xt7wwp9t2q46_99 https://exploreuk.uky.edu/dips/xt7wwp9t2q46/data/mets.xml https://exploreuk.uky.edu/dips/xt7wwp9t2q46/data/59m61.dao.xml American Liberty League 37 linear feet archival material English University of Kentucky This digital resource may be freely searched and displayed.  Permission must be received for subsequent distribution in print or electronically.  Physical rights are retained by the owning repository.  Copyright is retained in accordance with U. S. copyright laws.  For information about permissions to reproduce or publish, contact the Special Collections Research Center. Jouett Shouse Collection (American Liberty League Pamphlets), No. 102 "The Townsend Plan: An Analysis of an Attempt to Perpetrate a Cruel Hoax upon a Trusting People," February 24, 1936 text No. 102 "The Townsend Plan: An Analysis of an Attempt to Perpetrate a Cruel Hoax upon a Trusting People," February 24, 1936 2013 https://exploreuk.uky.edu/dips/xt7wwp9t2q46/data/59m61/59m61_102/Am_Lib_Leag_102_001/Am_Lib_Leag_102_001.pdf section false xt7wwp9t2q46_99 xt7wwp9t2q46 Pamphlets Available
* * ir
Copies of the following pamphlets and
other League literature may be obtained
upon application to the League’s national   _
headquarters:
Statement of Principles and Purposes   f
American Liberty League—Its Platform    
The Bonus
Inflation
The Thirty Hour Week Bill P  e
Price Control
The TVA Amendments
The Supreme Court and the New Deal
Expanding Bureaucracy
Lawmaking by Executive Order
New Deal Laws in Federal Courts
Dangerous Experimentation
Economic Planning-Mistaken But Not New * * *
Work Relief
The AAA and Our Form of Government
Alternatives to the American Form of Govern-
ment
A Program for Congress
ghef 1937 Buggeg N D
ro essors an t e ew eal •
Wealth end Ineeme An Analysis of an Attempt to
The President Wants More Power (leaflet)
The Townsend Nightmare (leaflet) Perpetrate & Cruel Hoax
The New Deal Works Program (leaflet) _
The Constitution—What It Means to the Man upon a Tfustlilg People
in the Street—By John W. Davis
‘ How to Meet the Issue—Speech by W. E. Borah.
The Duty of the Lawyer in the Present Crisis-
Speech by James M. Beck
The Constitution and the Supreme Court--
Speech by Borden Burr
Our Growing National Debt and Inflation-
Speech by Dr. E. W. Kemmerer
Inflation Is Bad Business———Speech by Dr. Neil
Carothers tmc
The Fallacies and Dangers of the Townsend gh   44,
Plan——Speech by Dr. W. E. Spahr ‘ ’#="·%?¤Z
What of 1936‘?—Speech by James P. Warburg e.   M
Americanism at the Crossroads——Speech by R. E ,  ii   °
E. Desvernine   “ ` A 0
The Constitution and the New Deal—Speech by ’?7'y (XP
James M. Carson
The American Constitution—Whose Heritage?
—Speech by Frederick H. Stinchyield
The American Form of Government——Let Us
Preserve It——Speech by Albert C. Ritchie
The Redistribution of Power—Speech by John
W. Davis
Time to Stop——Speech by Dr. Neil Carothers
The President Has Made the Issue——Speech by
Charles I. Dawson S
Tl·geng£2cts In the Case peech by Alfred E. AMERICAN LIBERTY LEAGUE
Tli/Ie Towgsegd Utopia——Speech by Dr. Ray Bert National Headquarters
ester e
Shall We Plow Under the Supreme Court‘?——— NATIONAL PRESS BUILDING
Speech by Jouett Shouse WASHINGTON, D. C.
ik
AMERICAN LIBERTY LEAGUE ·A· ·A-
NATIONAL PRESS BUILDING
WASHINGTON, D. C.
  Document N0. 102.
