In witness whereof I have hereunto set my hand and caused the great seal of the State of Ohio to be affixed in the city of Columbus, this 2d day of May, A. D. 1928.

[SEAL.]

By the governor :

VIC DONAHEY, Governor. CLARENCE J. BROWN, Secretary of State. MESSAGE FROM THE HOUSE

A message from the House of Representatives, by Mr. Haltigan, one of its clerks, announced that the House had passed without amendment the following bills of the Senate:

S. 4034. An act authorizing the Calhoun Bridge Co., an Illinois corporation, its successors and assigns, to construct, maintain, and operate a bridge across the Illinois River at or near Grafton, Ill.;

S. 4059. An act authorizing the State Highway Commission, Commonwealth of Kentucky, to construct, maintain, and operate a bridge across the Tennessee River at or near the mouth of Clarks River;

S. 4060. An act authorizing the State Highway Commission, Commonwealth of Kentucky, to construct, maintain, and operate a bridge across the Cumberland River at or near Canton, Ky.; S. 4061. An act authorizing the State Highway Commission, Commonwealth of Kentucky, to construct, maintain, and operate a bridge across the Cumberland River at or near Smithland, Ky.;

S. 4062. An act authorizing the State Highway Commission, Commonwealth of Kentucky, to construct, maintain, and operate a bridge across the Tennessee River at or near Eggners Ferry, Ky.;

S. 4253. An act authorizing H. L. McKee, his heirs, legal representatives, and assigns, to construct, maintain, and operate a bridge across Lake Sabine at or near Port Arthur, Tex.;

S. 4254. An act authorizing the State of Texas and the State of Louisiana to construct, maintain, and operate a free highway bridge across the Sabine River at or near Pendleton's Ferry;

S. 4288. An act authorizing the State Highway Commission, Commonwealth of Kentucky, to construct, maintain, and operate a bridge across the South Fork of the Cumberland River at or near Burnside, Pulaski County, Ky.;

S. 4289. An act authorizing the State Highway Commission, Commonwealth of Kentucky, to construct, maintain, and operate a bridge across the Cumberland River at or near Neelys Ferry, in Cumberland County, Ky.;

S. 4290. An act authorizing the State Highway Commission, Commonwealth of Kentucky, to construct, maintain, and operate a bridge across the Cumberland River at or near Burkesville, Cumberland County, Ky.;

S. 4291. An act authorizing the State Highway Commission, Commonwealth of Kentucky, to construct, maintain, and operate a bridge across the Cumberland River at or near Arat, Cumberland County, Ky.;

S. 4292. An act authorizing the State Highway Commission, Commonwealth of Kentucky, to construct, maintain, and operate a bridge across the Cumberland River at or near Center Point, in Monroe County, Ky.;

S. 4293. An act authorizing the State Highway Commission, Commonwealth of Kentucky, to construct, maintain, and operate a bridge across the Cumberland River at or near Creelsboro, in Russell County, Ky.;

S. 4294. An act authorizing the State Highway Commission, Commonwealth of Kentucky, to construct, maintain, and operate a bridge across the North Fork of the Cumberland River at or near Burnside, Pulaski County, Ky.; and

S. 4295. An act authorizing the State Highway Commission, Commonwealth of Kentucky, to construct, maintain, and operate a bridge across the Cumberland River at or near the mouth of Indian Creek, in Russell County, Ky.

The message also announced that the House had agreed to the amendment of the Senate to the bill (H. R. 8105) to provide for the membership of the Board of Visitors, United States Military Academy, and for other purposes.

The message further announced that the House had disagreed to the amendments of the Senate to the bill (H. R. 10159) granting pensions and increase of pensions to widows and former widows of certain soldiers, sailors, and marines of the Civil War, and for other purposes; requested a conference with the Senate on the disagreeing votes of the two Houses thereon, and that Mr. W. T. FITZGERALD, Mr. ELLIOTT, Mr. BEERS, Mr. LOZIER, and Mr. UNDERWOOD were appointed managers on the part of the House at the conference.

