as manner following. to with To the gwners to pay for the war, or are we to endeavos of the Total in the town of Beaufort, one-half a part of my remarks. to change the system of taxation? If of the value asseered thereon for taxation There being no objection, the statute it were a matter of raising money with by the United States direct-tax commie- was ordered to be printed in the RECORD, alobers for Bouth Caroline: to the owners of which to pay for the war, my vote might the lands which were rated for taxation by be different from what It will be: but B.S. follows: the State of South Carolina as being usually an examination of the facts clearly dem- Chapter ADS cultivated, 85 per acre for each acre thereof onstrates that there Is no possibility of An act to credit and pay to the several States returned on the proper tax-book; to the raising any substantial sum by the pro- and Territories and the District of Colum- owners of all other lands, 01 per acre for each bia all moneya collected under the direct posed method. acre thereof returned on said tax book: Pro- tax levied hr the act of Oongresa approved Mr. President, It is an easy thing to vided, That in all cases where such owners. August .001 assume that the wealthy people of the or persons claiming under them. have re- Be " enacted, etc., That It shall be the duty demmed r purchased said tande, or any part country have tremendous incomes from of the Secretary of the Treasury to credit to thereof, from the United States, they shall which could-be drawn, and should be each State and Territory of the United States not receive compensation for euch part 80 drawn, large sums to help finance the and the District of Columbia a sum equal to redeemed or purchased: and any sum or sums Government, particularly in this crisis. all collections by set-off or otherwise made held or to be held by the said State of South Of course, there are large Incomes; but from said States and Territories and the Dis- Carolina to trust for any such owner under the significant fact which seems to me trict of Columbia or from any of the citizens section $ of this act shall be deducted to have been utterly overlooked la that or inhabitants thereof or other persons under from the sum due to such owner under the the act of Congress approved August 5. 1001, in the aggregate the incomes of the very provisions of this section: And provided fur- and the amendatory acts thereto. ther, That in all cases where said owners have wealthy are but a drop in the bucket. 5sc. 2. That all moneys still due to the baretofore received from the United States I hold in my hand a press release United States on the quote of direct tax ap- the surplus proceeds arising from the sale of which was issued by the Secretary of the portioned by section 8 of the act of Congress their lands, such sums shall be deducted from Treasury on Friday, October 7. 1943, giv- approved August 5: 1861. are hereby remitted the sum which they are entitled to receive Ing the figures for taxable and nontax- and relinquished. under this act. That in all cases where per- able individual income and defense-tax Bsc. 3. That there s.hereby appropriated, sons, while serving in the Army or Navy or returns for 1940. filed during the year out of any money to the Treasury not other- Marine Corps of the United States. or who had wise appropriated, such sume as may be been honorably discharged from said serv- 1941. The significant revelation to be Decessary to reimburse each State, Territory, Ice. purchased any of gald lands under neo- found in the statement from the Treas- and the District of Columbia for all money tion 11 of the act of Congress approved ury is that during the year 1940, 1,866 found due to them under the provisions of June 7. 1852, and such lands afterward re- persons had B net income of between this act; and the Treasurer of the United verted to the United States, it shall be the $100,000 and $150,000; only 626 persons States is hereby directed to pay the same to duty of the Secretary of the Treasury to pay had a net Income of from $150,000 to the Governors of the States and Territories to such persons as shall in each case apply $200,000: 273 persons had an Income of and to the Commissioners of the District of therefor, or to their heirs at law, devisees, or Columbia, but no money shall be paid to any grantees, in good faith. and for valuable con- from $200,000 to $250,000; 167 persons sideration, whatever sum was 80 paid to the had an income of from $250,000 to $300.- State or Territory until the legislature bereof shall have accepted, by resolution, the sum United States in such care, That before 000; 166 persons had an income of from herein appropriated, and the trusts Imposed, paying any money to such persons the Beo- $300,000 to $400,000: 86 persons had en in full satisfaction of áll claims against the retary of the Treasury shall require the per- income ranging from $400,000 to $500.- United States on account of the levy and cot- 800 or persons entitled to receive the same to 000; 79 persons had so income ranging lection of said tax, and shall have authorized execute a release of all claims and demands from $500,000 to $750,000: 33 persons had the governor to receive sald money for the use of every kind and description whatever an income ranging between $750,000 and and purposes aforesald: Provided, That where against the United States arising out of the the sums, or any part thereof. credited to any execution of said acta, and also . release of all $1,000,000; 28 persons had an income State, Territory, or the District of Columbia, right, title, and interest in and to the said ranging between $1,000,000 and $1,500,- have been collected by the United States from lands. That there la hereby appropriated, 000: 8 persons had an income ranging the citizens or inhabitante thereof, or any out of any money in the Treasury not other- between $1,500,000 to $2,000,000; 6 per- other person, either directly or by sale of prop- wise appropriated, the sum of 8500,000, or no sons had an income ranging between erty, such sums shall be held In trust by such much thereof as may be Decessary to pay for $2,000,000 and $3,000,000: 4 persons had State, Territory, or the District of Columbia said lots and lands, which sum shall toclude an income ranging between $3,000.000 for the benefit of those persons or inhabitants all moneys in the Treasury derived in any manner from the enforcement of said acts and $4,000,000: 2 persons had an income from whom they were collected, or their legal representatives: and provided further, That in said partsfies, and not otherwise appro- ranging between $4,000,000 and $5,000,- no part of the money collected from Indi- priated. That section 1063 of the Revised 000; and 1 person had an income of $5,- Viduals and to be beld in trust as aforesaid Statutes le hereby made applicable to claims 000,000 and over. shall be retained by the United States as & srising under this act without limitation M Mr. President, If my arithmetic is cor- set-off against any Indebiedness alleged. to to the amount involved in such claim: And exist against the State, Territory. or District provided further. That any sum or sums of rect, that means that In 1940 there were of Columbia to which such tax was collected: money received Into the Treasury of the 3,345 persons who had an Income of And provided further, That to part of the United States from the sale of lands bid in $100,000 or more. Regraded Unclassified 8198 CONGRESSIONAL RECORD-SENATE OCTOBER 8 Mr. LUCAS. Mr. President, will the third of the total income of the United States, but that is not the fact; It in less Let us take the same situation with Senator yield? respect to the figures given out & few Mr. O'MAHONEY. I yield. than 10 percent. Mr. LUCAS. Is that gross Income or Mr. LEE. Mr. President, will the Sen- days ago by Secretary Morgenthau. Ac- cording to his statement 393,844 persona net income? ator yield? filed income-tax returns showing In. Mr. O'MAHONEY. It is net income, Mr. O'MAHONEY. I yield. comes between $4,000 and $5,000, for a M figured before the deduction of per- Mr. LEE. Do the Senator's figures in- total of $1,742,796,000. In other words, sonal exemptions. clude nontaxable income, as well as tax- the number of taxpayers in this small Mr. President, this is the significant able income? group which represents Incomes of be- fact: If the entire Income of those 3,345 Mr. O'MAHONEY. Yes: this study tween $4,000 and $5,000 la year received persons were to be totaled It would be was made under the auspices of the In the aggregate more than twice, In- found to amount to $691,424,000. In T. N. E. C., in cooperation with the deed, almost three times, as much BA all other words, If we were to take, not the W. P. A., and we endeavored to find the normal tax and the surtex, but the en- more. those who received Incomes of $100,000 or total income. tire income of every individual in the Mr. LEE. Including the tax-exempt Mr. President, I ask that I may be per- United States receiving $100,000 or more, the total receipta to the Treasury would Income? mitted to put these tables In the RECORD at this point. be only a little more than $691,000,000. Mr. O'MAHONEY. Oh, yes; that is and we are spending at the rate of my understanding. For example, let us There being no objection, the tables refer to those in the next bracket, who were ordered to be printed in the RECORD. $6,000,000,000 a month. as follows: To me it seems perfectly obvious that receive incomes of $15,000 to $20,000 a it is not worth $691,000,000 to the Treas- year. They constitute only two-tenths of Distribution and disposition of consumer ury of the United States to cut off the 1 percent of the number of consumer income preferential treatment which, by the ex- units in the United States, and their A. CONSUMER UNITS AND INCOME isting law, we give to the political sub- total aggregate income is only 2.3 percent [By income brackets) divisions of the United States, the States, of the total income of the United States. the counties, and the cities, If we were to go to the other end of Percent Percess I am not concerned about the amount the scale and take, for example, those Income brockets of con- of 4th- of taxes which may be paid by the who receive between $2,000 and $3,000 a sumer gate to units come no wealthy. Mr. President, but I am tremen- year-a very modest income-we would adved dously concerned that the States, the find that they constitute 11.2 percent of cities, and the counties of the United the number of consumer units, so-called. I. Under $500 17.0 Le II. $500 to $1,000 States shall not be deprived of this pref- Their income amounts to 17.4 percent of 22.1 III. $1,000 to $1,500 22.1 11.6 erential treatment. I believe that the the total. In other words, the total ag- IV. $1,500 t $2,000 11.1 34.6 present law grants a preference, cer- gregate income of persons receiving be- V. $2,000 to $3,000 IL? 17,4 VI. $2,000 to $5,000 LA tainly. but it is a preference granted to IL0 tween $2,000 and $3,000 a year is almost VII. $5,000 to $10,000 LA 7.0 Iceal political subdivisions which sadly twice as much as the total aggregate in- VIII. $10,000 to $15,000 ,4 12 need it in a time when counties and cities, IX. $15,000 to $20,000 .2 come of all the persons receiving $20,000 23 X. $20,000 and over .0 N.I. and even States, are turning to the Fed- or more a year. eral Treasury, with its tremendous defl- cit, for money with which to do the [Net Income classes and money figures in thousands of dollars] things which they cannot do without such assistance. It seema to me to be of Taxable and nontatable returns Number of Net income Personal Credit for Earned In- the utmost importance that we should by net income classes returns exemption depend- ents come credit Total tax maintain the present situation and that (1) (2) we should do nothing to Jeojardize It. (1) (4) (5) (6) a Very little is to be gained by withdraw- ing this preferential treatment, Tatable Individual returns: With 66 Income: Mr. President, there are in the United I Under 1 (estimated) 528,784 482,599 368,898 376 48,260 1,771 States about as many counties as there 2 1 under 2 (estimated) 2,903,086 4,094,796 2,330,981 53,832 409,480 57,156 1 2 under 2.5 (estimated) 914,060 2,082,858 1,288,008 26,694 208,386 24,001 are individuals receiving these huge In- 4 2.5 under a (estimated) 912,174 2,004,204 1,503,632 98,844 200,420 24,673 comes. I am not thinking of the Indi- 5 a under 4 (estimated) 1,014,823 1,474,787 1,831,912 178,230 335,628 45,372 I viduals with the huge incomes, but I am 4 under a (estimated) 393,844 1,742,796 708,116 144,756 157,150 22,515 7 I under 6. 217,751 1,189,297 384,342 89,191 96,728 27,998 thinking of the counties and of the mar- 8 0 under 7 128,902 832,567 224,733 15,183 24,00 9 ket they will have and which they , under 8 83,395 (22, M) 10 143,596 36,223 47,800 22,554 8 under 9 58,473 498,420 W,807 24,421 38,454 2,58 should have for their securities. 