February, 1936

 l · income to 6 per cent of the population if upwards
The Townsend Plan of 8,000,000 elderly persons benefited from it as
* , estimated.
l 3. Wage-earning classes would be the chief
The plan of Dr. F. E. Townsend for “Old Age sufferers under the arbitrary redistribution of
Revolving Pensions"—-—OARP—-has aroused false l ingomg
hopes for future security among millions of 4. Pyramiding of taxes would generate an in-
worthy citizens. No more cruel hoax ever was flation which would destroy our monetary system.
perpetrated upon a trusting people. Elderly men . 5. The plan would bankrupt thousands of cor-
and women, anxious for safety in their declining `· porations and individual business men and would
years, have been deluded into believing that at-   be wholly inequitable in its application.
tainment of the millennium is in sight. No one l 6. Stock and commodity exchanges would be
’ would deny them the privileges proposed if they X driven out of the country.
were possible of achievement. But the unani- l 7 . An enormous new bureaucracy with power
mous verdict of economists and fiscal experts is p over business would be created.
that the plan is based upon fallacious theories, 8. Even the army of supervisors and snoopers
that it would not work and that if the attempt T thus built up could not cope with the tremendous
were made to put it into operation, it could i administrative problems.
prove only the most disastrous failure and would 9. The plan would restrict rather than increase
carry to ruin our whole economic structure. production and would penalize thrift.
The Townsend Plan, as defined by H.R. 7154, 10. Recovery not only would be retarded but
is as flagrantly unconstitutional as any measure the economic system would be so shattered as to
thus far urged on Congress, and is fundamentally return the nation to the depths of depression.
contradictory to all traditional concepts of the 3 It seems incredible that any scheme so imprac-
American system of constitutional government. tical, so wholly beyond the power of sane reali-
It could only be validated by constitutional zation, could be seriously considered by even a
amendment and such an amendment, to provide T small segment of the American people. From
an adequate constitutional sanction, would time immemorial in many lands Utopian dreams
necessarily be in its nature and scope not have been cherished. But when they have faced
only an encroachment upon state rights but in l the cold logic of practicality, they have been
fact a complete usurpation of state sovereignty l quickly dispelled. The Townsend Plan is a fan-
and would thus open the doors to the future pos-   tasy of the same stripe as those of earlier years.
sibility of complete monopolization of state au- l The strength of this Republic lies in the con-
tonomy. It would embark the Federal Govern- , cept that the citizen owes a duty to the Govern-
ment upon fields of political activity and social l ment which is superior to any obligation by the
experimentation never thus far contemplated as A Government to the citizen. As President Grover
a legitimate, proper or even safe field of activity { Cleveland said in a veto message, "though the
for the Federal Government. Furthermore, the l people support the Government, the Government
taxing power of the Federal Government cannot 1 should not support the people." The very acute
be validly exercised for any such purpose as to ° emergency of the present depression has made
transfer public funds raised through taxes from necessary adequate provision for relief of the
one class or group of citizens to another, espe- needy. Public sentiment has been favorable
cially when such a transfer is for a purpose not to sound measures which under proper safe-
within the constitutional prerogatives of the 1 guards and within constitutional principles will
Federal Government. It is patently taking prop- i provide for the less fortunate in their old age.
erty for other than a public purpose, as public i Proper social measures can be adopted without
purposes have heretofore been constitutionally T acceptance of the theory, actually given en-
defined and generally understood. couragement by those in high authority, that
Insurmountable objections may be listed as the Government owes sustenance to its citizens.
follows: The type of thinking represented in this theory,
1. The plan could not possibly produce the which is wholly in conflict with the basic ideas
fanciful amounts involved. of our Government, has created an atmosphere
2. Instead of creating new wealth and income, conducive to the spread of enthusiasm for the
OARP would divert 40 per cent of the national Townsend Plan.
2 3 .