The message also announced that the House had disagreed to the amendments of the Senate to the bill (H. R. 12381) granting pensions and increase of pensions to certain soldiers and sailors of the Regular Army and Navy, etc., and certain soldiers and

sailors of wars other than the Civil War, and to widows of such soldiers and sailors; requested a conference with the Senate on the disagreeing votes of the two Houses thereon, and that Mr. KNUTSON, Mr. ROBSION of Kentucky, and Mr. HAMMER were appointed managers on the part of the House at the conference. ENROLLED BILLS SIGNED

The message further announced that the Speaker had affixed his signature to the following enrolled bills, and they were signed by the Vice President:

S. 3674. An act to amend the act entitled "An act to provide that the United States shall aid the States in the construction of rural post roads, and for other purposes," approved July 11, 1916, as amended and supplemented, and for other purposes; and

H. R. 4664. An act for the relief of Capt. George R. Armstrong, United States Army, retired.

PENSIONS AND INCREASE OF PENSIONS

The VICE PRESIDENT laid before the Senate the action of the House of Representatives disagreeing to the amendments of the Senate to the bill (H. R. 10159) granting pensions and increase of pensions to widows and former widows of certain soldiers, sailors, and marines of the Civil War, and for other purposes, and requesting a conference with the Senate on the disagreeing votes of the two Houses thereon.

Mr. NORBECK. I move that the Senate insist on its amendments, agree to the conference asked by the House, and that the Chair appoint the conferees on the part of the Senate.

The motion was agreed to; and the Vice President appointed Mr. NORBECK, Mr. DALE, and Mr. STECK Conferees on the part of the Senate.

The VICE PRESIDENT also laid before the Senate the action of the House of Representatives disagreeing to the amendments of the Senate to the bill (H. R. 12381) granting pensions and increase of pensions to certain soldiers and sailors of the Regular Army and Navy, etc., and certain soldiers and sailors of wars other than the Civil War, and to widows of such soldiers and sailors, and requesting a conference with the Senate on the disagreeing votes of the two Houses thereon.

Mr. NORBECK. I move that the Senate insist on its amendments, agree to the conference asked by the House, and that the Chair appoint the conferees on the part of the Senate.

The motion was agreed to; and the Vice President appointed Mr. NORBECK, Mr. SHIPSTEAD, and Mr. BRATTON Conferees on the part of the Senate.

The PRESIDING OFFICER. Eighty-two Senators having answered to their names, a quorum is present.

Mr. BLACK. Mr. President, I desire to offer an amendment to the pending revenue bill and to have it read. It is only four or five lines.

The PRESIDING OFFICER. The clerk will read. The LEGISLATIVE CLERK. On page 48, line 27, insert the following new section:

SEC. 55. ACCESS TO RETURNS GRANTED STATE OFFICERS, Subdivision (c) of section 257 of the revenue act of 1926 is amended to read as follows:

"(c) The proper officers of any State may, upon request of the governor thereof, have access to the returns of any taxpayer, or to an

abstract thereof showing the name and income of the taxpayer, at such times and in such manner as the Secretary may prescribe."

The PRESIDING OFFICER. The amendment intended to be proposed by the junior Senator from Alabama will lie on the table and be printed.

Mr. WALSH of Massachusetts. Mr. President, the tax bills enacted during the war were free from partisanship, and special care was given to enact bills which gave full expression to the principle of ability to pay. Upon individuals a normal tax was levied, and then a surtax, so graduated as to make the individual's tax increase with the size of his income. The same principle was applied to corporations. A flat or normal tax was levied upon the net incomes of all corporations, and then a graduated war and excess-profits tax was levied, upon the theory that corporations should be taxed in proportion to their profits; that those corporations which had enjoyed war and excess profits should pay a higher tax than those making a moderate profit.

To my mind there were two defects in the tax bill of 1921. The first and most glaring defect in this bill was that it reduced the taxes of profit-making corporations and increased the taxes of nonprofit-making corporations. This was done by eliminating the excess-profits tax and increasing the corporation income tax from 10 to 121⁄2 per cent. For instance, in 1919 all corporations were taxed 10 per cent on their net income, and the corporations that earned a profit of over 8 per cent on their invested capital paid a graduated excess-profits tax. The excess-profits tax was eliminated in the act of 1921 and, for the purpose of replenishing the heavy loss to the Treasury, a flat increase from 10 to 121⁄2 per cent was made on the net income of all corporations.