11 9 under 10 44,685 42,513 76,132 15,055 30,886 21,140 It was a perfectly amazing discovery 12 10 under II 33,701 D 358,174 57,001 14,018 24,550 18,998 Il under 12 to me when I found that, as & matter 14 26,843 308,273 45,261 11,071 20,850 12 under 13 21,217 15 264,818 35,601 8,010 17,519 18,317 of fact, the wealthy in the United States IN under 14 16 17,548 236,548 29,431 7,361 15,345 17,75 14 under LE receive only a very small proportion of 14,831 17 16 under 20 214,794 24,677 6,120 13,625 17,486 80,96 18 47,280 813,235 the total income. During the studies of 78,762 10,418 44,098 21 under as 19 24,288 540,085 25 under 30, 40,221 0,800 23,196 71,99 the Temporary National Economic Com- 20 13,920 379,737 22, N99 5,534 18,417 M,IN ao under 40 mittee we published 8 monograph, Mono- 21 14,792 40 under to 508,221 24,198 A,949 14,497 100,58 87,730 22 7,464 50 under a 331,895 12,123 2,674 7,431 graph No. 3, entitled "Who Pays the 23 4,155 on under 70 226,008 6,802 1,621 4,2M 60,00 Taxes?" On page 7 of the monograph 24 TO under EU 2,548 104,712 4,118 1,004 2,651 $6,327 25 1,625 121,329 2,041 600 1,704 45,311 Is to be found & diagram showing the R) under DO 20,579 20 90 under 100 1,176 99,408 1,982 426 1,218 disposition and distribution of consumer 17 100 under 1/0 TMI 73,956 1,200 313 Rd 31,25 25 100 under 200 1,8% 223,088 2,639 643 1,380 100,387 Income In the United States for 1938- 29 39. This makes, what is to me, a very 200 under 200 620 107,300 1,018 220 630 19,549 36,64 80 273 250 under 300 00,839 426 V7 287 at INT amazing revelation. All the people in 200 under 400 45,625 282 39 153 20,405 23 100 the United States who received income 400 under to 56,869 273 62 1.4 34,517 33 500 under 750 40 144 26 69 of $20,000 a year, and over, constitute 34 750 under 1,000 of 46,006 122 20 M 3,15 only three-tenths of 1 percent of all re- 35 as 27,474 8 14 17 17,00 3,000 under 1,500 36 1,500 under 2,000 Mi 53,445 44 de 18 2,20 ciplents of income, and they received 37 5 2,000 under 3,000 11,03% 13 2 6 6 14,070 (35) or 10,000 only 915 percent of the total income. I 2M 3,000 under 4,000 8 39 4,000 under A.00 4 13,443 7 = a 10,5M should have Imagined that the total In- 40 A,000 and over 2 5,00 4 I : 1,20 come of all those receiving $20,000 or I 5,075 2 (32) 1 1,00 41 more would amount to & perfectly amaz- Total e With no DEL Inmoire 7,437,201 23,279,100 916,107 1,59,000 1,440,00 9,403,548 2,551 67 5 H 3 Ing proportion. I thought it could not 46 possibly be less than one-fourth or one- 42 Total, lasable returns 7,437,307 23,575,023 11,450,015 916,112 1,600,014 Regraded Unclassified 1942 CONGRESSIONAL RECORD-SENATE 8199 Mr. O'MAHONEY. Mr. President, I exempt securities under the pending b01, have the courage to strike down these wish to remark that the point of the Issue We would secure $225,000,000 of ad- special privileges. not only for the pur- before us is simply this: We are not vot- ditional revenue. If we defeat the pose of removing them as special priv- ing for or against a substantial income to amendment offered by the Benetor from Deges, but also for the purpose of the Federal Treasury: we are not voling Ohio [Mr. BURTON) and begin to remove strengthening the fiscal program of the for or against the extremely wealthy: we this privilege, the time will come when Government for a long and desparate are voting directly on the question those who are sweating to pay the Inter- war. whether the political subdivisions of the est and the principal upon this gigantic There are today approximately $20,- United States shall continue to have a indebtedness will be relieved by reason 000,000,000 of tax-exempt securities out- market for their securities, which is pro- of this tax exemption having been standing. Under the existing law the tected by the law. withdrawn. Government is losing an estimated $184,- At B. time, Mr. President, when power I have been very much surprised to 000,000. Under the rates in the present In the United States and all over the hear ardent advocates of Federal aid for bill the income loss will be $225,000,000 world is being constantly centralized, I this, that, and the other thing rise on a year. This is a large slice of income, think it is the supreme duty of every per- the floor of the Senate and say that the and if the Burton amendment is defeated, son who believes in maintaining the proposal contained In the committee and the principle of the Senate com- principle of local government and local amendment is an assault upon the rights mittee is adopted, ultimately the tax- authority to support local authority by of the States. Yesterday, one Senator payers of this country, who are forced to preserving the law as It now standa. who, like myself, is an ardent advocate pour their hard-earned dollars Into the Mr. LA FOLLETTE. Mr. President, We of Pederal aid for vocational education, Treasury. will be assisted by those who shall never have an equitable tax system rose on the floor of the Benate and said are escaping their fair share of taxes in this country until the privilege of tax that he was opposed to the committee because of the tax-exemption privilege exemption is withdrawn from the munic- amendment because It would enable the these bonds have. ipal, county, and State levels of govern- Federal Government to secure revenue Mr. President, I wish to point out ment. It is true in time of peace, with from the securities issued by his State that as the income-tax rates have risen, low income-tax rates insofar as individ- for the support of education. the statistics of the Treasury Depart- uals are concerned. In time of war, Mr. President, I say you cannot have ment show that those in the upper brack- with the rates In the pending bill going to your cake and eat it, too. Either the ets have been accumulating more and 87.4 percent on the top bracket, this States must assume full responsibility more of their income from this tax- haven of refuge for the wealthy taxpayer for meeting all the problems which go exempt source. becomes a form of special privilege. It with modern society, or they must yield In this connection I point out that in is like a cancer enting at the vitals of up an obsolete, an outworn, an unjusti- 1923, net estates over $100,000 and under the democratic process, fied special privilege. $200,000 had only 1.6 percent in tax- I have been emazed as 3 have sat At this time, Mr. President, when the exempt securities income, In 1940 that through the debate today, to hear on the Government is engaged in a struggle for Income had risen to 3.1 percent. one hand that Senators are opposed to its very life, to have special pleaders sur- In 1928 estates of $1,000,000 and over the committee amendment because it round the corridors of the Capitol ask- derived 6.2 percent of their Income from does not tax the Income from existing IDg for a retention of special privilege la tax-exempt securities. By 1940 that fig- and outstanding tax-exempt securities, discouraging to me. This is a time when ure had risen to 15.1 percent. and on the other hand to hear Senators municipalities, counties, and States are These are the most recent figures ob- say that they cannot support the com- no longer burdened by the problems of tainable, bus I venture the assertion that mittee amendment because It. does not unemployment, and, therefore, they are if we could know what they are today raise any reventie for the war. I am to no longer in the position where they must under present tremendously increased some extent caught on the horns of that utilize their resources for vast public im- rates, we would find that this tendency dilemma myself. I have voted In the provements. On the contrary. the Fed- of the rich and those in the upper Senate time and time again for placing eral Government is shouldering the full brackets to accumulate more and more a tax on the Income from so-called tax- cost of putting in the utilities for the of these securities has gone on apace, and exempt securities, because I have no vast defense housing program which is with the constantly rising tax rate, un- shadow of a doubt that the Federal Gov- being constructed, part of which is per- less we check this privilege, the situation ernment has the power to tax them and manent in character, and is being built will become all the more aggravated. because I have always believed that the by private enterprise, and which will Mr. President, It has been said here income-tax system could never be just Inure to the benefit of the communities that one cannot cite the cases of a few or equitable with this island of refuge in which It is being built. For them to individuals and prove any theory. I hold for the wealthy taxpayer. But, Mr. come here and attempt to overwhelm the in my hand a table appearing in the President, in time of war It becomes ab- Congress by their concerted drive hearings of the House committee. The solutely essential that we remove these against this proposal is to me a shocking table shows the incomes of 25 Individuals. special privileges. indication that even in this dire hour of It shows the total amount of their In- I have prepared an amendment which the Nation's necessity selfish interests comes. It shows the total amount of provides for the taxation of the income and those who desire to retain special Income derived from tax-exempt securi- from outstanding securities. I am acrry privilege are not conscious of the situa- ties, and it shows their savings under the I am not In a position to offer It now, so tion which confronts the people and their rates proposed by the Treasury. I shall as to give an opportunity to vote for It to Government. read only a few of these items at random, those who have risen in this debate and I said in connection with another but I do not think they are untypical of said that If there was only some revenue amendment, and I venture to repeat It those with large incomes. involved they would be delighted to vote now, that we are tn the most desperate Let me say, before I quote from this for the amendment. fiscal and fmancial crisis that any nation table, in response to the arguments ad- The time has come when we should in the written history of the world has vanced by the Senator from Wyoming make a beginning in this direction, even ever faced. It is no answer, Mr. Presi- 1Mr. O'MARONEY] that for the very rea- If we cannot succeed in achieving the dent, to say that a particular amendment son that a large part of the percentage of whole objective. Let no man doubt that will raise only $225,000,000. or that it will the national income is in the lower with appropriations and contract all- raise only $150,000,000. I recognize that brackets, we should remove the tax- thorizations now already exceeding as against the vast expenditures which exemption privilege from those who are $200,000,000,000, the time will come when we are making, any particular amend- in the upper brackets. Otherwise that if the committee amendment is enacted ment may seem to shrink into insignifi- portion of the load is dumped on those into law, revenue will be obtained from cance, but if we follow that rule, we will with the least ability to carry the burden. an income tax levied on securities which never to the aggregate adopt & suffi- Individual No. 1 has State and local In- are now tax-exempt. cleatly heavy tax program to enable the teresta amounting to $221,000. His tax- It sa estimated that, if we were to tax Government to wenther the fiscal storm able net income from other sources is the income derived from so-called tax- and to maintain its credit. We must $601,000. His total Income is $823,800. Regraded Unclassified 8200 CONGRESSIONAL RECORD-SENATE OCTOBER 8 The revenue loss to the Treasury from tax opinions rendered by able Members of this body to the effect that we do have are about to be Baked to die for exemption under the rates proposed is preservation of this Government. like $195,000. the power. you think the young man coughing Do Individual No. B in the table has State Mr. President, there may be doubt in the minds of some upon this question. bia guts on the Sahara Desert feels that up and local interests of $820,000. He has taxable net Income of 8835,000. He has There is none in my own mind. I have a total income of $1,656,000. His tax- always believed that the sixteenth B special privilege? can get $750,000 of tax exemption from he is getting B. square deal when one man exempt interest is $605,000. His taxable amendment struck down the Pollock case interest Is $1,351,000. The revenue loss war. The question of the morale of the Mr. President, I fear this will be 1 long for good. Be that as It may, let us from the tax exemption is $646,000. assume that one takes the other position. people will ultimately determine whether Under the bill as reported from the com- If he is fair-minded at all he must admit, or not this Government survives. The mittee the revenue loss would be $722,000. it seems to me, that there is a grave ques- only way we can maintain morale when Individual No. 21 on the list has State tion of constitutional power involved. the casualty notices descend upon the and local interests amounting to $1,083,- If so, let us resolve It in favor of striking homes of America like snow in a Montana 000, His taxable net income from other down special privilege when we are tak- blizzard is to maintain equality of sacri- sources is $4,321,000. His total income ing the lives of young men to defend this fice 50 far as It is humanly possible under is $5,405,000. His tax-exempt interest Nation. Let us permit the Supreme the circumstances. is $3,380,000. His taxable interest is $4.