 I omlls Ol Plan   affZiiéfitfeltieip°’}Si‘3YSt§fsrlh€tpl“‘5 ll has
I I : ec an mam-
The Townsend Plan gives an impression of tain recovery by an increase in purchasing
simplicity. In brief it contemplates a pension ngtver of the portioln of the population above 60;
_ of $200 a month for men and women above 60 l to assure emp oyment for oun er workers
years of age. Payment of the pension is con- l by retiring those above 60 and tlo creite employ-
ditional upon an agreement that the recipients l ment through new industrial activity occasioned
withdraw from all gainful occupation and that   by expenditure of the pension money; and (3)
they spend the entire amount of their pension l to maintain an adequate retirement fund for all
within approximately a month after receiving it.   persons above 60.
The income of persons eligible for pensions shall
not exceed $2,400 per year, the pension being Enormous Sums Involved
reduced by the amount of any income from
other sources. The revenue for the payment of The amounts involved under the Townsend
pensions is to be obtained by a 2 per cent tax s Elan _·‘ill`€ S0 gllgtlhail to be Stagg€1`lng· If the
On 3,]] business *|;,{·3,n53,g{·,i()ng_ II1€I‘1C3I1 pu IC EL I10l'i I'€C€I1l3ly b€COI1'1€ 30-
Tho Townsond Plan has undorgono al procoss Cl.1Sl}OH1€?d to   in ll€I`I'D.S of billions in ~
of revision since it was first introduced in the oolllloolloll Wllll €III€Ig€II<>Y Government expen-
House of Representatives on January 16, 1g35_ ditures, the Townsend Plan undoubtedly would
The bill then presented, H.R. 3977, provided for ll_llV€ b_€€II SP€€S Whleoll aref currently used
and sa ary payments. III I§0I1SSI01”1S_0 _1 S pOSS1 e e ects, Most. Of
A revised bill, H.R. 7154, was introduced on loo dlSol`oPaII0l€S III flgIII`€S are due to the use of
April l, 1935. It llrnlts to $2,400 el year the different premises. Thus Dr. Ray Bert Wester-
totel lncornes, lncludlns the pension, of those I field, Professor of _Pol1t1cal Economy, Yale Uni-
qualifying. Instead ol fixing tho pension del_ versity, 1n a radio speech under the auspices
initely at $200 a month as in the earlier draft, of lllo Alllolloall LIb€I"lY League, asserted that
this bill provides that it shall be not in excess ll all ollgllolo P€I`S0IIS took advantage of the
of $200 per month. An equal division would be PollolollS» 9 Pol C€IIl· of the population would
mode ol funds available. This change is in , receive 55 per cent of the national income. In
recognition of the probability that the proposed ~ lllo Plooolll doClIIII_€IIt the €St1mate that 6 per
tex might not produce or sum large gnough to cent of the_populat1on· would receive 40 per cent
pay the lull ernount_ Also under the revlsed 1 of the national income 1S based on a premise
hlll an lnlslexllole tax ol 2 per cent on trons_   that only about two thirds of those eligible
actions is reinforced by a 2 per cent tax on ‘ Wolllll olll€llllY·
inheritances and gifts in excess of $500 and by l The oSlllIl8·l€ of eost commonly used by advo-
s a 10 per cent increase in income taxes. These   Coles ol llllo Ploll ls $I»600,000,000 monthly, or
two supplemental levies are intended to raise   about $20,000,000,000 annually. This is a colos-
enough money for administrative expenses l sal sum under any possible basis of comparison.
