thousand dollars annually. This was largely due to careless preparation of copy. The remedies applied cut this leakage nearly 30 per cent in six months.

Specifications can be as productive of loss as they are annoying to the bidder. A construction job in Georgia called for spruce laths. Just why, nobody knows. Pine laths were plentiful there, but the specifications were governmental specifications, and spruce laths were shipped in from Seattle at about twice the cost of the local pine, and the transportation charge, diagonally across the continent, was thrown into the wasteful method to make good measure. Standardized specifications will prevent the recurrence of such episodes.

The Government's transportation bill, except that for carrying the mail, is slightly less than a hundred million dollars a year. Fifty or sixty different groups handled the traffic problems for nine of the great department, each group wending its way without reference to its fellow traffic groups whose problems were similar. Some of the traffic handlers were experts and some were bunglers. One shipment was made which is not the average bad example but it is typical of the laxity that can arise where there is no pressing supervision. A miscellaneous shipment of hospital supplies was made without giving separate weights for the different classes of articles forming the shipment. The total weight for the lot was 13,000 pounds. Included in the miscellany was one human skeleton. The rate on human skeletons is three times first class, and because of the failure to classify this rate was applied to the whole shipment, and the minimum weight was fixed at 20,000 pounds, Such practices as this, and others less flagrant but more expensive than they ought to be. are not readily possible under the procedure now established for handling traffic.

DEPARTMENTAL RESERVES.

To

One branch of the Army required dredges to carry on its work. purchase them would have necessitated an outlay of several hundred thousand dollars. It was discovered during the negotiations that another branch of the Army had surplus boats which would have to be sold at a loss. The two were brought together, the surplus was put where needed, and a useless expenditure avoided. The Lighthouse Service needed tenders and had a million and a half dollars to buy them. It was ascertained that surplus mine planters which the Army possessed could, with comparatively small cost, be converted to the desired use and the money conserved. A case recently came to my notice of a requisition for 20 gallons of liquid soap, to cost $15 in the local market where the procuring officer was situated. The order cleared through the central supply office of a department in Washington. It bought for the field officer 30 gallons of the same kind of soap for $8.70, and the cost of transportation was negligible. What has been said of the extremes of soap and ships can be said equally effectively of a multitude of purchases of articles in the middle ground. The important consideration in the whole matter is the study and attention that are being given to the task of seeing that the Government gets a full dollar's worth whenever it makes an expenditure. That is real economy.

I wish space permitted a recitation of enough illustrations to give a complete picture of the valuable work that is being done by each of the coordinating boards that are at work to correct faulty and wasteful administrative practices which have not been interrupted for years. It is sufficient in this brief comment to say that the straightening-out process is going on in all the strata of Government business just as rapidly as they can be reached by careful and painstaking study. The job is progressing, and that in itself is hopeful and satisfactory news to those who have to foot the bills.

One noteworthy practice initiated deserves mention, After all the harsh cutting and the careful and detailed pruning are done in the preparation of the Budget estimates, and even, indeed, after Congress bas taken its toll of exactness from them, the departments are required to set up a small reserve from each appropriation to guard against a rainy day. This savings-bank account can not be drawn upon without a waiver from the head of a department, and that is not given except upon a convincing statement of the absolute exigencies of the case. The reserve set up for the year which began July 1 last and ends June 30 was at its peak $93,000,000. To date there has been released from the reserve only about two millions. The chances are that the year will be completed with a very large portion of the fund unused, and such as remains, of course, will revert to the Treasury.

This in brief is the executive phase of the Budget system. The President is the king-pin. The manner in which he accepts his responsibility determines the success or failure of the whole scheme. Whenever that individual, no matter who he may be, ceases to perform the duty zealously the operation of the system, so far as the executive branch is concerned, will be a gloomy sham. Fortunately for the initiation of the plan we had a President who accepted his responsibilities in a courageous and intelligent fashion.

Important as the executive phase of the Budget system may be, the attention of the legislative branch to the financial proposals of the administration is even of more direct importance to the taxpayer. Here it is that the duly constituted representatives of the public give expression to what they believe to be the views of their constituency.