- Court to decide this question, rather than I will give up anything I have in this 251,000. The revenue loss from the tax conduct a legalistic argument here. world to maintain democracy, to main- exemption is $871,000. The revenue loss Mr. President, I speak with feeling. tain this Government, and I think the under the bill as reported from the com- I hope that I am not exceeding the young men of this country are ready, mittee would be $953,000. bounds of propriety in debate, but I feel willing, and anxious to give up every. Mr. LEE. Mr. President, will the Sen- deeply on this question. I feel deeply thing they have, However, in all fair- ator yield? because I think the time has come, if ness they should know that those who Mr. LA POLLETTE. I yield. Mr. LEE. Does the argument that the this democracy is to survive, when we are here on the home front-the soldiers principle is minimized because there are must demonstrate that we have the cour- of democracy in positions of power-have the courage to Insist that In this war only B few of such inequities appeal to age to strike down special privilege at a there shall be equality of economic sucri- the Senator? time when young men by the millions fice as well as of fiesh and blood, Mr. LA POLLETTE. Mr. President, I EXHIBIT A have just said that, on the contrary, the very fact that there are relatively few TABLE No. 2-State and local government securities as a percent of prom estate, by star cases is more reason for removing the classes of net estate, estate tax returns filed in 1928-40 exemption. The exemption amounts to a consider- Net estate I On thousands of dollars) able sum of money, for the Treasury has estimated that under the rates proposed Filing you 100 under 200 under 300 under 500 under 1,100 and by the Finance Committee, If we were to 200 200 500 1,100 ² ever tax the Income derived from so-called tax-exempt securities, we would secure State and local government securities as percent of gross an additional amount of $225,000.000 a year. That is not "hay" in anybody's Percent Percent Percent Percent Pront 1028 language, regardless of the deficit which 1.6 2.3 27 4.3 L1 1929 1,0 1.8 2.2 4.5 4.0 we face. 1930 1.4 14 20 3,6 M Mr. President, I ask unanimous con- 1931 1.9 15 4,3 4.8 9.2 1932 2.2 sent that the two tables to which I have 26 5,0 K.J. no 1933 2.9 4.1 6.6 11.2 21.9 referred, together with the appendix fol- 1934 2.4 4.4 AS 10.0 ai 1935 lowing the statement of my individual 3.6 AT 6.7 11.0 161 1635 3.0 5.4 as 8.2 a views, be incorporated in the RECORD at 1937 3.1 6.3 5,7 9.1 ILI the conclusion of my remarks. 1988 2.9 4.4 &3 5.0 INT 1939 The PRESIDING OFFICER. Without 3.2 4.4 7.1 11.4 n: 1940 3.1 3.6 0.2 3.1 15.1 objection, It is so ordered. (See exhibits A, B, and C.) I Before specific exemption. Mr. LA FOLLETTE. Mr. President, 2 Includes securities of Territories and Insular possessions. we have not hesitated to interfere with # Gross estate Includes tax-exempt insurance. Bource: Compiled from Statistics of Income. the lives of individuals in this war. We have exercised the plenary power which EXHIBIT B government possesses. We have reached TABLE No. 4-Tax liability assuming interest from State and local government accurities into every home in America, and by the (s) Inc-exempt and (b) tazable under present and proposed individual income-tax rates, long arm and power of the Government for 25 selected individuals we have taken the flower of the young manhood of America and put It into uni- [In thousands of dollars] form. We are sending It overseas to die Present rates Proposed rates on foreign shores, on 42 fronts. Did we Taxable Inquire, Mr. President, whether we were State bet Case and income Total to- taking any privileges away from those local Tax liability come Revenue Tax liability Revenue from young men? We did not, We assured Interest other los from the Interest laxer- we them, however, that they were being sent sources Interest Interest Interest emption emption except taxable exempt tarable abroad to fight for the fundamental prin- ciples upon which this Government was I 221.0 601.9 923.8 predicated. Those principles Include the 2 424.2 236.2 00/7 171.8 504.4 $69.0 207.9 a 444.1 126.4 301.2 174.8 157.0 364.9 is principle of equality among men. 260.4 148.9 4 409,3 87.0 275.8 169.0 105.2 324.9 mi 230.9 1,337.5 4. 1,568.4 I do not wish to have anything I say 100.2 226.9 1,181.6 162,4 1,151.1 1,354.3 il 6 1,081.0 1,307.9 1,12&0 WAT :05.0 075,8 170.2 025.3 seem Invidious; but today I have heard 214.0 7. 147.8 362.8 241.8 158.0 294.0 ISA! 100.4 349.5 legalistic arguments about whether we % 144.2 493.7 82,6 333.6 257.0 101.1 407.9 3051 820.7 9. 635.6 1,656.1 (05.0 1,251.0 040.0 710.0 1,432.2 722.3 have the right to eliminate this special 162.7 249.8 10 412.5 158.1 551.7 279,2 121.1 194.5 337.7 10: 378,1 525.7 200.F privilege or not, in the face of an opinion 11 626.8 175.0 330,7 442.7 200.5 216.2 n 373.0 TOLI by the Assistant Attorney General of the 249,0 773.0 503.0 283.1 104.8 20.0 303.8 765.1 11 1,738.1 70.4 1,167.7 608.3 047.4 1,327.6 United States, an opinion by the General 668.7 14 805,0 974.6 108.6 712.8 514.3 243.3 833.7 i 817.4 Counsel of the Treasury Department, and 258.0 1,106.8 186.6 817.2 630.0 229.0 948.2 TIME Footnotes at end of table. Regraded Unclassified 1942 CONGRESSIONAL RECORD-SENATE 8201 TABLE No. 4-7ea liability assuming Interest from State and local government assourttes discriminatory burden. Rather. It represents (a) tax-clampt and (b) tesable under present and proposed individual income-taz refes, the effect of placing income from private and for 25 selected public sources upon the same plane of (In thomas of dollars) equality. The absence of any element of dis- crimination would be belpful in sustaining Present rates Proposed retas the constitutionality of the proposed tax. Texable Until the Supreme Court handed down its State net decision in Alabama V. Ring 4 Böczer on and Income Total In- Tax liability Revenue Tu Eability Care Revenue November 10, 1941 (314 U. 8. 1), there was local tram come lose from other loss from interest room for the view that, despite the declaions Interest Interest tax ex- DOCTORS ³ Enforest Interest taxes- affecting public employees, a constitutional easmpt tazable smption exampt tasable emption immunity from taxation might possibly be accorded to Government bondholders, Mr. 18 204.6 379.6 771.2 290.7 543.3 302.8 SOL 7 661.9 347.3 Justice Stone had stated in the O'Keefe opin- 200.5 603.0 890.5 and 658.0 29.8 003.7 764.0 250.0 lon (p. 486) that there was no basis "for the In 17 404.3 160.1 564.4 94.8 295.3 300.5 116.0 471.4 305.4 assumption that any tangible or 18 216.3 01A.1 1,231.4 000,8 015.6 249.0 780,0 1,008.3 STY.S certain economic burden la Imposed on the 313.4 228.7 598.1 1TW.2 416.6 27.4 20.0 495.7 10 273.8 356.5 135.4 OLD This 331.0 251.8 94.8 407.6 312.6 government concerned as would justify" a de- R 31 1,683.7 4,321.4 5,404.1 3,390.3 4,251.3 871.0 3,775.9 4,720.6 GSL 7 elaton that the tax upon the employee's salary 172.6 170.7 MIS 102.9 997.2 125.0 125.2 270,0 151.6 22 was invalid. On the other hand, It is no 220.2 106.9 193,1 $ 60 254.5 165,0 12L9 320.0 19LT 12 24 $14.8 231.7 546,5 117.8 487.3 265.8 542.5 277.0 doubt true that the usuing government Y2 OLE 218,0 543.7 130.1 $60.7 280.1 164.9 MALB 373.0 would bear & part of the economic burden of an income tax Imposed upon the bond- Total 9,980.4 14,441.7 26,411.1 10,348,8 17,914.1 7,365,3 12,08.0 20,667.0 5,769.3 holder. Novertheless, this Department did not attach to the statement of Mr. Justice I Exclusive of net long-tarm espital gains and tomas. Stone the significance urged for it by those As reseluded in Benale Finance Committee version of H. B. 7278, Victory las excluded. who have opposed the legislation now eug- Source: Incotrie time tram returns où Form 1040 for 1940, goated. The recent decision in Alabama King & Booser confirms our view. It la now Examine a tim of any legal problem can ever be prior clearly established that the validity of a tax OPENION OF ASSISTANT ATTORNEY GENERAL to a final determination of the precise issue upon bond Interest will not be affected by SAMUEL o. CLARK, л. ADDRESSED TO BANDOLPH by the Supreme Court. It is our considered the increased likelihood that the economic opinion that the Congress does have the B. PAUL burden will in some measure be passed on to power so tax such income, the Government. DEPARTMENT CIF JUNTICE, It is, of course, true that the Supreme Washington, April 14, 1942. The question in the Alabama case was Court concluded in Pollock V. Farmers' Loan whether na Alsbama sales tax, which was to Hon. RANDOLPH B. PAUL, Trust Co. (167 O. 429; 158 U. 8. 601) that Tar Adviser to the be collected from the buyer. was unconsti- a Federal tax could not validly be imposed Secretary of the Treasury. tutional in its application to purchases made upon Income derived from municipal obliga- Washington, D. by a contractor engaged by the United States tions. That decision was based upon the DEAR Ma. PAUL: On June 24, 1938, Hon. under a cost-plus-a-Axed-fre contract. It theory that B tax on income was a tax upon James W. Morris, Assistant Attorney General was quite clear. of course, that the entire the source from which the income was de- In charge of the Tax Division of the Depart- burden of the tax would be borne by the rived. Thus, & tax on the income from mu- ment of Justice, transmitted to the Honorable Government. In fact, the Government bad nicipal bonds was the equivalent of a tax Herman Ollphant, General Counsel of the agreed with the contractor that State taxes, Tressury Department, a comprehensive study upon the boude themselves, and, therefore, if valid, would constitute part of the cost of an unconstitutional burden upon the power of the constitutional aspects of the texation the project and would be assumed and borne to horrow. However, this reasoning has been of Government bondholders and employees. by the Government. Rence there was no completely discredited in later opinions of uncertainty as to the economic effect of the Copies of this study were also made available the Supreme Court. With the destruction of tax as in the earlier case of James v. Dravo to the appropriate congressional committees. the premise of the Pollock case, Its conclusion You have requested our opinion on the Contracting Co. (802 U. 6. 134). which in- must also fall. constitutionality of the proposal by your De- volved a lump-sum contract. The Supreme partment to subject to Federal income tax the "The theory, which once won & qualified Court nevertheless sustained the State REAC- approval, that a tax on income la legally or Mon. In the course of its opinion the Court interest received hereafter on outstanding and future Issues of State and municipal bonds, economically a tax on Its source, is no longer made the following observation (pp. 8-9): tenable "," maid the Supreme Court "So far as such a nondiscriminatory State with special emphasis on legal developments subsequent to the publication of our study. in March 1939, in Grapes Y. New York ez ref. tax upon the contractor enters into the cost We are pleased to comply with your request O'Kecje (806 U. B. 480). Less than a year of the materials to the Government, that La and submit the following views. earlier in Helvering v. Gerhardt (304 U. 8. but a normal incident of the organization In our earlier study we expressed-tte fol- 405) the Court had sustained & Federal tax within the same territory of two Independent lowing conclusion: $ upon the salaries received by employees or taxing sovereignties. The asserted right of the Port or New York Authority. The the one to be free of taxation by the other "It is believed that there can no longer be claimed immunity, if allowed. would in the does not spell immunity from paying the found in the decisions of the Supreme Court Court's opinion (p. 626) have troposed "to an added costs, attributable to the taxation of any rule of continuing authority which would inadmissible extent a. restriction upon the those who furnish supplies to the Govern- raise a constitutional probibition against ap- taxing power which the Constitution has ment and who have been granted no tax plying the Federal income tax to State bond- granted to the Federal Government." immunity." holders, officers, and employees." The imposition of & State tax upon the Thus, the Supreme Court finally loid to You are no doubt aware that since that salary of a Federal employee was similarly rest the theory that an economic burden In time the decisions of the Supreme Court on held in the O'Keefe case not to place an un- terms of Increased governmental costa In- the question of constitutional tax Immunity constitutional burden upon the employing validates a tax. The eartier opinions in Pan- have all served to reinforme and confirm that sovereign. Collector V. Day (11 Wall, 113), handle ou Co. V. Knoz (277 U. 8. 218). and conclusion, The trend toward a limitation another landmark decision like the Pollock Granes V. Texas Co. (298 U. B. 393), were held of ruch immunity, which had developed when case, was thus overruled. The express denial untenable no far as they support the contrary We published our study in 1938, has con- in the O'Konfe case that & tax on income was conclusion. tinued without interruption to the present date. the equivalent of a tax upon the source rep- A. deotaton. which supports State taxation resented no new thought but was rather a of Federal contractors We are, of course, no longer concerned with reiteration of a principle which had been would operate at least equally to sustain a the power of the Federal Government to tax applied in the Court's prior decision in New Federal tax Imposed upon State bondholders. the income of State officers and employees. York et rel. Cohn T. Graves (300 U. 8. 