Wages and salaries are not exempt from the   (llllblo ll;€ll`llY_lWo ollll`dS tif ttl? PI`€S€nt public
transaction taX_ e , w 1C is so argc a ew persons have
A further revlslon, this tlme ol H_R_ 7154, any hope of .1tS retirement in less than two or
appears in the Congressional Record of April 17, three gooolloolooo lt lo 40 Pol` oolll of tha €Stl-
1935. The changes chiefly have to do with the I mated llollollol llloolllo lol 1934- It is a Sum
application of the tax on transactions. In this about foo? lllmoo oo glool as the aIII0Unt Gur-
Verslon the $200 per month mexlmum nooro for rently raised annually by the Federal Govern-
pensions ls ellrnlnoted, making the omoont en_ ment from taxes of all kinds. It is 50 per cent
tirely dependent upon the fundst oVolloble_ greater than the combined expenditures of Fed-
4 5

 · If speculative transactions including those on
Zieeetestgeepeledeegieieeielfelniieeletsieile eggtaiseg eeeek end eemmeelier eygegegee teledlgggegvéng
. tate were e imma e rom e o a ,
expenditures of Federal, state and local govern- {Lie ee 2 . 1 f d d RGS
t d . th ,0 t _ It · 1 e remaining va ue 0 goo s_ an serv
¥2»2é$1· e?i¥“§eeee?2e22?e2e°€¤5¥e’eeeee22e“22e¥5i rsrssarsztee teseeeeztte  
' 7
Allies It is equal to ialmost half of the total nee be mere ehee e225¤eee>eee>eee‘ The eeee¤·
I · d lative transactions would be greatly reduced by
deposits of the more than 14,000 banks insure , reason Of the Operation Of a mx Furthermore
gg tg? €1];§d§¥e§9]??5ep0§’i0t ignggienggaggrggresggg the volume of ordinary transa.ctions would
as the de osits of iall insuredystate banks in- Shrink under eee eeeeeeiee ef e lex beeeeee 22
cludin elem members emei mmmemeem ofthe Weuld ieeeeeee eeieee eee ehee dteeeeeeee eee-
Federgl Reserve S Stem It is about twice the sumption. Likewise the transaction tax, wh1le
sum of the totalymonetary gold held by the Very breed ie ies eppeeeeiem Weule nee eever
United States and almost four times the total gggifsehlng that 12 meleeed m the 22221 ef bank
°“I§”iZ“°2Z,$e1e§eEZeElete$Iee has devised at revenue A eeeee ef 22 eee¤emieee» ef the Ueiveeeéev ef
g p · Chicago is authority for a carefully considered
scheme capable of producing $20,000,000,000 t. ,6 th t th T , Osed tax Of 2 Br Cent
even in one year, let alone year after year succes— Sxeoigiie got eield ingrgpthém $6 000 000 I500 and
sively. Nevertheless, the m1sgu1ded proponents th t it mi hgnot md as much és $2; 006 000 OOO
of the Townsend Plan seriously assert that it can ejixccordglg to Sgmg estimates al téx 0% 25’ pm;
gsm?eteaegnggS§§dt;;;;;;it?O£2`W eesessme e 2 eee cent or more on all transactions would be neces-
' sary to raise sufficient funds to pay the full
. . pension of $200 per month.
Basis ef COmPut&t1On The supplemental taxes in the bill on incomes,
The only statistical basis for the estimates of mheeeeeeeee deed glfeiil Wheeheedee ,2222*;,229 .er
revenue from a 2 per cent tax on transactions is greséiggecezzes eAm§5ep€I_e2€1€;?1;1cr;aS;r ig Silgll?
found in figures on bank debits. The total vol- ‘ ‘ . . . . . '
ume of all money transactions in the United ‘i(égl5e texeidpegd by leeiglguelg dE;mg§8t§§0%%%r
States in the year 1929, including all checks that Th 2Wee iv; yle e heugu > d > .ft‘
passed through banks as well as all cash items, pI_Oemb1§eV;O3eg noixprglgluzré g;r;¤te§;ne§25  
lliibs 1k9(:2€(i1 Basmrlggirged iiie ae1il(gi1tn$d1i?1€l)(;’l)O§)ri>i);;$i·0’02E)}§)é 000. Some idea of the very great administiiative
estimate;] mm] was about $700 000 000 000 cost of the scheme may be gained from the fact
1 During the depression the total was about $0500 i thee delegeneerteh here iegueeeeg legit the .e'$e;n2
000,000,00o m 1930, $618,000,000,000 m 1931, 9 22122 ,1,12922,3 {2222 22PP 2$22,I2h 2252 222t t.°
s414,000,000,000 in 1932 and a little less than , be 221 2122 °id°gV22   2 2b22g22 22 W2
ses0,000,000,000 in 1933: It reset to $426,000,- $1222 t2XP2;2 $*238 3; 2On§·2;1?; 22;*;, 82; 22;;,PgP
000,000 m 1934 and is estimated at about 2 2 P Y »h. Y . Vt! 2 Y 2
$482,000,000,0()() for 1935_ 10 p€I‘ CGIYG to 1S OWII mcome axes.