What was the result? The result was that all corporations earning less than 8 per cent on their capital stock after the enactment of that bill had their tax bill increased 25 per cent. It seemed to me at the time a condemnation by the Congress of the stupidity of those corporations who were not able to profiteer during the war, and indicated a desire upon its part to reward by a big tax reduction the ingenuity of many of those corporations that made very large profits during the war, by wiping out all their excess-profits taxes. Big business corporations achieved a great triumph, and struggling, limited profit-making corporations were penalized by that act. That injustice has continued from that day to this. Indeed, the burden of the small corporations has increased, for when we repealed the capital-stock tax in 1926, which exempted small corporations up to $5,000, the rate on incomes of corporations was increased to 13% per cent.

By increasing in 1921 the tax upon the net incomes of corporations from 10 to 121⁄2 per cent, a substantial increase was made in the income corporation tax where the earnings were approximately between 8 and 12 per cent. All corporations in the class earning more than 12 per cent had their taxes very substantially reduced. By the elimination of the excess-profits tax, the excess profits making corporations, it was estimated, were saved $450,000,000.

Whatever might be said-and very strong arguments were advanced in favor of the elimination of the excess-profits taxno justification could then or now be found for increasing the tax upon the corporations that were in the class earning profits of less than 8 per cent. Indeed, the active lobby that gathered here in Washington at the time, representing big business, set its heart and soul, regardless of the equities, upon the elimination of the excess-profits tax. The principal argument advanced was that excess-profits taxes were taking the money of the capitalistic class away from productive enterprises.

The result of increasing the normal corporation income tax reduced somewhat the loss of $450,000,000 to the Treasury by the elimination of the excess-profits tax. I have not the exact figures showing how much that loss was reduced, but when it was contemplated to increase the net income corporation tax by 10 to 15 per cent, the claim was made that this increase would produce $267,000,000 to the Treasury. Because the tax was finally increased only 2% per cent, and not 5 per cent,' as recommended, the increase to the Treasury was considerably less than $267,000,000.

Let me put it in another way. The excess-profits making corporations were saved by that law $465,000,000, while the nonexcess-profits making corporations had their taxes increased probably more than $100,000,000.

WHAT ARE THE BUSINESSES OR INDUSTRIES THAT WERE FAVORED IN THE TAX BILL OF 1921?

That bill, I repeat, reduced the taxes of monopolitistic or excess-profits making corporations, and increased the taxes upon the struggling, competitive, and small business corporations. Not a single business concern in the country other than those

THE NUMBER OF CORPORATIONS THAT BENEFITED

It is estimated that the number of corporations that paid an excess-profits tax prior to 1921 were about 100,000. About profits class; that is, they showed a net income of less than 100,000 other corporations paid a tax outside of the excess8 per cent. One hundred thousand other corporations had no income and paid no tax.

In 1918 the number of corporations which had a net income of less than $10,000 was 148,150 corporations. The number that had a net income of between ten and fifty thousand dollars was $50,000 and $1,000,000 was about 15,500 corporations. The num37,053 corporations. The number with a net income of between mated in 1921 that 50,000 corporations had their taxes reduced, ber with a net income of over $1,000,000, was 1,026. It was estiand 150,000 corporations had their taxes increased. Is it any wonder that when the tax bill of 1921 was passed, increasing Chicago, stated the effect of that tax very admirably in these the tax upon corporation incomes, the Manufacturers News, of words: This tax will hit thousands of small manufacturers below the belt."

DIFFERENCES BETWEEN THE MAJORITY REPORT OF THE SENATE FINANCE COMMITTEE, WHICH RECOMMENDS A TAX ON CORPORATION INCOMES OF 12 PER CENT, AND THE RECOMMENDATIONS OF THE MINORITY MEMBERS OF THE SENATE FINANCE COMMITTEE, RECOMMENDING A GRADUATE TAX ON CORPORATION INCOMES GRADUATED FROM 5 PER CENT TO 11 PER CENT

The majority report recommends the continuation of the present injustice. While it does provide for a slight reduction in the present corporation income tax paid by all corporations, and increases the exemption from $2,000 to $3,000, it still retains, when we compare its recommendations with the corporation income taxes levied in 1919, an increase in that large class of small corporations which make modest, nonexcess profits. Indeed, it still makes the tax bill of this class of corporations nearly 25 per cent higher than they were during and following the war and previous to the tax law of 1921. It does benefit by a further reduction of tax, the normal corporation income of those classes of corporations that were described during the war as excess-profits making corporations. In other words, since the war two substantial changes in corporation taxes proposed by the majority have and will result in lowering the tax bills of the excess-profits making class of corporations greatly below the taxes they paid during and following the war. only corporations that have benefited by the Republican tax reductions are the big dividend-paying corporations. The small dividend-paying corporations have been actually penalized.

