A FEDERAL INCORPORATION ACT
Along with the first board on tax laws, Administrator Dru appointed yet
another commission to deal with another phase of this subject. The
second board was composed of economists and others well versed in
matters relating to the tariff and Internal Revenue, who, broadly
speaking, were instructed to work out a tariff law which would
contemplate the abolishment of the theory of protection as a
governmental policy. A tariff was to be imposed mainly as a supplement
to the other taxes, the revenue from which, it was thought, would be
almost sufficient for the needs of the Government, considering the
economies that were being made.
Dru's father had been an ardent advocate of State rights, and the
Administrator had been reared in that atmosphere; but when he began to
think out such questions for himself, he realized that density of
population and rapid inter-communication afforded by electric and steam
railroads, motors, aeroplanes, telegraphs and telephones were, to all
practical purposes, obliterating State lines and molding the country
into a homogeneous nation.
Therefore, after the Revolution, Dru saw that the time had come for this
trend to assume more definite form, and for the National Government to
take upon itself some of the functions heretofore exclusively within the
jurisdiction of the States. Up to the time of the Revolution a state of
chaos had existed. For instance, laws relating to divorces, franchises,
interstate commerce, sanitation and many other things were different in
each State, and nearly all were inefficient and not conducive to the
general welfare. Administrator Dru therefore concluded that the time had
come when a measure of control of such things should be vested in the
Central Government. He therefore proposed enacting into the general laws
a Federal Incorporation Act, and into his scheme of taxation a franchise
tax that would not be more burdensome than that now imposed by the
States. He also proposed making corporations share with the Government
and States a certain part of their net earnings, public service
corporations to a greater extent than others. Dru's plan contemplated
that either the Government or the State in which the home or
headquarters of any corporation was located was to have representation
upon the boards of such corporation, in order that the interests of the
National, State, or City Government could be protected, and so as to
insure publicity in the event it was needful to correct abuses.
He had incorporated in the Franchise Law the right of Labor to have one
representative upon the boards of corporations and to share a certain
percentage of the earnings above their wages, after a reasonable per
cent, upon the capital had been earned. [Footnote: See WHAT CO-PARTNERSHIP
CAN DO below.] In turn, it was to be obligatory upon them not to strike,
but to submit all grievances to arbitration. The law was to stipulate
that if the business prospered, wages should be high; if times were dull,
they should be reduced.
The people were asked to curb their prejudice against corporations. It
was promised that in the future corporations should be honestly run, and
in the interest of the stockholders and the public. Dru expressed the
hope that their formation would be welcomed rather than discouraged, for
he was sure that under the new law it would be more to the public
advantage to have business conducted by corporations than by individuals
in a private capacity. In the taxation of real estate, the unfair
practice of taxing it at full value when mortgaged and then taxing the
holder of the mortgage, was to be abolished. The same was to be true of
bonded indebtedness on any kind of property. The easy way to do this was
to tax property and not tax the evidence of debt, but Dru preferred the
other method, that of taxing the property, less the debt, and then
taxing the debt wherever found.
His reason for this was that, if bonds or other forms of debt paid no
taxes, it would have a tendency to make investors put money into that
kind of security, even though the interest was correspondingly low, in
order to avoid the trouble of rendering and paying taxes on them. This,
he thought, might keep capital out of other needful enterprises, and
give a glut of money in one direction and a paucity in another. Money
itself was not to be taxed as was then done in so many States.