808) Both relationships rest upon contract; one The declaion of the Supreme Court in Graves and in Hole V. State Board (002 U. B. 95). Involves the furnishing of supplies and scrve Y. New York # rel. O'Reete (306 U. a. 466), There, too, It had been recognized that "In- tos, the other money. The tax in each in- and the enactment of the Public Balary Tax come is not necessarily clothed with the tas stance wodld increase the cost of govern- Act of 1939, have removed that problem from immunity enjoyed by its source." mental operations: In the case of the State the field of controversy, Taxation by both The opporients of the pending proposal tax on the Federal contractor, to the full State and Federal Governments of the salaries urge that it would produce an unconstitu- extent of the tax exacted; in the case of the of public employees la now an accepted incl- Lional "Interference" with State govern- State bondholders, to some extent which is dent of our fiscal system. The only remain- ments. Translated Into practical terms, the difficult of precise ascertainment. Parn- Ing question Is whether the income received interference complained of la marely the in- phrasing the language of the Supreme Court from State and municipal obligations may be creased cost of future public borrowing which in the Alabama case, we may therefore con- subjected to Federal taxation, In our view, might be occasioned by the tax. It is sig- clude that so far as 6 nondiscriminatory the unswer is as clear and certain as the solu- nificant that this increased cost involves no Federal Income tax upon 5. holder of B State No. 173-5 Regraded Unclassified 8202 CONGRESSIONAL RECORD-SENATE OCTOBER 8 obligation enters Into the cost of borrowing, tional, "there remains no constitutional that is but a normal Incident or the organi- bar to Federal texation of the income received and municipal bonds has been before the sation within the name territory of two Inde- from the bonds now outstanding." (Tax Im- American people. It is a question pendent taxing sovereigns. munity and the Revenue Bund, by Daniel B. which almost every American has his On What has been said thus far as to the power Goldberg, a printed memorandum distributed opinion. He certainly has had no lack of the Federal Government to impose a tax by the Conference on State Defense, March of opinion in the Dress and from the upon Income received from State obligations 1940.) platform. The debate in this body dur. applies with equal force to all Interest here- The Department's study of 1938. referred after received whether upon future Issues or to above, reached B. ascond and alternative ing the greater part of yesterday and all upon outstanding obligations. No constitu- conclusion that Irrespective of the weakened high order, of today has been of an exceptionally tional question as to the validity of a retro- vitality of the Pollock case and Collector 9. active tax is involved. Bee United States v. Day. there is sound basis for a construction or Two questions were presented to the Hudson (200 8. 408), and casts cited there- the sixteenth amendment which would re- Finance Committee again this year, M In. The proposed tax reaches only future move the Immunity of the State bondholder they were also presented to the Ways Income, and is therefore entirely prospective and officer. We there examined at length the history of the ratification of the amendment House: and Means Committee of the other in operation. It possesos the same constitu- tional validity as the Income tax Imposed by and presented as exhibits the evidence which would support that conclusion. Accordingly. First, whether the Income derived from the Public Salary Tax Act of 1839, upon the income received after 1938 by all Federal we refrain from entering into that phase of State and municipal bonds should be judges, irrespective of the date of their ap- the problem in detail. One brief observation, taxed: second, If It were not deemed wise pointment to office. however, seems appropriate, or just to tax the Income derived from The assumption, which was formerly prev- At the hearings last month before the Com- such bonds outstanding, should the in- mittee on Ways and Means of the House of alent that interest received upon State BC- come from future Issues of State and Representatives, reference was made to the municipal bonds be taxed? curities was Immune from Federal taxation, id analogous to the assumption of many years fears expressed in 1910 by then Governor There is a question of power; that is standing that Under Buans V. Gore (253 U. B. Hughes, of New York, that the proposed six- 245), an Income tax upon the salaries of Fed- teenth amendment would authorize the texa- quite true. It has often been debated tion of Interest received from State and must- I myself have in the past entertained eral judges would be unconstitutional as a cipal obligations. Reference was also made to the view that the power of Congress to diminution of their compensation. The sal- aries of some Federal judges were made sub- the subsequent assurances of Senator Root tax income derived from State and ject to the Income-tax laws by the Revenue and Senator Borah leading to the conclusion municipal bonds was Involved in great Act of 1932, which required that all compen- that the amendment WAS adopted by the doubt. I now have no serious doube that sation received by judges taking office after legislatures of all the States with the views the Supreme Court will hold that the June 6. 1982, the effective date of the act, be of the latter two in mind. The statements of Congress has the power to tax income included in grose income, Judges who had Governor Hughes and of Senators Root and taken office prior to June 6, 1932, were thus Borah, and of many others, were gathered and derived from State and municipal bonds commented upon in our study. Mr, President, conceding the power, given a statutory tax Immunity. In the case It is significant that & large number of the question is whether It is wise to Im- of the bondholder, express statutory exemp- public officials (some agreeing and others dis- pose the tax on the income from State tion was included in the act of October 5, 1913, and this provision was repeated in later agreeing with the construction placed upon and municipal bonds. That is & debata- acts. With the realization that tax immunity the amendment by Governor Hughes) urged ble question. It La a question on which of judges who had taken office prior to June that If the Hughes construction was correct, reasonable minds may differ. I grant e. 1992, was not a constitutional requirement, It furnished an additional ground for the the Congress, by the Public Balary Tax Act adoption of the amendment. Among these that. I cannot believe that we have not of 1959, took the final step to remove It. The were Frederick M. Davenport, to whom Ben- the power, and I cannot believe that It la wrong to tax the Income from State and present proposal to tax future income of all ator Root's letter bad been addressed, and State securities is therefore consistent with Senator Brown, of Nebraska, who was the municipal bonds. That, to my mind, the procedure and objective of the Public father of the joint resolution submitting the seems to be the big question. I shall go Salary Tax Act of 1939. A further illustra- amendment to the States. It la also signifi- as far as anyone will go in trying to main- tion of the application of the income-tax cant that the New York Legislature rejected tain the business machine upon which laws to future Income arising out of transac- the amendment in 1910 after the measage of tions which were closed before the particular Governor Hughes, but ratified it subsequently the country must depend-and by that I taxing provision was adopted may be found under the administration of Gov. John A. mean the whole business machine, from Dix, who vigorously championed the broadest the humblest individual to the largest or- in Burnet V. Wells (289 U. 8. 670). The grantor of an irrevocable trust was there held Interpretation of the amendment. ganization which we permit to exist. 1 constitutionally taxable upon the trust In- The foregoing and en abundance of almilar shall go as for as anyone will go In main- come although the trust had been crested evidence permitted the conclusion to be taining the business machine upon which before the enactment of the statute imposing reached in our study that the preponderant we depend, upon which we shall depend the tax. understanding of the States at the time of when the war ends, and upon which the There is no constitutional basta for con- the rationation of the sixteenth amendment was that Its adoption would in all probability men who are fighting must depend in tending that income hereafter received upon carry with It the power to tax the Income order to find a job when they return. outstanding State bonds must be free from Federal taxation because the obligations were from State and municipal bonds. Mr. President, I think that is a short- Issued and purchased on that implied or ex- We should like to reiterate, bowever, that sighted policy which would break down pressed understanding. The Federal Govern- the constitutionality of the proposed legisla- the business machine and which would ment was not a party to such contracts and tion does not depend exclusively upon the ac- let the returning soldiers find no work the power of the Congress to enact & revenue ceptance of our construction of the sixteenth and no employment, but find a period measure is not fettered by any agreement amendment, namely, that the words "from of stagnation through which they would between Individuals or between an individual whatever source derived" mean exactly what and à State. There are many illustrations of they say, and as so Interpreted clearly em- have to pass, after this war shall have this proposition. Thus, in Loutsville & Nash- brace Income from Government securities, ended. ville R. R. Y. Mottley (219 U. 8, 467), AD act With full confidence, the validity of our con- So, Mr. President, paraphrasing the of Congress which prohibited the enforce- clusion may rest upon the basic proposition expression "Keep 'Em Flying," I am will- ment of certain contracts for transportation previously discussed that no implied consti- Ing to "Keep Business Trying." It is es- was upheld, although applied to a preexisting tutional Immunity from Federal texation at- sential to the life of America to keep contract. In New York V. United States (257 taches to interest received from State and municipal obligations. business trying-that Is, by giving to U. 8. 501), an order of the Interstate Com- Very truly yours, business a fair treatment, although nos merce Commission which Increased an Intra- state railroad rate was upheld even though SAMUEL O. CLASS, Jr. relieving It of its proper and fair burdens. the State charter had provided that & leaser Assistanz Attorney General, of course. rate should be charged by the company, Bee also Norman V. B. à O, R. Co. (294 U. 8. 240), Mr. GEORGE. Mr. President, this Looking at the matter from the broad question has been debated in the United and national point of view, I cannot see It accordingly appears that DO objection on constitutional grounds can be. successfully States sinde before 1909. Thirty-three why the position I have just stated is pot years ago last July the two branches of the position which should be taken by raised against the proposal to tax the Income bereafter received upon outstanding State the Congress submitted the sixteenth the National Government, by every obligations. Indeed, the assistant secretary of amendment to the several States. Its State, by every municipality, and by the Conference on State Defense has admitted that If Federal texation of Income arising-out ratification, of course, followed. During every taxing district. It will not break of future issues of State bonds is constitu- all the intervening years the question of down the business machine, It will not the wisdom and power of taxing State destroy the opportunity for men to dad Jobs after the war ends and when the Regraded Unclassified 1942 CONGRESSIONAL RECORD-SENATE 8203 soldiers come marching home, It will not Clark. Idabo La Pollatta Reyacide Clark, Mo. of refunding any of the refunded obligations: break down the business machine, it will Langer Boster and Connaity Les Schwarts not destroy it, to tax income from every Danaber Lodge Shipstand (D) The aggregate principal amount of the source from which men derive it; and Davis I/unis Smith new issue la not in excess of the aggregate to do so will not break down the cities, Downay McCarran Spencar principal amount of the refunded obliga- Dosey Molariand Sweart tions; and the States, or the municipalities, nor Elender MoKellar Tan (E) Interest on each of the refunded will It seriously interfere with their abil- George McRary Thomas. Idaho Ity to finance themselves. With taxes Gerry Maloney Thomas, Okla. obligations ceases (by reason of such obliga- Gillette Maybank Thomas, Utab tion being called for redemption in accord- as high as they are, and as high as they Green Mead anos with the terms thereof as they existed must go, there must inevitably be a great Guffey Millikie Turnell on enactment date, or the date of lasue, scramble to secure every outstanding Gurney Murdock Vandenberg whichever to later) to run upon a date not Batch Numy Van Nuys tax-exempt bond or partially tax-exempt more than 7 months after the date upon Haydeu Norris Wagner bond and every such bond which here- Herring O'Dentel Wallgren which interest on the refunding obligation begins to run: and BILL after will be issued. O'Mahoney Walsh Holman Overton White (F) Interest on each of the refunded obli- So, Mr. President, It seems to me that Johnson, Calif. Pepper Wiley gations, for the period at the end of which whatever may have been our judgment Johnson, Colo. Redcliffe Willis It ceases to run by PRASON of such call for in the past, and however we may have Kilgore Reed redemption, is considered as Interest on an been committed to it, the proposal to The PRESIDING OFFICER. Eighty- obligation issued before January 1, 1945; and tax income derived from State and six Senators have answered to their (G) The refunding obligation. in its terms, municipal bonds issued after January 1, names. A quorum is present. states the exemption expiration date of, and identifies, the refunded obligations; and 1943, not only squares' Itself with the The question is on agreeing to the (B) The interest rate on the refunding principle of equity, which we like to think amendment of the Senator from Ohio obligations for any period ending on or be- underlies all democracy and is In a sense [Mr. BURTON]. fore the exemption expiration date of the the soul and spirit of democracy, but Mr. GEORGE. I ask for the year and refunded obligations in not higher than the prevents anyone, whether be be relatively nays. interest rate which any of the refunded oldi- poor, only moderately rich, or very rich, The yeas and nays were ordered. gations had, or would (If such obligation had from finding a shelter under which he Mr. BARKLEY. Mr. President, may not been called for redemption) have had, could take refuge at a time when his we have the amendment offered by the for the corresponding period, country, in sheer defense of the Ameri- Senator from Ohio (Mr. BURTON] stated? then the refunding obligation shall be con- can system of free institutions and of The PRESIDING OFFICER. The sidered as Issued before January 1. 