GRADUATED TAX ON SMALL CORPORATIONS

The

The minority proposal is a graduated tax upon corporation incomes with small net incomes paying a rate of 5 per cent upon their net income if the amount is not more than $7,000; 7 per cent if the amount is more than $7,000 and not more than $12,000; 9 per cent if such amount is more than $12,000 and not more than $15,000; and 111⁄2 per cent if such amount is more than $15,000.

As 92.1 per cent of all corporations showed a net income of not over $25,000 in 1925, a very large percentage of all corporations will be affected by the graduated tax proposed.

This is not a new idea. It is now part of the House bill. Indeed, in 1921, I proposed and argued for an amendment proposing a graduated tax upon the incomes of corporations, as follows:

Ten per cent of such excess amount by which the net income does not exceed $100,000; 15 per cent of such excess amount by which the net income exceeds $100,000, and does not exceed $300,000; 20 per cent of such excess amount by which the net income exceeds $300,000: Provided, That a corporation which does not make a net taxable income of more than 8 per cent on its invested capital for the taxable year shall not be taxed on its net income more than 10 per cent. This amendment was defeated in the Senate by only one vote.

A somewhat similar amendment, offered by me to that bill, was as follows:

Provided, That a corporation which did not pay an excess-profits tax upon its income for the calendar year 1920, under the revenue act of 1918, shall not be taxed on its net income more than 10 per cent. This amendment was also defeated by only one vote.

ADVANTAGES OF, AND ARGUMENTS FOR, A GRADUATED TAX ON CORPORATIONS

The theory of a graduated tax on corporations is that such a method will come nearer placing small corporations on an equality with individuals and partnerships in the matter of Federal taxes; that is to say, that a partnership doing business in competition with a corporation should be taxed as nearly equally as possible. Under the present corporation tax laws there is a grave discrimination against the small corporations compared with the partnerships. The graduated tax on corporation incomes is merely an attempt to equalize the burden of partnerships and small corporations.

Again, the tendency of the country at present seems to be toward consolidations of businesses and industries, and there is some question as to whether Congress should encourage that policy. If the small corporations are given an advantage in the payment of taxes over the consolidated capital, it might tend to promote individual effort.

Another advantage of the graduated tax on corporation incomes is that it in a measure takes some recognition of the principle of ability to pay, just as the surtax does in the case of individuals.

If ability to pay is a sound foundation for taxes on personal incomes, then it is a sound foundation for taxes on corporation incomes. If the individual be forced to pay a graduated income tax, why should not corporations also be forced to pay a graduated tax on their incomes? If one principle is sound, then the other is sound. What are corporations? They are groups of individuals, and I contend that the same principle which we apply in imposing an income tax upon individuals should apply to corporations, and if the groups of individuals are honestly organized and honestly managed the rule and principle of a graduated income tax will work out equitably with corporations

as with individuals.

The removal of the profits tax and the substitution of a flat corporation income tax is a direct step away from the principle of ability to pay. It is a move directly beneficial to monopolies and trusts, which alone, of all business institutions, are certain of being able to make excess profits when business revives.

All restraint on the making of profits was abandoned forever under the 1921 bill, because no matter how much profit a corporation may make it is to be taxed the same identical rate as a corporation that makes substantially no profit. Competitive business is penalized under the majority amendment. The small corporations are more likely to reflect individual and personal effort. This should be rewarded as is stimulated by the graduated-tax principle.

Corporation taxes are paid either by the consumers or by the stockholders. Therefore, it may be argued that a reduction of corporation taxes is of some benefit ultimately to the consumers.

If the corporation income tax is paid by the stockholders, an injustice exists that ought to be removed. There are said to be 2,500,000 individuals who return taxable net incomes, and the average rate of tax on their incomes has been reduced to 3.35 per cent, as compared with 3,000,000 stockholders who are virtually taxed on part of their income at the present rate of 13%

per cent.

