be the masters and not the lackeys of the politicans and the bureaucrats, which is what socialism requires. "The purpose of nationalization-nationalization of the means of production, distribution and exchange is the keystone of the Socialist arch. It is the political instrument whereby Socialist theory is turned into Socialist fact. "What was the principal intention of nationalization? It can be expressed in one sentence, "To destroy the whole structure upon which the independence of the individual person depends.' To anyone who has thought deeply upon the ethical and philosophical meaning of freedom it is obvious that it means and is intended to insure the destruction of the independent middle classes. "Employer, employee, self-employed professional men, retired persons of small means are to be reduced to indistinguishable cogs in the collective wheel of the servile state. Our whole civilization which has been built up on centuries of struggle to make men free from the excessive coercion of other men, whether they be kings and barons or dictators and politicians, is now to be subjugated to the dictatorship of the all-powerful state. "Up to 1945, or at any rate until 1939, under the system of capitalism or free enterprise there was insured the widest distribution of property, and property is the means whereby men are rendered independent and which indeed insures that the state is dependent upon the people. Under Liberals and Conservatives, with their background of tradition and loyalty to a cultural past, it was accepted and realized that the officials of state and government needed to be kept in check by the representatives of the people in the House of Commons and by the Upper House, the House of Lords. And because property was not state-owned, because millions of individual people through the limited company system were the true owners of the Bank of England, the railways, the coal industry, the gas industry, the electricity industry and so on, the state as such had no material resources of its own. Every year, therefore, the government, i. e., the administrators of the state, had to come to Parliament to ask for funds to carry on. The budget was the traditional means whereby the government of the day asked the people's representatives for power to raise money by taxation of the people for another year. But what has happened now? "From 1945 to 1951 Socialist governments with the utmost malice set out deliberately to destroy the whole of that complex and elaborate system of check and countercheck. By nationalization, which is the political instrument of socialism, and with glib and specious phrases such as 'public ownership,' 'in the interests of the community,' 'fair shares for all,' and so forth, they utterly and completely hoodwinked and deceived the public into delivering itself completely into the state's hands. With the bribe of 'social security' the Socialists persuaded organized labor to sell their birthright of freedom, and tyrannies like the closed shop, the denial of the right to work, the mass blackmail of the nation for more and more pay for less and less work, have taken its place. "Nationalization and trades unions--one of the most remarkable features of postwar Britain is that neither the wage earners nor the trades unions in nationalized industry, two extremely important factors in our national life, have seen that nationalization must in the end destroy their whole status. "And what has happened in the nationalized industries? The Socialists justified their program of wholesale nationalization by saying that it was vital that the great public utilities should 'belong to the people'; with those glib phrases of 'national interest,' and 'public ownership' the man in the street was led to believe that state control was desirable. Yet although the state (or the people) is now the employer of hundreds of thousands of men and women, we find the huge trade unions being allowed to occupy the role of demanding from the people' as a whole extra special benefits for the favored sections of the people which they represent. So the people as a whole are held to ransom by coal miners, railway workers, electricity workers, and others and no government to date has had the courage to call the trade unions' bluff. If there is a strike in a nationalized industry it must be a strike against the people for (so the Socialists say) a nationalized industry belongs to the people. It is high time the position was made crystal clear. "Nationalization and the housewife "What benefits has the housewife got from nationalization? Cheaper and better coal, as was promised? Cheaper and better gas? An abundant and cheaper supply of electricity? Already the losses, including the railways, amount to millions of pounds. And who pays? The man in the street, of courses. These losses represent 9d. on a packet of cigarettes, 3d.-6d. on a pint of beer, or 8d.