The Constitution of the United States provides that no money shall be drawn from the Treasury except in consequence of appropriations made by law. The compliance with this mandate of fundamental law is not an empty form of passive acquiescence. It is a virile exercise of power which is a potential factor for good. The President in a recent address characterized it most aptly when he said:

"The Budget and accounting act places no limitation upon the power and right of Congress to increase or decrease estimates submitted. This is in accord with the spirit of our institutions and is as it should be. It is my hope and expectation that as the Budget procedures develop the estimates transmitted to Congress will be so carefully prepared and will present so accurate a picture of the real operating needs of the Government as materially to lighten the burden of the appropriating committees. But it is not expected or desired that Congress should relinquish any of its prerogatives concerning public funds-prerogatives so wisely given to the people's representatives by the founders of the Government."

The work of the Congress commences when the Budget estimates, as formulated by the President, are transmitted by him in a document known as the Budget. This document is as complete a display of the financial situation of the Government as it is possible to make. It is replete with detailed statistics of receipts and expenditures, not only for the fiscal year with which it primarily deals but also the fiscal year in which the Government is then operating and the fiscal year which has just closed. A three-year period is thus considered with its array of comparative data, and an excellent opportunity is afforded for balancing one year's needs with current and past experience.

LOOSE METHODS TIGHTENED.

President Garfield, while chairman of the House Committee on Appropriations, once remarked that if one of our annual budgets should survive the next deluge, if it were the only fragment left after dry land appeared, from that annual budget alone could be read and reconstructed the entire history of the Nation. If that were true 50 years ago. what a splendid portrayal an analytical historian could make from a present-day Budget, with its devious ramifications into every phase of American activity!

The centralization of responsibility in the President to establish a clearing house for departmental Budget estimates made necessary a centralization and tightening up of the loose methods that were just as prevalent in congressional procedure as they were in the executive branch. At one time in the history of Congress budgetary procedure was quite correct. The Ways and Means Committee had the sole | jurisdiction over the question of raising revenue and partitioning it among the Federal services. The first step in the disintegration took place at the close of the Civil War, when the powers of taxation and appropriation were separated and a single committee on appropriations was created to handle the money bills, leaving the taxing power where it was.

This arrangement continued for a decade, when a stormy fight took place between powerful and rival factions in the House and further decentralization in the appropriating power scattered that right among eight different committees.

This was the situation that existed when the Budget system was installed. A practically similar situation existed in the Senate, where the jurisdiction over appropriations had been gradually split until nine different committees had a prescribed right to appropriate. It was a chaotic arrangement. A total of 13 regular annual appropriating bills had to be enacted to form the Budget. Bills which came from one committee in-the House went to an entirely different committee when they reached the Senate.

The supply measures were unscientific, fllogleal, and confusing to the public and even, indeed, to the membership of the Congress. The funds for a single department were often found in different bills. Few of them had any well-defined purpose of origin. Like Topsy, they just "growed." The War Department furnished the most horrible example

of this diffusion.

OLD PREROGATIVES GIVEN OVER,

The funds to be expended by that department were found in no less than five different bills, emerging from three different committees in each body. The Congress formed a fertile field of exploitation for the ambitious bureau chief. There was no executive agency to curb his enthusiasm. Whatever total of estimated wants he arrived at by the free and easy process of guessing usually was submitted to Congress by the Secretary of the Treasury without revision.

The President had no worth-while duties to perform in connection with the Budget estimates. The Secretary of the Treasury was powerless to interfere, no matter what the financial straits of the Nation might be at the time. Once the estimate reached Congress, the bureau chief usually utilized every resource at his command to get his total ratified regardless of the relationship it might bear to the sum of the needs of others. If he met a rebuff at the hands of one committee he would try it the next year by shifting his estimate to another bill which went to another committee and where, possibly, it might find a more friendly reception. He often succeeded by this ruse. The sole

sentinel between the Treasury and the insistent unrestrained appetite of spending officers was the Congress, and it was not well enough organized to combat the assaults most effectively. The fact that it kept the Government solvent is due to the vision, courage, and statesmanship of the men who, in the period of appropriating disorganization, made public expenditures their especial study. They were aided in this aim by a youthful Nation, resplendent in sources of taxation that were tapped lightly.

