The attached sheet shows the dollar amount of the offering of the stocks. I find that data are not available as to the actual sale, but I am told that it is safe to presume in the companies listed that practically all the stocks were promptly sold. For example, in the November 17, 1947, issue of the Commercial and Financial Chronicle I find: "Texas Eastern Transmission Corporation-stock offered a banking syndicate headed by Dillon, Read & Co., Inc., on November 12 offered 3,564,000 shares of comon stock (no par) at $9.50 per share. The issue was oversubscribed."

I trust this answers your question as to which corporations in my opinion were successful in the sale of stock issue.

Sincerely yours,

LLOYD C. HALVORSON, Economist, the National Grange.

New issues of common and preferred stock offered for cash sale during 1947 1

Cash sale to public

E. I. du Pont de Nemours & Co.:

700,000 shares preferred stock, $3.50 series, to public..

300,000 shares preferred stock, $3.50 series, to pension fund.
The Dow Chemical Co., 400,000 shares second preferred, to public.

Texas Eastern Transmission Corp., 3,550,000 shares common stock, to public.
General Foods Corp., 250,000 shares, $3.50 cumulative preferred, to public.
The Atlantic Refining Co., 250,000 shares, 3.75 percent series B cumulative
preferred stock, to public..

Investment trust: Investors Mutual, Inc., 4,000,000 shares capital stock $1,
to public...

Cash sale to security holders

American Cyanamid Co., 391,076 shares cumulative preferred stock.

Cash sale to employees and subscribers: American Tel. & Tel., 2,800,000 shares capital stock.

All of these were effectively registered under the Securities Act of 1933 during 1947.
Offering continuous.

The CHAIRMAN. We had statistics this morning. Mr. Stam, where is that tabulation that shows the common stock investments for 1946 and 1947?

Mr. HALVORSON. I might point out that Secretary Harriman made that same point this morning.

The CHAIRMAN. He made the point. We will show you what the point was that he made.

You state here that those who can get the location, equipment, material and so forth are already going into business as fast as they can. What do you have to say as to the number of people that are going out of business as fast as they can?

Mr. HALVORSON. Somebody is willing to come along and pay a higher price for the equipment, at the fair values set.

The CHAIRMAN. Do not the surveys show that there were more bankruptcies, several times over, in 1947 than in 1946? I am talking about bankruptcies, not mergers or sell-outs that do not reflect themselves. I am talking about bankruptcies.

Mr. HALVORSON. I say they probably were higher. I did not pay particular attention to those figures when I saw them in the past. But I believe they are still low compared to say the average period of the

1920's.

The CHAIRMAN. The significance is that they are increasing.

Mr. HALVORSON. Probably so. But a lot of businesses that are inefficient probably should go out of business.

The CHAIRMAN. New issues in 1946, 900 million; new issues in 1947, 800 million; new issues in 1946 of preferred stock, 400 million; 500 million in 1947, new issues of bonds and notes, 1 billion in 1946; 2.6 billion in 1947.

Mr. HALVORSON. I would like to make another point as to the sale of small businesses and farms. When prices, farm prices are low, incomes are low, the voluntary sale of farms goes down. I think that same thing is true in business. It is when prosperity is here that you get a large volume of transfers of businesses and farms.

The CHAIRMAN. Do you believe that the progressivity of income rates should be preserved as we increase taxes?

Mr. HALVORSON. As you reduce taxes

The CHAIRMAN. I say as we increase taxes.

Mr. HALVORSON. We ought to maintain progressive taxation, yes. But if we did increase taxes it should probably be the same way as we suggest a reduction in taxes, 5 points for people in the lower brackets, 5 points for those in the higher brackets.

The CHAIRMAN. Of course, you understand that your system does not apply progressivity of our tax rate, when we are going up. Have you made any study of the amounts of income taxes which different bracket taxpayers pay in relation to the income dollar?

Mr. HALVORSON. I do know that out of around $50,000 a taxpayer pays around half of his income for taxes.

The CHAIRMAN. I suggest that you read the record that has already been made.

I notice your suggestion that when we decrease we should decrease 5 points all the way along the line.

Mr. HALVORSON. Yes. That would give a higher percentage tax cut for the lower income people and a somewhat smaller percentage cut for the higher income people.