If it were possible to collect a tax of 2 per _
cent on the innumerable transactions repre- Number of Pensioners
sented in the total of` $1,200,000,000,000 in 1929, Th t_ t f 1 t f $20 OOO
many thousands of which covered the same 6 GS ima B O sl} slmlls COS 0 » _»"
goods or services, the revenue from at 2 per cent 000:000 fee the Penslens ls based ee e behef
tax would be $24,000,000,000. On the basis of ?Y edf7’%eOeg%e;)0efteheg 61;)e)e6e5e)e¤g€r1;;ee; gwoegvgnggg
th 1935 t t` , r 2 t t ld rem r e , H
yigld $9’60g?51($(§J’(66(?)T1ST?·10 t€§;1e;€§f tg; rIe;,(§,ln_ years oi age would elect to receive the proposed
sendites is that the expenditure of the pension $200 Per month- Tee eee; Weuld be geeh geeeeee
222222 221 22 22222,2 22 ‘§“2§;222 22 22 2222222 2 lf el? E‘ee“e§£?ei11$ee`Ze$§ e$}S€r3?»,eq`éi§e2e e. mem
voume equa totatol 9.Uft tl
their argument does not bear analyrgjgr me G Y of 10,385,026 persons 60 years of age and over,
6 7

 The present number is estimated at about family in which both the husband and wife were
12,400,000. The cost of the T`ownsend Plan if all above 60 would have an income even farther out
eligible persons were paid $200 per month would of line from the average. The husband and wife
have been nearly $25,000,000,000 in 1930 and at wouid each be entitled to $2,400 annually, or a
present would be nearly $30,000 000,000. tota of $4,800.
The number of persons over ,60 years of age Even in 1929, $1,200 was regarded as a repre-
who were gainfully employed in 1930 was 4,155,-   sentative family income. Out of about 27,000,-
495. The theory of the Townsend Plan is that * 000 families in 1929 nearly 20,000,000 had in-
these persons, or a considerable number of them,   comes below $2,500. Of these about 16,400,000
would give up their employment in order to take `~ were below $2,000 and 11,600,000 below $1,500.
advantage of the pension and that a correspond-
ing nurréber of younger persons would be given Wage Eetiiei-S Hit
their `o s.
Thai belief of most authorities is that $20,000,- Some who advocate the Townsend Plan think
000,000 would be the minimum cost if the $200 that it would be financed chiefly at the expense
per month pension were paid and that it might of the wealthy classes. This is not true. Of the
go considerably higher.l The number of persons total igatignal incomedfor11934 ebout 67Aper geint
ualif in mi ht be ess than the estimated went o e wage an sa ary c asses. n a i-
$,000,0700gor 8500,000 if it proved impossible to tional 16 per cent represented the income of
raise as much money as would be needed for the small business men, farmers, professional prac-
full $200 pension and the inducement to give up titioners and other self-employed persons, mak-
employment was correspondingly less. ing 83 per cent for compensation of individuals
as distinguished from returns on property.
A Redistribution Of Income A distribution of the national income for 1934
_ among the estimated present population of about
The assumption of the proponents of the 127 ,000,000 would give each less than $395. If
Townsend Plan appears to be that the pension 40 per cent were deducted from the national in-
money would be obtained from some source come of 1934 for distribution among 7,000,000 or
xggthout cuttingintoSthehincotrf11es of plersons laelow 8,000,000 Townsend Plan pensioners, the remain-
years o age. uc a eory as no as1s. in amount would be sufficient to ive an aver-
The tax on transactions would be embodied in agi of not more than $250 to eachg of the other
the price of commodities and services. It would 120,000,000. This would mean an average of not
have to come out of the incomes of the consum- more than $1,125 er family. Meanwhile, sin le
ing population, including both those below 60 persons above 60 gvould draw $2,400, while ingr-
years of age and those above. For the most part ried couples above 60 would have $4,800.
