below $70,000, approximately, and that the majority reductions shall apply to no income below $20,000 but to incomes of $20,000 and upward ad infinitum.

Mr. SMOOT. Mr. President, the majority members of the committee wanted

Mr. HARRISON. Mr. President, let me proceed. Mr. SMOOT. The majority members of the committee wanted to correct the evil that existed in the imposition of taxes against people with incomes up to $80,000, and it is shown on the map on the wall so plainly that the Senator himself will not deny it. In other words, they are paying a higher tax than they did in 1917, and we undertake to relieve all of those people who were paying a higher income tax under the existing law than they were paying in 1917.

Mr. HARRISON. Mr. President, the Senator knows that no one has ever said that the man whose income is $1,000,000 or $5,000,000 was discriminated against.

Mr. SMOOT. I am not talking about that.

Mr. HARRISON. The Senator is undertaking to give them some reduction.

Mr. SMOOT. Everybody knows what it was given for.

Mr. HARRISON. The only criticism that has been found was as to a little inequality within a certain bracket between twenty-odd thousand dollars, I believe it was, and sixty-odd thousand dollars income.

Mr. SMOOT. Eighty thousand dollars.

Mr. HARRISON. Say $80,000. My recollection is that it was sixty thousand and odd.

Mr. SMOOT. There is the map, which shows that it is $80,000.

Mr. HARRISON. The Senator does not limit it to them, but goes beyond that, and gives to the man whose income is larger than that just as much reduction as to the fellow who gets an income of $100,000.

Mr. SMOOT. Mr. President, he is paying exactly the same as he is paying to-day. He has not any reduction whatever. The credit in the past has been from bracket to bracket. He has had that credit, and we have not changed from what the existing law is on the man who has an income of over $100,000. Mr. HARRISON. The Senator says that under his amendment there will be no reduction to the man who gets an income of $500,000.

Mr. SMOOT. No; I do not say that. I say he gets $470. Mr. HARRISON. Of course, he does; and that is all I said. Mr. SMOOT. That is not what the Senator said. If he has an income of $5,000,000, he gets $470 reduction, and that is all.

Mr. HARRISON. Under our amendment he does not get any. Mr. President, the Senator says we are playing politics. We are trying to relieve first the man who needs relief.

Mr. SMOOT. That is what we have done.

Mr. HARRISON. And there will be, so far as our votes are concerned, no more tax reduction to the highest fellow, in the highest bracket, until the man of more moderate income has been relieved. We have followed that course throughout, and that is why we have relieved millions already from the payment of surtaxes. That is why we have reduced the people of moderate means by the millions from the payment of income taxes.

The policy we have pursued in the past will be continued in the future. But the Senator and his colleagues never favor a tax reduction bill unless it presents relief for the man with the big income, who does not need tax reduction as much as the poor unfortunate whose income may be $12,000 a year, who, under the Senator's amendment, gets no reduction, while the other fellow does.

That is the way the political minds of the Senator from Utah and his party work, and on the roll call we will see how they vote.

Mr. SWANSON. Mr. President

The PRESIDENT pro tempore. Does the Senator from Mississippi yield to the Senator from Virginia.

Mr. HARRISON. I yield.

Mr. SWANSON. Do I understand from the Senator that the Senator from Utah has introduced a proposition here to the effect that a man with an income of $100,000 shall get a reduction, but that a man with an income of $12,000 will get no reduction?

Mr. HARRISON. That is exactly the proposition; and the Senator will not rise now and deny that that will be the effect of his amendment.

Mr. SMOOT. Let us see what is does. Under the act of 1926 he got a reduction, and not only that

Mr. HARRISON. The Senator from Virginia is asking about the amendment of the Senator from Utah to this bill.

Mr. SWANSON. I am asking the Senator this: Has he offered an amendment in the Senate under which a man who has an income of $12,000 will get no reduction but a man with $100,000 will get a reduction?

Mr. SMOOT. All that he will ever pay is $20.

Mr. SWANSON. I do not care what he pays. It ought to be proportionate. I want just the proportion, not the amount. Mr. SMOOT. The man who gets $12,000 net, with all of his allowances, we ask to pay $20 toward maintaining the Government, and I think he is an ungrateful citizen of the United States if he objects to paying $20 toward maintaining the Government of the United States.