The Congress responded admirably to the public demand that it revise its methods to accord with the practice it had required of the executive departments. The Senate and House, by amendment of their respective rules, established single committees to which was given the sole power to appropriate money. This seems to have been a simple process, but it was exceedingly painful to many of the committees, which had to surrender the prerogative they had so long enjoyed to control the appropriations for some particular subdivision of government. The result of this concentration was the reduction of the number of congressional committees dealing with appropriations from 17 to 2. When this was accomplished the way was prepared for the reception of the Budget estimates which the President has to transmit. One can readily see how farcical the Congress could have made itself had it insisted on maintaining its old appropriating organization and required the President's Budget to run the gantlet of 17 unrelated committees, each vying with the others in the interest of the particular service which fell to its solicitous sponsorship.

A single route devoid of sidetracks having been mapped out for the Budget through Congress, the revision of the appropriation bills received first attention. The number of them was reduced from 13 to 11. They were revamped from a heterogeneous mass into a set of logically arranged measures which reflected in one compact set of figures the needs of each bureau and department, so that the amount requested for a given unit of organization could be readily ascertained without the searcher being compelled to qualify as a statistical contortionist. The size of the appropriating committees was increased. The Senate Appropriations Committee was enlarged to accommodate additional members during the period certain bills are to be under consideration. The House Appropriations Committee was increased from 21 to 35. The enlarged committees were organized into subcommittees for the detailed consideration of the newly arranged bills in accordance with a definite work schedule and a uniform plan of action. The subcommittees, after completing their work, must submit the results for clearance through the whole committee. No other means of maintaining the equilibrium of a carefully prepared financial program is possible. No other method can be devised that will throw the glaring white light of responsibility upon congressional action or lack of action.

The congressional procedure has stood the test for two years. It has handled two Budgets submitted by the Executive with courage, intelligence, and expedition. There has been no lessening of the dignity of Congress and no diminution in its constitutional prerogatives. The prestige of Congress under the new regimen is certain to be magnified. The elimination of fruitless discussion of petty details of Budget estimates gives more time for the consideration of many other and larger pressing questions of national import. The presentation of a mature program of finances by the President makes possible a debate upon the larger aspects of the question of finance-those of policy.

CORRECTIVE MEASURES.

The clearing of the Budget through single committees not only preserves its equilibrium but it affords Congress the opportunity to apply uniform corrective measures to departmental practice wherever it finds them necessary. One or two illustrations will stress the point: Congress a year ago passed a law changing the method of determining the pay of the military, naval, and quasi military services. Six of them located in four different departments were affected. It came to the attention of the committee that the interpretation of certain provisions of the act were not being uniformly considered by all the services. Ambiguities with reference to the granting of allowances of heat and light to officers who were granted rental allowances where they could not be provided with Government quarters made it necessary for the committee to take the position that such a construction was not in the mind of Congress when it passed the measure. Insistence on a uniform observance brought compliance with the legislative intent and headed off a movement that might have eventuated in the unanticipated expenditure of hundreds of thousands annually.

One more case, this time an increased expenditure, will further typify the uniformity which can be brought about: The subcommittees dealing with Army and Navy matters uncovered the ancient disparity in the treatment accorded to the cadets at the West Point and Annapolis Academies. It had existed for years, but one set of boys was under the jurisdiction of one department and one congressional committee, and the other set under others. As chairman of the committee I sent for the responsible administrative heads of the two academies and requested them to jot down in comparative line up the financial considerations granted to each set of boys. They made their report, and as a result the cadets at West Point received such additional aid as was necessary to equalize their status with that of the naval cadets.

The new order of procedure in Congress, like that in the executive branch of the Government, has come to stay. There will be no rever slon to the old hit-or-miss practices. There are those who would like to upset the reform on the theory that the old way was the ideal logical arrangement. The assumption is a violent one. The former practice of eight different appropriating committees in the House had its inception not as the result of the presentation of a well-considered plan but in the settlement of a struggle for political power.