it wleuld mean a shifting of income from the class The single pensioner would have an income
of t e population elow 60 to that above 60. nearly ten times as great as the average indi-
The sum of $20,000,000,000 is about 40 per   vidual below 60 and more than twice that of the
cent of the national income as estimated for the   average family. The great mass of the popula-
year 1934 and about 25 per cent of the national ’, tion would be hard hit by theoperation of the
income as estimated for 1929. The estimate of proposed tax. The tendency would be toward a
the Department of Commerce for national in- reduction of wages. Real incomes of the wage-
come in 1934 was about $50,000,000,000 and for earning classes would be lowered.
1929 about $7 9,000,000,000.
Eight million penslfoners would be a little more Inflgtign
than 6 er cent of t e o ulation. The effect of
the Tognsend Plan W§)u]?] be to give this 6 per The effect of the tax would be to inflate prices
T cent 40 per cent er the aatieaai income as esti- ta aahaatahia iavaia Tha Tcwaachditaa appcar
mated fey the meet recent yeah The ether 60 to think that a substantial increase in prices
per cent ofthe aataeaai income Weuid be dismb- 1 Wcaid dc ac harm ch thc thccry that thc fcrccd
uted among the temetihihg 94 per cent Oi the circulation of the pension money would greatly
pepuletieii increase the volume of transactions. Even if this
The income ei $2,400 per year promised to were true, the inflationary movement of prices
persons above 60 is greatly in excess or the pres- mvclvmg a constantly decreased purchasing
ent, average income Of the American people. A power would HOT; H]€3·n prOSp€I`1l`»y but rather the .
8 _ 9

 l`6V6l`S6 af ic- Thc 6Vh cffcccc VYchld_hc ccmPc·‘ are at least 11 transactions between the producer
rable to those of the disastrous inflation in Ger- cr raw matsriars and thc ccnsurnsr;
many and Ol.ih€I` European 90untI..i€S· Purchasing   Would bg S`[]_]‘pI'iSi]']g   pI‘lC€S of Hlainy COID'
PcW6l“ Wculd ba 1"6dhccd» lhchlchhg that cf thc modities were not doubled or tripled by reason
i P6US1ch6i“c_c·S W6h &S_cf tha hccll cf thc Pcphic" of the imposition of a tax on all transactions.
UGH- S6»Ym§S d6Pccll¤c_ and mcurchcc Pchclcc rl Higher prices would tend to discourage con-
Wculd Suifcr cl ccphcclcclch lh Vc»h1c· _ _ sumption, with a resultant increase in unit costs
Excessive prices would cause dislocations in cf manufacturc Instead cr thc rncrsassd pro-
ch6 6cchcmlc cchhcthhc cihd lcwch thc Shchdchd duction expected by the Townsendites, a curtail-
af liviae af ilia Waaa aaiaai and Small salaried ment ti iiiiiiittiiti activity Wttiiti tt pitttttit.