-9d. on the income tax. * "Nationalization of economic resources is four-fifths of the way to the totalitarian state. Moreover, if you destroy the right to work for profit and reward, if you destroy prosperity and the independence that goes with it, you do something else as well. You destroy morality and ethics. You first destroy the impulse to save, to put by for a rainy day, and then you destroy the desire to excel and to do better than your fellow. With what result? That the whole tempo of energy, progressiveness, and invention is slowed down, and, human nature being what it is, men who are deprived of their legitimate reward will seek to acquire what is their due by illegal means. Thus as the inevitable sequence there is a wholesale lowering of moral character and dishonesty, graft. corruption, and fiddling become the accepted order of the day. "Nationalization and its effect abroad: There is little doubt that the disasters that have overtaken this country abroad have been directly due to the Socialist doctrines of nationalization and trade union domination. First Abadan, then India, now Suez-all have followed the pattern set by British socialism in compulsorily expropriating the asests of bank, railway, coal, gas, and electricity shareholders for political purposes. The ruin it has brought upon us is immeasurable and irreparable. "Pink conservatism: Unfortunately there are a number of politicians who do not call themselves Socialists who believe that they should have a finger in the industrial pie and are better equipped than anyone else to 'guide and direct' industry. We must have none of it. We, the people, have to say, 'Leave us alone. For God's sake let us have done with political interference with our lives. Let us stand on our own feet, reap our own rewards, and, if necessary, pay the penalty for our own mistakes.' "The great middle classes-that ladder of society by means of which the humblest in the land, given opportunity, courage, toil, and enterprise can by his own efforts graduate to the highest rewards of wealth and honor-are doomed to extinction unless socialism is killed. And if that backbone of civilization goes, let there be no mistake, mass unemployment and mass starvation will stalk the land and the descent into communism will be inescapable. "Thus on the shoulders of people largely ignorant of the tremendous issues at stake rests the responsibility for the continuance of the Britain as we have known it. The whole world, not least Russia, is now watching to see whether Britain is indeed the decadent empire which the policies of socialism for the past 10 years have led them to believe, or whether she is going to throw off the garb of madness in which she has enveloped herself and once more assume the mantle of greatness and leadership which has made her in the past the admiration and the envy of the world. "In this so-called democracy of ours we see the professional politicians-of all parties, I am afraid-purchasing their popularity and bribing the populace by levying upon the rich and middle classes, who carry the burden of civilization, a taxation so unjust, so vicious, and so penal that unless it is reduced it will liquidate them entirely. When that time comes the burden of civilization will fall upon the masses and the probability is that they will be unable to sustain it because their training in socialism will have destroyed the belief that a man should work out his own salvation. "The one permanent legacy that socialism will leave behind is the class war. Thanks to the Socialist teachings of two generations we have become a schizophrenic nation, a Jekyll and Hyde nation of dual personality, a nation which embraces millions upon millions of men and women who have no realization of what they owe to the single fact that they have been born under the British flag. "What kind of Britain do we really want? "A free Britain or "A bankrupt servile state" with "Everyone wholly dependent on 'keeping in with' the officials and the ministers, ambition thwarted, initiative frowned upon, free enterprise discouraged, our whole lives mapped out for us by some new caste of privileged bureaucrats who, having gained the seats of power, will by the exercise of untrammeled authority reduce us to the status of serfs and slaves. "Freedom is the pearl of great price. To preserve it and to cherish it the best and noblest of our race have ever been ready to die. If we lose it, if we barter it for security, there is nothing more certain than that we shall lose both forever. "So the road for Britain, the only road, is the road to personal freedom and individual responsibility. There is no other road, not now, not ever. That some will falter and fall by the wayside is inevitable, but that is how life is, and the spirit of charity founded on the ethic of Christianity must insure that the strong, out of their strength and bounty, must keep and succor the weak. "The task is not easy. Courageous leadership, backed by united national effort, can alone save us. Not only freedom but national existence itself is at stake, for if we fail a dictatorship either of the right or left is inevitable." [Italics mine.] If one wishes further confirmation of the disastrous effects of socialism on England, I refer him to the following books: 1. The Socialist Tragedy, by Ivor Thomas, M. P., a former member of the Labor government in England. 