The theory upon which the separate appropriating committees were maintained rested upon the argument that the right to appropriate should be vested in the same committee that considered the legislation for a particular bureau or department. Granting the correctness of that premise, the system of divided jurisdiction was grossly incom plete. Of the eight committees in the House, only seven had jurisdietion over legislative subjects; the eighth, the Committee on Appropriations, had no power to legislate and only a partial power to appropriate. There are 60 standing committees in the House, and of these approximately 35 are purely legislative committees. To carry the plan to its ultimate and logical conclusion a further distribution of appropriating power should have been made and the appropriations for each department and bureau should have been allocated to some one of the 35 committees. An identical situation should have existed in the Senate, which has 34 standing committees, of which 30 should have had assigned to them the authority to appropriate for some particular unit of government for which it legislated. Visualize the situation if you will: The Budget of the United States being submitted to Congress by the President, there to be dissected and the irregular pieces distributed to 35 committees in the House and the results of their labors being passed upon by 30 committees in the Senate. Sixty-five committees dealing with the Budget estimates! What resemblance would the document returned to the President bear to the one he had carefully prepared and balanced? A frank statement of the possibilities of such a ridiculous and anomalous condition as would be presented ought to make anyone with the proper patriotic motives resent even the serious suggestion of adopting it.

The single appropriating committees, in addition to improving the procedure in handling appropriations, should also produce better general legislation. In the old days of divided appropriating jurisdiction, those money bills which came from the committees which exercised the dual legislative-appropriating function were made the vehicle for prac tically all the general legislation which the committees had to present. The inevitable result was a supply bill that was both a financial and legislative measure. As a rule, more time was devoted to the consideration of the legislative riders upon the bill than was given to the pecuniary problems-the sole motive for the existence of the measures. The single appropriating committees have no power to deal with general legislation. They should not have such power. General legisla tion and appropriations, if commingled in the same measure, can only work to the detriment of each. They must be considered separately. The appropriating committees as now constituted have all the jurisdiction they can wisely exercise if they devote themselves assiduously and solely to the task of checking the Budget estimates. That in itself is a broad enough field in which to operate.

THE REMEDY.

The legislative committees, instead of being weakened by the loss of the appropriating power, have been strengthened, if they will realize it. An earnest performance of the duty of studying the general legislation which falls to their particular lot will enable them to perform more and better public service than they were able to accomplish when they exercised the joint function.

A further step of legislative procedure is necessary in the House. It has been accomplished in the Senate. The House has 11 different committees whose duty it is to investigate public expenditures-1 committee for each of the 10 executive departments, and the eleventh for expenditures on account of public buildings. There are no expenditure committees for the Veterans' Bureau, the Interstate Commerce Commission, the Federal Trade Commission, or any of the other units of government not attached to any executive department. These expenditure committees seldom function except when the House of Senate is controlled by one political party and the administrative branch of the Government by another.

Even then their investigations can not be comprehensive. They may deal with specific and individual instances of mismanagement or maladministration, but there is no coordination of their activities or any opportunity to harmonize the broader aspects of the expenditure-investigation problem. The remedy for this situation is the abolition of the 11 committees and the crea tion of a single virile committee on public expenditures. Such an organization functioning with the General Accounting Office would, in my opinion, be a factor for an incalculable amount of good. Practically the only systematic attention now given by Congress to the investigation of expenditures is the time devoted by the appropriating committees in the course of the examination of the Budget estimates. That work must of necessity be incomplete. The time available for visaing Budget estimates and the magnitude of the work make it impossible for any committee or committees to perform the two duties simultane

and trebled their per capita cost in 10 years. In the State of Michigan the per capita cost of government increased from $5.66 in 1914 to $24.07 in 1922; in Wyoming the per capita cost of government was $7.40 in 1914 and $24.27 in 1922. These are samples of increased costs in the State governments. As illustrations of the increased costs of city governments in 10 years, Springfield, Ill., had a per capita cost of $21.20 in 1914 and $52.15 in 1922; Johnstown, Pa., à per capita cost of $15.90 in 1914 and $44.34 in 1922; Birmingham, Ala., a per capita cost of $14.99 in 1914 and $29.95 in 1922; Sacramento, Calif., a per capita cost of $40.08 in 1914 and $96.C8 in 1922; Fall River, Mass., a per capita cost of $23.81 in 1914 and $53.57 in 1922; Lansing, Mich., a per capita cost of $20.72 in 1915 and $76.12 in 1922; Hoboken, N. J., a per capita cost of $25.94 in 1914 and $71.03 in 1922; Winston-Salem, N. C., a per capita cost of $24.61 in 1917 and $45.68 in 1922. The increased governmental cost in States and cities was confined to no section, as will be seen from these figures.