°1aSS€S· . . . . This would mean more unemployment. In
Pyramidms cf Prlccc hhdch tha chchfmch at various indirect ways the effect would be in-
the tax would be inevitable. The levymg of a jurious tc industry and tradc_
2 pGI` cent tax OH each l]I`EtHS3iCl]lOI`1 would I`I1€3»1'1 Under Such an infjatjonary process as Wguld
not merely a tax of that amount on the final cost acccmpany thc rmpcsrtrcn cf thc tax thc entire
af ci ccmmcchcY cc tha cchchmcr but c _ccX ch monetary structure would break down; Con-
each stage in its production and distribution. In ndcncc in thc Vajuc cf Currency Would be
the case of most commodities this would mean a “y€ak€n€d as prices Spiralled upward and pur-
16VYl¤g af tha 2 P6? cchc WX cl daaaa ch mchc chasing power declined. The successive develop-
times. The final total tax would be much greater ments Would be ccmparabjc to those acccmpany_
than l¤h6 scm of tha actual ccxcs by hcccch cf ing the rise of prices under inflation in Germany,
ch6 u¤9·Vciclclcl6 Pyhcmlchhg cf _ccShS· Each France and Russia. At the ultimate stage of
manufacturer, wholesaler or retailer would be collalpse a rccrgamzatrcn cf thc mcnctary systcm
entitled to a return on investment sufficient to Would be ncccssary_ An cccurrcncc. cf this char-
cover his entire costs, including the amount of actcr Would tnrsatsn thc foundations cf thc
the tax. Prices would be iixed at an amount Amcrrcan GOV€rnm€nt•
sufficient to cover a profit on the capital needed
to pay the tax. Each tax would be levied on all Bankruptcy of Business Firms r
of the preceding taxes as well as on the amount
of other costs. It would be impossible to judge The Townsend Plan inevitably would mean
in advance just how much prices would be in- bankruptcy for thousands of corporations and
flated by such a procedure. individual business men. It would be impossible
In the case of a loaf of bread the final price for the average business concern to absorb the
would include taxes on wages paid to farm tax on transactions. It would have to be passed
V laborers, on seed and equipment bought by the on to the consumer. In many cases, however,
farmer, on the various stages in the growing and . it would be difficult to pass it on because of the
harvesting of the wheat, on the cost of shipping · competitive situation or consumer resistance. In
the wheat to market, on the handling of the such cases the tax would come out of capital,
wheat at an elevator, on the wages paid_in the which would mean eventual bankruptcy.
milling of the wheat into flour, on the sale of the i Even in 1929 a large proportion of corpora-
flour to the wholesaler and retailer, on each stage tions could not have stood a tax of 2 per cent on
of transportation, on wages paid by the baking _ gross income. Out of 510,000 corporations about
company, on costs of the retail grocer, and on half had no net income in 1929, according to their
the final sale to the consumer. reports to the Internal Revenue Bureau. For
With respect to an automobile, taxes would these corporations a tax of 2 per cent would have
commence on the wages of workmen digging iron meant an increased deficit. Among the corpora-
ore and would be repeated at the various stages tions which reported a net income in 1929 the
of the transformation of the ore into steel prod- average net income was 10 per cent of the gross
ucts, on the freight charges in the shipment of income. A 2 per cent tax on their gross income
the ore and steel, on the cost of fashioning the would have taken 20 per cent of their net income.
steel into automobile bodies and motors, on the The average net income from all invested capital V
sale of separate parts to the automobile manu- has been estimated at about 4 per cent. A 2
facturer and at each step as the cars were passed per cent tax on gross income would absorb half
on to the final purchaser. of it. For many corporations on the borderline
Even with such a product as glassware there . between a profit and a loss, the tax on trans- ·.
10 11

 ;e;rg;1sr,OvirVcnu`iiibk;re11eirS1s1rr*;l}en sufficient to turn the laygg bnyeaucrrrerric crrghenrizntioiis to enforrzre red;}
· a a encies us
The operation of the tax would be inequitable siionrn rigid be eniignrneeenre in gemnerisen with
among different classes of business. An inte- the bureaucracy reduired ee edminisrer the
grated industry, in which several stages of pro- Tewnsend 1>ien_
duction were combined under one management, , As many as 10 000 000 rereurns Would bg re-
Wotnd here a tremendous edrerreee- The lm' ceived monthly from those required to report the
position of a tax upon each separate transaction neyrnenr ef taxes. There ere ebeuii 5,309,999
would roree mergers er errerierieee engaged ir farmers 1500 000 re·tail stores, 600,000 employ-
successive stages of production and distribution. · ers ei demeseie Servants, 545,000 independent
This adjustment process would create confusion nrefessienei men, 175,000 menufeeruring estab- ,
grid. Would be er element or dlstnrloanoe re lishments, 165,000 wholesalers, 145,000 rcronsrinihc-
usiness. · i ra GS ,-
Wiiiie die rerieed Tewrieerd Pier dreir ei tiieliiieiee eigéieotrfeienelieee€ti€id,