2. The British Socialist Ill-Fare State, by the late Cecil Palmer, the talented English lecturer and writer. Experience of Rome In the Problems and Perils of Socialism, St. Loe Strachey, speaking of the Roman Empire, says: "The more the history of the decline and fall of the Roman Empire is studied, the more clear does it become that it was not the armies of the barbarians which destroyed that empire. Rome fell because her heart was stone,' and her heart had become petrified because her people had been ruined and pauperized by the insidious action of state socialism.” Experience of West Germany On the other hand, we have the example of West Germany which has drastically reduced its taxes as an aid to economic recovery, and which has staged such a marvelous recovery since World War II. In a speech made in December 1956, G. Keith Funston, president of the New York Stock Exchange, spoke of the remarkable industrial recovery in West Ger many since the war. He told of a German official visiting in New York 2 years before who spoke of "his plans to boost output." In Mr. Funston's words: "He aimed to accomplish this, he said, by slashing income taxes, by eliminating the capital-gains tax and by substantially reducing the double tax on corporate dividends. In my wisdom and based on our experience in this country I told him he was reaching for the moon. Very much to my astonishment, within 6 months this official had achieved everything he set out to do. "Well, West Germany's great industrial boom today is a matter of record." D. CONCLUSION The issue is crystal clear: (1) Shall we continue our present system of confiscatory income, death, and gift taxes with the establishment eventually of a system of complete socialism, or (2) shall we, before it is too late, take steps to save our system of private enterprise and individual liberty by substituting for our Marxian taxes a sound and reasonable system of taxation protected by a constitutional amendment, such as the Dirksen-Gwinn amendment (S. J. Res. 25 and H. J. Res. 141) now pending in Congress, which limits the power of Congress to tax incomes, inheritances and gifts? Interim relief through legislation While the ultimate remedy lies in a constitutional amendment limiting the taxing power of Congress, relief in the interim should be given by legislation. 1. Income tax.-In the case of the income tax, the least that should be done at the present time is to enact the Sadlak-Herlong bill (H. R. 6452 and H. R. 9119), now pending before this committee. By the provisions of this bill the personal income-tax rates would by gradual stages annually over a period of 5 years be reduced so that the first-bracket rate of 20 percent would be reduced to 15 percent, and the top-bracket rate would be reduced from 91 to 42 percent, with other bracket rates reduced proportionately, and the normal tax on the first $25,000 of corporate income would by gradual stages annually over the same period be reduced from 30 to 22 percent, and the surtax from 22 to 20 percent, making the top rate 42 percent, the same as the proposed rate on personal income, with power, however, in the case of budgetary requirements to postpone the reductions in a given year so that the completion of the proposed reductions could be stretched out over a period of 9 years instead of 5. This is a long time to delay the reform that is needed most of all, and needed now; namely, a drastic reduction in the higher individual surtax rates. This dwarfs in importance all other changes in our tax laws. An immediate elimination of all rates above 50 percent would cost about $700 million, which is but 1 percent of the total Federal revenue. There is every reason to believe that this would have an immediate and most stimulating effect on the economy and would result shortly in an increase in revenue. To quote again the conclusions of the tax foundation's study of high surtax rates as summarized by its president, Roswell Magill: "This study is designed to shed light on one of the most difficult tax problems of our time. In brief, it shows that much of the damage to individual incentives, and many of the problems of tax impact and litigation, arise out of the extraor dinary and indefensible high rates of our progressive income tax. "By applying a new research yardstick to the effects of high surtax rates, the study confirms the conclusion that the steeply progressive rates of the income tax are not worthwhile. From a revenue standpoint, they diminish receipts instead of expanding them. They distort economic activity by influencing incentives and business motives, and they handicap economic growth. They lead to practices that are wasteful and destructive. "To obviate these dangerous effects, the individual surtax rates should be readjusted to a ceiling of not over 50 percent. Although the apparent revenue loss would be about $700 million, the study shows that even this relatively modest sum would be likely to shrink in actual practice. Except in periods of recession, cuts in top marginal rates historically have been followed by substantial increases in the income subject to these rates. Moreover, the entire economy will benefit from lower top rates. Pools of new capital would become available for new enterprises. "If we want to preserve the process of individual saving and risking for profit, which has given the biggest single impetus to our fabulous economic history, we must begin at once to prune high surtax rates. They are not worthwhile in these times. Indeed, they never were." I recommend that the individual income tax rates in the Sadlak-Herlong bill be adjusted so as to eliminate at once the rates above 50 percent. It should be noted that the individual income-tax rates above 34 percent produce only about $2 billion of revenue, as compared with $700 million produced by the rates above 50 percent, a difference of $1,300 million. The rates between 34 and 42 percent produce less than $700 million. Thirty-four percent is the rate applicable to the net income bracket of $8,000 to $10,000. Forty-three percent is the rate applicable to the bracket of $12.000 to $14,000. Fifty percent is the rate applicable to the bracket of $16,000 to $18,000. 