should not sell certificates instead of bonds, because if these certificates are not subject to taxation these certificates would become more desirable than the 3 per cents for very rich people.

Mr. LEFFINGWELL. That is another thing, Mr. Garner. These certificates are the most attractive security the United States offers. They are payable on 10 days' notice at par, with accrued interest at a reduced rate, and it would not be wise to issue these certificates with that privilege in very large denominations or in very large amounts to single holders, and therefore restrictions should exist. On the other hand, the Secretary feels that a year's work has been done, and that it is quite proper to amend the bill so that a man who has bought a thousand dollars' worth of those certificates in 1918 can buy another thousand dollars' worth next year. We do not want to close the door to the small investor. He has done his part this year and should be allowed to do his part next year.

The CHAIRMAN. Do I understand, then, that this is seeking a redemption clause?

Mr. LEFFINGWELL. These are redeemable on 10 days' notice.
Mr. MOORE. At par?

Mr. LEFFINGWELL. "Par" has a peculiar meaning in regard to warsavings certificates. They are sold at a price which discounts the interest to maturity. The redemption price is calculated to equal the selling price plus interest at about 3 per cent to the date of redemption, so that a man loses about 1 per cent interest if he presents these certificates for redemption before maturity. Actually the amount of redemptions to date have been $5,709,000, or considerably less than 1 per cent.

Mr. GARNER. I do not see any objection to giving you an unlimited amount to sell, but I do see very material objection to selling these in large quantities to individuals. In the first place, they are not subject to taxation, and, in the second place, suppose a man would go and get a billion dollars' worth of them and take them into the Treasury to cash them at one time; what are you going to do about that? They ought not to be in large quantities in the hands of one person.

Mr. LEFFINGWELL. If you will refer to Secretary McAdoo's testimony last summer, when he proposed this provision in the law about war savings, you will find that he explained that and recommended that these limitations on individual holdings should be imposed. The only modification now suggested by the Treasury is that, a year's work having been done, we should be able to ask the man who has bought a thousand dollars' worth this year to buy another thousand dollars' worth next year.

Mr. MOORE. That leads me to ask this question: Why, if Congress, having authorized $2,000,000,000 of these war-savings certificates and only $679,000,000 worth of them have been sold, should we increase the limit of the authorization from two billion to four billion? Mr. LEFFINGWELL. The figure $679,000,000 represents cash receipts. The Treasury considers the limitation of two billion as applying not to cash receipts but to maturity value. Roughly estimated, the maturity value of the certificates sold is $800,000,000. Roughly estimated, the maturity value of the certificates for which we have received pledges to purchase during the balance of the year is $800,000,000. In order always to be ready to sell wherever the demand

develops it is necessary to carry a stock of war savings stamps widely distributed through thousands of agencies, and it is necessary, therefore, in order that we may not be embarrassed by the danger of an overissue, to have a limit far in excess of the current sales or no limit at all. The Treasury would prefer no limit, because, as is shown by the discussion to-day, the naming of a limit creates a mistaken impression that we expect to sell the whole authorized amount within a given limit of time. You must consider that if you are selling securities in denominations of 25 cents and $4, or, say, $4.25, through tens of thousands of agencies over this broad land you must have a stock of them in the hands of those agencies greatly in excess of the net probable sales, or you will find that in Spokane you have none for sale, where they want them, and you have too many in Portland, Me., where they do not want them. You must have such freedom that you will not be embarrassed as the fiscal officer of the Government with the question whether if all the stamps that are out in all the agencies were sold you would have made an over-issue.

Mr. MOORE. I think there should be the widest distribution of these large securities. That is what I have been asking all the way through. The country will be much safer if the bonds and certificates of one kind and another are widely distributed. These particular certificates, these war thrift certificates, will be tax free. You are of the opinion that they should not be obtained in very large quantities by single individuals?

Mr. LEFFINGWELL. If a person buys more than $1,000 maturity value, he must make a statement that is false in order to collect it. It is well protected by law.

As pertaining to the manner of distribution, I should like to add to the record a copy of a letter which I have here and which no doubt many of you have read. Secretary McAdoo wrote it under date of August 16, 1918, to the taxpayers of the United States, asking them to subscribe for Treasury certificates issued in anticipation of next year's taxes; and also a pamphlet containing statistical data concerning the distribution of the third liberty loan, which I think is of very great interest.

THE SECRETARY OF THE TREASURY,
Washington, August 16, 1918.

DEAR SIR: Those who pay taxes to the Government are contributing to winning the war no less really and in a spirit no less patriotic than those who buy liberty bonds and war-savings certificates. It may, in fact, be justly said that the taxpayer helps more patriotically than the bond buyer, because to pay taxes is to part with money, to make a genuine sacrifice, whereas to buy a Government bond is to lend money on impregnable security, to secure a privilege, not to make a sacrifice.

Under the war-revenue act, which became a law upon the President's approval on October 3, 1917, some $4,000,000,000 in taxes were imposed and collected. For the fiscal year ending June 30, 1919, we must look forward to expenditures on the part of the Government, including loans to the allies, of nearly double the amount of expenditures for the fiscal year which ended June 30, 1918, and in order to pay a proper part of our war bills as we go and avoid the economic and social evils incident to a disproportionate public debt, I have, in pursuance of the duty imposed upon me by law, advised the Congress that we shou'd raise by taxation for the fiscal year 1919 twice as much as in 1918, viz, $8,000,000,000.

Just as the number of bondholders in the United States has during the period of the war increased from a few hundred thousand to some 20,000,000, so will

the number of those who have income and profits taxes to pay increase from a few hundred thousand to millions.