There are now less than 9,000 individual income-tax payers whose average tax as returned equals or exceeds 131⁄2 per cent of their taxable income. These 9,000 individuals have a net income in excess of $110,000.

The Treasury Department recognized that it was desirable to reduce the tax on the small, closely held corporations, whose situation is substantially that of a partnership, although they do business in corporate form.

In order to give relief to the owners of these closely held corporations with a small income, the Treasury Department recommended that all corporations with incomes of $25,000 or less, and the number of whose stockholders does not exceed 10, be allowed to file their income-tax returns as if they were partnerships, and be taxed on a partnership basis. This recommendation has not been accepted by either the House or the Finance Committee of the Senate.

Mr. President, it seems to me the arguments are overwhelmingly and conclusively in favor of a graduated corporation income tax. It is the only way I know that will do justice, in part at least, to the small corporations.

EFFECT OF CORPORATION CONSOLIDATIONS

The Treasury Department pointed out, in their recent report, that 7.9 per cent of the total number of corporations made 90.1 per cent of the total net incomes reported by all corporations, which means that about 28,000 corporations out of 430,072 corporations filing returns in 1925 made 90.1 per cent of all the profits earned by all corporations. But some other figures are even more startling. The Treasury Department reports that 196 corporations made one-third of all the profits, or net

income, reported by all the corporations. This certainly strongly proves the tremendous trend toward the consolidation of wealth and of financial, industrial, and commercial corporations of this country. One is tempted to inquire, How long will it be before 96, instead of 196 corporations, or 9 instead of 96, will be making not one-third, but two-thirds or even more of all the profits of all our corporations?

CONTRAST BETWEEN LARGE AND SMALL CORPORATIONS

Four hundred thirty thousand and seventy-two corporations filed returns in 1925. Only 35 per cent of all these corporations paid any tax at all.

Twenty-five and two-tenths per cent of these corporations showed a profit of not over $2,000, the amount of the exemption then allowed.

Forty-one and three-tenths per cent reported losses.

Therefore, 66.5 per cent of all corporations in the United States paid no taxes in 1925.

Only 25.6 per cent of all corporations reported a net income of over $2,000 and not over $25,000.

Therefore, 92.1 per cent of all corporations in the United States showed a net income of not over $25,000 in 1925.

It is these corporations that will be greatly aided by the recommendations of the minority in favor of the graduated corporation income tax.

OWNERSHIP OF STOCK IN CORPORATIONS

A study of the dissemination of stock among the public is very impressive.

rate by arguing that the corporations represent the great accuSome may seek to justify the proposed excessive corporation mulated wealth of the country and hence the discriminatory spread between the 132 per cent corporation rate and the 5 per cent individual rate simply operates to apportion the aggregate tax burden according to ability to pay. Or it may be argued that those who receive dividends from corporations are persons of wealth who should pay a proportionately large normal tax. Both of these arguments disregard the fundamental principle that apportionment according to ability to pay finds its proper expression in the surtax brackets and rates and not in the flat normal tax. Nevertheless, they are sufficiently plausible to require answer.

proach to accuracy that, by and large, big business was conFifteen or twenty years ago it might be said with some apducted through corporations, and moderate or small sized businesses through partnerships, proprietorships, or associations. But methods of business have undergone profound changes in the last 15 or 20 years, and one of the most remarkable changes has been the greatly increased use of the corporation. To-day almost every enterprise, large or small, except certain types of brokerage houses and financial concerns, real-estate syndicates or ventures, and some large selling agencies are incorporated. It is a matter of common observation that the small stores, shops, restaurants, garages, and retail dealers generally, as well as moderate-sized businesses, are incorporated. Discrimifalls heavily on those with little ability to pay. nation against corporations in the matter of taxes, therefore,

nation in the case of large corporations: Consider, first, the effect of the present 82 per cent discrimi

Illustra

The American Telephone & Telegraph Co. publicly advertises the fact that it has more than 400,000 stockholders, and that no one stockholder owns as much as 1 per cent of its stock. On January 13, 1927, according to a statement of its president, the General Motors Co. was owned by 57,000 stockholders. A large railroad system-the Pennsylvania Railroad-numbers the checks for each dividend by the tens of thousands. tions might be multiplied indefinitely. The stock registers of our great industrial enterprises are very much like a city telephone directory. The Liberty loan issues instilled in the people a habit of investing in securities, and this habit has been fostered by the banks, trust companies, brokers, and other financial advisers since that time, until to-day the ownership of the great industrial corporations of the country is diffused among the common people to an extent unheard of in the past. Public utilities have found the policy of customer ownership to be a corner stone of sound financing.