Mr. HARRISON. Does the Senator think that the man who receives an income of $5,000,000, and who gets a reduction of $470, ought to object? He has no objection coming at all, has he?

Mr. SMOOT. Not as to the $470.
Mr. HARRISON. No.

Mr. SMOOT. He is entitled to it, because of the decreases that have been made in all the brackets before.

Mr. SIMMONS. They are not necessary decreases.

Mr. SMOOT. I want to say to the Senator that if he will look at the map, he will see there is a little red dot and a whole black line that shows who pays the tax, showing the number of people who pay the great bulk of the taxes to-day, and you can hardly see it when you get up there [indicating]. Mr. HARRISON. I am surprised that the Senator can see the unfortunate moderate class in this country at all. If the Senator would divert his mind from those red, white, and blue colorations up there a while to the poor devils out in the huts throughout this country, who need some relief, it would be better for the country.

Mr. SMOOT. A man must be a poor devil" who makes $12,000 a year, an awfully "poor devil," when all we ask him to do is to pay $20 toward maintaining the Government of the United States. He receives $2,000 more than a Senator is paid, but he is a 66 poor devil" when we ask him for $20 toward maintaining the Government of the United States. Mr. SWANSON. Mr. President, I did not ask the Senator for a reason. I want to know whether it is true--I want the specific fact-that a man with an income of $12,000 gets no reduction, but a man with an income of a hundred thousand dollars does get a reduction. I am not asking for the reason that animated the Senator. I simply want to know whether that is true under his amendment.

Mr. SMOOT. A $12,000 income

Mr. SWANSON. I am not asking for a reason, but is that true? Mr. HARRISON. Yes. Mr. SMOOT. If the Senator will just wait a minute, I will tell him. A man receiving a $12,000 a year income, under the amendment of the Senator, pays $20 per year. What does he pay now? Mr. WALSH of Massachusetts. pays a normal tax besides.

Mr. SWANSON.

That is only the surtax. He

Mr. WALSH of Massachusetts. How much is that?
Mr. SMOOT. Everyone pays a normal tax.

Mr. SIMMONS. He pays as high a normal tax as the man with a million dollars.

Mr. SMOOT. In percentage, but not as much actually. Mr. SIMMONS. Certainly; we are talking about percentages. Mr. SWANSON. And he gets no reduction?

The PRESIDENT pro tempore. To whom does the Senator from Mississippi yield?

Mr. HARRISON. I yield to the Senator from Utah, if he will make some explanation.

Mr. BRATTON. Mr. President, will the Senator from Mississippi yield?

Mr. BRATTON. The Senator from Utah has not answered the question propounded by the Senator from Virginia. I want to separate his question into two parts. I would like to ask the Senator from Utah whether a man with an income of $12,000 will get any reduction under his proposal.

Mr. SMOOT. No; he does not get any reduction. Mr. BRATTON. I want to follow that with another question. Would a man with $100,000 income get a reduction; and if so, how much?

Mr. SMOOT. He does not get a reduction in the percentage; the 20 per cent is exactly the same to him.

Mr. BARKLEY. In 1921, after the Republicans came into power, the tax reduction bill, which was then proposed, was a tax reduction largely limited to the high surtax rates. Had it not been for the fact that the minority in the House of Representatives and in the Senate insisted on a still greater reduction for the benefit of the average taxpayer, there would have been no relief granted even in that tax bill except to those who paid under the higher brackets of the income tax law.

The same was true of the tax bill of 1924 and again of the tax bill of 1926. It has been largely due to the insistence and the fight made by the members of the minority party on the Ways and Means Committee and the Finance Committee that the average man has received any reduction in taxes such as he was entitled to in any of this legislation.

Mr. SMOOT. If the Senator will read the recommendations of the Secretary of the Treasury, I think he will modify that statement.

Mr. SMOOT. I can tell the Senator the items that caused the increase above the estimate. The actuary who made those estimates is on the floor of the Senate, and I suggest to the Senator that if he will ask him what were the items that made up the difference, I think he can tell the Senator.

Mr. BARKLEY. I have not time to stop at this point and consult the actuary. I am taking the estimates as given out officially by the Treasury Department.