"At one and the same time the people are complaining of high taxes and demand more government expenditures. In the cities they want better water supplies, improved street lighting, more streets paved, more and better schools, more parks and playgrounds; and in the country they demand better roads and schools.

"These are all splendid aspirations, in keeping with American ideals for better living conditions, but they increase government cost and call for more and more taxes or the issuance of bonds, which are only debts charged up against the taxpayers, to be paid by them or their children at some future time, plus interest until the principal is paid. We can't eat our cake and have it. We shall have to adopt in taxation the old motto Whatsoever you want, pay the price and take it.'

"One remedy would be a more equitable method of taxation --more taxpayers. Only 6 per cent of the population pay any Federal income taxes, and it is estimated that only one-third of the people pay any taxes at all, Federal, State, or municipal. That not only puts the cost of government on a small minority, but it offers inducements to the large majority, the nontaxpayers, to vote recklessly for every proposition that will increase government cost. This situation was illustrated by a jocular remark of Senator John Sharp Williams, of Mississippi, when the income-tax amendment to the Constitution was before Congress. Mr. Williams said in the cloakroom, I'm for it, because it won't bear very heavily on my constituents. With such an amendment we can make New York pay one half the expenses of the Government, and Pennsylvania, Ohio, and Illinois the other half." Though that was said in jest, it is marching toward a reality. Last year the four States of Massachusetts, New York, Pennsylvania, and Illinois paid more than one-half of the income and profits tax and one-half of the total internal revenue collected by the Federal Government. The 44 other States paid the other half. That was not accidental. It was the spirit of the agitation for the income-tax amendment and the legislation that followed. The great majority, who do not pay income taxes, insist on soaking the rich, not realizing that the more direct taxes placed on business enterprise, the more indirect taxes will be placed on the masses by the increased cost of living. The industrial centers paid the income taxes. In 1921 Chicago had 420,631 of the 611,558 income tax payers in Illinois. The agricultural parts of the State paid small income taxes and made comparatively few returns. The tax therefore fell on industry, the same as did the increased State taxes, and helped to incrcase the cost of production and therefore the cost of living."

Mr. MADDEN was asked if he would make the income tax apply to all, regardless of their incomes. "Why not? It would be less of a burden to the poor man to pay a dollar or two income tax than to It is a fallacy pay double the amount in increased cost of living.

If we

that any part of the people can escape sharing in the cost of governmeut. They all pay in one way or another, and I think it would be better for every citizen to pay directly a part of the cost of government. It would bring him to realize that the cost must be met by taxation, either direct or indirect. It would also help him to recognize himself as in part responsible for the administration of the Government by informing himself as to how his money is spent. could get that idea into all our heads, we might pay less attention to the voice of the demagogue and the charge that the interests own and control the Government. I think that the suspicion of the interests is largely psychological, the development of a natural human suspicion that those who make the laws pay more attention to those who pay the cost of government than to those who do not pay anything. man who owns no railroad stock would not presume to have any direct voice in the management of the railroad; and government not being an eleemosynary institution, the man who pays no taxes lets his mind work in the same way and believes what the demagogue tells him about the interests that do pay heavy taxes, controlling the Government supported by taxation.

THE WORLD'S HEAVIEST TAXPAYERS.

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"We might even kill off some of the demagogues by making every citizen a paying stockholder in the Government, for the man who pays taxes is more inclined to want to know the whys and wherefores of appropriations of public money. He would most likely want to

know whether it was appropriated to pay for some necessity or merely for some scheme that some other fellow thought desirable.