1943, as clerk will state the amendment. to 80 much of the Interest as accrues for any human liberty, is straining every nerve, period ending before or on the exemption taxing to the utmost every citizen, to The CHIEF CLERK. It is proposed to expiration date of the refunded obligations, find the money which, plus what we may strike out on page 34, line 1, the words and shall be considered as Issued after De- be able to borrow and will be able to "before January 1, 1943," and beginning cember 31, 1042, as to the remainder of such borrow without breeking down our 600- on line 23. page 34, to strike out all down interest. For the purposes of this pars- nomic system, will make It possible for to and including line 16 on page 38, as graph- us to finance ourselves through the war. (I) Several obligations shall be considered follows: I feel that I should ask myself but as one issue, only If each to identical with all (9) For the purposes of clause (B) of para- the others in maturity, interest rate, terms one question, and that is, Is it right to graph (1) of this subsection: and conditions, and recitals, but the fact tax the income from State and municipal (A) If the terms of an obligation Issued that the denominations differ, or that some bonds? If it is right, I am willing to before January 1, 1943, the maturity of which are registered and some In coupon form shall let the Supreme Court say whether we on the date of enactment of the Revenue Act be disregarded. have the power, for its decisions are of 1942 (hereinafter called "enactment date") (J) "Exemption expiration date" means- sufficiently involved in doubt as to justify or the date of Issue, whichever is ister, Is later (1) With respect to & refunded obligation than December 31, 1942, are, after enactment me in concluding that the Court will re- issued before January 1. 1943, the date of date, changed ao as to Increase the principal solve the doubt in favor of the validity maturity which the obligation had on De- amount or interest rate or to extend the cember 31. 1942; of such an act. maturity. then such obligation shall (M to (II) With respect to a refunded obligation So, Mr. President, I exp.ess the hope interest accruing for any period after the data Issued after December 31, 1942, the date M that the Senate will vote down the of the change or December 31, 1943, which- of which interest thereon would (If the obli- amendment offered by the distinguished ever is later) be considered as Issued after gation had not been called for redemption) Junior Senator from Ohio. Let us stop such later date. have ceased to be considered as interest on now at least the future Issuance of State (B) In the case of an obligation issued an obligation issued before January 1, 1048. and municipal bonds the Income from after the enactment date and before January which will be exempted from our Federal 1, 1945, such obligation shall (as to Interest Mr. BURTON. Mr. President, merely accruing for any period after December 31, that I may be sure that I understand income tax. 1942) be considered M issued after December correctly the parliamentary situation, In this hour the ederal Government 31, 1942. If any part of the proceeds of the and that the Benate does, I understand is supreme. It must always be able to Issue of which the obligation is a part, or that the law now provides that income protect Its revenues against possible cur- If any obligation of the Issue, le devoted to tallment by means of bonds which may the retirement or refunding of an obligation from all State and municipal securities be issued in great volume before this war the maturity of which on enactment date shall be exempt from taxation. The ends, or Immediately upon its conclusion. was later than June 30, 1943. For the pur- committee proposes an amendment to So, I think it right to avoid the pos- poses of this subparagraph, June 30, 1945, limit that exemption to those securities shall be considered the maturity, on enact- which were issued or will be issued before sibility of such curtailment, and I believe ment date, of an obligation the interest on January 1, 1943. My amendment Is to that to do so will comport with equity which ceases to run before July 1, 1943, by strike out that date, and to strike out about which we talk, and which all of reason of such obligation being called for the limitation, and therefore to leave us really favor and support under our redemption in accordance with the terms system of Government. thereof an they existed on enactment date, the situation as it is at present. If my Mr. President, I suggest the absence of (4) For the purposes of clause (B) of para- amendment shall be voted up, the situa- graph (1) of this subsection, If an obligation tion will remain as It is now. and munici- a quorum. The PRESIDING OFFICER. The clerk la Insued after December 31, 1942 (hereinafter pal and State bonds will remain exempt. will call the roll. called "refunding obligation"), and If- The VICE PRESIDENT. The yeas (A) The tasue of which It is il part (herein- The legislative clerk called the roll, and and nays have been ordered, and the after called "new Issue") la issued for the the following Benators answered to their clerk will call the roll. purpose of refunding one or more obligations names: (hereinafter called "refunded obligations"): The Chief Clerk proceeded to call the Alken Bilbe and roll. Burton Austin Bone Butler (B) All refunded obligations have the same Mr. THOMAS of Utah (when his name Bailey Browster Byrd Ball exemption expiration date, as defined in sub- was called). I have a general pair with Brooks Capper Bankhead Brown paragraph (J) and the senior Senator from New Hampshire Caraway Barbour Bulow Chandler (C) No obligations, other than those of the (Mr. BRIDGES). I transfer that pair to Barking Bunker Chaves new issue, have been issued for the purpose the senior Senator from Virginia 1Mr. Regraded Unclassified 8204 CONGRESSIONAL RECORD-SENATE OCTOBER 8 GLASS), who would vote as I intend to States and its instrumentalities." That surface veraber 1, 1942, and not included In . vote. I vote "nay." I am advised that is A provision by which the United States the mouth area of 40 acree having as Its AQUare If present and voting the Senator from would give consent to the taxation, un- New Hampshire (Mr. BAIDGES) would in commercia) quantities the depletion Die of a well producing ou and center der an Income tax, of interest upon obli- vote "yea." gations, and dividends, earnings or other lowance value shall be based upon the fair market at The roll call was concluded. income from shares, certificates, stock, or other evidence of ownership of United production or within 30 days thereafter; to of the property at the date brought Mr. HILL The Senator from Virginia [Mr. GLASS] and the Senator from Dela- States-owned corporations, and so forth. allowance in all the above Cases to be made much ware (Mr. HUGHES) are absent from the ited to the estimated life or the property accordance with the annual production 11m. in It would also apply to the second amend- Senate because of illness. ment passed over, beginning in line 13, The Senator from Florida [Mr. on page 531, and ending in line 13, on by the Commissioner of Internal Revenue under rules and regulations to be prescribed ANDREWS), the Benator from Maryland page 532, which is section 510. Both with the approval of the Secretary which (Mr. TYDINOS), and the Senator from amendments were passed over, but the action to be taken on them would seem percent otherwise provided in the present allowance shall not be less than the 27% Montana [Mr. WHEELER] are detained on revenue act. official business. to be determined by the vote already In the absence of A stronger showing than The Senator from Georgia [Mr. Rus- taken by the Senate. I therefore ask has already been made I am opposed to sea- BELL) and the Senator from New Jersey that the two amendments be disposed of eral price increases but I do think the New [Mr. SMATHERS) are necessarily absent. today. now where production and consumption Are I ennounce the following pairs on the The VICE PRESIDENT. The question practically in balance and the possibility of & pending question: is on agreeing to the amendment begin- Mountain States and West Coast States that shortage is more Imminent such as the Rocky The Senator from Maryland (Mr. ning in line 6, on page 528, and ending In line 12, on page 531. new production obtained after November 1, TYDINGS), who would vote "Day," with the The amendment was rejected 1942, should receive a higher price due to Senator from North Dakota (Mr. NYR). greater costa and as & further stimulant to who would vote "yea." The VICE PRESIDENT. The question production. There is no accounting problem The Benator from Montana [Mr. is on agreeing to the committee amend- really involved in such 6 price Increase be- WHEELER), who would vote "nay." with ment, beginning in line 13 on page 531 cause the runs to the pipe lines are always the Senator from New Hampshire (Mr. and ending in line 13, on page 532. measured and the wells where oil la used on TODEY). who would vote "yea." The amendment was rejected. the property have settling tanks which are gaged each day. Mr. McNARY. The Senator from New The VICE PRESIDENT. The next Netther of these proposals would affect the Hampshire (Mr. BRIDGES!, the Benstor committee amendment will be stated. Treasury's revenue because they have to do from North Dakota (Mr. NYE), and the The next amendment was, on page with Dew production 80 they would not im- Senator from New Hampshire (Mr. 298, beginning in line 1, "Section 174. pair the present estimated revenue returns, TOBEY) are necessarily absent. Temporary income tax on individuals." would stimulate the production of highly The result was announced-yeas 52, Mr. McNARY. Mr. President, I call critical and much needed raw materials and nays 34, as follows: attention of the n'e Senator in charge produce additional revenue as well. These of the bill and the Democratic leader to recommendations are given in brief and I YEAS-52 would be glad to submit & detailed and com- Austin an understanding we had a 'ew days ago, Gerry Badeliffe plated written recommendation If the pro- Balley Gillette Reynolds Mr. GEORGE. Mr. President, I re- possis are of interest to the committee and Ball Gurney Roster member It: and if It Is agreeable to the are not found objectionable by Government Bankhese Hayden Schwarts Barbour Hill majority leader, I suggest that the Sen agencies and Henderson as I have not had Smith Bilbo Holman ate now take & recess until tomorrow a chance to consult with anyone about them. Spencer Bone Discussion of these principles certainly can- Johnson, Callf, Stewars Brewster Johnson, Colo. STIMULATION OF OIL PRODUCTION not barm the situation and It seems to me Thomas, Idaho Brooks Lodge Thomas, Okla, Lucas Mr. O'MAHONEY, Mr. President, I offers & tried solution without involving sub- Bunker Tunnell sidies which are difficult to administer and Burton McCarran Van Nuys ask unanimous consent to have printed general price increases which would be very Butler McParland Wallgren in the body of the RECORD a telegram difficult to justify. Caraway McKellar Walsh Chavez McNary which I received this morning from the WAYNE JOHNSON. White Connally Maybank Honorable Wayne Johnson, of the War War Production Board, Wiley Davis Millikin Willie Production Board, who sat in a hearing EXECUTIVE SESSION Doxey O'Maboney Elender of the Committee on Public Lands and Overton Surveys, which was considering ways and Mr. BARKLEY. I move that the Sen- NAYB-34 means of stimulating the production of ate proceed to the consideration of Alken Green Norris oll In the United States, Mr. Johnson executive business. Barkley Guffey O'Daniel Brown Pepper has suggested & possible amendment to The motion was agreed to: and the Hatch Bulow Herring Reed the revenue act. Senate proceeded to the consideration Byrd Kilgore Bhipstead La Pollette There being no objection, the telegram of executive business. Capper Taft Chandler Langer Thomas, Utah was ordered to be printed in the RECORD, EXECUTIVE MESSAGE REPERRED Clark, Idaho Lee Truman as follows: Clark, Mo. Maloney The VICE PRESIDENT laid before the Denaber Vandenberg Mead Downey Wagner NEW YORK, N. Y., October 7, 1942. Senate a message from the President of Murdoek Hon, JOSEPH C, O'MANOMEY, the United States submitting several George Murray Senate Committee on Public Lands: After listening to the testimony taken be- nominations In the Army and the Army NOT VOTING-10 Andrews fore your subcommittee yesterday and after Specialist Corps, which was referred to Nye Tydings Bridges Russell receiving a report on the testimony today, It the Committee on Military Affairs. Wheeler Class Emathers seemed to me that the suggestions thus far (For nominations this day received, see Hughes Tobey submitted to bring about the necessary ex- ploitation of existing prospective and un- the end of Senste proceedings.) Bo Mr. BURTON'S amendment to the known deposits of oil and gas were too gen- EXECUTIVE REPORTS OF COMMITTEES amendment of the committee was eral in their application. In order to avoid a agreed to. similar threatening shortage in 1918 the Con- The following favorable reports of The VICE PRESIDENT. The question greas adopted a reward for the bringing in nominations were submitted: recurs on the committee amendment on of new wells, To be sure the