Mr. SMOOT. For instance, the department did not then know anything about how much money would be collected from railroads; they could not tell as to that. If the Senator will ask Mr. McCoy, the actuary, he can explain the matter in a very little while to the satisfaction of the Senator.

Mr. BARKLEY. I do not think that item becomes material. Mr. SMOOT. I mean as to the entire difference. Mr. BARKLEY. I understand. What I am speaking about, however, is that the Treasury Department recommended a repartment Congress reduced the taxes $663,000,000; and yet, in spite of that reduction of $663,000,000, there was a surplus the next year of $313,000,000. So, if we take account of all the moneys collected from the railroads, it does not make up the discrepancy between actual result and the recommendations and dire predictions of the Treasury Department as to the result if Congress should overstep what the department thought was cautious and wise legislation in the matter of tax reduction. Furthermore, if the Treasury Department's figures had been accepted by Congress and the taxes had been reduced by only $372,000,000, the amount of the surplus in the following year would have been $604,000,000 instead of $313,000,000.

So if we are to be charged with playing politics with the tax reduction because we are now seeking a greater reduction for the average taxpayer, I reply to the Senator that that has been our course ever since the war. We have insisted on tax reduc

tions for those who belong to the great majority of the people, who do not have enormous incomes, as well as for those with larger incomes.

Mr. President, I say the Treasury can stand the tax reduction which we propose by the reduction in corporation taxes from 131⁄2 to 112 per cent; because, as has already been emphasized, the Treasury Department, in connection with every tax bill that has been brought to Congress, whether it has deliberately done it or done it because of ignorance of its own affairs, has grossly underestimated not only the revenue that the Government would collect under the tax law but has also to the same extent underestimated the amount of surplus that would be in the Treasury as a result of the tax bills that have passed.

In 1925 the amount of net income from all corporations in the United States subject to taxation was $9,340,000,000, and a 131⁄2 per cent tax on that sum represents $1,170,000,000. By the way, that is one-third of the total amount of revenue collected by the Governmnt, practically speaking. In 1926 the amount of net income from corporations subject to taxation had increased $200,000,000, and in 1927 the figures were about the same. Yet, notwithstanding that fact, the Treasury Department now estimates that the amount of revenue derived from this 131⁄2 per cent tax, if the tax should not be reduced, would be only $1,120,000,000.

In December, 1927, the Treasury Department estimated the surplus for 1929 at $252,000,000. On April 3, 1928, they have revised their figures by estimating that the surplus for 1929 would be $297,000,000. In July, 1927, at the beginning of the fiscal year 1928, the Treasury Department estimated that the surplus for 1928 would be $200,000,000. They began at the very beginning of the fiscal year to estimate the surplus for 1928 and they fixed it at $200,000,000. Yet they were so far wrong in their estimate that on December 31, 1927, six months later, they estimated the surplus for 1928 at $454,000,000, or $254,000,000 more than they had estimated in July, 1927.

In April of this year-last month-according to the testimony of the Secretary of the Treasury before the Senate Committee on Finance, it was estimated that the surplus would be $422,000,000 at the end of the present fiscal year, being $222,000,000 more than the estimate of nine months ago.

In 1921 the amount of tax reduction recommended by the Treasury Department was $372,000,000, and even when they recommended a reduction of $372,000,000 the officers of that department feared that there might be a deficit in the Treasury as a result of a greater reduction than that; and yet Congress reduced the taxes that year by $663,000,000.

Mr. SMOOT. Mr. President

Mr. SMOOT. We paid that much more on the national debt. Mr. BARKLEY. As to the tax bill of 1924 the Treasury Department recommended a reduction of $323,000,000; Congress actually reduced the taxes, over the protest of the Treasury Department, by $519,000,000; and, in spite of that, the surplus the next year was $505,000,000; so that if the Treasury Department's figures had been accepted in 1924 the amount of the surplus would have been $757,000,000.

In 1926 the Treasury Department recommended a tax reduction of $300,000,000; Congress, over the protest of the Treasury Department, reduced taxes by $422,000,000-$122,000,000 more than the Treasury Department thought was wise-yet, in spite of that, the surplus for that year was $307,000,000, and for the following year it was $635,000,000; and if the Treasury Department's figures had been accepted as to tax reduction in 1926 there would have been a surplus of $701,000,000 in the Treasury.

