Now as to the allegations concerning taxation.
1. The largest incomes are taxed far more heavily here than anywhere
else in the world.
The maximum rate of income taxation here is 67 per cent. In England
it is 42-1/2 per cent. Ours is therefore 50 per cent. higher than
England's and the rate in England is the highest prevailing
anywhere in Europe. Neither republican France nor democratic
England--containing in their cabinets Socialists and representatives
of labour--nor autocratic Germany have an income tax rate anywhere
near as high as our maximum rate. And in addition to the federal tax
we must bear in mind our state and municipal taxes.
2. Moderate and small incomes, on the other hand, are subject to a far
smaller rate of taxation here than in England.
In America, incomes of married men up to $2,000 are not subject to any
federal income tax at all.
In England the tax on incomes of $1,000 is 4-1/2%
" " " " " " " 1,500 is 6-3/4%
" " " " " " " 2,000 is 7-7/8%
(These are the rates if the income is derived from salaries or wages;
they are still higher if the income is derived from rents or
investments.)
The English scale of taxation on incomes of, say, $3,000, $5,000,
$10,000 and $15,000, respectively averages as follows, as compared
to the American rates for married men:
In In
England America.
Income tax rate on $3,000 14% 2/3 of 1%
" " " " 5,000 16% 1-1/2%
" " " " 10,000 20% 3-1/2%
" " " " 15,000 25% 5%
(If we add the so-called "occupational" tax, our total taxation on
incomes of $10,000 is 6-3/4 per cent., and on incomes of $15,000,
9-3/4 per cent.)
In other words, our income taxation is more democratic than that of
any other country, in that the largest incomes are taxed much more
heavily, and the small and moderate incomes much more lightly than
anywhere else, and incomes up to $2,000 for married men not taxed at
all.
3. It is true, on the other hand, that on very large incomes as
distinguished from the largest incomes, our income tax is somewhat
lower than the English tax, but the difference by which our tax is
lower than the English tax is incomparably more pronounced in the case
of small and moderate incomes than of large incomes. Moreover, if we
add to our income tax our so-called excess profit tax, which is merely
an additional income tax on earnings derived from business, we shall
find that the total tax to which rich men are subject is in the great
majority of cases heavier here than in England or anywhere else.
4. It is likewise true that the English war excess profit tax is 80
per cent. (less various offsets and allowances) whilst our so-called
excess profit tax ranges from 20 per cent. to 60 per cent.
But it is entirely misleading to base a conclusion as to the relative
heaviness of the American and British tax merely on a comparison of
the rates, because the English tax is assessed on a wholly different
basis from the American tax. As a matter of fact, Congress has
estimated that the 20 per cent. to 60 per cent. tax on the American
basis will produce approximately the same amount in dollars and cents
as the 80 per cent. tax is calculated to produce in England. (I know
I shall be answered that we have twice the population of England and
twice the wealth. But it must be borne in mind that a far larger
proportion of our wealth is represented by farms and other
non-industrial property, and that a far larger proportion of our
people than of the British people are engaged in agricultural pursuits
which are not affected by the excess profit tax. I believe it will be
found that the total wealth employed in business in America is not so
greatly superior to the total wealth similarly employed by Great
Britain.)
_The American excess profit law so called taxes all profits derived
from business_ over and above a certain moderate percentage,
regardless of whether or not such profits are the result of war
conditions. The American tax is a general tax on income derived from
business, in addition to the regular income tax. _The English tax
applies only to excess war profits_; that is, only to the sum by which
profits in the war years exceed the average profits on the three
years preceding the war, which in England were years of great
prosperity.
In other words, the English tax is nominally higher than ours, but it
applies only to war profits. The normal profits of business, _i. e._
the profits which business used to make in peace time, are exempted in
England. _There, only the excess over peace profits is taxed. Our tax,
on the contrary, applies to all profits_ over and above a very
moderate rate on the money invested in business.
In short, our law-makers have decreed that normal business profits are
taxed here much more heavily than in England, while direct war profits
are taxed less heavily. You will agree with me in questioning both the
logic and the justice of that method. It would seem that it would be
both fairer and wiser and more in accord with public sentiment if the
tax on business in general were decreased and, on the other hand, an
increased tax were imposed on specific war profits.
5. Our federal inheritance tax is far higher than in England or
anywhere else. The maximum rate here on direct descendants is 27-1/2
per cent. as against 20 per cent. in England. In addition we have
State inheritance taxes which do not exist in England.