"From my observation and investigation, we are the heaviest taxpayers in the world. In Great Britain substantially all the taxes are assessed by Parliament and the citizen pays one set of taxes. Of course, there are the local poor rates, but they do not figure in the taxes for government cost. In this country we have Federal taxes, State taxes, city taxes, highway taxes, school taxes, park taxes, drainage taxes, different organizations of Government assessing these taxes, and when all are combined they aggregate a higher rate of taxation than they have in Great Britain.

"I figured up my taxes last winter, just before I made out my income-tax return, and found that I had paid 32 per cent of my income in local and State taxes. My case is not an unusual one. The same applied to practically all business men, and when we compare our Federal taxes with those of Great Britain we ignore the principal governmental cost in this country. The heaviest governmental cost and taxation here are in the States and cities and on the farms. Secretary Wallace, in his last report, says that an investigation and answers to a questionnaire from the Department of Agriculture indicated that the farmer's taxes in Ohio, Indiana, and Wisconsin trebled between 1913 and 1921, and whereas the tax in 1913 represented 10 per cent of the farmer's income, in 1921 the tax represented one-third of his income. These taxes were local, for expense within the county, and within the control of the majority of the people in the county. They were principally for schools and roads. The farmer complained of high taxes and low prices for his products, and at the same time was responsible for the principal increase in his taxes. The people appear to have gone tax wild on roads."

But is not Congress in a way responsible for this increased tax for road building?

"Undoubtedly. Congress was persuaded by agitation and clever propaganda to assume the big-brother or good-uncle attitude by making State-aid appropriations, and it has led to much extravagance, to increased taxes, and bond issues. We passed the good roads bill and Congress has appropriated more than $350,000,000 to aid the States in constructing hard roads. That was in the nature of seduction to extravagance, and it compelled the States to match Uncle Sam's dollar with their own. Some States could not afford the expenditure, but pride and the offer of Uncle Sam to go halves led them toward bankruptcy. To get more money, they projected big roadbuilding plans, and some of the poorer States got more of the Federal apportionment than some of the most prosperous States. They got more than they could digest. Then they assumed that Uncle Sam, having gone into partnership with the States, would share in the expense of the upkeep of their highways. They were disappointed when Congress last year amended the law and provided that no aid should be given for any road construction until the State gave guaranty for the upkeep of that road. Some went so far as to charge that this act was one of repudiation of the contract entered into by the Federal Government. It had to be done to prevent the waste of public money from the State treasuries as well as from the Federal Treasury on extravagant road projects that did not promise stability, to prevent the building of cheap roads that would soon need repairing or rebuilding.

"The maternity act. passed November, 1921, is another example of State aid which some States do not want and yet will have to be taxed to give the aid to other States that accept. One or two States are already trying to get the act before the Supreme Court to test its constitutionality, because it adds to their budgets to accept the aid and match it with their own appropriations, and because their people will help to pay the Federal cost by Federal taxation. The embarrassment of this State-aid legislation is that it is general in character and is a forced development from Washington rather than a natural growth in the States. The temptation to get something for nothing leads to increase of local taxes and government cost, both Federal and local.

ROBIN HOOD LIBERALITY.

Congress has enacted a good many such laws offering aid to the States without explaining that Congress could not appropriate a dollar for any purpose without first taking it out of the pockets of the people, or a part of them, by taxation. It might be compared to the generosity of Robin Hood. However beneficial some of these State-aid appropriations may be, the legislation is wrong in principle. The Federal Government ought to levy taxes only to meet the necessary expenses of the Federal Government and such public works as it controls. The States should be left free to govern themselves and assess such taxes as will meet their government cost without the encouragement of Uncle Sam. They ought not to be seduced into extravagant expendi tures of their own revenues under the impression that the Federal Government is making them free gifts of money which has to be taken from the citizens of the States in Federal taxes."