I recall that not very long ago President Coolidge made a speech in which he gave utterance to a sentiment with which I can heartily agree. He said that any government which collects more money from the people in the form of taxes than it needs in order to discharge its just obligations and responsibilities is guilty of legal robbery. If that is true with respect to one form of government, it is true with respect to all forms of government; if it is true with respect to one form of taxation, it is true with respect to all forms of taxation.

Congress

There is a surplus in the Treasury of $422,000,000. has by law provided for the payment of our public debt in an orderly way. It has provided for a sinking fund that increases year by year, so that the domestic part of our public debt will be paid in about 20 or 22 years at the present rate of reduction, without resort to the expedient of piling up in the Treasury surpluses under false pretenses and under a prediction of deficits that never occur. The other portion of the public debt is supposed to be provided for from the payments made to us by those who are in debt to the United States Government.

So we have a surplus of $422,000,000, which represents taxes collected by the Government from the people which were unnecessary and beyond the amount required for the ordinary expenses of the Government, but which were collected because the administration refused to permit a tax reduction that would have made it impossible for such a surplus to have been accumulated in the Treasury. By reason of that the administration seeks to make a great record as to debt reduction and the payment of the debt at an earlier date than that provided for by Congress in an orderly manner under the guise of economical administration of the affairs of the Government.

If we have collected during the last four or five years an average of $500,000,000 a year more than the needs of the Government required, we have collected one-third of that $500,000,000 from the corporations of the United States, for they

Mr. BARKLEY. I yield.

have been doing that unjustly, if the Treasury Department has been underestimating the revenues and the surpluses, and

by reason of that situation the people and hundreds of thousands of corporations of the country have been overtaxed, then we certainly owe it to them to use the surplus that now exists in the Treasury to spread it out over a term of years and enable them to have a just tax reduction.

If it be true that the reduction of the corporation tax from 13% per cent to 11% per cent means a decrease of $82,000,000 a year in revenue, that $82,000,000 a year loss of revenue can be absorbed for five years by the surplus which is already in the Treasury as a result of the overtaxation to which they have been subjected by the administration and by the officials of the Treasury Department.

Therefore, Mr. President, I am very earnestly in favor of the House provision, and I would be willing to go even further and reduce the corporation tax to a greater extent in order that we might do a very tardy piece of justice to a class of our people who have been overtaxed for at least five years, and who, I hope, will not be subject to such injustice in the years to come. Therefore, I shall vote against the committee amendment and in behalf of the House provision for a reduction in the corporation tax to 111⁄2 per cent. This is the only tax which has been increased instead of reduced since the war. While all other taxes have gone down this one has gone up. This tax affects hundreds of thousands of small business concerns in every town and city in the Nation. It ought to be reduced at least as much as the House bill provides for, and I hope the committee amendment will be defeated.

The PRESIDENT pro tempore. The question is on agreeing to the amendment proposed by the committee.

Mr. SIMMONS. Mr. President, I have not risen for the purpose of making a set speech. I wish to put a good deal of matter in the RECORD, however, if I can obtain unanimous consent to put it in without reading.

Mr. SMOOT. That is all right.

Mr. SIMMONS. Mr. President, preliminary to doing that, I wish to say that the Secretary of the Treasury recommended that this tax be fixed at 12 per cent. The House, after very extensive hearings, and, as I understand, probably without any conflict between the two sides of that body, fixed the rate at 11% per cent. It also repealed the tax on automobiles. So it was the judgment of the body at the other end of the Capitol that the automobile tax could be repealed and the corporation tax could be reduced from 131⁄2 per cent to 11% per cent without jeopardizing the financial condition of the Treasury. When the bill came to the Senate, however, the majority of the Finance Committee insisted that it was necessary to raise the rate fixed by the House on corporations 1 per cent, and they based that contention upon the ground that they had agreed to repeal the automobile tax.