There is hardly a large corporation in America to-day that does not encourage its employees to buy its stock. Some corporations practically finance their capital requirements from the savings of their employees. This very revenue bill in section 165 recognizes and encourages the policy of employee ownership by making specific provisions for trusts created by an employer as part of a stock bonus, pension, or profit-sharing plan for the exclusive benefit of some or all of his employees. Under such a plan, by joint contributions of the employer and employee, large sums are made available for investment in the stock of the company, and the employee becomes a part owner of the business

for which he works. Representative data collected by the Federal Trade Commission in 1926, with the cooperation of the Bureau of Internal Revenue, discloses some remarkable facts with respect to the stock ownership of corporations. The commission said:

In the present inquiry schedules requesting data on the number and kinds of stockholders were addressed to a list of 10,000 corporations selected by the Bureau of Internal Revenue in such manner as to be representative not only of size but of each of the 43 industrial groups into which the bureau's returns are listed for tabulation. Returns were received by the commission from 4,367 corporations, with a combined capital stock amounting to over $9,000,000,000, or about 12 per cent of the capital stock of all corporations.

For these 4,367 corporations the average holding of common stock per stockholders was $6,969, while the average of preferred stock was $5,211. The average holdings of common stock per stockholder ranged from $3,273 for electric light and power companies to $18,957 for manufacturers of lumber and wood products, while the average holdings of preferred stock ranged from $1,486 for service corporations to $9,883 for coal-mining companies. Nearly one-third of all the stockholders reported were holders of not more than $500 worth of stock (common and preferred) each. This proportion of small holders to total holders ranged, however, from 11.7 per cent for electric-light companies to 53.8 per cent for petroleum-mining companies. 串

For corporations reporting the information, the stock holdings of officers, directors, and employees were an important part of the holdings of individuals. In the case of many smaller corporations all of the stock was held by officers and directors. Of the total commonstock holdings, officers and directors held about 10 per cent. They held about 6 per cent of the total preferred stock The employee stockholders comprised 7.5 per cent of the common stockholders reported and 3.5 per cent of the preferred stockholders. * (National Wealth and Income, Senate Doc. No. 126, 69th Cong., 1st sess., pp. 6-7.)

This report, as seen, discloses the remarkable fact that on an average the employees of corporations own almost as much stock as do the executives and directors. Most significant of all, in the present connection, however, is the fact that-nearly one-third of all the stockholders reported were holders of not more than $500 worth of stock each.

These employees, as well as the vast number of investors of moderate means and limited incomes, bear a very large part of the discriminatory burden caused by the excessive corporation rate. On their income from other sources, such as wages, interest, rent, and so forth, they pay a normal tax of 5 per cent or less. On the income from their modest stock holdings they pay a normal tax of 131⁄2 per cent. For the privilege of becoming part owners in these great business ventures, the Government exacts 270 per cent as much tax as it would exact on any other type of investment. The most inexcusable feature of this deplorable situation is that in the case of many of these small stockholders, their incomes are so small that they are not required to pay any direct tax, but nevertheless they must continue to pay indirectly 13% per cent on every dollar received as dividends regardless of the amount.

There can be no question that the 132 per cent rate does not apportion the tax according to ability to pay, even in the case of the large corporations. On the contrary, the discrimination falls heavily on hundreds of thousands of persons with small or moderate incomes.

Consider next the case of the small corporation. The Treasury statistics of income for 1925- the last year for which complete data are available-shows on page 13 that 430,072 corporate returns were filed for 1925. Of these returns 177,738 may be eliminated, for they show no taxable income. The remaining 252,334 may be divided into two groups according to corporate income, as follows:

Thus, it is seen that three-fourths of the profit-making corporations have small incomes and, it may fairly be presumed, were owned for the most part by individuals with small incomes.