How about the centralization of government as applied to taxes? "Yes; that is another side of the tax problem. The taxpayers in the cities and the States surrender control of much af their own taxes

for a mess of pottage cooked here in Washington. They pay their city taxes, but pay little attention to the use of the city revenues until there is inefficiency and sometimes graft. Then they appeal to the State government to take from their city councils some of their powers. The States get tired of paying the expense of such government functions and pass it along to the Federal Government, releasing powers that rightly belong to them in exchange for congressional appropriations. Congress accepts the increased power surrendered by the States, assesses new taxes to meet the new government cost, and the taxpayers transfer their tax revenues from their own State treasuries to the Federal Treasury. These government functions are administered by satraps from Washington instead of by local officials known to the people and easily controlled by the people. It is by such methods that bureaucratic government develops. The camel's nose of reform gets under the Federal tent and the bureaucratic camel soon occupies a large part of the tent and feeds on taxation forage. It would be well for the people in the States to remember that the appointment of a man to a Federal office does not add to his brain or to his character, because it is impossible to make a wooden head into a thinking machine by placing him in a Government bureau.

APPEALS FOR FEDERAL AID.

"Two years ago, when we were considering an appropriation for rural sanitation, the public health authorities of various States and cities came to Washington with the impression that it was another big State-aid proposition and they wanted to get their share. One of these gentlemen from my own State was very solicitous about enlarging the appropriation and extending it to small cities. He lived in one of the most beautiful and progressive cities in the State, but it had gone through an epidemic of typhoid fever. I expressed surprise at a sanitary condition that would develop such an epidemic, and he explained that when the city had saloons the revenue from licenses was apportioned to the sewage department, but that prohibition had cut off that source of revenue. All the other revenues had been apportioned to other city departments-paving, lighting, public library, parks, and so on-and the people would not vote more taxes nor permit the surrender of any of the revenues already apportioned. The outlet of the sewage system in the river became stagnant, the water supply polluted, the State would not help them, and the only relief was in Congress. He thought that Uncle Sam ought to do for that city what it would not do for itself. The people had neglected the most important function of city government and came to Congress for relief.

a

"Another gentleman, representing the music trade, came to me with an argument in favor of Federal aid to education. His principal interest was in having the Government establish a national conservatory of music in Washington and make it free to students from all parts of the country. It was to be a part of an educational department in the Government, He was from New York, and I asked if they did not have conservatory of music in that city. He assured me that they had one of the finest In the world. I picked up the Statistical Abstract and pointed to the cost of public education in this country, amounting to more than $1,000,000,000 a year. I then called his attention to the fact that New York paid one-fourth of the taxes collected by the Federal Government and asked if he thought the people of his State would like to pay one-fourth of an extra billion to make Uncle Sam the national school-teacher and singing master. He looked at the two sets of figures, picked up his hat, started toward the door, but turned about to say, I hadn't thought about it in terms of taxation. Thank you for giving me this lesson. I'll go home and try to clear the fog out of the brains of my friends.'

"The man was typical of many ordinarily thoughtful men who have not learned the first and most important question of government - taxation. They will join in any appeal for an appropriation of public money without stopping to think about where the money is to come from. They only know that the Treasury vaults are filled with gold and silver, and that the Bureau of Engraving and Printing is printing millions of money. They don't know that the gold and silver and paper money all represent taxes collected from the people.” The people thought they paid tariff taxes, didn't they? "Oh, yes; they've always thought that, but some are beginning to learn that there is a difference between imaginary taxes and real taxes. In 1909, when we had the Payne tariff bill before Congress, there was a great agitation all through the country about high taxes. Every man and woman thought Schedule K assessed a tax on him or her. They had the same idea about the sugar schedule and all the other schedules save the free list. The Republicans were defeated the next election because they had revised the tariff and taxed the people on their clothes, their food, and even their coffins.' But there was not a direct tax in the law. The contest was, in fact, between the importers and producers. The taxes were on imported products and were collected as they came into this country. If they were responsible for increased prices, that was between the manufacturer and the merchant and between the merchant and the consumer. I am not going to discuss the tariff, but mention this as illustrative of the confusion in the minds of the people as to Federal taxation. The average citizen thought he paid the customs tax, though he could not put his finger

on the tax or say what it amounted to. He listened to the man who said he paid a tax and convinced himself that Uncle Sam was taking a part of his earnings.

THE INCOME TAX.