Mr. President, if there is any tax now levied that is probably more onerous than when it was imposed during the war time it is this corporation income tax. It is the one tax that in recent years has been increased. We increased it in the act of 1926 from 122 per cent to 13% per cent. At first we increased it from 121⁄2 per cent to 13 per cent because of the repeal of the capital-stock tax. That was logical, and so the bill was authorized to be reported to the Senate. But before the bill, as I remember, was actually reported to the Senate, there was what was called an emergency meeting of the Finance Committee. The committee had already arranged to recoup the loss caused by repeal of the capital-stock tax, but we were called in a meeting in a room in the Capitol below the Senate Chamber, and it was explained to us that the Secretary of the Treasury insisted that upon the basis of 12% per cent there would be a deficit for the year 1927 of $51,000,000.

It was further explained to the committee that in order to prevent that catastrophe to the Treasury it was necessary to raise the rates of the corporation tax from 13 per cent to 131⁄2 per cent, and that was done over the protest of the minority. The Senator from Utah shakes his head, but it was done in his room at an emergency meeting of the committee which raised the rate from 13 to 131⁄2 per cent.

that there was money in the Treasury that was not needed for governmental purposes.

The tax-refund idea was rejected, and properly rejected, by the country, although proposed by the President in an (pen statement made in reply to a statement that I made. It was first repudiated by the country; and then, when the Committee on Ways and Means met, upon a motion to adopt the President's scheme, that committee refused to do it and rejected the White House plan.

What has become of all of that money, Mr. President$627,000,000? The Senator says it was applied to the debt. Before we get through with this bill, Mr. President, I am going to show that by the use of these surpluses extorted from the people in excess of the necessary requirements of the Government the majority are proceeding with the deliberate purpose and design of forcing the people to pay off this indebtedness from five to six years earlier than the requirements of the law which the Congress has enacted for the purpose of retiring that debt; but, Mr. President, I shall not go into that discussion now. The Senator from Utah, representing the majority, says that the tax of 112 per cent would be perfectly justifiable, and he himself would favor it, if it were not for the fact that the condition of the Treasury does not justify it.

Mr. President, in every tax reduction that we have made in this Chamber-in 1924, in 1926, and before-we were told that if we reduced taxation as much as the minority proposed, or anything like as much as the minority proposed, there would be a deficit in the Treasury; and in each case, instead of a deficit, there was a tremendous surplus which was applied to the public debt.

Mr. President, I am going to put in the RECORD-I had intended to ask that the clerk read it, but I will not have that done a statement with respect to these estimates. This statement is rather full. It starts at an early period in this process of reduction, and traces each bill from the beginning up to the present time, and shows that in every single instance the reduction made was actually in excess and largely in excess of what the Treasury said it could stand, and that in each instance the result shows that the Treasury did stand the reduction that was made, and could have stood many millions of dollars of additional reduction.

I shall content myself simply by asking that this statement be incorporated in the RECORD at this point in my remarks. The PRESIDENT pro tempore. Without objection, it is so ordered.

The statement is as follows:

ESTIMATES OF REVENUE

One of the critical problems in the consideration of tax reduction is that of estimating the future expected revenue and the future expected expenditures. The difference between these two estimates gives us the estimated surplus. In a statement presented to the Ways and Means Committee by the Secretary of the Treasury on October 31, 1927, the surplus for 1928 was estimated at $455,000,000, and that for 1929 at $274,000,000. On April 3, 1928, before the Finance Committee. the statement of the Secretary of the Treasury reduced the estimated surplus for 1928 to $401,000,000 and for 1929 to $212,000,000. This reduction is accounted for in the statement by an increase in the expenditures. It is worthy of note that the Treasury Department admits an increase in revenue of $50,000,000 in back-tax collection for 1929 over the October estimate. The matter of back taxes will be referred to later.

The first question which must be squarely met is the question of how much reliance can be placed on these Treasury estimates. It is well known that such estimates for a period of years have been notoriously low. This is admitted even by the Treasury Department itself. The October statement of the Secretary of the Treasury, already referred to, contains the following admission:

"For a number of years past the Treasury estimates have underestimated the revenue which was later realized."

In spite of the above admission, it is well to briefly summarize some of these former Treasury estimates in order to show the extent of such errors in judgment. This summary follows, arranged by estimates for fiscal years beginning with 1922:

ESTIMATES FOR FISCAL YEAR 1922

1. A deficit of $24,469,000 was predicted by Secretary Mellon in December, 1921, in his annual report to Congress. This estimate was

too low by $338,270,000.