The statistics of income further show that on the average the income of the 189,000 small corporations was less than $2,500. In the aggregate, however, their income amounts to the stupendous sum of approximately $470,000,000, which at 6 per cent represents an investment of $8,000,000,000. Some of these corporations did not have enough income to be subject to

the corporation tax. Those who were subject to the tax paid at the rate of 131⁄2 per cent and the burden undoubtedly fell in practically all instances on persons of modest means and very moderate incomes.

It is impossible to accurately compute the extent to which this discriminatory corporation rate falls on the wealthy, and the extent to which it falls on those of limited means and poor people. A rough approximation, however, may be arrived at from the figures in the statistics of income showing the distribution of dividends to stockholders according to income classes. The following table is taken from page 6 of the Statistics of Income for 1925:

Mr. KING. Mr. President

Mr. WALSH of Massachusetts. I am very glad to yield to the junior Senator from Utah. I wish to say that no man in this body has given more diligent study and labored more assiduously for the perfection of this bill than has the distinguished junior Senator from Utah; in fact, if any medals were to be given to Members of the Finance Committee for their labors on this measure, I think the two Senators from Utah would easily be the recipients of such recognition, because they certainly have given of their time and labor in a most commendable way. I hope the junior Senator of Utah will not think that I am indulging in flattery. I desire to sincerely express my admiration for his perseverance and the long hours of time he has given to this very important subject. I yield to the Senator from Utah.

Mr. KING. Mr. President, the Senator from Massachusetts is overgenerous in his words of commendation of my service.

I greatly appreciate his compliments, but fear that I do not deserve the same.

May 1 add that the Senator from Massachusetts during his service in the Senate has given serious attention to the study of our revenue legislation and to fiscal affairs generally; and no Senator has exhibited a broader knowledge of the principles of taxation and their application than the Senator from Massachusetts.

Before he concludes I should be glad to have him refer to the point which was urged against the excess-profits tax upon corporations and show that the provisions of the House bill dealing with graduated taxes upon corporations with a small annual income, are not subject to the criticisms urged against the principle of the excess-profits tax as found in the war revenue bill. The Senator will recall that the principal objection to the corporate excess-profits tax was based upon the difficulties encountered in determining valuation. The Internal Revenue Bureau encountered real obstacles when it attempted to value property for the purpose of applying the excess-profits tax. The amendment, which is now offered by the minority and which slightly modifies the provisions of the House bill dealing with graduated corporate taxes, does not involve the question of valuation and may be applied without difficulty and enforced without any resulting injustices.

Mr. WALSH of Massachusetts. No more than we ask an individual to tell us what the value of his holdings is. I am very glad the Senator made that point, because it shows that we are not trespassing upon the dangerous field, the complicated field, that the Treasury Department complained so much about when we levied the excess-profits tax.

Mr. KING. That is the point I had in mind. Mr. WALSH of Massachusetts. That principle does not apply here at all. It is not necessary for the Treasury Department to fix a valuation upon the amount of capital invested in any corporation. The tax in the proposed amendment is levied on income without regard to invested capital.

Since the Senator addressed me, he will be interested to know that one of the experts of the Treasury Department has informed me that more individuals in this country pay a tax by reason of being stockholders through this tax levied upon the incomes of corporations than all the individual taxpayers in the country. The number of people who make returns as individuais is not as large as the number of people who have to pay an indirect tax as stockholders because of the tax levied upon corporation incomes.

Mr. KING. I desire to ask the Senator one other question, with his permission.

The volume which I hold in my hand, called "Statistics of Income from Returns of Net Income for 1925," published by the Treasury Department, is a mine of statistical wealth and of value to Congress when it undertakes to frame tax measures, especially where it deals with the revenues to be collected from corporations and the taxes imposed upon individuals.

What I desire to ask the Senator is this: In pursuing his investigations to a later date than indicated in the volume to which I have just referred, has he found an increasing tendency upon the part of corporations to consolidate? And if so, has he discovered that in the consolidations and mergers there is substantially a uniform diffusion of stock and to the same extent as in the corporations theretofore found and which have been in some instances called trusts?

Mr. WALSH of Massachusetts. I think that is true. Is the Senator familiar with the study made by the Federal Trade Commission about the class and number of holders of stock? Mr. KING. Yes; I am familiar with that. I have the volume before me.