2. Estate and gift taxes.-The estate tax is the east defensible of any of the taxes levied by the Federal Government. It is a direct levy on capital, its economic effects are exceedingly harmful, it produces but little revenue, and it invades a field of taxation already being used by the States. Therefore, I submit that the levying of estate taxes should be abandoned by the Federal Government, and this means of taxation left exclusively to the States where competition would tend to keep the rates within reasonable bounds. The gift tax is merely auxiliary to the estate tax, and both should be dealt with alike. To accomplish this objective a bill should be promptly passed repealing the death and gift taxes, and in addition an amendment to the Constitution of the United States should be adopted prohibiting the levying of such taxes by the Federal Government in the future. A bill (H. R. 9435) repealing these taxes has been introduced in the House by Congressman Ralph W. Gwinn, and joint resolu tions proposing such a constitutional amendment have been introduced in the present Congress by Senator Dirksen and Congressman Gwinn (S. J. Res. 25; H. J. Res. 141, and H. J. Res. 461). 2 Based upon calendar year 1955 income level. Senate Joint Resolution 25 and House Joint Resolution 141 propose the amendment formerly known as the Reed-Dirksen amendment and now called the Dirksen-Gwinn amendment, to which reference has previously been made. 3. Cost of above changes and ways of meeting such cost. In introducing his bill on March 28, 1957, Congressman Sadlak said: "Estimated individual tax savings under my bill, based on 1956 income levels, would be $10.6 billion *** As to corporations, it is estimated that the total corporate tax savings, based upon 1956 income levels, would be about $4.2 billion." Together these savings amount to $14.8 billion. "Assuming continuance of prosperity and economic growth, it is reasonable to expect that the scheduled reductions would be fully realized without net revenue loss to the Federal Government, probably with some net gain. * * *. Based on 1956 income levels, it would take annual revenue growth of only about $3 billion a year to accomplish the scheduled rate reductions without net revenue loss to the Treasury. If the economy grows in step with the recent historic average, the revenue growth should average up to $4 billion a year without inflation." If the individual income tax rates in the Sadlak-Herlong bill should be adjusted so as to eliminate at once the rates above 50 percent the additional loss in revenue for the first year would be somewhat less than $700 million at 1955 income levels and somewhat more at 1956 levels. This adidtional loss would diminish progressively in each of the succeeding years until it disappears entirely at the end of the 5-year period when the top rate reaches 42 percent. If the revenue growth continues its recent historic average of $4 billion a year, it would more than take care of the foregoing revenue loss. We have in addition the revenue loss from the elimination of the estate and gift taxes, which are estimated at $1,475 million for the current fiscal year. Since my proposal contemplates a complete elimination of these taxes in the first year, the loss would remain constant, and not increase in the succeeding years. To meet this loss we have, in addition to any revenue growth not absorbed by the reduction in income-tax rates, the annual savings recommended by the Hoover Commission, which have been estimated at $5 billion. We have also the very large, if not even greater, savings that could be effected by the complete elimination of Government competition with private business. Steps should be taken promptly to make these savings fully effective. They alone amount to much more than the foregoing estimated losses in revenue. 4. Simplification of revenue laws.-Our income-tax laws are complex beyond all reason and collection by the Government and compliance by the taxpayers have become most costly and burdensome. The laws should be greatly simplified. The CHAIRMAN. Our next witness is Mr. E. A. Avakian. Mr. Avakian, will you identify yourself for the record by giving your name, address, and the capacity in which you appear. STATEMENT OF EMIK A. AVAKIAN, STAMFORD, CONN. Mr. AVAKIAN. My name is Emik Avakian. I am from Stamford, Conn. If we are to preserve the fundamentals on which our Nation is founded we must emphasize the dignity of the individual citizen. The people cannot be dealt with as a mass. The totalitarian approach is to handle all citizens in a like manner without any consideration of the individual needs. It has often been implied that our mechanized world of tomorrow will suppress individual differences. I wish to contradict this notion. The automatic handling of information gives us an opportunity to register the individualities of our citizens and thus no matter how large the population these modern techniques of computation and in |