Facts on Fortunes

The House Ways & Means Committee spent six days listening to the "public" on Franklin Roosevelt's share-the-wealth tax proposals, heard little of interest because witnesses had nothing concrete to shoot at. Last week the Senate Finance Committee wound up a seven-day hearing on the same subject which, in addition to the stereotyped objections of tax experts, economists and special pleaders, produced the following noteworthy testimony:

Mr, Fisher-Up to the witness stand marched Wager Fisher of Bryn Mawr, Pa.

"Whom do you represent?" demanded Chairman Pat Harrison.

"I represent myself. I want the Committee to consider the problem of my personal fortune."

The Committee politely considered.

"I have," said Mr. Fisher, "an estate of $180,000. All right. My money is invested in real estate. My mother left it to me. Gentlemen, if this law passes and I get killed going home on the train tonight, what is going to happen to my wife? She will be penniless."

With rough figures on scratch paper Senators estimated that estate and inheritance taxes on $180,000 would come to $26,800. How would Mrs. Fisher be penniless?

"Well," said Mr. Fisher with finality, "we haven't got $25,000 and we don't know where we could get it."

"Couldn't she sell some real estate?" asked Senator Barkley.

"Sure. For about one-tenth of what it's worth. That would still leave her penniless. I've been trying to sell real estate for three years. There aren't any buyers. We had to borrow $400 to live on one year."

Again Senator Barkley had an idea: "But this bill would give your wife ten years to pay the tax."

"And in the meantime what would she live on?"

To that the Finance Committee of the U. S. Senate had no answer.

"Well!" said Mr. Fisher, standing up and shrugging his shoulders, "that's the situation."

Mr, Ford, General Counsel Robert H. Jackson of the Bureau of Internal Revenue, an engaging young man who believes that the rich are too rich and the poor are too poor, began a lively poker game before the Committee with Henry Ford's fortune for imaginary blue chips. At stake was the important question of what would become of Ford Motor Co. when Father Henry dies and Son Edsel has to pay record-breaking death taxes.

Mr. Jackson either knows or can quickly find out from the income tax returns in his bureau the exact size and distribution of the Ford Fortune. But if he had revealed it publicly before the Senate Finance Committee last week, he would have violated the Federal secrecy-of-tax-returns law, could have been clapped into jail for one year and fined $1,000. Running no such risk he took his facts & figures from the annual reports filed by Ford Motor Co. with the Massachusetts Commissioner of Corporations, estimated the company to be worth $600,000,000, 41 1/2% owned by Son Edsel.

"This," declared Mr. Jackson in his argument for stiff death taxes, "illustrates concretely that estates do not pass from rich men to poor men, but usually to heirs already amply provided for. An estate of $354,000,000, the balance sheet value of the remaining 59% of the stock which we will assume Henry Ford still owns, is abnormal by any test we know. Moreover, while the Ford Motor Co. has been accumulating its surplus at an average rate of $20,000,000 a year, this amount has not been distributed to stockholders where it would be subject to surtaxes. The increase in value of the holdings of Henry Ford, if realized upon by a sale in his lifetime, would pay heavy individual taxes. If it now passes by inheritance, it will have escaped all surtaxes.

"It is obvious that a corporation with this record is not to be abandoned or closed because of any tax on the right to inherit its stock. The utmost to be anticipated would be that some part of the equity now represented by the common stock would be sold to other interests or to the public. This equity might be disposed of in part through a bond issue or through preferred stock or by a sale of a portion of the common stock. The effect of this would be to convert what is now a family industry into a widely owned one, and to permit the public to share in the future earnings of an enterprise to the building of which public patronage has made such a substantial contribution."

Edsel's Chips, Into the Ford poker game promptly jumped Roy C. Osgood, vice president of Chicago's First National Bank. He pointed out that under the proposed estate and inheritance taxes, the Federal and state governments would rake in $316,500,000 of Father Henry's $354,000,000 stack of chips, leaving only $27,500,000 for Edsel. If $316,500,000 of Ford securities had to be sold to pay taxes, the underwriting costs would be over $27,500,000, leaving Edsel Ford with nothing from his father and taking control of the business out of Ford hands. Then, if Son Edsel should die soon after his father, practically the whole business would have to be sold at forced sale. Next, Michigan's Senator Vandenberg took a hand in the poker game over the Ford Fortune. Said he: "Neither Mr. Henry Ford nor Mr. Edsel Ford has opened any communications with me on the subject. They have not protested to the Finance Committee. Pursuant to their lifelong habit of never taking a tax case to court, in this instance they silently await the Congressional verdict.

"It was necessary for me to solicit the information in order to get even a verification of generally known facts. ... I do not speak for the Fords or for their institution. I speak for myself. . . .

"Assume that Mr. Ford's total estate will be $300,000,000. The proposed inheritance tax, on top of the existing estate tax, would take $270,000,000 of this $300,000,000. . . . Where do you get your $270,000,000? You cannot take the factories. Without motivating genius behind them, they are futile brick and mortar. You cannot sell off the machinery, unless you sell off the livelihood of the greatest single group of high-paid workmen in the world. You cannot take Government title to the stock and submit the institution to political management and control. That would be the final absurdity. . . . You must sell Ford to the bankers and then to the public.

"Suppose this happens in an hour of economic depression when investment funds are not available? You have sacrificed vast values by forced sale. No matter when it happens, you have destroyed the dynamic integration, the personality, the dedication of the institution. . . . This is not social or economic progress. It is the shortsighted destruction, not the distribution of wealth."

New Thoughts, With such tall talk of such fat figures ringing in their ears, the Senate Finance Committeemen retired into their committeeroom with the House tax bill, started to remake it, supposedly in secret. Every few minutes, however, some loose-tongued Senator stuck out his head to whisper to the Press that another chunk had been taken out of the measure. First inheritance taxes went out bodily. Then a new schedule of estate taxes higher than those in force was ordered written. Next the stiff excess profits tax proposed by the House was pared down. Personal income tax exemptions were cut from $2,500 to $2,000 for married people, from $1,000 to $800 for single persons. Surtaxes were increased from the bottom up. These new rates would boost the taxes of every married income taxpayer at least $20 a year, would make everyone with an income over $5,000 a year pay a surtax, would add $60 a year to the tax of a man earning $6,000, $160 a year to the tax of a man earning $10,000. Even a jobless single man working on a PWA relief project might soon find himself owing the Government an income tax on money the same government had paid him to keep from starving.

Senator Pat Harrison emerged from the committeeroom rubbing his hands. "We have simply turned the bill into a revenue measure," he announced. By that he meant that it was expected to raise $464,000,000 instead of the $275,000,000 expected from the House bill.

But it was only a dream. After a week-end of public outcries, the Senate committee changed its mind, decided not to tax the "little fellow," went on to other decisions and indecisions, successive scenes in the nightmare of writing a tax bill.

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