"Mr. Average Citizen was also somewhat confused regarding our old internal revenue laws which taxed whisky, wine, beer, tobacco, oleomargarine, and a few other products. They were internal taxes, but President Garfield called them voluntary taxes because any citizen could escape the tax by refusing to drink liquor, chew or smoke tobacco, or use oleomargarine. They were not taxes for revenue so much as taxes for regulation. The Government taxed these products because the moral sense of a large majority of the people was opposed to the indiscriminate manufacture and sale of such articles. The taxes on whisky, beer, cigars, and tobacco brought large revenues to the Government, but revenue was not the object of the tax.

"Then, in 1913, we adopted the constitutional amendment giving Congress a new power-to levy taxes on incomes from whatever sources derived, without apportionment among the several States and without regard to any census or enumeration and for the first time in our history the citizen was faced with a real direct tax by the Federal Gov ernment. His illusions as to Federal taxation began to dissolve and he began to realize that Uncle Sam had assessed a tax on him. In the beginning few were called upon to pay the income tax, and the collections were relatively small. In 1913 only 357,598 income-tax returns were made and $28,000,000 collected. The income tax touched only the few, and it was assumed that it was to make idle capital help support the Government. But when we got into the war against Germany the income tax became one of the main reliances of the Government for revenue, In 1918 the income tax brought into the Treasury $1,269,000,000, though only 4,425,114 people paid taxes on incomes. That was about 4 per cent of the population paying income taxes to support the Government in war. Since then the taxpayers have increased to 6 per cent. but probably a majority of the population believe that they pay Federal taxes and complain. It is difficult to clear away a popular illusion, and it seems to me that the best way to make the people understand who pays the tax is to apply the income tax to all according to their earnings, for that is what income is.

"The Statistics of Income for 1921, recently issued by the Commissioner of Internal Revenue, is an interesting document bearing on this question, and I think bears out my contention that the income tax is. under the legislation of Congress, a tax on industry rather than a tax on great incomes. Of the 6,662,176 personal returns in 1921, 6,491,817 reported incomes of from $1,000 to $10,000; of the total income of $19,577,212,528 taxed, $13,813,169,167, or 70 per cent, was from salaries, wages, commissions, bonuses, fees, etc.'; and of the total $719,387,106 income tax collected in that year $288,948,141 was on incomes of from $1,000 to $25,000 and $202,216,490 on incomes from $100,000 to $1,000,000. The men with modest incomes paid $86,000,000 more income taxes than did the men with swollen fortunes. There were only 21 returns showing incomes of a million or more.

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"These statistics suggest that the income tax rests on the enterprising business and professional men, and they pay a personal-income tax in addition to the tax on their business if it is incorporated. lawyer, the doctor, the author, the journalist, the engineer, the mechanic, and the skilled laborer who earn $1,000 or more carry the peak of the income-tax load. The young man who earns more than $1,000, if single, or $2,000, if he has a family, must pay 4 per cent on all income in excess of those figures, regardless of what it costs him to live. There are many laborers who earn more than the doctor or the lawyer but do not make income-tax returns. They have gone on the assumption that they are exempt because labor should not be taxed. That is a false assumption, of course, but it is another of the common fallacies that exist, and the best way to remove it would be to require all citizens to make income-tax returns and pay according to their earnings. I think it would be a means of letting every citizen have the credit of helping to support the Government which gives him or her protection; and I believe it would be acceptable to the workingmen. I know them pretty well, and I do not believe they want to shirk any of their duties as citizens. It is one of the delusions that confuse politicians more than the workingmen."

What are the greatest embarrassments in tax legislation?

"As Uncle Joe Cannon would say, to put the boil on the other fellow's nose. This is a big country, has many industries, many classes of people; and the representatives of every section and every industry think it their duty to protect such interests from undue taxation. The result is a scramble to put the tax on the other man, the other industry, the other class, the other section. It is all right to tax industry, but all wrong to tax agriculture and labor in the same way. By these contests we get lopsided tax laws, whereas if we followed the simple principle of levying taxes on all without distinction, taxing them according to their ability to pay, we should place every citizen on an equality before the law; and I believe such tax laws would give more general satisfaction and remove the suspicion of favoritism which is generally credited to the citizens who really bear the heaviest burdens of taxation.