situation today By Mr. McKELLAR, from the Committee page 31, beginning in line 1, as amended, due to critical materials and changes in the on Post Offices and Post Roads: The amendment, as amended, was Industry make the law and regulations as Sundry postmasters. agreed to. then adopted not entirely appropriate for the By Mr. REYNOLDS, from the Committee Mr. GEORGE. Mr. President, I as- present situation but It gives a guiding prin- on Military Affairs: ciple. I wrote the regulations under the Sundry citizens for appointment in DE sume that the action just taken by the 1918 act and subsequently saw the adminis- Army Specialist Corps, established by an Senate will make It unnecessary to act tration of the not work perfectly and with Executive order; and upon two amendments which were passed modifications it could be equally or more ef- Sundry officers for appointment, by trans over. The first is on page 528, "Section fective today, My suggestion is: That in the for, and/or promotion in the Regular Army. 509. Taxation of obligations of United Cluie of mines, oil and gas wells brought into By Mr. BONE, from the Committee on production by the taxpayer on or after No- Patents: Regraded Unclassifie 1942 CONGRESSIONAL RECORD-SENATE 8205 Vernon I. Richard. to be examiner in The VICE PRESIDENT. Without ob- DIPLOMATIC AND FOREIGN SERVICE chief, Board of Appeals, United States Patent jection, the nomination is confirmed. George Wadsworth, to act as diplomatic Office: and THE MARINE CORPS agent and consul general of the United States Ernest F. Klinge, to be examiner in chief. of America near the Government of the Board of Appeals, United States Patent The legislative clerk proceeded to read Republic of Lebanon, at Beirut, and near the Office. sundry nominations in the Marine Corps. Government of the Republic of Byria, at The VICE PRESIDENT. If there be Mr. WALSH. I ask that the nomina- Damascus. no further reports of committees, the tions in the Marine Corps be confirmed IN THE NAVY clerk will state the nominations on the en bloc. PROMOTION IN THE TEMPORARY SERVICE calendar. The VICE PRESIDENT. Without ob- John H. Towers to be vice admiral for term- DIPLOMATIC AND FOREIGN SERVICE jection, the Marine Corps nominations porary service. are confirmed en bloc. IN THE MARINE Coaps The legislative clerk read the nom- That completes the calendar. PROMOTIONS IN THE TEMPORARY SERVICE, IN THE ination of George Wadsworth, of New Mr. BARKLEY. I ask that the Presi- MARINE CORPS York, to act as diplomatic agent and dent be immediately notified of all nom- To be major generals consul general of the United States of inations this day confirmed. Emile P. Moses America near the Government of the Re- The VICE PRESIDENT. Without ob- Harry Schmidt public of Lebanon, at Beirut, and near the Government of the Republic of Byria, jection, the President will be notified Ralph J. Mitchell forthwith. To be brigadier generals at Damascus. The VICE PRESIDENT. Without ob- RECESS Earl O. Long Mr. BARKLEY. As in legislative ses- Pedro A. del Valle jection, the nomination is confirmed. sion, I move that the Benate take B recess Francis P. Mulcahy POSTMASTERS Louis E. Woods until 11 o'clock tomorrow. Field Harris The legislative clerk proceeded to read The motion was agreed to; and (at POSTMASTERS sundry nominations of postmasters. 4 o'clock and 56 minutes p. m.) the Mr. McKELLAR. I ask that the nom- CALIFORNIA Senate took a recess until tomorrow, Fri- inations of postmasters be confirmed en Gilbert G. Vann. Arbuckle. day, October 9, 1942, at 11 a. m. Jacob Golden Land, Feather Falls. bloc. The VICE PRESIDENT. Without ob- Paul W. McGrorty, McCloud. NOMINATIONS John Carlos Rose, Milpitas. jection, the postmaster nominations are Robert L. Turner, Mojave. confirmed en bloc. Executive nominations received by the Julia M. Ruschin, Newark. THE NAVY Senate October 8 (legislative day of Octo- Lindsey L. Burke, Norwalk. ber 5), 1942: Charles A. Turner, Oceanside. The legislative clerk read the nomina- APPOINTMENTS IN THE ARMY SPECIALIST CORPS Icy June Murphy, Project City. tion of John H. Towers, to be vice ad- Leland Grister Gardner, executive officer, George H. Treat, San Andreas. miral for temporary service, to rank from Legislative and Liaison Division, War Depart- Louis J. McNeill, Tuolumne. October 6, 1942. ment, Special Staff, $5,600. KANSAS Mr. WALSH. I ask that the nomina- Hugh McKittrick Jones, principal person- Clarence O. Masterson, Wilmore. tion be confirmed. nel procurement officer, field service, Seventh MONTANA The VICE PRESIDENT. Without ob- Service Command, Army Specialist Corps, Oren D. Clement, Livingston. Jection, the nomination is confirmed. 65,600. Melvin James Bnyder, principal adminis- OREGON The legislative clerk read the nomina- trative officer, Engineer Corps, Services of Euna Pearl Burke, Astoria. tion of John 8. McCain, to be Chief of Supply, New York, N. Y., $5,600. Robert H. Fox, Bend. the Bureau of Aeronautics, with the rank Glen C. Smith, Independence. of rear admiral, for a term of 4 years, Winifred G. Wisecarver, McMinnville. effective upon the relinquishment of that CONFIRMATIONS DEPARTMENT OF THE NAVY office by Rear Admiral John H. Towers. Executive nominations confirmed by John 8. McCain to be Chief of the Bureau Mr. WALSH. I ask that the nomina- the Senate October 8 (legislative day of of Aeronautics, with the rank of rear admiral. tion be confirmed. October 5), 1942: for a term of 4 years. Regraded Unclassified 32 October a, 1942. Dear Felix: se use very good of you to - - a copy of your yourse address, as a - of compring my isle hours. Seriously, haverer, I ⑉ Losh- ing forward to reading 10 very attentively, and I an cure as will well vayage the time spent upon 19. Nimer to away, but visa she returns to Vachington, the will - to wood 19 and 2 shall save 10 for me. with vara sugards, (Signed) Henry Justice Fells Trunkfurter, I 1 Street r I s d o GEF/dbs File in Diary Regraded Unclassified 3 Supreme Court of the United States Washington. D.C. CHAMBERS OF USTICE FELIX FRANKFURTER October 6, 1942 Dear Henry: Since time is likely to be hanging heavy on your hands these days I thought I ought to supply you with & bit of reading matter. And your Eleanor may find a thing or two in this speech of interest to her. with warm regards, Ever yours, Hon. Henry Morgenthau, Jr. 34 Address by Associate Justice Felix Frankfurter at the Inauguration of Dr. Harry N. Wright, sixth President of the College of the City of New York, on Wednesday, September 30, 1942. 35 Address by Associate Justice Felix Frankfurter at the Inauguration of Dr. Harry N. Wright, sixth President of the College of the City of New York, on Wednesday, September 30, 1942. Mr. Chairman, Mr. President, Ladies and Gentlemen: In 1848 a movement for freedom was astir in Europe. It was short- lived. Only America profited thereby for it brought us the pilgrims of .48 - the Brandeises, the Jacobie, the Cerl Schurzes, and the rest. But just at the time that reaction smothered the democratic ferment in Europe, it achieved here an historic triumph. The exiled democratic revolutionaries from Europe set foot on America as the doors of this College vere opening. This College is not only an expression of the democratic faith. It 1s the creation of the democratic will. The old red building on Twenty-third Street, not beautiful but dear to men of my generation, with its memories of General Webb and Professors Compton, Doremus, Herberman, Johnston, McGuckin, Mott, and Werner, to mention only a few, stood forth as the visible symbol of the democratic reliance on a comprehensive process of popular education from the lowest grades to the highest. All ideas originate in some brain, and Townsend Harris is rightly cherished as a pioneer and chief promoter of the idea of a college like this. But the real founder of our College is the people of the City of New York. It cannot be too often recalled that this College vas ordered to be established by direct vote of the people after full discussion of the need for the higher education of youth in a great democratic community like New York. Higher education was thus made available to those capable of it not as a largesse, not as charity for the poor, but as part of the duties of a democratic government. It was 1 Regraded Unclassified 36 no more free in an invidious or even true sense than government is free, The cost of higher education for a democratic society was rightly deemed part of the cost of government. But it would be historically false to say that the American ideal which gave birth to this College wholly possessed American opinion a hundred years ago. The establishment of the College was vigorously re- sisted and popular approval of the measure viewed with forebodings. Let me quote from a contemporary document: "A calm observer of the signs of the times must distinctively perceive in many of the passing events of the day unerring indica- tions of the spread of that Agrarianism which preceded the decline and fall of the Roman republic. "The determination on the part of the pauper class emong us to levy upon the active, industrious, (and, if you please, affluent), portion of the community, the expenses of furnishing to the sons of the former a Collage education (through the Free Academy Project) must be viewed as one of the most shameless acts which disgrace these corrupt and degenerate times. *** It 18 a distinct and palpable assault upon the rights of property, with not so much of plausibility even as demagogues have usually been able to clothe their designs in," Happily Dr. Mario Cosenza rescued this letter from the oblivion of a newspaper file nearly a hundred years old. For it vas not the jeremiad of a lonely crank, and one 18 compelled to note that such an undemocratic outlook 1s not wholly without following in our own day. To be sure, the effort to undo what the people of the City of New York did in 1847 in founding this College, and which has been BO munificently sustained ever since, has long ceased to be a practical effort. However, unless I am misinformed, our College and the other New York City colleges are the only institutions completely maintained by an American municipality. If this be 80 I am at once proud and sorry. But the progress of collegiate education in our country and more particularly the increasing recognition of public responsibility for such education are encouraging. Whereas in 2 Regraded Unclassified 37 of college age 1900 a little more than four per cent of the population vas on- rolled in college, at the time of the last census about fifteen per cent was BO enrolled. And while in 1890, of the relatively small male college population twice the number was in privately controlled colleges as com- pared with those in publicly controlled colleges, that ratio has steadily narrowed, and the 1940 census reported the male population in publicly controlled colleges amounting to nearly half a million students as easily outstripping the attendance of privately controlled colleges. Opportunities for education cannot be allowed to depend on B. cash nexus. Specialized professional training for the complicated needs of modern society on top of the unifying bond of a common social outlook is indispensable for the more gifted members of a democratic society. But social differentiation in the formative years of education inevitably creates barriers against instinctive democratic sensibilities however subtly such divisive influences may assert themselves. To deny young people opportunity to equip themselves fully for their place in society merely because their parents lack financial resources, or for any other accident of irrelevant circumstance, is to deny democracy itself. For it means nothing less than the denial to a democracy of the adequate use of its talents. What kind of Americanism 1e it that excludes from the fullest opportunities for one's faculties or from office men otherwise qualified solely because they are Catholics or Jews or Negroes. How loyal to its professed ideals is a great university which bare one of its best scholars from a deanship because he is a Jew? How true a liberal 1a an adviser who encourages such discrimination? On this cen- tral issue of American democracy an observation of Senator Borah's de- serves to become part of the American tradition. The story goes that 3 Regraded Unclassified 38 a former President hesitated to name a noble American for a position for which he was uniquely qualified and gave 8.8 one of his reasons that "There 1e a good deal of anti-Semitiem abroad in the land." "Yes," replied Senator Borah "it is true that there ie a good deal of anti-Semitism abroad in the land. But the vay to deal with anti-Semitiam 18 not to yield to it." The way to deal with all forces of darkness, with all en- emies of true Americanism, is not to yield to them. "This great city of ours 18 an ever growing gathering of the sons of all nations, of all races, of all religions and irreligions, of all colors and creeds; and here in this City College of New York, they are all treated with absolute equality and absolute sympathy and tenderness. Not one suggestion 1e made against any boy's re- ligion or lack of religion, or color, or race, or creed. That con- stitutes a very great glory of this establishment." So spoke Joseph H. Choate when these magnificent buildings were dedicated - long before the right to enjoy that glory vas challenged by the greatest brute force in history. When the people founded this College they little dreamed that in order to vindicate the freedom of the human spirit of which this College is an expression, a hundred years later American soldiers would be scattered over six continents, our Nevy fighting on seven seas, and our Air Forces engaging the enemy on nine separate fronts around the world every flying day. We did not go to war. War came to us. No democratic people could be led into var to promote some social ideal. To promote even the noblest ideals by aggression would be no less agression than to enlarge boundaries by aggression. And 60 it 1s wholly accurate to say that our essential aim in this war 18 to defeat the enemy. To euggest that this ie merely to fight against something and that men ultimately will only fight for some- thing 1e to play with words. When we say we fight to defeat the enemy ve of course mean we fight for the kind of civilization we cherish. 