The CHAIRMAN. That would preserve, if there are inequities in the present rate of progressiveness, that would preserve them and add to them under what you have just said.

Mr. HALVERSON. If they are inequities, yes.

The CHAIRMAN. Are you content with the present rate of progressiveness?

Mr. HALVERSON. Yes.

Our members and I am speaking for them mostly-I think that they are satisfied with the present rate of progressivity in taxation. The CHAIRMAN. You think that the existing rate of progressivity is a wholesome thing for the long-term economy of this country?

Mr. HALVERSON. Yes, I do. At least our members do think so. The CHAIRMAN. Thank you very much for your presentation, Mr. Halverson.

Mr. HALVERSON. Thank you, sir.

The CHAIRMAN. Is Dr. King here?

Mr. KING. Yes, sir.

The CHAIRAN. Will you come forward, please? We are glad to have you with us, Doctor.

STATEMENT OF WILLFORD I. KING, ECONOMICS PROFESSOR EMERITUS, NEW YORK UNIVERSITY, AND CHAIRMAN OF THE COMMITTEE FOR CONSTITUTIONAL GOVERNMENT

Mr. KING. Thank you, very much. I appreciate being here. The CHAIRMAN. Will you please state your full name, address, and occupation to the reporter?

Mr. KING. Willford I. King, 28 Shore Road, Douglaston, N. Y. I am an economist, and chairman of the Committee for Constitutional Government.

The CHAIRMAN. Go ahead, Doctor.

Mr. KING. On last Thursday evening, I had the good fortune to hear the brilliant and scholarly address given by your chairman, Senator Millikin, at the Economic Club in New York City. After listening to his impressive explanation of how confiscatory taxation of upperbracket incomes destroys the supply of risk capital which is essential if new ventures are to be financed and national progress continued, I realized that it would be entirely superfluous for me to call your attention to the evils inherent in the existing income-tax structure.

The CHAIRMAN. I would like to have as much backing as possible, Doctor.

Mr. KING. Thanks! You rightly emphasized the fact that congressional action on all matters of legislation is, necessarily, limited by public sentiment, and hence that, before remedial measures can be adopted, it is necessary to teach the public the basic principles involved. For some 35 years I did what I could to instruct university students in what I believe to be sound economic principles. Since I have been actively connected with the Committee for Constitutional Government, I have been attempting to extend this type of education to thoughtful citizens in all parts of the United States.

You have before you a small pamphlet entitled "Raising the Workingman's Scale of Living." It is not unlikely that you have seen it before, for it has been very widely distributed. In this pamphlet, we have sought to familiarize the public with the fact that increasing production in the United States has been brought about, primarily, by expanding capital investment. Thus, chart II shows how, in the manufacturing field during the 90-year period for which records are available, the gross value of production per wage earner paralleled the capital investment per wage earner.

In the chart appearing on the first page of this pamphlet we bring out the fact that the welfare of the ordinary workingman is, likewise, dependent upon the capital investment per worker, for it is this capital investment which has been responsible, both for the amazing increase in real wages-about five times in the last hundred years-and for the gratifying diminution in the number of hours worked per week characterizing the past 100 years.

The CHAIRMAN. It is measured by the efficiency of the machine; is it not?

Mr. KING. Machines and power make workers more productive, and workers get what they produce. If they produce more, they get more, and if they produce less, they get less.

We have also emphasized the truth-long ago brought out by Adam Smith-that only through saving can capital be accumulated. As you well know, all available statistics indicate clearly that, in the United States, most of the saving is done by the well-to-do segments of the population. One of the investigations effectively bringing out this point is that made by the National Resources Committee covering the years 1935 and 1936. It indicates that the lion's share of the saving was done by families having incomes of $5,000 or more.

If you will now turn to chart VI of this same pamphlet, Raising the Workingman's Scale of Living, you will find the facts in question graphically portrayed. You will observe that the total deficit incurred by families having the lowest income cancels out more than half of the savings accumulated by families having incomes of $1,250 to $5,000. I may say that more recent studies have confirmed this general relationship. The chart here presented just happens to be one which has been published.