Mr. WALSH of Massachusetts. The Senator, then, will remember that it is stated there I referred to it in an earlier part of my address-that nearly one-third of all the stockholders reported from a study of a special group of corporations were holders of not more than $500 worth of stock each. That is remarkable. The Federal Trade Commission gathered together the lists of stockholders of a given number of corporations, found out what the holdings of each were, and reached the conclusion that nearly one-third of all the stockholders reported were the holders of not more than $500 worth of stock each. Nothing has surprised me more in my economic studies than the extent to which stock is being held by those in limited financial circumstances in this country, and the extent to which employees of industrial plants are buying and holding stocks.

Mr. KING. I have been interested in the observations of the Senator and the lucid explanation which he has made showing the distribution of stock among a large number of stockholders.

May I add that if those in our country who possess great wealth, who organize corporations and are instrumental in

bringing about mergers and great considerations, will pursue a course by which there will be a greater diffusion and distribution of the stock of corporations, and no monopolistic effects will be made, much of the prejudice which has justly existed against corporations will be dissipated. I have feared that some corporations would continue their ruthless course against competitors and seek to destroy the small corporations and the competing business owned and conducted by individuals and concentrate in the hands of a limited number of individuals and corporations the wealth owned by the latter.

I believe that my fears are not without foundation. There are trusts and monopolies in our business and industrial life, and they have wrought evil and in many fields destroyed competition. Such monopolistic aggregations should be dissolved and the antitrust laws should be launched against them and effectively enforced until their grip upon the economic life of the people is destroyed. They are a menace to the peace and prosperity of the people. Monopolies are hateful and dangerous, and when they become regnant they will threaten the political institutions of our country. Economics and industry can not be separated from the political field, and political institutions are more or less dependent upon economic and industrial conditions. Those who attempt to differentiate economics and industry from politics and political institutions will find that their efforts are futile.

Mr. WALSH of Massachusetts. The Senator never uttered sounder views.

Mr. KING. So it is important that in our political studies we shall study our economic conditions. Legislators and politicians and statesmen may not take the flattering unction to their souls that they can solve political questions and properly deal with them, unless and until they understand economic and industrial questions we may possess civil liberty and political liberty, but soon the crown of liberty will depart if we have industrial or economic servitude. I have been afraid that giant corporations, with their massed capital and mass production, would become so powerful in our industrial and political life that they would destroy competition; and with the destruction of competition there would arise an oligarchy of wealth dominating political institutions and controlling all the avenues in which the people walk.

Mr. WALSH of Massachusetts. Apropos of what the Senator has said, my attention has just been called to an article in the Washington Herald of May 11, one of the daily financial articles by Mr. B. C. Forbes, in which he says:

Again, we are making unprecedented progress in creating a nation of investors. All indications are that the number of individuals of moderate means now interested in stocks is far beyond anything ever before known. Democratization has been at work in this direction. Several millions of employees have been introduced to the idea of stock owning through the action of their employers in making stock available to workers on easy installment payments.

Now, I am going to close, but I want to say just one word to the other side.

If you accept the majority recommendation, you will be reducing the corporation taxes 1 per cent. The chief beneficiaries again will be those corporations that I class, for want of a better name, as the excess-profits-making ones.

Mr. GERRY. Mr. President, will the Senator yield at that point?

Mr. WALSH of Massachusetts. Certainly.

Mr. GERRY. You will be simply reducing the corporation taxes to the point where they were before they were raised in the last revenue bill. Is not that the case?

Mr. WALSH of Massachusetts. That is true; but, of course, the capital-stock tax has been removed. The Senator is correct so far as the normal corporation income tax is concerned.

Mr. President, I want to repeat, however, that the majority bill is not removing the 25 per cent increase made in 1921 in the tax bills of 92 per cent of all the small corporations of the country. The majority are again taking its old position as the protector of big business, the trusts and monopolies most able to pay; and, on the other hand, the small, struggling limiteddividend-earning corporations and their investors of this country are to be penalized further by practically nothing being done to get them back to the tax basis on which they were during the war. At least we should aim to accomplish this end.

I can not see how any Senator or any political party can defend such a policy. Is it any wonder that we sometimes accuse the majority party of not being the real protectors and defenders of business, but of being first and last the champions and protectors of big business?

Mr. President, I am pleading, the minority is pleading, for a square deal to 400,000 competitive corporations that represent the small investments of our people and small industries en