4 Regraded Unclassified 39 To be sure, the glare of war has revealed fissures in our spiritual struc- ture, deeper ones than ve had heretofore realized. Some of these must be promptly repaired for the more effective conduct of the war, The repair of others cannot long be delayed after peace comes. But the kind of civil- ization we cherish 18 the society which was launched by the Declaration of Independence, which was to move within the spacious framework of the Con- stitution, which vas rededicated by Lincoln at Gettysburg and in his Second Inaugural. It 18 a society in which the dignity of every individual 16 central, regardless of the accidents of antecedents; a society in which there are no unimportant people; in which institutions are progressively BO shaped as to bring to maximum fruition the potentialities of men. The innermost meaning of it all 18 Lincoln's homely expression of faith that the Lord must love the common people because he made BO many of them. One does not have to think too well of what our civilization has thus far achieved not to be ready to destroy ite good together with its evil in the arrogant hope of writing in the future nothing but good on a clean slate. The answer to the defects of our society is not denial of the democratic faith. The answer is more loyal practice of that faith. To the extent that it 18 true that men think and feel differently who live differently, it 18 a significant fact that economic inequalities are strikingly less in Britain than they are in this country. That in all of Britain last year there were only 80 persons to whom the tax- gatherere left an income of & 5000 is a fact of revolutionary implica- tions - far-reaching changes peacefully accomplished, but nonetheless revolutionary in their social consequences. They are consequences that make of our traditional, old school-tie, Tory-ridden, class-bound, anti- democratic picture of England an obsolete caricature, but too often a 5 Regraded Unclassified 40 mischief-making caricature still. It 18 the untrue picture of England, not unexploited by our enemies, that for too long has confused too many minds in this country as to the nature of this conflict. This obfuscation gave us first the era of the so-called "phony var" and made us unaware that the tiger vas only waiting for the right moment to pounce. Later, when the "phony war" became the most brutal of all vars, ve were gulled by poisonous talk that it vas a var of clashing imperialiams. Nov we see it for what it 1e - not at all as a war to save either the old British Empire or the new British Commonwealth of Nations. It is a war to save civil- ization itself from submergence. "If the President had listened to me", said Father Gannon the other day, referring to his former isolationist opinions, "China, Russia, and Great Britain would now be prostrate and we should be facing our zero hour alone and unprepared." Those few who are still BO blind as not to see this no longer count, at least for the present. But still fewer are those who strengthen the moral resources of the nation by a candid recantation of their foreshortened views on our relation to this struggle. Nothing would BO make for that spiritual unity which the peril of the hour demands than to have others follow the superb, forthright example of the distinguished President of Fordham University. I dare to avow simple ancient truths because we have forgotten to live by them. We are desperately in need not of new truths but of pas- eionate devotion to old truths. For a time we heard a great deal about a new plateau of commercial values and almost imperceptibly we assumed that ve were also being elevated to a new plateau of moral values. The law of political and economic institutions is the law of change. But there are eternal verities - those conditions without which freedom 18 6 Regraded Unclassified 41 outraged and faith replaced by cynicism. Ultimately there can be no free- dom for self unless it 1e vouchsafed to others; there can be no security where there 18 fear; and a democratic society presupposes confidence and candor in the relations of men with one another, and eager collaboration for the larger ends of life instead of the pursuit of petty, selfish or vain- glorious aims. These conditions for a good life do not change but they now operate in a much more complicated setting. Thus we talk glibly about the annibilation of distance. Speed of communication does bring many advantages. But we must not overlook the new and dangerous conditions created by these triumphs of science. The mobility of words at the present time too often brings in its train immobility of reflection. We have only begun to realize the op- portunities for arousing passions, confusing judgment, and regimenting opin- ion that are open to the new forces introduced by chain newspapers, syndicated articles, headline reading, the movies, the radio, and private polls. But we have a better appreciation now how slender a reed 18 reason - how recent its emergence in men, how deep the countervailing instincts and passions, how treacherous the whole rational process. The whole temper of our society, moreover, is hurried; its atmosphere and appurtenances hostile to reflection. Thus reason 18 asked to flourish when the conditions for it are least fav- orable. Without respect for freedom of inquiry and freedom of opinion there 1a no democracy. But no less indispensable 18 the assurance of the means by which opinion remains really free. Modern instruments of dissemination may unwittingly make the public the victims either of gullibility or of cynicism or of both. But only critically disciplined readers and listeners can generate 7 Regraded Unclassified 42 that healthy public opinion which a democratic government expresses. India- pensable is an atmosphere favorable to free and informed thought out of which issue informed opinion and free activity. Nov that the fiery furnace of var is gradually cleansing us of our pa- thetic illusions, it is becoming clearer every day that the qualities on which our very existence depends, the qualities without which victory 18 in- possible, will be equally needed in the processes of peace. There may be still those, fed too much on stories of wizardry and miracle makers, who hope for somebody to invent a quick and easy way to win the war. But victory depends on courage, endurance, honor, self-discipline, unselfish devotion. And without these, though we cry "Peace, peace", there will be no peace. How to relate intellect to character has baffled inquiry since man first re- flected on his destiny. But certainly a fusion of character and intellect will not be promoted if character be deemed & bit of Victorian hypocrisy. And BO it is the special function of this College and of all the colleges throughout the land to send forth its young men and women each year equipped with the accumulated visdom of mankind - its tested cultural and ethical her- itage. Precisely because each generation has its own needs and the future its unknown problems to which as yet there are no answers, it 18 indispen- sable to build on what all experience has vindicated and not start as though chaos were our heritage. Let youth gather the harvest of its ancestors. This 18 not the occasion to speak of the special adeptation of colleges to war needs and the light that wer and its antecedents have shed on the visdom of pre-war curricula. Suffice it to say that BO profound an upheaval 18 bound to stir inquiry into the extent to which traditional courses give not understanding but fleeting and partial knowledge, and into the ind- equacy of the cultural underpinning afforded to those who proceed to the 8 Regraded Unclassified 43 professions. We shall, I hope, make more certain that those who become doc- tors in the future will better appreciate not only that diseases pertain to human beings and do not exist as abstractions, but will be made fully alive to the social aspects of medicine. And their general cultural training should make future lawyers more aware that law 1a not a system of abstract logic but the web of arrangements, rooted in history but also in hopes, for promot- ing to a maximum the full use of a nation's resources and talents. War de- vours comforts, dislocates habits, and readjusts many peace-time requirements. Colleges cannot escape these exactions. Indeed, they should be pacemakers in imaginative and self-imposed contributions to the common effort. But one thing our colleges and universities must not do - they must not lower their academic standards. To do so 1a no contribution to the war and & great disservice to the peace to come. This means also that we cannot afford to economize in the essentials of education. That too many of our institutions in their physical extravagances reflected the materialism of the Babylonian period preceding the depression is no reason for crippling ourselves to meet bravely and visely the awful wrecknge which this war will leave behind. The problems of the post-war period cannot be met by impoiring our intellectual and moral capital - men adequately trained to meet those problems. In in- sisting upon trained leaders, I mean, of course, the very opposite of the BO- called Fuhrer Prinzip. The revival in our day by any man or people of the divine right to rule, particularly to rule the world, is a piece of humorless blasphemy. The difference between leaders as true servants of a community and self-designated overseers of peons 1e the difference between a free society and a concentration comp. The duty and opportunity to nurture and develop the creative minds we shall BO deeply need lies mainly with institutions like this. Colleges and 9 Regraded Unclassified 44 universities are the special guardians of the free pursuit of truth because they are the professional pursuers of truth, It was a sure instinct that made Hitler at the very outset burn books and seize the universities. We are told by A thinker entitled to tell us that today the whole range of learned thought is transforming every activity of mankind: How to shape that transformation and how to utilize the fundamental repercussions of science upon society 18 primarily the job of the institutions of learning. And this 1e not merely or even chiefly through the collaborative efforts of specialized scientists with consciousness of the limits of their specialties. Colleges must do their share chiefly through their products, the millions who year after year go out from halls like this, sensitized by their train- ing to the understanding of the social forces confronting them. They must be aware, therefore, that the future grows out of the past but 1e not con- tained within it, that the future depends not on the cautious hoarding of the potentialities of nan but on their stimulation and bold use. God did not unfold the eternal vision to Adam Smith in Manchester nor yet to Karl Marx in the British Museum, To have assumed that we could achieve security and decency by dissociat- ing ourselves except for purposes of money-making, from the family of peoples who make the world, does credit neither to our heads nor hearts. Such self- destructive isolationism has partly been the result of faulty education and has partly influenced shortsightedness in education. Too much have we gone on the assumption that education must concern itself predominantly with in- terests local to our people. Indeed our education was conceived in terms not only of our own peculiar interests but almost in opposition to the conceptions of life and interests of other and especially competitor nations. It 18 no comfort that other countries were no wiser than we, Since neither nations 10 Regraded Unclassified 45 nor men live unto themselves alone, education appropriate to a peaceful and gracious civilization must transcend national interests. It 1a necessary to know what goes on inside our own country and also to understand what goes on in other countries. An adequate education must promote the aspiration of civilized peoples everywhere, must view the relations of more advanced and less advanced peoples in a sympathetic manner and seek to bring them all into her- mony. Such a conception of education thinks of men everywhere as entitled to the goods of this world, entitled to their own culture, but not to the exclusive or selfish use either of goods or of ideas. But subscribing to progressive ideale is not a substitute for the need of hard thinking in order to know how to realize these ideals against ob- stinnte and hard realities. It requires unyielding will to translate thought into action. It is 80 much easier to draw a blueprint of Utopia than a relatively smooth working measure of economic control dealing with even one of the many problems begot by the concentration of economic power. However, words and the best intentions are not enough for the strategy of war. They are not enough for the strategy of peace. To give life to generalities re- quires imagination, understanding, planning, unremitting determination, and bold execution. If I may take some liberties with what John Maynard Keynes has written, the world has the resources and the techniques if we would only create the organizations to use them, capable of reducing to a position of secondary im- portance the economic problem which now absorbs our moral and material en- ergies. Economics 16 not the whole of life. Very far from it. But on the fair and sensible control of economic forces depends the opportunity to pur- sue a civilized life. If only we can bring sufficient good-will and resolute purpose to bear, the day need not be far off when the economic problem will 11 Regraded Unclassified 46 take a back seat where it belongs and the arena of the heart and head will be occupied by our real problems - the problems of life and of human relations, of creation and behavior and religion. Let us not mouth "that they shall not have died in vain." It 1e an in- decency to respond to the dedication of their lives with empty words. The only possible way to ensure they shall not have died in vain 18 for us to see to it that they did not do 80, And by "we" I mean each and every one of us. And what we can do about it is of the same order as to see to it that we win this war. By "we" again I mean every one of us. In the words of another, "To achieve Victory with a capital V 18 beyond us ordinary listeners. We must break it up into a thousand little victories around our own doorstep." It is not rhetoric but homespun truth to say that within the limits of his powers every one of us must be his own second front. The ideal that holds us together 18 our sincere respect for the common nan whatever his race or religion. If anything 1s distinctively American it 1s that hospitality to the human spirit whatever its source. In this faith America was founded; this 18 the faith that her poete have sung and her seers have preached; in this faith generations of unknown millions have labored; for this faith armies of the young have died and for this many more will give themselves. This, then, 18 yours: to build exultingly High, and yet more high, The knowledgeable towers above base ware And sinful surges reaching up to lay Dishonouring hands upon your work, and drag From their uprightness your desires to Ing Among low places with & common gait. That 80 Man's mind, not conquer'd by his clay, May sit above his fate, Inhabiting the purpose of the stare, And trade with his Eternity. 