I know that the Treasury Department can count upon the same loyal and ungrudging acceptance of the burdens which the war must cast upon those of us who stay at home and keep the economic and industrial machinery revolving to support our boys in France as was given in the fiscal year just passed.

In order that those who have income and profits taxes to pay may prepare themselves in advance for these large payments and accumulate gradually the funds necessary to meet them, an issue of 4 per cent Treasury certificates of indebtedness maturing July 15, 1919, is offered for subscription. These certificates will be accepted at par with an adjustment of accrued interest in payment of income and profits taxes when payable at or before the maturity of the certificates, and if the purchaser does not have occasion to use them in that manner they will be paid in cash at maturity with interest. A circular describing these certificates is inclosed with this letter. The certificates may be purchased at any Federal reserve bank or through your own bank or trust company. Similar certificates were issued in connection with the taxes nayah'e during the fiscal year just ended to an amount in excess of $1,600,000,000. They were, I believe, purchased chiefly by large corporations and wealthy persons. I am addressing this letter to those who have paid income and profits taxes generally, because I believe that the increased taxes and the probable increase in the number of taxpayers make it desirable that even those whose taxes are measured in small amounts should be preparing themselves to meet these payments, and that it will be to their advantage to participate in purchases of this issue of Treasury certificates.

The taxpayer who buys these certificates contributes in many ways to help in our great problem of winning the war. First, he pays the Government money before it is due, receiving interest from the Government meanwhile; second, he practices economy and thrift and thereby releases goods and services to the Government which are greatly needed for winning the war; third, he saves himself trouble and money and relieves the banking institutions, to which he would otherwise have to turn, from the pressure which his failure to prepare in advance for the payment of his taxes would involve.

The man who buys Treasury certificates to the amount of the taxes he will have to pay, and thereby anticipates their payment, will do a wise and helpful thing not only for himself but for his country, and will contribute in a most definite and patriotic way to the triumph of America in her mortal combat with the enemies of liberty and democracy-the Kaiser's legions of lust and licenseand share in the new glory of America's vindicated ideals of justice and humanity.

Cordially, yours,

To the taxpayer addressed.

W. G. MCADOO.

UNITED STATES OF AMERICA. FOUR PER CENT TREASURY CERTIFICATES OF INDEBTEDNESS, TAX SERIES OF 1919.

Dated and bearing interest from August 20, 1918. Due July 15, 1919. The Secretary of the Treasury, under the authority of the act approved September 24, 1917, as amended by the act approved April 4, 1918, offers for subscription, at par and accrued interest, Treasury certificates of indebtedness of the United States, tax series of 1919, dated and bearing interest from August 20, 1918, payable July 15, 1919, bearing interest at the rate of 4 per cent per annum, payable November 15, 1918, and January 15, March 15, May 15, and July 15, 1919.

Applications will be received at the Federal reserve banks.

Bearer certificates, with interest coupons attached, will be issued in denominations of $500, $1,000, $5,000, $10,000, and $100,000.

Said certificates shall be exempt, both as to principal and interest, from all taxation now or hereafter imposed by the United States, any State, or any of the possessions of the United States, or by any local taxing authority, except (a) estate or inheritance taxes, and (b) graduated additional income taxes, commonly known as surtaxes, and excess-profits and war-profits taxes, now or hereafter imposed by the United States, upon the income or profits of indi81738-18-2

viduals, partnerships, associations, or corporations. The interest on an amount of bonds and certificates authorized by said act approved September 24, 1917, or by said act as amended by said act approved April 4, 1918, or by the act approved July 9, 1918, the principal of which does not exceed in the aggregate $5,000, owned by any individual, partnership, association, or corporation, shall be exempt from the taxes provided for in clause (b) above.

Certificates of this series will be accepted at par, with an adjustment of accrued interest, under rules and regulations to be prescribed by the Secretary of the Treasury, in payment of income and profits taxes when payable at or before the maturity of the certificates. The certificates of this series do not bear the circulation privilege and will not be accepted in payment on bond subscriptions.

The right is reserved to reject any subscription and to allot less than the amount of certificates applied for and to close the subscription at any time without notice. Payment at par and accrued interest for certificates allotted must be made on allotment. After alloment and upon payment Federal reserve banks will issue interim receipts pending delivery of the definitive certificates. Qualified depositaries will be permitted to make payment by credit for certificates allotted to them for themselves and their customers up to an amount for which each shall have qualified in excess of existing deposits when so notified by Federal reserve banks.

As fiscal agents of the United States, Federal reserve banks are authorized and requested to receive subscriptions and to make allotments in full in the order of the receipt of applications until further notice. Certificates of Series IVA, B, C, and D will be accepted at par with an adjustment of accrued interest in payment for any certificates of the series now offered which shall be subscribed for and allotted not later than August 30, 1918.

W. G. MCADOO, Secretary of the Treasury.

TREASURY DEPARTMENT,

OFFICE OF THE SECRETARY,

August 16, 1918.

UNITED STATES GOVERNMENT THIRD LIBERTY LOAN.

STATISTICAL DATA COVERING SUBSCRIPTIONS OBTAINED AS COMPARED WITH QUOTAS ASSIGNED, PERCENTAGE OF POPULATION REACHED, ETC.

[Prepared by the War Loans Organization, United States Treasury Department.] Results of third Liberty loan subscriptions, according to districts.

The percentage of population subscribed is based on the estimated population of the United States on July 1, 1917, namely, 103,620,273.