Moreover, most of the savings in the last-mentioned class go to purchase homes or to meet emergencies and current needs; hence, it would appear that the capital necessary to finance new undertakings must come largely out of the savings of families having incomes of $5,000 or more. That such is the case is made clear by table V and chart VIII, appearing respectively on the next two pages of the pamphlet. These seem to demonstrate rather conclusively that the capital supply necessary to finance both new undertakings and the expansion of old enterprises depends primarily upon the aggregate of the aftertax incomes of those individuals receiving $5,000 or more annually. Table V indicates that, during the prewar period, this class of the population tended to spend about $3,000,000,000 per year for living expenses, and that they habitually invested in new issues of stocks and bonds about 74 percent of all their after-tax income in excess of this amount. Because of inflation and the changed value of the dollar, this ratio is not quite the same when you take out $5,000 today, for it takes more than $5,000 now to live in the style provided by a $5,000 prewar income. My assistant is now working on bringing this analysis up to date with such figures as we have, but this revision has not yet been completed.

The statistical analysis just cited supports, thoroughly, the fundamental proposition laid down by you, Mr. Chairman, namely, that the progress of the Nation is largely dependent upon the ability of the more prosperous segments of the population to save and accumulate capital. It is obvious that that part of income taken by Government in taxes cannot be saved by the individual. Since confiscatory taxation of persons in the upper-income brackets tends to hamper, greatly, the economic progress of the Nation, it follows that such taxation can only be justified on the ground of imperative public need for the revenues obtained thereby. This is one of the lessons which we have been attempting to teach to the thinking American public. We do not expect the facts presented to affect, in any way, the attitudes of those who have adopted communistic philosophies. They, of course, feel that inequality of income is, in its very nature, anathema. As they see

it, uniform poverty is preferable to a system in which some citizens are continuously more prosperous than others. From their point of view, there can be no justice until all incomes are leveled down.

I do not believe that many Americans subscribe to the communistic code of ethics, but I fear that many are led by envy to take the attitude that all success is criminal, and that, therefore, "swatting the rich" is a legitimate form of sport. One of the things we are trying to accomplish by our educational program is to make persons holding this attitude understand that, when Government confiscates the incomes of the wealthy, and thus prevents the accumulation of capital, it, at the same time, automatically puts a brake on the upward movement of wages and the incomes of the great majority of the people at large.

I believe that I can take it for granted that no member of your committee sympathizes with the views, either of the Communists or of those victims of envy who despise success. Doubtless, however, some of you may feel that it is, nevertheless, essential to maintain very high tax rates on upper-bracket incomes, for you do not see how, if such tax rates are lowered materially, it will be feasible to raise the revenue imperatively needed by Government. Presumably, most of you have taken it for granted that high tax rates give yields much higher than those resulting from low tax rates. Is this assumption valid?

Mr. Robert B. Dresser, one of the trustees of our committee, has long contended that high income-tax rates return no more revenues than do low income-tax rates. I believe that Andrew Mellon held the same point of view. Many of us, however, have been inclined to feel that such views probably represented nothing more than wishful thinking. Insofar as I am aware, they have not, up to the present time, been supported by any convincing evidence.

Since some of the friends of our committee felt that it was important to ascertain the facts in this connection, I finally decided to see whether it was feasible to make a statistical analysis which would either prove, or disprove, the validity of the assumption that high income-tax rates yield revenues no larger than those produced by low income-tax rates. I immediately encountered very serious obstacles. As time has passed, the general price level has fluctuated greatly. Furthermore, the total income of the people of the United States has risen very sharply. Finally, our economy has been affected by huge fluctuations, caused by either cyclical influences or by war. All of those things tend to throw off any comparisons.

As long as those obstructing factors influenced the data, it was almost impossible to derive, from the available figures, any conclusions which could be looked upon as reliable. Fortunately, there eventually came to my mind a method which I believed would eliminate the unwanted results of these extraneous forces. The procedure I adopted for this purpose was to express the income totals in the respective income brackets, not as amounts in dollars, but, rather, as percentages of the national income. Likewise, revenues received from such taxes were also expressed as percentages of the national income. When the data are thus treated, cyclical, trend, and monetary influences affect both the numerator and denominator of every fraction, and hence are approximately canceled out.