12 Regraded Unclassified 47 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE Oct.8,1942. TO Secretary Morgenthau FROM Mr. White This is a comparative statement of the earnings and expenses of the Stabilization Fund for the months of August and September, 1942. Earnings August 1942 September 1948 Interest earned on investments $ 20,110.20 $ 19,461.47 Interest earned on Yuan 24,391.84 23,601.61 Total $ 44,502.04 $ 43,063.08 Profits on handling charges on gold 77,552.47 76,016.82 Grand Total $122,054.51 $119,079.90 Expenses Salaries $ 19,843.34 $ 22,188.53 Travel 172.69 993.51 Subsistence 908.22 1,106.30 Telephone and Telegraph 2,381.33 1,359.21 Stationery 29.70 15.29 All others 676.87 359.07 $ 24,012.15 $ 26,021.91 Net earnings $ 98,042.36 $ 93,057.99 Regraded Unclassified 48 OCT 8- 1942 My dear Mr. President: In accordance with your mesorandum of October 2nd there is attached & repart providing the information 0000> cerning the availability of supplies for the Soviet Government. The report lists the priority cargoes scheduled by the Lend-Lease Administration for October shipment, cover- ing items purchased by the Treasury Procurement Division, totaling 86,326 tons, which will be net to the extent of 85,683 tons. There is on hand and will be produced during October 309,804 tons of materials other than priority cargo. Yours sincerely, (Signed) H. Morgenthau, Jr. The President The White House CEM:eo:rm 10-7-42 apr cry Regraded Unclassified TREASURY DEPARTMENT MATERIALS AVAILABLE FROM STORAGE AND PRODUCTION DURING NOWTH OF OCTOBER 1962 (SHORT TON DESIGNATIONS) 49 PRIORITY CARGOES AVAILABLE SPECIFIED FOR OCT. IN COMMODITY SHIPMENT STORAGE TO STORAGE PRODUCTION BALANCE STEEL BARS 7,000 14,910 4,076 3,620 15,604 SHEETS, STRIP, PLATES, SHAPES AND MISC. 14,815 75,668 15,456 22,747 97,056 SHELL STEEL 7,000 1,202 1,250 22,814 18,376 TOOL AND DIE STEEL 1,110 - - 467 . - RAILBOAD RAILS AND ACCESSORIES 17,598 5,838 2,675 26,111 RAILROAD WHERE. SETS 2,500 2,056 3,276 3,632 BARRED WIRE 9,202 378 1,167 10,827 CABLE (OTHER THAN COPPER) 222 - - 222 - WIRE PRODUCTS 5,760 29,022 4,956 19,744 67,982 PIPS AND TUBING 10,300 68,375 11,718 630 70,626 TIN PLATE 3,000 1,218 825 967 - COPPER AND COPPER PRODUCTS 5,750 210 2,645 11,313 8,419 ZIMC 5,500 - - 3,500 - ALUMINUM INSOTS AND SHEETS 2,500 - - 2,500 - NICKEL AND NICKEL PRODUCTS $80 - - 380 - - - 420 685 1,055 FERROBILICON - 210 462 672 HOLYBORNUM or - - - 07 - MAGNESIUM - - - 1 1 COBOLT 10 - - 15 5 CHEMICALS 1,015 - - 1,025 - MERCURY - - - - - INDUSTRIAL AND CONSTRUCTION MACHINERY, ACCESSORIES AND PARTS 10,327 2,898 5,066. 4,355 - AUTOMOTIVE EQUIPMENT AND PARTS 303 84 42 177 - Regraded Unclassified CONTINUED - PAGE 2 50 PRIORITY CARGOES AVAILABLE SPECIFIED FOR OCT. X TRANSIT COMMODITY SHIPMENT STORAGE TO STORAGE PRODUCTION BALANCE TIRES AND TURES 6,850 2,478 3,780 1,426 1,432 OIL FIELD MACHINERY - 1,848 - 5 1,853 FIRE FIGHTING EQUIPMENT - - - 90 90 CRAPHITE - METAL ELECTRODES 168 - 168 - - LEATHER AND LEATHER PRODUCTS - - - - - FURNITURE AND OFFICE EQUIPMENT = - - 38 - CLOTHING AND THEYILES a - - - - RUBBER PRODUCTS T - - 7 - PLASTICS 22 - - se - RADIO EQUIPMENT 25 - - 25 - PRECISION INSTRUMENTS 1 - - 1 - PROTOGRAPHIC EQUIPMENT - i - - 18 18 HAND AND MACHINE TOOLS 5,459 86 - 3,355 - BALL AND ROLLER BEARIEGS 110 - i - 278 - 168 PAPER AND PAPER PRODUCTS - 924 4,620 935 6, 479 MISC. SUPPLIES AND EQUIPMENT (GAS MASKS, DETONATION CORD, ETC.) - - - - - AIRCRAFT 18 - - 18 - MEDICAL SUPPLIES à EQUIPMENT 42 42 - - - GREASES AND PARAPPIN 42 - - 42 - - 66,325 227,010 63,027 106,450 309,606 . The difference of 648 taxe is caused by the inclusion of November and December allocations which have not yet been produced. Tennage under load not subscried. Regraded Unclassified 51 October 8, 1942 My dear Mr. President: Several days ago you requested that I furnish you with details as to the delay in placing of orders for Russia. I an sending you herewith two charts which illustrate the delays in that part of the program with which the Treasury Procurement is concerned. These charts present a cross- sectional analysis as of October 5, 1942, of the time that it takes to turn a request by the Russians for industrial na- terials on Lend-Lease into an order for those materials. The requisitions covered by the charts are those that cleared the Lend-Lease Administration in the month of August, a period which is a representative one, and one for which data on the histories of the requisitions were relatively complete and readily available. There were 203 requisitions for industrial materials for the Russians cleared by Lend-Lease in August. The first chart analyses 199 of these - 185 on which the orders had been placed by October 5 (summarized by groups on the left-hand side of the chart) and 14 on which the orders had not been placed by October 5 (shown individually on the right-hand side of the chart). The 4 requisitions excluded from the chart were issued to cover entire power plants. These items differ from the others cleared in August in that their plans are now in the stage of engineering development, and it may require considerable time before these plans will have progressed sufficiently to permit the procurement of many of the parts needed. The second chart focuses attention on the 48 items cleared by Lend-Lease in August on which the elapsed time from requisition date to order date exceeded 7 weeks. These items are included in Chart I but their extended period is obscured because they have been averaged in with other requisitions, the elapsed period on which was much shorter. Regraded Unclassified 52 - 2 - All bars on the charts have been classified as be- tween the time taken at Lend-Lease Administration, War Production Board, and the Treasury Procurement Division. The starting date for each agency was taken, in each case, as the date when the requisition was cleared by all agencies with prior authority. On this basis, it should be noted that part of the period of time at Lend-Lease Administration is accounted for, on some requisitions, by negotiations between that agency and the War Production Board. Sincerely yours, (Signed) H. Morgenthau, Jr. The President, The White House. Copy to Mr. Mack 10/9/42 Del. by ss Agent 3:42 10/8/42 Stamped "Striotly Conf." File in Diary. Regraded Unclassified 53 TREASURY DEPARTMENT PROCUREMENT DIVISION OFFICE OF THE DIRECTOR WASHINGTON October 6, 1942 MEMORANDUM TO THE SECRETARY: In accordance with your request, the following information relative to the Russian Lend-Lease program has been prepared. (a) All Russian Lend-Lease requisitions for the month of August have been analyzed to show the time required for processing at the Office of Lend-Lease Adminis- tration, War Production Board and the Procurement Di- vision. The information was submitted to Mr. Tickton this morning for the preparation of a chart. (b) The Russian Lend-Lease requisitions received at the Procurement Division during September and from October 1 to 5, 1942, inclusive have been analyzed to show the time of issuance of requisitions as compared to the time of receipt by the Procurement Division. Requisitions received by the Sept. Oct. Procurement Division 1 - 5 322 83 Above requisitions issued dur- ing months specified below: Sept. 141 13 Aug. 126 17 July 45 38 June 5 13 May 5 322 2 83 (c) Summarized statement relative to Russian tire plant program. From February 14, to July 17, 1942, 80 contracts were FORVICTORY placed with various manufacturers for equipment and BUY material totaling $6,116,097 against 64 requisitions STATES BONDS Regraded Unclassified 54 Page - 2 October 6, 1942 for & tire plant program. A letter from the War Produc- tion Board dated July 7, requested that production be de- layed in order that an effort might be made to provide & suitable existing plant, pointing out that this would avoid the use of critical materials for new equipment, and re- lieve the load on manufacturing facilities. No action, to delay production, was taken on this letter until after con- ferences between the War Production Board and the Soviet Purchasing Commission representatives on July 24, also further investigation by War Production Board representa- tives. On August 5, the Procurement Division notified certain manufacturers to suspend production on contracts totaling $4,453,605. Of that amount the War Production Board has subsequently released for manufacture items totaling $1,112,944 and production has been resumed. The present status is that the balance of the items under suspension are being reviewed by the War Production Board to determine whether suitable used equipment can be made available and the extent to which this can be accomplished. The matter is now in the hands of Mr. William Jeffers, Rub- ber Director, and his letter dated Oct. 2, stated that de- termination would be made definitely within the next few days. (a) Priorities insufficient to guarantee scheduled deliveries. The priority ratings now assigned by the War Production Board to many Russian contracts primarily those for in- dustrial machinery involving 982 contracts) are insuffi- cient to insure scheduled deliveries. At the moment, ap- proximately 950 contracts are in the process of rerating. We are advised by the War Production Board that this mat- ter has been the subject of frequent discussions with the Soviet representatives during the past several weeks and the matter was also brought to the attention of the Office of Lend-Lease Administration by the Soviet Ambassador at B. meeting in that office on September 25, 1942. To meet the revised delivery schedules the highest priorities will be required. Clifton C/J.K E. Amt Mack Director of Procurement Regraded Unclassified 55 Time Taken to Place Orders for Lend-Lease Industrial Supplies for Russia Attached to this memorandum are charts which present a cross-sectional analysis as of October 5, 1942, of the time that it takes to turn a request by the Russians for industrial materials on Lend-Lease into an order for those materials. The requisitions covered by the charts are those that cleared the Lend-Lease Administration in the month of August, a period which is a representative one, and one for which data on the histories of the requisi- tions were relatively complete and readily available. There were 203 requisitions for industrial materials for the Russians cleared by Lend-Lease in August. The first chart analyzes 199 of these -- 185 on which the or- ders had been placed by October 5 (summarized by groups on the left-hand side of the chart) and 14 on which the orders had not been placed by October 5 (shown individ- ually on the right-hand side of the chart). The 4 requi- sitions excluded from the chart were issued to cover entire power plants. These items differ from the others cleared in August in that their plans are now in the stage of engineering development and it may require considerable time before these plans will have progressed sufficiently to permit the procurement of many of the parts needed. The second chart focuses attention on the 43 items cleared by Lend-Lease in August on which the elapsed time from requisition date to order date exceeded 7 weeks. These items are included in Chart I but their extended period 1s obscured because they have been averaged in with other requisitions, the elapsed period on which was much shorter. All bars on the charts have been classified as between the time taken at Lend-Lease Administration, War Production Board, and the Treasury Procurement Division. The starting date for each agency was taken, in each case, as the date when the requisition was cleared by all agencies with prior authority. On this basis, it should be noted that part of the period of time at Lend-Lease Administration is accounted for, on some requisitions, by negotiations between that agency and the War Production Board. Attachments Regraded Unclassified